Converted by EDGARwiz

0001511164-14-000174.txt : 20140408 0001511164-14-000174.hdr.sgml : 20140408 20140408135635 ACCESSION NUMBER: 0001511164-14-000174 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20130628 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20140408 DATE AS OF CHANGE: 20140408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Vystar Corp CENTRAL INDEX KEY: 0001308027 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 202027731 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-53754 FILM NUMBER: 14750784 BUSINESS ADDRESS: STREET 1: 3235 SATELLITE BOULEVARD STREET 2: BUILDING 400, SUITE 290 CITY: DULUTH STATE: GA ZIP: 30096 BUSINESS PHONE: 770-965-0383 MAIL ADDRESS: STREET 1: 3235 SATELLITE BOULEVARD STREET 2: BUILDING 400, SUITE 290 CITY: DULUTH STATE: GA ZIP: 30096 8-K/A 1 kiron8kafinal.htm FORM 8-K/A Converted by EDGARwiz

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934


Date of Report (Date of earliest event reported)	June 28, 2013

VYSTAR CORPORATION

(Exact name of registrant as specified in its charter)


Georgia	000-53754	20-2027731
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)


2484 Briarcliff Rd NE, #22, Suite 159, Atlanta, GA	30329
(Address of principal executive offices)	(Zip Code)


Registrant’s telephone number, including area code	(770) 965-0383

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):


	¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


	¨	Soliciting material pursuant to Rule 14a- 12 under the Exchange Act (17 CFR 240.14a- 12)


	¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


	¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets.

On June 28, 2013, Vystar Corporation (the “Company”) filed with the Securities and Exchange Commission a Current Report on Form 8-K disclosing that the Company completed the acquisition of Kiron Clinical Sleep Lab, LLC (“Kiron”). Pursuant to the terms of the LLC Ownership Interest Purchase Agreement (the “Agreement”), the Company became the sole member of Kiron.

Item 9.01(a) and (b) of the Current Report on Form 8-K dated June 28, 2013 did not include the historical financial statements of Kiron or the unaudited pro forma combined financial information of the Company (collectively, the “Financial Information”), and instead contained an undertaking subsequently to file the Financial Information. This amendment is being filed for the purpose of satisfying the Company's undertaking to file the Financial Information required by Item 9.01(a) and (b) of Form 8-K, and this amendment should be read in conjunction with the initial report on Form 8-K.

Subsequent Events

Pursuant to the Agreement, the Company:

(a) Delivered $90,000 cash to Seller;

(b) Issued to Seller 727,434 shares of Vystar common stock, valued at $50,000 or $0.0688 per share; and

In addition, the Company agreed to pay an additional $60,000 (the “Adjustment Amount”), $10,000 in cash and $50,000 in shares of Vystar common stock, in the event the audited financial results of Kiron for the year-end 2011, 2012, and the first six (6) months of 2013 are within two percent (2%) variability of the Statement of Revenues and Expenses provided by the Seller at closing for the periods referenced above. In the event the audited financial results are within three percent (3%) variability, fifty percent (50%) of the Adjustment Amount shall be paid to the Seller. As this calculation is subject to audit, management’s current estimate is subject to change. The current estimate of the fair value of the contingent consideration is $0.

At closing, the Company and Seller also entered into an agreement (“Contract”) pursuant to which the Seller through his medical practice, Durham Neurology, PLLC, a wholly owned professional limited liability company would provide ongoing clinical and medical services to the Company and Kiron as Medical Director. The Seller subsequently dissolved Durham Neurology, PLLC leaving Kiron without a Medical Director. On March 10, 2014, Vystar and Kiron filed Civil Suit 74A-07997-1 IN THE SUPERIOR COURT OF GWINNETT COUNTY, STATE OF GEORGIA against Michael Soo, MD and Durham Neurology, PLLC for multiple breaches of the Agreement and Contract. Potential settlement discussions are currently taking place but there is no evidence that they will be successful. As such, the two percent (2%) of gross receipts for five (5) years that was included in the original consideration has also been forfeited. The Purchase Consideration was therefore adjusted to $140,000 and all initial Goodwill associated with the purchase was written-off.

