Nevada
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90-0273142
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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3920
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(Primary Standard Industrial Classification Number)
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500 Union Street, Suite 420, Seattle, Washington USA
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98101
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(Address of principal executive offices)
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(Zip Code)
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206-903-1351
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(Registrant's telephone number, including area code)
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N/A
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(Former name, address, and fiscal year, if changed since last report)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting Company
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x
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(Do not check if a smaller reporting Company)
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Title of Each Class
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Proposed Maximum
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Proposed Maximum
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||||||||||||||
of Securities to
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Amount to be
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Offering
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Aggregate
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Amount of
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||||||||||||
be Registered
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Registered
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Price Per Unit
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Offering Price
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Registration Fee
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Common stock issued to Special Situations Technology
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52,300,000 | $ | 0.10 | $ | 5,230,000 | $ | 713.37 | |||||||||
Funds , L.P. and 40 other accredited investors pursuant to a
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private placement which closed June 14, 2013 (1) (2)
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Shares of common stock issuable upon exercise of five-year Series
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52,300,000 | $ | 0.15 | $ | 7,845,000 | $ | 1,070.06 | |||||||||
A Warrants to purchase common stock at $0.15 per share related
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to the private placement which closed June 14, 2013 (1) (3)
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Shares of common stock issuable upon exercise of the five-year Series B
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52,300,000 | $ | 0.20 | $ | 10,460,000 | $ | 1,426.74 | |||||||||
Warrants to purchase common stock at $0.20 per share related
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to the private placement which closed June 14, 2013 (1) (3)
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Shares of common stock issuable upon exercise of the five-year
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5,230,000 | $ | 0.10 | $ | 523,000 | $ | 71.34 | |||||||||
Placement Agent Warrants to purchase common stock at $0.10 per
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share related to the private placement which closed June 14, 2013 (1) (3)
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Total
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162,130,000 | $ | 24,058,000 | $ | 3,281.51 |
(1) | The shares of our common stock being registered hereunder are being registered for sale by the Selling Shareholders named in the prospectus. |
(2)
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Pursuant to Rule 457(g) under the Securities Act of 1933, the proposed maximum offering price and the amount of the registration fee have been calculated based on the price in the private placement paid by the Selling Shareholders which closed June 14, 2013.
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(3)
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Pursuant to Rule 457(g) under the Securities Act of 1933, the proposed maximum offering price and the amount of the registration fee have been calculated based on the exercise price of the common stock warrants held by the Selling Shareholders in the private placement which closed June 14, 2013.
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Prospectus Summary
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5 |
Risk Factors
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6 |
Forward-Looking Statements
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11 |
Use of Proceeds
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11 |
Dilution
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11 |
Selling Security Holders
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12 |
Plan of Distribution
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14 |
Legal Matters
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16 |
Experts
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16 |
Business
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17 |
Description of Property
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24 |
Selected Financial Data
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25 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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26 |
Legal Proceedings
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30 |
Management
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30 |
Executive Compensation
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34 |
Security Ownership of Certain Beneficial Owners and Management
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37 |
Certain Relationships and Related Party Transactions
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38 |
Description of Securities
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40 |
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
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42 |
Disclosure of Commission Position of Indemnification for Securities Act Liabilities
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42 |
Additional Information
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43 |
Financial Statements
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F-1
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•
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Announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures, strategic relationships, addition or loss of significant customers and contracts, capital expenditure commitments and litigation;
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•
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Issuance of convertible or equity securities and related warrants for general or merger and acquisition purposes;
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•
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Issuance or repayment of debt, accounts payable or convertible debt for general or merger and acquisition purposes;
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Sale of a significant number of shares of our common stock by shareholders;
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•
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General market and economic conditions;
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Quarterly variations in our operating results;
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Investor and public relation activities;
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•
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Announcements of technological innovations;
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New product introductions by us or our competitors;
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Competitive activities; and
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Additions or departures of key personnel.
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any of our existing patents will continue to be held valid, if challenged;
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patents will be issued for any of our pending applications;
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any claims allowed from existing or pending patents will have sufficient scope or strength to protect us;
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•
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our patents will be issued in the primary countries where our products are sold in order to protect our rights and potential commercial advantage; or
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•
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any of our products or technologies will not infringe on the patents of other companies.
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Private placement average price per share of common stock
(52,300,000 shares at $0.10 per share and assuming full exercise of the
Warrants for 109,830,000 shares at an average price of $0.171 per share)
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$0.148
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Net Tangible Book Value per share prior to private placement
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$ (0.030)
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Net Tangible Book Value per share after private placement
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$0.067
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Dilution to investors in private placement (assuming full exercise of Warrants for 109,830,000 shares at an average price of $0.171 per share)
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$0.074
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Increase in Net Tangible Book Value to existing stockholders following the private placement (without any additional investment by existing stockholders)
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$0.097
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Securities
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SECURITIES BEING REGISTERED
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Beneficially
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Securities
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|||||||||||||||||||||||||||
Owned Prior to
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Securities
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Securities
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Securities
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Underlying
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||||||||||||||||||||||||
Private
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Beneficially
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Securities
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Underlying
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Underlying
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Placement Agent
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% Beneficial
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Placement
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Owner After
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Being
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Warrant A Being
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Warrant B Being
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Warrants Being
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Ownership
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Name of Selling Shareholder (A)
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Memorandum (B)
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Offering (E)
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Offered (C)
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Offered (C)
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Offered (C)
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Offered (D)
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After Offering (F)
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Michael E. Donnelly (1)
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32,603 | 32,603 | 500,000 | 500,000 | 500,000 | 597,340 | * | |||||||||||||||||||||
Michael L. Conn
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- | - | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
Growth Ventures, Inc. Pension Plan & Trust/ Gary McAdam
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- | - | 500,000 | 500,000 | 500,000 | - | * | |||||||||||||||||||||
Edward Staas
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- | - | 180,000 | 180,000 | 180,000 | - | * | |||||||||||||||||||||
Jim Bisping
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- | - | 100,000 | 100,000 | 100,000 | - | * | |||||||||||||||||||||
William D. Moreland
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- | - | 3,000,000 | 3,000,000 | 3,000,000 | - | * | |||||||||||||||||||||
Tom Juda & Nancy Juda Living Trust (3)
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- | - | 1,000,000 | 1,000,000 | 1,000,000 | - | * | |||||||||||||||||||||
Margaret Bathgate (1)
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775,000 | 775,000 | 750,000 | 750,000 | 750,000 | - | * | |||||||||||||||||||||
Delaware Charter G & T Co FBO Steven M. Bathgate (1)
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2,286,300 | 2,286,300 | 250,000 | 250,000 | 250,000 | 618,190 | * | |||||||||||||||||||||
Len Goldberg
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900,000 | 900,000 | 600,000 | 600,000 | 600,000 | - | * | |||||||||||||||||||||
Michael S. Barish
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- | - | 1,500,000 | 1,500,000 | 1,500,000 | - | * | |||||||||||||||||||||
Alva Terry Staples
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- | - | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
Lucky Dog LLC/ Robert Doane
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- | - | 500,000 | 500,000 | 500,000 | - | * | |||||||||||||||||||||
High Speed Aggregate, Inc./ Jeff Ploen
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- | - | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
Wallace Family Trust John Wallace
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- | - | 1,000,000 | 1,000,000 | 1,000,000 | - | * | |||||||||||||||||||||
H. Leigh Severance
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1,000,000 | 1,000,000 | 500,000 | 500,000 | 500,000 | - | * | |||||||||||||||||||||
Stephanie L. Russo
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- | - | 350,000 | 350,000 | 350,000 | - | * | |||||||||||||||||||||
Robert G. Allison
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- | - | 750,000 | 750,000 | 750,000 | - | * | |||||||||||||||||||||
Aeneas Valley Holdings LLC/ Scott Wilburn
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- | - | 2,000,000 | 2,000,000 | 2,000,000 | - | * | |||||||||||||||||||||
Viva CO LLC/ Douglas Kelsall and Steven Bathgate (1)
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500,000 | 500,000 | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
Delaware Charter G & T Co FBO John Jenkins
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- | - | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
Diker Micro-Cap Fund, LP/ Mark Diker
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- | - | 3,500,000 | 3,500,000 | 3,500,000 | - | * | |||||||||||||||||||||
Delaware Charter G & T Co. FBO Shane T. Petersen
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- | - | 150,000 | 150,000 | 150,000 | - | * | |||||||||||||||||||||
Delaware Charter G & T Co FBO Douglas Kelsall
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- | - | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
Liolios Family Trust/ Scott Liolios (1)
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- | - | 250,000 | 250,000 | 250,000 | 500,000 | * | |||||||||||||||||||||
Herbert C. Brosnan Jr
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- | - | 350,000 | 350,000 | 350,000 | - | * | |||||||||||||||||||||
Alan Budd Zuckerman (2)
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- | - | 1,000,000 | 1,000,000 | 1,000,000 | 2,295,000 | * | |||||||||||||||||||||
J3E2A2Z LP, an affiliate of Ronald P. Erickson, our CEO
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12,328,373 | 12,328,373 | 5,000,000 | 5,000,000 | 5,000,000 | - | 4.2 | % | ||||||||||||||||||||
GVC Capital LLC/ Vicki Barone (1)
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- | - | 1,500,000 | 1,500,000 | 1,500,000 | - | * | |||||||||||||||||||||
John D.Gibbs
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1,000,000 | 1,000,000 | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
Jeb Partners LP/ Jeb Besser
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- | - | 1,500,000 | 1,500,000 | 1,500,000 | - | * | |||||||||||||||||||||
Special Situations Technology Funds, L.P./ Adam Stettner
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- | - | 15,900,000 | 15,900,000 | 15,900,000 | - | * | |||||||||||||||||||||
Rapture Investments LP/ Cooper Dubois
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- | - | 5,000,000 | 5,000,000 | 5,000,000 | - | * | |||||||||||||||||||||
Delaware Charter G&T Co. FBO: Rod Cerny (4)
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- | - | 150,000 | 150,000 | 150,000 | - | * |
Mark Scott, our CFO
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2,268,500 | 2,268,500 | 100,000 | 100,000 | 100,000 | - | * | |||||||||||||||||||||
Patrick Lin
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- | - | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
SouthShore Capital Partners, LP/ Thomas Turner
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- | - | 500,000 | 500,000 | 500,000 | - | * | |||||||||||||||||||||
David R. Morgan
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- | - | 500,000 | 500,000 | 500,000 | - | * | |||||||||||||||||||||
Daniel S. & Patrice M. Perkins
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- | - | 250,000 | 250,000 | 250,000 | - | * | |||||||||||||||||||||
Millennium Trust Company LLC Cust. FBO John Seabern
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- | - | 1,000,000 | 1,000,000 | 1,000,000 | - | * | |||||||||||||||||||||
Financial America Securities, Inc. (1)
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- | - | - | - | - | 5,250 | * | |||||||||||||||||||||
Matthew Kelsall (1)
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- | - | - | - | - | 250,220 | * | |||||||||||||||||||||
Richard Huebner (1)
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- | - | - | - | - | 126,000 | * | |||||||||||||||||||||
Anita Dudley (1)
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- | - | - | - | - | 5,000 | * | |||||||||||||||||||||
Andrea Kidd (1)
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- | - | - | - | - | 10,000 | * | |||||||||||||||||||||
GVC Partners LLC (1)
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- | - | - | - | - | 493,900 | * | |||||||||||||||||||||
Delaware Charter G&T Co. FBO: Vicki Barone (1)
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- | - | 170,000 | 170,000 | 170,000 | 329,100 | * | |||||||||||||||||||||
21,090,776 | 21,090,776 | 52,300,000 | 52,300,000 | 52,300,000 | 5,230,000 |
(1)
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5,230,000 Placement Agent Warrants were allocated to employees of the placement agent and other participating FINRA Firms. GVC Partners LLC is the holding company of the placement agent GVC Capital LLC. GVC Partners LLC registered owners of GVC Partners LLC disclaim beneficial ownership of the shares allocated to it.
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(2)
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Affiliated directly or indirectly with G. Select Securities LLC, a registered broker-dealer.
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(3)
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Affiliated directly or indirectly with Concept Capital Markets LLC, a registered broker-dealer.
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(4)
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Affiliated directly or indirectly with Smith Hayes Advisors, Inc., a registered broker-dealer.
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-
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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-
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block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
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-
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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-
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an exchange distribution in accordance with the rules of the applicable exchange;
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-
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privately negotiated transactions;
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-
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short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC;
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-
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through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
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broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
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a combination of any such methods of sale; and
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any other method permitted by applicable law.
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Powders for law enforcement applications,
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Drugs and drug container seals for protection against contamination and counterfeiting for pharmaceutical applications.
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Fruit and vegetable ripeness for agriculture applications,
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Noninvasive skin analysis for discovery of certain diseases or conditions for medical applications.
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-
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ChromaID F12 Scanner. A small device made with electronic, optical, and software parts , which shines light onto a flat material and measures the amount of light that is reflected back. The device is the size of a flashlight (5.5” long and 1.25” diameter).
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-
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ChromaID Lab Software. A software application that runs on a Windows Personal Computer. This software configures and controls the ChromaID F12 Scanner, displays the captured ChromaID Profile, and compares it to known ChromaID Profiles.
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Sale of the ChromaID F12 Lab Kit and ChromaID Developer Tools.
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Licensing of the ChromaID technology,
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-
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Sales of the Scanhead and associated licensing and royalties.
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ChromaID database administration and management services.
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•
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Purchase Price - 90% of our volume-weighted average price (“VWAP”) on each trading day during the five-trading-day pricing period, unless the lowest VWAP or closing bid price (“Market Price”) on the trading day before settlement was lower, in which case the Purchase Price shall be the Market Price less $.01.
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•
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Threshold Price – We may specify a price below which we will not sell shares during the applicable five-trading-day pricing period. If the VWAP falls below the threshold price on any day(s) during the pricing period, such day(s) will be removed from the pricing period (and Ascendiant’s investment amount will be reduced by 1/5 for each such day).
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•
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Maximum Draw - 20% of our total trading volume for the 10-trading-day period immediately preceding the applicable draw down, times the average VWAP during such period (but in no event more than $100,000).
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Minimum Draw - None.
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•
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Minimum Time Between Draw Down Pricing Periods - Three trading days.
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•
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Minimum Use of Facility – We were not obligated to sell any shares of our common stock to Ascendiant during the Commitment Period.
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•
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Commitment and Legal Fees – Commitment fees of 5% ($150,000), payable in shares of our common stock based on the following schedule: $75,000 worth of restricted shares to be delivered at initial closing, $25,000 worth of shares if and when the S-1 is declared effective, and $25,000 worth of shares at 30 and 60 days). Legal fees were $7,500. We issued 1,490,943 shares for these commitment and legal fees.
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•
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Indemnification - Ascendiant is entitled to customary indemnification from us for any losses or liabilities it suffers as a result of any breach by us of any provisions of the Securities Purchase Agreement, or as a result of any lawsuit brought by any of our stockholders (except stockholders who are officers, directors or principal stockholders of the Company).
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•
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Conditions to Ascendiant’s Obligation to Purchase Shares - Trading in our common stock must not be suspended by the SEC or other applicable trading market; we must not have experienced a material adverse effect; all liquidated damages and other amounts owing to Ascendiant must be paid in full; the Registration Statement must be effective with respect to Ascendiant’s resale of all shares purchased under the equity drawdown facility; there must be a sufficient number of authorized but unissued shares of our common stock; and the issuance must not cause Ascendiant to own more than 9.99% of the then outstanding shares of our common stock.
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•
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Termination - The Securities Purchase Agreement would terminate if our common stock was not listed on one of several specified trading markets (which include the NYSE AMEX, OTC Bulletin Board and Pink Sheets, among others); if we filed for protection from its creditors; or if the Registration Statement was not declared effective by the SEC by the date nine months following the date of the Securities Purchase Agreement. We had the right to terminate the Securities Purchase Agreement with five days’ notice two years from the Registration Statement being declared effective or August 29, 2013.
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Nine Months
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||||||||||||||||||||||||
Ended
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Years Ended September 30,
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June 30, 2013
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2012
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2011
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2010
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2009
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2008
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(in thousands, except for share and per share data)
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||||||||||||||||||||||||
STATEMENT OF OPERATIONS DATA:
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Revenue
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$ | 6,334 | $ | 7,924 | $ | 9,136 | $ | 2,543 | $ | - | $ | - | ||||||||||||
Net loss
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(5,463 | ) | (2,726 | ) | (2,396 | ) | (1,147 | ) | (951 | ) | (945 | ) | ||||||||||||
Net loss applicable to Visualant, Inc. common shareholders
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(5,448 | ) | (2,732 | ) | (2,410 | ) | (1,149 | ) | (951 | ) | (945 | ) | ||||||||||||
Net loss per share
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(0.05 | ) | (0.04 | ) | (0.06 | ) | (0.04 | ) | (0.03 | ) | (0.05 | ) | ||||||||||||
Weighted average number of shares
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108,181,494 | 65,557,376 | 42,682,795 | 30,728,036 | 28,003,021 | 18,029,095 | ||||||||||||||||||
BALANCE SHEET DATA:
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||||||||||||||||||||||||
Total assets
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5,592 | 5,320 | 4,313 | 4,144 | 12 | 2 | ||||||||||||||||||
Stockholder's (deficiency) equity
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(1,782 | ) | 171 | (1,610 | ) | (1,900 | ) | (1,366 | ) | (2,135 | ) |
Nine
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Months Ended
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Year Ending,
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June 30, 2013
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September 30, 2012
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September 30, 2011
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September 30, 2010
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|||||||||||||
Analysis of Cash Flow-
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||||||||||||||||
Cash flow (used in) operations
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$ | (2,487,000 | ) | $ | (58,000 | ) | $ | (1,312,000 | ) | $ | (441,000 | ) | ||||
Cash flow (used in) provided by investing activities
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(11,000 | ) | (100,000 | ) | (108,000 | ) | 54,000 | |||||||||
Cash flow provided by financing activities
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3,067,000 | 1,207,000 | 1,428,000 | 466,000 | ||||||||||||
Net change in cash
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$ | 569,000 | $ | 1,049,000 | $ | 8,000 | $ | 79,000 | ||||||||
Cash
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$ | 1,710,000 | $ | 1,141,000 | $ | 92,000 | $ | 84,000 | ||||||||
Net working capital (deficit)
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164,000 | (2,362,000 | ) | (3,202,000 | ) | (2,667,000 | ) | |||||||||
Long term debt
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3,000 | 4,000 | 1,015,000 | 1,676,000 |
Nine
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Months Ended
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Year Ending,
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Investor/ Lendor
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June 30, 2013
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September 30, 2012
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September 30, 2011
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September 30, 2010
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Shares of Common Stock-
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Coach Capital LLC Convertible Debenture and warrant exercise
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- | - | 2,500,000 | - | ||||||||||||
Seaside
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- | - | 2,529,000 | - | ||||||||||||
Gemini Convertible Debentures
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14,032,000 | 6,725,000 | 312,000 | - | ||||||||||||
Ascendiant Convertible Debentures
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5,739,000 | 3,373,000 | - | - | ||||||||||||
Ascendiant Equity Line of Credit
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993,000 | 5,357,000 | 1,500,000 | - | ||||||||||||
Sumitomo Precision Products Co, Ltd.
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- | 17,308,000 | - | - | ||||||||||||
Special Situations and 40 other Accredited Purchase Agreement
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52,300,000 | - | - | - | ||||||||||||
Other
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- | - | 961,000 | - | ||||||||||||
Total shares issued from financings
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73,064,000 | 32,763,000 | 7,802,000 | - | ||||||||||||
Proceeds from Financings-
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||||||||||||||||
Coach Capital LLC Convertible Debenture and warrant exercise
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$ | - | $ | - | $ | 125,000 | $ | 250,000 | ||||||||
Seaside
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- | - | 761,000 | - | ||||||||||||
Gemini Convertible Debentures
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102,000 | 20,000 | 900,000 | - | ||||||||||||
Ascendiant Convertible Debentures
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23,000 | 19,000 | 300,000 | - | ||||||||||||
Ascendiant Equity Line of Credit
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100,000 | 377,000 | 182,000 | - | ||||||||||||
Sumitomo Precision Products Co, Ltd.
