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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~March 3031, ~~2023~~2024

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

For the transition period from _______________ to ________________

Commission File Number 000-53754

VYSTAR CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Georgia

20-2027731

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

~~725~~365 ~~Southbridge~~Shrewsbury St

Worcester, MA ~~01610~~01604

(Address of Principal Executive Offices, Zip Code)

(508) 791-9114

(Registrant’s telephone number including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ☒☐ NO ☐☒

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

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

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

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

Class		Outstanding as of ~~November~~October 1421, ~~2023~~2024
Common Stock, $0.0001 par value per share		1213,~~942~~290,~~592~~972 shares

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

In addition to historical information, this Form 10-Q contains statements relating to our future results (including certain projections and business trends) that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the “safe harbor” created by those sections. The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q (this “Report”). This Report contains certain forward-looking statements and the Company’s future operating results could differ materially from those discussed herein. Our disclosure and analysis included in this Report concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in expanding our business and raising debt and capital securities include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate”, “may”, “project”, “will likely result”, and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to certain risks, uncertainties, and assumptions, including prevailing market conditions and are more fully described under “Part I, Item 1A - Risk Factors” of our Form 10-K for the year ended December 31, ~~2022~~2023. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. In any event, these and other crucial factors, including those set forth in Item 1A - “Risk Factors” of our Form 10-K for the year ended December 31, ~~2022~~2023 may cause actual results to differ materially from those indicated by our forward-looking statements.

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

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

VYSTAR CORPORATION

FORM 10-Q FOR THE QUARTER ENDED ~~SEPTEMBER~~MARCH 3031, ~~2023~~2024

INDEX

Part I. Financial Information
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets at September 30, 2023 (unaudited) and December 31, 2022	4
	Condensed Consolidated Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 (unaudited) and 2022 (unaudited)	5
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 (unaudited) and 2023 (unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2023 (unaudited) and 2022 (unaudited)	6-7
	Condensed Consolidated Statements of Stockholders’ Deficit for the Three Months Ended March 31, 2024 (unaudited) and 2023 (unaudited)	6-7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 (unaudited) and 2022 (unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 (unaudited) and 2023 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2732
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3336
Item 4.	Controls and Procedures	3436
Part II. Other Information
Item 1.	Legal Proceedings	3538
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3538
Item 3.	Defaults Upon Senior Securities	3538
Item 4.	Mine Safety Disclosures	3538
Item 5.	Other Information	3538
Item 6.	Exhibits	3538
SIGNATURES		3639

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VYSTAR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	March 31,			December 31,
	2023			2022
	2024			2023
	(Unaudited)
ASSETS
Current assets:
Cash	$	4511,~~951~~768		$	1235,~~274~~442
Accounts receivable		2129,~~187~~736			124,~~145~~251
Inventories		6483,~~275~~286			9143,~~724~~821
Prepaid expenses and other		~~639~~303,~~582~~528			~~633~~348,~~769~~275
Assets of discontinued operations		~~269~~14,~~840~~930			360,~~026,971~~213
Total current assets		1443,~~040,835~~248			3492,~~776,883~~002
Property and equipment, net		~~108~~87,~~216~~021			~~140~~97,~~886~~719
Other assets:
Intangible assets, net		~~130~~114,~~584~~726			~~154~~122,~~371~~655
Inventories, long-term		-			63,009
Total assets	$	644,995		$	712,376
Assets of discontinued operations		5,581,377			7,503,970
Total other assets		5,711,961			7,721,350
Total assets	$	6,861,012		$	11,639,119
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	1,~~574~~170,~~612~~550		$	1,~~361~~071,~~483~~604
Accrued expenses		~~312~~461,~~924~~849			~~684~~450,~~147~~438
Stock subscription payable		2,~~008~~581,~~952~~379			12,~~655~~388,~~208~~926
Shareholder, convertible and contingently convertible notes payable and accrued interest - current maturities		~~349~~362,~~607~~662			~~336~~356,~~263~~472
Related party debt - current maturities		~~175~~178,~~011~~722			~~169~~176,~~552~~872
Unearned revenue		44,379			44,~~479~~379
Related party advances		~~368~~77,~~257~~460			~~266~~75,~~541~~281
Liabilities of discontinued operations		1,~~500~~523,~~381~~018			21,~~328~~350,~~589~~910
Total current liabilities		6,~~334~~400,~~123~~019			65,~~846~~914,~~262~~882
Long-term liabilities:
Liabilities of discontinued operations		3,975,873			5,513,667
Related party advances		353,894			343,694
Total liabilities		10,309,996			12,359,929
Liabilities of discontinued operations		3,306,005			3,494,005
Total long-term liabilities		3,659,899			3,837,699
Total liabilities		10,059,918			9,752,581
Stockholders’ deficit:
Convertible preferred stock series class A, $0.0001 par value 15,000,000 shares authorized; 8,698 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively (liquidation preference of $177,000 and $170,000 at September 30, 2023 and December 31, 2022, respectively)		1			1
Convertible preferred stock series class A, $0.0001 par value 15,000,000 shares authorized; 8,698 shares issued and outstanding at March 31, 2024 and December 31,2023 (liquidation preference of $181,000 and $179,000 at March 31, 2024 and December 31,2023, respectively)		1			1
Convertible preferred stock series B, $0.0001 par value 2,500,000 shares authorized; 370,969 shares issued and outstanding at September 30, 2023 and December 31, 2022 (liquidation preference of $2,904,000 and $2,710,000 at September 30, 2023 and December 31, 2022, respectively)		37			37
Convertible preferred stock series B, $0.0001 par value 2,500,000 shares authorized; 336,131 and 370,969 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively (liquidation preference of $2,749,000 and $2,970,000 at March 31, 2024 and December 31, 2023, respectively)		34			37
Convertible preferred stock series C, $0.0001 par value 2,500,000 shares authorized; 1,917,973 shares issued and outstanding at September 30, 2023 and December 31, 2022 (liquidation preference of $5,607,000 and $5,233,000 at September 30, 2023 and December 31, 2022, respectively)		192			192
Convertible preferred stock series C, $0.0001 par value 2,500,000 shares authorized; 1,917,973 shares issued and outstanding at March 31, 2024 and December 31, 2023 (liquidation preference of $5,858,000 and $5,733,000 at March 31, 2024 and December 31, 2023, respectively)		192			192
Convertible preferred stock		192			192
Common stock, $0.0001 par value, 500,000,000 shares authorized; 12,942,892 shares issued at September 30, 2023 and December 31, 2022, and 12,942,592 shares outstanding at September 30, 2023 and December 31, 2022, respectively		1,294			1,294
Common stock, $0.0001 par value, 1,500,000,000 shares authorized; 13,291,272 and 12,942,892 shares issued at March 31, 2024 and December 31, 2023, respectively, and 13,290,972 and 12,942,592 shares outstanding at March 31, 2024 and December 31, 2023, respectively		1,329			1,294
Additional paid-in capital		53,361,~~925~~893			53,361,925
Accumulated deficit		(5760,~~242~~975,~~180~~112	)		(5560,~~368~~612,~~868~~738	)
Common stock in treasury, at cost; 300 shares		(30	)		(30	)
Total Vystar stockholders’ deficit		(37,~~878~~611,~~761~~693	)		(27,~~005~~249,~~449~~319	)
Noncontrolling interest		~~429~~(1,~~777~~803,230	)		(1,~~284~~790,~~639~~886	)
Total stockholders’ deficit		(39,~~448~~414,~~984~~923	)		(~~720~~9,~~810~~040,205	)
Total liabilities and stockholders’ deficit	$	6644,~~861,012~~995		$	11712,~~639,119~~376

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

VYSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2023			2022			2023			2022
	2024			2023
	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2023			2022			2023			2022
	2024			2023
Revenue	$	6037,~~350~~607		$	36409,~~657~~907		$	~~506,383~~		$	~~205,500~~
Cost of revenue		517,~~585~~420			5476,~~223~~698			~~88,196~~			~~118,390~~
Gross profit		5420,~~765~~187			~~(17~~333,~~566~~209	)		~~418,187~~			~~87,110~~
Operating expenses:
Salaries, wages and benefits		70,916			81,551			200,127			200,384
Salaries and commissions		3,760			54,929
Share-based compensation		~~107~~192,~~630~~453			~~181~~138,~~199~~910			~~353,744~~			~~658,004~~
Professional fees		3572,~~622~~306			3255,~~595~~442			~~97,333~~			~~187,554~~
Advertising		~~3,745~~502			106,~~009~~665			~~13,971~~			~~24,223~~
Rent		2013,~~001~~214			-20,001			~~60,003~~			~~8,393~~
Service charges		10,711			2,394			15,083			6,600
Depreciation and amortization		18,627			18,819
Depreciation and amortization		18,819			35,119			56,457			105,357
Other operating		56,563			89,160
Other operating		106,020			178,138			279,822			520,637
Total operating expenses		357,425			383,926
Total operating expenses		373,464			521,005			1,076,540			1,711,152
Loss from operations		(337,238	)		(50,717	)
Loss from operations		(318,699	)		(538,571	)		(658,353	)		(1,624,042	)
Other expense:
Other income (expense):
Interest expense		(8,089	)		(10,337	)
Interest expense		(12,918	)		(8,891	)		(34,436	)		(205,095	)
Net loss from continuing operations		(345,327	)		(61,054	)
Change in fair value of derivative liabilities		-			240,300			-			1,760,300
Discontinued operations:
Loss on settlement of debt, net		-			(2,481,231	)		-			(2,250,411	)
Loss from operations		(29,391	)		(1,216,022	)
Total other expense, net		(12,918	)		(2,249,822	)		(34,436	)		(695,206	)
Net loss		(374,718	)		(1,277,076	)
Net loss from continuing operations		(331,617	)		(2,788,393	)		(692,789	)		(2,319,248	)
Net loss attributable to noncontrolling interest		12,344			510,729
Discontinued operations:
Net loss attributable to Vystar	$	(362,374	)	$	(766,347	)
Loss from operations		(598,014	)		(321,068	)		(2,035,385	)		(1,315,583	)
Basic and diluted loss per share:
Net loss		(929,631	)		(3,109,461	)		(2,728,174	)		(3,634,831	)
Net loss from continuing operations	$	(0.03	)	$	(0.00	)
Net loss attributable to noncontrolling interest		251,166			134,849			854,862			552,545
Net loss from discontinued operations	$	(0.00	)	$	(0.09	)
Net loss attributable to Vystar	$	(678,465	)	$	(2,974,612	)	$	(1,873,312	)	$	(3,082,286	)
Net loss attributable to noncontrolling interest	$	(0.00	)	$	(0.04	)
Basic and diluted loss per share:
Net loss attributable to common shareholders	$	(0.03	)	$	(0.06	)
Net loss from continuing operations	$	(0.03	)	$	(0.22	)	$	(0.05	)	$	(0.18	)
Basic and diluted weighted average number of common shares outstanding		13,275,658			12,942,592
Net loss from discontinued operations	$	(0.05	)	$	(0.02	)	$	(0.16	)	$	(0.10	)
Net loss attributable to noncontrolling interest	$	(0.02	)	$	(0.01	)	$	(0.07	)	$	(0.04	)
Net loss attributable to common shareholders	$	(0.05	)	$	(0.23	)	$	(0.14	)	$	(0.24	)
Basic and diluted weighted average number of common shares outstanding		12,942,592			12,942,592			12,942,592			12,942,609

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

VYSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2023~~2024

(Unaudited)

