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Visualant Incorporated (OTCBB: VSUL)

Price ............................................................................................... $0.11 52-Week Range ................................................................. $0.06 - $0.20 Market Capitalization ($M) ......................................................... $12.1 Enterprise Value ($M).................................................................. $13.7 Shares Outstanding (M) ............................................................... 110.0 Float (Shares; M) ............................................................................ 81.0 Insider Ownership (%) ............................................................... 25.2% Institutional Ownership (%) ......................................................... 1.1% Daily Volume (3-Month Avg.) ................................................. 451,150 Industry .............................................................. Electronic Instruments Corporate Headquarters .................................................... Seattle, WA

February 28, 2013

Condensed Income Statements (000s) FY Dec Revs Net Inc EPS P/E 2010 A $ 2,543 $ (1,149) $ (0.04) nm 2011 A $ 9,136 $ (2,410) $ (0.06) nm 2012 A $ 7,924 $ (2,732) $ (0.04) nm 2013 E $ 8,937 $ (2,863) $ (0.03) nm Source: Company reports, Stonegate estimates

Rev Grw na 259% -13% 13%

Cash & Cash Equivs Cash/Share Equity (book value) Equity/Share

Condensed Balance Sheet (12/31/12) (000s) $602 Working Capital $0.01 Current Ratio ($280) Total Debt/Equity ($0.00) Total Debt/Capital

(000s) ($2,715) 0.4x -786% 115%

Company Description Visualant developed a patented technology called Spectral Pattern Matching (SPM technology). SPM technology directs structured light onto a physical substance to capture a unique spectral signature called a ChromaID. The technology is used to identify, detect, and diagnose markers that are invisible to the human eye. ChromaID scanners can be integrated into various portable or fixed peripherals to conduct analyses that are more cost effective than current methods. It also distributes access control and authentication systems to corporate and government customers through its wholly owned subsidiary TransTech.

Initiation of coverage: Shedding Light on the Security and Authentication Industry

The Security and Authentication industrys rapid growth is creating the need for a cost effective solution As the worlds economies become more interconnected, there is a greater need for security and authentication of various products. One way is through spectrometry technology. The spectrometry market is estimated at around $5.0B and is expected to grow to $6.5B in 2014 for a CAGR of 6%. Management has past experience in early stage technology - The CEO of Visualant, Ron Erickson has had past experience with early stage technology companies. He recently had a highly successful exit from a company, DoubleDown where he was the sole angel investor. The company also has Dr. Thomas Furness, a pioneer in photospectrometry, who teaches at the University of Washington. Joint Venture with Sumitomo Precision Products (TSE:6355) led to development of new product In a joint venture with Sumitomo, a Japanese company with over $636.7M in revenue in 2012, Visualant developed the Cyclops 6 photospectrometer. This allowed them to leverage Sumitomos R&D. The Cyclops 6 is portable and can access Visulants database of identification. Numerous opportunities in different markets - The Company has developed applications for security and authentication (a branch out of their TransTech business). While the company sees this as their core business currently, they are exploring partnerships in other areas such as cosmetics, food, and pharmaceuticals. Valuation VSUL looks to position itself as a leader in the authentication and security space while exploring new markets to introduce their proprietary Spectral Pattern Matching technology through its subsidiary TransTech. On a comparable basis, VSUL trades at EV/S of 1.5x vs. a median of 3.7x of its peers.

See Important Disclosures and Disclaimer on Page 20

Investment Factors
Visualant Incorporated has patented Spectral Pattern Matching technology used to identify physical substances though identification of a unique spectral signature. When matched against existing databases, Visualant can identify particular markers invisible to the human eye. The company owns a subsidiary, TransTech Systems, which accounts for Visualants only revenue stream and has a presence in the security and authentication sector. Visualant is developing commercialized prototypes for their Spectral Pattern Matching (SPM) technology. Upon completion, Visualant will leverage its current distribution channels from TransTech in their go-to-market strategy.

Investment Positives
The Security and Authentication industrys rapid growth is creating the need for a cost effective solution As the worlds economies become more interconnected, there is a greater need for security and authentication of various products. One way is through spectrometry technology. The spectrometry market is estimated at around $5.0B and expected to grow to $6.5B in 2014 for a CAGR of 6%. Currently, VSUL has inroads to the security and authentication industry through the Companys subsidiary TransTech. There is a trend in the spectrometry industry toward smaller more miniature size devices. This feeds right into the Cyclops 6 which is small and portable with multiple applications. Management has past experience in early stage technology - The CEO of Visualant, Ron Erickson has had past experience with early stage technology companies. Ron recently had a highly successful exit from a company, DoubleDown where he was the lone angel investor. DoubleDown was acquired for $500M by International Game Technology (NYSE: IGT). Mr. Erickson is experienced in navigating a company in the early stages and guiding it to reach meaningful milestones. The company also has Dr. Thomas Furness, a pioneer in photospectrometry, who also teaches at the University of Washington. Together they give the company the ability to develop proprietary SPM technology while exploring commercial opportunities. Joint Venture with Sumitomo Precision Products led to development of commercial product product In a joint venture with Sumitomo, a Japanese company with over $636.7M in revenue in 2012, Visualant developed the Cyclops 6 photospectrometer. The Cyclops 6 shows the potential that the company has in regards to portability and access to the companys database. Portability and price point make the Cyclops 6 competitive with currently available alternatives. The product is small enough to transport to numerous areas without being damaged. Sumitomo has an equity stake in VSUL that represent 15.74% ownership in VSUL. Numerous opportunities in different markets - The Company will initially develop applications for security and authentication. While the company sees this as their core business currently, they are exploring partnerships in other areas such as cosmetics, food, and pharmaceuticals. Partnering with Sumitomo will benefit VSUL through access to research and development and more distribution channels. Sumitomo engages in the design, development, and manufacture of aerospace, heat control, environmental, micro technology, and sensor products in Japan and internationally. Sumitomo was founded in 1961 and is headquartered in Amagasaki, Japan.