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- | 2,250,000 | - | - | ||||||||||||
Special Situations and 40 other Accredited Purchase Agreement
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5,230,000 | - | - | - | ||||||||||||
Other
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- | - | 156,000 | 50,000 | ||||||||||||
Total proceeds from financings
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$ | 5,455,000 | $ | 2,666,000 | $ | 2,424,000 | $ | 300,000 | ||||||||
TransTech Secured Credit Facility with BFI Finance Corp.
|
$ | 110,000 | $ | 62,000 | $ | (137,000 | ) | $ | 188,000 |
Name
|
Age
|
Positions and Offices Held
|
Since
|
Directors-
|
|||
Ronald P. Erickson
|
69
|
Chief Executive Officer and President, Management Director
|
April 24, 2003
|
Jon Pepper
|
62
|
Independent Director
|
April 19, 2006
|
Marco Hegyi
|
55
|
Chairman of the Board, Independent Director
|
February 14, 2008
|
Ichiro Takesako
|
54
|
Management Director
|
December 28, 2012
|
Executive Officers-
|
|||
Mark Scott
|
60
|
Chief Financial Officer and Secretary
|
May 1, 2010
|
Richard Mander, Ph.D.
|
53
|
Vice President, Product Management and Technology
|
June 26, 2012
|
Todd Martin Sames
|
59
|
Vice President of Business Development
|
September 5, 2012
|
Jeffrey Kruse
|
55
|
President of TransTech Systems, Inc.
|
July 17, 2013
|
June 2008:
|
appointed as General Manager of Sales and Marketing Department of Micro Technology Division
|
April 2009:
|
appointed as General Manager of Overseas Business Department of Micro Technology Division, in charge of M&A activity of certain business segment and assets of Aviza Technology, Inc.
|
July 2010:
|
appointed as Executive Director of Sumitomo Process Technology Systems, 100% owned subsidiary of Sumitomo stationed in Newport, Wales
|
August 2011:
|
appointed as General Manager, Corporate Strategic Planning Group
|
April 2013:
|
appointed as General Manager of Business Development Department
|
•
|
Had any petition under the federal bankruptcy laws or any state insolvency law filed by or against, or had a receiver, fiscal agent, or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
|
•
|
Been convicted in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|||
•
|
Been the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
|
|||
◦
|
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
|
|||
◦
|
Engaging in any type of business practice; or
|
|||
◦
|
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;
|
|||
•
|
Been the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described in (i) above, or to be associated with persons engaged in any such activity;
|
|||
•
|
Been found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, where the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated; or
|
|||
•
|
Been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, where the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended, or vacated.
|
Audit
|
Compensation
|
Nominating
|
||
Marco Hegyi (Chairman)
|
Marco Hegyi (Chairman)
|
Ron Erickson (Chairman)
|
||
Jon Pepper
|
Jon Pepper
|
Marco Hegyi
|
||
Jon Pepper
|
•
|
a member of the Compensation Committee or equivalent of any other entity, one of whose executive officers served as one of our directors or was an immediate family member of a director, or served on our Compensation Committee; or
|
|
•
|
a director of any other entity, one of whose executive officers or their immediate family member served on our Compensation Committee.
|
Non-Equity
|
||||||||||||||||||||||||||||||
Incentive
|
||||||||||||||||||||||||||||||
Stock
|
Plan
|
Option
|
Other
|
|||||||||||||||||||||||||||
Salary
|
Bonus
|
Awards
|
Compensation
|
Awards
|
Compensation
|
Total
|
||||||||||||||||||||||||
Name
|
Principal Position
|
($)
|
($)
|
($)
|
($)
|
($) (7)
|
($)
|
($)
|
||||||||||||||||||||||
Salary-
|
||||||||||||||||||||||||||||||
Ronald P. Erickson (1)
|
Chief Executive Officer
|
9/30/2012
|
$ | 160,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 160,000 | ||||||||||||||
9/30/2011
|
$ | 62,500 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 62,500 | ||||||||||||||||
9/30/2010
|
$ | - | $ | - | $ | 40,000 | $ | - | $ | 52,662 | $ | - | $ | 92,662 | ||||||||||||||||
Mark Scott (2)
|
Chief Financial Officer
|
9/30/2012
|
$ | 104,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 104,000 | ||||||||||||||
Secretary
|
9/30/2011
|
$ | 74,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 74,000 | |||||||||||||||
9/30/2010
|
$ | 10,000 | $ | - | $ | 20,000 | $ | - | $ | - | $ | - | $ | 30,000 | ||||||||||||||||
James Gingo (3)
|
Chief Executive Officer,
|
9/30/2012
|
$ | 200,016 | $ | - | $ | - | $ | - | $ | - | $ | 8,001 | $ | 208,017 | ||||||||||||||
TransTech Systems, Inc.
|
9/30/2011
|
$ | 200,016 | $ | - | $ | - | $ | - | $ | - | $ | 8,001 | $ | 208,017 | |||||||||||||||
9/30/2010
|
$ | 62,649 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 62,649 | ||||||||||||||||
Richard Mander, Ph.D. (4)
|
Vice President of Product Management
|
9/30/2012
|
$ | 40,615 | $ | - | $ | - | $ | - | $ | - | $ | 3,000 | $ | 43,615 | ||||||||||||||
and Technology
|
9/30/2011
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
9/30/2010
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Todd Martin Sames (5)
|
Vice President of Business Development
|
9/30/2012
|
$ | 10,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 10,000 | ||||||||||||||
9/30/2011
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
9/30/2010
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Bradley E. Spark (6)
|
Former Chief Executive Officer
|
9/30/2012
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
Director
|
9/30/2011
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
9/30/2010
|
$ | 28,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 28,000 |
Option Awards (1)
|
Stock Awards
|
Number of
|
Number of
|
Number of
|
Number of
|
Market or
|
|||||||||||||||||||||||
Securities
|
Securities
|
Securities
|
Number of
|
Market Value
|
Unearned Shares,
|
Payout Value of
|
|||||||||||||||||||||
Underlying
|
Underlying
|
Underlying
|
Shares or Units
|
of Shares or
|
Units or Other
|
Unearned Shares,
|
|||||||||||||||||||||
Unexercised
|
Unexercised
|
Unexercised
|
Option
|
of Stock
|
Units of
|
Rights That
|
Units, or Other
|
||||||||||||||||||||
Options
|
Options
|
Unearned
|
Exercise
|
Option
|
That Have Not
|
Stock That
|
Have Not
|
Rights That Have
|
|||||||||||||||||||
Exercisable
|
Unexerciseable
|
Options
|
Price
|
Expiration
|
Vested
|
Have Not Vested
|
Vested
|
Not Vested
|
|||||||||||||||||||
Name
|
(#)
|
(#)
|
(#)
|
($)
|
Date
|
(#)
|
($)
|
(#)
|
($)
|
||||||||||||||||||
Ronald P. Erickson
|
3,000,000
|
-
|
-
|
$
|
0.15
|
5/9/2020
|
-
|
$
|
-
|
-
|
$
|
-
|
|
1)
|
Mr. Erickson’s stock option grant vested quarterly over two years.
|
Stock
|
Option
|
Other
|
||||||||||||||
Name
|
Awards (1)
|
Awards (1)
|
Compensation (2)
|
Total
|
||||||||||||
Bradley E. Sparks (3)
|
$ | 4,000 | $ | - | $ | - | $ | 4,000 | ||||||||
Marco Hegyi
|
- | 190,000 | - | 190,000 | ||||||||||||
Dr. Masahiro Kawahata (3)
|
8,000 | - | 130,650 | 138,650 | ||||||||||||
Jon Pepper
|
6,000 | - | - | 6,000 | ||||||||||||
Yoshitami Arai (3)
|
8,000 | - | 64,350 | 72,350 | ||||||||||||
James Gingo (3)
|
- | - | - | - | ||||||||||||
Paul R. Bonderson Jr. (3)
|
6,000 | - | - | 6,000 | ||||||||||||
Total
|
$ | 32,000 | $ | 190,000 | $ | 195,000 | $ | 417,000 |
•
|
each director and nominee for director;
|
|
•
|
each person known by us to own beneficially 5% or more of our common stock;
|
|
•
|
each officer named in the summary compensation table elsewhere in this report; and
|
|
•
|
all directors and executive officers as a group.
|
Shares Beneficially Owned
|
||||||||
Amount
|
Percentage
|
|||||||
Directors and Officers-
|
||||||||
Ronald P. Erickson (1)
|
12,328,373 | 4.2 | % | |||||
Mark Scott (2)
|
2,268,500 | * | ||||||
Marco Hegyi
|
2,775,000 | * | ||||||
Jon Pepper
|
1,650,000 | * | ||||||
Richard Mander
|
333,333 | * | ||||||
Todd Sames
|
433,333 | * | ||||||
Jeffrey Kruse
|
433,333 | * | ||||||
Sumitomo Precision Products Co., Ltd./ Ichiro Takesako
|
17,307,693 | 5.9 | % | |||||
Total Directors and Officers (8 in total)
|
37,529,565 | 12.9 | % |
Shares Beneficially Owned
|
||||||||
Number
|
Percentage
|
|||||||
Greater Than 5% Ownership
|
||||||||
Ronald P. Erickson (1)
|
12,328,373 | 4.2 | % | |||||
500 Union Street , Suite 420
|
||||||||
Seattle, WA 98101
|
||||||||
Sumitomo Precision Products Co., Ltd./ Ichiro Takesako (2)
|
17,307,693 | 5.9 | % | |||||
1-10 Fuso-cho
|
||||||||
Amagasaki
|
||||||||
Hyogo 660-0891 Japan
|
||||||||
Special Situations Technology Funds, L.P./ Adam Stettner (3)
|
- | * | ||||||
527 Madison Avenue
|
||||||||
Suite 2600
|
||||||||
New York, NY 10022
|
Quarter Ended
|
High
|
Low
|
||||||
December 31, 2012
|
$
|
0.20
|
$
|
0.08
|
||||
March 31, 2013
|
$
|
0.15
|
$
|
0.07
|
||||
June 30, 2013
|
$
|
0.15
|
$
|
0.08
|
||||
December 31, 2011
|
$
|
0.13
|
$
|
0.05
|
||||
March 31, 2012
|
$
|
0.12
|
$
|
0.05
|
||||
June 30, 2012
|
$
|
0.16
|
$
|
0.08
|
||||
September 30, 2012
|
$
|
0.18
|
$
|
0.07
|
||||
December 31, 2010
|
$
|
0.74
|
$
|
0.23
|
||||
March 31, 2011
|
$
|
0.70
|
$
|
0.33
|
||||
June 30, 2011
|
$
|
0.57
|
$
|
0.21
|
||||
September 30, 2011
|
$
|
0.24
|
$
|
0.08
|
||||
December 31, 2009
|
$
|
0.17
|
$
|
0.04
|
||||
March 31, 2010
|
$
|
0.16
|
$
|
0.05
|
||||
June 30, 2010
|
$
|
0.40
|
$
|
0.05
|
||||
September 30, 2010
|
$
|
0.40
|
$
|
0.14
|
INDEX TO FINANCIAL STATEMENTS
|
Title of Document
|
Page
|
|
Consolidated Balance Sheets as of June 30, 2013 and September 30, 2012 (audited)
|
F-2
|
|
Consolidated Statements of Operations for the three and nine months ended June 30, 2013 and 2012
|
F-3
|
|
Consolidated Statements of Cash Flows for the nine months ended June 30, 2013 and 2012
|
F-4
|
|
Notes to the Financial Statements
|
F-5
|
|
Report of PMB Helin Donovan, LLP
|
F-18
|
|
Report of Madsen & Associates CPA's, Inc. | F-19 | |
Consolidated Balance Sheets as of September 30, 2012 and 2011
|
F-20
|
|
Consolidated Statements of Operations for the years ended September 30, 2012 and 2011
|
F-21
|
|
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended September 30, 2012 and 2011
|
F-22
|
|
Consolidated Statements of Cash Flows for the years ended September 30, 2012 and 2011
|
F-23
|
|
Notes to the Financial Statements
|
F-24
|
VISUALANT, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
June 30, 2013
|
September 30, 2012
|
|||||||
ASSETS
|
(Audited)
|
|||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 1,509,829 | $ | 1,141,165 | ||||
Restricted cash
|
200,000 | - | ||||||
Accounts receivable, net of allowance of $40,750 and $16,750, respectively
|
809,856 | 1,012,697 | ||||||
Prepaid expenses
|
63,463 | 222,978 | ||||||
Inventories
|
690,629 | 344,692 | ||||||
Refundable tax assets
|
30,045 | 29,316 | ||||||
Total current assets
|
3,303,822 | 2,750,848 | ||||||
EQUIPMENT, NET
|
442,270 | 469,001 | ||||||
OTHER ASSETS
|
||||||||
Intangible assets, net
|
855,689 | 1,110,111 | ||||||
Goodwill
|
983,645 | 983,645 | ||||||
Other assets
|
6,161 | 6,161 | ||||||
TOTAL ASSETS
|
$ | 5,591,587 | $ | 5,319,766 | ||||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable - trade
|
$ | 2,297,387 | $ | 1,593,861 | ||||
Accounts payable - related parties
|
103,691 | 73,737 | ||||||
Accrued expenses
|
55,859 | 391,311 | ||||||
Accrued expenses - related parties
|
- | 5,849 | ||||||
Deferred revenue
|
- | 666,667 | ||||||
Convertible notes payable
|
- | 750,000 | ||||||
Derivative liability - warrants
|
4,184,000 | - | ||||||
Notes payable - current portion of long term debt
|
683,101 | 1,631,903 | ||||||
Total current liabilities
|
7,324,038 | 5,113,328 | ||||||
LONG TERM LIABILITIES:
|
||||||||
Long term debt
|
2,455 | 4,015 | ||||||
COMMITMENTS AND CONTINGENCIES
|
- | - | ||||||
STOCKHOLDERS' (DEFICIT) EQUITY:
|
||||||||
Preferred stock - $0.001 par value, 50,000,000 shares authorized, no shares
|
||||||||
issued and outstanding
|
- | - | ||||||
Common stock - $0.001 par value, 500,000,000 shares authorized, 166,677,149
|
||||||||
and 90,992,954 shares issued and outstanding at 6/30/13 and 9/30/12, respectively
|
166,679 | 90,993 | ||||||
Additional paid in capital
|
17,430,415 | 13,995,554 | ||||||
Accumulated deficit
|
(19,378,609 | ) | (13,915,931 | ) | ||||
Total stockholders' (deficit) equity
|
(1,781,515 | ) | 170,616 | |||||
Noncontrolling interest
|
46,609 | 31,807 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
|
$ | 5,591,587 | $ | 5,319,766 |
VISUALANT, INC. AND SUBSIDIARIES
|
||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
Three Months Ended,
|
Nine Months Ended,
|
|||||||||||||||
June 30, 2013
|
June 30, 2012
|
June 30, 2013
|
June 30, 2012
|
|||||||||||||
REVENUE
|
$ | 2,060,250 | $ | 1,813,625 | $ | 6,333,552 | $ | 5,525,785 | ||||||||
COST OF SALES
|
1,642,240 | 1,457,420 | 4,807,196 | 4,512,899 | ||||||||||||
GROSS PROFIT
|
418,010 | 356,205 | 1,526,356 | 1,012,886 | ||||||||||||
RESEARCH AND DEVELOPMENT EXPENSES
|
341,231 | 23,000 | 720,022 | 99,000 | ||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
|
1,018,083 | 1,076,134 | 3,570,911 | 2,754,050 | ||||||||||||
OPERATING LOSS
|
(941,304 | ) | (742,929 | ) | (2,764,577 | ) | (1,840,164 | ) | ||||||||
OTHER INCOME (EXPENSE):
|
||||||||||||||||
Interest expense
|
(38,605 | ) | (12,261 | ) | (154,642 | ) | (128,503 | ) | ||||||||
Other income
|
5,296 | 7,610 | 25,206 | 19,758 | ||||||||||||
Loss on change - derivative liability warrants
|
(1,448,710 | ) | - | (1,448,710 | ) | - | ||||||||||
Loss on purchase of warrants and additional investment right
|
- | - | (1,150,000 | ) | - | |||||||||||
Total other expense
|
(1,482,019 | ) | (4,651 | ) | (2,728,146 | ) | (108,745 | ) | ||||||||
LOSS BEFORE INCOME TAXES
|
(2,423,323 | ) | (747,580 | ) | (5,492,723 | ) | (1,948,909 | ) | ||||||||
Income taxes - current benefit
|
(13,910 | ) | (9,965 | ) | (30,045 | ) | (24,159 | ) | ||||||||
NET LOSS
|
(2,409,413 | ) | (737,615 | ) | (5,462,678 | ) | (1,924,750 | ) | ||||||||
NONCONTROLLING INTEREST
|
(6,476 | ) | (786 | ) | (14,802 | ) | 2,750 | |||||||||
NET (LOSS) ATTRIBUTABLE TO VISUALANT, INC. AND SUBSIDIARIES COMMON SHAREHOLDERS
|
$ | (2,402,937 | ) | $ | (736,829 | ) | $ | (5,447,876 | ) | $ | (1,927,500 | ) | ||||
Basic and diluted income (loss) per common share attributable to Visualant, Inc. and subsidiaries common shareholders-
|
||||||||||||||||
Basic and diluted income (loss) per share
|
$ | (0.02 | ) | $ | (0.01 | ) | $ | (0.05 | ) | $ | (0.03 | ) | ||||
Weighted average shares of common stock outstanding- basic and diluted
|
124,638,584 | 67,597,374 | 108,181,494 | 59,398,032 |
VISUALANT, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
Nine Months Ended,
|
||||||||
June 30, 2013
|
June 30, 2012
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$ | (5,462,678 | ) | $ | (1,927,500 | ) | ||
Adjustments to reconcile net loss to net cash provided by
|
||||||||
(used in) operating activities
|
||||||||
Depreciation and amortization
|
303,270 | 258,870 | ||||||
Issuance of capital stock for services and expenses
|
254,500 | 229,000 | ||||||
Issuance of warrants for services and expenses
|
25,000 | - | ||||||
Issuance of capital stock for accrued liabilities
|
136,630 | 11,454 | ||||||
Stock based compensation
|
227,335 | 250,069 | ||||||
(Loss) on sale of assets
|
(10,572 | ) | (7,189 | ) | ||||
Loss on purchase of warrants and additional investment right
|
850,000 | - | ||||||
Loss on change - derivative liability warrants
|
1,448,710 | - | ||||||
Provision for losses on accounts receivable
|
29,281 | - | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
301,700 | 111,804 | ||||||
Prepaid expenses
|
159,515 | 39,128 | ||||||
Inventory
|
(345,937 | ) | 61,114 | |||||
Accounts payable - trade and accrued expenses
|
264,039 | 478,206 | ||||||
Deferred revenue
|
(666,667 | ) | 916,667 | |||||
Income tax receivable
|
(729 | ) | (15,080 | ) | ||||
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
(2,486,603 | ) | 406,543 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital expenditures
|
(23,746 | ) | 5,301 | |||||
Proceeds from sale of equipment
|
12,201 | 8,302 | ||||||
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES:
|
(11,545 | ) | 13,603 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from line of credit
|
109,337 | (1,734 | ) | |||||
Repayment of debt
|
(1,899,500 | ) | (26,822 | ) | ||||
Proceeds from the issuance of common stock
|
4,852,372 | 2,626,669 | ||||||
Repayments of capital leases
|
(10,199 | ) | (9,489 | ) | ||||
Change in noncontrolling interest
|
14,802 | (15,478 | ) | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
3,066,812 | 2,573,146 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
568,664 | 2,993,292 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period
|
1,141,165 | 92,313 | ||||||
CASH AND CASH EQUIVALENTS, end of period
|
$ | 1,709,829 | $ | 3,085,605 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid
|
$ | 109,545 | $ | 12,458 | ||||
Taxes paid
|
$ | - | $ | - | ||||
Non-cash investing and financing activities:
|
||||||||
Debenture converted to common stock
|
$ | 750,000 | $ | 200,000 | ||||
Note payable issued for additional investment right
|
$ | 850,000 | $ | - | ||||
Acquisition of leased equipment
|
$ | - | $ | 597 |
1.
|
ORGANIZATION
|
2.
|
GOING CONCERN
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS
|
Level 1 – Quoted prices in active markets for identical assets and liabilities;
|
Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and
|
Carrying
|
||||||||||||||||
Fair Value Measurements Using Inputs
|
Amount at
|
|||||||||||||||
Financial Instruments
|
Level 1
|
Level 2
|
Level 3
|
June 30, 2013
|
||||||||||||
Liabilities:
|
||||||||||||||||
Derivative Instruments - Warrants
|
$ | - | $ | 4,184,000 | $ | - | $ | 4,184,000 | ||||||||
Total
|
$ | - | $ | 4,184,000 | $ | - | $ | 4,184,000 |
June 30, 2013
|
||||
Market price and estimated fair value of common stock:
|
$ | 0.090 | ||
Exercise price
|
$ | 0.15-0.20 | ||
Expected term (years)
|
3-5 years
|
|||
Dividend yield
|
- | |||
Expected volatility
|
82 | % | ||
Risk-free interest rate
|
1.3 | % |
4.
