10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2018

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

For the transition period from ___________to ____________

Commission File Number 000-55345

ZERO GRAVITY SOLUTIONS, INC.
(Exact name of business as specified in its charter)

NEVADA	46-1779352
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

190 NW SPANISH RIVER BOULEVARD, SUITE 101, BOCA RATON, FLORIDA 33431

(Address, including zip code, of principal executive offices)

(561) 416-0400

(Issuer’s telephone number)

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 18, 2018, the issuer had 40,954,115 shares of common stock issued and outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	2
Item 1. Condensed Consolidated Financial Statements (unaudited)	2
Condensed Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017	2
Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2018 and September 30, 2017 (unaudited)	3
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and September 30, 2017 (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative & Qualitative Disclosures about Market Risks	30
Item 4. Controls and Procedures	30
PART II OTHER INFORMATION	31
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3. Defaults upon Senior Securities	31
Item 5. Other Information	31
Item 6. Exhibits	31

FORWARD-LOOKING STATEMENTS

Statements in this report may be "forward-looking statements." Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this report, including the risks described under "Risk Factors" and any risks described in any other filings we make with the SEC. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this report.

Management’s discussion and analysis of financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate these estimates, including those related to useful lives of property and equipment, the allowance for doubtful accounts and stock based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates.

1

PART I. FINANCIAL INFORMATION

Item 1. CONDENSED Consolidated Financial Statements

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	September 30, 2018			December 31, 2017
	(unaudited)
ASSETS
CURRENT ASSETS
Cash	$	382,231		$	13,862
Accounts receivable, net		443			1,393
Prepaid expenses		146,390			216,139
Inventory		75,928			68,643
Total current assets		604,992			300,037
Property and equipment, net		89,845			104,590
OTHER ASSETS
Deposits		4,817			4,617
Intellectual property, net		10,522			11,458
Advance on future royalties - related parties, net		-			319,441
Total other assets		15,339			335,516
TOTAL ASSETS	$	710,176		$	740,143
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and other payables	$	290,115		$	693,695
Accounts payable, related party		67,069			80,097
Accrued interest		16,870			2,500
Accrued interest, related party		99,289			32,250
Deferred compensation, related party		12,500			12,500
Convertible Note payable - related party		500,000			500,000
Note payable		38,706			204,419
Total liabilities (all current)		1,024,549			1,525,461
LONG TERM LIABILITIES
Note payable, net of discount of $15,880 and $18,218		284,120			181,782
Notes payable, related parties, net of discount of $125,547 and $97,796		1,974,456			1,002,204
Convertible Note payable, net of discount of $224,080 and $0		325,920			-
Convertible Note payable - related party, net of discount of $585,211 and $0		914,789			-
Total long-term liabilities		3,499,285			1,183,986
Total Liabilities		4,523,834			2,709,447
Commitments (Note 4)
STOCKHOLDERS' DEFICIT
Common stock; 100,000,000 shares authorized, at $0.001 par value, 40,954,115 and 40,650,397 shares issued and outstanding, at September 30, 2018 and December 31, 2017, respectively		40,954			40,650
Additional paid-in capital		24,241,123			21,970,266
Accumulated deficit		(28,095,735	)		(23,980,220	)
Total stockholders' deficit		(3,813,658	)		(1,969,304	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	710,176		$	740,143

See accompanying notes to unaudited condensed consolidated financial statements

2

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2018			2017			2018			2017
REVENUE
Sale of goods	$	11,635		$	4,355		$	44,705		$	65,545
Total revenue		11,635			4,355			44,705			65,545
COST OF REVENUE
Cost of goods sold		2,476			157			6,100			10,263
Royalty expense		-			218			1,654			2,092
Total cost of revenue		2,476			375			7,754			12,355
GROSS PROFIT		9,159			3,980			36,951			53,190
OPERATING EXPENSES
General and administrative		1,003,056			1,492,884			3,553,188			5,623,117
Research and development		16,710			41,041			138,625			140,030
Total operating expenses		1,019,766			1,533,925			3,691,813			5,763,147
LOSS FROM OPERATIONS		(1,010,607	)		(1,529,945	)		(3,654,862	)		(5,709,957	)
OTHER INCOME (EXPENSE)
Loss on disposal of assets		(1,197	)		-			(1,540	)		-
Interest expense		(119,673	)		(18,386	)		(253,175	)		(45,101	)
Accretion of debt discount		(132,976	)		(2,673	)		(205,938	)		(2,673	)
Foreign exchange loss		-			(387	)		-			(387	)
Total other income (expense)		(253,846	)		(21,446	)		(460,653	)		(48,161	)
NET LOSS	$	(1,264,453	)	$	(1,551,391	)	$	(4,115,515	)	$	(5,758,118	)
NET LOSS PER SHARE - BASIC AND DILUTED	$	(0.03	)	$	(0.04	)	$	(0.10	)	$	(0.15	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED		40,954,115			40,323,242			40,846,981			38,948,632

See accompanying notes to unaudited condensed consolidated financial statements

3

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended
	September 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(4,115,515	)	$	(5,758,118	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		18,770			18,414
Amortization expense		936			646
Bad debt expense		4,060			-
Common stock issued for services		-			150,000
Warrants issued for services		296,271			655,128
Stock options issued as compensation		146,277			108,388
Loss on disposal of asset		1,540			-
Advance on future royalties - related parties reserve		129,580			-
Impairment expense		203,208			-
Warrant modification expense		-			926,885
Amortization of debt issuance costs		205,938			2,673
Changes in operating assets and liabilities:
Accounts receivable, trade		(3,110	)		87,693
Other current assets		-			(19,685	)
Prepaid expenses		69,749			204,771
Advance on future royalties - related parties		(13,347	)		(34,912	)
Inventory		(7,285	)		(49,210	)
Deposit		(200	)		(1,000	)
Accounts payable, related party		(13,028	)		-
Accounts payable and other payables		(403,580	)		227,537
Accrued interest, related party		14,370			-
Accrued interest		67,039			-
Net cash used in operating activities		(3,398,327	)		(3,480,791	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid to acquire intellectual property		-			(6,976	)
Cash paid to purchase equipment		(5,489	)		(9,412	)
Net cash used in investing activities		(5,489	)		(16,388	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of notes payable		(165,790	)		(195,355	)
Payments of notes payable - related party		(300,000	)		-
Proceeds from exercise of warrants – related party		-			1,185,000
Payment of offering costs - related party		(97,500	)		(33,750	)
Proceeds of notes payable		750,000			-
Proceeds of notes payable – related party		2,700,001			600,000
Proceeds from sale of common stock		911,154			1,977,999
Payment of offering costs		(25,680	)		(138,800	)
Net cash provided by financing activities		3,772,185			3,395,094
NET INCREASE (DECREASE) IN CASH		368,369			(102,085	)
CASH AT BEGINNING OF PERIOD		13,862			232,394
CASH AT END OF PERIOD	$	382,231		$	130,309
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Income Taxes	$	-		$	-
Interest	$	159,996		$	45,101
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued as equity direct offering costs	$	5,771		$	168,268
Warrants issued as debt discount	$	946,244		$	-

See accompanying notes to unaudited condensed consolidated financial statements

4

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations

Zero Gravity Solutions, Inc. (the “Company”) is a biotechnology company focused on commercializing technology derived from and designed for spaceflight with significant applications on Earth. These technologies are focused on improving world agriculture by providing valuable solutions to challenges facing humanity including threats to world agriculture and the ability to feed the world’s rapidly growing population.

The Company owns proprietary technology for its initial commercial product, BAM-FX™ that can boost the nutritional value and enhance the immune system of food crops without the use of Genetic Modification. The Company’s focus is the commercialization of BAM-FX™ in both domestic and international markets. The Company’s headquarters are located in Boca Raton, Florida. 

The Company operates through two wholly owned subsidiaries: BAM Agricultural Solutions, Inc. and Zero Gravity Life Sciences, Inc., both Florida corporations formed by the Company in 2014.

Going Concern and Management’s Plans 

At September 30, 2018, the Company had an approximate cash balance of $382,000, a working capital deficiency of approximately $(420,000), a loss from operations of approximately $(4,116,000), and negative cash flows from operating activities of approximately $(3,398,000). To date, the Company has relied on equity financing and has entered into related and non-related party promissory notes to fund its operations. The Company has also issued stock-based compensation in exchange for services. Although the Company intends to raise additional capital, the Company expects to continue to incur losses from operations and have negative cash flows from operating activities for the near-term and these losses could be significant as product development, regulatory, contract research, and technical marketing personnel related expenses are incurred. Management has evaluated its ability to continue as a going concern for the next twelve months from the issuance of these September 30, 2018 unaudited condensed consolidated financial statements, and has determined that there is substantial doubt as to its ability to continue as a going concern. The Company has satisfied its obligations using cash from successful capital raising efforts through September 30, 2018, however, there are no assurances that such successful efforts will continue for up to a year after these unaudited condensed consolidated financial statements are issued. The unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. The Company has executed product distribution agreements with domestic and international commercial agricultural distributors and generated initial product orders. Additional technical and marketing effort must be devoted to those distributors to insure the product is properly utilized and validated by end users. To fund these capital needs, the Company has and continues to raise capital through private placement offerings, conducted through it's own efforts or through the efforts of an investment bank, as well as raising funds through issuances of debt, to related and non-related parties. If the Company does not obtain additional capital, the Company would potentially be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs and expense levels. 

Management’s strategic plans include the following:

● Continuing to advance commercialization of the Company’s principal product, BAM-FX™ in both domestic and international markets;

● Pursuing additional capital raising opportunities;

● Continuing to explore and execute prospective partnering or distribution opportunities; and

● Identifying unique market opportunities that represent potential positive cash flow.

5

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

Interim Financial Statements

The interim unaudited condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the three and nine months ended September 30, 2018 and 2017, our cash flows for the nine months ended September 30, 2018 and 2017, and our financial position as of September 30, 2018 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual audited consolidated financial statements have been condensed or omitted from these interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the SEC on August 13, 2018. The December 31, 2017 balance sheet is derived from those statements.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, inventory reserves and classifications, amortization period and recoverability of intangible assets, valuation of beneficial conversion features in convertible debt, valuation of loss contingencies, valuation of stock-based compensation and the valuation allowance on deferred tax assets.

Segment Reporting

The Company views its operations and manages its business as one reportable segment. As a result the unaudited condensed consolidated financial statements presented within, relate to our principal operating segment.  Customers in the United States accounted for 100% of our revenues. Except for $23,202 in inventory shipped to Paraguay for a sale where the revenue has not been recognized, we do not have any other property or equipment outside of the United States.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Zero Gravity Solutions, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at September 30, 2018 and December 31, 2017.

Inventory

Inventory is valued on a lower of first in, first out (FIFO) cost or net realizable value. Inventory consisted of:

	September 30,		December 31,
	2018		2017
Raw materials	$	21,904	$	23,562
Finished product		54,024		45,081
Total Inventory	$	75,928	$	68,643

6

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred.

Depreciation is computed on a straight-line basis over estimated useful lives. Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Impairment of Long Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.”  This guidance requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Concentration of Credit Risk

The Company believes that its credit risk exposure is limited. The Company has never suffered a loss due to excess balances.

Fair Value of Financial Instruments

The Company accounts for financial instruments under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic (ASC) 820, Fair Value Measurements.  This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 — assets and liabilities whose significant value drivers are unobservable.

7

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions.  Unobservable inputs require significant management judgment or estimation.  In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy.  In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement.  Such determination requires significant management judgment. 

As the Company's common stock is not traded in an active market, the Company estimates the fair value of its common stock (used in its Black Scholes option pricing model) pursuant to ASC 820. This estimation process maximizes the use of observable inputs, including the quoted price of the Company's common stock in an inactive market, the price of the Company's common stock determined in connection with transactions in the Company's common stock, and an income approach to valuation (a discounted cash flow technique that considers the future cash flows).

The carrying amounts of the Company’s accounts receivable and accounts payable approximate fair value due to the relatively short period to maturity for these instruments. The carrying value of the Company’s notes payable approximates fair value due to their short period to maturity and their stated interest rates, combined with historic interest rate levels. 

Revenue recognition and accounts receivable

Effective January 1, 2018 (Date of adoption), we recognize revenues from the sale of agricultural biotechnology products to distributors and customers pursuant to the provisions of ASC 606, “Revenue From Contracts With Customers”.

We recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Revenue is recognized in accordance with the core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation.

Revenues for agricultural chemical products are recognized when title to the products is transferred which may be upon shipment to the customer or receipt by the customer of the product. This satisfies the performance obligation on which we earn the transaction price. There was no cumulative effect of adopting ASC 606. Amounts billed to customers for shipping and handling fees are included in net sales, and costs incurred by the company for the delivery of invoiced goods are classified as cost of goods sold in our Statements of Operations.

The Company determined that no reserve for estimated product returns and allowances was necessary during the nine months ended September 30, 2018 and 2017. Determination of the reserve for estimated product returns and allowances is based on management's analyses and judgments regarding certain conditions. Should future changes in conditions prove management's conclusions and judgments on previous analyses to be incorrect, revenue recognized for any reporting period could be materially affected. 

At September 30, 2018, three customers accounted for 100% of total accounts receivable, each representing 59.6%, 22.5%, and 17.9%, respectively. During the three months ended September 30, 2018, one customer accounted for 75.2% of net sales. During the nine months ended September 30, 2018 two customers accounted for 69.9% of net sales each representing, 50.3% and 19.6%, respectively. During the three months ended September 30, 2017, two customers accounted for 94.0% of net sales, each representing 79.1%, and 14.9%, respectively. During the nine months ended September 30, 2017 three customers accounted for 69.5% of net sales, each of these customers represented 33.6%, 22.9% and 13.0%, respectively. 

At December 31, 2017, three customers accounted for 100% of total accounts receivable. Each of these three customers represented 46.5%, 34.9% and 18.6%, respectively.

The Company extends credit to customers generally without requiring collateral. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. The Company records an allowance for doubtful accounts when it is probable that the accounts receivable balance will not be collected. When estimating the allowance, the Company takes into consideration such factors as its day-to-day knowledge of the financial position of specific clients, and the industry and size of its clients. The allowance for doubtful accounts as of September 30, 2018 and December 31, 2017 was $0 and $32,663, respectively.

8

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

Cost of sales

Cost of sales is comprised of material costs, invoiced shipping costs and royalty expense.  

Warrants

The Company recognizes the cost of warrants issued with debt as debt discount in the unaudited condensed consolidated financial statements which is recorded at the warrants relative fair value which is measured based on the grant date fair value of the award. The Company estimates the fair value of each warrant at the grant date by using the Black-Scholes option pricing model.

Stock based compensation

The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the unaudited condensed consolidated financial statements which is measured based on the grant date fair value of the award. Stock based compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award (generally the vesting period). The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model.

Costs equal to these fair values are recognized ratably over the requisite service period based on the number of awards that are expected to vest, or in the period of grant for awards that vest immediately and have no future service condition. The expense resulting from employee and share-based payments is recorded in general and administrative expense in 2018 and 2017.

The Company also grants share-based compensation awards to non-employees for service provided to the Company. The Company measures and recognizes the fair value of such transactions based on the fair value of consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

Loss per Share

Loss per share is calculated by dividing the Company’s net loss by the weighted average number of common shares outstanding during the period. Diluted earnings loss per share is calculated by dividing the Company’s net income (loss) by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity instruments. The effect of the inclusion of the dilutive shares would have resulted in a decrease in loss per share. Accordingly, the weighted average shares outstanding have not been adjusted for dilutive shares. Outstanding warrants, stock options and convertible debt are not considered in the calculation as the impact of the potential common shares (15,993,998, shares and 12,981,000 shares for the nine months ended September 30, 2018 and 2017, respectively), would be to decrease net loss per share.

Research and Development

Research and development costs are charged to expense as incurred.

Warranty Expense

The Company's distribution agreements provide for a warranty on products sold. As sales under such distribution agreements have been nominal through 2018 and 2017, there has been no warranty expense in 2018 or 2017. A provision for estimated future warranty costs is to be recorded as cost of sales when products are shipped, and warranty costs are to be based on historical trends in warranty charges as a percentage of gross product shipments. A resulting accrual is to be reviewed regularly, and periodically adjusted to reflect changes in warranty cost estimates.

Income Taxes

The Company accounts for income taxes under the asset and liability method, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is required to the extent any deferred tax assets may not be realizable.

9

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

The Company does not have an accrual for uncertain tax positions as of September 30, 2018 and December 31, 2017.  The Company files corporate income tax returns with the Internal Revenue Service and the States where the Company determines it is required to do so.  The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At September 30, 2018, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the three or nine months ended September 30, 2018 or 2017. 

Investments

We have an equity investment in a privately held entity as discussed in note 4. We account for investments either under the equity method or cost method of accounting depending on our ownership interest and the level of our influence. Investments accounted for under the equity method are recorded based upon the amount of our investment and adjusted each period for our share of the investee's income or loss. Cost method investments are recorded at cost less any impairments. All investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where our investment may not be recoverable.

Reclassifications

Certain amounts in the December 31, 2017 balance sheet have been reclassified from accounts payable, related party to accrued interest, related party to conform to the September 30, 2018 presentation.  This reclassification had no effect on current liabilities in either period presented.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASC 606, “Revenue from Contracts with Customers” which has been further clarified and amended. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and clarify guidance for multiple-element arrangements. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Statement of Financial Position. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company has finalized its assessment of ASC 606 and determined there will be no material effect on our financial position and results of operations. The timing and amount of revenue recognized based on the new standard is consistent with the revenue recognition policy under previous guidance, however, certain additional financial statement disclosures will be required beginning with 2018 reporting, including additional disaggregated view of revenue. We have adopted the new standard effective January 1, 2018, using the modified retrospective transition method.

In March 2016, the FASB issued ASU No. 2016-02, Leases. The main difference between the provisions of ASU No. 2016-02 and previous U.S. GAAP is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU No. 2016- 02 retains a distinction between finance leases and operating leases, and the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous U.S. GAAP. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right-of-use assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has not finalized the analysis to determine the effect of the standard, but believes that it will not have a material impact on the statement of operations.

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Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” ASU No 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. This guidance is applicable to the Company’s fiscal year beginning January 1, 2019. The Company is currently evaluating the potential effects of this guidance on its consolidated financial statements.

In July 2017, the FASB issued Accounting Standards Update No. 2017-11 Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815) (“ASU 2017-11”), which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. ASU 2017-11 also clarifies existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, ASU 2017-11 requires entities that present earnings per share (EPS) in accordance with ASC Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.  Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features in ASC 470-20.  For the Company, ASU 2017-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts ASU 2017-11 in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period in either of the following ways: 1. Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the first fiscal year and interim period(s) in which ASU 2017-11 is effective or 2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10. The Company has elected early adoption and the effects of this guidance are reflected in its unaudited condensed consolidated financial statements and there was no cumulative effect adjustment.

On August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification. The amendments will become effective on November 5, 2018. Among the amendments is the requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form 10-Q. The Company has elected to implement this amendment beginning the first quarter of 2019.

NOTE 2 – PROPERTY AND EQUIPMENT

	September 30, 2018			December 31, 2017
Computer equipment	$	13,032		$	15,332
Equipment and furniture		136,734			133,940
Leasehold improvements		7,593			7,593
		157,359			156,865
Accumulated Depreciation		(67,514	)		(52,275	)
Property and Equipment - Net	$	89,845		$	104,590

Depreciation expense for the nine months ended September 30, 2018 and 2017 was $18,770 and $18,414, respectively

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Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

NOTE 3 – RELATED PARTY TRANSACTIONS

The following descriptions of convertible notes and notes payable refer to notes issued to related parties of the Company. For a description of convertible notes and notes payable to non-related parties of the Company see Note 5.

