Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Jul. 06, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | Vystar Corp | |
Entity Central Index Key | 0001308027 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | No | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 1,105,776,437 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 403,091 | $ 72,355 |
Accounts receivable | 40,155 | 38,526 |
Stock subscription receivable | 49,250 | 49,250 |
Inventories | 3,916,997 | 4,114,977 |
Investments - equity securities, at fair value | 99,095 | 149,517 |
Prepaid expenses and other | 311,476 | 602,980 |
Deferred commission costs | 124,725 | 129,123 |
Total current assets | 4,944,789 | 5,156,728 |
Property and equipment, net | 1,787,616 | 1,879,739 |
Operating lease right-of-use assets | 10,094,497 | 10,379,685 |
Finance lease right-of-use assets, net | 871,246 | 849,209 |
Other assets: | ||
Intangible assets, net | 2,389,056 | 2,489,612 |
Goodwill | 460,301 | 460,301 |
Inventories, long-term | 890,130 | 935,121 |
Deferred commission costs, net of current portion | 211,335 | 217,024 |
Other | 34,377 | 34,377 |
Total other assets | 3,985,199 | 4,136,435 |
Total assets | 21,683,347 | 22,401,796 |
Current liabilities: | ||
Line of credit | 2,163,562 | 2,413,539 |
Term notes - current maturities | 769,814 | 16,374 |
Accounts payable | 3,124,371 | 2,846,306 |
Accrued expenses | 350,117 | 681,758 |
Stock subscription payable | 1,298,931 | 1,150,125 |
Operating lease liabilities - current maturities | 1,071,000 | 1,055,000 |
Finance lease liabilities - current maturities | 171,000 | 167,000 |
Shareholder, convertible and contingently convertible notes payable and accrued interest - current maturities | 611,281 | 366,326 |
Related party debt - current maturities | 46,000 | 46,000 |
Unearned revenue | 1,662,716 | 1,677,171 |
Derivative liabilities | 1,499,800 | 1,499,800 |
Total current liabilities | 12,768,592 | 11,919,399 |
Long-term liabilities: | ||
Term notes, net of current maturities | 500,000 | 500,000 |
Operating lease liabilities, net of current maturities | 7,231,508 | 7,490,431 |
Finance lease liabilities, net of current maturities | 707,524 | 694,487 |
Unearned revenue, net of current maturities | 811,550 | 823,401 |
Shareholder, convertible and contingently convertible notes payable and accrued interest, net of current maturities and debt discount | 319,681 | 494,363 |
Related party debt, net of current maturities and debt discount | 2,049,797 | 1,712,259 |
Total long-term liabilities | 11,620,060 | 11,714,941 |
Total liabilities | 24,388,652 | 23,634,340 |
Stockholders' deficit: | ||
Convertible preferred stock, $0.0001 par value 15,000,000 shares authorized; 13,828 issued and outstanding (liquidation preference of $94,779 and $91,275 at March 31, 2020 and December 31, 2019 , respectively) | 1 | 1 |
Common stock, $0.0001 par value, 1,500,000,000 shares authorized; 1,105,762,080 shares issued and 1,105,732,080 shares outstanding | 110,573 | 110,573 |
Additional paid-in capital | 38,442,169 | 38,436,607 |
Accumulated deficit | (42,472,344) | (41,104,967) |
Common stock in treasury, at cost; 30,000 shares | (30) | (30) |
Total Vystar stockholders' deficit | (3,919,631) | (2,557,816) |
Noncontrolling interest | 1,214,326 | 1,325,272 |
Total stockholders' deficit | (2,705,305) | (1,232,544) |
Total liabilities and stockholders' deficit | $ 21,683,347 | $ 22,401,796 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Convertible preferred stock, par value | $ 0.0001 | $ 0.0001 |
Convertible preferred stock, shares authorized | 15,000,000 | 15,000,000 |
Convertible preferred stock, shares issued | 13,828 | 13,828 |
Convertible preferred stock, shares outstanding | 13,828 | 13,828 |
Convertible preferred stock, liquidation preference | $ 94,779 | $ 91,275 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 1,500,000,000 | 1,500,000,000 |
Common stock, shares issued | 1,105,762,080 | 1,105,762,080 |
Common stock, shares outstanding | 1,105,732,080 | 1,105,732,080 |
Treasury stock, shares | 30,000 | 30,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Revenue | $ 5,932,238 | $ 191,667 |
Cost of revenue | 2,932,614 | 199,842 |
Gross profit (loss) | 2,999,624 | (8,175) |
Operating expenses: | ||
Salaries, wages and benefits | 1,454,074 | |
Share-based compensation | 154,368 | 1,612,286 |
Professional fees | 292,696 | 192,029 |
Advertising | 446,695 | 20,483 |
Rent | 293,171 | |
Service charges | 183,577 | 1,126 |
Depreciation and amortization | 243,923 | 49,653 |
Other operating | 781,673 | 120,303 |
Total operating expenses | 3,850,177 | 1,995,880 |
Loss from operations | (850,553) | (2,004,055) |
Other income (expense): | ||
Gain on settlement of debt, net | 14,945 | |
Interest expense | (604,714) | (99,663) |
Change in fair value of derivative liabilities | (1,044,250) | |
Other income (expense), net | (23,056) | (151) |
Total other expense, net | (627,770) | (1,129,119) |
Net loss | (1,478,323) | (3,133,174) |
Net loss attributable to noncontrolling interest | 110,946 | |
Net loss attributable to Vystar | $ (1,367,377) | $ (3,133,174) |
Basic and diluted loss per share: | ||
Net loss per share | $ 0 | $ 0 |
Basic and diluted weighted average number of common shares outstanding | 1,105,732,080 | 770,752,984 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Treasury Stock [Member] | Total Vystar Stockholders' Deficit [Member] | Noncontrolling Interest [Member] | Total |
Beginning balance at Dec. 31, 2018 | $ 1 | $ 45,774 | $ 31,485,532 | $ (33,400,345) | $ (1,869,038) | $ (1,869,038) | ||
Beginning balance, shares at Dec. 31, 2018 | 13,828 | 457,747,818 | ||||||
Common stock issued for services | $ 14,771 | 2,017,465 | 2,032,236 | 2,032,236 | ||||
Common stock issued for services, shares | 147,704,875 | |||||||
Share based compensation - options | 17,783 | 17,783 | 17,783 | |||||
Common stock issued for settlement of warrants | $ 7,725 | 324,717 | 332,442 | 332,442 | ||||
Common stock issued for settlement of warrants, shares | 77,246,324 | |||||||
Common stock issued for cash received, net | $ 14,493 | 420,307 | 434,800 | 434,800 | ||||
Common stock issued for cash received, net, shares | 144,933,992 | |||||||
Common stock issued for conversion of related party line of credit | $ 251 | 143,278 | 143,529 | 143,529 | ||||
Common stock issued for conversion of related party line of credit, shares | 2,512,900 | |||||||
Common stock issued upon conversion of convertible notes and settlement of derivatives | $ 22,732 | 1,320,931 | 1,343,663 | 1,343,663 | ||||
Common stock issued upon conversion of convertible notes and settlement of derivatives, shares | 227,336,218 | |||||||
Treasury stock repurchases | $ (30) | (30) | (30) | |||||
Treasury stock repurchases, shares | (30,000) | |||||||
Net loss | (3,133,174) | (3,133,174) | (3,133,174) | |||||
Ending balance at Mar. 31, 2019 | $ 1 | $ 105,746 | 35,730,013 | (36,533,519) | $ (30) | (697,789) | (697,789) | |
Ending balance, shares at Mar. 31, 2019 | 13,828 | 1,057,482,127 | (30,000) | |||||
Beginning balance at Dec. 31, 2018 | $ 1 | $ 45,774 | 31,485,532 | (33,400,345) | (1,869,038) | (1,869,038) | ||
Beginning balance, shares at Dec. 31, 2018 | 13,828 | 457,747,818 | ||||||
Ending balance at Dec. 31, 2019 | $ 1 | $ 110,573 | 38,436,607 | (41,104,967) | $ (30) | (2,557,816) | 1,325,272 | (1,232,544) |
Ending balance, shares at Dec. 31, 2019 | 13,828 | 1,105,762,080 | (30,000) | |||||
Common stock and warrants issued for services | 5,562 | 5,562 | 5,562 | |||||
Net loss | (1,367,377) | (1,367,377) | (110,946) | (1,478,323) | ||||
Ending balance at Mar. 31, 2020 | $ 1 | $ 110,573 | $ 38,442,169 | $ (42,472,344) | $ (30) | $ (3,919,631) | $ 1,214,326 | $ (2,705,305) |
Ending balance, shares at Mar. 31, 2020 | 13,828 | 1,105,762,080 | (30,000) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Cash flows from operating activities: | |||
Net loss | $ (1,478,323) | $ (3,133,174) | |
Adjustments to reconcile net loss to cash used in operating activities: | |||
Gain on settlement of debt | (14,945) | ||
Share-based compensation | 154,368 | 1,612,286 | |
Depreciation | 139,684 | 10,232 | |
Bad debts | 5,317 | ||
Amortization of intangible assets | 104,239 | 39,421 | |
Noncash lease expense | 32,166 | ||
Unamortized term debt issuance costs | (14,208) | ||
Amortization of debt discount | 315,875 | 73,519 | |
Change in fair value of derivative liabilities | 1,044,250 | $ 1,079,450 | |
Net unrealized loss on available-for-sale investments | 50,422 | ||
(Increase) decrease in assets: | |||
Accounts receivable | (6,946) | (513) | |
Inventories | 242,971 | (25,093) | |
Prepaid expenses and other assets | 291,504 | 6,235 | |
Deferred commission costs | 10,087 | ||
Increase (decrease) in liabilities: | |||
Accounts payable | 278,065 | (23,746) | |
Accrued expenses and interest payable | (289,705) | 1,164 | |
Unearned revenue | (26,306) | ||
Net cash used in operating activities | (190,790) | (410,364) | |
Cash flows from investing activities: | |||
Patents and trademark fees | (3,683) | (2,839) | |
Website development costs | (500) | ||
Net cash used in investing activities | (3,683) | (3,339) | |
Cash flows from financing activities: | |||
Net repayments on line of credit | (249,977) | ||
Proceeds from the issuance of term debt | 808,500 | (146,176) | |
Repayment of term debt | (40,852) | ||
Repayment of finance lease obligations | (42,462) | ||
Proceeds from the issuance of notes - related parties | 50,000 | 217,000 | |
Issuance of common stock, net of costs | 731,020 | ||
Treasury stock repurchases | (30) | ||
Net cash provided by financing activities | 525,209 | 801,814 | |
Net increase in cash | 330,736 | 388,111 | |
Cash - beginning of period | 72,355 | 50,053 | 50,053 |
Cash - end of period | 403,091 | 438,164 | $ 72,355 |
Cash paid during the period for: | |||
Interest | 224,433 | 16,209 | |
Non-cash transactions: | |||
Shareholder and convertible notes and accrued interest payable converted to common stock | 1,487,192 | ||
Common stock issued for accrued compensation | 771,203 | ||
Common stock issued for settlement of warrant exercises | 32,442 | ||
Settlement of derivative liabilities | $ 1,279,335 |
Description of Business
Description of Business | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Description of Business | NOTE 1 - DESCRIPTION OF BUSINESS History and Nature of Business Vystar Corporation (“Vystar”, the “Company”, “we,” “us,” or “our”) is based in Worcester, Massachusetts. The Company uses patented technology to produce a line of innovative air purifiers, which destroy viruses and bacteria through the use of ultraviolet light. Vystar also manufactures and sells reduced allergen natural rubber latex used primarily in various bedding products. In addition, Vystar has a majority ownership in Murida Furniture Co., Inc. dba Rotmans Furniture (“Rotmans”), the largest furniture and flooring store in New England and one of the largest independent furniture retailers in the U.S. Vystar is the creator and exclusive owner of the innovative technology to produce Vytex ® In May of 2018, Vystar acquired substantially all of the assets of UV Flu Technologies, Inc., formerly traded on the OTC under the ticker UVFT, whose patented ViraTech™ UV light air purification technology destroys greater than 99% of airborne bacteria, viruses and other microorganisms and virtually eliminates concentrations of odors and volatile organic compounds (“VOCs”). As part of Vystar’s mission to offer eco-friendly, sustainable materials and products that create a better environment for consumers and workers throughout the product lifecycle, UV Flu Technologies is an excellent counterpart to our Vytex materials and Vytex bedding products. Vystar products will help create a perfect natural sleep environment starting with Vytex bedding made from the purest latex in the world and UV Flu Technologies’ RxAir™ air purifier ensuring every breath is free of harmful pathogens, VOCs and odors. In May of 2019, Vystar acquired the assets of Fluid Energy Conversion Inc. (“FEC”), primarily consisting of its patent on the Hughes Reactor, which has the ability to control, enhance, and focus energy in flowing liquids and gases. Vystar intends to use this technology to enhance the effectiveness of Vystar’s RxAir purification system to destroy airborne pathogens while decreasing the cost and size of Vystar’s RxAir units. In July of 2019, Vystar acquired 58% of the outstanding shares of common stock of Rotmans. Rotmans sells a broad line of residential furniture and decorative accessories and serves customers throughout the New England region. The acquisition is expected to add approximately $30 million in top line revenue and enable Vystar to capitalize on the infrastructure already in place at Rotmans for accounting, retail sales facilities and staff, customer service, warehousing, and delivery. In addition, Rotmans will offer significant marketing and advertising opportunities for all of Vystar’s brands to Rotmans’ thousands of existing customers. The Company and Rotmans are exploring a number of initiatives relating to environmentally friendly product development and distribution that will utilize the access to the capital markets afforded by this combination. |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification. The Company has evaluated subsequent events through the date of the filing of its Form 10-Q with the Securities and Exchange Commission. Other than those events disclosed in Note 18, the Company is not aware of any other significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Company’s financial statements. Basis of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All significant intercompany accounts and transactions have been eliminated. COVID-19 In December 2019, a novel coronavirus (“COVID-19”) emerged and has subsequently spread worldwide. The World Health Organization has declared COVID-19 a pandemic resulting in federal, state, and local governments mandating various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus. On March 24, 2020, Massachusetts required all non-essential businesses to close their physical workplaces. As a result, the Rotmans showroom, offices and warehouse temporarily closed. During that time, associates worked remotely where possible. The Company re-opened on June 10, 2020 and continues to monitor developments, including government requirements and recommendations. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results for the entire year. The pandemic has resulted in significant economic disruption. Although our showroom has reopened, we cannot reasonably estimate the impact on Vystar should the pandemic persist or worsen. Accordingly, the estimates and assumptions made as of March 31, 2020 could change in subsequent interim reports and upon final determination at year-end, and it is reasonably possible that such changes could be significant (although the potential effects cannot be measured at this time). Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer. The Company and the chief executive officer view the Company’s operations and manage its business as one reportable segment with different operating segments. Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Significant estimates made by management include, among others, allowance for obsolete inventory, the allocation of purchase price related to acquisitions, the recoverability of long-lived assets, fair values of right of use assets and lease liabilities, valuation of derivative liabilities, share-based compensation and other equity issuances. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from these estimates. Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash, accounts receivable, investments - equity securities, accounts payable, accrued expenses and interest payable, lines of credit, shareholder notes payable, long-term debt and unearned revenue. The carrying values of all the Company’s financial instruments approximate or equal fair value because of their short maturities and market interest rates or, in the case of equity securities, being stated at fair value. In specific circumstances, certain assets and liabilities are reported or disclosed at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the Company’s principal market for such transactions. If there is not an established principal market, fair value is derived from the most advantageous market. Valuation inputs are classified in the following hierarchy: ● Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. ● Level 2 inputs are directly or indirectly observable valuation inputs for the asset or liability, excluding Level 1 inputs. ● Level 3 inputs are unobservable inputs for the asset or liability. Highest priority is given to Level 1 inputs and the lowest priority to Level 3 inputs. Acceptable valuation techniques include the market approach, income approach, and cost approach. In some cases, more than one valuation technique is used. The derivative liabilities were recognized at fair value on a recurring basis through the date of the settlement and March 31, 2020 and are level 3 measurements. There have been no transfers between levels during the three months ended March 31, 2020. Acquisitions Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on valuations that use information and assumptions provided by management. