UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ________________

Commission File Number 000-53754

VYSTAR CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Georgia

20-2027731

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

725 Southbridge St

Worcester, MA 01610

(Address of Principal Executive Offices, Zip Code)

(508) 791-9114

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
NONE		NONE		NONE

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 ☐ ~~YES~~NO ☒ ~~NO ☐~~

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☐ ~~YES~~NO ☒ ~~NO ☐~~

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒☐		Smaller reporting company ☒
(Do not check if a smaller reporting company)		Emerging growth company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) YES ☐ NO ☒

Class		Outstanding as of ~~December 6, 2022~~October 26, 2023
Common Stock, $0.0001 par value per share		~~12,941,260~~ 12,942,592shares

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

In addition to historical information, this Form 10-Q contains statements relating to our future results (including certain projections and business trends) that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the “safe harbor” created by those sections. The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q (this “Report”). This Report contains certain forward-looking statements and the Company’s future operating results could differ materially from those discussed herein. Our disclosure and analysis included in this Report concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in expanding our business and raising debt and capital securities include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate”, “may”, “project”, “will likely result”, and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to certain risks, uncertainties, and assumptions, including prevailing market conditions and are more fully described under “Part I, Item 1A - Risk Factors” of our Form 10-K for the year ended December 31, ~~2021.~~2022. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. In any event, these and other crucial factors, including those set forth in Item 1A - “Risk Factors” of our Form 10-K for the year ended December 31, ~~2021~~2022 may cause actual results to differ materially from those indicated by our forward-looking statements.

Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future results and readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date of this filing. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. The Company undertakes no obligation to update or revise forward-looking statements.

All references to “we”, “us”, “our” or “Vystar” in this Quarterly Report on Form 10-Q mean Vystar Corporation, and affiliates.

VYSTAR CORPORATION

FORM 10-Q FOR THE QUARTER ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023

INDEX

Part I. Financial Information

Item 1.	Financial Statements:	4

	Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	4

	Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 (unaudited) and ~~2021~~2022 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Deficit for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 (unaudited) and ~~2021~~2022 (unaudited)	6-7

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 (unaudited) and ~~2021~~2022 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3327

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3832

Item 4.	Controls and Procedures	3833

Part II. Other Information

Item 1.	Legal Proceedings	4034

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4034

Item 3.	Defaults Upon Senior Securities	4034

Item 4.	Mine Safety Disclosures	4034

Item 5.	Other Information	4034

Item 6.	Exhibits	4034

SIGNATURES		4135

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VYSTAR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
		(Unaudited)					(Unaudited)
ASSETS
Current assets:
Cash	$	160,686		$	151,175		$	49,517		$	12,274
Accounts receivable, net		43,667			68,541
Other receivables		684,775			875,362
Accounts receivable								13,616			12,145
Inventories		3,107,226			3,784,420			69,860			91,724
Prepaid expenses and other		673,717			337,013			644,884			633,769
Deferred commission costs		49,402			73,625
Assets of discontinued operations								751,404			3,026,971

Total current assets		4,719,473			5,290,136			1,529,281			3,776,883

Property and equipment, net		670,638			832,099			119,106			140,886

Operating lease right-of-use assets		7,462,785			7,776,978

Finance lease right-of-use assets, net		441,326			551,037

Other assets:
Intangible assets, net		949,934			1,208,870			138,513			154,371
Goodwill		460,301			460,301
Inventories, long-term		458,217			657,177			-			63,009
Deferred commission costs, net of current portion		26,209			60,586
Other		5,274			20,274
Assets of discontinued operations								6,762,448			7,503,970

Total other assets		1,899,935			2,407,208			6,900,961			7,721,350

Total assets	$	15,194,157		$	16,857,458		$	8,549,348		$	11,639,119

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable	$	4,439,100		$	5,149,570		$	1,514,098		$	1,361,483
Accrued expenses		893,553			897,420			326,588			684,147
Stock subscription payable		1,539,600			1,247,549			1,901,322			1,655,208
Operating lease liabilities - current maturities		731,000			634,000
Finance lease liabilities - current maturities		117,000			134,000
Shareholder, convertible and contingently convertible notes payable and accrued interest - current maturities		332,248			1,388,904			344,293			336,263
Related party debt - current maturities		616,025			1,487,000			173,177			169,552
Unearned revenue		603,373			880,204			44,379			44,479
Derivative liabilities		17,800			1,778,100
Related party advances		92,731			-			299,884			266,541
Liabilities of discontinued operations								1,394,980			2,328,589

Total current liabilities		9,382,430			13,596,747			5,998,721			6,846,262

Long-term liabilities:
Operating lease liabilities, net of current maturities		5,376,050			5,683,736
Finance lease liabilities, net of current maturities		355,328			443,882
Unearned revenue, net of current maturities		104,835			241,991
Related party debt, net of current maturities and debt discount		-			2,791,401

Total long-term liabilities		5,836,213			9,161,010
Liabilities of discontinued operations								5,069,980			5,513,667

Total liabilities		15,218,643			22,757,757			11,068,701			12,359,929

Stockholders’ deficit:
Convertible preferred stock series A, $0.0001 par value 15,000,000 shares authorized; 8,698 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively (liquidation preference of $81,055 and $74,531 at September 30, 2022 and December 31, 2021, respectively)		1			1
Convertible preferred stock series B, $0.0001 par value 2,500,000 shares authorized; 370,969 and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively (liquidation preference of $43,280 at September 30, 2022)		37			-
Convertible preferred stock series C, $0.0001 par value 2,500,000 shares authorized; 1,917,973 and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively (liquidation preference of $74,863 at September 30, 2022)		192			-
Convertible preferred stock value
Common stock, $0.0001 par value, 500,000,000 shares authorized; 12,941,760 shares issued at September 30, 2022 and December 31, 2021, and 12,941,260 and 12,941,460 shares outstanding at September 30, 2022 and December 31, 2021, respectively		1,294			1,294
Convertible preferred stock series class A, $0.0001 par value 15,000,000 shares authorized; 8,698 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (liquidation preference of $175,000 and $170,000 at June 30, 2023 and December 31, 2022, respectively)								1			1
Convertible preferred stock series B, $0.0001 par value 2,500,000 shares authorized; 370,969 shares issued and outstanding at June 30, 2023 and December 31, 2022 (liquidation preference of $2,839,000 and $2,710,000 at June 30, 2023 and December 31, 2022, respectively)								37			37
Convertible preferred stock series C, $0.0001 par value 2,500,000 shares authorized; 1,917,973 shares issued and outstanding at June 30, 2023 and December 31, 2022 (liquidation preference of $5,481,000 and $5,233,000 at June 30, 2023 and December 31, 2022, respectively)								192			192
Convertible preferred stock											-
Common stock, $0.0001 par value, 500,000,000 shares authorized; 12,942,892 shares issued at June 30, 2023 and December 31, 2022, and 12,942,592 shares outstanding at June 30, 2023 and December 31, 2022, respectively								1,294			1,294
Additional paid-in capital		53,361,926			43,851,510			53,361,925			53,361,925
Accumulated deficit		(54,492,803	)		(51,410,516	)		(56,563,715	)		(55,368,868	)
Common stock in treasury, at cost; 300 shares at September 30, 2022 and December 31, 2021, respectively		(30	)		(30	)
Common stock in treasury, at cost; 300 shares								(30	)		(30	)

Total Vystar stockholders’ deficit		(1,129,383	)		(7,557,741	)		(3,200,296	)		(2,005,449	)

Noncontrolling interest		1,104,897			1,657,442			680,943			1,284,639

Total stockholders’ deficit		(24,486	)		(5,900,299	)		(2,519,353	)		(720,810	)

Total liabilities and stockholders’ deficit	$	15,194,157		$	16,857,458		$	8,549,348		$	11,639,119

The accompanying notes are an integral part of these condensed consolidated financial statements.

VYSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021

Revenue $ 3,572,071 $ 4,066,597 $ 10,607,362 $ 23,150,720

Cost of revenue 1,681,713 1,932,290 4,809,951 10,576,205

Gross profit 1,890,358 2,134,307 5,797,411 12,574,515

Operating expenses:
Salaries, wages and benefits 866,427 1,188,835 2,560,840 4,713,623
Share-based compensation 181,199 207,382 658,004 623,501
Agent fees 312,909 312,214 1,058,095 2,641,654
Professional fees 91,624 124,285 414,498 343,246
Advertising 242,902 365,369 850,474 1,774,022
Rent 195,950 331,056 556,861 967,287
Service charges 90,132 147,466 282,376 456,481
Depreciation and amortization 119,237 193,158 420,397 577,539
Other operating 585,082 812,817 1,748,378 2,490,302

Total operating expenses 2,685,462 3,682,582 8,549,923 14,587,655

Loss from operations (795,104 ) (1,548,275 ) (2,752,512 ) (2,013,140 )

Other income (expense):
Interest expense (107,869 ) (186,732 ) (494,355 ) (540,062 )
Change in fair value of derivative liabilities 240,300 (88,200 ) 1,760,300 (1,400 )
Gain (loss) on settlement of debt, net (2,481,231 ) - (2,250,411 ) 2,675,926
Other income, net 34,443 (135,612 ) 102,147 (35,688 )

Total other income (expense), net (2,314,357 ) (410,544 ) (882,319 ) 2,098,776

Net income (loss) (3,109,461 ) (1,958,819 ) (3,634,831 ) 85,636

Net (income) loss attributable to noncontrolling interest 134,849 439,512 552,545 (823,363 )

Net loss attributable to Vystar $ (2,974,612 ) $ (1,519,307 ) $ (3,082,286 ) $ (737,727 )

Loss per share:
Basic and diluted $ (0.23 ) $ (0.12 ) $ (0.24 ) $ (0.06 )

Weighted average number of common shares outstanding:
Basic and diluted 12,941,260 12,816,505 12,941,279 12,627,241

	2023			2022			2023			2022
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022

Revenue	$	36,126		$	45,323		$	446,033		$	168,843

Cost of revenue		5,913			25,942			82,611			64,167

Gross profit		30,213			19,381			363,422			104,676

Operating expenses:
Salaries, wages and benefits		74,282			59,495			129,211			118,833
Share-based compensation		107,204			338,857			246,114			476,805
Professional fees		6,269			22,146			61,711			154,959
Advertising		3,561			7,981			10,226			14,215
Rent		20,001			-			40,002			8,393
Service charges		3,568			2,437			4,372			4,206
Depreciation and amortization		18,819			35,119			37,638			70,238
Other operating		85,446			140,213			173,802			342,499

Total operating expenses		319,150			606,248			703,076			1,190,148

Loss from operations		(288,937	)		(586,867	)		(339,654	)		(1,085,472	)

Other income (expense):
Interest expense		(11,181	)		(111,489	)		(21,518	)		(196,204	)
Change in fair value of derivative liabilities		-			1,463,000			-			1,520,000
Gain (loss) on settlement of debt, net		-			230,820			-			230,820

Total other income (expense), net		(11,181	)		1,582,331			(21,518	)		1,554,616

Net income (loss) from continuing operations		(300,118	)		995,464			(361,172	)		469,144

Discontinued operations:
Loss from operations		(221,349	)		(566,869	)		(1,437,371	)		(994,515	)

Net income (loss)		(521,467	)		428,595			(1,798,543	)		(525,371	)

Net loss attributable to noncontrolling interest		92,967			238,084			603,696			417,696

Net income (loss) attributable to Vystar	$	(428,500	)	$	666,679		$	(1,194,847	)	$	(107,675	)

Basic and diluted loss per share:
Net income (loss) from continuing operations	$	(0.02	)	$	0.08		$	(0.03	)	$	0.04
Net loss from discontinued operations	$	(0.02	)	$	(0.04	)	$	(0.11	)	$	(0.08	)
Net loss attributable to noncontrolling interest	$	(0.01	)	$	(0.02	)	$	(0.05	)	$	(0.03	)
Net income (loss) attributable to common shareholders	$	(0.03	)	$	0.05		$	(0.09	)	$	(0.01	)

Basic and diluted weighted average number of common shares outstanding		12,942,592			12,942,592			12,942,592			12,942,618

The accompanying notes are an integral part of these condensed consolidated financial statements.

VYSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023

(Unaudited)

Attributable to Vystar
Number Number Number Number Number Total
of of of of Additional of Vystar Total
Preferred Preferred Preferred Preferred Preferred Preferred Common Common Paid-in Accumulated Treasury Treasury Stockholders’ Noncontrolling Stockholders’
Shares A Stock A Shares B Stock B Shares C Stock C Shares Stock Capital Deficit Shares Stock Deficit Interest Deficit

Ending balance December 31, 2021 8,698 $ 1 - $ - - $ - 12,941,760 $ 1,294 $ 43,851,510 $ (51,410,516 ) (300 ) $ (30 ) $ (7,557,741 ) $ 1,657,442 $ (5,900,299 )

Share-based compensation - options 3,691 3,691 3,691

Retirement of common stock (200 ) -

Net loss - - - - - - - - - (774,354 ) - - (774,354 ) (179,612 ) (953,966 )

Ending balance March 31, 2022 8,698 1 - - - - 12,941,560 1,294 43,855,201 (52,184,870 ) (300 ) (30 ) (8,328,404 ) 1,477,830 (6,850,574 )

Share-based compensation - options 3,691 3,691 3,691

Net loss - - - - - - - - - 666,679 - - 666,679 (238,084 ) 428,595

Ending balance June 30, 2022 8,698 1 - - - - 12,941,560 1,294 43,858,892 (51,518,191 ) (300 ) (30 ) (7,658,034 ) 1,239,746 (6,418,288 )

Share-based compensation - options 3,691 3,691 3,691

Preferred stock issued for services 73,428 7 291,188 29 1,595,211 1,595,247 1,595,247

Preferred stock issued for cash 32,566 3 84,997 85,000 85,000

Preferred stock issued for settlement of accounts payable 127,857 13 511,415 511,428 511,428

Preferred stock issued for settlement of shareholder notes payable 152,755 15 893,602 893,617 893,617

Preferred stock issued for settlement of related party notes payable 1,594,219 160 6,346,404 6,346,564 6,346,564

Preferred stock issued for settlement of stock payable 16,929 2 67,714 67,716 67,716

Net loss - - - - - - - - - (2,974,612 ) - - (2,974,612 ) (134,849 ) (3,109,461 )

Ending balance September 30, 2022 8,698 $ 1 370,969 $ 37 1,917,973 $ 192 12,941,560 $ 1,294 $ 53,361,926 $ (54,492,803 ) (300 ) $ (30 ) $ (1,129,383 ) $ 1,104,897 $ (24,486 )

	Shares A		Stock A		Shares B		Stock B		Shares C		Stock C		Shares		Stock		Capital		Deficit			Shares			Stock			Deficit			Interest			Deficit
	Attributable to Vystar
	Number				Number				Number				Number									Number						Total
	of				of				of				of				Additional					of						Vystar						Total
	Preferred		Preferred		Preferred		Preferred		Preferred		Preferred		Common		Common		Paid-in		Accumulated			Treasury			Treasury			Stockholders’			Noncontrolling			Stockholders’
	Shares A		Stock A		Shares B		Stock B		Shares C		Stock C		Shares		Stock		Capital		Deficit			Shares			Stock			Deficit			Interest			Deficit

Ending balance December 31, 2022		8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592	$	1,294	$	53,361,925	$	(55,368,868	)		(300	)	$	(30	)	$	(2,005,449	)	$	1,284,639		$	(720,810	)

Net loss		-		-		-		-		-		-		-		-		-		(766,347	)		-			-			(766,347	)		(510,729	)		(1,277,076	)

Ending balance March 31, 2023		8,698		1		370,969		37		1,917,973		192		12,942,592		1,294		53,361,925		(56,135,215	)		(300	)		(30	)		(2,771,796	)		773,910			(1,997,886	)

Net loss		-		-		-		-		-		-		-		-		-		(428,500	)		-			-			(428,500	)		(92,967	)		(521,467	)

Ending balance June 30, 2023		8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592	$	1,294	$	53,361,925	$	(56,563,715	)		(300	)	$	(30	)	$	(3,200,296	)	$	680,943		$	(2,519,353	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

VYSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2021~~2022

(Unaudited)

Attributable to Vystar
Number Number Number Total
of of Additional of Vystar Total
Preferred Preferred Common Common Paid-in Accumulated Treasury Treasury Stockholders’ Noncontrolling Stockholders’
Shares Stock Shares Stock Capital Deficit Shares Stock Deficit Interest Deficit

Ending balance December 31, 2020 13,698 $ 1 11,999,318 $ 1,200 $ 41,352,261 $ (48,713,184 ) (300 ) $ (30 ) $ (7,359,752 ) $ 600,795 $ (6,758,957 )

Common stock issued for services 493,718 49 1,404,043 1,404,092 1,404,092

Share-based compensation - options 4,916 4,916 4,916

Common stock issued for settlement of related party payable 113,650 11 335,254 335,265 335,265

Common stock issued for cash received in prior period 16,667 2
24,998
25,000 25,000

Preferred stock conversion (5,000 ) 17,680 2 (2 ) - -

Net income - - - - - 918,127 - - 918,127 1,053,065 1,971,192

Ending balance March 31, 2021 8,698 1 12,641,033 1,264 43,121,470 (47,795,057 ) (300 ) (30 ) (4,672,352 ) 1,653,860 (3,018,492 )

Share-based compensation - options 3,691 3,691 3,691

Net income (loss) - - - - - (136,547 ) - - (136,547 ) 209,810 73,263

Ending balance June 30, 2021 8,698 1 12,641,033 1,264 43,125,161 (47,931,604 ) (300 ) (30 ) (4,805,208 ) 1,863,670 (2,941,538 )
Beginning balance 8,698 1 12,641,033 1,264 43,125,161 (47,931,604 ) (300 ) (30 ) (4,805,208 ) 1,863,670 (2,941,538 )

Common stock issued for services 292,060 29 705,968 705,997 705,997

Share-based compensation - options 3,691 3,691 3,691

Common stock issued for settlement of related party payable 8,667 1 12,999 13,000 13,000

Net loss - - - - - (1,519,307 ) - - (1,519,307 ) (439,512 ) (1,958,819 )
Net income (loss) - - - - - (1,519,307 ) - - (1,519,307 ) (439,512 ) (1,958,819 )

Ending balance September 30, 2021 8,698 1 12,941,760 $ 1,294 $ 43,847,819 $ (49,450,911 ) (300 ) $ (30 ) $ (5,601,827 ) $ 1,424,158 $ (4,177,669 )
Ending balance 8,698 1 12,941,760 $ 1,294 $ 43,847,819 $ (49,450,911 ) (300 ) $ (30 ) $ (5,601,827 ) $ 1,424,158 $ (4,177,669 )

