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.

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 ☐~~ NOYES ☒ 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.

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

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, 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, 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.

	March 31,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash	$	15,505		$	12,274		$	45,951		$	12,274
Accounts receivable		62,334			12,145			21,187			12,145
Inventories		75,657			91,724			64,275			91,724
Prepaid expenses and other		650,186			633,769			639,582			633,769
Assets of discontinued operations		1,337,516			3,026,971			269,840			3,026,971

Total current assets		2,141,198			3,776,883			1,040,835			3,776,883

Property and equipment, net		129,996			140,886			108,216			140,886

Other assets:
Intangible assets, net		146,442			154,371			130,584			154,371
Inventories, long-term		-			63,009			-			63,009
Assets of discontinued operations		6,943,519			7,503,970			5,581,377			7,503,970

Total other assets		7,089,961			7,721,350			5,711,961			7,721,350

Total assets	$	9,361,155		$	11,639,119		$	6,861,012		$	11,639,119

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable	$	1,443,882		$	1,361,483		$	1,574,612		$	1,361,483
Accrued expenses		337,112			684,147			312,924			684,147
Stock subscription payable		1,794,118			1,655,208			2,008,952			1,655,208
Shareholder, convertible and contingently convertible notes payable and accrued interest - current maturities		340,278			336,263			349,607			336,263
Related party debt - current maturities		171,365			169,552			175,011			169,552
Current maturities		171,365			169,552
Unearned revenue		44,379			44,479			44,379			44,479
Related party advances		296,395			266,541			368,257			266,541
Liabilities of discontinued operations		1,638,809			2,328,589			1,500,381			2,328,589

Total current liabilities		6,066,338			6,846,262			6,334,123			6,846,262

Long-term liabilities:
Liabilities of discontinued operations		5,292,703			5,513,667			3,975,873			5,513,667

Total liabilities		11,359,041			12,359,929			10,309,996			12,359,929

Stockholders’ deficit:
Convertible preferred stock series class A, $0.0001 par value 15,000,000 shares authorized; 8,698 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively (liquidation preference of $172,000 and $170,000 at March 31, 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 March 31, 2023 and December 31, 2022 (liquidation preference of $2,774,000 and $2,710,000 at March 31, 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 March 31, 2023 and December 31, 2022 (liquidation preference of $5,356,000 and $5,233,000 at March 31, 2023 and December 31, 2022, respectively)		192			192
Convertible preferred stock series class A, $0.0001 par value 15,000,000 shares authorized; 8,698 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively (liquidation preference of $177,000 and $170,000 at September 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 September 30, 2023 and December 31, 2022 (liquidation preference of $2,904,000 and $2,710,000 at September 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 September 30, 2023 and December 31, 2022 (liquidation preference of $5,607,000 and $5,233,000 at September 30, 2023 and December 31, 2022, respectively)								192			192
Convertible preferred stock		192			192			192			192
Common stock, $0.0001 par value, 500,000,000 shares authorized; 12,942,892 shares issued at March 31, 2023 and December 31, 2022, and 12,942,592 shares outstanding at March 31, 2023 and December 31, 2022, respectively		1,294			1,294
Common stock, $0.0001 par value, 500,000,000 shares authorized; 12,942,892 shares issued at September 30, 2023 and December 31, 2022, and 12,942,592 shares outstanding at September 30, 2023 and December 31, 2022, respectively								1,294			1,294
Additional paid-in capital		53,361,925			53,361,925			53,361,925			53,361,925
Accumulated deficit		(56,135,215	)		(55,368,868	)		(57,242,180	)		(55,368,868	)
Common stock in treasury, at cost; 300 shares		(30	)		(30	)		(30	)		(30	)

Total Vystar stockholders’ deficit		(2,771,796	)		(2,005,449	)		(3,878,761	)		(2,005,449	)

Noncontrolling interest		773,910			1,284,639			429,777			1,284,639

Total stockholders’ deficit		(1,997,886	)		(720,810	)		(3,448,984	)		(720,810	)

Total liabilities and stockholders’ deficit	$	9,361,155		$	11,639,119		$	6,861,012		$	11,639,119

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

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

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

	Attributable to Vystar																																					Attributable to Vystar
	Number				Number				Number				Number										Number						Total									Number				Number				Number				Number										Number						Total
	of				of				of				of					Additional					of						Vystar						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’			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			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	)		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	)
Balance		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																				3,691											3,691						3,691

Retirement of common stock														(200	)																					-															(200	)																					-

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

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	$	43,855,201	$	(52,184,870	)		(300	)	$	(30	)	$	(8,328,404	)	$	1,477,830		$	(6,850,574	)		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	)

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 income																																							-		-		-		-		-		-		-			-		-		(2,974,612	)		-			-			(2,974,612	)		(134,849	)		(3,109,461	)
Net income (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		12,942,592		$	1,294	$	53,361,926	$	(54,492,803	)		(300	)	$	(30	)	$	(1,129,383	)	$	1,104,897		$	(24,486	)
Balance																																							8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592		$	1,294	$	53,361,926	$	(54,492,803	)		(300	)	$	(30	)	$	(1,129,383	)	$	1,104,897		$	(24,486	)

