Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2017 | May 18, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | VISUALANT INC | |
Entity Central Index Key | 1,074,828 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
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 | 3,798,581 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEETS (au
CONSOLIDATED BALANCE SHEETS (audited) - USD ($) | Mar. 31, 2017 | Sep. 30, 2016 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 151,590 | $ 188,309 |
Accounts receivable, net of allowance of $180,000 and $55,000, respectively | 740,488 | 808,955 |
Prepaid expenses | 19,520 | 20,483 |
Inventories, net | 236,549 | 295,218 |
Total current assets | 1,148,147 | 1,312,965 |
EQUIPMENT, NET | 268,016 | 285,415 |
OTHER ASSETS | ||
Intangible assets, net | 19,738 | 43,750 |
Goodwill | 0 | 983,645 |
Other assets | 5,070 | 5,070 |
TOTAL ASSETS | 1,440,971 | 2,630,845 |
CURRENT LIABILITIES: | ||
Accounts payable - trade | 2,389,598 | 1,984,326 |
Accounts payable - related parties | 41,365 | |
Accrued expenses | 87,736 | 80,481 |
Accrued expenses - related parties | 899,832 | 1,109,046 |
Derivative liability | 1,367,837 | 145,282 |
Convertible notes payable | 210,000 | 909,500 |
Notes payable - current portion of long term debt | 1,165,493 | 1,170,339 |
Total current liabilities | 6,120,497 | 5,440,339 |
STOCKHOLDERS' DEFICIT | ||
Preferred stock - $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 12/31/2016 and 9/30/2016, respectively. | 0 | 0 |
Common stock - $0.001 par value, 100,000,000 shares authorized, 3,798,581and 2,356,152 shares issued and outstanding at 12/31/2016 and 9/30/2016, respectively | 3,799 | 2,356 |
Additional paid in capital | 26,548,796 | 24,259,702 |
Accumulated deficit | (31,234,591) | (27,073,365) |
Total stockholders' deficit | (4,679,525) | (2,809,494) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 1,440,971 | 2,630,845 |
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 12/31/2016 and 9/30/2016, respectively. | 23 | 23 |
Series C Convertible Preferred stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock - $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 12/31/2016 and 9/30/2016, respectively. | 1,790 | 1,790 |
Series D Convertible Preferred stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock - $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 12/31/2016 and 9/30/2016, respectively. | $ 658 |
CONSOLIDATED BALANCE SHEETS (a3
CONSOLIDATED BALANCE SHEETS (audited) (Parenthetical) - USD ($) | Mar. 31, 2017 | Sep. 30, 2016 |
CURRENT ASSETS: | ||
Allowance for Accounts receivable | $ 180,000 | $ 55,000 |
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 | 3,798,581 | 2,356,152 |
Common stock shares outstanding | 3,798,581 | 2,356,152 |
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 | 23,334 |
Preferred stock shares outstanding | 23,334 | 23,334 |
Series C Convertible Preferred stock [Member] | ||
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,785,715 | 1,785,715 |
Preferred stock shares issued | 1,785,715 | 1,785,715 |
Preferred stock shares outstanding | 1,785,715 | 1,785,715 |
Series D Convertible Preferred stock [Member] | ||
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 3,906,250 | 3,906,250 |
Preferred stock shares issued | 658,861 | 0 |
Preferred stock shares outstanding | 658,861 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||||
REVENUE | $ 1,497,019 | $ 1,467,462 | $ 2,645,819 | $ 3,278,310 |
COST OF SALES | 1,192,474 | 1,252,275 | 2,150,916 | 2,750,154 |
GROSS PROFIT | 304,545 | 215,187 | 494,903 | 528,156 |
RESEARCH AND DEVELOPMENT EXPENSES | 6,875 | 81,765 | 47,483 | 196,530 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 560,980 | 817,778 | 1,818,126 | 1,528,225 |
IMPAIRMENT OF GOODWILL | 0 | 0 | 983,645 | 0 |
OPERATING LOSS | (263,310) | (684,356) | (2,354,351) | (1,196,599) |
OTHER INCOME (EXPENSE): | ||||
Interest expense | (16,058) | (87,737) | (68,330) | (121,019) |
Other income | 39,533 | 945 | 43,140 | 18,448 |
(Loss) on change - derivative liability | (805,123) | 476,454 | (1,222,555) | 381,023 |
Total other expense | (781,648) | 389,662 | (1,247,745) | 278,452 |
(LOSS) BEFORE INCOME TAXES | (1,044,958) | (294,694) | (3,602,096) | (918,147) |
Income taxes - current provision | 0 | 0 | 0 | (3,089) |
NET (LOSS) | $ (1,044,958) | $ (294,694) | $ (3,602,096) | $ (915,058) |
Basic and diluted loss per common share attributable to Visualant,Inc. and subsidiaries common shareholders- | ||||
Basic and diluted loss per share | $ (0.28) | $ (0.24) | $ (1.04) | $ (0.81) |
Weighted average shares of common stock outstanding- basic | 3,713,078 | 1,210,141 | 3,479,895 | 1,124,897 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (3,602,096) | $ (915,058) |
Adjustments to reconcile net loss to net cash (used in) operating activities | ||
Depreciation and amortization | 41,411 | 94,546 |
Issuance of capital stock for services and expenses | 376,989 | 184,827 |
Conversion of interest | 87,694 | 0 |
Stock based compensation | 21,774 | 23,674 |
(Gain) on sale of assets | (1,034) | (800) |
Loss on change - derivative liability | 1,222,555 | (381,023) |
Amortization of debt discount | 10,500 | 131,507 |
Provision for losses on accounts receivable | 120,000 | 649 |
Impairment of goodwill | 983,645 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (51,533) | (191,284) |
Prepaid expenses | 963 | (7,547) |
Inventory | 58,669 | (36,139) |
Accounts payable - trade and accrued expenses | 161,883 | 55,164 |
Deferred revenue | 0 | (5,000) |
NET CASH (USED IN) OPERATING ACTIVITIES | (568,580) | (1,187,916) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Investment in BioMedx, Inc. | (260,000) | 0 |
Proceeds from investment in BioMedx, Inc. | 290,608 | 0 |
Capital expenditures | 0 | (1,290) |
Proceeds from sale of equipment | 1,034 | 800 |
NET CASH PROVIDED BY INVESTING ACTIVITIES: | 31,642 | (490) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
(Repayments) proceeds from line of credit | (4,781) | 142,940 |
Proeeds from warrant exercises | 0 | 169,360 |
Proceeds from convertible notes payable | 330,000 | 924,500 |
Repayments of convertible notes | (125,000) | (114,979) |
Repayments of capital leases | 300,000 | 505,000 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 500,219 | 1,626,821 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (36,719) | 438,415 |
CASH AND CASH EQUIVALENTS, beginning of period | 188,309 | 82,266 |
