10QSB: Optional form for quarterly and transition reports of small business issuers
Published on July 29, 2005
22
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2005
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( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
Commission File number 0-25541
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VISUALANT, INCORPORATED
------------------------
(Exact name of registrant as specified in charter)
Nevada 91-1948357
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 406, 500 Union Street,
Seattle, Washington USA 98101
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(Address of principal executive offices) (Zip Code)
206-903-1351
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Registrant's telephone number, including area code
N/A
---
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), Yes [X] No [ ] and ( ) has
been subject to filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Outstanding as of June 30, 2005
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Common Stock, $0.001 per share 16,059,349
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INDEX
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying balance sheet of Visualant, Incorporated (development stage
company) at June 30, 2005 and September 30, 2004 and the statement of operations
for the three and nine months ended June 30, 2005 and 2004 and statement of cash
flow for the nine months ended June 30, 2005 and 2004 and for the period from
October 8, 1998 (date of incorporation) to June 30, 2005, have been prepared by
the Company's management, in conformity with principles generally accepted in
the United States of America. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature.
Operating results for the quarter ended June 30, 2005 are not necessarily
indicative of the results that can be expected for the year ending September 30,
2005.
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VISUALANT, INCORPORATED
(Development Stage Company)
BALANCE SHEET
June 30, 2005 and September 30, 2004
The accompanying notes are an integral part of these financial statements
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VISUALANT, INCORPORATED
(Development Stage Company)
STATEMENT OF OPERATIONS
For the Three and Nine Months Ended June 30, 2005 and 2004 and Period
October 8,1998 (Date of Inception) to June 30, 2005
The accompanying notes are an integral part of these financial statements
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VISUALANT, INCORPORATED
(Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the period October 8, 1998 (Date of Inception) to June 30, 2005
The accompanying notes are an integral part of these financial statements
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VISUALANT, INCORPORATED
(Development Stage Company)
STATEMENT OF CASH FLOWS
For the nine months ended June 30, 2005 and 2004 and the Period
October 8, 1998 (Date of Inception) to June 30, 2005
The accompanying notes are an integral part of these financial statements
-7-
VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
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
intellectual 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 CBN 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.
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VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2005
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 June 30, 2005 the Company had a net operating loss carry forward of $
2,642,951. The tax benefit of approximately $ 793,000 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 2024.
Equipment
- ---------
Equipment consists of computers used in research and development and are
depreciated over five years.
Equipment $ 12,207
Accumulated depreciation (1,753)
---------
Net equipment $ 10,554
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Key Employee Incentive Stock Option Plan
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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.
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VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
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.
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VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2005
3. LICENSE
The Company acquired a world wide license for the use of technology to further
develop its interest, as outlined in note 4, from a related party for $7,500 by
the issuance of 10,000 common shares. The license is being amortized over five
years, its estimated useful life.
4. DEVELOPMENT OF TECHNOLOGIES OWNED BY THE COMPANY
The Company is in the business of researching, developing, acquiring, and
commercializing products and services related to 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.
5. COMMON CAPITAL STOCK
Since its inception, the Company has completed private placements of 13,058,999
of its common capital stock for $ 1,782,292, 10,000 shares for a license
outlined in note 3, 150,000 shares for services and 2,850,350 shares for payment
of debt of $1,425,175.
6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Officers, directors and key consultants have acquired 7% of the outstanding
common stock and have received the stock options as outlined in Note 8.
7. 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
Farginstituer 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.
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VISUALANT, INCORPORATED
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2005
8. 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, to purchase 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.
On March 22, 2005, the Company granted stock options to a former key consultant
of the Company of 210,000 common shares at $1.00 per share to expire on June 6,
2006.
None of the options had been exercised by the report date.
During June 2005 the Company established a stock option plan and reserved
2,000,000 common shares under the plan. The terms of the options have not been
established and no options have been issued.