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

	2023			2022			2023			2022
	Three Months Ended						Nine Months Ended
	March 31,						September 30,
	2023			2022			2023			2022
Cash flows from operating activities:
Net loss	$	(1,277,076	)	$	(953,966	)	$	(2,728,174	)	$	(3,634,831	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		138,910			137,948			353,744			658,004
Depreciation		16,074			64,268			47,083			161,461
Bad debts (recovery)		6,833			(4,342	)		8,766			(3,754	)
Amortization of intangible assets		7,929			86,312			23,787			258,936
Noncash lease expense		38,701			78,488			234,693			217,958
Amortization of debt discount		-			16,250			-			27,083
(Gain) on settlement of debt, net		(39,770	)		-
Change in fair value of derivative liabilities		-			(57,000	)		-			(1,760,300	)
(Gain) loss on settlement of debt, net								(39,770	)		2,250,411
Gain on sale of property and equipment								(213,776	)		-
(Increase) decrease in assets:
Accounts receivable		(47,218	)		27,560			(13,271	)		34,399
Inventories		79,075			(24	)		90,458			(47,537	)
Prepaid expenses and other		(16,417	)		48,390			(5,813	)		66,782
Assets of discontinued operations		2,189,604			303,713			2,849,123			1,284,702
Increase (decrease) in liabilities:
Accounts payable		82,400			154,990			213,129			410,559
Accrued expenses and interest payable		(341,207	)		56,637			(352,420	)		181,593
Unearned revenue		(100	)		(34,059	)		(100	)		(34,890	)
Liabilities of discontinued operations		(492,510	)		98,349			(630,952	)		(466,003	)

Net cash provided by operating activities		345,228			23,514
Net cash used in operating activities								(163,493	)		(395,427	)

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

Cash flows from financing activities:
Proceeds from related party advances		29,855			40,000			101,716			92,731
Cash flows used in discontinued operations		(227,604	)		(42,349	)
Proceeds from issuance of preferred stock								-			85,000
Cash flows provided by (used in) discontinued operations								(387,500	)		227,207

Net cash used in financing activities		(197,749	)		(2,349	)
Net cash provided by (used in) financing activities								(285,784	)		404,938

Net increase in cash		147,479			21,165			130,206			9,511

Cash - beginning of period		135,599			151,175			135,599			151,175

Cash - end of period		283,078			172,340
Less: cash of discontinued operations		(267,573	)		(150,829	)		(219,854	)		(132,803	)

Cash of continuing operations - end of period	$	15,505		$	21,511		$	45,951		$	27,883

Cash paid during the period for:
Interest	$	4,510		$	2,724		$	249,226		$	287,521

Non-cash transactions:
Rotmans operating lease right-of-use asset and related liability
adjusted for lease modification							$	849,534		$	-
Prepaid expenses with preferred stock								-			866,630
Preferred stock issued for settlement of related party payable								-			270,000
Preferred stock issued for settlement of debt and accrued interest								-			893,617
Preferred stock issued for settlement of related party debt and accrued interest								-			6,346,564
Preferred stock issued for stock subscription payable								-			67,716
Preferred stock issued for settlement of vendor payables								-			886,401
Rotmans vendor payables paid directly by related party								-			100,000
Rotmans lease liabilities arising from obtaining right-of-use assets								-			325,471

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

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.

All activities of Rotmans have been included in discontinued operations. Additional disclosure can be found in Note 15.

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

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 on Form 10-K for the year ended December 31, 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 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.

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.

In accordance with ASC No. 205-20, Discontinued Operations, for all periods presented, the results of operations and related balance sheet items associated with Rotmans are reported in discontinued operations in the accompanying consolidated financial statements. See Note 15 for further details.

Inventories include those costs directly attributable to the product before sale. Inventories consist primarily of finished goods of 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 inventories 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.

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 ~~March 31,~~September 30, 2023, the net balance of property and equipment is $~~129,996~~108,216 with accumulated depreciation of $~~212,407~~234,187. As of December 31, 2022, the net balance of property and equipment is $140,886 with accumulated depreciation of $201,517.

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

Changes to unearned revenue during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022 are summarized as follows:

	2023			2022			2023			2022

Balance, beginning of the period	$	44,479		$	79,368		$	44,479		$	79,368

Customer deposits received		-			-			-			300

Revenue earned		(100	)		(34,058	)		(100	)		(34,058	)

Balance, end of the period	$	44,379		$	45,310		$	44,379		$	45,610

The Company presents basic and diluted loss per share. ~~As the Company reported a net loss in~~For the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and dilutive ~~income~~loss per share were the same. Excluded from the computation of diluted ~~income~~loss per share were options to purchase ~~26,825~~22,354 and ~~269,500~~266,000 shares of common stock for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively, as their effect would be anti-dilutive. Warrants to purchase ~~44,767~~42,000 and ~~90,484~~38,483 shares of common stock for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively, were also excluded from the computation of diluted ~~income~~loss per share as their effect would be anti-dilutive. In addition, preferred stock convertible to ~~24,517,419~~25,665,878 and ~~32,010~~23,375,235 shares of common stock for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively, were excluded from the computation of diluted ~~income~~loss per share as their effect would be anti-dilutive. Both shareholder and Rotman Family contingently convertible notes for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022 were also excluded from the computation of diluted loss per share as no contingencies were met.

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~~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 ~~March 31,~~September 30, 2023 and December 31, 2022, reserves for estimated sales returns totaled $~~58,000~~29,000 and $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. 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 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.

Advertising costs, which include television, radio, newspaper, digital and other media advertising, are expensed upon first showing. Advertising costs were approximately $~~7,000~~14,000 and $~~6,000~~24,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively.

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 ~~March 31,~~September 30, 2023, the Company had cash of $~~15,505~~45,951 and a deficit in working capital of approximately $~~3.9~~5.3 million. Further, at ~~March 31,~~September 30, 2023, the accumulated deficit amounted to approximately $~~56.1~~57.2 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, 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 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 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.