Convertible Notes Payable to Related Parties

Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
July 2015	$	500,000	$	-	$	-	$	500,000
June 2018	$	1,000,000	$	444,416	$	56,617	$	612,201
July 2018	$	250,000	$	111,113	$	13,699	$	152,586
July 2018	$	250,000	$	111,109	$	11,111	$	150,002
	$	2,000,000	$	666,638	$	81,427	$	1,414,789
Convertible Notes Payable - Current	$	500,000	$	-	$	-	$	500,000
Convertible Notes Payable - Long Term	$	1,500,000	$	666,638	$	81,427	$	914,789

In July 2015, a member of the Company’s Board of Directors advanced the Company $500,000 under a note payable for working capital purposes. The unsecured note payable bears interest at 8.5% per annum, is payable quarterly, and was originally due in July 2016. In connection with the note, the Company issued warrants to purchase 350,000 shares of the Company’s common stock at an exercise price of $3 per share. The Company calculated the fair value of the warrants at $416,618 utilizing the Black-Scholes Model with the following assumptions: expected dividends of 0%, volatility of 184.2%, risk free interest rate of 1.66% and expected life of 5 years. The relative fair value of the debt and warrants was recorded resulting in a debt discount of $227,258 upon execution of the agreement. In July 2016, the maturity date of the note was extended to July 2017, and a conversion feature was added. The conversion feature allows the holder to convert the debt into common shares at his option at a conversion price of $1.25 per share (400,000 shares). The addition of the conversion feature represented a substantial modification to the debt instrument but the modification was determined to not be material. During 2017, $42,500 was recorded as interest expense and $10,625 was included in payables at December 31, 2017. During 2017, the maturity date of the note was extended to July 2018 and then extended again in 2018 to July 2019. For the nine months ended September 30, 2018 and 2017, the Company recorded interest expense of $21,250 on the note recorded in accrued interest - related party. The note is included in the current liabilities section of the unaudited consolidated balance sheets.

On June 29, 2018, in connection with its June 2018 Offering (as defined in Note 5), the Company received $1,000,000 from an affiliate of a board member, and in exchange the Company issued (a) an unsecured convertible promissory note dated June 29, 2018, and (b) a two-year warrant dated June 29, 2018 to purchase up to 1,000,000 shares of the Company’s common stock. The note bears interest at the rate of ten percent (10%) per annum, payable quarterly in cash. The note is payable in full plus all unpaid interest thereon, by June 28, 2020. The conversion feature allows the holder to convert the debt into common shares at his option at a conversion price of the lower of $3 per share or the Company's current offering price. Prepayment of all unpaid principal and interest may be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest, based on the full principal amount. The warrant is exercisable within 2 years of issuance into shares of the Company’s common stock, at $1.00 per share. The relative fair value of the note and warrant recorded resulted in debt discount of $414,416 upon execution. The Company also incurred $30,000 of lender fees. During the three month and nine months ended September 30, 2018 accretion of debt discount was $56,617, and was included in other expenses on the statements of operations.

On July 2, 2018, in connection with its June 2018 Offering (as defined in Note 5), the Company received $250,000 from a board member, and in exchange the Company issued (a) an unsecured convertible promissory note dated July 2, 2018, and (b) a two-year warrant dated July 2, 2018 to purchase up to 250,000 shares of the Company’s common stock. The note bears interest at the rate of ten percent (10%) per annum, payable quarterly in cash. The note is payable in full plus all unpaid interest thereon, by July 1, 2020. The conversion feature allows the holder to convert the debt into common shares at his option at a conversion price of the lower of $3 per share or the Company's current offering price. Prepayment of all unpaid principal and interest may be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest, based on the full principal amount. The warrant is exercisable within 2 years of issuance into shares of the Company’s common stock, at $1.00 per share. The relative fair value of the note and warrant recorded resulted in debt discount of $103,613 upon execution. The Company also incurred $7,500 of lender fees. During the three month and nine months ended September 30, 2018 accretion of debt discount was $13,699, and was included in other expenses on the statements of operations.

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Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

On July 19, 2018, in connection with its June 2018 Offering (as defined in Note 5), the Company received $250,000 from a board member, and in exchange the Company issued (a) an unsecured convertible promissory note dated July 19, 2018, and (b) a two-year warrant dated July 19, 2018 to purchase up to 250,000 shares of the Company’s common stock. The note bears interest at the rate of ten percent (10%) per annum, payable quarterly in cash. The note is payable in full plus all unpaid interest thereon, by July 18, 2020. The conversion feature allows the holder to convert the debt into common shares at his option at a conversion price of the lower of $3 per share or the Company's current offering price. Prepayment of all unpaid principal and interest may be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest, based on the full principal amount. The warrant is exercisable within 2 years of issuance into shares of the Company’s common stock, at $1.00 per share. The relative fair value of the note and warrant recorded resulted in debt discount of $103,609 upon execution. The Company also incurred $7,500 of lender fees. During the three month and nine months ended September 30, 2018 accretion of debt discount was $11,111, and was included in other expenses on the statements of operations.

Notes Payable to Related Parties
Notes payable outstanding at September 30, 2018 consist of the following:
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
August 2017	$	100,000	$	10,435	$	5,745	$	95,311
September 2017	$	500,000	$	52,166	$	28,227	$	476,061
October 2017	$	500,000	$	50,229	$	23,256	$	473,028
January 2018	$	500,000	$	50,590	$	20,111	$	469,521
March 2018	$	200,000	$	20,281	$	5,695	$	185,414
May 2018	$	300,001	$	30,452	$	5,572	$	275,121
	$	2,100,001	$	214,153	$	88,606	$	1,974,456

In August 2017, the Company issued an unsecured promissory note to its then in-house corporate counsel in the principal face amount of $100,000.  The promissory note bears interest at a rate of 10.0%, per annum, payable quarterly. The promissory note is payable in full plus all unpaid interest by August 2019. In connection with the note, the Company issued five-year warrants to purchase up to 10,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the debt and warrants recorded resulted in debt discount of $10,435 upon execution of the promissory note. For the three months ended September 30, 2018, accretion of debt discount was $1,314. For the nine months ended September 30, 2018, accretion of the debt discount was $3,907. Accretion of debt discount is included in other expenses on the statements of operations.

In September 2017, the Company issued an unsecured promissory note to a member of its Board of Directors in the principal face amount of $500,000.  The promissory note bears interest at a rate of 10.0%, per annum, payable quarterly. The promissory note is payable in full plus all unpaid interest by September 2019. In connection with the note, the Company issued five-year warrants to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the debt and warrants recorded resulted in debt discount of $52,166 upon execution of the promissory note. For the three and nine months ended September 30, 2018, accretion of the debt discount was $6,574 and $19,508 respectively, included in other expenses on the statements of operations.

In October 2017, the Company issued to Rio Vista Investments, LLC, a Nevada limited liability company (“Rio Vista”), (i) an unsecured promissory note in the principal face amount of $500,000 and (ii) a warrant to purchase up to 50,000 shares of the Company’s common stock. The note issued to Rio Vista bears interest at the rate of ten percent (10%) per annum, such interest being payable by the Company to Rio Vista quarterly in cash. The note is payable in full by the Company, plus all unpaid interest, by October 26, 2019. Prepayment of all unpaid principal and interest may be made by the Company prior to the date of maturity without penalty or premium. Additionally, the Company issued to Rio Vista a five-year warrant to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the debt and warrants recorded resulted in debt discount of $50,229 upon execution of the promissory note.  For the three and nine months ended September 30, 2018, accretion of the debt discount was $6,330 and $18,784, respectively, included in other expenses on the statements of operations. A member of the Company’s Board of Directors is a beneficiary of certain trusts that own Rio Vista.

In January 2018, the Company issued an unsecured note to its then in-house corporate counsel in the principal face amount of $100,000.  The note bears interest at a rate of 10.0%, per annum, payable quarterly. The promissory note was paid during the three month period ended March 31, 2018. In connection with the note, the Company issued five-year warrants to purchase up to 5,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the debt and warrants recorded resulted in debt discount of $3,831 upon execution of the note. For the period ended March 31, 2018, accretion of the debt discount was $3,831, included in other expenses on the statements of operations.

On or about January 17, 2018, the Company received $500,000 from an accredited investor, and in exchange the Company issued to the investor (a) an unsecured promissory note dated January 16, 2018, maturing on October 26, 2019, in the principal face amount of $500,000, and (b) a warrant dated January 18, 2018 to purchase up to 50,000 shares of the Company’s common stock. A member of the Company’s Board of Directors is a beneficiary of certain trusts that own Rio Vista, the holder of this note and warrant. The note bears interest at the rate of ten percent (10%) per annum, such interest being payable by the Company to the holder thereof quarterly in cash. The note is payable in full by the Company, plus all unpaid interest thereon, by October 26, 2019. Prepayment of all unpaid principal and interest on the note may be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest under such note, based on the full principal amount. In addition to the foregoing, the Company must repay the note to Rio Vista within 30 days of the date the Company possesses an amount of cash equal to the outstanding balance of principal and interest due under the note plus an amount reasonably anticipated to be necessary to operate the Company over the succeeding 6 months. The warrants are exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share. The relative fair value of the note and warrant recorded resulted in debt discount of $35,590 upon execution.  The Company also incurred $15,000 of lender fees. For the three and nine months ended September 30, 2018, accretion of the debt discount was $7,215 and $20,111, respectively, included in other expenses on the statements of operations.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

On or about March 8, 2018, the Company received $200,000 from an accredited investor and member of our Board of Directors, and in exchange the Company issued (a) an unsecured promissory note dated March 8, 2018 and (b) a warrant dated March 9, 2018 to purchase up to 20,000 shares of the Company’s common stock. The note bears interest at the rate of ten percent (10%) per annum, such interest being payable by the Company to the holder quarterly in cash. The note is payable in full by the Company, plus all unpaid interest thereon, by March 7, 2020. Prepayment of all unpaid principal due on the note may be made by the Company prior to the note’s maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest due under the note, based on the note’s principal balance as of the origination date. The note contains customary provisions for events of default and acceleration of sums due. The warrant is exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share. The relative fair value of the note and warrant recorded resulted in debt discount of $14,281 upon execution.  The Company also incurred $6,000 of lender fees. For the three and nine months ended September 30, 2018, accretion of debt discount and lender fees was $2,556 and $5,695, respectively, included in other expenses on the statements of operations.

On or about March 12, 2018, the Company received $200,000 from Boies Partners, Inc. (“BPI”), an accredited investor, and in exchange the Company issued to BPI (a) an unsecured promissory note dated March 12, 2018, and (b) a warrant dated March 12, 2018 to purchase up to 20,000 shares of the Company’s common stock. Alex Boies, a member of our Board of Directors, has no financial interest in or control over BPI and does not otherwise have any beneficial ownership in any securities owned by BPI, but BPI is owned by a family member of Alex Boies. The note bears interest at the rate of ten percent (10%) per annum, such interest being payable by the Company to the holder thereof quarterly in cash. The note is payable in full by the Company, plus all unpaid interest thereon, by March 11, 2020. Prepayment of all unpaid principal due on the note may be made by the Company prior to the note’s maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest due under the note, based on the note’s principal balance as of the origination date. The note contains customary provisions for events of default and acceleration of sums due. The warrants are exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share. The relative fair value of the note and warrant recorded resulted in debt discount of $14,279 upon execution.  The Company also incurred $6,000 of lender fees. For the three and nine months ended September 30, 2018, accretion of the debt discount and lender fees was $19,781 and $20,279, respectively, included in other expenses on the statements of operations. This note further provides that within 30 days of receipt of payment of any amount principal outstanding under the note, (the "Conversion Window") the note holder shall have the right to convert any portion of such payment into the Company’s common stock at the lesser of $3.00 per share or the lowest price per share of any sale by the Company of its common stock occurring between the date of the note and the end of the Conversion Window. This note was repaid during the three months ended June 30, 2018. 

On May 2, 2018, the Company received $300,001 from an accredited investor and member of our Board of Directors, and in exchange the Company issued (a) an unsecured promissory note dated May 2, 2018, and (b) a warrant dated May 2, 2018 to purchase up to 30,000 shares of the Company’s common stock. The note bears interest at the rate of ten percent (10%) per annum, payable quarterly in cash. The note is payable in full plus all unpaid interest thereon, by May 1, 2020. The note contains a contingent conversion feature that allows the value of the note to be converted at $3 per share or such lower price at which the Company has issued stock subsequent to May 2, 2018, if any part of the principle balance is paid. The intrinsic value of contingent conversion will be determined and recognized when the contingency occurs. Prepayment of all unpaid principal and interest may be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest, based on the full principal amount. The warrant is exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share. The relative fair value of the note and warrant recorded resulted in debt discount of $21,452 upon execution. The Company also incurred $9,000 of lender fees. For the three and nine months ended September 30, 2018, accretion of the debt discount and lender fees was $3,841 and $5,572, respectively, included in other expenses on the statements of operations.

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Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

Royalty Agreement

In 2013, the Company entered into a royalty agreement, which was amended in 2015, with a key employee and principal stockholder of the Company and a current Director of the Company. The agreement has a term of 25 years, requires payments of royalties equal to 5% of gross sales of products derived from certain patents held or licensed by the Company, including the BAM-FX™ product, and also a minimum monthly payment of $2,500 to be offset against future royalty obligations of the Company. In addition certain other costs the Company made that were necessary for the maintenance and protection of the Company’s rights in the underlying patents were applied against future royalty obligations of the Company.

Sales subject to the royalty agreement were $0 and $4,355 for the three months and $33,070 and $65,545 for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, and December 31, 2017, $0 and $319,441 of prepaid royalties, respectively, are available to be offset against future royalty obligations. Management recorded an allowance for collectability of $6,020 during the three months ended June 30, 2018 and $129,580 during the nine months ended September 30, 2018 which is included in general and administrative expenses. Sales during the third quarter were not subject to the royalty agreement.

Included in advance of future royalties was $203,208 in legal fees relating to patent defense.  During the nine months ended September 30, 2018, this amount was reclassified to an intangible asset patent defense fees, and was determined to be impaired and charged to general and administrative expenses.

Consulting Agreement

In March 2015, the Company entered into a consulting agreement with a former Director. The agreement had a term of nine months and required payments of $200,000 of which $200,000 was recorded as a component of general and administrative expense in the 2015 statement of operations. An obligation of $65,000 and $75,000 was payable to the former Director and is included in accounts payable at September 30, 2018 and December 31, 2017, respectively.

NOTE 4 – COMMITMENTS

Lease Commitments

The Company leases its office, building and laboratory space under short term leases. These leases are renewable either monthly or annually. The Company also has a two-year lease for its warehouse in Okeechobee, which began September 1, 2016 and expired August 31, 2018. We are currently finalizing a new two year lease for this facility. Lease expense was $158,976 and $76,034 for the periods ended September 30, 2018 and 2017, respectively.

License and Business Development Agreement

On February 20, 2018, BAM Agricultural Solutions, Inc. (“BAM”), a wholly-owned subsidiary of the Company, and Pedro Lichtinger Waisman, Isaac Lichtinger Waisman and Victor Lichtinger Waisman (the “Lichtinger Group”) entered into a License and Business Development Agreement Mexico, effective as of February 13, 2018 (the “Agreement”). Following consummation of the Agreement, the Lichtinger Group formed Agro Space Tech SA de CV de RV (“Agro Space”), a Mexican company, to which BAM will receive a twenty percent (20%) equity ownership interest. The Lichtinger Group will contribute up to $500,000 in capital into Agro Space, with BAM having no initial capital requirement. If Agro Space requires more than the initial $500,000 capital contribution, BAM will have a right to contribute capital pro rata and maintain its ownership percentage. As of September 30, 2018 Agro Space has been formed, but the Company had not received certificates for its equity ownership, and principal operations have yet to commence. The Company uses the cost method to account for its equity ownership interest due to its minority ownership and lack of management control as the remaining 80% ownership is equally owned by and all operational decisions are made by three individuals, all of whom are related. The recorded cost of the investment was $0 at September 30, 2018.

The Agreement provides Agro Space with the exclusive right to import, package, sell and distribute BAM’s product lines and promote its brand, as well as other “white label” brands as they are introduced, in the Mexican markets, and a limited manufacturing right to modify the presentation of BAM’s products and dilute such products, all during the term of the Agreement. BAM will retain the right to all of its intellectual property, including any materials produced in connection with the Agreement and BAM’s products, and Agro Space will have a royalty-free right to reproduce, translate, summarize or otherwise use such materials for the sole purpose of performing pursuant to the Agreement. The exclusivity of the rights licensed to Agro Space are conditioned upon (i) Agro Space meeting specified revenue targets beginning on the third anniversary following the successful completion of specified local trials through the tenth anniversary thereof; and (ii) the ability for Agro Space to expand the business to target and add a specified number of crops during each of the five (5) years following the successful completion of specified local trials.

In February 2018 in addition to BAM receiving an ownership interest in Agro Space, Zero Gravity Solutions, Inc. ("Company") received $100,000 from the Lichtinger Group following the execution of the Agreement, to purchase shares of the Company pursuant to the Company’s 2016 private offering of shares of its common stock for $3.00 per share (See Note 6). The Agreement further provides that Agro Space will pay to BAM up to $900,000, in the aggregate, upon reaching specified milestones based on completing government/academic trials and revenue hurdles.

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Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

Research Commitment

In January 2016, the Company entered into a Reimbursable Space Act Agreement (the “SAA”) with the National Aeronautics and Space Administration Ames Research Center (“NASA ARC”).  Pursuant to the SAA, NASA ARC will evaluate the Company’s nutrient delivery system for commercial agriculture and NASA applications and the potential development of new agricultural technologies and products.  The Company provides funding and reimbursement for the costs incurred by NASA ARC under the SAA, and owns any resulting intellectual property created pursuant to the SAA.  The Company paid NASA ARC a total of $373,750 in fiscal 2016, which served as reimbursement for NASA ARC’s estimated expenses to carry out its first-year responsibilities pursuant to the SAA.  The SAA remains in effect until the earlier of completion of all obligations contemplated in the SAA or five years from the date of agreement. For the period ended September 30, 2018 and 2017, $0 and $29,610, respectively, was expensed to research and development expense pursuant to the SAA.

NOTE 5 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

On June 29, 2018, the Company initiated a new private offering of its securities (the “June 2018 Offering”) to certain prospective accredited investors, including certain members of the Board of Directors and/or their respective affiliates (See Note 3), consisting of up to $2,000,000 of 10% secured convertible promissory notes (the “June 2018 Offering Notes”), and two-year warrants to purchase up to 2,000,000 shares of the Company's common stock at an exercise price of $1.00 per share (the “June 2018 Offering Warrants”). The June 2018 Offering terminated on July 31, 2018, and consisted of one or more closings.

The following descriptions of convertible notes and notes payable refer to notes issued to non-related parties of the Company. For a description of convertible notes and notes payable to related parties of the Company, see Note 3.