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Investment Challenges/Risk
Numerous target markets creates multiple hurdles in go-to-market strategy - Individual market acceptance is difficult to predict. VSUL touts the variety of applications and technologies, and leveraging it with their database. This multi-faceted approach sounds great theoretically because that could lead to numerous other revenue streams, however what must not be overlooked is the strategy for market acceptance in every area. VSUL looks to be disruptive technology to what is currently available in the market; however adoption could prove to be difficult. Photospectrometry is relatively new to the identification industry and it will take a tremendous effort to get market acceptance. Each market from healthcare to cosmetics will have to have a tailored message on the benefits of photospectrometry and VSULs technology in particular. Less expensive alternatives from less sophisticated devices to VSUL device - While VSUL has proprietary technology and an easy to use device, there are other ways to create do it yourself spectrometers. These can be created for a few hundred dollars. While the alternatives have mixed reliability, they do remain inexpensive. While VSUL is positioning itself as a low cost leader compared to current manufactured photospectrometers, do it yourself solutions may prove to be problematic in terms of competition Joint Venture agreement with Sumitomo only signed for one year - Visualant heavily relied on Sumitomo to create the Cyclops 6 product. The Cyclops 6 was the first step toward commercializing the companys proprietary technology. While this product has proved to be effective, the agreement with Sumitomo was made in May 2012 and is only for one year. The uncertainty around this contract could prove a challenge for VSUL as it looks toward outside investment. Potential for stock dilution and complicated Capital Structure - The Company has issued multiple warrants throughout its existence and used their stock as currency in the form of convertible debentures to pay various people it owes. This has led to a somewhat historically confusing capital structure. Additionally, the Company recently authorized, subject to shareholder approval at the 2013 annual shareholder meeting, an increase in number of shares available for issuance under the Companys Stock Incentive Plan from 7M to 14M shares. If the Company continues to use its stock as a form of currency, current shareholders will be subject to dilution.

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Valuation Summary
Visualant Incorporated is a company that has developed patented technology that directs structured light onto a physical substance to capture a unique spectral signature, the ChromaID, used to identify markers that are invisible to the naked eye. The Company looks to grow through strategic partnerships while continuing their business in the security and authentication space. Comparative Analysis
Visualant, Inc. (NasdaqGM: VSUL) (all figures in $M expect per share information) EV/Revenue Name Thermo Fisher Scientific, Inc. Anacor Pharmaceuticals, Inc. Diebold, Incorporated SPS Commerce, Inc. Intellicheck Mobilisa, Inc. Electro-Sensors Inc. Wireless Ronin Technologies Inc. Ticker TMO ANAC DBD SPSC IDN ELSE RNIN Price (1) $ 74.25 $ 3.15 $ 28.46 $ 37.32 $ 0.76 $ 3.90 $ 2.05 Sh 358.4 35.6 63.2 14.8 27.7 3.4 5.0 Mrkt Cap $ $ $ $ $ $ $ 26,611.2 112.0 1,800.1 552.8 21.0 13.2 10.3 EV $ 32,822.7 $ 102.8 $ 1,856.5 $ 486.8 $ 18.2 $ 3.9 $ 8.4 Average Median Visualant Incorporated
(1) Previous day's closing price (2) Estimates are from Capital IQ except for VSUL which are Stonegate estimates Source: Company reports, CapitalIQ, Stonegate Securities
(2)

EBITDA (2) 2014 E 2.4x 9.3x 0.6x 4.1x nm nm nm 4.1x 3.3x na TTM 12.5x nm 7.8x 75.0x 23.4x 4.9x nm 24.7x 12.5x nm 2013 E 11.6x nm 7.4x 38.8x nm nm nm 19.3x 11.6x nm 2014 E 10.9x nm 6.7x 28.1x nm nm nm 15.3x 10.9x na TTM 23.1x nm 23.1x 414.7x nm 23.3x nm 121.1x 23.2x nm

P/E (2) 2013 E 12.4x nm 12.7x 55.9x nm nm nm 27.0x 12.7x nm 2014 E 11.1x nm 10.8x nm nm nm nm 11.0x 11.0x na

TTM 2.6x 10.2x 0.6x 6.3x 1.6x 0.6x 1.3x 3.3x 1.6x 1.7x

2013 E 2.5x 10.2x 0.6x 5.0x nm nm nm 4.6x 3.7x 1.5x

VSUL

0.11

109.9

12.1

13.7

Above we have summarized our comparative analysis of VSUL and select players in the industry with similar lines of business. We note that based on our 2013 estimates, VSUL trades at EV/S of 1.5x vs. a median of 3.7x of its peers. See pages 10 and 11 for further discussion of our financial model.

Potential Catalysts for VSUL:

We outline the following potential catalysts for VSUL in the near-term: Increased revenue from TransTech subsidiary....................2013 & 2014 TransTech growth in non-base streams of revenue ..2013 Commercialization of SPM technology in Security and Authentication sector...2H2013 Prototype of SPM technology in other sectors.....2013 Commercialization of SPM technology in other sectors..2014

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Company Overview
Company Background
Visualant Inc. focuses on colorboth color that is visible to the human eye, and color in the infrared and ultraviolet portion of the spectrum that is invisible to humans in an effort toward identification. Visualant developed a patented scanning technology called Spectral Pattern Matching (SPM). The SPM technology analyzes color at the photon level, and uses proprietary algorithms to capture and store the unique color identification known as a ChromaID profile. This is compared to a base line for authentication and diagnostic applications. Founded in 1998, the Company changed its name to Visualant, Inc. in August 2004. In December 2005, the company entered into a R&D partnership headed by Dr. Thomas Furness. The formation of the partnership laid the foundation for Visualants strategic direction. The technology initially began as a technique for matching paint color and paint codes. However, the Company saw opportunities for the technology if applied to colors outside of the visible spectrum. Over the next seven years, Dr. Furness and Dr. Brian Showengerdt, under contract with Visualant, developed the proprietary technology. Four patents were issued between September 2011 and November 2012 that protect Visualants proprietary technology. A noteworthy milestone in Visualants history was the June 2010 acquisition of TransTech Systems, Inc., a distributor of access control and authentication systems. Sales of these products comprise all of Visualants revenue. In June 2012, Visualant formed a development partnership with Japanbased Sumitomo Precision Products. Sumitomo has played an instrumental role in advancing the Companys proprietary technology from the lab toward the marketplace. Visualant is headquartered in Seattle, Washington, and has 16 full time and 3 part time employees.

Products and Product Pipeline

Visualant currently generates revenue from products and solutions sold through its subsidiary TransTech. It is worth nothing that SPM technology has not contributed any revenue in 2012. TransTechs main business is to provide identification personalization systems for security. These systems include components such as ID card printers, software, supplies, data collection devices, document scanners, photo capture products, documents authentication devices, and signature capture products. While important in respect to maintaining revenues and some cash flow, Visulant is more focused on its product pipeline which we discuss below.

Pipeline Visualants technology analyzes the invisible, unique spectral signature of any substance or object. The Companys Spectral Pattern Matching system recognizes over 700 colors, which is 233 times more than the human eye is capable of recognizing. After seven years in development and over $6 million in research-related expenses, Visualant is preparing to launch its first commercial product.
Cyclops 6 The prototype Cyclops 6 ChromaID Scanner (Exhibit 1) built by Sumitomo Precision Products, is the first step towards commercializing the SPM technology. The Cyclops 6 is a handheld device (the size of a flashlight) and contains thirty-four LED emitters. These emitters beam structured light on a substance. A reflection is then created and captured in a simple photodiode. The result is the unique ChromaID profile, which can be matched against existing databases to identify, detect, or diagnose specific markers invisible to the human eye. The ChromaID is unique to every substance and used to identify what it is.