	March 31,			December 31,
	2023			2022			September 30, 2023			December 31, 2022

Tooling and testing equipment	$	338,572		$	338,572		$	338,572		$	338,572
Furniture, fixtures and equipment		3,831			3,831			3,831			3,831

Property and equipment, gross		342,403			342,403			342,403			342,403
Accumulated depreciation		(212,407	)		(201,517	)		(234,187	)		(201,517	)

Property and equipment, net	$	129,996		$	140,886		$	108,216		$	140,886

Depreciation expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022 was $~~10,890~~32,670.

							Amortization
	March 31,			December 31,			Period
	2023			2022			(in Years)	September 30, 2023			December 31, 2022			Amortization Period (in Years)
Amortized intangible assets:
Patents	$	361,284		$	361,284		6 - 20	$	361,284		$	361,284			6 - 20
Proprietary technology		13,000			13,000		10		13,000			13,000			10
Tradename and brand		13,000			13,000		5 - 10		13,000			13,000			5 - 10

Total		387,284			387,284				387,284			387,284
Intangible assets, gross		387,284			387,284				387,284			387,284
Accumulated amortization		(249,914	)		(241,985	)			(265,772	)		(241,985	)

Intangible assets, net		137,370			145,299				121,512			145,299
Indefinite-lived intangible assets:
Trademarks		9,072			9,072				9,072			9,072

Total intangible assets	$	146,442		$	154,371			$	130,584		$	154,371

Amortization expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022 was $~~7,929~~23,787 and $~~24,229~~72,687, respectively.

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

	Amount		Amount

Remaining in 2023	$	23,787	$	7,929
2024		31,716		31,716
2025		24,652		24,652
2026		16,032		16,032
2027		16,032		16,032
Thereafter		25,151		25,151

Total	$	137,370	$	121,512

Rotmans leases equipment, a showroom, offices and warehouse facilities. These leases expire at various dates through 2031 and have monthly base rents which range from $800to $~~81,000~~84,000. ~~One of~~ On August 10, 2023, Rotmans facility lease was amended and granted the ~~leases may be terminated~~lessor an early ~~by the lessor~~termination option at the end of 2028 with a six-month notice. Due to this lease modification, Rotmans remeasured its lease liability by calculating the present value of the remaining lease payments and current discount rate which resulted in a reduction of $849,534 to the liability. The corresponding lease asset was reduced by the same amount.

The table below presents the lease costs for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:

	2023		2022		2023		2022		2023		2022
	Three Months Ended				Three Months Ended				Nine Months Ended
	March 31,				September 30,				September 30,
	2023		2022		2023		2022		2023		2022

Operating lease cost	$	165,186	$	287,670	$	151,995	$	289,824	$	458,245	$	865,628

Finance lease cost:

Amortization of right-of-use assets		-		44,468		-		30,276		-		114,450
Interest on lease liabilities		-		7,312		-		8,342		-		22,439

Total lease cost	$	165,186	$	339,450	$	151,995	$	328,442	$	458,245	$	1,002,517

During the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, the Company recognized sublease income of approximately $~~34,000~~134,000 and $102,000, respectively, which in included in discontinued operations in the accompanying condensed consolidated statements of operations. Approximate future minimum rental payments to be received are $93,000 for the remainder of 2023, $372,000 for 2024 – 2027 and $313,000 for 2028.

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.

	2023			2022
	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
	2023			2022			2023			2022			2023			2022

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

Operating cash flows used for operating leases	$	245,924		$	263,616		$	228,415		$	264,539		$	691,839		$	790,159
Financing cash flows used for financing leases		-			49,661			-			35,572			-			130,732

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

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

Weighted average remaining lease term:
Operating leases		7.8 years			8.8 years			5.3 years			8.0 years			5.3 years			8.0 years
Finance leases		3.2 years			4.1 years			2.7 years			3.7 years			2.7 years			3.7 years

Weighted average discount rate:
Operating leases		5.60	%		5.60	%		7.21	%		5.61	%		7.21	%		5.61	%
Finance leases		5.16	%		5.16	%		5.16	%		5.16	%		5.16	%		5.16	%

The future minimum lease payments required under operating and financing lease obligations as of ~~March 31,~~September 30, 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			Operating Leases			Finance Leases			Total

Remainder of 2023	$	803,427		$	139,080		$	942,507		$	401,172		$	139,080		$	540,252
2024		955,272			139,080			1,094,352			1,086,252			139,080			1,225,332
2025		870,000			139,080			1,009,080			1,000,980			139,080			1,140,060
2026		870,000			68,395			938,395			1,000,980			68,395			1,069,375
2027		870,000			-			870,000			1,000,980			-			1,000,980
Thereafter		2,682,500			-			2,682,500
2028											1,000,980			-			1,000,980

Total undiscounted lease liabilities		7,051,199			485,635			7,536,834			5,491,344			485,635			5,976,979
Less: imputed interest		(1,291,023	)		(42,108	)		(1,333,131	)		(872,984	)		(42,108	)		(915,092	)

Net lease liabilities	$	5,760,176		$	443,527		$	6,203,703		$	4,618,360		$	443,527		$	5,061,887

As of ~~March 31,~~September 30, 2023, Vystar and Rotmans do not have additional operating and finance leases that have not yet commenced.

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 was reimbursed for the advance from the proceeds of the sale. The initial sales agreement with the agent ended in May 2021. The agreement has been amended numerous times and ended in December 2022. At the conclusion of the agreement, the remaining inventories were transferred to the agent. As of ~~March 31, 2023 and~~ December 31, 2022, a receivable is due from the agent for the inventories in the amount ~~of $229,434~~ ~~and~~ $1,853,972~~, respectively,~~ and is included in assets of discontinued operations. No amounts are due from the agent at September 30, 2023.

