Know Labs (KNWN) 10-Q 29 Jul 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Jun. 30, 2016	Jul. 29, 2016
Document And Entity Information
Entity Registrant Name	VISUALANT INC
Entity Central Index Key	1,074,828
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--09-30
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		1,564,866
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,016

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Jun. 30, 2016	Sep. 30, 2015
CURRENT ASSETS:
Cash and cash equivalents	$ 276,879	$ 82,266
Accounts receivable, net of allowance of $40,000 and $40,000, respectively	1,102,821	619,849
Prepaid expenses	19,742	27,774
Inventories, net	306,529	217,824
Total current assets	1,705,971	947,713
EQUIPMENT, NET	303,584	366,250
OTHER ASSETS
Intangible assets, net	56,875	158,000
Goodwill	983,645	983,645
Other assets	5,070	5,070
TOTAL ASSETS	3,055,145	2,460,678
CURRENT LIABILITIES:
Accounts payable - trade	2,655,741	2,520,223
Accounts payable - related parties	3,996	73,455
Accrued expenses	37,190	4,068
Accrued expenses - related parties	1,288,743	1,256,861
Derivative liability	738,984	2,704,840
Convertible notes payable	957,310	109,000
Notes payable - current portion of long term debt	1,547,587	1,164,692
Deferred revenue	0	5,833
Total current liabilities	7,229,551	7,838,972
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock - $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 6/30/2016 and 9/30/2015, respectively. Series A Convertible Preferred stock - $0.001 par value, 23,334 shares authorized, 23,334 and 11,667 issued and outstanding at 6/30/2016 and 9/30/2015, respectively. Series B Redeemable Convertible Preferred stock - $0.001 par value, 5,000 shares authorized, 221 and 0 shares issued and outstanding at 6/30/2016 and 9/30/2015, respectively.	0	0
Common stock - $0.001 par value, 100,000,000 shares authorized, 1,410,628 and 1,155,991 shares issued and outstanding at 6/30/2016 and 9/30/2015, respectively	1,411	1,156
Additional paid in capital	20,585,633	18,786,694
Accumulated deficit	(24,761,478)	(24,166,156)
Total stockholders' deficit	(4,174,406)	(5,378,294)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	3,055,145	2,460,678
Series A Convertible Preferred stock [Member]
STOCKHOLDERS' DEFICIT
Preferred stock - $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 6/30/2016 and 9/30/2015, respectively. Series A Convertible Preferred stock - $0.001 par value, 23,334 shares authorized, 23,334 and 11,667 issued and outstanding at 6/30/2016 and 9/30/2015, respectively. Series B Redeemable Convertible Preferred stock - $0.001 par value, 5,000 shares authorized, 221 and 0 shares issued and outstanding at 6/30/2016 and 9/30/2015, respectively.	23	12
Series B Convertible Preferred stock [Member]
STOCKHOLDERS' DEFICIT
Preferred stock - $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 6/30/2016 and 9/30/2015, respectively. Series A Convertible Preferred stock - $0.001 par value, 23,334 shares authorized, 23,334 and 11,667 issued and outstanding at 6/30/2016 and 9/30/2015, respectively. Series B Redeemable Convertible Preferred stock - $0.001 par value, 5,000 shares authorized, 221 and 0 shares issued and outstanding at 6/30/2016 and 9/30/2015, respectively.	$ 5	$ 0

CONSOLIDATED BALANCE SHEETS (U3

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2016	Sep. 30, 2015
CURRENT ASSETS:
Allowance for Accounts receivable	$ 40,000	$ 40,000
EQUITY (DEFICIT)
Preferred stock par value	$ 0.001	$ 0.001
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	100,000,000	100,000,000
Common stock shares issued	1,410,628	1,155,991
Common stock shares outstanding	1,410,628	1,155,991
Series A Convertible Preferred stock [Member]
EQUITY (DEFICIT)
Preferred stock par value	$ 0.001	$ 0.001
Preferred stock shares authorized	23,334	23,334
Preferred stock shares issued	23,334	11,667
Preferred stock shares outstanding	23,334	11,667
Series B Convertible Preferred stock [Member]
EQUITY (DEFICIT)
Preferred stock par value	$ 0.001	$ 0.001
Preferred stock shares authorized	5,000	5,000
Preferred stock shares issued	221	0
Preferred stock shares outstanding	221	0

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
REVENUE	$ 1,833,283	$ 1,546,931	$ 4,585,548	$ 4,825,099
COST OF SALES	1,495,568	1,291,046	3,834,521	4,041,058
GROSS PROFIT	337,715	255,885	751,027	784,041
RESEARCH AND DEVELOPMENT EXPENSES	69,387	89,097	243,114	285,627
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	743,016	821,101	2,297,001	2,349,326
OPERATING LOSS	(474,688)	(654,313)	(1,789,088)	(1,850,912)
OTHER INCOME (EXPENSE):
Interest expense	(118,486)	(17,124)	(254,557)	(138,144)
Other (expense) income	(14,199)	5,336	(10,934)	23,784
Gain on change - derivative liability	2,835,362	1,428,093	1,965,856	1,809,116
(Loss) on conversion of debt	(506,599)	0	(506,599)	0
Total other income (expense)	2,196,078	1,416,305	1,193,766	1,694,756
INCOME (LOSS) BEFORE INCOME TAXES	1,721,390	761,992	(595,322)	(156,156)
Income taxes - current provision	0	(5,288)	0	(8,377)
NET INCOME (LOSS)	$ 1,721,390	$ 767,280	$ (595,322)	$ (147,779)
Basic income (loss) per common share attributable to Visualant, Inc. and subsidiaries common shareholders-
Basic income (loss) per share	$ 1.29	$ 0.68	$ (0.48)	$ (0.13)
Weighted average shares of common stock outstanding- basic	1,339,484	1,131,960	1,236,721	1,127,252
Diluted income (loss) per common share attributable to Visualant, Inc. and subsidiaries common shareholders-
Diluted income (loss) per share	$ 0.97	$ 0.68	$ (0.48)	$ (0.13)
Weighted average shares of common stock outstanding- diluted	1,779,650	1,131,960	1,236,721	1,127,252

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (595,322)	$ (147,779)
Adjustments to reconcile net loss to net cash (used in) operating activities
Depreciation and amortization	136,129	299,493
Issuance of capital stock for services and expenses	222,061	137,500
Stock based compensation	35,511	53,222
Loss (gain) on sale of assets	22,367	(20,042)
Gain on change - derivative liability	(1,965,856)	(1,809,116)
Provision for losses on accounts receivable	211	12,035
Non-cash related to issuance of convertible notes payable	148,790	0
Issuance of common stock related to convertible notes payable and Series B Redeemable Convertible Preferred stock	577,478	0
Changes in operating assets and liabilities:
Accounts receivable	(483,183)	131,146
Prepaid expenses	8,032	9,741
Inventory	(88,705)	143,527
Accounts payable - trade and accrued expenses	131,063	1,040,396
Income tax receivable	0	(8,377)
Deferred revenue	(5,833)	8,333
CASH (USED IN) OPERATING ACTIVITIES	(1,857,257)	(149,921)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(1,290)	0
Proceeds from sale of equipment	6,585	21,452
NET CASH PROVIDED BY INVESTING ACTIVITIES:	5,295	21,452
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) from line of credit	382,895	(139,558)
Proceeds from sale of preferred stock	505,000	350,000
Proeeds from warrant exercises	349,159	0
Proceeds from convertible notes payable	924,500	64,000
Repayments of convertible notes	(114,979)	(166,500)
Repayments of capital leases	0	(2,290)
NET CASH PROVIDED BY FINANCING ACTIVITIES	2,046,575	105,652
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	194,613	(22,817)
CASH AND CASH EQUIVALENTS, beginning of period	82,266	70,386
CASH AND CASH EQUIVALENTS, end of period	276,879	47,569
Supplemental disclosures of cash flow information:
Interest paid	33,646	97,290
Taxes paid	0	0
Gain on change - derivative liability warrants	0	17,727
Issuance of common stock for debt conversion	$ 0	$ 25,499

