ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This analysis of our results of operations should be read in conjunction with the accompanying financial statements, including notes thereto, contained in Item 8 of this Report. 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.
Overview
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 EPA- and FDA-certified laboratories, the RxAir has been proven to destroy greater than 99% of bacteria and viruses and reduce concentrations of odors and VOCs. The RxAir uses high-intensity germicidal UV lamps that destroy bacteria and viruses instead of just trapping them, setting it apart from ordinary air filtration units. RxAir® and ViraTech® are registered trademarks of Vystar Corp. For more information, visit http://www.RxAir.com.
The Company’s RxAir product line use 48 inches of high-intensity germicidal UV lamps that destroy bacteria, viruses and other germs instead of just trapping them, setting it apart from ordinary air filtration units. RxAir is one of the few UV air purifiers that have been proven in independent EPA- and FDA- certified testing laboratories to destroy on the first pass 99.6% of harmful airborne viruses and bacteria. In addition to inactivating airborne viruses that cause influenza (flu) and colds, RxAir’s device disarms the airborne pathogens that cause MRSA (staph), strep (whooping cough), tuberculosis (TB), measles, pneumonia and a myriad of other antibiotic-resistant and viral infections.
Vystar produces the RxAir product line with a world-class manufacturer and an expert U.S. engineer with a full understanding of the RxAir technology. Vystar sells RxAir residential and commercial units via distributors, online and through retail channels. Vystar has assembled a distribution network for sales of the RX400™ FDA cleared Class II Filterless Air Purifier. Vystar also sells the ViraTech replacement cartridge for approximately 25,000 units that have been previously sold. The RX3000™ Commercial FDA cleared Class II Air Purifier, our largest unit, is currently not in production. We have produced a sample size of the RX800™ FDA cleared Class II Filterless Air Purifier and they are currently in the testing stage. We have a prototype for the RX300, which will be renamed RX600, and are exploring production options. The Company also hopes to have an even smaller unit designed during 2026 for automobiles and refrigerators with USB charging. Tariffs by the U.S. government may impact future production.
About Vytex
Vytex is a multi-patented latex raw material in which the allergy causing proteins are reduced to a level that falls at or below detection based on ASTM approved test methods. Vytex has been available as a raw material commercially for fourteen years and through that time has a group of manufacturers who use it in end products such as electrical gloves, condoms, adhesives, etc. 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. Vystar now has a testing supply of Vytex dry rubber for larger trials through CMC Global. 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 market. 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. CMC Global 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 to new economic circumstances; including strategy and policy shifts in supply chain management and restoring greater geographic diversification of latex processing and product manufacturing. The R&D association with IRMRA promises quicker laboratory and field-based testing and evaluations downstream. At Vystar, the recalibrated sustainability programme (FSC, nitrosamines & ammonia free, ultralow proteins, no SVHC and green carbon neutrality) emphasize certifications with Corrie MacColl market reach facilitating faster rollouts. Nontraditional/non Hevea brasiliensis based production efforts are likely to continue to face new penetration and high cost-benefit acceptance challenges in this decade. A PDF of the full presentation is available on vytex.com.
Additionally, in August 2021, Dr. Matthan presented new data to the Automotive Tyre Manufacturers’ Association including Vytex dry rubber.
In July 2025, the Company unveiled a newly redesigned website, www.vytex.com , as part of a comprehensive brand refresh aimed at improving customer interaction and enhancing digital presence. This initiative aligns with our strategy to provide a more engaging and user-friendly experience for our customers.
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 a prototype and are evaluating our ability to eradicate hard water pollution that fouls pools, fountains, and pumps. By the end of the year, we expect to run a trial on FEC/Hughes devices for hard water abatement and dialysis membrane efficiency. These products will move us toward living more safely and cleanly in our environment.
In May 2025, Vystar announced final testing for the RxAir prototype, integrating the cutting-edge Fluid Energy conversion technology with the Hughes Reactor. This advancement, developed by Dr. Bryan Stone, who serves on Vystar’s board, represents a significant leap in innovation for the Company. We expect testing to be completed by the end of 2026. Due to the fluctuations of tariffs by the U.S. government and cash flows, we expect production in late 2027.
Other Matters
We are monitoring current developments in trade policy and tariff actions by the U.S. government, including imports from China and baseline tariffs on most imports from most other countries. These tariffs could adversely impact our growth and cost of products sold.
