UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549







FORM
10-Q







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


For
the quarterly period ended June 30, 2009




OR




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




For
the transition period from




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.)




3235
Satellite Blvd.


Building
400, Suite 290


Duluth, GA
30096


(Address
of Principal Executive Offices, Zip Code)




(770) 965-0383


(Registrant's telephone number including area
code)




(Former
Name or Former Address, if changed since last report)







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   o    NO  
x




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted 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 and post such
files).    YES    ̈
    NO    ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
      accelerated filer    ̈
            
            Accelerated
      filer    ̈
            
            Non-accelerated
      filer    ̈
            
            Smaller
      reporting company   x(Do
      not check if a smaller reporting
company)




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




As of
August 14, 2009, there were 12,656,274 shares of the Registrant’s common stock,
par value $0.0001 per share, outstanding.










Vystar
Corporation
 Form
10-Q for the Quarter Ended June 30, 2009
 
 Index
 
 Part I.  Financial
      InformationItem
      1.
                                                          Financial Statements
                                                          
                                                          3Balance Sheets at June 30, 2009 (unaudited) and
      December 31, 2008
                                                          
                                                          3Statements of Operations for the Three and Six
      Months Ended June 30, 2009 and 2008 and for the Period from February 2,
      2000 (Inception) to June 30, 2009 (unaudited)
                                                          
                                                          4Statements of Stockholders’ Equity for the Six
      Months Ended June 30, 2009 and for the Period from February 2, 2000
      (Inception) to June 30, 2009 (unaudited)
                                                          
                                                          5Statements of Cash Flows for the Six Months Ended
      June 30, 2009 and 2008 and for the Period from February 2, 2000
      (Inception) to June 30, 2009 (unaudited)
                                                          
                                                          7Notes to Financial Statements
      (unaudited)
                                                          
                                                          8Item
      2.
                                                          Management’s Discussion and Analysis of Financial
      Condition and Results of
      Operations
                                                          
                                                          20Item
      3.
                                                          Quantitative and Qualitative Disclosures About
      Market Risk
                                                          
                                                          24Item
      4.
                                                          Controls and Procedures
                                                          
                                                          25Part II.  Other
      InformationItem
      1.
                                                          Legal Proceedings
                                                          
                                                          25Item
      2.
                                                          Unregistered Sales of Equity Securities and Use of
      Proceeds
                                                          
                                                          25Item
      3.
                                                          Defaults Upon Senior
    Securities
                                                          
                                                          26Item
      4.
                                                          Submission of Matters to a Vote of Security
      Holders
                                                          
                                                          26Item
      5.
                                                          Other Information
                                                          
                                                          26Item
      6.
                                                          Exhibits
                                                          
                                                          27
  2
  Part
I.       FINANCIAL INFORMATION
 
 ITEM
1.               Financial
Statements
 
 VYSTAR
CORPORATION
 (A
Development Stage Company)
 BALANCE
SHEETS
 
 June 30, 2009
                                        
                                        
                                        December 31, 2008(unaudited)ASSETSCURRENT
      ASSETSCash
                                        
                                        $
                                        1,344,735
                                        
                                        
                                        $
                                        956,655Investments
                                        
                                        
                                        -
                                        
                                        
                                        
                                        750,000Note
      receivable due from related party, net of allowance for uncollectible
      amountof
      $90,205 and $120,205 at June 30, 2009 and December 31, 2008,
      respectively
                                        
                                        
                                        77,744
                                        
                                        
                                        
                                        60,000Inventory
                                        
                                        
                                        52,592
                                        
                                        
                                        
                                        -Prepaid
      expenses
                                        
                                        
                                        36,333
                                        
                                        
                                        
                                        44,938Deposits
                                        
                                        
                                        20,064
                                        
                                        
                                        
                                        -Other
                                        
                                        
                                        12,004
                                        
                                        
                                        
                                        1,217TOTAL
      CURRENT ASSETS
                                        
                                        
                                        1,543,472
                                        
                                        
                                        
                                        1,812,810PROPERTY
      AND EQUIPMENT, NET
                                        
                                        
                                        11,875
                                        
                                        
                                        
                                        15,307OTHER
      ASSETSNote
      receivable due from related party, net of current portion shown
      above
                                        
                                        
                                        -
                                        
                                        
                                        
                                        17,744Patents
      and trademarks, net
                                        
                                        
                                        101,622
                                        
                                        
                                        
                                        83,570Other
                                        
                                        
                                        5,887
                                        
                                        
                                        
                                        5,887TOTAL
      ASSETS
                                        
                                        $
                                        1,662,856
                                        
                                        
                                        $
                                        1,935,318LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                                        
                                        $
                                        105,254
                                        
                                        
                                        $
                                        74,498Accounts
      payable - related party
                                        
                                        
                                        36,453
                                        
                                        
                                        
                                        36,453Accrued
      expenses
                                        
                                        
                                        153,586
                                        
                                        
                                        
                                        129,155TOTAL
      CURRENT LIABILITIES
                                        
                                        
                                        295,293
                                        
                                        
                                        
                                        240,106LONG-TERM
      LIABILITIES
                                        
                                        
                                        10,259
                                        
                                        
                                        
                                        12,574TOTAL
      LIABILITIES
                                        
                                        
                                        305,552
                                        
                                        
                                        
                                        252,680STOCKHOLDERS'
      EQUITYPreferred
      stock, $0.0001 par value, 15,000,000 shares authorized;none
      issued and outstanding
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Common
      stock, $0.0001 par value, 50,000,000 shares authorized;12,656,274
      and 11,951,774 shares issued and outstanding atJune
      30, 2009 and December 31, 2008, respectively
                                        
                                        
                                        1,266
                                        
                                        
                                        
                                        1,195Additional
      paid-in capital
                                        
                                        
                                        11,192,693
                                        
                                        
                                        
                                        10,466,302Deferred
      compensation
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (18,384
                                        )Stock
      subscription receivable
                                        
                                        
                                        (1,000
                                        )
                                        
                                        
                                        -Deficit
      accumulated during development stage
                                        
                                        
                                        (9,835,655
                                        )
                                        
                                        
                                        (8,766,475
                                        )TOTAL
      STOCKHOLDERS' EQUITY
                                        
                                        
                                        1,357,304
                                        
                                        
                                        
                                        1,682,638TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                        
                                        $
                                        1,662,856
                                        
                                        
                                        $
                                        1,935,318
 
 The
accompanying notes are an integral part of these financial
statements.
  3
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 STATEMENTS
OF OPERATIONS
 (unaudited)
 Period From February 2,Three Months Ended
                            
                            
                            Six Months Ended
                            
                            
                            2000 (Inception) ToJune 30, 2009
                            
                            
                            June 30, 2008
                            
                            
                            June 30, 2009
                            
                            
                            June 30, 2008
                            
                            
                            June 30, 2009NET
      SALES
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            2,530
                            
                            
                            $
                            -
                            
                            
                            $
                            2,757COST
      AND EXPENSEResearch
      and development
                            
                            
                            45,956
                            
                            
                            
                            63,561
                            
                            
                            
                            128,093
                            
                            
                            
                            290,615
                            
                            
                            
                            2,246,839General
      and administrative
                            
                            
                            516,769
                            
                            
                            
                            934,802
                            
                            
                            
                            983,133
                            
                            
                            
                            3,293,226
                            
                            
                            
                            7,538,935562,726
                            
                            
                            
                            998,363
                            
                            
                            
                            1,111,226
                            
                            
                            
                            3,583,841
                            
                            
                            
                            9,785,774LOSS
      FROM OPERATIONS
                            
                            
                            (562,726
                            )
                            
                            
                            (998,363
                            )
                            
                            
                            (1,108,696
                            )
                            
                            
                            (3,583,841
                            )
                            
                            
                            (9,783,017
                            )OTHER
      INCOME (EXPENSE)Interest
      income
                            
                            
                            2,613
                            
                            
                            
                            2,839
                            
                            
                            
                            10,236
                            
                            
                            
                            6,297
                            
                            
                            
                            53,582Recovery
      (provision) for note receivable fromrelated
      party
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            30,000
                            
                            
                            
                            -
                            
                            
                            
                            (90,205
                            )Loss
      on disposal of assets
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (13,400
                            )Interest
      expense
                            
                            
                            (701
                            )
                            
                            
                            -
                            
                            
                            
                            (720
                            )
                            
                            
                            -
                            
                            
                            
                            (2,562
                            )Other
      expense
                            
                            
                            -
                            
                            
                            
                            (54
                            )
                            
                            
                            -
                            
                            
                            
                            (54
                            )
                            
                            
                            (54
                            )NET
      LOSS
                            
                            $
                            (560,814
                            )
                            
                            $
                            (995,578
                            )
                            
                            $
                            (1,069,180
                            )
                            
                            $
                            (3,577,598
                            )
                            
                            $
                            (9,835,656
                            )Basic
      and Diluted Loss per Share
                            
                            $
                            (0.05
                            )
                            
                            $
                            (0.09
                            )
                            
                            $
                            (0.09
                            )
                            
                            $
                            (0.31
                            )Basic
      and Diluted Weighted Average Number of Common Shares
      Outstanding
                            
                            
                            12,376,829
                            
                            
                            
                            10,854,300
                            
                            
                            
                            12,165,791
                            
                            
                            
                            11,422,106
 
 The
accompanying notes are an integral part of these financial
statements.
  4
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 STATEMENTS
OF STOCKHOLDERS’ EQUITY
 Number of
                                    Shares
                                  
                                  
                                  Common Stock
                                  
                                  
                                  Additional Paid-in
                                    Capital
                                  
                                  
                                  Stock
                                    Subscription
                                    Receivable
                                  
                                  
                                  Deferred
                                    Compensation
                                  
                                  
                                  Deficit
                                    Accumulated
                                    During
                                    Development
                                    Stage
                                  
