10KSB: Optional form for annual and transition reports of small business issuers [Section 13 or 15(d), not S-B Item 405]
Published on January 7, 2005
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(x) ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934
(FEE REQUIRED)
For the fiscal year ended September 30, 2004
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( ) TRANSACTION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transaction period from to
Commission File number 0-25541
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VISUALANT, INCORPORATED
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(Exact name of Company as specified in charter)
Nevada 91-1948357
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State or other jurisdiction of incorporation (I.R.S. Employee
or organization Identification No.)
500 Union Street, Suite 406
Seattle, Washington 98101
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 206-903-1351
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Securities registered pursuant to section 12 (b) of the Act:
Title of each share Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12 (g) of the Act:
None
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(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15 (d) of the Exchange Act during the past 12 months (or for a shorter
period that the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
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contained, to the best of the Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $ -0-
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State the aggregate market value of the voting stock held by nonaffiliates of
the Company. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specific date within the past 60 days.
As at September 30, 2004, the aggregate market value of the voting stock held by
nonaffiliates is undeterminable and is considered to be 0.
(THE COMPANY INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE LAST FIVE YEARS)
Not applicable
(APPLICABLE ONLY TO CORPORATE COMPANYS)
As of September 30, 2004, the Company has 11,689,848 shares of common stock
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibits incorporated by reference are referred to under Part 1V
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TABLE OF CONTENTS
PART 1
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Page
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY AND ORGANIZATION
Visualant, Incorporated (formerly Starberrys Corporation), a Nevada
corporation (the "Company"), was incorporated on October 8, 1998. The Company
has no subsidiaries and no affiliated companies. The Company's executive offices
are located in Vancouver, British Columbia, Canada.
The Company's Articles of Incorporation currently provide that the
Company is authorized to issue 200,000,000 shares of Common Stock, par value
$0.001 per share, and 50,000,000 Preferred Shares. As at September 30, 2004
there were 11,689,848 Common Shares and no Preferred Shares outstanding.
On November 24, 1998 the Company acquired the exclusive rights to market
high quality cigars through a climate controlled kiosk merchandise display case,
known as the King Climate Control, by the payment of $50,000. The Company did
not proceed with this new business and in 2000 abandoned the activity.
In November 2002, the Company signed a Letter of Intent with eVision
Technologies Corporation and Ken Turpin (founder / inventor) to acquire 100% of
the assets related to the business of Colour By Number ("CBN"). The CBN System
is a digital color management system providing one color language across
industries and materials, empowering architects, designers, contractors,
retailers and consumers to take full control of their choice and use of color.
The Company was unsuccessful in raising the financing to complete this
acquisition, which has been abandoned.
In addition, the Company signed a Letter of Intent on 19 January 2003 with
Malaremastarnas Riksforening, the owner of all the shares of Skandinaviska
Farinstituter AB ("SCI" or the Scandinavian Color Institute) which owns the
color notation system Natural Color Systems ("NCS") and the Scandinavian Color
School, outlining the general terms of a proposed acquisition by the Company of
all of the shares of SCI. On April 9, 2003 the Company signed a Definitive
Purchase Agreement to complete the acquisition, subject to certain conditions,
of all the shares of SCI for a price of SEK 35,000,000 (see attached Exhibit A.)
Subsequent to June 30, 2003 that Agreement was amended to change the Closing
Date from August 31, 2003 to November 30, 2003. NCS is the leading color
notation system in Europe and is also highly regarded around the world. It is
the national standard for color in Sweden, Norway, Spain and South Africa.
The Company was unsuccessful in raising the financing to complete this
acquisition, and it has also been abandoned.
The Company changed its name to Visualant, Incorporated on August 18, 2004.
On June 16, 2004, the Company entered into a contract for the development
of its color technology providing 3D spectral-based pattern file creation and
matching. Color pattern files can be created from any digital photograph or
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scan, without having to reprint, recreate, recall or modify existing digital
source of documents. Those pattern files are then matched against existing
databases to detect and identify crime, forgery, counterfeiting and other
frauds. The Visualant technology provides a new, accurate and fast detection
tool for critical applications such as national security, forgery/fraud
prevention, brand protection, and product tampering.
The Company has no revenue to date from its operations, and its ability to
affect its plans for the future will depend on the availability of financing.
Such financing will be required to enable the Company to acquire new businesses.
The Company anticipates obtaining such funds from its officers and directors,
financial institutions or by way of the sale of its capital stock under an SB-2
and regulations. However, there can be no assurance that the Company will be
successful in obtaining additional capital for such business acquisitions from
the sale of its capital stock, or in otherwise raising substantial capital.
During the year, the Company filed with the SEC various documents such as
Forms 10-KSB, 10-QSB, 3, SC 13-D, 8-Ks, Pre-14-C and other forms. The Company
distributed to its shareholders an annual report for the fiscal year ended
September 30, 2002, which included the audited financial statements, information
circular and proxy. The Company did not distribute any material to its
shareholders in prior years.
The shareholders may read and copy any material filed by the Company with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C., 20549. The shareholders may obtain information on the
operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains an Internet site that contains reports, proxy and
information statements, and other information which the Company has filed
electronically with the SEC, by accessing the website using the following
address: http://www.sec.gov. Presently the Company does not have its own
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Internet address. The Company is prepared to distribute, upon request from
shareholders, any of the material previously filed with the SEC.