|
DEVELOPMENT OF CHROMAID™ TECHNOLOGY
|
5.
|
JOINT DEVELOPMENT AGREEMENT WITH SUMITOMO PRECISION PRODUCTS CO., LTD.
|
6.
|
ACQUISITION OF TRANSTECH SYSTEMS, INC.
|
7.
|
ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION
|
8.
|
INVENTORIES
|
9.
|
FIXED ASSETS
|
Estimated
|
June 30, 2013
|
||||||||||||
Useful Lives
|
Purchased
|
Capital Leases
|
Total
|
||||||||||
Machinery and equipment
|
2-10 years
|
$ | 119,998 | $ | 87,039 | $ | 207,037 | ||||||
Leasehold improvements
|
5-20 years
|
603,612 | - | 603,612 | |||||||||
Furniture and fixtures
|
3-10 years
|
73,539 | 101,260 | 174,799 | |||||||||
Software and websites
|
3-7 years
|
63,782 | 44,849 | 108,631 | |||||||||
Less: accumulated depreciation
|
(435,409 | ) | (216,400 | ) | (651,809 | ) | |||||||
$ | 425,522 | $ | 16,748 | $ | 442,270 |
10.
|
INTANGIBLE ASSETS
|
Estimated
|
June 30,
|
September 30,
|
|||||||
Useful Lives
|
2013
|
2012
|
|||||||
Customer contracts
|
5 years
|
$ | 983,645 | $ | 983,645 | ||||
Technology
|
5 years
|
712,500 | $ | 712,500 | |||||
Less: accumulated amortization
|
(840,456 | ) | (586,034 | ) | |||||
Intangible assets, net
|
$ | 855,689 | $ | 1,110,111 |
11.
|
ACCOUNTS PAYABLE
|
12.
|
ACCRUED EXPENSES
|
13.
|
CONVERTIBLE NOTES PAYABLE
|
14.
|
NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT
|
June 30,
|
September 30,
|
|||||||
2013
|
2012
|
|||||||
BFI Business Finance Secured Credit Facility
|
$ | 477,812 | $ | 568,475 | ||||
TransTech capitalized leases, net of capitalized interest
|
7,744 | 17,943 | ||||||
Note payable to Umpqua Bank
|
200,000 | - | ||||||
Related party notes payable-
|
||||||||
James Gingo Promissory Note
|
- | 1,000,000 | ||||||
Lynn Felsinger
|
- | 49,500 | ||||||
Total debt
|
685,556 | 1,635,918 | ||||||
Less current portion of long term debt
|
(683,101 | ) | (1,631,903 | ) | ||||
Long term debt
|
$ | 2,455 | $ | 4,015 |
Years Ended June 30,
|
Total
|
|||
2014
|
$ | 105,611 | ||
2015
|
65,292 | |||
2016
|
38,008 | |||
2017
|
- | |||
2018
|
- | |||
Beyond
|
- | |||
Total
|
$ | 208,911 |
Years Ended June 30,
|
Total
|
|||
2014
|
$ | 683,101 | ||
2015
|
2,455 | |||
2016
|
- | |||
2017
|
- | |||
2018
|
- | |||
Total
|
$ | 685,556 |
15.
|
EQUITY
|
June 30, 2013
|
||||||||
Weighted
|
||||||||
Average
|
||||||||
Exercise
|
||||||||
Shares
|
Price
|
|||||||
Outstanding at beginning of period
|
3,369,050 | $ | 0.307 | |||||
Issued
|
110,080,000 | 0.100 | ||||||
Exercised
|
- | - | ||||||
Forfeited
|
(300,000 | ) | (0.200 | ) | ||||
Expired
|
(792,000 | ) | (0.500 | ) | ||||
Outstanding at end of period
|
112,357,050 | $ | 0.173 | |||||
Exerciseable at end of period
|
112,357,050 |
June 30, 2013
|
||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||
Number of
|
Remaining
|
Exercise
|
Shares
|
Exercise
|
||||||||||||||
Warrants
|
Life
|
Price
|
Exerciseable
|
Price
|
||||||||||||||
6,080,000 | 4.37 | $ | 0.100 | 6,080,000 | $ | 0.100 | ||||||||||||
52,300,000 | 4.88 | 0.150 | 52,300,000 | 0.150 | ||||||||||||||
52,300,000 | 4.88 | 0.200 | 52,300,000 | 0.200 | ||||||||||||||
1,059,073 | 0.62 | 0.20-0.29 | 1,059,073 | 0.20-0.29 | ||||||||||||||
117,977 | 0.80 | 0.30-0.39 | 117,977 | 0.30-0.39 | ||||||||||||||
500,000 | 0.63 | 0.40-0.49 | 500,000 | 0.40-0.49 | ||||||||||||||
112,357,050 | 4.75 | $ | 0.173 | 112,357,050 | $ | 0.173 |
Dividend yield
|
0%
|
Expected life
|
3-5 years
|
Expected volatility
|
143%
|
Risk free interest rate
|
1.5%
|
16.
|
STOCK OPTIONS
|
Weighted Average
|
||||||||||||
Options
|
Exercise Price
|
$ | ||||||||||
Outstanding as of September 30, 2011
|
6,920,000 | $ | 0.296 | $ | 2,050,800 | |||||||
Granted
|
2,200,000 | 0.104 | 229,000 | |||||||||
Exercised
|
- | - | - | |||||||||
Forfeitures
|
(3,200,000 | ) | 0.470 | (1,503,000 | ) | |||||||
Outstanding as of September 30, 2012
|
5,920,000 | 0.131 | $ | 776,800 | ||||||||
Granted
|
5,100,000 | 0.130 | 663,000 | |||||||||
Exercised
|
- | - | - | |||||||||
Forfeitures
|
(15,000 | ) | 0.240 | (3,600 | ) | |||||||
Outstanding as of June 30, 2013
|
11,005,000 | $ | 0.131 | 1,436,200 |
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||
Average
|
Average
|
Average
|
|||||||||||||||||
Range of
|
Number
|
Remaining Life
|
Exercise Price
|
Number
|
Exercise Price
|
||||||||||||||
Exercise Prices
|
Outstanding
|
In Years
|
Exerciseable
|
Exerciseable
|
Exerciseable
|
||||||||||||||
0.090 | 500,000 |
6.50 years
|
0.090 | 375,000 | 0.090 | ||||||||||||||
0.100 | 1,900,000 |
8.25 years
|
0.100 | 2,000,000 | 0.100 | ||||||||||||||
0.120 | 200,000 |
1.00 years
|
0.120 | 100,000 | 0.120 | ||||||||||||||
0.130 | 5,100,000 |
6.43 years
|
0.130 | 3,633,333 | 0.130 | ||||||||||||||
0.150 | 3,100,000 |
6.55 years
|
0.150 | 3,100,000 | 0.150 | ||||||||||||||
0.240 | 205,000 |
2.00 years
|
0.240 | 165,000 | 0.240 | ||||||||||||||
11,005,000 |
7.29 years
|
$ | 0.131 | 9,373,333 | $ | 0.135 |
17.
|
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
|
18.
|
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
|
Years Ended June 30,
|
Total
|
|||
2014
|
$ | 105,611 | ||
2015
|
65,292 | |||
2016
|
38,008 | |||
2017
|
- | |||
2018
|
- | |||
Beyond
|
- | |||
Total
|
$ | 208,911 |
19.
|
SUBSEQUENT EVENTS
|
PMB Helin Donovan, LLP
/s/ PMB Helin Donovan, LLP
November 10, 2012
Seattle, Washington
|
MADSEN & ASSOCIATES CPA’S, INC.
Certified Public Accountants and Business Consultants
|
684 East Vine St. #3
Murray, Utah 84107
Telephone 801-268-2632
|
VISUALANT, INCORPORATED AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
September 30, 2012
|
September 30, 2011
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
1,141,165
|
$
|
92,313
|
||||
Accounts receivable, net of allowance of $16,750 and $16,750, respectively
|
1,012,697
|
823,724
|
||||||
Prepaid expenses
|
222,978
|
283,204
|
||||||
Inventories
|
344,692
|
454,588
|
||||||
Refundable tax assets
|
29,316
|
9,080
|
||||||
Total current assets
|
2,750,848
|
1,662,909
|
||||||
EQUIPMENT, NET
|
469,001
|
522,668
|
||||||
OTHER ASSETS
|
||||||||
Intangible assets, net
|
1,110,111
|
1,143,090
|
||||||
Goodwill
|
983,645
|
983,645
|
||||||
Other assets
|
6,161
|
1,091
|
||||||
TOTAL ASSETS
|
$
|
5,319,766
|
$
|
4,313,403
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable - trade
|
$
|
1,593,861
|
$
|
1,206,100
|
||||
Accounts payable - related parties
|
73,737
|
8,093
|
||||||
Accrued expenses
|
391,311
|
155,267
|
||||||
Accrued expenses - related parties
|
5,849
|
783,732
|
||||||
Deferred revenue
|
666,667
|
-
|
||||||
Convertible notes payable
|
750,000
|
1,175,000
|
||||||
Note payable - current portion of long term debt
|
1,631,903
|
1,537,191
|
||||||
Total current liabilities
|
5,113,328
|
4,865,383
|
||||||
LONG TERM LIABILITIES:
|
||||||||
Long term debt
|
4,015
|
1,014,582
|
||||||
STOCKHOLDERS' EQUITY (DEFICIT):
|
||||||||
Preferred stock - $0.001 par value, 50,000,000 shares authorized, no shares
|
||||||||
issued and outstanding
|
-
|
-
|
||||||
Common stock - $0.001 par value, 200,000,000 shares authorized, 90,992,954
|
||||||||
and 49,065,669 shares issued and outstanding at 9/30/12 and 9/30/11, respectively
|
90,993
|
49,066
|
||||||
Additional paid in capital
|
13,995,554
|
9,524,577
|
||||||
Accumulated deficit
|
(13,915,931
|
)
|
(11,184,033
|
)
|
||||
Total stockholders' equity (deficit)
|
170,616
|
(1,610,390
|
)
|
|||||
Noncontrolling interest
|
31,807
|
43,828
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$
|
5,319,766
|
$
|
4,313,403
|
VISUALANT, INCORPORATED AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Year Ended,
|
||||||||
September 30, 2012
|
September 30, 2011
|
|||||||
REVENUE
|
$
|
7,923,976
|
$
|
9,136,216
|
||||
COST OF SALES
|
6,344,247
|
7,570,006
|
||||||
GROSS PROFIT
|
1,579,729
|
1,566,209
|
||||||
RESEARCH AND DEVELOPMENT EXPENSES
|
176,944
|
133,941
|
||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
|
3,624,711
|
3,691,760
|
||||||
OPERATING LOSS
|
(2,221,926
|
)
|
(2,259,491
|
)
|
||||
OTHER INCOME (EXPENSE):
|
||||||||
Interest expense
|
(463,735
|
)
|
(212,571
|
)
|
||||
Loss on purchase of outstanding warrants
|
(500,000
|
)
|
-
|
|||||
Gain on extinguishment of debt
|
394,057
|
-
|
||||||
Other income
|
36,597
|
67,458
|
||||||
Total other expense
|
(533,081
|
)
|
(145,113
|
)
|
||||
LOSS BEFORE INCOME TAXES
|
(2,755,007
|
)
|
(2,404,604
|
)
|
||||
Income taxes - current benefit
|
(29,315
|
)
|
(9,080
|
)
|
||||
NET LOSS
|
(2,725,692
|
)
|
(2,395,524
|
)
|
||||
NONCONTROLLING INTEREST
|
6,206
|
14,231
|
||||||
NET LOSS ATTRIBUTABLE TO VISUALANT, INC. AND SUBSIDIARIES COMMON SHAREHOLDERS
|
$
|
(2,731,898
|
)
|
$
|
(2,409,756
|
)
|
||
Basic and diluted loss per common share attributable to Visualant, Inc. and subsidiaries common shareholders-
|
||||||||
Basic and diluted loss per share
|
$
|
(0.04
|
)
|
$
|
(0.06
|
)
|
||
Weighted average shares of common stock outstanding- basic and diluted
|
65,557,376
|
42,682,795
|
VISUALANT, INCORPORATED AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
|
Total
|
||||||||||||||||||||
Additional
|
Stockholders'
|
|||||||||||||||||||
Common Stock
|
Paid in
|
Accumulated
|
Equity
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
(Deficit)
|
||||||||||||||||
Balance as of September 30, 2010
|
38,229,374
|
$
|
38,229
|
$
|
6,835,647
|
$
|
(8,774,277
|
)
|
$
|
(1,900,401
|
)
|
|||||||||
Stock compensation expense - employee options
|
-
|
-
|
23,586
|
-
|
23,586
|
|||||||||||||||
Stock compensation expense - non-employee options
|
-
|
-
|
129,641
|
-
|
129,641
|
|||||||||||||||
Issuance of common stock for services
|
1,289,692
|
1,290
|
589,014
|
-
|
590,304
|
|||||||||||||||
Issuance of common stock for RATLab LLC acquisition
|
1,000,000
|
1,000
|
199,000
|
-
|
200,000
|
|||||||||||||||
Issuance of common stock
|
4,862,462
|
4,861
|
1,063,387
|
-
|
1,068,248
|
|||||||||||||||
Issuance of common stock for debenture conversion
|
2,885,730
|
2,886
|
422,115
|
-
|
425,001
|
|||||||||||||||
Issuance of common stock for accrued liabilities
|
798,411
|
799
|
262,188
|
-
|
262,987
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(2,409,756
|
)
|
(2,409,756
|
)
|
|||||||||||||
Comprehensive loss
|
(2,409,756
|
)
|
||||||||||||||||||
Balance as of September 30, 2011
|
49,065,669
|
49,066
|
9,524,577
|
(11,184,033
|
)
|
(1,610,390
|
)
|
|||||||||||||
Stock compensation expense - employee options
|
-
|
-
|
27,746
|
-
|
27,746
|
|||||||||||||||
Stock compensation expense - non-employee options
|
-
|
-
|
238,426
|
-
|
238,426
|
|||||||||||||||
Issuance of common stock for services
|
3,400,000
|
3,400
|
323,100
|
-
|
326,500
|
|||||||||||||||
Issuance of common stock
|
22,664,705
|
22,664
|
2,604,005
|
-
|
2,626,669
|
|||||||||||||||
Issuance of common stock for debenture conversion
|
9,273,795
|
9,276
|
415,724
|
-
|
425,000
|
|||||||||||||||
Issuance of common stock for accrued liabilities
|
825,089
|
823
|
37,870
|
-
|
38,693
|
|||||||||||||||
Issuance of common stock for debt extinguishment
|
4,513,696
|
4,514
|
446,856
|
451,370
|
||||||||||||||||
Issuance of common stock for asset purchase
|
1,250,000
|
1,250
|
161,250
|
162,500
|
||||||||||||||||
Beneficial conversion feature
|
-
|
-
|
216,000
|
-
|
216,000
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(2,731,898
|
)
|
(2,731,898
|
)
|
|||||||||||||
Comprehensive loss
|
(2,731,898
|
)
|
||||||||||||||||||
Balance as of September 30, 2012
|
90,992,954
|
$
|
90,993
|
$
|
13,995,554
|
$
|
(13,915,931
|
)
|
$
|
170,616
|
VISUALANT, INCORPORATED AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year Ended,
|
||||||||
September 30, 2012
|
September 30, 2011
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(2,731,898
|
)
|
$
|
(2,409,756
|
)
|
||
Adjustments to reconcile net loss to net cash provided by
|
||||||||
(used in) operating activities
|
||||||||
Depreciation and amortization
|
356,348
|
384,919
|
||||||
Issuance of capital stock for services and expenses
|
326,500
|
660,251
|
||||||
Issuance of capital stock for accrued liabilities
|
38,693
|
-
|
||||||
Stock based compensation
|
266,172
|
151,118
|
||||||
Amortization of debt discount
|
-
|
11,153
|
||||||
Beneficial conversion feature
|
216,000
|
-
|
||||||
Gain on sale of assets
|
(7,690
|
)
|
(3,911
|
)
|
||||
Gain on extinguishment of debt
|
(394,057
|
)
|
-
|
|||||
Loss on repurchase of outstanding warrants
|
500,000
|
-
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(188,973
|
)
|
59,844
|
|||||
Prepaid expenses
|
60,226
|
(251,833
|
)
|
|||||
Inventory
|
109,896
|
168,182
|
||||||
Other assets
|
(5,070
|
)
|
-
|
|||||
Accounts payable - trade and accrued expenses
|
749,248
|
(81,758
|
)
|
|||||
Deferred revenue
|
666,667
|
-
|
||||||
Income tax receivable
|
(20,236
|
)
|
(500
|
)
|
||||
CASH (USED IN) OPERATING ACTIVITIES
|
(58,174
|
)
|
(1,312,291
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital expenditures
|
(109,167
|
)
|
(121,060
|
)
|
||||
Proceeds from sale of equipment
|
9,058
|
13,377
|
||||||
Purchase of investments-deposit
|
-
|
50
|
||||||
NET CASH (USED IN) INVESTING ACTIVITIES:
|
(100,109
|
)
|
(107,633
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Payments on line of credit
|
62,098
|
(136,957
|
)
|
|||||
Repayment of debt
|
(956,935
|
)
|
(650,000
|
)
|
||||
Proceeds from the issuance of common stock
|
2,626,669
|
943,233
|
||||||
Repayments of capital leases
|
(12,676
|
)
|
(23,221
|
)
|
||||
Proceeds from the issuance of convertible debt
|
-
|
1,300,000
|
||||||
Purchase of outstanding warrants
|
(500,000
|
)
|
-
|
|||||
Change in noncontrolling interest
|
(12,021
|
)
|
(4,755
|
)
|
||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
1,207,135
|
1,428,300
|
||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
1,048,852
|
8,376
|
||||||
CASH AND CASH EQUIVALENTS, beginning of period
|
92,313
|
83,937
|
||||||
CASH AND CASH EQUIVALENTS, end of period
|
$
|
1,141,165
|
$
|
92,313
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid
|
$
|
135,828
|
$
|
164,503
|
||||
Taxes paid
|
$
|
-
|
$
|
3,041
|
||||
Non-cash investing and financing activities:
|
||||||||
Debenture converted to common stock
|
$
|
425,000
|
$
|
425,000
|
||||
Issuance of common stock for acquisition
|
$
|
-
|
$
|
200,000
|
||||
Issuance of common stock for conversion of liabilities
|
$
|
-
|
$
|
262,987
|
||||
Issuance of note payable for acquisition
|
$
|
-
|
$
|
100,000
|
Acquisition of leased equipment
|
$
|
597
|
$
|
-
|
||||
Issuance of common stock for asset purchase
|
$
|
162,500
|
$
|
-
|
||||
Issuance of common stock for debt extinguishment
|
$
|
451,370
|
$
|
-
|
1.
|
ORGANIZATION
|
2.
|
GOING CONCERN
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS
|
•
|
Quoted prices for similar assets or liabilities in active markets;
|
•
|
Quoted prices for identical or similar assets in nonactive markets;
|
•
|
Inputs other than quoted prices that are observable for the asset or liability; and
|
•
|
Inputs that are derived principally from or corroborated by other observable market data.
|
4.
|
DEVELOPMENT OF SPECTRUM PATTERN MATCHING TECHNOLOGY
|
5.
|
JOINT DEVELOPMENT AGREEMENT WITH SUMITOMO PRECISION PRODUCTS CO., LTD.
|
6.
|
ACQUISITION OF TRANSTECH
|
7.
|
ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION
|
8.
|
INVENTORIES
|
9.
|
FIXED ASSETS
|
Estimated
|
September 30, 2012
|
||||||||||||
Useful Lives
|
Purchased
|
Capital Leases
|
Total
|
||||||||||
Machinery and equipment
|
2-10 years
|
$
|
119,331
|
$
|
87,039
|
$
|
206,370
|
||||||
Leasehold improvements
|
5-20 years
|
603,612
|
-
|
$
|
603,612
|
||||||||
Furniture and fixtures
|
3-10 years
|
55,307
|
101,260
|
$
|
156,567
|
||||||||
Software and websites
|
3- 7 years
|
64,112
|
44,849
|
$
|
108,961
|
||||||||
Less: accumulated depreciation
|
(400,516
|
)
|
(205,993
|
)
|
$
|
(606,509
|
)
|
||||||
$
|
441,846
|
$
|
27,155
|
$
|
469,001
|
Estimated
|
September 30, 2011
|
||||||||||||
Useful Lives
|
Purchased
|
Capital Leases
|
Total
|
||||||||||
Machinery and equipment
|
3-10 years
|
$
|
134,616
|
$
|
87,039
|
$
|
221,655
|
||||||
Leasehold improvements
|
20 years
|
600,000
|
-
|
$
|
600,000
|
||||||||
Furniture and fixtures
|
3-10 years
|
45,676
|
101,260
|
$
|
146,936
|
||||||||
Software and websites
|
3- 7 years
|
64,112
|
44,849
|
$
|
108,961
|
||||||||
Less: accumulated depreciation
|
(374,021
|
)
|
(180,863
|
)
|
$
|
(554,884
|
)
|
||||||
$
|
470,383
|
$
|
52,285
|
$
|
522,668
|
10.