	Shares A\		Stock A		Shares B			Stock B			Shares C		Stock C		Shares		Stock		Capital			Deficit			Shares			Stock			Deficit			Interest			Deficit
	Attributable to Vystar
	Number				Number						Number				Number										Number						Total
	of				of						of				of				Additional						of						Vystar						Total
	Preferred		Preferred		Preferred			Preferred			Preferred		Preferred		Common		Common		Paid-in			Accumulated			Treasury			Treasury			Stockholders’			Noncontrolling			Stockholders’
	Shares A\		Stock A		Shares B			Stock B			Shares C		Stock C		Shares		Stock		Capital			Deficit			Shares			Stock			Deficit			Interest			Deficit
Ending balance December 31, 2022		8,698	$	1		370,969		$	37			1,917,973	$	192		12,942,592	$	1,294	$	53,361,925		$	(55,368,868	)		(300	)	$	(30	)	$	(2,005,449	)	$	1,284,639		$	(720,810	)
Ending balance December 31, 2023		8,698	$	1		370,969		$	37			1,917,973	$	192		12,942,592	$	1,294	$	53,361,925		$	(60,612,738	)		(300	)	$	(30	)	$	(7,249,319	)	$	(1,790,886	)	$	(9,040,205	)
Net loss		-		-		-			-			-		-		-		-		-			(766,347	)		-			-			(766,347	)		(510,729	)		(1,277,076	)
Preferred stock conversion to common stock						(34,838	)		(3	)						348,380		35		(32	)											-						-
Ending balance March 31, 2023		8,698		1		370,969			37			1,917,973		192		12,942,592		1,294		53,361,925			(56,135,215	)		(300	)		(30	)		(2,771,796	)		773,910			(1,997,886	)
Net loss		-		-		-			-			-		-		-		-		-			(362,374	)		-			-			(362,374	)		(12,344	)		(374,718	)
Net loss		-		-		-			-			-		-		-		-		-			(428,500	)		-			-			(428,500	)		(92,967	)		(521,467	)
Ending balance March 31, 2024		8,698	$	1		336,131		$	34			1,917,973	$	192		13,290,972	$	1,329	$	53,361,893		$	(60,975,112	)		(300	)	$	(30	)	$	(7,611,693	)	$	(1,803,230	)	$	(9,414,923	)
Ending balance June 30, 2023		8,698		1		370,969			37			1,917,973		192		12,942,592		1,294		53,361,925			(56,563,715	)		(300	)		(30	)		(3,200,296	)		680,943			(2,519,353	)
Net loss		-		-		-			-			-		-		-		-		-			(678,465	)		-			-			(678,465	)		(251,166	)		(929,631	)
Ending balance September 30, 2023		8,698	$	1		370,969		$	37			1,917,973	$	192		12,942,592	$	1,294	$	53,361,925		$	(57,242,180	)		(300	)	$	(30	)	$	(3,878,761	)	$	429,777		$	(3,448,984	)

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

VYSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2022~~2023

(Unaudited)

	Shares A\		Stock A		Shares B		Stock B		Shares C		Stock C		Shares			Stock		Capital		Deficit			Shares			Stock			Deficit			Interest			Deficit
	Attributable to Vystar
	Number				Number				Number				Number										Number						Total
	of				of				of				of					Additional					of						Vystar						Total
	Preferred		Preferred		Preferred		Preferred		Preferred		Preferred		Common			Common		Paid-in		Accumulated			Treasury			Treasury			Stockholders’			Noncontrolling			Stockholders’
	Shares A\		Stock A		Shares B		Stock B		Shares C		Stock C		Shares			Stock		Capital		Deficit			Shares			Stock			Deficit			Interest			Deficit
Ending balance December 31, 2021		8,698	$	1		-	$	-		-	$	-		12,942,792		$	1,294	$	43,851,510	$	(51,410,516	)		(300	)	$	(30	)	$	(7,557,741	)	$	1,657,442		$	(5,900,299	)
Ending balance December 31, 2022		8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592		$	1,294	$	53,361,925	$	(55,368,868	)		(300	)	$	(30	)	$	(2,005,449	)	$	1,284,639		$	(720,810	)
Share-based compensation - options																			3,691											3,691						3,691
Balance		8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592		$	1,294	$	53,361,925	$	(55,368,868	)		(300	)	$	(30	)	$	(2,005,449	)	$	1,284,639		$	(720,810	)
Retirement of common stock														(200	)																					-
Net loss		-		-		-		-		-		-		-			-		-		(766,347	)		-			-			(766,347	)		(510,729	)		(1,277,076	)
Net loss		-		-		-		-		-		-		-			-		-		(774,354	)		-			-			(774,354	)		(179,612	)		(953,966	)
Ending balance March 31, 2023		8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592		$	1,294	$	53,361,925	$	(56,135,215	)		(300	)	$	(30	)	$	(2,771,796	)	$	773,910		$	(1,997,886	)
Ending balance March 31, 2022		8,698		1		-		-		-		-		12,942,592			1,294		43,855,201		(52,184,870	)		(300	)		(30	)		(8,328,404	)		1,477,830			(6,850,574	)
Balance		8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592		$	1,294	$	53,361,925	$	(56,135,215	)		(300	)	$	(30	)	$	(2,771,796	)	$	773,910		$	(1,997,886	)
Share-based compensation - options																			3,691											3,691						3,691
Net income		-		-		-		-		-		-		-			-		-		666,679			-			-			666,679			(238,084	)		428,595
Ending balance June 30, 2022		8,698		1		-		-		-		-		12,942,592			1,294		43,858,892		(51,518,191	)		(300	)		(30	)		(7,658,034	)		1,239,746			(6,418,288	)
Balance		8,698		1		-		-		-		-		12,942,592			1,294		43,858,892		(51,518,191	)		(300	)		(30	)		(7,658,034	)		1,239,746			(6,418,288	)
Share-based compensation - options																			3,691											3,691						3,691
Preferred stock issued for services						73,428		7		291,188		29							1,595,211											1,595,247						1,595,247
Preferred stock issued for cash										32,566		3							84,997											85,000						85,000
Preferred stock issued for settlement of accounts payable						127,857		13											511,415											511,428						511,428
Preferred stock issued for settlement of shareholder notes payable						152,755		15											893,602											893,617						893,617
Preferred stock issued for settlement of related party notes payable										1,594,219		160							6,346,404											6,346,564						6,346,564
Preferred stock issued for settlement of stock payable						16,929		2											67,714											67,716						67,716
Net income		-		-		-		-		-		-		-			-		-		(2,974,612	)		-			-			(2,974,612	)		(134,849	)		(3,109,461	)
Net income (loss)		-		-		-		-		-		-		-			-		-		(2,974,612	)		-			-			(2,974,612	)		(134,849	)		(3,109,461	)
Ending balance September 30, 2022		8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592		$	1,294	$	53,361,926	$	(54,492,803	)		(300	)	$	(30	)	$	(1,129,383	)	$	1,104,897		$	(24,486	)
Balance		8,698	$	1		370,969	$	37		1,917,973	$	192		12,942,592		$	1,294	$	53,361,926	$	(54,492,803	)		(300	)	$	(30	)	$	(1,129,383	)	$	1,104,897		$	(24,486	)

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

VYSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2023			2022
	2024			2023
	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2023			2022
	2024			2023
Cash flows from operating activities:
Net loss	$	(2374,~~728,174~~718	)	$	(31,~~634~~277,~~831~~076	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Share-based compensation		~~353~~192,~~744~~453			~~658~~138,~~004~~910
Depreciation		4710,~~083~~698			~~161~~16,~~461~~074
Bad debts (recovery)		~~8,766~~-			(36,~~754~~833	)
Amortization of intangible assets		237,~~787~~929			~~258~~7,~~936~~929
Noncash lease expense		~~234,693~~-			~~217~~38,~~958~~701
Amortization of debt discount		-			27,083
Gain on settlement of debt, net		-			(39,770	)
Change in fair value of derivative liabilities		-			(1,760,300	)
Gain on sale of property and equipment		(1,000	)		-
(Gain) loss on settlement of debt, net		(39,770	)		2,250,411
Gain on sale of property and equipment		(213,776	)		-
(Increase) decrease in assets:
Accounts receivable		(1325,~~271~~485	)		34(47,~~399~~218	)
Inventories		90(39,~~458~~465	)		~~(47~~79,~~537~~075	)
Prepaid expenses and other		(544,~~813~~747	)		66(16,~~782~~417	)
Assets of discontinued operations		243,~~849,123~~565			12,~~284~~189,~~702~~604
Increase (decrease) in liabilities:
Accounts payable		~~213~~98,~~129~~946			~~410~~82,~~559~~400
Accrued expenses and interest payable		~~(352~~19,~~420~~451	)		~~181~~(341,~~593~~207	)
Unearned revenue		~~(100~~-	)		(~~34,890~~100	)
Liabilities of discontinued operations		(~~630~~77,~~952~~878	)		(~~466~~492,~~003~~510	)
Net cash used in operating activities		(163,493	)		(395,427	)
Net cash provided by (used in) operating activities		(100,757	)		345,228
Cash flows from investing activities:
Cash flows provided by discontinued operations		~~579~~1,~~483~~000			-
Net cash provided by investing activities		1,000			-
Cash flows from financing activities:
Proceeds from related party advances		~~101~~12,~~716~~379			9229,~~731~~855
Proceeds from issuance of preferred stock		-			85,000
Cash flows provided by (used in) discontinued operations		61,986			(227,604	)
Cash flows provided by (used in) discontinued operations		(387,500	)		227,207
Net cash provided by (used in) financing activities		74,365			(197,749	)
Net cash provided by (used in) financing activities		(285,784	)		404,938
Net increase (decrease) in cash		(25,392	)		147,479
Net increase in cash		130,206			9,511
Cash - beginning of period		50,354			135,599
Cash - beginning of period		135,599			151,175
Less: cash of discontinued operations		(13,194	)		(267,573	)
Less: cash of discontinued operations		(219,854	)		(132,803	)
Cash of continuing operations - end of period	$	11,768		$	15,505
Cash of continuing operations - end of period	$	45,951		$	27,883
Cash paid during the period for:
Interest	$	~~249,226~~49		$	~~287~~4,~~521~~510
Non-cash transactions:
Rotmans operating lease right-of-use asset and related liability
adjusted for lease modification	$	849,534		$	-
Prepaid expenses with preferred stock		-			866,630
Preferred stock issued for settlement of related party payable		-			270,000
Preferred stock issued for settlement of debt and accrued interest		-			893,617
Preferred stock issued for settlement of related party debt and accrued interest		-			6,346,564
Preferred stock issued for stock subscription payable		-			67,716
Preferred stock issued for settlement of vendor payables		-			886,401
Rotmans vendor payables paid directly by related party		-			100,000
Rotmans lease liabilities arising from obtaining right-of-use assets		-			325,471

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

VYSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS

Nature of Business

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

All activities of Rotmans have been included in discontinued operations. Additional disclosure can be found in Note 1516.

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

Basis of Presentation

The condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the condensed consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and do not contain certain information included in the Company’s Annual Report onand Form 10-K for the year ended December 31, ~~2022~~2023. Therefore, the interim condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-K.

The Company has evaluated subsequent events through the date of the filing of its Form 10-Q with the Securities and Exchange Commission. Other than those events disclosed in Note 1617, 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.

Discontinued Operations

In accordance with ASC No. 205-20, Discontinued Operations, for all periods presented, the results of operations and related balance sheet items associated with Rotmans are reported in discontinued operations in the accompanying condensed consolidated financial statements. ~~See~~ See Note 1516 for further details.

Segment Reporting

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

Estimates

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

Fair Value of Financial Instruments

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

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

Valuation inputs are classified in the following hierarchy:

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

Highest priority is given to Level 1 inputs and the lowest priority to Level 3 inputs. Acceptable valuation techniques include the market approach, income approach, and cost approach. In some cases, more than one valuation technique is used. The derivative liabilities were recognized at fair value on a recurring basis through the date of the settlement and March 31, 2024 and are level 3 measurements. There have been no transfers between levels during the three months ended March 31, 2024.

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, Cash Equivalents and Restricted Cash

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

Accounts Receivable, Net

Accounts receivable, net are stated at the amount management expects to collect from outstanding balances. The Company grants credit to Vystar customers without requiring collateral. The amount of accounting loss for which Vystar is at risk in these unsecured accounts receivable is limited to their carrying value. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based upon its assessment of the current status of individual accounts. Balances that are still outstanding after management has performed reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of March 31, 2024 and December 31, 2023, the Company has recorded an allowance for doubtful accounts of $5,450.

Other Receivables

Rotmans terminated its agreement with a supplier in 2021 for consideration of $100,000. As of December 31, 2023, remaining funds due from this termination totaled $33,334 and were received in March 2024. Other receivables at March 31, 2024 consisted of funds due from the sale of miscellaneous equipment with moving out of the showroom facilitity.