On December 24, 2013, Vystar entered into an Independent Contractor Agreement with Jamila Randolph Battle, MD, a North Carolina physician and sleep specialist, to assume the role of Medical Director for Kiron on January 1, 2014. Dr. Battle received her undergraduate degree from Duke University and her medical degree from the University of North Carolina at Chapel Hill School of Medicine. She completed her family medicine residency at the University of Michigan, Ann Arbor. Upon completion of her training she returned to North Carolina where she practiced family medicine and served as a consulting associate at Duke Family Medicine. In 2010 she began formal training and education with The School of Sleep Medicine in Palo Alto, California and the Mayo Clinic in Rochester, MN. In 2012, she became Board Certified in Sleep Medicine.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

The audited consolidated balance sheets of Kiron as of December 31, 2012 and 2011 and the related consolidated statements of operations, changes in member’s equity (deficit) and cash flows for each of the two years ended December 31, 2012 and 2011, the Notes to the Consolidated Financial Statements and the Report of Independent Auditors are filed as Exhibit 99.1 to this Current Report on Form 8-K/A.

The unaudited interim consolidated balance sheets of Kiron as of June 30, 2013 and 2012 and the related consolidated statements of operations for the three and six month periods ended June 30, 2013 and 2012 and the consolidated statements of cash flows for the six month period ended June 30, 2013 and 2012 and the notes to the consolidated financial statements.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined financial statements of the Company as of June 30, 2013 and for the year ended December 31, 2012, and for the six month period ended June 30, 2013 giving effect to the acquisition of Kiron, are filed as Exhibit 99.2 to this Current Report on Form 8-K/A.

(d) Exhibits



99.1	Audited consolidated balance sheets of Kiron as of December 31, 2012 and 2011 and the related consolidated statements of operations, changes in member’s equity (deficit) and cash flows for each of the two years ended December 31, 2012 and 2011, the Notes to the Consolidated Financial Statements and the Report of Independent Auditors.

	The unaudited interim consolidated balance sheets of Kiron as of June 30, 2013 and 2012 and the related consolidated statements of operations for the three and six month periods ended June 30, 2013 and 2012 and the consolidated statements of cash flows for the six month period ended June 30, 2013 and 2012 and the notes to the consolidated financial statements.

99.2	Unaudited pro forma condensed combined financial statements of the Company as of and for the six month period ended June 30, 2013, giving effect to the acquisition of Kiron and unaudited condensed combined statement of operations for the year ended December 31, 2012.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	VYSTAR CORPORATION
April 8, 2014

	By:	/s/ W. Dean Waters
		W. Dean Waters
		Chief Financial Officer

EX-99.1 2 kironexhibit9918kafinal.htm EXHIBIT 99.1 Converted by EDGARwiz

Exhibit 99.1

TABLE OF CONTENTS


	Page

Independent auditors’ report	2

Consolidated balance sheets at December 31, 2012 and 2011	3

Consolidated statements of operations for the years ended December 31, 2012 and 2011	4

Consolidated statements of cash flows for the years ended December 31, 2012 and 2011	5

Notes to consolidated financial statements	6

INDEPENDENT AUDITORS' REPORT

To the Owner of

Kiron Clinical Sleep Lab, LLC

Durham, North Carolina

We have audited the accompanying consolidated balance sheets of Kiron Clinical Sleep Lab, LLC (the "Company") as of December 31, 2012 and 2011, and the related consolidated statements of operations, changes in member’s equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements referred to above are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kiron Clinical Sleep Lab, LLC as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred historical losses and management expects the Company will continue to incur operating losses and negative cash flows. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Porter Keadle Moore, LLC

Atlanta, Georgia.

September 10, 2013

Kiron Clinical Sleep Lab, LLC

Consolidated Balance Sheets

December 31,


ASSETS
	2012		2011
CURRENT ASSETS
Cash	$	37,857	$	30,328
Accounts receivable, net		16,595		7,586
Prepaid expenses		-		5,828
TOTAL CURRENT ASSETS		54,542		43,652

PROPERTY AND EQUIPMENT, NET		54,452		43,652

TOTAL ASSETS	$	91,107	$	86,527


LIABILITIES AND MEMBER'S EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable	$	24,567	$	36,402
Compensation payable		30,678		44,431
Deferred rent		2,085		5,658
Payroll taxes withheld		2,554		-

TOTAL CURRENT LIABILITIES		59,884		86,491

MEMBER'S EQUITY (DEFICIT)		31,223		36

TOTAL LIABILITIES AND MEMBER'S EQUITY (DEFICIT)	$	91,107	$	86,527

See the accompanying notes to the consolidated financial statements.