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 period ended June 30,
2005 would have been unchanged.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS
Visualant Incorporated (formerly Starberry's Corporation), a Nevada corporation
(the "Company"), was incorporated on October 8, 1998. The Company's executive
offices are located in Seattle, Washington.
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 June 30, 2005 there were
16,059,349 Common Shares and no Preferred Shares outstanding.
On June 16, 2004, the Company executed an Intellectual Property Agreement with
Ken Turpin to confirm the Company's ownership of the business of researching,
developing, acquiring and commercializing products and services related to color
technology outside the visible spectrum, using specialized narrow band N-IR and
N-UV sensors and special analysis software modeling. In this Agreement, Turpin
acknowledges and agrees that all work product has been made for the Company and
that the Company is the exclusive owner of all right, title and interest in and
to the work product and all intellectual property rights therein.
Also on June 16, 2004, the Company executed an Independent Contractor Agreement
with E-Vision Technologies Inc., by which the Company hired E-Vision to research
and develop the Company's color technology outside the visible spectrum on a fee
for service basis.
On August 18, 2004, the Company changed its name to Visulant, Incorporated to
reflect its new business pursuits.
On April 21, 2005, the Company entered into a worldwide licensing agreement with
E-Vision Technologies Inc. (the Licensor). The Licensor has agreed to grant the
Company the sole rights to its technology. This technology, the CBN coding
system, identifies colors, and uses the identification for the purpose of
formulating colors. This system has been licensed to the Company on an
exclusive worldwide basis for all purposes, except for the purpose of
formulating colors. As consideration for this license, Visualant Inc. issued
E-Vision 10,000 common shares of the Company.
The focus of the Company is to capitalize upon the business opportunities in
national security, document forgery/fraud, brand protection, label fraud and
product tampering. The Company will position its technology as both a
revolutionary and practical solution for security and fraud/forgery prevention
markets and applications, and:
Build awareness and acceptance among systems integrators in the selected
markets.
Support target market-specific software developers, providing them with the
software development kits (SDKs) specific to their market/application needs.
Pursue strategic and business partnerships with known leaders in selective
markets, while developing high visibility and contact with designers and system
integrators within their organizations.
Develop a visual presentation that captures the revolutionary nature of the
Visualant technology, so that an audience of one or many can easily grasp the
significance of this "out of sight" breakthrough.
Develop a complete marketing and sales plan with objectives, strategies,
sales goals, and measurement tools.
Develop white papers and technical briefs specific to selected markets.
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Develop and place a series of feature articles for the technical press.
Target market-specific trade journals, and trade shows/conferences with
press releases and corporate presence.
Deploy a market-specific sales team with expertise and existing
relationships within their respective industries/market segments.
The Company intends to raise further funds through private placements of the
Company's common stock. The financing activities of the Company are current and
ongoing, and it will expand and accelerate its marketing program as the timing
and amount of financing allow.
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 band N-IR and N-UV sensors and
spatial analysis software modeling which translate the visible into the
invisible. The Company has a contract with E-Vision Technologies Inc. of
Vancouver, British Columbia, to conduct research and development on behalf of
the Company. Visualant, Inc. has an agreement to pay them $9,300 Canadian
semi-monthly to perform this service.
The Company has no revenue to date from its operations, and its ability to
affect its plans for the future will depend on the future 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. 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.
The Company will have to raise additional funds to finance its operations for
the next year. The Company intends to raise the required funds for the year
ended September 30, 2005 by obtaining share capital from outside sources.
During the three months ended December 31, 2004, the Company raised $212,000 in
additional share capital through the sale of common shares. In January through
June 2005, an additional $952,500 was raised through the sale of common shares.
The Company plans in the months from July 2005 to December 2005 to raise a
minimum of $500,000 and a maximum of $1,300,000 more through the sale of common
shares. Expenses are anticipated to be approximately $38,000 per month to
continue operations as they are now. If additional funds are raised above this,
the research and development will be increased.