The following table summarizes shareholder, convertible and contingently convertible notes payable:

	2023			2022
	March 31,			December 31,
	2023			2022			September 30, 2023			December 31, 2022

Shareholder, convertible and contingently convertible notes	$	309,500		$	309,500		$	309,500		$	309,500
Accrued interest		30,778			26,763			40,107			26,763

Total shareholder notes and accrued interest		340,278			336,263			349,607			336,263

Less: current maturities		(340,278	)		(336,263	)		(349,607	)		(336,263	)

Total long-term debt	$	-		$	-		$	-		$	-

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.~~$0.18. All of these notes are outstanding as of ~~March 31,~~September 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.

One note in the amount of $19,500 remains from the 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.~~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 ~~March 31,~~September 30, 2023 and December 31, 2022 is $27,881 and $~~19,500~~26,513., respectively. The note matured in 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 de minimis at ~~March 31,~~September 30, 2023 and December 31, 2022.

	2023			2022			September 30,			December 31,
	March 31,			December 31,			2023			2022
	2023			2022

Rotman Family convertible note	$	5,000		$	5,000
Rotman Family nonconvertible note		140,000			140,000
Rotman Family convertible notes							$	5,000		$	5,000
Rotman Family nonconvertible notes								140,000			140,000
Accrued interest		26,365			24,552			30,011			24,552

Due to related party		171,365			169,552			175,011			169,552
Less: current maturities		(171,365	)		(169,552	)		(175,011	)		(169,552	)

Due to related party, noncurrent	$	-		$	-		$	-		$	-

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 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.~~$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 ~~March 31,~~September 30, 2023 and December 31, 2022.

In connection with the acquisition of 58% of Rotmans, Bernard Rotman was issued a related party note payable in the amount of $140,000. The note bears interest at an annual rate of five percent (5%) and matures four years from issuance. Monthly payments of $2,917 to Bernard Rotman were scheduled to begin six months from issuance until maturity in December ~~2023.~~2023. The balance of Bernard Rotman’s note including accrued interest is approximately $~~166,000~~169,000 and $164,000 at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, as no payments have been made to date.

In April 2022, Blue Oar Consulting, Inc. (“Blue Oar”), an entity wholly owned by Gregory Rotman, advanced Rotmans $500,000 and paid bills totaling $100,000 on Rotmans behalf. Rotmans formalized the advances and issued a promissory note to Blue Oar. The note bore interest at an annual rate of six percent (6%) and 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 its inventory. The final principal payment on the note balance was made in April 2023. As of ~~March 31,~~September 30, 2023, ~~and~~unpaid accrued interest on the note totaled $22,518. As of December 31, 2022, the balance of the note payable including accrued interest was approximately $~~197,000~~ ~~and $~~407,000~~, respectively,~~ and is included in liabilities from discontinued operations. ~~The final principal payment on the note balance was made in April 2023.~~

On May 2, 2013, the Company began a private placement offering to sell up to 200,000 shares of the Company’s ~~10%~~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 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 ~~March 31,~~September 30, 2023 and December 31, 2022, the liquidation preference totals approximately $~~172,000~~177,000 and $170,000, respectively.

As of ~~March 31,~~September 30, 2023, the 8,698 shares of outstanding preferred stock had undeclared dividends of approximately $~~85,000~~90,000 and could be converted into ~~33,711~~34,564 shares of common stock, at the option of the holder.

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

On April 11, 2022, the Company amended its Articles of Incorporation to add the terms of a ~~10%~~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 1,000 shares of common stock at the option of the 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 ~~March 31,~~September 30, 2023 and December 31, 2022, the liquidation preference totals approximately $~~2,774,000~~2,904,000 and $2,710,000, respectively.

As of ~~March 31,~~September 30, 2023, the 370,969 shares of outstanding preferred stock had undeclared dividends of approximately $~~177,000~~307,000 and could be converted into ~~3,962,762~~4,148,755 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 $~~113,000~~108,000 and could be converted into ~~3,871,290~~3,864,261 shares of common stock, at the option of the holder.

On July 8, 2022, the Company amended its Articles of Incorporation to add the terms of a ~~10%~~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 1,000 shares of common stock at the option of the 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 ~~March 31,~~September 30, 2023 and December 31, 2022, the liquidation preference totals approximately $~~5,356,000~~5,607,000 and $5,233,000, respectively.

As of ~~March 31,~~September 30, 2023, the 1,917,973 shares of outstanding preferred stock had undeclared dividends of approximately $~~350,000~~601,000 and could be converted into ~~20,520,946~~21,482,559 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 $~~227,000~~325,000 and could be converted into ~~20,048,021~~20,425,550 shares of common stock, at the option of the holder.

Included in stock subscription payable at ~~March 31,~~September 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.

At ~~March 31,~~September 30, 2023 and December 31, 2022, the Company recorded $~~1,794,118~~2,008,952 and $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 ~~March 31,~~September 30, 2023 and December 31, 2022:

	Amount			Shares			Amount			Shares

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

Balance, December 31, 2022		1,655,208			2,131,876			1,655,208			2,131,876
Additions		138,910			995,608			353,744			124,658,513

Balance, March 31, 2023	$	1,794,118			3,127,484
Balance, September 30, 2023							$	2,008,952			126,790,389

The following table presents our revenues disaggregated by each major product category and service for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:

	Net Sales		Net Sales		Net Sales		Net Sales
	Three Months Ended March 31,								Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2023				2022				2023				2022
			% of				% of				% of				% of				% of		��		% of
	Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales
Merchandise:
Air Purification Units	$	403,696		98.5	$	103,290		83.6	$	35,972		59.6	$	25,617		69.9	$	459,837		90.8	$	167,848		81.7
Mattresses and Toppers		6,011		1.5		12,514		10.1		16,405		27.2		5,726		15.6		36,311		7.2		23,366		11.4
Accessories and Other		200		0.0		7,716		6.3
Other										7,973		13.2		5,314		14.5		10,235		2.0		14,286		6.9
Net sales	$	409,907		100.0	$	123,520		100.0	$	60,350		100.0	$	36,657		100.0	$	506,383		100.0	$	205,500		100.0

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 $~~138,910~~353,744 and $~~137,948~~658,004 of stock-based compensation for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 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 $~~1,524,118~~1,738,952 and $1,385,208 at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively.

