Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Mar. 31, 2015 | 14-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | VISUALANT INC | |
Entity Central Index Key | 1074828 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -21 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 169,793,664 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2015 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2015 | Sep. 30, 2014 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $121,862 | $70,386 |
Accounts receivable, net of allowance of $32,000 and $40,750, respectively | 865,306 | 815,460 |
Prepaid expenses | 34,791 | 25,067 |
Inventories | 309,743 | 412,831 |
Refundable tax assets | 32,679 | 29,590 |
Total current assets | 1,364,381 | 1,353,334 |
EQUIPMENT, NET | 405,559 | 447,236 |
OTHER ASSETS | ||
Intangible assets, net | 262,038 | 431,653 |
Goodwill | 983,645 | 983,645 |
Other assets | 5,070 | 5,070 |
TOTAL ASSETS | 3,020,693 | 3,220,938 |
CURRENT LIABILITIES: | ||
Accounts payable - trade | 2,457,944 | 2,234,123 |
Accounts payable - related parties | 51,794 | 66,729 |
Accrued expenses | 27,402 | 31,369 |
Accrued expenses - related parties | 791,249 | 260,687 |
Derivative liability - warrants | 2,215,861 | 2,579,157 |
Convertible notes payable | 64,000 | 166,500 |
Notes payable - current portion of long term debt | 1,200,666 | 1,290,960 |
Total current liabilities | 6,808,916 | 6,629,525 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' DEFICIT | ||
Series A Convertible Preferred stock - $0.001 par value, 50,000,000 shares authorized, 3,500,000 and 0 shares issued and outstanding at 3/31/15 and 9/30/14, respectively | 3,500 | |
Common stock - $0.001 par value, 500,000,000 shares authorized, 169,793,664 and 168,163,674 shares issued and outstanding at 3/31/15 and 9/30/14, respectively | 169,794 | 168,164 |
Additional paid in capital | 18,488,660 | 17,958,368 |
Accumulated deficit | -22,450,177 | -21,535,119 |
Total stockholders' deficit | -3,788,223 | -3,408,587 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $3,020,693 | $3,220,938 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Sep. 30, 2014 |
CURRENT ASSETS: | ||
Allowance for Accounts receivable | $32,000 | $40,750 |
EQUITY (DEFICIT) | ||
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares authorized | 50,000,000 | 50,000,000 |
Preferred stock shares issued | 3,500,000 | 3,500,000 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $0.00 | $0.00 |
Common stock shares authorized | 500,000,000 | 500,000,000 |
Common stock shares issued | 169,793,664 | 168,163,674 |
Common stock shares outstanding | 169,793,664 | 168,163,674 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2014 | |
Income Statement [Abstract] | ||||
REVENUE | $1,435,097 | $2,025,366 | $3,278,310 | $3,902,455 |
COST OF SALES | 1,204,705 | 1,685,091 | 2,750,154 | 3,256,112 |
GROSS PROFIT | 230,392 | 340,275 | 528,156 | 646,343 |
RESEARCH AND DEVELOPMENT EXPENSES | 77,143 | 91,887 | 196,530 | 404,874 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 875,022 | 753,521 | 1,528,225 | 1,596,017 |
OPERATING LOSS | -721,773 | -505,133 | -1,196,599 | -1,354,548 |
OTHER INCOME (EXPENSE): | ||||
Interest expense | -83,889 | -23,174 | -121,019 | -41,122 |
Other income | 12,131 | 6,087 | 18,448 | 13,809 |
Gain (loss) on change - derivative liability warrants | 3,032,030 | -1,191,753 | 381,023 | -1,178,888 |
Total other income (expense) | 2,960,272 | -1,208,840 | 278,452 | -1,206,201 |
INCOME (LOSS) BEFORE INCOME TAXES | 2,238,499 | -1,713,973 | -918,147 | -2,560,749 |
Income taxes - current (benefit) provision | -3,752 | 1,332 | -3,089 | 155 |
NET INCOME (LOSS) | 2,242,251 | -1,715,305 | -915,058 | -2,560,904 |
NONCONTROLLING INTEREST | 4,366 | 20,534 | ||
NET INCOME (LOSS) ATTRIBUTABLE TO VISUALANT, INC. AND SUBSIDIARIES COMMON SHAREHOLDERS | $2,242,251 | ($1,719,671) | ($915,058) | ($2,581,438) |
Basic and diluted income (loss) per common share attributable to Visualant, Inc. and subsidiaries common shareholders- | ||||
Basic and diluted income (loss) per share | $0.01 | ($0.01) | ($0.01) | ($0.02) |
Weighted average shares of common stock outstanding- basic and diluted | 169,313,503 | 165,263,674 | 168,734,606 | 165,263,674 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | ($915,058) | ($2,560,904) |
Adjustments to reconcile net loss to net cash (used in) operating activities | ||
Depreciation and amortization | 209,882 | 195,697 |
Issuance of capital stock for services and expenses | 137,500 | |
Stock based compensation | 40,150 | 45,880 |
(Gain) on sale of assets | -18,650 | -1,111 |
Gain (loss) on change - derivative liability warrants | -381,023 | 1,178,888 |
Provision for losses on accounts receivable | 3,036 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | -52,882 | 149,793 |
Prepaid expenses | -9,724 | 4,600 |
Inventory | 103,088 | 108,567 |
Accounts payable - trade and accrued expenses | 760,980 | 41,739 |
Income tax receivable | -3,089 | 155 |
CASH (USED IN) OPERATING ACTIVITIES | -125,790 | -836,696 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Proceeds from sale of equipment | 20,060 | 1,600 |
NET CASH PROVIDED BY INVESTING ACTIVITIES: | 20,060 | 1,600 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds (repayments) from line of credit | -88,799 | -249,335 |
Proceeds from sale of preferred stock | 350,000 | |
Proceeds from notes payable | 200,000 | |
Proceeds from notes payable- related party | 205,000 | |
Repayment of convertible notes | -166,500 | |
Proceeds from convertible note | 64,000 | |
Repayments of capital leases | -1,495 | -1,760 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 157,206 | 153,905 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 51,476 | -681,191 |
CASH AND CASH EQUIVALENTS, beginning of period | 70,386 | 747,129 |
CASH AND CASH EQUIVALENTS, end of period | 121,862 | 65,938 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 81,257 | 22,947 |
Taxes paid | ||
Non-cash investing and financing activities: | ||
Gain (loss) on change - derivative liability warrants | 17,727 | |
Issuance of common stock for debt conversion | $25,499 |
1_ORGANIZATION
1. ORGANIZATION | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
1. ORGANIZATION | Visualant, Inc. (the “Company” or “Visualant”) was incorporated under the laws of the State of Nevada in 1998.The Company has authorized 550,000,000 shares of capital stock, of which 500,000,000 are shares of voting common stock, par value $0.001 per share, and 50,000,000 are shares of voting Series A Convertible Preferred Stock, par value $0.001 per share. |
Since 2007 the Company have been focused primarily on the development of a proprietary technology which is capable of uniquely identifying and authenticating almost any substance using light at the “photon” level to detect the unique digital “signature” of the substance. The Company calls this its “ChromaID™” technology. | |
In 2010, the Company acquired TransTech Systems, Inc. as an adjunct to its business. TransTech is a distributor of products for employee and personnel identification. TransTech currently provides substantially all of the Company’s revenues. The Company intends, however, to use a majority of the proceeds of this offering to further develop and market our ChromaID technology. | |
The Company is in the process of commercializing its ChromaID™ technology. To date, the Company entered into one License Agreement with Sumitomo Precision Products Co., Ltd. and has a strategic relationship with Invention Development Management Company, L.L.C. (“IDMC”). | |
The Company believes that its commercialization success is dependent upon its ability to significantly increase the number of customers that are purchasing and using its products. To date the Company has generated minimal revenue from sales of its ChromaID products. The Company is currently not profitable. Even if the Company succeeds in introducing the ChromaID technology and related products to its target markets, the Company may not be able to generate sufficient revenue to achieve or sustain profitability. | |
ChromaID was invented by scientists from the University of Washington under contract with Visualant. The Company has pursued an aggressive intellectual property strategy and have been granted seven patents. The Company also has 22 patents pending. The Company possess all right, title and interest to the issued patents. Ten of the pending patents are licensed exclusively to the Company in perpetuity by our strategic partner, Intellectual Ventures through its subsidiary IDMC. |
2_GOING_CONCERN
2. GOING CONCERN | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
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. The Company incurred net losses of $1,017,281 and $6,604,631 for the years ended September 30, 2014 and 2013, respectively. Our net cash used in operating activities was $(125,790) and $(1,379,397) for the six months ended March 31, 2015 and the year ended September 30, 2014, respectively. |
The Company anticipates that it will record losses from operations for the foreseeable future. As of March 31, 2015, the Company’s accumulated deficit was $22,450,177. 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 the Company’s independent registered public accounting firm relating to our financial statements for the year ended September 30, 2014 includes an explanatory paragraph expressing the substantial doubt about the Company’s 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. |
3_SIGNIFICANT_ACCOUNTING_POLIC
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | 6 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Notes to Financial Statements | |||||||||||||||||
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | Basis of Presentation – The accompanying unaudited consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated. The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). | ||||||||||||||||
The unaudited consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2014. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. | |||||||||||||||||
Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries, TransTech Systems, Inc. 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. 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 $15,000 and $10,000 reserve for impaired inventory as of March 31, 2015 and September 30, 2014, respectively. | |||||||||||||||||
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. The Company performs annual assessments and has determined that no impairment is necessary. On June 7, 2011, the Company closed the acquisition of all Visualant related assets of the RATLab LLC, namely the rights to the medical field of use of the Chroma ID technology. On July 31, 2012, the Company closed the acquisition of all rights to the ChromaID technology in the environmental field of use from Javelin LLC. | |||||||||||||||||
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 unit’s 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 annually or 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 entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels: | |||||||||||||||||
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 | |||||||||||||||||
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. | |||||||||||||||||
Derivative Instruments – Warrants with the June 2013 Private Placement | |||||||||||||||||
Carrying | |||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 1,725,900 | $ | - | $ | 1,725,900 | |||||||||
Total | $ | - | $ | 1,725,900 | $ | - | $ | 1,725,900 | |||||||||
Liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | $ | 0.08 | |||||||||||||||
Exercise price | $ | 0.15-0.20 | |||||||||||||||
Expected term (years) | 2.753 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.78 | % | |||||||||||||||
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. | |||||||||||||||||
The Company issued warrants to purchase 104,600,000 shares of common stock in connection with our June 2013 private placement of 52,300,000 shares of common stock. The exercise 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 our common stock or securities exercisable, convertible or exchangeable for our 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 shares of common stock 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 allocated to stockholders’ equity and $2,735,290 allocated to the warrant derivative. The Company recognized $1,448,710 of other expense resulting from the increase in the fair value of the warrant liability at September 30, 2013. During the year ended September 30, 2014, the Company recognized $2,092,000 of other income resulting from the decrease in the fair value of the warrant liability at September 30, 2014. During the six months ended March 31, 2015, the Company recognized $366,100 of other income resulting from the decrease in the fair value of the warrant liability at March 31, 2015. | |||||||||||||||||