Kiron Clinical Sleep Lab, LLC

Consolidated Statements of Operations

For the Years Ended December 31,


	2012		2011

Net revenue	$	885,358	$	891,730

Cost of revenue		263,642		291,132
Gross profit		621,716		600,598

Operating expenses		462,012		476,389

Net income		159,704		124,209

Member’s equity (deficit), beginning of year		36		(13,427)

Member’s contributions		37,486		48,795

Member’s distributions		(166,003)		(159,541)

Member’s equity, end of year	$	31,223	$	36

See the accompanying notes to the consolidated financial statements.

Kiron Clinical Sleep Lab, LLC

Consolidated Statements of Cash Flows

For the Years Ended December 31,


	2012		2011
Cash flows from operating activities
Net loss	$	159,704	$	124,209
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation		6,220		6,259
Changes in operating assets and liabilities:
Accounts receivable		(9,009)		(5,858)
Prepaid expenses		5,828		18
Accounts payable		(11,835)		(1,091)
Compensation payable		(13,753)		9,943
Deferred rent		(3,573)		(3,574)
Other current liabilities		2,554		(5,460)

Net cash provided by operating activities		136,136		124,446

Cash flows from investing activities
Purchases of property and equipment		-		(980)

Net cash used in investing activities		-		(980)

Cash flows from financing activities
Reduction of short-term debt		-		(4,048)
Contributions from member		37,486		48,795
Distributions to member		(166,003)		(159,541)

Net cash used by financing activities		(128,517)		(114,794)

Increase in cash		7,619		8,672

Cash, beginning of period		30,238		21,566

Cash - end of year	$	37,857	$	30,238

Supplemental disclosure of cash flow information:
Cash paid in interest	$	444	$	636

See the accompanying notes to the consolidated financial statements.

Kiron Clinical Sleep Lab, LLC

Notes to Consolidated Financial Statements

(1) NATURE OF BUSINESS

Kiron Clinical Sleep Lab, LLC (the “Company’) was founded in 1998, and operates as a limited liability company organized under the laws of the State of North Carolina. The Company is located in Durham, North Carolina with additional offices / facilities in Chapel Hill. Kiron provides diagnostic testing for sleep disorders including overnight polysomnogram studies, Continuous Positive Airway Pressure (CPAP) titrations, Maintenance of Wakefulness Tests (MWTs) and Multiple Sleep Latency Tests (MSLTs). Kiron is also an in-network provider of CPAP equipment and supplies for Blue Cross Blue Shield, United Healthcare, Wellpath and Medcost.

On June 28, 2013, Vystar Corporation entered into an LLC Ownership Interest Purchase Agreement with Michael Soo, M.D., the sole member of Kiron Clinical Sleep Lab, LLC, to purchase all outstanding membership and ownership interests of Kiron, and on July 1, 2013, completed such purchase.

At closing, the Company and Seller entered into an agreement (“Contract”) pursuant to which the Seller through his medical practice, Durham Neurology, PLLC, a wholly owned professional limited liability company would provide ongoing clinical and medical services to the Company and Kiron as Medical Director. The Seller subsequently dissolved Durham Neurology, PLLC leaving Kiron without a Medical Director. On March 10, 2014, Vystar and Kiron filed Civil Suit 74A-07997-1 IN THE SUPERIOR COURT OF GWINNETT COUNTY, STATE OF GEORGIA against Michael Soo, MD and Durham Neurology, PLLC for multiple breaches of the Agreement and Contract. Potential settlement discussions are currently taking place but there is no evidence that they will be successful. As such, the two percent (2%) of gross receipts for five (5) years that was included in the original consideration has also been forfeited. The Purchase Consideration was therefore adjusted to $140,000 and all initial Goodwill associated with the purchase was written-off.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company maintains its records on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires

management 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. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with maturities of three months or less.