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including, legal, accounting, and other costs, are capitalized in asset acquisitions and for business combinations are expensed in the periods in which the costs are incurred. The results of operations of acquired assets are included in the financial statements from the acquisition date. Cash and Cash Equivalents Cash and cash equivalents include all liquid investments with a maturity date of less than three months when purchased. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions which typically settle within five days. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company routinely sells, without recourse, trade receivables resulting from retail furniture sales to various financial institutions at an average service charge of 5.9% in 2020. Amounts sold during the first quarter of 2020 were approximately $1,691,000. There were no sales of trade receivables in the first quarter of 2019. Retail furniture receivables retained by the Company are generally collateralized by the merchandise sold, represent valid claims against debtors for sales arising on or before the balance sheet date and are reduced to their estimated net realizable value. In addition, the Company grants credit to Vytex customers without requiring collateral. The amount of accounting loss for which Vystar is at risk in these unsecured accounts receivable is limited to their carrying value. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based upon its assessment of the current status of individual accounts. Balances that are still outstanding after management has performed reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of March 31, 2020 and December 31, 2019, the Company considers accounts receivable to be fully collectible and no allowance for doubtful accounts was recorded. Inventories Inventories include those costs directly attributable to the product before sale. Inventories consist primarily of finished goods of foam toppers, furniture, mattresses and pillows and are carried at net realizable value, which is defined as selling price less cost of completion, disposal and transportation. The Company evaluates the need to record write-downs for inventory on a regular basis. Appropriate consideration is given to obsolescence, slow-moving and other factors in evaluating net realizable values. Inventories not expected to be sold within 12 months are classified as long-term. Prepaid Expenses and Other Assets Prepaid expenses and other assets include amounts related to prepaid insurance policies, which are expensed on a straight-line basis over the life of the underlying policy, and other expenses. Investments - Equity Securities Marketable equity securities have been categorized as available-for-sale and, as a result, are stated at fair value. Unrealized gains and losses are reflected in the statement of operations. The Company periodically reviews the available-for-sale securities for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As of March 31, 2020, the Company believes that the carrying value of the available-for-sale securities was recoverable in all material respects. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided over the estimated useful lives of the assets, generally 5 to 10 years, using straight-line and accelerated methods. Expenditures for major renewals and betterments are capitalized, while routine repairs and maintenance are expensed as incurred. When property items are retired or otherwise disposed of, the asset and related reserve accounts are relieved of the cost and accumulated depreciation, respectively, and the resultant gain or loss is reflected in earnings. As of March 31, 2020, the net balance of property and equipment is $1,787,616 with accumulated depreciation of $300,922. As of December 31, 2019, the net balance of property and equipment is $1,879,739 with accumulated depreciation of $208,799. Intangible Assets Patents represent legal and other fees associated with the registration of patents. The Company has five issued patents with the United States Patent and Trade Office (“USPTO”) as well as five issued international Patent Cooperation Treaty (“PCT”) patents. Patents are carried at cost and are being amortized on a straight-line basis over their estimated useful lives, typically ranging from 9 to 20 years. The Company has trademark protection for “Vystar”, “Vytex”, and “RxAir” among others. Trademarks are carried at cost and since their estimated life is indeterminable, no amortization is recognized. Instead, they are evaluated annually for impairment. Customer relationships, tradename and marketing related intangibles are carried at cost and are being amortized on a straight-line basis over their estimated useful lives, typically ranging from 5 to 10 years. Long-Lived Assets We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We evaluate assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the assets. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. During the three months ended March 31, 2020 and 2019, we did not recognize any impairment of our long-lived assets. Goodwill Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. Goodwill is not amortized, rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. We perform our annual impairment test at the end of each calendar year, or more frequently if events or changes in circumstances indicate the asset might be impaired. Accounting for acquisitions requires us to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While we use best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. The impairment model permits, and we utilize, a simplified approach for determining goodwill impairment. In the first step, we evaluate the recoverability of goodwill by estimating the fair value of our reporting unit using multiple techniques, including an income approach using a discounted cash flow model and a market approach. Based on an equal weighting of the results of these two approaches, a conclusion of fair value is estimated. The fair value is then compared to the carrying value of our reporting unit. If the fair value of a reporting unit is less than its carrying value, the Company recognizes this amount as an impairment loss. Impairment losses, limited to the carrying value of goodwill, represent the excess of the carrying amount of goodwill over its implied fair value. Convertible Notes Payable Borrowings are recognized initially at the principal amount received. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as interest expense in the statements of operations over the period of the borrowings using the effective interest method. Derivatives The Company evaluates its debt instruments or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of Accounting Standards Codification (“ASC”) Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity The Company applies the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. From time to time, the Company has issued notes with embedded conversion features. Certain of the embedded conversion features contain price protection or anti-dilution features that result in these instruments being treated as derivatives for accounting purposes. Accordingly, during the three months ended March 31, 2020 and 2019, the Company has classified all conversion features as derivative liabilities and has estimated the fair value of these embedded conversion features using a Monte Carlo simulation model. Unearned Revenue Unearned revenue consists of customer advance payments, deposits on sales of undelivered merchandise and deferred warranty revenue on self-insured stain protection warranty coverage. There was no unearned revenue during the three months ended March 31, 2019. Changes to unearned revenue during the three months ended March 31, 2020 are summarized as follows: Balance, December 31, 2019 $ 2,500,572 Customer deposits received 4,930,536 Warranty coverage purchased 98,309 Gift cards purchased 2,500 Revenue earned (5,057,651 ) Balance, March 31, 2020 $ 2,474,266 Loss Per Share The Company presents basic and diluted loss per share. Because the Company reported a net loss in the first quarter of 2020 and 2019, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same. Excluded from the computation of diluted loss per share were options to purchase 27,983,271 and 29,098,270 shares of common stock for the three months ended March 31, 2020 and 2019, respectively, as their effect would be anti-dilutive. Warrants to purchase 14,237,315 and 14,382,380 shares of common stock for the three months ended March 31, 2020 and 2019, respectively, were also excluded from the computation of diluted loss per share as their effect would be anti-dilutive. In addition, preferred stock convertible to 4,661,180 and 4,382,730 shares of common stock three months ended March 31, 2020 and 2019, respectively, were excluded from the computation of diluted loss per share as their effect would be anti-dilutive. Revenue Our principal activities from which we generate our revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. The contract is based on either the acceptance of standard terms and conditions at the retail store, on the websites for e-commerce customers and via telephone with our third-party call center for our print media and direct mail 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. 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, 2020 and December 31, 2019, reserves for estimated sales returns totaled $3,000, respectively, and are included in the accompanying consolidated balance sheets as accrued expenses. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product is shipped based on fulfillment by the Company. The Company considers fulfillment when it passes all liability at the point of shipping through third party carriers or in-house delivery services. Delivery fees are charged to customers and are included in revenue in the accompanying consolidated statements of operations and the costs associated with these deliveries are included in operating expenses in the accompanying consolidated statements of operations. 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 consolidated statements of operations. The Company also defers revenues for separately-priced stain protection warranty coverage for which it is ultimately self-insured. Revenue is recognized from the extended warranty sales on a straight-line basis over the respective contract term. The extended warranty terms primarily range from three to five years from the date of delivery. At March 31, 2020, deferred warranty revenue was approximately $812,000 and is included in unearned revenue in the accompanying consolidated balance sheets. During the three months ended March 31, 2020, the Company recorded total proceeds of approximately $98,000 and recognized total revenues of approximately $134,000 related to deferred warranty revenue arrangements. Commission costs in obtaining extended warranty contracts are capitalized and recognized as expense on a straight-line basis over the period of the warranty contract. At March 31, 2020, deferred commission costs are approximately $336,000 and included in the accompanying consolidated balance sheets. All other costs, such as costs of services performed under the contract, general and administrative expenses, and advertising costs are expensed as incurred. Cost of Revenue Cost of revenue consists primarily of product and freight costs and fees paid to online retailers. Research and Development Research and development costs are expensed when incurred. Research and development costs include all costs incurred related to the research, development and testing of the Company’s process to produce Vytex NRL. Vytex NRL has produced protein test results on finished products that are both “below detection” and “not detectable” in terms of the amount of proteins remaining in these finished goods made with Vytex NRL. These results have been reproduced in many subsequent tests. For the three months ended March 31, 2020 and 2019, Vystar’s research and development costs were not significant. Advertising Costs Advertising costs, which include television, radio, newspaper and other media advertising, are expensed upon first showing. Advertising costs included in general and administrative expenses in the accompanying consolidated statements of operations were approximately $447,000 and $20,000 for the three months ended March 31, 2020 and 2019, respectively. Share-Based Compensation The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of our common stock. The Company has elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14C to estimate the expected term of employee stock options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The value of restricted stock awards is determined using the fair value of the Company’s common stock on the date of grant. The Company accounts for forfeitures as they occur. Compensation expense is recognized on a straight-line basis over the requisite service period of the award. Income Taxes Vystar recognizes income taxes on an accrual basis based on a tax position taken or expected to be taken in its tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets or liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold will be measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more likely than not be realized. Should they occur, interest and penalties related to tax positions are recorded as interest expense. No such interest or penalties have been incurred for the three months ended March 31, 2020 and 2019. The Company remains subject to income tax examinations from Federal and state taxing jurisdictions for 2016 through 2019. Concentration of Credit Risk Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash and accounts receivable. Cash held in operating accounts may exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limits. While the Company monitors cash balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, the Company has experienced no loss or lack of access to our cash; however, the Company can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets. Credit concentration risk related to accounts receivable is mitigated as customer credit is checked prior to the sales and accounts receivable consists of a high number of relatively small balances. Other Risks and Uncertainties The Company is exposed to commodity price risk, mainly associated with variations in the market price for NRL as well as wintering of the Hevea trees, which differs for each country. The timing and magnitude of industry cycles are difficult to predict and are impacted by general economic conditions including the buying climate in China. The Company responds to changes in NRL prices by adjusting sales prices on a weekly basis and by turning rather than holding inventory in anticipation of higher prices. The Company actively manages its exposure to commodity price risk and monitors the actual and expected spread between forward selling prices and purchase costs and processing and shipping expense. The Company also currently spreads the processing of Vytex NRL among three continents. Sales contracts are based on forward market prices, and generally orders are placed 30 to 90 days ahead of shipment date due to these fluctuations. However, financial results may be negatively impacted where selling prices fall more quickly than purchase price adjustments can be made or when levels of inventory have an anticipated net realizable value that is below cost. The Company is also exposed to risks pertinent to the operations of a retailer, including, but not limited to, the ability to acquire new customers and maintain a strong brand as well as broader economic factors such as interest rates and changes in customer spending patterns. Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement |
Liquidity and Going Concern