Convertible Notes Payable to Non-Related Parties
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
July 2018	$	50,000	$	22,231	$	1,923	$	29,692
July 2018	$	50,000	$	22,231	$	1,923	$	29,692
July 2018	$	25,000	$	11,116	$	873	$	14,757
July 2018	$	250,000	$	111,160	$	9,233	$	148,073
July 2018	$	25,000	$	11,115	$	934	$	14,819
July 2018	$	50,000	$	22,232	$	1,924	$	29,692
July 2018	$	100,000	$	44,464	$	3,659	$	59,195
	$	550,000	$	244,549	$	20,469	$	325,920

The Company received, in the aggregate, $550,000 from seven other current shareholders and issued June 2018 Offering Notes of $550,000 in exchange therefore, and June 2018 Offering Warrants to purchase, in the aggregate, up to 550,000 shares of the Company’s common stock. The relative fair value of the warrants of $228,049 and offering costs of $16,500 were recorded as debt discounts and are accreted over the term of the note. Pursuant to the June 2018 Offering, in the aggregate, the Company issued June 2018 Offering Notes having an aggregate principal balance of $2,050,000, and June 2018 Offering two year warrants to purchase  up to 2,050,000 shares of the Company’s common stock at $1.00 per share. The notes convert at $3.00 per share, unless the Company issues shares at a subsequent lower price, then the notes convert at that subsequent lower price. See Note 3 for $1,500,000 of June 2018 Offering Notes received by related parties. All June 2018 Offering Warrants issued were accounted for at their relative fair value of $853,518.  These values along with the related offering costs of $61,500, are recorded as debt discounts and are accreted over the term of the note.

Notes Payable to Non-Related Parties
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
December 2017	$	200,000	$	18,652	$	7,410	$	188,758
January 2018	$	100,000	$	7,124	$	2,486	$	95,362
	$	300,000	$	25,776	$	9,896	$	284,120

In December 2017, the Company received $200,000 from an investor, and in exchange the Company issued the investor (a) an unsecured promissory note dated December 14, 2017, maturing on December 13, 2019, in the principal face amount of $200,000, and (b) a warrant dated December 18, 2017 to purchase up to 50,000 shares of the Company’s common stock. The note bears interest at the rate of ten percent (10%) per annum, payable quarterly. The note is repayable in full by the Company, plus all unpaid interest thereon, by the maturity date. Prepayment of all unpaid principal and interest on the note may be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest under the note, based on the full principal amount. The warrants are exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share. The relative fair value of the debt and warrants recorded resulted in a debt discount of $18,652 upon execution of the promissory note. For the three and nine months ended September 30, 2018, accretion of the debt discount was $2,351 and $7,410, respectively, included in other expenses on the statements of operations.

On or about January 18, 2018, the Company received $100,000 from an accredited investor, and in exchange the Company issued to the investor (a) an unsecured promissory note dated January 19, 2018, maturing on January 18, 2020, in the principal face amount of $100,000, and (b) a warrant dated January 19, 2018 to purchase up to 10,000 shares of the Company’s common stock. The note bears interest at the rate of ten percent (10%) per annum, payable quarterly. The note is repayable in full by the Company, plus all unpaid interest thereon, by the maturity date. Prepayment of all unpaid principal and interest on the note may be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest under the note, based on the full principal amount. The warrants are exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share. The relative fair value of the debt and warrants recorded resulted in a debt discount of $7,124 upon execution of the promissory note. For the three and nine months ended September 30, 2018, accretion of the debt discount was $898 and $2,486, respectively, included in other expenses on the statements of operations.

The Company has an outstanding note payable for financing corporate insurance premiums. The original principle value was $223,707. The note carries a rate of interest of 7.5% and is due in November 2018. The note calls for eleven payments of $19,353. The balance at September 30, 2018 was $38,706.

16

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

NOTE 6 – EQUITY

2018 transactions:

Common Stock

Private placement offerings

During 2016, the Company commenced a private offering of up to $10,000,000 of the Company’s securities for $3.00 per share of common stock.  Pursuant to the 2016 offering, during the nine months ended September 30, 2018, the Company sold 303,718 shares of common stock, received gross proceeds of $911,154, paid cash offering costs of $25,680, and issued fully vested, non-forfeitable warrants to purchase up to 7,490 shares of common stock with an exercise price of $3.00 per share to the placement agent. These warrants are netted in additional paid in capital as non-cash offering costs of the placement of $5,771.  Effective on June 28, 2018, the Company terminated its 2016 private offering.

Warrants

Warrants issued for services

During the nine months ended September 30, 2018, the Company issued fully vested, non-forfeitable five-year warrants to purchase up to 385,000 common shares at an exercise price of $3.00 per common share to employees and consultants for services rendered. The value of those services was $296,271, which was recorded as general and administrative expense.

Warrants issued with debt

In connection with the issuance of a $100,000 unsecured promissory note dated January 18, 2018, the Company issued a warrant dated January 19, 2018 to purchase up to 10,000 shares of the Company’s common stock. The warrants are exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share. The relative fair value of the debt and warrants recorded resulted in debt discount of $7,124 upon execution of the promissory note.

In July 2018, the Company with the issuance, in the aggregate, of $550,000 secured promissory note to seven other current shareholders, issued June 2018 Offering Warrants to purchase, in the aggregate, up to 550,000 shares of the Company’s common stock. The relative fair value of the warrants recorded was $228,049 upon execution of the promissory notes. 

Warrants issued with debt – related party

In January 2018, the Company issued to its then in-house counsel, in connection with the issuance of an unsecured promissory note in the principal face amount of $100,000, a five-year warrant to purchase up to 5,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the warrant recorded was $3,831 upon execution of the promissory note. 

In January 2018, the Company issued to Rio Vista a five-year warrant to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $3.00 per share in connection with a $500,000 unsecured promissory note. The relative fair value of the debt and warrants recorded resulted in debt discount of $35,590 upon execution of the promissory note.

In March 2018, in connection with issuance of a $200,000 unsecured promissory note to a member of its Board of Directors, the Company issued five-year warrant to purchase up to 20,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of $14,281 upon execution of the promissory note.

In March 2018, in connection with issuance of a $200,000 unsecured promissory note to an accredited investor, the Company issued five-year warrant to purchase up to 20,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of $14,279 upon execution of the promissory note.

In May 2018, in connection with issuance of a $300,000 unsecured promissory note to an accredited investor, the Company issued a five-year warrant to purchase up to 30,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of $21,452 upon execution of the promissory note.

In June 2018, in connection with issuance of a $1,000,000 secured convertible promissory note to an accredited investor made pursuant to the June 2018 Offering, the Company issued a two-year warrant to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of $414,416 upon execution of the promissory note. 

In July 2018, in connection with the issuance of two $250,000 secured convertible promissory notes to a member of its Board of Directors made pursuant to the June 2018 Offering, the Company issued two, two-year warrants to purchase up to 250,000 shares of the Company’s common stock for a total of 500,000 shares at an exercise price of $1.00 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of $103,613 and $103,609, respectively upon execution of the promissory note. 

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

The following is a summary of the Company’s warrant activity for the nine months ended September 30, 2018:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - January 1, 2017		9,664,733		$	1.53
Granted		1,838,442			2.01
Exercised		(790,000	)		2.00
Cancelled/Forfeited		-			-
Outstanding and exercisable - December 31, 2017		10,713,175		$	1.86		2.8	$	2,606,698
Outstanding - January 1, 2018		10,713,175		$	1.86
Granted		2,577,490			1.14
Exercised		-			-
Cancelled/Forfeited		-			-
Outstanding and exercisable - September 30, 2018		13,290,665		$	1.77		2.1	$	2,687,519

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company’s stock price on September 30, 2018 and the exercise price, multiplied by the number of in-the-money warrants) that would have been received by the warrant holders, had all warrant holders been able to, and in fact had, exercised their warrants on September 30, 2018.

Stock incentive plan options

In November 2015, the Company adopted its 2015 Equity Incentive Plan. The Plan provides stock based compensation to employees, directors and consultants, as more fully described in the Plan. The Company has reserved 4,000,000 shares under the Plan. During the nine months ended September 30, 2018 the Company granted options to purchase up to 25,000 shares of common stock each, to two employees with an exercise price of $3.00 per share and a term of 10 years. The estimated fair value of $38,441 of the grants for the nine months ended September 30, 2018 was based upon the following management assumptions: For the nine month period ended September 30, 2018, expected dividends of $0, volatility of 101.7% based on comparative volatility, risk free interest rates of 2.58 - 2.69%, and expected term of the options of 5 years.

The Company recognizes compensation expense for stock option grants based on the fair value at the date of grant using the Black-Scholes option pricing model. As the Company does not currently have reliably determined historic stock prices, the Company uses management estimates of stock value. The Company uses historical data, among other factors, to estimate the expected option life and the expected forfeiture rate. The Company estimates expected term considering factors such as historical exercise patterns and the recipients of the options granted. The risk-free rate is based on the United States Treasury Department yield curve in effect at the time of grant for the expected life of the option. The Company assumes an expected dividend yield of zero for all periods.  For employee, consultant and director stock based compensation, the Company used management's fair value estimates of $1.21 for the period September 30, 2018.

Stock option expense for the nine months ended September 30, 2018 was $146,277.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

The Company has elected to account for forfeitures as they occur.

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - January 1, 2017		2,755,000		$	1.25
Granted		440,000			3.00
Exercised		-			-
Cancelled/Forfeited		(30,000	)		1.25
Outstanding - December 31, 2017		3,165,000		$	1.49		8.5	$	192,850
Exercisable - December 31, 2017		2,750,000		$	1.27		8.2	$	192,850
Outstanding - January 1, 2018		3,165,000		$	1.49
Granted		50,000			3.00
Exercised		-			-
Cancelled/Forfeited		(1,595,000	)		1.34
Outstanding - September 30, 2018		1,620,000		$	1.56		7.9	$	-
Exercisable - September 30, 2018		1,519,375		$	1.30		8.4	$	-

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company’s stock price on September 30, 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on September 30, 2018.

19

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

NOTE 7 – SUBSEQUENT EVENTS

Subsequent to September 30, 2018, the Company issued fully vested, non-forfeitable five - year warrants to purchase 40,000 common shares at an exercise price of $3.00 per common share to consultants for services rendered, with a fair value of  $30,870.

In November 2018, the Company received $250,000 as an advance on inventory purchases from an affiliate of a Member of the Board of Directors.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Zero Gravity Solutions, Inc., a Nevada corporation, is a biotechnology company focused on commercializing technology derived from and designed for spaceflight with significant applications on Earth. These technologies are focused on improving world agriculture by providing valuable solutions to challenges facing humanity including threats to world agriculture and the ability to feed the world’s rapidly growing population. The Company’s business model is currently focused on one primary business, generating revenue from agricultural application of BAM-FX™, a cost effective, micro-nutrient delivery platform for plants that efficiently delivers minerals and micro-nutrients to plants.  The Company's secondary business, Directed Selection™, relates to the production and alteration of new varieties of novel stem cells with unique and beneficial characteristics in the prolonged zero/micro gravity environment of the ISS. These novel stem cells, if developed, could be patented for commercial sale to third parties in the agricultural and human regenerative medical markets. The Company is headquartered in Boca Raton, Florida.

Our business activities are separated between two primary wholly owned subsidiaries. BAM Agricultural Solutions, Inc., (“BAM Inc.”) oversees product development, introduction and business development through in-field trials and validation tests with crop growers and channel partners, product analysis through academic institutions and NASA, manufacturing, and sale of and agronomy support for our BAM-FX™ product. Zero Gravity Life Sciences Inc. (“ZGLS”) is expected to be responsible for any future space research projects, life science applications of our technology and conducting research on future BAM Inc. product lines.

The Company is focused on near-term revenue generation through the introduction of the Company’s first commercial product, BAM-FX™, to domestic and international agricultural markets. BAM-FX™ is licensed in and registered for sale as a fertilizer application with forty-five (45) domestic states and has been approved for import and commercial sales in Chile, Paraguay, Colombia, Brazil and China. The Company is also pursuing import approval through proper governmental officials and agencies to begin commercial sales in Haiti, Philippines and India. International operations are conducted through in-country established businesses with which a distribution agreement has been executed.

The Company began domestic product trials on multiple crops in laboratory and academic settings as well as in field applications on grower/end-user crops during 2014 and expanded field applications with those and additional trial participants in subsequent years. Our trials show significant yield, nutritional value and biomass improvements for crops treated. We continue to use validation trials with growers to increase our understanding of application rates and protocols for our product and show its efficacy. These trials are critical in both market and product development efforts. During the past four years, the Company increasingly focused on obtaining third-party validated results, through studies with academic institutions and NASA, in accordance with the Company’s Space Act Agreement ("SSA").

During 2016, the Company shifted domestic business development efforts from a direct to grower approach to developing business relationships with channel partners, in general, large agricultural product distributors with which the Company executed a distribution agreement. Three distribution agreements with agricultural product distributors in Ohio and California were signed during 2016 with three additional in 2017, expanding into Pennsylvania. These efforts have had limited success domestically, due to limited third party crop data from USDA agricultural extension or affiliated universities to support crop yield and performance predictability, combined economic factors including product pricing and risk aversion which, in some instances, did not result in sufficient return on investment for channel partners or growers, and slow adoption practices found within the agricultural industry. We believe slow adoption by channel partners is due to their perceived commitment risk based upon the Company’s lack of adequate capital and capital reserves to address long term operations and sustainability.

The Company began to see limited success penetrating domestic and international markets during 2017. Domestically, the agronomy team conducted in excess of one hundred and fifty grower trials to replicate positive results from prior years using established product protocols and to refine product protocols on a variety of crops in addition to a number of third party validated trials. We believe a number of growers and channel partners will place product orders during the fourth quarter of 2018 as BAM-FX™ gains a market foothold in California, Texas, Iowa, Kentucky and Pennsylvania. International trials were conducted in China, India, Paraguay, Colombia, Brazil and Chile during 2017. We expect to begin generating revenue in other countries during 2018 as a result of our 2017 trial results and expected positive results from trials in 2018.  Our ability to sell in international markets is dependent upon obtaining government approval for commercial import and sale in country and developing and maintaining strong working relationships with distributors in those countries.

We developed a ready to use, home and garden product, Gardener’s Choice, during 2017 for retail markets. Independent third parties successfully tested Gardener’s Choice for plant performance and consumer safety during 2018. During the fourth quarter of 2017, the Company showcased the product concept at a home and garden trade show and generated significant interest from prospective purchasers. During the first quarter of 2018, the Company introduced Gardener’s Choice directly to Ace Hardware retailers at their annual trade show. In October 2018, the Company attended and managed its show booth at the GIE+EXPO, considered to be the industry’s largest showcase for lawn and garden products distributed through home centers, dealers and retailers, in Louisville, Kentucky. The Company generated significant product interest and distributed in excess of one hundred and thirty product order forms to interested parties. We have received positive feedback from retailers and expect to secure purchase commitments for the product during the fourth quarter of 2018.

We believe we will obtain state registration for sale in all states in the United States, complete promotional material for Gardener’s Choice and have product available for distribution during the fourth quarter of 2018.

To support commercialization and revenue generation efforts, the Company employs certified crop advisors and agronomists for the technical requirements of product introduction domestically and internationally. Reductions in our consulting agronomy staff occurred during the fourth quarter of 2017 due to curtailed operations in Chile, and domestically due to our focus on specific geographies in Texas, California and the Midwest and targeted high value crops.

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The Company continues to develop technical relationships to validate the science incorporated in BAM-FX™ and identify additional commercial markets and licensing opportunities for the product. During the first quarter of 2016, the Company executed a new five-year SAA with NASA ARC. The SAA gives the Company access to NASA scientists and laboratories, which assist in identifying and documenting additional attributes of the Company’s science and potential applications in other segments of agricultural markets. We continued working with NASA ARC through the second quarter of 2017, however have not funded additional research pursuant to the SAA due to lack of adequate resources. We maintain our relationship with researchers and specialists and expect to continue research when resources are available.

The Company manufactures its product in a manufacturing facility in Okeechobee, Florida, on an as-needed batch process. The Company continually performs regulatory and process efficiency reviews of manufacturing operations. Our manufacturing plant manager is an experienced biochemical engineer. We have made process improvements and equipment modifications to existing equipment to enhance efficiencies and improve quality control and assurance though September 30, 2018. Our process improvements more closely align production with a continuous flow production process. The Company expects to engineer, design and build a scale model of a continuous flow process manufacturing facility during 2019 given financial resources are available.

We began developing new formulations of BAM-FX™ to address nutritional needs of plants that are additive to our product’s current zinc and copper formulation. New formulations can include boron, manganese, magnesium and iron, which address known plant deficiencies. We believe formulations can be manufactured to include all or numerous combinations of these elements. Certain new formulations have been laboratory tested and these tests confirmed the ability to combine those elements.  Testing the efficacy of these formulations on field crops is expected to begin during the fourth quarter of 2018.

We successfully lab tested a dry formulation, which maintains the attributes of our product, during 2017. If the dry formulation produces the same efficacy as BAM-FX™, a concentrated liquid product, transportation and handling costs would be reduced significantly and we believe we could increase addressable markets due to lower cost to purchasers. We expect to continue developing new formulations and dry formulations in a laboratory setting, begin to perform efficacy trials and design a scale production process during the fourth quarter of 2018, with the intent of adding a number of new specialized products to our current product offering.

Although we have started and realized nominal product sales, we anticipate that in the near term, ongoing expenses, including product development, manufacturing process improvement, corporate administration and technical product support, will be funded primarily by proceeds from sales of our securities and debt.

During 2016, the Company commenced a private offering of up to $10,000,000 of the Company’s securities consisting of 3,333,333 shares of common stock for $3.00 per share.  Through December 31, 2017, proceeds from the offering were $665,001 with offering costs of $53,200. During the nine months ended September 30, 2018, gross proceeds from the offering were $911,154 with cash offering costs of $25,680.  Effective June 28, 2018, the Company terminated its 2016 private offering. 

On June 29, 2018, the Company initiated the June 2018 Offering of its securities to certain prospective accredited investors, including certain members of the Board of Directors and/or their respective affiliates, consisting of up to $2,000,000 of 10% secured convertible promissory notes, and two-year warrants to purchase up to 2,000,000 shares of the Company's common stock at an exercise price of $1.00 per share. During the nine months ended September 30, 2018, gross proceeds from the June 2018 Offering were $2,050,000, with cash offering costs of $61,500. The June 2018 Offering terminated on July 31, 2018, and consisted of one or more closings.

We have generated nominal revenues from our operations thus far and expect that product sales will increase in 2018 primarily from direct sales to end users, domestic and international channel partners’ distribution efforts, initial revenues from our retail product, Gardner’s Choice and introduction of product into specialty crop markets.

We cannot, however, guarantee we will be successful in generating significant revenue in 2018 or in the execution of our business strategy. Our business is subject to risks inherent in the establishment of a new business enterprise, including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies. To become profitable and competitive, we must raise additional capital to execute our 2018 business plan and realize revenues expected.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in our unaudited Condensed Consolidated Financial Statements and accompanying notes. Note 1: Summary of Significant Accounting Policies in our Condensed Consolidated Financial Statements contains a description of the accounting policies used in the preparation of our consolidated financial statements as well as the consideration of recently issued accounting standards and the estimated impact these standards will have on our consolidated financial statements. We evaluate our estimates on an ongoing basis, including those related to revenue recognition and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual amounts could differ significantly from these estimates under different assumptions and conditions.