Accounts Receivable

The Company extends credit to its customers based on the customer's ability to pay. An allowance for doubtful accounts is provided equal to the estimated losses that will be incurred in collection of all receivables. Estimated losses are based on a review of the current status of the receivables, historical collection experience, and management’s evaluation of the effect of existing economic conditions. No allowance for doubtful accounts was recorded at December 31, 2012 or 2011. The Company does not normally require collateral for trade receivables.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided for using the straight-line method over the estimated lives of the related assets. Leasehold improvements are depreciated over the estimated useful life. Depreciation is based on the estimated useful lives as follows: machinery and equipment, 5 to

7 years; office furniture and fixtures, 5 to 7 years; vehicles, 5 years; leasehold improvements, 15 years; software, 3 years.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses, and member advances. The carrying values of all the Company’s financial instruments approximate fair value because of their short maturities. The Company currently has no lines-of-credit or equipment loans outstanding.

Sales Taxes

The Company collects sales taxes from customers on sales subject to the tax. The Company’s accounting policy is to exclude the sales tax billed to and collected from customers from revenues and cost of sales and, instead, record the sales tax charged to customers as a liability, and remit those taxes to the appropriate state taxing authority when due.

Revenue Recognition

Revenue is attributable to fees for providing services, primarily sleep disorder testing, therapeutic titrations and clinical management. Most agreements include a fee per patient and type of study performed. The agreements may also include a fixed monthly fee for equipment. Fees associated with services are recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured. Service fees are determined based on written price quotations or service agreements having stipulated terms and conditions that do not require management to make any significant judgments or assumptions regarding any potential uncertainties.

Cost of Revenue

Cost of revenue consists primarily of personnel and medical supplies costs incurred in the delivery of the service.

Advertising and Promotion Costs

The Company expenses advertising and promotion costs as incurred. Advertising and promotion expense was $521 and $970 for 2012 and 2011, respectively.

Income Taxes

The Company operates as a limited liability company (“LLC”). As such, the net income or loss from the Company

flows through to the members and they are taxed on their proportionate share of the LLC’s taxable income. Therefore, no provision or liability for federal or state income taxes related to the LLC is included in these financial statements.

Tax benefits arising from an uncertain tax position can only be recognized for financial reporting purposes if, and to the extent that, the position is more likely than not to be sustained in an audit by the applicable taxing authority.

There were no material unrecognized tax benefits and related tax liabilities at December 31, 2012 and 2011. Penalties related to uncertain tax positions would be recorded as a component of general and administrative expenses. Interest relating to uncertain tax positions would be recorded as a component of interest expense. The Company is no longer subject to income tax examinations for calendar years prior to 2010.

Recent Accounting Pronouncements

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board and other standard setting entities that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

(3) CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash balances in financial institutions and accounts receivable.

Cash Balances

The Company maintains its cash balance in one financial institution. The account at the institution is insured by the

Federal Deposit Insurance Corporation (FDIC) up to $250,000. As of December 31, 2012 and 2011, the Company had no uninsured cash balances. The Company has not incurred any losses from these accounts, and management believes the Company is not exposed to any significant credit risk on its cash balances.

Major Suppliers

Purchases from the Company’s two largest vendors and suppliers accounted for approximately 91.5% of total purchases for the years ended December 31, 2012 and 2011. In the event of an interruption of supply from these suppliers, management believes that similar materials could be purchased with minimal lead time from a variety of different sources at similar trade terms.

(4) PROPERTY AND EQUIPMENT

The following is a summary of property and equipment, at cost less accumulated depreciation at December 31:


	2012	2011
Computer equipment	$ 25,964	$ 25,964
Furniture and fixtures	124,973	124,973
Computer software	860	860
Leasehold improvements	63,115	63,115
	214,912	214,912
Less: accumulated depreciation	178,257	172,037
Total	$ 36,655	$ 42,875

Depreciation expense was $6,220 and $6,259 for the years ended December 31, 2012 and 2011, respectively.