PLANNED BUSINESS
This Form 10-KSB contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or the Company's future financial
performance. In some cases, the reader can identify forward-looking statements
by terminology such as "may", "will", "should", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential" or "continue" or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled "Risk Factors", that
may cause the Company or its industry's actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these
forward-looking statements. Although the Company believes that the expectations
reflected in the forward-looking statements are reasonable, it cannot guarantee
future results, levels of activity, performance or achievements. Except as
required by applicable law, including the securities laws of the United States,
the Company does not intend to update any of the forward-looking statements to
conform these statements to actual results.
The Company's financial statements are stated in United States Dollars and
are prepared in accordance with United States Generally Accepted Accounting
Principles. In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States Dollars.
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RISK FACTORS
There are certain inherent risks which will have an effect on the Company's
development in the future and some of these risk factors are noted below but are
not all encompassing since there may be others unknown to management at the
present time which might have an impact in the future on the development of the
Company.
1. FUTURE TRADING IN THE COMPANY'S STOCK MAY BE RESTRICTED BY THE SEC'S PENNY
STOCK REGULATIONS WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL
THE COMPANY'S SHARES WHEN, AND IF, THE SHARES ARE EVENTUALLY QUOTED.
The SEC has adopted regulations which generally define "penny stock" to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. The Company's shares most likely will be covered by the penny stock
rules, which impose additional sales practice requirements on broker-dealers who
sell to persons other than established customers and "accredited investors."
The term "accredited investor" refers generally to institutions with assets in
excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 jointly with their spouse. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document in a form prepared by the SEC which provides information
about penny stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to broker-dealers to trade in the Company's securities. The
Company believes that the penny stock rules discourage investor interest in and
limit the marketability of, its common stock when, and if, it is called for
trading. The Company feels that its shares will be considered to be penny stock
when the shares are finally quoted.
2. THE COMPANY IS UNCERTAIN IF IT WILL BE ABLE TO OBTAIN ADDITIONAL CAPITAL
NECESSARY FOR ITS DEVELOPMENT.
The Company has incurred a cumulative net loss for the period from October
8, 1998 (date of inception) to September 30, 2004 of $2,194,010. As a result of
these losses and negative cash flows from operations, the Company's ability to
continue operations will be dependent upon the availability of capital from
outside sources unless and until it achieves profitability. It can only achieve
profitability if an ore body is found on the Bridge claim.
3. WHETHER THE COMPANY WILL CONTINUE TO BE A GOING CONCERN
The Company's auditors, in the audited financial statements as at September
30 2004, have indicated a concern in their audit opinion as to whether the
Company will be able to raise sufficient funds to complete its objectives and,
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if not, indicates that the Company might not be able to continue as a going
concern. Without adequate future financing, the Company might cease to operate
and the existing shareholders and any future shareholders will lose their entire
investment.
4. SOME OF THE PRESENT SHAREHOLDERS HAVE ACQUIRED SHARES AT EXTREMELY LOW
PRICES
Some of the present shareholders have acquired share at prices ranging from
$0.001 to $0.25 per share whereas other shareholders have purchased their shares
at $0.50 and $0.75 per share. In addition, the Company has issued 300,000
incentive stock options to a related party at $0.10 per share exercisable in
whole or in part on or before August 15, 2009.
5. FUTURE ISSUANCE OF STOCK OPTIONS, WARRANTS AND/OR RIGHTS WILL HAVE A
DILUTING FACTOR ON EXISTING AND FUTURE SHAREHOLDERS
The grant and exercise of stock options, warrants or rights to be issued in
the future would likely result in a dilution of the value of the Company's
common shares for all shareholders. At present, the Company has established a
Non-Qualified Stock Option Plan as noted on page 33 of this report and may in
the future issue further stock options to officers, directors and consultants
which will dilute the interest of the existing and future shareholders.
Moreover, the Company may seek authorization to increase the number of its
authorized shares and to sell additional securities and/or rights to purchase
such securities at any time in the future. Dilution of the value of the common
shares would likely result from such sales.
6. THE COMPANY DOES NOT EXPECT TO DECLARE OR PAY ANY DIVIDENDS
The Company has not declared or paid any dividends on its common stock
since its inception, and it does not anticipate paying any such dividends for
the foreseeable future.
7. CONFLICT OF INTEREST
Some of the Directors of the Company are also directors and officers of
other companies and conflicts of interest may arise between their duties as
directors of the Company and as directors and officers of other companies.
8. CONCENTRATION OF OWNERSHIP BY MANAGEMENT.
The management of the Company, either directly or indirectly, owns 625,000
shares. Even thought this only represents 5.35 % of the issued and outstanding
shares, it might be difficult for any one shareholder to solicit sufficient
votes to replace the existing management. Therefore, any given shareholder may
never have a voice in the direction of the Company.
9. KEY-MAN INSURANCE
The Company carries no key-man insurance. In the event that Mr. Erickson
or Mr. Brier either departed the Company or passed away, the Company would not
have the available funds to attract an individual of similar experience.
Management is considering obtaining key-man insurance once it has sufficient
funds to do so.