We define a critical accounting policy or estimate as one that is both important to our financial condition and results of operations and requires us to make difficult, subjective or complex judgments or estimates about matters that are uncertain. We believe that the following are the critical accounting policies and estimates used in the preparation of our Condensed Consolidated Financial Statements. In addition, there are other items within our Condensed Consolidated Financial Statements that require estimates but are not deemed critical as defined in this paragraph.

Revenue Recognition

In accordance with ASC 606 we consider a contract with a customer, to be a signed agreement, a binding contract or other similar documentation reflecting the terms and conditions under which products are sold. We recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. This recognition generally occurs when the product is shipped to or received by the customer.

Going Concern

We adopted FASB ASU No. 2014-15, Presentation of Financial Statements- Going Concern, during the first quarter of 2016.  This standard defines management’s responsibility to evaluate conditions or events as related to uncertainties that raise substantial doubt about our ability to continue as a going concern and to provide related footnote disclosures, as applicable.  Management’s estimates and assumptions, used in the evaluation of our ability to meet our obligations as they become due within one year after the date our financial statements are issued, are based on the facts and circumstances at such date and are subject to a material and high level of subjectivity and uncertainty due to the matters themselves being uncertain and subject to modification. The effect of any individual or aggregate changes in the estimates and assumptions, or the facts and circumstances, could be material to the financial statements. We have concluded that there is substantial doubt about our ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern, but do not include any adjustments that might result if we were unable to do so.

Employee Stock-Based Compensation and Share-Based payment to non-employees

We measure employee compensation expense for all stock-based awards at fair value on the date of grant and recognize compensation expense over the service period for awards expected to vest.

We use the Black-Scholes option-pricing model to determine the fair value for stock option awards and recognize compensation expense on a straight-line basis over the awards' vesting periods. Determining the fair value of stock-based awards at the grant date requires judgment. The determination of the grant date fair value of options using an option-pricing model is affected by our estimated common stock fair value as well as assumptions regarding a number of other complex and subjective variables. If any of the assumptions used in the Black-Scholes model changes significantly, stock-based compensation for future awards may differ materially compared with the awards granted previously. In valuing our options, we make assumptions about risk-free interest rates, dividend yields, volatility and weighted-average expected lives, including estimated forfeiture rates, of the options.

As the Company's common stock is not traded in an active market, the Company estimates the fair value of its common stock (used in its Black Scholes option pricing model) pursuant to ASC 820. This estimation process maximizes the use of observable inputs, including the quoted price of the Company's common stock in an inactive market, the price of the Company's common stock determined in connection with transactions in the Company's common stock, and an income approach to valuation (discounted cash flow).

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The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, including the expected term and the price volatility of the underlying stock, which determine the fair value of stock-based awards. These assumptions include:

● Risk-free rate. Risk-free interest rates are derived from U.S. Treasury securities as of the option grant date.

● Expected dividend yields. Expected dividend yields are based on our historical dividend payments, which have been zero to date.

● Volatility. Because we have a limited trading history as a public company, we estimate volatility of our share price based on a combination of the published historical volatilities of comparable publicly-traded companies in our vertical markets and the historical volatility of our common stock.

● Expected term. We estimate the weighted-average expected life of the options as 5 years.

● Forfeiture rate. Forfeiture rates are estimated using historical actual forfeiture trends as well as our judgment of future forfeitures. These rates are evaluated at least annually and any change in compensation expense is recognized in the period of the change. The estimation of stock awards that will ultimately vest requires judgment and, to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period in which the estimates are revised. We consider many factors when estimating expected forfeitures, including the types of awards and employee class. Actual results, and future changes in estimates, may differ substantially from management's current estimates.

The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and additional paid-in capital in shareholders' deficit over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options or warrants at the end of each period.

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Results of Operations - For the Three Months Ended September 30, 2018 Compared to the Three Months Ended September 30, 2017

For the three months ended	September 30,			September 30,
	2018			2017			$ Change			% Change
Revenue	$	11,635		$	4,355		$	7,280			167.2	%
Cost of Revenue		2,476			375			2,101			560.3	%
Gross Profit		9,159			3,980			5,179			130.1	%
Operating Expenses		1,019,766			1,533,925			(514,159	)		(33.5	)%
Loss from Operations		(1,010,607	)		(1,529,945	)		519,338			33.9	%
Other Income / (Expense)		(253,846	)		(21,446	)		(232,400	)		(1,083.7	)%
Net Loss	$	(1,264,453	)	$	(1,551,391	)	$	286,938			18.5	%
Net Loss per Share - Basic and Diluted	$	(0.03	)	$	(0.04	)	$	0.01			25.0	%

Revenue for the three months ended September 30, 2018 was $11,635, an increase of $7,280 or 167.2% over $4,355 for the three months ended September 30, 2017. Revenue is generated from sales to distributors of agricultural products and to growers who have completed trials in multiple crop-growing seasons with positive crop attributes from applying BAM-FX™ to their crops. In general, growers are sensitive to perceived usage risks and any incremental cost associated with new agricultural products, generally continuing their use of traditional lower cost but less effective chelated zinc and copper products. The Company addressed its product pricing in 2017 and adjusted wholesale and retail prices during the first quarter of 2018 to provide growers a more compelling return on their product purchase.

For the three months ended September 30, 2018, cost of revenue was $2,476, an increase of $2,101 over $375 reported during the same period in 2017. The increase in cost of revenue is directly related to our increase in revenue for the period ended September 30, 2018 over 2017.

25

Operating Expenses decreased by $514,159 to $1,019,766 for the three months ended September 30, 2018 compared to $1,533,925 for the three months ended September 30, 2017, or 33.5%. The decrease in operating expense is primarily due to a decrease in audit fees of $40,301, a decrease in consulting and professional fees of $108,649 a decrease of $195,425 in non-cash equity compensation paid to consultants, board members and employees, and a decrease in employee and employee related benefits and travel expense of $166,022. These decreases were primarily offset by and an increase in legal fees of $20,338.

Other Expense for the three months ended September 30, 2018 increased by $232,400 to $253,846 from $21,446 for the period ended September 30, 2017. The increase in other expense is primarily due to an increase in interest expense of $101,287 and an increase in accretion of debt discount of $130,303 in connection with the Company’s issuance of notes.

Net Loss for the three months ended September 30, 2018 decreased by $286,938 to $1,264,453 from net loss of $1,551,391 for the three months ended September 30, 2017. The decrease in net loss is primarily due to a decrease in operating expenses for the period ended September 30, 2018 of $514,159, offset by an increase in other expense of $232,400. 

Results of Operations - For the Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September 30, 2017

For the Nine Months ended	September 30,			September 30,
	2018			2017			$ Change			% Change
Revenue	$	44,705		$	65,545		$	(20,840	)		(31.8	)%
Cost of Revenue		7,754			12,355			(4,601	)		(37.2	)%
Gross Profit		36,951			53,190			(16,239	)		(30.5	)%
Operating Expenses		3,691,813			5,763,147			(2,071,334	)		(35.9	)%
Loss from Operations		(3,654,862	)		(5,709,957	)		2,055,095			36.0	%
Other Income / (Expense)		(460,653	)		(48,161	)		(412,492	)		(856.5	)%
Net Loss	$	(4,115,515	)	$	(5,758,118	)	$	1,642,603			28.5	%
Net Loss per Share - Basic and Diluted	$	(0.10	)	$	(0.15	)	$	0.05			33.3	%

Revenue for the nine months ended September 30, 2018 was $44,705, a decrease of $20,840 or 31.8% over $65,545 for the nine months ended September 30, 2017. The decrease in revenue is primarily due to non-recurring product stocking orders from distributors during the nine months ended September 30 2017 in states with limited grower trials during 2017 and 2018. Revenue is generated from sales to distributors of agricultural products and to growers who have completed trials in multiple crop-growing seasons with positive crop attributes from applying BAM-FX™ to their crops. In general, growers are sensitive to perceived usage risks and any incremental cost associated with new agricultural products, generally continuing their use of traditional lower cost but less effective chelated zinc and copper products. The Company addressed its product pricing in 2017 and adjusted wholesale and retail prices during the first quarter of 2018 to provide growers a more compelling return on their product purchase.

For the nine months ended September 30, 2018, cost of revenue was $7,754, a decrease of $4,601 over $12,355 reported during the same period in 2017. The decrease in cost of revenue is directly related to our decrease in revenue for the period ended September 30, 2018 over 2017.

26

Operating Expenses decreased by $2,071,334 to $3,691,813 for the nine months ended September 30, 2018 compared to $5,763,147 for the nine months ended September 30, 2017, or 35.9%. The decrease in operating expense is primarily due to a decrease in audit fees of $137,951, a decrease in non-cash inducement costs of $926,855, a decrease in consulting and professional fees of $426,848, a decrease of $467,213 in non-cash equity compensation paid to consultants, board members and employees, and a decrease in employee and employee related benefits and travel expense of $396,347. These decreases were primarily offset by the increase in impairment costs and write off of royalty advance  of $332,788.

Other Expense for the nine months ended September 30, 2018 increased by $412,492 to $460,653 from $48,161 for the nine months ended September 30, 2017. The increase in other expense is primarily due to an increase in interest expense of $208,075 and an increase in accretion of debt discount of $203,065 in connection with the Company's issuance of notes.

Net Loss for the nine months ended September 30, 2018 decreased by $1,642,603 to $4,115,515 from net loss of $5,758,118 for the nine months ended September 30, 2017. The decrease in net loss is primarily due to a decrease in operating expense for the period ended September 30, 2018 of $2,071,334, offset by a decrease in gross profit of $16,239 and an increase in other expense of $412,492. 

Use of Cash

Net Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2018 decreased by $83,000 to $3,398,000 from $3,481,000 for nine months ended September 30, 2017. The decrease in net cash used in operating activities is primarily due to a decrease in net loss of $1,643,000, an increase in impairment expense of $203,000, an increase in reserve for advances on future royalties of $130,000, an increase in amortization of debt issuance costs of $203,000, and a decrease in inventory of $42,000, offset by a decrease in accounts payable and other payables of $631,000, a decrease in non-cash warrant modification expense of $927,000, a decrease in common stock issued for services of $150,000 and a decrease in warrants issued for services of $359,000 and a decrease in collections of accounts receivable and prepaid expenses of $225,000. 

Net Cash Used in Investing Activities

Net cash used in investing activities decreased by $11,000 due to a decrease in payment for intellectual property of $7,000 and a decrease in cash paid to purchase equipment $4,000. 

Net Cash Provided by Financing Activities

Net cash provided by financing activities increased by $377,000 to $3,772,000 for the nine months ended September 30, 2018 from $3,395,000 for the nine months ended September 30, 2017. The increase in net cash provided by financing activities is due primarily to an increase in proceeds from the issuance of notes payable to related parties of $2,700,000 and notes payable of $750,000 offset by a decrease in proceeds from exercise of warrants by related parties of $1,185,000, a decrease in proceeds from sale of common stock net of payment of offering costs of $954,000, an increase in payment of notes payable of $270,000 and an increase in payment of offering costs on related party debt of $64,000.

Liquidity and Capital Resources

The Company expects to incur significant expenses and operating losses for the foreseeable future. Specifically, we estimate that the costs associated with the execution of our 2018 business plan may exceed $350,000 per month. This expense rate is primarily due to: an increase in costs of additional personnel, personnel-related costs and promotional expenses to develop markets for domestic and international sales of our product, BAM-FX™, our retail product, Gardener’s Choice, and our cannabis market product introduction; improvements to our manufacturing facility and processes; and, research and product development related expense for expansion of our product line, product improvement and dry formulation. The Company has evaluated its ability to continue as a going concern for the next twelve months from the issue date of the September 30, 2018 unaudited condensed consolidated financial statements.  There is substantial doubt about the Company's ability to continue as a going concern as we do not currently have the funding necessary to support the projected operating costs we expect to need to operate the business through the third quarter 2019.

We filed a registration statement on Form 10 with the SEC that became effective in February 2015, which requires us to operate as a fully reporting public company. We expect to continue to incur additional personnel and professional costs associated with operating as a fully reporting public company. Accordingly, we have acknowledged the need to obtain additional funding to operate the Company and have continued to raise funds through a private offering.

27

Adequate additional financing may not be realized from a private offering or otherwise may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts. We will need to generate significant revenues to achieve profitability, and we may never do so.

Cash on Hand

As of September 30, 2018, the Company had a cash balance of approximately $382,000 compared to a cash balance of approximately $14,000 as of December 31, 2017.

Total assets were approximately $710,000 and $740,000 at September 30, 2018 and December 31, 2017, respectively. Working capital (deficit) was $(420,000) and $(1,225,000) at September 30, 2018 and December 31, 2017, respectively. The decrease in working capital deficit of $805,000 during the period was primarily due to cash provided by financing activities of $3,772,000 offset by cash used in operating activities of $3,398,000. Total stockholders’ deficit increased by $1,844,000 to $(3,814,000) at September 30, 2018 from $(1,969,000) at December 31, 2017.

Outlook

Required Capital Over the Next Year

Due to the fact that our product, BAM-FX™, is new in the agricultural markets, it is difficult to accurately predict revenues and cash flow at this time. We will need additional funding to cover 2018 expenses. Subsequent to December 31, 2017 through September 30, 2018, we issued 303,718 shares of common stock pursuant to our private offering for approximately $911,000 in gross proceeds.

On or about January 17, 2018, the Company received $500,000 from an accredited investor, and in exchange the Company issued to the investor (a) an unsecured promissory note dated January 16, 2018, maturing on October 26, 2019, in the principal face amount of $500,000 (the “First Note”), and (b) a warrant dated January 18, 2018 to purchase up to 50,000 shares of the Company’s common stock of (the “First Warrant”). A member of the Company’s board of directors is a beneficiary of certain trusts that own Rio Vista Investments, LLC, the holder of the First Note and First Warrant.

On or about January 18, 2018, the Company received $100,000 from an accredited investor, and in exchange the Company issued to the investor (a) an unsecured promissory note dated January 19, 2018, maturing on January 18, 2020, in the principal face amount of $100,000 (the “Second Note”), and (b) a warrant dated January 19, 2018 to purchase up to 10,000 shares of the Company’s common stock of (the “Second Warrant”). The First Note and Second Note shall collectively be referred to as the “January Notes”, and the First Warrant and Second Warrant shall collectively be referred to as the “January Warrants”. The Notes and Warrants were made on substantially the same terms, except as noted. The January Notes bear interest at the rate of ten percent (10%) per annum, such interest being payable by the Company to the holders thereof quarterly in cash. The January Notes are payable in full by the Company, plus all unpaid interest thereon, by their respective maturity dates. Prepayment of all unpaid principal and interest on each note may be made by the Company prior to such notes's maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest under such note, based on the full principal amount. In addition to the foregoing, the Company must repay the First Note to Rio Vista Investments, LLC within 30 days of the date the Company possesses an amount of cash equal to the outstanding balance of principal and interest due under the Second Note plus an amount reasonably anticipated to be necessary to operate the Company over the succeeding 6 months. The January Warrants are exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share.

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On or about March 8, 2018, the Company received $200,000 from an accredited investor and member of our Board of Directors, and in exchange the Company issued (a) an unsecured promissory note dated March 8, 2018 (the “Third Note”), and (b) a warrant dated March 9, 2018 to purchase up to 20,000 shares of the Company’s common stock (the “Third Warrant”).

On or about March 12, 2018, the Company received $200,000 from Boies Partners, Inc. (“BPI”), an accredited investor, and in exchange the Company issued to BPI (a) an unsecured promissory note dated March 12, 2018 (the “Fourth Note”), and (b) a warrant dated March 12, 2018 to purchase up to 20,000 shares of the Company’s common stock (the “Fourth Warrant”). Alex Boies, a member of our Board of Directors, has no financial interest in or control over BPI and does not otherwise have any beneficial ownership in any securities owned by BPI.

The Third Note and Fourth Note shall collectively be referred to as the “March Notes”, and the Third Warrant and Fourth Warrant shall collectively be referred to as the “March Warrants”. The Notes were made on substantially the same terms, except as noted. The Warrants were made on the same terms.

The March Notes bear interest at the rate of ten percent (10%) per annum, such interest being payable by the Company to the holders thereof quarterly in cash. The March Notes are payable in full by the Company, plus all unpaid interest thereon, by March 7, 2020 and March 11, 2020, respectively. Prepayment of all unpaid principal due on each Note may be made by the Company prior to each such Note’s maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to one year of interest due under such Note, based on such Note’s principal balance as of the origination date. The Notes contains customary provisions for events of default and acceleration of sums due.

The Fourth Note further provides that within 30 days of receipt of payment of any amount principal outstanding under the Fourth Note (the “Conversion Window”), the note holder shall have the right to convert any portion of such payment into the Company’s common stock at the lesser of $3.00 per share or the lowest price per share of any sale by the Company of its common stock occurring between the date of the Fourth Note and the end of the Conversion Window.

The March Warrants are exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share.

In May 2018, in connection with issuance of a $300,001 unsecured promissory note to an accredited investor, the Company issued five-year warrant to purchase up to 30,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of $21,452 upon execution of the promissory note.

In June 2018, in connection with issuance of a $1,000,000 secured promissory note to an accredited investor made pursuant to the June 2018 Offering, the Company issued a two-year warrant to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of $414,416 upon execution of the promissory note. 

In July 2018, in connection with issuance of a $1,050,000 secured promissory note to accredited investors made pursuant to the June 2018 Offering, the Company issued a two-year warrant to purchase up to 1,050,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of $435,271 upon execution of the promissory note. 

In November 2018, the Company received $250,000 as an advance on inventory purchases from an affiliate of a related party.

On February 20, 2018, BAM Inc. and Pedro Lichtinger Waisman, Isaac Lichtinger Waisman and Victor Lichtinger Waisman (the “Lichtinger Group”) entered into a License and Business Development Agreement Mexico, effective as of February 13, 2018 (the “Agreement”). Following consummation of the Agreement, the Lichtinger Group formed a company in Mexico, Agro Space Tech SA de CV de RV (“Agro Space”), to which BAM will receive a twenty percent (20%) equity ownership interest. BAM received $100,000 following execution of the Agreement, to purchase shares of the Company in connection with the Company’s ongoing private placement of shares of its common stock for USD $3.00 per share.

29

Without consideration of any revenue or additional fundraising, at the Company’s current rate of expenditure, we expect that our current capital will not be sufficient to cover our future operating costs for twelve months.

The sales cycle for our product BAM-FX™ in agriculture markets is generally two to three growing seasons. We have completed our second season and with certain growers, our third season, of validation and testing as a commercial product and believe that positive trial results on growers’ crops have contributed to product awareness. However, as important as the positive trial results are, third-party validation of the product’s performance and scientific proof of the product’s mode of action are equally important to our channel partners in their purchasing decisions. The scientific studies, which were undertaken in 2016, are expected to continue during 2018. We believe that the combination of validation, testing and technical studies carried out over the past years will lead to revenue generation and growth in 2018. 

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

For a discussion of our accounting policies and related items, please see the Notes to the unaudited Condensed Consolidated Financial Statements, included in Note 1.

Item 3. Quantitative & Qualitative Disclosures about Market Risks

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Accounting Officer (our Chief Executive Officer and Chief Financial Officer, respectively), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon this evaluation, our Chief Executive Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that (i) information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms and (ii) our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to our management including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the Company’s disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

 Changes in Internal Control Over Financial Reporting

There were no changes in internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the nine months ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

30

PART II OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any current or pending legal proceedings.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The transactions below were exempt from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended, or Regulation D promulgated thereunder the Securities Act. All proceeds received in connection with any of the following transactions, as applicable, were used for general working capital purposes.