1. ORGANIZATION

1. ORGANIZATION	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
1. ORGANIZATION	Visualant, Incorporated (the “Company,” “Visualant, Inc.” or “Visualant”) was incorporated under the laws of the State of Nevada in 1998. The Company has authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share. On July 21, 2015, the Company filed with the Secretary of State of Nevada an Amended and Restated Certificate of Designations, Preferences and Rights for our Series A Convertible Preferred Stock. On March 8, 2016, the Company received approval from the State of Nevada for the Certificate of Designations of Preferences, Powers, Rights and Limitations of Series B Redeemable Convertible Preferred Stock. The Certificate authorized 5,000 shares of Series B Preferred Stock at a par value of $.001 per share that is convertible into common stock at $7.50 per share, subject to certain adjustments as set forth in the Certificate. Since 2007 the Company has 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 is in the process of commercializing its ChromaID™ technology. To date, the Company has 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 ten patents. The Company also has 20 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 the Company’s strategic partner, Intellectual Ventures through its subsidiary IDMC. On May 6, 2015, the Company’s stockholders approved a reverse split of our common stock, in a ratio to be determined by the Company’s Board of Directors, of not less than 1-for-50 nor more than 1-for-150. On June 9, 2015, the Company’s Board of Directors determined that the ratio of the reverse split would be 1-for-150. All warrant, option, share and per share information in this Form 10-Q gives retroactive effect for a 1-for-150 split with all numbers rounded up to the nearest whole share.

2. GOING CONCERN

2. GOING CONCERN	9 Months Ended
	Jun. 30, 2016
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 $595,322, $2,631,037 and $1,017,291 for the nine months ended June 30, 2016 and the years ended September 30, 2015 and 2014, respectively. Net cash used in operating activities was $1,857,257, $239,877 and $1,379,397 for the for the nine months ended June 30, 2016 and the years ended September 30, 2015 and 2014, respectively. The Company anticipates that it will record losses from operations for the foreseeable future. As of June 30, 2016, the Company’s accumulated deficit was $24,761,478. 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, or entities with which he is affiliated. 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, 2015 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	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS	Basis of Presentation 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, 2015. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. Principles of Consolidation Cash and Cash Equivalents Accounts Receivable and Allowance for Doubtful Accounts Inventories Equipment Intangible Assets/ Intellectual Property Goodwill Long-Lived Assets Fair Value Measurements and Financial Instruments Fair Value Measurement and Disclosures 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 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities at June 30, 2016 and September 30, 2015 based upon the short-term nature of the assets and liabilities. Derivative financial instruments - Revenue Recognition Stock Based Compensation Convertible Securities Income Taxes . Net Loss per Share June 30, 2016 June 30, 2015 Weighted average number of common shares used in basic net income per common share 1,339,484 1,131,960 Dilutive effects of outstanding stock options and warrants 440,166 - Weighted average number of common shares used in diluted net income per common share 1,779,650 1,131,960 Dividend Policy Patent Policy— Use of 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 CHROMAID(TM)

4. DEVELOPMENT OF CHROMAID(TM) TECHNOLOGY	9 Months Ended
	Jun. 30, 2016
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 its “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 from 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 the Company’s plans for its Company’s proprietary ChromaID technology. Based on the Company’s anticipated expenditures on this technology, the expected efforts of its management and its relationship with Intellectual Ventures and its subsidiary, IDMC, and the Company’s other strategic partner, Sumitomo Precision Products, Ltd., the Company expects its ChromaID technology to provide an increasing portion of its 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 believes 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 its 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 has been granted nine patents. The Company currently has 20 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 our strategic partner, the IDMC subsidiary of Intellectual Ventures. IDMC Relationship In November 2013, the Company entered into a strategic relationship with IDMC, a subsidiary of Intellectual Ventures, a private intellectual property fund. 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. 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 during the fall of 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. The Company’s next planned product should be an exemplar product is a prototype that will be produced to address several markets. The primary purpose of this prototype will be to demonstrate the technology to prospective business partners, and will consist of a small, hand held, battery powered, Bluetooth enabled scanning device. The scanner should wirelessly connect to a smart phone or tablet to transfer the scanned data. The smart phone application will include two or three industry specific but generic applications that allow for the demonstration of the scanning and matching of the ChromaID signatures. The applications will focus on drug identification, food safety and liquid detection. The prototype device will lend itself to consumer applications and can be a consumer product as well. 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. Visualant’s 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 $243,114 during the nine months ended June 30, 2016 and $362,661 and $670,742 during the years ended September 30, 2015 and 2014, respectively, on research and development activities. 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 ten patents, 20 patent applications, and two registered trademarks, and our trade secrets, copyrights and other intellectual property rights are important assets. 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 B2 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. On March 23, 2015, the Company was issued US Patent No. 8,988,666 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 May 26, 2015, the Company was issued patent US Patent No. 9,041,920 B2 entitled “Device for Evaluation of Fluids using Electromagnetic Energy” by the United States Office of Patents and Trademarks. The patent expires March 12, 2033. On April 19, 2016, the Company was issued patent US Patent No. 9,316,581 B2 entitled “Method, Apparatus, and Article to Facilitate Evaluation of Substances Using Electromagnetic Energy” by the United States Office of Patents and Trademarks. The patent expires March 12, 2033. The Company pursues an aggressive patent strategy to expand its 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 Visualant’s 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 the 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 97,169 shares of common stock to IDMC as consideration for the exclusive intellectual property license and application development services. The warrant has a current exercise price of $2.50 per share and expires November 10, 2018. The per share price is subject to adjustment based on any issuances below $2.50 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.	9 Months Ended
	Jun. 30, 2016
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 (the “Joint 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 on advancing the ChromaID technology and market research aimed at identifying the most significant markets for the ChromaID technology. This agreement expired December 31, 2013. This collaborative work supported the development of the ChromaID Lab Kit. 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. The Company also entered into a License Agreement with Sumitomo in May 2012 which provides for 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). On May 21, 2015, the Company entered into an amendment to the License Agreement, which, effective as of June 18, 2014, which eliminated the Sumitomo exclusivity and provides that if the Company sells products in certain territories – Japan, China, Taiwan, Korea and the entirety of Southeast Asia (Burma, Indonesia, Thailand, Cambodia, Laos, Vietnam, Singapore and the Philippines) – the Company will pay Sumitomo a royalty rate of 2% of net sales (excluding non-recurring engineering revenues) over the remaining term of the five-year License Agreement (through May 2017).

6. ACCOUNTS RECEIVABLE_CUSTOMER

6. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
6. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION	Accounts receivable were $1,102,821 and $619,849, net of allowance, as of June 30, 2016 and September 30, 2015, respectively. The Company had one customer (14.8%) in excess of 10% of our consolidated revenues for the nine months ended June 30, 2016. The Company had three customers (28.1%, 14.5% and 11.2%) with accounts receivable in excess of 10% as of June 30, 2016. The Company does expect to have customers with consolidated revenues or accounts receivable balances of 10% of total accounts receivable in the foreseeable future.

7. INVENTORIES

7. INVENTORIES	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
7. INVENTORIES	Inventories were $306,529 and $217,824 as of June 30, 2016 and September 30, 2015, 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 $20,000 reserve for impaired inventory as of June 30, 2016 and September 30, 2015, respectively.

