UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2007
o TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
For the transition period from _______ to ________
Commission File number 000-30262
![](https://capedge.com/proxy/10QSB/0001199835-08-000077/visualant.jpg)
VISUALANT, INCORPORATED
(Exact name of registrant as specified in charter)
Nevada | 91-1948357 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
500 Union Street, Suite 406, Seattle, Washington USA | 98101 |
(Address of principal executive offices) | (Zip Code) |
206-903-1351 | ||
(Registrant's telephone number, including area code) | ||
N/A | ||
(Former name, address, and fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
The number of shares of common stock, $.001 par value, issued and outstanding as of February 15, 2008 which includes 1,200,000 shares granted by the board on December 14, 2007 that have not yet been issued:
18,153,891 shares
Transitional Small Business Disclosure Format (check one):
Yes o No x
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TABLE OF CONTENTS | ||
Page Number | ||
PART 1 | FINANCIAL INFORMATION | 3 |
ITEM 1 | Financial Statements (unaudited) | 3 |
Balance Sheets as of December 31, 2007 and September 30, 2007 | 4 | |
Statements of Operations | ||
For the three months ended December 31, 2007 and 2006, and the period from October 8, 1998 (Date of Inception) to December 31, 2007 | 5 | |
Statements of Cash Flows | ||
For the three months ended December 31, 2007 and 2006 and for the period from October 8, 1998 (Date of Inception) to December 31, 2007 | 6 | |
Notes to the Financial Statements. | 7 | |
ITEM 2 | Management's Plan of Operation | 12 |
ITEM 3 | Controls and Procedures | 13 |
PART II | OTHER INFORMATION | 14 |
ITEM 6 | Exhibits and Reports on Form 8-K | 14 |
SIGNATURES | 14 |
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PART I - FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
The accompanying balance sheets of Visualant, Incorporated (development stage company) at December 31, 2007 and September 30, 2007, the statements of operations for the three months ended December 31, 2007 and 2006, the statements of cash flows for the three months ended December 31, 2007 and 2006 and for the period from October 8, 1998 (date of incorporation) to December 31, 2007, have been prepared by the Company's management, in conformity with principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
Operating results for the three month period ended December 31, 2007 are not necessarily indicative of the results that can be expected for the year ending September 30, 2008.
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VISUALANT, INCORPORATED
(Development Stage Company)
BALANCE SHEETS
December 31, 2007 and September 30, 2007
December 31, 2007 | September 30, 2007 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 228 | $ | 91 | ||||
Prepaid Expenses | 24,139 | 5,537 | ||||||
Total Current Assets | 24,367 | 5,628 | ||||||
Deferred Financing Costs, net | 75,156 | 83,156 | ||||||
TOTAL ASSETS | $ | 99,523 | $ | 88,784 | ||||
CURRENT LIABILITIES | ||||||||
Notes payable | $ | 50,750 | $ | 50,750 | ||||
Accrued expenses and other liabilities | 375,472 | 297,842 | ||||||
Accounts payable | 877,734 | 793,185 | ||||||
Total Current Liabilities | 1,303,956 | 1,141,777 | ||||||
Long-term Notes Payable | 425,340 | 425,340 | ||||||
Commitments and Contingencies | - | - | ||||||
STOCKHOLDERS' 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, 18,153,891 and 16,853,891 shares issued and outstanding, respectively | 18,154 | 16,854 | ||||||
Additional paid in capital | 4,389,315 | 4,234,495 | ||||||
Deficit accumulated during the development stage | (6,037,242 | ) | (5,729,682 | ) | ||||
Total Stockholders' Equity (Deficiency) | (1,629,773 | ) | (1,478,333 | ) | ||||
TOTAL LIABILITIES & EQUITY | $ | 99,523 | $ | 88,784 |
The accompanying notes are an integral part of these financial statements
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VISUALANT, INCORPORATED
(Development Stage Company)
STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 2007 and 2006 and the Period from
October 8, 1998 (Date of Inception) to December 31, 2007
Three Months Ended December 31, 2007 | Three Months Ended December 31, 2006 | Period of Inception from October 8, 1998 to December 31, 2007 | ||||||||||
Revenues | $ | - | $ | - | $ | - | ||||||
Expenses | ||||||||||||
Research and development | - | 249,317 | 1,237,417 | |||||||||
