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Published on June 2, 2017
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500 Union Street, Suite 420
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Seattle, Washington 98101
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June 2,
2017
Mr.
Kevin J. Kuhar, Accounting Branch Chief
Securities
and Exchange Commission
Division
of Corporation Finance
100 F
Street N.E.
Washington,
D.C. 20549
Re:
Visualant,
Inc.
Form 10-K for the Fiscal Year Ended September
30, 2016, Filed January 13,
2017
Amendment
No. 1 to Form 10-K for the Fiscal Year Ended September 30,
2016, Filed
April 13, 2017
Form
10-Q for the Quarterly Period Ended December 31, 2016, Filed
February 21, 2017
File
No. 001-37479
Dear
Mr. Kuhar:
Visualant,
Incorporated, a Nevada corporation (the “Company”), has
received and reviewed your letter dated May 4, 2017 (the
“Comment Letter”), which responds to the
Company’s response letter dated March 17, 2017, both of which
pertain to Company’s Form10-K for the year ended September
30, 2016 as filed with the Securities & Exchange Commission
(the “Commission”) on January 31, 2017, and amended
April 13, 2017, and Form 10-Q for the quarterly period ended
December 31, 2016 as filed with the Commission on February 21,
2017, File No. 001-37479.
Specific to your
comments, please find our responses below, our responses below are in addition to those filed
via the Edgar system. The following numbered responses
correspond to those numbered comments as set forth in the comment
letter dated March 17, 2017.
Amendment No. 1 to Form 10-K for the Fiscal Year Ended September
30, 2016
Note 14 – Equity
Series B Redeemable Convertible Preferred Stock, page
F-19
1.
We note the disclosure added in response to comment 3. You state
that in addition to paying the institutional investor the sum of
$505,000, the company issued 52,000 restricted shares of common
stock valued at $169,000 for the conversion of the remaining
preferred shares that the investor had purchased - i.e., 51 Series
B preferred shares. Please address the following:
(a)
Describe to us the terms of the conversion and reconcile the 52,000
shares disclosed in this note to the conversion reflected on the
statement of stockholders’ equity showing you issued 126,064
common shares with a dollar amount of $675,695.
(b)
Cite the section of, or provide us with the relevant excerpt from,
the First Amendment to the Stock Purchase Agreement that describes
the conversion terms of the remaining preferred
shares.
(c)
As applicable, provide us a revised statement of
stockholders’ equity showing the corrected
amounts.
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Response: We have
amended Note 14 of our Notes to Financial Statements in response to
your comment as outlined below.
(a)
Describe to us the terms of the conversion and reconcile the 52,000
shares disclosed in this note to the conversion reflected on the
statement of stockholders’ equity showing you issued 126,064
common shares with a dollar amount of $675,695.
We have
added the following disclosure to our 10-K to better disclose the
conversions of the Series B shares.
In the
quarter ended June 30, 2016, the investor converted 35 preferred
shares into 74,064 shares of common stock valued at $506,695. Prior
to the closing of the First Amendment to the Stock Purchase
Agreement the investor converted the remaining 16 preferred shares
into 52,000 shares for common stock valued at
$169,000.
On
August 5, 2016, the Company closed the First Amendment to Stock
Purchase Agreement with the institutional investor. As a result of
this amendment agreement the Company paid the sum of $505,000 to
the institutional investor and cancelled the remaining 204 shares
of Series B Preferred Stock that had not been purchased, and the
parties terminated the relationship and all aspects of the Stock
Purchase Agreement described above in its entirety. We recorded an
expense of $674,000 related to this amendment agreement during the
three months ended September 30, 2016, which includes the
conversion of the remaining shares.
(b)
Cite the section of, or provide us with the relevant excerpt from,
the First Amendment to the Stock Purchase Agreement that describes
the conversion terms of the remaining preferred
shares.
The
Agreement was filed as an exhibit to the Company’s Current
Report on Form 8-K, filed August 11, 2016. Per the
“Agreement”, section Parts I-IV of the First Amendment
the company paid $505,000 to cancel all remaining Series B
Shares.
(c)
As applicable, provide us a revised statement of
stockholders’ equity showing the corrected
amounts.
We have corrected our statement of stockholders’ equity
showing the corrected amounts. The Company has revised its
statement of cash flows to more accurately reflect transactions
between operating activities and financing activities that were
previously netted. As a result, the change to cash used in
operations was reduced from $3,373,734 to $2,746,333 and the change
in cash provided by financing activities was reduced from
$3,496,629 to $2,869,228. The Company revised its statement of
stockholders’ equity (deficit) to correct a typographical
error and to reflect the preferred B shares converted into common
stock as a single line item on the statement of stockholder equity.
These revisions had no effect on the Company’s net loss,
asset or liabilities for the year ended September 30,
2016.
2.
We note no changes to your consolidated statements of cash flows
that are consistent with your response to comment 3. Please provide
us with revised statements of cash flows for the reported periods
showing the corrected disclosure.
Response: We have
amended our 10-K filing to include revised consolidated statements
of cash flows consistent with our response to comment 3, and Item1
of this response letter.
Form 10-Q for the Quarterly Period Ended December 31,
2016
Note 11 – Goodwill, page 14
3.
We note your response to comment 6. However, we also note the
statement in your Form 8-K dated February 21, 2017 that you
determined that your goodwill of $983,645 related to the 2010
acquisition of TransTech was impaired. Please show us how you
calculated the $483,645 impairment charge relating to
TransTech’s goodwill. Provide us with a table showing the
carrying values of all the assets and liabilities of TransTech as
of the date of the impairment test and explain how you considered
them in your calculation.
2
Response:
We have concluded that we should
restate our financial statements as of and for the quarter ended
December 31, 2016.
Subsequent to the filing of 10-Q for the three months ended
December 31, 2016, we concluded that the goodwill in Transtech
should have been reduced to $0. The assumptions management used to
determine goodwill were incorrect and through additional analysis
management has determined that a full impairment of goodwill is
appropriate.
The effect of the restatement on specific line items in the
Consolidated Statement of Operations for the three months ended
December 31, 2016 was to increase Impairment of goodwill, Operating
loss, Loss before income tax and Net Loss by $500,000 and our Loss
per share by $0.15 per share to $0.81. The effect of the
restatement on the specific line items in the Consolidates Balance
Sheet at December 31, 2016 was to reduce Goodwill, Current assets,
Total assets, Retained earnings, Total stockholders’ equity
and Total liabilities and stockholders’ equity by
$500,000.
In
connection with the Company’s responding to the comments set
forth in the May 4, 2017 letter, the Company acknowledges
that:
●
The Company is
responsible for the adequacy and accuracy of the disclosure in the
Filing;
●
Staff comments or
changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
Filing; and,
●
The Company may not
assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of
the United States.
A
copy of this letter and any related documents have also been filed
via the EDGAR system. Thank you for your courtesies.
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Very
truly yours,
/s/ Jeff T. Wilson
Jeff T.
Wilson
Chief
Financial Officer
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