8. FIXED ASSETS

8. FIXED ASSETS	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
8. FIXED ASSETS	Fixed assets, net of accumulated depreciation, was $303,584 and $366,250 as of June 30, 2016 and September 30, 2015, respectively. Accumulated depreciation was $778,313 and $803,705 as of June 30, 2016 and September 30, 2015, respectively. Total depreciation expense, was 55,100 and $61,727 for the nine months ended June 30, 2016 and 2015, 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 June 30, 2016 was comprised of the following: Estimated June 30, 2016 Useful Lives Purchased Capital Leases Total Machinery and equipment 2-10 years $ 252,636 $ 69,581 $ 322,217 Leasehold improvements 5-20 years 548,612 - 548,612 Furniture and fixtures 3-10 years 73,977 101,260 175,237 Software and websites 3- 7 years 35,831 - 35,831 Less: accumulated depreciation (607,472 ) (170,841 ) (778,313) $ 303,584 $ - $ 303,584

9. DERIVATIVE INSTRUMENTS

9. DERIVATIVE INSTRUMENTS	9 Months Ended
	Jun. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]
9. DERIVATIVE INSTRUMENTS	In April 2008, the FASB issued a pronouncement that provides guidance on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in the pronouncement on accounting for derivatives. This pronouncement was effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of these requirements can affect the accounting for warrants and many convertible instruments with provisions that protect holders from a decline in the stock price (or “down-round” provisions). For example, warrants or conversion features with such provisions are no longer recorded in equity. Down-round provisions reduce the exercise price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise price of those instruments or issues new warrants or convertible instruments that have a lower exercise price. Derivative liability as of June 30, 2016 is as follows: Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 June 30, 2016 Liabilities: Derivative Instruments $ - $ 738,984 $ - $ 738,984 Total $ - $ 738,984 $ - $ 738,984 Derivative liability as of September 30, 2015 is as follows: Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 September 30, 2015 Liabilities: Derivative Instruments $ - $ 2,704,840 $ - $ 2,704,840 Total $ - $ 2,704,840 $ - $ 2,704,840 The risk-free rate of return reflects the interest rate for the United States Treasury Note with similar time-to-maturity to that of the warrants. Derivative Instruments – Warrants with the June 2013 Private Placement The Company issued warrants to purchase 697,370 shares of common stock in connection with our June 2013 private placement of 348,685 shares of common stock. The exercise price of these warrants is $2.50 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 the Company’s 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 year ended September 30, 2015, the Company recognized $104,716 of other expense resulting from the decrease in the fair value of the warrant liability at September 30, 2015. During the nine months ended June 30, 2016, the Company recognized $1,650,339 of other income resulting from the increase in the fair value of the warrant liability at June 30, 2016. Derivative Instruments – Warrant with the November 2013 IDMC Services and License Agreement 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 97,169 shares of common stock in connection with the November 2013 IDMC Services and License Agreement. The warrant price of $30.00 per share expires November 10, 2018 and the per share price is subject to adjustment. In August 2015 the exercise price was reset to $2.50 per shares. 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 year ended September 30, 2015, the Company recognized $14,574 of other income related to the IDMC warrant. During the nine months ended June 30, 2016, the Company recognized $213,286 of other income from the increase in the fair value of the warrant liability at June 30, 2016. Derivative Instrument – Series A Convertible Preferred Stock 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 11,667 shares of Series A Convertible Preferred Stock with attached warrants during the year ended September 30, 2015. The Company allocated $233,322 to stockholder’s equity and $116,678 to the derivative warrant liability. The warrants were issued with a down round provision. The warrants have a term of five years, 23,334 are exercisable at $30 per common share and 23,334 are exercisable at $45 per common share. On August 14, 2015 the exercise price was adjusted to $2.50 per share. During the year ended September 30, 2015, the Company recognized $30,338 of other expense related to the warrant liability. During the nine months ended June 30, 2016, the Company recognized $102,436 of other income resulting from the increase in the fair value of the warrant liability at June 30, 2016. Derivative Instrument – Convertible Note Payable Vis Vires Group, Inc. The Company entered into a Convertible Note Payable with Vis Vires Group, Inc. on February 19, 2016 for $100,000 to fund short-term working capital. The Vis Vires Note accrues interest at a rate of 8% per annum and becomes due on November 22, 2016 and is convertible into common stock on August 19, 2016. The Vis Vires Note is convertible at 65% of the average of the lowest three day trading price in the 10 days prior to conversion. The Company recorded accrued interest of $2,915 as of June 30, 2016. During the nine months ended June 30, 2016, the Company recognized a $65,278 debt discount resulting from the fair value of the conversion option and other income resulting from the increase in the fair value of the warrant liability at June 30, 2016 of $55,243. The Company also recorded other financing expense in the amount of $14,000 which was expensed to interest immediately due to the short term nature of the note. Liabilities measured at fair value on a recurring basis for the Vis Vires Convertible Note Payable are summarized as follows: June 30, 2016 Market price and estimated fair value of common stock: $ 3.25 Exercise price 2.50 Expected term (years) 0.25 Dividend yield - Expected volatility 86.8 % Risk-free interest rate 0.01 % Derivative Instrument – Convertible Note Payable Vis Vires Group, Inc. The Company entered into a Convertible Note Payable with Vis Vires Group, Inc. on August 10, 2015 for $84,000 to fund short-term working capital. The Vis Vires Note accrued interest at a rate of 8% per annum and was due on May 12, 2016 and was convertible into common stock on February 5, 2016. The Vis Vires Note was convertible at 65% of the average of the lowest three day trading price in the 10 days prior to conversion. The Company recorded accrued interest of $405 as of September 30, 2015. During the year ended September 30, 2015, the Company recognized $55,038 of other expense related to the Vis Vires Note. On February 6, 2016, the Company paid $114,979 to Vis Vires to repay the Note Payable in full. The Company recognized other income of $47,028 during the nine months ended June 30, 2016.