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ChromaID Development Kit - CEO Ron Erickson has stated that Visualants potential has multiple applications across multiple industries. Their first product (due out in the first quarter of 2013) is the ChromaID scanner development kit. The kit is designed as a platform enabling companies to develop their own unique applications.

Sumitomo has several ideas for prototypes designed to enable Spectral Pattern Matching to reach new markets. Visualant and Sumitomo plan to embed ChromaID technology into mobile and fixed-mount devices for the commercial and industrial markets. This enables in-the-field diagnostics and authentication testing of items that were previously required to be sent to separate labs for costly tests. Examples of these prototypes are displayed in Exhibit 2.

In addition, the two companies have begun development of mobile apps and products to embed into consumer electronics, including tablets, laptops, and smart phones (Exhibit 3). Mobile applications would allow someone to scan an item using the scanhead and access the database through their smart phone or tablet. This would allow companies already issuing smart phone for their employees to download the application software and be ready to use. Visualants market opportunities Visualants primary targeted sectors, at least in the short term, are security and defense markets that require increased accuracy in authentication and trace detection, including law enforcement, private security companies, laboratories, banks, and government agencies. Other important near-term opportunities in the diagnostics market include the medical, environmental, and agricultural segments. Authentication market opportunities - The growing problem of counterfeiting, product diversion, piracy, forgery, and identity theft not only undermines the integrity of business, but also compromises national security. According to the International Anti-counterfeiting Coalition, counterfeiting and piracy cost the United States between $200-$500 billion per year, and an estimated 750,000 American jobs. The advantage of Visualants technology is its invisible signature, because counterfeiters cannot counterfeit what they cannot see. A few of the immediate applications in the authentication market for the Companys breakthrough technology are listed in Exhibit 4.

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Diagnostics market opportunities - In terms of market size, the segments of the diagnostics market that Visualant is targeting, which include the medical, agricultural, and environmental markets, are much larger than the authentication market, and licensing its technology in these noncore areas could provide the Company with some significant opportunities for growth. Exhibit 5 lists some of Visualants targeted market segments and their real world applications and opportunities.

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Technology Review The underlying premise behind ChromaID technology is simpleeverything in the world has a unique chromatic identifier that is invisible to the human eye. It is readable using Visualants technology. Visualants patented technology can detect the unique fingerprint that would be otherwise invisible.
Traditional spectrophotometers capture spectral patterns. A spectrophotometer consists of two instruments: a spectrometer for producing light of any selected color (wavelength), and a photometer for measuring the intensity of light. By observing how light interacts with matter, both spectrophotometers and Visualants SPM technology can create a spectral pattern for different types of matter. While spectrophotometers and SPM technology possess some similarities, they differ in some fundamental ways. As illustrated in Exhibit 6, spectrophotometers illuminate the subject matter using a broadband white light source. The light is reflected from the subject through a collimator (which narrows the beam) and a diffraction grating or prism that splits the light into multiple separate wavelengths. Finally, a linear CCD array measures the light. The Visualant Spectral Signature approach is simpler and less costly than a traditional spectrometer, and the technology can be implemented into more diverse form factors. VSULs technology has proven to be more cost effective because of its use of a photodetector instead of a prism. Step 1: A ChromaID scanner reads sample Visualant uses simple light emitting diodes (LEDs) and photo diodes as the source of its light. The emitters fire in a sequence, shining light multiple times onto the subject matter using thousands of colors per second, creating a pattern of light on the surface of the sample. A unique aspect that sets this approach apart, and one that is surrounded by several patents, is the virtual LED, which is created by varying the current supplied to the LEDs through a range of steps and varying the spectrum of light produced by the emitter. For example, one of the Companys scanner prototypes utilizes 34 emitters, with each LED fired through 25 current steps, and the sequence is repeated four times. So in just a single scan, the emitters paint 3,400 flashes of light (34 x 25 x 4 = 3,400) onto the sample. The detector measures the reflected light from the sample created by each of these 3,400 flashes in less than one second, and the data is captured to create a pattern file, which is the samples unique ChromaID.

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Step 2: Software displays ChromaID profile The ChromaID can be plotted on a chart showing the intensity of the reflected light at each wavelength. The spectral signature of the sample is then saved to a database that can be stored on a computer, on a mobile device, or onto a remote server. Step 3: Compare ChromaID profile to database of known profiles Using proprietary encryption algorithms, the spectral signature is transmitted to a remote server where the pattern of the chart is compared to a database from known substances and the closeness of the match is quantified. Visualant has also protected this comparison process with patents. SPM technology can be miniaturized and is easily integrated into a variety of hand-held or fixed mount configurations, and can be combined in the same package as a bar code or biometric scanner.

Business Strategy
Visualant plans to sell its SPM technology through licensing agreements or as component parts, therefore the end user products will typically be third parties that incorporate Visualants scan head into their products. The Company is focusing on customers that sell products in the commercial, industrial, and government security sectors. Visualants growth strategy is centered on these initiatives: Accelerate business development in the United States and Japanese markets Release development kit in 2013 - The impending release of the development kit enables third parties to explore innovative ways to deploy Visualants technology, thereby opening the door to new market opportunities not previously considered, as well as helping to validate the technology. Market license agreements for SPM technology The Company will strategically market SPM technology through a licensing model. Devices will be sold with the end user paying for license to access VSULs database. Todd Sames, the VP business development hired in September 2012, is strongly focused on driving new licensing agreements for the SPM technology with a variety of original device manufacturers. With 25 years in the high tech and telecom sectors, Todd should play a key role in finding market opportunities for the Companys smartphonebased applications and other advanced technology. Expand opportunities in Japan - Visualant will leverage its joint venture relationship with Sumitomo to facilitate expansion into the Japanese market. Implement synergies between Visualant and TransTech Exploit strengths and capabilities - Visualant and its subsidiary, TransTech are working together to promote each companys strengths and capabilities to expand opportunities for both companies. Visualants strength is innovation, and TransTechs strength is its network of over 400 dealers, resellers, and integrators, and its established relationships in the security and law enforcement market. Add product lines - To boost revenue, Visualant is adding new products to TransTechs current product lines for distribution, including radiofrequency ID (RFID) tracking products and new document authentication products. The companies are currently exploring opportunities with card manufacturers. Cross-selling opportunities - TransTech will be leveraging the relationships it has built over 15 years in the security industry to introduce the SPM technology. TransTech will have the opportunity to target its current customer base in the security market with expanded solutions that include the addition of the SPM technology. At the same time, Visualant is finding new markets and new customers for TransTechs product lines.