	Shares A		Stock A		Shares B		Stock B		Shares C		Stock C		Shares			Stock		Capital		Deficit			Shares			Stock			Deficit			Interest			Deficit
	Attributable to Vystar
	Number				Number				Number				Number										Number						Total
	of				of				of				of					Additional					of						Vystar						Total
	Preferred		Preferred		Preferred		Preferred		Preferred		Preferred		Common			Common		Paid-in		Accumulated			Treasury			Treasury			Stockholders’			Noncontrolling			Stockholders’
	Shares A		Stock A		Shares B		Stock B		Shares C		Stock C		Shares			Stock		Capital		Deficit			Shares			Stock			Deficit			Interest			Deficit

Ending balance December 31, 2021		8,698	$	1		-	$	-		-	$	-		12,942,792		$	1,294	$	43,851,510	$	(51,410,516	)		(300	)	$	(30	)	$	(7,557,741	)	$	1,657,442		$	(5,900,299	)

Share-based compensation - options																			3,691											3,691						3,691

Retirement of common stock														(200	)																					-

Net loss		-		-		-		-		-		-		-			-		-		(774,354	)		-			-			(774,354	)		(179,612	)		(953,966	)

Ending balance March 31, 2022		8,698		1		-		-		-		-		12,942,592			1,294		43,855,201		(52,184,870	)		(300	)		(30	)		(8,328,404	)		1,477,830			(6,850,574	)
Balance		8,698		1		-		-		-		-		12,942,592			1,294		43,855,201		(52,184,870	)		(300	)		(30	)		(8,328,404	)		1,477,830			(6,850,574	)

Share-based compensation - options																			3,691											3,691						3,691

Net income		-		-		-		-		-		-		-			-		-		666,679			-			-			666,679			(238,084	)		428,595
Net income (loss)		-		-		-		-		-		-		-			-		-		666,679			-			-			666,679			(238,084	)		428,595

Ending balance June 30, 2022		8,698	$	1		-	$	-		-	$	-		12,942,592		$	1,294	$	43,858,892	$	(51,518,191	)		(300	)	$	(30	)	$	(7,658,034	)	$	1,239,746		$	(6,418,288	)
Balance		8,698	$	1		-	$	-		-	$	-		12,942,592		$	1,294	$	43,858,892	$	(51,518,191	)		(300	)	$	(30	)	$	(7,658,034	)	$	1,239,746		$	(6,418,288	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

VYSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended
September 30,
2022 2021
Cash flows from operating activities:
Net income (loss) $ (3,634,831 ) $ 85,636
Adjustments to reconcile net income (loss) to net cash used in operating activities:
(Gain) loss on settlement of debt, net 2,250,411 (2,675,926 )
Share-based compensation 658,004 623,501
Depreciation 161,461 289,569
Bad debts (recovery) (3,754 ) 132,702
Amortization of intangible assets 258,936 287,970
Noncash lease expense 217,958 229,093
Amortization of debt discount 27,083 26,335
Change in fair value of derivative liabilities (1,760,300 ) 1,400
Loss on sale of property and equipment - 170,801
Gain on sale of investments - (16,300 )
(Increase) decrease in assets:
Accounts receivable 28,629 (338,848 )
Other receivables 190,587 -
Inventories 876,154 1,275,713
Prepaid expenses and other 184,376 163,492
Deferred commission costs 58,600 83,205
Increase (decrease) in liabilities:
Accounts payable 332,551 (149,465 )
Accrued expenses and interest payable 172,696 (2,077,141 )
Unearned revenue (413,988 ) (880,266 )

Net cash used in operating activities (395,427 ) (2,768,529 )

Cash flows from investing activities:
Acquisition of property and equipment - (54,157 )
Proceeds from the sale of property and equipment - 311,300
Proceeds from the sales of investments - 144,210
Patents and trademark fees - (2,183 )

Net cash provided by investing activities - 399,170

Cash flows from financing activities:
Proceeds from issuance of term debt - 1,402,900
Proceeds from the issuance of notes - related parties 500,000 533,039
Proceeds from the issuance of convertible notes payable - 290,000
Proceeds from related party advances 92,731 -
Repayment of related party debt (162,500 ) -
Repayment of finance lease obligations (110,293 ) (130,488 )
Proceeds from issuance of preferred stock 85,000 -

Net cash provided by financing activities 404,938 2,095,451

Net increase (decrease) in cash 9,511 (273,908 )

Cash - beginning of period 151,175 620,539

Cash - end of period $ 160,686 $ 346,631

Cash paid during the period for:
Interest $ 287,521 $ 331,849

Non-cash transactions:
Common stock issued for accrued compensation $ - $ 2,110,089
Common stock issued for settlement of related party payable - 335,265
Common stock issued for cash received in prior period - 38,000
Common stock issued for preferred stock - 177
Prepaid expenses with common stock - 291,000
Prepaid expenses with preferred stock 506,080 -
Notes payable paid with preferred stock 1,124,436 -
Related party notes payable paid with preferred stock 4,254,992
Warrants and consulting paid by preferred stock 58,500 -
Preferred stock issued for stock subscription payable 103,750 -
Vendor payables paid with preferred stock 943,021 -
Vendor payables paid directly by related party 100,000 -
Reduction of third-party vendor payable with transfer of inventories - 2,886,497
Acquisition of inventories with third-party vendor payable at commencement of second sale agreement - 2,886,497
Derivatives issued as a debt discount - 65,000

	2023			2022
	Six Months Ended
	June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(1,798,543	)	$	(525,371	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		246,114			476,805
Depreciation		31,604			128,536
Bad debts (recovery)		1,566			(4,039	)
Amortization of intangible assets		15,858			172,624
Noncash lease expense		73,408			153,016
Amortization of debt discount		-			27,083
Change in fair value of derivative liabilities		-			(1,520,000	)
Gain on settlement of debt, net		(39,770	)		(230,820	)
Gain on sale of property and equipment		(213,776	)		-
(Increase) decrease in assets:
Accounts receivable		1,500			1,833
Inventories		84,873			25,504
Prepaid expenses and other		(11,115	)		61,645
Assets of discontinued operations		2,278,817			843,994
Increase (decrease) in liabilities:
Accounts payable		152,615			294,907
Accrued expenses and interest payable		(345,903	)		77,804
Unearned revenue		(100	)		(33,759	)
Liabilities of discontinued operations		(642,340	)		(457,171	)

Net cash used in operating activities		(165,192	)		(507,409	)

Cash flows from investing activities:
Cash flows provided by discontinued operations		579,483			-

Cash flows from financing activities:
Proceeds from related party advances		33,343			69,820
Cash flows provided by (used in) discontinued operations		(402,604	)		356,437

Net cash provided by (used in) financing activities		(369,261	)		426,257

Net increase (decrease) in cash		45,030			(81,152	)

Cash - beginning of period		135,599			151,175
Less: cash of discontinued operations		(131,112	)		(53,020	)

Cash of continuing operations - end of period	$	49,517		$	17,003

Cash paid during the period for:
Interest	$	9,863		$	191,183

Non-cash transactions:
Rotmans vendor payables paid directly by related party	$	-		$	100,000
Stock subscription payable recorded for consulting and exercise of outstanding options and warrants		-			58,500

The accompanying notes are an integral part of these condensed consolidated financial statements.

VYSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS

Nature of Business

Vystar Corporation (“Vystar”, the “Company”, “we,” “us,” or “our”) is based in Worcester, Massachusetts. The Company uses patented technology to produces a line of innovative air purifiers, which destroy viruses and bacteria through the use of ultraviolet light. Vystar is also the creator and exclusive owner to produce Vytex^® Natural Rubber Latex (“NRL”) currently being used primarily in various bedding products. In addition, Vystar has a majority ownership in Murida Furniture Co., Inc. dba Rotmans Furniture (“Rotmans”), formerly one of the largest independent furniture retailers in the U.S.

~~On September 1, 2022, our amendment effecting a~~ ~~1-for-100 reverse stock split~~All activities of ~~our common stock was effective, which was previously approved by our Board of Directors on July 26, 2022. The total number of shares which the Company is authorized to issue is~~ ~~520,000,000, of which~~ ~~500,000,000~~ ~~is common and~~ ~~20,000,000~~ ~~is preferred. All share and per share amounts~~Rotmans have been ~~adjusted~~included in ~~these condensed consolidated financial statements to reflect the effects of the reverse stock split.~~discontinued operations. Additional disclosure can be found in Note 15. ~~The Company is awaiting FINRA approval to effectuate the reverse stock split.~~

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the condensed consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and do not contain certain information included in the Company’s Annual Report ~~and~~on Form 10-K for the year ended December 31, ~~2021.~~2022. Therefore, the interim condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-K.

The Company has evaluated subsequent events through the date of the filing of its Form 10-Q with the Securities and Exchange Commission. Other than those events disclosed in Note ~~18,~~16, the Company is not aware of any other significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Company’s financial statements.

Basis of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All significant intercompany accounts and transactions have been eliminated.

~~COVID-19 and Economic Conditions~~Discontinued Operations

~~The novel coronavirus (“COVID-19”) pandemic, its contributory efforts on~~In accordance with ASC No. 205-20, Discontinued Operations, for all periods presented, the economy and general economic conditions, continues to impact our business and results of operations. During the nine months ended September 30, 2022, we experienced rising product prices, volatile transportation costs and supply chain disruptions. In addition, discretionary consumer spending has been adversely impacted by rising inflation, including fuel costs and interest rates. We cannot reasonably estimate the extent and duration of any future impact from the COVID-19 pandemic or general economic conditions on our business. Accordingly, the estimates and assumptions made as of September 30, 2022 could change in subsequent interim reports, and it is reasonably possible that such changes could be significant (although the potential effects cannot be measured at this time).

~~Segment Reporting~~

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer. The Company and the chief executive officer view the Company’s operations and manage its business as one reportable segment with different operating segments.

~~Estimates~~

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Significant estimates made by management include, among others, allowance for obsolete inventory, the recoverability of long-lived assets, valuation and impairment of intangible assets, fair values of right of use assets and lease liabilities, valuation of derivative liabilities, share-based compensation and other equity issuances. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from these estimates.

~~Fair Value of Financial Instruments~~

The Company’s financial instruments consist principally of cash, accounts receivable, accounts payable, accrued expenses and interest payable, shareholder notes payable, long-term debt and unearned revenue. The carrying values of all the Company’s financial instruments approximate or equal fair value because of their short maturities and market interest rates or, in the case of equity securities, being stated at fair value.

In specific circumstances, certain assets and liabilities are reported or disclosed at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the Company’s principal market for such transactions. If there is not an established principal market, fair value is derived from the most advantageous market.

~~Valuation inputs are classified in the following hierarchy:~~

	●	~~Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.~~
	●	~~Level 2 inputs are directly or indirectly observable valuation inputs for the asset or liability, excluding Level 1 inputs.~~
	●	~~Level 3 inputs are unobservable inputs for the asset or liability.~~

Highest priority is given to Level 1 inputs and the lowest priority to Level 3 inputs. Acceptable valuation techniques include the market approach, income approach, and cost approach. In some cases, more than one valuation technique is used. The derivative liabilities were recognized at fair value on a recurring basis through the date of the settlement and September 30, 2022 and are level 3 measurements. There have been no transfers between levels during the nine months ended September 30, 2022.

~~Acquisitions~~

Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on valuations that use information and assumptions provided by management. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including, legal, accounting, and other costs, are capitalized in asset acquisitions and for business combinations are expensed in the periods in which the costs are incurred. The results of operations ~~of acquired assets~~and related balance sheet items associated with Rotmans are ~~included~~reported in discontinued operations in the accompanying consolidated financial ~~statements from the acquisition date.~~

~~Cash, Cash Equivalents and Restricted Cash~~

Cash and cash equivalents include all liquid investments with a maturity date of less than three months when purchased. Cash equivalents also include amounts due from third-party financial institutionsstatements. See Note 15 for credit and debit card transactions which typically settle within five days. Restricted cash represents cash balances restricted as to withdrawal or use and are included in prepaid expenses and other on the condensed consolidated balance sheets.

~~Accounts Receivable, Net~~

Accounts receivable, net are stated at the amount management expects to collect from outstanding balances. The Company routinely sells, without recourse, trade receivables resulting from retail furniture sales to two financial institutions at an average service charge of 3% ~~in 2022. Amounts sold during the nine months ending September 30, 2022 were approximately $3,067,000~~. Retail furniture receivables retained by the Company are generally collateralized by the merchandise sold, represent valid claims against debtors for sales arising on or before the balance sheet date and are reduced to their estimated net realizable value. In addition, the Company grants credit to Vystar customers without requiring collateral. The amount of accounting loss for which Vystar is at risk in these unsecured accounts receivable is limited to their carrying value. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based upon its assessment of the current status of individual accounts. Balances that are still outstanding after management has performed reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of September 30, 2022 and December 31, 2021, the Company has recorded an allowance for doubtful accounts of $~~267,000~~ ~~and $273,000, respectively.~~

~~Other Receivables~~

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020 and the subsequent extension of the CARES Act, the Company was eligible for a refundable employee retention credit subject to certain criteria. The Company recognized employee retention credits of $~~771,287~~ during the year ended December 31, 2021 which has been included in other income, net in the consolidated statements of operations. The Company has filed for refunds of the employee retention credits and as of the date of this Quarterly Report on Form 10-Q has subsequently received $~~154,468~~ ~~and estimates receiving the remaining refunds by the end of 2022.~~

~~Rotmans terminated its agreement with a supplier in 2021 and will receive $100,000~~ ~~in consideration. As of December 31, 2021, the remaining account balance of $104,075~~ ~~represents funds due from this termination. The Company has received $37,408~~ ~~during the nine months ended September 30, 2022.~~

~~Inventories~~

Inventories include those costs directly attributable to the product before sale. Inventories consist primarily of finished goods of furniture, mattresses, RxAir purifier units, foam toppers and pillows and are carried at net realizable value, which is defined as selling price less cost of completion, disposal and transportation. The Company evaluates the need to record write-downs for inventory on a regular basis. Appropriate consideration is given to obsolescence, slow-moving and other factors in evaluating net realizable values. Inventories not expected to be sold within 12 months are classified as long-term.

~~Prepaid Expenses and Other~~

Prepaid expenses and other include restricted cash, amounts related to prepaid insurance policies, which are expensed on a straight-line basis over the life of the underlying policy, and other expenses.further details.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided over the estimated useful lives of the assets, generally 5 to 10 years,, using straight-line and accelerated methods.

Expenditures for major renewals and betterments are capitalized, while routine repairs and maintenance are expensed as incurred. When property items are retired or otherwise disposed of, the asset and related reserve accounts are relieved of the cost and accumulated depreciation, respectively, and the resultant gain or loss is reflected in earnings. As of ~~September~~June 30, 2023, the net balance of property and equipment is $119,106 with accumulated depreciation of $223,297. As of December 31, 2022, the net balance of property and equipment is $~~670,638~~140,886 with accumulated depreciation of $~~805,445. As of December 31, 2021, the net balance of property and equipment is $832,099~~ ~~with accumulated depreciation of $643,984~~201,517.

119

~~Intangible Assets~~

Patents represent legal and other fees associated with the registration of patents. The Company has five issued patents with the United States Patent and Trade Office (“USPTO”) as well as five issued international Patent Cooperation Treaty (“PCT”) patents. Patents are carried at cost and are being amortized on a straight-line basis over their estimated useful lives, typically ranging from 9 to ~~20 years~~.

The Company has trademark protection for “Vystar”, “Vytex”, and “RxAir” among others. Trademarks are carried at cost and since their estimated life is indeterminable, no amortization is recognized. Instead, they are evaluated annually for impairment.

~~Customer relationships, tradename and marketing related intangibles are carried at cost and are being amortized on a straight-line basis over their estimated useful lives, typically ranging from~~ 5 to ~~10 years~~.

Our intangible assets are reviewed for impairment annually or more frequently as warranted by events of changes in circumstances. As disclosed in Note 18, Rotmans will be closing its showroom at the end of 2022. At that time, the carrying amounts of our intangible assets may not be fully recoverable and an impairment charge will be recorded.

~~Long-Lived Assets~~

We review our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. We evaluate assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the assets. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value. Assets to be disposed of would be separately presented in the condensed consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the condensed consolidated balance sheet, if material. During the nine months ended September 30, 2022 and 2021, we did not recognize any impairment of our long-lived assets. As disclosed in Note 18, Rotmans will be closing its showroom at the end of 2022. At that time, the carrying amounts of the assets may not be fully recoverable and an impairment charge will be recorded.

~~Goodwill~~

Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. Goodwill is not amortized, rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. We perform our annual impairment test at the end of each calendar year, or more frequently if events or changes in circumstances indicate the asset might be impaired.

Accounting for acquisitions requires us to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While we use best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement.

The impairment model permits, and we utilize, a simplified approach for determining goodwill impairment. In the first step, we evaluate the recoverability of goodwill by estimating the fair value of our reporting unit using multiple techniques, including an income approach using a discounted cash flow model and a market approach. Based on an equal weighting of the results of these two approaches, a conclusion of fair value is estimated. The fair value is then compared to the carrying value of our reporting unit. If the fair value of a reporting unit is less than its carrying value, the Company recognizes this amount as an impairment loss. Impairment losses, limited to the carrying value of goodwill, represent the excess of the carrying amount of goodwill over its implied fair value.

~~As disclosed in Note 18, Rotmans will be closing its showroom at the end of 2022. At that time, goodwill will be reviewed and, if impaired, a loss will be recorded.~~

~~Convertible Notes Payable~~

Borrowings are recognized initially at the principal amount received. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as interest expense in the statements of operations over the period of the borrowings using the effective interest method.

~~Derivatives~~

The Company evaluates its debt instruments or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of Accounting Standards Codification (“ASC”) Topic 815-40, ~~Derivative Instruments and Hedging: Contracts in Entity’s Own Equity~~. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

The Company applies the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. From time to time, the Company has issued notes with embedded conversion features. Certain of the embedded conversion features contain price protection or anti-dilution features that result in these instruments being treated as derivatives for accounting purposes. Accordingly, as of September 30, 2022, the Company has classified all conversion features as derivative liabilities and has estimated the fair value of these embedded conversion features using a Monte Carlo simulation model.

Unearned Revenue

Unearned revenue consists of customer advance payments, deposits on sales of undelivered merchandise and deferred warranty revenue on self-insured stain protection warranty coverage.