There is no plan to purchase or sell any equipment, other than the $12,307 paid
for research and development equipment in October 2004.
The Company intends to hire additional personnel in the near future, depending
on its success in raising funds to accelerate its research and development
program and marketing plans.
When used in this discussion, the words "believe", "anticipates", "expects" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, which could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to republish
revised forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events. Readers are
also urged to carefully review and consider the various disclosures made by the
Company that attempt to advise interested parties of factors which affect the
Company's business, in this report, as well as the Company's periodic reports on
Forms 10-KSB, 10-QSB and 8-K filed with the Securities and Exchange Commission
(the "SEC").
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The Company's financial statements are stated in United States Dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
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 June 30, 2005 of $2,462,951 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.
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. THE PRESENT SHAREHOLDERS HAVE ACQUIRED SHARES AT EXTREMELY LOW PRICES
Some of the present shareholders have acquired shares 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 pages 11 and 12 of this report and
may in 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
1,150,000 shares. Even though this only represents 7 % 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 individuals of similar experience.
Management is considering obtaining key-man insurance once it has sufficient
funds to do so.
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
employees other than Ralph Brier.
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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.
LIQUIDITY AND CAPITAL RESOURCES
As at June 30, 2005, the Company had assets of $676,170, including cash of
$650,779, accounts receivable of $7,587, equipment of $10,554 and license of
$7,250, and liabilities of $61,054. The liabilities include accounts payable of
$50,304 and accounts payable to related parties of $10,750.
The Company's financial position has changed substantially since its last fiscal
year.
The Company has incurred certain expenses during the nine months ended June 30,
2005 as follows:
i. The Company accrued $3,000 in fees to its auditors for the audit of the
June 30, 2005 financial statements included in this Form 10-QSB, as well as
$1,515 in fees paid for the two previous quarters. The Company accrued
$1,500 in fees to its Chief Financial Officer for the preparation of the
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June financial statements and 10-QSB, and $1,185 for previous work done
during the nine month period.
ii. The Company has paid $68,400 to its President for management fees and
$37,555 to the Chairman of the Board for consulting fees. It has also paid
consulting fees of $65,719 to a key consultant of the firm for obtaining
financings. Another agent has been paid $2,500 to assist in taking the
Company public.
iii. Financing fees of $28,175 were paid or payable to a shareholder of the
Company to obtain financing for the Company.
iv. Gain on foreign exchange consists of the difference between the US and
Canadian exchange rate on monies expended by the Company in Canadian
dollars.
v. The Company has accrued incentive stock options of $18,000 for nine months.
This is calculated on 300,000 options over 5 years, which is 60,000 options
per year. The value of these is calculated on the fair market value at the
time of granting of the options of $.50 minus the option price of $.10
times the number of options, which works out to $24,000 per year or $6,000
per quarter.
vi. The Company has incurred $24,492 in legal expenses for legal work towards
patenting their technology, and for legal work on the registration
statement in progress.
vii. The Company has incurred expenses for photocopying, faxing, courier and
printing of cheques . Fees of $1,094 for the creation of a website are
included in this amount.
viii. Printing costs of $2,144 were incurred for the printing of the business
plan.
ix. Rental costs of $200 per month are paid to maintain an office.
x. Research and development fees consist of the bi-monthly charge of $9,300
Canadian (approximately $7,700 US) for software development related to
color technology outside the visible spectrum, plus depreciation on the
research and development equipment and amortization on the license.
xi. Telephone costs are incurred to maintain telephones for the CEO of the
Company.
xii. Transfer agent fees of $1,092 include the annual resident agent fees and
filing list of officers in the amount of $400. The balance of the fees is
for transfer costs, original issue costs and interest charges on the
balance outstanding. A registration fee of $1,000 was paid to a new
transfer agent.
xiii. Travel and promotion costs of $10,982 were incurred for business trips by
the President and a key consultant involved in the Company. $8,107 were
paid to a shareholder for travel costs incurred while doing business for
the Company. Promotion costs of $1,853 were included in this cost.
xiv. Interest expense is accrued on the note payable to Glencoe Capital Inc. at
a rate of 15% per annum for two months, until the note was redeemed for
shares for debt.