(5) OPERATING LEASES

Commencing June 1, 2010, the Company entered into a non-cancelable operating lease for its Durham office and facilities. The lease was for a term of 38 months but was amended effective September 1, 2013 to extend the lease for another 61 months. Under the terms of the lease, the lessor and the Company acknowledge and agree that, provided no event of default occurs during the term of the lease, the monthly installment of rent due for the first two (2) months of the term of the lease shall be abated and shall not be payable to lessor. Notwithstanding the foregoing, during such abatement period, the Company shall be liable for and shall pay all amounts due for any expenses, taxes, insurance costs, utilities and such other amounts due pursuant to the terms of the lease.

Commencing December 1, 2012, the Company entered into a non-cancelable operating lease for its Chapel Hill office and facilities. The lease expires on November 30, 2015.

The Company leases certain of its office equipment and billing service software under non-cancelable operating leases expiring at varying dates through 2016.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2012 are as follows:


Year Ending December 31		Amount
2013		$ 136,362
2014		127,883
2015		102,948
2016		64,563
2017		66,387
Thereafter		45,137

Total		$ 543,280

Rent expense charged to operations for the years ended December 31, 2012 and 2011 was $110,703 and $114,205 respectively.

(6) RELATED PARTY TRANSACTIONS

The Company rents its Chapel Hill facilities from Dream Bardo, LLC (a single-member LLC owned by Dr. Michael Soo, who is also the owner of Kiron Clinical Sleep Lab, LLC) on a month-to-month basis during 2012 and 2011. The total rent paid under this agreement for the years ended December 31, 2012 and 2011 was $10,000 and $17,658 respectively.

(7) SUBSEQUENT EVENTS

Pursuant to the Agreement, the Company:

(a) Delivered $90,000 cash to Seller;

(b) Issued to Seller 727,434 shares of Vystar common stock, valued at $50,000 or $0.0688 per share; and

Kiron Clinical Sleep Lab, LLC

Consolidated Balance Sheets

June 30,

(unaudited)


Assets
	2013		2012
Current assets
Cash	$	20,476	$	47,760
Accounts receivable, net		41,593		7,943
Prepaid expenses		6,183		6,003
Total current assets		68,252		61,706

Property and equipment, net		34,769		39,765

Total assets	$	103,021	$	101,471

Liabilities and member's equity

Current liabilities
Accounts payable	$	27,189	$	43,022
Compensation payable		41,565		47,027
Deferred rent		298		3,871
Payroll taxes withheld		-		436

Total current liabilities		69,052		94,356

Member's equity:		33,969		7,115

Total liabilities and member's equity	$	103,021	$	101,471

Kiron Clinical Sleep Lab, LLC

Consolidated Statements of Operations

(unaudited)


	3 months ended June 30,				6 months ended June 30,
	2013		2012		2013		2012
Revenue	$	224,349	$	219,454	$	428,377	$	441,895

Cost of revenue		74,267		58,480		136,866		119,184
Gross profit		150,082		160,974		291,736		259,402

Operating expenses		115,117		119,123		234,736		259,402

Net Income		34,965		41,851		56,775		63,309

Member’s equity (deficit), beginning of period		21,004		2,523		31,223		36

Member’s contributions		-		9,079		-		16,210

Member’s distributions		(22,000)		(46,338)		(54,029)		(72,440)

Member’s equity, end of period	$	33,969	$	7,115	$	33,969	$	7,115

Kiron Clinical Sleep Lab, LLC

Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

(unaudited)


	2013		2012
Cash flows from operating activities:
Net income	$	56,775	$	63,309
Adjustment to reconcile net loss to cash used in operating activities
Depreciation		3,019		3,110
Changes in operating assets and liabilities
Accounts receivable		(24,998)		(357)
Prepaid expenses		(6,183)		(175)
Accounts payable		2,622		6,620
Compensation payable		10,887		2,596
Deferred rent		(1,787)		(1,787)
Other current liabilities		(2,554)		436

Net cash provided by operating activities		37,781		73,752

Cash flows from investing activities:
Purchases of property and equipment		(1,133)		-

Net cash used in investing activities		(1,133)		-

Cash flows from financing activities:
Contributions from member		-		16,210
Distributions to member		(54,029)		(72,440)

Net cash used by financing activities		(54,029)		(56,230)

Net increase in cash		(17,381)		17,522

Cash - beginning of period		37,857		30,238

Cash - end of period	$	20,476	$	47,760

Cash paid during the period for interest	$	191	$	230

See the accompanying notes to the consolidated financial statements.