Changes to unearned revenue during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are summarized as follows:

SCHEDULE OF UNEARNED REVENUE


	2022			2021			2023			2022

Balance, beginning of the period	$	1,122,195		$	2,427,771		$	44,479		$	79,368

Customer deposits received		9,368,761			20,250,952			-			300

Gift cards purchased		1,200			9,610

Revenue earned		(9,783,948	)		(21,140,827	)		(100	)		(34,058	)

Balance, end of the period	$	708,208		$	1,547,506		$	44,379		$	45,610

~~Loss~~Income (Loss) Per Share

The Company presents basic and diluted ~~loss~~income (loss) per share. AsFor the ~~Company reported a net loss in the nine~~three and six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and dilutive ~~loss~~income (loss) per share were the same. Excluded from the computation of diluted ~~loss~~income (loss) per share were options to purchase ~~266,000~~25,982 and ~~267,500~~265,250 shares of common stock for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, as their effect would be anti-dilutive. Warrants to purchase ~~38,483~~43,267 and ~~104,928~~38,859 shares of common stock for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, were also excluded from the computation of diluted ~~loss~~income (loss) per share as their effect would be anti-dilutive. In addition, preferred stock ~~series A~~ convertible to ~~33,607~~25,088,511 and ~~31,868~~32,434 shares of common stock for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, were excluded from the computation of diluted ~~loss per share as their effect would be anti-dilutive. Preferred stock series B and C convertible to~~ ~~3,771,152~~ ~~and~~ ~~19,466,562~~ ~~shares of common stock for the nine months ended September 30, 2022 were excluded from the computation of diluted loss~~income (loss) per share as their effect would be anti-dilutive. Both shareholder and Rotman Family contingently convertible notes of ~~2,249,987~~ ~~and~~ ~~3,862,190~~ ~~shares of common stock~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively,~~2022 were also excluded from the computation of diluted ~~loss~~income (loss) per share as ~~their effect would be anti-dilutive.~~no contingencies were met.

Revenue

Our principal activities from which we generate our revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. The contract is based on either the acceptance of standard terms and conditions at the retail store and on the websites for e-commerce customers, or the execution of terms and conditions contracts with retailers and wholesalers. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale.

Consideration is typically paid prior to shipment via credit card or check when our products are sold direct to consumers, which is typically within 1 to 2 days or approximately 30 days from the time control is transferred when sold to wholesalers, distributors and retailers. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and, in some circumstances, published credit and financial information pertaining to the customer.

A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for us is transfer of finished goods to our customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. We have concluded the sale of finished goods and related shipping and handling are accounted for as the single performance obligation.

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods to the customer. We issue refunds to retail, e-commerce and print media customers, upon request, within 30 days of delivery. We estimate the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. For retailers, distributors and wholesalers, we do not offer a right of return or refund and revenue is recognized at the time products are shipped to customers. Our RxAir units carry a one year warranty. In all cases, judgment is required in estimating these reserves. Actual claims for returns could be materially different from the estimates. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, reserves for estimated sales returns totaled $~~281,000~~49,000 and $~~337,000~~415,000, respectively, and are included in the accompanying condensed consolidated balance sheets as accrued expenses.

We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product is shipped based on fulfillment by the Company. The Company considers fulfillment when it passes all liability at the point of shipping through third party ~~carriers or in-house delivery services.~~carriers. Delivery fees are charged to customers and are included in revenue in the accompanying condensed consolidated statements of operations and the costs associated with these deliveries are included in revenues as ~~a third-party delivery service is~~third party carrier are engaged. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenue in the accompanying condensed consolidated statements of operations.

The Company also defers revenues for separately-priced stain protection warranty coverage for which it is ultimately self-insured. Revenue is recognized from the extended warranty sales on a straight-line basis over the respective contract term. The extended warranty terms primarily range from three to five years from the date of delivery. The Company ended this warranty program during 2020 but continues to amortize the previously contracted warranties over their original terms. The Company currently offers a separately-priced stain protection warranty serviced by a third-party. ~~At September 30, 2022 and December 31, 2021, deferred warranty revenue was approximately $301,000~~ ~~and $524,000~~, respectively, and is included in unearned revenue in the accompanying consolidated balance sheets. During the nine months ended September 30, 2022 and 2021, the Company recognized total revenues of approximately $~~217,000~~ ~~and $308,000~~, respectively, related to deferred warranty revenue arrangements. Commission costs in obtaining extended warranty contracts are capitalized and recognized as expense on a straight-line basis over the period of the warranty contract. At September 30, 2022 and December 31, 2021, deferred commission costs were approximately $~~76,000~~ ~~and $134,000~~, respectively, and are included in the accompanying condensed consolidated balance sheets. All other costs, such as costs of services performed under the contract, general and administrative expenses, and advertising costs are expensed as incurred.

~~Cost of Revenue~~

~~Cost of revenue consists primarily of product and freight costs and fees paid to online retailers.~~

~~Research and Development~~

Research and development costs are expensed when incurred. Research and development costs include all costs incurred related to the research, development and testing. For the nine months ended September 30, 2022 and 2021, Vystar’s research and development costs were not significant.

Advertising Costs

Advertising costs, which include television, radio, newspaper, digital and other media advertising, are expensed upon first showing. Advertising costs were approximately $~~850,000~~10,000 and $~~1,774,000~~14,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~Share-Based Compensation~~

The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of our common stock. The Company has elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14C to estimate the expected term of employee stock options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The value of restricted stock awards is determined using the fair value of the Company’s common stock on the date of grant. The Company accounts for forfeitures as they occur. Compensation expense is recognized on a straight-line basis over the requisite service period of the award.

~~Income Taxes~~

Vystar recognizes income taxes on an accrual basis based on a tax position taken or expected to be taken in its tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets or liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of ~~greater than 50%~~), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold will be measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more likely than not be realized. Should they occur, interest and penalties related to tax positions are recorded as interest expense. No ~~such interest or penalties have been incurred for the nine months ended September 30, 2022 and 2021.~~

~~The Company remains subject to income tax examinations from Federal and state taxing jurisdictions for 2019 through 2021.~~

~~Concentration of Credit Risk~~

Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash and accounts receivable. Cash held in operating accounts may exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limits. While the Company monitors cash balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, the Company has experienced no loss or lack of access to our cash; however, the Company can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets. Credit concentration risk related to accounts receivable is mitigated as customer credit is checked prior to the sales.

~~Other Risks and Uncertainties~~

The Company is exposed to risks pertinent to the operations of a retailer, including, but not limited to, the ability to acquire new customers and maintain a strong brand as well as broader economic factors such as interest rates and changes in customer spending patterns.

~~Recent Accounting Pronouncements~~

~~In August 2020, the FASB issued ASU 2020-06,~~ ~~Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).~~ The new ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in the ASU are effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board also specified that an entity should adopt the guidance as of the beginning of its annual fiscal year and is not permitted to adopt the guidance in an interim period. The Company is still evaluating the effect the adoption will have on its financial statements.

NOTE 3 - LIQUIDITY AND GOING CONCERN

The Company’s financial statements are prepared using the accrual method of accounting in accordance with U.S. GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. However, the Company has incurred significant losses and experienced negative cash flow since inception. At ~~September~~June 30, ~~2022,~~2023, the Company had cash of $~~160,686~~49,517 and a deficit in working capital of approximately $~~4.6~~4.4 million. Further, at ~~September~~June 30, ~~2022~~2023, the accumulated deficit amounted to approximately $~~54.5~~56.6 million. We use working capital to finance our ongoing operations, and since those operations do not currently cover all our operating costs, managing working capital is essential to our Company’s future success. Because of this history of losses and financial condition, ~~as well as the Rotmans going out of business sale as discussed in Note 18,~~ there is substantial doubt about the Company’s ability to continue as a going concern.

A successful transition to attaining profitable operations is dependent upon obtaining sufficient financing to fund the Company’s planned expenses and achieving a level of revenue adequate to support the Company’s cost structure. Management plans to finance future operations using cash on hand, increased revenue from RxAir air purification units, Vytex license fees and stock issuances to new and existing shareholders.

There can be no assurances the Company will be able to achieve projected levels of revenue in ~~2022~~2023 and beyond. If the Company is not able to achieve projected revenue and obtain alternate additional financing of equity or debt, the Company would need to significantly curtail or reorient operations during ~~2022,~~2023, which could have a material adverse effect on the ability to achieve the business objectives, and as a result, may require the Company to file bankruptcy or cease operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.

The Company’s future expenditures will depend on numerous factors, including: the rate at which the Company can introduce RxAir air purification units and license Vytex NRL raw materials to manufacturers, and subsequently retailers; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance of the Company’s products, services and competing technological developments; the Company’s ability to successfully acquire new customers and maintain a strong brand; and broader economic factors such as interest rates and changes in customer spending patterns. As the Company expands its activities and operations, cash requirements are expected to increase at a rate consistent with revenue growth after the Company has achieved sustained revenue generation.

~~NOTE 4 -~~~~INVESTMENTS – EQUITY SECURITIES~~

~~Investments, which represented equity securities in a publicly traded company, were sold during the nine months ended September 30, 2021 at a gain of approximately $16,000~~ ~~which is included in other income (expense).~~

NOTE 54 - PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT, NET

							June 30,			December 31,
	September 30,			December 31,			2023			2022
	2022			2021

Tooling and testing equipment							$	338,572		$	338,572
Furniture, fixtures and equipment	$	588,624		$	588,624			3,831			3,831
Tooling and testing equipment		338,572			338,572
Parking lots		365,707			365,707
Leasehold improvements		134,014			134,014
Motor vehicles		49,166			49,166

Property and equipment, gross		1,476,083			1,476,083			342,403			342,403
Accumulated depreciation		(805,445	)		(643,984	)		(223,297	)		(201,517	)

Property and equipment, net	$	670,638		$	832,099		$	119,106		$	140,886

Depreciation expense for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was $~~161,461~~21,780 ~~and $289,569, respectively.~~.

1712

NOTE 65 - INTANGIBLE ASSETS

Intangible assets consist of the following:

SCHEDULE OF INTANGIBLE ASSETS

														Amortization
	September 30,			December 31,			Amortization Period	June 30,			December 31,			Period
	2022			2021			(in Years)	2023			2022			(in Years)
Amortized intangible assets:
Customer relationships	$	150,000		$	150,000		6 - 10
Patents								$	361,284		$	361,284			6 - 20
Proprietary technology		280,000			280,000		10		13,000			13,000			10
Tradename and brand		1,050,000			1,050,000		5 - 10		13,000			13,000			5 - 10
Marketing related		380,000			380,000		5
Patents		361,284			361,284		6 - 20
Noncompete		50,000			50,000		5

Total		2,271,284			2,271,284				387,284			387,284
Intangible assets, gross									387,284			387,284
Accumulated amortization		(1,330,422	)		(1,071,486	)			(257,843	)		(241,985	)

Intangible assets, net		940,862			1,199,798				129,441			145,299
Indefinite-lived intangible assets:
Trademarks		9,072			9,072				9,072			9,072

Total intangible assets	$	949,934		$	1,208,870			$	138,513		$	154,371

Amortization expense for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was $~~258,936~~15,858 and $~~287,970~~48,458, respectively.

Estimated future amortization expense for finite-lived intangible assets is as follows:

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Amount

Remaining in 2022 $ 86,313
2023 338,638
2024 239,411
2025 90,550
2026 71,232
Thereafter 114,718

Total $ 940,862
18
Amount

Remaining in 2023 $ 15,858
2024 31,716
2025 24,652
2026 16,032
2027 16,032
Thereafter 25,151

Total $ 129,441

NOTE 76 - LEASES (DISCONTINUED OPERATIONS)

~~The Company~~Rotmans leases equipment, a showroom, offices and warehouse facilities. These leases expire at various dates through ~~2024~~2031 and have monthly base rents which range from $800 to $81,000. One of the leases may be terminated early by the lessor at the end of 2028 with ~~options to extend to 2031~~.a six-month notice.
13

The table below presents the lease costs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:
SCHEDULE OF LEASE COST
2023 2022 2023 2022
Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
September 30. September 30, June 30, June 30,
2022 2021 2022 2021 2023 2022 2023 2022

Operating lease cost $ 289,824 $ 396,937 $ 865,628 $ 1,189,481 $ 141,064 $ 288,134 $ 306,250 $ 575,804

Finance lease cost:

Amortization of right-of-use assets 30,276 45,912 114,450 137,736 - 39,706 - 84,174
Interest on lease liabilities 8,342 8,371 22,439 26,792 - 6,785 - 14,097

Total lease cost $ 328,442 $ 451,220 $ 1,002,517 $ 1,354,009 $ 141,064 $ 334,625 $ 306,250 $ 674,075

During the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized sublease income of approximately $~~102,000~~14,000 and $~~81,000~~68,000, respectively, which isin included in ~~other income (expense), net~~discontinued operations in the accompanying condensed consolidated statements of operations.

Our leases generally do not provide an implicit rate, and therefore we use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. We used incremental borrowing rates as of the implementation date for operating leases that commenced prior to that date.

The following table presents other information related to leases:
SCHEDULE OF OTHER INFORMATION RELATED TO LEASES
2023 2022 2023 2022
Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
September 30, September 30, June 30, June 30,
2022 2021 2022 2021 2023 2022 2023 2022

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used for operating leases $ 264,539 $ 375,911 $ 790,159 $ 1,127,733 $ 217,500 $ 262,004 $ 463,424 $ 525,620
Financing cash flows used for financing leases 35,572 52,427 130,732 157,281 - 45,499 - 95,160

Assets obtained in exchange for operating lease liabilities 320,732 - 320,732 - - - - -

Assets obtained in exchange for finance lease liabilities - - 4,739 - - - - -

Weighted average remaining lease term:
Operating leases 8.0 years 9 years 8.0 years 9 years 7.6 years 8.6 years 7.6 years 8.6 years
Finance leases 3.7 years 4.4 years 3.7 years 4.4 years 2.9 years 3.9 years 2.9 years 3.9 years

Weighted average discount rate:
Operating leases 5.61 % 5.59 % 5.61 % 5.59 % 5.60 % 5.60 % 5.60 % 5.60 %
Finance leases 5.16 % 5.16 % 5.16 % 5.16 % 5.16 % 5.16 % 5.16 % 5.16 %

1914

The future minimum lease payments required under operating and financing lease obligations as of ~~September~~June 30, ~~2022~~2023 having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS REQUIRED UNDER OPERATING AND FINANCING LEASE OBLIGATIONS
Operating Leases Finance Leases Total

Remainder of 2023 $ 585,927 $ 139,080 $ 725,007
2024 955,272 139,080 1,094,352
2025 870,000 139,080 1,009,080
2026 870,000 68,395 938,395
2027 870,000 - 870,000
Thereafter 2,682,500 - 2,682,500

Total undiscounted lease liabilities 6,833,699 485,635 7,319,334
Less: imputed interest (1,215,246 ) (42,108 ) (1,257,354 )

Net lease liabilities $ 5,618,453 $ 443,527 $ 6,061,980

Operating Leases Finance Leases Total

Remainder of 2022 $ 264,540 $ 34,770 $ 299,310
2023 1,049,351 139,080 1,188,431
2024 955,272 139,080 1,094,352
2025 870,000 139,080 1,009,080
2026 870,000 68,395 938,395
Thereafter 3,552,500 - 3,552,500

Total undiscounted lease liabilities 7,561,663 520,405 8,082,068
Less: imputed interest (1,454,613 ) (48,077 ) (1,502,690 )

Net lease liabilities $ 6,107,050 $ 472,328 $ 6,579,378
As of ~~September~~June 30, ~~2022, the Company does~~2023, Vystar and Rotmans do not have additional operating and finance leases that have not yet commenced.

NOTE 87 - NOTES PAYABLE AND LOAN FACILITY

~~Letter of Credit~~Discontinued Operations
~~The Company entered into a $125,000~~ ~~letter of credit agreement with Fidelity Co-operative Bank in November 2020. The pledged collateral of a $125,000~~ ~~cash deposit account is included in prepaid expenses and other. The letter of credit was required pursuant to an agreement with a third-party financial institution for customer financing.~~

~~Advances~~Advances/Receivable

On May 29, 2020, Rotmans entered into a sale promotion consulting agreement with a national furniture sales event company. Under the agreement, Rotmans appointed the third-party as its exclusive agent to assist with a high-impact sale. Before the sale, the agent advanced the Company funds of approximately $2,300,000 to pay off a bank line of credit and certain other vendors. The agent ~~will be~~was reimbursed for the advance from the proceeds of the sale. The initial sales agreement with the agent ended in May 2021. A new agreement was entered into with the agent in June 2021. The remaining inventories on hand were used to pay off the liability of the first sale and then simultaneously purchased back for the next sale. The agreement has been amended numerous times and ~~will end~~ended in October 2022 as disclosed in Note 18. The agent has a senior first priority security interest and lien in Rotmans inventories and other assets until all obligations and liabilities are satisfied. The outstanding balanceDecember 2022. At the conclusion of the ~~advance~~agreement, the remaining inventories were transferred to the agent. As of June 30, 2023 and December 31, 2022, a receivable is ~~approximately~~due from the agent for the inventories in the amount of $~~1,947,000~~187,342 and $~~2,082,000~~1,853,972 ~~as of September 30, 2022 and December 31, 2021,~~, respectively, and is included in ~~accounts payable in the accompanying condensed consolidated balance sheet.~~assets of discontinued operations.

