**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**





x    QUARTERLY  REPORT  UNDER
      SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      quarterly period ended June 30, 2007








o     TRANSITION
      REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT





For
      the
      transition period from to





Commission
      File
      number               000-30262










**VISUALANT,
      INCORPORATED**


(Exact
      name of registrant as specified in charter)





**Nevada**
            **91-1948357**(State
                or other jurisdiction of incorporation or
                organization)
            (I.R.S.
                Employer Identification No.)**500
                Union Street, Suite 406,****Seattle, Washington USA**
            **98101**(Address
                of principal executive offices)
            (Zip
                Code)






**206-903-1351**(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), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No o


Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes o No x
 
 The
        number of shares of common stock, $.001 par value, outstanding as of August
        14,
        2007: 16,853,891 shares
 
 Transitional
        Small Business Disclosure Format (check one):   Yes oNo x





1








TABLE
                OF CONTENTSPageNumberPART
              1
            FINANCIAL
              INFORMATION
            3ITEM
                1
            Financial
              Statements (unaudited)
            3Balance
              Sheets as of June 30, 2007 and September 30, 2006
            4Statements
              of OperationsFor
                the three and nine months ended June 30, 2007 and 2006, and the period
                from October 8, 1998 (Date of Inception) to June 30, 2007
            5Statements
              of Cash FlowsFor
                the nine months ended June 30, 2007 and 2006 and for the period from
                October 8, 1998 (Date of Inception) to June 30, 2007
            6Notes
              to the Financial Statements.
            7ITEM
                2
            Management's
              Plan of Operation
            11ITEM
                3
            Controls
              and Procedures
            12PART
              II
            OTHER
              INFORMATION
            13ITEM
                6
            Exhibits
              and Reports on Form 8-K
            13SIGNATURES
            13






































2





PART
      I -
      FINANCIAL INFORMATION





ITEM
                1.
            FINANCIAL
                STATEMENTS





The
      accompanying balance sheets of Visualant, Incorporated (development stage
      company) at June 30, 2007 and September 30, 2006, the statements of operations
      for the three and nine months ended June 30, 2007 and 2006, the statements
      of
      cash flows for the nine months ended June 30, 2007 and 2006 and for the period
      from October 8, 1998 (date of incorporation) to June 30, 2007, 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 three and nine month periods ended June 30, 2007 are not
      necessarily indicative of the results that can be expected for the year ending
      September 30, 2007.
































3


**VISUALANT,
      INCORPORATED**


**(Development
      Stage Company)**


**BALANCE
      SHEETS**


**June
      30, 2007 and September 30, 2006**





**June
                30, 2007**
            
            
            **September
                30, 2006****ASSETS****CURRENT
                ASSETS**Cash
            
            $
            216
            
            
            $
            7,160Prepaid
                Expenses
            
            
            9,898
            
            
            
            -Total
                Current Assets
            
            
            10,114
            
            
            
            7,160Deferred
                Financing Costs, net
            
            
            91,156
            
            
            
            -**TOTAL
                ASSETS**
            
            $
            101,270
            
            
            $
            7,160**LIABILITIES
                AND STOCKHOLDERS' DEFICIT****CURRENT
                LIABILITIES**Notes
                payable
            
            $
            50,750
            
            
            $
            165,705Accrued
                expenses and other liabilities
            
            
            190,374
            
            
            
            8,247Accounts
                payable
            
            
            656,018
            
            
            
            306,424Total
                Current Liabilities
            
            
            897,142
            
            
            
            480,376Long-term
                Notes Payable
            
            
            425,340
            
            
            
            -Commitments
                and Contingencies
            
            
            -
            
            
            
            -**STOCKHOLDERS'
                DEFICIT**Preferred
                stock - $0.001
                par value, 50,000,000 shares authorized, no shares issued and
                outstanding
            
            
            -
            
            
            
            -Common
                stock - $0.001 par value, 200,000,000 shares authorized, 16,853,891
                and
                16,503,891 shares issued and outstanding, respectively
            
            
            16,854
            
            
            
            16,504Additional
                paid in capital
            
            
            4,205,321
            
            
            
            3,604,969Deficit
                accumulated during the development stage
            
            
            (5,443,387
            )
            
            
            (4,094,689
            )Total
                Stockholders' Equity (Deficiency)
            
            
            (1,221,212
            )
            