Derivative Instruments – Warrant with the November 2013 IDMC Services and License Agreement | |||||||||||||||||
Carrying | |||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 276,930 | $ | - | $ | 276,930 | |||||||||
Total | $ | - | $ | 276,930 | $ | - | $ | 276,930 | |||||||||
Liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.2 | ||||||||||||||||
Expected term (years) | 3.62 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.75 | % | |||||||||||||||
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. | |||||||||||||||||
The Company issued a warrant to purchase 14,575,286 shares of common stock in connection with the November 2013 IDMC Services and License Agreement. The warrant price of $0.20 per share expires November 10, 2018 and the per share price is subject to adjustment. This warrant was 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. This warrant was issued with a down-round provision whereby the exercise price would be adjusted downward in the event that additional shares of our common stock or securities exercisable, convertible or exchangeable for our common stock were issued at a price less than the exercise price. Therefore, the fair value of these warrants was 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. During the year ended September 30, 2014, the Company recognized $320,657 of other expense related to the IDMC warrant. During the six months ended March 31, 2015, the Company recognized $43,726 of other income related to the IDMC warrant. | |||||||||||||||||
Derivative Instrument – Convertible Note Payable | |||||||||||||||||
Carrying | |||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Convertible Promissory Note | $ | - | $ | 38,031 | $ | - | $ | 38,031 | |||||||||
Total | $ | - | $ | 38,031 | $ | - | $ | 38,031 | |||||||||
Liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.052 | ||||||||||||||||
Expected term (years) | 0.6 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 76.7 | % | |||||||||||||||
Risk-free interest rate | 0.78 | % | |||||||||||||||
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 Convertible Note Payable. | |||||||||||||||||
The Company entered into a Convertible Note Payable with KBM Worldwide, Inc. on August 25, 2014 for $103,500. The Note was paid off on March 2, 2015. The Company entered into a Convertible Note Payable with KBM on September 24, 2014 for $63,000. The Note was repaid March 27, 2015. The Company entered into a Convertible Note Payable with KBM on January 27, 2015 for $64,000. The KBM Note accrues interest at a rate of 8% per annum and becomes due on October 27, 2015 and is convertible into common stock on July 26, 2015. The outstanding KBM Notes is convertible at 65% of the average of the lowest three day trading price in the 10 days prior to conversion; however, the outstanding KBM notes is not convertible until July 26, 2015. During the year ended September 30, 2014, the Company recognized $166,500 of other expense related to the KBM Notes. During the six months ended March 31, 2015, the Company recognized $29,529 of other income and allocated $98,940 to stockholder’s equity related to the KBM Notes. | |||||||||||||||||
Derivative Instrument – Series A Convertible Preferred Stock | |||||||||||||||||
Carrying | |||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 175,000 | $ | - | $ | 175,000 | |||||||||
Total | $ | - | $ | 175,000 | $ | - | $ | 175,000 | |||||||||
Liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.2 | ||||||||||||||||
Expected term (years) | 3.62 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.75 | % | |||||||||||||||
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 Series A Convertible Preferred Stock. | |||||||||||||||||
The Company issued 3,500,000 shares of Series A Convertible Preferred Stock with attached warrants during the six months ended March 31, 2015. The Company allocated $233,333 to stockholders equity and $116,667 to the derivative warrant liability. The warrants were issued with a down round provision. During the six months ended March 31, 2015, the Company recognized $175,000 of other expense related to the warrant liability. | |||||||||||||||||
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 March 31, 2015 and September 30, 2014 based upon the short-term nature of the assets and liabilities. | |||||||||||||||||
Revenue Recognition – Visualant and TransTech revenue are 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. | |||||||||||||||||
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 March 31, 2015 and September 30, 2014, the Company had refundable tax assets related to TransTech of $32,679 and $29,590, 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 March 31, 2015, there were options outstanding for the purchase of 10,865,000 common shares, warrants for the purchase of 134,955,286 common shares, preferred stock for the conversion of 3,500,000 common shares and an unknown number of shares related to the conversion of a $64,000 Convertible Promissory Note which could potentially dilute future earnings per share. As of March 31, 2014, there were options outstanding for the purchase of 12,705,000 common shares, warrants for the purchase of 126,454,286 common shares 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. |
4_DEVELOPMENT_OF_CHROMAIDTM_TE
4. DEVELOPMENT OF CHROMAID(TM) TECHNOLOGY | 6 Months Ended | ||
Mar. 31, 2015 | |||
Notes to Financial Statements | |||
4. DEVELOPMENT OF CHROMAID(TM) TECHNOLOGY | The Company is focused primarily on the development of a proprietary technology which is capable of uniquely identifying and authenticating almost any substance using light to create, record and detect the unique digital “signature” of the substance. The Company calls this our “ChromaID™” technology. | ||
The Company’s ChromaID™ Technology | |||
The Company has developed a proprietary technology to uniquely identify and authenticate almost any substance. This patented technology utilizes light at the photon (elementary particle of light) level through a series of emitters and detectors to generate a unique signature or “fingerprint” from a scan of almost any solid, liquid or gaseous material. This signature of reflected or transmitted light is digitized, creating a unique ChromaID signature. Each ChromaID signature is comprised of hundreds or thousands of specific data points. | |||
The ChromaID technology looks beyond visible light frequencies to areas of near infra-red and ultraviolet light that are outside the humanly visible light spectrum. The data obtained allows the Company to create a very specific and unique ChromaID signature of the substance for a myriad of authentication and verification applications. | |||
Traditional light-based identification technology, called spectrophotometry, has relied upon a complex system of prisms, mirrors and visible light. Spectrophotometers typically have a higher cost and utilize a form factor more suited to a laboratory setting and require trained laboratory personnel to interpret the information. The ChromaID technology uses lower cost LEDs and photodiodes and specific frequencies of light resulting in a more accurate, portable and easy-to-use solution for a wide variety of applications. The ChromaID technology not only has significant cost advantages as compared to spectrophotometry, it is also completely flexible is size, shape and configuration. The ChromaID scan head can range in size from endoscopic to a scale that could be the size of a large ceiling-mounted florescent light fixture. | |||
In normal operation, a ChromaID master or reference scan is generated and stored in a database. The Visualant scan head can then scan similar materials to identify, authenticate or diagnose them by comparing the new ChromaID digital signature scan to that of the original or reference ChromaID signature or scan result. | |||
The following summarizes our plans for the Company’s proprietary ChromaID technology. Based on the Company’s anticipated expenditures on this technology, the expected efforts of our management and our relationship with Intellectual Ventures and its subsidiary, IDMC, and our other strategic partner, Sumitomo Precision Products, Ltd., we expect our ChromaID technology to provide an increasing portion of our revenues in future years from product sales, licenses, royalties and other revenue streams., as discussed further below. | |||
ChromaID: A Foundational Platform Technology | |||
The Company’s ChromaID technology provides a platform upon which a myriad of applications can be developed. As a platform technology, it is analogous to a smartphone, upon which an enormous number of previously unforeseen applications have been developed. The ChromaID technology is an enabling technology that brings the science of light and photonics to low cost, real world commercialization opportunities across multiple industries. The technology is foundational and as such, the basis upon which the Company’s believe a significant business can be built. | |||
As with other foundational technologies, a single application may reach across multiple industries. The ChromaID technology can, for example effectively differentiate and identify different brands of clear vodkas that appear identical to the human eye. By extension this same technology can identify pure water from water with contaminants present. It can provide real time detection of liquid medicines such as morphine that have been adulterated or compromised. It can detect if jet fuel has water contamination present. It could determine when it is time to change oil in a deep fat fryer. These are but a few of the potential applications of the ChromaID technology based upon extensions of its ability to identify different clear liquids. | |||
The cornerstone of a company with a foundational platform technology is the Company’s intellectual property. ChromaID was invented by scientists from the University of Washington under contract with Visualant. The Company has pursued an aggressive intellectual property strategy and have been granted seven patents. The Company currently has 22 patents pending. The Company possesses all right, title and interest to the issued patents. Ten of the pending patents are licensed exclusively to us in perpetuity by its strategic partner, IDMC. | |||
At the Photonics West trade show held in San Francisco in February 2013, the Company was honored to receive a PRISM award from the Society of Photo-Optical Instrumentation Engineers International, better known as SPIE. | |||
IDMC Relationship | |||
In November 2013, the Company entered into a strategic relationship with IDMC, a subsidiary of Intellectual Ventures, a private intellectual property fund with over $5 billion under management. Intellectual Ventures owns over 40,000 IP assets and has broad global relationships for the invention of technology, the filing of patents and the licensing of intellectual property. IDMC has worked to expand the reach and the potential application of the ChromaID technology and has filed ten patents base on the ChromaID technology, which it has licensed to the Company. In connection with IDMC’s work to expand the Company’s intellectual property portfolio, the Company agreed to curtail outbound marketing activities of its technology through the fourth fiscal quarter of 2014. | |||
Initial testing in the Company’s laboratories and the work of the IDMC inventors have shown that the ChromaID technology has a number of broad and useful applications a few of which include: | |||
• | Milk identification for quality, protein and fat content and impurities | ||
• | Identification of liquids for counterfeits or contaminants | ||
• | Detecting adulterants in food and food products compromising its quality | ||
• | Color grading of diamonds | ||
• | Identifying real cosmetics versus counterfeit cosmetics | ||
• | Identifying counterfeit medications versus real medications | ||
• | Identifying regular flour versus gluten free flour | ||
• | Authenticating secure identification cards | ||
Products | |||
The Company first delivered product, the ChromaID 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 cards, cosmetic companies, scanner manufactures and food processing companies. | |||