The Company used the Black-Scholes option pricing model to estimate the grant-date fair value of option and warrant awards:

In total for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company recorded $~~3,691~~11,370 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 ~~three~~nine months ended ~~March 31,~~September 30, 2023. There is no unrecognized compensation expense as of ~~March 31,~~September 30, 2023 for non-vested share-based awards to be recognized over a period of less than one year.

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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 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.

There were no options granted during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Forfeitures are recognized as they occur.

The following table summarizes all stock option activity of the Company for the ~~three~~nine months ended ~~March 31,~~September 30, 2023:

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

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

Granted		-			-		-		-			-		-

Exercised		-			-		-		-			-		-

Forfeited		(220,500	)	$	22.00		-		(223,267	)	$	21.87		-

Outstanding, March 31, 2023		44,767		$	7.42		1.04
Outstanding, September 30, 2023									42,000		$	7.17		0.78

Exercisable, March 31, 2023		44,767		$	7.42		1.04
Exercisable, September 30, 2023									42,000		$	7.17		0.78

As of ~~March 31,~~September 30, 2023 and 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 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.

The following table represents the Company’s warrant activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2023:

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

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

Granted		-			-		-		-		-			-		-		-

Exercised		-			-		-		-		-			-		-		-

Forfeited		-			-		-		-		-			-		-		-

Expired		(10,441	)		-	$	34.22		-		(14,912	)		-	$	26.09		-

Outstanding, March 31, 2023		26,825			-	$	6.59		1.55
Outstanding, September 30, 2023											22,354			-	$	6.49		1.31

Exercisable, March 31, 2023		26,825			-	$	6.59		1.55
Exercisable, September 30, 2023											22,354			-	$	6.49		1.31

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 ~~three~~nine months ended ~~March 31,~~September 30, 2023, the Company expensed approximately $~~112,000~~306,000 related to this employment agreement. As of ~~March 31,~~September 30, 2023, the Company had a stock subscription payable balance of $~~682,225~~779,877, or approximately ~~1,373,000~~57,583,000 shares to be issued in the future and $~~198,155~~213,155 of reimbursable expenses payable and $116,403 of unpaid salary related to this party.

The Board of Directors authorized their board fees for 2021 be paid in common stock of the Company. Included in stock subscription payable at ~~March 31,~~September 30, 2023 and December 31, 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.

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 $15,000 per 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 ~~three~~nine months ended ~~March 31,~~September 30, 2023, the Company expensed approximately $~~121,000~~328,000 related to the consulting agreement. As of ~~March 31,~~September 30, 2023, the Company had a stock subscription payable balance of $~~705,672~~822,854, or approximately ~~1,592,000~~69,045,000 ~~shares.~~shares and $180,000 of consulting expenses in accounts payable.

As of ~~March 31,~~September 30, 2023, Gregory Rotman and Steven Rotman advanced the Company funds totaling $~~266,170~~313,031 and $~~30,225~~55,226, respectively. The advances are due on demand as repayment terms have not yet been finalized.

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 ~~March 31,~~September 30, 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.

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 11.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, the Company entered into various service agreements with consultants for financial reporting, advisory, and compliance services.

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.

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 both parties submitted competing motions for summary judgment.

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 36,575,555 shares equating to a request of damages against EMA and in favor of Vystar for $~~4,802,00~~4,802,0000,, with interest accruing at 24%, and attorneys’ fees. The briefing by the parties was fully submitted on July 29, 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 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~~

On October 27, 2023, the Court held oral argument on the issues addressed in the supplemental briefing. Subsequent to argument the Court reserved judgment and indicated a ~~final~~written decision ~~from the Court.~~would be issued shortly.

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 ~~three~~nine months ended ~~March 31,~~September 30, 2023, the Company made approximately 2721% of its sales to one customer. Included in accounts ~~receivable~~payable is $~~16,184~~1,429 at ~~March 31,~~September 30, 2023 ~~from~~due to the ~~major customer.~~customer for returned merchandise.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, ~~the Company~~Rotmans made approximately 1614% of its purchases from one major vendor. ~~The Company~~Rotmans owed its major vendor approximately $~~111,000~~72,000 at ~~March 31,~~September 30, 2022.

The provision (benefit) for income taxes for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 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:

	2022			2021			2023			2022
	Three Months Ended						Nine Months Ended
	March 31,						September 30,
	2022			2021			2023			2022

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

Change in valuation allowance on net operating loss carryforwards		21.0			21.0			21.0			21.0

Effective income tax rate		0.0	%		0.0	%		0.0	%		0.0	%

Deferred tax assets as of ~~March 31,~~September 30, 2023 and December 31, 2022 are as follows:

	2023			2022			2023			2022

NOL carryforwards	$	8,300,000		$	8,300,000		$	8,400,000		$	8,300,000

Less valuation allowance		(8,300,000	)		(8,300,000	)		(8,400,000	)		(8,300,000	)

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 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 $~~39,700,000~~40,100,000 as of ~~March 31,~~September 30, 2023, of which approximately $18,400,000 expires beginning in 2024 and $~~21,300,000~~21,700,000 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 $~~21,000,000~~21,400,000 as of ~~March 31,~~September 30, 2023 in Georgia and Massachusetts, respectively, which expires beginning in 2038.