Inventories

Inventories include those costs directly attributable to the product before sale. Inventories consist primarily of finished goods of mattresses, RxAir purifier units, foam toppers and pillows and are carried at net realizable value, which is defined as selling price less cost of completion, disposal and transportation. The Company evaluates the need to record write-downs for ~~inventories~~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.~~

Inventories consist of the following:

SCHEDULE OF INVENTORIES

	March 31,			December 31,
	2024			2023

Finished goods	$	589,286		$	559,821

Obsolescence reserve		(506,000	)		(516,000	)

Total inventories	$	83,286		$	43,821

Prepaid Expenses and Other

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

Property and Equipment

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

Expenditures for major renewals and betterments are capitalized, while routine repairs and maintenance are expensed as incurred. When property items are retired or otherwise disposed of, the asset and related reserve accounts are relieved of the cost and accumulated depreciation, respectively, and the resultant gain or loss is reflected in earnings. As of ~~September~~March 3031, ~~2023~~2024, the net balance of property and equipment is $~~108~~87,~~216 with~~021 with accumulated depreciation of $~~234~~255,~~187~~382. As of December 31, ~~2022~~2023, the net balance of property and equipment is $~~140~~97,~~886~~719 with accumulated depreciation of $~~201~~244,~~517~~684.

911

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.

Proprietary technology and tradename intangibles are carried at net realizeable value and are being amortized on a straight-line basis over their estimated useful lives, typically ranging from 5 to 10 years.

Our intangible assets are reviewed for impairment annually or more frequently as warranted by events of changes in circumstances.

Long-Lived Assets

We review our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. We evaluate assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the assets. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value. Assets to be disposed of would be separately presented in the condensed consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the condensed consolidated balance sheet, if material. During the three months ended March 31, 2024 and 2023, we did not recognize any impairment of our long-lived assets.

Convertible Notes Payable

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

Derivatives

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

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

Unearned Revenue

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

Changes to unearned revenue during the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

SCHEDULE OF UNEARNED REVENUE

	2023			2022
	2024			2023
Balance, beginning of the period	$	44,~~479~~379		$	7944,~~368~~479
Customer deposits received		-			~~300~~-
Revenue earned		~~(100~~-	)		(~~34,058~~100	)
Balance, end of the period	$	44,379		$	4544,~~610~~379

Loss Per Share

The Company presents basic and diluted loss per share. ~~For~~As the ~~three~~Company ~~and~~reported ~~nine~~a net loss in the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and dilutive income ~~loss~~ per share were the same. Excluded from the computation of diluted ~~loss~~income per share were options to purchase 2217,~~354~~405 and ~~266~~26,~~000~~ 825 shares of common stock for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively, as their effect would be anti-dilutive. Warrants to purchase 42,000 and 3844,~~483~~767 shares of common stock for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively, were also excluded from the computation of diluted ~~loss~~income per share as their effect would be anti-dilutive. In addition, preferred stock convertible to 25 26,~~665~~407,~~878~~258 and 2324,~~375~~517,~~235~~ 419 shares of common stock for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively, were excluded from the computation of diluted ~~loss~~ income per share as their effect would be anti-dilutive. Both shareholder and Rotman Family contingently convertible notes for the ~~nine~~ three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 were also excluded from the computation of diluted loss per share as no contingencies were met.

Revenue

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

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

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

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods to the customer. We issue refunds to retail, e-commerce and print media customers, upon request, within 30 days of delivery. We estimate the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. For retailers, distributors and wholesalers, we do not offer a right of return or refund and revenue is recognized at the time products are shipped to customers. Our RXAir units carry a one year warranty. In all cases, judgment is required in estimating these reserves. Actual claims for returns could be materially different from the estimates. As of September 30, 2023 and December 31, 2022, reserves for estimated sales returns totaled $29,000 and $415,000, respectively, and are included in the accompanying condensed consolidated balance sheets as accrued expenses.13

WeThe ~~recognize~~transaction ~~revenue~~price ~~when~~of wea ~~satisfy~~contract ais allocated to each distinct performance obligation inand arecognized ~~contract~~as byrevenue ~~transferring~~when ~~control~~or ~~over~~as athe ~~product~~customer receives tothe abenefit ~~customer~~of ~~when~~the ~~product~~ performance obligation. The transaction price is ~~shipped~~determined based on ~~fulfillment~~the byconsideration ~~the~~to ~~Company.~~which ~~The~~we ~~Company~~will ~~considers~~be entitled ~~fulfillment~~to ~~when~~receive itin ~~passes~~exchange ~~all~~for ~~liability~~transferring atgoods to the ~~point~~customer. ofWe ~~shipping through~~issue ~~third~~refunds ~~party~~to ~~carriers.~~retail, ~~Delivery~~e-commerce ~~fees~~and ~~are~~print ~~charged~~media to customers, upon ~~and~~request, ~~are~~within ~~included~~30 indays ~~revenue~~of indelivery. ~~the~~We ~~accompanying~~estimate ~~condensed~~the ~~consolidated statements~~amount of ~~operations~~potential ~~and~~refunds ~~the~~at ~~costs~~each ~~associated~~reporting ~~with~~period ~~these~~using ~~deliveries~~a ~~are~~portfolio ~~included~~approach of historical data, adjusted for changes in ~~revenues~~expected ascustomer ~~third~~experience, ~~party~~including ~~carrier~~seasonality ~~are~~and ~~engaged~~changes in economic factors. For ~~Taxes~~retailers, ~~assessed~~distributors byand awholesalers, ~~governmental~~we ~~authority~~do ~~that~~not ~~are~~offer ~~both~~a ~~imposed~~right onof return or refund and ~~concurrent~~revenue ~~with~~is arecognized ~~specific~~at ~~revenue-producing~~the ~~transaction,~~time ~~that~~ products are shipped ~~collected~~to bycustomers. usIn ~~from~~all ~~a customer~~cases, ~~are~~judgment ~~excluded~~is ~~from~~required ~~revenue.~~in ~~Shipping~~estimating ~~and~~these ~~handling~~reserves. ~~costs~~Actual ~~associated~~claims ~~with~~for ~~outbound~~returns ~~freight~~could ~~after~~be ~~control~~materially ~~over~~different afrom ~~product~~the ~~has~~estimates. ~~transferred~~As toof aMarch ~~customer~~31, ~~are~~2024 ~~accounted~~and December 31, 2023, reserves for asestimated asales ~~fulfillment~~returns ~~cost~~totaled $3,000 and $14,000, respectively, and are included in ~~cost of revenue in~~ the accompanying condensed consolidated ~~statements~~balance ofsheets ~~operations~~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. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenue in the accompanying condensed consolidated statements of operations.

Cost of Revenue

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

Research and Development

Research and development costs are expensed when incurred. Research and development costs include all costs incurred related to the research, development and testing. For the three months ended March 31, 2024 and 2023, Vystar’s research and development costs were not significant.

Advertising Costs

Advertising costs, which include television, radio, newspaper, digital and other media advertising, are expensed upon first showing. Advertising costs were approximately $141,000 and $247,000 for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, 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, 2024 and 2023.

The Company remains subject to income tax examinations from Federal and state taxing jurisdictions for 2020 through 2023.

Concentration of Credit Risk

Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of accounts receivable. Credit concentration risk related to accounts receivable is mitigated as customer credit is checked prior to the sales.

Other Risks and Uncertainties

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

Recent Accounting Pronouncements

On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The new ASU requires public entities to disclose more information about their reportable segments. The new guidance does not change the definition of a segment, the method for determining segments, or the criteria for aggregating operating segments. It requires more frequent disclosures than in the past, including in interim financial statements in addition to annual ones. It also requires that prior comparative financial statements be recast to conform with the new information. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

NOTE 3 - LIQUIDITY AND GOING CONCERN

The Company’s financial statements are prepared using the accrual method of accounting in accordance with U.S. GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. However, the Company has incurred significant losses and experienced negative cash flow since inception. At ~~September~~March 3031, ~~2023~~2024, the Company had cash of $4511,~~951~~768 and a deficit in working capital of approximately $~~5.3~~6 million. Further, at ~~September~~March 3031, ~~2023~~2024, the accumulated deficit amounted to approximately $~~57.2~~61 million. We use working capital to finance our ongoing operations, and since those operations do not ~~currently~~ currently cover all our operating costs, managing working capital is essential to our Company’s future success. Because of this history of losses and financial condition, there is substantial doubt about the Company’s ability to continue as a going concern.

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

11There can be no assurances the Company will be able to achieve projected levels of revenue in 2024 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 2024, 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.

There can be no assurances the Company will be able to achieve projected levels of revenue in 2023 and beyond. If the Company is not able to achieve projected revenue and obtain alternate additional financing of equity or debt, the Company would need to significantly curtail or reorient operations during 2023, which could have a material adverse effect on the ability to achieve the business objectives, and as a result, may require the Company to file bankruptcy or cease operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.15

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

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT, NET

	September 30, 2023			December 31, 2022
	March 31,			December 31,
	2024			2023
Tooling and testing equipment	$	338,572		$	338,572
Furniture, fixtures and equipment		3,831			3,831
Property and equipment, gross		342,403			342,403
Accumulated depreciation		(~~234~~255,~~187~~382	)		(~~201~~244,~~517~~684	)
Property and equipment, net	$	~~108~~87,~~216~~021		$	~~140~~97,~~886~~719

Depreciation expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 was $3210,~~670~~698 and $16,074, respectively.

1216

NOTE 5 - INTANGIBLE ASSETS

Intangible assets consist of the following:

	September 30, 2023			December 31, 2022			Amortization Period (in Years)
							Amortization
	March 31,			December 31,			Period
	2024			2023			(in Years)
Amortized intangible assets:
Patents	$	361,284		$	361,284			6 - 20
Proprietary technology		13,000			13,000			10
Tradename and brand		13,000			13,000			5 - 10
Total		387,284			387,284
Intangible assets, gross		387,284			387,284
Accumulated amortization		(281,630	)		(273,701	)
Accumulated amortization		(265,772	)		(241,985	)
Intangible assets, net		105,654			113,583
Intangible assets, net		121,512			145,299
Indefinite-lived intangible assets:
Trademarks		9,072			9,072
Total intangible assets	$	~~130~~114,~~584~~726		$	~~154~~122,~~371~~655

Amortization expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 was $237,~~787 and $72,687, respectively~~929.

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

	Amount
Remaining in 2023	$	7,929
Remaining in 2024	$	23,787
2024		31,716
2025		24,652
2026		16,032
2027		16,032
Thereafter		25,151
2028		13,232
Total	$	121,512
Thereafter		11,919
Total	$	105,654

NOTE 6 - LEASES (DISCONTINUED OPERATIONS)

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

13With the winding up of operations in 2023, Rotmans terminated its delivery leases and returned the right-of-use assets to the lessor. A settlement liability of $25,000 is owed to a third-party at March 31, 2024 and December 31, 2023. With the decision to forego future subleasing of the Rotmans facility in December 2023, and subsequent departure from the facility in late January 2024, an impairment loss of $5,240,946 was recognized in December 2023 for its right-of use asset. Rotmans was not formally relieved of its lease obligations totaling approximately $4,436,000 as of March 31, 2024.

~~The table below presents the lease costs for the three and nine months ended September 30, 2023 and 2022:~~17

The table below presents the lease costs for the three months ended March 31, 2024 and 2023:

	2023		2022		2023		2022
	2024		2023
	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2023		2022		2023		2022
	2024		2023
Operating lease cost	$	~~151,995~~-	$	~~289~~165,~~824~~186	$	~~458,245~~	$	~~865,628~~
Finance lease cost:
Amortization of right-of-use assets		-		~~30,276~~-		-		~~114,450~~
Interest on lease liabilities		-		~~8,342~~-		-		~~22,439~~
Total lease cost	$	~~151,995~~-	$	~~328~~165,~~442~~186	$	~~458,245~~	$	~~1,002,517~~

~~During~~Rotmans ~~the~~leases ~~nine~~generally ~~months~~do ~~ended~~not ~~September~~provide ~~30,~~an ~~2023~~implicit rate, and ~~2022,~~therefore ~~the~~we ~~Company~~use ~~recognized~~our ~~sublease~~incremental ~~income~~borrowing ofrate ~~approximately~~as ~~$134,000~~the ~~and~~discount ~~$102,000,~~rate ~~respectively,~~when measuring ~~which~~operating inlease ~~included~~liabilities. inThe ~~discontinued~~incremental ~~operations~~borrowing inrate represents an estimate of the ~~accompanying~~interest ~~condensed~~rate ~~consolidated~~we ~~statements~~would ofincur ~~operations.~~at ~~Approximate~~lease ~~future~~commencement to ~~minimum~~borrow ~~rental~~an ~~payments~~amount equal to bethe ~~received~~lease ~~are~~payments ~~$93,000~~on ~~for~~a collateralized basis over the ~~remainder~~term of ~~2023,~~the ~~$372,000~~lease. ~~for~~We ~~2024~~used incremental borrowing rates –as ~~2027~~of ~~and~~the ~~$313,000~~implementation date for ~~2028~~operating leases that commenced prior to that date.