Kiron Clinical Sleep Lab, LLC

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

(1) NATURE OF BUSINESS

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company maintains its records on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with maturities of three months or less.

Accounts Receivable

Property and Equipment

7 years; office furniture and fixtures, 5 to 7 years; vehicles, 5 years; leasehold improvements, 15 years; software, 3 years.

Fair Value of Financial Instruments

Sales Taxes

Revenue Recognition

Cost of Revenue

Cost of revenue consists primarily of personnel and medical supplies costs incurred in the delivery of the service.

Income Taxes

The Company operates as a limited liability company (“LLC”). As such, the net income or loss from the Company

Recent Accounting Pronouncements

(3) SUBSEQUENT EVENTS

Pursuant to the Agreement, the Company:

(a) Delivered $90,000 cash to Seller;

(b) Issued to Seller 727,434 shares of Vystar common stock, valued at $50,000 or $0.0688 per share; and

EX-99.2 3 kironexhibit9928kafinal.htm EXHIBIT 99.2 Converted by EDGARwiz

EXHIBIT 99.2

UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

On June 28, 2013, Vystar Corporation entered into an LLC Ownership Interest Purchase Agreement (the “Agreement”) with Dr. Michael Soo (“Seller”), the sole member of Kiron Clinical Sleep Lab, LLC, a North Carolina limited liability company (“Kiron”). Kiron is in the business of providing sleep disorder testing and clinical management to physician’s offices and hospitals. Vystar purchased all outstanding membership and ownership interests of Kiron and on the same date completed such purchase (the “Purchase”). Pursuant to the Agreement, the Company:

(a) Delivered $90,000 cash to Seller;

(b) Issued to Seller 727,434 shares of Vystar common stock, valued at $50,000 or $0.0688 per share; and

In addition, the Company agreed to pay an additional $60,000 (the “Adjustment Amount”), $10,000 in cash and $50,000 in shares of Vystar common stock, in the event the audited financial results of Kiron for the year-end 2011, 2012, and the first six (6) months of 2013 were within two percent (2%) variability of the Statement of Revenues and Expenses provided by the Seller at closing for the periods referenced above. In the event the audited financial results were within three percent (3%) variability, fifty percent (50%) of the Adjustment Amount would be paid to the Seller. As this calculation is subject to audit, management’s current estimate is subject to change. The current estimate of the fair value of the contingent consideration is $0.

The completed audit of Kiron’s 2011 and 2012 financial statements showed financial results that exceeded the three percent (3%) variability allowed under the Agreement and thus the $60,000 Adjustment Amount was forfeited. At closing, the Company and Seller entered into an agreement (“Contract”) pursuant to which the Seller through his medical practice, Durham Neurology, PLLC, a wholly owned professional limited liability company would provide ongoing clinical and medical services to the Company and Kiron as Medical Director. The Seller subsequently dissolved Durham Neurology, PLLC leaving Kiron without a Medical Director. On March 10, 2014, Vystar and Kiron filed Civil Suit 74A-07997-1 IN THE SUPERIOR COURT OF GWINNETT COUNTY, STATE OF GEORGIA against Michael Soo, MD and Durham Neurology, PLLC for multiple breaches of the Agreement and Contract. Potential settlement discussions are currently taking place but there is no evidence that they will be successful. As such, the two percent (2%) of gross receipts for five (5) years that was included in the original consideration has also been forfeited. The Purchase Consideration was therefore adjusted to $140,000 and all initial Goodwill associated with the purchase was written-off.

The following unaudited pro forma combined financial statements reflect the acquisition of 100% of the membership interest of Kiron Clinical Sleep Lab, LLC using the acquisition method of accounting. The acquisition has been accounted for in conformity with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 805, Business Combinations (“ASC 805”). The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The pro forma adjustments are preliminary and have been prepared to illustrate the estimated effect of the acquisition. Differences between these preliminary estimates and the final acquisition accounting will occur and these differences could have a material impact on the accompanying unaudited pro forma combined financial statements and the combined companies’ future results of

operations and financial position. The unaudited pro forma combined financial statements do not purport to be indicative of the operating results or financial position that would have been achieved had the acquisition taken place on the date indicated or the results that may be obtained in the future.