In addition, as of ~~March 31,~~September 30, 2023, Rotmans has a net operating loss carryforward of approximately $~~5,500,000~~5,900,000 for federal income tax purposes of which $1,800,000 expires beginning in 2029 and $~~3,700,000~~4,100,000 can be carried forward indefinitely. Rotmans has a state operating loss carryforward of approximately $~~4,600,000~~5,000,000 which expires beginning in 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.

Rotmans closed its showroom on December 14, 2022. The Company has accounted for the closing as discontinued operations in accordance with ASC No. 205-20, Discontinued Operations. The results of operations are reported as discontinued operations in 2023 and 2022. The assets and liabilities have been reported in the condensed consolidated balance sheets as assets and liabilities of discontinued operations.

The loss from discontinued operations for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022 are as follows:

							2023			2022			2023			2022
							Three Months Ended						Nine Months Ended
							September 30,						September 30,
	2023			2022			2023			2022			2023			2022

Revenue	$	107,479		$	3,715,738		$	-		$	3,535,414		$	157,479		$	10,401,862

Cost of revenue		122,650			1,622,049			-			1,627,490			122,650			4,691,561

Gross profit (loss)		(15,171	)		2,093,689
Gross profit								-			1,907,924			34,829			5,710,301

Operating expenses:
Salaries, wages and benefits		264,671			849,144			90,495			784,876			457,120			2,360,456
Agent fees		-			418,179			-			312,909			-			1,058,095
Professional fees		98,593			56,590			93,795			59,028			215,487			226,944
Advertising		67,280			287,254			206			232,894			66,662			826,251
Rent		179,782			175,334			332,197			195,950			693,040			548,468
Service charges		20,600			105,403			417			87,738			21,336			275,776
Depreciation and amortization		5,184			115,461			4,589			84,118			14,413			315,040
Other operating		526,505			453,328			59,735			406,944			710,973			1,227,741

Total operating expenses		1,162,615			2,460,693			581,434			2,164,457			2,179,031			6,838,771

Loss from operations		(1,177,786	)		(367,004	)		(581,434	)		(256,533	)		(2,144,202	)		(1,128,470	)

Other income (expense):
Interest expense		(83,702	)		(94,594	)		(76,419	)		(98,978	)		(236,858	)		(289,260	)
Gain on settlement of debt, net		39,770			-			-			-			39,770			-
Gain on sale of property and equipment								-			-			213,776			-
Other income		5,696			33,952			59,839			34,443			92,129			102,147

Total other expense, net		(38,236	)		(60,642	)
Total other income (expense), net								(16,580	)		(64,535	)		108,817			(187,113	)

Net loss from discontinued operations	$	(1,216,022	)	$	(427,646	)	$	(598,014	)	$	(321,068	)	$	(2,035,385	)	$	(1,315,583	)

Details of the balance sheet items for discontinued operations as are as follows:

	March 31,		December 31,
	2023		2022		2023		2022

Current assets:
Cash	$	267,573	$	123,325	$	219,854	$	123,325
Accounts receivable		229,434		1,853,972		-		1,853,972
Other receivables		444,680		684,775		33,334		684,775
Property held for sale		365,707		-
Inventories		-		76,379		-		76,379
Prepaid expenses and other		30,122		288,520		16,652		288,520

Total current assets	$	1,337,516	$	3,026,971	$	269,840	$	3,026,971

Non-current assets:
Property and equipment, net	$	119,529	$	490,420	$	110,300	$	490,420
Operating lease right-of-use assets, net		6,818,716		7,008,276		5,465,803		7,008,276
Other assets		5,274		5,274		5,274		5,274

Total non-current assets	$	6,943,519	$	7,503,970	$	5,581,377	$	7,503,970

Current liabilities:
Accounts payable	$	321,293	$	339,426	$	289,221	$	339,426
Accrued expenses		209,298		726,410		40,642		726,410
Operating lease liabilities - current maturities		761,000		737,000		936,000		737,000
Finance lease liabilities - current maturities		150,000		119,000		212,000		119,000
Related party debt - current maturities		197,218		406,753		22,518		406,753

Total current liabilities	$	1,638,809	$	2,328,589	$	1,500,381	$	2,328,589

Non-current liabilities:
Operating lease liabilities, net of current maturities	$	4,999,176	$	5,189,140	$	3,682,360	$	5,189,140
Finance lease liabilities, net of current maturities		293,527		324,527		231,527		324,527
Unearned revenue						61,986		-

Total non-current liabilities	$	5,292,703	$	5,513,667	$	3,975,873	$	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 ~~provided by~~used in operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022 are the following discontinued operations items:

	2023			2022		2023			2022

Depreciation	$	5,184		$	53,378	$	14,413		$	128,791
Bad debts		9,804			3,158		4,537			3,461
Amortization of intangible assets		-			62,083		-			186,249
Noncash lease expense		38,701			78,488		234,693			217,958
(Gain)on settlement of debt, net		(39,770	)		-
Gain on settlement of debt, net							(39,770	)		-
Gain on sale of property and equipment							(213,776	)		-

~~Rotmans sold its parking lots to a third-party in May 2023 at a gain of approximately~~has advanced the Company funds totaling $~~200,000~~32,500. The ~~lots were classified~~Company has not formalized an agreement with repayment terms as ~~held for sale as a plan was made in March 2023 to sell the lots.~~of this date.

~~Rotmans facilities lease was amended on August 10, 2023. Beginning in September 2023, in addition to the 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 also assumed liability for roof repairs for a specified building within the facilities; subleases will be deemed approved by the lessor unless notified to the contrary within ten days, and the lessor has the option, with a six-month notice, to terminate the lease after December 31, 2028. Simultaneously, two subleases were approved with occupancy scheduled to begin shortly. Base sublease rent in the aggregate totals $~~30,993~~ ~~per month with annual increases based on the consumer price index. Each lease term is at least~~ ~~five years~~.