                                  
                                  TotalBeginning
      Balance, 2/2/00 (Inception)
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Common
      stock issued to founder of Vystar LLC
                                  
                                  
                                  2,500,000
                                  
                                  
                                  
                                  250
                                  
                                  
                                  
                                  (250
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  25,311
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (25,311
                                  )
                                  
                                  
                                  -Ending
      Balance, 12/31/00
                                  
                                  
                                  2,500,000
                                  
                                  
                                  
                                  250
                                  
                                  
                                  
                                  25,061
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (25,311
                                  )
                                  
                                  
                                  -Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  4,808
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (4,808
                                  )
                                  
                                  
                                  -Ending
      Balance, 12/31/01
                                  
                                  
                                  2,500,000
                                  
                                  
                                  
                                  250
                                  
                                  
                                  
                                  29,869
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (30,119
                                  )
                                  
                                  
                                  -Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  4,275
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (4,275
                                  )
                                  
                                  
                                  -Ending
      Balance, 12/31/02
                                  
                                  
                                  2,500,000
                                  
                                  
                                  
                                  250
                                  
                                  
                                  
                                  34,144
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (34,394
                                  )
                                  
                                  
                                  -Common
      stock cancelled at merger of Vystar LLC
                                  
                                  
                                  (2,500,000
                                  )
                                  
                                  
                                  (250
                                  )
                                  
                                  
                                  250
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Common
      stock issued to founders of Vystar Corporation
                                  
                                  
                                  2,825,000
                                  
                                  
                                  
                                  283
                                  
                                  
                                  
                                  3,817
                                  
                                  
                                  
                                  (4,100
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Ending
      Balance, 12/31/03
                                  
                                  
                                  2,825,000
                                  
                                  
                                  
                                  283
                                  
                                  
                                  
                                  38,211
                                  
                                  
                                  
                                  (4,100
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (34,394
                                  )
                                  
                                  
                                  -Additional
      founders' shares of common stock issued
                                  
                                  
                                  8,475,000
                                  
                                  
                                  
                                  847
                                  
                                  
                                  
                                  (847
                                  )
                                  
                                  
                                  4,100
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  4,100Common
      stock issued in private placement memorandum at $1.00/share during 2004,
      net of issuance costs of $74,833
                                  
                                  
                                  692,000
                                  
                                  
                                  
                                  69
                                  
                                  
                                  
                                  617,098
                                  
                                  
                                  
                                  (10,000
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  607,167Share-based
      compensation to employees vested during 2004
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5,868
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5,868Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (500,154
                                  )
                                  
                                  
                                  (500,154
                                  )Ending
      Balance, 12/31/04
                                  
                                  
                                  11,992,000
                                  
                                  
                                  
                                  1,199
                                  
                                  
                                  
                                  660,330
                                  
                                  
                                  
                                  (10,000
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (534,548
                                  )
                                  
                                  
                                  116,981Common
      stock issued in private placement memorandum at $1.00/share during Jan
      2005, net of issuance costs of $3,900
                                  
                                  
                                  78,000
                                  
                                  
                                  
                                  8
                                  
                                  
                                  
                                  74,092
                                  
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  84,100Common
      stock issued in private placement memorandum at $1.50/share during 2005,
      net of issuance costs of $71,806 cash and $9,451 non-cash
                                  
                                  
                                  795,674
                                  
                                  
                                  
                                  80
                                  
                                  
                                  
                                  1,112,173
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,112,253Share-based
      compensation to employees vested during 2005
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  32,760
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  32,760Share-based
      payments for services vested during 2005
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  50,232
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  50,232Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,265,923
                                  )
                                  
                                  
                                  (1,265,923
                                  )Ending
      Balance, 12/31/05
                                  
                                  
                                  12,865,674
                                  
                                  
                                  
                                  1,287
                                  
                                  
                                  
                                  1,929,587
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,800,471
                                  )
                                  
                                  
                                  130,403Common
      stock issued with warrants in private placement memorandum at $1.50/share
      during 2006, net of issuance costs of $82,643 cash and $8,404
      non-cash
                                  
                                  
                                  823,131
                                  
                                  
                                  
                                  82
                                  
                                  
                                  
                                  1,143,569
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,143,651Common
      stock issued for exercise of warrants
                                  
                                  
                                  19,000
                                  
                                  
                                  
                                  2
                                  
                                  
                                  
                                  9,498
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  9,500Common
      stock issued for services rendered during June, 2006, valued at
      $1.00/share
                                  
                                  
                                  7,500
                                  
                                  
                                  
                                  1
                                  
                                  
                                  
                                  7,499
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  7,500Common
      stock issued for services rendered during September, 2006, valued at
      $1.00/share
                                  
                                  
                                  2,500
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,500
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,500Common
      stock issued for services rendered during October, 2006, valued at
      $1.00/share
                                  
                                  
                                  6,000
                                  
                                  
                                  
                                  1
                                  
                                  
                                  
                                  5,999
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,000Common
      stock issued for services rendered during December, 2006, valued at
      $1.00/share
                                  
                                  
                                  36,490
                                  
                                  
                                  
                                  4
                                  
                                  
                                  
                                  36,486
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  36,490Share-based
      compensation to employees vested during 2008
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  204,659
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  204,659Share-based
      payments for services vested during 2006
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,803
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,803Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,086,297
                                  )
                                  
                                  
                                  (1,086,297
                                  )Ending
      Balance, 12/31/06
                                  
                                  
                                  13,760,295
                                  
                                  
                                  $
                                  1,377
                                  
                                  
                                  $
                                  3,342,600
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  (2,886,768
                                  )
                                  
                                  $
                                  457,209
 
 The
accompanying notes are an integral part of these financial
statements.
  5
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 STATEMENTS
OF STOCKHOLDERS’ EQUITY
 Number of
                              Shares
                            
                            
                            Common Stock
                            
                            
                            Additional Paid-in
                              Capital
                            
                            
                            Stock
                              Subscription
                              Receivable
                            
                            
                            Deferred
                              Compensation
                            
                            
                            Deficit
                              Accumulated
                              During
                              Development
                              Stage
                            
                            
                            TotalEnding
      Balance, 12/31/06
                            
                            
                            13,760,295
                            
                            
                            $
                            1,377
                            
                            
                            $
                            3,342,600
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            (2,886,768
                            )
                            
                            $
                            457,209Common
      stock issued with warrants in private placement memorandum at $1.50/share
      during 2007, net of issuance costs of $61,911 cash and $9,648
      non-cash
                            
                            
                            597,501
                            
                            
                            
                            60
                            
                            
                            
                            824,632
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            824,692Common
      stock issued for exercise of warrants
                            
                            
                            757,399
                            
                            
                            
                            76
                            
                            
                            
                            379,374
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            379,450Common
      stock issued for services rendered during January, 2007, valued at
      $1.00/share
                            
                            
                            2,500
                            
                            
                            
                            -
                            
                            
                            
                            2,500
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,500Common
      stock issued for services rendered during February, 2007, valued at
      $1.00/share
                            
                            
                            4,000
                            
                            
                            
                            -
                            
                            
                            
                            4,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            4,000Common
      stock issued for services rendered during March, 2007, valued at
      $1.00/share
                            
                            
                            14,200
                            
                            
                            
                            1
                            
                            
                            
                            14,199
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            14,200Common
      stock issued for services rendered during April, 2007, valued at
      $1.00/share
                            
                            
                            9,925
                            
                            
                            
                            1
                            
                            
                            
                            9,924
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            9,925Common
      stock issued for services rendered during June, 2007, valued at
      $1.00/share
                            
                            
                            2,500
                            
                            
                            
                            -
                            
                            
                            
                            2,500
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,500Share-based
      compensation to employees vested during 2007
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            97,502
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            97,502Share-based
      payments for services vested during 2007
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            22,314
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            22,314Net
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (1,239,634
                            )
                            
                            
                            (1,239,634
                            )Ending
      Balance, December 31, 2007
                            
                            
                            15,148,320
                            
                            
                            
                            1,515
                            
                            
                            
                            4,699,545
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (4,126,402
                            )
                            
                            
                            574,658Common
      stock issued in private placement memorandum at $1.50/share during 2008,
      net of issuance costs of $375 cash
                            
                            
                            5,000
                            
                            
                            
                            -
                            
                            
                            
                            7,125
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            7,125Contribution
      of founder's stock
                            
                            
                            (4,900,000
                            )
                            
                            
                            (490
                            )
                            
                            
                            490
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Common
      stock issued for services rendered during March, 2008, valued at
      $1.00/share
                            
                            
                            5,000
                            
                            
                            
                            -
                            
                            
                            
                            5,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            5,000Common
      stock issued for services rendered during April, 2008, valued at
      $1.00/share, net of issuance costs of $4,080 non-cash
                            
                            
                            59,080
                            
                            
                            
                            6
                            
                            
                            
                            54,994
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            55,000Common
      stock issued for services rendered during May, 2008, valued at
      $1.50/share
                            
                            
                            1,333
                            
                            
                            
                            -
                            
                            
                            
                            2,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,000Common
      stock issued for services rendered during May, 2008, valued at
      $1.63/share
                            
                            
                            3,374
                            
                            
                            
                            1
                            
                            
                            
                            5,499
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            5,500Common
      stock issued for services rendered during December, 2008, valued at
      $2.00/share
                            
                            
                            10,500
                            
                            
                            
                            1
                            
                            
                            
                            20,999
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            21,000Common
      stock issued in private placement memorandum at $2.00/share during 2008,
      net of issuance costs of $91,371 cash and $17,162 non-cash
                            
                            
                            1,189,000
                            
                            
                            
                            119
                            
                            
                            