The Company’s second product, the ChromaID Liquid Lab Kit, scans and identifies liquids. This product is currently in prototype form. Similar to the Company’s first product, it will be marketed to customers who are considering licensing the technology. Rather than use an LED emitter to reflect light off of a surface that is captured by a photodiode to generate a ChromaID signature the liquid analysis product shines light through the liquid (transmissive) with the LEDs positioned on one side of the liquid sample and the photo detectors on the opposite side. This device is in a functional state in our laboratory and the Company anticipates having a Liquid ChromaID Lab Kit available for customers by the Company’s fourth fiscal quarter ending September 30, 2015. Target markets include, but are not limited to, water companies, petrochemical companies, pharmaceutical companies, and numerous consumer applications. | |||
The ChromaID Lab Kits allows potential licensors of our technology to work with our technology and develop solutions for their particular application. Our contractual arrangements with IDMC are described in greater detail below. | |||
Our Commercialization Plans for the ChromaID Technology. | |||
The Company shipped our first ChromaID product, the ChromaID Lab Kits, to our strategic partner IDMC during the last calendar quarter of 2013 and first calendar quarter of 2014, after we completed final assembly and testing. As part of the Company’s agreement with IDMC, the Company curtailed its ChromaID marketing efforts through the fourth calendar quarter of 2014 while IDMC worked to expand our intellectual property portfolio. Thereafter, the Company began to actively market the ChromaID Lab Kits to interested and qualified customers. To date, the Company has achieved limited revenue from the sale of our ChromaID Lab Kits. | |||
The Lab Kit includes the following: | |||
ChromaID Scanner. A small device made with electronic and optical components and firmware which pulses light onto a flat material and records and digitizes the light that is reflected back from that material. The device is the size of a typical flashlight (5.5” long and 1.25” diameter). However, the technology can be incorporated into almost any size, shape and configuration. | |||
ChromaID Lab Software. A software application that runs on a Windows PC. The software allows for configuration of the scanner, controls the behavior of the ChromaID Scanner, displays a graph of the captured ChromaID signature profile, stores the ChromaID signature in a database and uses algorithms to compare the accuracy of the match of the unknown scan to the known ChromaID signature profile. This software is intended for lab and experimental use only and is not required for commercialized product applications. | |||
Software Development Toolkit. A collection of software applications, API (an abbreviation of application program interface – a set of routines, protocols, and tools for building software applications) definitions and file descriptions that allow a customer to extract the raw data from the ChromaID signatures and run their own software routines against that raw data. | |||
The ChromaID Lab Kit allows customers to experiment with and evaluate the ChromaID technology and determine if it is appropriate for their specific applications. The primary electronic and optical parts of the ChromaID scanner, called the “scan head,” could be supplied to customers to integrate into their own products. A set of ChromaID Developer Tools are also available. These allow customers to develop their own products based on the ChromaID technology. | |||
ChromaID signatures must be stored, managed, and readily accessible for comparison, matching and authentication purposes. The database can be owned and operated by the end customer, but in the case of thousands of ChromaID signatures, database management may be outsourced to us or a third party provider. These database services could be made available on a per-access transaction basis or on a monthly or annual subscription basis. The actual storage location of the database can be cloud-based, on a stand-alone scanning device or on a mobile device via a Bluetooth connection depending on the requirements of access, size of the database and security as defined by the customer. As a result, large databases can be accessed by cell phone or other mobile technologies using either local storage or cloud based storage. | |||
Based on the commercialization plans outlined above, the Company’s business model anticipates deriving revenue from several sources: | |||
• | Sales of the ChromaID Lab Kit and ChromaID Liquid Lab Kit | ||
• | Non Recurring Engineering (NRE) fees to assist customers with scan integration into their products | ||
• | Licensing of the ChromaID technology | ||
• | Royalties per unit generated from the sales of scan heads | ||
• | Per click transaction revenue from accessing the unique ChromaID signatures | ||
• | Developing custom product applications for customers | ||
• | ChromaID database administration and management services | ||
Our Acceleration of Business Development in the United States and Around the World | |||
The Company is coordinating its internal business development, sales and marketing efforts with those of our strategic partners IDMC, and Sumitomo Precision Products to leverage market data and information in order to focus on specific target vertical markets which have the greatest potential for early adoption. The ChromaID Lab Kit provides a means for us to demonstrate the technology to customers in these markets. It also allows customers to experiment with developing unique applications for their particular use. Our Business Development team is pursuing license opportunities with customers in our target markets. | |||
There is no requirement for FDA or other government approval for the current applications of our ChromaID technology. Over time, as the Company explores the application of our ChromaID technology for medical diagnostics and other applications, the Company expects that there will be requirements for FDA and other government approvals before applications using the technology in medical and other regulated fields can enter the marketplace. | |||
Research and Development | |||
The Company’s research and development efforts are primarily focused improving the core foundational ChromaID technology and developing new and unique applications for the technology. As part of this effort, the Company typically conduct testing to ensure that ChromaID application methods are compatible with the customer’s requirements, and that they can be implemented in a cost effective manner. The Company is also actively involved in identifying new application methods. Our team has considerable experience working with the application of light-based technologies and their application to various industries. The Company believes that its continued development of new and enhanced technologies relating to our core business is essential to its future success. The Company spent $1,169,281 on research and development activities for the year ended September 30, 2013 and $670,742 for the year ended September 30, 2014. The Company’s research and development efforts are supported internally, through its relationship with IDMC and through contractors led by Dr. Tom Furness and his team at RATLab LLC. | |||
The Company’s Patents | |||
The Company believes that it’s seven patents, 22 patent applications, and two registered trademarks, and our trade secrets, copyrights and other intellectual property rights are important assets for us. The Company’s patents will expire at various times between 2027 and 2033. The duration of the Company’s trademark registrations varies from country to country. However, trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained. | |||
The patents that have been granted to Visualant include: | |||
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. | |||
On November 12, 2013, the Company was issued US Patent No. 8,583,394 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 November 21, 2014, the Company was issued US Patent No. 8,888,207 entitled “Systems, Methods, and Articles Related to Machine-Readable Indicia and Symbols” by the United States Office of Patents and Trademarks. The patent expires February 7, 2033. | |||
The Company pursues an aggressive patent strategy to expand our unique intellectual property in the United States and other countries. | |||
Services and License Agreement Invention Development Management Company, L.L.C. | |||
In November 2013, the Company entered into a Services and License Agreement with IDMC. IDMC is affiliated with Intellectual Ventures, which collaborates with inventors and partners with pioneering companies and invests both expertise and capital in the process of invention. On November 19, 2014, the Company amended the Services and License Agreement with IDMC. This amendment exclusively licenses 10 filed patents to us. | |||
The agreement requires IDMC to identify and engage inventors to develop new applications of our ChromaID™ technology, present the developments to us for approval, and file at least 10 patent applications to protect the developments. IDMC is responsible for the development and patent costs. The Company provided the Chroma ID Lab Kits to IDMC at no cost and are providing ongoing technical support. In addition, to provide time for this accelerated expansion of its intellectual property the Company delayed the selling of the ChromaID Lab Kits for 140 days except for certain select accounts. The Company continued its business development efforts during this period and have worked with IDMC and their global business development resources to secure potential customers and licensees for the ChromaID technology. The Company shipped 20 ChromaID Lab Kits to inventors in the IDMC network during December 2013 and January 2014. As part of our agreement with IDMC, the Company curtailed its ChromaID marketing efforts through the fourth calendar quarter of 2014 while IDMC worked to expand our intellectual property portfolio. Thereafter, the Company began to actively market the ChromaID Lab Kits to interested and qualified customers. | |||
The Company has received a worldwide, nontransferable, exclusive license to the intellectual property developed under the IDMC agreement during the term of the agreement, and solely within the identification, authentication and diagnostics field of use, to (a) make, have made, use, import, sell and offer for sale products and services; (b) make improvements; and (c) grant sublicenses of any and all of the foregoing rights (including the right to grant further sublicenses). | |||
The Company received a nonexclusive and nontransferable option to acquire a worldwide, nontransferable, nonexclusive license to the useful intellectual property held by IDMC within the identification, authentication and diagnostics field of use to (a) make, have made, use, import, sell and offer to sell products and services and (b) grant sublicenses to any and all of the foregoing rights. The option to acquire this license may be exercised for up to two years from the effective date of the Agreement. | |||
IDMC is providing global business development services to us for geographies not being pursued by Visualant. Also, IDMC has introduced the Company to potential customers, licensees and distributors for the purpose of identifying and pursuing a license, sale or distribution arrangement or other monetization event. | |||
The Company granted to IDMC a nonexclusive, worldwide, fully paid, nontransferable, sublicenseable, perpetual license to our intellectual property solely outside the identification, authentication and diagnostics field of use to (a) make, have made, use, import, sell and offer for sale products and services and (b) grant sublicenses of any and all of the foregoing rights (including the right to grant further sublicenses). | |||
The Company granted to IDMC a nonexclusive, worldwide, fully paid up, royalty-free, nontransferable, non-sublicenseable, perpetual license to access and use the Company’s technology solely for the purpose of marketing the aforementioned sublicenses of our intellectual property to third parties outside the designated fields of use. | |||