~~Term Notes~~Continuing Operations
~~On April 16, 2020, Rotmans received $1,402,900~~ in loan funding from the Paycheck Protection Program (the “PPP”), established pursuant to the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). The unsecured loan (the “PPP Loan”) was evidenced by a promissory note of the Company dated April 16, 2020 (the “Note”) in the principal amount of $~~1,402,900~~ ~~with United Community Bank (the “Bank”), the lender. Under the terms of the Note and the PPP Loan, interest accrues on the outstanding principal at the rate of~~ ~~1.0% per annum. The term of the Note was two years, though it may be payable sooner in connection with an event of default under the Note.~~ ~~On January 24, 2021, the PPP loan was fully forgiven by the SBA.~~
~~On February 2, 2021, Rotmans received an additional $1,402,900~~ ~~in PPP loan funding from the SBA. The terms of the Note were the same as the original PPP Loan. On June 25, 2021, the PPP loan was fully forgiven by the SBA.~~
20

Shareholder, Convertible and Contingently Convertible Notes Payable

The following table summarizes shareholder, convertible and contingently convertible notes payable:
SCHEDULE OF ~~LONG-TERM~~LONG - TERM DEBT
June 30,
2023 December 31,
2022

Shareholder, convertible and contingently convertible notes $ 309,500 $ 309,500
Accrued interest 34,793 26,763

Total shareholder notes and accrued interest 344,293 336,263

Less: current maturities (344,293 ) (336,263 )

Total long-term debt $ - $ -

September 30, December 31,
2022 2021

Shareholder, convertible and contingently convertible notes $ 309,500 $ 1,241,895
Accrued interest 22,748 147,009

Total shareholder notes and accrued interest 332,248 1,388,904
Less: current maturities (332,248 ) (1,388,904 )

Total long-term debt $ - $ -
15

Shareholder Convertible Notes Payable
During the year ended December 31, 2018, the Company issued shareholder contingently convertible notes payable, some of which were for contract work performed by other entities in lieu of compensation and expense reimbursement, totaling approximately $~~335,000. The notes are (i) unsecured, (ii) bear interest at an annual rate of five percent (~~5~~%) from date of issuance, and (iii) are convertible at the Company’s option post April 19, 2018.~~ ~~The notes mature one year from issuance but may be extended one (1) additional year by the Company.~~ ~~If converted, the notes plus accrued interest are convertible into shares of the Company’s common stock at the prior twenty (20) day average closing price with a~~ 50~~% discount. The outstanding balance of all of these notes as of September 30, 2022 and December 31, 2021 is $19,500~~ ~~and $338,195, respectively. The notes matured in January 2020 and continue to accrue interest until settlement. The unpaid balance on the notes bears interest at an annual rate of eight percent (~~8~~%) in arrears. All of these notes except one were settled in April 2022 at a gain of approximately $98,000. The Company issued~~ ~~53,822~~ ~~shares of its preferred stock series B in July to complete the settlement.~~
~~During the year ended December 31, 2019, the Company issued certain contingently convertible promissory notes in varying amounts to existing shareholders which totaled $613,700. The face amount of the note represents the amount due at maturity along with the accrued interest at an annual rate of five percent (~~5~~%). The amount can be converted into shares of the Company’s stock, at the option of the Company, based on the average closing price for the trailing 20 days prior to conversion and carrying a~~ 35~~% to~~ 50% discount. These notes can be converted only after an acceleration event which involves a symbol change, uplisting, or reverse stock split and such conversion is in the control of the Company. All of these notes were settled in April 2022 at a gain of approximately $~~142,000. The Company issued~~ ~~98,933~~ ~~shares of its preferred stock series B in July to complete the settlement.~~

During the year ended December 31, 2021, the Company issued certain contingently convertible promissory notes in varying amounts to existing shareholders which totaled $290,000. The notes are unsecured and bear interest at an annual rate of five percent (5%) from date of issuance. The face amount of the notes represents the amount due at maturity along with the accrued interest. In the event that the spin-off of RxAir does not occur within 2023, the Company will convert these notes into common stock at a conversion price of $1.60. If the spin-off does occur, these notes will convert into RxAir common stock with two conversion prices of $0.15 and $2, which equates to a blended conversion price of $0.18. All of these notes are outstanding as of ~~September~~June 30, 2023 and December 31, 2022. At the issuance date of these notes, it was determined they contain a beneficial conversion feature amounting to approximately $90,000. As these notes are contingently convertible, the beneficial conversion feature will not be recorded on the consolidated financial statements until the actual conversion occurs.

~~Based on~~One note remains from the ~~variable conversion~~Company’s issuance of shareholder contingently convertible notes payable in 2018 and is (i) unsecured, (ii) bore interest at an annual rate of five percent (5%) from date of issuance, and (iii) is convertible at the Company’s option post April 19, 2018. The note matured one year from issuance and was extended one (1) additional year by the Company. If converted, the note plus accrued interest are convertible into shares of the Company’s common stock at the prior twenty (20) day average closing price with a 50% discount. The outstanding balance as of ~~these notes issued prior to 2021, the Company recorded the embedded conversion features as derivative liabilities, which amounted to $647,100~~ atJune 30, 2023 and December 31, ~~2021. With the debt settlements beginning~~2022 is $19,500. The note matured in ~~April 2022, the~~January 2020 and continues to accrue interest until settlement. The note is in default and bears interest at an annual rate of eight percent (8%) in arrears. The value of the embedded conversion features on the one remaining note was $~~17,800~~de minimis at ~~September~~June 30, 2023 and December 31, 2022.
21

Related Party Debt

The following table summarizes related party debt:
SCHEDULE OF RELATED PARTY DEBT
June 30, December 31,
2023 2022

Rotman Family convertible notes $ 5,000 $ 5,000
Rotman Family nonconvertible notes 140,000 140,000
Accrued interest 28,177 24,552

Due to related party 173,177 169,552
Less: current maturities (173,177 ) (169,552 )

Due to related party, noncurrent $ - $ -

September 30, December 31,
2022 2021

Rotman Family convertible notes $ 5,000 $ 1,967,737
Rotman Family nonconvertible notes 577,500 1,953,509
Accrued interest 33,525 384,238
Debt discount - (27,083 )

Long term debt, current 616,025 4,278,401
Less: current maturities (616,025 ) (1,487,000 )

Long term debt $ - $ 2,791,401
Rotman Family Convertible ~~Notes~~Note
~~On September 30, 2019, the Company issued contingently convertible promissory notes totaling $180,000~~ ~~to Steven Rotman ($105,000) and Greg Rotman ($75,000). These notes are (i) unsecured, (ii) bear interest at an annual rate of eight percent (~~8~~%) from date of issuance, (iii) are convertible at the Company’s option after December 31, 2019, and (iv) mature~~ ~~five years~~ from issuance. If converted, the notes plus accrued interest are convertible into shares of the Company’s common stock at the average of the five lowest closing prices in the 90-day period prior to conversion with a 50~~% discount. These notes were settled by the Company in July 2022 with the issuance of~~ ~~48,276~~ ~~and~~ ~~25,812~~ ~~shares of preferred stock series C to Steven and Greg Rotman, respectively. The balance of the notes payable including accrued interest to Steven and Greg Rotman is approximately $126,000~~ ~~and $66,000, respectively, at December 31, 2021.~~
~~On July 18, 2019, the Company issued contingently convertible notes totaling $1,522,500~~ ~~to Steven Rotman ($1,102,500) and Bernard Rotman ($420,000) as partial consideration for the acquisition of~~ 58~~% of Rotmans. These notes are (i) unsecured, and (ii) bear interest at an annual rate of five percent (~~5~~%) from date of issuance. These notes can be converted only after an acceleration event which involves a symbol change, or reverse stock split and such conversion is in the control of the Company.~~ ~~Steven Rotman’s note matures eight years from issuance and Bernard Rotman’s note matures four years from issuance.~~ ~~If converted, the notes plus accrued interest are convertible into shares of the Company’s common stock at a 20-day average closing price at a~~ 50~~% discount. These notes were settled by the Company in July 2022 with the issuance of~~ ~~474,336~~ ~~and~~ ~~180,699~~ ~~shares of preferred stock series C to Steven and Bernard Rotman, respectively. The balance of the notes payable including accrued interest to Steven and Bernard Rotman were approximately $1,238,000~~ ~~and $472,000, respectively, at December 31, 2021.~~
~~On December 19, 2019, the Company issued a contingently convertible promissory note totaling $100,000~~ ~~to Steven Rotman. The face amount of the note represents the amount due at maturity along with the accrued interest at~~ 5~~%. The amount can be converted into shares of the Company’s stock, at the option of the Company, based on the average closing price for the trailing 20 days prior to conversion and carrying~~ 50% discount. The note can be converted only after an acceleration event which involves a symbol change, uplisting, or reverse stock split and such conversion is in the control of the Company. The note was extended to mature ~~two years~~ ~~from issuance. This note was settled by the Company in July 2022 with the issuance of~~ ~~42,225~~ ~~shares of preferred stock series C. The balance of the note payable including accrued interest to Steven Rotman is approximately $110,000~~ ~~at December 31, 2021, respectively.~~
~~On February 20, 2020, the Company issued a contingently convertible promissory note totaling $50,000~~ ~~to Steven Rotman. The face amount of the note represents the amount due at maturity along with the accrued interest at~~ 5~~%. The amount can be converted into shares of the Company’s stock, at the option of the Company, based on the average closing price for the trailing 20 days prior to conversion and carrying~~ 50% discount. The note can be converted only after an acceleration event which involves a symbol change, uplisting, or reverse stock split and such conversion is in the control of the Company. The note matures ~~two years~~ ~~from issuance. This note was settled by the Company in July 2022 with the issuance of~~ ~~20,913~~ ~~shares of preferred stock series C. The balance of the note payable including accrued interest to Steven Rotman is approximately $55,000~~ ~~at December 31, 2021.~~
22
~~On June 3, 2021, the Company issued a contingently convertible promissory note totaling $130,030~~ ~~to Gregory Rotman. The face amount of the note represents the amount due at maturity along with the accrued interest at~~ 5~~%. The amount can be converted into shares of the Company’s stock, at the holder’s option, based on the average closing price for the trailing 20 days prior to conversion and carrying~~ 50~~% discount or $1.65~~ ~~per share whichever is lower. The holder may elect to accelerate conversion in the event of a spin-out or reverse split. The note matures~~ ~~two years~~ ~~from issuance. This note was settled by the Company in July 2022 with the issuance of~~ ~~51,896~~ ~~shares of preferred stock series C. The balance of the note payable including accrued interest to Gregory Rotman is approximately $134,000~~ ~~December 31, 2021.~~

On August 17, 2021, the Company issued a contingently convertible promissory note totaling $5,000 to Jamie Rotman. The note is unsecured and bears interest at an annual rate of five percent (5%) from date of issuance. The face amount of the note represents the amount due at maturity along with the accrued interest. In the event that the spin-off of RxAir does not occur within ~~2023,~~one year, the Company will convert the note into common stock at a conversion price of $1.60. If the spin-off does occur, the note will convert into RxAir common stock with two conversion prices of $0.15 and $2, which equates to a blended conversion price of $0.18. At the issuance date of this note, it was determined to contain a beneficial conversion feature amounting to approximately $2,000. As this note is contingently convertible, the beneficial conversion feature will not be recorded on the consolidated financial statements until the actual conversion occurs. The balance of the note payable including accrued interest to Jamie Rotman is approximately $5,000 at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.
16

The following table summarizes the Rotman Family Convertible ~~Notes:~~Note:
SCHEDULE OF NOTES PAYABLE

Carrying Amount
Principal September 30, December 31,
Issue Date Amount 2022 2021
Steven Rotman 8.00% note due July 2024 07/18/19 $ 105,000 $ - $ 126,000
Gregory Rotman 8.00% note due July 2024 07/18/19 55,207 - 66,264
Steven Rotman 5.00% note due July 2027 07/18/19 1,102,500 - 1,238,016
Bernard Rotman 5.00% note due July 2023 07/18/19 420,000 - 471,625
Steven Rotman 5.00% note due December 2021 12/19/19 100,000 - 110,208
Steven Rotman 5.00% note due February 2022 02/02/20 50,000 - 54,583
Gregory Rotman 5.00% note due June 2023 06/03/21 130,030 - 133,822
Jamie Rotman 5.00% note due August 2022 08/17/21 5,000 5,250 5,094

Debt instrument, carrying amount $ 1,967,737 5,250 2,205,612

Debt Discount - (27,083 )

Notes payable $ 5,250 $ 2,178,529
Based on the variable conversion price for these convertible notes excluding the one issued in August 2021, the Company recorded the embedded conversion features as derivative liabilities, which amounted to $~~1,131,000~~ ~~at December 31, 2021. With the subsequent conversions in July 2022, there was~~ no ~~value of the embedded conversion features at September 30, 2022.~~
Issue Date Principal Amount 2023 2022
Carrying Amount
June 30, December 31,
Issue Date Principal Amount 2023 2022
Jamie Rotman 5.00% note due August 2023 08/17/21 $ 5,000 $ 5,469 $ 5,344

Rotman Family Nonconvertible ~~Notes~~Note

In connection with the acquisition of 58% of Rotmans, ~~Steven and~~ Bernard Rotman ~~were~~was issued a related party ~~notes~~note payable in the ~~amounts~~amount of $~~367,500~~ ~~and $~~140,000~~, respectively. The notes bear interest at an annual rate of five percent (~~5%). ~~Steven Rotman’s note matures~~ ~~eight years~~ ~~from issuance and Bernard Rotman’s note matures~~ ~~four years~~ ~~from issuance. Payments of $3,828~~ ~~and $2,917~~ ~~to Steven and Bernard Rotman, respectively, per month were scheduled to begin six months from issuance until~~ ~~maturity in December 2027 and 2023, respectively. Steven Rotman’s note was settled by the Company in July with the issuance of~~ ~~158,112~~ ~~shares of preferred stock series C. The balance of Bernard Rotman’s note including accrued interest is approximately $162,000~~ ~~at September 30, 2022. The balance of these notes payable including accrued interest to Steven and Bernard Rotman is approximately $413,000~~ ~~and $157,000, respectively, at December 31, 2021.~~
23
~~During the six months ended December 31, 2020, Steven Rotman advanced the Company funds totaling $1,048,000. In December 2020, the Company formalized the advances and issued a promissory note to Steven Rotman.~~ The note bears interest at an annual rate of five percent (5%) and ~~was due one year~~matures four years from issuance. ~~The~~Monthly payments of $2,917 to Bernard Rotman were scheduled to begin six months from issuance until maturity ~~date has been extended to~~ in December ~~2022. The face amount of the note represents the amount due at maturity along with accrued interest. This note was settled by the Company in July 2022 with the issuance of~~ ~~427,296~~2023 ~~shares of preferred stock series C.~~. The balance of ~~the~~Bernard Rotman’s note ~~payable~~ including accrued interest ~~to Steven Rotman~~ is approximately $~~1,115,000~~168,000, and $164,000 at June 30, 2023 and December 31, ~~2021.~~2022, respectively, as no payments have been made to date.

~~During 2021, Steven~~The following table summarizes the Rotman ~~advanced the Company funds totaling $~~Family Nonconvertible Note:
~~398,009. The Company formalized the advances and issued promissory notes to Steven Rotman. The notes bear interest at an annual rate of five percent (~~5SCHEDULE OF NOTES PAYABLE%) and are due no later than two years from the issuance date. The face amount of the notes represents the amount due at maturity along with accrued interest. These notes were settled by the Company in July 2022 with the issuance of
Issue Date Principal Amount 2023 2022
Carrying Amount
June 30, December 31,
Issue Date Principal Amount 2023 2022
Bernard Rotman 5.00% note due July 2023 07/18/19 $ 140,000 $ 167,708 $ 164,208
~~158,908~~ ~~shares of preferred stock series C. The balance of the notes payable including accrued interest to Steven Rotman is approximately $~~
~~415,000~~Discontinued Operations Note ~~at December 31, 2021.~~

In April 2022, Blue Oar Consulting, Inc. (“Blue Oar”), an entity wholly owned by Gregory Rotman, advanced ~~the Company~~Rotmans $500,000 and paid bills totaling $100,000 on ~~the Company’s~~Rotmans behalf. ~~The Company~~Rotmans formalized the advances and issued a promissory note to Blue Oar. The note ~~bears~~bore interest at an annual rate of six percent (6%) and ~~requires~~required weekly payments of $12,500 until the note and interest is paid in full. The Company also granted Blue Oar a security interest in ~~Murida’s~~its inventory.
The ~~following table summarizes~~final principal payment on the ~~Rotman Family Nonconvertible Notes:~~
~~SCHEDULE OF NOTES PAYABLE~~

Carrying Amount
Principal September 30, December 31,
Issue Date Amount 2022 2021
Steven Rotman 5.00% note due July 2027 07/18/19 $ 367,500 $ - $ 412,672
Bernard Rotman 5.00% note due July 2023 07/18/19 140,000 162,458 157,208
Steven Rotman 5.00% note due December 2022 12/22/20 1,048,000 - 1,115,243
Steven Rotman 5.00% note due March 2023 03/31/21 395,000 - 411,652
Steven Rotman 5.00% note due June 2023 06/02/21 3,009 - 3,097
Blue Oar 6.00% note due May 2023 04/28/22 600,000 448,317 -

$ 2,553,509 $ 610,775 $ 2,099,872
~~Approximate maturities for the succeeding years are as follows:~~
~~SCHEDULE OF MATURITIES OF NOTES PAYABLE~~

Remainder of 2022 $ 345,000
2023 271,025

Long term debt $ 616,025
24
~~NOTE 9 -~~~~DERIVATIVE LIABILITIES~~
note balance was made in April 2023. As of ~~September~~June 30, ~~2022 and~~2023, unpaid accrued interest on the note totaled $22,518. As of December 31, ~~2021,~~2022, the ~~Company had a~~balance of the note payable including accrued interest was approximately $~~17,800~~407,000 and $~~1,778,100, respectively, derivative liability balance on the condensed consolidated balance sheet and recorded a gain from change in fair value of derivative liabilities of $240,300~~ ~~and $1,760,300~~ for the three months and nine months ended September 30, 2022, respectively. The derivative liability activity comes from the convertible notes payable. The Company analyzed the conversion features and warrants of the various note agreements for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these Convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion feature of the notes and recorded a derivative liability.
The embedded derivatives for the notes are carried on the Company’s condensed consolidated balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the condensed consolidated statement of operations and the associated fair value carrying amount on the consolidated balance sheet is adjusted by the change. The Company fair values the embedded derivative using a lattice-based valuation model or Monte Carlo simulation. With the settlement of all except one of the convertible notes payable, the balance has been significantly reduced as of September 30, 2022.
~~The following table summarizes the derivative liabilities~~ included in ~~the condensed consolidated balance sheet at September 30, 2022 and December 31, 2021:~~liabilities from discontinued operations.
~~Fair Value of Embedded Derivative Liabilities:~~
~~SCHEDULE OF DERIVATIVE LIABILITIES~~

2022 2021

Balance, beginning of the period $ 1,778,100 $ 1,766,700

Initial measurement of liabilities - 65,000

Change in fair value (1,760,300 ) (53,600 )

Balance, end of the period $ 17,800 $ 1,778,100
NOTE 108 - STOCKHOLDERS’ DEFICIT
Cumulative Convertible Preferred Stock

Series A Preferred Stock

On May 2, 2013, the Company began a private placement offering to sell up to 200,000 shares of the Company’s 10% Series A Cumulative Convertible Preferred Stock. Under the terms of the offering, the Company offered to sell up to 200,000 shares of preferred stock at $10 per share for a value of $2,000,000. The preferred stock was convertible at a conversion price of $7.50 per common share at the option of the holder after a nine-month holding period. The conversion price was lowered to $5.00 per common share for those holders who invested an additional $25,000 or more in ~~the Company’s~~Vystar’s common stock in the aforementioned September 2014 Private Placement. The preferred shares have full voting rights as if converted and have a fully participating liquidation preference. In the event of a liquidation, dissolution or winding up of the Company, the holders of Series A Preferred Stock shall be entitled to receive an amount equal to the dividends accumulated and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, plus a sum equal to $10 per share. As of June 30, 2023 and December 31, 2022, the liquidation preference totals approximately $175,000 and $170,000, respectively.
17

As of ~~September~~June 30, ~~2022,~~2023, the 8,698 shares of outstanding preferred stock had undeclared dividends of approximately $~~81,000~~88,000 and could be converted into ~~33,607~~34,135 shares of common stock, at the option of the holder.