|
INTANGIBLE ASSETS
|
Estimated
|
September 30,
|
September 30,
|
|||||||
Useful Lives
|
2012
|
2011
|
|||||||
Customer contracts
|
5 years
|
$
|
983,645
|
$
|
983,645
|
||||
Technology
|
5 years
|
712,500
|
$
|
450,000
|
|||||
Less: accumulated amortization
|
(586,034
|
)
|
(290,555
|
)
|
|||||
Intangible assets, net
|
$
|
1,110,111
|
$
|
1,143,090
|
11.
|
ACCOUNTS PAYABLE
|
12.
|
CONVERTIBLE NOTES PAYABLE
|
13.
|
NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT
|
September 30,
|
September 30,
|
|||||||
2012
|
2011
|
|||||||
BFI Finance Corp Secured Credit Facility
|
$
|
568,475
|
$
|
506,377
|
||||
TransTech capitalized leases, net of capitalized interest
|
17,943
|
31,216
|
||||||
Related party notes payable-
|
||||||||
James Gingo Promissory Note
|
1,000,000
|
1,650,000
|
||||||
RATLab LLC
|
-
|
150,000
|
||||||
Bradley E. Sparks
|
-
|
73,228
|
||||||
Lynn Felsinger
|
49,500
|
82,000
|
||||||
Ronald P. Erickson and affiliated parties
|
-
|
58,952
|
||||||
Total debt
|
1,635,918
|
2,551,773
|
||||||
Less current portion of long term debt
|
(1,631,903
|
)
|
(1,537,191
|
)
|
||||
Long term debt
|
$
|
4,015
|
$
|
1,014,582
|
Years Ended September 30,
|
Total
|
|||
2013
|
$
|
13,928
|
||
2014
|
3,332
|
|||
2015
|
683
|
|||
2016
|
-
|
|||
2017
|
-
|
|||
Total
|
17,943
|
|||
Less current portion of capitalized leases
|
(13,928
|
)
|
||
Long term capital leases
|
$
|
4,015
|
Years Ended September 30,
|
Total
|
|||
2013
|
$
|
1,631,903
|
||
2014
|
3,332
|
|||
2015
|
683
|
|||
2016
|
-
|
|||
2017
|
-
|
|||
Total
|
$
|
1,635,918
|
14.
|
EQUITY
|
September 30, 2012
|
||||||||
Weighted
|
||||||||
Average
|
||||||||
Exercise
|
||||||||
Shares
|
Price
|
|||||||
Outstanding at beginning of period
|
4,569,050
|
0.410
|
||||||
Issued
|
600,000
|
0.100
|
||||||
Exercised
|
-
|
-
|
||||||
Forfeited
|
-
|
-
|
||||||
Expired
|
(1800000
|
)
|
(0.500
|
)
|
||||
Outstanding at end of period
|
3,369,050
|
0.307
|
||||||
Exerciseable at end of period
|
3,369,050
|
September 30, 2012
|
||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||
Number of
|
Remaining
|
Exercise
|
Shares
|
Exercise
|
||||||||||||||
Warrants
|
Life
|
Price
|
Exerciseable
|
Price
|
||||||||||||||
600,000
|
2.50
|
$
|
0.100
|
600,000
|
$
|
0.100
|
||||||||||||
1,359,073
|
1.26
|
0.20-0.29
|
1,359,073
|
0.20-0.29
|
||||||||||||||
117,977
|
1.55
|
0.30-0.39
|
117,977
|
0.30-0.39
|
||||||||||||||
500,000
|
1.38
|
0.40-0.49
|
500,000
|
0.40-0.49
|
||||||||||||||
792,000
|
3.63
|
0.500
|
792,000
|
0.500
|
||||||||||||||
3,369,050
|
2.27
|
$
|
0.307
|
3,369,050
|
$
|
0.307
|
Assumptions
|
||||
Dividend yield
|
0
|
%
|
||
Expected life
|
3
|
|||
Expected volatility
|
143
|
%
|
||
Risk free interest rate
|
2
|
%
|
15.
|
STOCK OPTIONS
|
Weighted Average
|
||||||||||||
Options
|
Exercise Price
|
$
|
||||||||||
Outstanding as of September 30, 2010
|
4,735,000
|
$
|
0.289
|
$
|
1,366,250
|
|||||||
Granted
|
2,320,000
|
0.339
|
785,800
|
|||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Forfeitures
|
(135,000
|
)
|
(0.750
|
)
|
(101,250
|
)
|
||||||
Outstanding as of September 30, 2011
|
6,920,000
|
0.296
|
2,050,800
|
|||||||||
Granted
|
2,200,000
|
0.104
|
229,000
|
|||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Forfeitures
|
(3,200,000
|
)
|
(0.470
|
)
|
(1,503,000
|
)
|
||||||
Outstanding as of September 30, 2012
|
5,920,000
|
$
|
(0.131
|
)
|
$
|
776,800
|
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||
Range of
|
Number
|
Remaining Life
|
Exercise Price
|
Number
|
Exercise Price
|
|||||||||||||
Exercise Prices
|
Outstanding
|
In Years
|
Exerciseable
|
Exerciseable
|
Exerciseable
|
|||||||||||||
0.090 |
500,000
|
7.75 years
|
$
|
0.090
|
375,000
|
$
|
0.090
|
|||||||||||
0.100 |
1,900,000
|
9.50 years
|
0.100
|
1,250,000
|
0.100
|
|||||||||||||
0.120 |
200,000
|
2.25 years
|
0.120
|
50,000
|
0.120
|
|||||||||||||
0.150 |
100,000
|
2.75 years
|
0.150
|
100,000
|
0.150
|
|||||||||||||
0.150 |
3,000,000
|
7.75 years
|
0.150
|
3,000,000
|
0.150
|
|||||||||||||
0.240 |
220,000
|
3.25 years
|
0.240
|
128,333
|
0.240
|
|||||||||||||
5,920,000
|
7.86 years
|
$
|
0.131
|
4,903,333
|
$
|
0.141
|
16.
|
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
|
17.
|
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
|
Years Ended September 30,
|
Total
|
|||
2013
|
$
|
78,396
|
||
2014
|
81,348
|
|||
2015
|
57,012
|
|||
2016
|
23,755
|
|||
2017
|
-
|
|||
Beyond
|
-
|
|||
Total
|
$
|
240,511
|
NOTE 18.
|
INCOME TAXES
|
2012
|
2011
|
|||||||
U.S. operations loss carry forward at statutory rate of 42.6%
|
$
|
(1,163,832
|
)
|
$
|
(1,151,090
|
)
|
||
Less Valuation Allowance
|
1,163,832
|
1,151,090
|
||||||
Net Deferred Tax Assets
|
-
|
-
|
||||||
Change in Valuation allowance
|
$
|
-
|
$
|
-
|
2012
|
2011
|
|||||||
Federal Statutory Rate
|
-42.6
|
%
|
-42.6
|
%
|
||||
Increase in Income Taxes Resulting from:
|
||||||||
Change in Valuation allowance
|
42.6
|
%
|
42.6
|
%
|
||||
Effective Tax Rate
|
0.0
|
%
|
0.0
|
%
|
19.
|
SUBSEQUENT EVENTS
|
/s/ Ronald P. Erickson
|
/s/ Mark Scott
|
||
Ronald P. Erickson
|
Mark Scott
|
||
Chief Executive Officer
|
Chief Financial Officer
|
Securities and Exchange Commission registration fee
|
$
|
3,300
|
||
Accounting fees and expenses
|
2,500
|
|||
Legal fees and expenses
|
15,000
|
|||
Registrar and transfer agent fees and expenses
|
2,000
|
|||
Miscellaneous
|
3,200
|
|||
Total expenses
|
$
|
26,000
|
VISUALANT, INC.
|
||
By:
|
/s/ Ronald P. Erickson
|
|
Ronald P. Erickson
Chief Executive Officer and President
|
SIGNATURES
|
TITLE
|
DATE
|
/s/ Ronald P. Erickson
|
Chief Executive Officer, President and Director
|
September 13 , 2013
|
Ronald P. Erickson
|
(Principal Executive Officer)
|
|
/s/ Mark Scott
|
Chief Financial Officer and Secretary
|
September 13 , 2013
|
Mark Scott
|
(Principal Financial/Accounting Officer)
|
|
/s/ Marco Hegyi
|
Chairman of the Board, Independent Director
|
September 13 , 2013
|
Marco Hegyi
|
||
/s/ Jon Pepper
|
Independent Director
|
September 13 , 2013
|
Jon Pepper
|
||
/s/ Ichiro Takesako
|
Management Director
|
September 13 , 2013
|
Ichiro Takesako
|
NO.
|
EXHIBIT DESCRIPTION
|
||
3.1
|
Amended and Restated Bylaws. Filed as an exhibit to the Company’s Form 8-K dated August 10, 2012 and filed with the SEC on August 17, 2012, and incorporated by reference.
|
||
3.2
|
Amended and Restated Articles of Incorporation dated December 28, 2012 . Filed as an exhibit to the Company’s Form 8-KA dated March 21, 2013 and filed with the SEC on September 10 , 2013, and incorporated by reference. Also filed herewith.
|
||
3.3 |
Certificate and Amendment to Articles of Incorporation for Visualant, Inc. dated August 12, 2013. Filed as an exhibit to the Company’s Form 8-K dated August 12, 2013 and filed with the SEC on August 14, 2013, and incorporated by reference. Also filed herewith.
|
||
4.1
|
Visualant, Inc. 2011 Stock Incentive Plan filed as an exhibit to the Company’s Definitive Proxy Statement on Schedule 14A filed on January 31, 2011, File No. 000-30262-11560322, and incorporated herein by reference.
|
||
5.1
|
Opinion of Fifth Avenue Law Group, PLLC . Filed herewith.
|
||
10.1 |
Stock Purchase Agreement dated June 8, 2010 by and between Visualant, Inc. and TransTech Systems, Inc. Filed as an Exhibit Form 10-Q filed on August 12, 2010, and incorporated herein by reference.
|
10.2 |
Promissory Note dated June 8, 2010 by and between Visualant, Inc. and James M. Gingo. Filed as an Exhibit to Form 10-Q filed on August 12, 2010, and incorporated herein by reference.
|
10.3 |
Stock Pledge Agreement dated June 8, 2010 by and between Visualant, Inc., James M. Gingo and Brownstein, Rask, Sweeney, Kerr, Grim, Grim, DeSylvia and Hay, LLP. Filed as an Exhibit to Form 10-Q filed on August 12, 2010, and incorporated by reference.
|
10.4 |
Security Agreement dated June 8, 2010 by TransTech Systems, Inc. Filed herewith. Filed as an Exhibit to Form 10-Q filed on August 12, 2010, and incorporated by reference.
|
10.5 |
Employment Agreement dated June 8, 2010 by and between Visualant, Inc. and James Gingo. Filed as an to Form 10-Q filed on August 12, 2010, and incorporated by reference.
|
10.6
|
Securities Purchase Agreement dated December 23, 2010 by and between Visualant, Inc. and Seaside 88 Advisors LLC. Filed as an Exhibit to the Company’s Form 10-Q dated December 31, 2010 and filed on February 11, 2011, and incorporated by reference.
|
10.7
|
Amendment 2 to Securities Purchase Agreement by and between Visualant, Inc. and Seaside 88 Advisors, LLC. Filed as an Exhibit to the Company’s Form 8-K dated April 22, 2011 and filed with the SEC on April 27, 2011, and incorporated by reference.
|
10.8
|
Securities Purchase Agreement dated May 19, 2011 by and between Visualant, Inc. and Gemini Master Fund Ltd and Ascendiant Capital Partners, LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.9
|
Registration Rights Agreement dated May 19, 2011 by and between Visualant, Inc. and Gemini Master Fund Ltd and Ascendiant Capital Partners, LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.10
|
Convertible Debenture dated May 19, 2011 by and between Visualant, Inc. and Gemini Master Fund Ltd. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.11
|
Convertible Debenture dated May 19, 2011 by and between Visualant, Inc. and Ascendiant Capital Partners, LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.12
|
Warrant dated May 19, 2011 by and between Visualant, Inc. and Gemini Master Fund Ltd. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.13
|
Warrant dated May 19, 2011 by and between Visualant, Inc. and Ascendiant Capital Partners, LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.14
|
Warrant dated May 19, 2011 by and between Visualant, Inc. and Ascendiant Capital Markets LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.15
|
Asset Purchase Agreement dated June 7, 2011 by and between Visualant, Inc. and the RATLab LLC and filed as an Exhibit to the company’s Form 8-K with the SEC on June 10, 1011, and incorporated by reference.
|
10.16
|
Securities Purchase Agreement dated June 17, 2011 by and between Visualant, Inc. and Ascendiant Capital Partners, LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.17
|
Registration Rights Agreement dated June 17, 2011 by and between Visualant, Inc. and Ascendiant Capital Partners, LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated and filed June 28, 2011, and incorporated by reference.
|
10.18
|
Financial Consulting Agreement effective October 5, 2011 by and between Visualant, Inc. and D. Weckstein &Co. Inc. Filed as an Exhibit to the Company’s Amended Registration Statement on Form S-1 dated and filed August 16, 2013, and incorporated by reference.
|
10.19
|
Advisory Agreement dated February 7, 2012 by and between Visualant, Inc. and Coventry Capital LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated April 2, 2012 and filed with the SEC on April 3, 2012, and incorporated by reference.
|
10.20
|
Extension Agreement dated March 12, 2012 by and between Visualant, Inc. and Gemini Master Fund Ltd and Ascendiant Capital Partners, LLC. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated April 2, 2012 and filed with the SEC on April 3, 2012, and incorporated by reference.
|
10.21
|
Warrant dated March 12, 2012 by and between Visualant, Inc. and National Securities Corporation. Filed herewith April 2, 2012 Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated April 2, 2012 and filed with the SEC on April 3, 2012, and incorporated by reference.
|
10.22
|
Warrant dated March 12, 2012 by and between Visualant, Inc. and Steven Freifeld. Filed as an Exhibit to the Company’s Registration Statement on Form S-1 dated April 2, 2012 and filed with the SEC on April 3, 2012, and incorporated by reference.
|
10.23
|
License Agreement dated May 31, 2012 by and between Visualant, Inc. and Sumitomo Precision Products Co., Ltd. Filed as an exhibit to the Company’s Form 8-K dated May 31, 2012 and filed with the SEC on June 4, 2012, and incorporated by reference.
|
10.24
|
Joint Research and Product Development Agreement dated May 31, 2012 by and between Visualant, Inc. and Sumitomo Precision Products Co., Ltd. Filed herewith.
|
10.25
|
Stock Purchase Agreement dated May 31, 2012 by and between Visualant, Inc. and Sumitomo Precision Products Co., Ltd. Filed as an exhibit to the Company’s Form 8-K dated May 31, 2012 and filed with the SEC on June 4, 2012, and incorporated by reference.
|
10.26
|
Asset Purchase Agreement dated July 31, 2012 by and between Visualant, Inc. and the Javelin LLC and filed with the SEC on August 22, 2012, and incorporated by reference.
|
10.27
|
Warrant Purchase Agreement dated January 23, 2013 by and between Visualant, Inc. and Ascendiant Capital Partners LLC. Filed as an exhibit to the Company’s Form 8-K dated January 30, 2013 and filed with the SEC on January 30, 2013, and incorporated by reference.
|
10.28
|
Amendment to Warrant Purchase Agreement dated January 23, 2013 by and between Visualant, Inc. and Gemini Master Fund Ltd. Filed as an exhibit to the Company’s Form 8-K dated January 30, 2013 and filed with the SEC on January 30, 2013, and incorporated by reference.
|
10.29
|
AIR Termination Agreement dated January 23, 2013 by and between Visualant, Inc. and Gemini Master Fund Ltd. Filed as an exhibit to the Company’s Form 8-K dated January 30, 2013 and filed with the SEC on January 30, 2013, and incorporated by reference.
|
10.30
|
$850,000 Term Note of Visualant, Inc. dated January 23, 2013. Filed as an exhibit to the Company’s Form 8-K dated January 30, 2013 and filed with the SEC on January 30, 2013, and incorporated by reference.
|
10.31
|
Amendment to Joint Research and Product Development Agreement dated March 29, 2013 by and between Visualant, Inc. and Sumitomo Precision Products Co., Ltd. Filed herewith.
|
10.32
|
Option Agreement dated April 26, 2013 by and between Visualant, Inc. and Ascendiant Capital Partners LLC. Filed as an exhibit to the Company’s Form 8-K dated April 26, 2013 and filed with the SEC on May 1, 2013, and incorporated by reference.
|
10.33
|
Form of Purchase Agreement by and between Visualant, Inc. and investors. Filed as an exhibit to the Company’s Form 8-K dated June 14, 2013 and filed with the SEC on June 18, 2013, and incorporated by reference.
|
10.34
|
Form of Warrant by and between Visualant, Inc. and investors. Filed as an exhibit to the Company’s Form 8-K dated June 14, 2013 and filed with the SEC on June 18, 2013, and incorporated by reference.
|
10.35
|
Form of Registration Rights Agreement by and between Visualant, Inc. and investors. Filed as an exhibit to the Company’s Form 8-K dated June 14, 2013 and filed with the SEC on June 18, 2013, and incorporated by reference.
|
10.36
|
Form of Voting Agreement by and between Visualant, Inc. and investors. Filed as an exhibit to the Company’s Form 8-K dated June 14, 2013 and filed with the SEC on June 18, 2013, and incorporated by reference.
|
10.37 | Amendment No. 1 to Lease dated June 14, 2013 by and between Visualant, Inc. and Logan Building LLC. Filed as an Exhibit to the Company’s Amended Registration Statement on Form S-1 dated and filed August 16, 2013, and incorporated by reference. |
10.38 | Amendment to Lease dated March 3, 2006 by and between TransTech Systems, Inc. and Little Properties LLC. Filed as an Exhibit to the Company’s Amended Registration Statement on Form S-1 dated and filed August 16, 2013, and incorporated by reference. |
10.39 |
Settlement and Release Agreement dated September 6, 2012 by and between Visualant, Inc. and Bradley E. Sparks. Filed as an Exhibit to the Company’s Form 8K filed with the SEC on September 11, 2012, and incorporated by reference.
|
10.40 | Demand Promissory Note dated May 31, 2013 by and between Visualant, Inc. and J3E2A2Z LP, an entity affiliated with Ronald P. Erickson, our Chief Executive Officer. Filed as an Exhibit to the Company’s Amended Registration Statement on Form S-1 dated and filed August 16, 2013, and incorporated by reference. |
10.41 |
Lease dated July 11, 2012 by and between Visualant, Inc. and Harbor Properties Inc. Filed herewith.
|
10.42 |
Exercise of Lease Letter dated May 24, 2011 by TransTech Systems, Inc. to Little Properties LLC. Filed herewith.
|
10.43 |
Security Agreement dated June 12, 2013 by and between Visualant, Inc. and BFI Business Finance, filed as an exhibit to the Company’s Form 10Q dated June 30, 2013 and filed August 15, 2013, and incorporated by reference.
|
14.1
|
Code of Conduct and Ethics dated November 30, 2012. Filed as an exhibit to the Company’s Form 8-K dated December 28, 2012 and filed with the SEC on January 3, 2013, and incorporated by reference.
|
21.1
|
Subsidiaries of the Registrant. Filed as an exhibit to the Company’s Form 10-K dated September 30, 2012 and filed with the SEC on November 13, 2012, and incorporated by reference.
|
23.1
|
Consent of PMB Helin Donovan, LLP. Filed herewith.
|
23.2
|
Consent of Madsen & Associates CPA's, Inc. Filed herewith.
|
24.1
|
Power of Attorney (included on the signature page of this registration statement).
|
99.1
|
Audit Committee Charter dated November 30, 2012. Filed as an exhibit to the Company’s Form 8-K dated December 28, 2012 and filed with the SEC on January 3, 2013, and incorporated by reference.
|
99.2
|
Compensation Committee Charter dated November 30, 2012. Filed as an exhibit to the Company’s Form 8-K dated December 28, 2012 and filed with the SEC on January 3, 2013, and incorporated by reference.
|
99.3
|
Nominations and Governance Committee Charter dated November 30, 2012. Filed as an exhibit to the Company’s Form 8-K dated December 28, 2012 and filed with the SEC on January 3, 2013, and incorporated by reference.
|
|
(a)
|
the designation of the series;
|
|
(b)
|
the number of shares in the series;
|
|
(c)
|
the rate of dividends, if any;
|
|
(d)
|
whether shares in the series may be redeemed and, if so, the redemption price and the terms, time and conditions of such redemption;
|
|
(e)
|
the amount payable upon shares of such series, if any, in the event of voluntary or involuntary liquidation;
|
|
(f)
|
sinking fund provisions, if any, for the redemption or purchase of shares in the series;
|
|
(g)
|
the terms and conditions, if any, on which shares in the series may be converted into shares of common stock or other securities of the corporation;
|
|
(h)
|
voting rights, if any; and
|
|
(i)
|
such other covenants, limitations and conditions as are expressly stated in the resolution or resolutions adopted by the Board of Directors establishing such series.
|
VISUALANT, INCORPORATED
/s/ Mark Scott
By: Mark Scott
Its: Secretary
|
Very truly yours,
/s/ Fifth Avenue Law Group, PLLC
Fifth Avenue Law Group, Pllc
|
Sumitomo Precision Products Co., Ltd.