Liquidity and Going Concern | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Liquidity and Going Concern | NOTE 3 - LIQUIDITY AND GOING CONCERN The Company’s financial statements are prepared using the accrual method of accounting in accordance with U.S. GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. However, the Company has incurred significant losses and experienced negative cash flow since inception. At March 31, 2020, the Company had cash of $403,091 and a deficit in working capital of approximately $7.8 million. Further, at March 31, 2020 the accumulated deficit amounted to approximately $42.5 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 and Vytex license fees that now also include the Company’s association with foam cores made from Vytex used in mattresses, mattress toppers and pillows, and stock warrant exercises from existing shareholders. The Company has also focused the efforts of key internal employees on the goal of creating efficiencies in each department in our retail furniture business, including purchasing, marketing, inventory control, advertising, accounting, warehousing and customer service. In addition, the Company has invested in new accounting and operations software, which will improve our ability to control inventory levels and monitor the financial performance of our operations. There can be no assurances that the Company will be able to achieve projected levels of revenue in 2020 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 2020, 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 and 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; market acceptance of the Company’s products, services and competing technological developments; the Company’s ability to successfully realize synergies through the integration of the merged companies, acquire new customers and maintain a strong brand; the success of our efforts to reduce expenses in our retail furniture business; 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. |
Investments - Equity Securities
Investments - Equity Securities | 3 Months Ended |
Mar. 31, 2020 | |
Investments, All Other Investments [Abstract] | |
Investments - Equity Securities | NOTE 4 - INVESTMENTS – EQUITY SECURITIES Cost and fair value of investments - equity securities are as follows as of March 31, 2020: Gross Fair Cost Unrealized Losses Value $ 141,225 $ (42,130 ) $ 99,095 Net unrealized holding losses on available-for-sale securities were approximately $50,000 in the first quarter of 2020 and have been included in other income (expenses) in the accompanying statements of operations. There were no investments – equity securities prior to the Rotmans acquisition in July 2019. Investments represent equity securities in a publicly traded company. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment, net consists of the following: March 31, December 31, 2020 2019 Furniture, fixtures and equipment $ 1,354,665 $ 1,354,665 Tooling and testing equipment 319,000 319,000 Parking lots 365,707 365,707 Motor vehicles 49,166 49,166 2,088,538 2,088,538 Accumulated depreciation (300,922 ) (208,799 ) Property and equipment, net $ 1,787,616 $ 1,879,739 Depreciation expense for the three months ended March 31, 2020 and 2019 was $139,684 and $10,232, respectively. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 6 - INTANGIBLE ASSETS Intangible assets consist of the following: Amortization March 31, December 31, Period 2020 2019 (in Years) Amortized intangible assets: Customer relationships $ 210,000 $ 210,000 6 - 10 Proprietary technology 610,000 610,000 10 Tradename and brand 1,380,000 1,380,000 5 - 10 Marketing related 380,000 380,000 5 Patents 359,101 355,418 6 - 20 Noncompete 50,000 50,000 5 Total 2,989,101 2,985,418 Accumulated amortization (609,117 ) (504,878 ) Intangible assets, net 2,379,984 2,480,540 Indefinite-lived intangible assets: Trademarks 9,072 9,072 Total intangible assets $ 2,389,056 $ 2,489,612 Amortization expense for the three months ended March 31, 2020 and 2019 was $104,239 and $39,421, respectively. Estimated future amortization expense for finite-lived intangible assets is as follows: Amount Remaining in 2020 $ 312,716 2021 416,956 2022 417,140 2023 410,529 2024 311,306 Thereafter 511,337 Total $ 2,379,984 |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | NOTE 7 LEASES The Company leases equipment, a showroom, offices and warehouse facilities. These leases expire at various dates through 2024 with options to extend to 2031. The table below presents the lease costs for the three months ended March 31, 2020: March 31, 2020 Operating lease cost $ 394,348 Finance lease cost: Amortization of right-of-use assets 47,561 Interest on lease liabilities 11,690 Total lease cost $ 453,599 During the three months ended March 31, 2020, the Company recognized sublease income of approximately $27,000 which is included in other income (expense), net in the accompanying condensed consolidated statements of operations. There were no lease costs for the three months ended March 31, 2019. Our leases generally do not provide an implicit rate, and therefore we use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. We used incremental borrowing rates as of the implementation date for operating leases that commenced prior to that date. The following table presents other information related to leases: Three months ended Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases $ 372,884 Financing cash flows used for financing leases 54,152 Assets obtained in exchange for operating lease liabilities - Assets obtained in exchange for finance lease liabilities 75,739 Weighted average remaining lease term: Operating leases 9 years Finance leases 6 years Weighted average discount rate: Operating leases 5.53 % Finance leases 5.16 % The future minimum lease payments required under operating and financing lease obligations as of March 31, 2020 having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows: Operating Leases Finance Total Remainder of 2020 $ 1,127,733 $ 160,156 $ 1,287,889 2021 1,503,643 205,545 1,709,188 2022 1,110,794 150,943 1,261,737 2023 880,275 150,142 1,030,417 2024 870,000 140,002 1,010,002 Thereafter 5,220,000 207,475 5,427,475 Total undiscounted lease liabilities 10,712,445 1,014,263 11,726,708 Less: imputed interest (2,409,937 ) (135,739 ) (2,545,676 ) Net lease liabilities $ 8.302,508 $ 878,524 $ 9,181,032 As of March 31, 2020, the Company does not have additional operating and finance leases that have not yet commenced. |
Notes Payable and Loan Facility
Notes Payable and Loan Facility | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable and Loan Facility | NOTE 8 NOTES PAYABLE AND LOAN FACILITY Line of Credit At March 31, 2020, the Company had a $2,500,000 revolving line of credit with Fidelity Co-operative Bank. Advances were limited to 50% of eligible inventory and bore interest at the prime rate plus 0.50% with a floor of 3.75%. The interest rate was 3.75% at March 31, 2020. The line of credit was due upon demand and subject to renewal annually. It was secured by all assets of the Company and subject to certain financial and non-financial covenants. The Company was not in compliance with certain covenants and was in default at March 31, 2020. The credit line was subsequently paid-off on May 29, 2020. Indebtedness to existing and future Rotman Family notes were subordinated to the bank debt. The line was also secured with a mortgage on a property of a wholly-owned entity of Steven Rotman. Borrowings under this agreement at March 31, 2020 were approximately $2,164,000. Related Party Line of Credit (CMA Note Payable) On November 2, 2012, the Company executed a $1,500,000 unsecured line of credit agreement with CMA Investments, LLC (“CMA”), a related party and a Georgia limited liability company (the “CMA Note”). Three of the directors the Company (“CMA directors”) were initially the members of CMA Investments, LLC. Pursuant to the term of the CMA Note, interest is computed at LIBOR plus 5.25% on amounts drawn and fees. The CMA Note was settled in July 2019. Term Notes Certain investors guaranteed $100,000 each with Fidelity Bank to establish a $500,000 revolving line of credit. At the present time, the Company is paying interest only at a rate of 4.5% per annum, with a balloon payment of $500,000 due in 2033. The balance is $500,000 as of March 31, 2020 and December 31, 2019. Other term debt totaling $13,397 and $16,374 at March 31, 2020 and December 31, 2019, respectively, represents three 0% loans on motor vehicles, requiring cumulative monthly payments of $1,488 through maturity in November 2020. On February 24, 2020, the Company entered into an agreement with Libertas Funding LLC (“Libertas”) to sell future sale receipts totaling $1,089,000 for a purchase price of $825,000. The sold amount of future sales receipts are delivered weekly to Libertas at predetermined amounts over a period of nine months. The agreement contains an early delivery discount fee for delivering the future revenues before the end of the contract term and an origination fee of $16,500, which has been capitalized and is being amortized over the term of the agreement. The implicit borrowing rate of the agreement is approximately 75%. The agreement is personally guaranteed by Steven Rotman. As of March 31, 2020, current maturities of term notes include $756,417 related to this agreement. Shareholder, Convertible and Contingently Convertible Notes Payable The following table summarizes shareholder, convertible and contingently convertible notes payable: March 31, December 31, 2020 2019 Shareholder, convertible and contingently convertible notes $ 951,895 $ 951,895 Accrued interest 58,467 46,569 Debt discount (79,400 ) (137,775 ) 930,962 860,689 Less: current maturities (611,281 ) (366,326 ) $ 319,681 $ 494,363 Shareholder Convertible Notes Payable During the year ended December 31, 2018, the Company issued shareholder contingently convertible notes payable (the “Notes”), some of which were for contract work performed by other entities in lieu of compensation and expense reimbursement, totaling approximately $335,000. The Notes are (i) unsecured, (ii) bear interest at an annual rate of five percent (5%) per annum from date of issuance, and (iii) are convertible at the Company’s option post April 19, 2018. The Notes mature one year from issuance but may be extended one (1) additional year by the Company. If converted, the Notes plus accrued interest are convertible into shares of the Company’s common stock at the prior twenty (20) day average closing price with a 50% discount. The outstanding balance of all of these Notes of as March 31, 2020 and December 31, 2019 is $338,195. The Notes matured in January 2020. During the year ended December 31, 2019, the Company issued certain contingently convertible promissory notes in varying amounts to existing shareholders which totaled $613,700. The face amount of the note represents the amount due at maturity along with the accrued interest. The amount can be converted into shares of the Company’s stock, at the option of the Company, based on the average closing price for the trailing 20 days prior to conversion and carrying a 35% to 50% discount. These notes can be converted only after an acceleration event which involves a symbol change, uplisting, or reverse stock split and such conversion is in the control of the Company. All of these notes are outstanding as of March 31, 2020. Based on the variable conversion price of these notes, the Company recorded the embedded conversion features as derivative liabilities, which amounted to $442,934 at December 31, 2019. There were no significant changes to this measurement at March 31, 2020. Convertible and Contingently Convertible Notes Payable From January 1, 2018 and through 2019, the Company had issued certain convertible and contingently convertible notes payable in varying amounts, in the aggregate of $710,000. The face amount of the notes represented the amount due at maturity along with the accrued interest, at which time that amount may be converted into shares of the Company stock based on the lowest 2 day closing price for the trailing 20 days prior to conversion and carrying a 35% discount. The convertible and contingently convertible notes provided for interest to accrue at an interest rate equal to 12% per annum or the maximum rate permitted under applicable law after the occurrence of any event of default as provided in the notes. At any time after 180 days from the issue date, the holder, at its option, may convert the outstanding principal balance and accrued interest into shares of common stock of the Company. The initial conversion price for the principal and interest in connection with voluntary conversions by a holder of the convertible and contingently convertible notes ranges from $0.05 to $0.10 per share, subject to adjustment as provided therein. The total outstanding balance of the convertible and contingently convertible notes was converted as of December 31, 2019 into approximately 303 million shares of the Company’s common stock. Based on the variable conversion price, the Company recorded initial derivative liabilities of $465,905. The remaining balance of $235,085, net of discount, as of December 31, 2018 was reduced to zero in 2019 after a change in fair value of $1,044,250 and a settlement of $1,279,335 to the balance of the derivative liabilities upon the date all notes were converted. In connection with the issuance of the convertible and contingently convertible notes, the Company issued warrants to purchase 411,875 shares of the Company’s common stock. The exercise term of the warrants ranges from issuance to any time on or after the six (6) month anniversary or prior to the maturity of the related note. The exercise price of the warrants is $0.40 per share of the Company’s common stock, as may be adjusted from time to time pursuant to the antidilution provisions of the related warrant. Pursuant to ASU 2017-11, such antidilution features do not subject the Company to derivative accounting pursuant to ASC 815. All warrants were forfeited during the year ended December 31, 2019 upon negotiation and conversion of the remaining outstanding balances. Related Party Debt The following table summarizes related party debt: March 31, December 31, 2020 2019 Rotman Family convertible notes $ 1,832,707 $ 1,782,707 Rotman Family nonconvertible notes 507,500 507,500 Accrued interest 83,190 53,153 Debt Discount (327,600 ) (585,100 ) 2,095,797 1,758,260 Less: current maturities (46,000 ) (46,000 ) $ 2,049,797 $ 1,712,260 Rotman Family Convertible Notes On June 30, 2019, the Company issued contingently convertible promissory notes totaling $180,000, to Steven Rotman ($105,000) and Greg Rotman ($75,000). These notes are (i) unsecured, (ii) bear interest at an annual rate of eight percent (8%) per annum from date of issuance, (iii) are convertible at the Company’s option after December 31, 2019, and (iv) mature five years from issuance. If converted, the notes plus accrued interest are convertible into shares of the Company’s common stock at the average of the five lowest closing prices in the 90-day period prior to conversion with a 50% discount. The balance of the notes payable including accrued interest to Steven and Greg Rotman is approximately $111,000 and $59,000, respectively, at March 31, 2020 and approximately $109,000 and $57,000, respectively, at December 31, 2019. On July 18, 2019, the Company issued contingently convertible notes totaling $1,522,500, to Steven Rotman ($1,102,500) and Bernard Rotman ($420,000) as partial consideration for the acquisition of 58% of Rotmans (see Note 18). These notes are (i) unsecured, and (ii) bear interest at an annual rate of eight percent (8%) per annum from date of issuance. These notes can be converted only after an acceleration event which involves a symbol change, or reverse stock split and such conversion is in the control of the Company. Steven Rotman’s note matures eight years from issuance and Bernard Rotman’s note matures four years from issuance. If converted, the notes plus accrued interest are convertible into shares of the Company’s common stock at a 20-day average closing price at a 50% discount. The balance of the notes payable including accrued interest to Steven and Bernard Rotman were approximately $1,142,000 and $435,000, respectively, at March 31, 2020 and approximately $1,128,000 and $430,000, respectively, at December 31, 2019. On December 19, 2019, the Company issued a contingently convertible promissory note totaling $100,000, to Steven Rotman. The face amount of the note represents the amount due at maturity along with the accrued interest. The amount can be converted into shares of the Company’s stock, at the option of the Company, based on the average closing price for the trailing 20 days prior to conversion and carrying 50% discount. The note can be converted only after an acceleration event which involves a symbol change, uplisting, or reverse stock split and such conversion is in the control of the Company. The note matures two years from issuance. The balance of the note payable including accrued interest to Steven Rotman is approximately $101,000 and $100,000 at March 31, 2020 and December 31, 2019, respectively. On February 20, 2020, the Company issued a contingently convertible promissory note totaling $50,000, to Steven Rotman. The face amount of the note represents the amount due at maturity along with the accrued interest. The amount can be converted into shares of the Company’s stock, at the option of the Company, based on the average closing price for the trailing 20 days prior to conversion and carrying 50% discount. The note can be converted only after an acceleration event which involves a symbol change, uplisting, or reverse stock split and such conversion is in the control of the Company. The note matures two years from issuance. The balance of the note payable including accrued interest to Steven Rotman is approximately $50,000, at March 31, 2020. Based on the variable conversion price for all of these convertible notes, the Company recorded the embedded conversion features as derivative liabilities, which amounted to $1,056,866 at December 31, 2019. There were no significant changes to this measurement at March 31, 2020. Rotman Family Nonconvertible Notes In connection with the acquisition of 58% of Rotmans (see Note 18), Steven and Bernard Rotman were issued related party notes payable in the amounts of $367,500 and $140,000, respectively. The notes bear interest at an annual rate of five percent (5%). Steven Rotman’s note matures eight years from issuance and Bernard Rotman’s note matures four years from issuance. Payments of $3,828 and $2,917 to Steven and Bernard Rotman, respectively, per month begin six months from issuance until maturity in December 2027 and 2023, respectively. The balance of these notes payable including accrued interest to Steven and Bernard Rotman is approximately $381,000 and $145,000, respectively, at March 31, 2020 and approximately $376,000 and $143,000, respectively, at December 31, 2019. Approximate maturities for the succeeding years are as follows: Remainder of 2020 $ 46,000 2021 59,000 2022 62,000 2023 85,000 2024 34,000 Thereafter 221,500 $ 507,500 |