CASH AND CASH EQUIVALENTS, end of period | 151,590 | 520,681 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 14,245 | 26,460 |
Conversion of convertible debt | 695,000 | 0 |
Beneficial conversion feature | 559,130 | 0 |
Conversion of convertible debt to preferred shares | $ 220,000 | $ 0 |
1. GOING CONCERN
1. GOING CONCERN | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
1. GOING CONCERN | The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $1,746,495 and $2,631,037 for the years ended September 30, 2016 and 2015, respectively. Net cash used in operating activities was $(3,373,734) and $(239,877) for the years ended September 30, 2016 and 2015, respectively. The Company anticipates that it will record losses from operations for the foreseeable future. As of March 31, 2017, the Companys accumulated deficit was $31,234,591. 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 Companys independent registered public accounting firm relating to our financial statements for the year ended September 30, 2016 includes an explanatory paragraph expressing the substantial doubt about the Companys ability to continue as a going concern. We believe that our cash on hand will be sufficient to fund our operations until May 31, 2017. We need additional financing to implement our business plan and to service our ongoing operations and pay our current debts. There can be no assurance that we will be able to secure any needed funding, or that if such funding is available, the terms or conditions would be acceptable to us. If we are unable to obtain additional financing when it is needed, we will need to restructure our operations, and divest all or a portion of our business. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, and could increase our expenses and require that our assets secure such debt. Equity financing, if obtained, could result in dilution to our then-existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay, scale back, eliminate the development of business opportunities or file for bankruptcy and our operations and financial condition may be materially adversely affected. |
2. ORGANIZATION
2. ORGANIZATION | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
2. 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 Nevada Secretary of State an Amended and Restated Certificate of Designations, Preferences and Rights for its Series A Convertible Preferred Stock. Among other things, the Amended and Restated Certificate changed the conversion price and the stated value 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. As a result of the foregoing, the Company currently has 23,334 Series A Preferred Stock issued and outstanding, with a conversion price of $0.70 per share. On August 11, 2016, the Company applied with the State of Nevada for the approval of the Certificate of Designations, Preferences, and Rights of Series C Convertible Preferred Stock. The Certificate designated 1,250,000 shares as Series C Convertible Preferred Stock with a par value of $.001 per share. The Series C Convertible Preferred Stock is convertible into common stock at $0.70 per share, with certain adjustments as set forth in the Certificate. The Series C Convertible Preferred Stock is convertible into common stock at $0.70 per share, with certain adjustments as set forth in the Certificate. As a result of the foregoing, the Company currently has 1,785,715 shares of Series C Preferred Stock issued and outstanding, with a conversion price of $0.70 per share. On November 8, 2016, the Company applied with the State of Nevada for the approval of the Certificate of Designations, Preferences, and Rights of Series D Convertible Preferred Stock. The Certificate designated up to 3,906,250 shares with a par value of $.001 per share. The Series D Convertible Preferred Stock is convertible into common stock at $0.80 per share, with certain adjustments as set forth in the Certificate. The Company has issued 658,861 shares of Series D Convertible Preferred Stock through March 31,, 2017, and plans to issue up to 3,125,000 Series D Shares (and an equal number of warrants) for gross proceeds of $2,500,000 pursuant on a best efforts basis. 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 Companys revenues. The Company is in the process of commercializing its ChromaID technology. To date, the Company has entered into License Agreements with Sumitomo Precision Products Co., Ltd. and Intellicheck, Inc. In addition, it has a technology license agreement with Xinova., formerly Invention Development Management Company, a subsidiary of Intellectual Ventures. 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 intellectual property strategy and have been granted eleven 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 Companys strategic partner, Xinova |
3. ACCOUNTS RECEIVABLE_CUSTOMER
3. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
3. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | Accounts receivable were $740,488 and $808,955, net of allowance, as of March 31, 2017 and September 30, 2016, respectively. The Company had no customers in excess of 10% of the Companys consolidated revenues for the three or six months ended March 31, 2017. The Company had one customer (31.9%) with accounts receivable in excess of 10% as of March 31, 2017. The customer has not made a payment on the account since March 31, 2016 and the Company reserved $120,000 during the six months ended March 31, 2017 as selling, general and administrative expenses. The Company intends to aggressively pursue collection of the balance. The Company has a total allowance for bad debt in the amount of $175,000 at March 31, 2017. |
4. INVENTORIES
4. INVENTORIES | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
4. INVENTORIES | Inventories were $236,549 and $295,218 as of March 31, 2017 and September 30, 2016, 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 $25,000 reserve for impaired inventory as of March 31, 2017 and September 30, 2016, respectively. |
5. NOTES RECEIVABLE
5. NOTES RECEIVABLE | 6 Months Ended |
Mar. 31, 2017 | |
Notes Receivable | |