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Exploit the advantages that Sumitomo Precision Products, Ltd. provides Move from the laboratory to the marketplace - In May 2012, the Company entered into a oneyear joint development partnership with Sumitomo Precision Products Co., Ltd., to accelerate the commercialization of Visualant's SPM technology. Founded in 1961, Sumitomo Precision Products (TSE:6355) is a publicly-traded, Japanese-based manufacturer of aerospace equipment, heat control equipment, sensors, and micro-electronics with FY 2012 revenue of over $636.7 million and 1,674 globally dispersed employees. Sumitomo was responsible for the development of the recently unveiled Cyclops 6 ChromaID Scanner. Apart from the investment of manufacturing expertise, Sumitomo has invested $2.2 million in Visualant. We view Sumitomos interest in Visualant as a validation of the Visualants technology. Increase licensing and royalty producing agreements outside the core security and authentication marketplace - Sumitomo will play a key role in expanding opportunities outside Visualants core law enforcement and security markets. Visualant and Sumitomo plan to coordinate the sales and marketing efforts to focus on new markets with a likelihood of adoption.

Sales and Marketing Strategy

Visulants subsidiary TransTech sales strategy is a combination of a direct and indirect model. First, TransTech purchases its supplies from four main manufacturers; Evolis, Fargo, Magicard, and NiSCA. Then TransTech sells its products through a network of 400 distributors. For larger accounts, TransTech will sell directly and create a customized solution. 90% of the revenue is through distributors and 95% of sales are made to customers in the United States. The majority of TransTechs distributors and end users and are located west of the Mississippi. For FY12, TransTechs largest direct customer was an aerospace customer of ID card systems and visitor management solutions which accounted for 6% of revenue. On the distributor side, IDSecurityOnline.com is TransTechs fastest growing dealer and sells exclusively over the internet and also accounts for 6% of revenue. Another distribution, CDW Logistics, accounts for 5.5% of revenue. We note that approximately 75 of the 500 active distributors accounted for 85% of total revenue in FY12. With the development of VSULs SPM technology, TransTech will add more product lines in 2013 while targeting their core competency of identification.

Financial Model Review

Revenues Visualants current revenues come from their subsidiary, TransTech. As mentioned, TransTech sells ID Printers, ID scanners, signature capture machines, Visitor Management peripherals, RFID hardware, and consumables. Driving sales is customers increased desire to add layers of security and tracking. Additional drivers to sales include: (1) Visulants new SPM technology, which is expected in the middle of 2013; and (2) new RFID-based products that were introduced in the middle of FY2012. Expenses Cost of goods sold is largely variable and consequently, will increase or decrease based on the direction of sales. Major expense items include: materials, labor, warranty and service costs. While FY10 and FY11 gross margins remained relatively level in the 17% range, new product introductions should drive margins higher. Operational expenses are mainly driven by SG&A with a minimal amount to R&D. R&D is a low level due to the Companys JV with Sumitomo. We note that costs associated with developing the Cyclops 6 in FY2012 were covered by Sumitomo. Sumitomo will continue to cover R&D expenses for new products that are jointly developed. Capital Structure Overview While the Companys cap structure as of December 2012 is somewhat complex, we note that it has become simpler after the last 10Q. Most notably, in January 2013, VSULs convertible debt was fully converted into equity. The convertible debt total,

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including interest, was previously carried on the balance sheet at $650K and converted at $.05 per share resulting in an additional 15M shares. In addition to the convertible conversion, VSUL and the same investors came to additional agreements: VSUL acquired additional warrants outstanding Extension to a warrant purchase agreement Termination of an additional investment right agreement whereby the same investors had the ability to invest in VSUL under the same terms as the convertible debt/warrant transaction in May 2011. We note that VSUL created an additional $850K notes payable in regard to the latter two bullet points above. Below we outline the current cap structure.

Earnings Model Assumptions- Our model on page 17 project a sales increase from $7.9M to $8.9M from FY2012 to FY2013. Driving our FY2013 revenues are a combination of existing sales and new product launches. Roughly $7.5M of our FY13 revenue estimate is from current product sales sold through distributors. The remaining revenues are driven by: (1) direct sales of existing products (2) the new RFID products that were launched in mid FY12, and (3) Spectrophotometry-based solutions, which are expected to launch in Q3FY13 We model gross margins increasing from 19.9% for FY12, to 23.2% for FY13. While the base business of printers and accessories has carried a gross margin of 17%, the Company is making a concerted effort to expand new product sales as well as increase its direct sales efforts in FY2013. As mentioned, new products carry higher margins. Additionally, direct sales carry higher margins because VSUL direct solutions are customized and direct sales eliminate a middle man cost. We modeled SG&A to grow Y/Y driven by new product roll-outs, which should increase marketing costs and additional headcount. We have also incorporated the above changes to the cap structure. We also note that we have modeled a capital raise in Q3FY3. With the above assumptions our model results in a net loss of ($2.9M) or ($0.03) per share in FY2013 versus ($2.7M) or ($0.04) per share for FY2012.

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Industry Background
Visualants SPM technology competes in the spectroscopy and spectrometry marketplace. BCC Research estimates the value of the overall US spectroscopy market was $4.9B in 2009, rising to $6.5B in 2014, with a five-year CAGR of 6%. Exhibit 10 illustrates the projected growth rate in the largest markets that utilize these technologies. Global Industry Analysts (GIA), Inc. projects global spectrograph and spectrophoto sales to exceed $10.3B by 2015. The Japanese, European and the US markets combined, represent an 80 percent share of the global spectroscopy market, according to GIA. Below is a breakdown of the US Spectroscope Industry by sector in 2009 and the projections for 2014.

Due to security-related issues, such as the increasing emphasis on detection of explosives and hazardous chemicals, there is a trend toward miniaturization of spectroscopic instruments. This trend has led to the growth of handheld and other portable field-use instruments in this market. The handheld spectroscopy market is largely comprised of two technologies: Raman and Fouriertransform infrared (FT-IR). The largest areas of demand in the Raman handheld market are in the pharmaceuticals and in the government sectors (Exhibit 11). Government agencies are relying on Raman for identification of narcotics, chemical weapons, and explosives. According to Strategic Directions International (SDI), the worldwide market for portable and handheld Raman was more than $85M in 2011, with projected strong double-digit growth going forward.

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The market for handheld and portable spectrometers is growing. Government applications, such as for defense and first responders, account for the largest percentage of demand for portable and handheld FT-IR (Exhibit 12).

The competitive landscape in this market has changed over the last several years, with large diversified scientific instrument companies acquiring small companies with advanced technology. In 2010, Thermo Fisher Scientific (NYSE: TMO) acquired a handheld spectroscopy startup for $145 million. In 2011, Agilent (NYSE:A) acquired A2 Technologies for an undisclosed amount. These two public companies, along with two private companies, Broker and Smiths Detection, are the largest competitors in the portable and handheld FT-IR market, which SDI projects will grow from $65 million in 2010 to more than $100 million by 2015. Although these technologies differ from Visualants unique Spectral Pattern Matching technology, we believe that Visualants products, particularly if offered at a substantially lower price point, could effectively compete with these technologies, garnering market share.