            
            (473,216
            )**TOTAL
                LIABILITIES & EQUITY**
            
            $
            101,270
            
            
            $
            7,160





The
      accompanying notes are an integral part of these financial
      statements




4




**VISUALANT,
      INCORPORATED**


(Development
      Stage Company)


STATEMENTS
      OF OPERATIONS


**For
      the Three and Nine Months Ended June 30, 2007 and 2006 and the Period
      from**


**October
      8, 1998 (Date of Inception) to June 30, 2007**





**Three
                Months Ended June 30, 2007**
            
            
            **Three
                Months Ended June 30, 2006**
            
            
            **Nine
                Months Ended June 30, 2007**
            
            
            **Nine
                Months Ended June 30, 2006**
            
            
            **Period
                of Inception from October 8, 1998 to June 30,
                2007****Revenues**
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -**Expenses**Research
                and development
            
            
            162,086
            
            
            
            84,588
            
            
            
            559,909
            
            
            
            260,520
            
            
            
            1,247,318Administrative
            
            
            219,570
            
            
            
            196,829
            
            
            
            744,970
            
            
            
            489,050
            
            
            
            2,926,784Total
                Operating Expense
            
            
            381,656
            
            
            
            281,417
            
            
            
            1,304,879
            
            
            
            749,570
            
            
            
            4,174,102Loss
                from Operations
            
            
            (381,656
            )
            
            
            (281,417
            )
            
            
            (1,304,879
            )
            
            
            (749,570
            )
            
            
            (4,174,102
            )**Other
                Income (Expense)**Settlement
                of debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            43,400Interest
                expense
            
            
            (18,837
            )
            
            
            -
            
            
            
            (43,819
            )
            
            
            -
            
            
            
            (158,358
            )Loss
                of deposit
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,154,327
            )**Net
                Loss**
            
            $
            (400,493
            )
            
            $
            (281,417
            )
            
            $
            (1,348,698
            )
            
            $
            (749,570
            )
            
            $
            (5,443,387
            )Net
                Loss Applicable to Common Stockholders Basic and diluted
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.08
            )
            
            $
            (0.05
            )Weighted
                Average Shares used in computing basic and diluted net loss per
                share
            
            
            16,775,000
            
            
            
            16,454,000
            
            
            
            16,605,000
            
            
            
            16,454,000





The
      accompanying notes are an integral part of these financial statements






5




**VISUALANT,
      INCORPORATED**


**(Development
      Stage Company)**


**STATEMENTS
      OF CASH FLOWS**


**For
      the Nine Months Ended June 30, 2007 and 2006 and the Period
      from**


**October
      8, 1998 (Date of Inception) to June 30, 2007**





**Nine
                Months Ended**
            
            
            **Nine
                Months Ended**
            
            
            **October
                8, 1998****June
                30,**
            
            
            **June
                30,**
            
            
            **to
                June 30,****2007**
            
            
            **2006**
            
            
            **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            $
            (1,348,698
            )
            
            $
            (749,570
            )
            
            $
            (5,443,387
            )Reconciliation
                of net loss to net cash used in operating activities:Depreciation,
                amortization and tangible and intangible asset impairments
            
            
            -
            
            
            
            2,100
            
            
            
            19,808Issuance
                of capital stock for expenses
            
            
            75,000
            
            
            
            -
            
            
            
            157,956Stock
                based compensation
            
            
            222,748
            
            
            
            -
            
            
            
            294,748Stock
                Options Issued in exchange for services
            
            
            206,954
            
            
            
            -
            
            
            
            206,954Amortization
                of Deferred Financing
            
            
            4,844
            
            
            
            -
            
            
            
            4,844Loss
                of deposit
            
            
            -
            
            
            
            -
            
            
            
            1,154,327Capital
                contributions - expenses
            
            
            -
            
            
            
            -
            
            
            
            10,950Increase
                (decrease) in cash resulting from changes in assets
                and liabilities:Prepaid
                expenses
            
            
            (9,898
            )
            
            
            -
            
            
            
            (9,898
            )Accounts
                payable and accrued expenses
            
            
            531,721
            
            
            
            61,222
            
            
            
            2,273,628Net
                Cash Used in Operating Activities
            
            
            (317,329
            )
            
            
            (686,248
            )
            
            
            (1,330,070
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Purchase
                of property and equipment
            