5. NOTES RECEIVABLE | On November 1, 2016, the Company purchased an Original Issue Discount Convertible Promissory Note from BioMedx, Inc. The Company paid $260,000 for the Note with a principal amount of $286,000. The Note matures one year from issuance and bears interest at 5%. The principal and interest can be converted to Biologic common stock at the option of the Company. The Company received 150,000 shares of Pulse Biologics common stock as partial consideration for purchasing the Note. In addition, if BioMedx does not repay the Promissory Note, the Company will have the right to convert the Promissory Note into 51% of the ownership of BioMedx. In addition, the Company and Pulse Biologics agreed to negotiate in good faith to enter into a joint development agreement and subsequent merger transaction prior to December 31, 2017. Due to the inherent uncertainty involved with a start-up company, The Companys management has determined the value of the Promissory Note and BioMedx common stock is zero at December 31, 2016 and recorded a reserve for the full value. During the three months ended March 31, 2017 BiomedX paid the Company $290,608 in full satisfaction of the Note. The Company recorded the gain as a reduction in SG&A expense during the period. |
6. FIXED ASSETS
6. FIXED ASSETS | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
6. FIXED ASSETS | Fixed assets, net of accumulated depreciation, was $268,016 and $285,415 as of March 31, 2017 and September 30, 2016, respectively. Accumulated depreciation was $805,251 and $796,481 as of March 31, 2017 and September 30, 2016, respectively. Total depreciation expense, was $17,399 and $36,278 for the six months ended March 31, 2017 and 2016, respectively. All equipment is used for selling, general and administrative purposes and accordingly all depreciation is classified in selling, general and administrative expenses. |
7. INTANGIBLE ASSETS
7. INTANGIBLE ASSETS | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
7. INTANGIBLE ASSETS | Total amortization expense was $24,012 and $35,625 for the six months ended March 31, 2017 and 2016, respectively. |
8.GOODWILL
8.GOODWILL | 6 Months Ended |
Mar. 31, 2017 | |
Goodwill Usd Abstract | |
8. GOODWILL | The Companys TransTech business is very capital intensive. The Company reviewed TransTechs operations based on its overall financial constraints and determined the value has been impaired. The company recorded an impairment of goodwill associated with TransTech of $983,645 during the six months March 31, 2017. |
9. DERIVATIVE INSTRUMENTS
9. DERIVATIVE INSTRUMENTS | 6 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments | |
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 March 31, 2017 is as follows: Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 March 31, 2017 Liabilities: Derivative Instruments $ - $ 367,837 $ - $ 367,837 Total $ - $ 367,837 $ - $ 367,837 Derivative liability as of September 30, 2016 is as follows: Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 September 30, 2016 Liabilities: Derivative Instruments $ - $ 145,282 $ - $ 145,282 Total $ - $ 145,282 $ - $ 145,282 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, historical volatility was 130% and the stock price was $0.70 at March 31, 2017. 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 per share price is subject to adjustment. In August 2016, the exercise price was reset to $0.70 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 Companys common stock were issued at a price less than the exercise price. Therefore, the fair value of these warrants were recorded as a liability in the consolidated balance sheet and are marked to market each reporting period until they are exercised or expire or otherwise extinguished. The proceeds from the private placement were allocated between the 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 year ended September 30, 2016, the Company recognized $2,085,536 of other income resulting from the decrease in the fair value of the warrant liability at September 30, 2016. During the six months March 31, 2017, the Company recognized $7,370 of other expense resulting from the increase in the fair value of the warrant liability at March 31, 2017. Derivative Instruments Warrant with the November 2013 Xinova Services and License Agreement The Company issued a warrant to purchase 97,169 shares of common stock in connection with the November 2013 Xinova 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 2016, the exercise price was reset to $0.70 per share. 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 Xinova warrant. During the year ended September 30, 2015, the Company recognized $14,574 of other income related to the Xinova warrant. During the year ended September 30, 2016, the Company recognized $286,260 of other income from the increase in the fair value of the warrant liability at September 30, 2016. During the six months ended March 31, 2017, the Company recognized $2,138 of other expense resulting from the increase in the fair value of the warrant liability at March 31, 2017. Derivative Instrument 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 stockholders 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 4, 2016, the exercise price was adjusted to $0.70 per share. During the year ended September 30, 2015, the Company recognized $30,338 of other expense related to the warrant liability. During the year ended September 30, 2016, the Company recognized $132,724 of other income resulting from the increase in the fair value of the warrant liability at September 30, 2016. During the six months March 31, 2017, the Company recognized $1,450 of other expense resulting from the increase in the fair value of the warrant liability at March 31, 2017. Derivative Instrument Series C Convertible Preferred Stock The Company issued shares of Series C Convertible Preferred Stock with attached warrants during the year ended September 30, 2016. In February 2017, the Company modified the term of the warrants to provide a down round provision. The Company recognized $769,643 of other expense resulting from the fair value of the warrant liability at March 31, 2017. |
10. CONVERTIBLE NOTES PAYABLE
10. CONVERTIBLE NOTES PAYABLE | 6 Months Ended |
Mar. 31, 2017 | |
Convertible Notes Payable | |