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10. LIMITED FULL TIME EMPLOYEES
The only director who works full time for the Company is its President,
Ralph Brier. The other directors will devote time to the activities of the
Company as required from time to time. At the present time, there are no other
employees other than Ralph Brier.
11. RECENTLY ENACTED AND PROPOSED REGULATORY CHANGES
Recently enacted and proposed changes in the laws and regulations affecting
public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and
rules proposed by the SEC and NASDAQ could cause the Company to incur increased
costs as it evaluates the implications of new rules and responds to new
requirements. The new rules will make it more difficult for the Company to
obtain certain types of insurance, including directors and officers liability
insurance, and the Company may be forced to accept reduced policy limits and
coverage or incur substantially higher costs to obtain the same or similar
coverage. The impact of these events could also make it more difficult for the
Company to attract and retain qualified persons to serve on the Company's board
of directors, or as executive officers. The Company is presently evaluating and
monitoring developments with respect to these new and proposed rules, and it
cannot predict or estimate the amount of the additional costs it may incur or
the timing of such costs.
ITEM 2. DESCRIPTION OF PROPERTY
OFFICES
The Company's executive offices are located at 500 Union Street, Suite
406, Seattle, Washington, USA, 98101. The office is located in premises which
are also used by the Chairman of the Board of the Company for other business
interests. There is no charge to the Company for using this office.
OTHER PROPERTY
The Company does not own any other property other than the rights to the
Cigar King and the Starberrys food service concepts.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings to which the Company is a party or to
which its property is subject, nor to the best of management's knowledge are any
material legal proceedings contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The last annual meeting was on August 7, 2002. No matters have been
submitted to a vote of securities holders in the most recent fiscal year.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
During the past year there has been no established trading market for
the Company's common stock. Since its inception, the Company has not paid any
dividends on its common stock, and the Company does not anticipate that it will
pay dividends in the foreseeable future. As at September 30, 2004 the Company
had 58 shareholders.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
The Company was incorporated on October 8, 1998 under the laws of the
State of Nevada. The Company's Articles of Incorporation currently provide that
the Company is authorized to issue 200,000,000 shares of Common Stock, par value
$0.001 per share, and 50,000,000 shares of Preferred Stock with such terms as
will be specified by the Board of Directors at the time it acts to create a
specific series of the Preferred Stock to be issued. As at September 30, 2004
there were 11,689,848 Common Shares and no Preferred Shares outstanding.
Liquidity and Capital Resources
As at September 30, 2004, the Company had assets of $12,831, and
$1,471,525 in liabilities. Included in the liabilities is accounts payable of
$213,523.
During the year, the Company has incurred the following expenses:
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i. The Company has accrued $4,000 in fees to its auditors, Madsen &
Associates, CPA's Inc. for the examination of the Form 10-KSB as at September
30, 2004. In addition, the Company was charged $485 each for the March 10-QSB
and the June 10-QSB by Madsen & Associates. In addition, the Company has
accrued $3,000 in order that the Company's accountant can prepare the applicable
working papers and other information to be submitted to the auditors for their
review of the Form 10-KSB, plus additional fees of $2,340 for preparation of 3
10-QSB's and underaccrual of the 2003 10-KSB.
ii. The Company paid consulting fees of $10,000 to its president over a two
month period, at $5,000 per month.
iii. The Company has incurred certain expenses during the year for filing
its various Forms 10-KSB and 10-QSB with the SEC. The Company paid $1,913 in
total for the June 30, 2003 10QSB and a Form 12B-25. It accrued $345 for an
8-K. In addition, it accrued $600 payable to the accountant for edgarizing March
and June 2004 10-QSB's and September 2004 10-KSB.
iv. Legal fees of $66,667 were incurred during the year. Prior year's legal
fees of $43,400 were settled and shown separately on the income statement as
settlement of debt.
v. Loss on foreign exchange consists of the difference between the US and
Canadian dollar exchange rate on monies expended by the Company in Canadian
dollars.
vi. Office expenses consist of photocopy, fax and courier expenses and other
miscellaneous expenses incurred by the officers of the Company.
vii. During the period, the Company received its annual billing from Nevada
Agency and Trust Company for acting as transfer agent for the year in the amount
of $1,200. Amounts for stock transfer fees and original issue fees totaled
$160. In addition, the Company has accrued certain late charges of interest
totaling $366. Included in these transfer agent fees is $640 for obtaining a
new CUSIP number and changing the Company's name.
viii. Recovery of prior year's expenses was for consulting fees previously
accrued.
ix. Settlement of debt is the reversal of legal expenses due to the issue of
shares for debt to two legal firms for amounts payable to them of $43,400.
x. Research and development fees of $65,100 were paid according to the terms
of an independent contractor agreement, at $9,300 semimonthly for three and one
half months.
xi. Interest expense on the note payable to a related party was $75,000.
The Company estimates the following expenses will be required during the
next twelve months to meet its obligations:
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Included in the current accounts payable above is $4,150 payable to a related
party for accounting fees.
1. Accounting and auditing expense has been projected as follows:
2. Consulting fees are based on those paid in the previous year.
3. Filing fees will include the cost of filing the various Forms 10-QSB and
the Form 10-KSB on Edgar. It is estimated that the cost for each of the Form
10-QSBs will be $200 whereas the cost for filing the Form 10-KSB will be $300.