Management Objectives
The COVID-19 pandemic has raised awareness of airborne disease transmission and consumers’ desire to reduce their risk of infection through the use of air purifiers. The Company has pivoted its resources to meeting the demand for air purifiers by adding additional distributors to the RxAir sales network and contracting the development of the next generation RxAir Ultraviolet-C light air purifiers.
Vystar and the Indian Rubber Manufacturers Research Association’s (“IRMRA”) are 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.
Vystar entered into a Market Development and Distribution Agreement with Corrie MacColl 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.
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.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. As such, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. Our management reviews its estimates on an on-going basis. We base our estimates and assumptions on historical experience, knowledge of current conditions and our understanding of what we believe to be reasonable that might occur in the future considering available information. Actual results may differ from these estimates, and material effects on our operating results and financial position may result.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.
Fair Value Inputs Related to Share-based and Other Equity Compensation
Generally accepted accounting principles require all share-based payments, including grants of employee stock options, stock grants and warrants, to be recognized in the financial statements based on their fair values. We compute the value of option awards granted by utilizing the Black-Scholes valuation model based upon their expected lives, expected volatility, expected dividend yield, and the risk-free interest rate. The value of the awards is then straight-line expensed over the service period of the awards. Issuance in shares of common stock is valued using the closing market price on the measurement date.
Inventories
Inventories include those costs directly attributable to the product before sale. Inventories consist primarily of RxAir purifiers, foam toppers and pillows and are carried at net realizable value, which is defined as selling price less cost of completion, disposal and transportation. The Company evaluates the need to record write-downs for inventories on a regular basis. Approximate 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.
Revenue
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. Consideration is typically paid prior to shipment via credit card or check when our products are sold direct to consumers, which is typically within a 1 to 2 days or approximately 30 days from the time control is transferred when sold to wholesalers, distributors and retailers. 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. We assess our estimates of expected returns at each financial reporting date.
Valuation and Impairment of Intangible and Long-Lived Assets
We perform an impairment assessment of intangible assets including goodwill annually or more frequently as warranted by events or changes in circumstances. We review long-lived assets such as property and equipment for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. If the total of the estimated undiscounted future cash flows is less than the carrying value of the assets, an impairment loss is recognized for the excess of the carrying value over the fair value of the long-lived assets.
Accounting for Derivative Financial Instruments
The Company evaluates stock options, stock warrants, notes payable 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 ASC 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 that the fair value is recorded as a liability, the change in fair value is recorded in the statement 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 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.
RESULTS OF OPERATIONS
Year ended December 31, 2025 compared to year ended December 31, 2024
Year Ended December 31,
$ Change
% Change
CONSOLIDATED
Revenue
Cost of revenue
Gross profit
Operating expenses:
Salaries and commissions
Share-based compensation
Professional fees
Advertising
Consulting
Rent
Service charges
Depreciation and amortization
Other operating
Total operating expenses
Loss from operations
Other income (expense):
Interest expense
Gain (loss) on settlement of liabilities, net
Other income
Total other income (expense), net
Net loss from continuing operations
Discontinued operations:
Income (loss) from operations
Net income (loss)
Net (income) loss attributable to noncontrolling interest
Net income (loss) attributable to Vystar
Revenues
Consolidated revenues for the year ended December 31, 2025 and 2024 were $54,821 and $135,969, respectively, for a decrease of $81,148 or 59.7%. The decrease in revenues was due in part to reduced sales to a former major customer and a special bulk sale of Vytex products in 2024. The Company will aggressively review its pricing and sales strategies in 2026.
Consolidated gross profit for the year ended December 31, 2025 and 2024 was $31,815 and $69,641, respectively, for a decrease of $37,826 or 54.3%. Consolidated cost of revenue for year ended December 31, 2025 and 2024 was $23,006 and $66,328, respectively, a decrease of $43,322 or 65.3%. The decrease in gross profit and decrease in cost of revenue was due to decreased sales and increased channel costs.
Operating Expenses
The Company’s operating expenses consist primarily of share-based compensation and other general and administrative costs, including professional fees related to accounting, finance, and legal services as well as other operating expenses such as rent and consulting. The Company’s consolidated operating expenses was $1,092,355 and $1,587,220 for the year ended December 31, 2025 and 2024, respectively, for a decrease of $494,865 or 31.2%. The decrease in operating expenses was due to a temporary suspension of consulting fees to Blue Oar Consulting, Inc. (“Blue Oar”), decrease in professional fees consistent with the winding down of litigation matters, and share-based compensation consistent with higher common stock prices.