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.

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.

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 late 2023.

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 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.

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.

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.

Comparison of the Three Months Ended ~~March 31,~~September 30, 2023 with the Three Months Ended ~~March 31,~~September 30, 2022

Revenues for the three months ended ~~March 31,~~September 30, 2023 and 2022 were ~~$409,907~~$60,350 and ~~$123,520,~~$36,657, respectively, for an increase of ~~$286,387~~$23,693 or ~~231.9%~~64.6%. The increase in revenues ~~was due~~can be attributed to ~~increased sales to distributors and~~ income recognized upon the satisfaction of the warranty coverage term on RxAir units.

The Company reported gross profit of ~~$333,209~~$54,765 for the three-month period ended ~~March 31,~~September 30, 2023 compared to gross ~~profit~~loss of ~~$85,295~~$17,566 for the three-month period ended ~~March 31,~~September 30, 2022, an increase of ~~$247,914~~$72,331 or ~~290.7%~~411.8%. The increase in gross profit is attributable to the ~~income recognized upon~~higher reserves established in prior years on inventory over 365 days old and the satisfaction of the RxAir warranty coverage ~~term which was partially offset by an increase in slow-moving reserves.~~term.

The cost of revenue for the three months ended ~~March 31,~~September 30, 2023 and 2022 was ~~$76,698~~$5,585 and ~~$38,225,~~$54,223, respectively, ~~an increase~~a decrease of ~~$38,473~~$48,638 or ~~100.6%~~89.7%. ~~The increase is consistent with increased product sales and an increase in slow-moving reserves of approximately $26,000.~~

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 ~~$383,926~~$373,464 and ~~$583,900~~$521,005 for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, a decrease of ~~$199,974~~$147,541 or ~~34.2%~~28.3%. The decrease was partly due to ~~reduced~~a reduction in share-based compensation for legal ~~fees~~ and ~~cost cutting of general and administrative expenditures.~~supplemental consulting services.

Other expense for the three months ended ~~March 31,~~September 30, 2023 was ~~$10,337~~$12,918 which consisted of interest expense. This compares to other expense of ~~$27,715~~$2,249,822 for the three months ended ~~March 31,~~September 30, 2022, which consisted of ~~interest expense of $84,715 and~~ change in fair value of derivative liabilities of ~~$57,000.~~$240,300, loss on settlement of debt, net of $2,481,231 and interest expense of $8,891.

Loss from discontinued operations for the three months ended ~~March 31,~~September 30, 2023 and 2022 was ~~$1,216,022~~$598,014 and ~~$427,646,~~$321,068, respectively, for an increase of ~~$788,376~~$276,946 or ~~184.4%~~86.3%. The loss in 2023 included post-closing store costs and fixed costs exceeding sublease income. The loss in 2022 reflected decreased revenues due to rising inflation which resulted in changes in discretionary consumer spending.

Net loss was $929,631 for the three months ended September 30, 2023 compared to net loss of $3,109,461 for the three months ended September 30, 2022, a decrease of $2,179,830 or 70.1%. Net loss in the quarter ended September 30, 2022 was partly attributable to the loss on settlement of debt, net of $2,481,231.

Comparison of the Nine Months Ended September 30, 2023 with the Nine Months Ended September 30, 2022

Revenues for the nine months ended September 30, 2023 and 2022 were $506,383 and $205,500, respectively, for an increase of $300,883 or 146.4%. The increase in revenues was primarily due to sales to distributors and income recognized upon satisfaction of the warranty coverage term on RxAir units.

The Company reported gross profit of $418,187 for the nine-month period ended September 30, 2023 compared to gross profit of $87,110 for the nine-month period ended September 30, 2022, an increase of $331,077 or 380.1%. The increase in gross profit is partly attributable to the higher reserves established in prior years on inventory over 365 days old and income recognized upon the satisfaction of the RxAir warranty coverage term.

The cost of revenue for the nine months ended September 30, 2023 and 2022 was $88,196 and $118,390, respectively, a decrease of $30,194 or 25.5%.

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 $1,076,540 and $1,711,152 for the nine months ended September 30, 2023 and 2022, respectively, a decrease of $634,612 or 37.1%. 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 expense for the nine months ended September 30, 2023 was $34,436 which consisted of interest expense. This compares to other income of $695,206 for the nine months ended September 30, 2022, which consisted of change in fair value of derivative liabilities of $1,760,300, loss on settlement of debt, net of $2,250,411 and interest expense of $205,095.

Loss from discontinued operations for the nine months ended September 30, 2023 and 2022 was $2,035,385 and $1,315,583, respectively, for an increase of $719,802 or 54.7%. The loss in 2023 included post-closing store costs and fixed costs which exceeded revenues earned from inventory sales.

Net loss was ~~$1,277,076~~$2,728,174 and ~~$953,966~~$3,634,831 for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively, ~~an increase~~a decrease of ~~$323,110~~$906,657 or ~~33.9%~~24.9%. Net loss in the ~~quarter~~nine months ended ~~March 31, 2023 versus~~September 30, 2022 was increased by the loss on settlement of debt, net ~~loss~~of $2,250,411 and the change in ~~the same period~~fair value of derivative liabilities of $1,760,300 upon settlement in April 2022 ~~reflected the burden~~ of ~~post-closing~~shareholder convertible notes payable and ~~fixed costs~~pending settlement of ~~the Rotmans store.~~related party debt in July and September 2022 which contained embedded conversion features.