            
            -
            
            
            
            -
            
            
            
            (12,308
            )Purchase
                of investment - deposit
            
            
            -
            
            
            
            -
            
            
            
            (1,154,327
            )Net
                Cash Used in Investing Activities
            
            
            -
            
            
            
            -
            
            
            
            (1,166,635
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Proceeds
                from issuance of common stock
            
            
            -
            
            
            
            95,000
            
            
            
            2,022,892Proceeds
                from issuance of convertible debt
            
            
            425,340
            
            
            
            -
            
            
            
            425,340Proceeds
                from issuance of notes payable
            
            
            135,246
            
            
            
            100,000
            
            
            
            298,890Repayment
                of notes payable
            
            
            (250,201
            )
            
            
            -
            
            
            
            (250,201
            )Net
                Cash Provided by Financing Activities
            
            
            310,385
            
            
            
            195,000
            
            
            
            2,496,921Net
                Change in Cash
            
            
            (6,944
            )
            
            
            (491,248
            )
            
            
            216Cash
                at Beginning of Period
            
            
            7,160
            
            
            
            519,009
            
            
            
            -Cash
                at End of Period
            
            $
            216
            
            
            $
            27,761
            
            
            $
            216




The
      accompanying notes are an integral part of these financial
      statements


6
 
 **VISUALANT,
        INCORPORATED**
 **(Development
        Stage Company)**
 **NOTES
        TO FINANCIAL STATEMENTS**


**1.**
            **ORGANIZATION**





Visualant,
      Inc. 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 whereby 50,000,000 shares of preferred stock with a par value
      of
      $0.001 were authorized.  On August 18, 2004 the name of the Company
      was changed to “Visualant, Incorporated”. There are no preferred shares issued
      and the terms have not been determined.





The
      Company is in the development stage and has not commenced
      operations.







**2.**
            **GOING
                CONCERN**





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. We have incurred net losses of approximately
      $1.3 million and $750,000 for the nine months ended June 30, 2007 and 2006,
      respectively. Our current liabilities exceeded our current assets by
      approximately $887,000 as of June 30, 2007.  Our net cash used in
      operating activities approximated $317,000 for the nine months ended June 30,
      2007.





As
      of
      June 30, 2007, the Company had approximately $216 in cash.  The
      Company is considered illiquid as this cash is not considered sufficient to
      fund
      the recurring operating and associated financing costs. The Company needs to
      raise additional funding to continue its operations.  However, there
      can be no assurance that financing or additional funding will be available
      to
      the Company on favorable terms or at all. If the Company raises additional
      capital through the sale of equity or convertible debt securities, the issuance
      of such securities may result in dilution to existing stockholders.




We
      anticipate that we will generate significant losses from operations for the
      foreseeable future. As of June 30, 2007, our accumulated deficit was $5.4
      million.  We have limited capital resources, and operations to date
      have been funded with the proceeds from private equity and debt financings.
      These conditions raise substantial doubt about our ability to continue as a
      going concern. The audit report prepared by our independent registered public
      accounting firm relating to our consolidated financial statements for the year
      ended September 30, 2006 includes an explanatory paragraph expressing the
      substantial doubt about our ability to continue as a going concern.





Continuation
      of the company as a going concern is dependant upon obtaining additional working
      capital and the management of the Company has developed a strategy, which it
      believes will accomplish this objective through additional equity funding,
      payment of debt by the issuance of common stock, and advances of short term
      debt
      by officers and directors, which will enable the Company to continue to conduct
      operations.  The financial statements do not include any adjustments
      that might be necessary if we are unable to continue as a going
      concern.







7
 
 **VISUALANT,
        INCORPORATED**
 **(Development
        Stage Company)**
 **NOTES
        TO FINANCIAL STATEMENTS**


**3.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**




The
      significant accounting policies used in the preparation of the Company’s
      consolidated financial statements are disclosed in the Annual Report on Form
      10-K for the year ended September 30, 2006. Additional significant accounting
      policies are disclosed below.