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						Nine Months Ended
	2024			2023
	September 30,						September 30,
	Three Months Ended
	2023			2022			2023			2022
	March 31,
Cash paid for amounts included in the measurement of lease liabilities:
	2024			2023
Operating cash flows used for operating leases	$	228,415		$	264,539		$	691,839		$	790,159
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows used for financing leases		-			35,572			-			130,732
Operating cash flows used for operating leases	$	-		$	245,924
Assets obtained in exchange for operating lease liabilities		-			-			-			320,732
Financing cash flows used for financing leases		-			-
Assets obtained in exchange for finance lease liabilities		-			-			-			4,739
Assets obtained in exchange for operating lease liabilities		-			-
Weighted average remaining lease term:
Assets obtained in exchange for finance lease liabilities		-			-
Operating leases		5.3 years			8.0 years			5.3 years			8.0 years
Weighted average remaining lease term:
Finance leases		2.7 years			3.7 years			2.7 years			3.7 years
Operating leases		4.5 years			7.8 years
Weighted average discount rate:
Finance leases		-			3.2 years
Operating leases		7.21	%		5.61	%		7.21	%		5.61	%
Weighted average discount rate:
Finance leases		5.16	%		5.16	%		5.16	%		5.16	%
Operating leases		7.15	%		5.60	%
Finance leases		-			5.16	%

14The future minimum lease payments required under operating and financing lease obligations as of March 31, 2024 having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows:

The future minimum lease payments required under operating and financing lease obligations as of September 30, 2023 having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows:

	Operating Leases			~~Finance Leases~~			~~Total~~
Remainder of 2023	$	401,172		$	139,080		$	540,252
Remainder of 2024	$	1,228,372
2024		1,086,252			139,080			1,225,332
2025		1,000,980
2025		1,000,980			139,080			1,140,060
2026		1,000,980
2026		1,000,980			68,395			1,069,375
2027		1,000,980
2027		1,000,980			-			1,000,980
2028		1,000,980
2028		1,000,980			-			1,000,980
Total undiscounted lease liabilities		5,232,292
Total undiscounted lease liabilities		5,491,344			485,635			5,976,979
Less: imputed interest		(796,287	)
Less: imputed interest		(872,984	)		(42,108	)		(915,092	)
Net lease liabilities	$	4,436,005
Net lease liabilities	$	4,618,360		$	443,527		$	5,061,887

~~As of September 30, 2023, Vystar and Rotmans do not have additional operating and finance leases that have not yet commenced.~~18

As of March 31, 2024, the Company does not have additional operating and finance leases that have not yet commenced.

NOTE 7 - NOTES PAYABLE AND LOAN FACILITY

Discontinued Operations

Advances/Receivable

On May 29, 2020, Rotmans entered into a sale promotion consulting agreement with a national furniture sales event company. Under the agreement, Rotmans appointed the third-party as its exclusive agent to assist with a high-impact sale. Before the sale, the agent advanced the Company funds of approximately $2,300,000 to pay off a bank line of credit and certain other vendors. The agent was reimbursed for the advance from the proceeds of the sale. The initial sales agreement with the agent ended in May 2021. The agreement has been amended numerous times and ended in December 2022. At the conclusion of the agreement, the remaining inventories were transferred to the agent. As of December 31, 2022, a receivable is due from the agent for the inventories in the amount $1,853,972 and is included in assets of discontinued operations. No amounts are due from the agent at September 30, 2023.

Continuing Operations

Shareholder, Convertible and Contingently Convertible Notes Payable

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

	September 30, 2023			December 31, 2022
	March 31,			December 31,
	2024			2023
Shareholder, convertible and contingently convertible notes	$	309,500		$	309,500
Accrued interest		4053,~~107~~162			2646,~~763~~972
Total shareholder notes and accrued interest		~~349~~362,~~607~~662			~~336~~356,~~263~~472
Less: current maturities		(~~349~~362,~~607~~662	)		(~~336~~356,~~263~~472	)
Total long-term debt	$	-		$	-

Shareholder Convertible Notes Payable

During the year ended December 31, ~~2021~~2018, the ~~Company~~Vystar issued ~~certain~~shareholder contingently convertible ~~promissory~~ notes inpayable, ~~varying~~some ~~amounts~~of towhich ~~existing~~were for contract ~~shareholders~~work ~~which~~performed ~~totaled~~by other entities in lieu of compensation and expense reimbursement, totaling approximately $~~290~~338,000. The notes are (i) unsecured, ~~and~~(ii) bear interest at an annual rate of five percent (5%) from date of issuance~~. The~~, ~~face~~and ~~amount~~(iii) ofare ~~the~~convertible ~~notes~~at ~~represents~~Vystar’s option ~~the~~post ~~amount~~April ~~due~~19, at2018. ~~maturity~~The ~~along~~notes ~~with~~mature ~~the~~one ~~accrued~~year ~~interest.~~from Inissuance ~~the~~but ~~event~~may ~~that~~be ~~the~~extended ~~spin-off~~one ~~of RxAir~~(1) ~~does~~additional ~~not~~year ~~occur~~by ~~within~~Vystar. ~~2023,~~If converted, the ~~Company~~notes ~~will~~plus ~~convert~~accrued ~~these~~interest ~~notes~~are convertible into shares of Vystar’s common stock at athe ~~conversion~~prior ~~price~~twenty of(20) ~~$1.60.~~day Ifaverage ~~the spin-off~~closing ~~does~~price ~~occur,~~with ~~these~~a ~~notes~~50% ~~will~~discount. ~~convert~~The ~~into~~notes ~~RxAir~~matured ~~common~~in ~~stock~~January ~~with~~2020 ~~two~~and ~~conversion~~continue ~~prices~~to ofaccrue ~~$0.15~~interest ~~and~~at ~~$2,~~an ~~which~~annual ~~equates~~rate toof aeight ~~blended~~percent ~~conversion~~(8%) ~~price~~in ofarrears $0until settlement.~~18.~~ All of these notes ~~are~~except ~~outstanding~~one aswere ofsettled ~~September~~in ~~30,~~April ~~2023 and December 31,~~ 2022. AtThe ~~the~~remaining ~~issuance~~note ~~date~~ of ~~these notes~~$19, it500 ~~was~~is ~~determined~~in ~~they~~default ~~contain~~at March ~~a beneficial conversion feature amounting to approximately $90~~31,~~000.~~ As2024 ~~these~~and ~~notes~~December ~~are contingently convertible~~31, ~~the~~ ~~beneficial conversion feature will not be recorded on the consolidated financial statements until the actual conversion occurs~~2023.

~~One~~During ~~note~~the inyear ~~the~~ended ~~amount~~December of31, ~~$19~~2021,~~500~~ ~~remains from~~ the Company’s ~~issuance~~issued ofcertain ~~shareholder~~ contingently convertible promissory notes ~~payable~~ in varying amounts to existing ~~2018~~shareholders ~~and~~which istotaled ~~(i)~~$290,000. The notes are unsecured, ~~(ii)~~and ~~bore~~bear interest at an annual rate of five percent (5%) from date of issuance,. The ~~and~~face ~~(iii)~~amount isof ~~convertible at~~ the ~~Company’s~~notes ~~option~~represents ~~post~~the ~~April~~amount ~~19,~~due ~~2018.~~at ~~The note~~maturity ~~matured~~along ~~one~~with ~~year~~the ~~from~~accrued ~~issuance~~interest. ~~and~~In ~~was~~the ~~extended~~event ~~one~~that ~~(1)~~the ~~additional~~spin-off ~~year~~of RxAir bydoes ~~the~~not ~~Company.~~occur Ifwithin ~~converted~~2024, the ~~note~~Company ~~plus accrued~~will ~~interest~~convert ~~are~~these ~~convertible~~notes into ~~shares of the Company’s~~ common stock at ~~the~~a ~~prior~~conversion ~~twenty~~price ~~(20)~~of ~~day~~$1.60. ~~average~~If ~~closing~~the ~~price~~spin-off ~~with~~does aoccur, ~~50% discount.~~these ~~The~~notes ~~outstanding~~will ~~balance~~convert asinto ofRxAir ~~September~~common ~~30,~~stock ~~2023~~with ~~and~~two ~~December~~conversion ~~31,~~prices ~~2022~~of is $~~27,881~~0.15 and $262,~~513,~~ ~~respectively.~~which equates to a blended conversion ~~The~~price ~~note~~of ~~matured~~$0.18. inAll ~~January~~of ~~2020~~these ~~and~~notes ~~continues~~were tooutstanding ~~accrue~~as ~~interest~~of ~~until~~March ~~settlement~~31, 2024. ~~The~~At ~~note~~the isissuance indate ~~default~~of ~~and~~these ~~bears~~notes, ~~interest~~it atwas andetermined they ~~annual~~contain ~~rate~~a ofbeneficial ~~eight~~conversion ~~percent~~feature ~~(8%) in~~amounting ~~arrears~~to approximately $90,000. ~~The~~As ~~value~~these ofnotes ~~the~~are ~~embedded~~contingently convertible, the beneficial conversion ~~features~~feature onwill ~~the~~not ~~one~~be ~~remaining~~recorded ~~note~~on ~~was~~the decondensed ~~minimis~~consolidated atfinancial ~~September~~statements ~~30,~~until ~~2023~~the ~~and December~~actual ~~31,~~conversion ~~2022~~occurs.

Related Party Debt

The following table summarizes related party debt:

	September 30,			December 31,
	March 31,			December 31,
	2023			2022
	2024			2023
Rotman Family convertible notes	$	5,000		$	5,000
Rotman Family convertible note	$	5,000		$	5,000
Rotman Family nonconvertible notes		140,000			140,000
Rotman Family nonconvertible note		140,000			140,000
Accrued interest		3033,~~011~~722			2431,~~552~~872
Due to related party		~~175~~178,~~011~~722			~~169~~176,~~552~~872
Less: current maturities		(~~175~~178,~~011~~722	)		(~~169~~176,~~552~~872	)
Due to related party, noncurrent	$	-		$	-

Rotman Family Convertible Note

On August 17, 2021, the Company issued a contingently convertible promissory note totaling $5,000 to Jamie Rotman. The note is unsecured and bears interest at an annual rate of five percent (5%) from date of issuance. The face amount of the note represents the amount due at maturity along with the accrued interest. In the event that the spin-off of RxAir does not occur within ~~one year~~2024, the Company will ~~convert~~ convert the note into common stock at a conversion price of $1.60. If the spin-off does occur, the note will convert into RxAir common ~~stock~~ stock with two conversion prices of $0.15 and $2, which equates to a blended conversion price of $0.18. At the issuance date of this note, it was determined to contain a beneficial conversion feature amounting to approximately $2,000. As this note is contingently convertible, the beneficial conversion feature will not be recorded on the condensed consolidated financial statements until the actual conversion occurs. The balance of the note payable including accrued interest to Jamie Rotman is approximately $56,000 at ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~ 2023.

The following table summarizes the Rotman Family Convertible Note:

				March 31,		December 31,
				Carrying Amount
	Issue Date	Principal Amount		September 30, 2023		December 31, 2022
				March 31,		December 31,
Jamie Rotman 5.00% note due August 2023	08/17/21	$	5,000	$	5,553	$	5,344
	Issue Date	Principal Amount		2024		2023
Jamie Rotman 5% note due August 2024	08/17/21	$	5,000	$	5,764	$	5,644

Rotman Family Nonconvertible Note

In connection with the acquisition of 58% of Rotmans, Bernard Rotman was issued a related party note payable in the amount of $140,000. The note bears interest at an annual rate of five percent (5%) and matures four years from issuance. ~~Monthly~~Payments ~~payments~~ of $2,917 toper ~~Bernard Rotman~~month were scheduled to begin six months from issuance until maturity in December 2023. The balance of ~~Bernard~~the ~~Rotman’s~~ note payable including accrued interest to Bernard Rotman is approximately $~~169~~173,000 and $~~164~~171,000 at ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, respectively~~, as no payments have been made to date~~.