By: /s/ Susumu Kaminaga
Name: Susumu Kaminaga
Title: President
|
Visualant Incorporated
By: /s/ Ronald P. Erickson
Name: Ronald P. Erickson
Title: President and CEO
|
Sumitomo Precision Products Co., Ltd.
By: /s/ Shinichi Miki
Name: Shinichi Miki
Title: President
|
Visualant, Incorporated
By: /s/ Ronald P. Erickson
Name: Ronald P. Erickson
Title: President and CEO
|
Top Level Schedule on Joint Development Tasks- Attachment B to the Joint Development Agreement
|
3/25/2013
|
|||||||||||||||
2013
|
2014
|
|||||||||||||||
Tasks
|
Owner
|
Mar.
|
Apr
|
May
|
Jun
|
Jul
|
Aug
|
Sep
|
Oct
|
Nov
|
Dec
|
Jan
|
Feb
|
Mar
|
||
Orca HW (6D) and FW (Ahi) Complete
|
Both
|
26-Apr
|
||||||||||||||
Test Orca with TaterTot (Host software)
|
Both?
|
May 13 Start testing
|
||||||||||||||
Squid Prototype Development
|
Visualant
|
May 27 Start to test working unit
|
||||||||||||||
Self Calibration Development
|
Starts May 13 We have to work with Prof Furness to plan this we can start when we have Orca, FW, and Host Software
|
|||||||||||||||
Skunk Works
|
Visualant
|
This is work with RATLab. The only real schedule is 'submit entry into xprize'
|
||||||||||||||
Dev. Kit (6D rev 1) Release to Market
|
Both
|
End June. We see the Dev Kit potentially being released with Calibration algorithm as a later update
|
||||||||||||||
Dev. Kit (Squid) Release to Market
|
Both
|
To be discussed between Visualant and SPP working group based on schedule above
|
||||||||||||||
Market Research with Dev. Kit (6D rev 1)
|
Both
|
After the market release(3 to 6 months? To be discussed)
|
||||||||||||||
Market Research with Dev. Kit (Squid)
|
Both
|
After the market release(3 to 6 months? To be discussed)
|
||||||||||||||
Market response wrap up
|
Both
|
after above two activities
|
||||||||||||||
Ver. 7 Concept design
|
Both
|
after above
|
||||||||||||||
Ver. 7 top level configuration docs
|
Visualant?
|
TBD
|
||||||||||||||
Ver. 7 tests/ Callibration
|
Both
|
TBD
|
||||||||||||||
Ver. 7 release
|
Both
|
TBD
|
SECTION 1 BASIC PROVISIONS
|
1
|
SECTION 2 PREMISES AND PREPARATION OF PREMISES
|
2
|
SECTION 3 TERM AND COMMENCEMENT
|
2
|
SECTION 4 RENT
|
3
|
SECTION 5 QUIET ENJOYMENT
|
5
|
SECTION 6 UTILITIES, SERVICES AND COMMON AREAS
|
5
|
SECTION 7 DEPOSITS
|
7
|
SECTION 8 USE, COMPLIANCE WITH LAWS AND RULES
|
8
|
SECTION 9 MAINTENANCE AND REPAIRS
|
8
|
SECTION 10 ALTERATIONS AND LIENS
|
9
|
SECTION 11 INSURANCE AND WAIVER OF SUBROGATION
|
10
|
SECTION 12 CASUALTY DAMAGE
|
10
|
SECTION 13 CONDEMNATION
|
11
|
SECTION 14 ASSIGNMENT AND SUBLETTING
|
11
|
SECTION 15 PERSONAL PROPERTY, RENT AND OTHER TAXES
|
12
|
SECTION 16 DEFAULT; LANDLORD’S REMEDIES
|
12
|
SECTION 17 SUBORDINATION, ATTORNMENT AND LENDER PROTECTION
|
14
|
SECTION 18 ESTOPPEL CERTIFICATES
|
14
|
SECTION 19 RIGHTS RESERVED BY LANDLORD
|
14
|
SECTION 20 LANDLORD’S DEFAULT; REMEDIES
|
15
|
SECTION 21 RELEASE AND INDEMNITY
|
16
|
SECTION 22 RETURN OF POSSESSION
|
17
|
SECTION 23 HOLDING OVER
|
17
|
SECTION 24 NOTICES
|
17
|
SECTION 25 REAL ESTATE BROKERS
|
17
|
SECTION 26 NO WAIVER
|
17
|
SECTION 27 SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
|
18
|
SECTION 28 TELECOMMUNICATION LINES
|
18
|
SECTION 29 SUBSTANCES; DISRUPTIVE ACTIVITIES
|
18
|
SECTION 30 DISABILITIES ACTS
|
19
|
SECTION 31 DEFINITIONS
|
19
|
SECTION 32 OFFER
|
20
|
SECTION 33 MISCELLANEOUS
|
21
|
SECTION 34 TERMINATION OF PRIOR LEASE | 22 |
SECTION 35 ENTIRE AGREEMENT
|
22
|
A. Building:
|
Logan Building, 500 Union Street, Seattle, Washington (the “Building”), located on a portion of the real property legally described on Exhibit A attached hereto (the “Property”).
|
B. Premises:
|
Suite 420 in the Building as outlined or cross-hatched on Exhibit A-1.
|
C. Commencement Date:
|
The “Commencement Date” shall be August 1, 2012 subject to Section 3.
|
D. Expiration Date:
|
August 31, 2014, subject to Section 3.
|
E. Rentable Area:
|
The rentable area of the Premises shall conclusively be deemed approximately 1,014 rentable square feet, and the rentable area of the Building shall conclusively be deemed 114,088 square feet, for purposes of this Lease, subject to Section 31(M).
|
F. Tenant’s Share:
|
.88% of the total rentable area of the Building (“Tenant’s Share”), subject to Section 4 and Section 31(M).
|
G. Base Rent:
|
From the Rent Commencement Date through the Expiration Date, as further described in Section 4, as follows:
|
Period
|
Monthly Base Rent
|
08/01/12 – 08/31/12
|
$0.00
|
09/01/12 – 8/31/13
|
$1,943.50
|
09/01/13 – 8/31/14
|
$2,028.00
|
H. Additional Rent:
|
Tenant shall pay Tenant’s Share of Taxes and Tenant’s Share of Expenses for the applicable “Fiscal Year” in excess of such amounts for the Fiscal Year commencing September 1, 2011 – August 31, 2012, (the “Base Fiscal Year”) as further described in Section 4. For purposes of this Lease “Fiscal Year” means the twelve (12) month period commencing September 1 and continuing through the following August 31. The first pass through billing of Additional Rent will be in the fall (Sept./Oct.) of 2013, when the Landlord can compare the comparison year expenses to the Base Year expenses for the building, if any.
|
I. Permitted Use:
|
General office use and related use subject to Section 8.
|
J. Deposits:
|
A security deposit of Five Thousand Seventy and 00//100 Dollars ($5,070.00), which shall be subject to Section 7.
|
K.
|
First Month’s Rent. Tenant, upon execution of the agreement, shall provide Landlord with the first month’s rent totaling One Thousand Nine Hundred Forty-three and 50/100 Dollars ($1,943.50).
|
L. Broker (if any):
|
Jim Lovsted, Jeff Huntington, Tim Foster, Lloyd Low representing the Landlord. Scott Driver of Scott Driver & Company, P.S. represents the Tenant. There are no other agents party to this agreement.
|
M. Riders/Exhibits:
|
In addition to Exhibit A (Property), Exhibit A-1 (Premises), Exhibit B (Work Letter), and Rider One (Rules and Regulations)
|
LANDLORD:
HARBOR PROPERTIES, INC.,
a Washington corporation
BY: /s/ Douglas L. Daley
Douglas L. Daley
President
TENANT:
Visualant, Inc., a Nevada corporation
By: /s/ Ronald P. Erickson
Its: Chief Executive Officer
|
|
By: ______________
Its: ___________________________
|
|
|
·
|
Landlord and Tenant hereby agree that the Landlord will provide the following building standard improvements pursuant to the mutually agreed upon plan attached to this Lease:
|
|
·
|
Landlord shall insure Tenant has Building standard signage & keys
|
Cc:
|
Steve Waddle, Controller, TransTech Systems, Inc.
Ron Erickson, CEO, Visualant, Inc.
Mark Scott, CFO, Visualant, Inc.
Sharon Little, Partner, Little Properties, L.L.C.
Bill Little, Partner, Little Properties, L.L.C.
|
/s/ Madsen & Associates CPA’s, Inc.
|
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MM!SH\JA&SK5(U,"UAXIXCFS3+(2HPGC8PIQ?D "_ACXL^#6NVWAR
M2^\%Z[H5O\-/"^M_;M0D\1O)KT5],@BTR]DTH>N?#C]C+X,_";XX:)\=O`47
MB30=:\-?LJ?#O]CKP[X+M]3L/^%=Z'\(/A=XP\0^,_"ATW0O[)&I6_BB&]\1
MW6F7VK?VXUG>Z+9:7:OI2W%D+R3#\9?\%&/V`?A[-:VWC7]M?]E7PW Y_:&U7P'!\(/@-K_F6VL_##X'?#;1]
M:MO!NM^/-&D&W0/B]\5=8\7>*O&WC?0(?L[>&=!G\!^$-7TW3?$_AOQ!;`K]
M0U4(H51A5&`,DX`]R23^)HH`_B2_X*:_"+XF?\$POVI?&?QOTO2)V_8Y_:0^
M*-[\0M'\>Z=::C+;_"SXP?$B_2Z\>_"_X@:MI-N?^$8LM:\8ZCK7CSX,>(M0
MDLM"FM=?U3X=M,^J>%-`&H=-H/[2?PG^+7A>]U*34I$OM9.F^9HFLR:E=W,D
M7B>ZU'3;!"]G//'J^@OI>J&YN9S<66^72X19:;!;6J68_L<\=>`_!7Q.\(^(
MO`'Q%\)^'/'7@;Q?I-[H'BOP=XNT33/$?ACQ+H>I0/;7^CZ]H6L6M[I>K:9>
MV\CPW5C?6L]M/&Q22-E)%?RL?\%'_P#@A7^QA\!/AQ\3?V@_V:/$G[07[-VI
MVNA:YXCD^&7PM^)NFW?P=FU6'5M/GMOL7@SXE^#_`(AW'A72;2[U_6[NS\-^
M!]:\+^&;5M2EM8-'CTZWL+*T`/SZ\/:-\6OV%OCSJ7[3?["_Q+M-*O-=?2[3
MXU_#7Q);0/X'^)/AO^T(] Intangible assets as of June 30, 2013 and September 30, 2012 consisted
of the following: Total amortization expense was $254,422 and $215,047 for the nine
months ended June 30, 2013 and 2012, respectively. The fair value of the TransTech intellectual property acquired was
$983,645, estimated by using a discounted cash flow approach based on future economic benefits associated with agreements with
customers, or through expected continued business activities with its customers. In summary, the estimate was based on a projected
income approach and related discounted cash flows over five years, with applicable risk factors assigned to assumptions in the
forecasted results. The fair value of the RATLab intellectual property associated with
the assets acquired was $450,000 estimated by using a discounted cash flow approach based on future economic benefits. In summary,
the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable risk factors
assigned to assumptions in the forecasted results. The fair value of the Javelin intellectual property acquired was
$262,500 estimated by using a discounted cash flow approach based on future economic benefits associated with the assests acquired.
In summary, the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable
risk factors assigned to assumptions in the forecasted results. Intangible assets as of September 30, and 2012 and 2011 consisted
of the following: Total amortization expense was $295,479 and $224,979 for the year
ended September 30, 2012 and 2011, respectively. The fair value of the TransTech intellectual property acquired was
$983,645, estimated by using a discounted cash flow approach based on future economic benefits associated with agreements with
customers, or through expected continued business activities with its customers. In summary, the estimate was based on a projected
income approach and related discounted cash flows over five years, with applicable risk factors assigned to assumptions in the
forecasted results. The fair value of the RATLab intellectual property associated with
the assets acquired was $450,000 estimated by using a discounted cash flow approach based on future economic benefits.. In summary,
the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable risk factors
assigned to assumptions in the forecasted results. The fair value of the Javelin intellectual property acquired was
$262,500 estimated by using a discounted cash flow approach based on future economic benefits associated with the assets acquired.
In summary, the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable
risk factors assigned to assumptions in the forecasted results. The Companys ChromaID Technology The Company has invented a way to project light
at a material (solid surface, liquid, or gas) and measure the amount of light that is reflected back. The pattern of this reflected
light is compared to other patterns the Company has captured and this allows the Company to identify, detect, or diagnose materials
that cannot be identified by the human eye. The Company refers to this pattern of reflected light as a ChromaID. The Company
designs ChromaID scanning devices made with electronic, optical, and software parts to produce and capture the light. The Companys first product, the ChromaID
F12 Lab Kit, scans and identifies solid surfaces. The Company is marketing this product to customers who are considering licensing
the technology. Target markets include, but are not limited to, commercial paint manufacturers, pharmaceutical equipment manufacturers,
process control companies, currency paper and ink manufacturers, security card, reader, and scanner manufacturers, food processing,
and electronic gaming. The Companys Patents On August 9, 2011, the Company was issued US
Patent No. 7,996,173 B2 entitled Method, Apparatus and Article to Facilitate Distributed Evaluation of Objects Using Electromagnetic
Energy, by the United States Office of Patents and Trademarks. The patent expires August 24, 2029. On December 13, 2011, the Company was issued
US Patent No. 8,076,630 B2 entitled System and Method of Evaluating an Object Using Electromagnetic Energy by the
United States Office of Patents and Trademarks. The patent expires November 7, 2028. On December 20, 2011, the Company was issued
US Patent No. 8,081,304 B2 entitled Method, Apparatus and Article to Facilitate Evaluation of Objects Using Electromagnetic
Energy by the United States Office of Patents and Trademarks. The patent expires July 28, 2030. On October 9, 2012, the Company was issued US
Patent No. 8,285,510 B2 entitled Method, Apparatus, and Article to Facilitate Distributed Evaluation of Objects Using Electromagnetic
Energy by the United States Office of Patents and Trademarks. The patent expires July 31, 2027. On February 5, 2013, the Company was issued
US Patent No. 8,368,878 B2 entitled Method, Apparatus and Article To Facilitate Evaluation of Objects Using Electromagnetic
Energy by the United States Office of Patents and Trademarks. The patent expires July 31, 2027. The Company is pursuing an aggressive patent
strategy to expand our unique intellectual property in the United States and Japan and other countries. The Company has developed a unique patented
Visualant Spectral Pattern Matching technology. This technology directs structured light onto a physical substance to capture
a Visualant Spectral Signature called a ChromaID. When matched against existing databases, the ChromaID can be used
to identify, detect, or diagnose markers invisible to the human eye. ChromaID scanners can be integrated into a variety of mobile
or fixed-mount form factors, making it possible to effectively conduct analyses in the field that could only previously be performed
by large and expensive lab-based tests. Visualant Spectral Pattern Matching and
the ChromaID profile were developed over a seven year period by Professors Dr. Tom Furness and Dr. Brian Showngerdt of RATLab LLC
under contract to Visualant. The technology is now being transferred into products and a ScanHead module. Visualant has partnered
with Sumitomo Precision Products to manufacture the ScanHead and reduce the technology to a reliable and cost effective form. The
first demonstration of this is the Cyclops6 ChromaID Scanner which was demonstrated at the Japanese Instrumentation Manufacturing
Association trade show in Tokyo in October 2012. The Cyclops 6 ChromaID Scanner can be used to evaluate the technology for flat
surface applications and has sensitivity from 350nm to 1450nm. Visualant is pursuing an aggressive patent strategy to expand
our unique intellectual property in the United States and Japan. The following patents have been issued to date: On September 6, 2011, the Company announced that it was issued
US Patent No. 7,996,173, entitled Method, Apparatus and Article to Facilitate Distributed Evaluation of Objects Using Electromagnetic
Energy, by the United States Office of Patents and Trademarks. On January 19, 2012, the Company announced
that it was issued US Patent No. 8,081,304, entitled Method, Apparatus and Article to Facilitate Evaluation of Objects Using
Electromagnetic Energy by the United States Office of Patents and Trademarks. On March 20, 2012, the Company announced
that it was issued US Patent No. 8,076,630, entitled System and Method of Evaluating an Object Using Electromagnetic Energy
by the United States Office of Patents and Trademarks. On November 1, 2012, the Company announced
that it was issued US Patent No. 8,285,510 entitled System and Method of Evaluating an Object Using Electromagnetic Energy
by the United States Office of Patents and Trademarks. On June 7, 2011, the Company closed the
acquisition of all Visualant related assets of the RATLab LLC (RATLab). The RATLab is a Seattle based research and
development laboratory created by Dr. Tom Furness, founder and Director of the HITLab International, with labs at Seattle,
University of Canterbury in New Zealand, and the University of Tasmania in Australia. With this acquisition, the Company consolidated
all intellectual property relating to the Spectral Pattern Matching technology except for environmental field of use. The
Company acquired the Visualant related assets of the RATLab for (i) 1,000,000 shares of our common stock at closing valued at $0.20
per share, the price during the negotiation of this agreement; (ii) $250,000 (paid); and (iii) payment of the outstanding
promissory note owing to Mr. Furness in the amount of $65,000 with accrued interest of $24,675 (paid). On July 31, 2012, the Company closed
the acquisition of the environmental field of use of its Spectral Pattern Matching technology from Javelin LLC (Javelin).
The Company acquired the Visualant related assets of Javelin for (i) 1,250,000 shares of our common stock at closing valued
at thirteen ($0.13) per share, the price during the negotiation of this agreement; and (ii) $100,000, with $20,000 payable
at closing and $80,000 to be paid in four equal installments over a period of eight months. In addition, Company entered into a
Business Development Agreement which will pay Javelin ten percent (10%) on the gross margin received by Visualant from license
agreements and joint venture developments sourced by Javelin. Mr. Erickson, our Chief Executive Officer and/or
entities in which Mr. Erickson has a beneficial interest have made advances and loans to us in the total principal amount of $960,000
on or before the date hereof at an average annual interest rate of 4.2%. In addition, Mr. Erickson and/or entities in which Mr.