10. CONVERTIBLE NOTES PAYABLE | Convertible notes payable as of March 31, 2017 and September 30, 2016 consisted of the following: 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. On November 31, 2016, holders of $695,000 of the Convertible Promissory Notes converted to 944,948 shares of common stock and five year warrants to purchase common stock at a price of $1.00 per share. The Company recorded accrued interest of $14,687 during the six months ended March 31, 2017. On February 15, 2017 the Company repaid the remaining $15,000 Promissory Note and accrued interest in cash. On September 30, 2016, the Company entered into a $175,000 Convertible Promissory Note with Clayton A. Struve, an accredited investor and affiliate of the Company, to fund short-term working capital. The Convertible Promissory Note accrues interest at a rate of 10% per annum and becomes due on March 30, 2017. The Note holder can convert to common stock at $0.70 per share. During the six months ended March 31, 2017, the Company recorded interest of $ 8,750 related to the convertible note. The Company entered into two Convertible Promissory Notes totaling $330,000 with accredited investors during on November 1, 2016. The Notes accrue interest at a rate of 10% per annum and become due May 1, 2017 and are convertible into Preferred stock at a conversion price of $0.80 per share and a five-year warrant to purchase a share of common stock at $1.00 per share. The company first allocated the value received to the warrants based on the Black Scholes value assuming a 1 year life, 130% volatility and .7% risk free interest rate. The remaining value was below the fair market value on the date of issuance and as a result the company recorded and beneficial conversion dividend of $326,687 at the time issuance. The Company recorded interest of $10,633 as of February 24, 2017. On February 24, 2016, The Company paid $113,544 in full payment of an Original Issue Discount Convertible Promissory Note issued to an accredited investor on November 1, 2016. On February 24, 2017, the holder of an Original Issue Discount Convertible Promissory Note issued on November 1, 2016 converted the principal and outstanding interest of $227,088 into 283,861 shares of the Companys Series D Preferred Stock and a five-year warrant to purchase 283,861 shares of common stock. The warrants were issued with a down round provision. The warrants have a term of five years, and are exercisable at $1.00 per common share. The Company recorded the fair value of the warrants as a derivative liability. During the six months March 31, 2017, the Company recognized $122,344 of other expense related to the value of the warrants. |
11. NOTES PAYABLE, CAPITALIZED
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | Notes payable, capitalized leases and long-term debt as of March 31, 2017 and September 30, 2016 consisted of the following: March 31, September 30, 2017 2016 Capital Source Business Finance Group $ 365,558 $ 370,404 Note Payable to Umpqua Bank 199,935 199,935 Secured note payable to J3E2A2Z LP - related party 600,000 600,000 Total debt 1,165,493 1,170,339 Less current portion of long term debt (1,165,493 ) (1,170,339 ) Long term debt $ - $ - Capital Source Business Finance Group 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 December 31, 2017 and provides for interest at 3.25% 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 $17,852 as of March 31, 2017. 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 March 31, 2017. The notes payable also provide for a second lien on our assets if not repaid by March 31, 2017 or converted into convertible debentures or equity on terms acceptable to the Mr. Erickson. The Company recorded accrued interest of $49,204 as of March 31, 2017. |
12. EQUITY
12. EQUITY | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
12. EQUITY | Authorized Capital Stock Series D Convertible Preferred Stock On November 14, 2016, the Company issued 187,500 shares of Series D Convertible Preferred Stock and a warrant to purchase 187,500 shares of common stock in a private placement to certain accredited investors for gross proceeds of $150,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated November 10, 2016. On December 19, 2016, the Company issued 187,500 shares of Series D Convertible Preferred Stock and a warrant to purchase 187,500 shares of common stock in a private placement to an accredited investor for gross proceeds of $150,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated December 14, 2016. On February 28, 2017, the Company issued 283,861 shares of Series D Convertible Preferred Stock and a warrant to purchase 283,861 shares of common stock in a private placement to an accredited investor for conversion of a $220,000 Promissory Note and accrued interest of $7,089 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated February 28, 2017. The initial conversion price of the Series D Shares is $0.80 per share, subject to certain adjustments. The initial exercise price of the warrant is $1.00 per share, also subject to certain adjustments. As part of the Purchase Agreement, the Company has agreed to register the shares of common stock sold in the private placement and the shares of common stock issuable upon exercise of the warrant for resale or other disposition. On November 8, 2016, the Company applied with the State of Nevada for the approval of the Certificate of Designations, Preferences, and Rights of Series D Convertible Preferred Stock. The Certificate designated up to 3,906,250 shares with a par value of $.001 per share. The Series D Convertible Preferred Stock is convertible into common stock at $0.80 per share, with certain adjustments as set forth in the Certificate. The Company has issued 375,000 shares of Series D Convertible Preferred Stock through February 21, 2017, and intends to issue up to 3,125,000 Series D Shares (and an equal number of warrants) for gross proceeds of $2,500,000 pursuant on a best efforts basis. To determine the effective conversion price, a portion of the proceeds received by the Company upon issuance of the Series D Preferred Stock was first allocated to the freestanding warrants issued as part of this transaction. Given that the warrants are subject to repricing in the event of a future financing below $0.80 per share, the Company determined that the warrants should receive an allocation of the proceeds based on their relative fair value. As such, the warrants associated with the November 14, 2016 issuance were allocated a fair value of approximately $56,539 upon issuance, with the remaining $63,539 of net proceeds allocated to the Series D Preferred Stock. Proportionately, this allocation resulted in approximately 53% of the amount of the Series D Preferred Stock issuance remaining, which applied to the stated conversion price of $0.80 resulted in an effective conversion price of