Other Income (Expense)
Other income (expense), net for the year ended December 31, 2025 and 2024 was $(470,854) and $(154,488), respectively, for an increase of $316,366 or 204.8%. The increase in other expenses is primarily due to increases in interest expense of $156,818 and a change in net loss on settlement of liabilities of $144,008.
Discontinued Operations
Income (loss) from discontinued operations for the year ended December 31, 2025 and 2024 was $(456) and $4,192,379, respectively, for a decrease of $4,192,835 or 100%. The decrease was attributable to the derecognition of Rotmans facility lease and the winding down of operations in 2024.
Net Income (Loss)
Net income (loss) for the year ended December 31, 2025 and 2024 was $(1,531,850) and $2,520,312, respectively. Net income in 2024 includes income from discontinued operations of $4,192,379.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America 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 December 31, 2025, the Company had cash of $4,454 and a deficit in working capital of $6,614,169. For the year ended December 31, 2025, the Company had a net loss of $1,531,850 and an accumulated deficit of $61,384,883. For the year ended December 31, 2024, the Company had a net income of $2,520,312 and the accumulated deficit amounted to $59,853,225. 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 about the Company’s ability to continue as a going .
Net cash used in operating activities was $180,393 for the year ended December 31, 2025 as compared to $99,962 for the year ended December 31, 2024. During the year ended December 31, 2025, cash used in operations was primarily due to an operating loss from operations, which was offset by expenses paid directly by related parties of approximately $106,000 and non-cash expenses of share-based compensation, depreciation and amortization.
The Company had no cash flows provided by investing activities during the year ended December 31, 2025. The Company had cash flows provided by investing activities from discontinued operations of $1,000 during the year ended December 31, 2024 for sales of property and equipment.
Net cash provided by financing activities was $176,679 and $61,986 during the year ended December 31, 2025 and 2024, respectively. During 2025, cash was provided from advances from stock subscriptions of $208,636, proceeds of related party advances of $2,000 and proceeds from common stock issuances of $16,364. Cash was used in financing activities during the year for repayments of related party debt of $41,527 and related party advances of $8,794. During 2024, cash of $61,986 was provided by discontinued operations.
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, that now also include the Company’s association with foam cores made from Vytex used in mattresses, mattress toppers and pillows.
There can be no assurances that we will be able to achieve projected levels of revenue in 2026 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 2026, 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 for bankruptcy or cease operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
Our future expenditures will depend on numerous factors, including: the rate at which we can introduce RxAir products and license Vytex NRL raw material and the foam cores made from Vytex to manufacturers and subsequently retailers; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, along with market acceptance of our products, and services and competing technological developments. As we expand our activities and operations, our cash requirements are expected to increase at a rate consistent with revenue growth after we achieve sustained revenue generation.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements.
Certain Relationships and Related Transactions
Jamie Rotman was appointed as President of the Company effective December 21, 2023. She is the daughter of the Company’s former CEO, Steven Rotman. On 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 termination without cause (as defined) and a 24 month change in control severance.
During the year ended December 31, 2025, the Company expensed approximately $375,000 related to this employment agreement. As of December 31, 2025, the Company had a stock subscription payable balance of $738,684 or approximately 28,072,000 shares of common stock to Ms. Rotman.
Blue Oar provides business consulting services to the Company. This entity is owned by Gregory Rotman, who is the brother of the Company’s CEO, Jamie Rotman. 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. The Company and Blue Oar mutually agreed to temporarily suspend the monthly payment for expenses beginning in January 2025. During the year ended December 31, 2025, the Company expensed approximately $312,000 related to the consulting agreement. Vystar issued 4,036,812 shares of common stock during 2025 for prior accrued share-based compensation totaling $63,806. As of December 31, 2025, the Company had a stock subscription payable balance of $1,099,573, or approximately 109,368,000 shares to be issued in the future and $405,000 of consulting expenses in accounts payable to this entity.
Dr. Bryan Stone receives a $25 per unit commission for RxAir units sold to a specific customer. During the year ended December 31, 2025, commissions of $124 were due to Dr. Stone and included in accrued expenses.