Competition
Visualants technology has the potential to address a wide range of markets, so listing competitors must be on a market-by-market basis. Because of their ownership in TransTech, VSUL go to market strategy will initially focus on security and authentication. While competing spectroscopy and spectrometry companies do have products that address the authentication market, these machines tend to be fragile, expensive (upwards of $10,000), and some are too large for many applications. Generally, authentication technologies are divided into two categoriesovert and covert. Overt products are visible to the naked eye and typically address the consumer market. Visualants technology is classified as covert. Because covert technologies are invisible, they cannot be reverse-engineered and duplicated, so consequently, law enforcement and customs agencies often use these methods. Exhibit 9 compares the Visualant Spectral Pattern Matching technology with some of the most widely used authentication methods. Visualant competes indirectly with the technologies listed in Exhibit 13; however, the SPM technology is also an effective method of augmenting these methods. As counterfeiting becomes more pervasive, an increasing number of companies are adding layers of redundancies to increase securitycombining overt techniques (RFID chips, holograms, etc.) with covert techniques. For example, the latest version of $20 bills now have 20 additional security features from the last version. We view Visualants technology as a covert, cost effective method of adding increased security and authentication to existing methods.

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Key differentiators Applications are far reaching - SPM technology can authenticate a very wide range of objects and substances, because everything has a unique chromatic identifier. The ability to identify the ChromaID of any type of matter makes thousands of applications possible. Manufactured inexpensively in volume - The Visualant technology uses inexpensive, massproduced LED sources to illuminate the sample, and measures the reflected light using a single detector. This process eliminates the need for expensive prisms and mirrors, the components that drive up the cost of traditional spectrophotometers. Highly flexible, highly miniaturized form factor The technology is highly miniaturized; it can be designed into stand-alone hand-held or fixed mount systems, or it can be integrated into other products, such as a bar code scanner, and iris scanner, or a smart phone. Flexible, customizable Scan heads can be designed to meet the requirements of specific applications, adding only the number of emitters necessary to provide the wavelength of light that will characterize the samples measured. All of the prototypes include 34 emitters, but some types of samples may only require four or six emitters.

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Comparable Analysis
Visualant, Inc. (NasdaqGM: VSUL) (all figures in $M expect per share information) Revenue (2) Name Thermo Fisher Scientific, Inc. Anacor Pharmaceuticals, Inc. Diebold, Incorporated SPS Commerce, Inc. Intellicheck Mobilisa, Inc. Electro-Sensors Inc. Wireless Ronin Technologies Inc. Visualant Incorporated Ticker TMO ANAC DBD SPSC IDN ELSE RNIN VSUL Price
(1)

EBITDA (2) 2014 E TTM 2013 E 2014 E TTM $ $ $ $ $ $ $

Earnings (2) 2013 E $ $ $ $ $ $ $ 6.01 (1.61) 2.24 0.67 (0.03) 2014 E $ $ $ $ $ $ $ 6.67 (1.57) 2.64 (0.06) -

Sh 358.4 35.6 63.2 14.8 27.7 3.4 5.0 $ $ $ $ $ $ $

Mrkt Cap 26,611.2 112.0 1,800.1 552.8 21.0 13.2 10.3

EV $ 32,822.7 $ 102.8 $ 1,856.5 $ 486.8 $ 18.2 $ 3.9 $ 8.4 13.7

TTM $ 12,509.9 $ 10.0 $ 2,991.7 $ 77.1 $ 11.1 $ 6.4 $ 6.7 $

2013 E

$ 74.25 $ 3.15 $ 28.46 $ 37.32 $ 0.76 $ 3.90 $ 2.05 $ 0.11

$ 12,969.9 $ 13,488.8 $ 10.1 $ 11.0 $ 2,989.8 $ 3,131.7 $ 98.3 $ 119.0 $ - $ $ - $ $ - $ 8.9

(2)

$2,618.8 $2,820.0 $3,004.9 ($55.2) ($56.0) ($58.1) $239.1 $250.3 $277.6 $6.5 $12.5 $17.3 $0.8 $0.0 $0.0 $0.8 $0.0 $0.0 ($5.1) $0.0 $0.0 ($2.1) ($2.2) EBITDA (2)

3.21 (1.92) 1.23 0.09 (0.01) 0.17 (1.14)

109.9 $

12.1 $

8.2 $

$ (0.04) $ (0.03) P/E (2) 2014 E 10.9x nm 6.7x 28.1x nm nm nm 15.3x 10.9x na TTM 23.1x nm 23.1x 414.7x nm 23.3x nm 121.1x 23.2x nm 2013 E 12.4x nm 12.7x 55.9x nm nm nm 27.0x 12.7x nm 2014 E 11.1x nm 10.8x nm nm nm nm 11.0x 11.0x na

EV/Revenue Name Thermo Fisher Scientific, Inc. Anacor Pharmaceuticals, Inc. Diebold, Incorporated SPS Commerce, Inc. Intellicheck Mobilisa, Inc. Electro-Sensors Inc. Wireless Ronin Technologies Inc. Ticker TMO ANAC DBD SPSC IDN ELSE RNIN Price (1) $ 74.25 $ 3.15 $ 28.46 $ 37.32 $ 0.76 $ 3.90 $ 2.05 Sh 358.4 35.6 63.2 14.8 27.7 3.4 5.0 Mrkt Cap $ $ $ $ $ $ $ 26,611.2 112.0 1,800.1 552.8 21.0 13.2 10.3 EV $ 32,822.7 $ 102.8 $ 1,856.5 $ 486.8 $ 18.2 $ 3.9 $ 8.4 Average Median Visualant Incorporated
(1) Previous day's closing price (2) Estimates are from Capital IQ except for VSUL which are Stonegate estimates Source: Company reports, CapitalIQ, Stonegate Securities