approximately $0.34. Having determined the effective conversion price, the Company then compared this to the fair value of the underlying Common Stock as of the commitment date, which was approximately $1.14 per share, and concluded that the conversion feature did have an intrinsic value of $0.80 per share. As such, the Company concluded that the Series D Preferred Stock did contain a beneficial conversion feature of $150,211 which was recorded as a beneficial conversion in stockholders equity. The warrants associated with the December 19, 2016 issuance were allocated a fair value of approximately $60,357 upon issuance, with the remaining $69,643 of net proceeds allocated to the Series D Preferred Stock. Proportionately, this allocation resulted in approximately 54% of the amount of the Series D Preferred Stock issuance remaining, which applied to the stated conversion price of $0.80 resulted in an effective conversion price of approximately $0.37. Having determined the effective conversion price, the Company then compared this to the fair value of the underlying Common Stock as of the commitment date, which was approximately $0.81 per share, and concluded that the conversion feature did have an intrinsic value of $0.44 per share. As such, the Company concluded that the Series C Preferred Stock did contain a beneficial conversion feature of $82,232 which was recorded as a beneficial conversion in stockholders equity. Common Stock All of the offerings and sales described below were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities, the offerings and sales were made to a limited number of persons, all of whom were accredited investors and transfer was restricted by the company in accordance with the requirements of Regulation D and the Securities Act. All issuances to accredited and non-accredited investors were structured to comply with the requirements of the safe harbor afforded by Rule 506 of Regulation D, including limiting the number of non-accredited investors to no more than 35 investors who have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of an investment in our securities. The following equity issuances occurred during the six months ended March 31, 2017: On October 21, 2015, the Company entered into a Public Relations Agreement with Financial Genetics LLC for public relation services. On October 18, 2016, the Company entered into an Amendment to Public Relations Agreement with Financial Genetics LLC. Under the Agreements, Financial Genetics was issued 297,481 shares of our common stock during the six months ended March 31, 2017. The Company expensed $238,261 during the six months ended March 31, 2017. On October 6, 2016, the Company entered into a Services Agreement with Redwood Investment Group LLC for financial services. Under the Agreement, Redwood was issued 200,000 shares of our common stock. The Company expensed $140,000 during the six months ended March 31, 2017. 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 accrued interest at a rate of 8% per annum and became due September 2016 to February 2017 and were convertible into common stock as part of our next financing. On November 30, 2016, the Company converted $695,000 of the /Convertible Promissory Notes and interest of $54,078 into 936,348 shares of comment stock at $0.80 per share. The Company also issued warrants to purchase 936,348 shares of the Companys common stock. The five-year warrants are exercisable at $1.00 per share, subject to adjustment. On December 22, 2016, a supplier converted accounts payable totaling $6,880 into 8,600 shares of common stock valued at $0.80 per share. Warrants to Purchase Common Stock The following warrants were issued during the six months ended March 31, 2017: 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 accrued interest at a rate of 8% per annum and became due September 2016 to February 2017 and were convertible into common stock as part of our next financing. On November 30, 2016, the Company converted $695,000 of the /Convertible Promissory Notes and interest of $54,078 into 936,348 shares of comment stock at $0.80 per share. The Company also issued warrants to purchase 936,348 shares of the Companys common stock. The five-year warrants are exercisable at $1.00 per share, subject to adjustment. On November 14, 2016, the Company issued 187,500 shares of Series D Convertible Preferred Stock and a warrant to purchase 187,500 shares of common stock in a private placement to certain accredited investors for gross proceeds of $150,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated November 10, 2016. On December 19, 2016, the Company issued 187,500 shares of Series D Convertible Preferred Stock and a warrant to purchase 187,500 shares of common stock in a private placement to an accredited investor for gross proceeds of $150,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated December 14, 2016. On February 28, 2017, the Company issued 283,861 shares of Series D Convertible Preferred Stock and a warrant to purchase 283,861 shares of common stock in a private placement to an accredited investor for conversion of a $220,000 Promissory Note and accrued interest of $7,089 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated February 28, 2017 The initial conversion price of the Series D Shares is $0.80 per share, subject to certain adjustments. The initial exercise price of the warrant is $1.00 per share, also subject to certain adjustments. During the six months ended March 31, 2017, the Company revised five year placement agent warrants to purchase 312,500 shares of common stock. The price was reduced from $1.00 to $0.70 per share and the exercise price is now subject to adjustment. The Company recorded 250,000 shares during the year ended September 30, 2016 the fair value of these warrants is $137,812 at March 31, 2017. A summary of the warrants outstanding as of March 31, 2017 were as follows: March 31, 2017 Weighted Average Exercise Shares Price Outstanding at beginning of period 3,453,171 $ 0.84 Issued 1,698,263 0.94 Exercised - - Forfeited - - Expired - - Outstanding at end of period 5,151,434 $ 0.88 Exercisable at end of period 5,151,434 Intrinsic value - - A summary of the status of the warrants outstanding as of March 31, 2017 is presented below: March 31,2017 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 3,501,336 3.69 $ 0.70 3,501,336 $ 0.70 1,635,762 3.74 1.00 1,635,762 1.00 14,336 0.87 30.00 14,336 30.00 5,151,434 3.80 $ 0.88 5,151,434 $ 0.88 The significant weighted average assumptions relating to the valuation of the Companys warrants for the period ended March 31, 2017 were as follows: Dividend yield 0% Expected life .25-5 Expected volatility 130% Risk free interest rate .05-1.0% There were vested warrants of 5,151,434 as of March 31, 2017 with an aggregate intrinsic value of $0. |