In connection with the original license agreement, the Company issued a warrant to purchase 14,575,286 shares of common stock to IDMC as consideration for the exclusive intellectual property license and application development services. The warrant has an exercise price of $0.20 per share and expires November 10, 2018. The per share price is subject to adjustment based on any issuances below $.20 per share except as described in the warrant. | |||
The Company agreed to pay IDMC a percentage of license revenue for the global development business services and a percentage of revenue received from any company introduced to us by IDMC. The Company also have also agreed to pay IDMC a royalty when the Company receives royalty product revenue from an IDMC-introduced company. IDMC has agreed to pay the Company a license fee for the nonexclusive license of the Company’s intellectual property. | |||
The term of both the exclusive intellectual property license and the nonexclusive intellectual property license commences on the effective date of November 11, 2013, and terminates when all claims of the patents expire or are held in valid or unenforceable by a court of competent jurisdiction from which no appeal can be taken. | |||
The term of the Agreement commences on the effective date until either party terminates the Agreement at any time following the fifth anniversary of the effective date by providing at least ninety days’ prior written notice to the other party. |
5_AGREEMENTS_WITH_SUMITOMO_PRE
5. AGREEMENTS WITH SUMITOMO PRECISION PRODUCTS CO., LTD. | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
5. AGREEMENTS WITH SUMITOMO PRECISION PRODUCTS CO., LTD. | In May 2012, the Company entered into a Joint Research and Product Development Agreement with Sumitomo Precision Products Co., Ltd., a publicly-traded Japanese corporation, for the commercialization of our ChromaID technology. In March 2013, the Company entered into an amendment to this agreement, which extended the Joint Development Agreement from March 31, 2013 to December 31, 2013. The extension provided for continuing work between Sumitomo and Visualant focused upon advancing the ChromaID technology and market research aimed at identifying the most significant markets for the ChromaID technology. This collaborative work supported the development of the ChromaID Lab Kit. This agreement expired December 31, 2013. The current version of the technology was introduced to the marketplace as a part of our ChromaID Lab Kit during the fourth quarter of 2013. Sumitomo invested $2,250,000 in exchange for 17,307,693 shares of restricted shares of common stock priced at $0.13 per share that was funded on June 21, 2012. |
The Company also entered into a License Agreement with Sumitomo in May 2012, under which Sumitomo paid the Company an initial payment of $1 million. The License Agreement granted Sumitomo an exclusive license for the then extant ChromaID technology. The territories covered by this license include Japan, China, Taiwan, Korea and the entirety of Southeast Asia (Burma, Indonesia, Thailand, Cambodia, Laos, Vietnam, Singapore and the Philippines). The Sumitomo License fee was recorded as revenue over the life the Joint Research and Product Development Agreement and was fully recorded as of May 31, 2013. |
6_ACQUISITION_OF_TRANSTECH_SYS
6. ACQUISITION OF TRANSTECH SYSTEMS, INC. | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
6. ACQUISITION OF TRANSTECH SYSTEMS, INC. | The Company’s wholly owned subsidiary, TransTech Systems, Inc., is a distributor of products, including systems solutions, components and consumables, for employee and personnel identification in government and the private sector, document authentication, access control, and radio frequency identification. TransTech provides these products and services, along with marketing and business development assistance to value-added resellers and system integrators throughout North America. |
The Company expects its ownership of TransTech to accelerate our market entry and penetration through well-operated and positioned dealers of security and authentication systems, thus creating a natural distribution channel for products featuring its proprietary ChromaID technology. TransTech currently provides substantially all of our revenues. TransTech’s management team functions independently from Visualant’s and its operations require a minimal commitment of our management time and other resources. The Company’s acquisition of TransTech in June 2010. |
7_ACCOUNTS_RECEIVABLECUSTOMER_
7. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
7. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | Accounts receivable were $865,306 and $815,460, net of allowance, as of March 31, 2015 and September 30, 2014, respectively. The Company had one customer (10.6%) in excess of 10% of our consolidated revenues for the six months ended March 31, 2015. The Company had two customers (12.8% and 11.4%) with accounts receivable in excess of 10% as of March 31, 2015. The Company does expect to have customers with consolidated revenues or accounts receivable balances of 10% of total accounts receivable in the foreseeable future. |
8_INVENTORIES
8. INVENTORIES | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
8. INVENTORIES | Inventories were $309,743 and $412,831 as of March 31, 2015 and September 30, 2014, respectively. Inventories consist primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale. There is a $15,000 and $10,000 reserve for impaired inventory as of March 31, 2015 and September 30, 2014, respectively. |
9_FIXED_ASSETS
9. FIXED ASSETS | 6 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Notes to Financial Statements | ||||||||||||||
9. FIXED ASSETS | Fixed assets, net of accumulated depreciation, was $405,559 and $447,236 as of March 31, 2015 and September 30, 2014, respectively. Accumulated depreciation was $766,118 and $742,676 as of March 31, 2015 and September 30, 2014, respectively. Total depreciation expense, was $40,357 and $26,767 for the six months ended March 31, 2015 and 2014, respectively. All equipment is used for selling, general and administrative purposes and accordingly all depreciation is classified in selling, general and administrative expenses. | |||||||||||||
Property and equipment as of March 31, 2015 was comprised of the following: | ||||||||||||||
Estimated | 31-Mar-15 | |||||||||||||
Useful Lives | Purchased | Capital Leases | Total | |||||||||||
Machinery and equipment | 2-10 years | $ | 194,096 | $ | 87,038 | $ | 281,134 | |||||||
Leasehold improvements | 5-20 years | 603,612 | - | 603,612 | ||||||||||
Furniture and fixtures | 3-10 years | 77,039 | 101,260 | 178,299 | ||||||||||
Software and websites | 3- 7 years | 63,783 | 44,849 | 108,632 | ||||||||||
Less: accumulated depreciation | (534,677 | ) | (231,441 | ) | (766,118 | ) | ||||||||
$ | 403,853 | $ | 1,706 | $ | 405,559 |
10_INTANGIBLE_ASSETS
10. INTANGIBLE ASSETS | 6 Months Ended | |||||||||
Mar. 31, 2015 | ||||||||||
Notes to Financial Statements | ||||||||||
10. INTANGIBLE ASSETS | Intangible assets as of March 31, 2015 and September 30, 2014 consisted of the following: | |||||||||
Estimated | March 31, | September 30, | ||||||||
Useful Lives | 2015 | 2014 | ||||||||
Customer contracts | 5 years | $ | 983,645 | $ | 983,645 | |||||
Technology | 5 years | 712,500 | 712,500 | |||||||
Less: accumulated amortization | (1,434,107 | ) | (1,264,492 | ) | ||||||
Intangible assets, net | $ | 262,038 | $ | 431,653 | ||||||
Total amortization expense was $169,615 for the six months ended March 31, 2015 and 2014, 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. |
11_ACCOUNTS_PAYABLE
11. ACCOUNTS PAYABLE | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
11. ACCOUNTS PAYABLE | Accounts payable were $2,457,944 and $2,234,123 as of March 31, 2015 and September 30, 2014, 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. The Company had 2 vendors (12.8% and 12.2%) with accounts payable in excess of 10% of its accounts payable as of March 31, 2015. The Company does expect to have vendors with accounts payable balances of 10% of total accounts payable in the foreseeable future. |
12_CONVERTIBLE_NOTES_PAYABLE
12. CONVERTIBLE NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2015 | |
Convertible Notes Payable | |
12. CONVERTIBLE NOTES PAYABLE | The Company entered into a Convertible Note Payable with KBM Worldwide, Inc. on August 25, 2014 for $103,500. The Note was paid off on March 2, 2015. The Company entered into a Convertible Note Payable with KBM on September 24, 2014 for $63,000. The Note was repaid March 27, 2015. The Company entered into a Convertible Note Payable with KBM on January 27, 2015 for $64,000. The KBM Note accrues interest at a rate of 8% per annum and becomes due on October 27, 2015 and is convertible into common stock on July 26, 2015. The outstanding KBM Notes is convertible at 65% of the average of the lowest three day trading price in the 10 days prior to conversion; however, the outstanding KBM notes is not convertible until July 26, 2015. During the year ended September 30, 2014, the Company recognized $166,500 of other expense related to the KBM Notes. During the six months ended March 31, 2015, the Company recognized $29,529 of other income and allocated $98,940 to stockholder’s equity related to the KBM Notes. The Company recorded accrued interest of $898 as of March 31, 2015. |
13_NOTES_PAYABLE_CAPITALIZED_L
13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | 6 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | Notes payable, capitalized leases and long term debt as of March 31, 2015 and September 30, 2014 consisted of the following: | ||||||||
March 31, | September 30, | ||||||||
2015 | 2014 | ||||||||
BFI Business Finance Secured Credit Facility | $ | 399,599 | $ | 488,398 | |||||
Note payable to Umpqua Bank | 200,000 | 200,000 | |||||||
Secured note payable to J3E2A2Z LP - related party | 600,000 | 600,000 | |||||||
TransTech capitalized leases, net of capitalized interest | 1,067 | 2,562 | |||||||
Total debt | 1,200,666 | 1,290,960 | |||||||
Less current portion of long term debt | (1,200,666 | ) | (1,290,960 | ) | |||||
Long term debt | $ | - | $ | - | |||||
Capital Source Business Finance Group Secured Credit Facility | |||||||||
The Company finances its TransTech operations from operations and a Secured Credit Facility with Capital Source Business Finance Group. On December 9, 2008, TransTech entered into a $1,000,000 secured credit facility with Capital Source to fund its operations. On December 12, 2014, the secured credit facility was renewed for an additional six months, with a floor for prime interest of 4.5% (currently 4.5%) plus 2.5%. The eligible borrowing is based on 80% of eligible trade accounts receivable, not to exceed $1,000,000. The secured credit facility is collateralized by the assets of TransTech, with a guarantee by Visualant, including a security interest in all assets of Visualant. Availability under this Secured Credit ranges from $0 to $175,000 ($56,000 as of March 31, 2015) on a daily basis. The remaining balance on the accounts receivable line $399,599 as of March 31, 2015 must be repaid by the time the secured credit facility expires on June 12, 2015, or we renew by automatic extension for the next successive six-month term. | |||||||||
Note Payable to Umpqua Bank | |||||||||
The Company has a $200,000 Business Loan Agreement with Umpqua Bank (the “Umpqua Loan”), which currently matures on December 31, 2015 and provides for interest at 3.25% per year. The cash from the Umpqua Loan was received on January 14, 2014. Related to this Umpqua Loan, the Company entered into a demand promissory note for $200,000 on January 10, 2014 with an entity affiliated with Ronald P. Erickson, our Chief Executive Officer. This demand promissory note will be effective in case of a default by the Company under the Umpqua Loan. The Company recorded accrued interest of $7,315 as of March 31, 2015. | |||||||||
The Company also has two other demand promissory note payable to entities affiliated with Mr. Erickson, totaling $600,000. Each of these notes were issued between January and July 2014, provide for interest of 3% per year and currently mature on June 30, 2015. They also provide for a second lien on our assets if not repaid by June 30, 2015 or converted into convertible debentures or equity on terms acceptable to the Mr. Erickson. The Company recorded accrued interest of $15,337 as of March 31, 2015. | |||||||||
Capitalized Leases | |||||||||
TransTech has capitalized leases for equipment. The leases have a remaining lease term of seven months. The imputed interest rate in the capitalized leases is approximately 10.5%. | |||||||||