***Accounting
      for Income Taxes***





In
      June
      2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for
      Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,
      Accounting for Income Taxes,” which clarifies the accounting for uncertainty in
      income taxes. FIN 48 prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. The interpretation
      requires that we recognize in the financial statements, the impact of a tax
      position, if that position is more likely than not of being sustained on audit,
      based on the technical merits of the position. FIN 48 also provides guidance
      on
      derecognition, classification, interest and penalties, accounting in interim
      periods and disclosure. The provisions of FIN 48 are effective beginning January
      1, 2007 with the cumulative effect of the change in accounting principle
      recorded as an adjustment to opening retained earnings. The Company adopted
      FIN
      48 effective January 1, 2007 and there was no impact on the Company’s financial
      statements.







***Financial
      Statement Restatement***





In
      September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
      Accounting Bulletin No. 108 (“SAB 108”).  Due to diversity in practice
      among registrants, SAB 108 expresses SEC staff views regarding the process
      by
      which misstatements in financial statements are evaluated for purposes of
      determining whether financial statement restatement is necessary. SAB 108 is
      effective for fiscal years ending after November 15, 2006. The Company adopted
      SAB 108 effective October 1, 2006 and there was no impact on the Company’s
      financial statements.







***Basic
      and Diluted Net Income (Loss) Per Share***





Net
      loss
      per common share excludes any dilutive effects of options, warrants and
      convertible securities.  Net earnings (loss) per share is computed
      using the weighted-average number of outstanding common shares and common stock
      equivalent shares during the applicable period. Common stock equivalent shares,
      which include options warrants and convertible securities, are excluded
      from the computation if their effect is anti-dilutive. There were no dilutive
      instruments for the nine months ended June 30, 2007.







***Recent
      Accounting Pronouncements***





In
      September 2006, the FASB issued Statement of Financial Accounting Standards No.
      157, *Fair Value Measurements*(“SFAS 157”). SFAS 157 defines fair value,
      establishes a framework for measuring fair value and expands disclosures about
      fair value measurements but does not require any new fair value measurements.
      SFAS 157 is effective for financial statements issued for fiscal years
      beginning after November 15, 2007, and interim periods within those fiscal
      years. We are evaluating the possible impact of SFAS 157 on the financial
      statements.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, The Fair Value Option for Financial Assets and Financial Liabilities,
      (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial
      instruments and certain other items at fair value. The objective is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions. SFAS 159 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007. We have not yet determined the impact
      of adopting SFAS 159 on our financial position.







8
 
 **VISUALANT,
        INCORPORATED**
 **(Development
        Stage Company)**
 **NOTES
        TO FINANCIAL STATEMENTS**


**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 illumination and detection
      of
      electromagnetic energy, typically in the visible and near-visible portions
      of
      the electromagnetic spectrum, using specialized illumination and sensing systems
      and spatial analysis software modeling which allow for pattern
      recognition.  This technology involves specialized and proprietary
      information and trade secrets, which the Company considers to be among its
      most
      sensitive, confidential, and proprietary information.







**5.**
            **NOTES
                PAYABLE**





During
      the year ended September 30, 2006, the Company entered into agreements with
      Coach Capital, LLC for three demand notes payable to Coach Capital, LLC totaling
      $165,705 including related loan fees for purposes of financing ongoing
      operations.





During
      the first quarter of 2007, the Company entered into an additional demand note
      with Coach Capital, LLC totaling $56,016 including loan
      fees.   In February 2007, the Company entered into a demand note
      with CEO and President, Bradley E. Sparks totaling $50,000 plus loan fees of
      $750. In addition, the Company entered into another demand note with Coach
      Capital, LLC during the quarter totaling $28,480 including loan fees. 
During the third quarter, all of the notes and interest payable to Coach
      Capital, LLC were paid in full with funds borrowed under the Company’s new
      convertible line of credit (see Note 6).  As of June 30, 2007, the
      outstanding notes payable totaled $50,750 consisting of the note payable to
      Sparks.  Interest expense accrues on all of the notes at a rate of 18%
      per annum.  Accrued interest on the notes payable is recorded in the
      balance sheet in accrued expenses and other liabilities.





Any
      delays in repayment of the principal and accrued interest on the notes payable
      upon demand will result in a penalty interest rate of 30% per
      annum.