13. STOCK OPTIONS
13. STOCK OPTIONS | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
13. STOCK OPTIONS | Description of Stock Option 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 no stock option transactions during the six months ended March 31, 2017: There are currently 50,908 options to purchase common stock at an average exercise price of $18.05 per share outstanding as of March 31, 2017 under the 2011 Stock Incentive Plan. The Company recorded $21,774 and $23,674 of compensation expense, net of related tax effects, relative to stock options for the six months ended March 31, 2017 and 2016 in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.00) and ($0.01) per share, respectively. As of March 31, 2017, there is approximately $91,643 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 2.78 years. Stock option activity for the six months ended March 31, 2017 and the years ended September 30, 2016 and 2015 was as follows: Weighted Average Options Exercise Price $ Outstanding as of September 30, 2016 50,908 18.04 918,627 Granted - - - Exercised - - - Forfeitures - - - Outstanding as of December 31, 2016 50,908 $ 18.045 $ 918,627 Granted Exercised Forfeitures Outstanding as of March 31, 2017 50,908 $ 18.045 $ 918,627 The following table summarizes information about stock options outstanding and exercisable as of March 31, 2017: 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 1.72 $ 13.5 3,334 $ 13.5 15.000 20,906 2.52 15 9,514 15 19.500 13,334 2.61 19.5 13,334 19.5 22.500 13,334 3.31 22.5 13,334 22.5 50,908 2.81 $ 18.04 39,516 $ 18.92 There were exercisable options of 50,908 as of March 31, 2017 with an aggregate intrinsic value of $0. |
14. OTHER SIGNIFICANT TRANSACTI
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
14. 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 December 31, 2017 and provides for interest at 3.25% 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 $19,476 as of March 31, 2017. 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 March 31, 2017. The notes payable also provide for a second lien on our assets if not repaid by March 31, 2017 or converted into convertible debentures or equity on terms acceptable to the Mr. Erickson. The Company recorded accrued interest of $49,204 as of March 31, 2017. Other Amounts Due to Mr. Erickson Mr. Erickson and/or entities with which he is affiliated also have advanced $524,832 and have unreimbursed expenses and compensation of approximately $375,000. The Company owes Mr. Erickson, or entities with which he is affiliated, $1,499,832 as of March 31, 2017. |
15. COMMITMENTS, CONTINGENCIES
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
15. 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. Properties and Operating Leases The Company is obligated under various non-cancelable operating leases for its various facilities and certain equipment. Corporate Offices The Companys executive office is located at 500 Union Street, Suite 810, 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. The Company leases this office on a month to month basis at $6,942 per month. |
16. SUBSEQUENT EVENTS
16. SUBSEQUENT EVENTS | 6 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
16. SUBSEQUENT EVENTS | The Company evaluates subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements are available. Subsequent to March 31, 2017, there were the following material transactions that require disclosure: On May 1, 2017, Visualant Inc., (the Company) issued 357,143 shares of Series D Convertible Preferred Stock (the Series D Shares) and a warrant to purchase 357,143 shares of common stock in a private placement to an accredited investor for gross proceeds of $250,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated May 1, 2016. The initial conversion price of the Series D Shares is $0.70 per share, subject to certain adjustments. The initial exercise price of the warrant is $0.70 per share, also subject to certain adjustments. The Company also amended and restated the Certificate of Designation for the Series D Shares, resulting in an adjustment to the conversion price of all currently outstanding Series D Shares to $0.70 per share The transaction triggered a provision in the 500,000 outstanding shares of Series A Preferred Stock, 1,785,714 outstanding shares of Series C Preferred Stock and 752,984 outstanding shares Series D Preferred Stock to adjust the conversion price to $0.70 per share. In addition, the exercise price of 2,358,914 outstanding warrants was adjusted to $0.70 per share. |
9. DERIVATIVE INSTRUMENTS (Tabl
9. DERIVATIVE INSTRUMENTS (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative liability | Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 March 31, 2017 Liabilities: Derivative Instruments $ - $ 367,837 $ - $ 367,837 Total $ - $ 367,837 $ - $ 367,837 Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 September 30, 2016 Liabilities: Derivative Instruments $ - $ 145,282 $ - $ 145,282 Total $ - $ 145,282 $ - $ 145,282 |
11. NOTES PAYABLE, CAPITALIZE23
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
Notes payable, capitalized leases and long term debt | March 31, September 30, 2017 2016 Capital Source Business Finance Group $ 365,558 $ 370,404 Note Payable to Umpqua Bank 199,935 199,935 Secured note payable to J3E2A2Z LP - related party 600,000 600,000 Total debt 1,165,493 1,170,339 Less current portion of long term debt (1,165,493 ) (1,170,339 ) Long term debt $ - $ - |
12. EQUITY (Tables)
12. EQUITY (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
Summary of the warrants issued | March 31, 2017 Weighted Average Exercise Shares Price Outstanding at beginning of period 3,453,171 $ 0.84 Issued 1,698,263 0.94 Exercised - - Forfeited - - Expired - - Outstanding at end of period 5,151,434 $ 0.88 Exercisable at end of period 5,151,434 Intrinsic value - - |
Summary of the status of the warrants outstanding | March 31,2017 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 3,501,336 3.69 $ 0.70 3,501,336 $ 0.70 1,635,762 3.74 1.00 1,635,762 1.00 14,336 0.87 30.00 14,336 30.00 5,151,434 3.80 $ 0.88 5,151,434 $ 0.88 |