As of December 31, ~~2021,~~2022, the 8,698 shares of outstanding preferred stock had undeclared dividends of approximately $~~75,000~~83,000 and could be converted into ~~32,303~~33,292 shares of common stock, at the option of the holder.
25

Series B Preferred Stock

On April 11, 2022, the Company amended its Articles of Incorporation to add the terms of a 10% Series B Cumulative Convertible Preferred Stock. Under the amendment, the number of shares authorized are 2,500,000. The preferred stock accumulates a 10% per annum dividend and is convertible into 101,000 shares of common stock at the option of the ~~holder.~~holder after a six-month holding period. The holders of Series B preferred stock have full voting rights as if converted and have a fully participating liquidation preference. In the event of a liquidation, dissolution or winding up of the Company, the holders of Series B Preferred Stock shall be entitled to receive an amount equal to the dividends accumulated and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, plus a sum equal to $7 per share. As of June 30, 2023 and December 31, 2022, the liquidation preference totals approximately $2,839,000 and $2,710,000, respectively.

As of ~~September~~June 30, ~~2022,~~2023, the 370,969shares of outstanding preferred stock had undeclared dividends of approximately $~~43,000~~ 242,000and could be converted into ~~3,771,519~~ 4,055,250 shares of common stock, at the option of the holder.
As of December 31, 2022, the 370,969 shares of outstanding preferred stock had undeclared dividends of approximately $108,000 and could be converted into 3,864,261shares of common stock, at the option of the holder.

Series C Preferred Stock

On July 8, 2022, the Company amended its Articles of Incorporation to add the terms of a 10% Series C Cumulative Convertible Preferred Stock. Under the amendment, the number of shares authorized are 2,500,000. The preferred stock accumulates a 10% per annum dividend and is convertible into 101,000 shares of common stock at the option of the ~~holder.~~holder after a six-month holding period. The holders of Series C preferred stock have full voting rights as if converted and have a fully participating liquidation preference. In the event of a liquidation, dissolution or winding up of the Company, the holders of Series C Preferred Stock shall be entitled to receive an amount equal to the dividends accumulated and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, plus a sum equal to $2.61 per share. As of June 30, 2023 and December 31, 2022, the liquidation preference totals approximately $5,481,000 and $5,233,000, respectively.

As of ~~September~~June 30, ~~2022,~~2023, the 1,917,973shares of outstanding preferred stock had undeclared dividends of approximately $~~75,000~~ 475,000and could be converted into ~~19,466,562~~ 20,999,125 shares of common stock, at the option of the holder.
As of December 31, 2022, the 1,917,973 shares of outstanding preferred stock had undeclared dividends of approximately $325,000 and could be converted into 20,425,550shares of common stock, at the option of the holder.

Common Stock and Warrants
~~During the nine months ended September 30, 2022, the Company retired~~ ~~200~~ ~~shares of previously issued common stock.~~ Included in stock subscription payable at ~~September~~June 30, 2023 and December 31, 2022, is $270,000 received under common stock subscription agreements for 180,000 shares during the year ended December 31, 2020.

18
Stock Subscription Payable

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company recorded $~~1,539,600~~1,901,322 and $~~1,247,549~~1,655,208, respectively, of stock subscription payable related to common stock to be issued. The following summarizes the activity of stock subscription payable during the period ended ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:
SCHEDULE OF ACTIVITY OF STOCK SUBSCRIPTION PAYABLE
Amount Shares

Balance, January 1, 2022 $ 1,247,549 605,058
Additions 659,647 1,552,386
Issuances (251,988 ) (25,568 )

Balance, December 31, 2022 1,655,208 2,131,876
Additions 246,114 3,455,456

Balance, June 30, 2023 $ 1,901,322 5,587,332
Amount Shares

Balance, January 1, 2021 $ 2,589,556 994,314
Additions, net 806,082 421,854
Issuances, net (2,148,089 ) (811,110 )

Balance, December 31, 2021 1,247,549 605,058
Additions, net 544,039 828,281
Issuances, net (251,988 ) (25,568 )

Balance, September 30, 2022 $ 1,539,600 1,407,771
26
NOTE 119 - REVENUES

The following table presents our revenues disaggregated by each major product category and service for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:
SCHEDULE OF REVENUES

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
% of % of % of % of
Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales
Merchandise:
Case Goods
Bedroom Furniture $ 481,765 13.5 $ 398,807 9.8 $ 1,167,928 11.0 $ 1,725,588 7.5
Dining Room Furniture 260,123 7.3 235,945 5.8 641,042 6.0 1,337,503 5.8
Occasional 327,709 9.2 422,044 10.4 1,285,605 12.1 3,186,248 13.8
Total case goods 1,069,597 30.0 1,056,796 26.0 3,094,575 29.1 6,249,339 27.1
Upholstery 1,271,872 35.6 1,627,212 40.0 4,027,753 38.0 8,200,995 35.4
Mattresses and Toppers 957,155 26.8 847,997 20.9 2,490,604 23.5 3,681,848 15.9
Broadloom, Flooring and Rugs 93,454 2.6 143,618 3.5 373,229 3.5 1,996,618 8.6
Warranty 115,892 3.2 142,709 3.5 371,144 3.5 589,729 2.5
Air Purification Units 25,617 0.7 192,755 4.7 167,848 1.6 1,783,965 7.7
Accessories and Other 38,484 1.1 55,510 1.4 82,209 0.8 648,226 2.8
Net sales $ 3,572,071 100.0 $ 4,066,597 100.0 $ 10,607,362 100.0 $ 23,150,720 100.0
Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
% of % of % of % of
Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales Net Sales
Air Purification Units $ 20,169 55.8 $ 38,941 85.9 $ 423,865 95.0 $ 142,231 84.2
Mattresses and Toppers 13,895 38.5 5,126 11.3 19,906 4.5 17,640 10.5
Other 2,062 5.7 1,256 2.8 2,262 0.5 8,972 5.3
Net sales $ 36,126 100.0 $ 45,323 100.0 $ 446,033 100.0 $ 168,843 100.0
NOTE 1210 - SHARE-BASED COMPENSATION

Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures.

In total, the Company recorded $~~658,004~~246,114 and $~~623,501~~476,805 of stock-based compensation for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, including shares to be issued related to consultants and board member stock options and common stock and warrants issued to non-employees. Included in stock subscription payable is accrued stock-based compensation of $~~1,269,600~~1,631,322 and $~~751,671~~1,385,208 at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

The Company used the Black-Scholes option pricing model to estimate the grant-date fair value of option and warrant awards:
● Expected Dividend Yield - because the Company does not currently pay dividends, the expected dividend yield is zero;
● Expected Volatility in Stock Price - volatility based on the Company’s trading activity was used to determine expected volatility;
● Risk-free Interest Rate - reflects the average rate on a United States Treasury Bond with a maturity equal to the expected term of the option; and
● Expected Life of Award - because we have minimal experience with the exercise of options or warrants for use in determining the expected life of each award, we used the option or warrant’s contractual term as the expected life.

In total for the ~~nine~~six months ended ~~September~~June 30, 2022, ~~and 2021,~~ the Company recorded $~~11,370~~7,682 ~~and $12,298, respectively,~~ of share-based compensation expense related to employee and Board Members’ stock options. The Company did not recognize any such share-based compensation for the six months ended June 30, 2023. There is no unrecognized compensation expense as of ~~September~~June 30, ~~2022~~2023 for non-vested share-based awards to be recognized over a period of less than one ~~year~~.year.

2719

Options

During 2004, the Board of Directors of the Company adopted a stock option plan (the “Plan”) and authorized up to 40,000 shares to be issued under the Plan. In April 2009, the Company’s Board of Directors authorized an increase in the number of shares to be issued under the Plan to 100,000 shares and to include the independent Board Members in the Plan in lieu of continuing the previous practice of granting warrants each quarter to independent Board Members for services. At ~~September~~June 30, ~~2022,~~2023, there are 22,518 shares of common stock available for issuance under the Plan. In 2014, the Board of Directors adopted an additional stock option plan which provides for an additional 50,000 shares which are all available as of ~~September~~June 30, ~~2022.~~2023. In 2019, the Board of Directors adopted an additional stock option plan with provides for 500,000 shares which are all available as of ~~September~~June 30, ~~2022.~~2023. The Plan is intended to permit stock options granted to employees to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the Plan that are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options. Stock options are granted at an exercise price equal to the fair market value of the Company’s common stock on the date of grant, typically vest over periods up to 4 years and are typically exercisable up to 10 ~~years~~. years.

There were no options granted during the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively. Forfeitures are recognized as they occur.

The following table summarizes all stock option activity of the Company for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:
SCHEDULE OF STOCK OPTION ACTIVITY
Weighted
Weighted Average
Average Remaining
Number Exercise Contractual
of Shares Price Life (Years)

Outstanding, December 31, 2022 265,267 $ 19.54 0.51

Granted - - -

Exercised - - -

Forfeited (222,000 ) $ 21.95 -

Outstanding, June 30, 2023 43,267 $ 7.16 0.96

Exercisable, June 30, 2023 43,267 $ 7.16 0.96
Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years)

Outstanding, December 31, 2021 271,750 $ 19.40 1.53

Granted - - -

Exercised (5,000 ) - -

Forfeited - - -

Outstanding, September 30, 2022 266,750 $ 19.63 0.76

Exercisable, September 30, 2022 266,000 $ 19.74 0.73
As of ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the aggregate intrinsic value of the Company’s outstanding options was minimal. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

Warrants

Warrants are issued to third parties as payment for services, debt financing compensation and conversion and in conjunction with the issuance of common stock. The fair value of each common stock warrant issued for services is estimated on the date of grant using the Black-Scholes option pricing model.

2820

The following table represents the Company’s warrant activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:
SCHEDULE OF WARRANT ACTIVITY
Number of Shares Weighted Average Fair Value Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Weighted
Average
Outstanding, December 31, 2021 101,743 - $ 8.19 2.36
Weighted Weighted Remaining
Number Average Average Contractual
of Shares Fair Value Exercise Price Life (Years)

Outstanding, December 31, 2022 37,266 - $ 7.57 1.31

Granted - - - - - - - -

Exercised (52,033 ) - - - - - - -

Forfeited - - - - - - - -

Expired (11,228 ) - $ 15.00 - (11,284 ) - $ 32.22 -

Outstanding, September 30, 2022 38,482 - $ 8.04 1.51
Outstanding, June 30, 2023 25,982 - $ 6.57 1.35

Exercisable, September 30, 2022 38,482 - $ 8.04 1.51
Exercisable, June 30, 2023 25,982 - $ 6.57 1.35
NOTE 1311 - RELATED PARTY TRANSACTIONS

Officers and Directors

Per Steven Rotman’s Employment agreement dated July 22, 2019, as amended, he is to be paid $125,000 per year in cash, $10,417 per month in shares based on a 20-day average price at a 50% discount to market, $5,000 per month in cash for expenses as well as access to a Company provided vehicle and health and life insurance. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company expensed approximately $~~319,000~~210,000 related to this employment agreement. As of ~~September~~June 30, ~~2022,~~2023, the Company had a stock subscription payable balance of $~~467,000~~730,954, or approximately ~~524,200~~ 2,491,000shares to be issued in the future and $~~153,155~~213,155 of reimbursable expenses payable and $116,403 of unpaid salary related to this party. ~~In addition,~~ ~~66,667~~ ~~shares are owed to this party under a stock subscription agreement dated in July 2020 for $100,000~~.
~~During the three months ended September 30, 2022, the Company issued~~ ~~1,330,066~~ ~~shares of preferred stock series C for the settlement of debt totaling $3,552,321. A loss of $1,900,950~~ ~~was recognized on the issuance and is included in other expenses for the period.~~

The Board of Directors authorized their board fees for 2021 be paid in common stock of the Company. Included in stock subscription payable at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 is 100,000 shares valued at $291,000, of which 20,000 shares valued at $58,200 is included in Steven Rotman’s balance above.

Blue Oar Consulting, Inc.
This entity is owned by Gregory Rotman, who is the son of the Company’s CEO, Steven Rotman. Blue Oar provides business consulting services to the Company. In exchange for such services, the Company has entered into a consulting agreement with the related party entity.

Per the consulting agreement, Blue Oar is to be paid $15,000per month in cash for expenses, and $12,500 per month to be paid in shares based on a 20-day average at a 50% discount to market. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company expensed approximately $~~351,000~~224,000 related to the consulting agreement. As of ~~September~~June 30, ~~2022,~~2023, the Company had a stock subscription payable balance of $~~497,000~~764,147, or approximately ~~607,500~~2,934,000 shares. ~~In addition,~~ ~~46,667~~ ~~shares are owed to this party under a stock subscription agreement dated in July 2020 for $70,000~~.
~~During the three months ended September 30, 2022, the Company issued~~ ~~221,385~~ ~~shares of preferred stock series C for the settlement of debt and payables totaling $702,161. A loss of $313,340~~ ~~was recognized on the issuance and is included in other expenses for the period.~~
29

Related Party Advances

~~During the nine months ended September~~As of June 30, ~~2022,~~2023, Gregory Rotman and Steven Rotman advanced the Company funds totaling $~~73,644~~269,659 and $~~19,087~~30,225, respectively. The advances are due on demand as repayment terms have not yet been finalized.
~~Bernard Rotman~~

~~On July 18, 2019, the Company issued a contingently convertible note totaling $420,000~~ ~~to Bernard Rotman as partial consideration for the acquisition of~~ 58~~% of Rotmans. During the three months ended September 30, 2022, the Company issued~~ ~~180,699~~ ~~shares of preferred stock series C for the settlement of this debt totaling $482,125. A loss of $69,007~~ ~~was recognized on the issuance and is included in other expenses for the period.~~
~~Fluid Energy Conversion Inc.~~
~~In May of 2019, the Company acquired the assets of Fluid Energy Conversion Inc. (“FEC”) for~~ ~~25,000~~ shares of common stock. FEC is owned by Dr. Bryan Stone, one of the Company’s directors. The assets consist of a patent on the Hughes Reactor, which has the ability to control, enhance and focus energy in flowing liquids and gases. Included in subscription stock payable at December 31, 2021 is $~~103,750~~ ~~representing the value of the~~ ~~25,000~~ ~~shares on the purchase date. The Company entered into a settlement in July 2022 and issued~~ ~~16,929~~ ~~shares of preferred stock series B in lieu of common stock. A gain of $36,034~~ ~~was realized on the settlement during the three months ended September 30, 2022 and is included in other expenses for the period.~~
Designcenters.com
This entity is owned by Jamie Rotman, who is the daughter of the Company’s CEO, Steven Rotman. Designcenters.com (“Design”) provided bookkeeping and management services to the Company through July 2019. In exchange for such services, the Company had entered into a consulting agreement with the related party entity. As of ~~September~~June 30, ~~2022,~~2023, the Company had a stock subscription payable balance of $42,000, for approximately 8,500 shares related to this party for services incurred and expensed in 2019.

21
NOTE 1412 - COMMITMENTS

Employment and Consulting Agreements

The Company has entered into employment and consulting agreements with certain of our officers, employees, and affiliates. For employees, payment and benefits would become payable in the event of termination by us for any reason other than cause, or upon change in control of our Company, or by the employee for good reason.

There is currently one employment agreement in place with the CEO, Steven Rotman. See compensation terms in Note ~~13.~~11.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company entered into various service agreements with consultants for financial reporting, advisory, and compliance services.

Litigation
From time to time, the Company is party to certain legal proceedings that arise in the ordinary course and are incidental to our business. Future events or circumstances, currently unknown to management, will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.
30

EMA Financial

On February 19, 2019, EMA Financial, Inc. filed a lawsuit in the Southern District of New York against the Company. The lawsuit alleged various breaches of an underlying convertible promissory note and stock purchase agreement and sought four claims for relief: (i) specific performance to enforce a stock conversion and contractual obligations; (ii) breach of contract; (iii) permanent injunction to enforce the stock conversion and contractual obligations; and (iv) legal fees and costs of the litigation. The complaint was filed with a motion seeking: (i) a preliminary injunction seeking an immediate resolution of the case through the stock conversion; (ii) a consolidation of the trial with the preliminary injunctive hearing; and (iii) summary judgment on the first and third claims for relief.

The Company filed an opposition to the motion and upon oral argument the motion for injunctive relief was denied. The Court issued a decision permitting a motion for summary judgment to proceed and permitted the Company the opportunity to supplement its opposition papers together with the plaintiff who was also provided opportunity to submit reply papers. On April 5, 2019, the Company filed the opposition papers as well as a motion to dismiss the first and third causes of action in the complaint. On March 13, 2020, the Court granted the Company’s motion dismissing the first and third claims for relief and denied the motion for summary judgment as moot.

The Company subsequently filed an amended answer with counterclaims. The affirmative defenses if granted collectively preclude the relief sought. In addition, Vystar filed counterclaims asserting: (a) violation of 10(b)(5) of the Securities and Exchange Act; (b) violation of Section 15(a)(1) of the Exchange Act (failure to register as a broker-dealer); (c) pursuant to the Uniform Declaratory Judgment Act, 28 U.S.C. §§ 2201, the Company requests the Court to declare: (i) pursuant to Delaware law, the underlying agreements are unconscionable; (ii) the underlying agreements are unenforceable and/or portions are unenforceable, such as the liquidated damages sections; (iii) to the extent the agreement is enforceable, Vystar in good faith requests the Court to declare the legal fee provisions of the agreements be mutual (d) unjust enrichment; (e) breach of contract (in the alternative); and (f) attorneys’ fees.