Additional Edgar charges are estimated at $500. Each year the Company is
required to file a list of officers and directors with the State of Nevada at a
cost of $260. Additional costs of $90 are estimated.
4. Estimated legal fees are based on the projected costs for patenting the
3D spectral - based pattern file creation and matching system.
5. Relates to photocopying, faxing and courier, in addition to miscellaneous
expenses incurred by the directors. The estimate of these charges is
6. Research and development fees are payable to an independent contractor at
$18,600 per month for two months.
7. The Company is charged $1,200 annually by Nevada Agency & Trust Company.
Additional stock transfer and original issue fees of $1,300 are estimated. The
Company has calculated $400 in late interest charges for the next year.
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8. Travel and promotion expenses have been estimated at $20,000. These
expenses will be incurred by the directors who may incur travel expenses to
pursue the new project for the Company, and to obtain financing.
At the present time, the Company has no contractual obligations for leasing
premises.
At present, the directors devote time to the affairs of the Company as required.
There are no plans to hire any employees at this time. The Company will
continue to use the services of consultants in the furtherance of the Company's
goals.
Results of Operations
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The Company has had no revenues from operations since its inception.
Plan of operation.
The Company is seeking new acquisition and financing opportunities.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company are included following the
signature page to this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On February 5, 2004, the Company dismissed Sellers & Andersen, LLC as the
independent accountants. This action was approved by the directors of the
Company. The Company appointed Madsen & Associates, CPA's Inc. as the
independent accountants.
The reports of Madsen & Associates, CPA's Inc. for the financial statements as
at September 30, 2003 and through the subsequent interim periods ended December,
2003, March 31, 2004 and June 30, 2004 contained no adverse opinion or
disclaimers of opinion and were not modified or qualified as to audit scope or
accounting principles, but did contain modifications as to the Company's ability
to continue as a going concern.
During the fiscal year ended September 30, 2003, and through the subsequent
interim periods ended December, 2003, March 31, 2004 and June 30, 2004, to the
best of the Company's knowledge, there have been no disagreements with Madsen &
Associates, CPA's Inc. on any matters of accounting principles or practices,
financial statement disclosure, or audit scope or procedures, which disagreement
if not resolved to the satisfaction of Madsen & Associates would have caused
them to make reference in connection with its report on the financial statements
of the Company for such years.
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ITEM 8A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
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The Company's Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of the Company's controls and procedures (as
defined in the Securities Act of 1934 Rule 13a 14(c) and 15d 14 (c) of the date
within 90 days of the filing of this annual report on Form 10-KSB (the
"Evaluation Date"), have concluded that as of the Evaluation Date, the Company's
disclosure controls and procedures were adequate and effective to ensure that
material information relating to it would be made known to it by others,
particularly during the period in which this quarterly report on Form 10-KSB was
being made.
(b) Changes in Internal Controls
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There were no significant changes in the Company's internal controls or in other
factors that could significantly affect the Company's disclosure controls and
procedures subsequent to the Evaluation Date, nor any significant deficiencies
or material weaknesses in such disclosure controls and procedures requiring
corrective actions.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
The following table sets forth as of September 30, 2004, the name, age,
and position of each executive officer and director and the term of office of
each director of the Company.
Each director of the Company serves for a term of one year and until his
successor is elected at the Company's annual shareholders' meeting and is
qualified, subject to removal by the Company's shareholders. Each officer
serves, at the pleasure of the Board of Directors, for a term of one year and
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until his successor is elected at the Annual General Meeting of the Board of
Directors and is qualified.
On November 3, 2003, Kenneth R. Tolmie resigned as Chief Financial Officer,
Chief Accounting Officer and Secretary of the Company. Mary Hethey was
appointed Chief Financial Officer, Chief Accounting Officer and Secretary of the
Company in the place and stead of Kenneth R. Tolmie.
On August 31, 2004, Ronald P. Erickson resigned as President and CEO of the
Company. He was appointed Chairman of the Board of the Company. Richard Brier
was appointed President and CEO of the Company.
Set forth below is certain biographical information regarding each of
the Company's executive officers and directors.
RONALD P. ERICKSON has been a director and officer of the Company since
April 24, 2003. He was appointed President and Chief Executive Officer of the
Company on September 29, 2003, and resigned from this position on August 31,
2004 at which he was appointed Chairman of the Board. Resident in Seattle, he
is a seasoned executive with more than 20 years of expertise in the high
technology, telecommunications and microcomputer industries. Mr. Erickson is
also Chairman of Intrinsyc Software Inc., a Vancouver-based publicly-traded
company providing proprietary software and solutions which enable the
development and networking of intelligent devices such as PDA's. Mr. Erickson
is the current chair, and former CEO of eCharge, an electronic payment systems
developer, where he played a major role in raising approximately US $100
million in equity capital from major international investors. Mr. Erickson
previously was co-founder, Chairman, President and CEO of GlobalTel Resources,
Inc., a provider of telecommunication services, messaging and intranet
solutions. During his career Mr. Erickson has also held executive positions at
Egghead Software Inc, NBI Inc and MicroRim, Inc. With a law degree from the
University of California, Davis, he maintains an active license to practice law
in the State of Washington and the District of Columbia.