The Company's estimated expenses over twelve months and required funds are as
follows:
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1. Accounting and auditing expense has been projected as follows:
Accounting expense will be $2,500 per month, which is the monthly salary
paid to the new CFO, Dave Grossman.
2. Consulting fees of $15,420 per month are paid to the CEO of the Company,
Ralph Brier. The consulting fees increased from $9,000 per month to $15,420
per month in June 2005.
3. The Company will incur a cost for filing the Annual List of Directors and
Officers to the State of Nevada to maintain the Company in good standing
for the next twelve months. The annual charge for filing this form is $400.
Fees for filing the financial statements on Edgar are included in
accounting costs.
4. Legal fees are estimated based on the business done with the Company's
lawyers in the first quarter of the 2005 fiscal year. The costs are
estimates for preparing a provisional patent application, and for other
Company business including filing the registration statement.
5. Relates to photocopying, faxing and courier, in addition to miscellaneous
expenses incurred by the directors. The estimate of these charges is
approximately $750 per month for 12 months. Printing costs of $3,000 are
included in this amount.
6. Rent expenses are payable at $200 per month for 12 months.
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7. Research and development is paid to Kenneth Turpin at a rate of $18,600
Canadian ($15,500 US) per month for twelve months.
8. The estimate of telephone expenses to conduct Company business is
approximately $300 per month for 12 months.
9. The Company is charged $500 per annum by Empire Stock Transfer Inc.
Additional stock transfer and original issue fees of $1,400 are estimated.
The Company has calculated $250 in late interest charges for the next year.
10. Travel and promotion expenses have been estimated at $10,000. These
expenses may be incurred by the directors and key consultants who may incur
travel expenses to obtain financing for the Company or to do other Company
business.
11. The estimate for website and logo design for the Company is $2,000.
As mentioned previously, the Company does not have sufficient funds to pay any
of the above noted expenses other than if its directors and officers continue to
contribute funds to the Company.
At the present time, the Company has leased premises at Suite 406, 500 Union
Street, Seattle, Washington, for $200 per month.
Effective August 1, 2005, Mary Hethey retired as Secretary-Treasurer, Chief
Accounting Officer and Chief Financial Officer. David Grossman was appointed by
the Board as the new Secretary Treasurer and Chief Financial Officer on August
1, 2005.
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.
ITEM 3. CONTROLS AND PROCEDURES
-------------------------------
(a) Evaluation of Disclosure Controls and Procedures
- -------------------------------------------------------------
The Company's Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of the Company's controls and procedures (as
defined in the Securities Act of 1934 Rule 13a 14(c) and 15d 14 (c) as of the
end of the period covered by the report on Form 10-QSB (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-QSB was being made.
(b) Changes in Internal Controls
-------------------------------
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.
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PART 11. OTHER INFORMATION
ITEM 1. 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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:
(a) Exhibits
99.1 Certification of the Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certificate Pursuant to 18 U.S.C Section 1350 signed by the Chief Executive
Officer
99.3 Certification of the Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.4 Certificate Pursuant to 18 U.S.C. Section 1350 signed by the Chief
Financial Officer
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VISUALANT, INCORPORATED
(FORMERLY STARBERRYS CORPORATION)
(Registrant)
By:"Ralph Brier"
--------------------------------
Ralph Brier
Chief Executive Officer, President,
and Director
Date: July 28, 2005
By: "Mary Hethey"
--------------------------------
Mary Hethey
Chief Financial Officer, Chief Accounting Officer
and Secretary Treasurer
Date: July 28, 2005
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