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 ~~March 31,~~September 30, 2023, the Company had cash of ~~$15,505~~$45,951 and a deficit in working capital of approximately ~~$3.9~~$5.3 million. Further, at ~~March 31,~~September 30, 2023, the accumulated deficit amounted to approximately ~~$56.1~~$57.2 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, 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 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 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.

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.

Net cash ~~provided by~~used in operating activities was ~~$345,228~~$163,493 for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 as compared to net cash ~~provided by~~used in operating activities of ~~$23,514~~$395,427 for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, cash ~~provided by~~used in operations was primarily due to the net loss offset by the increase of assets of discontinued operations, and non-cash related add-back of share-based compensation expense, ~~depreciation, amortization and~~ noncash lease ~~expense.~~expense, depreciation and amortization.

~~The Company had~~Net cash provided by investing activities was $579,483 during the nine months ended September 30, 2023 and represented proceeds from the sale of property and equipment. There was no cash provided by investing activities during the ~~three~~nine months ended ~~March 31, 2023 and~~September 30, 2022.

Net cash used in financing activities was ~~$197,749~~$285,784 during the ~~three~~nine months ended ~~March 31,~~September 30, 2023, as compared to net cash ~~of $2,349 used in~~provided by financing activities of $404,938 during the ~~three~~nine months ended ~~March 31,~~September 30, 2022. During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, cash was provided by related party advances of ~~$29,855~~$101,716 which was offset by cash flows used in discontinued operations of ~~$227,604.~~$387,500. During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, cash was provided by related party advances in the amount of ~~$40,000 which was offset by~~$92,731, proceeds from issuance of preferred stock of $85,000 and cash flows ~~used in~~provided by discontinued operations of ~~$42,349.~~$227,207.

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.

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~~None

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 ~~March 31,~~September 30, 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 internal resources.

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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2023. Such conclusion was reached based on the following material weaknesses noted by management:

Management expects to strengthen internal control during 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.

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 12 of the Notes to Condensed Consolidated Financial Statements.

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.

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

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

Class		Outstanding as of ~~October 26,~~November 14, 2023
Common Stock, $0.0001 par value per share		12,942,592 shares

Part I. Financial Information

Item 1.	Financial Statements:

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

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended ~~March 31,~~September 30, 2023 (unaudited) and 2022 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Nine Months Ended ~~March 31,~~September 30, 2023 (unaudited) and 2022 (unaudited)	6-7

	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023 (unaudited) and 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	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

~~Item 4.~~	~~Controls and Procedures~~	32

~~Part II. Other Information~~

~~Item 1.~~	~~Legal Proceedings~~	33

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	33

~~Item 3.~~	~~Defaults Upon Senior Securities~~	33

Item 4.	Controls and Procedures	34

Part II. Other Information

Item 1.	Legal Proceedings	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	3335

Item 5.	Other Information	33

~~Item 6.~~	~~Exhibits~~	3335

~~SIGNATURES~~Item 6.	34Exhibits	35

SIGNATURES		36

	2023			2022			2023			2022
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022

Revenue	$	60,350		$	36,657		$	506,383		$	205,500

Cost of revenue		5,585			54,223			88,196			118,390

Gross profit		54,765			(17,566	)		418,187			87,110

Operating expenses:
Salaries, wages and benefits		70,916			81,551			200,127			200,384
Share-based compensation		107,630			181,199			353,744			658,004
Professional fees		35,622			32,595			97,333			187,554
Advertising		3,745			10,009			13,971			24,223
Rent		20,001			-			60,003			8,393
Service charges		10,711			2,394			15,083			6,600
Depreciation and amortization		18,819			35,119			56,457			105,357
Other operating		106,020			178,138			279,822			520,637

Total operating expenses		373,464			521,005			1,076,540			1,711,152

Loss from operations		(318,699	)		(538,571	)		(658,353	)		(1,624,042	)

Other income (expense):
Interest expense		(12,918	)		(8,891	)		(34,436	)		(205,095	)
Change in fair value of derivative liabilities		-			240,300			-			1,760,300
Loss on settlement of debt, net		-			(2,481,231	)		-			(2,250,411	)

Total other expense, net		(12,918	)		(2,249,822	)		(34,436	)		(695,206	)

Net loss from continuing operations		(331,617	)		(2,788,393	)		(692,789	)		(2,319,248	)

Discontinued operations:
Loss from operations		(598,014	)		(321,068	)		(2,035,385	)		(1,315,583	)

Net loss		(929,631	)		(3,109,461	)		(2,728,174	)		(3,634,831	)

Net loss attributable to noncontrolling interest		251,166			134,849			854,862			552,545

Net loss attributable to Vystar	$	(678,465	)	$	(2,974,612	)	$	(1,873,312	)	$	(3,082,286	)

Basic and diluted loss per share:
Net loss from continuing operations	$	(0.03	)	$	(0.22	)	$	(0.05	)	$	(0.18	)
Net loss from discontinued operations	$	(0.05	)	$	(0.02	)	$	(0.16	)	$	(0.10	)
Net loss attributable to noncontrolling interest	$	(0.02	)	$	(0.01	)	$	(0.07	)	$	(0.04	)
Net loss attributable to common shareholders	$	(0.05	)	$	(0.23	)	$	(0.14	)	$	(0.24	)

Basic and diluted weighted average number of common shares outstanding		12,942,592			12,942,592			12,942,592			12,942,609

				March 31,		December 31,
				Carrying Amount
				March 31,		December 31,
	Issue Date	Principal Amount		2023		2022
Jamie Rotman 5.00% note due August 2023	08/17/21	$	5,000	$	5,406	$	5,344

	●	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.

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

	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: ~~October 26,~~November 14, 2023	By:	/s/ Steven Rotman
		Steven Rotman
		President, Chief Executive Officer, Chief Financial Officer and Director