RALPH BRIER was appointed CEO, President and Director of the Company on
August 31, 2004. He has over 25 years of diverse experience in marketing,
sales, business development and strategic planning, with a focus in the security
and biometrics sector. Ralph was Executive Vice President Strategic Sales with
Applied DNA Sciences, a Los Angeles based biotechnology security firm. He was
previously employed by Sagem Morpho, a division of Groupe SAGEM in France, a
global leader in the provisioning of biometric solutions for business and
government. During his tenure there, he doubled commercial sales revenues,
serving as the senior commercial, channel and OEM business executive of
biometric software, smart card implementation and hardware.
TERRY H. MCKAY has been a director since June 6, 2002. Dr. McKay currently
practices Dentistry in North Vancouver, BC. Since 1999 he has been a director of
Swident, a Swiss dental insurance company, and serves on its Financial Audit
Committee. Dr. McKay is past Clinical Director for Knowell Technology and a past
Board member of longivitystore.com. Mr. McKay graduated from the University of
British Columbia with a B.A. and D.M.D. in 1975. He has practiced Dentistry in
BC and in Seattle, Washington. Dr. McKay's professional memberships include the
Canadian Dental Association, B.C. College of Dental Surgeons, Washington State
Dental Association, American Academy of Gold Foil Operations and the American
Academy of Operative Dentists.
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MARY M. HETHEY, C.A., was appointed Chief Financial Officer, Chief
Accounting Officer and Secretary of the Company on November 3, 2003. Mrs.
Hethey graduated with a B.A. in Economics from the University of Toronto in
1973. She moved to Vancouver and started to article with Clarkson Gordon
Chartered Accountants in 1975, and transferred to Collins Barrow in 1978, where
she performed both audits and non-audit engagements. In 1979 she obtained her
Chartered Accountant designation. Since 1985, Mrs. Hethey has been a senior
executive with various public companies listed both on the Canadian and US stock
exchanges. She has continued to work as a Chartered Accountant since 1979.
KEN TURPIN was appointed Chief Science Officer on August 31, 2004. He has
worked with the visual world of color as it applies to building materials for
the past 15 years. His most recent business success was the founding,
development, and sale of Fire Stop Systems, which was acquired and renamed to
PFP Partners by Johns Manville in 1998. Throughout his career in manufacturing
building products, Ken often dealt with the world of color, where he observed
how people viewed and used color. In 1999, he began to allocate significant
human, technical and financial resources to the world of visual color. The
result of this research and development is CBN Systems. While doing the
research on this project, he identified many other opportunities in the
"non-visual to humans" spectrum of color.
To the knowledge of management, during the past five years, no present or
former director, executive officer or person nominated to become a director or
an executive officer of the Company:
(1)
filed a petition under the federal bankruptcy laws or any state insolvency law,
nor had a receiver, fiscal agent or similar officer appointed by the court for
the business or property of such person, or any partnership in which he was a
general partner at or within two years before the time of such filings;
(2)
was convicted in a criminal proceeding or named subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses);
(3)
was the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining him from or otherwise limiting, the following activities:
(i)
acting as a futures commission merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker, leverage transaction merchant,
associated person of any of the foregoing, or as an investment advisor,
underwriter, broker or dealer in securities, or as an affiliate person, director
or employee of any investment company, or engaging in or continuing any conduct
or practice in connection with such activity;
(ii)
engaging in any type of business practice; or
(iii)
-15-
engaging in any activities in connection with the purchase or sale of any
security or commodity or in connection with any violation of federal or state
securities laws or federal commodities laws;
(4)
was the subject of any order, judgment, or decree, not subsequently reversed,
suspended, or vacated, of any federal or state authority barring, suspending or
otherwise limiting for more than 60 days the right of such person to engage in
any activity described above under this Item, or to be associated with persons
engaged in any such activities;
(5)
was found by a court of competent jurisdiction in a civil action or by the
Securities and Exchange Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the
Securities and Exchange Commission has not been subsequently reversed,
suspended, or vacated.
(6)
was found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities
law, and the judgment in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed, suspended or vacated.
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
The Company knows of no director, officer, beneficial owner of more than
ten percent of any class of equity securities of the registrant registered
pursuant to Section 12 ("Reporting Person") that failed to file any reports
required to be furnished pursuant to Section 16(a). Other than those disclosed
below, the registrant knows of no Reporting Person that failed to file the
required reports during the most recent fiscal year.
The following table sets forth as at September 30, 2004, the name and
position of each Reporting Person that failed to file on a timely basis any
reports required pursuant to Section 16 (a) during the most recent fiscal year.
-16-
ITEM 10. EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth compensation paid or accrued by the Company
for the last three years ended September 30, 2004:
SUMMARY COMPENSATION TABLE (2002, 2003 AND 2004)
Long Term Compensation (US Dollars)
--------------------------------------
Annual Compensation Awards Payouts
-------------------- ------ -------
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BONUSES AND DEFERRED COMPENSATION
None
COMPENSATION PURSUANT TO PLANS
None
PENSION TABLE
None
OTHER COMPENSATION
In September 2003, the Company grant stock options to its Chief Financial
Officer of common stock at $1.00 per share, which will expire in December 2006.