The following table summarizes the Rotman Family Nonconvertible Note:

				March 31,		December 31,
				Carrying Amount
	Issue Date	Principal Amount		September 30, 2023		December 31, 2022
				March 31,		December 31,
Bernard Rotman 5.00% note due July 2023	07/18/19	$	140,000	$	169,458	$	164,208
	Issue Date	Principal Amount		2024		2023
Bernard Rotman 5% note due July 2023	07/18/19	$	140,000	$	172,958	$	171,208
Carrying amount	07/18/19	$	140,000	$	172,958	$	171,208

~~Discontinued Operations Note~~20

~~In April~~NOTE ~~2022,~~8 ~~Blue~~- ~~Oar~~DERIVATIVE Consulting, Inc. (“Blue Oar”), an entity wholly owned by Gregory Rotman, advanced Rotmans $500,000 and paid bills totaling $100,000 on Rotmans behalf. Rotmans formalized the advances and issued a promissory note to Blue Oar. The note bore interest at an annual rate of six percent (6%) and required weekly payments of $12,500 until the note and interest is paid in full. The Company also granted Blue Oar a security interest in its inventory. The final principal payment on the note balance was made in April 2023. As of September 30, 2023, unpaid accrued interest on the note totaled $22,518. As of December 31, 2022, the balance of the note payable including accrued interest was approximately $407,000 and is included in liabilities from discontinued operations.LIABILITIES

~~NOTE~~As of 8March 31, 2024 and December 31, 2023, the Company did not have a derivative liability balance on the condensed consolidated balance sheet as the liability was considered de minimis. The Company analyzed the conversion features and warrants of the various note agreements for derivative accounting consideration under ASC 815-15 ~~STOCKHOLDERS~~“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 ~~DEFICIT~~own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion feature of the notes and recorded a derivative liability.

The embedded derivatives for the notes are carried on the Company’s condensed consolidated balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the condensed consolidated statement of operations and the associated fair value carrying amount on the consolidated balance sheet is adjusted by the change.

NOTE 9 - STOCKHOLDERS’ DEFICIT

Cumulative Convertible Preferred Stock

Series A Preferred Stock

On May 2, 2013, the Company began a private placement offering to sell up to 200,000 shares of the Company’s 10% Series A Cumulative Convertible Preferred Stock. Under the terms of the offering, the Company offered to sell up to 200,000 shares of preferred stock at $10 per share for a value of $2,000,000. The preferred stock was convertible at a conversion price of $7.50 per common share at the option of the holder after a nine-month holding period. The conversion price was lowered to $5.00 per common share for those holders who invested an additional $25,000 or more in Vystar’s common stock in the aforementioned September 2014 Private Placement. The preferred shares have full voting rights as if converted and have a fully participating liquidation preference. In the event of a liquidation, dissolution or winding up of the Company, the holders of Series A Preferred Stock shall be entitled to receive an amount equal to the dividends accumulated and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, plus a sum equal to $10 per share. As of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the liquidation preference totals approximately $~~177~~181,000 and $~~170~~179,000, respectively.

17As of March 31, 2024, the 8,698 shares of outstanding preferred stock had undeclared dividends of approximately $94,000 and could be converted into 35,417 shares of common stock, at the option of the holder.

As of ~~September~~December 3031, 2023, the 8,698 shares of outstanding preferred stock had undeclared dividends of approximately $9092,000 and could be converted into 34,~~564~~993 shares of common stock, at the option of the holder.

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

Series B Preferred Stock

On April 11, 2022, the Company amended its Articles of Incorporation to add the terms of a 10% Series B Cumulative Convertible Preferred Stock. Under the amendment, the number of shares authorized are 2,500,000. The preferred stock accumulates a 10% per annum dividend and is convertible into 1,000 shares of common stock at the option of the holder after a six-month holding period. The holders of Series B preferred stock have full voting rights as if converted and have a fully participating liquidation preference. In the event of a liquidation, dissolution or winding up of the Company, the holders of Series B Preferred Stock shall be entitled to receive an amount equal to the dividends accumulated and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, plus a sum equal to $7 per share. As of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the liquidation preference totals approximately $2,~~904~~749,000 and $2,~~710~~970,000, respectively.

AsDuring ofthe ~~September~~three 30months ended March 31, ~~2023~~2024, ~~the 370~~34,~~969~~838 shares of outstanding preferred stock ~~had~~were ~~undeclared dividends of approximately $307,000 and could be~~ converted into 4348,~~148,755~~380 shares of common stock~~, at the option of the holder~~.

As of December 31, 2022, the 370,969 shares of outstanding preferred stock had undeclared dividends of approximately $108,000 and could be converted into 3,864,261 shares of common stock, at the option of the holder.21

As of March 31, 2024, the 336,131 shares of outstanding preferred stock had undeclared dividends of approximately $396,000 and could be converted into 3,927,668 shares of common stock, at the option of the holder.

As of December 31, 2023, the 370,969 shares of outstanding preferred stock had undeclared dividends of approximately $373,000, and could be converted into 4,242,259 shares of common stock, at the option of the holder.

Series C Preferred Stock

On July 8, 2022, the Company amended its Articles of Incorporation to add the terms of a 10% Series C Cumulative Convertible Preferred Stock. Under the amendment, the number of shares authorized are 2,500,000. The preferred stock accumulates a 10% per annum dividend and is convertible into 1,000 shares of common stock at the option of the holder after a six-month holding period. The holders of Series C preferred stock have full voting rights as if converted and have a fully participating liquidation preference. In the event of a liquidation, dissolution or winding up of the Company, the holders of Series C Preferred Stock shall be entitled to receive an amount equal to the dividends accumulated and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, plus a sum equal to $2.61 per share. As of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the liquidation preference totals approximately $5,~~607~~858,000 and $5,~~233~~733,000, respectively.

As of ~~September~~March 3031, ~~2023~~2024, the 1,917,973 shares of outstanding preferred stock had undeclared dividends of approximately $~~601~~852,000 and could be be converted into 2122,~~482~~443,~~559~~173 shares of common stock, at the option of the holder.

As of December 31, ~~2022~~2023, the 1,917,973 shares of outstanding preferred stock had undeclared dividends of approximately $~~325~~727,000 and could be converted into 2021,~~425~~965,~~550~~994 shares of common stock, at the option of the holder.

Common Stock and Warrants

Included in stock subscription payable at ~~September~~March ~~30, 2023 and December~~ 31, ~~2022~~2024, is $270,000 received under common stock subscription agreements for 180,000 shares during the year ended December 31, 2020.

Stock Subscription Payable

At ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the Company recorded $2,~~008~~581,~~952~~379 and $12,~~655~~388,~~208~~926, respectively, of stock subscription payable ~~related~~ related to common stock to be issued. The following summarizes the activity of stock subscription payable during the period ended ~~September 30~~March 31, ~~2023~~ 2024 and December 31, ~~2022~~2023:

SCHEDULE OF ~~ACTIVITY OF~~ STOCK SUBSCRIPTION PAYABLE ACTIVITY

	Amount			Shares
Balance, January 1, 2022	$	1,247,549			605,058
Balance, January 1, 2023	$	1,655,208			2,131,876
Additions		~~659~~733,~~647~~718			1131,~~552~~198,~~386~~696
Issuances		~~(251,988~~-	)		~~(25,568~~-	)
Balance, December 31, 2022		1,655,208			2,131,876
Balance, December 31, 2023		2,388,926			133,330,572
Additions		~~353~~192,~~744~~453			~~124~~4,~~658~~201,~~513~~378
Balance, September 30, 2023	$	2,008,952			126,790,389
Issuances		-			-
Balance, March 31, 2024	$	2,581,379			137,531,950

~~NOTE 9 – REVENUES~~22

~~The~~NOTE ~~following~~10 ~~table~~- ~~presents our revenues disaggregated by each major product category and service for the three and nine months ended September 30, 2023 and 2022:~~REVENUES

~~SCHEDULE~~The following OFtable ~~REVENUES~~presents our revenues disaggregated by each major product category and service for the three months ended March 31, 2024 and 2023:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
			% of				% of				% of				% of
	Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales		Net Sales
Air Purification Units	$	35,972		59.6	$	25,617		69.9	$	459,837		90.8	$	167,848		81.7
Mattresses and Toppers		16,405		27.2		5,726		15.6		36,311		7.2		23,366		11.4
Other		7,973		13.2		5,314		14.5		10,235		2.0		14,286		6.9
Net sales	$	60,350		100.0	$	36,657		100.0	$	506,383		100.0	$	205,500		100.0

NOTE 10 - SHARE-BASED COMPENSATION

			% of				% of
	Three Months Ended March 31,
	2024				2023
			% of				% of
	Net Sales		Net Sales		Net Sales		Net Sales
Air Purification Units	$	26,930		71.6	$	403,696		98.5
Mattresses and Toppers		8,188		21.8		6,011		1.5
Royalties and other		2,489		6.6		200		0.0
Net sales	$	37,607		100.0	$	409,907		100.0

NOTE 11 - 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 $~~353~~192,~~744~~453 and $~~658~~138,~~004~~910 of stock-based compensation for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, 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 $12,~~738~~311,~~952~~379 and $12,~~385~~118,~~208~~926 at ~~September 30~~March 31, ~~2023~~2024 and December 31, ~~2022~~2023, respectively.

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

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

InFor ~~total for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2022,~~2024 ~~the~~and ~~Company~~2023, ~~recorded~~there ~~$11,370~~were ofno share-based compensation expense related to employee and Board Members’ stock options. ~~The Company did not recognize any such share-based compensation for the nine months ended September 30, 2023.~~ There is no unrecognized compensation expense as of ~~September~~March 3031, ~~2023~~2024 for non-vested share-based awards to be recognized ~~over~~ over a period of less than one year.

Options

During 2004, the Board of Directors of ~~the~~Vystar ~~Company~~ adopted a stock option plan (the “Plan”) and authorized up to 40,000 shares to be be issued under the Plan. In April 2009, ~~the Company~~Vystar’s Board of Directors authorized an increase in the number of shares to be issued under the Plan to 100,000 shares and to include the independent Board Members in the Plan in lieu of continuing the previous practice of granting warrants each quarter to independent Board Members for services. At ~~September~~March 3031, ~~2023~~2024, there are 22,518 shares of common stock available for issuance under the Plan. In 2014, the Board of Directors adopted an additional stock option plan which provides for an additional 50,000 shares, which are all available as of ~~September~~March 3031, ~~2023~~2024. In 2019, the Board of Directors adopted an additional stock option plan which ~~with~~ provides for an additional 500,000 shares, which are all available as of ~~September~~March 3031, ~~2023~~2024. 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~~Vystar’s common stock on 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 nine months ended September 30, 2023 and 2022, respectively. Forfeitures are recognized as they occur.~~23

~~The~~There ~~following~~were ~~table~~no ~~summarizes~~options ~~all~~granted ~~stock~~during ~~option~~the ~~activity~~three ofmonths ~~the~~ended ~~Company~~March ~~for~~31, ~~the~~2024 ~~nine~~and ~~months~~2023, ~~ended~~respectively. ~~September~~Forfeitures ~~30,~~are ~~2023:~~recognized as they occur.

The following table summarizes all stock option activity of the Company for the three months ended March 31, 2024:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
						Weighted
Outstanding, December 31, 2022		265,267		$	19.54		0.51
				Weighted		Average
				Average		Remaining
	Number			Exercise		Contractual
	of Shares			Price		Life (Years)
Outstanding, December 31, 2023		42,000		$	7.17		2.15
Granted		-			-		-
Exercised		-			-		-
Forfeited		~~(223,267~~-	)	$	~~21.87~~-		-
Outstanding, September 30, 2023		42,000		$	7.17		0.78
Outstanding, March 31, 2024		42,000		$	7.17		1.90
Exercisable, September 30, 2023		42,000		$	7.17		0.78
Exercisable, March 31, 2024		42,000		$	7.17		1.90

As of ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, the aggregate intrinsic value of the Company’s outstanding options was minimal. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

Warrants

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

2024

The following table represents the Company’s warrant activity for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024:

	Number of Shares			Weighted Average Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
								Weighted
Outstanding, December 31, 2022		37,266			-	$	7.57		1.31
								Average
				Weighted		Weighted		Remaining
	Number			Average		Average		Contractual
	of Shares			Fair Value		Exercise Price		Life (Years)
Outstanding, December 31, 2023		21,520			-	$	6.57		1.10
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited		-			-		-		-
Expired		(144,~~912~~115	)		-	$	265.0981		-
Outstanding, September 30, 2023		22,354			-	$	6.49		1.31
Outstanding, March 31, 2024		17,405			-	$	7.01		1.08
Exercisable, September 30, 2023		22,354			-	$	6.49		1.31
Exercisable, March 31, 2024		17,405			-	$	7.01		1.08

NOTE 1112 - RELATED PARTY TRANSACTIONS

Officers and Directors

~~Per~~Jamie ~~Steven~~ Rotman’s Employment agreement dated July 22, 2019, as amended, he is to be paid $125,000 per year in cash, $10,417 per month in shares based on a 20-day average price at a 50% discount to market, $5,000 per month in cash for expenses as well as access to a Company provided vehicle and health and life insurance. During the nine months ended September 30, 2023, the Company expensed approximately $306,000 related to this employment agreement. As of September 30, 2023, the Company had a stock subscription payable balance of $779,877, or approximately 57,583,000 shares to be issued in the future and $213,155 of reimbursable expenses payable and $116,403 of unpaid salary related to this party.