**6.**
            **LINE
                OF CREDIT**





On
      May 7,
      2007, the Company entered into a Convertible Line of Credit Agreement with
      Coventry Capital LLC., a Delaware company, pursuant to which Coventry Capital
      will provide the Company with a convertible line of credit of up to $1
      million.  The line of credit may be increased up to $3 million in the
      event the Company achieves certain performance criteria.  The borrowed
      funds will bear interest at the rate of 10% per annum, and are due in full
      on
      May 7, 2010.  Coventry Capital, however, has the right to convert all
      or part of the indebtedness into common stock of the Company at a fixed
      conversion rate of $0.50 per share.  As of June 30, 2007 the balance
      outstanding on this convertible line of credit was $425,340.  The
      Company currently is unable to borrow any additional funds under this line
      of
      credit due to its failure to meet certain financial covenants or conditions
      required by Coventry Capital.  The Company has attributed no value to
      the conversion rights.





In
      connection with the Coventry Capital convertible line of credit, the Company
      issued 200,000 shares of common stock to the placement agent for arranging
      the
      new financing.  The $96,000 value of the common stock upon issuance
      was recorded as deferred financing costs and is being amortized over the
      three-year term of the convertible line of credit.





**7.**
            **COMMON
                CAPITAL STOCK**





During
      the second quarter of fiscal year 2007, the Company issued 150,000 common shares
      in satisfaction of $75,000 owed for legal services.  During the third
      quarter of fiscal year 2007, the Company issued 200,000 common shares as a
      fee
      for the Coventry Capital Convertible Line of Credit Agreement described in
      Note
      6.







9
 
 **VISUALANT,
        INCORPORATED**
 **(Development
        Stage Company)**
 **NOTES
        TO FINANCIAL STATEMENTS**


**8.**
            **STOCK
                OPTIONS**




Effective
      October 1, 2006, we began recording compensation expense associated with stock
      options and other equity-based compensation in accordance with SFAS No. 123
      (revised 2004), “Share-Based Payment”. We adopted FAS 123(R) using the modified
      prospective method. We recognize these compensation costs on a straight-line
      basis over the requisite service period of the award. Total compensation cost
      recognized for fair value options issued to employees and directors was
      approximately $51,000 and $223,000 for the three and nine months ended June
      30,
      2007, respectively.





Options
      have also been granted to consultants for services.  Total cost
      recognized for the fair value of options issued for services was approximately
      $38,000 and $207,000 for the three and nine months ended June 30, 2007,
      respectively.





In
      2005,
      our Board of Directors adopted a combined incentive and nonqualified stock
      option plan for our employees and consultants (“2005 Stock Option
      Plan”).   On October 9, 2006 the Board of Directors authorized an
      increase in shares available for grant from 2 million to 4 million, subject
      to
      stockholder approval.





There
      were no stock options issued during the three months ended June 30,
      2007.







**9.**
            **SIGNIFICANT
                TRANSACTIONS WITH RELATED
                PARTIES**





See
      Note
      5 for discussion of notes payable issued to the Company’s CEO and President
      during the quarter ended March 31, 2007.







**10.**
            **CANCELLATION
                OF AGREEMENT TO PURCHASE SHARES OF
                SCI**





On
      April
      9, 2003 the Company signed a Purchase Agreement with Malaremastastarnas
      Riksforening, the owner of all the shares of Skandinaviska Farginstituter AB
      (the Scandinavian Colour Institute or "SCI") which owns the color notation
      system Natural Color Systems ("NCS"), containing the terms of an acquisition
      by
      the Company or its assigns for a price of SEK 35,000,000 of all shares of
      SCI.  Pursuant to the terms of the agreements the Company made
      payments of $1,154,327 into an escrow account as part payment toward the
      purchase price.  The Company subsequently failed to make further
      payments on the contracts and by mutual agreement the contracts were cancelled
      and the moneys paid were expensed.







**11.**
            **SUBSEQUENT
                EVENTS**





In
      May
      2007, the Company entered into a Letter of Intent with RATLab LLC pursuant
      to
      which the Company proposed to acquire RATLab LLC as part of a share exchange
      transaction.  The parties, however, had not entered into a Share
      Exchange Agreement as of June 30, 2007, the date the Letter of Intent
      expired.  Further discussions between the two companies on the topic
      have been put on hold, although an acquisition transaction in the future has
      not
      been ruled out.





The
      Research and Development Contract under which RATLab LLC has been providing
      research and development services to the Company has been suspended as of July
      12, 2007 due to lack of funding, and Dr. Thomas Furness, President of RATLab
      LLC, resigned as Senior Scientific Advisor to the Company on August 8,
      2007.  As of June 30, 2007, the Company owes RATLab LLC and Dr.
      Furness approximately $65,000 and $32,000, respectively, for past
      services.  Amounts owed are planned to be paid when funds are
      available and when additional services, including delivery of additional
      prototypes and transfer of source documentation regarding intellectual property,
      are provided.  Discussions are in progress to determine the
      relationship between the Company and the RATLab going forward.