Derivative Liabilities
Derivative Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liabilities | NOTE 9 - DERIVATIVE LIABILITIES As of March 31, 2020, the Company had a $1,499,800 derivative liability balance on the consolidated balance sheet and recorded a loss from change in fair value of derivative liabilities of $1,079,450 for the year ended December 31, 2019. The derivative liability activity comes from the Convertible notes payable (and any related warrants). The Company analyzed the conversion features and warrants of the various note agreements for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these Convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion feature of the notes and recorded a derivative liability. The embedded derivatives for the notes are carried on the Company’s consolidated balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the consolidated statement of operations and the associated fair value carrying amount on the consolidated balance sheet is adjusted by the change. The Company fair values the embedded derivative using a lattice-based valuation model or Monte Carlo simulation. The following table summarizes the derivative liabilities included in the consolidated balance sheet at March 31, 2020: Fair Value of Embedded Derivative and Warrant Liabilities: Balance, December 31, 2018 $ 235,085 Initial measurement of liabilities 1,464,600 Change in fair value 1,079,450 Settlement due to conversion (1,279,335 ) Balance, December 31, 2019 1,499,800 Change in fair value - Settlement due to conversion - Balance, March 31, 2020 $ 1,499,800 |
Stockholders' Deficit
Stockholders' Deficit | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 10 STOCKHOLDERS’ DEFICIT Cumulative Convertible Preferred Stock On May 2, 2013, the Company began a private placement offering to sell up to 200,000 shares of the Company’s 10% Series A Cumulative Convertible Preferred Stock. Under the terms of the offering, the Company offered to sell up to 200,000 shares of preferred stock at $10 per share for a value of $2,000,000. The preferred stock accumulates a 10% per annum dividend and was convertible at a conversion price of $0.075 per common share at the option of the holder after a nine-month holding period. The conversion price was lowered to $0.05 per common share for those holders who invested an additional $25,000 or more in the Company’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. As of March 31, 2020, the 13,828 shares of outstanding preferred stock had undeclared dividends of approximately $95,000 and could be converted into 4,661,180 shares of common stock, at the option of the holder. As of December 31, 2019, the 13,828 shares of outstanding preferred stock had undeclared dividends of approximately $91,000 and could be converted into 4,591,100 shares of common stock, at the option of the holder. Common Stock and Warrants During the three months ended March 31, 2020, no shares were issued under equity purchase agreements. During the three months ended March 31, 2020, no shares were issued for the conversion of principal and interest. |
Revenues
Revenues | 3 Months Ended |
Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenues | NOTE 11 - REVENUES The following table presents our revenues disaggregated by each major product category and service for the three months ended March 31, 2020 and 2019: Three Months Ended March 31, 2020 2019 % of % of Net Sales Net Sales Net Sales Net Sales Merchandise: Case Goods Bedroom Furniture $ 861,123 14.5 $ - - Dining Room Furniture 522,114 8.8 - - Occasional 960,379 16.2 - - 2,343,616 39.5 - - Upholstery 1,617,547 27.3 - - Mattresses and Toppers 1,071,327 18.1 179,017 93.4 Broadloom, Flooring and Rugs 406,879 6.9 - - Warranty 98,309 1.7 - - Accessories and Other 394,560 6.7 12,650 6.6 $ 5,932,238 100.0 $ 191,667 100.0 |
Share-Based Compensation
Share-Based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Share-Based Compensation | NOTE 12 - SHARE-BASED COMPENSATION Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures. In total, the company recorded $154,368 and $1,612,286 of stock-based compensation for the three months ended March 31, 2020 and 2019, 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 $993,981 and $845,175 at March 31, 2020 and December 31, 2019, respectively. The Company used the Black-Scholes option pricing model to estimate the grant-date fair value of option and warrant awards granted. The following assumptions were used for warrant awards during the three months ended March 31, 2020: ● Expected Dividend Yield - because the Company does not currently pay dividends, the expected dividend yield is zero; ● Expected Volatility in Stock Price - volatility based on the Company’s trading activity was used to determine expected volatility; ● Risk-free Interest Rate - reflects the average rate on a United States Treasury Bond with a maturity equal to the expected term of the option; and ● Expected Life of Award - because we have minimal experience with the exercise of options or warrants for use in determining the expected life of each award, we used the option or warrant’s contractual term as the expected life. In total for the three months ended March 31, 2020 and 2019, the Company recorded $5,562 and $17,783, respectively, of share-based compensation expense related to employee and Board Members’ stock options. The unrecognized compensation expense as of March 31, 2020 was $43,371 for non-vested share-based awards to be recognized over a period of approximately three years. Options During 2004, the Board of Directors of the Company adopted a stock option plan (the “Plan”) and authorized up to 4,000,000 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 10,000,000 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, 2020, there are 2,251,729 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 5,000,000 shares which are all available as of March 31, 2020. In 2019, the Board of Directors adopted an additional stock option plan with provides for 50,000,000 shares which are all available as of March 31, 2020. 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 months ended March 31, 2020. The following table summarizes all stock option activity of the Company for the three months ended March 31, 2020: Weighted Weighted Average Average Remaining Number Exercise Contractual of Shares Price Life (Years) Outstanding, December 31, 2019 27,983,271 $ 0.20 3.45 Granted - - - Exercised - - - Forfeited - - - Outstanding, March 31, 2020 27,983,271 $ 0.20 3.20 Exercisable, March 31, 2020 26,783,271 $ 0.21 3.42 As of March 31, 2020, and 2019, the aggregate intrinsic value of the Company’s outstanding options was approximately $1,000 and $52,000, respectively. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock. Warrants Warrants are issued to third parties as payment for services, debt financing compensation and conversion and in conjunction with the issuance of common stock. The fair value of each common stock warrant issued for services is estimated on the date of grant using the Black-Scholes option pricing model. The following table represents the Company’s warrant activity for the three months ended March 31, 2020: Weighted Average Weighted Weighted Remaining Number Average Average Contractual of Shares Fair Value Exercise Price Life (Years) Outstanding, December 31, 2019 14,237,646 $ 0.07 3.58 Granted - - - - Exercised - - - - Forfeited - - - - Expired - - - - Outstanding, March 31, 2020 14,237,646 0.07 3.28 Exercisable, March 31, 2020 14,237,646 $ 0.07 3.28 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 13 - RELATED PARTY TRANSACTIONS Officers and Directors Per Steven Rotman’s Employment agreement dated July 22, 2019, 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. Under the terms of his previous employment agreement, he was paid approximately $1 per year in cash and $20,833 per month to be paid in shares based on a 20-day average at a 0% discount to market. The Company expensed $201,200 during the year ended December 31, 2019 related to 4,000,000 shares issued for Steven Rotman’s services as a Board Member of the Company. As of March 31, 2020, the Company had a stock subscription payable balance of $510,000, or approximately 16,725,000 shares to be issued in the future. Designcenters.com This entity is owned by Jamie Rotman, who is the daughter of the Company’s CEO, Steven Rotman. Designcenters.com (“Design”) provided bookkeeping and management services to the Company through July 2019. In exchange for such services, the Company had entered into a consulting agreement with the related party entity. Per the Design’s consulting agreement, Design was to receive approximately $7,100 per month to be paid in cash or shares based on a 20-day average at a 50% discount to market and a $10,000 quarterly bonus to be paid in shares using the same formula. During the year ended December 31, 2019, the Company issued Design 20,030,407 shares in accordance with the consulting agreement that were accrued and expensed as of December 31, 2018. During the year ended December 31, 2019, the Company expensed approximately $83,000 related to the consulting agreement. Of the expensed amount, approximately $41,000 was paid in cash. As of March 31, 2020, the Company had a stock subscription payable balance of $42,000, for approximately 850,000 shares related to this party. Blue Oar Consulting, Inc. This entity is owned by Gregory Rotman, who is the son of the Company’s CEO, Steven Rotman. Blue Oar Consulting, Inc. (“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 Blue Oar’s consulting agreement, it 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 months ended March 31, 2020, the Company issued Blue Oar 9,042,046 shares in accordance with the consulting agreement that were accrued and expensed as of March 31, 2020. During the three months ended March 31, 2020, the Company expensed approximately $83,000 related to the consulting agreement. Of the expensed amount, approximately $45,000 was paid in cash. As of March 31, 2020, the Company had a stock subscription payable balance of $411,000, or approximately 19,604,000 shares related to this party. Polymer Consultancy Services, Ltd. This entity is owned in part by Dr. R.K. Matthan, a director of the Company. Polymer Consultancy Services, Ltd. (“Polymer”) provides research and development consulting services related to the Company’s latex products. The Company did not incur any charges with Polymer for these services during the three months ended March 31, 2020. |
Commitments
Commitments | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments | NOTE 14 - COMMITMENTS Employment and Consulting Agreements The Company has entered into employment and consulting agreements with certain of our officers, employees, and affiliates. For employees, payment and benefits would become payable in the event of termination by us for any reason other than cause, or upon change in control of our Company, or by the employee for good reason. There is currently one employment agreement in place with the CEO, Steven Rotman. See compensation terms in Note 13. During the three months ended March 31, 2020, the Company entered into various services agreement with consultants for financial reporting, advisory, and compliance services. The Company also entered into an agreement with a third-party to provide delivery services for all delivered customer sales. Existing fleet operating leases are being subleased to the third-party according to the same terms and conditions as the original lease agreements. Litigation From time to time, the Company is party to certain legal proceedings that arise in the ordinary course and are incidental to our business. Future events or circumstances, currently unknown to management, will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods. EMA Financial On February 19, 2019, EMA Financial, Inc. filed a lawsuit in the Southern District of New York against the Company. The lawsuit alleged various breaches of an underlying convertible promissory note and stock purchase agreement and sought four claims for relief: (i) specific performance to enforce a stock conversion and contractual obligations; (ii) breach of contract; (iii) permanent injunction to enforce the stock conversion and contractual obligations; and (iv) legal fees and costs of the litigation. The complaint was filed with a motion seeking: (i) a preliminary injunction seeking an immediate resolution of the case through the stock conversion; (ii) a consolidation of the trial with the preliminary injunctive hearing; and (iii) summary judgment on the first and third claims for relief. The Company filed an opposition to the motion and at 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 and denied the motion for summary judgment as moot. The Company subsequently filed an amended answer with counterclaims. The affirmative defenses collectively preclude the relief sought. The counterclaims asserted are: (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. Robert LaChapelle Class Action On March 13, 2020, Robert LaChapelle, a former employee of Rotmans Furniture, the Company’s majority owned subsidiary, on behalf of himself and all others similarly situated, filed a class action complaint against Rotmans and two of its prior owners (including Steve Rotman, President of the Company) in the Worcester Superior Court alleging non-payment of overtime pay and Sunday premium pay pursuant to the Massachusetts Blue Laws (Ch. 136), the Massachusetts Overtime Law (Chapter 151, § 1A), and the Massachusetts Payment of Wages Law (Chapter 149 §§148 and 150). Specifically, LaChapelle has alleged that Rotmans failed to pay him and other sales people who were paid on a commission-only basis overtime pay at a rate of least 1.5 times the basic minimum wage or premium pay (also at 1.5 times the basic minimum wage) for hours they worked on Sundays. Rotmans is in the process of investigating these claims to determine whether it may be liable to the members of the putative class for unpaid overtime and Sunday pay and, if so, the approximate amount of such amounts. Eric Maas Lawsuit The Company and members of its Board of Directors, and certain employees and consultants, have been added as defendants in the case Maas v. Zymbe, LLC, et. al. The complaint was recently moved from Superior Court of the State of California to Federal District Court in California. The amended complaint alleges various employment, contract, and tort claims, including defamation, arising out of a dispute over the quality and utility of consulting and other services provided by Mr. Eric Maas, including through his dealings with Mr. Jason Leaf and Mr. Gregory Rotman. The original litigation was filed in 2017. |
Major Customers and Vendors
Major Customers and Vendors | 3 Months Ended |
Mar. 31, 2020 | |
Major Customers And Vendors | |