Administrative | 282,914 | 264,102 | 3,480,241 | |||||||||
Total Operating Expense | 282,914 | 513,419 | 4,717,658 | |||||||||
Loss from Operations | (282,914 | ) | (513,419 | ) | (4,717,658 | ) | ||||||
Other Income (Expense) | ||||||||||||
Settlement of debt | - | - | 43,400 | |||||||||
Interest expense | (24,646 | ) | 10,726 | (208,657 | ) | |||||||
Loss of deposit | - | - | (1,154,327 | ) | ||||||||
Net Loss | $ | (307,560 | ) | $ | (524,145 | ) | $ | (6,037,242 | ) | |||
Net Loss Applicable to Common Stockholders Basic and diluted | $ | (0.02 | ) | $ | (0.03 | ) | ||||||
Weighted Average Shares used in computing basic and diluted net loss per share | 17,183,239 | 16,503,891 | ||||||||||
The accompanying notes are an integral part of these financial statements
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VISUALANT, INCORPORATED
(Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 2007 and 2006 and the Period from
October 8, 1998 (Date of Inception) to December 31, 2007
Three Months Ended | Three Months Ended | October 8, 1998 | ||||||||||
December 31, | December 31, | to December 31, | ||||||||||
2007 | 2006 | 2007 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net loss | $ | (307,560 | ) | $ | (524,145 | ) | $ | (6,037,242 | ) | |||
Reconciliation of net loss to net cash used in operating activities: | ||||||||||||
Depreciation, amortization and tangible and intangible asset impairments | - | - | 19,808 | |||||||||
Issuance of capital stock for expenses | 118,000 | - | 275,956 | |||||||||
Stock based compensation | 38,120 | 75,314 | 340,844 | |||||||||
Stock Options Issued in exchange for services | - | 157,571 | 228,152 | |||||||||
Amortization of Deferred Financing | 8,000 | - | 20,844 | |||||||||
Loss of deposit | - | - | 1,154,327 | |||||||||
Capital contributions - expenses | - | - | 10,950 | |||||||||
Increase (decrease) in cash resulting from changes in assets and liabilities: | ||||||||||||
Prepaid expenses | (18,602 | ) | (27,600 | ) | (24,139 | ) | ||||||
Accounts payable and accrued expenses | 162,179 | 255,748 | 2,678,381 | |||||||||
Net Cash Used in Operating Activities | 137 | (63,112 | ) | (1,332,119 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Purchase of property and equipment | - | - | (12,308 | ) | ||||||||
Purchase of investment - deposit | - | - | (1,154,327 | ) | ||||||||
Net Cash Used in Investing Activities | - | - | (1,166,635 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Proceeds from issuance of common stock | - | - | 2,022,892 | |||||||||
Proceeds from issuance of convertible debt | - | - | 425,340 | |||||||||
Proceeds from issuance of notes payable | - | 56,016 | 300,951 | |||||||||
Repayment of notes payable | - | - | (250,201 | ) | ||||||||
Net Cash Provided by Financing Activities | - | 56,016 | 2,498,982 | |||||||||
Net Change in Cash | 137 | (7,096 | ) | 228 | ||||||||
Cash at Beginning of Period | 91 | 7,160 | - | |||||||||
Cash at End of Period | $ | 228 | $ | 64 | $ | 228 |
The accompanying notes are an integral part of these financial statements
1. | ORGANIZATION |
Visualant, Inc. was incorporated under the laws of the State of Nevada on October 8, 1998 under the name of “Cigar King Corporation” with authorized common stock of 200,000,000 shares at $0.001 par value. On September 13, 2002 the name was changed to “Starberrys Corporation” as part of a change in the authorized capital stock whereby 50,000,000 shares of preferred stock with a par value of $0.001 were authorized. On August 18, 2004 the name of the Company was changed to “Visualant, Incorporated”. There are no preferred shares issued and the terms have not been determined.
The Company is in the development stage and has not commenced operations.
2. | 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. We have incurred net losses of approximately $308,000 and $524,000 for the three months ended December 31, 2007 and 2006, respectively. Our current liabilities exceeded our current assets by approximately $1.3 million as of December 31, 2007. Our net cash used in operating activities approximated $150 for the three months ended December 31, 2007.
As of December 31, 2007, the Company had minimal cash. The Company is considered illiquid as this cash is not considered sufficient to fund the recurring operating and associated financing costs. The Company needs to raise additional funding to continue its operations. 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.