On June 10, 2020, EMA filed a motion for summary judgment as to its remaining claims for relief and a motion to dismiss the Company’s affirmative defenses and counterclaims. The Company opposed the motion on July 10, 2020, and the same was fully submitted to the Court on July 28, 2020. On March 29, 2021, the Court issued a decision granting in part and denying in part the motion. Specifically, the Court granted that part of the motion seeking summary judgment and dismissal on the Company’s affirmative defense and counterclaim regarding Sections 15(a)/29(b) of the Exchange Act. Two weeks later the Company filed a motion for reconsideration as to the dismissal portion of the order, or, for the alternative, a motion for certification for the right to file a petition to the Second Circuit Court of Appeals on the issue. The Court denied the motion for reconsideration and certification. Subsequently, fact discovery has been completed and on June 24, 2022 ~~the~~both parties submitted competing motions for summary judgment.

22
On EMA seeks summary judgment on its breach of contract and attorneys’ fees claims, specifically seeking damages in the amount of $1,820,000 with 24% interest premised on the argument it was entitled to effectuate a January 15 and February 5, 2019, notices of conversions. EMA further seeks to dismiss Vystar’s affirmative defenses and counterclaims. Conversely, Vystar filed its motion for summary judgment seeking an order to dismiss the EMA complaint on the grounds: (i) the underlying note was satisfied on December 11, 2018; and (ii) EMA, through multiple breaches of the note, over-converted the note by ~~365,756~~36,575,555 shares equating to a request of damages against EMA and in favor of Vystar for $4,802,000, with interest accruing at 24%, and attorneys’ fees. The briefing by the parties was fully submitted on July 29, ~~2022,~~2022.
On January 6, 2023, the Court issued a series of preliminary rulings based upon the parties’ respective summary judgment motions. Those rulings narrowed the outstanding issues (and claims) to only the parties’ breach of contract claim and ~~we now~~counterclaim (and affirmative defenses) regarding the conversion process. Of particular importance, the Court found EMA breached the note by failing to effectuate the conversions in the manner outlined by the controlling note. The Court further found the principal balance at issue was $80,000, interest accrued from the date set in the note and default interest, to the extent applicable, was to accrue at the default rate from September 2018, forward. The Court left undecided whether EMA’s breach of the note was material, whether affirmative defenses as previously raised by the parties were applicable to each parties’ contractual claim, and a damages analysis associated with the same. The Court then requested a supplemental briefing as to the issues of materiality, liability and damages. The issues were fully briefed and submitted on February 24 and March 15, 2023. The parties await a final decision byfrom the Court.

NOTE 1513 - MAJOR CUSTOMERS AND VENDORS

Major customers and vendors are defined as a customer or vendor from which the Company derives at least 10% of its revenue and cost of revenue, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company made approximately 1421% of its sales to one customer. Included in accounts payable is $1,429 at June 30, 2023 due to the customer for returned merchandise.
During the six months ended June 30, 2022, Rotmans made approximately 16% of its purchases from one major vendor. ~~The Company~~Rotmans owed its major vendor approximately $~~72,000~~81,000 at ~~September~~June 30, 2022.

~~During the nine months ended September 30, 2021, the Company made approximately~~ 17~~% of its purchases from one major vendor. The Company owed its major vendor approximately $167,000~~ ~~at September 30, 2021.~~
31
NOTE 1614 - INCOME TAXES

The provision (benefit) for income taxes for the ~~nine~~three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 assumes a 21% effective tax rate for federal income taxes. A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
SCHEDULE OF PROVISION FOR INCOME TAXES
2023 2022
Six Months Ended
June 30,
2023 2022

Federal statutory income tax rate (21.0 )% (21.0) %

Change in valuation allowance on net operating loss carryforwards 21.0 21.0

Effective income tax rate 0.0 % 0.0 %

23

Nine Months Ended
September 30,
2022 2021

Federal statutory income tax rate (21.0 )% (21.0 )%

Change in valuation allowance on net operating loss carryforwards 21.0 21.0

Effective income tax rate 0.0 % 0.0 %

Deferred tax assets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:
SCHEDULE OF DEFERRED TAX ASSETS
2023 2022

NOL carryforwards $ 8,350,000 $ 8,300,000

Less valuation allowance (8,350,000 ) (8,300,000 )

Deferred tax assets $ - $ -

2022 2021

NOL carryforwards $ 8,300,000 $ 7,275,000

Less valuation allowance (8,300,000 ) (7,275,000 )

Deferred tax assets $ - $ -
Deferred taxes are caused primarily by net operating loss carryforwards. U.S. Tax Legislation enacted in 2017 (the “TCJA”) has significantly changed certain aspects of U.S. federal income taxation. Net Operating Losses (“NOLs”) generated in 2017 and prior years can be carried forward for 20 years. NOLs generated in 2018 – 2020, as enacted by the CARES Act, can be carried forward indefinitely. However, NOLs generated ~~in 2021 is~~after 2020 can also carried forward indefinitely but limited to 80% of taxable income.

For federal income tax purposes, the Company has a net operating loss carryforward of approximately $~~39,600,000~~39,800,000 as of ~~September~~June 30, ~~2022,~~2023, of which approximately $18,400,000 expires beginning in 2024 and $~~21,200,000~~21,400,000 which can be carried forward indefinitely. For state income tax purposes, the Company has a net operating loss carryforward of approximately $18,400,000 and $~~20,900,000~~21,200,000 as of ~~September~~June 30, ~~2022~~2023 in Georgia and Massachusetts, respectively, which expires beginning in ~~2023.~~2038.

In addition, as of ~~September~~June 30, ~~2022,~~2023, Rotmans has a net operating loss carryforward of approximately $~~5,400,000~~5,500,000 for federal income tax purposes of which $~~1,500,000~~1,800,000 expires beginning in 2029 and $~~3,900,000~~3,700,000 can be carried forward indefinitely. Rotmans has a state operating loss carryforward of approximately $4,600,000 which expires beginning in ~~2022.~~2038.

Pursuant to Internal Revenue Code Section 382, the future realization of our net operating loss carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future.

NOTE 1715 - ~~PROFIT SHARING PLAN~~DISCONTINUED OPERATIONS

Rotmans closed its showroom on December 14, 2022. The Company ~~sponsors a qualified 401(k) profit sharing plan covering all eligible employees.~~has accounted for the closing as discontinued operations in accordance with ASC No. 205-20, Discontinued Operations. The ~~plan permits participants to make tax-deferred contributions to~~results of operations are reported as discontinued operations in 2023 and 2022. The assets and liabilities have been reported in the ~~plan by salary reduction. Company contributions are discretionary~~condensed consolidated balance sheets as assets and ~~are determined annually by the Board~~liabilities of ~~Directors.~~discontinued operations.

24
~~There were no Company contributions in 2022 and 2021. Participant and Company contributions are limited to amounts allowed under the Internal Revenue Code.~~

The ~~Company offers~~ no ~~post-retirement benefits other than~~loss from discontinued operations for the ~~plan discussed above~~three and ~~no significant post-employment benefits.~~six months ended June 30, 2023 and 2022 are as follows:
SCHEDULE OF DISCONTINUED OPERATIONS
2023 2022 2023 2022
Three Months Ended Six Months Ended
June 30, June 30,
2023 2022 2023 2022

Revenue $ 50,000 $ 3,150,710 $ 157,479 $ 6,866,448

Cost of revenue - 1,442,022 122,650 3,064,071

Gross profit 50,000 1,708,688 34,829 3,802,377

Operating expenses:
Salaries, wages and benefits 101,954 726,436 366,625 1,575,580
Agent fees - 327,007 - 745,186
Professional fees 23,099 111,326 121,692 167,916
Advertising (824 ) 306,103 66,456 593,357
Rent 181,061 177,184 360,843 352,518
Service charges 319 82,635 20,919 188,038
Depreciation and amortization 4,640 115,461 9,824 230,922
Other operating 124,733 367,469 651,238 820,797

Total operating expenses 434,982 2,213,621 1,597,597 4,674,314

Loss from operations (384,982 ) (504,933 ) (1,562,768 ) (871,937 )

Other income (expense):
Interest expense (76,737 ) (95,688 ) (160,439 ) (190,282 )
Gain on settlement of debt, net - - 39,770 -
Gain on sale of property and equipment 213,776 - 213,776 -
Other income 26,594 33,752 32,290 67,704

Total other income (expense), net 163,633 (61,936 ) 125,397 (122,578 )

Net loss from discontinued operations $
(221,349
) $
(566,869
) $
(1,437,371
) $
(994,515
)
25
Details of the balance sheet items for discontinued operations as are as follows:
2023 2022

Current assets:
Cash $ 131,112 $ 123,325
Accounts receivable 187,342 1,853,972
Other receivables 33,334 684,775
Inventories - 76,379
Prepaid expenses and other 399,616 288,520

Total current assets $ 751,404 $ 3,026,971

Non-current assets:
Property and equipment, net $ 114,889 $ 490,420
Operating lease right-of-use assets, net 6,642,285 7,008,276
Other assets 5,274 5,274

Total non-current assets $ 6,762,448 $ 7,503,970

Current liabilities:
Accounts payable $ 254,937 $ 339,426
Accrued expenses 125,525 726,410
Operating lease liabilities - current maturities 811,000 737,000
Finance lease liabilities - current maturities 181,000 119,000
Related party debt - current maturities 22,518 406,753

Total current liabilities $ 1,394,980 $ 2,328,589

Non-current liabilities:
Operating lease liabilities, net of current maturities $ 4,807,453 $ 5,189,140
Finance lease liabilities, net of current maturities 262,527 324,527

Total non-current liabilities $ 5,069,980 $ 5,513,667
The consolidated statements of cash flows do not present the cash flows from discontinued operations separately from cash flows from continuing operations. Included in adjustments to reconcile net loss to net cash used in operating activities for the six months ended June 30, 2023 and 2022 are the following discontinued operations items:
2023 2022

Depreciation $ 9,824 $ 106,756
Bad debts 4,537 3,461
Amortization of intangible assets - 124,166
Noncash lease expense 73,408 153,016
Gain on settlement of debt, net (39,770 ) -

NOTE 1816 - SUBSEQUENT EVENTS

~~In October 2022,~~Rotmans facilities lease was amended on August 10, 2023. Beginning in September 2023, in addition to the ~~Company announced it is closing~~monthly base rent, Rotmans will be responsible for the base year heating costs of $9,833 per month with any annual increase over the base year due within thirty days of receipt. A supplementary payment of $10,106 for insurance costs was made with the amendment. Rotmans ~~retail showroom~~also assumed liability for roof repairs for a specified building within the facilities; subleases will be deemed approved by the ~~end of~~lessor unless notified to the ~~year~~contrary within ten days, and the lessor has ~~started~~the option, with a ~~going out of business sale. The Company is exploring alternative uses for~~six-month notice, to terminate the ~~showroom in 2023 and reviewing the disposition of the remaining business assets. In addition, the Company’s 401(k) profit sharing plan will be terminated by~~lease after December 31, ~~2022.~~
~~As of September 30, 2022,~~2028. Simultaneously, two subleases were approved with occupancy scheduled to begin shortly. Base sublease rent in the ~~Company was in negotiations~~aggregate totals $30,993 per month with ~~its third-party agent to extend the repayment terms of advances totaling $1,947,000~~ due in October 2022. The agreement had previously been amended but this time, an extension could not be reached with the lender which triggered the going out of business sale. We will assess impairmentannual increases based on the ~~Company’s intangible assets, long-lived assets and goodwill during the fourth quarter.~~consumer price index. Each lease term is at least five years.

3226

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

This analysis of our results of operations should be read in conjunction with the accompanying financial statements. This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Statements that are predictive in nature and that depend upon or refer to future events or conditions are forward-looking statements. Although we believe that these statements are based upon reasonable expectations, we can give no assurance that projections will be achieved. Please refer to the discussion of forward-looking statements included in Part I of this Report.

About RxAir
RxAir promotes a healthy lifestyle through the use of its innovative, patented ViraTech air purification technology, thereby improving the quality of life of each and every customer. Independently tested by the U.S. Environmental Protection Agency (“EPA”) and U.S. Food and Drug Administration (“FDA”) certified laboratories, the RxAir has been proven to destroy greater than 99% of bacteria and viruses and reduce concentrations of odors and volatile organic compounds (“VOCs”). The RxAir uses high-intensity germicidal UV lamps that destroy bacteria and viruses instead of just trapping them, setting it apart from ordinary air filtration units. RxAir® and ViraTech® are registered trademarks of Vystar Corp. For more information, visit http://www.RxAir.com.

The Company’s RxAir product line use 48 inches of high-intensity germicidal UV lamps that destroy bacteria, viruses and other germs instead of just trapping them, setting it apart from ordinary air filtration units. RxAir is one of the few UV air purifiers that have been proven in independent EPA- and FDA- certified testing laboratories to destroy on the first pass 99.6% of harmful airborne viruses and bacteria. In addition to inactivating airborne viruses that cause influenza (flu) and colds, RxAir’s device disarms the airborne pathogens that cause MRSA (staph), strep (whooping cough), tuberculosis (TB), measles, pneumonia and a myriad of other antibiotic-resistant and viral infections.

The RxAir product line includes:

● RxAir™ Residential Filterless Air Purifier
● RX400 ™ FDA cleared Class II Filterless Air Purifier
● RX3000™ Commercial FDA cleared Class II Air Purifier

Vystar produces the RxAir product line with a new world-class manufacturer and an expert U.S. engineer with a full understanding of the RxAir technology. Vystar sells RxAir residential and commercial units through multiple distributors and the Company’s website. Once distribution channels are firmly established, Vystar expects the air purification products will produce margins of approximately 70%.

Vystar’s Board of Directors have approved preliminary plans to spin off the RxAir, Vytex and FEC product lines into a separate legal entity which Vystar intends to take public. Vystar anticipates retaining approximately 10% of the shares in the new entity and will distribute the remaining ownership percentage to Vystar shareholders. This plan is expected to be executed in ~~early~~late 2023.
33
~~About Rotmans~~
Rotmans, one of the largest independent furniture retailers in the U.S., encompassing over 170,000 square feet in Worcester, Mass., and employing approximately 50 people, was founded and has been under the leadership of the Rotman family for the past 50 years. Steven Rotman and a group of dedicated employees provide continuity of management and customer-focused values for the Company. As disclosed in subsequent events, Rotmans will be closing its retail showroom by the end of the year.

About Vytex

Vytex is a multi-patented latex raw material in which the allergy causing proteins are reduced to a level that falls at or below detection based on ASTM approved test methods. Vytex has been available as a raw material commercially for ~~fourteen~~over fifteen years and through that time has a group of manufacturers who use it in end products such as electrical gloves, condoms, adhesives, etc. Latex has been trading below $1,000 a metric tonne for some time now, hence a large oversupply heading into the winter. Synthetics are dominating the market.
Ironically, most use Vytex as it’s better for their manufacturing process as an easier to use raw material and not for protein properties. As of mid-2020 Vystar and the Indian Rubber Manufacturers Research Association’s (“IRMRA”) had been actively collaborating to develop viscoelastic deproteinized natural rubber (DPNR) variants having properties for expanding applications in specific new arenas such as green tires, biodegradable and other unique bioelastoplast product lines that desire a new approach. Additionally, this research, while slowed by the COVID-19 pandemic, showed attributes with extra low ammonia offerings that are desired.

Towards the end of 2020, Vystar entered into a Market Development and Distribution Agreement with Corrie MacColl, Ltd. (“CMC Global”) to produce, develop and manage the Vytex product and supply lines. This agreement allows Vystar to expand the market for its Natural Rubber Latex products and has garnered much attention across a broad range of industries including liquid Vytex as well as the newly developed dry rubber Vytex. As of the date of this report, CMC Global has provided numerous opportunities that are in a trial basis or moving towards manufacturing trials in industries that use a significant amount of natural rubber latex, hence Vytex that now includes production size trial runs in a large dipped product consumer line starting late 2022. Additionally Vystar now has a testing supply of Vytex dry rubber for larger trials. The success of early trials and the shipping crisis has led to broader spectrum of manufacturers combining the potential of Cameroon production with strategically placed contract manufacturers based on geographical needs including the North American maket. Also Vystar research has shown great strides in specializing liquid Vytex (ultra low protein latex, ULPL) to meet the immediate needs of customers such as low or no nitrosamine and others (discussed in the presentation below available in the pdf) and additional patents have been proposed to cover these findings. Research into dry rubber continues at a moderate pace as tire companies seek out alternatives to synthetics.

27
Vytex researcher Dr. Ranjit Matthan and CMC Global Director John Heath presented at The International Latex Conference which was held virtually July 20 to 22, 2021 and offered a plenary session entitled “Innovations and Sustainability in Natural Rubber Latex - The New Paradigm.” The presentation discussed the dramatic effect the COVID-19 pandemic has had on the natural rubber supply chain, and how the industry is reacting the new economic circumstances; including strategy and policy shifts in supply chain management and restoring greater geographic diversification of latex processing and product manufacturing. The R&D association with IRMRA promises quicker laboratory and field-based testing and evaluations downstream. At Vystar, the recalibrated sustainability programme (FSC, nitrosamines & ammonia free, ultralow proteins, no SVHC and green carbon neutrality) emphasize certifications with Corrie MacColl market reach facilitating faster rollouts. Nontraditional/non Hevea brasiliensis based production efforts are likely to continue to face new penetration and high cost-benefit acceptance challenges in this decade. A PDF of the full presentation is available on vytex.com.

Additionally, in August 2021, Dr. Matthan presented new data to the Automotive Tyre Manufacturers’ Association including Vytex dry rubber. ~~A follow up paper has been completed by Dr Matthan, John Heath and William Doyle and will run in Rubber World in early 2023.~~
In Halcyon Agri (owner of CMC Global), 2020 Corporate Report: “Our group-wide innovation capabilities have enabled us to engage in innovative commercial partnerships. Corrie MacColl is collaborating with Vystar Corporation to transform our Cameroon plantation output into ultra-pure latex with stronger molecular bond that offers enhanced strength, durability, and flexibility in the end products. This is achieved by removing non-rubber components and 99.85% of the proteins.” CMC Global continues to work with the facility at Cameroon to produce Vytex at their owned processing plant.

About FEC
Vystar is looking to Fluid Energy as it moves forward in its quest for a cleaner and safer environment. The Company is planning to improve its air purifying by using the ultrasonic technology of Fluid Energy and combining it with its leading UV-C technology. The designs and prototypes are in development. This ultrasonic technology is applied into water products with the same goal. We have working prototypes for our water product targets that have tested beyond expectation for bacterial killing and flow metering. We will begin soon evaluating our ability to eradicate hard water pollution that fouls pools, fountains, and pumps. These products will move us toward living more safely and cleanly in our environment.