10. INTANGIBLE ASSETS

10. INTANGIBLE ASSETS	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
10. INTANGIBLE ASSETS	Intangible assets as of June 30, 2016 and September 30, 2015 consisted of the following: Estimated June 30, September 30, Useful Lives 2016 2015 Customer contracts 5 years $ 983,645 $ 983,645 Technology 5 years 712,500 712,500 Less: accumulated amortization (1,639,270 ) (1,538,145 ) Intangible assets, net $ 56,875 $ 158,000 Total amortization expense was $101,125 and $238,028 for the nine months ended June 30, 2016 and 2015, 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	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
11. ACCOUNTS PAYABLE	Accounts payable were $2,655,741and $2,520,233 as of June 30, 2016 and September 30, 2015, 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 two vendors (12.0% and 10.9%) with accounts payable in excess of 10% of its accounts payable as of June 30, 2016. 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	9 Months Ended
	Jun. 30, 2016
Convertible Notes Payable
12. CONVERTIBLE NOTES PAYABLE	Convertible notes payable as of June 30, 2016 consisted of the following: The Company entered into a Convertible Note Payable with Vis Vires Group, Inc. on August 10, 2015 for $84,000 to fund short-term working capital. The Vis Vires Note accrued interest at a rate of 8% per annum and becomes due on May 12, 2016 and was convertible into common stock on February 5, 2016. The Vis Vires Note was convertible at 65% of the average of the lowest three day trading price in the 10 days prior to conversion. On February 6, 2015, the Company paid $114,979 to Vis Vires to repay the Note Payable in full. The Company entered into Convertible Promissory Notes totaling $710,000 with accredited investors during September 2015 to February 2016 to fund short-term working capital. The Notes accrue interest at a rate of 8% per annum and become due September 2016 to February 2017 and are convertible into common stock at the same price of our next financing. The Company recorded accrued interest of $31,275 as of June 30, 2016. The investors received $710,000 in warrants that are exercisable into common stock at the price equal to the price of the common stock sold in our next public financing. The Company entered into 8%-10% Convertible Promissory Notes and Securities Purchase Agreements with three accredited investors on February 4, 2016, totaling $165,000 with an original issue discount of $15,000 to fund short-term working capital. The Notes become due on February 3, 2017 and are convertible into common stock after six months from issuance. The Notes are convertible at 60% of the average of the lowest trading price in the 25 days prior to conversion but not less than $0.001 per share. The Company issued a total of 10,500 shares of restricted common stock to the investors valued at $70,875 and paid $7,500 in legal fees. The Company received $128,500 net of all fees. Due to the short term of the note the Company expensed all fees and interest immediately. On February 5, 2016, the Company valued the beneficial conversion feature of this senior secured convertible redeemable debenture at $110,000 and recorded additional paid in capital of $110,000. During the nine months June 30, 2016, the Company recorded interest expense of $142,086, related to the amortization of the debt discount associated with the Convertible Promissory Notes. As of June 30, 2016, the Company has $33,087 to be amortized to expense related to debt discount associated with the Convertible Promissory Notes. The Company entered into a Convertible Note Payable with Vis Vires Group, Inc. on February 19, 2016 for $100,000 to fund short-term working capital. The Vis Vires Note accrues interest at a rate of 8% per annum and becomes due on November 22, 2016 and is convertible into common stock on August 19, 2016. The Vis Vires Note is convertible at 65% of the average of the lowest three day trading price in the 10 days prior to conversion. The Company recorded accrued interest of $2,915 as of June 30, 2016. During the nine months ended June 30, 2016, the Company recognized a $65,278 debt discount resulting from the fair value of the conversion option and other income resulting from the increase in the fair value of the warrant liability at June 30, 2016 of $55,243. The Company also recorded other financing expense in the amount of $14,000 which was expensed to interest immediately due to the short term nature of the note.

13. NOTES PAYABLE, CAPITALIZED

13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT	Notes payable, capitalized leases and long term debt as of June 30, 2016 and September 30, 2015 consisted of the following: June 30, September 30, 2016 2015 Capital Source Business Finance Group $ 747,652 $ 364,757 Note payable to Umpqua Bank 199,935 199,935 Secured note payable to J3E2A2Z LP - related party 600,000 600,000 Total debt 1,547,587 1,164,692 Less current portion of long term debt (1,547,587 ) (1,164,692 ) 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 Note Payable to Umpqua Bank The Company has a $199,935 Business Loan Agreement with Umpqua Bank (the “Umpqua Loan”), which matures on June 30, 2016 and provides for interest at 3.25% per year. On December 19, 2015, the Umpqua Loan maturity was extended to December 31, 2016 and provides for interest at 3.50% per year 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 $14,844 as of June 30, 2016. Note Payables to Ronald P. Erickson or J3E2A2Z LP The Company also has two other demand promissory notes 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 now mature on September 30, 2016. They also provide for a second lien on our assets if not repaid by September 30, 2016 or converted into convertible debentures or equity on terms acceptable to the Mr. Erickson. The Company recorded accrued interest of $35,679 as of June 30, 2016. Aggregate maturities totaling $1,547,587 are all due within twelve months.