Aggregate maturities totaling $1,200,166 are all due within twelve months. |
14_EQUITY
14. EQUITY | 6 Months Ended | ||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||
14. EQUITY | Voting Preferred Stock | ||||||||||||||||||
On September 13, 2002, 50,000,000 shares of preferred stock with a par value of $0.001 were authorized by the stockholders. There were no preferred shares issued and the terms had not been determined as of September 30, 2014. | |||||||||||||||||||
On January 23, 2015 and February 23, 2015, respectively, the Board of Directors and the Nevada Secretary of State approved a Certificate of Designations, Preference and Rights for Series A Convertible Preferred Stock. The Company’s Series A Preferred is $0.001 par value, with 50,000,000 shares authorized. Each holder of outstanding shares of Series A Preferred shall be entitled to the number of votes equal to the number of whole shares of common stock of the Corporation into which the shares of Series A Preferred held by such holder are then convertible as of the applicable record date. The Company cannot not amend, alter or repeal any preferences, rights, or other terms of the Series A Preferred so as to adversely affect the Series A Preferred, without the written consent or affirmative vote of the holders of at least sixty-six and two-thirds percent (66.66%) of the then outstanding shares of Series A Preferred, voting as a separate voting group, given by written consent or by vote at a meeting called for such purpose for which notice shall have been duly given to the holders of the Series A Preferred. | |||||||||||||||||||
During the six months ended March 31, 2015, the Company sold 3,500,000 Series A Preferred Stock to two investors totaling $350,000 that is convertible into 3,500,000 shares of common stock at $0.10 per share over the next five years. The Company and the holders of the Series A Preferred Stock are in the process of amending the conversion price to $0.20 per share, subject to adjustment upon the occurrence of certain events. The Series A Preferred Stock has voting rights and may not be redeemed without the consent of the holder. The Company also issued (i) a Series C five-year Warrant for 3,500,000 shares of common stock at an exercise price of $0.20 per share, which is callable at $0.40 per share; and (ii) ) a Series D five-year Warrant for 3,500,000 shares of common stock at an exercise price of $0.30 per share, which is callable at $0.60 per share. The Series A Preferred Stock and Series C and D Warrants have registration rights upon the closing of this offering. | |||||||||||||||||||
Common Stock | |||||||||||||||||||
All of the offerings and sales described below were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities, the offerings and sales were made to a limited number of persons, all of whom were accredited investors and transfer was restricted by the company in accordance with the requirements of Regulation D and the Securities Act. All issuances to accredited and non-accredited investors were structured to comply with the requirements of the safe harbor afforded by Rule 506 of Regulation D, including limiting the number of non-accredited investors to no more than 35 investors who have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of an investment in our securities. | |||||||||||||||||||
The following equity issuances occurred during the six months ended March 31, 2015: | |||||||||||||||||||
On December 14, 2014, the Company entered into an Advisory Agreement with Lester Garfinkel for financial consulting services. Under the Advisory Agreement, Mr. Garfinkel was awarded 25,000 shares of our common stock. The shares were valued at $0.20 per share by the parties. The Company expensed $2,500 during the three months ended March 31, 2015. | |||||||||||||||||||
On January 23, 2015, the Company issued 1,350,000 shares of restricted common stock to seven employees and directors for services during 2014. The shares were issued in accordance with the 2011 Stock Incentive Plan and the Company expensed $135,000 during the six months ended March 31, 2015. | |||||||||||||||||||
On February 23, 2015, the Company issued 254,990 shares of common stock to NVPR LLC related to a conversion of a $24,499 liability under a 7% Convertible Debenture. | |||||||||||||||||||
Warrants to Purchase Common Stock | |||||||||||||||||||
The following warrant issuances occurred during the six months ended March 31, 2015: | |||||||||||||||||||
The Company issued (i) a Series C five-year Warrant for 3,500,000 shares of common stock at an exercise price of $0.20 per share, which is callable at $0.40 per share; and (ii) ) a Series D five-year Warrant for 3,500,000 shares of common stock at an exercise price of $0.30 per share, which is callable at $0.60 per share. The Comany allocated $233,333 to stockholders equity and $116,667 to the derivative warrant liability. The warrants were issued with a down round provision. During the six months ended March 31, 2015, the Company recognized $175,000 of other expense related to the warrant liability. | |||||||||||||||||||
A summary of the warrants issued as of March 31, 2015 were as follows: | |||||||||||||||||||
31-Mar-15 | |||||||||||||||||||
Weighted | |||||||||||||||||||
Average | |||||||||||||||||||
Exercise | |||||||||||||||||||
Shares | Price | ||||||||||||||||||
Outstanding at beginning of period | 128,555,286 | $ | 0.175 | ||||||||||||||||
Issued | 7,000,000 | 0.25 | |||||||||||||||||
Exercised | - | - | |||||||||||||||||
Forfeited | - | - | |||||||||||||||||
Expired | (600,000 | ) | 0.1 | ||||||||||||||||
Outstanding at end of period | 134,955,286 | $ | 0.179 | ||||||||||||||||
Exerciseable at end of period | 134,955,286 | ||||||||||||||||||
A summary of the status of the warrants outstanding as of March 31, 2015 is presented below: | |||||||||||||||||||
31-Mar-15 | |||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||
Average | Average | Average | |||||||||||||||||
Number of | Remaining | Exercise | Shares | Exercise | |||||||||||||||
Warrants | Life ( In Years) | Price | Exerciseable | Price | |||||||||||||||
5,730,000 | 2.88 | $ | 0.10-.13 | 5,730,000 | $ | 0.10-.13 | |||||||||||||
52,300,000 | 3.13 | 0.15 | 52,300,000 | 0.15 | |||||||||||||||
73,425,286 | 3.28 | 0.2 | 73,425,286 | 0.2 | |||||||||||||||
3,500,000 | 4.62 | 0.3 | 3,500,000 | 0.3 | |||||||||||||||
134,955,286 | 3.28 | 0.179 | 134,955,286 | 0.179 | |||||||||||||||
The significant weighted average assumptions relating to the valuation of the Company’s warrants for the period ended March 31, 2015 were as follows: | |||||||||||||||||||
Dividend yield | 0% | ||||||||||||||||||
Expected life | 3 | ||||||||||||||||||
Expected volatility | 90% | ||||||||||||||||||
Risk free interest rate | 0.70% | ||||||||||||||||||
There were vested warrants of 134,955,286 as of March 31, 2015 with an aggregate intrinsic value of $0. |
15_STOCK_OPTIONS
15. STOCK OPTIONS | 6 Months Ended | ||||||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||
15. STOCK OPTIONS | Description of Stock Option Plan | ||||||||||||||||||||||
On April 29, 2011, the 2011 Stock Incentive Plan was approved at the Annual Stockholder Meeting. The Company was authorized to issue options for, and has reserved for issuance, up to 7,000,000 shares of common stock under the 2011 Stock Incentive Plan. On March 21, 2013, an amendment to the Stock Option Plan was approved by the stockholders of the Company, increasing the number of shares reserved for issuance under the Plan to 14,000,000 shares. | |||||||||||||||||||||||
Determining Fair Value under ASC 505 | |||||||||||||||||||||||
The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes 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. The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases 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. The Company has not paid any cash dividends on our common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjusts 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 is recognized in the period the forfeiture estimate is changed. | |||||||||||||||||||||||
Stock Option Activity | |||||||||||||||||||||||
The Company had the following stock option transactions during the six months ended March 31, 2015: | |||||||||||||||||||||||
During the six months ended March 31, 2015, five employees and three directors, forfeited stock option grants for 3,935,000 shares of common stock at $0.132 per share. | |||||||||||||||||||||||
On January 23, 2015, three employees were issued performance grants for 1,700,000 shares of common stock at $0.100 per share. The grants were issued in accordance with the 2011 Stock Incentive Plan, vest quarterly over three years after being earned and expire January 22, 2020. As of March 31, 2015, none of the stock option grants were earned. | |||||||||||||||||||||||
There are currently 10,865,000 options to purchase common stock at an average exercise price of $0.119 per share outstanding as of March 31, 2015 under the 2011 Stock Incentive Plan. The Company recorded $40,150 and $45,880 of compensation expense, net of related tax effects, relative to stock options for the six months ended March 31, 2015 and 2014 in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.00). At March 31, 2015, there is approximately $217,683 of total unrecognized costs related to employee granted stock options that are not vested. These costs are expected to be recognized over a period of approximately 5.02 years. | |||||||||||||||||||||||
Stock option activity for the six months ended March 31, 2015 and the years ended September 30, 2014 and 2013 was as follows: | |||||||||||||||||||||||
Weighted Average | |||||||||||||||||||||||
Options | Exercise Price | $ | |||||||||||||||||||||
Outstanding as of September 30, 2012 | 5,920,000 | $ | 0.131 | $ | 776,800 | ||||||||||||||||||
Granted | 6,830,000 | 0.122 | 836,000 | ||||||||||||||||||||
Exercised | - | - | - | ||||||||||||||||||||
Forfeitures | (15,000 | ) | (0.240 | ) | (3,600 | ) | |||||||||||||||||
Outstanding as of September 30, 2013 | 12,735,000 | 0.126 | 1,609,200 | ||||||||||||||||||||
Granted | 395,000 | 0.1 | 39,500 | ||||||||||||||||||||
Exercised | - | - | - | ||||||||||||||||||||
Forfeitures | (30,000 | ) | (0.217 | ) | (6,500 | ) | |||||||||||||||||
Outstanding as of September 30, 2014 | 13,100,000 | 0.125 | 1,642,200 | ||||||||||||||||||||
Granted | 1,700,000 | 0.1 | 170,000 | ||||||||||||||||||||
Exercised | - | - | - | ||||||||||||||||||||
Forfeitures | (3,935,000 | ) | (0.132 | ) | (517,600 | ) | |||||||||||||||||
Outstanding as of March 31, 2015 | 10,865,000 | $ | 0.119 | $ | 1,294,600 | ||||||||||||||||||
The following table summarizes information about stock options outstanding and exercisable as of March 31, 2015: | |||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Average | Average | Average | |||||||||||||||||||||
Range of | Number | Remaining Life | Exercise Price | Number | Exercise Price | ||||||||||||||||||
Exercise Prices | Outstanding | In Years | Exerciseable | Exerciseable | Exerciseable | ||||||||||||||||||
0.09 | 500,000 | 2.63 | $ | 0.09 | 500,000 | $ | 0.09 | ||||||||||||||||
0.1 | 5,175,000 | 5.25 | 0.1 | 2,654,444 | 0.1 | ||||||||||||||||||
0.13 | 2,950,000 | 4.9 | 0.13 | 2,791,667 | 0.13 | ||||||||||||||||||
0.15 | 2,100,000 | 4.89 | 0.15 | 2,100,000 | 0.15 | ||||||||||||||||||
0.24 | 140,000 | 0.38 | 0.24 | 140,000 | 0.24 | ||||||||||||||||||
10,865,000 | 5.02 | $ | 0.119 | 8,186,111 | $ | 0.13 | |||||||||||||||||
There were exercisable options of 8,186,111 as of March 31, 2015 with an aggregate intrinsic value of $0. |
16_OTHER_SIGNIFICANT_TRANSACTI
16. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
16. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | Related Party Transactions with Ronald P. Erickson |
See Note 13 for Notes Payable to Ronald P. Erickson, our Chief Executive Officer Chief and/or entities in which Mr. Erickson has a beneficial interest. | |
The Company has a $200,000 Business Loan Agreement with Umpqua Bank (the “Umpqua Loan”), which currently matures on December 31, 2015 and provides for interest at 3.25% per year. The cash from the Umpqua Loan was received on January 14, 2014. Related to this Umpqua Loan, the Company entered into a demand promissory note for $200,000 on January 10, 2014 with an entity affiliated with Ronald P. Erickson, our Chief Executive Officer. This demand promissory note will be effective in case of a default by the Company under the Umpqua Loan. | |