On June 29, 2018, the Company initiated a new private offering of its securities (the “June 2018 Offering”) to certain prospective accredited investors, including certain members of the Board of Directors and/or their respective affiliates, consisting of up to $2,000,000 of 10% secured convertible promissory notes (the “June 2018 Offering Notes”), and two-year warrants to purchase up to 2,000,000 shares of the Company’s common stock at an exercise price of $1.00 per share (the “June 2018 Offering Warrants”).  An accredited investor and member of our Board of Directors provided additional funding of $250,000 on July 2, 2018 and an additional $250,000 on July 17, 2018, and the Company issued June 2018 Offering Notes in exchange therefore, with maturity dates of July 2, 2020 and July 17, 2020, respectively, and June 2018 Offering Warrants to purchase, in the aggregate, up to 500,000 shares of the Company’s common stock.  In addition, during July 2018, the Company received, in the aggregate, $550,000 from seven other current shareholders and issued June 2018 Offering Notes in exchange therefore, and June 2018 Offering Warrants to purchase, in the aggregate, up to 550,000 shares of the Company’s common stock.  Pursuant to the June 2018 Offering, in the aggregate, the Company issued June 2018 Offering Notes having an aggregate principal balance of $2,050,000, and June 2018 Offering Warrants to purchase  up to 2,050,000 shares of the Company’s common stock.  The June 2018 Offering terminated on July 31, 2018.

During the three months ended September 30, 2018, the Company issued fully vested, non-forfeitable five-year warrants to purchase shares of the Company’s common stock at an exercise price of $3.00 per share (“Provider Warrants”) to employees and consultants for services rendered to purchase, in the aggregate, up to 95,000 shares of the Company’s common stock.  Following September 30, 2018, the Company issued Provider Warrants to purchase, in the aggregate, up to 40,000 shares of the Company’s common stock to employees and consultants for services rendered.  During 2018, in the aggregate, the Company has issued Provider Warrants to purchase up to 425,000 shares of the Company’s common stock to employees and consultants for services rendered.

Item 3. Defaults upon Senior Securities

None.

Item 5. Other Information

None.

ITEM 6. EXHIBITS

No.	Description of Exhibit	Note
3.1	Certificate of Incorporation, Amendments to Articles of Incorporation and Articles of Merger	(2)
3.2	Second Amended and Restated By-Laws of the Company	(3)
10.1	Form of 10% Secured Convertible Promissory Note used in the June 2018 Offering.	(4)
10.2	Form of Warrant used in the June 2018 Offering.	(4)
31.1	Certification of Principal Executive Officer and Principal Financial and Accounting Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	(1)
32.1	Certification of Principal Executive Officer and Principal Financial and Accounting Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	(1)
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the three-months ended September 30, 2018 are formatted in XBRL (eXtensible Business Reporting Language):  (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (iv) the Notes to the Condensed Consolidated Financial Statements.	(1)

(1)           Filed herewith.

(2)           Incorporated by reference from the Company’s Registration Statement on Form 10, filed with the SEC on December 29, 2014.

(3)           Incorporated by reference from the Company’s Current Report on Form 8-K, filed with the SEC on October 5, 2015.

(4)           Incorporated by reference from the Company’s Current Report on Form 8-K, filed with the SEC on July 13, 2018.

31

SIGNATURES

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

	ZERO GRAVITY SOLUTIONS, INC.
	(Registrant)
Dated:  November 19, 2018	By:	/s/ Timothy A. Peach
		Timothy A. Peach, Acting Chief Executive Officer
		(Principal Executive Officer) Chief Financial Officer
		(Principal Accounting Officer)

32

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, I, Timothy A. Peach, certify that:

1. I have reviewed this report on Form 10-Q of Zero Gravity Solutions, Inc., for the fiscal quarter ended September 30, 2018;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 19, 2018

/s/ Timothy A. Peach

Timothy A. Peach

Chief Executive Officer, Principle Executive

Officer, Principal Accounting Officer, Chief

Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Zero Gravity Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy A. Peach, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 19, 2018

/s/ Timothy A. Peach

Timothy A. Peach

Chief Executive Officer, Principle Executive

Officer, Principal Accounting Officer, Chief

Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 18, 2018
Document Information [Line Items]
Entity Registrant Name	Zero Gravity Solutions, Inc.
Entity Central Index Key	0001574186
Trading Symbol	zgsi
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		40,954,115
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
CURRENT ASSETS
Cash	$ 382,231	$ 13,862
Accounts receivable, net	443	1,393
Prepaid expenses	146,390	216,139
Inventory	75,928	68,643
Total current assets	604,992	300,037
Property and equipment, net	89,845	104,590
OTHER ASSETS
Deposits	4,817	4,617
Intellectual property, net	10,522	11,458
Advance on future royalties - related parties, net		319,441
Total other assets	15,339	335,516
TOTAL ASSETS	710,176	740,143
CURRENT LIABILITIES
Accounts payable and other payables	290,115	693,695
Accounts payable, related party	67,069	80,097
Accrued interest	16,870	2,500
Accrued interest, related party	99,289	32,250
Deferred compensation, related party	12,500	12,500
Convertible Note payable - related party	500,000	500,000
Note payable	38,706	204,419
Total liabilities (all current)	1,024,549	1,525,461
LONG TERM LIABILITIES
Note payable, net of discount of $15,880 and $18,218	284,120	181,782
Notes payable, related parties, net of discount of $125,547 and $97,796	1,974,456	1,002,204
Convertible Note payable, net of discount of $224,080 and $0	325,920
Convertible Note payable - related party, net of discount of $585,211 and $0	914,789
Total long-term liabilities	3,499,285	1,183,986
Total Liabilities	4,523,834	2,709,447
Commitments (Note 4)
STOCKHOLDERS' DEFICIT
Common stock; 100,000,000 shares authorized, at $0.001 par value, 40,954,115 and 40,650,397 shares issued and outstanding, at September 30, 2018 and December 31, 2017, respectively	40,954	40,650
Additional paid-in capital	24,241,123	21,970,266
Accumulated deficit	(28,095,735)	(23,980,220)
Total stockholders' deficit	(3,813,658)	(1,969,304)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 710,176	$ 740,143

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Debt, discount	$ 224,080	$ 0
Note payable, related parties, discount	125,547	97,796
Convertible note payable, related parties discount	$ 585,211	$ 0
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares issued (in shares)	40,954,115	40,650,397
Common stock, shares outstanding (in shares)	40,954,115	40,650,397
Notes Payable, Other Payables [Member]
Debt, discount	$ 15,880	$ 18,218

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
REVENUE
Revenues	$ 11,635	$ 4,355	$ 44,705	$ 65,545
COST OF REVENUE
Cost of goods sold	2,476	157	6,100	10,263
Royalty expense		218	1,654	2,092
Total cost of revenue	2,476	375	7,754	12,355
GROSS PROFIT	9,159	3,980	36,951	53,190
OPERATING EXPENSES
General and administrative	1,003,056	1,492,884	3,553,188	5,623,117
Research and development	16,710	41,041	138,625	140,030
Total operating expenses	1,019,766	1,533,925	3,691,813	5,763,147
LOSS FROM OPERATIONS	(1,010,607)	(1,529,945)	(3,654,862)	(5,709,957)
OTHER INCOME (EXPENSE)
Loss on disposal of assets	(1,197)		(1,540)
Interest expense	(119,673)	(18,386)	(253,175)	(45,101)
Accretion of debt discount	(132,976)	(2,673)	(205,938)	(2,673)
Foreign exchange loss		(387)		(387)
Total other income (expense)	(253,846)	(21,446)	(460,653)	(48,161)
NET LOSS	$ (1,264,453)	$ (1,551,391)	$ (4,115,515)	$ (5,758,118)
NET LOSS PER SHARE - BASIC AND DILUTED (in dollars per share)	$ (0.03)	$ (0.04)	$ (0.10)	$ (0.15)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED (in shares)	40,954,115	40,323,242	40,846,981	38,948,632

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (4,115,515)	$ (5,758,118)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	18,770	18,414
Amortization expense	936	646
Bad debt expense	4,060
Common stock issued for services		150,000
Warrants issued for services	296,271	655,128
Stock options issued as compensation	146,277	108,388
Loss on disposal of asset	1,540
Advance on future royalties - related parties reserve	129,580
Impairment expense	203,208
Warrant modification expense		926,885
Amortization of debt issuance costs	205,938	2,673
Changes in operating assets and liabilities:
Accounts receivable, trade	(3,110)	87,693
Other current assets		(19,685)
Prepaid expenses	69,749	204,771
Advance on future royalties - related parties	(13,347)	(34,912)
Inventory	(7,285)	(49,210)
Deposit	(200)	(1,000)
Accounts payable, related party	(13,028)
Accounts payable and other payables	(403,580)	227,537
Accrued interest, related party	14,370
Accrued interest	67,039
Net cash used in operating activities	(3,398,327)	(3,480,791)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid to acquire intellectual property		(6,976)
Cash paid to purchase equipment	(5,489)	(9,412)
Net cash used in investing activities	(5,489)	(16,388)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of notes payable	(165,790)	(195,355)
Payments of notes payable - related party	(300,000)
Proceeds from exercise of warrants – related party		1,185,000
Payment of offering costs - related party	(97,500)	(33,750)
Proceeds of notes payable	750,000
Proceeds of notes payable – related party	2,700,001	600,000
Proceeds from sale of common stock	911,154	1,977,999
Payment of offering costs	(25,680)	(138,800)
Net cash provided by financing activities	3,772,185	3,395,094
NET INCREASE (DECREASE) IN CASH	368,369	(102,085)
CASH AT BEGINNING OF PERIOD	13,862	232,394
CASH AT END OF PERIOD	382,231	130,309
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income Taxes
Interest	159,996	45,101
Warrants Issued as Equity Direct Offering Costs [Member]
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued	5,771	168,268
Warrants Issued as Debt Discount [Member]
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued	$ 946,244

XML

Note 1 - Organization and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

NOTE

1

– ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations

Zero Gravity Solutions, Inc. (the “Company”) is a biotechnology company focused on commercializing technology derived from and designed for spaceflight with significant applications on Earth. These technologies are focused on improving world agriculture by providing valuable solutions to challenges facing humanity including threats to world agriculture and the ability to feed the world’s rapidly growing population.

The Company owns proprietary technology for its initial commercial product, BAM-FX™ that can boost the nutritional value and enhance the immune system of food crops without the use of Genetic Modification. The Company’s focus is the commercialization of BAM-FX™ in both domestic and international markets. The Company’s headquarters are located in Boca Raton, Florida. 

The Company operates through

two

wholly owned subsidiaries: BAM Agricultural Solutions, Inc. and Zero Gravity Life Sciences, Inc., both Florida corporations formed by the Company in

2014.

Going Concern and Management’s Plans 

At

September 30, 2018,

the Company had an approximate cash balance of

$382,000,

 a working capital deficiency of approximately $(

420,000

), a loss from operations of approximately $(

4,116,000

), and negative cash flows from operating activities of approximately $(

3,398,000

). To date, the Company has relied on equity financing and has entered into related and non-related party promissory notes to fund its operations. The Company has also issued stock-based compensation in exchange for services. Although the Company intends to raise additional capital, the Company expects to continue to incur losses from operations and have negative cash flows from operating activities for the near-term and these losses could be significant as product development, regulatory, contract research, and technical marketing personnel related expenses are incurred. Management has evaluated its ability to continue as a going concern for the next

twelve

months from the issuance of these

September 30, 2018

unaudited condensed consolidated financial statements, and has determined that there is substantial doubt as to its ability to continue as a going concern. The Company has satisfied its obligations using cash from successful capital raising efforts through

September 30, 2018,

however, there are

no

assurances that such successful efforts will continue for up to a year after these unaudited condensed consolidated financial statements are issued. The unaudited condensed consolidated financial statements do

not

include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that

may

result should the Company be unable to continue as a going concern. The Company has executed product distribution agreements with domestic and international commercial agricultural distributors and generated initial product orders. Additional technical and marketing effort must be devoted to those distributors to insure the product is properly utilized and validated by end users. To fund these capital needs, the Company has and continues to raise capital through private placement offerings, conducted through it's own efforts or through the efforts of an investment bank, as well as raising funds through issuances of debt, to related and non-related parties. If the Company does

not

obtain additional capital, the Company would potentially be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs and expense levels. 

Management’s strategic plans include the following:

● Continuing to advance commercialization of the Company’s principal product, BAM-FX™ in both domestic and international markets;

● Pursuing additional capital raising opportunities;

● Continuing to explore and execute prospective partnering or distribution opportunities; and

● Identifying unique market opportunities that represent potential positive cash flow.

Interim Financial Statements

The interim unaudited condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the

three

and

nine

months ended

September 30, 2018

and

2017,

our cash flows for the

nine

months ended

September 30, 2018

and

2017,

and our financial position as of

September 30, 2018

have been made. The results of operations for such interim periods are

not

necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual audited consolidated financial statements have been condensed or omitted from these interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form

10

-K for the year ended

December 31, 2017

as filed with the SEC on

August 13, 2018.

The

December 31, 2017

balance sheet is derived from those statements.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, inventory reserves and classifications, amortization period and recoverability of intangible assets, valuation of beneficial conversion features in convertible debt, valuation of loss contingencies, valuation of stock-based compensation and the valuation allowance on deferred tax assets.

Segment Reporting

The Company views its operations and manages its business as 

one

reportable segment. As a result the unaudited condensed consolidated financial statements presented within, relate to our principal operating segment.  Customers in the United States accounted for

100%

of our revenues. Except for

$23,202

in inventory shipped to Paraguay for a sale where the revenue has

not

been recognized, we do

not

have any other property or equipment outside of the United States.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Zero Gravity Solutions, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of

three

months or less to be cash equivalents. The Company had

no

cash equivalents at

September 30, 2018

and

December 31, 2017.

Inventory

Inventory is valued on a lower of

first

in,

first

out (FIFO) cost or net realizable value. Inventory consisted of:

	September 30,		December 31,
	2018		2017
Raw materials	$	21,904	$	23,562
Finished product		54,024		45,081
Total Inventory	$	75,928	$	68,643

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred.

Depreciation is computed on a straight-line basis over estimated useful lives. Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable.

Impairment of Long Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of ASC

360

-

10

-

35

-

15

“Impairment or Disposal of Long-Lived Assets.”  This guidance requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Concentration of Credit Risk

The Company believes that its credit risk exposure is limited. The Company has never suffered a loss due to excess balances.

Fair Value of Financial Instruments

The Company accounts for financial instruments under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic (ASC)

820,

Fair Value Measurements

.  This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements, ASC

820

establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into

three

levels as follows:

Level

1

— quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level

2

— observable inputs other than Level

1,

quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are

not

active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level

3

— assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions.  Unobservable inputs require significant management judgment or estimation.  In some cases, the inputs used to measure an asset or liability

may

fall into different levels of the fair value hierarchy.  In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement.  Such determination requires significant management judgment. 

As the Company's common stock is

not

traded in an active market, the Company estimates the fair value of its common stock (used in its Black Scholes option pricing model) pursuant to ASC

820.

This estimation process maximizes the use of observable inputs, including the quoted price of the Company's common stock in an inactive market, the price of the Company's common stock determined in connection with transactions in the Company's common stock, and an income approach to valuation (a discounted cash flow technique that considers the future cash flows).

The carrying amounts of the Company’s accounts receivable and accounts payable approximate fair value due to the relatively short period to maturity for these instruments. The carrying value of the Company’s notes payable approximates fair value due to their short period to maturity and their stated interest rates, combined with historic interest rate levels. 

Revenue recognition and accounts receivable

Effective

January 1, 2018 (

Date of adoption), we recognize revenues from the sale of agricultural biotechnology products to distributors and customers pursuant to the provisions of ASC

606,

“Revenue From Contracts With Customers”.

We recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Revenue is recognized in accordance with the core principle by applying the following

five

steps:

1

) identify the contracts with a customer;

2

) identify the performance obligations in the contract;

3

) determine the transaction price;

4

) allocate the transaction price to the performance obligations; and

5

) recognize revenue when (or as) we satisfy a performance obligation.

Revenues for agricultural chemical products are recognized when title to the products is transferred which

may

be upon shipment to the customer or receipt by the customer of the product. This satisfies the performance obligation on which we earn the transaction price. There was

no

cumulative effect of adopting ASC

606.

Amounts billed to customers for shipping and handling fees are included in net sales, and costs incurred by the company for the delivery of invoiced goods are classified as cost of goods sold in our Statements of Operations.

The Company determined that

no

 reserve for estimated product returns and allowances was necessary during the

nine

months ended

September 30, 2018

and

2017.

Determination of the reserve for estimated product returns and allowances is based on management's analyses and judgments regarding certain conditions. Should future changes in conditions prove management's conclusions and judgments on previous analyses to be incorrect, revenue recognized for any reporting period could be materially affected. 

At

September 30, 2018,

three

customers accounted for

100%

of total accounts receivable, each representing

59.6%,

22.5%,

and

17.9%,

respectively. During the

three

months ended

September 30, 2018,

one

customer accounted for

75.2%

of net sales. During the

nine

months ended

September 30, 2018

two

customers accounted for

69.9%

of net sales each representing,

50.3%

and

19.6%,

respectively. During the

three

months ended

September 30, 2017,

two

 customers accounted for

94.0%

of net sales, each representing

79.1%,

and

14.9%,

respectively. During the

nine

months ended

September 30, 

2017

three

 customers accounted for

69.5%

of net sales, each of these customers represented

33.6%,

22.9%

and

13.0%,

respectively. 

At

December 31, 2017,

three

customers accounted for

100%

of total accounts receivable. Each of these

three

customers represented

46.5%,

34.9%

and

18.6%,

respectively.

The Company extends credit to customers generally without requiring collateral. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. The Company records an allowance for doubtful accounts when it is probable that the accounts receivable balance will

not

be collected. When estimating the allowance, the Company takes into consideration such factors as its day-to-day knowledge of the financial position of specific clients, and the industry and size of its clients. The allowance for doubtful accounts as of

September 30, 2018

and

December 31, 2017

was

$0

 and

$32,663,

respectively.

Cost of sales

Cost of sales is comprised of material costs, invoiced shipping costs and royalty expense.  

Warrants

The Company recognizes the cost of warrants issued with debt as debt discount in the unaudited condensed consolidated financial statements which is recorded at the warrants relative fair value which is measured based on the grant date fair value of the award. The Company estimates the fair value of each warrant at the grant date by using the Black-Scholes option pricing model.

Stock based compensation

The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the unaudited condensed consolidated financial statements which is measured based on the grant date fair value of the award. Stock based compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award (generally the vesting period). The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model.

Costs equal to these fair values are recognized ratably over the requisite service period based on the number of awards that are expected to vest, or in the period of grant for awards that vest immediately and have

no

future service condition. The expense resulting from employee and share-based payments is recorded in general and administrative expense in

2018

and

2017.

The Company also grants share-based compensation awards to non-employees for service provided to the Company. The Company measures and recognizes the fair value of such transactions based on the fair value of consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

Loss per Share

Loss per share is calculated by dividing the Company’s net loss by the weighted average number of common shares outstanding during the period. Diluted earnings loss per share is calculated by dividing the Company’s net income (loss) by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity instruments. The effect of the inclusion of the dilutive shares would have resulted in a decrease in loss per share. Accordingly, the weighted average shares outstanding have

not

been adjusted for dilutive shares. Outstanding warrants, stock options and convertible debt are

not

considered in the calculation as the impact of the potential common shares (

15,993,998,

shares and

12,981,000

 shares for the

nine

months ended

September 30, 2018

and

2017,

respectively), would be to decrease net loss per share.