14. EQUITY

14. EQUITY	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
14. EQUITY	Authorized Capital Stock The Company has authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares of voting preferred stock, par value $0.001 per share. Voting Preferred Stock As of June 30, 2016, the Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $0.001. On July 21, 2015, the Company filed with the Nevada Secretary of State an Amended and Restated Certificate of Designations, Preferences and Rights for our Series A Convertible Preferred Stock. Among other things, the Amended and Restated Certificate changed the conversion price and the stated value of the Series A Preferred from $0.10 (pre reverse stock split) to $30.00 (post-reverse stock split), and added a provision adjusting the conversion price upon the occurrence of certain events. Under the Amended and Restated Certificate, the Company had 11,667 shares of Series A Preferred authorized, all of which are outstanding. Each holder of outstanding shares of Series A Preferred is entitled to the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred held by such holder are then convertible as of the applicable record date. The Company cannot 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 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 year ended September 30, 2015, the Company sold 11,667 Series A Preferred Stock to two investors totaling $350,000. These shares are expected to be convertible into 11,667 shares of common stock at $30.00 per share, subject to adjustment, for a period of five years. 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 23,334 shares of common stock at an exercise price of $30.00 per share, which is callable at $60.00 per share; and (ii) a Series D five-year Warrant for 23,334 shares of common stock at an exercise price of $45.00 per share, which is callable at $90.00 per share. The Series A Preferred Stock and Series C and D Warrants had registration rights. On July 20, 2015, the two investors entered into an Amendment to Series A Preferred Stock Terms whereby they agreed to the terms of the Amended and Restated Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock and waived all registration rights. On August 14, 2015, the warrant exercise price was adjusted to $2.50 per share due to the issuance of common stock at that price. On March 8, 2016, the Company received approval from the State of Nevada for the Correction to the Company’s Amended and Restated Certificate of Designations, Preferences and Rights of its Series A Convertible Preferred Stock. The Amended and Restated Certificate filed July 21, 2015 changed the conversion price and the stated value from $0.10 (pre reverse stock split) to $30.00 (post-reverse stock split), and adding a provision adjusting the conversion price upon the occurrence of certain events. On February 19, 2016, the holders of Series A Convertible Preferred Stock entered into Amendment 2 of Series A Preferred Stock Terms and increased the number of Preferred Stock Shares to properly account for the reverse stock split. We have 23,334 Series A Preferred Stock issued and outstanding. Series B Redeemable Convertible Preferred Stock On March 8, 2016, the Company received approval from the State of Nevada for the Certificate of Designations of Preferences, Powers, Rights and Limitations of Series B Redeemable Convertible Preferred Stock. The Certificate authorized 5,000 shares of Series B Preferred Stock at a par value of $.001 per share that is convertible into common stock at $7.50 per share, subject to certain adjustments as set forth in the Certificate. The Company entered into a Stock Purchase Agreement with an institutional investor pursuant to which the Company issued 255 Shares of Series B Redeemable Preferred Shares (“Series B Preferred Shares”) of the Company at $10,000 per share with a 5.0% original issue discount for the sum of $2,500,000. At closing, the Company sold 51 Series B Preferred Shares in exchange for payment to the Company of $500,000 in cash and issued an additional 204 Series B Preferred Shares in exchange for delivery of a full recourse 1% Promissory Note (“Note”) for $1,995,000 and payment to the Company of $5,000 in cash (paid). The Note is collateralized by the Series B Preferred Shares. Under the terms of the Note, the Company is to receive an additional $500,000 for each $5 million, or in certain cases a lower amount, in aggregate trading volume of the common stock, so long as it meets certain other requirements. Any remaining balance under the Note is payable at its maturity in seven years. Due to the uncertainty on the receipt of achieving future funding, the Company has not booked the full recourse 1% Promissory Note. The Series B Preferred Shares are convertible into common stock at $7.50 per share; provided that the institutional investor may not convert any Series B Preferred Shares into common stock until that portion of the Note underlying the purchase of the converted portion of Series B Preferred Shares is paid in cash to Company. The Company may issue, at our sole discretion in lieu of cash, as a conversion premium or in payment of dividends on such shares of Series B Preferred Shares. The number of additional common shares that we may issue as a conversion premium or in payment of dividends, is dependent on the dividend rate which can vary depending on our underlying stock price at the time of conversion and assuming no triggering event has occurred. The Company filed a Registration Statement on Form S-1, which was declared effective May 6, 2016, to register $2,675,000 for the resale of all shares of common stock issuable upon conversion of the Series B Shares. During the three months ended June 30, 2016, the Company issued 74,084 shares of common stock to this institutional investor at $5.591 or $339,998 and expensed $506,599 related to the conversion of 34 Series B Preferred Shares. The institutional investor has presented conversion notices for an additional 29,166 to 161,428 shares of common stock related to the conversion of 34 Series B Preferred Shares. The Company has denied these requests and expects to negotiate with the institutional investor. 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 nine months ended June 30, 2016: Eleven investors exercised warrants at $2.50 per share and were issued 139,668 shares of common stock, for a total of $349,165 in proceeds to the Company. On October 21, 2015, the Company entered into a Public Relations Agreement with Financial Genetics LLC for public relation services. Under the Agreement, Financial Genetics was issued 26,696 shares of our common stock. The Company expensed $195,171 during the nine months ended June 30, 2016. On October 6, 2015, the Company entered into a Consulting Agreement with Joshua Conroy for business development services. Under the Agreement, Mr. Conroy was issued 1,711 shares of our common stock. The Company expensed $11,977 during the nine months ended June 30, 2016. The Company entered into Convertible Promissory Notes totaling $710,000 with accredited investors during September 2015 to February 2016 to fund short-term working capital. The Notes accrue interest at a rate of 8% per annum and become due September 2016 to February 2017 and are convertible into common stock as part of our next financing. The investors received $710,000 in warrants that are exercisable into common stock at the price equal to the price of the common stock sold in our next public financing. The Company entered into 8%-10% Convertible Promissory Notes and Securities Purchase Agreements with three accredited investors on February 4, 2016, totaling $165,000 with an original issue discount of $15,000 to fund short-term working capital. The Notes become due on February 3, 2017 and are convertible into common stock after six months from issuance. The Notes are convertible at 60% of the average of the lowest trading price in the 25 days prior to conversion but not less than $0.001 per share. The Company issued a total of 10,500 shares of restricted common stock to the investors valued at $70,875 and paid $7,500 in legal fees and recorded a total debt discount of $165,000 during the nine months ended June 30, 2016. The Company received $128,500 net of all fees. On February 23, 2016, the Company entered into a Consulting Agreement with David Markowski for business development services. On February 29, 2016, Mr. Markowski was issued 2,000 shares of our common stock. The Company expensed $14,600 during the nine months ended June 30, 2016. During the three months ended June 30, 2016, the Company issued 74,084 shares of common stock to this institutional investor at $5.591 or $339,998 and expensed $506,599 related to the conversion of 34 Series B Preferred Shares. On May 6, 2015, the Company’s stockholders approved a reverse split of our common stock, in a ratio to be determined by the Company’s Board of Directors, of not less than 1-for-50 nor more than 1-for-150. On June 9, 2015, the Company’s Board of Directors determined that the ratio of the reverse split would be 1-for-150. All warrant, option, share and per share information in this Form 10-Q gives retroactive effect for a 1-for-150 split with all numbers rounded up to the nearest whole share. Warrants to Purchase Common Stock The following warrant exercises occurred during the nine months ended June 30, 2016: Eleven investors exercised warrants at $2.50 per share and were issued 139,668 shares of common stock, for a total of $349,165 in proceeds to the Company. A warrant to acquire 1,679 shares of common stock at $19.36 per share expired. The Company entered into Convertible Promissory Notes totaling $710,000 with accredited investors during September 2015 to February 2016 to fund short-term working capital. The investors received $710,000 in warrants that are exercisable into common stock at the price equal to the price of the common stock sold in our next public financing. The number of warrants convertible into shares of common stock is not known at this time as the number of shares is determined by the price of the next up-lift offering by an investment banker. A summary of the warrants issued as of June 30, 2016 were as follows: June 30, 2016 Weighted Average Exercise Shares Price Outstanding at beginning of period 899,750 $ 3.18 Issued - - Exercised (139,668 ) (2.50) Forfeited - - Expired (1,679 ) 19.36 Outstanding at end of period 758,403 $ 3.27 Exerciseable at end of period 758,403 A summary of the status of the warrants outstanding as of June 30, 2016 is presented below: June 30, 2016 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exerciseable Price 736,398 1.71 $ 2.50 736,398 $ 2.50 1,667 0.38 19.50-22.50 1,667 19.50-22.50 20,338 1.09 30.00 20,338 30.00 758,403 1.54 $ 3.27 758,403 $ 3.27 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the period ended June 30, 2016 were as follows: Dividend yield 0% Expected life 3 Expected volatility 90% Risk free interest rate 0.7% There were vested warrants of 736,398 as of June 30, 2016 with an aggregate intrinsic value of $414,224.

15. STOCK OPTIONS

15. STOCK OPTIONS	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
15. STOCK OPTIONS	Description of Stock Option Plan On April 29, 2011, the Company’s 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 46,667 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 93,333 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 nine months ended June 30, 2016: During the nine months ended June 30, 2016, employees forfeited stock option grants for 797 shares of common stock at $36.21 per share. There are currently 56,610 options to purchase common stock at an average exercise price of $18.19 per share outstanding as of June 30, 2016 under the 2011 Stock Incentive Plan. The Company recorded $35,511 and $53,222 of compensation expense, net of related tax effects, relative to stock options for the nine months ended June 30, 2016 and 2015 in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.03) and ($0.05) per share, respectively. At June 30, 2016, there is approximately $149,700 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 3.58 years. Stock option activity for the nine months ended June 30, 2016 and the years ended September 30, 2015 and 2014 was as follows: Weighted Average Options Exercise Price $ Outstanding as of September 30, 2013 84,900 $ 18.954 $ 1,609,200 Granted 2,633 15.002 39,500 Exercised - - - Forfeitures (200 ) (32.500 ) (6,500) Outstanding as of September 30, 2014 87,333 18.804 1,642,200 Granted 11,335 15.000 170,025 Exercised - - - Forfeitures (41,261 ) (18.286 ) (754,500) Outstanding as of September 30, 2015 57,407 18.43 1,057,725 Granted - - - Exercised - - - Forfeitures (797 ) (35.210 ) (28,062) Outstanding as of June 30, 2016 56,610 $ 18.189 $ 1,029,663 The following table summarizes information about stock options outstanding and exercisable as of June 30, 2016: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Exerciseable Exerciseable Exerciseable 13.500 3,334 2.00 $ 13.50 3,334 $ 13.50 15.000 20,939 3.08 15.00 9,103 15.00 19.500 19,003 3.84 19.50 19,002 19.50 22.500 13,334 3.88 22.50 13,334 22.50 56,610 3.58 $ 18.19 44,773 $ 19.58 There were exercisable options of 56,610 as of June 30, 2016 with an aggregate intrinsic value of $0.

16. OTHER SIGNIFICANT TRANSACTI

16. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES	9 Months Ended
	Jun. 30, 2016
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. Note Payable to Umpqua Bank The Company has a $199,935 Business Loan Agreement with Umpqua Bank (the “Umpqua Loan”), which matures on June 30, 2016 and provides for interest at 3.25% per year. On December 19, 2015, the Umpqua Loan maturity was extended to December 31, 2016 and provides for interest at 3.50% per year 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 $14,844 as of June 30, 2016. Note Payables to Ronald P. Erickson or J3E2A2Z LP The Company also has two other demand promissory notes 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 now mature on September 30, 2016. They also provide for a second lien on our assets if not repaid by September 30, 2016 or converted into convertible debentures or equity on terms acceptable to the Mr. Erickson. The Company recorded accrued interest of $35,679 as of June 30, 2016. Other Amounts Due to Mr. Erickson Mr. Erickson and/or entities with which he is affiliated also have advanced $668,500 and have unreimbursed expenses and compensation of approximately $398,004. We owe Mr. Erickson, or entities with which he is affiliated, $1,686,503 as of June 30, 2016.