~~The~~Jamie ~~Board~~Rotman ofwas ~~Directors~~appointed ~~authorized~~as ~~their~~President ~~board~~of ~~fees~~the ~~for~~Company ~~2021~~effective beDecember ~~paid~~21, in2023. ~~common~~She ~~stock~~is the daughter of the Company’s former CEO, Steven Rotman. ~~Included~~On inJuly ~~stock~~22, ~~subscription~~2024, the Company entered into an Employment Agreement (the “Employment Agreement”) with Ms. Jamie Rotman, under which Ms. Rotman receives annual compensation equal to $180,000 payable in Series C Preferred Stock or common stock, either at ~~September~~Ms. 30Rotman’s discretion, ~~2023~~discounted 50% over the then market price (and ~~December~~payable ~~31,~~in ~~2022~~cash isat ~~100~~Ms. Rotman’s discretion),~~000~~ ~~shares~~plus a ~~valued~~signing atbonus of $~~291~~25,000, payable in shares of ~~which~~Series 20C Preferred Stock,~~000~~ ~~shares~~vesting ~~valued~~over at2024. ~~$58~~The Employment Agreement was made retroactive to January 1,~~200~~ is2024. ~~included~~The Employment Agreement also provides for a 24-month severance payment upon a termination without cause (as defined) inand ~~Steven~~a ~~Rotman’s~~24 ~~balance~~month ~~above~~change in control severance.

During the three months ended March 31, 2024, the Company expensed approximately $128,000 related to this employment agreement. As of March 31, 2024, the Company had a stock subscription payable balance of $128,000 or approximately 2,576,000 shares of common stock.

Previously, Jamie Rotman provided bookkeeping and management services to the Company through July 2019 through her entity, Designcenters.com (“Design”). In exchange for such services, the Company had entered into a consulting agreement with the related party entity. As of March 31, 2024, the Company had a stock subscription payable balance of $42,000, for approximately 8,500 shares related to this party for services incurred and expensed in 2019.

Blue Oar Consulting, Inc.

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

Per the consulting agreement, Blue Oar is to be paid $15,000 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 nine months ended September 30, 2023, the Company expensed approximately $328,000 related to the consulting agreement. As of September 30, 2023, the Company had a stock subscription payable balance of $822,854, or approximately 69,045,000 shares and $180,000 of consulting expenses in accounts payable.25

Per the consulting agreement, Blue Oar is to be paid $15,000 per month in cash for expenses, and $12,500 per month to be paid in shares based on a 20-day average at a 50% discount to market. During the three months ended March 31, 2024, the Company expensed approximately $110,000 related to the consulting agreement. As of March 31, 2024, the Company had a stock subscription payable balance of $1,095,000, or approximately 74,238,000 shares. In addition, the Company has a liability of $270,000 for consulting expenses in accounts payable.

Bryan Stone

In May of 2019, the Company acquired the assets of Fluid Energy Conversion Inc. (“FEC”). FEC is owned by Dr. Bryan Stone, one of the Company’s directors. The assets consist of a patent on the Hughes Reactor, which has the ability to control, enhance and focus energy in flowing liquids and gases.

In addition, Dr. Stone receives a $25 per unit commission for RxAir units sold to a specific customer. During the three months ended March 31, 2024, commissions of $1,187 were due to Dr. Stone and included in accrued expenses in the condensed consolidated balance sheets. There were no commissions earned in the three months ended March 31, 2023.

Former Officer and Director

Steven Rotman

As of March 31, 2024, the Company had a stock subscription payable balance of $952,593, or approximately 60,556,000 shares to be issued in the future and $153,155 of reimbursable expenses payable and $81,482 of unpaid salary related to this party.

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

Related Party Advances

AsDuring ofthe ~~September~~three ~~30,~~months ~~2023,~~ended ~~Gregory~~March ~~Rotman~~31, ~~and~~2024, Steven Rotman advanced ~~the~~Vystar ~~Company~~funds totaling $2,179 and advanced Rotmans funds totaling $~~313~~61,~~031~~986. As of March 31, 2024, $77,460 and $5561,~~226~~986 is due Steve Rotman from Vystar and Rotmans, respectively. The advances are due on demand as repayment terms have not yet been finalized.

~~Designcenters.com~~NOTE 13 - COMMITMENTS

This entity is owned by Jamie Rotman, who is the daughter of the Company’s CEO, Steven Rotman. Designcenters.com (“Design”) provided bookkeeping and management services to the Company through July 2019. In exchange for such services, the Company had entered into a consulting agreement with the related party entity. As of September 30, 2023, the Company had a stock subscription payable balance of $42,000, for approximately 8,500 shares related to this party for services incurred and expensed in 2019.

NOTE 12 - 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~~Jamie Rotman. See compensation terms in Note 1112.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, the Company entered into various service agreements with consultants for financial reporting, advisory, and compliance services.

Litigation

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

EMA Financial

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

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

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

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

On EMA seeks summary judgment on its breach of contract and attorneys’ fees claims, specifically seeking damages in the amount of $1,820,000 with 24% interest premised on the argument it was entitled to effectuate a January 15 and February 5, 2019, notices of conversions. ~~EMA~~ EMA further seeks to dismiss Vystar’s affirmative defenses and counterclaims. Conversely, Vystar filed its motion for summary judgment seeking an order to dismiss the EMA complaint on the grounds: (i) the underlying note was satisfied on December 11, 2018; and (ii) EMA, through multiple breaches of the note, over-converted the note by 36,575,555 shares equating to a request of damages against EMA and in favor of Vystar for $4,802,000, with interest accruing at 24%, and attorneys’ fees. The briefing by the parties was fully submitted on July 29, 2022.

On January 6, 2023, the Court issued a series of preliminary rulings based upon the parties’ respective summary judgment motions. Those rulings narrowed the outstanding issues (and claims) to only the parties’ breach of contract claim and counterclaim (and affirmative defenses) regarding the conversion process. Of particular importance, the Court found EMA breached the note by failing to effectuate the conversions in the manner outlined by the controlling note. The Court further found the principal balance at issue was $80,000, interest accrued from the date set in the note and default interest, to the extent applicable, was to accrue at the default rate from September 2018, forward. The Court left undecided whether EMA’s breach of the note was material, whether affirmative defenses as previously raised by the parties were applicable to each parties’ contractual claim, and a damages analysis associated with the same. The Court then requested a supplemental briefing as to the issues of materiality, liability and damages. The issues were fully briefed and submitted on February 24 and March 15, 2023.

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

~~NOTE~~On October 1327, -2023, ~~MAJOR~~the ~~CUSTOMERS~~Court ~~AND~~held ~~VENDORS~~oral argument on the issues addressed in the supplemental briefing. On November 27, 2023, the Court issued its order resolving the case in Vystar’s favor. The Court held while EMA breached the terms of the underlying promissory note by virtue of the manner of its conversions, such breach was not material. The Court thereafter held the balance of the note was paid in full by Vystar. Based upon the decision in favor of Vystar, the Court granted Vystar’s request for legal fees, and requested a briefing on the same. Vystar subsequently submitted a motion for legal and expert fees in the amount of approximately $638,000 supported by the relevant paperwork. The parties await the Court’s decision.

On December 24, 2023, EMA filed a motion for reconsideration, arguing the Court failed to properly read the underlying note that, in EMA’s belief, allowed it to effectuate the two post default conversions at issue in the case. After the matter was fully briefed by the parties, on May 16, 2024, the Court held oral argument. On the same date after argument the Court granted EMA the procedural right for reconsideration, and thereafter denied the substantive portion of its motion. The November 27, 2023, decision stands.

On December 27, 2023, EMA filed a notice of appeal with the United States Court of Appeals for the Second Circuit. The appeal targets each section of the prior decisions that fell against EMA. Vystar has until June 14, 2024, to file its notice of appeal with the same appellate court. The appeal, if filed, will target the relevant and material decisions issued by the Court against Vystar.

On June 13, 2024, Vystar has timely filed its notice of cross-appeal.

On August 5, 2024, the District Court denied, without prejudice to renew, the motion for attorneys’ fees, ruling that such is premature based upon the pending appeal and cross-appeal.

On September 20, 2024, EMA filed its submissions, and Vystar thereafter has requested ninety-one days to file its opposition and cross-appeal. Thereafter the parties will submit final submissions for the appellate court to consider.

NOTE 14 - MAJOR CUSTOMERS AND VENDORS

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

During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, the Company made approximately 2159% of its sales to one customer. Included in accounts ~~payable~~receivable is $114,~~429~~177 at ~~September~~March 3031, ~~2023~~2024 ~~due~~from to the ~~customer~~major ~~for returned merchandise~~customer.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, ~~Rotmans~~the Company made approximately 1427% of its ~~purchases~~sales ~~from~~to one ~~major vendor~~customer. ~~Rotmans~~Included ~~owed~~in ~~its~~accounts ~~major~~receivable ~~vendor~~is ~~approximately~~ $7216,~~000~~184 at ~~September~~March 3031, ~~2022~~2023 from the major customer.

2328

NOTE 1415 - INCOME TAXES

The provision (benefit) for income taxes for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 assumes a 21% effective tax rate for federal income taxes. A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:

SCHEDULE OF ~~PROVISION~~FEDERAL ~~FOR~~STATUTORY AND THE EFFECTIVE INCOME TAX RATE PERCENTAGE OF INCOME BEFORE INCOME TAXES

	2023			2022
	Three Months Ended
	Nine Months Ended
	March 31,
	September 30,
	2024			2023
	2023			2022
Federal statutory income tax rate		(21.0	%)		(21.0	%)
Change in valuation allowance on net operating loss carryforwards		21.0			21.0
Effective income tax rate		0.0	%		0.0	%

Deferred tax assets as of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023 are as follows:

SCHEDULE OF DEFERRED TAX ASSETS

	2023			2022
	2024			2023
NOL carryforwards	$	8,~~400~~000,000		$	8,~~300~~000,000
Less valuation allowance		(8,~~400~~000,000	)		(8,~~300~~000,000	)
Deferred tax assets	$	-		$	-

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

For federal income tax purposes, the Company has a net operating loss carryforward of approximately $4038,~~100~~000,000 as of ~~September~~March 3031, ~~2023~~2024, of of which approximately $18,400,000 expires beginning in 2024 and $2119,~~700~~600,000 which can be carried forward indefinitely. For state income tax purposes, the Company has a net operating loss carryforward of approximately $18,400,000 and $2119,~~400~~300,000 as of ~~September~~March 3031, ~~2023 in~~2024 in Georgia and Massachusetts, respectively, which expires beginning in 2038.

In addition, as of ~~September~~March 3031, ~~2023~~2024, Rotmans has a net operating loss carryforward of approximately $56,~~900~~200,000 for federal income tax ~~purposes~~ purposes of which $1,800,000 expires beginning in 2029 and $4,~~100~~400,000 can be carried forward indefinitely. Rotmans has a state operating ~~loss~~ loss carryforward of approximately $5,~~000~~300,000 which expires beginning in 2038.

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

~~NOTE 15 - DISCONTINUED OPERATIONS~~29

~~Rotmans~~NOTE ~~closed~~16 ~~its showroom on December 14, 2022. The Company has accounted for the closing as discontinued operations in accordance with ASC No. 205~~-~~20,~~ ~~Discontinued~~DISCONTINUED Operations. The results of operations are reported as discontinued operations in 2023 and 2022. The assets and liabilities have been reported in the condensed consolidated balance sheets as assets and liabilities of discontinued operations.OPERATIONS

24At the completion of its Going Out of Business sale, Rotmans closed its showroom on December 14, 2022. The results of operations are reported as discontinued operations in 2024 and 2023. The assets and liabilities have been reported in the condensed consolidated balance sheets as assets and liabilities of discontinued operations.