                            2,286,509
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,286,628Common
      stock issued for exercise of warrants during 2008, net of issuance costs
      of $7,317 cash
                            
                            
                            430,167
                            
                            
                            
                            43
                            
                            
                            
                            211,224
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            211,267Share-based
      compensation to employees vested during 2008
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,572,276
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,572,276Share-based
      payments for services vested during 2008, net of issuance costs of $21,916
      non-cash
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,545,695
                            
                            
                            
                            -
                            
                            
                            
                            (1,545,695
                            )
                            
                            
                            -
                            
                            
                            
                            -Amortization
      of deferred compensation during 2008
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,527,311
                            
                            
                            
                            -
                            
                            
                            
                            1,527,311Forgiveness
      of debt by founder
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            54,946
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            54,946Net
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (4,640,073
                            )
                            
                            
                            (4,640,073
                            )Ending
      Balance, December 31, 2008
                            
                            
                            11,951,774
                            
                            
                            
                            1,195
                            
                            
                            
                            10,466,302
                            
                            
                            
                            -
                            
                            
                            
                            (18,384
                            )
                            
                            
                            (8,766,475
                            )
                            
                            
                            1,682,638Common
      stock issued in private placement memorandum at $2.00/share during 2009,
      net of issuance costs of $10,300 cash and $1,096 non-cash
                            
                            
                            288,000
                            
                            
                            
                            29
                            
                            
                            
                            565,671
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            565,700Common
      stock issued for exercise of warrants during 2009
                            
                            
                            416,500
                            
                            
                            
                            42
                            
                            
                            
                            20,458
                            
                            
                            
                            (1,000
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            19,500Share-based
      compensation to employees vested during 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            59,400
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            59,400Share-based
      payments for services vested during 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            80,862
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            80,862Amortization
      of deferred compensation during 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            18,384
                            
                            
                            
                            -
                            
                            
                            
                            18,384Net
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (1,069,180
                            )
                            
                            
                            (1,069,180
                            )Ending
      Balance, June 30, 2009 (unaudited)
                            
                            
                            12,656,274
                            
                            
                            $
                            1,266
                            
                            
                            $
                            11,192,693
                            
                            
                            $
                            (1,000
                            )
                            
                            $
                            -
                            
                            
                            $
                            (9,835,655
                            )
                            
                            $
                            1,357,304
 
 The
accompanying notes are an integral part of these financial
statements.
  6
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 STATEMENTS
OF CASH FLOWS
 (unaudited)
 Period From February 2,Six Months Ended
                                
                                
                                2000 (Inception) ToJune 30, 2009
                                
                                
                                June 30, 2008
                                
                                
                                June 30, 2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                                
                                $
                                (1,069,180
                                )
                                
                                $
                                (3,577,598
                                )
                                
                                $
                                (9,835,655
                                )Adjustment
      to reconcile net loss to net cashused
      in operating activitiesStock-based
      compensation expense
                                
                                
                                140,262
                                
                                
                                
                                1,560,502
                                
                                
                                
                                2,302,786Provision
      (recovery) on related party note receivable
                                
                                
                                (30,000
                                )
                                
                                
                                -
                                
                                
                                
                                90,205Amortization
      of deferred compensation
                                
                                
                                18,384
                                
                                
                                
                                1,499,737
                                
                                
                                
                                1,545,696Forgiveness
      of debt by founder
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                54,946Depreciation
                                
                                
                                3,433
                                
                                
                                
                                3,585
                                
                                
                                
                                27,503Amortization
                                
                                
                                1,492
                                
                                
                                
                                1,502
                                
                                
                                
                                10,344Loss
      on disposal of assets
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                13,400(Increase)
      decrease in assetsInventory
                                
                                
                                (52,592
                                )
                                
                                
                                -
                                
                                
                                
                                (52,592
                                )Prepaid
      expenses
                                
                                
                                18,051
                                
                                
                                
                                (34,380
                                )
                                
                                
                                (63,599
                                )Deposits
                                
                                
                                (20,064
                                )
                                
                                
                                -
                                
                                
                                
                                (20,064
                                )Other
                                
                                
                                (10,787
                                )
                                
                                
                                -
                                
                                
                                
                                (17,892
                                )Increase
      (decrease) in liabilitiesAccounts
      payable
                                
                                
                                30,756
                                
                                
                                
                                69,715
                                
                                
                                
                                105,254Accounts
      payable - related party
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                36,453Accrued
      expenses
                                
                                
                                2,119
                                
                                
                                
                                4,658
                                
                                
                                
                                131,274Other
                                
                                
                                (2,317
                                )
                                
                                
                                (1,262
                                )
                                
                                
                                44,653Net
      cash used in operating activities
                                
                                
                                (970,443
                                )
                                
                                
                                (473,541
                                )
                                
                                
                                (5,627,288
                                )CASH
      FLOWS FROM INVESTING ACTIVITIESRedemption
      (purchase) of investment
                                
                                
                                750,000
                                
                                
                                
                                (500,000
                                )
                                
                                
                                -Advances
      to related party - note receivable
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (257,908
                                )Proceeds
      on related party note receivable
                                
                                
                                30,000
                                
                                
                                
                                -
                                
                                
                                
                                89,959Cost
      of patents and trademarks
                                
                                
                                (6,677
                                )
                                
                                
                                (15,822
                                )
                                
                                
                                (62,387
                                )Purchase
      of property and equipment
                                
                                
                                -
                                
                                
                                
                                (8,320
                                )
                                
                                
                                (52,778
                                )Net
      cash provided by (used in) investing activities
                                
                                
                                773,323
                                
                                
                                
                                (524,142
                                )
                                
                                
                                (283,114
                                )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of common stock, net of issuance costs of$11,396,
      $66,093, and $476,213 for the periodsended
      June 30, 2009, June 30, 2008, andfrom
      inception to June 30, 2009, respectively
                                
                                
                                585,200
                                
                                
                                
                                1,223,489
                                
                                
                                
                                7,255,137Net
      cash provided by financing activities
                                
                                
                                585,200
                                
                                
                                
                                1,223,489
                                
                                
                                
                                7,255,137NET
      INCREASE IN CASH
                                
                                
                                388,080
                                
                                
                                
                                225,806
                                
                                
                                
                                1,344,735CASH
      - BEGINNING OF PERIOD
                                
                                
                                956,655
                                
                                
                                
                                573,177
                                
                                
                                
                                -CASH
      - END OF PERIOD
                                
                                $
                                1,344,735
                                
                                
                                $
                                798,983
                                
                                
                                $
                                1,344,735
 
 The
accompanying notes are an integral part of these financial
statements.
  7
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 History
and Nature of Business
 Vystar®
Corporation (“Vystar” or the “Company”) is the creator and exclusive owner of
the innovative technology to produce Vytex® Natural Rubber Latex ("NRL"). This
technology reduces antigenic protein in natural rubber latex products to
virtually undetectable levels in both liquid NRL and finished latex
products.  Vystar intends to introduce Vytex NRL, its new “low
protein” natural rubber latex, throughout the worldwide marketplace that uses
NRL or latex substitutes as a component of manufactured products.Natural
rubber latex is used in an extensive range of products including balloons,
textiles, footwear and clothing (threads), adhesives, foams, furniture, carpet,
paints, coatings, protective equipment, sporting equipment, and especially
health care products such as condoms, surgical and exam gloves. The Company
plans to produce Vytex through toll manufacturing and licensing agreements and
has started introducing Vytex NRL into the supply channels with aggressive,
targeted marketing campaigns directed to the end users.  During 2008,
the Company signed an agreement with Revertex (Malaysia) for the production of
Vytex NRL.  Revertex is a non-exclusive, toll manufacturer for Vystar
and is in full production mode to manufacture Vytex NRL
commercially.  In May 2009, the Company and Alatech Healthcare, LLC
received 510(k) clearance from the U.S. Food and Drug Administration to market
and sell Alatech’s Envy TM
condom manufactured with Vytex NRL.  The Envy condom will be the first
medical product available in the U.S. made from Vytex NRL and it will carry
labeling that will reflect the lowest antigenic protein content currently
available in a natural rubber latex medical device.
 
 Vystar
LLC, the predecessor to the Company, was formed February 2, 2000, as a Georgia
limited liability company by Travis W. Honeycutt. The Company’s operations under
the LLC entity were focused substantially on the research, development and
testing of the Vytex NRL process, as well as attaining intellectual property
rights. In 2003, the Company reorganized as Vystar Corporation, a Georgia
Corporation, at which time all assets and liabilities of the limited liability
company became assets and liabilities of Vystar Corporation, including all
intellectual property rights, patents and trademarks.
 
 Basis
of Presentation
 The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles of the United States of America
(“GAAP”) for interim financial information.  Accordingly, certain
information and footnotes required by GAAP for complete financial statements may
be condensed or omitted.  These interim financial statements should be
read in conjunction with our audited financial statements and notes thereto
included in our Form S-1, Registration Statement under the Securities Act of
1933.  The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying
disclosures.  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.
  8
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Concentration
of Credit Risk
 Certain
financial instruments potentially subject the Company to concentrations of
credit risk.  These financial instruments consist primarily of cash,
investments (an unsecured certificate of deposit that matured April 11, 2009)
and, as discussed in Note 8, an unsecured related party note
receivable.  Cash held in operating accounts in many cases exceeds the
Federal Deposit Insurance Corporation, or FDIC, insurance
limits.  While we monitor cash balances in our operating accounts on a
regular basis and adjust the balances as appropriate, these balances could be
impacted if the underlying financial institutions fail.  To date, we
have experienced no loss or lack of access to our cash; however, we can provide
no assurances that access to our cash will not be impacted by adverse conditions
in the financial markets.
 
 Inventory
 Inventory
is stated at the lower of cost or market and cost is determined using the
first-in, first-out (FIFO) method. The valuation of inventory requires the
Company to estimate net realizable value. Inventory is written down for
estimated obsolescence to the lesser of cost or market value.
 