Major Customers and Vendors | NOTE 15 - MAJOR CUSTOMERS AND VENDORS Major customers and vendors are defined as a customer or vendor from which the Company derives at least 10% of its revenue and cost of revenue, respectively. During the three months ended March 31, 2020, the Company made approximately 15% of its purchases from one major vendor. The Company owed its major vendor approximately $185,000 at March 31, 2020. There were no significant vendor concentrations during the three months ended March 31, 2019. During the three months ended March 31, 2019, revenue came from six major customers. At March 31, 2019, receivables from major customers totaled approximately $16,000. There were no major customers during the three months ended March 31, 2020. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 16 - INCOME TAXES The provision (benefit) for income taxes for the three months ended March 31, 2020 and 2019 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: Three Months Ended March 31, 2020 2019 Federal statutory income tax rate (21.0 )% (21.0 )% Change in valuation allowance on net operating loss carryforwards 21.0 21.0 Effective income tax rate 0.0 % 0.0 % Deferred tax assets as of March 31, 2020 and December 31, 2019 are as follows: 2020 2019 NOL carryforwards $ 5,620,000 $ 5,490,000 Less valuation allowance (5,620,000 ) (5,490,000 ) Deferred tax assets $ - $ - Deferred taxes are caused primarily by net operating loss carryforwards. For federal income tax purposes, the Company has a net operating loss carryforward of approximately $26,700,000 as of March 31, 2020, of which approximately $18,400,000 expires beginning in 2024 and $8,300,000 which can be carried forward indefinitely. For state income tax purposes, the Company has a net operating loss carryforward of approximately $18,300,000 and $8,300,000 as of March 31, 2020 in Georgia and Massachusetts, respectively, which expires beginning in 2023. In addition, as of March 31, 2020 Rotmans has a net operating loss carryforward of approximately $2,700,000 for federal income tax purposes of which $1,810,000 expires beginning in 2029 and $890,000 can be carried forward indefinitely. Rotmans has a state operating loss carryforward of approximately $1,800,000 which expires beginning in 2022. 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. |
Profit Sharing Plan
Profit Sharing Plan | 3 Months Ended |
Mar. 31, 2020 | |
Retirement Benefits [Abstract] | |
Profit Sharing Plan | NOTE 17 - PROFIT SHARING PLAN The Company sponsors a qualified 401(k) profit sharing plan covering all eligible employees. The plan permits participants to make tax-deferred contributions to the plan by salary reduction. Company contributions are discretionary and are determined annually by the Board of Directors. There were no Company contributions in 2020. Participant and Company contributions are limited to amounts allowed under the Internal Revenue Code. The Company offers no post-retirement benefits other than the plan discussed above and no significant post-employment benefits. |
Acquisition of Rotmans
Acquisition of Rotmans | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
Acquisition of Rotmans | NOTE 18 – ACQUISITION OF ROTMANS On July 18, 2019,the Company acquired 58% of the outstanding shares of common stock of Rotmans, the largest furniture and flooring store in New England for an aggregate purchase price of $2,030,000. The consideration is to be paid in 25% in term notes payable over 4 to 8 years and 75% in notes convertible to common stock (see Note 8). The Company and Rotmans are exploring a number of initiatives relating to environmentally friendly product development and distribution that will utilize the access to the capital markets afforded by this combination. The following unaudited pro forma information presents a summary of the Company’s combined operating results for the three months ended March 31, 2020 and 2019, as if the acquisition and the related financing transactions had occurred on January 1, 2019. The following pro forma financial information is not necessarily indicative of the Company’s operating results as they would have been had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses. Three Months Ended March 31, 2020 2019 Total revenues $ 5,932,238 $ 6,734,929 Loss from operations $ 850,553 $ 2,505,367 Net loss $ 1,477,990 $ 3,687,824 Net loss attributable to Vystar $ 1,367,044 $ 3,456,916 Basic and dilated loss per share $ 0.00 $ 0.00 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 19 - SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date of the filing of its Form 10-Q with the Securities and Exchange Commission. On April 16, 2020, Rotmans received $1,402,900 in loan funding from the Paycheck Protection Program (the “PPP”), established pursuant to the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). The unsecured loan (the “PPP Loan”) is evidenced by a promissory note of the Company dated April 16, 2020 (the “Note”) in the principal amount of $1,402,900 with United Community Bank (the “Bank”), the lender. Under the terms of the Note and the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0% per annum. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, Rotmans is obligated to make equal monthly payments of principal and interest, beginning seven months from the date of the Note, until the maturity date. The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, Rotmans may apply for forgiveness for all or a part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by Rotmans during the twenty-four week period after the loan origination for certain purposes including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least 60% of the loan amount is used for eligible payroll costs; the employer maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered twenty-four week period will qualify for forgiveness. The Note may be prepaid in part or in full, at any time, without penalty. The Note provides for certain customary events of default, including (i) failing to make a payment when due under the Note, (ii) failure to do anything required by the Note or any other loan document, (iii) defaults of any other loan with the Bank, (iv) failure to disclose any material fact or make a materially false or misleading representation to the Bank or SBA, (v) default on any loan or agreement with another creditor, if the Bank believes the default may materially affect Rotmans ability to pay the Note, (vi) failure to pay any taxes when due, (vii) becoming the subject of a proceeding under any bankruptcy or insolvency law, having a receiver or liquidator appointed for any part of the Rotmans business or property, or making an assignment for the benefit of creditors, (viii) having any adverse change in financial condition or business operation that the Bank believes may materially affect Rotmans ability to pay the Note, (ix) if Rotmans reorganizes, merges, consolidates, or otherwise changes ownership or business structure without the Bank’s prior written consent, or (x) becoming the subject of a civil or criminal action that the Bank believes may materially affect Rotmans ability to pay the Note. Upon the occurrence of an event of default, the Bank has customary remedies and may, among other things, require immediate payment of all amounts owed under the Note, collect all amounts owing from Rotmans, and file suit and obtain judgment against Rotmans. In May 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 to pay off the Fidelity Co-operative Bank (“Fidelity”) line of credit loan. Before the sale, the agent lent the Company funds to pay off the Fidelity loan on May 29, 2020. The agent will be reimbursed for the advance from the proceeds of the sale. In addition, the agent has a senior first priority security interest and lien in Rotmans inventories and other assets until all obligations and liabilities are satisfied. Profits of the sale will be distributed according to the specific terms of the agreement. The agreement will expire 240 days from the commencement date of May 29, 2020. Our Rotmans showroom reopened on June 10, 2020 in connection with COVID-19 pandemic. See Note 2 for details. On July 1, 2020, 130 preferred shares were converted into 44,357 shares of common stock. |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification. The Company has evaluated subsequent events through the date of the filing of its Form 10-Q with the Securities and Exchange Commission. Other than those events disclosed in Note 18, the Company is not aware of any other significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Company’s financial statements. |
Basis of Consolidation | Basis of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All significant intercompany accounts and transactions have been eliminated. |
Covid-19 | COVID-19 In December 2019, a novel coronavirus (“COVID-19”) emerged and has subsequently spread worldwide. The World Health Organization has declared COVID-19 a pandemic resulting in federal, state, and local governments mandating various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus. On March 24, 2020, Massachusetts required all non-essential businesses to close their physical workplaces. As a result, the Rotmans showroom, offices and warehouse temporarily closed. During that time, associates worked remotely where possible. The Company re-opened on June 10, 2020 and continues to monitor developments, including government requirements and recommendations. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results for the entire year. The pandemic has resulted in significant economic disruption. Although our showroom has reopened, we cannot reasonably estimate the impact on Vystar should the pandemic persist or worsen. Accordingly, the estimates and assumptions made as of March 31, 2020 could change in subsequent interim reports and upon final determination at year-end, and it is reasonably possible that such changes could be significant (although the potential effects cannot be measured at this time). |
Segment Reporting | Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer. The Company and the chief executive officer view the Company’s operations and manage its business as one reportable segment with different operating segments. |
Estimates | Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Significant estimates made by management include, among others, allowance for obsolete inventory, the allocation of purchase price related to acquisitions, the recoverability of long-lived assets, fair values of right of use assets and lease liabilities, valuation of derivative liabilities, share-based compensation and other equity issuances. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from these estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash, accounts receivable, investments - equity securities, accounts payable, accrued expenses and interest payable, lines of credit, shareholder notes payable, long-term debt and unearned revenue. The carrying values of all the Company’s financial instruments approximate or equal fair value because of their short maturities and market interest rates or, in the case of equity securities, being stated at fair value. In specific circumstances, certain assets and liabilities are reported or disclosed at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the Company’s principal market for such transactions. If there is not an established principal market, fair value is derived from the most advantageous market. Valuation inputs are classified in the following hierarchy: ● Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. ● Level 2 inputs are directly or indirectly observable valuation inputs for the asset or liability, excluding Level 1 inputs. ● Level 3 inputs are unobservable inputs for the asset or liability. Highest priority is given to Level 1 inputs and the lowest priority to Level 3 inputs. Acceptable valuation techniques include the market approach, income approach, and cost approach. In some cases, more than one valuation technique is used. The derivative liabilities were recognized at fair value on a recurring basis through the date of the settlement and March 31, 2020 and are level 3 measurements. There have been no transfers between levels during the three months ended March 31, 2020. |
Acquisitions | Acquisitions Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on valuations that use information and assumptions provided by management. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including, legal, accounting, and other costs, are capitalized in asset acquisitions and for business combinations are expensed in the periods in which the costs are incurred. The results of operations of acquired assets are included in the financial statements from the acquisition date. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include all liquid investments with a maturity date of less than three months when purchased. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions which typically settle within five days. |
Accounts Receivable | Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company routinely sells, without recourse, trade receivables resulting from retail furniture sales to various financial institutions at an average service charge of 5.9% in 2020. Amounts sold during the first quarter of 2020 were approximately $1,691,000. There were no sales of trade receivables in the first quarter of 2019. Retail furniture receivables retained by the Company are generally collateralized by the merchandise sold, represent valid claims against debtors for sales arising on or before the balance sheet date and are reduced to their estimated net realizable value. In addition, the Company grants credit to Vytex customers without requiring collateral. The amount of accounting loss for which Vystar is at risk in these unsecured accounts receivable is limited to their carrying value. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based upon its assessment of the current status of individual accounts. Balances that are still outstanding after management has performed reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of March 31, 2020 and December 31, 2019, the Company considers accounts receivable to be fully collectible and no allowance for doubtful accounts was recorded. |
Inventories | Inventories Inventories include those costs directly attributable to the product before sale. Inventories consist primarily of finished goods of foam toppers, furniture, mattresses and pillows and are carried at net realizable value, which is defined as selling price less cost of completion, disposal and transportation. The Company evaluates the need to record write-downs for inventory on a regular basis. Appropriate consideration is given to obsolescence, slow-moving and other factors in evaluating net realizable values. Inventories not expected to be sold within 12 months are classified as long-term. |
Prepaid Expenses and Other Assets | Prepaid Expenses and Other Assets Prepaid expenses and other assets include amounts related to prepaid insurance policies, which are expensed on a straight-line basis over the life of the underlying policy, and other expenses. |
Investments - Equity Securities | Investments - Equity Securities Marketable equity securities have been categorized as available-for-sale and, as a result, are stated at fair value. Unrealized gains and losses are reflected in the statement of operations. The Company periodically reviews the available-for-sale securities for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As of March 31, 2020, the Company believes that the carrying value of the available-for-sale securities was recoverable in all material respects. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided over the estimated useful lives of the assets, generally 5 to 10 years, using straight-line and accelerated methods. Expenditures for major renewals and betterments are capitalized, while routine repairs and maintenance are expensed as incurred. When property items are retired or otherwise disposed of, the asset and related reserve accounts are relieved of the cost and accumulated depreciation, respectively, and the resultant gain or loss is reflected in earnings. As of March 31, 2020, the net balance of property and equipment is $1,787,616 with accumulated depreciation of $300,922. As of December 31, 2019, the net balance of property and equipment is $1,879,739 with accumulated depreciation of $208,799. |