Research and Development

Research and development costs are charged to expense as incurred.

Warranty Expense

The Company's distribution agreements provide for a warranty on products sold. As sales under such distribution agreements have been nominal through

2018

and

2017,

there has been

no

 warranty expense in

2018

or

2017.

A provision for estimated future warranty costs is to be recorded as cost of sales when products are shipped, and warranty costs are to be based on historical trends in warranty charges as a percentage of gross product shipments. A resulting accrual is to be reviewed regularly, and periodically adjusted to reflect changes in warranty cost estimates.

Income Taxes

The Company accounts for income taxes under the asset and liability method, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is required to the extent any deferred tax assets

may

not

be realizable.

The Company does

not

have an accrual for uncertain tax positions as of

September 30, 2018

and

December 31, 2017.  

The Company files corporate income tax returns with the Internal Revenue Service and the States where the Company determines it is required to do so.  The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At

September 30, 2018,

the Company did

not

have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the

three

or

nine

months ended

September 30, 2018

or

2017.

 

Investments

We have an equity investment in a privately held entity as discussed in note

4.

We account for investments either under the equity method or cost method of accounting depending on our ownership interest and the level of our influence. Investments accounted for under the equity method are recorded based upon the amount of our investment and adjusted each period for our share of the investee's income or loss. Cost method investments are recorded at cost less any impairments. All investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where our investment 

may 

not

be recoverable.

Reclassifications

Certain amounts in the

December 31, 2017

balance sheet have been reclassified from accounts payable, related party to accrued interest, related party to conform to the

September 30, 2018

presentation.  This reclassification had

no

effect on current liabilities in either period presented.

Recently Issued Accounting Pronouncements

In

May 2014,

the Financial Accounting Standards Board (“FASB”) issued ASC

606,

“Revenue from Contracts with Customers” which has been further clarified and amended. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were

not

previously addressed comprehensively (for example, service revenue and contract modifications) and clarify guidance for multiple-element arrangements. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Statement of Financial Position. The standard is effective for fiscal years, and interim periods within those years, beginning after

December 

15,

2017.

The Company has finalized its assessment of ASC

606

and determined there will be

no

material effect on our financial position and results of operations. The timing and amount of revenue recognized based on the new standard is consistent with the revenue recognition policy under previous guidance, however, certain additional financial statement disclosures will be required beginning with

2018

reporting, including additional disaggregated view of revenue. We have adopted the new standard effective

January 1, 2018,

using the modified retrospective transition method.

In

March 2016,

the FASB issued ASU

No.

2016

-

02,

Leases

. The main difference between the provisions of ASU

No.

2016

-

02

and previous U.S. GAAP is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU

No.

2016

-

02

retains a distinction between finance leases and operating leases, and the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have

not

significantly changed from previous U.S. GAAP. For leases with a term of

12

months or less, a lessee is permitted to make an accounting policy election by class of underlying asset

not

to recognize right-of-use assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has

not

finalized the analysis to determine the effect of the standard, but believes that it will

not

have a material impact on the statement of operations.

In

June 2018,

the Financial Accounting Standards Board (“FASB”) issued ASU

No.

2018

-

07,

“Compensation - Stock Compensation (Topic

718

): Improvements to Nonemployee Share-Based Payment Accounting.” ASU

No

2018

-

07

expands the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Early adoption is permitted, but

no

earlier than an entity’s adoption date of Topic

606.

This guidance is applicable to the Company’s fiscal year beginning

January 

1,

2019.

The Company is currently evaluating the potential effects of this guidance on its consolidated financial statements.

In

July 2017,

the FASB issued Accounting Standards Update

No.

2017

-

11

Earnings Per Share (Topic

260

) Distinguishing Liabilities from Equity (Topic

480

) Derivatives and Hedging (Topic

815

) (“ASU

2017

-

11”

)

, which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature

no

longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. ASU

2017

-

11

also clarifies existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)

no

longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, ASU

2017

-

11

requires entities that present earnings per share (EPS) in accordance with ASC Topic

260

to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.  Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features in ASC

470

-

20.

 For the Company, ASU

2017

-

11

is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts ASU

2017

-

11

in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period in either of the following ways:

1.

Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the

first

fiscal year and interim period(s) in which ASU

2017

-

11

is effective or

2.

Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs

250

-

10

-

45

-

5

through

45

-

10.

The Company has elected early adoption and the effects of this guidance are reflected in its unaudited condensed consolidated financial statements and there was

no

cumulative effect adjustment.

On

August 2018,

the SEC adopted amendments to certain disclosure requirements in Securities Act Release

No.

33

-

10532,

Disclosure Update and Simplification. The amendments will become effective on

November 5, 2018.

Among the amendments is the requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form

10

-Q. The Company has elected to implement this amendment beginning the

first

quarter of

2019.

XML

Note 2 - Property and Equipment

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

NOTE

2

 – PROPERTY AND EQUIPMENT

	September 30 , 2018			December 31, 2017
Computer equipment	$	13,032		$	15,332
Equipment and furniture		136,734			133,940
Leasehold improvements		7,593			7,593
		157,359			156,865
Accumulated Depreciation		(67,514	)		(52,275	)
Property and Equipment - Net	$	89,845		$	104,590

Depreciation expense for the

nine

months ended

September 30, 2018

and

2017

was

$18,770

 and

$18,414,

respectively

XML

Note 3 - Related Party Transactions

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE

3

 – RELATED PARTY TRANSACTIONS

The following descriptions of convertible notes and notes payable refer to notes issued to related parties of the Company. For a description of convertible notes and notes payable to non-related parties of the Company see Note

5.

Convertible Notes Payable to Related Parties

Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
July 2015	$	500,000	$	-	$	-	$	500,000
June 2018	$	1,000,000	$	444,416	$	56,617	$	612,201
July 2018	$	250,000	$	111,113	$	13,699	$	152,586
July 2018	$	250,000	$	111,109	$	11,111	$	150,002
	$	2,000,000	$	666,638	$	81,427	$	1,414,789
Convertible Notes Payable - Current	$	500,000	$	-	$	-	$	500,000
Convertible Notes Payable - Long Term	$	1,500,000	$	666,638	$	81,427	$	914,789

In

July 2015,

a member of the Company’s Board of Directors advanced the Company

$500,000

under a note payable for working capital purposes. The unsecured note payable bears interest at

8.5%

per annum, is payable quarterly, and was originally due in

July 2016.

In connection with the note, the Company issued warrants to purchase

350,000

shares of the Company’s common stock at an exercise price of

$3

 per share. The Company calculated the fair value of the warrants at

$416,618

utilizing the Black-Scholes Model with the following assumptions: expected dividends of

0%,

volatility of

184.2%,

risk free interest rate of

1.66%

and expected life of

5

years. The relative fair value of the debt and warrants was recorded resulting in a debt discount of

$227,258

upon execution of the agreement. In

July 2016,

the maturity date of the note was extended to

July 2017,

and a conversion feature was added. The conversion feature allows the holder to convert the debt into common shares at his option at a conversion price of

$1.25

per share (

400,000

shares). The addition of the conversion feature represented a substantial modification to the debt instrument but the modification was determined to

not

be material. During

2017,

$42,500

 was recorded as interest expense and

$10,625

was included in payables at

December 31, 2017.

During

2017,

the maturity date of the note was extended to

July 2018

and then extended again in

2018

to

July 2019.

For the

nine

months ended

September 30, 2018

and

2017,

the Company recorded interest expense of

$

21,250

on the note recorded in accrued interest - related party. The note is included in the current liabilities section of the unaudited consolidated balance sheets.

On

June 29, 2018,

in connection with its

June 2018

Offering (as defined in Note

5

), the Company received

$1,000,000

 from an affiliate of a board member, and in exchange the Company issued (a) an unsecured convertible promissory note dated

June 29, 2018,

and (b) a

two

-year warrant dated

June 29, 2018

to purchase up to

1,000,000

 shares of the Company’s common stock. The note bears interest at the rate of

ten

percent (

10%

) per annum, payable quarterly in cash. The note is payable in full plus all unpaid interest thereon, by

June 28, 2020.

The conversion feature allows the holder to convert the debt into common shares at his option at a conversion price of the lower of

$3

per share or the Company's current offering price. Prepayment of all unpaid principal and interest 

may

be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest, based on the full principal amount. The warrant is exercisable within

2

 years of issuance into shares of the Company’s common stock, at

$1.00

per share. The relative fair value of the note and warrant recorded resulted in debt discount of

$414,416

 upon execution. The Company also incurred

$30,000

of lender fees. During the

three

month and

nine

months ended

September 30, 2018

accretion of debt discount was

$56,617

,

and was included in other expenses on the statements of operations.

On

July 2, 2018,

in connection with its

June 2018

Offering (as defined in Note

5

), the Company received

$250,000

 from a board member, and in exchange the Company issued (a) an unsecured convertible promissory note dated

July 2, 2018,

and (b) a

two

-year warrant dated

July 2, 2018

to purchase up to

250,000

 shares of the Company’s common stock. The note bears interest at the rate of

ten

percent (

10%

) per annum, payable quarterly in cash. The note is payable in full plus all unpaid interest thereon, by

July 1, 2020.

The conversion feature allows the holder to convert the debt into common shares at his option at a conversion price of the lower of

$3

per share or the Company's current offering price. Prepayment of all unpaid principal and interest 

may

be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest, based on the full principal amount. The warrant is exercisable within

2

 years of issuance into shares of the Company’s common stock, at

$1.00

per share. The relative fair value of the note and warrant recorded resulted in debt discount of

$103,613

 upon execution. The Company also incurred

$7,500

of lender fees. During the

three

month and

nine

months ended

September 30, 2018

accretion of debt discount was

$13,699

,

and was included in other expenses on the statements of operations.

On

July 19, 2018,

in connection with its

June 2018

Offering (as defined in Note

5

), the Company received

$250,000

 from a board member, and in exchange the Company issued (a) an unsecured convertible promissory note dated

July 19, 2018,

and (b) a

two

-year warrant dated

July 19, 2018

to purchase up to

250,000

 shares of the Company’s common stock. The note bears interest at the rate of

ten

percent (

10%

) per annum, payable quarterly in cash. The note is payable in full plus all unpaid interest thereon, by

July 18, 2020.

The conversion feature allows the holder to convert the debt into common shares at his option at a conversion price of the lower of

$3

per share or the Company's current offering price. Prepayment of all unpaid principal and interest 

may

be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest, based on the full principal amount. The warrant is exercisable within

2

 years of issuance into shares of the Company’s common stock, at

$1.00

per share. The relative fair value of the note and warrant recorded resulted in debt discount of

$103,609

 upon execution. The Company also incurred

$7,500

of lender fees. During the

three

month and

nine

months ended

September 30, 2018

accretion of debt discount was

$11,111

,

and was included in other expenses on the statements of operations.

Notes Payable to Related Parties
Notes payable outstanding at September 30, 2018 consist of the following:
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
August 2017	$	100,000	$	10,435	$	5,745	$	95,311
September 2017	$	500,000	$	52,166	$	28,227	$	476,061
October 2017	$	500,000	$	50,229	$	23,256	$	473,028
January 2018	$	500,000	$	50,590	$	20,111	$	469,521
March 2018	$	200,000	$	20,281	$	5,695	$	185,414
May 2018	$	300,001	$	30,452	$	5,572	$	275,121
	$	2,100,001	$	214,153	$	88,606	$	1,974,456

In

August 2017,

the Company issued an unsecured promissory note to its then in-house corporate counsel in the principal face amount of

$100,000.

 The promissory note bears interest at a rate of

10.0%,

per annum, payable quarterly. The promissory note is payable in full plus all unpaid interest by

August 2019.

In connection with the note, the Company issued

five

-year warrants to purchase up to

10,000

shares of the Company’s common stock at an exercise price of

$3.00

 per share. The relative fair value of the debt and warrants recorded resulted in debt discount of

$10,435

upon execution of the promissory note. For the

three

months ended

September 30, 2018,

accretion of debt discount was

$1,314.

For the

nine

months ended

September 30, 2018,

accretion of the debt discount was

$3,907.

Accretion of debt discount is included in other expenses on the statements of operations.

In

September 2017,

the Company issued an unsecured promissory note to a member of its Board of Directors in the principal face amount of

$500,000.

 The promissory note bears interest at a rate of

10.0%,

per annum, payable quarterly. The promissory note is payable in full plus all unpaid interest by

September 2019.

In connection with the note, the Company issued

five

-year warrants to purchase up to

50,000

shares of the Company’s common stock at an exercise price of

$3.00

 per share. The relative fair value of the debt and warrants recorded resulted in debt discount of

$52,166

upon execution of the promissory note. For the

three

and

nine

months ended

September 30, 2018,

accretion of the debt discount was

$6,574

 and

$19,508

respectively, included in other expenses on the statements of operations.

In

October 2017,

the Company issued to Rio Vista Investments, LLC, a Nevada limited liability company (“Rio Vista”), (i) an unsecured promissory note in the principal face amount of

$500,000

and (ii) a warrant to purchase up to

50,000

shares of the Company’s common stock. The note issued to Rio Vista bears interest at the rate of

ten

percent (

10%

) per annum, such interest being payable by the Company to Rio Vista quarterly in cash. The note is payable in full by the Company, plus all unpaid interest, by

October 26, 2019.

Prepayment of all unpaid principal and interest

may

be made by the Company prior to the date of maturity without penalty or premium. Additionally, the Company issued to Rio Vista a

five

-year warrant to purchase up to

50,000

shares of the Company’s common stock at an exercise price of

$3.00

per share. The relative fair value of the debt and warrants recorded resulted in debt discount of

$50,229

upon execution of the promissory note.  For the

three

and

nine

months ended

September 30, 2018,

accretion of the debt discount was

$6,330

and

$18,784,

respectively, included in other expenses on the statements of operations. A member of the Company’s Board of Directors is a beneficiary of certain trusts that own Rio Vista.

In

January 

2018,

the Company issued an unsecured note to its then in-house corporate counsel in the principal face amount of

$100,000.

 The note bears interest at a rate of

10.0%,

per annum, payable quarterly. The promissory note was paid during the

three

month period ended

March 31, 2018.

In connection with the note, the Company issued

five

-year warrants to purchase up to

5,000

shares of the Company’s common stock at an exercise price of

$3.00

 per share. The relative fair value of the debt and warrants recorded resulted in debt discount of

$3,831

 upon execution of the note. For the period ended

March 31, 2018,

accretion of the debt discount was

$3,831,

included in other expenses on the statements of operations.

On or about

January 17, 2018,

the Company received

$500,000

from an accredited investor, and in exchange the Company issued to the investor (a) an unsecured promissory note dated

January 16, 2018,

maturing on

October 26, 2019,

in the principal face amount of

$500,000,

and (b) a warrant dated

January 18, 2018

to purchase up to

50,000

shares of the Company’s common stock. A member of the Company’s Board of Directors is a beneficiary of certain trusts that own Rio Vista, the holder of this note and warrant. The note bears interest at the rate of

ten

percent (

10%

) per annum, such interest being payable by the Company to the holder thereof quarterly in cash. The note is payable in full by the Company, plus all unpaid interest thereon, by

October 26, 2019.

Prepayment of all unpaid principal and interest on the note

may

be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest under such note, based on the full principal amount. In addition to the foregoing, the Company must repay the note to Rio Vista within

30

days of the date the Company possesses an amount of cash equal to the outstanding balance of principal and interest due under the note plus an amount reasonably anticipated to be necessary to operate the Company over the succeeding

6

months. The warrants are exercisable within

5

years of issuance into shares of the Company’s common stock, at

$3.00

per share. The relative fair value of the note and warrant recorded resulted in debt discount of

$35,590

upon execution.  The Company also incurred

$15,000

of lender fees. For the

three

and

nine

months ended

September 30, 2018,

accretion of the debt discount was

$7,215

 and

$20,111,

respectively, included in other expenses on the statements of operations.

On or about

March 8, 2018,

the Company received

$200,000

from an accredited investor and member of our Board of Directors, and in exchange the Company issued (a) an unsecured promissory note dated

March 8, 2018 

and (b) a warrant dated

March 9, 2018

to purchase up to

20,000

shares of the Company’s common stock. The note bears interest at the rate of

ten

percent (

10%

) per annum, such interest being payable by the Company to the holder quarterly in cash. The note is payable in full by the Company, plus all unpaid interest thereon, by

March 7, 2020.

Prepayment of all unpaid principal due on the note

may

be made by the Company prior to the note’s maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest due under the note, based on the note’s principal balance as of the origination date. The note contains customary provisions for events of default and acceleration of sums due. The warrant is exercisable within

5

years of issuance into shares of the Company’s common stock, at

$3.00

per share. The relative fair value of the note and warrant recorded resulted in debt discount of

$14,281

 upon execution.  The Company also incurred

$6,000

of lender fees. For the

three

and

nine

months ended

September 30, 2018,

accretion of debt discount and lender fees was

$2,556

and

$5,695,

respectively, included in other expenses on the statements of operations.

On or about

March 12, 2018,

the Company received

$200,000

from Boies Partners, Inc. (“BPI”), an accredited investor, and in exchange the Company issued to BPI (a) an unsecured promissory note dated

March 12, 2018,

and (b) a warrant dated

March 12, 2018

to purchase up to

20,000

shares of the Company’s common stock. Alex Boies, a member of our Board of Directors, has

no

financial interest in or control over BPI and does

not

otherwise have any beneficial ownership in any securities owned by BPI, but BPI is owned by a family member of Alex Boies. The note bears interest at the rate of

ten

percent (

10%

) per annum, such interest being payable by the Company to the holder thereof quarterly in cash. The note is payable in full by the Company, plus all unpaid interest thereon, by 

March 11, 2020.

Prepayment of all unpaid principal due on the note

may

be made by the Company prior to the note’s maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest due under the note, based on the note’s principal balance as of the origination date. The note contains customary provisions for events of default and acceleration of sums due. The warrants are exercisable within

5

years of issuance into shares of the Company’s common stock, at

$3.00

per share. The relative fair value of the note and warrant recorded resulted in debt discount of

$14,279

 upon execution.  The Company also incurred

$6,000

of lender fees. For the

three

and

nine

months ended

September 30, 2018,

accretion of the debt discount and lender fees was

$19,781

and

$20,279,

respectively, included in other expenses on the statements of operations. This note further provides that within

30

days of receipt of payment of any amount principal outstanding under the note, (the "Conversion Window") the note holder shall have the right to convert any portion of such payment into the Company’s common stock at the lesser of

$3.00

per share or the lowest price per share of any sale by the Company of its common stock occurring between the date of the note and the end of the Conversion Window. This note was repaid during the

three

months ended

June 

30,

2018.

 

On

May 2, 2018, 

the Company received

$300,001

 from an accredited investor and member of our Board of Directors, and in exchange the Company issued (a) an unsecured promissory note dated

May 2, 2018,

and (b) a warrant dated

May 2, 2018

to purchase up to

30,000

shares of the Company’s common stock. The note bears interest at the rate of

ten

percent (

10%

) per annum, payable quarterly in cash. The note is payable in full plus all unpaid interest thereon, by

May 1, 2020.