TTM 2.6x 10.2x 0.6x 6.3x 1.6x 0.6x 1.3x 3.3x 1.6x 1.7x

2013 E 2.5x 10.2x 0.6x 5.0x nm nm nm 4.6x 3.7x 1.5x

2014 E 2.4x 9.3x 0.6x 4.1x nm nm nm 4.1x 3.3x na

TTM 12.5x nm 7.8x 75.0x 23.4x 4.9x nm 24.7x 12.5x nm

2013 E 11.6x nm 7.4x 38.8x nm nm nm 19.3x 11.6x nm

VSUL

0.11

109.9

12.1 $

13.7

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Balance Sheets
Visualant, Inc. (NasdaqGM: VSUL) Consolidate d Balance She e ts (in thousands $) Fiscal Ye ar: De ce mbe r FY 2011 ASSETS Curre nt Asse ts Cash & cash equivalents Accounts receivables Inventories Prepaid expenses and other current assets Prepaid and income taxes receivable Total Curre nt Asse ts Property and equipment, net Goodwill Intangibles Other noncurrent assets Total Asse ts LIABILITIES AND STO CKHO LDERS' EQ UITY Curre nt Liabilitie s Accounts payable - trade Accounts payable - related parties Accrued expenses Accrued expenses - related parties Notes payable, current portion Convertible notes payable Deferred revenue Other current liabilities Total Curre nt Liabilitie s Long-Te rm Liabilitie s Long term debt Total Long-Te rm Liabilitie s Stockholde rs' Equity Common stock Additional paid-in-capital Accumulated comprehensive (loss) Total Stockholde rs' Equity (de ficit) Non-controlling interest Total Liabilitie s and Stockholde rs' Equity Ratios Liquidity Current Ratio Quick Ratio Working Capital Le ve rage Debt T o Equity Debt T o Capital Capital Usage -Annualiz e d A/R T urns Inv T urns A/P T urns Source: Company Reports, Stonegate Securities FY 2012 Q1 De c-12 $ 602.1 746.8 710.8 151.2 9.9 2,220.8 461.4 983.6 1,025.3 6.2 4,697.3 $ Q2 E Mar-13 112.0 416.5 603.5 393.2 7.9 1,533.0 459.7 983.6 950.3 10.2 3,936.9 $ Q3 E Jun-13 1,575.4 624.1 648.7 388.5 17.3 3,253.9 448.4 983.6 875.3 8.6 5,569.9 $ Q4 E Se p-13 122.2 947.5 655.4 275.8 11.0 2,012.0 448.9 983.6 800.3 11.0 4,255.9 $ FY 2013 E

92.3 823.7 454.6 283.2 9.1 1,662.9 522.7 983.6 1,143.1 1.1 4,313.4

1,141.2 1,012.7 344.7 223.0 29.3 2,750.8 469.0 983.6 1,110.1 6.2 5,319.8

122.2 947.5 655.4 275.8 11.0 2,012.0 448.9 983.6 800.3 11.0 4,255.9

1,206.1 8.1 155.3 783.7 1,537.2 1,175.0 4,865.4

1,593.9 73.7 391.3 5.8 1,631.9 750.0 666.7 5,113.3

1,906.1 414.4 1,548.7 650.0 416.7 4,935.7

1,610.6 629.1 2,340.9 393.2 4,973.7

2,181.7 777.0 1,870.9 431.6 5,261.3

2,485.7 110.3 1,410.9 496.4 4,503.3

2,485.7 110.3 1,410.9 496.4 4,503.3

1,014.6 1,014.6

4.0 4.0

3.3 3.3

49.1 9,524.6 (11,184.0) (1,610.4) 43.8 $ 4,313.4

91.0 13,995.6 (13,915.9) 170.6 31.8 $ 5,319.8

94.4 94.4 94.4 94.4 94.4 14,242.2 14,292.2 16,342.2 16,392.2 16,392.2 (14,616.9) (15,462.0) (16,166.4) (16,772.6) (16,772.6) (280.2) (1,075.3) 270.2 (285.9) (285.9) 38.5 38.5 38.5 38.5 38.5 $ 4,697.3 $ 3,936.9 $ 5,569.9 $ 4,255.9 $ 4,255.9

0.3x 0.2x ($3,202.5)

0.5x 0.4x ($2,362.5)

0.4x 0.3x ($2,715.0)

0.3x 0.1x ($3,440.7)

0.6x 0.4x ($2,007.3)

0.4x 0.2x ($2,491.4)

0.4x 0.2x ($2,491.4)

-231.4% 176.1%

1398.4% 93.3%

-785.7% 114.6%

-217.7% 185.0%

692.5% 87.4%

-493.5% 125.4%

-493.5% 125.4%

22.2x 33.3x 25.6x

8.6x 15.9x 16.8x

9.3x 11.5x 3.5x

13.5x 9.9x 3.7x

16.6x 10.4x 3.4x

14.0x 12.8x 4.0x

9.1x 13.7x 11.5x

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Income Statements
Vi su al ant, Inc. (NasdaqGM: VSUL) C onsoli date d State me n ts of Income (i n th ousan ds $, e xce pt pe r sh are amounts) Fi scal Ye ar: De ce mbe r Q1 De c-10 $ 2,067.9 $ 2,067.9 Q2 Mar-11 $ 2,866.3 $ 2,866.3 Q3 Jun-11 $ 2,102.7 $ 2,102.7 Q4 Se p-11 $ 2,099.4 $ 2,099.4 Q1 De c-11 $ 1,812.9 $ 1,812.9 Q2 Mar-12 $ 1,899.3 $ 1,899.3 Q3 Jun-12 $ 1,813.6 $ 1,813.6 Q4 Se p-12 $ 2,398.2 $ 2,398.2 Q1 De c-12 $ 2,055.4 $ 2,055.4 Q2 E Mar-13 $ 1,965.8 $ 1,965.8 Q3 E Ju n-13 $ 2,158.2 $ 2,158.2 Q4 E S e p-13 $ 2,757.9 $ 2,757.9

FY 2010 Re ve nu e s Revenues Total re ve nu e Cost of revenues Cost of goods sold T ot al cost of revenues Gross (loss) profit Research and development Sales, General and administ rat ive T ot al operat ing expenses Income (l oss) from ope rations Ot her income / (expense) Ot her income, net Int erest expense Loss on Purch of Warrant s/Gain on debt T ot al ot her (income) / expense Pre -tax i ncome (loss) Income t axes (benefit ) Non cont rolling int erest C onsoli date d ne t i ncome (l oss) Di lu te d EPS (Loss) Shares outst anding - Dilut ed EBIT DA $ 2,542.6 $ 2,542.6

FY 2011 $ 9,136.2 $ 9,136.2

FY 2012 $ 7,924.0 $ 7,924.0

FY 2013 E $ 8,937.3 $ 8,937.3

2,095.5 2,095.5 447.1 90.9 1,377.1 1,468.0 (1,020.9)

1,654.7 1,654.7 413.2 6.0 646.5 652.5 (239.2)

2,521.4 2,521.4 344.9 6.0 831.4 837.4 (492.5)

1,678.8 1,678.8 423.9 82.5 1,248.1 1,330.6 (906.8)

1,715.1 1,715.1 384.3 39.4 965.8 1,005.2 (621.0)

7,570.0 7,570.0 1,566.2 133.9 3,691.8 3,825.7 (2,259.5)

1,489.6 1,489.6 323.2 39.0 795.8 834.8 (511.6)

1,565.9 1,565.9 333.4 37.0 882.1 919.1 (585.7)