 Loss
Per Share
 The
Company follows SFAS No. 128, “Earnings Per Share,” resulting in the
presentation of basic and diluted earnings per share.  Because the
Company reported a net loss in 2009 and 2008, common stock equivalents,
including stock options and warrants, were anti-dilutive; therefore, the amounts
reported for basic and dilutive loss per share were the
same.  Excluded from the computation of diluted loss per share were
options to purchase 3,360,000 shares and 3,225,000 shares of common stock for
2009 and 2008, respectively, as their effect would be
anti-dilutive.  Warrants to purchase 2,548,318 shares and 2,177,834
shares of common stock for 2009 and 2008, respectively, were also excluded from
the computation of diluted loss per share as their effect would be
anti-dilutive.
 
 Revenue
 Revenue
is recognized at the time product is shipped.
 
 Recently
Adopted Pronouncements
 
 In
April 2009, the FASB issued FASB Staff Position No. 107-1 (FSP FAS
107-1) and APB 28-1 (APB 28-1), which amends FASB Statement No. 107, Disclosures about Fair Value of
Financial Instruments and APB Opinion No. 28, Interim Financial Reporting,
to require disclosures about the fair value of financial instruments for interim
reporting periods. FSP FAS 107-1 and APB 28-1 will be effective for interim
reporting periods ending after June 15, 2009. The Company adopted FSP FAS
107-1 and APB 28-1 on a prospective basis and the impact did not have a material
effect on its results of operations, financial position, or cash
flows.
  9
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Recently
Issued Pronouncements
 
 In June
2006 the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48 (“FIN 48”), Accounting for Uncertainty in Income
Taxes. FIN 48 prescribes detailed guidance for the financial statement
recognition, measurement and disclosure of uncertain tax positions recognized in
an enterprise’s financial statements in accordance with FASB Statement
No. 109, Accounting for
Income Taxes. Tax positions must meet a more-likely-than-not recognition
threshold at the effective date to be recognized upon the adoption of FIN 48 and
in subsequent periods. FIN 48 was effective for the Company at the beginning of
the annual period ending December 31, 2008.  In December 2008, the FASB
issued FSP FIN 48-3, which deferred the effective date of FIN 48 for certain
enterprises to annual financial statements for fiscal years beginning after
December 15, 2008.  Management has elected to defer the application of
FIN 48 in accordance with FSP FIN 48-3. The Company will continue to follow FAS
5, Accounting for
Contingencies, until it adopts FIN 48.  We are presently
evaluating whether the adoption of this interpretation will have a material
impact on our financial statements.
 
 NOTE
2 – OPERATIONS
 
 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.  The Company has incurred significant
losses and experienced negative cash flow since its
inception.  Further, at June 30, 2009, the deficit accumulated during
the development stage amounted to approximately $9,836,000.
 
 The
Company is still in the development stage at June 30, 2009.  As of
July 31, 2009, during 2009 the Company has received approximately $586,200, net
of issuance costs, through the issuance of 704,500 shares of common stock,
primarily through a private placement (Note 6) and exercise of warrants. The
Company’s product development is proceeding on schedule and revenue generation
began on a limited basis during the first quarter of 2009.  Successful
completion of the Company’s development program and, ultimately, the attainment
of profitable operations are dependent upon future events, including acceptance
by manufacturers of the Vytex NRL technology and consumer confidence in products
manufactured using it.  The Company will continue to monitor available
capital to determine if additional equity investments will be required to
fulfill its development activities.  Management believes the current
business plan is attractive enough to investors to raise additional capital if
necessary, but believes current liquid assets are sufficient to allow the
Company to continue as a going concern through June 30, 2010.
 
 On
November 13, 2008 the Company filed a Registration Statement on Form S-1
under the Securities Act of 1933, with the United States Securities and Exchange
Commission (SEC).  On February 11, 2009, the Company amended the
initial statement and filed a second pre-effective amendment on May 29, 2009,
registering for resale additional shares that were previously
issued.  Additional pre-effective amendments were subsequently filed
and the Company’s 1933 Act S-1 Registration Statement and 1934 8-A registration
were declared effective by the SEC on August 7, 2009.  The Company has
4,803,338 shares of its common stock registered for resale and plans to have its
shares trading on the Over the Counter Bulletin Board (OTCBB) during the third
quarter of 2009.
  10
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
3 – PROPERTY AND EQUIPMENT
 
 Property
and equipment consists of the following at June 30, 2009 and December 31,
2008:
 
 June 30, 2009
                    
                    
                    December 31, 2008Furniture
      and fixtures
                    
                    $
                    15,347
                    
                    
                    $
                    15,347Equipment
                    
                    
                    23,431
                    
                    
                    
                    23,43138,778
                    
                    
                    
                    38,778Accumulated
      depreciation
                    
                    
                    (26,903
                    )
                    
                    
                    (23,471
                    )$
                    11,875
                    
                    
                    $
                    15,307
 
 Depreciation
expense for the three months ended June 30, 2009 and 2008 was $1,886 and for the
six months ended June 30, 2009 and 2008 was $3,433 and $3,585,
respectively.
 
 NOTE
4 – PATENTS AND TRADEMARKS
 
 Patents
represent legal and other fees associated with the registration of
patents.  The Company has two patents and two provisional patent
submissions with the United States Patent and Trade Office (USPTO), as well as
an international PCT (Patent Cooperation Treaty) patent.
 
 The
Company has incurred legal and other fees associated with its application to the
USPTO for trademark protection for “Vystar”, “Vytex”, and “Created by
Nature.  Recreated by Science.” during 2009 and 2008.
 
 Patents
and trademarks are as follows:
 
 June 30, 2009
                    
                    
                    December 31, 2008Patents
                    
                    $
                    106,428
                    
                    
                    $
                    86,884Accumulated
      amortization
                    
                    
                    (10,344
                    )
                    
                    
                    (8,852
                    )96,084
                    
                    
                    
                    78,032Trademarks
                    
                    
                    5,538
                    
                    
                    
                    5,538$
                    101,622
                    
                    
                    $
                    83,570
 
 Amortization
expense for the three months ended June, 2009 and 2008 was $746 and $741,
respectively, and for the six months ended June 30, 2009 and 2008 was $1,492 and
$1,502, respectively.
 
 NOTE
5 – INCOME TAXES
 
 There is
no income tax benefit recorded for the losses for the six months ended June 30,
2009 and 2008 since management has determined that the realization of the net
deferred tax asset is not assured and has created a valuation allowance for the
entire amount of the net deferred tax asset.
  11
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
6 – STOCKHOLDERS’ EQUITY
 
 In April
2009, the Company’s Board of Directors authorized the number of preferred shares
to be increased from 10,000,000 shares to 15,000,000 shares and the number of
common shares from 25,000,000 shares to 50,000,000 shares.
 
 Common
Stock and Warrants
 The
Company’s predecessor company, Vystar LLC, issued 2,500,000 shares of its common
stock at inception in February 2000 to its founder.  These shares were
cancelled and re-issued by Vystar Corporation at merger in December
2003.  Also during 2003, Vystar Corporation issued 325,000 shares to
its remaining founders for $4,100.  During 2004, the Company issued an
additional 8,475,000 shares to its founders in order to adjust the number of
issued and outstanding shares at that time.
 
 During
the period from November 2004 through January 13, 2005, the Company issued
770,000 shares of its common stock in a private placement for proceeds of
$691,267, net of issuance costs of $78,733.
 
 The
private placement memorandum was amended on December 28, 2004.  Under
the terms of the amendment and subsequent revisions on April 10, 2006 and
September 25, 2006, the Company issued 795,674 shares in 2005 for proceeds of
$1,112,253, net of issuance costs of $71,806 cash and $9,451 non-cash; 823,131
shares in 2006 for proceeds of $1,143,651, net of issuance costs of $82,643 cash
and $8,404 non-cash; 597,501 shares in 2007 for proceeds of $824,692, net of
issuance costs of $61,911 cash and $9,648 non-cash and 5,000 shares in 2008 for
proceeds of $7,125, net of issuance costs of $375 cash, prior to its closing in
April 2008.  All of the shares issued were common
stock.  Terms of the memorandum included issuing warrants to purchase
an aggregate of 1,308,965 shares of common stock at $.50 per
share.  During 2008 and 2007, 423,167 and 755,899 shares issued in the
private placement, respectively, were purchased through the exercise of the
warrants.  The unexercised warrants, representing 26,000 shares,
expired during 2008.
 
 During
2005 the Company issued stock purchase warrants to purchase 17,300 shares of
common stock at an exercise price of $.50 in exchange for services rendered with
the private placement, valued at $9,451. The warrants are exercisable until
January 2010 and vested immediately.
 
 During
2006 the Company issued stock purchase warrants to purchase 36,233 shares of
common stock at exercise prices ranging from $1.00 to $1.50 per share in
exchange for services rendered, valued at $11,499.  The warrants are
exercisable for periods ranging from 2011 to 2016 and vested
immediately.
 
 During
2006 the Company issued 52,490 shares of common stock for services rendered
valued at $52,490.
 
 During
2007 the Company issued stock purchase warrants to purchase 126,525 shares of
common stock at exercise prices ranging from $.50 to $1.50 in exchange for
services rendered, valued at $34,320.  The warrants are exercisable
for periods ranging from 2009 through 2017 and vested immediately.
 
 During
2007 the Company issued 33,125 shares of common stock for professional services
valued at $33,125.
 