The Company also has two other demand promissory note payable to entities affiliated with Mr. Erickson, totaling $600,000. Each of these notes were issued between January and July 2014, provide for interest of 3% per year and currently mature on June 30, 2015. They also provide for a second lien on our assets if not repaid by June 30, 2015 or converted into convertible debentures or equity on terms acceptable to the Mr. Erickson. Mr. Erickson and/or entities with which he is affiliated also have advanced approximately $492,000 and have unreimbursed expenses and compensation of approximately $236,000. As a result, the Company currently owes Mr. Erickson, or entities with which he is affiliated, approximately $1,328,000. |
17_COMMITMENTS_CONTINGENCIES_A
17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | Legal Proceedings |
We may from time to time become a party to various legal proceedings arising in the ordinary course of our business. We are currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to our business. | |
Employment Agreements | |
The Company does not have employment agreements with our Named Executive Officers. | |
Properties and Operating Leases | |
The Company is obligated under various non-cancelable operating leases for its various facilities and certain equipment. | |
Corporate Offices | |
The Company’s executive office is located at 500 Union Street, Suite 420, Seattle, Washington, USA, 98101. The Company leases 2,244 square feet and its net monthly payment is $2,535, through the expiration date of May 31, 2015. | |
TransTech Facilities | |
TransTech is located at 12142 NE Sky Lane, Suite 130, Aurora, OR 97002. TransTech leases a total of approximately 9,750 square feet of office and warehouse space for its administrative offices, product inventory and shipping operations. In March 2011, the lease was extended for a five year term at a monthly rental of $4,751. There are two additional five year renewals available with a set accelerating increase of 10% per 5 year term. | |
The aggregate future minimum lease payments under operating leases as of March 31, 2015 was $57,411. |
18_SUBSEQUENT_EVENTS
18. SUBSEQUENT EVENTS | 6 Months Ended |
Mar. 31, 2015 | |
Subsequent Events [Abstract] | |
18. SUBSEQUENT EVENTS | The Company evaluates subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements are available. |
Subsequent to March 31, 2015, the following material transactions occurred: | |
An employee and a director forfeited stock option grants for 2,095,000 shares of common stock at $0.101 per share. | |
On April 24, 2015, the Company filed a registration statement on Form S-1 to register $10 million of Company securities. The Company has applied for listing of the Company’s common stock and the warrants on The NASDAQ Capital Market. | |
On May 7, 2015, the Company filed an information statement on Schedule 14C in connection with the action by written consent of stockholders taken without a meeting related to (a) a reverse stock split of all our authorized and outstanding capital stock (consisting of common stock and Series A Convertible Preferred Stock) at a specific ratio to be determined by our board of directors within a range from 1-for-50 to 1-for-150 and (b) an amendment to our articles of incorporation to decrease the number of authorized shares of common stock from 500,000,000 to 100,000,000 and decrease the number of authorized shares of preferred stock from 50,000,000 to 5,000,000. |
3_SIGNIFICANT_ACCOUNTING_POLIC1
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Policies) | 6 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Notes to Financial Statements | |||||||||||||||||
BASIS OF PRESENTATION | Basis of Presentation – The accompanying unaudited consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated. The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). | ||||||||||||||||
The unaudited consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2014. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. | |||||||||||||||||
PRINCIPLES OF CONSOLIDATION | Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries, TransTech Systems, Inc. Inter-Company items and transactions have been eliminated in consolidation. | ||||||||||||||||
CASH AND CASH EQUIVALENTS | 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. 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 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 – 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 $15,000 and $10,000 reserve for impaired inventory as of March 31, 2015 and September 30, 2014, respectively. | ||||||||||||||||
EQUIPMENT | 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 | 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. The Company performs annual assessments and has determined that no impairment is necessary. On June 7, 2011, the Company closed the acquisition of all Visualant related assets of the RATLab LLC, namely the rights to the medical field of use of the Chroma ID technology. On July 31, 2012, the Company closed the acquisition of all rights to the ChromaID technology in the environmental field of use from Javelin LLC. | ||||||||||||||||
GOODWILL | 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 unit’s 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 | Long-Lived Assets – The Company reviews its long-lived assets for impairment annually or 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 | 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 entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels: | ||||||||||||||||
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 | |||||||||||||||||
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. | |||||||||||||||||
Derivative Instruments – Warrants with the June 2013 Private Placement | |||||||||||||||||
Carrying | |||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 1,725,900 | $ | - | $ | 1,725,900 | |||||||||
Total | $ | - | $ | 1,725,900 | $ | - | $ | 1,725,900 | |||||||||
Liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | $ | 0.08 | |||||||||||||||
Exercise price | $ | 0.15-0.20 | |||||||||||||||
Expected term (years) | 2.753 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.78 | % | |||||||||||||||
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. | |||||||||||||||||
The Company issued warrants to purchase 104,600,000 shares of common stock in connection with our June 2013 private placement of 52,300,000 shares of common stock. The exercise 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 our common stock or securities exercisable, convertible or exchangeable for our 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 shares of common stock 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 allocated to stockholders’ equity and $2,735,290 allocated to the warrant derivative. The Company recognized $1,448,710 of other expense resulting from the increase in the fair value of the warrant liability at September 30, 2013. During the year ended September 30, 2014, the Company recognized $2,092,000 of other income resulting from the decrease in the fair value of the warrant liability at September 30, 2014. During the six months ended March 31, 2015, the Company recognized $366,100 of other income resulting from the decrease in the fair value of the warrant liability at March 31, 2015. | |||||||||||||||||
Derivative Instruments – Warrant with the November 2013 IDMC Services and License Agreement | |||||||||||||||||
Carrying | |||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 276,930 | $ | - | $ | 276,930 | |||||||||
Total | $ | - | $ | 276,930 | $ | - | $ | 276,930 | |||||||||
Liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.2 | ||||||||||||||||
Expected term (years) | 3.62 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.75 | % | |||||||||||||||
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. | |||||||||||||||||
The Company issued a warrant to purchase 14,575,286 shares of common stock in connection with the November 2013 IDMC Services and License Agreement. The warrant price of $0.20 per share expires November 10, 2018 and the per share price is subject to adjustment. This warrant was 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. This warrant was issued with a down-round provision whereby the exercise price would be adjusted downward in the event that additional shares of our common stock or securities exercisable, convertible or exchangeable for our common stock were issued at a price less than the exercise price. Therefore, the fair value of these warrants was 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. During the year ended September 30, 2014, the Company recognized $320,657 of other expense related to the IDMC warrant. During the six months ended March 31, 2015, the Company recognized $43,726 of other income related to the IDMC warrant. | |||||||||||||||||
Derivative Instrument – Convertible Note Payable | |||||||||||||||||
Carrying | |||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Convertible Promissory Note | $ | - | $ | 38,031 | $ | - | $ | 38,031 | |||||||||
Total | $ | - | $ | 38,031 | $ | - | $ | 38,031 | |||||||||
Liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.052 | ||||||||||||||||
Expected term (years) | 0.6 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 76.7 | % | |||||||||||||||
Risk-free interest rate | 0.78 | % | |||||||||||||||
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 Convertible Note Payable. | |||||||||||||||||
The Company entered into a Convertible Note Payable with KBM Worldwide, Inc. on August 25, 2014 for $103,500. The Note was paid off on March 2, 2015. The Company entered into a Convertible Note Payable with KBM on September 24, 2014 for $63,000. The Note was repaid March 27, 2015. The Company entered into a Convertible Note Payable with KBM on January 27, 2015 for $64,000. The KBM Note accrues interest at a rate of 8% per annum and becomes due on October 27, 2015 and is convertible into common stock on July 26, 2015. The outstanding KBM Notes is convertible at 65% of the average of the lowest three day trading price in the 10 days prior to conversion; however, the outstanding KBM notes is not convertible until July 26, 2015. During the year ended September 30, 2014, the Company recognized $166,500 of other expense related to the KBM Notes. During the six months ended March 31, 2015, the Company recognized $29,529 of other income and allocated $98,940 to stockholder’s equity related to the KBM Notes. | |||||||||||||||||
Derivative Instrument – Series A Convertible Preferred Stock | |||||||||||||||||
Carrying | |||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 175,000 | $ | - | $ | 175,000 | |||||||||
Total | $ | - | $ | 175,000 | $ | - | $ | 175,000 | |||||||||
Liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.2 | ||||||||||||||||
Expected term (years) | 3.62 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.75 | % | |||||||||||||||
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 Series A Convertible Preferred Stock. | |||||||||||||||||
The Company issued 3,500,000 shares of Series A Convertible Preferred Stock with attached warrants during the six months ended March 31, 2015. The Company allocated $233,333 to stockholders equity and $116,667 to the derivative warrant liability. The warrants were issued with a down round provision. During the six months ended March 31, 2015, the Company recognized $175,000 of other expense related to the warrant liability. | |||||||||||||||||
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 March 31, 2015 and September 30, 2014 based upon the short-term nature of the assets and liabilities. | |||||||||||||||||
REVENUE RECOGNITION | Revenue Recognition – Visualant and TransTech revenue are 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. | ||||||||||||||||
STOCK BASED COMPENSATION | 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 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 March 31, 2015 and September 30, 2014, the Company had refundable tax assets related to TransTech of $32,679 and $29,590, respectively. | ||||||||||||||||
NET LOSS PER SHARE | 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 March 31, 2015, there were options outstanding for the purchase of 10,865,000 common shares, warrants for the purchase of 134,955,286 common shares, preferred stock for the conversion of 3,500,000 common shares and an unknown number of shares related to the conversion of a $64,000 Convertible Promissory Note which could potentially dilute future earnings per share. As of March 31, 2014, there were options outstanding for the purchase of 12,705,000 common shares, warrants for the purchase of 126,454,286 common shares which could potentially dilute future earnings per share. | ||||||||||||||||