17. COMMITMENTS, CONTINGENCIES

17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS	Legal Proceedings The Company may from time to time become a party to various legal proceedings arising in the ordinary course of our business. The Company is currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to our business. During the three months ended June 30, 2016, the Company issued 74,084 shares of common stock to this institutional investor at $5.591 or $339,998 and expensed $506,599 related to the conversion of 34 Series B Preferred Shares. The institutional investor has presented conversion notices for an additional 29,166 to 161,428 shares of common stock related to the conversion of 34 Series B Preferred Shares. The Company has denied these requests and expects to negotiate with the institutional investor. 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 1,014 square feet and its net monthly payment is $2,535. The Company leases this office on a month to month basis. 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. We leased this office until June 30, 2016 for $5,486 per month. Effective July 1, 2016, the Company leases this office on a month to month basis at $6,120 per month. The aggregate future minimum lease payments under operating leases as of June 30, 2016 were $20,826.

18. SUBSEQUENT EVENTS

18. SUBSEQUENT EVENTS	9 Months Ended
	Jun. 30, 2016
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 June 30, 2016, there were no material transactions that require disclosure: Subsequent to June 30, 2016, executives of the Company exercised warrants at $2.50 per share and were issued 68,001 shares of common stock. On July 12, 2016, a supplier converted accounts payable totaling $232,966 into 77,665 shares of common stock valued at $3.00 per share.

3. SIGNIFICANT ACCOUNTING POL24

3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Policies)	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
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 were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
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 $20,000 for impaired inventory as of June 30, 2016 and September 30, 2015, 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 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities at June 30, 2016 and September 30, 2015 based upon the short-term nature of the assets and liabilities.
Derivative financial instruments	The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.
Revenue Recognition	Visualant and TransTech revenue are derived from products and services. Revenue is considered realized when the products or 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, the Company defers 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
Convertible Securities	Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities issued subsequent to September 30, 2015. We will evaluate our contracts based upon the earliest issuance date. In the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to our inability to demonstrate we have sufficient shares authorized and unissued, shares will be allocated on the basis of issuance date, with the earliest issuance date receiving first allocation of shares. If a reclassification of an instrument were required, it would result in the instrument issued latest being reclassified first.
Income Taxes	Income taxes are calculated based upon the asset and liability method of accounting. Deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard to allow for recognition of such an asset. In addition, realization of an uncertain income tax position must be estimated as “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements .
Net Loss per Share	Under the provisions of ASC 260, “Earnings Per Share,” basic earnings per share is calculated by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding, and does not include the impact of any potentially dilutive common stock equivalents. Diluted earnings per share reflect the potential dilution of securities that could share in our earnings through the conversion of common shares issuable via outstanding stock options and stock warrants, except where their inclusion would be anti-dilutive. Total outstanding common stock equivalents at June 30, 2016 and 2015 were 772,833 and 969,225 respectively. Diluted common shares outstanding were calculated using the Treasury Stock Method for the three months ended June 30, 2016 and 2015 were as follows: June 30, 2016 June 30, 2015 Weighted average number of common shares used in basic net income per common share 1,339,484 1,131,960 Dilutive effects of outstanding stock options and warrants 440,166 - Weighted average number of common shares used in diluted net income per common share 1,779,650 1,131,960
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.
Patent Policy	The Company expenses all costs incurred for patents applications and registered trademarks.
Use of 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.

3. SIGNIFICANT ACCOUNTING POL25

3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Tables)	9 Months Ended
	Jun. 30, 2016
Significant Accounting Policies Adoption Of Accounting Standards Tables
Anti dilutive shares	June 30, 2016 June 30, 2015 Weighted average number of common shares used in basic net income per common share 1,339,484 1,131,960 Dilutive effects of outstanding stock options and warrants 440,166 - Weighted average number of common shares used in diluted net income per common share 1,779,650 1,131,960

8. FIXED ASSETS (Tables)

8. FIXED ASSETS (Tables)	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Schedule of Property and equipment	Estimated June 30, 2016 Useful Lives Purchased Capital Leases Total Machinery and equipment 2-10 years $ 252,636 $ 69,581 $ 322,217 Leasehold improvements 5-20 years 548,612 - 548,612 Furniture and fixtures 3-10 years 73,977 101,260 175,237 Software and websites 3- 7 years 35,831 - 35,831 Less: accumulated depreciation (607,472 ) (170,841 ) (778,313) $ 303,584 $ - $ 303,584

9. DERIVATIVE INSTRUMENTS (Tabl

9. DERIVATIVE INSTRUMENTS (Tables)	9 Months Ended
	Jun. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative liability	Derivative liability as of June 30, 2016 is as follows: Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 June 30, 2016 Liabilities: Derivative Instruments $ - $ 738,984 $ - $ 738,984 Total $ - $ 738,984 $ - $ 738,984 Derivative liability as of September 30, 2015 is as follows: Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 September 30, 2015 Liabilities: Derivative Instruments $ - $ 2,704,840 $ - $ 2,704,840 Total $ - $ 2,704,840 $ - $ 2,704,840
Liabilities measured at fair value on a recurring basis	June 30, 2016 Market price and estimated fair value of common stock: $ 3.25 Exercise price 2.50 Expected term (years) 0.25 Dividend yield - Expected volatility 86.8 % Risk-free interest rate 0.01 %

10. INTANGIBLE ASSETS (Tables)

10. INTANGIBLE ASSETS (Tables)	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Schedule Of Intangible Assets	Estimated June 30, September 30, Useful Lives 2016 2015 Customer contracts 5 years $ 983,645 $ 983,645 Technology 5 years 712,500 712,500 Less: accumulated amortization (1,639,270 ) (1,538,145 ) Intangible assets, net $ 56,875 $ 158,000

13. NOTES PAYABLE, CAPITALIZE29

13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Tables)	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Notes payable, capitalized leases and long term debt	June 30, September 30, 2016 2015 Capital Source Business Finance Group $ 747,652 $ 364,757 Note payable to Umpqua Bank 199,935 199,935 Secured note payable to J3E2A2Z LP - related party 600,000 600,000 Total debt 1,547,587 1,164,692 Less current portion of long term debt (1,547,587 ) (1,164,692 ) Long term debt $ - $ -

14. EQUITY (Tables)

14. EQUITY (Tables)	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Summary of the warrants issued	June 30, 2016 Weighted Average Exercise Shares Price Outstanding at beginning of period 899,750 $ 3.18 Issued - - Exercised (139,668 ) (2.50) Forfeited - - Expired (1,679 ) 19.36 Outstanding at end of period 758,403 $ 3.27 Exerciseable at end of period 758,403
Summary of the status of the warrants outstanding	June 30, 2016 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exerciseable Price 736,398 1.71 $ 2.50 736,398 $ 2.50 1,667 0.38 19.50-22.50 1,667 19.50-22.50 20,338 1.09 30.00 20,338 30.00 758,403 1.54 $ 3.27 758,403 $ 3.27
Weighted average assumptions relating to the valuation of the Companys warrants	Dividend yield 0% Expected life 3 Expected volatility 90% Risk free interest rate 0.7%