 During
February 2008 the Company’s former CEO surrendered 4,900,000 shares of the
Company’s common stock issued to him during 2004.  These shares were
cancelled and returned to the Company for future re-issue, eliminating the need
to increase the Company’s number of authorized shares.
  12
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
6 – STOCKHOLDERS’ EQUITY (CONTINUED)
 
 Common
Stock and Warrants (Continued)
 
 On May 5,
2008, the Company initiated an equity raise through a private placement
projected at $3,000,000 at completion, through an issuance of 1,500,000 shares
of common stock and warrants to purchase an additional 750,000 shares of common
stock at $1.00 per share.  On October 31, 2008 the Company closed the
offering after receiving $2,378,000 and issuing 1,189,000 shares of common stock
and warrants to purchase an additional 594,500 shares of common
stock.  In April 2009 the Company opened the private placement to
existing shareholders and qualified investors under the same terms and
conditions for a period not to exceed May 28, 2009.  The Company
received an additional $585,200 and issued 288,000 shares of common stock and
warrants to purchase an additional 144,000 shares of common stock.
 
 At
December 31, 2008 the Company recognized an increase of $54,946 in additional
paid-in capital resulting from forgiveness of debt by the former
CEO.
  During
2008 the Company issued stock purchase warrants to purchase 1,924,721 shares of
common stock at exercise prices ranging from $.01 to $2.00 in exchange for
services rendered, valued at $1,769,916.  The warrants are exercisable
for periods ranging from 2012 through 2018 and vested immediately.
 
 During
2008 the Company issued 79,287 shares of common stock for professional services
valued at $88,500, including 4,080 shares valued at $4,080 for services rendered
in connection with the Company’s private placement memorandum.
 
 During
2009 the Company issued stock purchase warrants to purchase 130,039 shares of
common stock at exercise prices ranging from $1.00 to $1.63 in exchange for
services rendered, valued at $81,960.  The warrants are exercisable by
2019 and vested immediately.
 
 NOTE
7 – STOCK-BASED COMPENSATION
 
 In
December 2004 the Financial Accounting Standards Board (“FASB”) issued SFAS 123
(revised 2004), Share-Based
Payment (“SFAS 123(R)”).  SFAS 123(R) supersedes APB Opinion
No. 25, Accounting for Stock
Issued to Employees, and amends SFAS No. 95, Statement of Cash
Flows.  Generally, the approach in SFAS 123(R) is similar to
the approach described in SFAS 123.  However, SFAS 123(R) requires
share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair values at the date
of grant, net of estimated forfeitures.  Pro forma disclosure is no
longer an alternative.
 
 On
January 1, 2006, the Company adopted SFAS 123(R) using the modified prospective
method as permitted under SFAS 123(R) and reflected compensation expense during
2006 in accordance with the transition provisions.  Under the modified
prospective method, prior periods are not restated to reflect the impact of
adopting the new standard at earlier dates.
  13
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
7 – STOCK-BASED COMPENSATION (CONTINUED)
 
 The
Company used the Black-Scholes option pricing model to estimate the grant-date
fair value of awards granted during 2009 and 2008.  The following
assumptions were used:
 
 ·
              Expected
      Dividend Yield – because the Company does not currently pay dividends, the
      expected dividend yield is zero;
 ·
              Expected
      Volatility in Stock Price – because the Company is not publicly traded,
      the expected volatility of similar public entities (including companies
      engaged in the manufacture and/or distribution of medical, surgical, and
      healthcare supplies) was considered with expected volatility ranging from
      23.26% - 38.85%;
 ·
              Risk-free
      Interest Rate – reflects the average rate on a United States Treasury bond
      with maturity equal to the expected term of the option, ranging from 1.51
      – 5.05%; and
 ·
              Expected
      Life of Awards – because the Company is still in the development stage and
      has had minimal experience with the exercise of options or warrants for
      use in determining the expected life for each award, the simplified method
      was used to calculate an expected life based on the midpoint between the
      vesting date and the end of the contractual term of the stock
      award.
 
 The
Company recorded approximately $54,000 and $80,000 of stock-based compensation
expense for the three month periods ended June 30, 2009 and 2008, respectively,
and approximately $140,000 and $1,467,000 for the six month periods ended June
30, 2009 and 2008, respectively, related to employee stock options and stock
warrants issued to board members and nonemployees.  Of this,
approximately $47,000 and $16,000 for the three month periods ended June 30,
2009 and 2008, respectively, and approximately $59,000 and $1,361,000 for the
six month periods ended June 30, 2009 and 2008, respectively, was attributable
to the fair value of shares issued under the Company’s stock option plan that
vested during those periods.  As of June 30, 2009, approximately
$783,405 of unrecognized compensation expense related to non-vested share-based
awards remains to be recognized over a weighted average period of approximately
7 years.
 
 Stock
Options
 
 During
2004, the Board of Directors of the Company adopted a stock option plan (the
“Plan”) and authorized up to 4,000,000 shares to be issued under the
Plan.  The Company’s Board of Directors authorized an increase in the
number of shares to be issued under the Plan to 10,000,000 shares and to include
the independent Board members in the plan in lieu of continuing the previous
practice of granting warrants each quarter to independent board members for
services.  At June 30, 2009, there were 5,400,000 shares of common
stock reserved for issuance under the Plan.  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 typically granted at an exercise price
equal to the fair market value of the Company’s common stock on the date of
grant, typically vest over periods up to 4 years and are typically exercisable
up to 10 years.  During the six months ended June 30, 2009 options to
purchase 1,600,000 shares were issued under the Plan, of which 400,000 were
forfeited during the period.
  14
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
7 – STOCK-BASED COMPENSATION (CONTINUED)
 
 Stock
Options (continued)
 
 The
weighted-average assumptions used in the option pricing model for stock option
grants were as follows for the six months ended June 30:
 
 2009
                    
                    
                    2008Expected
      Dividend Yield
                    
                    
                    -
                    
                    
                    
                    -Expected
      Volatility in Stock Price
                    
                    
                    37.85
                    %
                    
                    
                    23.51
                    %Risk-Free
      Interest Rate
                    
                    
                    1.71
                    %
                    
                    
                    2.68
                    %Expected
      Life of Stock Awards - Years
                    
                    
                    5
                    
                    
                    
                    5.1Weighted
      Average Fair Value at Grant Date
                    
                    $
                    0.58
                    
                    
                    $
                    0.71
 
 The
following table summarizes all stock option activity of the Company for the six
months ended June 30, 2009:
 
 Number of
                    
                    
                    Weighted AverageOptions
                    
                    
                    Exercise PriceOutstanding,
      December 31, 2008
                    
                    
                    3,400,000
                    
                    
                    $
                    1.03Granted
                    
                    
                    1,600,000
                    
                    
                    $
                    1.63Forfeited
                    
                    
                    (400,000
                    )
                    
                    $
                    1.63Outstanding,
      June 30, 2009
                    
                    
                    4,600,000
                    
                    
                    $
                    1.22Exercisable,
      June 30, 2009
                    
                    
                    3,360,000
                    
                    
                    $
                    1.06
 
 Warrants
 
 Warrants
are issued to third parties as payment for services and in conjunction with the
issuance of common stock.  The fair value of each common stock warrant
issued for services is estimated on the date of grant using the Black-Scholes
option pricing model.  The following weighted average assumptions were
used for warrants granted for the six months ended June 30, 2009 and
2008:
 
 2009
                      
                      
                      2008Expected
      Dividend Yield
                      
                      
                      -
                      
                      
                      
                      -Expected
      Volatility in Stock Price
                      
                      
                      37.85
                      %
                      
                      
                      22.38
                      %Risk-Free
      Interest Rate
                      
                      
                      1.71
                      %
                      
                      
                      2.19
                      %Expected
      Life of Awards, Years
                      
                      
                      4.9
                      
                      
                      
                      4.3
  15
  VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
7 – STOCK-BASED COMPENSATION (CONTINUED)
 
 Warrants
(Continued)
 
 The
following table represents the Company’s warrant activity for the six months
ended June 30, 2009:
 
 Weighted Average
                      
                      
                      
                      
                      
                      Weighted AverageNumber of
                      
                      
                      Grant Date
                      
                      
                      Weighted Average
                      
                      
                      RemainingWarrants
                      
                      
                      Fair Value
                      
                      
                      Exercise Price
                      
                      
                      Contractual Life (Years)Outstanding,
      December 31, 2008
                      
                      
                      2,690,779
                      
                      
                      
                      
                      
                      $
                      0.85
                      
                      
                      
                      5.14Issued
      in private placement
                      
                      
                      144,000
                      
                      
                      $
                      1.00
                      
                      
                      $
                      1.00Granted
                      
                      
                      130,039
                      
                      
                      $
                      0.62
                      
                      
                      $
                      1.00Exercised
                      
                      
                      (416,500
                      )
                      
                      
                      
                      
                      
                      $
                      0.05Expired
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      $
                      -Outstanding,
      June 30, 2009
                      
                      
                      2,548,318
                      
                      
                      
                      
                      
                      
                      $
                      1.05
                      
                      
                      
                      4.18Exercisable,
      June 30, 2009
                      
                      
                      2,548,318
                      
                      
                      
                      
                      
                      
                      $
                      1.05
                      
                      
                      
                      4.18
 
 For the
period since inception through December 31, 2006, the Company issued warrants to
purchase shares of the Company’s common stock for services
rendered.  The warrants were issued at exercise prices ranging from
$.50 to $1.50 per share and are exercisable over periods ranging from five to
ten years.  All of the warrants vested immediately.  The
fair value of the warrants was calculated as of the date of the grant utilizing
the Black-Scholes option pricing model with the following
assumptions:  expected dividend yield of 0, stock volatility ranging
from 26.17% - 29.93%, 3.36% - 4.34% risk-free interest rate, and a 2.5 to 5 year
expected life of the awards.  The total amount of the fair value
($6,095 expense and $14,854 cost of raising capital) was recorded when vesting
occurred.  All warrants issued were fully vested within the calendar
year in which they were granted.
 