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

SCHEDULE OF DISCONTINUED OPERATIONS

	2023			2022			2023			2022
	2024			2023
	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2023			2022			2023			2022
	2024			2023
Revenue	$	-		$	3107,~~535,414~~479		$	~~157,479~~		$	~~10,401,862~~
Cost of revenue		-			1122,~~627,490~~650			~~122,650~~			~~4,691,561~~
Gross profit		-			1(15,~~907,924~~171	)		~~34,829~~			~~5,710,301~~
Operating expenses:
Salaries, wages and benefits		~~90,495~~-			~~784~~264,~~876~~671			~~457,120~~			~~2,360,456~~
Agent fees		-			312,909			-			1,058,095
Professional fees		17,351			98,593
Professional fees		93,795			59,028			215,487			226,944
Advertising		-			67,280
Advertising		206			232,894			66,662			826,251
Rent		-			179,782
Rent		332,197			195,950			693,040			548,468
Service charges		170			20,600
Service charges		417			87,738			21,336			275,776
Depreciation and amortization		-			5,184
Depreciation and amortization		4,589			84,118			14,413			315,040
Other operating		12,691			526,505
Other operating		59,735			406,944			710,973			1,227,741
Total operating expenses		30,212			1,162,615
Total operating expenses		581,434			2,164,457			2,179,031			6,838,771
Loss from operations		(30,212	)		(1,177,786	)
Loss from operations		(581,434	)		(256,533	)		(2,144,202	)		(1,128,470	)
Other income (expense):
Other income (expense):
Interest expense		(192	)		(83,702	)
Interest expense		(76,419	)		(98,978	)		(236,858	)		(289,260	)
Gain on settlement of debt, net		-			39,770
Gain on settlement of debt, net		-			-			39,770			-
Gain on sale of property and equipment		1,000			-
Gain on sale of property and equipment		-			-			213,776			-
Other income		13			5,696
Other income		59,839			34,443			92,129			102,147
Total other income (expense), net		821			(38,236	)
Total other income (expense), net		(16,580	)		(64,535	)		108,817			(187,113	)
Net loss from discontinued operations	$	(29,391	)	$	(1,216,022	)
Net loss from discontinued operations	$	(598,014	)	$	(321,068	)	$	(2,035,385	)	$	(1,315,583	)

2530

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

	2023		2022
	2024		2023
	March 31,		December 31,
	2024		2023
Current assets:
Cash	$	~~219~~13,~~854~~194	$	~~123~~14,~~325~~912
Accounts receivable		-		1,853,972
Other receivables		1,000		33,334
Other receivables		33,334		684,775
Prepaid expenses and other		736		11,967
Inventories		-		76,379
Total current assets	$	14,930	$	60,213
Prepaid expenses and other		16,652		288,520
Total current assets	$	269,840	$	3,026,971
Non-current assets:
Property and equipment, net	$	110,300	$	490,420
Operating lease right-of-use assets, net		5,465,803		7,008,276
Other assets		5,274		5,274
Total non-current assets	$	5,581,377	$	7,503,970
Current liabilities:
Accounts payable	$	~~289~~331,~~221~~032	$	~~339~~346,~~426~~924
Accrued expenses		40,642		726,410
Security deposits		-		61,986
Operating lease liabilities - current maturities		936,000		737,000
Related party advances		61,986		-
Finance lease liabilities - current maturities		212,000		119,000
Operating lease liabilities - current maturities		1,130,000		942,000
Related party debt - current maturities		22,518		406,753
Total current liabilities	$	1,523,018	$	1,350,910
Total current liabilities	$	1,500,381	$	2,328,589
Non-current liabilities:
Operating lease liabilities, net of current maturities	$	3,~~682~~306,~~360~~005	$	53,~~189~~494,~~140~~005
Finance lease liabilities, net of current maturities		231,527		324,527
Unearned revenue		61,986		-
Total non-current liabilities	$	3,975,873	$	5,513,667

The condensed consolidated statements of cash flows do not present the cash flows from discontinued operations separately from cash flows from continuing operations. Included in adjustments to reconcile net loss to net cash used in operating activities ~~for the nine months ended September 30, 2023 and 2022~~ are the following discontinued operations items:

	2023			2022
	2024			2023
Depreciation	$	14,413		$	128,791
	Three Months Ended
Bad debts		4,537			3,461
	March 31,
Amortization of intangible assets		-			186,249
	2024			2023
Noncash lease expense		234,693			217,958
Depreciation	$	-		$	5,184
Gain on settlement of debt, net		(39,770	)		-
Bad debts		-			9,804
Gain on sale of property and equipment		(213,776	)		-
Noncash lease expense		-			38,701
Gain on settlement of debt, net		-			(39,770	)
Gain on sale of property and equipment		1,000			-

NOTE 1617 - SUBSEQUENT EVENTS

~~Blue~~On ~~Oar~~June ~~has~~1, ~~advanced~~2024, the Company ~~funds~~entered ~~totaling~~into ~~$32,500~~a term convertible promissory note with Blue Oar. The Company ~~has~~may ~~not~~borrow ~~formalized~~amounts up to $1,000,000 at an ~~agreement~~interest ~~with~~rate ~~repayment~~of ~~terms~~12% asper annum. Prior working capital advances of $343,694 through December 31, 2023 are rolled into this note agreement. Monthly installment payments of principal and interest of $7,500 are payable beginning on July 1, 2024 with a balloon payment due on July 1, 2025. The maturity date can be extended for six months to January 1, 2026 at Blue Oar’s discretion. Blue Oar may elect to receive payments in common stock at a discounted rate of 50% of the market rate based on any two days within the prior twenty day’s closing price, no less than $.01 (the “Floor”). The note carries a $50,000 closing fee ($75,000 if not paid in full with common shares). In the event of default, the interest rate will increase to 19% and owe a default fee of 6% of the outstanding balance plus $25,000.

26On July 22, 2024, the Company entered into an Employment Agreement (the “Employment Agreement”) with Ms. Jamie Rotman, under which Ms. Rotman receives annual compensation equal to $180,000 payable in Series C Preferred Stock or common stock, either at Ms. Rotman’s discretion, discounted 50% over the then market price (and payable in cash at Ms. Rotman’s discretion), plus a signing bonus of $25,000 payable in shares of Series C Preferred Stock, vesting over 2024. The Employment Agreement was made retroactive to January 1, 2024. The Employment Agreement also provides for a 24-month severance payment upon a termination without cause (as defined) and a 24 month change in control severance. Ms. Rotman was appointed as President of the Company effective December 21, 2023. See Note 12.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

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

About RxAir

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

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

The RxAir product line includes:

● RxAir™ Residential Filterless Air Purifier ● RX400™ FDA cleared Class II Filterless Air Purifier ● RX800™ FDA cleared Class II Filterless Air Purifier ● RX3000™ Commercial FDA cleared Class II Air Purifier

Vystar produces the RxAir product line with a new world-class manufacturer and an expert U.S. engineer with a full understanding of the RxAir technology. Vystar sells RxAir residential and commercial units through multiple distributors and the Company’s website. Once distribution channels are firmly established, Vystar expects the air purification products will produce margins of approximately 70%.32

Vystar’s ~~Board~~produces ofthe ~~Directors~~RxAir ~~have~~product ~~approved~~line ~~preliminary~~with ~~plans~~a toworld-class ~~spin~~manufacturer ~~off~~and an expert U.S. engineer with a full understanding of the RxAir technology. Vystar sells RxAir residential and commercial units via distributors, ~~Vytex~~online and ~~FEC~~through ~~product~~retail ~~lines~~channels. ~~into~~Vystar has assembled a ~~separate~~distribution network ~~legal~~for ~~entity~~sales ~~which Vystar~~of ~~intends~~RX400 and RX800, our newest unit to ~~take~~the ~~public~~healthcare and medical markets. Vystar ~~anticipates~~also ~~retaining~~sells the ViraTec replacement cartridge for approximately ~~10%~~25,000 units that have been previously sold. The RX3000 our largest unit, has been reengineered and samples of ~~the~~those ~~shares~~units are in ~~the~~stock. ~~new~~We ~~entity~~are ~~and~~not ~~will~~producing ~~distribute~~more ~~the remaining~~of ~~ownership~~those ~~percentage~~at this time but plan to ~~Vystar~~restart ~~shareholders~~production during 2024. ~~This~~We ~~plan~~have isengineered the ~~expected~~RX300 a smaller version of our unit and hope to be ~~executed~~in production with that unit in ~~late~~2024. ~~2023~~The Company also hopes to have an even smaller unit designed during 2024 for automobiles and refrigerators with USB charging which is currently in the early stages of development and has not been engineered or prototyped.

About Vytex

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

Ironically, most use Vytex as it’s better for their manufacturing process as an easier to use raw material and not for protein properties. As of mid-2020 Vystar and the Indian Rubber Manufacturers Research Association’s (“IRMRA”) had been actively collaborating to develop viscoelastic deproteinized natural rubber (DPNR) variants having properties for expanding applications in specific new arenas such as green tires, biodegradable and other unique bioelastoplast product lines that desire a new approach. Additionally, this research, while slowed by the COVID-19 pandemic, showed attributes with extra low ammonia offerings that are desired.

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

In Halcyon Agri (owner of CMC Global), 2020 Corporate Report: “Our group-wide innovation capabilities have enabled us to engage in innovative commercial partnerships. Corrie MacColl is collaborating with Vystar to transform our Cameroon plantation output into ultra-pure latex with stronger molecular bond that offers enhanced strength, durability, and flexibility in the end products. This is achieved by removing non-rubber components and 99.85% of the proteins.” CMC Global continues to work with the facility at Cameroon to produce Vytex at their owned processing plant.

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

2833

Additionally, in August 2021, Dr. Matthan presented new data to the Automotive Tyre Manufacturers’ Association including Vytex dry rubber.

Vystar has expanded Vytex into the consumer arena with an introduction into the bedding category, aligning with key foam manufacturers to create mattresses, mattress toppers and pillows. Through this effort, Vystar can bring the benefits of great sleep and a more natural product to the public.

About FEC

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

RESULTS OF OPERATIONS

Comparison of the Three Months Ended ~~September~~March 3031, ~~2023~~2024 with the Three Months Ended ~~September~~March 3031, ~~2022~~2023

	Three Months Ended September 30,
	Three Months Ended March 31,
	2023			2022			$ Change			% Change
	2024			2023			$ Change			% Change
	CONSOLIDATED
Revenue	$	6037,~~350~~607		$	36409,~~657~~907		$	23(372,~~693~~300	)		64-90.68	%
Cost of revenue		517,~~585~~420			5476,~~223~~698			(4859,~~638~~278	)		-8977.73	%
Gross profit		5420,~~765~~187			~~(17~~333,~~566~~209	)		72(313,~~331~~022	)		~~411~~-93.89	%
Operating expenses:
Salaries, wages and benefits		703,~~916~~760			8154,~~551~~929			(1051,~~635~~169	)		-1393.02	%
Share-based compensation		~~107~~192,~~630~~453			~~181~~138,~~199~~910			~~(73~~53,~~569~~543	)		~~-40~~38.65	%
Professional fees		3572,~~622~~306			3255,~~595~~442			316,~~027~~864			930.34	%
Advertising		~~3,745~~502			106,~~009~~665			(6,~~264~~163	)		-6292.65	%
Rent		2013,~~001~~214			-20,001			20(6,~~001~~787	)		~~100~~-33.09	%
Service charges		~~10,711~~240			~~2,394~~804			~~8,317~~(564	)		~~347~~-70.41	%
Depreciation and amortization		18,~~819~~627			3518,~~119~~819			(~~16,300~~192	)		-461.40	%
Other operating		~~106~~56,~~020~~323			~~178~~88,~~138~~356			(7232,~~118~~033	)		-4036.53	%
Total operating expenses		~~373~~357,~~464~~425			~~521~~383,~~005~~926			(~~147~~26,~~541~~501	)		-286.39	%
Loss from operations		(~~318~~337,~~699~~238	)		(~~538~~50,~~571~~717	)		~~219~~(286,~~872~~521	)		~~-40~~564.89	%
Other income (expense):
Other expense:
Interest expense		(128,~~918~~089	)		(810,~~891~~337	)		(42,~~027~~248	)		45-21.37	%
Change in fair value of derivative liabilities		-			240,300			(240,300	)		-100.0	%
Net loss from continuing operations		(345,327	)		(61,054	)		(284,273	)		465.6	%
Loss on settlement of debt, net		-			(2,481,231	)		2,481,231			-100.0	%
Total other expense, net		(12,918	)		(2,249,822	)		2,236,904			-99.4	%
Net loss from continuing operations		(331,617	)		(2,788,393	)		2,456,776			-88.1	%
Discontinued operations:
Loss from operations		(~~598~~29,~~014~~391	)		(~~321~~1,~~068~~216,022	)		~~(276~~1,~~946~~186,631	)		86-97.36	%
Net loss		(~~929~~374,~~631~~718	)		(31,~~109~~277,~~461~~076	)		2902,~~179,830~~358			-70.17	%
Net loss attributable to noncontrolling interest		~~251~~12,~~166~~344			~~134~~510,~~849~~729			~~116~~(498,~~317~~385	)		86-97.36	%
Net loss attributable to Vystar	$	(~~678~~362,~~465~~374	)	$	(2766,~~974,612~~347	)	$	2403,~~296,147~~973			-7752.27	%

2934

Revenues

Revenues for the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 were $6037,~~350~~607and ~~and~~ $36409,~~657~~907, respectively, for ana ~~increase~~decrease of $23372,~~693~~300 or 6490.68%. The ~~increase~~ decrease in revenues ~~can~~was bedue ~~attributed~~to the Company’s internal reorganization. Jamie Rotman took over as CEO to ~~income~~refocus ~~recognized~~the ~~upon~~Company on Vystar’s two main product lines, RxAir and Vytex. Her focus in the ~~satisfaction~~first quarter was additionally to complete the move-out of the ~~warranty~~Rotmans ~~coverage~~250,000 sq ~~term~~ft onfacility ~~RxAir~~and ~~units~~relocate the inventory. Another one of her objectives was to bring the internal reporting systems up to date including procedures to make future reporting and external audits run smoothly.