~~Impact of COVID-19 and Economic Conditions on Our Business~~
The COVID-19 pandemic, its contributory effect on the economy and general economic conditions, has resulted in significant economic disruption and adversely impacted our business. It has caused, among other things, interruptions in our supply chains and suppliers, including potential problems with inventory availability and the potential result of the volatility or higher cost of product and international freight due to the high demand of products and low supply for an unpredictable period of time. In addition, discretionary consumer spending has been negatively affected by rising inflation, including fuel costs and interest rates. At this time, we cannot reasonably estimate the duration of the pandemic or general economic conditions and its influence on consumers and our business.
34
RESULTS OF OPERATIONS
Comparison of the Three Months Ended ~~September~~June 30, ~~2022~~2023 with the Three Months Ended ~~September~~June 30, ~~2021~~2022

Three Months Ended June 30,
2023 2022 $ Change % Change
CONSOLIDATED

Revenue $ 36,126 $ 45,323 $ (9,197 ) -20.3 %

Cost of revenue 5,913 25,942 (20,029 ) -77.2 %

Gross profit 30,213 19,381 10,832 55.9 %

Operating expenses:
Salaries, wages and benefits 74,282 59,495 14,787 24.9 %
Share-based compensation 107,204 338,857 (231,653 ) -68.4 %
Professional fees 6,269 22,146 (15,877 ) -71.7 %
Advertising 3,561 7,981 (4,420 ) -55.4 %
Rent 20,001 - 20,001 100.0 %
Service charges 3,568 2,437 1,131 46.4 %
Depreciation and amortization 18,819 35,119 (16,300 ) -46.4 %
Other operating 85,446 140,213 (54,767 ) -39.1 %

Total operating expenses 319,150 606,248 (287,098 ) -47.4 %

Loss from operations (288,937 ) (586,867 ) 297,930 -50.8 %

Other income (expense):
Interest expense (11,181 ) (111,489 ) 100,308 -90.0 %
Change in fair value of derivative liabilities - 1,463,000 (1,463,000 ) -100.0 %
Gain on settlement of debt, net - 230,820 (230,820 ) -100.0 %

Total other income (expense), net (11,181 ) 1,582,331 (1,593,512 ) -100.7 %

Net income (loss) from continuing operations (300,118 ) 995,464 (1,295,582 ) -130.1 %

Discontinued operations:
Loss from operations (221,349 ) (566,869 ) 345,520 -61.0 %

Net income (loss) (521,467 ) 428,595 (950,062 ) -221.7 %

Net loss attributable to noncontrolling interest 92,967 238,084 (145,117 ) -61.0 %

Net loss attributable to Vystar $ (428,500 ) $ 666,679 $ (1,095,179 ) -164.3 %
Three Months Ended September 30,
2022 2021 $ Change % Change
CONSOLIDATED

Revenue $ 3,572,071 $ 4,066,597 $ (494,526 ) -12.2 %

Cost of revenue 1,681,713 1,932,290 (250,577 ) -13.0 %

Gross profit 1,890,358 2,134,307 (243,949 ) -11.4 %

Operating expenses:
Salaries, wages and benefits 866,427 1,188,835 (322,408 ) -27.1 %
Share-based compensation 181,199 207,382 (26,183 ) -12.6 %
Agent fees 312,909 312,214 695 0.2 %
Professional fees 91,624 124,285 (32,661 ) -26.3 %
Advertising 242,902 365,369 (122,467 ) -33.5 %
Rent 195,950 331,056 (135,106 ) -40.8 %
Service charges 90,132 147,466 (57,334 ) -38.9 %
Depreciation and amortization 119,237 193,158 (73,921 ) -38.3 %
Other operating 585,082 812,817 (227,735 ) -28.0 %

Total operating expenses 2,685,462 3,682,582 (997,120 ) -27.1 %

Loss from operations (795,104 ) (1,548,275 ) 753,171 -48.6 %

Other income (expense):
Interest expense (107,869 ) (186,732 ) 78,863 -42.2 %
Change in fair value of derivative liabilities 240,300 (88,200 ) 328,500 -372.4 %
Loss on settlement of debt, net (2,481,231 ) - (2,481,231 ) 100.0 %
Other income (expense), net 34,443 (135,612 ) 170,055 -125.4 %

Total other expense, net (2,314,357 ) (410,544 ) (1,903,813 ) 463.7 %

Net loss (3,109,461 ) (1,958,819 ) (1,150,642 ) 58.7 %

Net loss attributable to noncontrolling interest 134,849 439,512 (304,663 ) -69.3 %

Net loss attributable to Vystar $ (2,974,612 ) $ (1,519,307 ) $ (1,455,305 ) 95.8 %
28

Revenues

Revenues for the three months ended ~~September~~June 30, 2023 and 2022 were $36,126 and ~~2021 were $3,572,071 and $4,066,597,~~$45,323, respectively, for ana decrease of ~~$494,526~~$9,197 or ~~12.2%~~20.3%. The decrease in revenues ~~was due~~can be attributed to ~~the~~a reduction in discretionary consumer spending due to rising ~~inflation in 2022.~~costs.

The Company reported ~~a decrease in~~ gross profit ~~to $1,890,358~~of $30,213 for the three-month period ended ~~September~~June 30, ~~2022~~2023 compared to gross profit of ~~$2,134,307~~$19,381 for the three-month period ended ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$243,949~~$10,832 or ~~11.4%~~55.9%. The ~~decrease~~increase in gross profit is ~~consistent with~~attributable to the ~~decrease in revenues.~~sale of slow-moving inventory items and the overall mix of products sold.

The cost of revenue for the three months ended ~~September~~June 30, 2023 and 2022 was $5,913 and ~~2021 was $1,681,713 and $1,932,290,~~$25,942, respectively, a decrease of ~~$250,577~~$20,029 or ~~13.0%.~~
35
~~Operating Expenses~~
The Company’s operating expenses consist primarily of compensation and support costs for management and administrative staff, and for other general and administrative costs, including professional fees related to accounting, finance, and legal services as well as advertising, rent and other operating expenses. The Company’s operating expenses were $2,685,462 and $3,682,582 for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $997,120 or 27.1%77.2%. The decrease ~~was due in part~~is attributable to ~~reduced revenues and~~higher reserves being maintained on slow-moving inventory which directly offsets the ~~closing of a second warehouse occupied by Rotmans until October 2021.~~
~~Other Expense~~
Other expense for the three months ended September 30, 2022 was $2,314,357 which consisted of interest expense of $107,869, change in fair value of derivative liabilities of ($240,300), loss on settlement of debt, net of $2,481,231 and other income of $34,443. This compares to other expense of $410,544 for the three months ended September 30, 2021, which consisted of interest expense of $186,732, change in fair value of derivative liabilities of $88,200 and other expense of $135,612. Loss on settlement of debt, net resulted from the settlement of notes and vendor payables with preferred stock series B and C in July and September 2022.
~~Net Loss~~
Net loss was $3,109,461 and $1,958,819 for the three months ended September 30, 2022 and 2021, respectively, an increase of $1,150,642 or 58.7%. Net loss in the quarter ended September 30, 2022 versus net loss in the same period in 2021 was due to a reduced operating loss which was offset by loss on settlement of debt, net.
~~RESULTS OF OPERATIONS~~
~~Comparison~~carrying cost of the ~~Nine Months Ended September 30, 2022 with the Nine Months Ended September 30, 2021~~products sold.
Nine Months Ended September 30,
2022 2021 $ Change % Change
CONSOLIDATED

Revenue $ 10,607,362 $ 23,150,720 $ (12,543,358 ) -54.2 %

Cost of revenue 4,809,951 10,576,205 (5,766,254 ) -54.5 %

Gross profit 5,797,411 12,574,515 (6,777,104 ) -53.9 %

Operating expenses:
Salaries, wages and benefits 2,560,840 4,713,623 (2,152,783 ) -45.7 %
Share-based compensation 658,004 623,501 34,503 5.5 %
Agent fees 1,058,095 2,641,654 (1,583,559 ) -59.9 %
Professional fees 414,498 343,246 71,252 20.8 %
Advertising 850,474 1,774,022 (923,548 ) -52.1 %
Rent 556,861 967,287 (410,426 ) -42.4 %
Service charges 282,376 456,481 (174,105 ) -38.1 %
Depreciation and amortization 420,397 577,539 (157,142 ) -27.2 %
Other operating 1,748,378 2,490,302 (741,924 ) -29.8 %

Total operating expenses 8,549,923 14,587,655 (6,037,732 ) -41.4 %

Loss from operations (2,752,512 ) (2,013,140 ) (739,372 ) 36.7 %

Other income (expense):
Interest expense (494,355 ) (540,062 ) 45,707 -8.5 %
Change in fair value of derivative liabilities 1,760,300 (1,400 ) 1,761,700 -125835.7 %
Gain (loss) on settlement of debt, net (2,250,411 ) 2,675,926 (4,926,337 ) -184.1 %
Other income (expense), net 102,147 (35,688 ) 137,835 -386.2 %

Total other income (expense), net (882,319 ) 2,098,776 (2,981,095 ) -142.0 %

Net income (loss) (3,634,831 ) 85,636 (3,720,467 ) -4344.5 %

Net (income) loss attributable to noncontrolling interest 552,545 (823,363 ) 1,375,908 -167.1 %

Net income (loss) attributable to Vystar $ (3,082,286 ) $ (737,727 ) $ (2,344,559 ) 317.8 %
~~Revenues~~
Revenues for the nine months ended September 30, 2022 and 2021 were $10,607,362 and $23,150,720, respectively, for a decrease of $12,543,358 or 54.2%. The decrease in revenues was due to the success of the high impact closing to remodel sale at Rotmans in 2021 and the reduction in discretionary consumer spending due to rising inflation in 2022.
The Company reported a significant decrease in gross profit to $5,797,411 for the nine month period ended September 30, 2022 compared to gross profit of $12,574,515 for the nine month period ended September 30, 2021, a decrease of $6,777,104 or 53.9%. The decrease in gross profit is consistent with the decrease in revenues.
~~The cost of revenue for the nine months ended September 30, 2022 and 2021 was $4,809,951 and $10,576,205, respectively, a decrease of $5,766,254 or 54.5%.~~
36

Operating Expenses

The Company’s operating expenses consist primarily of compensation and support costs for management and administrative staff, and for other general and administrative costs, including professional fees related to accounting, finance, and legal services as well as advertising, rent and other operating expenses. The Company’s operating expenses were ~~$8,549,923~~$319,150 and ~~$14,587,655~~$606,248 for the ~~nine~~three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, a decrease of ~~$6,037,732~~$287,098 or ~~41.4%~~47.4%. The decrease was partly due to a reduction in ~~part to reduced revenues~~share-based compensation for legal and ~~the closing of a second warehouse occupied by Rotmans until October 2021.~~supplemental consulting services.

Other Income (Expense)
Other ~~income (expense)~~expense for the ~~nine~~three months ended ~~September~~June 30, ~~2022~~2023 was ~~($882,319)~~$11,181 which consisted of interest ~~expense~~expense. This compares to other income of ~~($494,355),~~$1,582,331 for the three months ended June 30, 2022, which consisted of change in fair value of derivative liabilities of ~~$1,760,300, loss~~$1,463,000, gain on settlement of debt, net of ~~($2,250,411)~~$230,820 and other income of $102,147. Loss on settlement of debt, net resulted from the settlement of notes and vendor payables with preferred stock series B and C in 2022. This compares to other income (expense) of $2,098,776 for the nine months ended September 30, 2021, which consisted of interest expense of ~~($540,062),~~$111,489.
Discontinued Operations
Loss from discontinued operations for the three months ended June 30, 2023 and 2022 was $221,349 and $566,869, respectively, for a decrease of $345,520 or 61%. The loss in 2023 included post-closing store costs and fixed costs which exceeded revenues earned from inventory sales. The loss in 2022 reflected decreased revenues due to rising inflation which resulted in changes in discretionary consumer spending.
Net Income (Loss)
Net loss was $521,467 for the three months ended June 30, 2023 compared to net income of $428,595 for the three months ended June 30, 2022, a decrease of $950,062 or 221.7%. Net income in the quarter ended June 30, 2022 was primarily due to the change in fair value of derivative liabilities of ~~($1,400),~~$1,463,000 upon settlement of shareholder notes payable and related party debt which contained embedded conversion features.
29
RESULTS OF OPERATIONS
Comparison of the Six Months Ended June 30, 2023 with the Six Months Ended June 30, 2022
Six Months Ended June 30,
2023 2022 $ Change % Change
CONSOLIDATED

Revenue $ 446,033 $ 168,843 $ 277,190 164.2 %

Cost of revenue 82,611 64,167 18,444 28.7 %

Gross profit 363,422 104,676 258,746 247.2 %

Operating expenses:
Salaries, wages and benefits 129,211 118,833 10,378 8.7 %
Share-based compensation 246,114 476,805 (230,691 ) -48.4 %
Professional fees 61,711 154,959 (93,248 ) -60.2 %
Advertising 10,226 14,215 (3,989 ) -28.1 %
Rent 40,002 8,393 31,609 376.6 %
Service charges 4,372 4,206 166 3.9 %
Depreciation and amortization 37,638 70,238 (32,600 ) -46.4 %
Other operating 173,802 342,499 (168,697 ) -49.3 %

Total operating expenses 703,076 1,190,148 (487,072 ) -40.9 %

Loss from operations (339,654 ) (1,085,472 ) 745,818 -68.7 %

Other income (expense):
Interest expense (21,518 ) (196,204 ) 174,686 -89.0 %
Change in fair value of derivative liabilities - 1,520,000 (1,520,000 ) -100.0 %
Gain on settlement of debt, net - 230,820 (230,820 ) -100.0 %

Total other income (expense), net (21,518 ) 1,554,616 (1,576,134 ) -101.4 %

Net income (loss) from continuing operations (361,172 ) 469,144 (830,316 ) -177.0 %

Discontinued operations:
Loss from operations (1,437,371 ) (994,515 ) (442,856 ) 44.5 %

Net loss (1,798,543 ) (525,371 ) (1,273,172 ) 242.3 %

Net loss attributable to noncontrolling interest 603,696 417,696 186,000 44.5 %

Net loss attributable to Vystar $ (1,194,847 ) $ (107,675 ) $ (1,087,172 ) 1009.7 %
Revenues
Revenues for the six months ended June 30, 2023 and 2022 were $446,033 and $168,843, respectively, for an increase of $277,190 or 164.2%. The increase in revenues was primarily due to sales to distributors and income recognized upon the satisfaction of the warranty coverage term on RxAir units.
The Company reported gross profit of $363,422 for the six-month period ended June 30, 2023 compared to gross profit of $104,676 for the six-month period ended June 30, 2022, an increase of $258,746 or 247.2%. The increase in gross profit is attributable to the income recognized upon the satisfaction of the RxAir warranty coverage term.
The cost of revenue for the six months ended June 30, 2023 and 2022 was $82,611 and $64,167, respectively, an increase of $18,444 or 28.7%. The increase is consistent with increased product sales.
30
Operating Expenses
The Company’s operating expenses consist primarily of compensation and support costs for management and administrative staff, and for other general and administrative costs, including professional fees related to accounting, finance, and legal services as well as advertising, rent and other operating expenses. The Company’s operating expenses were $703,076 and $1,190,148 for the six months ended June 30, 2023 and 2022, respectively, a decrease of $487,072 or 40.9%. The decrease was partly due to a reduction in share-based compensation for legal and supplemental consulting services and cost cutting of general and administrative expenditures.
Other Income (Expense)
Other expense for the six months ended June 30, 2023 was $21,518 which consisted of interest expense. This compares to other income of $1,554,616 for the six months ended June 30, 2022, which consisted of change in fair value of derivative liabilities of $1,520,000, gain on settlement of debt, net of ~~$2,675,926~~$230,820 and ~~other~~interest expense of ~~($35,688). Included in gain on settlement of debt, net is PPP loan forgiveness of $2,805,800.~~$196,204.

~~Net Income (Loss)~~Discontinued Operations

~~Net income (loss) was ($3,634,831) and $85,636~~Loss from discontinued operations for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 was $1,437,371 and ~~2021,~~$994,515, respectively, ~~a decrease~~for an increase of ~~$3,720,467~~$442,856 or ~~4,344.5%~~44.5%. The loss in 2023 included post-closing store costs and fixed costs which exceeded revenues earned from inventory sales.
Net Loss
Net loss was $1,798,543 and $525,371 for the six months ended June 30, 2023 and 2022, respectively, an increase of $1,273,172 or 242.3%. Net loss in the ~~nine~~six months ended ~~September~~June 30, 2022 ~~versus net income in the same period in 2021~~ was due to PPP loan forgiveness of $2,805,800 and increased sales and margins from the operations of a high impact closing to remodel sale at Rotmans in 2021. The net loss in 2022 was increased by the loss on settlement of debt, net partially offsetsignificantly reduced by the change in fair value of derivative liabilities of ~~$1,760,300.~~$1,520,000 upon settlement in April 2022 of shareholder convertible notes payable and pending settlement of related party debt in July and September 2022 which contained embedded conversion features.

LIQUIDITY AND CAPITAL RESOURCES
The Company’s financial statements are prepared using the accrual method of accounting in accordance with U.S. GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. However, we have incurred significant losses and experienced negative cash flow since inception. At ~~September~~June 30, ~~2022,~~2023, the Company had cash of ~~$160,686~~$49,517 and a deficit in working capital of approximately ~~$4.6~~$4.4 million. Further, at ~~September~~June 30, ~~2022,~~2023, the accumulated deficit amounted to approximately ~~$54.5~~$56.6 million. We use working capital to finance our ongoing operations, and since those operations do not currently cover all of our operating costs, managing working capital is essential to our Company’s future success. Because of this history of losses and financial condition, ~~as well as the Rotmans going out of business sale as discussed in Note 18,~~ there is substantial doubt about the Company’s ability to continue as a going concern.

A successful transition to profitable operations is dependent upon obtaining sufficient financing to fund the Company’s planned expenses and achieving a level of revenue adequate to support the Company’s cost structure.

Management plans to finance future operations using cash on hand, as well as increased revenue from RxAir air purifier sales and Vytex license fees. The Company will also raise capital with common stock subscription issuances.

There can be no assurances that we will be able to achieve projected levels of revenue in ~~2022~~2023 and beyond. If we are not able to achieve projected revenue and obtain alternate additional financing of equity or debt, we would need to significantly curtail or reorient operations during ~~2022,~~2023, which could have a material adverse effect on our ability to achieve our business objectives, and as a result, may require the Company to file bankruptcy or cease operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
31

Our future expenditures will depend on numerous factors, including: the rate at which we can introduce RxAir products and license Vytex NRL raw material and the foam cores made from Vytex to manufacturers and subsequently retailers; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, along with market acceptance of our products, and services and competing technological developments. As we expand our activities and operations, our cash requirements are expected to increase at a rate consistent with revenue growth after we achieve sustained revenue generation.