Weighted average assumptions relating to the valuation of the Companys warrants | Dividend yield 0% Expected life .25-5 Expected volatility 130% Risk free interest rate .05-1.0% |
13. STOCK OPTIONS (Tables)
13. STOCK OPTIONS (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
Stock option activity | Weighted Average Options Exercise Price $ Outstanding as of September 30, 2016 50,908 18.04 918,627 Granted - - - Exercised - - - Forfeitures - - - Outstanding as of December 31, 2016 50,908 $ 18.045 $ 918,627 Granted Exercised Forfeitures Outstanding as of March 31, 2017 50,908 $ 18.045 $ 918,627 |
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 1.72 $ 13.5 3,334 $ 13.5 15.000 20,906 2.52 15 9,514 15 19.500 13,334 2.61 19.5 13,334 19.5 22.500 13,334 3.31 22.5 13,334 22.5 50,908 2.81 $ 18.04 39,516 $ 18.92 |
1. GOING CONCERN (Details Narra
1. GOING CONCERN (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | |
Notes to Financial Statements | ||||
Net loss | $ 1,746,495 | $ 2,631,037 | ||
Net cash used in operating activities | $ (568,580) | $ (1,187,916) | (3,373,734) | $ (239,877) |
Accumulated Deficit | $ 31,234,591 | $ 27,073,365 |
2. ORGANIZATION (Details Narrat
2. ORGANIZATION (Details Narrative) | Mar. 31, 2017USD ($)shares |
Organization Details Narrative | |
Series D Convertible Preferred Stock issued | 658,861 |
Series D Shares value | $ | $ 2,500,000 |
Series D Shares issue | 3,125,000 |
3. ACCOUNTS RECEIVABLE_CUSTOM28
3. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | |||||
Accounts receivable, net of allowance | $ 740,488 | $ 740,488 | $ 808,955 | ||
Allowance for bad debt | 175,000 | ||||
Selling general and administrative expenses | $ 560,980 | $ 817,778 | $ 1,818,126 | $ 1,528,225 |
4. INVENTORIES (Details Narrati
4. INVENTORIES (Details Narrative) - USD ($) | Mar. 31, 2017 | Sep. 30, 2016 |
Notes to Financial Statements | ||
Inventories | $ 236,549 | $ 295,218 |
Reserve for impaired inventory | $ 25,000 | $ 25,000 |
5. NOTES RECEIVABLE (Details Na
5. NOTES RECEIVABLE (Details Narrative) | Mar. 31, 2017USD ($) |
Notes Receivable Details Narrative | |
Note receivable | $ 290,608 |
6. FIXED ASSETS (Details Narrat
6. FIXED ASSETS (Details Narrative) - USD ($) | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | |||
Property and equipment, net | $ 268,016 | $ 285,415 | |
Property and equipment, accumulated depreciation | 805,251 | $ 796,481 | |
Depreciation expense | $ 17,399 | $ 36,278 |
7. INTANGIBLE ASSETS (Details N
7. INTANGIBLE ASSETS (Details Narrative) - USD ($) | 6 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Notes to Financial Statements | ||
Amortization expense | $ 24,012 | $ 35,625 |
8. GOODWILL (Details Narrative)
8. GOODWILL (Details Narrative) | 6 Months Ended |
Mar. 31, 2017USD ($) | |
Goodwill Details Narrative | |
Impairment of goodwill | $ 983,645 |
9. DERIVATIVE INSTRUMENTS (Deta
9. DERIVATIVE INSTRUMENTS (Details) - USD ($) | Mar. 31, 2017 | Sep. 30, 2016 |
Fair Value Measurements Level 1 [Member] | ||
Liabilities: | ||
Derivative Instruments | $ 0 | $ 0 |
Total | 0 | 0 |
Fair Value Measurements Level 2 [Member] | ||
Liabilities: | ||
Derivative Instruments | 367,837 | 145,282 |
Total | 367,837 | 145,282 |
Fair Value Measurements Level 3 [Member] | ||
Liabilities: | ||
Derivative Instruments | 0 | 0 |
Total | 0 | 0 |
Carrying Amount [Member] | ||
Liabilities: | ||
Derivative Instruments | 367,837 | 145,282 |
Total | $ 367,837 | $ 145,282 |
9. DERIVATIVE INSTRUMENTS (De35
9. DERIVATIVE INSTRUMENTS (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Warrants June 2013 Private Placement [Member] | ||||
Fair value of the warrant liability | $ 7,370 | $ 2,085,536 | $ 104,716 | $ 2,092,000 |
Warrant November 2013 IDMC Services and License Agreement [Member] | ||||
Other expense | 2,138 | |||
Other income | 286,260 | $ 14,574 | ||
Series A Convertible Preferred Stock [Member] | ||||
Fair value of the warrant liability | 116,678 | |||
Other expense | 30,338 | |||
Change in the fair value of the liability | 1,450 | $ 132,724 | ||
Convertible Note Payable Vis Vires Group, Inc. [Member] | ||||
Change in the fair value of the liability | $ 769,643 |
10. CONVERTIBLE NOTES PAYABLE (
10. CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | 6 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | |
Convertible Note | $ 175,000 | |
Vis Vires Group, Inc [Member] | ||
Accrued interest | $ 14,687 | |
Interest expense | 122,344 | |
Convertible Note | $ 8,750 | |
Convertible Promissory Note accrues interest rate | 10.00% |
11. NOTES PAYABLE, CAPITALIZE37
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Details) - USD ($) | Mar. 31, 2017 | Sep. 30, 2016 |
Notes Payable Capitalized Leases And Long Term Debt Details | ||
Capital Source Business Finance Group | $ 365,558 | $ 370,404 |
Note payable to Umpqua Bank | 199,935 | 199,935 |
Secured note payable to J3E2A2Z LP - related party | 600,000 | 600,000 |
Total debt | 1,165,493 | 1,170,339 |
Less current portion of long term debt | (1,165,493) | (1,170,339) |
Long term debt | $ 0 | $ 0 |
11. NOTES PAYABLE, CAPITALIZE38
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Details Narrative) | 6 Months Ended |
Mar. 31, 2017USD ($) | |
Notes Payable Capitalized Leases And Long Term Debt Details Narrative | |
Accounts receivable | $ 290,608 |
Credit facility | The secured credit facility is collateralized by the assets of TransTech, with a guarantee by Visualant, including a security interest in all assets of Visualant. Availability under this Secured Credit ranges from $0 to $175,000 ($10,000 as of September 30, 2016) on a daily basis. The remaining balance on the accounts receivable line of $365,588 as of March 31, 2017 must be repaid by the time the secured credit facility expires on June 12, 2017, or we renew by automatic extension for the next successive six-month term. |
Business loan | $ 199,935 |
Business loan maturity date | Dec. 31, 2017 |
Business loan rate of interest | 3.25% |
Accrued liabilities related parties from advances from Ronald P. Erickson | $ 1,499,832 |
Accrued interest | $ 49,204 |
12. EQUITY (Details)
12. EQUITY (Details) | 6 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Shares | |
Outstanding at beginning of period | 3,453,171 |
Issued | 1,698,263 |
Exercised | 0 |
Forfeited | 0 |
Expired | 0 |
Outstanding at end of period | 5,151,434 |
Exercisable at end of period | 5,151,434 |