The Company reported gross profit of $5420,~~765~~187 for the three-month period ended ~~September~~March 3031, ~~2023~~2024 compared to gross ~~loss~~profit of $17333,~~566~~209 for ~~the~~ the three-month period ended ~~September~~March 3031, ~~2022~~2023, ana ~~increase~~decrease of $72313,~~331~~022 or ~~411~~93.89%. The ~~increase~~decrease in gross profit is ~~attributable~~consistent ~~to the~~with ~~higher reserves established in prior years on inventory over 365 days old and~~ the ~~satisfaction of the RxAir warranty coverage~~decrease ~~term~~in revenues.

The cost of revenue for the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 was $517,~~585~~420 and $5476,~~223~~698, respectively, a decrease of $4859,~~638~~278 or 89 77.73%.

Operating Expenses

The Company’s operating expenses consist primarily of compensation and support costs for management and administrative staff, and for other general and administrative costs, including professional fees related to accounting, finance, and legal services as well as advertising, ~~rent~~ and other operating expenses. The Company’s operating expenses were $~~373~~357,~~464~~425 and $~~521~~383,~~005~~926 for the three months ended ~~September 30~~March 31, 2024 ~~2023~~ and ~~2022~~2023, respectively, a decrease of $~~147~~26,~~541~~501 or 286.39%. The decrease was ~~partly~~ due ~~to a reduction~~ in ~~share-based~~part ~~compensation for~~to ~~legal~~reduced ~~and supplemental consulting services~~revenues.

Other ~~Income (~~Expense)

Other expense for the three months ended ~~September~~March 3031, ~~2023~~2024 ~~was~~and ~~$12,918~~2023 ~~which~~ consisted of interest expense. ~~This compares to other expense~~ of $28,~~249,822~~089 ~~for~~and ~~the three months ended September 30, 2022, which consisted of change in fair value of derivative liabilities of~~ $~~240~~10,~~300~~337, ~~loss~~ ~~on settlement of debt, net of $2,481,231 and interest expense of $8,891~~respectively.

Discontinued Operations

Loss from discontinued operations for the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 was $~~598~~29,~~014~~391 and $~~321~~1,~~068~~216,022, respectively, for ana ~~increase~~decrease of $~~276~~1,~~946~~186,631 or 8697.36%. The ~~loss~~decrease inwas ~~2023~~attributable ~~included post-closing store costs and fixed costs exceeding sublease income. The loss in 2022 reflected decreased revenues due~~ to ~~rising~~the ~~inflation~~final ~~which~~winding ~~resulted~~down inof ~~changes~~expenses in ~~discretionary consumer spending~~2024.

Net Loss

Net loss was $~~929~~374,~~631~~718 ~~for~~and ~~the three months ended September 30, 2023 compared to net loss of~~ $31,~~109~~277,~~461~~076 for the three months ended ~~September 30~~March 31, ~~2022~~2024 and 2023, respectively, a decrease of $2902,~~179,830~~358 or 70.17%. Net loss in the quarter ended ~~September~~March 3031, ~~2022~~2024 ~~was~~versus ~~partly~~net ~~attributable~~loss toin the ~~loss~~same ~~on settlement~~period ofin ~~debt,~~2023 ~~net~~decreased ofdue ~~$2,481,231~~to a significantly reduced loss from discontinued operations.

RESULTS OF OPERATIONS

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

	Nine Months Ended September 30,
	2023			2022			$ Change			% Change
	CONSOLIDATED
Revenue	$	506,383		$	205,500		$	300,883			146.4	%
Cost of revenue		88,196			118,390			(30,194	)		-25.5	%
Gross profit		418,187			87,110			331,077			380.1	%
Operating expenses:
Salaries, wages and benefits		200,127			200,384			(257	)		-0.1	%
Share-based compensation		353,744			658,004			(304,260	)		-46.2	%
Professional fees		97,333			187,554			(90,221	)		-48.1	%
Advertising		13,971			24,223			(10,252	)		-42.3	%
Rent		60,003			8,393			51,610			614.9	%
Service charges		15,083			6,600			8,483			128.5	%
Depreciation and amortization		56,457			105,357			(48,900	)		-46.4	%
Other operating		279,822			520,637			(240,815	)		-46.3	%
Total operating expenses		1,076,540			1,711,152			(634,612	)		-37.1	%
Loss from operations		(658,353	)		(1,624,042	)		965,689			-59.5	%
Other income (expense):
Interest expense		(34,436	)		(205,095	)		170,659			-83.2	%
Change in fair value of derivative liabilities		-			1,760,300			(1,760,300	)		-100.0	%
Loss on settlement of debt, net		-			(2,250,411	)		2,250,411			-100.0	%
Total other expense, net		(34,436	)		(695,206	)		660,770			-95.0	%
Net loss from continuing operations		(692,789	)		(2,319,248	)		1,626,459			-70.1	%
Discontinued operations:
Loss from operations		(2,035,385	)		(1,315,583	)		(719,802	)		54.7	%
Net loss		(2,728,174	)		(3,634,831	)		906,657			-24.9	%
Net loss attributable to noncontrolling interest		854,862			552,545			302,317			54.7	%
Net loss attributable to Vystar	$	(1,873,312	)	$	(3,082,286	)	$	1,208,974			-39.2	%

Revenues

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

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

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

Operating Expenses

The Company’s operating expenses consist primarily of compensation and support costs for management and administrative staff, and for other general and administrative costs, including professional fees related to accounting, finance, and legal services as well as advertising, rent and other operating expenses. The Company’s operating expenses were $1,076,540 and $1,711,152 for the nine months ended September 30, 2023 and 2022, respectively, a decrease of $634,612 or 37.1%. The decrease was partly due to a reduction in share-based compensation for legal and supplemental consulting services and cost cutting of general and administrative expenditures.

Other Income (Expense)

Other expense for the nine months ended September 30, 2023 was $34,436 which consisted of interest expense. This compares to other income of $695,206 for the nine months ended September 30, 2022, which consisted of change in fair value of derivative liabilities of $1,760,300, loss on settlement of debt, net of $2,250,411 and interest expense of $205,095.

Discontinued Operations

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

Net Loss

Net loss was $2,728,174 and $3,634,831 for the nine months ended September 30, 2023 and 2022, respectively, a decrease of $906,657 or 24.9%. Net loss in the nine months ended September 30, 2022 was increased by the loss on settlement of debt, net of $2,250,411 and the change in fair value of derivative liabilities of $1,760,300 upon settlement in April 2022 of shareholder convertible notes payable and pending settlement of related party debt in July and September 2022 which contained embedded conversion features.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s financial statements are prepared using the accrual method of accounting in accordance with U.S. GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. However, we have incurred significant losses and experienced negative cash flow since inception. At ~~September~~March 3031, ~~2023~~2024, the Company had ~~cash~~ cash of $4511,~~951~~768 and a deficit in working capital of approximately $~~5.3~~6 million. Further, at ~~September~~March 3031, ~~2023~~2024, the accumulated deficit ~~amounted~~ amounted to approximately $~~57.2~~61 million. We use working capital to finance our ongoing operations, and since those operations do not currently cover all of our operating costs, managing working capital is essential to our Company’s future success. Because of this history of losses and financial condition, there is substantial doubt about the Company’s ability to continue as a going concern.

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

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

There can be no assurances that we will be able to achieve projected levels of revenue in ~~2023~~2024 and beyond. If we are not able to achieve projected revenue and obtain alternate additional financing of equity or debt, we would need to significantly curtail or reorient operations during ~~2023~~2024, which could have a material adverse effect on our ability to achieve our business objectives, and as a result, may require the Company to file bankruptcy or cease operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.

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

Sources and Uses of Cash

Net cash used in operating activities was $~~163~~100,~~493~~757 for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 as compared to net cash ~~used~~provided inby operating activities of $~~395~~345,~~427~~228 for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023. During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, cash used in operations was primarily due to the net loss offset ~~by the increase of assets of discontinued operations, and~~ non-cash related add-back of share-based compensation expense, ~~noncash lease expense,~~ depreciation and amortization.

~~Net~~The Company had cash provided by investing activities ~~was~~from discontinued operations of $~~579~~1,~~483~~000 during the ~~nine~~three months ended ~~September~~March 3031, ~~2023 and represented proceeds from the sale of property and equipment~~2024. There ~~was~~were no ~~cash provided by~~ investing activities during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023.

Net cash ~~used~~provided inby financing activities was $~~285~~74,~~784~~365 during the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, as compared to ~~net~~ cash ~~provided~~used byin ~~financing activities~~ of $~~404~~197,~~938~~ 749 during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023. During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, cash was provided by related party advances of $~~101~~12,~~716~~379 ~~which~~and ~~was offset by cash flows used in~~ discontinued operations of $~~387~~61,~~500~~986. During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, cash was provided by related party advances ~~in the amount of $92,731, proceeds from issuance of preferred stock~~ of $8529,~~000~~855 and ~~cash~~used ~~flows~~in ~~provided by~~ discontinued operations in the amount of $227,~~207~~604.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that may be reasonably likely to have a current or future material effect on our financial condition, liquidity, or results of operations.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

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

Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None

ITEM 4.

CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer and Chief Financial Officer (the “Certifying Officer”) is responsible for establishing and maintaining disclosure controls and procedures for the Company. Although the Certifying Officer has designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which this report was prepared, certain material weaknesses occurred during the period ended ~~September~~March 3031, ~~2023~~2024 and subsequent to period end. The Certifying Officer ~~has~~ has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e) (the “Rules”) under the Securities Exchange Act of 1934 (or “Exchange Act”) as of the end of the period covered by this Quarterly Report and is working on improving controls with an outside CPA firm and internal resources.

Management’s Report on Internal Control Over Financial Reporting

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

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

Management, under the supervision and with the participation of our Chief Executive Officer and our acting Chief Financial Officer, conducted an evaluation of our internal control over financial reporting as of ~~September~~March 3031, ~~2023~~2024, based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) 2013. Based on our evaluation under the COSO framework, management concluded that our internal control over financial reporting was not effective as of ~~September~~March 3031, ~~2023.~~ 2024. Such conclusion was reached based on the following material weaknesses noted by management:

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

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

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

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

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

Management expects to strengthen internal control during ~~2023~~2024 by developing stronger business and financial processes for accounting for transactions ~~such as warrant/stock issuances~~, which will enhance internal control for the Company.

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PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

The Company is subject to legal proceedings and claims that have not been fully resolved and have arisen in the ordinary course of business. See the discussion of pending legal proceedings in Note 1214 of the Notes to Condensed Consolidated Financial Statements.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

Exhibit Index

Number		Description

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

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

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

* Filed herewith

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SIGNATURES

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

	VYSTAR CORPORATION
Date: November 14, 2023	By:	/s/ Steven Rotman
Date: October 21, 2024	By:	/s/ Jamie Rotman
		Steven Rotman
		Jamie Rotman
		President, Chief Executive Officer, Chief Financial Officer and Director

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