The note contains a contingent conversion feature that allows the value of the note to be converted at

$3

per share or such lower price at which the Company has issued stock subsequent to

May 2, 2018,

if any part of the principle balance is paid. The intrinsic value of contingent conversion will be determined and recognized when the contingency occurs. Prepayment of all unpaid principal and interest 

may

be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest, based on the full principal amount. The warrant is exercisable within

5

years of issuance into shares of the Company’s common stock, at

$3.00

per share. The relative fair value of the note and warrant recorded resulted in debt discount of

$21,452

 upon execution. The Company also incurred

$9,000

of lender fees. For the

three

and 

nine

months ended

September 30, 2018,

accretion of the debt discount and lender fees was

$3,841

and

$5,572,

respectively, included in other expenses on the statements of operations.

Royalty Agreement

In

2013,

the Company entered into a royalty agreement, which was amended in

2015,

with a key employee and principal stockholder of the Company and a current Director of the Company. The agreement has a term of

25

years, requires payments of royalties equal to

5%

of gross sales of products derived from certain patents held or licensed by the Company, including the BAM-FX™ product, and also a minimum monthly payment of

$2,500

to be offset against future royalty obligations of the Company. In addition certain other costs the Company made that were necessary for the maintenance and protection of the Company’s rights in the underlying patents were applied against future royalty obligations of the Company.

Sales subject to the royalty agreement were

$0

and

$4,355

for the

three

months and

$33,070

and

$65,545

for the

nine

months ended

September 30, 2018

and

2017,

respectively. As of

September 30, 2018,

and

December 31, 2017,

$0

 and

$319,441

of prepaid royalties, respectively, are available to be offset against future royalty obligations. Management recorded an allowance for collectability of

$6,020

during the

three

months ended

June 

30,

2018

and

$129,580

during the

nine

months ended

September 30, 2018

which is included in general and administrative expenses. Sales during the

third

quarter were

not

subject to the royalty agreement.

Included in advance of future royalties was

$203,208

in legal fees relating to patent defense.  During the

nine

months ended

September 30, 2018,

this amount was reclassified to an intangible asset patent defense fees, and was determined to be impaired and charged to general and administrative expenses.

Consulting Agreement

In

March 2015,

the Company entered into a consulting agreement with a former Director. The agreement had a term of

nine

months and required payments of

$200,000

 of which

$200,000

was recorded as a component of general and administrative expense in the

2015

statement of operations. An obligation of

$65,000

and

$75,000

was payable to the former Director and is included in accounts payable at

September 30, 2018

and

December 31, 2017,

respectively.

XML

Note 4 - Commitments

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Commitments Disclosure [Text Block]

NOTE

4

 – COMMITMENTS

Lease Commitments

The Company leases its office, building and laboratory space under short term leases. These leases are renewable either monthly or annually. The Company also has a

two

-year lease for its warehouse in Okeechobee, which began

September 1, 2016

and expired

August 31, 2018.

We are currently finalizing a new

two

year lease for this facility. Lease expense was

$158,976

 and

$76,034

for the periods ended

September 30, 2018

and

2017,

respectively.

License and Business Development Agreement

On

February 20, 2018,

BAM Agricultural Solutions, Inc. (“BAM”), a wholly-owned subsidiary of the Company, and Pedro Lichtinger Waisman, Isaac Lichtinger Waisman and Victor Lichtinger Waisman (the “Lichtinger Group”) entered into a License and Business Development Agreement Mexico, effective as of

February 13, 2018 (

the “Agreement”). Following consummation of the Agreement, the Lichtinger Group formed Agro Space Tech SA de CV de RV (“Agro Space”), a Mexican company, to which BAM will receive a

twenty

percent (

20%

) equity ownership interest. The Lichtinger Group will contribute up to 

$500,000

in capital into Agro Space, with BAM having

no

initial capital requirement. If Agro Space requires more than the initial 

$500,000

capital contribution, BAM will have a right to contribute capital

pro rata

and maintain its ownership percentage. As of

September 30, 2018

Agro Space has been formed, but the Company had

not

received certificates for its equity ownership, and principal operations have yet to commence. The Company uses the cost method to account for its equity ownership interest due to its minority ownership and lack of management control as the remaining

80%

ownership is equally owned by and all operational decisions are made by

three

individuals, all of whom are related. The recorded cost of the investment was

$0

at

September 30, 2018.

The Agreement provides Agro Space with the exclusive right to import, package, sell and distribute BAM’s product lines and promote its brand, as well as other “white label” brands as they are introduced, in the Mexican markets, and a limited manufacturing right to modify the presentation of BAM’s products and dilute such products, all during the term of the Agreement. BAM will retain the right to all of its intellectual property, including any materials produced in connection with the Agreement and BAM’s products, and Agro Space will have a royalty-free right to reproduce, translate, summarize or otherwise use such materials for the sole purpose of performing pursuant to the Agreement. The exclusivity of the rights licensed to Agro Space are conditioned upon (i) Agro Space meeting specified revenue targets beginning on the

third

anniversary following the successful completion of specified local trials through the

tenth

anniversary thereof; and (ii) the ability for Agro Space to expand the business to target and add a specified number of crops during each of the

five

(

5

) years following the successful completion of specified local trials.

In

February 2018

in addition to BAM receiving an ownership interest in Agro Space, Zero Gravity Solutions, Inc. ("Company") received

$100,000

from the Lichtinger Group following the execution of the Agreement, to purchase shares of the Company pursuant to the Company’s

2016

private offering of shares of its common stock for

$3.00

per share (See Note

6

). The Agreement further provides that Agro Space will pay to BAM up to

$900,000,

in the aggregate, upon reaching specified milestones based on completing government/academic trials and revenue hurdles.

Research Commitment

In

January 2016,

the Company entered into a Reimbursable Space Act Agreement (the “SAA”) with the National Aeronautics and Space Administration Ames Research Center (“NASA ARC”).  Pursuant to the SAA, NASA ARC will evaluate the Company’s nutrient delivery system for commercial agriculture and NASA applications and the potential development of new agricultural technologies and products.  The Company provides funding and reimbursement for the costs incurred by NASA ARC under the SAA, and owns any resulting intellectual property created pursuant to the SAA.  The Company paid NASA ARC a total of

$373,750

in fiscal

2016,

which served as reimbursement for NASA ARC’s estimated expenses to carry out its

first

-year responsibilities pursuant to the SAA.  The SAA remains in effect until the earlier of completion of all obligations contemplated in the SAA or

five

years from the date of agreement. For the period ended

September 30, 2018 

and

2017,

 

$0

and

$29,610,

respectively, was expensed to research and development expense pursuant to the SAA.

XML

Note 5 - Convertible Notes Payable and Notes Payable

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE

5

 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

On

June 29, 2018,

the Company initiated a new private offering of its securities (the

“June 2018

Offering”) to certain prospective accredited investors, including certain members of the Board of Directors and/or their respective affiliates (See Note

3

), consisting of up to

$2,000,000

of

10%

secured convertible promissory notes (the

“June 2018

Offering Notes”), and

two

-year warrants to purchase up to

2,000,000

shares of the Company's common stock at an exercise price of

$1.00

per share (the

“June 2018

Offering Warrants”). The

June 2018

Offering terminated on

July 31, 2018,

and consisted of

one

or more closings.

The following descriptions of convertible notes and notes payable refer to notes issued to non-related parties of the Company. For a description of convertible notes and notes payable to related parties of the Company, see Note 

3.

Convertible Notes Payable to Non-Related Parties
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
July 2018	$	50,000	$	22,231	$	1,923	$	29,692
July 2018	$	50,000	$	22,231	$	1,923	$	29,692
July 2018	$	25,000	$	11,116	$	873	$	14,757
July 2018	$	250,000	$	111,160	$	9,233	$	148,073
July 2018	$	25,000	$	11,115	$	934	$	14,819
July 2018	$	50,000	$	22,232	$	1,924	$	29,692
July 2018	$	100,000	$	44,464	$	3,659	$	59,195
	$	550,000	$	244,549	$	20,469	$	325,920

The Company received, in the aggregate,

$550,000

from

seven

other current shareholders and issued

June 2018

Offering Notes of

$550,000

in exchange therefore, and

June 2018

Offering Warrants to purchase, in the aggregate, up to

550,000

shares of the Company’s common stock. The relative fair value of the warrants of

$228,049

and offering costs of

$16,500

were recorded as debt discounts and are accreted over the term of the note. Pursuant to the

June 2018

Offering, in the aggregate, the Company issued

June 2018

Offering Notes having an aggregate principal balance of

$2,050,000,

and

June 2018

Offering

two

year warrants to purchase  up to

2,050,000

shares of the Company’s common stock at

$1.00

per share. The notes convert at

$3.00

per share, unless the Company issues shares at a subsequent lower price, then the notes convert at that subsequent lower price. See Note

3

for

$1,500,000

of

June 2018 

Offering Notes received by related parties. All

June 2018

Offering Warrants issued were accounted for at their relative fair value of

$853,518.

  These values along with the related offering costs of

$61,500,

are recorded as debt discounts and are accreted over the term of the note.

Notes Payable to Non-Related Parties
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
December 2017	$	200,000	$	18,652	$	7,410	$	188,758
January 2018	$	100,000	$	7,124	$	2,486	$	95,362
	$	300,000	$	25,776	$	9,896	$	284,120

In

December 2017,

the Company received

$200,000

from an investor, and in exchange the Company issued the investor (a) an unsecured promissory note dated

December 14, 2017,

maturing on

December 13, 2019,

in the principal face amount of

$200,000,

and (b) a warrant dated

December 18, 2017

to purchase up to

50,000

shares of the Company’s common stock. The note bears interest at the rate of

ten

percent (

10%

) per annum, payable quarterly. The note is repayable in full by the Company, plus all unpaid interest thereon, by the maturity date. Prepayment of all unpaid principal and interest on the note

may

be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest under the note, based on the full principal amount. The warrants are exercisable within

5

years of issuance into shares of the Company’s common stock, at

$3.00

per share. The relative fair value of the debt and warrants recorded resulted in a debt discount of

$18,652

upon execution of the promissory note. For the

three

and

nine

months ended

September 30, 2018,

accretion of the debt discount was

$2,351

 and

$7,410,

respectively, included in other expenses on the statements of operations.

On or about

January 18, 2018,

the Company received

$100,000

from an accredited investor, and in exchange the Company issued to the investor (a) an unsecured promissory note dated

January 19, 2018,

maturing on

January 18, 2020,

in the principal face amount of

$100,000,

and (b) a warrant dated

January 19, 2018

to purchase up to

10,000

shares of the Company’s common stock. The note bears interest at the rate of

ten

percent (

10%

) per annum, payable quarterly. The note is repayable in full by the Company, plus all unpaid interest thereon, by the maturity date. Prepayment of all unpaid principal and interest on the note

may

be made by the Company prior to the maturity date, provided that the holder thereof shall receive a minimum amount of interest equal to

one

year of interest under the note, based on the full principal amount. The warrants are exercisable within

5

years of issuance into shares of the Company’s common stock, at

$3.00

per share. The relative fair value of the debt and warrants recorded resulted in a debt discount of

$7,124

 upon execution of the promissory note. For the

three

and

nine

months ended

September 30, 2018,

accretion of the debt discount was

$898

 and

$2,486,

respectively, included in other expenses on the statements of operations.

The Company has an outstanding note payable for financing corporate insurance premiums. The original principle value was

$223,707.

 The note carries a rate of interest of

7.5%

and is due in

November 2018.

The note calls for

eleven

payments of

$19,353.

The balance at

September 30, 2018

was

$38,706.

XML

Note 6 - Equity

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Shareholders' Equity and Share-based Payments [Text Block]

NOTE

6

 – EQUITY

2018

transactions:

Common Stock

Private placement offerings

During

2016,

the Company commenced a private offering of up to

$10,000,000

of the Company’s securities for

$3.00

per share of common stock.  Pursuant to the

2016

offering, during the

nine

months ended

September 30, 2018,

the Company sold 

303,718

shares of common stock, received gross proceeds of

$911,154,

paid cash offering costs of

$25,680,

and issued fully vested, non-forfeitable warrants to purchase up to

7,490

 shares of common stock with an exercise price of

$3.00

per share to the placement agent. These warrants are netted in additional paid in capital as non-cash offering costs of the placement of 

$5,771.

  Effective on

June 28, 2018,

the Company terminated its

2016

private offering.

Warrants

Warrants issued for services

During the

nine

months ended

September 30, 2018,

the Company issued fully vested, non-forfeitable

five

-year warrants to purchase up to

385,000

common shares at an exercise price of

$3.00

per common share to employees and consultants for services rendered. The value of those services was

$296,271,

which was recorded as general and administrative expense.

Warrants issued with debt

In connection with the issuance of a

$100,000

unsecured promissory note dated

January 18, 2018,

the Company issued a warrant dated

January 

19,

2018

 to purchase up to

10,000

shares of the Company’s common stock. The warrants are exercisable within

5

years of issuance into shares of the Company’s common stock, at

$3.00

per share. The relative fair value of the debt and warrants recorded resulted in debt discount of

$7,124

 upon execution of the promissory note.

In

July 2018,

the Company with the issuance, in the aggregate, of

$550,000

secured promissory note to 

seven

other current shareholders, issued

June 2018

Offering Warrants to purchase, in the aggregate, up to

550,000

shares of the Company’s common stock. The relative fair value of the warrants recorded was

$228,049

 upon execution of the promissory notes. 

Warrants issued with debt – related party

In

January 

2018,

the Company issued to its then in-house counsel, in connection with the issuance of an unsecured promissory note in the principal face amount of

$100,000,

a

five

-year warrant to purchase up to

5,000

shares of the Company’s common stock at an exercise price of

$3.00

per share. The relative fair value of the warrant recorded was

$3,831

 upon execution of the promissory note. 

In

January 2018,

the Company issued to Rio Vista a

five

-year warrant to purchase up to

50,000

shares of the Company’s common stock at an exercise price of

$3.00

 per share in connection with a

$500,000

unsecured promissory note. The relative fair value of the debt and warrants recorded resulted in debt discount of

$35,590

 upon execution of the promissory note.

In

March 

2018,

in connection with issuance of a

$200,000

unsecured promissory note to a member of its Board of Directors, the Company issued

five

-year warrant to purchase up to

20,000

shares of the Company’s common stock at an exercise price of

$3.00

 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of

$14,281

 upon execution of the promissory note.

In

March 

2018,

in connection with issuance of a

$200,000

unsecured promissory note to an accredited investor, the Company issued

five

-year warrant to purchase up to

20,000

shares of the Company’s common stock at an exercise price of

$3.00

 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of

$14,279

 upon execution of the promissory note.

In

May 

2018,

in connection with issuance of a

$300,000

unsecured promissory note to an accredited investor, the Company issued a

five

-year warrant to purchase up to

30,000

shares of the Company’s common stock at an exercise price of

$3.00

 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of

$21,452

 upon execution of the promissory note.

In

June 

2018,

in connection with issuance of a

$1,000,000

secured convertible promissory note to an accredited investor made pursuant to the

June 2018

Offering, the Company issued a

two

-year warrant to purchase up to

1,000,000

shares of the Company’s common stock at an exercise price of

$1.00

 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of

$414,416

 upon execution of the promissory note. 

In

July 

2018,

in connection with the issuance of

two

$250,000

secured convertible promissory notes to a member of its Board of Directors made pursuant to the

June 2018

Offering, the Company issued two,

two

-year warrants to purchase up to

250,000

shares of the Company’s common stock for a total of

500,000

shares at an exercise price of

$1.00

 per share. The relative fair value of the debt and warrant recorded resulted in debt discount of

$103,613

 and

$103,609,

respectively upon execution of the promissory note. 

The following is a summary of the Company’s warrant activity for the

nine

months ended

September 30, 2018:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - January 1, 2017		9,664,733		$	1.53
Granted		1,838,442			2.01
Exercised		(790,000	)		2.00
Cancelled/Forfeited		-			-
Outstanding and exercisable - December 31, 2017		10,713,175		$	1.86		2.8	$	2,606,698
Outstanding - January 1, 2018		10,713,175		$	1.86
Granted		2,577,490			1.14
Exercised		-			-
Cancelled/Forfeited		-			-
Outstanding and exercisable - September 30, 2018		13,290,665		$	1.77		2.1	$	2,687,519

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company’s stock price on

September 30, 2018

and the exercise price, multiplied by the number of in-the-money warrants) that would have been received by the warrant holders, had all warrant holders been able to, and in fact had, exercised their warrants on

September 30, 2018.

Stock incentive plan options

In

November 2015,

the Company adopted its

2015

Equity Incentive Plan. The Plan provides stock based compensation to employees, directors and consultants, as more fully described in the Plan. The Company has reserved

4,000,000

shares under the Plan. During the

nine

months ended

September 30, 2018 

the Company granted options to purchase up to

25,000

shares of common stock each, to

two

employees with an exercise price of

$3.00

per share and a term of

10

years. The estimated fair value of

$38,441

of the grants for the

nine

months ended

September 30, 2018 

was based upon the following management assumptions: For the

nine

month period ended

September 30, 2018,

expected dividends of

$0,

volatility of

101.7%

based on comparative volatility, risk free interest rates of

2.58

-

2.69%,

and expected term of the options of

5

years.

The Company recognizes compensation expense for stock option grants based on the fair value at the date of grant using the Black-Scholes option pricing model. As the Company does

not

currently have reliably determined historic stock prices, the Company uses management estimates of stock value. The Company uses historical data, among other factors, to estimate the expected option life and the expected forfeiture rate. The Company estimates expected term considering factors such as historical exercise patterns and the recipients of the options granted. The risk-free rate is based on the United States Treasury Department yield curve in effect at the time of grant for the expected life of the option. The Company assumes an expected dividend yield of

zero

for all periods.  For employee, consultant and director stock based compensation, the Company used management's fair value estimates of

$1.21

for the period

September 30, 2018.

Stock option expense for the

nine

months ended

September 30, 2018

was

$146,277.

The Company has elected to account for forfeitures as they occur.

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - January 1, 2017		2,755,000		$	1.25
Granted		440,000			3.00
Exercised		-			-
Cancelled/Forfeited		(30,000	)		1.25
Outstanding - December 31, 2017		3,165,000		$	1.49		8.5	$	192,850
Exercisable - December 31, 2017		2,750,000		$	1.27		8.2	$	192,850
Outstanding - January 1, 2018		3,165,000		$	1.49
Granted		50,000			3.00
Exercised		-			-
Cancelled/Forfeited		(1,595,000	)		1.34
Outstanding - September 30, 2018		1,620,000		$	1.56		7.9	$	-
Exercisable - September 30, 2018		1,519,375		$	1.30		8.4	$	-

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company’s stock price on

September 30, 2018

and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on

September 30, 2018.

XML

Note 7 - Subsequent Events

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

NOTE

7

 – SUBSEQUENT EVENTS

Subsequent to

September 30, 2018,

the Company issued fully vested, non-forfeitable

five

- year warrants to purchase

40,000

common shares at an exercise price of

$3.00

per common share to consultants for services rendered, with a fair value of  

$30,870.