On the dated of the grant the fair market value of the shares was $.50.
COMPENSATION OF DIRECTORS
On August 15, 2004, the Company granted stock options to Ralph Brier,
President and Director, of 300,000 common shares at $.10 per share; which will
expire August 15, 2009. The options will vest at 25,000 shares each quarter
starting August 15, 2004. On the date of the grant the fair market value of the
shares was $.50.
TERMINATION OF EMPLOYMENT
There are no compensatory plans or arrangements, including payments to
be received from the Company, with respect to any person named in Cash
Compensation set out above which would in any way result in payments to any such
person because of his resignation, retirement, or other termination of such
person's employment with the Company or its subsidiaries, or any change in
control of the Company, or a change in the person's responsibilities following a
change in control of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as at September 30, 2004, the name and
address and the number of shares of the Company's common stock, with a par value
of $0.001 per share, held of record or beneficially by each person who held of
record, or was known by the Company to own beneficially, more than 5% of the
issued and outstanding shares of the Company's common stock, and the name and
shareholdings of each director and of all officers and directors as a group.
-18-
(1)
All shares owned directly are owned beneficially and of record, and such
shareholder has sole voting, investment and dispositive power, unless otherwise
noted.
(2)
Stock options of 300,000 shares of common stock at $0.10 per share, expiring on
August 19, 2009.
(3)
Stock options of 25,000 shares of common stock at $1.00 per share, expiring on
December 31, 2006.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Except as indicated below, there were no material transactions, or
series of similar transactions, since inception of the Company and during its
current fiscal period, or any currently proposed transactions, or series of
similar transactions, to which the Company was or is to be a party, in which the
-19-
amount involved exceeds $60,000, and in which any director or executive officer,
or any security holder who is known by the Company to own of record or
beneficially more than 5% of any class of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, has an interest.
On May 28, 2002, the Company signed an agreement with First Equity
Capital Group Inc. for the assignment of the Starberrys business system and name
from First Equity to the Company. The consideration was 2,500,000 shares plus
$50,000. The 2,500,000 shares were delivered by the Company to First Equity on
June 6, 2002.
INDEBTEDNESS OF MANAGEMENT
There were no material transactions, or series of similar transactions,
since the beginning of the Company's last fiscal year, or any currently proposed
transactions, or series of similar transactions, to which the Company was or is
to be a part, in which the amount involved exceeded $60,000 and in which any
director or executive officer, or any security holder who is known to the
Company to own of record or beneficially more than 5% of the common shares of
the Company's capital stock, or any member of the immediate family of any of the
foregoing persons, has an interest.
TRANSACTIONS WITH PROMOTERS
The Company does not have promoters and has no transactions with any
promoters.
-20-
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS.
The following financial statements are included in this report:
(a) (2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules are included as part of this
report:
None.
(a) (3) EXHIBITS
The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:
(1) Articles of Incorporation incorporated herein by reference to the Company's
Registration Statement on Form 10-SB filed on October 12, 2000; and
(2) By laws incorporated herein by reference to the Company's Registration
Statement on Form 10-SB filed on October 12, 2000.
-21-
99.1 Certificate Pursuant to Section 301(a) of the Sarbanes-Oxley Act of 2002
(Chief Executive Officer)
99.2 Certification of the Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.3 Certificate Pursuant to Section 301(a) of the Sarbanes-Oxley Act of 2002
(Chief Financial Officer)
99.4 Certification of the Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
(i) Form 8-K incorporated herein by reference to the Company's filing on
October 10, 2003 announcing the resignation of John H. Goodwin as
President, Chief Executive Officer and Director, and the appointment of
Ronald P. Erickson as President and Chief Executive Officer of the Comapny.
(ii) Form 8-K incorporated herein by reference to the Company's filing on
November 3, 2003 announcing the resignation of Ken Tolmie as Chief
Financial Officer and Secretary and the appointment of Mary Hethey as Chief
Financial Officer and Secretary Treasurer. Of the Company.
(iii) Form 8-K filed on February 5, 2004 regarding the change of the Company's
certifying accountants.
(iv) Form 8-K filed on September 13, 2004 regarding Intellectual Property
Agreement with Ken Turpin; resignation of Hans Nasholm as Director and Ron
Erickson as CEO and President of the Company; appointment of Ralph Brier as
CEO, President and Director, Ken Turpinas Chief Science Officer and Zach
Wilkes as Chief Technical Officer of the Company; change of name to
Visualant, Incorporated; issuance of 200,00 shares at $0.50 per share and
stock options of 300,000 common shares.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) Audit Fees
-----------
The aggregate fees billed by the independent accountants for the last two fiscal
years for professional services for the audit of the Company's annual financial
statements and the review included in the Company's Form 10-QSB and services
-22-
that are normally provided by the accountants in connection with statutory and
regulatory filings or engagements for those fiscal years were $10,485.
(2) Audit-Related Fees
-------------------
The aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountants that are reasonably related to the
performance of the audit or review of the Company's financial statements and are
not reported under Item 9 (e)(1) of Schedule 14A was NIL.
(3) Tax Fees
---------
The aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountants for tax compliance, tax advise,
and tax planning was $200.