Intangible Assets | Intangible Assets Patents represent legal and other fees associated with the registration of patents. The Company has five issued patents with the United States Patent and Trade Office (“USPTO”) as well as five issued international Patent Cooperation Treaty (“PCT”) patents. Patents are carried at cost and are being amortized on a straight-line basis over their estimated useful lives, typically ranging from 9 to 20 years. The Company has trademark protection for “Vystar”, “Vytex”, and “RxAir” among others. Trademarks are carried at cost and since their estimated life is indeterminable, no amortization is recognized. Instead, they are evaluated annually for impairment. Customer relationships, tradename and marketing related intangibles are carried at cost and are being amortized on a straight-line basis over their estimated useful lives, typically ranging from 5 to 10 years. |
Long-Lived Assets | Long-Lived Assets We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We evaluate assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the assets. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. During the three months ended March 31, 2020 and 2019, we did not recognize any impairment of our long-lived assets. |
Goodwill | Goodwill Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. Goodwill is not amortized, rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. We perform our annual impairment test at the end of each calendar year, or more frequently if events or changes in circumstances indicate the asset might be impaired. Accounting for acquisitions requires us to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While we use best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. The impairment model permits, and we utilize, a simplified approach for determining goodwill impairment. In the first step, we evaluate the recoverability of goodwill by estimating the fair value of our reporting unit using multiple techniques, including an income approach using a discounted cash flow model and a market approach. Based on an equal weighting of the results of these two approaches, a conclusion of fair value is estimated. The fair value is then compared to the carrying value of our reporting unit. If the fair value of a reporting unit is less than its carrying value, the Company recognizes this amount as an impairment loss. Impairment losses, limited to the carrying value of goodwill, represent the excess of the carrying amount of goodwill over its implied fair value. |
Convertible Notes Payable | Convertible Notes Payable Borrowings are recognized initially at the principal amount received. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as interest expense in the statements of operations over the period of the borrowings using the effective interest method. |
Derivatives | Derivatives The Company evaluates its debt instruments or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of Accounting Standards Codification (“ASC”) Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity The Company applies the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. From time to time, the Company has issued notes with embedded conversion features. Certain of the embedded conversion features contain price protection or anti-dilution features that result in these instruments being treated as derivatives for accounting purposes. Accordingly, during the three months ended March 31, 2020 and 2019, the Company has classified all conversion features as derivative liabilities and has estimated the fair value of these embedded conversion features using a Monte Carlo simulation model. |
Unearned Revenue | Unearned Revenue Unearned revenue consists of customer advance payments, deposits on sales of undelivered merchandise and deferred warranty revenue on self-insured stain protection warranty coverage. There was no unearned revenue during the three months ended March 31, 2019. Changes to unearned revenue during the three months ended March 31, 2020 are summarized as follows: Balance, December 31, 2019 $ 2,500,572 Customer deposits received 4,930,536 Warranty coverage purchased 98,309 Gift cards purchased 2,500 Revenue earned (5,057,651 ) Balance, March 31, 2020 $ 2,474,266 |
Loss Per Share | Loss Per Share The Company presents basic and diluted loss per share. Because the Company reported a net loss in the first quarter of 2020 and 2019, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same. Excluded from the computation of diluted loss per share were options to purchase 27,983,271 and 29,098,270 shares of common stock for the three months ended March 31, 2020 and 2019, respectively, as their effect would be anti-dilutive. Warrants to purchase 14,237,315 and 14,382,380 shares of common stock for the three months ended March 31, 2020 and 2019, respectively, were also excluded from the computation of diluted loss per share as their effect would be anti-dilutive. In addition, preferred stock convertible to 4,661,180 and 4,382,730 shares of common stock three months ended March 31, 2020 and 2019, respectively, were excluded from the computation of diluted loss per share as their effect would be anti-dilutive. |
Revenue | Revenue Our principal activities from which we generate our revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. The contract is based on either the acceptance of standard terms and conditions at the retail store, on the websites for e-commerce customers and via telephone with our third-party call center for our print media and direct mail 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. 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, 2020 and December 31, 2019, reserves for estimated sales returns totaled $3,000, respectively, and are included in the accompanying consolidated balance sheets as accrued expenses. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product is shipped based on fulfillment by the Company. The Company considers fulfillment when it passes all liability at the point of shipping through third party carriers or in-house delivery services. Delivery fees are charged to customers and are included in revenue in the accompanying consolidated statements of operations and the costs associated with these deliveries are included in operating expenses in the accompanying consolidated statements of operations. 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 consolidated statements of operations. The Company also defers revenues for separately-priced stain protection warranty coverage for which it is ultimately self-insured. Revenue is recognized from the extended warranty sales on a straight-line basis over the respective contract term. The extended warranty terms primarily range from three to five years from the date of delivery. At March 31, 2020, deferred warranty revenue was approximately $812,000 and is included in unearned revenue in the accompanying consolidated balance sheets. During the three months ended March 31, 2020, the Company recorded total proceeds of approximately $98,000 and recognized total revenues of approximately $134,000 related to deferred warranty revenue arrangements. Commission costs in obtaining extended warranty contracts are capitalized and recognized as expense on a straight-line basis over the period of the warranty contract. At March 31, 2020, deferred commission costs are approximately $336,000 and included in the accompanying consolidated balance sheets. All other costs, such as costs of services performed under the contract, general and administrative expenses, and advertising costs are expensed as incurred. |
Cost of Revenue | Cost of Revenue Cost of revenue consists primarily of product and freight costs and fees paid to online retailers. |
Research and Development | Research and Development Research and development costs are expensed when incurred. Research and development costs include all costs incurred related to the research, development and testing of the Company’s process to produce Vytex NRL. Vytex NRL has produced protein test results on finished products that are both “below detection” and “not detectable” in terms of the amount of proteins remaining in these finished goods made with Vytex NRL. These results have been reproduced in many subsequent tests. For the three months ended March 31, 2020 and 2019, Vystar’s research and development costs were not significant. |
Advertising Costs | Advertising Costs Advertising costs, which include television, radio, newspaper and other media advertising, are expensed upon first showing. Advertising costs included in general and administrative expenses in the accompanying consolidated statements of operations were approximately $447,000 and $20,000 for the three months ended March 31, 2020 and 2019, respectively. |
Share-Based Compensation | Share-Based Compensation The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of our common stock. The Company has elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14C to estimate the expected term of employee stock options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The value of restricted stock awards is determined using the fair value of the Company’s common stock on the date of grant. The Company accounts for forfeitures as they occur. Compensation expense is recognized on a straight-line basis over the requisite service period of the award. |
Income Taxes | Income Taxes Vystar recognizes income taxes on an accrual basis based on a tax position taken or expected to be taken in its tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets or liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold will be measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more likely than not be realized. Should they occur, interest and penalties related to tax positions are recorded as interest expense. No such interest or penalties have been incurred for the three months ended March 31, 2020 and 2019. The Company remains subject to income tax examinations from Federal and state taxing jurisdictions for 2016 through 2019. |
Concentration of Credit Risk | Concentration of Credit Risk Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash and accounts receivable. Cash held in operating accounts may exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limits. While the Company monitors cash balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, the Company has experienced no loss or lack of access to our cash; however, the Company can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets. Credit concentration risk related to accounts receivable is mitigated as customer credit is checked prior to the sales and accounts receivable consists of a high number of relatively small balances. |
Other Risks and Uncertainties | Other Risks and Uncertainties The Company is exposed to commodity price risk, mainly associated with variations in the market price for NRL as well as wintering of the Hevea trees, which differs for each country. The timing and magnitude of industry cycles are difficult to predict and are impacted by general economic conditions including the buying climate in China. The Company responds to changes in NRL prices by adjusting sales prices on a weekly basis and by turning rather than holding inventory in anticipation of higher prices. The Company actively manages its exposure to commodity price risk and monitors the actual and expected spread between forward selling prices and purchase costs and processing and shipping expense. The Company also currently spreads the processing of Vytex NRL among three continents. Sales contracts are based on forward market prices, and generally orders are placed 30 to 90 days ahead of shipment date due to these fluctuations. However, financial results may be negatively impacted where selling prices fall more quickly than purchase price adjustments can be made or when levels of inventory have an anticipated net realizable value that is below cost. The Company is also exposed to risks pertinent to the operations of a retailer, including, but not limited to, the ability to acquire new customers and maintain a strong brand as well as broader economic factors such as interest rates and changes in customer spending patterns. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement |
Basis of Presentation and Sum_3
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Unearned Revenue | Changes to unearned revenue during the three months ended March 31, 2020 are summarized as follows: Balance, December 31, 2019 $ 2,500,572 Customer deposits received 4,930,536 Warranty coverage purchased 98,309 Gift cards purchased 2,500 Revenue earned (5,057,651 ) Balance, March 31, 2020 $ 2,474,266 |
Investments - Equity Securiti_2
Investments - Equity Securities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Investments, All Other Investments [Abstract] | |
Schedule of Cost and Fair Value of Investments | Cost and fair value of investments - equity securities are as follows as of March 31, 2020: Gross Fair Cost Unrealized Losses Value $ 141,225 $ (42,130 ) $ 99,095 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | Property and equipment, net consists of the following: March 31, December 31, 2020 2019 Furniture, fixtures and equipment $ 1,354,665 $ 1,354,665 Tooling and testing equipment 319,000 319,000 Parking lots 365,707 365,707 Motor vehicles 49,166 49,166 2,088,538 2,088,538 Accumulated depreciation (300,922 ) (208,799 ) Property and equipment, net $ 1,787,616 $ 1,879,739 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Intangible assets consist of the following: Amortization March 31, December 31, Period 2020 2019 (in Years) Amortized intangible assets: Customer relationships $ 210,000 $ 210,000 6 - 10 Proprietary technology 610,000 610,000 10 Tradename and brand 1,380,000 1,380,000 5 - 10 Marketing related 380,000 380,000 5 Patents 359,101 355,418 6 - 20 Noncompete 50,000 50,000 5 Total 2,989,101 2,985,418 Accumulated amortization (609,117 ) (504,878 ) Intangible assets, net 2,379,984 2,480,540 Indefinite-lived intangible assets: Trademarks 9,072 9,072 Total intangible assets $ 2,389,056 $ 2,489,612 |
Schedule of Estimated Future Amortization Expense | Estimated future amortization expense for finite-lived intangible assets is as follows: Amount Remaining in 2020 $ 312,716 2021 416,956 2022 417,140 2023 410,529 2024 311,306 Thereafter 511,337 Total $ 2,379,984 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Schedule of Lease Cost | The table below presents the lease costs for the three months ended March 31, 2020: March 31, 2020 Operating lease cost $ 394,348 Finance lease cost: Amortization of right-of-use assets 47,561 Interest on lease liabilities 11,690 Total lease cost $ 453,599 |
Schedule of Other Information Related to Leases | The following table presents other information related to leases: Three months ended Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases $ 372,884 Financing cash flows used for financing leases 54,152 Assets obtained in exchange for operating lease liabilities - Assets obtained in exchange for finance lease liabilities 75,739 Weighted average remaining lease term: Operating leases 9 years Finance leases 6 years Weighted average discount rate: Operating leases 5.53 % Finance leases 5.16 % |
Schedule of Future Minimum Lease Payments Required Under Operating and Financing Lease Obligations | The future minimum lease payments required under operating and financing lease obligations as of March 31, 2020 having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows: Operating Leases Finance Total Remainder of 2020 $ 1,127,733 $ 160,156 $ 1,287,889 2021 1,503,643 205,545 1,709,188 2022 1,110,794 150,943 1,261,737 2023 880,275 150,142 1,030,417 2024 870,000 140,002 1,010,002 Thereafter 5,220,000 207,475 5,427,475 Total undiscounted lease liabilities 10,712,445 1,014,263 11,726,708 Less: imputed interest (2,409,937 ) (135,739 ) (2,545,676 ) Net lease liabilities $ 8.302,508 $ 878,524 $ 9,181,032 |
Notes Payable and Loan Facili_2
Notes Payable and Loan Facility (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | The following table summarizes shareholder, convertible and contingently convertible notes payable: March 31, December 31, 2020 2019 Shareholder, convertible and contingently convertible notes $ 951,895 $ 951,895 Accrued interest 58,467 46,569 Debt discount (79,400 ) (137,775 ) 930,962 860,689 Less: current maturities (611,281 ) (366,326 ) $ 319,681 $ 494,363 |
Schedule of Related Party Debt | The following table summarizes related party debt: March 31, December 31, 2020 2019 Rotman Family convertible notes $ 1,832,707 $ 1,782,707 Rotman Family nonconvertible notes 507,500 507,500 Accrued interest 83,190 53,153 Debt Discount (327,600 ) (585,100 ) 2,095,797 1,758,260 Less: current maturities (46,000 ) (46,000 ) $ 2,049,797 $ 1,712,260 |
Schedule of Maturities of Notes Payable | Approximate maturities for the succeeding years are as follows: Remainder of 2020 $ 46,000 2021 59,000 2022 62,000 2023 85,000 2024 34,000 Thereafter 221,500 $ 507,500 |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Liabilities | The following table summarizes the derivative liabilities included in the consolidated balance sheet at March 31, 2020: Fair Value of Embedded Derivative and Warrant Liabilities: Balance, December 31, 2018 $ 235,085 Initial measurement of liabilities 1,464,600 Change in fair value 1,079,450 Settlement due to conversion (1,279,335 ) Balance, December 31, 2019 1,499,800 Change in fair value - Settlement due to conversion - Balance, March 31, 2020 $ 1,499,800 |