15. STOCK OPTIONS (Tables)

15. STOCK OPTIONS (Tables)	9 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Stock option activity	Weighted Average Options Exercise Price $ Outstanding as of September 30, 2013 84,900 $ 18.954 $ 1,609,200 Granted 2,633 15.002 39,500 Exercised - - - Forfeitures (200 ) (32.500 ) (6,500) Outstanding as of September 30, 2014 87,333 18.804 1,642,200 Granted 11,335 15.000 170,025 Exercised - - - Forfeitures (41,261 ) (18.286 ) (754,500) Outstanding as of September 30, 2015 57,407 18.43 1,057,725 Granted - - - Exercised - - - Forfeitures (797 ) (35.210 ) (28,062) Outstanding as of June 30, 2016 56,610 $ 18.189 $ 1,029,663
Stock options outstanding and exercisable	Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Exerciseable Exerciseable Exerciseable 13.500 3,334 2.00 $ 13.50 3,334 $ 13.50 15.000 20,939 3.08 15.00 9,103 15.00 19.500 19,003 3.84 19.50 19,002 19.50 22.500 13,334 3.88 22.50 13,334 22.50 56,610 3.58 $ 18.19 44,773 $ 19.58

2. GOING CONCERN (Details Narra

2. GOING CONCERN (Details Narrative) - USD ($)	9 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Sep. 30, 2015	Sep. 30, 2014
Notes to Financial Statements
Net loss	$ 595,322		$ 2,631,037	$ 1,017,291
Net cash used in operating activities	(1,857,257)	$ (149,921)	(239,877)	$ (1,379,397)
Accumulated Deficit	$ 24,761,478		$ 24,166,156

3. SIGNIFICANT ACCOUNTING POL33

3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details) - shares	3 Months Ended		9 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Significant Accounting Policies Adoption Of Accounting Standards Details
Weighted average number of common shares used in basic net income per common share	1,339,484	1,131,960	1,236,721	1,127,252
Dilutive effects of outstanding stock options and warrants	440,166	0
Weighted average number of common shares used in diluted net income per common share	1,779,650	1,131,960	1,236,721	1,127,252

3. SIGNIFICANT ACCOUNTING POL34

3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($)	9 Months Ended
	Jun. 30, 2016	Sep. 30, 2015
Reserve for impaired inventory	$ 20,000	$ 20,000
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 CHROMAID(TM35

4. DEVELOPMENT OF CHROMAID(TM) TECHNOLOGY (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Sep. 30, 2015	Sep. 30, 2014
Notes to Financial Statements
Research and development expense	$ 69,387	$ 89,097	$ 243,114	$ 285,627	$ 362,661	$ 670,742

6. ACCOUNTS RECEIVABLE_CUSTOM36

6. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION (Details Narrative) - USD ($)	Jun. 30, 2016	Sep. 30, 2015
Notes to Financial Statements
Accounts receivable, net of allowance	$ 1,102,821	$ 619,849

7. INVENTORIES (Details Narrati

7. INVENTORIES (Details Narrative) - USD ($)	Jun. 30, 2016	Sep. 30, 2015
Notes to Financial Statements
Inventories	$ 306,529	$ 217,824
Reserve for impaired inventory	$ 20,000	$ 20,000

8. FIXED ASSETS (Details)

8. FIXED ASSETS (Details) - USD ($)	Jun. 30, 2016	Sep. 30, 2015
Machinery and equipment (2-10 years)	$ 322,217
Leasehold improvements (5-20 years)	548,612
Furniture and fixtures (3-10 years)	175,237
Software and websites (3- 7 years)	35,831
Less: accumulated depreciation	(778,313)	$ (803,705)
Property and equipment, net	303,584	$ 366,250
Purchased [Member]
Machinery and equipment (2-10 years)	252,636
Leasehold improvements (5-20 years)	548,612
Furniture and fixtures (3-10 years)	73,977
Software and websites (3- 7 years)	35,831
Less: accumulated depreciation	(607,472)
Property and equipment, net	303,584
Capital Leases [Member]
Machinery and equipment (2-10 years)	69,581
Leasehold improvements (5-20 years)	0
Furniture and fixtures (3-10 years)	101,260
Software and websites (3- 7 years)	0
Less: accumulated depreciation	(170,841)
Property and equipment, net	$ 0

8. FIXED ASSETS (Details Narrat

8. FIXED ASSETS (Details Narrative) - USD ($)	9 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Sep. 30, 2015
Notes to Financial Statements
Property and equipment, net	$ 303,584		$ 366,250
Property and equipment, accumulated depreciation	778,313		$ 803,705
Depreciation expense	$ 55,100	$ 61,727

9. DERIVATIVE INSTRUMENTS (Deta

9. DERIVATIVE INSTRUMENTS (Details) - USD ($)	Jun. 30, 2016	Sep. 30, 2015
Fair Value Measurements Level 1 [Member]
Liabilities:
Derivative Instruments	$ 0	$ 0
Total	0	0
Fair Value Measurements Level 2 [Member]
Liabilities:
Derivative Instruments	738,984	2,704,840
Total	738,984	2,704,840
Fair Value Measurements Level 3 [Member]
Liabilities:
Derivative Instruments	0	0
Total	0	0
Carrying Amount [Member]
Liabilities:
Derivative Instruments	738,984	2,704,840
Total	$ 738,984	$ 2,704,840

9. DERIVATIVE INSTRUMENTS (De41

9. DERIVATIVE INSTRUMENTS (Details 1) - Fair Value, Measurements, Recurring Convertible Note Payable [Member]	9 Months Ended
	Jun. 30, 2016$ / shares
Market price and estimated fair value of common stock:	$ 3.25
Exercise price	$ 2.50
Expected term (years)	3 months
Dividend yield	0.00%
Expected volatility	86.80%
Risk-free interest rate	0.01%

9. DERIVATIVE INSTRUMENTS (De42

9. DERIVATIVE INSTRUMENTS (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
	Jun. 30, 2016	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2013
Warrants June 2013 Private Placement [Member]
Fair value of the warrant liability	$ 1,650,339	$ 104,716	$ 2,092,000	$ 1,448,710
Warrant November 2013 IDMC Services and License Agreement [Member]
Fair value of the warrant liability	213,286	14,574	$ 320,657
Series A Convertible Preferred Stock [Member]
Fair value of the warrant liability	102,436	$ 30,338
Shares issued		11,667
Convertible Note Payable Vis Vires Group, Inc. [Member]
Accrued interest	2,915	$ 405
Other expense		$ 55,038
Debt discount	65,278
Other financing expense debt discount	$ 14,000

10. INTANGIBLE ASSETS (Details)

10. INTANGIBLE ASSETS (Details) - USD ($)	9 Months Ended
	Jun. 30, 2016	Sep. 30, 2015
Less: accumulated amortization	$ (1,639,270)	$ (1,538,145)
Intangible assets, net	56,875	158,000
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

10. INTANGIBLE ASSETS (Details Narrative) - USD ($)	9 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Notes to Financial Statements
Amortization expense	$ 101,125	$ 238,028

11. ACCOUNTS PAYABLE (Details N

11. ACCOUNTS PAYABLE (Details Narrative) - USD ($)	Jun. 30, 2016	Sep. 30, 2015
Notes to Financial Statements
Accounts payable	$ 2,655,741	$ 2,520,223
Vendor One with accounts payble on excess of 10%	12.00%
Vendor Two with accounts payble on excess of 10%	10.90%

12. CONVERTIBLE NOTES PAYABLE (

12. CONVERTIBLE NOTES PAYABLE (Details Narrative) - Vis Vires Group, Inc [Member]	9 Months Ended
	Jun. 30, 2016USD ($)shares
Accrued interest	$ 31,275
Legal fees	$ 7,500
Restricted common stock issued to investors | shares	10,500
Restricted common stock issued to investors, value	$ 70,875
Debt discount	165,000
Interest expense	33,087
Accrued interest on Vis Vires group	2,915
Amortization of the debt discount	$ 65,278