The unaudited pro forma combined balance sheet as of June 30, 2013 is presented as if our acquisition of Kiron had occurred on June 30, 2013.

The unaudited pro forma combined consolidated statements of operations for the year ended December 31, 2012 and for the six months ended June 30, 2013 illustrate the effect of the Kiron acquisition as if it had occurred on January 1, 2012 and includes the historical Vystar Corporation and Kiron unaudited statements of operations for those periods.

The historical consolidated financial statements have been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisition (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results of the companies. These unaudited pro forma condensed combined financial statements are prepared by management for informational purposes only in accordance with Article 8 of Securities and Exchange Commission Regulation S-X and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisition been consummated as of the dates presented, and should not be taken as representative of future consolidated operating results of Vystar Corporation. The unaudited pro forma combined financial statements do not reflect any operating efficiencies and/or cost savings that we may achieve, or any additional expenses or costs of integration that we may incur, with respect to the combined companies as such adjustments are not factually supportable at this point in time. The assumptions used to prepare the pro forma financial statements are contained in the notes to the unaudited pro forma combined financial statements, and such assumptions should be reviewed in their entirety.

The unaudited pro forma combined financial statements have been developed from, and should be read in conjunction with the historical audited consolidated financial statements for the year ended December 31, 2012 and notes thereto of Vystar Corporation contained in its Annual Report on Form 10-K which was filed on June 30, 2013.

VYSTAR CORPORATION AND SUBSIDIARIES

Unaudited Pro Forma Combined Balance Sheets

June 30, 2013


	Historical Vystar Corporation		Historical Kiron, LLC		Pro forma Adjustments			Pro forma Combined
ASSETS
Current assets
Cash		$ 209,145		$ 20,476		$ (90,000)	(A)		$ 139,621
Accounts receivable, net of allowance		150,404		41,593		-			191,997
Inventory		3,449		-		-			3,449
Prepaid expenses		42,868		6,183		-			49,051
Other		10,748		-		-			10,748
Total current assets		416,614		68,252		(90,000)			394,866

Property and equipment, net		183,988		34,769		-			218,757

Other assets
Intangible assets, net		226,476				-			226,476
Deposits		4,421				-			4,421
Total assets		$ 831,499		$ 103,021		$ (90,000)			$ 844,520

Liabilities and stockholders' deficit
Current liabilities
Accounts payable		$ 697,598		$ 27,189		$ -			$ 724,787
Accrued compensation		165,370		41,565		-			206,935
Accrued expenses		178,592		298		65,794	(D)		244,684
Related party line of credit		1,499,875		-		-			1,499,875
Bank line of credit		49,738		-		-			49,738
A/R financing facility		8,502		-		-			8,502
Current portion of long term debt		57,286		-		-			57,286
Total current liabilities		2,656,961		69,052		65,794			2,791,807

Long term debt, net of current portion		735,432		-		-			735,432
Total liabilities		3,392,393		69,052		65,794			3,527,239

Stockholders' deficit
Preferred stock, $0.0001 par value, 15,000,000 shares authorized; 26,968 shares issued and outstanding on June 30, 2013		3							3
Common stock, $0.0001 par value, 50,000,000 shares authorized; 28,207,184 shares outstanding at June 30, 2013		2,821		-		73	(B)		2,894
Additional paid-in capital		19,307,205		-		49,927	(B)		19,357,132
Deferred compensation		(15,000)		-		-			(15,000)
Member's capital (deficit)				33,969		(33,969)	(C)		-
Accumulated deficit		(21,855,923)		-		(171,825)			(22,027,748)
Total stockholders' deficit		(2,560,894)		33,969		(155,794)			(2,682,719)
Total liabilities and stockholders' deficit		$ 831,499		$ 103,021		$ (90,000)			$ 844,520

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

VYSTAR CORPORATION AND SUBSIDIARIES

Unaudited Pro Forma Combined Statement of Operations

For the Six Months Ended June 30, 2013


	Historical Vystar Corporation		Historical Kiron, LLC		Pro Forma Adjustments			Pro Forma Combined

Revenues, net		534,451		428,377		-			962,828

Cost of revenues		411,279		136,866		65,794	(D)		613,939
Gross profit		123,172		291,511		(65,794)			348,889