 During
2007 the Company issued warrants for services at exercise prices ranging from
$.50 to $1.50 per share, exercisable over periods ranging from two to ten
years.  All of the warrants vested immediately.  The fair
value of the warrants was calculated as of the date of the grant utilizing the
Black-Scholes option pricing model with the following assumptions: expected
dividend yield of 0, stock volatility ranging from 22.07% - 39.25%, 3.36% -
5.05% risk-free interest rate, and a 2 to 5 year expected life of the
awards.  The total amount of the fair value ($25,875 expense and
$8,448 cost of raising capital) was recorded when vesting occurred.
 
 The
Company issued warrants for services during 2008 at exercise prices ranging from
$1.00 to $2.00 per share, exercisable over periods ranging from four to ten
years.  All of the warrants vested immediately.  The fair
value of the warrants was calculated as of the date of the grant utilizing the
Black-Scholes option pricing model and assumptions as detailed
above.  The total amount of the fair value ($185,143 expense,
$1,545,695 deferred compensation cost, and $39,078 cost of raising capital) was
recorded when vesting occurred.
 
 The
Company issued warrants for services during the six months ended June 30, 2009
at exercise prices ranging from $1.00 to $1.63 per share, exercisable over 5 and
10 year periods.  All of the warrants vested
immediately.  The fair value of the warrants was calculated as of the
date of the grant utilizing the Black-Scholes option pricing model and
assumptions as detailed above.  The total amount of the fair value
($80,864 expense and $1,096 cost of raising capital) was recorded when vesting
occurred.
  16
 
 VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
8 – RELATED PARTY TRANSACTIONS
 
 Universal
Capital Management
 
 On
January 31, 2008, the Company entered into a management agreement with Universal
Capital Management, Inc. ("UCM"), a venture capital company that invests in
development stage companies. Under this agreement, UCM agreed to provide
management services, including assistance with strategic planning, investment
banking consultation and investor introduction services, and investor relations
services for a period of three months, expiring April 30,
2008.  Pursuant to the terms of this agreement, the Company issued UCM
warrants, valued at approximately $1,491,000, to purchase 1,000,000 shares of
its common stock at an exercise price of $0.01.  These warrants are
exercisable in whole or in part at or before January 31, 2013 and vested
immediately.
 
 On April
30, 2008, the Company entered into an additional management agreement with UCM
for a period of one year pursuant to which UCM agreed to continue to provide
management services, including day-to-day managerial.  Pursuant to the
terms of this agreement, UCM was issued warrants, valued at approximately
$55,000, to purchase 500,000 shares of the Company's common stock at an exercise
price of $2.00 per share.  The warrants are exercisable in whole or in
part at or before April 30, 2013 and vested immediately.  In the event
that the Company elects to extend the management agreement for an additional one
year term beyond the first year of the agreement,
the Company has agreed to issue additional warrants to purchase 500,000 shares
of its common stock at an exercise price of $0.01 per share.  Prior to
its expiration, the Company notified UCM that it did not intend to renew the
management agreement expiring April 30, 2009 for an additional one year term and
the agreement lapsed.
 
 As a
result of these two agreements, UCM held a beneficial ownership of 10.9% in the
Company at June 30, 2009.
 
 On August
15, 2008, the Company entered into an agreement with UCM whereby UCM agreed to
assist the Company in registering its shares publicly, as well as provide
management assistance with certain responsibilities unique to a publicly held
entity.  In consideration for these services, the Company agreed to issue
600,000 shares of its common stock to stockholders of UCM, contingent upon the
Company’s registration statement becoming effective, on or about the effective
date of the registration statement.
 
 In May
2009, as previously discussed in Note 2, the Company prepared a second
pre-effective amendment to its Form S-1, Registration Statement under the
Securities Act of 1933.  The structure in the initial filing, which
included issuing 600,000 shares of its common stock to stockholders of UCM
contingent upon the acceptance of the registration statement, was abandoned in
this amendment.  Under the terms of the August 15, 2008 agreement with
UCM that agreement has been terminated
  17
 
 VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
8 – RELATED PARTY TRANSACTIONS (CONTINUED)
 
 Climax
Global Energy
 
 During
2006 and 2005, the Company advanced cash to and made payments on behalf of
Climax Global Energy, Inc. (“Climax”), a company controlled by the Company’s
former CEO, in the amounts of $12,795 and $242,654, respectively.  At
December 31, 2007, the balance due from Climax was $240,409.  Climax
is in a pre-revenue, research and development mode and is in the process of
raising capital through a private placement memorandum.  While the
Company will provide its best efforts to fully collect the balance due, which is
unsecured, management reserved at December 31, 2008 and 2007 approximately
$120,000 of the balance remaining due to the uncertainty involved.  As
such, the Company recorded a corresponding charge in 2007 of approximately
$120,000 in its statement of operations.
 
 On August
15, 2008, the Company entered into an agreement with Climax which specified the
payment terms of the note receivable discussed above.  The significant
terms were established as follows:  (A) the note is non-interest
bearing, (B) a $25,000 payment to be made on or before September 30, 2008, and
(C) equal monthly payments of $5,000 will commence in October
2008.  In the event that Climax attains certain financial thresholds
as specified in the agreement, receives new third party equity funding exceeding
$20 million on a cumulative basis or Climax is sold or completes an initial
public offering, the remaining amount due shall become payable thirty days
following the end of the calendar year in which the event
occurred.  In any event, the note shall be due and payable in full no
later than January 31, 2010.  As of June 30, 2009 all payments due
under the agreement had been received by the Company and management determined
that $30,000 of the $120,000 reserve created in 2007 could be released, based
upon payment history and Climax representations of available cash
balances.
  Officers
and Directors
 
 On March
31, 2009, the Company’s four independent directors each received warrants,
valued at approximately $12,000, to purchase 20,000 shares, of the Company’s
common stock with an exercise price of $1.63.  The warrants are
exercisable in whole or in part at or before March 31, 2019 and vested
immediately.
 
 As
previously discussed in Note 7, during April 2009 the Company’s Board of
Directors authorized the inclusion of the independent Board members in the
Company’s stock option plan in lieu of continuing the previous practice of
granting warrants each quarter to independent board members.  Each
Board member was granted options to purchase 400,000 shares of the Company’s
common stock at an exercise price of $1.63.  Vesting occurs at the end
of each complete calendar quarter served as an independent board member of the
Company at a rate of 20,000 shares each.  The options are exercisable
in whole or in part before June 30, 2019.
 
 Other
 
 For the
six months ended June 30, 2009, Travis Honeycutt, founding CEO, provided to the
Company prospect advisory services in the thread industry and received $18,000
for his services.
  18
 
 VYSTAR
CORPORATION
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS (unaudited)
 JUNE 30,
2009 AND 2008
 
 NOTE
8 – RELATED PARTY TRANSACTIONS (CONTINUED)
 
 Other
(Continued)
 
 At June
30, 2009 and December 31, 2008, the Company has accrued severance of $81,250
payable to the Company’s former CFO, Glenn Smotherman.  Mr. Smotherman
has agreed to payment of this liability beginning at the earlier of payment in
full of the Climax receivable or the Company’s achievement of specific sales
goals.  When payment begins, the liability will be satisfied in 24
equal monthly payments.
 
 At June
30, 2009 and December 31, 2008, the Company has a balance payable to Reactive
Energy, LLC, a company wholly owned by the Company’s former CEO, for management
fees and contract services of $36,453.  The Company intends to satisfy
this liability upon the effectiveness of its registration
statement.
 
 NOTE
9 – SUBSEQUENT EVENTS
 
 In August
2009, as previously discussed in Note 2, the Company prepared fourth and fifth
pre-effective amendments to its Form S-1, Registration Statement under the
Securities Act of 1933.  The Registration statement was declared
effective by the SEC on August 7, 2009.
  19
  ITEM
      2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
 
 GENERAL
 
 Vystar
LLC, the predecessor to the Company, was formed February 2, 2000, as a Georgia
limited liability company by Travis W. Honeycutt. The Company’s operations under
the LLC entity were focused substantially on the research, development and
testing of the Vytex® Natural Rubber Latex ("NRL") process, as well as attaining
intellectual property rights. In 2003, the Company reorganized as Vystar®
Corporation, a Georgia Corporation, at which time all assets and liabilities of
the limited liability company became assets and liabilities of Vystar
Corporation, including all intellectual property rights, patents and
trademarks.
 
 We are
the creator and exclusive owner of the innovative technology to produce NRL.
This technology reduces antigenic protein in natural rubber latex products to
virtually undetectable levels in both liquid NRL and finished latex
products.  Vystar intends to introduce Vytex NRL, our new “low
protein” natural rubber latex, throughout the worldwide marketplace that uses
NRL or latex substitutes as a component of manufactured
products.  Natural rubber latex is used in an extensive range of
products including balloons, textiles, footwear and clothing (threads),
adhesives, foams, furniture, carpet, paints, coatings, protective equipment,
sporting equipment, and especially health care products such as condoms,
surgical and exam gloves. We plan to produce Vytex through toll manufacturing
and licensing agreements and have started introducing Vytex NRL into the supply
channels with aggressive, targeted marketing campaigns directed to the end
users.
 
 We are a
developmental stage company whose primary activities since inception have been
devoted to the development of NRL as well as raising capital to support those
efforts, but our focus is changing to developing the market for NRL and
beginning operations.  As we move from a development stage company to
a product vendor, we expect that our financial condition and results of
operations will undergo substantial change. In particular, we expect to record
both revenue and expense from product sales and to incur increased costs for
sales and marketing expenses. Accordingly, the financial condition and results
of operations reflected in our historical financial statements are not expected
to be indicative of our future financial condition and results of
operations.
  Critical
Accounting Policies and Estimates
  Our
discussion and analysis of our financial condition and results of operations is
based on the accompanying 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 revenues 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 policy affects our more significant
judgments and estimates used in the preparation of our financial
statements.
 