We anticipate that we will generate significant losses from operations for the foreseeable future. As of December 31, 2007, our accumulated deficit was $6.0 million. We have 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 consolidated financial statements for the year ended September 30, 2007 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 dependant upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding, payment of debt by the issuance of common stock, and advances of short term debt by officers and directors, which will enable the Company to continue to conduct operations. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
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VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Recent Accounting Pronouncements
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements but does not require any new fair value measurements.
SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are evaluating the possible impact of SFAS 157 on the financial statements.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We have not yet determined the impact of adopting SFAS 159 on our financial position.
4. | DEVELOPMENT OF TECHNOLOGIES OWNED BY THE COMPANY |
The Company is in the business of researching, developing, acquiring, and commercializing products and services related to illumination and detection of electromagnetic energy, typically in the visible and near-visible portions of the electromagnetic spectrum, using specialized illumination and sensing systems and spatial analysis software modeling which allow for pattern recognition. This technology involves specialized and proprietary information and trade secrets, which the Company considers to be among its most sensitive, confidential, and proprietary information.
5. | NOTES PAYABLE |
During the year ended September 30, 2006, the Company entered into agreements with Coach Capital, LLC for three demand notes payable to Coach Capital, LLC totaling $165,705 including related loan fees for purposes of financing ongoing operations.
During the first quarter of 2007, the Company entered into an additional demand note with Coach Capital, LLC totaling $56,016 including loan fees. In February 2007, the Company entered into a demand note with CEO and President, Bradley E. Sparks totaling $50,000 plus loan fees of $750. In addition, the Company entered into another demand note with Coach Capital, LLC during the quarter totaling $28,480 including loan fees. During the third quarter, all of the notes and interest payable to Coach Capital, LLC were paid in full with funds borrowed under the Company’s new convertible line of credit (see Note 6). As of December 31, 2007, the outstanding notes payable totaled $50,750 consisting of the note payable to Sparks. Interest expense accrues on all of the notes at a rate of 18% per annum. Accrued interest on the notes payable is recorded in the balance sheet in accrued expenses and other liabilities.
Any delays in repayment of the principal and accrued interest on the notes payable upon demand will result in a penalty interest rate of 30% per annum.
6. | LINE OF CREDIT |
On May 7, 2007, the Company entered into a Convertible Line of Credit Agreement with Coventry Capital LLC., a Delaware company, pursuant to which Coventry Capital will provide the Company with a convertible line of credit of up to $1 million. The line of credit may be increased up to $3 million in the event the Company achieves certain performance criteria. The borrowed funds will bear interest at the rate of 10% per annum, and are due in full on May 7, 2010. Coventry Capital, however, has the right to convert all or part of the indebtedness into common stock of the Company at a fixed conversion rate of $0.50 per share. As of December, 2007 the balance outstanding on this convertible line of credit was $425,340. The Company currently is unable to borrow any additional funds under this line of credit due to its failure to meet certain financial covenants or conditions required by Coventry Capital. The Company has attributed no value to the conversion rights.
In connection with the Coventry Capital convertible line of credit, the Company issued 200,000 shares of common stock to the placement agent for arranging the new financing. The $96,000 value of the common stock upon issuance was recorded as deferred financing costs and is being amortized over the three-year term of the convertible line of credit.
7. | COMMON CAPITAL STOCK |
In October, the board of directors granted and issued 100,000 shares of common stock to a consultant for the performance of services. These shares were valued at $10,000 on the date of grant.
On December 14, 2007 the board of directors granted Ron Erickson 500,000 shares of common stock, Lynn Felsinger 300,000 shares of common stock, Dr. Masahiro Kawahata 200,000 shares of common stock, and Jon Pepper 200,000 shares of common stock. The shares of common stock were issued for past services performed. As of the filing date, the shares had been granted but not yet been issued. The shares were valued at $108,000 on the date of the grant.
8. | STOCK OPTIONS |
Description of Stock Option Plan
In 2005, our Board of Directors adopted a combined incentive and nonqualified stock option plan for our employees and consultants (“2005 Stock Option Plan”). On October 9, 2006 the Board of Directors authorized an increase in shares available for grant from 2 million to 4 million, subject to stockholder approval.