1,457.4 1,457.4 356.2 23.0 1,076.1 1,099.1 (742.9)

1,831.3 1,831.3 566.8 78.0 870.7 948.7 (381.8)

6,344.2 6,344.2 1,579.7 177.0 3,624.7 3,801.7 (2,222.0)

1,522.0 1,522.0 533.4 166.4 1,050.4 1,216.8 (683.4)

1,620.7 1,620.7 345.1 100.0 920.0 1,020.0 (674.9)

1,632.3 1,632.3 525.9 99.0 1,100.0 1,199.0 (673.1)

2,087.7 2,087.7 670.2 94.0 1,150.0 1,244.0 (573.8)

6,862.7 6,862.7 2,074.6 459.4 4,220.4 4,679.8 (2,605.2)

(143.7) 9.7 (134.0) (1,154.9) (8.1) 2.1 (1,148.9) $ (0.04) $

(60.8) 40.9 (19.9) (259.1) (1.0) 1.6 (259.8) (0.01) $

(41.0) 14.4 (26.6) (519.1) (5.2) 6.1 (520.0) (0.01) $

(47.8) 5.5 (42.2) (949.0) (1.2) 1.7 (949.5) (0.02) $

(63.1) 6.7 (56.4) (677.4) (1.7) 4.8 (680.5) (0.01)

(212.6) 67.5 (145.1) (2,404.6) (9.1) 14.2 (2,409.8) $ (0.06) $

7.3 (58.5) (51.2) (562.8) (7.9) 4.8 (559.6) (0.01) $

5.0 (57.7) (52.7) (638.3) (6.2) (1.1) (630.9) (0.01) $

7.6 (12.3) (4.7) (747.6) (10.0) (0.8) (736.8) (0.01) $

16.6 (335.2) (105.9) (424.5) (806.3) (5.2) 3.4 (804.6) (0.01)

36.6 (463.7) (105.9) (533.1) (2,755.1) (29.3) 6.2 (2,731.9) $ (0.04) $

12.9 (40.3) (27.4) (710.8) (9.9) 6.7 (707.6) (0.01) $

(146.2) (30.0) (2.0) (178.2) (853.1) (8.0) (845.1) (0.01) $

6.1 (42.5) (4.0) (40.4) (713.5) (9.0) (704.5) (0.01) $

7.2 (42.5) (5.0) (40.3) (614.1) (8.0) (606.1) (0.00) $

(120.0) (155.3) (11.0) (286.3) (2,891.5) (34.9) 6.7 (2,863.3) (0.03)

30,728.0 1,183.1

38,245.2 (152.8)

39,662.5 101.9

44,987.8 (750.1)

47,835.6 (413.3)

42,682.8 (1,214.3)

52,339.0 (268.0)

58,335.3 (646.2)

67,597.4 (655.6)

83,957.8 (257.1)

65,557.4 (1,826.9)

93,401.1 (547.2)

97,137.1 (596.3)

120,108.7 (576.0)

122,510.8 (485.6)

108,289.4 (2,205.1)

Margi n Anal ysi s Gross margin Sales and market ing Research and development Sales, General and administ rative Operating margin P re-t ax margin Net income margin T ax rat e EBIT DA margin Growth Rate Anal ysi s Y/Y T ot al revenue T ot al cost of revenues Research and development Sales, General and administ rative Operating income P re-t ax income Net income EPS Share count - fully dilut ed