DIVIDEND POLICY | 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 | 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 | ||||||||||||||||
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. |
3_SIGNIFICANT_ACCOUNTING_POLIC2
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Tables) | 6 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Convertible Note Payable [Member] | |||||||||||||||||
Fair value of financial Instruments | Carrying | ||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Convertible Promissory Note | $ | - | $ | 38,031 | $ | - | $ | 38,031 | |||||||||
Total | $ | - | $ | 38,031 | $ | - | $ | 38,031 | |||||||||
Valuation assumptions for liabilities measured at fair value on a recurring basis | Liabilities measured at fair value on a recurring basis are summarized as follows: | ||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.052 | ||||||||||||||||
Expected term (years) | 0.6 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 76.7 | % | |||||||||||||||
Risk-free interest rate | 0.78 | % | |||||||||||||||
Series A Convertible Preferred Stock [Member] | |||||||||||||||||
Fair value of financial Instruments | Carrying | ||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 175,000 | $ | - | $ | 175,000 | |||||||||
Total | $ | - | $ | 175,000 | $ | - | $ | 175,000 | |||||||||
Valuation assumptions for liabilities measured at fair value on a recurring basis | Liabilities measured at fair value on a recurring basis are summarized as follows: | ||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.2 | ||||||||||||||||
Expected term (years) | 3.62 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.75 | % | |||||||||||||||
Warrants with the June 2013 Private Placement | |||||||||||||||||
Fair value of financial Instruments | Carrying | ||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 1,725,900 | $ | - | $ | 1,725,900 | |||||||||
Total | $ | - | $ | 1,725,900 | $ | - | $ | 1,725,900 | |||||||||
Valuation assumptions for liabilities measured at fair value on a recurring basis | Liabilities measured at fair value on a recurring basis are summarized as follows: | ||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | $ | 0.08 | |||||||||||||||
Exercise price | $ | 0.15-0.20 | |||||||||||||||
Expected term (years) | 2.753 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.78 | % | |||||||||||||||
Warrant with the November 2013 IDMC Services and License Agreement | |||||||||||||||||
Fair value of financial Instruments | Carrying | ||||||||||||||||
Fair Value Measurements Using Inputs | Amount at | ||||||||||||||||
Financial Instruments | Level 1 | Level 2 | Level 3 | 31-Mar-15 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative Instruments - Warrants | $ | - | $ | 276,930 | $ | - | $ | 276,930 | |||||||||
Total | $ | - | $ | 276,930 | $ | - | $ | 276,930 | |||||||||
Valuation assumptions for liabilities measured at fair value on a recurring basis | Liabilities measured at fair value on a recurring basis are summarized as follows: | ||||||||||||||||
31-Mar-15 | |||||||||||||||||
Market price and estimated fair value of common stock: | 0.08 | ||||||||||||||||
Exercise price | 0.2 | ||||||||||||||||
Expected term (years) | 3.62 | ||||||||||||||||
Divident yield | - | ||||||||||||||||
Expected volatility | 64.9 | % | |||||||||||||||
Risk-free interest rate | 0.75 | % |
9_FIXED_ASSETS_Tables
9. FIXED ASSETS (Tables) | 6 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Notes to Financial Statements | ||||||||||||||
Schedule of Property and equipment | Property and equipment as of March 31, 2015 was comprised of the following: | |||||||||||||
Estimated | 31-Mar-15 | |||||||||||||
Useful Lives | Purchased | Capital Leases | Total | |||||||||||
Machinery and equipment | 2-10 years | $ | 194,096 | $ | 87,038 | $ | 281,134 | |||||||
Leasehold improvements | 5-20 years | 603,612 | - | 603,612 | ||||||||||
Furniture and fixtures | 3-10 years | 77,039 | 101,260 | 178,299 | ||||||||||
Software and websites | 3- 7 years | 63,783 | 44,849 | 108,632 | ||||||||||
Less: accumulated depreciation | (534,677 | ) | (231,441 | ) | (766,118 | ) | ||||||||
$ | 403,853 | $ | 1,706 | $ | 405,559 |
10_INTANGIBLE_ASSETS_Tables
10. INTANGIBLE ASSETS (Tables) | 6 Months Ended | |||||||||
Mar. 31, 2015 | ||||||||||
Notes to Financial Statements | ||||||||||
Schedule Of Intangible Assets | Intangible assets as of March 31, 2015 and September 30, 2014 consisted of the following: | |||||||||
Estimated | March 31, | September 30, | ||||||||
Useful Lives | 2015 | 2014 | ||||||||
Customer contracts | 5 years | $ | 983,645 | $ | 983,645 | |||||
Technology | 5 years | 712,500 | 712,500 | |||||||
Less: accumulated amortization | (1,434,107 | ) | (1,264,492 | ) | ||||||
Intangible assets, net | $ | 262,038 | $ | 431,653 |
13_NOTES_PAYABLE_CAPITALIZED_L1
13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Tables) | 6 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
Notes payable, capitalized leases and long term debt | Notes payable, capitalized leases and long term debt as of March 31, 2015 and September 30, 2014 consisted of the following: | ||||||||
March 31, | September 30, | ||||||||
2015 | 2014 | ||||||||
BFI Business Finance Secured Credit Facility | $ | 399,599 | $ | 488,398 | |||||
Note payable to Umpqua Bank | 200,000 | 200,000 | |||||||
Secured note payable to J3E2A2Z LP - related party | 600,000 | 600,000 | |||||||
TransTech capitalized leases, net of capitalized interest | 1,067 | 2,562 | |||||||
Total debt | 1,200,666 | 1,290,960 | |||||||
Less current portion of long term debt | (1,200,666 | ) | (1,290,960 | ) | |||||
Long term debt | $ | - | $ | - |
14_EQUITY_Tables
14. EQUITY (Tables) | 6 Months Ended | ||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||
Summary of the warrants issued | A summary of the warrants issued as of March 31, 2015 were as follows: | ||||||||||||||||||
31-Mar-15 | |||||||||||||||||||
Weighted | |||||||||||||||||||
Average | |||||||||||||||||||
Exercise | |||||||||||||||||||
Shares | Price | ||||||||||||||||||
Outstanding at beginning of period | 128,555,286 | $ | 0.175 | ||||||||||||||||
Issued | 7,000,000 | 0.25 | |||||||||||||||||
Exercised | - | - | |||||||||||||||||
Forfeited | - | - | |||||||||||||||||
Expired | (600,000 | ) | 0.1 | ||||||||||||||||
Outstanding at end of period | 134,955,286 | $ | 0.179 | ||||||||||||||||
Exerciseable at end of period | 134,955,286 | ||||||||||||||||||
Summary of the status of the warrants outstanding | A summary of the status of the warrants outstanding as of March 31, 2015 is presented below: | ||||||||||||||||||
31-Mar-15 | |||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||
Average | Average | Average | |||||||||||||||||
Number of | Remaining | Exercise | Shares | Exercise | |||||||||||||||
Warrants | Life ( In Years) | Price | Exerciseable | Price | |||||||||||||||
5,730,000 | 2.88 | $ | 0.10-.13 | 5,730,000 | $ | 0.10-.13 | |||||||||||||
52,300,000 | 3.13 | 0.15 | 52,300,000 | 0.15 | |||||||||||||||
73,425,286 | 3.28 | 0.2 | 73,425,286 | 0.2 | |||||||||||||||
3,500,000 | 4.62 | 0.3 | 3,500,000 | 0.3 | |||||||||||||||
134,955,286 | 3.28 | 0.179 | 134,955,286 | 0.179 | |||||||||||||||
Weighted average assumptions relating to the valuation of the Companys warrants | The significant weighted average assumptions relating to the valuation of the Company’s warrants for the period ended March 31, 2015 were as follows: | ||||||||||||||||||
Dividend yield | 0% | ||||||||||||||||||
Expected life | 3 | ||||||||||||||||||
Expected volatility | 90% | ||||||||||||||||||
Risk free interest rate | 0.70% |
15_STOCK_OPTIONS_Tables
15. STOCK OPTIONS (Tables) | 6 Months Ended | ||||||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||
Stock option activity | Stock option activity for the six months ended March 31, 2015 and the years ended September 30, 2014 and 2013 was as follows: | ||||||||||||||||||||||
Weighted Average | |||||||||||||||||||||||
Options | Exercise Price | $ | |||||||||||||||||||||
Outstanding as of September 30, 2012 | 5,920,000 | $ | 0.131 | $ | 776,800 | ||||||||||||||||||
Granted | 6,830,000 | 0.122 | 836,000 | ||||||||||||||||||||
Exercised | - | - | - | ||||||||||||||||||||
Forfeitures | (15,000 | ) | (0.240 | ) | (3,600 | ) | |||||||||||||||||
Outstanding as of September 30, 2013 | 12,735,000 | 0.126 | 1,609,200 | ||||||||||||||||||||
Granted | 395,000 | 0.1 | 39,500 | ||||||||||||||||||||
Exercised | - | - | - | ||||||||||||||||||||
Forfeitures | (30,000 | ) | (0.217 | ) | (6,500 | ) | |||||||||||||||||
Outstanding as of September 30, 2014 | 13,100,000 | 0.125 | 1,642,200 | ||||||||||||||||||||
Granted | 1,700,000 | 0.1 | 170,000 | ||||||||||||||||||||
Exercised | - | - | - | ||||||||||||||||||||
Forfeitures | (3,935,000 | ) | (0.132 | ) | (517,600 | ) | |||||||||||||||||
Outstanding as of March 31, 2015 | 10,865,000 | $ | 0.119 | $ | 1,294,600 | ||||||||||||||||||
Stock options outstanding and exercisable | The following table summarizes information about stock options outstanding and exercisable as of March 31, 2015: | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Average | Average | Average | |||||||||||||||||||||
Range of | Number | Remaining Life | Exercise Price | Number | Exercise Price | ||||||||||||||||||
Exercise Prices | Outstanding | In Years | Exerciseable | Exerciseable | Exerciseable | ||||||||||||||||||
0.09 | 500,000 | 2.63 | $ | 0.09 | 500,000 | $ | 0.09 | ||||||||||||||||
0.1 | 5,175,000 | 5.25 | 0.1 | 2,654,444 | 0.1 | ||||||||||||||||||
0.13 | 2,950,000 | 4.9 | 0.13 | 2,791,667 | 0.13 | ||||||||||||||||||
0.15 | 2,100,000 | 4.89 | 0.15 | 2,100,000 | 0.15 | ||||||||||||||||||
0.24 | 140,000 | 0.38 | 0.24 | 140,000 | 0.24 | ||||||||||||||||||
10,865,000 | 5.02 | $ | 0.119 | 8,186,111 | $ | 0.13 |
2_GOING_CONCERN_Details_Narrat
2. GOING CONCERN (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | |
Notes to Financial Statements | ||||||
Net loss | ($2,242,251) | $1,715,305 | $915,058 | $2,560,904 | $1,017,281 | $6,604,631 |
CASH (USED IN) OPERATING ACTIVITIES | -125,790 | -836,696 | -1,379,397 | |||
Accumulated Deficit | $22,450,177 | $22,450,177 | $21,535,119 |
3_SIGNIFICANT_ACCOUNTING_POLIC3
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details) (USD $) | Mar. 31, 2015 |
Fair Value Measurements Level 1 [Member] | Warrants June 2013 Private Placement [Member] | |
Liabilities: | |
Derivative Instruments | $0 |
Total | 0 |
Fair Value Measurements Level 1 [Member] | Warrants November 2013 IDMC Services and License Agreement | |
Liabilities: | |
Derivative Instruments | 0 |
Total | 0 |
Fair Value Measurements Level 1 [Member] | Convertible Note Payable [Member] | |
Liabilities: | |
Derivative Instruments | 0 |
Total | 0 |
Fair Value Measurements Level 1 [Member] | Series A Convertible Preferred Stock [Member] | |
Liabilities: | |
Derivative Instruments | 0 |
Total | 0 |
Fair Value Measurements Level 2 [Member] | Warrants June 2013 Private Placement [Member] | |
Liabilities: | |
Derivative Instruments | 1,725,900 |
Total | 1,725,900 |
Fair Value Measurements Level 2 [Member] | Warrants November 2013 IDMC Services and License Agreement | |
Liabilities: | |
Derivative Instruments | 276,930 |
Total | 276,930 |
Fair Value Measurements Level 2 [Member] | Convertible Note Payable [Member] | |
Liabilities: | |
Derivative Instruments | 38,031 |
Total | 38,031 |
Fair Value Measurements Level 2 [Member] | Series A Convertible Preferred Stock [Member] | |
Liabilities: | |
Derivative Instruments | 175,000 |
Total | 175,000 |
Fair Value Measurements Level 3 [Member] | Warrants June 2013 Private Placement [Member] | |
Liabilities: | |
Derivative Instruments | 0 |
Total | 0 |
Fair Value Measurements Level 3 [Member] | Warrants November 2013 IDMC Services and License Agreement | |
Liabilities: | |
Derivative Instruments | 0 |
Total | 0 |
Fair Value Measurements Level 3 [Member] | Convertible Note Payable [Member] | |
Liabilities: | |
Derivative Instruments | 0 |
Total | 0 |
Fair Value Measurements Level 3 [Member] | Series A Convertible Preferred Stock [Member] | |
Liabilities: | |
Derivative Instruments | 0 |
Total | 0 |
Carrying Value [Member] | Warrants June 2013 Private Placement [Member] | |
Liabilities: | |
Derivative Instruments | 1,725,900 |
Total | 1,725,900 |
Carrying Value [Member] | Warrants November 2013 IDMC Services and License Agreement | |
Liabilities: | |