Determining Fair Value Under SFAS No. 123R
Effective October 1, 2006, we began recording compensation expense associated with stock options and other equity-based compensation in accordance with SFAS No. 123 (revised 2004), “Share-Based Payment”. We adopted FAS 123(R) using the modified prospective method. Share-based compensation recognized in fiscal 2007 as a result of the adoption of SFAS No. 123R use the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. We amortize the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding. We estimate the volatility of our common stock based on the historical volatility of our own common stock over the most recent period corresponding with the estimated expected life of the award. We base the risk-free interest rate used in the Black-Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. We have not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes-Merton option valuation model. In accordance with SFAS No. 123R, we adjust share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization after October 1, 2006 is recognized in the period the forfeiture estimate is changed.
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8. | STOCK OPTIONS - continued |
Stock Option Activity
A summary of activity relating to our stock option plan is as follows:
Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | |||||||
Outstanding as of September 30, 2007 | 1,897,500 | ||||||||
Granted | - | ||||||||
Exercised | - | ||||||||
Expired | - | ||||||||
Forfeited | - | ||||||||
Outstanding as of December 31, 2007 | 1,897,500 | $ | 0.55 | 3.27 |
No options have been granted during the three months ended December 31, 2007.
9. | SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES |
See Note 5 for discussion of notes payable issued to the Company’s CEO and President during the quarter ended March 31, 2007. During the fiscal year ended September 30, 2007, Mr. Erickson advanced $49,256 of cash and incurred $549 of expense in behalf of Visualant. In addition to the note payable transaction, Mr. Sparks advanced $15,000 of cash and incurred $10,800 of expense in behalf of the Company. During the first quarter ending December 31, 2007, Mr. Erickson advanced $18,500 to the Company. Other than the note payable, all amounts are recorded in the accounts payable balance. The directors and officers of the Company beneficially own an aggregate 2,027,875 shares of common stock or 11.0% of the Company.
10. | CANCELLATION OF AGREEMENT TO PURCHASE SHARES OF SCI |
On April 9, 2003 the Company signed a Purchase Agreement with Malaremastastarnas Riksforening, the owner of all the shares of Skandinaviska Farginstituter AB (the Scandinavian Colour Institute or "SCI") which owns the color notation system Natural Color Systems ("NCS"), containing the terms of an acquisition by the Company or its assigns for a price of SEK 35,000,000 of all shares of SCI. Pursuant to the terms of the agreements the Company made payments of $1,154,327 into an escrow account as part payment toward the purchase price. The Company subsequently failed to make further payments on the contracts and by mutual agreement the contracts were cancelled and the moneys paid were expensed.
11. | SUBSEQUENT EVENTS |
None
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ITEM 2. | MANAGEMENT'S PLAN OF OPERATIONS |
The Company is a development stage company engaged in the business of commercializing products and services based upon our spectral signature technology as reflected in our recently filed patent applications. These patent applications pertain to the use of controlled illumination with specific bands of electromagnetic radiation, detection of returned electromagnetic radiation and data management in an innovative manner enabling our devices to establish a unique spectral signature for both individual and classes of items. The unique spectral signature data can potentially be used in a variety of applications in areas such as brand protection, forgery detection, homeland security, medical diagnostics, quality control, fluids monitoring, metal stress analysis, and many others. As of September 30, 2007, the Company has six utility patent applications with the U.S. Patent Office.
The Company purchases its research and development services from outside third party sources. On March 15, 2006, the Company entered into a research and development contract with RATLab LLC, a privately-owned research laboratory in Seattle, Washington. Under the contract, RATLab performs research and development using the Company’s existing intellectual property, as well as newly developed research and technologies in order to assist the Company with the commercialization of its core spectral signature technologies. During the three and twelve-month periods ended September 30, 2007, the Company paid approximately $0 and $251,000 in research and development fees to RATLab LLC. RATLab LLC is a research laboratory formed primarily by Dr. Thomas Furness, founder and former director of the Human Interface Technology Lab (HIT Lab) at the University of Washington, and one of the leading researchers in the world in the area of human interface technology. RATLab LLC also employs other leading scientists and research associates in the areas of computer science, imaging technology, and light sensing technology, who are part of the team conducting research on behalf of the Company.
The Company’s research and development activities under its Research and Development Contract with RATLab LLC, however, were suspended on July 12, 2007 due to lack of funds. Upon receiving additional funding, developmental activities will resume with the either the RATLab or with another outside third party.
The Company initially intends to position its technology as both a revolutionary as well as a practical solution for security and fraud prevention applications and markets. The Company’s current focus is to secure customers for its spectral signature technology and to capitalize upon the potential business opportunities in the areas of national security, document forgery/fraud, brand protection, label fraud and product tampering. However, the broad scope of the applications covered by the Company’s patent applications may result in new opportunities surfacing from customers desiring prototypes designed to satisfy their specific technology needs. As of December 31, 2007, the Company had no customers.