Revenues (Tables)
Revenues (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Revenue | The following table presents our revenues disaggregated by each major product category and service for the three months ended March 31, 2020 and 2019: Three Months Ended March 31, 2020 2019 % of % of Net Sales Net Sales Net Sales Net Sales Merchandise: Case Goods Bedroom Furniture $ 861,123 14.5 $ - - Dining Room Furniture 522,114 8.8 - - Occasional 960,379 16.2 - - 2,343,616 39.5 - - Upholstery 1,617,547 27.3 - - Mattresses and Toppers 1,071,327 18.1 179,017 93.4 Broadloom, Flooring and Rugs 406,879 6.9 - - Warranty 98,309 1.7 - - Accessories and Other 394,560 6.7 12,650 6.6 $ 5,932,238 100.0 $ 191,667 100.0 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | The following table summarizes all stock option activity of the Company for the three months ended March 31, 2020: Weighted Weighted Average Average Remaining Number Exercise Contractual of Shares Price Life (Years) Outstanding, December 31, 2019 27,983,271 $ 0.20 3.45 Granted - - - Exercised - - - Forfeited - - - Outstanding, March 31, 2020 27,983,271 $ 0.20 3.20 Exercisable, March 31, 2020 26,783,271 $ 0.21 3.42 |
Schedule of Warrant Activity | The following table represents the Company’s warrant activity for the three months ended March 31, 2020: Weighted Average Weighted Weighted Remaining Number Average Average Contractual of Shares Fair Value Exercise Price Life (Years) Outstanding, December 31, 2019 14,237,646 $ 0.07 3.58 Granted - - - - Exercised - - - - Forfeited - - - - Expired - - - - Outstanding, March 31, 2020 14,237,646 0.07 3.28 Exercisable, March 31, 2020 14,237,646 $ 0.07 3.28 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Provision for 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: Three Months Ended March 31, 2020 2019 Federal statutory income tax rate (21.0 )% (21.0 )% Change in valuation allowance on net operating loss carryforwards 21.0 21.0 Effective income tax rate 0.0 % 0.0 % |
Schedule of Deferred Tax Assets | Deferred tax assets as of March 31, 2020 and December 31, 2019 are as follows: 2020 2019 NOL carryforwards $ 5,620,000 $ 5,490,000 Less valuation allowance (5,620,000 ) (5,490,000 ) Deferred tax assets $ - $ - |
Acquisition of Rotmans (Tables)
Acquisition of Rotmans (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
Schedule of Proforma Information | Three Months Ended March 31, 2020 2019 Total revenues $ 5,932,238 $ 6,734,929 Loss from operations $ 850,553 $ 2,505,367 Net loss $ 1,477,990 $ 3,687,824 Net loss attributable to Vystar $ 1,367,044 $ 3,456,916 Basic and dilated loss per share $ 0.00 $ 0.00 |
Description of Business (Detail
Description of Business (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Jul. 31, 2019 | May 31, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues | $ 5,932,238 | $ 191,667 | ||
Rotmans [Member] | ||||
Ownership percentage | 58.00% | |||
Revenues | $ 30,000,000 | |||
UV Flu Technologies, Inc., [Member] | ||||
Percentage destroys of airborne bacteria | 99.00% |
Basis of Presentation and Sum_4
Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Sales average service charge, percentage | 5.90% | ||
Sale of accounts receivable, value | $ 1,691,000 | ||
Property and equipment | 1,787,616 | $ 1,879,739 | |
Accumulated depreciation of property and equipment | 300,922 | 208,799 | |
Impairment of long-lived assets | |||
Reserves for estimated sales returns | 3,000 | 3,000 | |
Deferred revenue | |||
Deferred commission costs | 336,000 | ||
Advertising expense | $ 446,695 | $ 20,483 | |
Income tax, likely hood percentage | Greater than 50% | ||
Income tax examination, penalties and interest accrued | |||
Deferred Warranty Revenue [Member] | |||
Proceeds from deferred revenue arrangements | 98,000 | ||
Recognized from deferred revenue arrangements | 134,000 | ||
Deferred revenue | $ 812,000 | ||
Options to Purchase Common Shares [Member] | |||
Antidilutive securities excluded from computation of earnings per share, amount | 27,983,271 | 29,098,270 | |
Warrants to Purchase Common Shares [Member] | |||
Antidilutive securities excluded from computation of earnings per share, amount | 14,237,315 | 14,382,380 | |
Preferred Stock Convertible to Common Stock [Member] | |||
Antidilutive securities excluded from computation of earnings per share, amount | 4,661,180 | 4,382,730 | |
Minimum [Member] | |||
Property and equipment, useful life | 5 years | ||
Intangible asset, useful life | 9 years | ||
Minimum [Member] | Customer Relationships Tradename and Marketing [Member] | |||
Intangible asset, useful life | 5 years | ||
Maximum [Member] | |||
Property and equipment, useful life | 10 years | ||
Intangible asset, useful life | 20 years | ||
Maximum [Member] | Customer Relationships Tradename and Marketing [Member] | |||
Intangible asset, useful life | 10 years |
Basis of Presentation and Sum_5
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Unearned Revenue (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Accounting Policies [Abstract] | |
Beginning balance | $ 2,500,572 |
Customer deposits received | 4,930,536 |
Warranty coverage purchased | 98,309 |
Gift cards purchased | 2,500 |
Revenue earned | (5,057,651) |
Ending balance | $ 2,474,266 |
Liquidity and Going Concern (De
Liquidity and Going Concern (Details Narrative) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Cash | $ 403,091 | $ 72,355 |
Working capital deficit | 7,800,000 | |
Accumulated deficit | $ (42,472,344) | $ (41,104,967) |
Investments - Equity Securiti_3
Investments - Equity Securities (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Investments, All Other Investments [Abstract] | ||
Net unrealized holding gains on available-for-sale securities | $ (50,422) |
Investments - Equity Securiti_4
Investments - Equity Securities - Schedule of Cost and Fair Value of Investments (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Investments, All Other Investments [Abstract] | ||
Cost | $ 141,225 | |
Gross Unrealized Losses | (42,130) | |
Fair Value | $ 99,095 | $ 149,517 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 139,684 | $ 10,232 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment, Net (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Property and equipment, gross | $ 2,088,538 | $ 2,088,538 |
Accumulated depreciation | (300,922) | (208,799) |
Property and equipment, net | 1,787,616 | 1,879,739 |
Furniture, Fixtures and Equipment [Member] | ||
Property and equipment, gross | 1,354,665 | 1,354,665 |
Tooling and Testing Equipment [Member] | ||
Property and equipment, gross | 319,000 | 319,000 |
Parking Lots [Member] | ||
Property and equipment, gross | 365,707 | 365,707 |
Motor Vehicles [Member] | ||
Property and equipment, gross | $ 49,166 | $ 49,166 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 104,239 | $ 39,421 |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Intangible assets, Gross | $ 2,989,101 | $ 2,985,418 |
Accumulated amortization | (609,117) | (504,878) |
Net amortized intangibles | 2,379,984 | 2,480,540 |
Trademarks | 9,072 | 9,072 |
Total intangible assets | $ 2,389,056 | 2,489,612 |
Minimum [Member] | ||
Estimated Life | 9 years | |
Maximum [Member] | ||
Estimated Life | 20 years | |
Customer Relationships [Member] | ||
Intangible assets, Gross | $ 210,000 | 210,000 |
Customer Relationships [Member] | Minimum [Member] | ||
Estimated Life | 6 years | |
Customer Relationships [Member] | Maximum [Member] | ||
Estimated Life | 10 years | |
Proprietary Technology [Member] | ||
Estimated Life | 10 years | |
Intangible assets, Gross | $ 610,000 | 610,000 |
Tradename and Brand [Member] | ||
Intangible assets, Gross | $ 1,380,000 | 1,380,000 |
Tradename and Brand [Member] | Minimum [Member] | ||
Estimated Life | 5 years | |
Tradename and Brand [Member] | Maximum [Member] | ||
Estimated Life | 10 years | |
Marketing Related [Member] | ||
Estimated Life | 5 years | |
Intangible assets, Gross | $ 380,000 | 380,000 |
Patents [Member] | ||
Intangible assets, Gross | $ 359,101 | 355,418 |
Patents [Member] | Minimum [Member] | ||
Estimated Life | 6 years | |
Patents [Member] | Maximum [Member] | ||
Estimated Life | 20 years | |
Noncompete [Member] | ||
Estimated Life | 5 years | |
Intangible assets, Gross | $ 50,000 | $ 50,000 |
Intangible Assets - Schedule _2
Intangible Assets - Schedule of Estimated Future Amortization Expense (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Remaining in 2020 | $ 312,716 | |
2021 | 416,956 | |
2022 | 417,140 | |
2023 | 410,529 | |
2024 | 311,306 | |
Thereafter | 511,337 | |
Net amortized intangibles | $ 2,379,984 | $ 2,480,540 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Sublease income | $ 27,000 | |
Lease costs | $ 453,599 |
Leases - Schedule of Lease Cost
Leases - Schedule of Lease Cost (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Operating lease cost | $ 394,348 | |
Amortization of right-of-use assets | 47,561 | |
Interest on lease liabilities | 11,690 | |
Total lease cost | $ 453,599 |
Leases - Schedule of Other Info
Leases - Schedule of Other Information Related to Leases (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Leases [Abstract] | |
Operating cash flows used for operating leases | $ 372,884 |
Financing cash flows used for financing leases | 54,152 |
Assets obtained in exchange for operating lease liabilities | |
Assets obtained in exchange for finance lease liabilities | $ 75,739 |
Weighted average remaining lease term: operating leases | 9 years |
Weighted average remaining lease term: finance leases | 6 years |
Weighted average discount rate: operating leases | 5.53% |
Weighted average discount rate: finance leases | 5.16% |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Lease Payments Required Under Operating and Financing Lease Obligations (Details) | Mar. 31, 2020USD ($) |
Leases [Abstract] | |
Operating Leases Remainder of 2020 | $ 1,127,733 |
Operating Leases 2021 | 1,503,643 |
Operating Leases 2022 | 1,110,794 |
Operating Leases 2023 | 880,275 |
Operating Leases 2024 | 870,000 |
Operating Leases Thereafter | 5,220,000 |
Operating Leases Total undiscounted lease liabilities | 10,712,445 |
Operating Leases Less: imputed interest | (2,409,937) |
Operating Leases Net lease liabilities | 8,302,508 |
Finance Leases Remainder of 2020 | 160,156 |
Finance Leases 2021 | 205,545 |
Finance Leases 2022 | 150,943 |
Finance Leases 2023 | 150,142 |
Finance Leases 2024 | 140,002 |
Finance Leases Thereafter | 207,475 |
Finance Leases Total undiscounted lease liabilities | 1,014,263 |
Finance Leases Less: imputed interest | (135,739) |
Finance Leases Net lease liabilities | 878,524 |
Remainder of 2020 | 1,287,889 |
2021 | 1,709,188 |
2022 | 1,261,737 |
2023 | 1,030,417 |
2024 | 1,010,002 |
Thereafter | 5,427,475 |
Total undiscounted lease liabilities | 11,726,708 |
Less: imputed interest | (2,545,676) |
Net lease liabilities | $ 9,181,032 |
Notes Payable and Loan Facili_3
Notes Payable and Loan Facility (Details Narrative) - USD ($) | Feb. 24, 2020 | Feb. 20, 2020 | Dec. 19, 2019 | Jul. 18, 2019 | Jun. 30, 2019 | Nov. 02, 2012 | Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Debt, outstanding amount | $ 2,095,797 | $ 1,758,260 | |||||||
Derivative liabilities | $ 1,499,800 | 1,499,800 | $ 235,085 | ||||||
Rotman Family Convertible Notes [Member] | |||||||||
Derivative liabilities | 1,056,866 | ||||||||
Rotman Family Non Convertible Notes [Member] | |||||||||
Debt instrument, description | The notes bear interest at an annual rate of five percent (5%). Steven Rotman's note matures eight years from issuance and Bernard Rotman's note matures four years from issuance. Payments of $3,828 and $2,917 to Steven and Bernard Rotman, respectively, per month begin six months from issuance until maturity in December 2027 and 2023, respectively. | ||||||||
Rotman Family Non Convertible Notes [Member] | Steven RotMan [Member] | |||||||||
Debt face amount | $ 367,500 | ||||||||
Debt instrument, Interest rate | 5.00% | ||||||||
Debt instrument, payments | $ 3,828 | ||||||||
Debt instrument, maturity description | Note matures eight years from issuance | ||||||||
Debt face amount with accrued interest | $ 381,000 | 376,000 | |||||||
Rotman Family Non Convertible Notes [Member] | Bernard Rotman [Member] | |||||||||
Debt face amount | $ 140,000 | ||||||||
Debt instrument, Interest rate | 5.00% | ||||||||
Debt instrument, payments | $ 2,917 | ||||||||
Debt instrument, maturity description | Note matures four years from issuance | ||||||||
Debt face amount with accrued interest | $ 145,000 | 143,000 | |||||||
Libertas Funding LLC [Member] | |||||||||
Sale of future sale receipt | $ 1,089,000 | ||||||||
Sale of future sale receipt for purchase price | 825,000 | ||||||||
Origination fee amount | $ 16,500 | ||||||||
Debt instrument, implicit borrowing rate | 75.00% | ||||||||
Term notes current maturities | 756,417 | ||||||||
Other Term Debts [Member] | Three 0% Loans [Member] | |||||||||
Debt face amount | $ 13,397 | 16,374 | |||||||
Debt instrument, Interest rate | 0.00% | ||||||||
Debt instrument, payments | $ 1,488 | ||||||||
Debt instrument, maturity date | Nov. 30, 2020 | ||||||||
Contingently Convertible Notes Payable [Member] | |||||||||
Debt face amount | $ 335,000 | ||||||||
Debt instrument, Interest rate | 5.00% | ||||||||
Debt instrument, maturity description | The Notes mature one year from issuance but may be extended one (1) additional year by the Company. | ||||||||
Debt closing discount rate, percentage | 50.00% | ||||||||
Debt, outstanding amount | $ 338,195 | 338,195 | |||||||
Convertible Promissory Notes [Member] | |||||||||
Debt face amount | 613,700 | ||||||||
Debt, outstanding amount | 613,700 | ||||||||
Convertible Promissory Notes [Member] | Rotman Family Convertible Notes [Member] | |||||||||
Debt face amount | $ 1,522,500 | $ 180,000 | |||||||
Debt instrument, Interest rate | 8.00% | 8.00% | |||||||
Debt instrument, maturity description | Mature five years from issuance | ||||||||
Debt discount percentage | 50.00% | 50.00% | |||||||
Convertible Promissory Notes [Member] | Rotman Family Convertible Notes [Member] | Steven RotMan [Member] | |||||||||
Debt face amount | $ 50,000 | $ 100,000 | $ 1,102,500 | $ 105,000 | |||||
Debt instrument, maturity description | The note matures two years from issuance. | The note matures two years from issuance. | Note matures eight years from issuance | ||||||
Debt face amount with accrued interest | 111,000 | 109,000 | |||||||
Debt discount percentage | 50.00% | 50.00% | |||||||
Convertible Promissory Notes [Member] | Rotman Family Convertible Notes [Member] | Greg Rotman [Member] | |||||||||
Debt face amount | $ 75,000 | ||||||||
Debt face amount with accrued interest | 59,000 | 57,000 | |||||||
Convertible Promissory Notes [Member] | Rotman Family Convertible Notes [Member] | Bernard Rotman [Member] | |||||||||
Debt face amount | $ 420,000 | ||||||||
Debt instrument, maturity description | Note matures four years from issuance. | ||||||||
Debt face amount with accrued interest | 435,000 | $ 430,000 | |||||||
Convertible Promissory Notes [Member] | Minimum [Member] | |||||||||
Debt conversion percentage | 35.00% | ||||||||
Convertible Promissory Notes [Member] | Maximum [Member] | |||||||||
Debt conversion percentage | 50.00% | ||||||||
Shareholders Contingently Convertible Notes Payable [Member] | |||||||||
Derivative liabilities | $ 442,934 | ||||||||
Convertible and Contingently Convertible Notes Payable [Member] | |||||||||
Debt face amount | $ 710,000 | 0 | $ 235,085 | ||||||
Debt instrument, Interest rate | 12.00% | ||||||||
Debt closing discount rate, percentage | 35.00% | ||||||||
Derivative liabilities | $ 465,905 | ||||||||
Convertible conversion of shares | 303,000,000 | ||||||||
Change in fair value of derivative liabilities | $ 1,044,250 | ||||||||
Number of warrants to purchase common stock | 411,875 | ||||||||
Exercise price of warrants | $ 0.40 | ||||||||
Convertible and Contingently Convertible Notes Payable [Member] | Minimum [Member] | |||||||||
Debt, conversion price per share | 0.05 | ||||||||
Convertible and Contingently Convertible Notes Payable [Member] | Maximum [Member] | |||||||||
Debt, conversion price per share | $ 0.10 | ||||||||
Convertible and Contingently Convertible Notes Payable [Member] | Derivative Liabilities Upon the Date All Notes were Converted [Member] | |||||||||
Change in fair value of derivative liabilities | $ 1,279,335 | ||||||||
Convertible Promissory Notes [Member] | Rotman Family Convertible Notes [Member] | Steven RotMan [Member] | |||||||||