Operating expenses
Sales and marketing		135,331		-		-			135,331
General and administrative		1,108,431		234,736		-			1,343,167

Research and development		19,634		-		-			19,634
Total operating expenses		1,263,396		234,736		-			1,498,132

Profit/(Loss) from operations		(1,140,224)		56,775		(65,794)			(1,149,243)

Other income (expense)
Other income		2,440		-		-			2,440
Interest income		6,541		-		-			6,541

Interest expense		(319,133)		-		-			(319,133)

Net profit/(loss)		(1,450,376)		56,775		(65,794)			(1,459,395)

Basic and diluted loss per share		(0.06)				-			(0.06)

Basic and diluted weighted average number of common shares outstanding		24,822,740				727,434	(B)		25,550,174

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

VYSTAR CORPORATION AND SUBSIDIARIES

Unaudited Pro Forma Combined Statement of Operations

For the Year Ended December 31, 2012


	Historical Vystar Corporation		Historical Kiron, LLC		Pro Forma Adjustments			Pro Forma Combined

Revenues, net		540,168		885,358		-			1,425,526

Cost of revenues		440,100		263,642		134,088	(E)		837,830
Gross profit		100,068		621,716		(134,088)			587,696

Operating expenses
Sales and marketing		409,963		-		-			409,963
General and administrative		1,665,918		462,012		-			2,127,930
Research and development		36,969		-		-			36,969
Goodwill impairment		87,000		-		-			87,000
Total operating expenses		2,199,850		462,012		-			2,661,862

Profit/(Loss) from operations		(2,099,782)		159,704		(134,088)			(2,074,166)

Other income (expense)
Interest income		526		-		-			526
Other income		5,250		-		-			5,250
Interest expense		(650,298)		-		-			(650,298)

Net income/(loss)		(2,744,304)		159,704		(134,088)			(2,718,688)

Basic and Diluted Loss per Share		(0.13)							(0.13)

Basic and Diluted Weighted Average Number of Common shares outstanding		20,445,512				727,434	(B)		21,172,946

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

KIRON CLINICAL SLEEP LAB, LLC

Notes to Unaudited Pro Forma Combined Financial Statements

1. Background and Basis of Pro Forma Presentation

On June 28, 2013, Vystar Corporation (“Vystar” or the “Company”) acquired the outstanding equity interests in Kiron, LLC, (“Kiron”), which provides sleep disorder testing and clinical management to physician’s offices and hospitals.

The unaudited pro forma combined financial information was prepared based on the historical financial statements of Vystar and Kiron.

Our acquisition has been accounted for in conformity with ASC 805 and uses the fair value concepts defined in Accounting Standards Codification 820, Fair Value Measurements and Disclosures (“ASC 820-10”). ASC 805 requires, among other things, that most assets acquired and liabilities assumed in an acquisition be recognized at their fair values as of the acquisition date and requires that fair value be measured based on the principles in ASC 820-10. ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10 also requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available.

Purchase Price Allocation

The acquisition was accounted for as a business combination as defined by FASB Topic 805 – Business Combinations. As of the date of this filing, the purchase price allocation and valuation has not been finalized, and is subject to change.


Value of 727,434 shares issued at $0.0688 per share			50,000
Cash paid at closing			90,000
Total consideration			140,000

Assets purchased:
Tangible assets:
Debt-free working capital			(800)
Fixed assets and equipment			34,769
Subtotal			33,969

Goodwill			106,031
Write-off of Goodwill			(106,031)
Total assets purchased			33,969

Net assets acquired			33,969

Pro Forma Financial Statement Adjustments

The following pro forma adjustments are included in the Company’s unaudited pro forma combined financial statements:

(A)

Cash paid at closing

(B)

To record the 727,434 shares of Vystar common stock, valued at $50,000 or $0.0688 per share, issued to Seller.

(C)

To eliminate Kiron member’s equity.

(D)

To record Medical Director Fee Expense of $64,600 and Medical Insurance Billing Software of $1,194 for the six month period ending June 30, 2013.

(E)

To record Medical Director Fee of $131,700 and Medical Insurance Billing Software of $2,388 for the twelve month period ending December 31, 2012.