Derivative Instruments | 276,930 |
Total | 276,930 |
Carrying Value [Member] | Convertible Note Payable [Member] | |
Liabilities: | |
Derivative Instruments | 38,031 |
Total | 38,031 |
Carrying Value [Member] | Series A Convertible Preferred Stock [Member] | |
Liabilities: | |
Derivative Instruments | 175,000 |
Total | $175,000 |
3_SIGNIFICANT_ACCOUNTING_POLIC4
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details1) (USD $) | 6 Months Ended |
Mar. 31, 2015 | |
Warrants - June 2013 Private Placement | |
Market price and estimated fair value of common stock: | $0.08 |
Expected term (years) | 2 years 9 months 1 day |
Dividend yield | |
Expected volatility | 64.90% |
Risk-free interest rate | 0.78% |
Warrants - June 2013 Private Placement | Minimum [Member] | |
Exercise price | $0.15 |
Warrants - June 2013 Private Placement | Maximum [Member] | |
Exercise price | $0.20 |
Warrants - November 2013 IDMC Services and License Agreement | |
Market price and estimated fair value of common stock: | $0.08 |
Exercise price | $0.20 |
Expected term (years) | 3 years 7 months 13 days |
Dividend yield | |
Expected volatility | 64.90% |
Risk-free interest rate | 0.75% |
Convertible Note Payable [Member] | |
Market price and estimated fair value of common stock: | $0.08 |
Exercise price | $0.05 |
Expected term (years) | 7 months 6 days |
Dividend yield | |
Expected volatility | 76.70% |
Risk-free interest rate | 0.78% |
Series A Convertible Preferred Stock [Member] | |
Market price and estimated fair value of common stock: | $0.08 |
Exercise price | $0.20 |
Expected term (years) | 3 years 7 months 13 days |
Dividend yield | |
Expected volatility | 64.90% |
Risk-free interest rate | 0.75% |
3_SIGNIFICANT_ACCOUNTING_POLIC5
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) (USD $) | 6 Months Ended | |
Mar. 31, 2015 | Sep. 30, 2014 | |
Reserve for impaired inventory | 15,000 | $10,000 |
Options outstanding | 12,705,000 | |
Warrants outstanding | 126,454,286 | |
Minimum [Member] | ||
Estimated useful lives of assets | 2 years | |
Minimum [Member] | Leasehold Improvements [Member] | ||
Estimated useful lives of assets | 5 years | |
Maximum [Member] | ||
Estimated useful lives of assets | 10 years | |
Maximum [Member] | Leasehold Improvements [Member] | ||
Estimated useful lives of assets | 20 years |
4_DEVELOPMENT_OF_CHROMAIDTM_TE1
4. DEVELOPMENT OF CHROMAID(TM) TECHNOLOGY (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | |
Notes to Financial Statements | ||||||
Research and development expense | $77,143 | $91,887 | $196,530 | $404,874 | $670,742 | $1,169,281 |
7_ACCOUNTS_RECEIVABLECUSTOMER_1
7. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION (Details Narrative) (USD $) | Mar. 31, 2015 | Sep. 30, 2014 |
Notes to Financial Statements | ||
Accounts receivable, net of allowance | $865,306 | $815,460 |
8_INVENTORIES_Details_Narrativ
8. INVENTORIES (Details Narrative) (USD $) | Mar. 31, 2015 | Sep. 30, 2014 |
Notes to Financial Statements | ||
Inventories | $309,743 | $412,831 |
Reserve for impaired inventory | $15,000 | $10,000 |
9_FIXED_ASSETS_Details
9. FIXED ASSETS (Details) (USD $) | Mar. 31, 2015 | Sep. 30, 2014 |
Machinery and equipment (2-10 years) | $281,134 | |
Leasehold improvements (5-20 years) | 603,613 | |
Furniture and fixtures (3-10 years) | 178,299 | |
Software and websites (3- 7 years) | 108,632 | |
Less: accumulated depreciation | -766,118 | -742,676 |
Property and equipment, net | 405,559 | 447,236 |
Purchased [Member] | ||
Machinery and equipment (2-10 years) | 194,096 | |
Leasehold improvements (5-20 years) | 603,612 | |
Furniture and fixtures (3-10 years) | 77,039 | |
Software and websites (3- 7 years) | 63,783 | |
Less: accumulated depreciation | -534,677 | |
Property and equipment, net | 403,853 | |
Capital Lease [Member] | ||
Machinery and equipment (2-10 years) | 87,038 | |
Leasehold improvements (5-20 years) | ||
Furniture and fixtures (3-10 years) | 101,260 | |
Software and websites (3- 7 years) | 44,849 | |
Less: accumulated depreciation | -231,441 | |
Property and equipment, net | $1,706 |
9_FIXED_ASSETS_Details_Narrati
9. FIXED ASSETS (Details Narrative) (USD $) | 6 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Sep. 30, 2014 | |
Notes to Financial Statements | |||
Property and equipment, net | $405,559 | $447,236 | |
Property and equipment, accumulated depreciation | 766,118 | 742,676 | |
Depreciation expense | $40,357 | $26,767 |
10_INTANGIBLE_ASSETS_Details
10. INTANGIBLE ASSETS (Details) (USD $) | 6 Months Ended | |
Mar. 31, 2015 | Sep. 30, 2014 | |
Less: accumulated amortization | ($1,434,107) | ($1,264,492) |
Intangible assets, net | 262,038 | 431,653 |
Customer Contracts [Member] | ||
Intangible Assets Gross | 983,645 | 983,645 |
Estimated Useful life | 5 years | |
Technology [Member] | ||
Intangible Assets Gross | $712,500 | $712,500 |
Estimated Useful life | 5 years |
10_INTANGIBLE_ASSETS_Details_N
10. INTANGIBLE ASSETS (Details Narrative) (USD $) | 6 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Notes to Financial Statements | ||
Amortization expense | $169,615 | $169,615 |
11_ACCOUNTS_PAYABLE_Details_Na
11. ACCOUNTS PAYABLE (Details Narrative) (USD $) | Mar. 31, 2015 | Sep. 30, 2014 |
Notes to Financial Statements | ||
Accounts payable | $2,457,944 | $2,234,123 |
Vendor One with accounts payble on excess of 10% | 12.80% | |
Vendor Two with accounts payble on excess of 10% | 12.20% |
12_CONVERTIBLE_NOTES_PAYABLE_D
12. CONVERTIBLE NOTES PAYABLE (Details Narrative) (KBM Notes [Member], USD $) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Sep. 30, 2014 | |
KBM Notes [Member] | ||
Other expense recognized | $166,500 | |
Other income recognized | 29,529 | |
Allocated to shareholder's equity | 98,940 | |
Accrued interest | $898 |
13_NOTES_PAYABLE_CAPITALIZED_L2
13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Details) (USD $) | Mar. 31, 2015 | Sep. 30, 2014 |
Notes Payable Capitalized Leases And Long Term Debt Details | ||
BFI Business Finance Secured Credit Facility | $399,599 | $488,398 |
Note payable to Umpqua Bank | 200,000 | 200,000 |
Note payable to J3E2A2Z LP - related party | 600,000 | 600,000 |
TransTech capitalized leases, net of capitalized interest | 1,067 | 2,562 |
Total debt | 1,200,666 | 1,290,960 |
Less current portion of long term debt | -1,200,666 | -1,290,960 |
Long term debt |
14_EQUITY_Details
14. EQUITY (Details) (USD $) | 6 Months Ended |
Mar. 31, 2015 | |
Shares | |
Outstanding at beginning of period | 128,555,286 |
Issued | 7,000,000 |
Exercised | |
Forfeited | |
Expired | -600,000 |
Outstanding at end of period | 134,955,286 |
Exerciseable at end of period | 134,955,286 |
Weighted Average Exercise Price: | |
Outstanding at beginning of period | $0.18 |
Issued | $0.25 |
Exercised | |
Forfeited | |
Expired | $0.10 |
Outstanding at end of period | $0.18 |
14_EQUITY_Details_1
14. EQUITY (Details 1) (USD $) | 6 Months Ended |
Mar. 31, 2015 | |
Number of Warrants | 134,955,286 |
Weighted Average Remaining Life (years) | 3 years 3 months 11 days |
Weighted Average Exercise Price | $0.18 |
Shares Exercisable | 134,955,286 |
0.10-013 [Member] | |
Number of Warrants | 5,730,000 |
Weighted Average Remaining Life (years) | 2 years 10 months 17 days |
Shares Exercisable | 5,730,000 |
0.10-013 [Member] | Minimum [Member] | |
Weighted Average Exercise Price | $0.10 |
0.10-013 [Member] | Maximum [Member] | |
Weighted Average Exercise Price | $0.13 |
0.150 [Member] | |
Number of Warrants | 52,300,000 |
Weighted Average Remaining Life (years) | 3 years 1 month 17 days |
Weighted Average Exercise Price | $0.15 |
Shares Exercisable | 52,300,000 |
0.200 [Member] | |
Number of Warrants | 73,425,286 |
Weighted Average Remaining Life (years) | 3 years 3 months 11 days |
Weighted Average Exercise Price | $0.20 |
Shares Exercisable | 73,425,286 |
0.300 [Member] | |
Number of Warrants | 3,500,000 |
Weighted Average Remaining Life (years) | 4 years 7 months 13 days |
Weighted Average Exercise Price | $0.30 |
Shares Exercisable | 3,500,000 |
14_EQUITY_Details_2
14. EQUITY (Details 2) | 6 Months Ended |
Mar. 31, 2015 | |
Equity Details | |
Dividend yield | 0.00% |
Expected life | 3 years |
Expected volatility | 90.00% |
Risk free interest rate | 0.70% |
14_EQUITY_Details_Narrative
14. EQUITY (Details Narrative) (USD $) | 6 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
Expenses related to warrants | $175,000 |
Intrinsic value | $0 |
Warrants Vested | 134,955,286 |
15_STOCK_OPTIONS_Details
15. STOCK OPTIONS (Details) (USD $) | 6 Months Ended | 12 Months Ended | |
Mar. 31, 2015 | Sep. 30, 2014 | Sep. 30, 2013 | |
Shares: | |||
Outstanding at beginning of period | 128,555,286 | ||
Shares granted | 7,000,000 | ||
Shares exercised | |||
Shares forfeitures | |||
Outstanding at end of period | 134,955,286 | ||
Weighted Average Exercise Price: | |||
Outstanding at beginning of period | $0.18 | ||
Shares granted | $0.25 | ||
Shares exercised | |||
Shares forfeitures | |||
Outstanding at end of period | $0.18 | ||
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, End | $0 | ||
Stock Options | |||
Shares: | |||
Outstanding at beginning of period | 13,100,000 | 12,735,000 | 5,920,000 |
Shares granted | 1,700,000 | 395,000 | 6,830,000 |
Shares exercised | |||
Shares forfeitures | -3,935,000 | -30,000 | -15,000 |
Outstanding at end of period | 10,865,000 | 13,100,000 | 12,735,000 |
Weighted Average Exercise Price: | |||
Outstanding at beginning of period | $0.13 | $0.13 | $0.13 |
Shares granted | $0.10 | $0.10 | $0.12 |
Shares exercised | |||
Shares forfeitures | ($0.13) | ($0.22) | ($0.24) |
Outstanding at end of period | $0.12 | $0.13 | $0.13 |
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, Beginning | 1,642,200 | 1,609,200 | 776,800 |
Aggregate Intrinsic Value Outstanding, Granted | $170,000 | $39,500 | $836,000 |
Aggregate Intrinsic Value Outstanding, Exercised | |||
Aggregate Intrinsic Value Outstanding, Forefeitures | ($517,600) | ($6,500) | ($3,600) |
Aggregate Intrinsic Value Outstanding, End | $1,294,600 | $1,642,200 | $1,609,200 |
15_STOCK_OPTIONS_Details_1
15. STOCK OPTIONS (Details 1) (USD $) | 6 Months Ended |
Mar. 31, 2015 | |
Number of Outstanding Stock Options | 134,955,286 |
Weighted Average Remaining Life (years) | 3 years 3 months 11 days |
Weighted Average Exercise Price Exerciseable | $0.18 |
Number Exercisable | 134,955,286 |
Stock Options | |
Number of Outstanding Stock Options | 10,865,000 |
Weighted Average Remaining Life (years) | 5 years 7 days |
Weighted Average Exercise Price Exerciseable | $0.12 |
Number Exercisable | 8,186,111 |
Exercise Price 0.090 [Member] | |
Number of Outstanding Stock Options | 500,000 |
Weighted Average Remaining Life (years) | 2 years 7 months 17 days |
Weighted Average Exercise Price Exerciseable | $0.09 |
Number Exercisable | 500,000 |
Exercise Price 0.100 [Member] | |
Number of Outstanding Stock Options | 5,175,000 |
Weighted Average Remaining Life (years) | 5 years 3 months |
Weighted Average Exercise Price Exerciseable | $0.10 |
Number Exercisable | 2,654,444 |
Exercise Price 0.130 [Member] | |
Number of Outstanding Stock Options | 2,950,000 |
Weighted Average Remaining Life (years) | 4 years 10 months 24 days |
Weighted Average Exercise Price Exerciseable | $0.13 |
Number Exercisable | 2,791,667 |
Exercise Price 0.150 [Member] | |
Number of Outstanding Stock Options | 2,100,000 |
Weighted Average Remaining Life (years) | 4 years 10 months 21 days |
Weighted Average Exercise Price Exerciseable | $0.15 |
Number Exercisable | 2,100,000 |
Exercise Price 0.240 [Member] | |
Number of Outstanding Stock Options | 140,000 |
Weighted Average Remaining Life (years) | 4 months 17 days |
Weighted Average Exercise Price Exerciseable | $0.24 |
Number Exercisable | 140,000 |
15_STOCK_OPTIONS_Details_Narra
15. STOCK OPTIONS (Details Narrative) (USD $) | 6 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Compensation expense | $40,150 | $45,880 |
Options to purchase common stock under 2011 Stock Incentive Plan | 134,955,286 | |
Options exercisable | 134,955,286 | |
2011 Stock Incentive Plan | ||
Options to purchase common stock under 2011 Stock Incentive Plan | 217,683 | |
Period for recognition | 5 years 7 days | |
Average exercise price under 2011 Stock Incentive Plan | $0.12 | |
Options exercisable | 8,186,111 | |
Aggregate intrinsic value | $0 |
17_COMMITMENTS_CONTINGENCIES_A1
17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS (Details Narrative) (USD $) | Mar. 31, 2015 |
Notes to Financial Statements | |
Aggregate future minimum lease payments under operating leases | $57,411 |