 Non Cash Compensation Expense
- On January 1, 2006, Vystar adopted SFAS No. 123(R), Share Based Payment. SFAS
No. 123(R) requires all share-based payments, including grants of
employee stock options and warrants, to be recognized in the financial
statements based on their fair values.
  20
 
 We
compute the value of 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 are then
straight-line expensed over the service period of the awards.
 
 RESULTS
OF OPERATIONS
  Comparison
of the Three Months Ended June 30, 2009 with the Three Months Ended June 30,
2008
  Revenues
  We
are a development stage company that has yet to commence significant revenue
generating operations.
  Operating
Expenses
  Our
operating expenses were $562,726 and $998,363 for the three months ended June
30, 2009 and 2008, respectively, for a decrease of $435,637 or 44%. In 2009,
$54,190 was recorded for stock-based compensation as well as an additional
$4,597 for amortization of deferred compensation.  The deferred
compensation expense represents the amortized fair value of warrants issued for
future services to non-employees.  This compares with $80,073 for
stock-based compensation in 2008 for the same period and $506,040 for
amortization of deferred compensation in that period.  The stock-based
compensation charges to operations in 2009 and 2008 were primarily for incentive
stock options granted under our Incentive Stock Option Plan to executive
officers and were made so that their interests would be aligned with those of
shareholders, providing incentive to improve Company performance on a long-term
basis.  Grants of warrants were also made to third parties for various
services rendered to preserve operating capital.
  Included
in our operating expenses for the three months ended June 30, 2009 was $45,956
for research and development expenses compared to $63,561 for the three months
ended June 30, 2008 and $516,770 for general and administrative expenses
compared to $934,802 for the same period in 2008.  Without including
the effects of the stock-based compensation and amortization of deferred charges
discussed above, general and administrative expenses increased $102,756 or 29%
compared with 2008 due to legal and accounting fees related to the filing of our
initial registration statement as well as increased marketing and public
relations expenses as we move toward becoming a product vendor.
  Research
and development expenses currently consist primarily of compensation for
employees and contractors engaged in internal research and product development
activities, laboratory operations, and related operating expenses.
  General
and administrative expenses consist primarily of compensation and support costs
for management and administrative staff, and for other general and
administrative costs, including executive, accounting and finance, legal,
consulting and other operating expenses.
  Other
Income (Expense)
  Other
income was $1,912 for the three months ended June 30, 2009, consisting of $2,613
of interest income on cash deposits net of interest expense of
$701.  This compares to $2,839 of interest income for the three months
ended June 30, 2008.
  21
  Net
Loss
  Net loss
was $560,814 and $995,578 for the three months ended June 30, 2009 and 2008,
respectively, for a decrease of $434,764, primarily resulting from reduced
general and administrative expenses incurred as described above.
  Comparison
of the Six Months Ended June 30, 2009 with the Six Months Ended June 30,
2008
  Revenues
  We
recognized $2,530 in net sales revenue for the six months ended June 30, 2009;
there were no sales during the same period of 2008.  Our operations
are continuing to develop and expand in anticipation of commencing significant
revenue generation later this year but we are still a development stage company
as of June 30, 2009.
  Operating
Expenses
  Our
operating expenses were $1,111,226 and $3,583,841 for the six months ended June
30, 2009 and 2008, respectively, for a decrease of $2,472,615 or 69%. In 2009,
$140,262 was recorded for stock-based compensation as well as an additional
$18,384 for amortization of deferred compensation.  The deferred
compensation expense represents the amortized fair value of warrants issued for
future services to non-employees.  This compares with $1,467,006 for
stock-based compensation in 2008 for the same period and amortization of
deferred compensation of $1,499,737.  The stock-based compensation
charges to operations in both years were primarily for incentive stock options
granted under our Incentive Stock Option Plan to executive officers and
independent board members.  They were made so that their interests
would be aligned with those of shareholders, providing incentive to improve
Company performance on a long-term basis.  Grants of warrants were
also made to third parties for various services rendered to preserve operating
capital.
  Included
in our operating expenses for the six months ended June 30, 2009 was $128,093
for research and development expenses compared to $290,615 for the six months
ended June 30, 2008 and $983,133 for general and administrative expenses
compared to $3,293,226 for the same period in 2008.  With the
stock-based compensation and amortization of deferred charges discussed above
excluded from the comparison, general and administrative expenses increased
$304,246 or 61% during 2009 compared with 2008 due to legal and accounting fees
related to filing our initial registration statement as well as our annual audit
fees and increased staffing, public relations and marketing expenses as we
continue developing our operations.
  Research
and development expenses currently consist primarily of compensation for
employees and contractors engaged in internal research and product development
activities, laboratory operations, and related operating
expenses.  The reduction in research and development expenses for the
six months ended June 30, 2009 from the same period in 2008 resulted primarily
from a reduction of $163,757 in stock-based compensation expense for awards to
employees and contractors engaged in these activities.
  We expect
to continue to incur substantial research and development expenses for clinical
trials, regulatory submissions, assistance with manufacturing trials, and
product enhancements.
  General
and administrative expenses consist primarily of compensation and support costs
for management and administrative staff, and for other general and
administrative costs, including executive, accounting and finance, legal,
consulting and other operating expenses.
  22
  We do not
expect general and administrative expenses to increase significantly over our
2008 levels.  While we expect to increase the level of corporate and
administrative activity, including increases associated with our operation as a
public company, and significantly increase expenditures related to the future
production and sales of our products, these increases will be offset by a
reduced level of stock-based compensation from what we experienced during
2008.
  Other
Income (Expense)
  Other
income was $39,516 for the six months ended June 30, 2009, consisting of $10,236
of interest income on cash deposits, the $30,000 release of a provision for a
related party note receivable and interest expense of $720.  This
compares to $6,297 of interest income for the six months ended June 30, 2008
reduced by $54 of other expense.
  Net
Loss
  Net loss
was $1,069,180 and $3,577,598 for the six months ended June 30, 2009 and 2008,
respectively, for a decrease of $2,508,418, primarily resulting from the
reduction of stock-based compensation and deferred compensation amortization
expenses incurred as described above.
  LIQUIDITY
AND CAPITAL RESOURCES
  As of
June 30, 2009, we had $1,344,735 in cash.
  Sources and Uses of
Cash
  For the
six months ended June 30, 2009 and 2008, net cash used by operations was
$970,443 and $473,541, respectively.  The negative cash flow for the
June 30, 2009 period was primarily the result of the $1,069,180 net
loss.  This was reduced by several non-cash charges, primarily the
stock-based compensation charges of $140,262 and $18,384 for amortization of
deferred compensation.  Releasing $30,000 of the provision on a
related note receivable offset the above charges.  The Company made
its initial purchases of inventory, in the amount of $52,592, during this
period.  This was offset by the decrease in prepaid expenses of
$18,051, primarily from expensing prepaid insurance policies.  An
increase in deposits against future inventory purchases of $20,064 offset by an
increase in accounts payable of $30,756 accounted for the majority of the
remaining negative cash flow from operations.   The negative cash
flow for the six months ended June 30, 2008 resulted primarily from the net loss
of $3,577,598 reduced by non-cash charges related to stock-based compensation
expense of $1,560,502 and amortization of deferred compensation of
$1,499,737.   Prepaid expenses increased $34,380, primarily from
the timing of the insurance policy renewals and accounts payable increased
$69,715 due to increased marketing and legal costs.
  Net cash provided by investing
activities for the six months ended June 30, 2009 was $773,323.  This
resulted primarily from the maturing in April 2009 of a $750,000 certificate of
deposit.  In addition, we received $30,000 in proceeds from a related
party note receivable during the period and incurred $6,677 in legal expenses
related to our patents and trademarks.  During the six months ended
June 30, 2008, net cash of $524,142 was used by investing
activities.  This consisted of the purchase of a $500,000 certificate
of deposit, $15,822 in legal expenses related to our patents and equipment
purchases of $8,320.
  Net cash
provided by financing activities for the six months ended June 30, 2009 was
$585,200 in proceeds from the sale of common stock and warrants, net of issuance
costs of $11,396.  Net cash provided by financing activities for the
six months ended June 30, 2008 was $1,223,489.  We received proceeds
from the sale of common stock and warrants of $1,223,489, net of issuance costs
of $66,093.
  23
  Our future expenditures and
capital requirements will depend on numerous factors, including: the rate at
which we can introduce and sell NRL to manufacturers; the costs of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights; and market acceptance of our products and competing
technological developments. We expect that we will incur in excess of $2 million
of expenditures over the next 12 months. As we expand our activities and
operations, our cash requirements are expected to increase at a rate consistent
with revenue growth after we have achieved sustained revenue
generation.
  Our
business does not presently generate the cash needed to finance our current and
anticipated operations. We believe we have raised sufficient capital to finance
our operations for the next twelve (12) months.
  We expect
that our cash used in operations will continue to increase as a result of the
following planned activities:
  ·
              The
      addition of staff to our workforce as needs
  arise;
 ·
              Increased
      spending for the expansion of our research and development efforts,
      including clinical trials, regulatory submissions, assistance with
      manufacturing trials and product
enhancements;
 ·
              Increased
      spending in marketing as our products are introduced into the
      marketplace;
 ·
              Increases
      in our general and administrative activities related to our operations as
      a reporting public company and related corporate compliance
      requirements.
  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
  24
 
 ITEM
      4.
              CONTROLS
      AND PROCEDURES
 
 (A)
              Evaluation
      of disclosure controls and
procedures
 
 Our management, including our principal
executive and principal financial officer, has evaluated the effectiveness of
our disclosure controls and procedures as of June 30, 2009.  Our
disclosure controls and procedures are designed to provide reasonable assurance
that the information required to be disclosed in this quarterly report on Form
10-Q has been appropriately recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and
forms, and that such information is accumulated and communicated to our
management, including our principal executive and principal financial officer,
to allow timely decisions regarding required disclosure.  Based on
that evaluation, our principal executive and principal financial officer have
concluded that our disclosure controls and procedures are effective at the
reasonable assurance level.
 