Due
      to
      personal reasons and not because of any disagreement with the Company on any
      matter relating to the Company’s operations, policies or practices, William
      Gordon tendered his resignation from the Visualant Board of Directors effective
      August 8, 2007.





10


ITEM
                2.
            MANAGEMENT'S
                PLAN OF OPERATIONS





**General**





The
      Company is a development stage company engaged in the business of
      commercializing products and services based upon our spectral signature
      technology as reflected in our recently filed patent
      applications.  These patent applications pertain to the use of
      controlled illumination with specific bands of electromagnetic radiation,
      detection of returned electromagnetic radiation and data management in an
      innovative manner enabling our devices to establish a unique spectral
      signature for both individual and classes of items.  The unique
      spectral signature data can potentially be used in a variety of applications
      in
      areas such as brand protection, forgery detection, homeland security, medical
      diagnostics, quality control, fluids monitoring, metal stress analysis, and
      many
      others.  As of June 30, 2007, the Company has filed seven
      utility patent applications with the U.S. Patent Office.





The
      Company purchases its research and development services from outside third
      party
      sources.  On March 15, 2006, the
      Company entered into a research and development contract with RATLab LLC, a
      privately-owned research laboratory in Seattle, Washington.  Under the
      contract, RATLab performs research and development using the Company’s existing
      intellectual property, as well as newly developed research and technologies
      in
      order to assist the Company with the commercialization of its core spectral
      signature technologies.  During the three and nine-month periods ended
      June 30, 2007, the Company paid approximately $140,000 and $251,000 in research
      and development fees to RATLab LLC.  RATLab LLC is a research
      laboratory formed primarily by Dr. Thomas Furness, founder and former director
      of the Human Interface Technology Lab (HIT Lab) at the University of Washington,
      and one of the leading researchers in the world in the area of human interface
      technology.  RATLab LLC also employs other leading scientists and
      research associates in the areas of computer science, imaging technology, and
      light sensing technology, who are part of the team conducting research on behalf
      of the Company.





The
      Company’s research and development activities under its Research and Development
      Contract with RATLab LLC, however, were suspended on July 12, 2007 due to lack
      of funds. See Note 11 to Financial Statements for further
      discussion.





The
      Company initially intends to position its technology as both a revolutionary
      as
      well as a practical solution for security and fraud prevention applications
      and
      markets.  The Company’s current focus is to secure customers for its
      spectral signature technology and to capitalize upon the potential business
      opportunities in the areas of national security, document forgery/fraud, brand
      protection, label fraud and product tampering.  However, the
      broad scope of the applications covered by the Company’s patent applications may
      result in new opportunities surfacing from customers desiring prototypes
      designed to satisfy their specific technology needs.  As of June 30,
      2007, the Company had no customers.





The
      Company has developed prototypes which capture the spectral signatures of items
      and manage the data gathered.  These prototypes are being shown to
      potential customers and funding sources to demonstrate the potential and
      capabilities of our devices.  It is envisioned that once the Company
      has secured a customer or customers, it will collaborate with the customer
      to
      develop devices and specific applications of the Company’s technology that are
      designed to address the customer’s unique concerns.  The Company will
      then hire new personnel sufficient to fulfill its development obligations under
      any contract entered into.  In lieu of such hiring, the Company may
      contract with certain research organizations to perform development activities
      on behalf of the Company.







11


ITEM
                2.
            MANAGEMENT'S
                PLAN OF OPERATIONS
                - *continued*