Erickson has a beneficial interest also have unreimbursed 2013 expenses and unpaid salary and interest from 2013 on the outstanding
principal amount of the Loans totaling approximately $65,000 as of June 14, 2013. Mr. Erickson and related entities converted $500,000
of the advances and loans as part of the PPM which closed June 14, 2013. The remaining amounts were paid to Mr. Erickson and related
entities by June 30, 2013. The PPM is discussed in Note 15. Mr. Mark Scott, our Chief Financial Offer, invested
$10,000 in the Private Placement which closed June 14, 2013 and is disclosed in Note 15. Other related party transactions are discussed
in Note 14. See Note 13 for discussion of notes payable issued to the Companys
former CEO and President during the quarter ended March 31, 2007. Other than the note payable, related interest and
payroll related accruals, all amounts are recorded in the related party accounts payable balance. As of the filing date,
Mr. Erickson beneficially owns 5,423,773 shares of common stock. Mr. Sparks resigned from the Board of Directors effective September
6, 2012. On September 6, 2012, the Company entered into a Settlement and Release Agreement with Mr. Sparks pursuant
to which the Company agreed to (i) pay to Mr. Sparks the sum of $50,750 and issue 513,696 shares of the Companys common
stock as satisfaction in full of amounts owed pursuant to a note issued in 2007 and related accrued interest; and (ii) pay
to Mr. Sparks the sum of $39,635 and issue 4,000,000 shares of the Companys common stock as satisfaction in full of amounts
owed to pursuant to a note issued in 2009, related accrued interest, and other liabilities, including accrued compensation of $721,333. The
full Settlement and Release Agreement was filed as Exhibit 10.1 to Form 8-K/A1 filed by the Company on September 12, 2012. The Company paid $195,000 for fees due two directors for their services
on closing the SPP transactions. The Company paid $60,000 on June 25, 2012 and $135,000 on July 25, 2012. Accounts payable were $2,297,387 and $1,593,861
as of June 30, 2013 and September 30, 2012, respectively. Such liabilities consisted of amounts due to vendors for inventory
purchases and technology development, external audit, legal and other expenses incurred by the Company. TransTech had 3 vendors
(37.5%, 19.2%, and 11.6%) with accounts payable in excess of 10% of its accounts payable as of June 30, 2013. The Company does
expect to have vendors with accounts payable balances of 10% of total accounts payable in the foreseeable future. Accounts payable were $1,593,861 and $1,206,100 as of September
30, 2012 and 2011, respectively. Such liabilities consisted of amounts due to vendors for inventory purchases and technology development,
external audit, legal and other expenses incurred by the Company. TransTech had 3 vendors (30.1%, 13.7%, and 12.4%) with
accounts payable in excess of 10% of its accounts payable as of September 30, 2012. The Company does expect to have vendors with
accounts payable balances of 10% of total accounts payable in the foreseeable future. The Company evaluates subsequent events, for
the purpose of adjustment or disclosure, up through the date the financial statements are available. Subsequent to June 30, 2013, the following material
transactions occurred: On July 3, 2013, the Company filed a registration
statement on Form S-1 covering 70,300,000 shares. The common stock being registered for resale consists of (i) 52,300,000
shares of common stock issued to Special Situations and forty other accredited investors (collectively, the Investors)
pursuant to a Private Placement which closed June 14, 2013; and (ii) 18,000,000 shares of common stock issuable upon exercise of
a portion of the five-year Warrants to purchase shares of common stock at $0.15 per share issued as part of the above-referenced
Private Placement. At a special meeting of shareholders held on
August 9, 2013 the stockholders of the Company approved of an increase in the authorized shares of common stock from 200,000,000
to 500,000,000 and thereafter to amend the articles of the Company to reflect this change in share authorization. The Company evaluated subsequent events, for the purpose of adjustment
or disclosure, up through the date the financial statements were issued. As of November 13, 2012, 4,512,603 shares of the Companys
common stock have been issued to Ascendiant upon conversion of $200,000 of the convertible debentures and interest of $25,630 at
an average of $0.05 per share. As of November 13, 2012, the Company has issued to Ascendiant 6,358,933
shares for $483,141 or $.076 per shares under the Securities Purchase Agreement dated June 17, 2011. The Company has incurred losses since inception, which have generated
net operating loss carryforwards. The net operating loss carryforwards arise from United States sources. Pretax losses arising from United States operations were approximately
$1,522,000 for the year ended September 30, 2012. Pretax losses arising from United States operations were approximately $2,534,000
for the year ended September 30, 2011. The Company has non- US net operating loss carryforwards of approximately
$11,877,200, which expire in 2019-2030 and US of approximately $11,877,200 which expire in 2019-2030. Because it is not more likely
than not that sufficient tax earnings will be generated to utilize the net operating loss carryforwards, a corresponding valuation
allowance of approximately $1,164,000 and $1,151,000 was established as of September 30, 2012 and 2011, respectively. Additionally,
under the Tax Reform Act of 1986, the amounts of, and benefits from, net operating losses may be limited in certain circumstances,
including a change in control. Section 382 of the Internal Revenue Code generally imposes an
annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation
has undergone significant changes in its stock ownership. There can be no assurance that the Company will be able to utilize any
net operating loss carryforwards in the future. For the year ended September 30, 2012, the Companys effective
tax rate differs from the federal statutory rate principally due to net operating losses and warrants issued for services. The principal components of the Companys deferred tax assets
at September 30, 2012 are as follows: A reconciliation of the United States Federal Statutory rate to the
Companys effective tax rate for the period ended September 30, 2012 and 2011 is as follows: The Company evaluated subsequent events, for the purpose of adjustment
or disclosure, up through the date the financial statements were issued. Stock option activity for the nine months ended June 30, 2013 and
the year ended September 30, 2012: Stock option activity for the years ended September 30, 2012
and 2011 are summarized as follows: The following table summarizes information about stock options outstanding
and exercisable at June 30, 2013: The following table summarizes information about stock options
outstanding and exercisable at September 30, 2012: Intangible assets as of June 30, 2013 and September 30, 2012 consisted
of the following: Intangible assets as of September 30, and 2012 and 2011 consisted
of the following: LEGAL PROCEEDINGS There are no pending legal proceedings against the Company that are
expected to have a material adverse effect on its cash flows, financial condition or results of operations. On May 31, 2013, the Company exercised its option to purchase the
4,000,000 Option Shares from Ascendiant and paid to Ascendiant the $300,000 purchase price. To date, Ascendiant has
delivered only 2,284,525 of the 4,000,000 Option Shares purchased by the Company and has failed to deliver the remaining
1,715,475 Option Shares. On June 17, 2013, the Company filed a complaint (the Complaint) against Ascendiant Capital
Partners, LLC (Ascendiant) in the Orange County Superior Court of California (Case No. 30-2013-00656770-CU-BC-CJC)
for breach of contract, seeking damages, specific performance and injunctive relief against Ascendiant. In its Complaint, the Company
alleged that Ascendiant breached its obligations under the Option Agreement by delivering to the Company only 2,284,525 of the
4,000,000 Option Shares and failing to deliver the remaining 1,715,475 Option Shares. The Company filed a motion for preliminary
injunction with the California Superior Court, seeking preliminary injunctive relief requiring Ascendiant to transfer the remaining
1,715,475 Option Shares to Visualant or, in the alternative, enjoining Ascendiant from transferring, selling, or otherwise encumbering
the Option Shares. The Compliant is currently being reviewed by the California Superior Court. EMPLOYMENT AGREEMENTS Mr. Erickson, Mr. Scott and other named executive officers of Visualant
do not have employment agreements. LEASES The Company is obligated under various non-cancelable operating leases
for their various facilities and certain equipment. Corporate Offices The Companys executive office is located at 500 Union Street,
Suite 420, Seattle, Washington, USA, 98101. On August 1, 2012, the Company entered into a lease which expires August 31, 2014.
The monthly lease rate was $1,944 for the year ending August 31, 2013 and $2,028 for the year ending August 31, 2014. On June 14,
2013, the Company amended the lease and added Suite 450, increasing our monthly payment to $3,978 through August 31, 2013, $4,057
from September 1, 2013 to May 31, 2014 and $4,140 from June 1, 2014 through August 31, 2014. TransTech Facilities TransTech is located at 12142 NE Sky Lane, Suite 130, Aurora, OR
97002. They lease a total of approximately 9,750 square feet of office and warehouse space for its administrative offices, product
inventory and shipping operations, at a monthly rental of $4,292. The lease was extended from March 2011 for an additional five
year term at a monthly rental of $4,751. There are two additional five year renewals with a set accelerating increase of 10% per
5 year term. The aggregate future minimum lease payments under operating leases,
to the extent the leases have early cancellation options and excluding escalation charges, are as follows: LEGAL PROCEEDINGS There are no pending legal proceedings against the Company that are
expected to have a material adverse effect on its cash flows, financial condition or results of operations. EMPLOYMENT AGREEMENTS Mr. Erickson, Mr. Scott and other named executive officers of Visualant
do not have employment agreements. Agreement with James Gingo On June 8, 2010, the Company entered into an Employment Agreement
(Gingo Agreement) with Mr. Gingo. The Gingo Agreement has a three year term beginning on June 8, 2010 at the annual
base salary of $200,000 per year. The Gingo Agreement provides for participation in the Companys benefit programs available
to other employees (including group insurance arrangements). Also under the Gingo Agreement, Mr. Gingo is eligible for discretionary
performance bonuses up to 50% of his annual salary based upon performance criteria to be determined by the Companys Compensation
Committee based on criteria under development. If Mr. Gingos employment is terminated without Cause (as defined in the Gingo
Agreement), Mr. Gingo will be entitled to a payment equal to one years annual base salary paid over the next year. LEASES The Company is obligated under various non-cancelable operating leases
for their various facilities and certain equipment. Corporate Offices The Companys executive office is located
at 500 Union Street, Suite 420, Seattle, Washington, USA, 98101. On August 1, 2012, we entered into a lease which expires August
31, 2014. The monthly lease rate is $1,944 for the year ending August 31, 2013 and $2,028 for the year ending August 31, 2014. TransTech Facilities TransTech leases a total of approximately 9,750 square feet of office
and warehouse space for its administrative offices, product inventory and shipping operations, at a monthly rental of $4,292. The
lease was extended from March 2011 for an additional five year term at a monthly rental of $4,751. There are two additional five
year renewals with a set accelerating increase of 10% per 5 year term. TransTech also leases additional 500 square feet
of off-site space at $250 per month from a related party. The aggregate future minimum lease payments under operating leases,
to the extent the leases have early cancellation options and excluding escalation charges, are as follows: The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company incurred net losses of $5,462,678 and $2,725,692 for the nine months ended June 30, 2013 and the
year ended September 30, 2012, respectively. Our net cash used in operating activities was $2,468,603 for the nine months ended
June 30, 2013. The Company anticipates that it will record
losses from operations for the foreseeable future. As of June 30, 2013, our accumulated deficit was $19,378,609. The
Company has limited capital resources, and operations to date have been funded with the proceeds from private equity and debt financings
and loans from Ronald P. Erickson, our Chief Executive Officer. These conditions raise substantial doubt about our ability to continue
as a going concern. The audit report prepared by our independent registered public accounting firm relating to our financial statements
for the year ended September 30, 2012 includes an explanatory paragraph expressing the substantial doubt about our ability to continue
as a going concern. Continuation of the Company as a going concern
is dependent upon obtaining additional working capital. The financial statements do not include any adjustments that
might be necessary if we are unable to continue as a going concern. The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has incurred net losses of $2,725,692 and $2,395,525 for the years ended September 30, 2012 and 2011, respectively.
The Companys current liabilities exceeded its current assets by approximately $2.4 million as of September 30, 2012. Our
net cash used in operating activities was $58,174 for the year ended September 30, 2012. As of September 30, 2012, the Company had $1,141,165 in cash. The
Company needs to obtain additional financing to implement its business plan and service our debt repayments. However, there
can be no assurance that financing or additional funding will be available to the Company on favorable terms or at all. If the
Company raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities may
result in dilution to existing stockholders. The Company anticipates that it will record losses from operations
for the foreseeable future. As of September 30, 2012, our accumulated deficit was $13.9 million. The Company has limited
capital resources, and operations to date have been funded with the proceeds from private equity and debt financings. These conditions
raise substantial doubt about our ability to continue as a going concern. The audit report prepared by our independent registered
public accounting firm relating to our financial statements for the year ended September 30, 2012 includes an explanatory paragraph
expressing the substantial doubt about our ability to continue as a going concern. Continuation of the Company as a going concern is dependent upon
obtaining additional working capital. The financial statements do not include any adjustments that might be necessary
if we are unable to continue as a going concern. The Companys ChromaID Technology The Company has invented a way to project light
at a material (solid surface, liquid, or gas) and measure the amount of light that is reflected back. The pattern of this reflected
light is compared to other patterns the Company has captured and this allows the Company to identify, detect, or diagnose materials
that cannot be identified by the human eye. The Company refers to this pattern of reflected light as a ChromaID. The Company
designs ChromaID scanning devices made with electronic, optical, and software parts to produce and capture the light. The Companys first product, the ChromaID
F12 Lab Kit, scans and identifies solid surfaces. The Company is marketing this product to customers who are considering licensing
the technology. Target markets include, but are not limited to, commercial paint manufacturers, pharmaceutical equipment manufacturers,
process control companies, currency paper and ink manufacturers, security card, reader, and scanner manufacturers, food processing,
and electronic gaming. The Companys Patents On August 9, 2011, the Company was issued US
Patent No. 7,996,173 B2 entitled Method, Apparatus and Article to Facilitate Distributed Evaluation of Objects Using Electromagnetic
Energy, by the United States Office of Patents and Trademarks. The patent expires August 24, 2029. On December 13, 2011, the Company was issued
US Patent No. 8,076,630 B2 entitled System and Method of Evaluating an Object Using Electromagnetic Energy by the
United States Office of Patents and Trademarks. The patent expires November 7, 2028. On December 20, 2011, the Company was issued
US Patent No. 8,081,304 B2 entitled Method, Apparatus and Article to Facilitate Evaluation of Objects Using Electromagnetic
Energy by the United States Office of Patents and Trademarks. The patent expires July 28, 2030. On October 9, 2012, the Company was issued US
Patent No. 8,285,510 B2 entitled Method, Apparatus, and Article to Facilitate Distributed Evaluation of Objects Using Electromagnetic
Energy by the United States Office of Patents and Trademarks. The patent expires July 31, 2027. On February 5, 2013, the Company was issued
US Patent No. 8,368,878 B2 entitled Method, Apparatus and Article To Facilitate Evaluation of Objects Using Electromagnetic
Energy by the United States Office of Patents and Trademarks. The patent expires July 31, 2027. The Company is pursuing an aggressive patent
strategy to expand our unique intellectual property in the United States and Japan and other countries. The Company has developed a unique patented
Visualant Spectral Pattern Matching technology. This technology directs structured light onto a physical substance to capture
a Visualant Spectral Signature called a ChromaID. When matched against existing databases, the ChromaID can be used
to identify, detect, or diagnose markers invisible to the human eye. ChromaID scanners can be integrated into a variety of mobile
or fixed-mount form factors, making it possible to effectively conduct analyses in the field that could only previously be performed
by large and expensive lab-based tests. Visualant Spectral Pattern Matching and
the ChromaID profile were developed over a seven year period by Professors Dr. Tom Furness and Dr. Brian Showngerdt of RATLab LLC
under contract to Visualant. The technology is now being transferred into products and a ScanHead module. Visualant has partnered
with Sumitomo Precision Products to manufacture the ScanHead and reduce the technology to a reliable and cost effective form. The
first demonstration of this is the Cyclops6 ChromaID Scanner which was demonstrated at the Japanese Instrumentation Manufacturing
Association trade show in Tokyo in October 2012. The Cyclops 6 ChromaID Scanner can be used to evaluate the technology for flat
surface applications and has sensitivity from 350nm to 1450nm. Visualant is pursuing an aggressive patent strategy to expand
our unique intellectual property in the United States and Japan. The following patents have been issued to date: On September 6, 2011, the Company announced that it was issued
US Patent No. 7,996,173, entitled Method, Apparatus and Article to Facilitate Distributed Evaluation of Objects Using Electromagnetic
Energy, by the United States Office of Patents and Trademarks. On January 19, 2012, the Company announced
that it was issued US Patent No. 8,081,304, entitled Method, Apparatus and Article to Facilitate Evaluation of Objects Using
Electromagnetic Energy by the United States Office of Patents and Trademarks. On March 20, 2012, the Company announced
that it was issued US Patent No. 8,076,630, entitled System and Method of Evaluating an Object Using Electromagnetic Energy
by the United States Office of Patents and Trademarks. On November 1, 2012, the Company announced
that it was issued US Patent No. 8,285,510 entitled System and Method of Evaluating an Object Using Electromagnetic Energy
by the United States Office of Patents and Trademarks. On June 7, 2011, the Company closed the
acquisition of all Visualant related assets of the RATLab LLC (RATLab). The RATLab is a Seattle based research and
development laboratory created by Dr. Tom Furness, founder and Director of the HITLab International, with labs at Seattle,
University of Canterbury in New Zealand, and the University of Tasmania in Australia. With this acquisition, the Company consolidated
all intellectual property relating to the Spectral Pattern Matching technology except for environmental field of use. The
Company acquired the Visualant related assets of the RATLab for (i) 1,000,000 shares of our common stock at closing valued at $0.20
per share, the price during the negotiation of this agreement; (ii) $250,000 (paid); and (iii) payment of the outstanding
promissory note owing to Mr. Furness in the amount of $65,000 with accrued interest of $24,675 (paid). On July 31, 2012, the Company closed
the acquisition of the environmental field of use of its Spectral Pattern Matching technology from Javelin LLC (Javelin).
The Company acquired the Visualant related assets of Javelin for (i) 1,250,000 shares of our common stock at closing valued
at thirteen ($0.13) per share, the price during the negotiation of this agreement; and (ii) $100,000, with $20,000 payable
at closing and $80,000 to be paid in four equal installments over a period of eight months. In addition, Company entered into a
Business Development Agreement which will pay Javelin ten percent (10%) on the gross margin received by Visualant from license
agreements and joint venture developments sourced by Javelin. PRINCIPLES OF CONSOLIDATION - The consolidated
financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. Inter-Company items
and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS - The Company
classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents.
The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit
Insurance Corporation up to $250,000. Beginning December 31, 2010 and through December 31, 2013, all noninterest-bearing transaction
accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. The Company has not experienced
any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL
ACCOUNTS - Accounts receivable consist primarily of amounts due to the Company from normal business activities. The Company maintains
an allowance for doubtful accounts to reflect the expected non-collection of accounts receivable based on past collection history
and specific risks identified within the portfolio. If the financial condition of the customers were to deteriorate resulting in
an impairment of their ability to make payments, or if payments from customers are significantly delayed, additional allowances
might be required. INVENTORIES - Inventories consist primarily
of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components
held for resale and are stated at the lower of cost or market on the first-in, first-out (FIFO) method. Inventories
are considered available for resale when drop shipped and invoiced directly to a customer from a vendor, or when physically received
by TransTech at a warehouse location. The company records a provision for excess and obsolete inventory whenever an
impairment has been identified. There is a $10,000 reserve for impaired inventory as of June 30, 2013 and September 30, 2012. EQUIPMENT - Equipment consists of machinery,
leasehold improvements, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization.
Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally
2-10 years, except for leasehold improvements which are depreciated over 5-20 years. INTANGIBLE ASSETS / INTELLECTUAL PROPERTY
The Company amortizes the intangible assets and intellectual property acquired in connection with the acquisition of TransTech,
over sixty months on a straight - line basis, which was the time frame that the management of the Company was able to project forward
for future revenue, either under agreement or through expected continued business activities. Intangible assets and
intellectual property acquired from RATLab LLC and Javelin are recorded likewise. GOODWILL Goodwill is the excess of cost
of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination.
With the adoption of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment
between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment
testing for goodwill is done at a reporting unit level. Reporting units are one level below the business segment level, but are
combined when reporting units within the same segment have similar economic characteristics. Under the criteria set forth by ASC
350, the Company has one reporting unit based on the current structure. An impairment loss generally would be recognized
when the carrying amount of the reporting units net assets exceeds the estimated fair value of the reporting unit.
The Company performs annual assessments and has determined that no impairment is necessary. LONG-LIVED ASSETS The Company reviews
its long-lived assets for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed
of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount
or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an
impairment loss is recognized in operating results. FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS ASC
Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in
an orderly transaction between market participants on the measurement date. This topic also establishes a fair value
hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The
fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entitys own assumptions
(unobservable inputs). The hierarchy consists of three levels: Level 3 Unobservable inputs developed using estimates and
assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. Liabilities measured at fair value on a recurring basis are summarized
as follows: The risk-free rate of return reflects the interest
rate for the United States Treasury Note with similar time-to-maturity to that of the warrants. Derivative Instruments - Warrants The Company issued 104,600,000 warrants in connection
with the June 2013 Private Placement of 52,300,000 shares of common stock. The strike price of these warrants is $0.15
to $0.20 per share. These warrants were not issued with the intent of effectively hedging any future cash flow, fair
value of any asset, liability or any net investment in a foreign operation. These warrants were issued with a down-round
provision whereby the exercise price would be adjusted downward in the event that additional shares of the Companys common
stock or securities exercisable, convertible or exchangeable for the Companys common stock were issued at a price less than
the exercise price. Therefore, the fair value of these warrants were recorded as a liability in the consolidated balance
sheet and are marked to market each reporting period until they are exercised or expire or otherwise extinguished. The proceeds from the Private Placement were
allocated between the Common Shares and the Warrants issued in connection with the Private Placement based upon their estimated
fair values as of the closing date at June 14, 2013, resulting in the aggregate amount of $2,494,710 to the Stockholders
Equity and $2,735,290 to the warrant derivative. During 2013, the Company recognized $1,448,710 of other expense resulting
from the increase in the fair value of the warrant liability at June 30, 2013. REVENUE RECOGNITION TransTech
revenue is derived from other products and services. Revenue is considered realized when the services have been provided to the
customer, the work has been accepted by the customer and collectability is reasonably assured. Furthermore, if an actual measurement
of revenue cannot be determined, we defer all revenue recognition until such time that an actual measurement can be determined.