 (B)
              Changes
      in internal control over financial
reporting
 
 We
regularly review our system of internal control over financial reporting and
make changes to our processes and systems to improve controls and increase
efficiency, while ensuring that we maintain an effective internal control
environment.  Changes may include such activities as implementing new,
more efficient systems, consolidating activities, and migrating
processes.
 
 There
were no changes in our internal control over financial reporting that occurred
during the second quarter of 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  PART
II.  OTHER INFORMATION
  ITEM
1. LEGAL
PROCEEDINGS
  None.
  ITEM
2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Set forth
below is information regarding shares of common stock, warrants and options to
purchase common stock issued by the Company in the quarter ended June 30, 2009,
that were not registered under the Securities Act of 1933, as amended (the
“Securities Act”). Also included is the consideration, if any, received by the
Company for such shares, warrants and options and information relating to the
section of the Securities Act, or rule of the Securities and Exchange
Commission, under which exemption from registration was claimed.
  (a) Common Stock and
Warrant Financings
  From
April 1, 2009 through June 30, 2009, the Company issued 288,000 shares of
its common stock at a price of $2.00 per share. In connection with such
offering, the Company issued one warrant to purchase one share of common stock
at an exercise price of $1.00 per share for each two shares of common stock
purchased.
  25
 
 From
April 1, 2009 through June 30, 2009, the Company issued 14,500 and 400,000
shares of common stock upon the exercise of warrants issued prior to April 1,
2009 at $1.00 per share and $.01 per share, respectively.
  From
April 1, 2009 through June 30, 2009, the Company issued 6,127 warrants to
purchase one share of common stock at an exercise price of $1.00 per share and
5,335 warrants to purchase one share of common stock at an exercise price of
$1.63 per share for services rendered to the Company.
 
 (b) Stock Option
Grants
  From
April 1, 2009, through June 30, 2009, the Company issued options to directors to
purchase an aggregate of 1,600,000 shares of common stock at an
exercise price of $1.63. As the result of the resignation of a director in June
2009, 400,000 of such options terminated.  The remaining options vest
60,000 per quarter beginning June 30, 2009.  Through the date hereof,
none of such options have been exercised.
  (c) Application of
Securities Laws and Other Matters
  No
underwriters were involved in the foregoing sales of securities. The securities
described in section (a) of this Item 15 were issued to investors in
reliance upon the exemption from the registration requirements of the Securities
Act, as set forth in Section 4(2) under the Securities Act and
Regulation D promulgated thereunder, as applicable, relative to sales by an
issuer not involving any public offering, to the extent an exemption from such
registration was required.
  The
issuance of stock options as described in section (b) of this Item 15
were issued pursuant to written compensatory plans or arrangements with the
Company’s employees, directors and consultants, in reliance on the exemption
provided by Rule 701 promulgated under the Securities Act. All recipients
either received adequate information about the Company or had access, through
employment or other relationships, to such information.
  All of
the foregoing securities are deemed restricted securities for purposes of the
Securities Act. All certificates representing the issued shares of common stock,
warrants and options described in this Item 15 included appropriate legends
setting forth that the securities had not been registered and the applicable
restrictions on transfer.
  ITEM
3.  DEFAULTS UPON SENIOR SECURITIES
  None
  ITEM
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  None
  ITEM
5.  OTHER INFORMATION
  None
  26
  ITEM
6.  EXHIBITS
  Exhibit
Index *
 *
Some Exhibits have certain confidential information redacted pursuant to a
request for confidential treatment
 
 Exhibit
                  Number
                
                Description3.1
                
                Articles
      of Incorporation of Vystar Acquisition Corporation (now named Vystar
      Corporation) dated December 17, 2003 (as amended) (incorporated by
      reference to Vystar’s Registration Statement on Form S-1 originally filed
      on November 13, 2008, Registration Statement No.
    333-155344)3.2
                
                Bylaws
      of Vystar Corporation (incorporated by reference to Vystar’s Registration
      Statement on Form S-1 originally filed on November 13, 2008, Registration
      Statement No. 333-155344)4.1
                
                Specimen
      Certificate evidencing shares of Vystar common stock (incorporated by
      reference to Vystar’s Registration Statement on Form S-1 originally filed
      on November 13, 2008, Registration Statement No.
    333-155344)4.2
                
                Form
      of Share Subscription Agreements and Investment Letter (First Private
      Placement) (incorporated by reference to Vystar’s Registration Statement
      on Form S-1 originally filed on November 13, 2008, Registration Statement
      No. 333-155344)4.3
                
                Form
      of Share Subscription Agreement and Investment Letter (Second Private
      Placement) (incorporated by reference to Vystar’s Registration Statement
      on Form S-1 originally filed on November 13, 2008, Registration Statement
      No. 333-155344)4.4
                
                Form
      of Vystar Corporation Investor Questionnaire and Subscription Agreement
      (Third Private Placement) (incorporated by reference to Vystar’s
      Registration Statement on Form S-1 originally filed on November 13, 2008,
      Registration Statement No. 333-155344)10.1*
                
                Manufacturing
      Agreement between Vystar Corporation and Revertex (Malaysia) Sdn. Bhd.
      effective April 1, 2008 (incorporated by reference to Vystar’s
      Registration Statement on Form S-1 originally filed on November 13, 2008,
      Registration Statement No. 333-155344)10.2
                
                Executive
      Employment Agreement between Vystar Corporation and William R. Doyle,
      dated November 11, 2008 (incorporated by reference to Vystar’s
      Registration Statement on Form S-1 originally filed on November 13, 2008,
      Registration Statement No. 333-155344)10.3
                
                Management
      Agreement dated January 31, 2008 between Universal Capital Management,
      Inc. and Vystar Corporation (incorporated by reference to Vystar’s
      Registration Statement on Form S-1 originally filed on November 13, 2008,
      Registration Statement No. 333-155344)10.4
                
                Letter
      Agreement dated August 15, 2008 between Universal Capital Management, Inc.
      and Vystar Corporation (incorporated by reference to Vystar’s Registration
      Statement on Form S-1 originally filed on November 13, 2008, Registration
      Statement No. 333-155344)10.5
                
                Addendum
      to Management Agreement dated February 29, 2008 between Universal Capital
      Management, Inc. and Vystar Corporation (previously
  filed)
  27
  10.6
                
                Warrant
      Purchase Agreement dated January 31, 2008 between Universal Capital
      Management, Inc. and Vystar Corporation (incorporated by reference to
      Vystar’s Registration Statement on Form S-1 originally filed on November
      13, 2008, Registration Statement No. 333-155344)10.7
                
                Management
      Agreement dated April 30, 2008 between Universal Capital Management, Inc.
      and Vystar Corporation (incorporated by reference to Vystar’s Registration
      Statement on Form S-1 originally filed on November 13, 2008, Registration
      Statement No. 333-155344)10.8
                
                Warrant
      Purchase Agreement dated April 30, 2008 between Universal Capital
      Management, Inc. and Vystar Corporation (incorporated by reference to
      Vystar’s Registration Statement on Form S-1 originally filed on November
      13, 2008, Registration Statement No. 333-155344)10.9
                
                Vystar
      Corporation 2004 Long-Term Compensation Plan, as amended (incorporated by
      reference to Vystar’s Registration Statement on Form S-1 originally filed
      on November 13, 2008, Registration Statement No.
    333-155344)10.10
                
                Employment
      Agreement between Vystar Corporation and Sandra Parker dated April 1, 2008
      (incorporated by reference to Vystar’s Registration Statement on Form S-1
      originally filed on November 13, 2008, Registration Statement No.
      333-155344)10.11
                
                First
      Amendment to Employment Agreement dated July 1, 2009, between Vystar
      Corporation and Sandra Parker (incorporated by reference to Vystar’s
      Registration Statement on Form S-1 originally filed on November 13, 2008,
      Registration Statement No. 333-155344)10.12*
                
                Distributor
      Agreement among Vystar Corporation, Centrotrade Minerals & Metals,
      Inc. and Centrotrade Deutschland, GmbH dated January 6, 2009 (incorporated
      by reference to Vystar’s Registration Statement on Form S-1 originally
      filed on November 13, 2008, Registration Statement No.
      333-155344)10.13
                
                Note
      agreement between Vystar Corporation and Climax Global Energy, Inc. dated
      August 15, 2008 (incorporated by reference to Vystar’s Registration
      Statement on Form S-1 originally filed on November 13, 2008, Registration
      Statement No. 333-155344)10.14
                
                Lockup
      Agreement with Glen W. Smotherman dated July 30, 2009 (incorporated by
      reference to Vystar’s Registration Statement on Form S-1 originally filed
      on November 13, 2008, Registration Statement No.
    333-155344)31.1
                
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                
                Certification
      of Chief Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act
      of 200232.1
                
                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
 
 *
              Confidential treatment requested
      as to certain portions, which portions have been omitted and filed
      separately with the Securities and Exchange
    Commission.
  28
  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
      CORPORATIONDate:  August
      14, 2009
                            By:
                            /s/ William R. DoyleWilliam
      R. DoyleChairman,
      President, Chief Executive Officer and Director (Principal Executive
      Officer)Date:
      August 14, 2009
                            By:
                            /s/ Linda S. HammockLinda
      S. HammockActing
      Chief Financial Officer (Principal Financial and Accounting
    Officer)
  29