Debt face amount with accrued interest | 1,142,000 | $ 1,128,000 | |||||||
Convertible Promissory Notes [Member] | Rotman Family Convertible Notes [Member] | Steven RotMan [Member] | |||||||||
Debt face amount with accrued interest | 101,000 | 100,000 | |||||||
Convertible Promissory Notes [Member] | Rotman Family Convertible Notes [Member] | Steven RotMan [Member] | |||||||||
Debt face amount with accrued interest | 50,000 | ||||||||
CMA Investments, LLC [Member] | |||||||||
Revolving line of credit | $ 1,500,000 | ||||||||
CMA Investments, LLC [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||||||||
Line of credit, floor rate percentage | 5.25% | ||||||||
Debt instrument, maturity date | Jul. 31, 2019 | ||||||||
Fidelity Co-Operative Bank [Member] | |||||||||
Revolving line of credit | $ 2,500,000 | ||||||||
Line of credit, advances limited percentage | 50.00% | ||||||||
Line of credit interest rate | 3.75% | ||||||||
Line of credit, floor rate percentage | 3.75% | ||||||||
Credit facility, borrowing capacity available | $ 2,164,000 | ||||||||
Fidelity Co-Operative Bank [Member] | Prime Rate [Member] | |||||||||
Line of credit interest rate | 0.50% | ||||||||
Fidelity Bank [Member] | Term Notes [Member] | |||||||||
Revolving line of credit | $ 500,000 | ||||||||
Line of credit, outstanding | 500,000 | $ 500,000 | |||||||
Debt face amount | $ 100,000 | ||||||||
Debt instrument, Interest rate | 4.50% | ||||||||
Fidelity Bank [Member] | Term Notes [Member] | Due in 2033 [Member] | |||||||||
Balloon payment | $ 500,000 |
Notes Payable and Loan Facili_4
Notes Payable and Loan Facility - Schedule of Long-term Debt (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
Shareholder, convertible and contingently convertible notes | $ 951,895 | $ 951,895 |
Accrued interest | 58,467 | 46,569 |
Debt discount | (79,400) | (137,775) |
Total shareholder notes and accrued interest | 930,962 | 860,689 |
Less: current maturities | (611,281) | (366,326) |
Total long-term debt | $ 319,681 | $ 494,363 |
Notes Payable and Loan Facili_5
Notes Payable and Loan Facility - Schedule of Related Party Debt (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Long term debt, current | $ 2,095,797 | $ 1,758,260 |
Accrued interest | 83,190 | 53,153 |
Debt discount | (327,600) | (585,100) |
Less: current maturities | (46,000) | (46,000) |
Long term debt | 2,049,797 | 1,712,260 |
Rotman Family Convertible Notes [Member] | ||
Long term debt, current | 1,832,707 | 1,782,707 |
Rotman Family Non Convertible Notes [Member] | ||
Long term debt, current | 507,500 | $ 507,500 |
Long term debt | $ 507,500 |
Notes Payable and Loan Facili_6
Notes Payable and Loan Facility - Schedule of Maturities of Notes Payable (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Long term debt | $ 2,049,797 | $ 1,712,260 |
Rotman Family Non Convertible Notes [Member] | ||
Remainder of 2020 | 46,000 | |
2021 | 59,000 | |
2022 | 62,000 | |
2023 | 85,000 | |
2024 | 34,000 | |
Thereafter | 221,500 | |
Long term debt | $ 507,500 |
Derivative Liabilities (Details
Derivative Liabilities (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||
Derivative liability | $ 1,499,800 | $ 1,499,800 | |
Change in fair value of derivative liabilities | $ 1,044,250 | $ 1,079,450 |
Derivative Liabilities - Schedu
Derivative Liabilities - Schedule of Derivative Liabilities (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Beginning balance | $ 1,499,800 | $ 235,085 |
Initial measurement of liabilities | 1,464,600 | |
Change in fair value | 1,079,450 | |
Settlement due to conversion | (1,279,335) | |
Ending balance | $ 1,499,800 | $ 1,499,800 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | May 02, 2013 | Mar. 31, 2020 | Dec. 31, 2019 |
Preferred stock, shares outstanding | 13,828 | 13,828 | |
Conversion of Principal and Interest [Member] | |||
Number of shares of common stock | |||
Equity Purchase Agreements [Member] | |||
Number of shares of common stock | |||
Holder [Member] | |||
Preferred stock, shares outstanding | 13,828 | 13,828 | |
Preferred stock, undeclared dividends | $ 95,000 | $ 91,000 | |
Debt converted into common shares | 4,661,180 | 4,591,100 | |
10% Series A Cumulative Convertible Preferred Stock [Member] | |||
Preferred stock, shares in private placement offering | 200,000 | ||
Number of sale of shares | 200,000 | ||
Sale of stock price per share | $ 10 | ||
Number of sale of shares, value | $ 2,000,000 | ||
Preferred stock, dividend rate | 10.00% | ||
Conversion price per share | $ 0.075 | ||
Conversion price lowered | $ 0.05 | ||
Number of shares of common stock | 25,000 |
Revenues - Schedule of Revenue
Revenues - Schedule of Revenue (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Net Sales | $ 5,932,238 | $ 191,667 |
Net Sales, percentage | 100.00% | 100.00% |
Case Goods [Member] | ||
Net Sales | $ 2,343,616 | |
Net Sales, percentage | 39.50% | 0.00% |
Case Goods [Member] | Bedroom Furniture [Member] | ||
Net Sales | $ 861,123 | |
Net Sales, percentage | 14.50% | 0.00% |
Case Goods [Member] | Dining Room Furniture [Member] | ||
Net Sales | $ 522,114 | |
Net Sales, percentage | 8.80% | 0.00% |
Case Goods [Member] | Occasional [Member] | ||
Net Sales | $ 960,379 | |
Net Sales, percentage | 16.20% | 0.00% |
Upholstery [Member] | ||
Net Sales | $ 1,617,547 | |
Net Sales, percentage | 27.30% | 0.00% |
Mattresses and Toppers [Member] | ||
Net Sales | $ 1,071,327 | $ 179,017 |
Net Sales, percentage | 18.10% | 93.40% |
Broadloom, Flooring and Rugs [Member] | ||
Net Sales | $ 406,879 | |
Net Sales, percentage | 6.90% | 0.00% |
Warranty [Member] | ||
Net Sales | $ 98,309 | |
Net Sales, percentage | 1.70% | 0.00% |
Accessories and Other [Member] | ||
Net Sales | $ 394,560 | $ 12,650 |
Net Sales, percentage | 6.70% | 6.60% |
Share-Based Compensation (Detai
Share-Based Compensation (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Apr. 30, 2009 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2014 | Dec. 31, 2004 | |
Share-based compensation | $ 154,368 | $ 1,612,286 | ||||
Accrued share-based compensation | 993,981 | $ 845,175 | ||||
Unrecognized compensation expenses | $ 43,371 | |||||
Unrecognized compensation years | 3 years | |||||
Number of options granted | ||||||
Aggregate intrinsic value, outstanding | $ 1,000 | $ 52,000 | ||||
Stock Option Plan [Member] | ||||||
Share based arrangement authorized shares | 4,000,000 | |||||
Employee and Board Members [Member] | ||||||
Share-based compensation | $ 5,562 | $ 17,783 | ||||
Board of Directors [Member] | Stock Option Plan [Member] | ||||||
Share based arrangement additional authorized shares | 10,000,000 | 50,000,000 | 5,000,000 | |||
Number of shares available for issuance | 2,251,729 | |||||
Share based arrangement vested period | 4 years | |||||
Share based arrangement exercisable period | 10 years |
Share-Based Compensation - Sche
Share-Based Compensation - Schedule of Stock Option Activity (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Number of Shares, Granted | ||
Stock Options [Member] | ||
Number of Shares, Outstanding, Beginning balance | 27,983,271 | |
Number of Shares, Granted | ||
Number of Shares, Exercised | ||
Number of Shares, Forfeited | ||
Number of Shares, Outstanding, Ending balance | 27,983,271 | |
Number of Shares, Exercisable, Ending balance | 27,983,271 | |
Weighted Average Exercise Price, Outstanding, Beginning balance | $ 0.20 | |
Weighted Average Exercise Price, Granted | ||
Weighted Average Exercise Price, Exercised | ||
Weighted Average Exercise Price, Forfeited | ||
Weighted Average Exercise Price, Outstanding, Ending balance | 0.20 | |
Weighted Average Exercise Price, Exercisable, Ending balance | $ 0.21 | |
Weighted Average Remaining Contractual Life (Years), Outstanding, Beginning balance | 3 years 5 months 12 days | |
Weighted Average Remaining Contractual Life (Years), Granted | 0 years | |
Weighted Average Remaining Contractual Life (Years), Outstanding, Ending balance | 3 years 2 months 12 days | |
Weighted Average Remaining Contractual Life (Years), Exercisable, Ending balance | 3 years 5 months 1 day |
Share-Based Compensation - Sc_2
Share-Based Compensation - Schedule of Warrant Activity (Details) - Stock Warrants [Member] | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Number of Shares, Outstanding, Beginning balance | shares | 14,237,646 |
Number of Shares, Granted | shares | |
Number of Shares, Exercised | shares | |
Number of Shares, Forfeited | shares | |
Number of Shares, Expired | shares | |
Number of Shares, Outstanding, Ending balance | shares | 14,237,646 |
Number of Shares, Exercisable, Ending balance | shares | 14,237,646 |
Weighted Average Exercise Price, Granted | |
Weighted Average Exercise Price, Exercised | |
Weighted Average Exercise Price, Forfeited | |
Weighted Average Exercise Price, Expired | |
Weighted Average Exercise Price, Outstanding, Beginning balance | 0.07 |
Weighted Average Exercise Price, Granted | |
Weighted Average Exercise Price, Exercised | |
Weighted Average Exercise Price, Forfeited | |
Weighted Average Exercise Price, Expired | |
Weighted Average Exercise Price, Outstanding, Ending balance | 0.07 |
Weighted Average Exercise Price, Exercisable, Ending balance | $ 0.07 |
Weighted Average Remaining Contractual Life (Years), Outstanding, Beginning balance | 3 years 6 months 29 days |
Weighted Average Remaining Contractual Life (Years), Granted | 0 years |
Weighted Average Remaining Contractual Life (Years), Expired | 0 years |
Weighted Average Remaining Contractual Life (Years), Outstanding, Ending balance | 3 years 3 months 11 days |
Weighted Average Remaining Contractual Life (Years), Exercisable, Ending balance | 3 years 3 months 11 days |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Jun. 22, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 |
Number of shares issued for services, value | $ 2,032,236 | |||
Stock subscription payable | $ 510,000 | |||
Stock subscription payable, shares | 16,725,000 | |||
Number of shares of common stock, value | $ 434,800 | |||
Steven RotMan [Member] | ||||
Number of shares issued for services, value | $ 201,200 | |||
Number of shares issued for services | 4,000,000 | |||
Per Steven Rotman's Employment Agreement [Member] | ||||
Related party cash | $ 5,000 | |||
Discount rate | 50.00% | |||
Per Steven Rotman's Employment Agreement [Member] | Per Year [Member] | ||||
Related party cash | $ 125,000 | |||
Per Steven Rotman's Employment Agreement [Member] | Per Month [Member] | ||||
Related party cash paid in shares, value | $ 10,417 | |||
Previous Employment Agreement [Member] | ||||
Discount rate | 0.00% | |||
Previous Employment Agreement [Member] | Per Year [Member] | ||||
Related party cash | $ 1 | |||
Previous Employment Agreement [Member] | Per Month [Member] | ||||
Related party cash paid in shares, value | $ 20,833 | |||
Design's Consulting Agreement [Member] | Designcenters [Member] | ||||
Related party cash | $ 41,000 | |||
Discount rate | 50.00% | |||
Number of shares of common stock | 20,030,407 | |||
Stock subscription payable | $ 42,000 | |||
Stock subscription payable, shares | 850,000 | |||
Performance bonus | $ 10,000 | |||
Number of shares of common stock, value | $ 83,000 | |||
Design's Consulting Agreement [Member] | Per Month [Member] | Designcenters [Member] | ||||
Related party cash | 7,100 | |||
Blue Oar's Consulting Agreement [Member] | Blue Oar Consulting, Inc. [Member] | ||||
Related party cash | $ 45,000 | |||
Discount rate | 50.00% | |||
Number of shares of common stock | 9,042,046 | |||
Stock subscription payable | $ 411,000 | |||
Stock subscription payable, shares | 19,604,000 | |||
Number of shares of common stock, value | $ 83,000 | |||
Blue Oar's Consulting Agreement [Member] | Per Month [Member] | Blue Oar Consulting, Inc. [Member] | ||||
Related party cash | 15,000 | |||
Related party cash paid in shares, value | $ 12,500 |
Major Customers and Vendors (De
Major Customers and Vendors (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Concentration of risk, percentage | 100.00% | 100.00% |
Revenues | $ 5,932,238 | $ 191,667 |
Revenue [Member] | Customer or Vendor [Member] | ||
Concentration of risk, percentage | 10.00% | |
Revenue [Member] | One Major Vendor [Member] | ||
Concentration of risk, percentage | 15.00% | |
Revenues | $ 185,000 | |
Revenue [Member] | Six Major Customers [Member] | ||
Revenues | $ 16,000 | |
Cost of Revenue [Member] | Customer or Vendor [Member] | ||
Concentration of risk, percentage | 10.00% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Effective income tax rate | 21.00% | 21.00% |
Net operating loss carryforward | $ 26,700,000 | |
Rotmans Furniture [Member] | Federal [Member] | ||
Net operating loss carryforward | 2,700,000 | |
Rotmans Furniture [Member] | State [Member] | ||
Net operating loss carryforward | $ 1,800,000 | |
Net operating loss, expiration year | Expires beginning in 2022 | |
Georgia [Member] | ||
Net operating loss carryforward | $ 18,300,000 | |
Net operating loss, expiration year | Expires beginning in 2023 | |
Massachusetts [Member] | ||
Net operating loss carryforward | $ 8,300,000 | |
Net operating loss, expiration year | Expires beginning in 2023 | |
Expires Beginning in 2024 [Member] | ||
Net operating loss carryforward | $ 18,400,000 | |
Carried Forward Indefinitely [Member] | ||
Net operating loss carryforward | 8,300,000 | |
Carried Forward Indefinitely [Member] | Rotmans Furniture [Member] | Federal [Member] | ||
Net operating loss carryforward | 890,000 | |
Expires Beginning in 2029 [Member] | Rotmans Furniture [Member] | Federal [Member] | ||
Net operating loss carryforward | $ 1,810,000 |
Income Taxes - Schedule of Prov
Income Taxes - Schedule of Provision for Income Taxes (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory income tax rate | (21.00%) | (21.00%) |
Change in valuation allowance on net operating loss carryforwards | 21.00% | 21.00% |
Effective income tax rate | 0.00% | 0.00% |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
NOL carryforwards | $ 5,620,000 | $ 5,490,000 |
Less valuation allowance | (5,620,000) | (5,490,000) |
Deferred tax assets |
Acquisition of Rotmans (Details
Acquisition of Rotmans (Details Narrative) - Rotmans Furniture [Member] | Jul. 18, 2019USD ($) |
Acquired percent interest | 58.00% |
Aggregate purchase price | $ 2,030,000 |
Percent of consideration paid | 25.00% |
Percent of consideration paid in convertible notes | 75.00% |
Minimum [Member] | |
Notes payable term | 4 years |
Maximum [Member] | |
Notes payable term | 8 years |
Acquisition of Rotmans - Schedu
Acquisition of Rotmans - Schedule of Proforma Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Business Combinations [Abstract] | ||
Total revenues | $ 5,932,238 | $ 6,734,929 |
Loss from operations | 850,553 | 2,505,367 |
Net loss | 1,477,990 | 3,687,824 |
Net loss attributable to Vystar | $ 1,367,044 | $ 3,456,916 |
Basic and dilated loss per share | $ 0 | $ 0 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Jul. 01, 2020 | Apr. 16, 2020 | May 31, 2020 | Mar. 31, 2019 |
Preferred Stock [Member] | ||||
Number of shares issued | ||||
Common Stock [Member] | ||||
Number of shares issued | 144,933,992 | |||
Subsequent Event [Member] | Preferred Stock [Member] | ||||
Number of shares issued | 130 | |||
Subsequent Event [Member] | Common Stock [Member] | ||||
Number of convertible shares | 44,357 | |||
Subsequent Event [Member] | Paycheck Protection Program [Member] | ||||
Loan received funding amount | $ 1,402,900 | |||
Promissory note principal amount | $ 1,402,900 | |||
Debt interest percentage | 1.00% | |||
Debt description | The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, Rotmans may apply for forgiveness for all or a part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by Rotmans during the twenty-four week period after the loan origination for certain purposes including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least 60% of the loan amount is used for eligible payroll costs; the employer maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered twenty-four week period will qualify for forgiveness. | |||
Subsequent Event [Member] | Sale Promotion Consulting Agreement [Member] | ||||
Debt description | Under the agreement, Rotmans appointed the third-party as its exclusive agent to assist with a high-impact sale to payoff the Fidelity Co-operative Bank ("Fidelity") line of credit loan. Before the sale, the agent lent the Company funds to payoff the Fidelity loan on May 29, 2020. The agent will be reimbursed for the advance from the proceeds of the sale. In addition, the agent has a senior first priority security interest and lien in Rotmans inventories and other assets until all obligations and liabilities are satisfied. Profits of the sale will be distributed according to the specific terms of the agreement. The agreement will expire 240 days from the commencement date of May 29, 2020. |