If during the course of a contract management determines that losses are expected to be incurred, such costs are charged to operations
in the period such losses are determined. Revenues are deferred when cash has been received from the customer but the revenue has
not been earned. The Sumitomo License fee is being recorded as revenue over the life the Joint Development Agreement discussed
below. The Company recorded deferred revenue of $666,667 and $0 as of September 30, 2012 and 2011, respectively. STOCK BASED COMPENSATION - The Company has share-based
compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options
to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost is measured
by the Company at the grant date, based on the fair value of the award, over the requisite service period. For options issued to
employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants
of stock options and stock to non-employees and other parties are accounted for in accordance with the ASC 505. INCOME TAXES - Income tax benefit is based on
reported loss before income taxes. Deferred income taxes reflect the effect of temporary differences between asset and liability
amounts that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. These
deferred taxes are measured by applying currently enacted tax laws where that company operates out of. The Company recognizes refundable
and deferred assets to the extent that management has determined their realization. As of June 30, 2013 and September 30, 2012,
the Company had refundable tax assets related to TransTech of $30,045 and $29,316, respectively. NET LOSS PER SHARE Under the provisions
of ASC 260, Earnings Per Share, basic loss per common share is computed by dividing net loss available to common
shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per
share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject
to anti-dilution limitations. The common stock equivalents have not been included as they are anti-dilutive. As of June 30, 2013,
there were options outstanding for the purchase of 11,005,000 common shares, warrants for the purchase of 112,357,050 common shares,
and an undetermined number shares of common stock related to convertible debt, which could potentially dilute future earnings per
share. As of June 30, 2012, there were options outstanding for the purchase of 9,020,000 common shares, warrants for the purchase
of 4,977,051 common shares, and an undetermined number shares of common stock related to convertible debt, which could potentially
dilute future earnings per share. DIVIDEND POLICY - The Company has never paid
any cash dividends and intends, for the foreseeable future, to retain any future earnings for the development of our business.
Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results
of operations, financial condition, capital requirements and investment opportunities. USE OF ESTIMATES - The preparation of financial
statements in conformity with accounting principles generally accepted in the United States 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 those estimates. RECENT ACCOUNTING PRONOUNCEMENTS A variety of proposed or otherwise potential
accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative
and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards
would be material to our consolidated financial statements. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its wholly owned and majority-owned subsidiaries. Inter-Company items and transactions
have been eliminated in consolidation. CASH AND CASH EQUIVALENTS - The Company classifies highly liquid
temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains
cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation
up to $250,000. Beginning December 31, 2010 and through December 31, 2012, all noninterest-bearing transaction accounts are fully
insured, regardless of the balance of the account, at all FDIC-insured institutions. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant risk for cash on deposit. As of September 30, 2012,
the Company had no uninsured cash. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS - Accounts
receivable consists primarily of amounts due to the Company from normal business activities. The Company maintains an allowance
for doubtful accounts to reflect the expected non-collection of accounts receivable based on past collection history and specific
risks identified within the portfolio. If the financial condition of the customers were to deteriorate resulting in an impairment
of their ability to make payments, or if payments from customers are significantly delayed, additional allowances might be required. INVENTORIES - Inventories consist primarily of printers and consumable
supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale and are
stated at the lower of cost or market on the first-in, first-out (FIFO) method. Inventories are considered
available for resale when drop shipped and invoiced directly to a customer from a vendor, or when physically received by TransTech
at a warehouse location. The company records a provision for excess and obsolete inventory whenever an impairment has
been identified. There is a $10,000 reserve for impaired inventory as of September 30, 2012 and 2011. EQUIPMENT - Equipment consists of machinery, leasehold improvements,
furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed
by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 2-10 years, except
for leasehold improvements which are depreciated over 5-20 years. INTANGIBLE ASSETS / INTELLECTUAL PROPERTY - The Company amortizes
the intangible assets and intellectual property acquired in connection with the acquisition of TransTech Systems, Inc. (TransTech),
over sixty months on a straight - line basis, which was the time frame that the management of the Company was able to project forward
for future revenue, either under agreement or through expected continued business activities. Intangible assets and
intellectual property acquired from RATLab LLC (RATLab) and Javelin LLC (Javelin) are recorded likewise. GOODWILL Goodwill is the excess of cost of an acquired entity
over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. With the adoption
of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment between annual
tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for
goodwill is done at a reporting unit level. Reporting units are one level below the business segment level, but are combined when
reporting units within the same segment have similar economic characteristics. Under the criteria set forth by ASC 350, the Company
has one reporting unit based on the current structure. An impairment loss generally would be recognized when the carrying
amount of the reporting units net assets exceeds the estimated fair value of the reporting unit. The Company performs
annual assessments and has determined that no impairment is necessary. LONG-LIVED ASSETS - The Company reviews its long-lived assets for
impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets
under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not
expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less
the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is
recognized in operating results. FAIR VALUE MEASUREMENTS- Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy
contains three levels as follows: Level 1 - Unadjusted quoted prices that are available in active
markets for the identical assets or liabilities at the measurement date. Level 2 - Other observable inputs available at the measurement
date, other than quoted prices included in Level 1, either directly or indirectly, including: Level 3 - Unobservable inputs that cannot
be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined
using pricing models for which the assumptions utilize managements estimates of market participant assumptions. Assets and Liabilities that are Measured at Fair Value on a Recurring
Basis. The Company accounts for fair value measurements in accordance with ASC 820, Fair Value Measurements and Disclosures,
which defines fair value, establishes a framework for measurement and expands disclosure about fair value measurement. The fair
value hierarchy requires the use of observable market data when available. In instances in which the inputs used to measure fair
value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest
level input that is significant to the fair value measurement in its entirety. The Companys assessment of the significance
of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific
to the asset or liability. REVENUE RECOGNITION TransTech revenue is derived from other
products and services. Revenue is considered realized when the services have been provided to the customer, the work has been accepted
by the customer and collectability is reasonably assured. Furthermore, if an actual measurement of revenue cannot be determined,
we defer all revenue recognition until such time that an actual measurement can be determined. If during the course of a contract
management determines that losses are expected to be incurred, such costs are charged to operations in the period such losses are
determined. Revenues are deferred when cash has been received from the customer but the revenue has not been earned. The Sumitomo
Precision Products License fee is being recorded as revenue over the life the Joint Development Agreement discussed below. The
Company recorded deferred revenue of $666,667 and $0 as of September 30, 2012 and 2011, respectively. STOCK BASED COMPENSATION - The Company has share-based compensation
plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options to purchase
shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost is measured by the
Company at the grant date, based on the fair value of the award, over the requisite service period. For options issued to employees,
the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants
of stock options and stock to non-employees and other parties are accounted for in accordance with the ASC 505. INCOME TAXES - Income tax benefit is based on reported loss before
income taxes. Deferred income taxes reflect the effect of temporary differences between asset and liability amounts that are recognized
for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are measured
by applying currently enacted tax laws where that company operates out of. The Company recognizes refundable and deferred assets
to the extent that management has determined their realization. As of September 30, 2012 and September 30, 2011, the Company had
refundable tax assets related to TransTech of $29,316 and $9,080, respectively. NET LOSS PER SHARE Under the provisions of ASC 260, Earnings
Per Share, basic loss per common share is computed by dividing net loss available to common shareholders by the weighted
average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations.
The common stock equivalents have not been included as they are anti-dilutive. As of September 30, 2012, there were options outstanding
for the purchase of 5,920,000 common shares, warrants for the purchase of 3,369,050 common shares, and an undetermined number shares
of common stock related to convertible debt, which could potentially dilute future earnings per share. As of September 30, 2011,
there were options outstanding for the purchase of 6,920,000 common shares, warrants for the purchase of 4,569,050 common shares,
an undetermined number shares of common stock related to convertible debt, which could potentially dilute future earnings per share. DIVIDEND POLICY - The Company has never paid any cash dividends and
intends, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy
will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition,
capital requirements and investment opportunities. USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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 those
estimates. RECENT ACCOUNTING PRONOUNCEMENTS Recent accounting pronouncements applicable to the Company are summarized
below. On May 12, 2011, the FASB issued ASU 2011-04, Fair Value Measurement,
which requires measurement uncertainty disclosure in the form of a sensitivity analysis of unobservable inputs to reasonable alternative
amounts for all Level 3 recurring fair value measurements. ASU 2011-04 became effective for interim and annual periods beginning
on or after December 15, 2011. The Company adopted this guidance in the third quarter of Fiscal 2012. The adoption of this guidance
requires additional disclosures, but did not have any impact on the Companys consolidated results of operations, financial
position, or cash flows. On June 16, 2011, the FASB issued ASU 2011-05, Presentation of
Comprehensive Income, which revised the manner in which entities present comprehensive income in their financial statements.
ASU 2011-05 is effective for fiscal years beginning after December 15, 2011 (our Fiscal 2013). The Company does not believe that
the adoption of this will have a significant impact on its consolidated financial statements. In September 2011, the FASB issued ASU 2011-08, Testing Goodwill
for Impairment, which simplified the manner in which entities test goodwill for impairment. After assessment of certain qualitative
factors, if it is determined to be more likely than not that the fair value of a reporting unit is less than its carrying amount,
entities must perform a quantitative analysis of the goodwill impairment test. Otherwise, the quantitative test becomes optional.
ASU 2011-08 is effective for fiscal years beginning after December 15, 2011 (our Fiscal 2013). The Company does not believe that
the adoption of this will have a significant impact on its consolidated financial statements. A variety of proposed or otherwise potential accounting standards
are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary
nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material
to our consolidated financial statements. The
consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. Inter-Company
items and transactions have been eliminated in consolidation. The
consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. Inter-Company
items and transactions have been eliminated in consolidation. The
Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash
equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal
Deposit Insurance Corporation up to $250,000. Beginning December 31, 2010 and through December 31, 2013, all noninterest-bearing
transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. The Company
has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. The Company classifies highly liquid
temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains
cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation
up to $250,000. Beginning December 31, 2010 and through December 31, 2012, all noninterest-bearing transaction accounts are fully
insured, regardless of the balance of the account, at all FDIC-insured institutions. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant risk for cash on deposit. As of September 30, 2012,
the Company had no uninsured cash. Accounts
receivable consist primarily of amounts due to the Company from normal business activities. The Company maintains an allowance
for doubtful accounts to reflect the expected non-collection of accounts receivable based on past collection history and specific
risks identified within the portfolio. If the financial condition of the customers were to deteriorate resulting in an impairment
of their ability to make payments, or if payments from customers are significantly delayed, additional allowances might be required. Accounts
receivable consists primarily of amounts due to the Company from normal business activities. The Company maintains an allowance
for doubtful accounts to reflect the expected non-collection of accounts receivable based on past collection history and specific
risks identified within the portfolio. If the financial condition of the customers were to deteriorate resulting in an impairment
of their ability to make payments, or if payments from customers are significantly delayed, additional allowances might be required. Inventories
consist primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access
control components held for resale and are stated at the lower of cost or market on the first-in, first-out (FIFO)
method. Inventories are considered available for resale when drop shipped and invoiced directly to a customer from
a vendor, or when physically received by TransTech at a warehouse location. The company records a provision for excess
and obsolete inventory whenever an impairment has been identified. There is a $10,000 reserve for impaired inventory as of June
30, 2013 and September 30, 2012. Inventories consist
primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control
components held for resale and are stated at the lower of cost or market on the first-in, first-out (FIFO) method. Inventories
are considered available for resale when drop shipped and invoiced directly to a customer from a vendor, or when physically received
by TransTech at a warehouse location. The company records a provision for excess and obsolete inventory whenever an
impairment has been identified. There is a $10,000 reserve for impaired inventory as of September 30, 2012 and 2011. Equipment
consists of machinery, leasehold improvements, furniture and fixtures and software, which are stated at cost less accumulated
depreciation and amortization. Depreciation is computed by the straight-line method over the estimated useful lives or lease period
of the relevant asset, generally 2-10 years, except for leasehold improvements which are depreciated over 5-20 years. Equipment consists of machinery, leasehold
improvements, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation
is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 2-10
years, except for leasehold improvements which are depreciated over 5-20 years. The
Company amortizes the intangible assets and intellectual property acquired in connection with the acquisition of TransTech, over
sixty months on a straight - line basis, which was the time frame that the management of the Company was able to project forward
for future revenue, either under agreement or through expected continued business activities. Intangible assets and
intellectual property acquired from RATLab LLC and Javelin are recorded likewise. The Company amortizes the intangible
assets and intellectual property acquired in connection with the acquisition of TransTech Systems, Inc. (TransTech),
over sixty months on a straight - line basis, which was the time frame that the management of the Company was able to project
forward for future revenue, either under agreement or through expected continued business activities. Intangible assets
and intellectual property acquired from RATLab LLC (RATLab) and Javelin LLC (Javelin) are recorded
likewise. Goodwill
is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed
in a business combination. With the adoption of ASC 350, goodwill is not amortized, rather it is tested for impairment annually,
and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying
amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. Reporting units are one level below
the business segment level, but are combined when reporting units within the same segment have similar economic characteristics.
Under the criteria set forth by ASC 350, the Company has one reporting unit based on the current structure. An impairment
loss generally would be recognized when the carrying amount of the reporting units net assets exceeds the estimated fair
value of the reporting unit. The Company performs annual assessments and has determined that no impairment is necessary. Goodwill is the excess of cost of an
acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. With
the adoption of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment
between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment
testing for goodwill is done at a reporting unit level. Reporting units are one level below the business segment level, but are
combined when reporting units within the same segment have similar economic characteristics. Under the criteria set forth by ASC
350, the Company has one reporting unit based on the current structure. An impairment loss generally would be recognized
when the carrying amount of the reporting units net assets exceeds the estimated fair value of the reporting unit.
The Company performs annual assessments and has determined that no impairment is necessary. The
Company reviews its long-lived assets for impairment when changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value.
Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower
of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed
fair values, an impairment loss is recognized in operating results. The Company reviews its long-lived assets
for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets
under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not
expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less
the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is
recognized in operating results. ASC
Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value
hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The
fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entitys own assumptions
(unobservable inputs). The hierarchy consists of three levels: Level
3 Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect
those assumptions that a market participant would use. Liabilities
measured at fair value on a recurring basis are summarized as follows: The
risk-free rate of return reflects the interest rate for the United States Treasury Note with similar time-to-maturity to that
of the warrants. Derivative
Instruments - Warrants The
Company issued 104,600,000 warrants in connection with the June 2013 Private Placement of 52,300,000 shares of common stock. The
strike price of these warrants is $0.15 to $0.20 per share. These warrants were not issued with the intent of effectively
hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. These
warrants were issued with a down-round provision whereby the exercise price would be adjusted downward in the event that additional
shares of the Companys common stock or securities exercisable, convertible or exchangeable for the Companys common
stock were issued at a price less than the exercise price. Therefore, the fair value of these warrants were recorded
as a liability in the consolidated balance sheet and are marked to market each reporting period until they are exercised or expire
or otherwise extinguished. The
proceeds from the Private Placement were allocated between the Common Shares and the Warrants issued in connection with the Private
Placement based upon their estimated fair values as of the closing date at June 14, 2013, resulting in the aggregate amount of
$2,494,710 to the Stockholders Equity and $2,735,290 to the warrant derivative. During 2013, the Company recognized
$1,448,710 of other expense resulting from the increase in the fair value of the warrant liability at June 30, 2013. FAIR VALUE MEASUREMENTS- Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy
contains three levels as follows: Level 1 - Unadjusted quoted prices that are available in active
markets for the identical assets or liabilities at the measurement date. Level 2 - Other observable inputs available at the measurement
date, other than quoted prices included in Level 1, either directly or indirectly, including: Level 3 - Unobservable inputs that cannot
be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined
using pricing models for which the assumptions utilize managements estimates of market participant assumptions. Assets and Liabilities that are Measured at Fair Value on a Recurring
Basis. The Company accounts for fair value measurements in accordance with ASC 820, Fair Value Measurements and Disclosures,
which defines fair value, establishes a framework for measurement and expands disclosure about fair value measurement. The fair
value hierarchy requires the use of observable market data when available. In instances in which the inputs used to measure fair
value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest
level input that is significant to the fair value measurement in its entirety. The Companys assessment of the significance
of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific
to the asset or liability. TransTech revenue is derived from other products and services. Revenue is considered realized when the
services have been provided to the customer, the work has been accepted by the customer and collectability is reasonably
assured. Furthermore, if an actual measurement of revenue cannot be determined, we defer all revenue recognition until such time
that an actual measurement can be determined. If during the course of a contract management determines that losses are expected
to be incurred, such costs are charged to operations in the period such losses are determined. Revenues are deferred when cash
has been received from the customer but the revenue has not been earned. The Sumitomo License fee is being recorded as revenue
over the life the Joint Development Agreement discussed below. The Company recorded deferred revenue of $0 and $666,667 as of
June 30, 2013 and September 30, 2012, respectively. REVENUE RECOGNITION TransTech
revenue is derived from other products and services. Revenue is considered realized when the services have been provided to the
customer, the work has been accepted by the customer and collectability is reasonably assured. Furthermore, if an actual measurement
of revenue cannot be determined, we defer all revenue recognition until such time that an actual measurement can be determined.
If during the course of a contract management determines that losses are expected to be incurred, such costs are charged to operations
in the period such losses are determined. Revenues are deferred when cash has been received from the customer but the revenue has
not been earned. The Sumitomo License fee is being recorded as revenue over the life the Joint Development Agreement discussed
below. The Company recorded deferred revenue of $666,667 and $0 as of September 30, 2012 and 2011, respectively. The
Company has share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted
stock, as well as options to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based
compensation cost is measured by the Company at the grant date, based on the fair value of the award, over the requisite service
period. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology
over the related period of benefit. Grants of stock options and stock to non-employees and other parties are accounted
for in accordance with the ASC 505. The Company has share-based compensation
plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options to purchase
shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost is measured by the
Company at the grant date, based on the fair value of the award, over the requisite service period. For options issued to employees,
the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants
of stock options and stock to non-employees and other parties are accounted for in accordance with the ASC 505. Income
tax benefit is based on reported loss before income taxes. Deferred income taxes reflect the effect of temporary differences between
asset and liability amounts that are recognized for financial reporting purposes and the amounts that are recognized for income
tax purposes. These deferred taxes are measured by applying currently enacted tax laws where that company operates out of. The
Company recognizes refundable and deferred assets to the extent that management has determined their realization. As of June 30,
2013 and September 30, 2012, the Company had refundable tax assets related to TransTech of $30,045 and $29,316, respectively. Income tax benefit is based on reported
loss before income taxes. Deferred income taxes reflect the effect of temporary differences between asset and liability amounts
that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred
taxes are measured by applying currently enacted tax laws where that company operates out of. The Company recognizes refundable
and deferred assets to the extent that management has determined their realization. As of September 30, 2012 and September 30,
2011, the Company had refundable tax assets related to TransTech of $29,316 and $9,080, respectively. Under
the provisions of ASC 260, Earnings Per Share, basic loss per common share is computed by dividing net loss available
to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted
net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the
Company, subject to anti-dilution limitations. The common stock equivalents have not been included as they are anti-dilutive.
As of June 30, 2013, there were options outstanding for the purchase of 11,005,000 common shares, warrants for the purchase of
112,357,050 common shares, and an undetermined number shares of common stock related to convertible debt, which could potentially
dilute future earnings per share. As of June 30, 2012, there were options outstanding for the purchase of 9,020,000 common shares,
warrants for the purchase of 4,977,051 common shares, and an undetermined number shares of common stock related to convertible
debt, which could potentially dilute future earnings per share. Under
the provisions of ASC 260, Earnings Per Share, basic loss per common share is computed by dividing net loss available
to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted
net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the
Company, subject to anti-dilution limitations. The common stock equivalents have not been included as they are anti-dilutive.