This
      Report on Form 10-QSB contains certain forward-looking statements that are
      based
      on current expectations.  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,
      and
      should not be regarded as a representation by the Company or any other person
      that the objectives or plans of the Company will be achieved.  The
      Company may encounter competitive, technological, financial and business
      challenges making it more difficult than expected to continue to develop and
      market its products; the market may not accept the Company’s future products;
      the Company may not be able to retain existing key
      management personnel; and there may be other material adverse changes in the
      Company’s operations or business.  Assumptions relating to budgeting,
      marketing, and other management decisions are subjective in many respects and
      thus susceptible to interpretations and periodic revisions based on actual
      experience and business developments, the impact of which may cause the Company
      to alter its marketing or other budgets, which may in turn affect the Company’s
      financial position and results of operations.  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
      other risk factors relating to the Company and the various disclosures made
      by
      the Company  that  attempt  to advise interested
      parties of factors which affect the Company's business, in the Company’s Annual
      Report on Form 10-KSB for the year ended September 30, 2006 as well as in the
      Company's periodic reports on Forms 10-QSB and 8-K filed with the Securities
      and
      Exchange Commission
      (the  "SEC").The  Company's  financial statements
      are stated in United States Dollars and are
      prepared  in  accordance  with  United  States  Generally  Accepted  Accounting
      Principles.







LIQUIDITY  AND  CAPITAL  RESOURCES





The
      Company has no revenue to date from its operations, and its ability to implement
      its plans for the future will depend on the future availability of
      financing.  Such financing will be required to enable the Company to
      further develop its spectral signature technology and continue its
      operations.  The Company intends to raise further funds through
      private placements of the Company's common stock and through short term
      borrowing.  The financing activities of the Company are current and
      ongoing, and it will expand and accelerate its development program as the timing
      and amount of financing allow.  However, there can be no assurance
      that the Company will be successful in obtaining additional capital for such
      technology development from the sale of its capital stock, or in otherwise
      raising substantial capital.





The
      Company’s cost to continue operations as they are now conducted is approximately
      $85,000 per month, and the Company does not have sufficient funds to cover
      existing operations.   The Company needs to raise additional
      funds in order to continue its existing operations, to resume its research
      and
      development activities, and to finance its plans to expand its operations for
      the next year.  The Company intends to raise the required funds by
      obtaining share capital from outside sources.  During the nine months
      ended June 30, 2007, the Company obtained funds in the aggregate amount of
      approximately $135,000 through
      loans
      from Coach Capital and Bradley E. Sparks, CEO and President.  The
      Company borrowed $425,000 from Coventry Capital during the quarter ended June
      30, 2007 under the newly signed Convertible Line of
      Credit.  Approximately $250,000 of the proceeds from the Convertible
      Line of Credit were used to repay the principal due on the Coach Capital
      notes payable.  During the quarter, operating funds were also advanced
      to the Company by its Chairman, Ronald P. Erickson.  If the Company is
      successful in raising additional funds, the Company’s research and development
      efforts will continue and expand.






**Off-Balance
      Sheet Arrangements**





The
      Company currently has no off-balance sheet arrangements that have, or are
      reasonably likely to have, a current or future effect on the Company’s financial
      condition, revenues or expenses, results of operations, liquidity or capital
      resources.







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-15(e) or Rule 15d-15(e))
      as of the end of the period covered by this report, have concluded that the
      Company’s disclosure controls and procedures are effective to give reasonable
      assurance that the information required to be disclosed in reports that the
      Company files under the Exchange Act is recorded, processed, summarized and
      reported as and when required.





(b)           Changes
      in Internal Control Over Financial Reporting




There
      were no significant changes in the Company’s internal control over financial
      reporting that occurred during the Company’s last fiscal quarter that have
      materially affected, or are reasonably likely to materially 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.







**ITEM
                8B.**
            **OTHER
                INFORMATION**





There
      is
      no additional information that was not disclosed by the Company through 8K
      filings throughout the fiscal year.





12


PART
      II.     OTHER INFORMATION








ITEM
                6.
            EXHIBITS
                AND REPORTS ON FORM 8-K





The
      exhibits filed herewith as required by Item 601 of Regulation S-B, are
      as  follows:





(a)        Exhibits





31.1 Certification
      of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002





31.2 Certification
      of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002





32.1 Certificate
      Pursuant to 18 U.S.C. Section 1350 signed by the Chief Executive Officer





32.2 Certificate
      Pursuant to 18 U.S.C. Section 1350 signed by the Chief Financial
      Officer








**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**


(Registrant)





Date:
                August 16,
                2007
            By:
            /s/ Bradley
              E.
              SparksBradley
              E. SparksChief
              Executive Officer,
              President, and Director




Date:
                August 16, 2007
            By:
            /s/ Bradley
              E. SparksBradley
              E. SparksChief
              Financial Officer, and Secretary Treasurer




13