(4) All Other Fees
----------------
During the last two fiscal years there were no other fees charged by the
principal accountants other than those disclosed in (1) and (2) above.
(5) Audit Committee's Pre-approval Policies
------------------------------------------
At the present time, there are not sufficient directors, officers and employees
involved with Standard to make any pre-approval policies meaningful. Once
Standard has elected more directors and appointed directors and non-directors to
the Audit Committee it will have meetings and function in a meaningful manner.
(6) Audit hours incurred
----------------------
The principal accountants spent approximately 50 percent of the total hours
spent on the accounting. The hours were about equal to the hours spent by the
Company's internal accountant.
-23-
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VISUALANT, INCORPORATED
(the "Registrant")
By: /s/ "Ralph Brier"
Ralph Brier
Chief Executive Officer, President and
Director
Date: January 7, 2005
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: /s/ "Ralph Brier"
Ralph Brier
Chief Executive Officer, President and
Director
Date: January 7, 2005
By: /s/ "Mary M. Hethey"
Mary M. Hethey
Chief Financial Officer and Secretary
Treasurer
Date: January 7, 2005
-24-
MADSEN & ASSOCIATES CPA'S INC. 684 East Vine Street #3, Certified
Public Accountants and Murray, Utah 84107
Business Consultants Telephone 801-268-2632
Board of Directors
Visualant, Incorporated
Vancouver, B.C., Canada
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheet of Visualant, Incorporated
(development stage company) at September 30, 2004, and the related statements of
operations, stockholders' equity, and cash flows for the year ended September
30, 2004 and 2003 and the period October 8, 1998 (date of inception) to
September 30, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public
Accounting Oversight Board (United States). These standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Visualant, Incorporated at
September 30, 2004, and the results of operations, and cash flows for the years
ended September 30, 2004 and 2003 and the period October 8, 1998 (date of
inception) to September 30, 2004 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company will need additional
working capital for its planned activity and to service its debt, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in the notes to the
financial statements. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Salt Lake City, Utah Madsen & Associates CPA's Inc.
December 20, 2004
-25-
VISUALANT, INCORPORATED
(Development Stage Company)
BALANCE SHEET
September 30, 2004
The accompanying notes are an integral part of these financial statements
-26-
VISUALANT, INCORPORATED
(Development Stage Company)
STATEMENT OF OPERATIONS
For the Years Ended September 30, 2004 and 2003 and Period
October 8,1998 (Date of Inception) to September 30, 2004
The accompanying notes are an integral part of these financial statements
-27-
VISUALANT, INCORPORATED
(Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the period October 8, 1998 (Date of Inception) to September 30, 2004
The accompanying notes are an integral part of these financial statements
-28-
VISUALANT, INCORPORATED
(Development Stage Company)
STATEMENT OF CASH FLOWS
For the years ended September 30, 2004 and 2003 and the Period
October 8, 1998 (Date of Inception) to September 30, 2004
SCHEDULE OF NONCASH FLOWS FROM OPERATING AND FINANCING ACTIVITIES
The accompanying notes are an integral part of these financial statements
-29-
VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on October 8,
1998 under the name of "Cigar King Corporation" with authorized common stock of
200,000,000 shares at $0.001 par value. On September 13, 2002 the name was
changed to "Starberrys Corporation" as part of a change in the authorized
capital stock by the addition of 50,000,000 shares of preferred stock with a par
value of $0.001 and on August 18, 2004, the name was changed to "Visualant,
Incorporated". There are no preferred shares issued and the terms have not been
determined.
The Company was originally organized for the purpose of engaging in quality
cigar sales. During 1998 the Company purchased the right to use the name "Cigar
King" to market high quality cigars and during 2000 the activity was abandoned.
During 2002, the Company entered into a contract of purchase of all assets and
intelluctual property related to the "Color by Numbers" business and system and
on April 9, 2003 the Company signed a Purchase Agreement for the Acquisition of
all shares of the Company which owns design, paint and building products. The
contract was subsequently rescinded.
During June 2004, the Company entered into a contract for the further
development of a color technology, providing 3D spectral-based pattern file
creation and matching.
The Company has not started any operations and is in the development stage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
- -------------------
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
- ----------------
The Company has not adopted a policy regarding payment of dividends.
Basic and Diluted Net Income (Loss) Per Share
- ----------------------------------------------------
Basic net income (loss) per share amounts are computed based on the weighted
average number of shares actually outstanding. Diluted net income (loss) per
share amounts are computed using the weighted average number of common shares
and common equivalent shares outstanding as if shares had been issued on the
exercise of the common share rights unless the exercise becomes antidilutive and
then only if the basic per share amounts are shown in the report.
-30-
VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2004
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes
- -------------
The Company utilizes the liability method of accounting for income taxes. Under
the liability method deferred tax assets and liabilities are determined on the
differences between financial reporting and the tax bases of the assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect, when the differences are expected to reverse. An allowance against
deferred tax assets is recognized, when it is more likely than not, that such
tax benefits will not be realized.
On September 30, 2004 the Company had a net operating loss carry forward of $
2,170,010. The tax benefit of approximately $ 651,000 from the loss carry
forward has been fully offset by a valuation reserve because the use of the
future tax benefit is doubtful since the Company has no operations. The loss
carryforward will expire in 2023.
