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Replies to post #110407 on Vystar Corp (VYST)
08/08/19 8:48 AM
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08/08/19 11:08 AM
VYST Plan to Reduce OS & Add Huge Valuation…
Before you read this post, understand that these are thoughts that I touched on a good while back as some food for thought for what I believe is the best course of action for VYST to take as a team. Now, I believe that Steve Rotman, the CEO of VYST and his team are doing something similar or exactly as I had previously believed they would do.
I think with the share buyback, people are presuming that ”money” is going to be the ”medium of exchange” to execute a share buyback. I believe the company is going to use a ”newly created special class” of ”preferred shares” as the ”medium of exchange” to buyback shares from the Insiders. I say this because of where I believe the shares to be bought would be coming from… the Insiders.
Below is the VYST 8-K that reflects that they are going to create two separate classes of preferred shares to have a total of three separate classes of preferred shares:
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001308027&owner=exclude&count=40
https://www.sec.gov/Archives/edgar/data/1308027/000138713119005223/vyst-8k_071919.htm
This further leads me to think that those preferred shares were created to be used as the ”medium of exchange” for purchasing common shares from the Insiders to eliminate a huge amount of shares from the Outstanding Shares (OS); therefore significantly reducing the OS. After reviewing this earlier post below, I believe that there is a good chance that Insiders own somewhere in the area of 75% of the OS:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=150289912
I believe that the OS for VYST is still under 1.1 billion shares. So, as a worst-case scenario, 75% of 1,100,000,000 shares would equate to approximately 800,000,000 shares (rounded) to be bought from Insiders. This would reduce the OS for VYST down to approximately 300 million shares as calculated below:
1,100,000,000 shares – 800,000,000 shares = 300,000,000 shares for VYST OS
So, let’s presume that the Insiders own roughly 800 million shares. Let’s presume that Steve Rotman and his team of VYST agrees to use 8 million shares of preferred shares as the ”medium of exchange” to buy the 800 million shares of VYST owned by Insiders. So…
800,000,000 Common Shares = 8,000,000 Preferred Shares
Let’s presume that they give the 8 million preferred shares the right to be converted into common shares on a 1 for 1 basis to be issued after VYST goes to trading on the NASDAQ like how they stated such within the PR below:
https://www.otcmarkets.com/stock/VYST/news/story?e&id=1398911
This means that they can take the 800,000,000 shares and then retire them to then take the OS down from slightly over a billion shares to then being approximately 300,000,000 shares.
So, why would the Insiders be willing to have their 800,000,000 shares exchanged for 8 million preferred shares to later be converted into common after they get to the NASDAQ? Because this will significantly reduce the OS and this is what helps to better position VYST for growth since the lower the OS, the greater the valuation for VYST. This would greatly contribute towards VYST trading in the dollars while not needing to do a reverse split. If the Insiders were to do nothing and keep their 800,000,000 shares, at .025 per share, the value of those shares would be $20,000,000 in value. Also, I’m sure that the Insiders of VYST do not need these shares to provide for them food, clothing, or shelter. I believe they are well off enough to where the money that would be made from their VYST shares could be put off to later to give the company a chance to grow even more to provide more value to their investment. If those 8,000,000 shares of preferred are converted into common on a 1 for 1 basis later after VYST is trading on the NASDAQ with meeting its minimum bid price requirement of $4.00 per share, that would mean at least $32,000,000 in value. That’s an extra $12 million in valued added collectively for the Insiders.
For the average investor, let’s say that you owned 1,000,000 shares of VYST. At the price of .025 per share, that’s $25,000 in value.
After this process of the share reduction takes place and VYST gets to the NASDAQ, your 1,000,000 shares of VYST would be worth a minimum of $400,000 in value. This would be after VYST getting to the NASDAQ by meeting the $4.00 per share minimum bid requirement
Let’s talk VYST Valuation:
I believe that the Rotmans Furniture acquisition has made VYST very profitable, How much profitable? None of us know right know, but I believe we will know soon enough. So, for now, I’m going to speculate on what I believe a valuation for VYST would look like. If for any reason any of the variables that I will consider below changes, then use the Substitute Property to replace any variable with that “known” variable. These are the key variables below as I believe they will exist although they should be considered speculative in nature as the exact or finite variables are still unknown for now:
VYST Key Variables
** $35,000,000 Revenues
** 50% Gross Profit Margin
** 15% Net Profit Margin
** PE Ratio for the Furniture Industry is 36.53:
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.html
** $18.6 Tax NOL – See Page 11
https://www.sec.gov/Archives/edgar/data/1308027/000138713118001267/vyst-10k_123117.htm
Tax NOL Deduction Key Notes to Understand
https://www.irs.gov/publications/p536#en_US_2018_publink1000177329
https://www.irs.gov/publications/p536
https://www.upcounsel.com/irs-corporate-tax-rate-schedule
** The Tax Cuts and Jobs Act (TCJA), section 13302, eliminated the option for most taxpayers to carry back a Net Operating Loss (NOL) unless certain farming stipulations of which do not apply here with VYST.
** Any unused NOL amounts may be carried forward and deducted in any number of future years under the TCJA.
** The TCJA permits taxpayers to deduct NOLs only up to 80% of Taxable Income for the year.
** With the passage of TCJA, corporate tax rate is 21%.
** Taxable Income for a corporation is Gross Income.
** VYST Gross Income/Taxable Income = $35M x 50% Gross Profit Margin = $17.5M
** VYST Taxable Income = $17,500,000 Gross Income
** 80% NOL Deduction (per TCJA) of $17.5M = $14,000,000 NOL Deduction
** VYST Net Income = $35M x 15% Net Profit Margin = $5,250,000 Net Income
** VYST Corporate Tax would be 21% of $35M = $7,350,000 to pay in Corporate Taxes
** VYST has up to $14,000,000 as their “max” NOL Deduction to be applied for the year, but they only need to have enough applied to cover their $7,350,000 in Corporate Taxes which would go back into enhancing their profits.
** This means that after applying the NOL for VYST, their Net Income should change to reflect somewhere in the area of $5,250,000 + $7,350,000 = $12,600,000 Adjusted Net Income.
** This means that if the NOL remains at $18.6 Million and the revenues remain constant at worst for the next 3 years, then the NOL deductions would be as follow; Year 1 would utilize $7,350,000, Year 2 would utilize $7,350,000, and Year 3 would utilize $3,900,000.
As for a share price valuation, I think I’m going to keep this really simple. Per the tweet below, the company’s ”current board” has never had the topic of doing a reverse split ever brought up in their board meetings. This means that the board back in the day back in 2018 put that in their filings as a worst-case scenario back when much was unknown. This means that now that much is now known and have been for a while since the current board has been in place, doing a reverse split has never been a topic of discussion because they know what they have and have no plans to do one:
Quote:
A reverse split has never been a topic of discussion for Vystar’s current board. A reverse was approved in early 2018 as part of a shareholder consent only. It included many items Approved for the Vystar board to utilize if needed not knowing what the future would bring. $VYST
— Vystar Corporation (@VystarCompany) August 7, 2019
08/08/19 2:18 PM
08/08/19 3:14 PM
I believe the company is going to use a ”newly created special class” of ”preferred shares” as the ”medium of exchange” to buyback shares from the Insiders.