37
Sources and Uses of Cash

Net cash used in operating activities was ~~$395,427~~$165,192 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to net cash used in operating activities of ~~$2,768,529~~$507,409 for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, cash ~~used in~~provided by operations was primarily due to the net loss offset by the ~~decrease~~increase of ~~inventories and other receivables,~~assets of discontinued operations, and non-cash related add-back of share-based compensation expense, depreciation ~~amortization, loss on settlement of debt, net~~ and ~~change in fair value of derivative liabilities.~~amortization.

~~The Company had~~Net cash provided by investing activities was $579,483 during the six months ended June 30, 2023 and represented proceeds from the sale of property and equipment. There was no cash provided by investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2022 as compared to $399,170 for the nine months ended September 30, 2021.~~2022.

Net cash used in financing activities was $369,261 during the six months ended June 30, 2023, as compared to net cash provided by financing activities ~~was $404,938~~of $426,257 during the ~~nine~~six months ended ~~September~~June 30, ~~2022, as compared to cash provided of $2,095,451 during~~2022. During the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2023, cash was provided by related party advances of $33,343 which was offset by cash flows used in discontinued operations of $402,604. During the ~~nine~~six months ended ~~September~~June 30, 2022, cash was provided by related party ~~term debt and~~ advances of $592,731 and preferred stock issuances of $85,000 which was offset by the repayment of finance lease obligations of $110,293 and repayment of related party debt of $162,500. During the nine months ended September 30, 2021, cash was provided by PPP loan proceeds of $1,402,900, related party term debt in the amount of ~~$533,039~~$69,820 and ~~convertible notes payable~~cash flows provided by discontinued operations of ~~$290,000 offset by the repayment of finance lease obligations of $130,488.~~$356,437.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that may be reasonably likely to have a current or future material effect on our financial condition, liquidity, or results of operations.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; product development, introduction and acceptance; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
~~ITEM 3.~~ ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None

32
~~ITEM 4.~~ ~~CONTROLS AND PROCEDURES~~
ITEM 4.CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer and Chief Financial Officer (the “Certifying Officer”) is responsible for establishing and maintaining disclosure controls and procedures for the Company. Although the Certifying Officer has designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which this report was prepared, certain material weaknesses occurred during the period ended ~~September~~June 30, ~~2022~~2023 and subsequent to period end. The Certifying Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e) (the “Rules”) under the Securities Exchange Act of 1934 (or “Exchange Act”) as of the end of the period covered by this Quarterly Report and is working on improving controls with an outside CPA firm and ~~dedicated~~ internal resources.
38

Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d - 15(f) under the Securities Exchange Act of 1934). Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that our receipts and expenditures are made in accordance with management authorization; and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting, however well designed and operated, can provide only reasonable, and not absolute, assurance that the controls will prevent or detect misstatements. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

Management, under the supervision and with the participation of our Chief Executive Officer and our acting Chief Financial Officer, conducted an evaluation of our internal control over financial reporting as of ~~September~~June 30, ~~2022,~~2023, based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) 2013. Based on our evaluation under the COSO framework, management concluded that our internal control over financial reporting was not effective as of ~~September~~June 30, ~~2022.~~2023. Such conclusion was reached based on the following material weaknesses noted by management:

a) We have a lack of segregation of duties due to the small size of the Company.

b) The Company did not maintain reasonable control over records underlying transactions necessary to permit preparation of the Company’s financial statements.

c) Lack of controls that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposal of the Company’s assets that could have a material effect on the financial statements.

d) Lack of a formal CFO position who can devote significant attention to financial reporting resulted in multiple audit adjustments.

e) Lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. Management believes the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future period.

Management expects to strengthen internal control during ~~2022~~2023 by developing stronger business and financial processes for accounting for transactions such as warrant/stock issuances, which will enhance internal control for the Company.
3933

PART II. OTHER INFORMATION
~~ITEM 1.~~ ~~LEGAL PROCEEDINGS~~
ITEM 1.LEGAL PROCEEDINGS

The Company is subject to legal proceedings and claims that have not been fully resolved and have arisen in the ordinary course of business. See the discussion of pending legal proceedings in Note 1412 of the Notes to Condensed Consolidated Financial Statements.
~~ITEM 2.~~ ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

During the three months ended September 30, 2022, the Company issued 32,566 shares of preferred stock series C under stock subscription agreements dated in September 2022 for $85,000. Other issuance in the quarter were in connection with settlements of convertible and related party notes, share based compensation and vendor payables.ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None
~~ITEM 3.~~ ~~DEFAULTS UPON SENIOR SECURITIES~~
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None
~~ITEM 4.~~ ~~MINE SAFETY DISCLOSURES~~
ITEM 4.MINE SAFETY DISCLOSURES

Not applicable
~~ITEM 5.~~ ~~OTHER INFORMATION~~
ITEM 5.OTHER INFORMATION

None
~~ITEM 6.~~ ~~EXHIBITS~~
ITEM 6.EXHIBITS

Exhibit Index

Number Description

31.1 * Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 * Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

4034

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VYSTAR CORPORATION

Date: ~~December 7, 2022~~October 26, 2023 By: /s/ Steven Rotman
Steven Rotman

President, Chief Executive Officer, Chief Financial Officer and Director

4135


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021

Revenue	$	3,572,071		$	4,066,597		$	10,607,362		$	23,150,720

Cost of revenue		1,681,713			1,932,290			4,809,951			10,576,205

Gross profit		1,890,358			2,134,307			5,797,411			12,574,515

Operating expenses:
Salaries, wages and benefits		866,427			1,188,835			2,560,840			4,713,623
Share-based compensation		181,199			207,382			658,004			623,501
Agent fees		312,909			312,214			1,058,095			2,641,654
Professional fees		91,624			124,285			414,498			343,246
Advertising		242,902			365,369			850,474			1,774,022
Rent		195,950			331,056			556,861			967,287
Service charges		90,132			147,466			282,376			456,481
Depreciation and amortization		119,237			193,158			420,397			577,539
Other operating		585,082			812,817			1,748,378			2,490,302

Total operating expenses		2,685,462			3,682,582			8,549,923			14,587,655

Loss from operations		(795,104	)		(1,548,275	)		(2,752,512	)		(2,013,140	)

Other income (expense):
Interest expense		(107,869	)		(186,732	)		(494,355	)		(540,062	)
Change in fair value of derivative liabilities		240,300			(88,200	)		1,760,300			(1,400	)
Gain (loss) on settlement of debt, net		(2,481,231	)		-			(2,250,411	)		2,675,926
Other income, net		34,443			(135,612	)		102,147			(35,688	)

Total other income (expense), net		(2,314,357	)		(410,544	)		(882,319	)		2,098,776

Net income (loss)		(3,109,461	)		(1,958,819	)		(3,634,831	)		85,636

Net (income) loss attributable to noncontrolling interest		134,849			439,512			552,545			(823,363	)

Net loss attributable to Vystar	$	(2,974,612	)	$	(1,519,307	)	$	(3,082,286	)	$	(737,727	)

Loss per share:
Basic and diluted	$	(0.23	)	$	(0.12	)	$	(0.24	)	$	(0.06	)

Weighted average number of common shares outstanding:
Basic and diluted		12,941,260			12,816,505			12,941,279			12,627,241


	Amount

Remaining in 2022	$	86,313
2023		338,638
2024		239,411
2025		90,550
2026		71,232
Thereafter		114,718

Total	$	940,862

	Amount

Remaining in 2023	$	15,858
2024		31,716
2025		24,652
2026		16,032
2027		16,032
Thereafter		25,151

Total	$	129,441

	Operating Leases			Finance Leases			Total

Remainder of 2023	$	585,927		$	139,080		$	725,007
2024		955,272			139,080			1,094,352
2025		870,000			139,080			1,009,080
2026		870,000			68,395			938,395
2027		870,000			-			870,000
Thereafter		2,682,500			-			2,682,500

Total undiscounted lease liabilities		6,833,699			485,635			7,319,334
Less: imputed interest		(1,215,246	)		(42,108	)		(1,257,354	)

Net lease liabilities	$	5,618,453		$	443,527		$	6,061,980

	June 30, 2023			December 31, 2022

Shareholder, convertible and contingently convertible notes	$	309,500		$	309,500
Accrued interest		34,793			26,763

Total shareholder notes and accrued interest		344,293			336,263

Less: current maturities		(344,293	)		(336,263	)

Total long-term debt	$	-		$	-


				Carrying Amount
		Principal		September 30,		December 31,
	Issue Date	Amount		2022		2021
Steven Rotman 8.00% note due July 2024	07/18/19	$	105,000	$	-	$	126,000
Gregory Rotman 8.00% note due July 2024	07/18/19		55,207		-		66,264
Steven Rotman 5.00% note due July 2027	07/18/19		1,102,500		-		1,238,016
Bernard Rotman 5.00% note due July 2023	07/18/19		420,000		-		471,625
Steven Rotman 5.00% note due December 2021	12/19/19		100,000		-		110,208
Steven Rotman 5.00% note due February 2022	02/02/20		50,000		-		54,583
Gregory Rotman 5.00% note due June 2023	06/03/21		130,030		-		133,822
Jamie Rotman 5.00% note due August 2022	08/17/21		5,000		5,250		5,094

Debt instrument, carrying amount		$	1,967,737		5,250		2,205,612

Debt Discount					-		(27,083	)

Notes payable				$	5,250	$	2,178,529

	Issue Date	Principal Amount		2023		2022
				Carrying Amount
				June 30,		December 31,
	Issue Date	Principal Amount		2023		2022
Jamie Rotman 5.00% note due August 2023	08/17/21	$	5,000	$	5,469	$	5,344

	Amount			Shares

Balance, January 1, 2022	$	1,247,549			605,058
Additions		659,647			1,552,386
Issuances		(251,988	)		(25,568	)

Balance, December 31, 2022		1,655,208			2,131,876
Additions		246,114			3,455,456

Balance, June 30, 2023	$	1,901,322			5,587,332

	Amount			Shares

Balance, January 1, 2021	$	2,589,556			994,314
Additions, net		806,082			421,854
Issuances, net		(2,148,089	)		(811,110	)

Balance, December 31, 2021		1,247,549			605,058
Additions, net		544,039			828,281
Issuances, net		(251,988	)		(25,568	)

Balance, September 30, 2022	$	1,539,600			1,407,771


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
			% of				% of				% of				% of
	Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales
Merchandise:
Case Goods
Bedroom Furniture	$	481,765		13.5	$	398,807		9.8	$	1,167,928		11.0	$	1,725,588		7.5
Dining Room Furniture		260,123		7.3		235,945		5.8		641,042		6.0		1,337,503		5.8
Occasional		327,709		9.2		422,044		10.4		1,285,605		12.1		3,186,248		13.8
Total case goods		1,069,597		30.0		1,056,796		26.0		3,094,575		29.1		6,249,339		27.1
Upholstery		1,271,872		35.6		1,627,212		40.0		4,027,753		38.0		8,200,995		35.4
Mattresses and Toppers		957,155		26.8		847,997		20.9		2,490,604		23.5		3,681,848		15.9
Broadloom, Flooring and Rugs		93,454		2.6		143,618		3.5		373,229		3.5		1,996,618		8.6
Warranty		115,892		3.2		142,709		3.5		371,144		3.5		589,729		2.5
Air Purification Units		25,617		0.7		192,755		4.7		167,848		1.6		1,783,965		7.7
Accessories and Other		38,484		1.1		55,510		1.4		82,209		0.8		648,226		2.8
Net sales	$	3,572,071		100.0	$	4,066,597		100.0	$	10,607,362		100.0	$	23,150,720		100.0

	●	Expected Dividend Yield - because the Company does not currently pay dividends, the expected dividend yield is zero;
	●	Expected Volatility in Stock Price - volatility based on the Company’s trading activity was used to determine expected volatility;
	●	Risk-free Interest Rate - reflects the average rate on a United States Treasury Bond with a maturity equal to the expected term of the option; and
	●	Expected Life of Award - because we have minimal experience with the exercise of options or warrants for use in determining the expected life of each award, we used the option or warrant’s contractual term as the expected life.

						Weighted
				Weighted		Average
				Average		Remaining
	Number			Exercise		Contractual
	of Shares			Price		Life (Years)

Outstanding, December 31, 2022		265,267		$	19.54		0.51

Granted		-			-		-

Exercised		-			-		-

Forfeited		(222,000	)	$	21.95		-

Outstanding, June 30, 2023		43,267		$	7.16		0.96

Exercisable, June 30, 2023		43,267		$	7.16		0.96

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)

Outstanding, December 31, 2021		271,750		$	19.40		1.53

Granted		-			-		-

Exercised		(5,000	)		-		-

Forfeited		-			-		-

Outstanding, September 30, 2022		266,750		$	19.63		0.76

Exercisable, September 30, 2022		266,000		$	19.74		0.73

	Number of Shares			Weighted Average Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)									Weighted
																	Average
Outstanding, December 31, 2021		101,743			-	$	8.19		2.36
													Weighted		Weighted		Remaining
										Number			Average		Average		Contractual
										of Shares			Fair Value		Exercise Price		Life (Years)


Outstanding, December 31, 2022											37,266			-	$	7.57		1.31

Granted		-			-		-		-		-			-		-		-

Exercised		(52,033	)		-		-		-		-			-		-		-

Forfeited		-			-		-		-		-			-		-		-

Expired		(11,228	)		-	$	15.00		-		(11,284	)		-	$	32.22		-

Outstanding, September 30, 2022		38,482			-	$	8.04		1.51
Outstanding, June 30, 2023											25,982			-	$	6.57		1.35

Exercisable, September 30, 2022		38,482			-	$	8.04		1.51
Exercisable, June 30, 2023											25,982			-	$	6.57		1.35

	2023			2022

NOL carryforwards	$	8,350,000		$	8,300,000

Less valuation allowance		(8,350,000	)		(8,300,000	)

Deferred tax assets	$	-		$	-

	●	RxAir™ Residential Filterless Air Purifier
	●	RX400 ™ FDA cleared Class II Filterless Air Purifier
	●	RX3000™ Commercial FDA cleared Class II Air Purifier

	Three Months Ended June 30,
	2023			2022			$ Change			% Change
	CONSOLIDATED

Revenue	$	36,126		$	45,323		$	(9,197	)		-20.3	%

Cost of revenue		5,913			25,942			(20,029	)		-77.2	%

Gross profit		30,213			19,381			10,832			55.9	%

Operating expenses:
Salaries, wages and benefits		74,282			59,495			14,787			24.9	%
Share-based compensation		107,204			338,857			(231,653	)		-68.4	%
Professional fees		6,269			22,146			(15,877	)		-71.7	%
Advertising		3,561			7,981			(4,420	)		-55.4	%
Rent		20,001			-			20,001			100.0	%
Service charges		3,568			2,437			1,131			46.4	%
Depreciation and amortization		18,819			35,119			(16,300	)		-46.4	%
Other operating		85,446			140,213			(54,767	)		-39.1	%

Total operating expenses		319,150			606,248			(287,098	)		-47.4	%

Loss from operations		(288,937	)		(586,867	)		297,930			-50.8	%

Other income (expense):
Interest expense		(11,181	)		(111,489	)		100,308			-90.0	%
Change in fair value of derivative liabilities		-			1,463,000			(1,463,000	)		-100.0	%
Gain on settlement of debt, net		-			230,820			(230,820	)		-100.0	%

Total other income (expense), net		(11,181	)		1,582,331			(1,593,512	)		-100.7	%

Net income (loss) from continuing operations		(300,118	)		995,464			(1,295,582	)		-130.1	%

Discontinued operations:
Loss from operations		(221,349	)		(566,869	)		345,520			-61.0	%

Net income (loss)		(521,467	)		428,595			(950,062	)		-221.7	%

Net loss attributable to noncontrolling interest		92,967			238,084			(145,117	)		-61.0	%

Net loss attributable to Vystar	$	(428,500	)	$	666,679		$	(1,095,179	)		-164.3	%

	Six Months Ended June 30,
	2023			2022			$ Change			% Change
	CONSOLIDATED

Revenue	$	446,033		$	168,843		$	277,190			164.2	%

Cost of revenue		82,611			64,167			18,444			28.7	%

Gross profit		363,422			104,676			258,746			247.2	%

Operating expenses:
Salaries, wages and benefits		129,211			118,833			10,378			8.7	%
Share-based compensation		246,114			476,805			(230,691	)		-48.4	%
Professional fees		61,711			154,959			(93,248	)		-60.2	%
Advertising		10,226			14,215			(3,989	)		-28.1	%
Rent		40,002			8,393			31,609			376.6	%
Service charges		4,372			4,206			166			3.9	%
Depreciation and amortization		37,638			70,238			(32,600	)		-46.4	%
Other operating		173,802			342,499			(168,697	)		-49.3	%

Total operating expenses		703,076			1,190,148			(487,072	)		-40.9	%

Loss from operations		(339,654	)		(1,085,472	)		745,818			-68.7	%

Other income (expense):
Interest expense		(21,518	)		(196,204	)		174,686			-89.0	%
Change in fair value of derivative liabilities		-			1,520,000			(1,520,000	)		-100.0	%
Gain on settlement of debt, net		-			230,820			(230,820	)		-100.0	%

Total other income (expense), net		(21,518	)		1,554,616			(1,576,134	)		-101.4	%

Net income (loss) from continuing operations		(361,172	)		469,144			(830,316	)		-177.0	%

Discontinued operations:
Loss from operations		(1,437,371	)		(994,515	)		(442,856	)		44.5	%

Net loss		(1,798,543	)		(525,371	)		(1,273,172	)		242.3	%

Net loss attributable to noncontrolling interest		603,696			417,696			186,000			44.5	%

Net loss attributable to Vystar	$	(1,194,847	)	$	(107,675	)	$	(1,087,172	)		1009.7	%

	a)	We have a lack of segregation of duties due to the small size of the Company.

	b)	The Company did not maintain reasonable control over records underlying transactions necessary to permit preparation of the Company’s financial statements.

	c)	Lack of controls that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposal of the Company’s assets that could have a material effect on the financial statements.

	d)	Lack of a formal CFO position who can devote significant attention to financial reporting resulted in multiple audit adjustments.

	e)	Lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. Management believes the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future period.

Number		Description

31.1 *		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 *		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	VYSTAR CORPORATION

Date: ~~December 7, 2022~~October 26, 2023	By:	/s/ Steven Rotman
		Steven Rotman
		President, Chief Executive Officer, Chief Financial Officer and Director