As of September 30, 2012, there were options outstanding for the purchase of 5,920,000 common shares, warrants for the purchase
of 3,369,050 common shares, and an undetermined number shares of common stock related to convertible debt, which could potentially
dilute future earnings per share. As of September 30, 2011, there were options outstanding for the purchase of 6,920,000 common
shares, warrants for the purchase of 4,569,050 common shares, an undetermined number shares of common stock related to convertible
debt, which could potentially dilute future earnings per share. The
Company has never paid any cash dividends and intends, for the foreseeable future, to retain any future earnings for the development
of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including
our results of operations, financial condition, capital requirements and investment opportunities. The Company has never paid any cash dividends
and intends, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend
policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial
condition, capital requirements and investment opportunities. The
preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 those estimates. The preparation of financial statements
in conformity with accounting principles generally accepted in the United States 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 those estimates. A
variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and
various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined
whether implementation of such proposed standards would be material to our consolidated financial statements. Recent accounting pronouncements applicable
to the Company are summarized below. On May 12, 2011, the FASB issued ASU
2011-04, Fair Value Measurement, which requires measurement uncertainty disclosure in the form of a sensitivity
analysis of unobservable inputs to reasonable alternative amounts for all Level 3 recurring fair value measurements. ASU 2011-04
became effective for interim and annual periods beginning on or after December 15, 2011. The Company adopted this guidance in the
third quarter of Fiscal 2012. The adoption of this guidance requires additional disclosures, but did not have any impact on the
Companys consolidated results of operations, financial position, or cash flows. On June 16, 2011, the FASB issued ASU
2011-05, Presentation of Comprehensive Income, which revised the manner in which entities present comprehensive
income in their financial statements. ASU 2011-05 is effective for fiscal years beginning after December 15, 2011 (our Fiscal 2013).
The Company does not believe that the adoption of this will have a significant impact on its consolidated financial statements. In September 2011, the FASB issued ASU
2011-08, Testing Goodwill for Impairment, which simplified the manner in which entities test goodwill for impairment.
After assessment of certain qualitative factors, if it is determined to be more likely than not that the fair value of a reporting
unit is less than its carrying amount, entities must perform a quantitative analysis of the goodwill impairment test. Otherwise,
the quantitative test becomes optional. ASU 2011-08 is effective for fiscal years beginning after December 15, 2011 (our Fiscal
2013). The Company does not believe that the adoption of this will have a significant impact on its consolidated financial statements. A variety of proposed or otherwise potential
accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative
and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards
would be material to our consolidated financial statements. Notes payable, capitalized leases and long term debt as of June 30,
2013 and September 30, 2012 consisted of the following: The aggregate future minimum lease payments under capital
leases, to the extent the leases have early cancellation options and excluding escalation charges, are as follows: The aggregate future minimum lease payments
under capital leases, to the extent the leases have early cancellation options and excluding escalation charges, are as follows: Notes payable, capitalized leases and long term debt as of
September 30, 2012 and 2011 consisted of the following: Aggregate maturities for notes payable, capitalized
leases and long term debt by year are as follows: Aggregate maturities for notes payable, capitalized leases
and long term debt by year are as follows: G]Y?^^A_C1O3^\O\`WT/\:_BC_P"'B?[:_P#T)_MK_`/1P_CC_`+YT+_Y3T?\`#Q/]M?\`Z.'\\`?.A?_*>C_B$&?_\`
M0QR?I_R]Q?E_U">;^YA_Q%C)?^@',_\`P5AO+_J+_KY,_MOA,;ELJ5.4I4<3E>-A[-8>E
M1KUYER4*D:5K*K]8JPJ 1G6*P^-IXW#9?A\-65-Y!4EC
MJ=)XBG6G6SBG".&K?5TU.%!+VLX2JJ2A6E+ELTWZF44:^%EAL3C,3BJ*G_;=
M+ZE.56GB*4:>53J.M35=-X];TNXL99?#
MNKVRZ%J0!_7K^T[^VS^RC^QIX
9 Months Ended
12 Months Ended
Notes to Financial Statements
10. INTANGIBLE ASSETS
Estimated
June 30,
September 30,
Useful Lives
2013
2012
Customer contracts
5 years
$
983,645
$
983,645
Technology
5 years
712,500
$
712,500
Less: accumulated amortization
(840,456
)
(586,034
)
Intangible assets, net
$
855,689
$
1,110,111
10.
INTANGIBLE ASSETS
Estimated
September 30,
September 30,
Useful Lives
2012
2011
Customer contracts
5 years
$
983,645
$
983,645
Technology
5 years
712,500
$
450,000
Less: accumulated amortization
(586,034
)
(290,555
)
Intangible assets, net
$
1,110,111
$
1,143,090
Notes to Financial Statements
2014
$ 683,101
$ 1,631,903
2015
2,455
3,332
2016
683
2017
0
2018
0
Total
$ 685,556
$ 1,635,918
3 Months Ended
9 Months Ended
12 Months Ended
Income Statement [Abstract]
REVENUE
$ 2,060,250
$ 1,813,625
$ 6,333,552
$ 5,525,785
$ 7,923,976
$ 9,136,216
COST OF SALES
1,642,240
1,457,420
4,807,196
4,512,899
6,344,247
7,570,006
GROSS PROFIT
418,010
356,205
1,526,356
1,012,886
1,579,729
1,566,209
RESEARCH AND DEVELOPMENT EXPENSES
341,231
23,000
720,022
99,000
176,944
133,941
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
1,018,083
1,076,134
3,570,911
2,754,050
3,624,711
3,691,760
OPERATING LOSS
(941,304)
(742,929)
(2,764,577)
(1,840,164)
(2,221,926)
(2,259,491)
OTHER INCOME (EXPENSE)
Interest expense
(38,605)
(12,261)
(154,642)
(128,503)
(463,735)
(212,571)
Other income
5,296
7,610
25,206
19,758
36,597
67,458
Loss on change - derivative liability warrants
(1,448,710)
(1,448,710)
Loss on purchase of warrants and additional investment right
(1,150,000)
Loss on purchase of outstanding warrants
(500,000)
Gain on extinguishment of debt
394,057
Total other expense
(1,482,019)
(4,651)
(2,728,146)
(108,745)
(533,081)
(145,113)
LOSS BEFORE INCOME TAXES
(2,423,323)
(747,580)
(5,492,723)
(1,948,909)
(2,755,007)
(2,404,604)
Income taxes - current benefit
(13,910)
(9,965)
(30,045)
(24,159)
(29,315)
(9,080)
NET LOSS
(2,409,413)
(737,615)
(5,462,678)
(1,924,750)
(2,725,692)
(2,395,524)
NONCONTROLLING INTEREST
(6,476)
(786)
(14,802)
2,750
6,206
14,231
NET LOSS ATTRIBUTABLE TO VISUALANT, INC. AND SUBSIDIARIES COMMON SHAREHOLDERS
$ (2,402,937)
$ (736,829)
$ (5,447,876)
$ (1,927,500)
$ (2,731,898)
$ (2,409,756)
Basic and diluted loss per common share attributable to Visualant, Inc. and subsidiaries common shareholders-
Basic and diluted loss per share
$ (0.02)
$ (0.01)
$ (0.05)
$ (0.03)
$ (0.04)
$ (0.06)
Weighted average shares of common stock outstanding- basic and diluted
124,638,584
67,597,374
108,181,494
59,398,032
65,557,376
42,682,795
9 Months Ended
12 Months Ended
Notes to Financial Statements
4. DEVELOPMENT OF CHROMAID(TM) TECHNOLOGY
9 Months Ended
12 Months Ended
Notes to Financial Statements
17. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Notes to Financial Statements
2014
$ 105,611
$ 78,396
2015
65,292
81,348
2016
38,008
57,012
2017
23,755
2018
Beyond
Total
$ 208,911
$ 240,511
9 Months Ended
12 Months Ended
Stock option outstanding
112,357,050
3,369,050
3,369,050
4,569,050
Stock option granted
110,080,000
600,000
Stock option exercised
Stock option forfeitures
(300,000)
Stock option expired
(792,000)
3,369,050
Stock option outstanding weighted average exercise price
$ 0.173
$ 0.307
$ 0.307
$ 0.410
Stock option granted weighted average exercise price
$ 0.1
$ 0.100
Stock option exercised weighted average exercise price
Stock option forfeitures weighted average exercise price
$ (0.200)
9 Months Ended
12 Months Ended
Notes to Financial Statements
11. ACCOUNTS PAYABLE
Notes to Financial Statements
Accounts payable
$ 2,297,387
$ 1,593,861
$ 1,206,100
Vendor1 with accounts payble on excess of 10%
37.50%
Vendor2 with accounts payble on excess of 10%
19.20%
Vendor3 with accounts payble on excess of 10%
11.60%
Liabilities:
Derivative Instruments - Warrants
Total
Liabilities:
Derivative Instruments - Warrants
4,184,000
Total
4,184,000
Liabilities:
Derivative Instruments - Warrants
Total
Liabilities:
Derivative Instruments - Warrants
4,184,000
Total
$ 4,184,000
9 Months Ended
12 Months Ended
Subsequent Events [Abstract]
19. SUBSEQUENT EVENTS
12 Months Ended
Income Tax Disclosure [Abstract]
18a. INCOME TAXES
2012
2011
U.S. operations loss carry forward at statutory rate of 42.6%
$
(1,163,832
)
$
(1,151,090
)
Less Valuation Allowance
1,163,832
1,151,090
Net Deferred Tax Assets
-
-
Change in Valuation allowance
$
-
$
-
2012
2011
Federal Statutory Rate
-42.6
%
-42.6
%
Increase in Income Taxes Resulting from:
Change in Valuation allowance
42.6
%
42.6
%
Effective Tax Rate
0.0
%
0.0
%
Less: accumulated amortization
$ (840,456)
$ (586,034)
$ (290,555)
Intangible assets, net
855,689
1,110,111
1,143,090
Intangible Assets Gross
983,645
983,645
983,645
Intangible Assets Gross
$ 712,500
$ 712,500
$ 450,000
9 Months Ended
12 Months Ended
Notes to Financial Statements
Stock option activity
Weighted Average
Options
Exercise Price
$
Outstanding as of September 30, 2011
6,920,000
$
0.296
$
2,050,800
Granted
2,200,000
0.104
229,000
Exercised
-
-
-
Forfeitures
(3,200,000
)
0.470
(1,503,000
)
Outstanding as of September 30, 2012
5,920,000
0.131
$
776,800
Granted
5,100,000
0.130
663,000
Exercised
-
-
-
Forfeitures
(15,000
)
0.240
(3,600
)
Outstanding as of June 30, 2013
11,005,000
$
0.131
1,436,200
Weighted Average
Options
Exercise Price
$
Outstanding as of September 30, 2010
4,735,000
$
0.289
$
1,366,250
Granted
2,320,000
0.339
785,800
Exercised
-
-
-
Forfeitures
(135,000
)
(0.750
)
(101,250
)
Outstanding as of September 30, 2011
6,920,000
0.296
2,050,800
Granted
2,200,000
0.104
229,000
Exercised
-
-
-
Forfeitures
(3,200,000
)
(0.470
)
(1,503,000
)
Outstanding as of September 30, 2012
5,920,000
$
(0.131
)
$
776,800
Stock options outstanding and exercisable
Weighted
Weighted
Weighted
Average
Average
Average
Range of
Number
Remaining Life
Exercise Price
Number
Exercise Price
Exercise Prices
Outstanding
In Years
Exerciseable
Exerciseable
Exerciseable
0.090
500,000
6.50 years
0.090
375,000
0.090
0.100
1,900,000
8.25 years
0.100
2,000,000
0.100
0.120
200,000
1.00 years
0.120
100,000
0.120
0.130
5,100,000
6.43 years
0.130
3,633,333
0.130
0.150
3,100,000
6.55 years
0.150
3,100,000
0.150
0.240
205,000
2.00 years
0.240
165,000
0.240
11,005,000
7.29 years
$
0.131
9,373,333
$
0.135
Weighted
Weighted
Weighted
Average
Average
Average
Range of
Number
Remaining Life
Exercise Price
Number
Exercise Price
Exercise Prices
Outstanding
In Years
Exerciseable
Exerciseable
Exerciseable
0.090
500,000
7.75 years
$
0.090
375,000
$
0.090
0.100
1,900,000
9.50 years
0.100
1,250,000
0.100
0.120
200,000
2.25 years
0.120
50,000
0.120
0.150
100,000
2.75 years
0.150
100,000
0.150
0.150
3,000,000
7.75 years
0.150
3,000,000
0.150
0.240
220,000
3.25 years
0.240
128,333
0.240
5,920,000
7.86 years
$
0.131
4,903,333
$
0.141
3 Months Ended
9 Months Ended
12 Months Ended
9 Months Ended
12 Months Ended
9 Months Ended
11 Months Ended
Reserve for impaired inventory
$ 10,000
$ 10,000
$ 10,000
$ 10,000
Estimated useful lives of assets
2 years
5 years
5 years
10 years
20 years
20 years
Loss on change - derivative liability warrants
1,448,710
1,448,710
Deferred revenue
0
0
666,667
0
Refundable tax assets
30,045
30,045
29,316
9,080
Options outstanding
11,005,000
9,020,000
11,005,000
9,020,000
5,920,000
6,920,000
Warrants outstanding
112,357,050
4,977,051
112,357,050
4,977,051
3,369,050
4,569,050
Cash insured by Federal Deposit Insurance Corporation
$ 250,000
Notes to Financial Statements
Accrued expenses
$ 55,859
$ 391,311
$ 155,267
9 Months Ended
12 Months Ended
Notes to Financial Statements
Schedule Of Intangible Assets
Estimated
June 30,
September 30,
Useful Lives
2013
2012
Customer contracts
5 years
$
983,645
$
983,645
Technology
5 years
712,500
$
712,500
Less: accumulated amortization
(840,456
)
(586,034
)
Intangible assets, net
$
855,689
$
1,110,111
Estimated
September 30,
September 30,
Useful Lives
2012
2011
Customer contracts
5 years
$
983,645
$
983,645
Technology
5 years
712,500
$
450,000
Less: accumulated amortization
(586,034
)
(290,555
)
Intangible assets, net
$
1,110,111
$
1,143,090
Notes to Financial Statements
Inventories
$ 690,629
$ 344,692
$ 454,588
Reserve for impaired inventory
$ 10,000
$ 10,000
$ 10,000
12 Months Ended
Income Tax Disclosure [Abstract]
Federal Statutory Rate
(42.60%)
(42.60%)
Change in Valuation allowance
42.60%
42.60%
Effective Tax Rate
0.00%
0.00%
9 Months Ended
12 Months Ended
Notes to Financial Statements
18. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
Years Ended June 30,
Total
2014
$
105,611
2015
65,292
2016
38,008
2017
-
2018
-
Beyond
-
Total
$
208,911
Years Ended September 30,
Total
2013
$
78,396
2014
81,348
2015
57,012
2016
23,755
2017
-
Beyond
-
Total
$
240,511
9 Months Ended
12 Months Ended
Notes to Financial Statements
2. GOING CONCERN
9 Months Ended
12 Months Ended
Notes to Financial Statements
4. DEVELOPMENT OF SPECTRAL PATTERN MATCHING TECHNOLOGY
9 Months Ended
12 Months Ended
Notes to Financial Statements
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS
Level 1 Quoted prices in active markets for identical assets and liabilities;
Level 2 Inputs other than level one inputs that are either directly or indirectly observable; and
Carrying
Fair Value Measurements
Using Inputs
Amount at
Financial Instruments
Level 1
Level 2
Level 3
June 30, 2013
Liabilities:
Derivative Instruments - Warrants
$
-
$
4,184,000
$
-
$
4,184,000
Total
$
-
$
4,184,000
$
-
$
4,184,000
June 30, 2013
Market price and estimated fair value of common stock:
$
0.090
Exercise price
$
0.15-0.20
Expected term (years)
3-5 years
Dividend yield
-
Expected volatility
82
%
Risk-free interest rate
1.3
%
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable,
other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities
at June 30, 2013 and 2012 based upon the short-term nature of the assets and liabilities.
3.
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets in nonactive markets;
Inputs other than quoted prices that are observable for the asset or liability; and
Inputs that are derived principally from or corroborated by other observable market data.
12 Months Ended
Notes to Financial Statements
Revenues of transtech in current year
$ 8
Interest in TransTech acquired by company
$ 100
Interest rate on note issued to president of transtech
3.50%
Payable period of note
3 years
9 Months Ended
12 Months Ended
Notes to Financial Statements
PRINCIPLES OF CONSOLIDATION
CASH AND CASH EQUIVALENTS
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
INVENTORIES
EQUIPMENT
INTANGIBLE ASSETS / INTELLECTUAL PROPERTY
GOODWILL
LONG-LIVED ASSETS
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
Level
1 Quoted prices in active markets for identical assets and liabilities;
Level
2 Inputs other than level one inputs that are either directly or indirectly observable; and
Carrying
Fair
Value Measurements Using Inputs
Amount
at
Financial Instruments
Level
1
Level
2
Level
3
June
30, 2013
Liabilities:
Derivative Instruments - Warrants
$
-
$
4,184,000
$
-
$
4,184,000
Total
$
-
$
4,184,000
$
-
$
4,184,000
June
30, 2013
Market price and estimated
fair value of common stock:
$
0.090
Exercise price
$
0.15-0.20
Expected term (years)
3-5 years
Dividend yield
-
Expected volatility
82
%
Risk-free interest rate
1.3
%
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable,
other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities
at June 30, 2013 and 2012 based upon the short-term nature of the assets and liabilities.
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets in nonactive markets;
Inputs other than quoted prices that are observable for the asset or liability; and
Inputs that are derived principally from or corroborated by other observable market data.
REVENUE RECOGNITION
STOCK BASED COMPENSATION
INCOME TAXES
NET LOSS PER SHARE
DIVIDEND POLICY
USE OF ESTIMATES
RECENT ACCOUNTING PRONOUNCEMENTS
9 Months Ended
12 Months Ended
Notes to Financial Statements
Schedule Of Future Minimum Lease Payments For Capital Leases
June 30,
September 30,
2013
2012
BFI Business Finance Secured Credit Facility
$
477,812
$
568,475
TransTech capitalized leases, net of capitalized interest
7,744
17,943
Note payable to Umpqua Bank
200,000
-
Related party notes payable-
James Gingo Promissory Note
-
1,000,000
Lynn Felsinger
-
49,500
Total debt
685,556
1,635,918
Less current portion of long term debt
(683,101
)
(1,631,903
)
Long term debt
$
2,455
$
4,015
Years Ended September 30,
Total
2013
$
13,928
2014
3,332
2015
683
2016
-
2017
-
Total
17,943
Less current portion of capitalized leases
(13,928
)
Long term capital leases
$
4,015
Schedule Of Maturities Of Long Term Debt
Years Ended June 30,
Total
2014
$
105,611
2015
65,292
2016
38,008
2017
-
2018
-
Beyond
-
Total
$
208,911
September 30,
September 30,
2012
2011
BFI Finance Corp Secured Credit Facility
$
568,475
$
506,377
TransTech capitalized leases, net of capitalized interest
17,943
31,216
Related party notes payable-
James Gingo Promissory Note
1,000,000
1,650,000
RATLab LLC
-
150,000
Bradley E. Sparks
-
73,228
Lynn Felsinger
49,500
82,000
Ronald P. Erickson and affiliated parties
-
58,952
Total debt
1,635,918
2,551,773
Less current portion of long term debt
(1,631,903
)
(1,537,191
)
Long term debt
$
4,015
$
1,014,582
Aggregate maturities for notes payable, capitalized leases and long term debt
Years Ended June 30,
Total
2014
$
683,101
2015
2,455
2016
-
2017
-
2018
-
Total
$
685,556
Years Ended September 30,
Total
2013
$
1,631,903
2014
3,332
2015
683
2016
-
2017
-
Total
$
1,635,918
9 Months Ended
12 Months Ended
Notes to Financial Statements
Net loss
$ 5,462,678
$ (2,731,898)
$ (2,409,756)
CASH (USED IN) OPERATING ACTIVITIES
2,486,603
(406,543)
58,174
1,312,291
Accumulated Deficit
19,378,609
13,915,931
11,184,033
Current liabilities exceeded its current assets
2
Cash
$ 1,141,165
12 Months Ended
Operating loss before tax
$ 1,522,000
Operating loss before tax
11,877,200
Operating loss before tax
$ 11,877,200
9 Months Ended
Shares
Outstanding at beginning of period
3,369,050
Issued
110,080,000
Exercised
Forfeited
(300,000)
Expired
(792,000)
Outstanding at end of period
112,357,050
Exerciseable at end of period
112,357,050
4,903,333
Weighted Average Exercise Price:
Outstanding at beginning of period
$ 0.307
Issued
$ 0.1
Exercised
Forfeited
$ (0.200)
Expired
$ (0.500)
Outstanding at end of period
$ 0.173
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