Weighted Average Exercise Price: | |
Outstanding at beginning of period | $ / shares | $ 0.84 |
Issued | $ / shares | 0.94 |
Exercised | $ / shares | 0 |
Forfeited | $ / shares | 0 |
Expired | $ / shares | 0.88 |
Outstanding at end of period | $ / shares | $ 0 |
12. EQUITY (Details 1)
12. EQUITY (Details 1) | 6 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of Warrants | 5,151,434 |
Weighted Average Remaining Life (years) | 3 years 9 months 18 days |
Weighted Average Exercise Price | $ / shares | $ 0.88 |
Shares Exercisable | 5,151,434 |
0.70 | |
Number of Warrants | 3,501,336 |
Weighted Average Remaining Life (years) | 3 years 8 months 8 days |
Weighted Average Exercise Price | $ / shares | $ 0.70 |
Shares Exercisable | 3,501,336 |
1 | |
Number of Warrants | 1,635,762 |
Weighted Average Remaining Life (years) | 8 months 26 days |
Weighted Average Exercise Price | $ / shares | $ 1 |
Shares Exercisable | 1,635,762 |
30 | |
Number of Warrants | 14,336 |
Weighted Average Remaining Life (years) | 10 months 2 days |
Weighted Average Exercise Price | $ / shares | $ 30 |
Shares Exercisable | 14,336 |
12. EQUITY (Details 2)
12. EQUITY (Details 2) | 6 Months Ended |
Mar. 31, 2017 | |
Dividend yield | 0.00% |
Expected volatility | 130.00% |
Minimum [Member] | |
Expected life | 3 months |
Risk free interest rate | 0.01% |
Maximum [Member] | |
Expected life | 3 years |
Risk free interest rate | 0.07% |
12. EQUITY (Details Narrative)
12. EQUITY (Details Narrative) | Mar. 31, 2017USD ($)shares |
Notes to Financial Statements | |
Intrinsic value | $ | $ 0 |
Warrants Vested | shares | 45,151,434 |
13. STOCK OPTIONS (Details)
13. STOCK OPTIONS (Details) - USD ($) | 6 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | Sep. 30, 2015 | |
Shares: | |||
Outstanding at beginning of period | 3,453,171 | ||
Shares granted | 1,698,263 | ||
Shares exercised | 0 | ||
Shares forfeitures | 0 | ||
Outstanding at end of period | 5,151,434 | 3,453,171 | |
Weighted Average Exercise Price: | |||
Outstanding at beginning of period | $ 0.84 | ||
Shares granted | 0.94 | ||
Shares exercised | 0 | ||
Shares forfeitures | 0 | ||
Outstanding at end of period | $ 0 | $ 0.84 | |
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, End | $ 0 | ||
Stock Options | |||
Shares: | |||
Outstanding at beginning of period | 50,908 | 57,407 | 87,333 |
Shares granted | 0 | 0 | 11,335 |
Shares exercised | 0 | 0 | 0 |
Shares forfeitures | 0 | (6,499) | (41,261) |
Outstanding at end of period | 50,908 | 50,908 | 57,407 |
Weighted Average Exercise Price: | |||
Outstanding at beginning of period | $ 18.04 | $ 18.43 | $ 18.80 |
Shares granted | 0 | 0 | 15 |
Shares exercised | 0 | 0 | 0 |
Shares forfeitures | 0 | (21.40) | (18.29) |
Outstanding at end of period | $ 18.045 | $ 18.04 | $ 18.43 |
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, Beginning | $ 918,627 | $ 1,057,725 | $ 1,642,200 |
Aggregate Intrinsic Value Outstanding, Granted | $ 0 | $ 0 | $ 170,025 |
Aggregate Intrinsic Value Outstanding, Exercised | $ 0 | $ 0 | $ 0 |
Aggregate Intrinsic Value Outstanding, Forefeitures | $ 0 | $ (139,098) | $ (754,500) |
Aggregate Intrinsic Value Outstanding, End | $ 918,627 | $ 918,627 | $ 1,057,725 |
13. STOCK OPTIONS (Details 1)
13. STOCK OPTIONS (Details 1) | 6 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of Outstanding Stock Options | 5,151,434 |
Weighted Average Remaining Life (years) | 3 years 9 months 18 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 0.88 |
Number Exercisable | 5,151,434 |
Exercise Price 13.500 | |
Number of Outstanding Stock Options | 3,334 |
Weighted Average Remaining Life (years) | 1 year 8 months 19 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 13.50 |
Number Exercisable | 3,334 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 13.50 |
Exercise Price 15.000 | |
Number of Outstanding Stock Options | 20,906 |
Weighted Average Remaining Life (years) | 2 years 6 months 7 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 15 |
Number Exercisable | 9,514 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 15 |
Exercise Price 19.500 | |
Number of Outstanding Stock Options | 13,334 |
Weighted Average Remaining Life (years) | 2 years 7 months 9 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 19.50 |
Number Exercisable | 13,334 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 19.50 |
Exercise Price 22.500 | |
Number of Outstanding Stock Options | 13,334 |
Weighted Average Remaining Life (years) | 3 years 3 months 21 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 22.50 |
Number Exercisable | 13,334 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 22.50 |
Exercise Price Total | |
Number of Outstanding Stock Options | 50,908 |
Weighted Average Remaining Life (years) | 2 years 9 months 21 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 18.04 |
Number Exercisable | 39,516 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 18.92 |
13. STOCK OPTIONS (Details Narr
13. STOCK OPTIONS (Details Narrative) - USD ($) | 6 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Compensation expense | $ 21,774 | $ 23,674 |
Unrecognized compensation costs | $ 91,643 | |
Period for recognition | 2 years 9 months 10 days | |
Options to purchase common stock under 2011 Stock Incentive Plan | 5,151,434 | |
Exercisable at end of period | 5,151,434 | |
2011 Stock Incentive Plan | ||
Options to purchase common stock under 2011 Stock Incentive Plan | 50,908 | |
Average exercise price under 2011 Stock Incentive Plan | $ 18.05 | |
Exercisable at end of period | 50,908 | |
Aggregate intrinsic value | $ 0 |
14. OTHER SIGNIFICANT TRANSAC46
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details narrative) | 6 Months Ended |
Mar. 31, 2017USD ($) | |
Accrued liabilities related parties from advances from Ronald P. Erickson | $ 1,499,832 |
Business loan | $ 199,935 |
Business loan maturity date | Dec. 31, 2017 |
Business loan rate of interest | 3.25% |
Accrued interest | $ 49,204 |
Affiliated advances | 524,832 |
Unreimbursed expense | 375,000 |
Chief Executive Officer | |
Accrued liabilities related parties from advances from Ronald P. Erickson | $ 600,000 |
Business loan maturity date | Mar. 31, 2017 |
15. COMMITMENTS, CONTINGENCIE47
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS (Details Narrative) | Mar. 31, 2017USD ($) |
Notes to Financial Statements | |
Aggregate future minimum lease payments under operating leases | $ 6,942 |