Key Employee Incentive Stock Option Plan
- ---------------------------------------------
SFAS No.123, "Accounting for Stock-Based Compensation", establishes accounting
and reporting standards for stock-based employee compensation plans. As
permitted by SFAS No. 123, the Company accounts for such arrangements under APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations.
Cash and Cash Equivalents
- ----------------------------
The Company considers all highly liquid instruments purchased with a maturity,
at the time of purchase, of less than three months, to be cash equivalents.
Financial Instruments
- ----------------------
The carrying amounts of financial instruments, including cash and accounts
payable, are considered by management to be their estimated fair values due to
their short term maturities.
Financial and Concentrations Risk
- ------------------------------------
The Company does not have any concentration or related financial credit risk.
Research and Development Costs
- ---------------------------------
Research and development costs, including wages, supplies, depreciation of
equipment used in the research activity, and any assigned overhead expenses, are
expensed as incurred.
-31-
VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2004
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Revenue Recognition
- --------------------
Revenue will be recognized on the sale and delivery of a product or the
completion of a service provided.
Advertising and Market Development
- -------------------------------------
The Company will expense advertising and market development costs as incurred.
Estimates and Assumptions
- ---------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with accounting principles generally accepted in the United States
of America. Those estimates and assumptions affect the reported amounts of the
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from the
estimates that were assumed in preparing these financial statements.
Foreign Currency Translation
- ------------------------------
Part of the transactions of the Company were completed in Canadian dollars and
have been translated to US dollars as incurred, at the exchange rate in effect
at the time, and therefore, no gain or loss from the translations is recognized.
US dollars are considered to be the functional currency.
Recent Accounting Pronouncements
- ----------------------------------
The Company does not expect that the adoption of other recent accounting
pronouncements will have a material impact on its financial statements.
3. DEVELOPMENT OF TECHNOLOGIES OWNED BY THE COMPANY
The Company is in the business of researching, developing, acquiring, and
commercializing products and services related to color technology outside the
visible spectrum, using specialized narrow and N-IR and N-UV sensors and spatial
analysis software modeling which translate the invisible into the visible and
involving specialized and proprietary information and trade secrets which the
Company owns, which is considered to be among its most sensitive, confidential,
and proprietary information.
The Company has a working agreement with an independent contractor to further
develop the technology in which the Company has agreed to pay development costs
incurred semi monthly.
-32-
VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2004
4. COMMON CAPITAL STOCK
Since its inception, the Company has completed private placements of 11,355,000
of its common capital stock for $ 617,792, 150,000 shares for services and
184,848 shares for payment of debt.
During December 2004, subsequent to the balance sheet date, the Company issued
280,000 common shares in a private placement for $140,000, 2,639,502 common
shares for the payment of debt due to related parties of $1,235,252, and 170,000
common shares for the payment of $85,000 in debt due to unrelated parties.
5. INCENTIVE STOCK OPTIONS
During 2002 the Company granted stock options, to a related party of 25,000
shares of common stock at $1.00 per share, which will expire December 31, 2006.
On the date of grant the fair market value of the shares was $.50.
On August 15, 2004 the Company granted incentive stock options to a related
party, of 300,000 common shares at $.10 per share, which will expire August 15,
2009. The options will vest at 25,000 shares each quarter starting on August
15, 2004. On the date of grant the fair market value of the shares was $.50.
None of the options had been exercised by the report date.
SFAS No. 123, "Accounting for Stock-Based Compensation", establishes accounting
and reporting standards for stock-based employee compensation plans. As
permitted by SFAS No. 123, the Company accounts for such arrangements under the
intrinsic value method as provided in APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations.
The Company applies the intrinsic value method in accounting for its
compensation based stock options. If the Company had measured the options under
the fair value based method the net pro-forma operating loss and loss per share
amounts for the year ended September 30, 2004 would have been unchanged.
6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Officers, directors and key consultants have acquired 27% of the outstanding
common stock and have received the stock options as outlined in Note 5.
During December 2004 $1,235,252 in debt due to related parties was paid by the
issuance of 2,639,502 common shares. (Note 4)
-33-
VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2004
8. CANCELLATION OF AGREEMENT TO PURCHASE SHARES OF SCI
On April 9, 2003 the Company signed a Purchase Agreement with Malaremastastarnas
Riksforening, the owner of all the shares of Skandinaviska Farginstituter AB
(the Scandinavian Colour Institute or "SCI") which owns the color notation
system Natural Color Systems ("NCS"), containing the terms of an acquisition by
the Company or its assigns for a price of SEK 35,000,000 of all shares of SCI.
Pursuant to the terms of the agreements the Company made payments of $1,154,327
into an escrow account as part payment toward the purchase price. The Company
subsequently failed to make further payments on the contracts and by mutual
agreement the contracts were cancelled and the moneys paid were expensed.
9. GOING CONCERN
The Company does not have the working capital to service its debt and for any
future planned activity which raises substantial doubt about its ability to
continue as a going concern.
Continuation of the company as a going concern is dependant upon obtaining
additional working capital and the management of the Company has developed a
strategy, which it believes will accomplish this objective through additional
equity funding, payment of debt by the issuance of common stock, and
contributions to capital by officers, which will enable the Company to conduct
operations for the coming year.
-34-