The Company has developed prototypes which capture the spectral signatures of items and manage the data gathered. These prototypes are being shown to potential customers and funding sources to demonstrate the potential and capabilities of our devices. It is envisioned that once the Company has secured a customer or customers, it will collaborate with the customer to develop devices and specific applications of the Company’s technology that are designed to address the customer’s unique concerns. The Company will then hire new personnel sufficient to fulfill its development obligations under any contract entered into. In lieu of such hiring, the Company may contract with certain research organizations to perform development activities on behalf of the Company.
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ITEM 2. | MANAGEMENT'S PLAN OF OPERATIONS - continued |
This Report on Form 10-QSB contains certain forward-looking statements that are based on current expectations. When used in this discussion, the words "believe", "anticipates", "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected, and should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. The Company may encounter competitive, technological, financial and business challenges making it more difficult than expected to continue to develop and market its products; the market may not accept the Company’s future products; the Company may not be able to retain existing key management personnel; and there may be other material adverse changes in the Company’s operations or business. Assumptions relating to budgeting, marketing, and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause the Company to alter its marketing or other budgets, which may in turn affect the Company’s financial position and results of operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the other risk factors relating to the Company and the various disclosures made by the Company that attempt to advise interested parties of factors which affect the Company's business, in the Company’s Annual Report on Form 10-KSB for the year ended September 30, 2007 as well as in the Company's periodic reports on Forms 10-QSB and 8-K filed with the Securities and Exchange Commission (the "SEC"). The Company's financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Liquidity and Capital Resources
The Company has no revenue to date from its operations, and its ability to implement its plans for the future will depend on the future availability of financing. Such financing will be required to enable the Company to further develop its spectral signature technology and continue its operations. The Company intends to raise further funds through private placements of the Company's common stock and through short term borrowing. The financing activities of the Company are current and ongoing, and it will expand and accelerate its development program as the timing and amount of financing allow. However, there can be no assurance that the Company will be successful in obtaining additional capital for such technology development from the sale of its capital stock, or in otherwise raising substantial capital.
The Company’s cost to continue operations as they are now conducted is approximately $35,000 per month, and the Company does not have sufficient funds to cover existing operations. The Company needs to raise additional funds in order to continue its existing operations, to resume its research and development activities, and to finance its plans to expand its operations for the next year. The Company intends to raise the required funds by obtaining share capital from outside sources. During the twelve months ended September 30, 2007, the Company obtained funds in the aggregate amount of approximately $135,000 through loans from Coach Capital and Bradley E. Sparks, CEO and President. The Company borrowed $425,000 from Coventry Capital during the year ended September 30, 2007 under the Convertible Line of Credit. Approximately $250,000 of the proceeds from the Convertible Line of Credit were used to repay the principal due on the Coach Capital notes payable. During the year, operating funds were also advanced to the Company by its Chairman, Ronald P. Erickson and salaries were deferred. If the Company is successful in raising additional funds, the Company’s research and development efforts will continue and expand, and overdue accounts payable will be satisfied.
Off-Balance Sheet Arrangements
The Company currently has no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity or capital resources.
ITEM 3. | CONTROLS AND PROCEDURES |
(a) Evaluation of Disclosure Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s controls and procedures (as defined in the Securities Act of 1934 Rule 13a-15(e) or Rule 15d-15(e)) as of the end of the period covered by this report, have concluded that the Company’s disclosure controls and procedures are effective to give reasonable assurance that the information required to be disclosed in reports that the Company files under the Exchange Act is recorded, processed, summarized and reported as and when required.
(b) Changes in Internal Control Over Financial Reporting
There were no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s disclosure controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions.
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PART II. OTHER INFORMATION
ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K |
The exhibits filed herewith as required by Item 601 of Regulation S-B, are as follows:
(a) Exhibits
31.1 Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.1 Certificate Pursuant to 18 U.S.C. Section 1350 signed by the Chief Executive Officer
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VISUALANT, INCORPORATED
(Registrant)
Date: February 19, 2008 | By: | /s/ Bradley E. Sparks | |
Bradley E. Sparks | |||
Chief Executive Officer, President, and Director | |||
Date: February 19, 2008 | By: | /s/ Bradley E. Sparks | |
Bradley E. Sparks | |||
Chief Financial Officer, and Secretary Treasurer | |||
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