17.6% 0.0% 3.6% 54.2% -40.2% -45.4% -45.2% 0.7% 46.5%

20.0% 0.0% 0.3% 31.3% -11.6% -12.5% -12.6% 0.4% -7.4%

12.0% 0.0% 0.2% 29.0% -17.2% -18.1% -18.1% 1.0% 3.6%

20.2% 0.0% 3.9% 59.4% -43.1% -45.1% -45.2% 0.1% -35.7%

18.3% 0.0% 1.9% 46.0% -29.6% -32.3% -32.4% 0.2% -19.7%

17.1% 0.0% 1.5% 40.4% -24.7% -26.3% -26.4% 0.4% -13.3%

17.8% 0.0% 2.2% 43.9% -28.2% -31.0% -30.9% 1.4% -14.8%

17.6% 0.0% 1.9% 46.4% -30.8% -33.6% -33.2% 1.0% -34.0%

19.6% 0.0% 1.3% 59.3% -41.0% -41.2% -40.6% 1.3% -36.1%

23.6% 0.0% 3.3% 36.3% -15.9% -33.6% -33.5% 0.6% -10.7%

19.9% 0.0% 2.2% 45.7% -28.0% -34.8% -34.5% 1.1% -23.1%

26.0% 0.0% 8.1% 51.1% -33.3% -34.6% -34.4% 1.4% -26.6%

17.6% 0.0% 5.1% 46.8% -34.3% -43.4% -43.0% 0.9% -30.3%

24.4% 0.0% 4.6% 51.0% -31.2% -33.1% -32.6% 1.3% -26.7%

24.3% 0.0% 3.4% 41.7% -20.8% -22.3% -22.0% 1.3% -17.6%

23.2% 0.0% 5.1% 47.2% -29.2% -32.4% -32.0% 1.2% -24.7%

na na -99.8% -90.9% 98.3% 98.2% 98.4% 97.9% -26.5%

na na -74.5% 330.8% -37.8% -39.6% -39.9% -6.9% 30.9%

na na -75.0% 358.1% -139.7% -124.6% -125.0% -69.4% 32.8%

372.3% 373.9% 650.1% 150.9% -117.2% -115.9% -117.5% -60.0% 36.0%

0.1% -1.5% 21.7% 76.2% -176.8% -126.8% -123.9% -43.9% 55.6%

259.3% 261.3% 47.3% 168.1% -121.3% -108.2% -109.7% -51.0% 38.9%

-12.3% -10.0% 550.0% 23.1% -113.8% -117.2% -115.4% -57.4% 36.9%

-33.7% -37.9% 516.7% 6.1% -18.9% -23.0% -21.3% 17.5% 47.1%

-13.7% -13.2% -72.1% -13.8% 18.1% 21.2% 22.4% 48.4% 50.3%

14.2% 6.8% 97.8% -9.9% 38.5% -19.0% -18.2% 32.6% 75.5%

-13.3% -16.2% 32.1% -1.8% 1.7% -14.6% -13.4% 26.2% 53.6%

13.4% 2.2% 326.6% 32.0% -33.6% -26.3% -26.4% 29.1% 78.5%

3.5% 3.5% 170.3% 4.3% -15.2% -33.6% -33.9% 19.6% 66.5%

19.0% 12.0% 330.4% 2.2% 9.4% 4.6% 4.4% 46.2% 77.7%

15.0% 14.0% 20.5% 32.1% -50.3% 23.8% 24.7% 48.4% 45.9%

12.8% 8.2% 159.5% 16.4% -17.2% -5.0% -4.8% 36.5% 65.2%

Source: Com pany Reports, Stonegate Securities estim ates

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Cash Flow Statements

Visualant, Inc. (NasdaqGM: VSUL) Consolidated Statements of Cash Flows (cumulative, in thousands $) Fiscal Year: Dece mber FY 2011 Cash Flow from O perations (2,409.8) Consolidated net income (loss) Adjustments to reconcile net income to net cash : Depreciation and amortization Issuance of capital stock for services and expenses Issuance of capital stock for accrued liabilities Stock-based compensation Amortization of debt discount (Loss) on sale of assets Provision for losses on accounts receivable Beneficial Conversion Feature Loss (Gain) on Extinguishment of Debt/Repo of Warrants Changes in operating assets & liabilities, net of acquisitions Accounts receivable Inventory Prepaid expenses and other current assets Other assets Accounts payable - trade and accrued expenses Deferred revenue Income tax receivable Ne t cash provide d by operating activities Cash Flow from Investing Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Purchases of available-for-sale investments Ne t cash use d by investing activitie s Cash Flow from Financing Payments on line of credit Proceeds from line of credit Repayment of debt Proceeds from the issuance of common stock Repayments of capital leases Proceeds (Repayments) from the issuance of convertible debt Change in noncontrolling interest Purchase of outstanding warrants Ne t cash provide d (used) by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash Cash and cash equivalents, beginning of year Cash and cash equivalents, end of period Source: Company Reports, Stonegate Securities 8.4 83.9 92.313 1,048.852 92.313 1,141.2 (539.1) 1,141.2 602.08 (1,029.20) 1,141.2 112.0 434.2 1,141.2 1,575.4 (1,019.0) 1,141.2 122.2 384.9 660.3 151.1 11.2 (3.9) (0.5) 59.8 168.2 (251.8) (81.8) (1,312.3)

FY 2012 (2,731.9) 356.3 38.7 266.2 326.5 (7.7) 216.0 105.9 (189.0) 109.9 60.2 (5.1) 749.2 666.7 (20.2) (58.2)

Q1 De c-12 (700.9) 102.1 19.5 14.6 16.0 (7.1) 0.3 265.6 (366.1) 71.8 255.7 (250.0) 19.4 (559.1)

Q2 E Mar-13 (1,546.0) 180.7 19.5 14.6 66.0 (7.1) 0.3 595.9 (258.8) (170.2) (4.1) 174.9 (273.5) 21.5 (1,186.3)

Q3 E Jun-13 (2,250.5) 277.8 19.5 14.6 116.0 (7.1) 0.3 388.2 (304.0) (165.5) (2.5) 893.9 (235.0) 12.1 (1,242.1)

FY 2013 E (2,856.6) 366.1 19.5 14.6 166.0 (7.1) 0.3 64.9 (310.7) (52.8) (4.9) 531.2 (170.2) 18.3 (2,221.5)

(121.060) 13.377 0.1 (107.6)

(109.2) 9.1 (100.1)

(10.5) 7.8 (2.6)

(12.4) 7.8 (4.6)

(23.2) 7.8 (15.4)

(37.0) 7.8 (29.2)

(137.0) (650.0) 943.2 (23.2) 1,300.0 (4.8) 1,428.3

62.1 (956.9) 2,626.7 (12.7) (12.0) (500.0) 1,207.1

(50.7) (30.0) 100.0 (3.3) 6.7 22.7

(98.7) 1,150.0 (990.0) 100.0 (6.3) 6.7 161.7

(135.7) 1,150.0 (1,420.0) 2,100.0 (9.3) 6.7 1,691.7

(167.7) 1,150.0 (1,846.0) 2,100.0 (11.3) 6.7 1,231.7

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Important Disclosures and Disclaimer

(a) Stonegate Securities, Inc. (Stonegate) expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. (b) The Research Analyst principally responsible for the preparation of this report has received compensation that is based upon, among other things, Stonegates investment banking revenues. (c) Within the last twelve months, Stonegate has not received compensation for investment banking services from the Company; however Stonegate has a non-exclusive research and institutional investor awareness agreement in place since 11/12/12; Stonegate is currently engaged to provide research and institutional investor awareness for the Company. As compensation, Stonegate receives $2,500 per month for the next 3 months and thereafter at the Companys discretion. (d) Within the last twelve months, Stonegate has not managed or co-managed a public offering for the Company. (e) Stonegate and/or its employees, officers, directors and owners do not own options, rights or warrants to purchase this security. (f) Stonegate does not make a market in this security. (g) No employee of Stonegate serves on the Companys Board of Directors. (h) A Research Analyst and/or a member of the Analysts household do not own shares of this security. (i) A Research Analyst and/or a member of the Analysts household do not serve as an officer, director, or advisory board member of the Company. (j) This security is eligible for sale in one or more states. (k) This security is subject to the Securities and Exchange Commissions Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities. (l) Stonegate or its affiliates do not beneficially own 1% or more of an equity security of the Company. (m) Stonegate does not have other actual, material conflicts of interest in the securities of the Company. Meaning of Ratings - Stonegate does not rate the securities covered in its information memorandums. Distribution of Ratings - Stonegate does not rate the securities covered in its information memorandums. Price Chart - Stonegate does not have, nor has previously had, a rating for any securities of the Company. Price Targets - Stonegate does not have a price target for any securities of the Company. Regulation Analyst Certification: I, Marco Rodriguez, hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report. For Additional Information Contact: Stonegate Securities, Inc. Marco Rodriguez, CFA 214-987-4121 Marco@stonegateinc.com
Please note that this report was originally prepared and issued by Stonegate for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of Stonegate should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. The information contained herein is based on sources which we believe to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Because the objectives of individual clients may vary, this report is not to be construed as an offer or the solicitation of an offer to sell or buy the securities herein mentioned. This report is the independent work of Stonegate Securities and is not to be construed as having been issued by, or in any way endorsed or guaranteed by, any issuing companies of the securities mentioned herein. The firm and/or its employees and/or its individual shareholders and/or members of their families and/or its managed funds may have positions or warrants in the securities mentioned and, before or after your receipt of this report, may make or recommend purchases and/or sales for their own accounts or for the accounts of other customers of the firm from time to time in the open market or otherwise. While we endeavor to update the information contained herein on a reasonable basis, there may be regulatory, compliance, or other reasons that prevent us from doing so. The opinions or information expressed are believed to be accurate as of the date of this report; no subsequent publication or distribution of this report shall mean or imply that any such opinions or information remains current at any time after the date of this report. All opinions are subject to change without notice, and we do not undertake to advise you of any such changes. Reproduction or redistribution of this report without the expressed written consent of Stonegate Securities is prohibited. Additional information on any securities mentioned is available on request.

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