13. NOTES PAYABLE, CAPITALIZE47

13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Details) - USD ($)	Jun. 30, 2016	Sep. 30, 2015
Notes Payable Capitalized Leases And Long Term Debt Details
Capital Source Business Finance Group	$ 747,652	$ 364,757
Note payable to Umpqua Bank	199,935	199,935
Secured note payable to J3E2A2Z LP - related party	600,000	600,000
Total debt	1,547,587	1,164,692
Less current portion of long term debt	(1,547,587)	(1,164,692)
Long term debt	$ 0	$ 0

14. EQUITY (Details)

14. EQUITY (Details)	9 Months Ended
	Jun. 30, 2016$ / sharesshares
Shares
Outstanding at beginning of period	899,750
Issued	0
Exercised	(139,668)
Forfeited	0
Expired	(1,679)
Outstanding at end of period	758,403
Exercisable at end of period	758,403
Weighted Average Exercise Price:
Outstanding at beginning of period | $ / shares	$ 3.18
Issued | $ / shares	0
Exercised | $ / shares	(2.50)
Forfeited | $ / shares	0
Expired | $ / shares	19.36
Outstanding at end of period | $ / shares	$ 3.27

14. EQUITY (Details 1)

14. EQUITY (Details 1)	9 Months Ended
	Jun. 30, 2016$ / sharesshares
Number of Warrants	758,403
Weighted Average Remaining Life (years)	1 year 6 months 14 days
Weighted Average Exercise Price | $ / shares	$ 3.27
Shares Exercisable	758,403
2.50
Number of Warrants	736,398
Weighted Average Remaining Life (years)	1 year 8 months 16 days
Weighted Average Exercise Price | $ / shares	$ 2.50
Shares Exercisable	736,398
19.50-22.50
Number of Warrants	1,667
Weighted Average Remaining Life (years)	4 months 17 days
Shares Exercisable	1,667
19.50-22.50 | Minimum [Member]
Weighted Average Exercise Price | $ / shares	$ 19.50
19.50-22.50 | Maximum [Member]
Weighted Average Exercise Price | $ / shares	$ 22.50
30
Number of Warrants	20,338
Weighted Average Remaining Life (years)	1 year 1 month 2 days
Weighted Average Exercise Price | $ / shares	$ 30
Shares Exercisable	20,338

14. EQUITY (Details 2)

14. EQUITY (Details 2)	9 Months Ended
	Jun. 30, 2016
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)	Jun. 30, 2016USD ($)shares
Notes to Financial Statements
Intrinsic value | $	$ 414,224
Warrants Vested | shares	736,398

15. STOCK OPTIONS (Details)

15. STOCK OPTIONS (Details) - USD ($)	9 Months Ended	12 Months Ended
	Jun. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Shares:
Outstanding at beginning of period	899,750
Shares granted	0
Shares exercised	139,668
Shares forfeitures	0
Outstanding at end of period	758,403	899,750
Weighted Average Exercise Price:
Outstanding at beginning of period	$ 3.18
Shares granted	0
Shares exercised	2.50
Shares forfeitures	0
Outstanding at end of period	$ 3.27	$ 3.18
Aggregate Intrinsic Value
Aggregate Intrinsic Value Outstanding, End	$ 414,224
Stock Options
Shares:
Outstanding at beginning of period	57,407	87,333	84,900
Shares granted	0	11,335	2,633
Shares exercised	0	0	0
Shares forfeitures	(797)	(41,261)	(200)
Outstanding at end of period	56,610	57,407	87,333
Weighted Average Exercise Price:
Outstanding at beginning of period	$ 18.43	$ 18.804	$ 18.954
Shares granted	0	15	15.002
Shares exercised	0	0	0
Shares forfeitures	(35.210)	(18.286)	(32.500)
Outstanding at end of period	$ 18.189	$ 18.43	$ 18.804
Aggregate Intrinsic Value
Aggregate Intrinsic Value Outstanding, Beginning	$ 1,057,725	$ 1,642,200	$ 1,609,200
Aggregate Intrinsic Value Outstanding, Granted	$ 0	$ 170,025	$ 39,500
Aggregate Intrinsic Value Outstanding, Exercised	$ 0	$ 0	$ 0
Aggregate Intrinsic Value Outstanding, Forefeitures	$ (28,062)	$ (754,500)	$ (6,500)
Aggregate Intrinsic Value Outstanding, End	$ 1,029,663	$ 1,057,725	$ 1,642,200

15. STOCK OPTIONS (Details 1)

15. STOCK OPTIONS (Details 1)	9 Months Ended
	Jun. 30, 2016$ / sharesshares
Number of Outstanding Stock Options | shares	758,403
Weighted Average Remaining Life (years)	1 year 6 months 14 days
Weighted Average Exercise Price Exerciseable	$ 3.27
Number Exercisable | shares	758,403
Exercise Price 13.500
Range of Exercise Prices	$ 13.500
Number of Outstanding Stock Options | shares	3,334
Weighted Average Remaining Life (years)	2 years
Weighted Average Exercise Price Exerciseable	$ 13.50
Number Exercisable | shares	3,334
Weighted Average Exercise Price Exerciseable	$ 13.50
Exercise Price 15.000
Range of Exercise Prices	$ 15
Number of Outstanding Stock Options | shares	20,939
Weighted Average Remaining Life (years)	3 years 29 days
Weighted Average Exercise Price Exerciseable	$ 15
Number Exercisable | shares	9,103
Weighted Average Exercise Price Exerciseable	$ 15
Exercise Price 19.500
Range of Exercise Prices	$ 19.500
Number of Outstanding Stock Options | shares	19,003
Weighted Average Remaining Life (years)	3 years 10 months 2 days
Weighted Average Exercise Price Exerciseable	$ 19.50
Number Exercisable | shares	19,002
Weighted Average Exercise Price Exerciseable	$ 19.50
Exercise Price 22.500
Range of Exercise Prices	$ 22.500
Number of Outstanding Stock Options | shares	13,334
Weighted Average Remaining Life (years)	3 years 10 months 17 days
Weighted Average Exercise Price Exerciseable	$ 22.50
Number Exercisable | shares	13,334
Weighted Average Exercise Price Exerciseable	$ 22.50
Exercise Price Total
Number of Outstanding Stock Options | shares	56,610
Weighted Average Remaining Life (years)	3 years 6 months 29 days
Weighted Average Exercise Price Exerciseable	$ 18.19
Number Exercisable | shares	44,773
Weighted Average Exercise Price Exerciseable	$ 19.58

15. STOCK OPTIONS (Details Narr

15. STOCK OPTIONS (Details Narrative) - USD ($)	9 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Compensation expense	$ 35,511	$ 5,322
Unrecognized compensation costs	$ 149,700
Period for recognition	3 years 6 months 29 days
Options to purchase common stock under 2011 Stock Incentive Plan	758,403
Exercisable at end of period	758,403
2011 Stock Incentive Plan
Options to purchase common stock under 2011 Stock Incentive Plan	56,610
Average exercise price under 2011 Stock Incentive Plan	$ 18.19
Exercisable at end of period	56,610
Aggregate intrinsic value	$ 0

16. OTHER SIGNIFICANT TRANSAC55

16. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details narrative)	9 Months Ended
	Jun. 30, 2016USD ($)
Accrued liabilities related parties from advances from Ronald P. Erickson	$ 35,679
Business loan	$ 199,935
Business loan maturity date	Dec. 31, 2016
Business loan rate of interest	3.50%
Chief Executive Officer
Accrued liabilities related parties from advances from Ronald P. Erickson	$ 1,686,503

17. COMMITMENTS, CONTINGENCIE56

17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS (Details Narrative)	Jun. 30, 2016USD ($)
Notes to Financial Statements
Aggregate future minimum lease payments under operating leases	$ 20,826