In

November 2018,

the Company received

$250,000

as an advance on inventory purchases from an affiliate of a Member of the Board of Directors.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Going Concern and Management Plans [Policy Text Block]

Going Concern and Management’s Plans 

At

September 30, 2018,

the Company had an approximate cash balance of

$382,000,

 a working capital deficiency of approximately $(

420,000

), a loss from operations of approximately $(

4,116,000

), and negative cash flows from operating activities of approximately $(

3,398,000

). To date, the Company has relied on equity financing and has entered into related and non-related party promissory notes to fund its operations. The Company has also issued stock-based compensation in exchange for services. Although the Company intends to raise additional capital, the Company expects to continue to incur losses from operations and have negative cash flows from operating activities for the near-term and these losses could be significant as product development, regulatory, contract research, and technical marketing personnel related expenses are incurred. Management has evaluated its ability to continue as a going concern for the next

twelve

months from the issuance of these

September 30, 2018

unaudited condensed consolidated financial statements, and has determined that there is substantial doubt as to its ability to continue as a going concern. The Company has satisfied its obligations using cash from successful capital raising efforts through

September 30, 2018,

however, there are

no

assurances that such successful efforts will continue for up to a year after these unaudited condensed consolidated financial statements are issued. The unaudited condensed consolidated financial statements do

not

include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that

may

result should the Company be unable to continue as a going concern. The Company has executed product distribution agreements with domestic and international commercial agricultural distributors and generated initial product orders. Additional technical and marketing effort must be devoted to those distributors to insure the product is properly utilized and validated by end users. To fund these capital needs, the Company has and continues to raise capital through private placement offerings, conducted through it's own efforts or through the efforts of an investment bank, as well as raising funds through issuances of debt, to related and non-related parties. If the Company does

not

obtain additional capital, the Company would potentially be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs and expense levels. 

Management’s strategic plans include the following:

● Continuing to advance commercialization of the Company’s principal product, BAM-FX™ in both domestic and international markets;

● Pursuing additional capital raising opportunities;

● Continuing to explore and execute prospective partnering or distribution opportunities; and

● Identifying unique market opportunities that represent potential positive cash flow.

Basis of Accounting, Policy [Policy Text Block]

Interim Financial Statements

The interim unaudited condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the

three

and

nine

months ended

September 30, 2018

and

2017,

our cash flows for the

nine

months ended

September 30, 2018

and

2017,

and our financial position as of

September 30, 2018

have been made. The results of operations for such interim periods are

not

necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual audited consolidated financial statements have been condensed or omitted from these interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form

10

-K for the year ended

December 31, 2017

as filed with the SEC on

August 13, 2018.

The

December 31, 2017

balance sheet is derived from those statements.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, inventory reserves and classifications, amortization period and recoverability of intangible assets, valuation of beneficial conversion features in convertible debt, valuation of loss contingencies, valuation of stock-based compensation and the valuation allowance on deferred tax assets.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

The Company views its operations and manages its business as 

one

reportable segment. As a result the unaudited condensed consolidated financial statements presented within, relate to our principal operating segment.  Customers in the United States accounted for

100%

of our revenues. Except for

$23,202

in inventory shipped to Paraguay for a sale where the revenue has

not

been recognized, we do

not

have any other property or equipment outside of the United States.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Zero Gravity Solutions, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of

three

months or less to be cash equivalents. The Company had

no

cash equivalents at

September 30, 2018

and

December 31, 2017.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is valued on a lower of

first

in,

first

out (FIFO) cost or net realizable value. Inventory consisted of:

	September 30,		December 31,
	2018		2017
Raw materials	$	21,904	$	23,562
Finished product		54,024		45,081
Total Inventory	$	75,928	$	68,643

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred.

Depreciation is computed on a straight-line basis over estimated useful lives. Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable.

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

Impairment of Long Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of ASC

360

-

10

-

35

-

15

“Impairment or Disposal of Long-Lived Assets.”  This guidance requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

The Company believes that its credit risk exposure is limited. The Company has never suffered a loss due to excess balances.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The Company accounts for financial instruments under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic (ASC)

820,

Fair Value Measurements

.  This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements, ASC

820

establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into

three

levels as follows:

Level

1

— quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level

2

— observable inputs other than Level

1,

quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are

not

active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level

3

— assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions.  Unobservable inputs require significant management judgment or estimation.  In some cases, the inputs used to measure an asset or liability

may

fall into different levels of the fair value hierarchy.  In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement.  Such determination requires significant management judgment. 

As the Company's common stock is

not

traded in an active market, the Company estimates the fair value of its common stock (used in its Black Scholes option pricing model) pursuant to ASC

820.

This estimation process maximizes the use of observable inputs, including the quoted price of the Company's common stock in an inactive market, the price of the Company's common stock determined in connection with transactions in the Company's common stock, and an income approach to valuation (a discounted cash flow technique that considers the future cash flows).

The carrying amounts of the Company’s accounts receivable and accounts payable approximate fair value due to the relatively short period to maturity for these instruments. The carrying value of the Company’s notes payable approximates fair value due to their short period to maturity and their stated interest rates, combined with historic interest rate levels. 

Revenue Recognition and Accounts Receivable [Policy Text Block]

Revenue recognition and accounts receivable

Effective

January 1, 2018 (

Date of adoption), we recognize revenues from the sale of agricultural biotechnology products to distributors and customers pursuant to the provisions of ASC

606,

“Revenue From Contracts With Customers”.

We recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Revenue is recognized in accordance with the core principle by applying the following

five

steps:

1

) identify the contracts with a customer;

2

) identify the performance obligations in the contract;

3

) determine the transaction price;

4

) allocate the transaction price to the performance obligations; and

5

) recognize revenue when (or as) we satisfy a performance obligation.

Revenues for agricultural chemical products are recognized when title to the products is transferred which

may

be upon shipment to the customer or receipt by the customer of the product. This satisfies the performance obligation on which we earn the transaction price. There was

no

cumulative effect of adopting ASC

606.

Amounts billed to customers for shipping and handling fees are included in net sales, and costs incurred by the company for the delivery of invoiced goods are classified as cost of goods sold in our Statements of Operations.

The Company determined that

no

 reserve for estimated product returns and allowances was necessary during the

nine

months ended

September 30, 2018

and

2017.

Determination of the reserve for estimated product returns and allowances is based on management's analyses and judgments regarding certain conditions. Should future changes in conditions prove management's conclusions and judgments on previous analyses to be incorrect, revenue recognized for any reporting period could be materially affected. 

At

September 30, 2018,

three

customers accounted for

100%

of total accounts receivable, each representing

59.6%,

22.5%,

and

17.9%,

respectively. During the

three

months ended

September 30, 2018,

one

customer accounted for

75.2%

of net sales. During the

nine

months ended

September 30, 2018

two

customers accounted for

69.9%

of net sales each representing,

50.3%

and

19.6%,

respectively. During the

three

months ended

September 30, 2017,

two

 customers accounted for

94.0%

of net sales, each representing

79.1%,

and

14.9%,

respectively. During the

nine

months ended

September 30, 

2017

three

 customers accounted for

69.5%

of net sales, each of these customers represented

33.6%,

22.9%

and

13.0%,

respectively. 

At

December 31, 2017,

three

customers accounted for

100%

of total accounts receivable. Each of these

three

customers represented

46.5%,

34.9%

and

18.6%,

respectively.

The Company extends credit to customers generally without requiring collateral. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. The Company records an allowance for doubtful accounts when it is probable that the accounts receivable balance will

not

be collected. When estimating the allowance, the Company takes into consideration such factors as its day-to-day knowledge of the financial position of specific clients, and the industry and size of its clients. The allowance for doubtful accounts as of

September 30, 2018

and

December 31, 2017

was

$0

 and

$32,663,

respectively.

Cost of Sales, Policy [Policy Text Block]

Cost of sales

Cost of sales is comprised of material costs, invoiced shipping costs and royalty expense.  

Warrants [Policy Text Block]

Warrants

The Company recognizes the cost of warrants issued with debt as debt discount in the unaudited condensed consolidated financial statements which is recorded at the warrants relative fair value which is measured based on the grant date fair value of the award. The Company estimates the fair value of each warrant at the grant date by using the Black-Scholes option pricing model.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock based compensation

The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the unaudited condensed consolidated financial statements which is measured based on the grant date fair value of the award. Stock based compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award (generally the vesting period). The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model.

Costs equal to these fair values are recognized ratably over the requisite service period based on the number of awards that are expected to vest, or in the period of grant for awards that vest immediately and have

no

future service condition. The expense resulting from employee and share-based payments is recorded in general and administrative expense in

2018

and

2017.

The Company also grants share-based compensation awards to non-employees for service provided to the Company. The Company measures and recognizes the fair value of such transactions based on the fair value of consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

Earnings Per Share, Policy [Policy Text Block]

Loss per Share

Loss per share is calculated by dividing the Company’s net loss by the weighted average number of common shares outstanding during the period. Diluted earnings loss per share is calculated by dividing the Company’s net income (loss) by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity instruments. The effect of the inclusion of the dilutive shares would have resulted in a decrease in loss per share. Accordingly, the weighted average shares outstanding have

not

been adjusted for dilutive shares. Outstanding warrants, stock options and convertible debt are

not

considered in the calculation as the impact of the potential common shares (

15,993,998,

shares and

12,981,000

 shares for the

nine

months ended

September 30, 2018

and

2017,

respectively), would be to decrease net loss per share.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

Research and development costs are charged to expense as incurred.

Standard Product Warranty, Policy [Policy Text Block]

Warranty Expense

The Company's distribution agreements provide for a warranty on products sold. As sales under such distribution agreements have been nominal through

2018

and

2017,

there has been

no

 warranty expense in

2018

or

2017.

A provision for estimated future warranty costs is to be recorded as cost of sales when products are shipped, and warranty costs are to be based on historical trends in warranty charges as a percentage of gross product shipments. A resulting accrual is to be reviewed regularly, and periodically adjusted to reflect changes in warranty cost estimates.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes under the asset and liability method, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is required to the extent any deferred tax assets

may

not

be realizable.

The Company does

not

have an accrual for uncertain tax positions as of

September 30, 2018

and

December 31, 2017.  

The Company files corporate income tax returns with the Internal Revenue Service and the States where the Company determines it is required to do so.  The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At

September 30, 2018,

the Company did

not

have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the

three

or

nine

months ended

September 30, 2018

or

2017.

 

Investment, Policy [Policy Text Block]

Investments

We have an equity investment in a privately held entity as discussed in note

4.

We account for investments either under the equity method or cost method of accounting depending on our ownership interest and the level of our influence. Investments accounted for under the equity method are recorded based upon the amount of our investment and adjusted each period for our share of the investee's income or loss. Cost method investments are recorded at cost less any impairments. All investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where our investment 

may 

not

be recoverable.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain amounts in the

December 31, 2017

balance sheet have been reclassified from accounts payable, related party to accrued interest, related party to conform to the

September 30, 2018

presentation.  This reclassification had

no

effect on current liabilities in either period presented.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

In

May 2014,

the Financial Accounting Standards Board (“FASB”) issued ASC

606,

“Revenue from Contracts with Customers” which has been further clarified and amended. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were

not

previously addressed comprehensively (for example, service revenue and contract modifications) and clarify guidance for multiple-element arrangements. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Statement of Financial Position. The standard is effective for fiscal years, and interim periods within those years, beginning after

December 

15,

2017.

The Company has finalized its assessment of ASC

606

and determined there will be

no

material effect on our financial position and results of operations. The timing and amount of revenue recognized based on the new standard is consistent with the revenue recognition policy under previous guidance, however, certain additional financial statement disclosures will be required beginning with

2018

reporting, including additional disaggregated view of revenue. We have adopted the new standard effective

January 1, 2018,

using the modified retrospective transition method.

In

March 2016,

the FASB issued ASU

No.

2016

-

02,

Leases

. The main difference between the provisions of ASU

No.

2016

-

02

and previous U.S. GAAP is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU

No.

2016

-

02

retains a distinction between finance leases and operating leases, and the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have

not

significantly changed from previous U.S. GAAP. For leases with a term of

12

months or less, a lessee is permitted to make an accounting policy election by class of underlying asset

not

to recognize right-of-use assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has

not

finalized the analysis to determine the effect of the standard, but believes that it will

not

have a material impact on the statement of operations.

In

June 2018,

the Financial Accounting Standards Board (“FASB”) issued ASU

No.

2018

-

07,

“Compensation - Stock Compensation (Topic

718

): Improvements to Nonemployee Share-Based Payment Accounting.” ASU

No

2018

-

07

expands the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Early adoption is permitted, but

no

earlier than an entity’s adoption date of Topic

606.

This guidance is applicable to the Company’s fiscal year beginning

January 

1,

2019.

The Company is currently evaluating the potential effects of this guidance on its consolidated financial statements.

In

July 2017,

the FASB issued Accounting Standards Update

No.

2017

-

11

Earnings Per Share (Topic

260

) Distinguishing Liabilities from Equity (Topic

480

) Derivatives and Hedging (Topic

815

) (“ASU

2017

-

11”

)

, which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature

no

longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. ASU

2017

-

11

also clarifies existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)

no

longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, ASU

2017

-

11

requires entities that present earnings per share (EPS) in accordance with ASC Topic

260

to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.  Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features in ASC

470

-

20.

 For the Company, ASU

2017

-

11

is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts ASU

2017

-

11

in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period in either of the following ways:

1.

Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the

first

fiscal year and interim period(s) in which ASU

2017

-

11

is effective or

2.

Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs

250

-

10

-

45

-

5

through

45

-

10.

The Company has elected early adoption and the effects of this guidance are reflected in its unaudited condensed consolidated financial statements and there was

no

cumulative effect adjustment.

On

August 2018,

the SEC adopted amendments to certain disclosure requirements in Securities Act Release

No.

33

-

10532,

Disclosure Update and Simplification. The amendments will become effective on

November 5, 2018.

Among the amendments is the requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form

10

-Q. The Company has elected to implement this amendment beginning the

first

quarter of

2019.

XML

Note 1 - Organization and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30,		December 31,
	2018		2017
Raw materials	$	21,904	$	23,562
Finished product		54,024		45,081
Total Inventory	$	75,928	$	68,643

XML

Note 2 - Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	September 30 , 2018			December 31, 2017
Computer equipment	$	13,032		$	15,332
Equipment and furniture		136,734			133,940
Leasehold improvements		7,593			7,593
		157,359			156,865
Accumulated Depreciation		(67,514	)		(52,275	)
Property and Equipment - Net	$	89,845		$	104,590

XML

Note 3 - Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
July 2015	$	500,000	$	-	$	-	$	500,000
June 2018	$	1,000,000	$	444,416	$	56,617	$	612,201
July 2018	$	250,000	$	111,113	$	13,699	$	152,586
July 2018	$	250,000	$	111,109	$	11,111	$	150,002
	$	2,000,000	$	666,638	$	81,427	$	1,414,789
Convertible Notes Payable - Current	$	500,000	$	-	$	-	$	500,000
Convertible Notes Payable - Long Term	$	1,500,000	$	666,638	$	81,427	$	914,789

Notes Payable to Related Parties
Notes payable outstanding at September 30, 2018 consist of the following:
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
August 2017	$	100,000	$	10,435	$	5,745	$	95,311
September 2017	$	500,000	$	52,166	$	28,227	$	476,061
October 2017	$	500,000	$	50,229	$	23,256	$	473,028
January 2018	$	500,000	$	50,590	$	20,111	$	469,521
March 2018	$	200,000	$	20,281	$	5,695	$	185,414
May 2018	$	300,001	$	30,452	$	5,572	$	275,121
	$	2,100,001	$	214,153	$	88,606	$	1,974,456

XML

Note 5 - Convertible Notes Payable and Notes Payable (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Convertible Debt [Table Text Block]

Convertible Notes Payable to Non-Related Parties
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
July 2018	$	50,000	$	22,231	$	1,923	$	29,692
July 2018	$	50,000	$	22,231	$	1,923	$	29,692
July 2018	$	25,000	$	11,116	$	873	$	14,757
July 2018	$	250,000	$	111,160	$	9,233	$	148,073
July 2018	$	25,000	$	11,115	$	934	$	14,819
July 2018	$	50,000	$	22,232	$	1,924	$	29,692
July 2018	$	100,000	$	44,464	$	3,659	$	59,195
	$	550,000	$	244,549	$	20,469	$	325,920

Schedule of Debt [Table Text Block]

Notes Payable to Non-Related Parties
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
December 2017	$	200,000	$	18,652	$	7,410	$	188,758
January 2018	$	100,000	$	7,124	$	2,486	$	95,362
	$	300,000	$	25,776	$	9,896	$	284,120

XML

Note 6 - Equity (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - January 1, 2017		9,664,733		$	1.53
Granted		1,838,442			2.01
Exercised		(790,000	)		2.00
Cancelled/Forfeited		-			-
Outstanding and exercisable - December 31, 2017		10,713,175		$	1.86		2.8	$	2,606,698
Outstanding - January 1, 2018		10,713,175		$	1.86
Granted		2,577,490			1.14
Exercised		-			-
Cancelled/Forfeited		-			-
Outstanding and exercisable - September 30, 2018		13,290,665		$	1.77		2.1	$	2,687,519

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - January 1, 2017		2,755,000		$	1.25
Granted		440,000			3.00
Exercised		-			-
Cancelled/Forfeited		(30,000	)		1.25
Outstanding - December 31, 2017		3,165,000		$	1.49		8.5	$	192,850
Exercisable - December 31, 2017		2,750,000		$	1.27		8.2	$	192,850
Outstanding - January 1, 2018		3,165,000		$	1.49
Granted		50,000			3.00
Exercised		-			-
Cancelled/Forfeited		(1,595,000	)		1.34
Outstanding - September 30, 2018		1,620,000		$	1.56		7.9	$	-
Exercisable - September 30, 2018		1,519,375		$	1.30		8.4	$	-

XML

Note 1 - Organization and Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Number of Wholly Owned Subsidiaries			2
Cash, Ending Balance	$ 382,231		$ 382,231		$ 13,862
Working Capital	(420,000)		(420,000)
Net Income (Loss) Attributable to Parent, Total	(1,264,453)	$ (1,551,391)	(4,115,515)	$ (5,758,118)
Net Cash Provided by (Used in) Operating Activities, Total			$ (3,398,327)	$ (3,480,791)
Number of Reportable Segments			1
Inventory Shipped to Outside of US for Sale Not Recognized			$ 23,202
Cash Equivalents, at Carrying Value, Total	0		0		0
Allowance for Doubtful Accounts Receivable, Current, Ending Balance	0		$ 0		$ 32,663
Weighted Average Number Diluted Shares Outstanding Adjustment, Total			15,993,998	12,981,000
Product Warranty Expense			$ 0	$ 0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	0		0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total	$ 0	$ 0	$ 0	$ 0
Geographic Concentration Risk [Member] | Sales Revenue, Net [Member] | UNITED STATES
Concentration Risk, Percentage			100.00%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Number of Major Customers	1	2	2	3
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Three Customers [Member]
Concentration Risk, Percentage				69.50%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Customer One [Member]
Concentration Risk, Percentage		79.10%	50.30%	33.60%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Customer Two [Member]
Concentration Risk, Percentage		14.90%	19.60%	22.90%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Customer Three [Member]
Concentration Risk, Percentage				13.00%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | One Customer [Member]
Concentration Risk, Percentage	75.20%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Two Customers [Member]
Concentration Risk, Percentage		94.00%	69.90%
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Major Customers			3		3
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Three Customers [Member]
Concentration Risk, Percentage			100.00%		100.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Customer One [Member]
Concentration Risk, Percentage			59.60%		46.50%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Customer Two [Member]
Concentration Risk, Percentage			22.50%		34.90%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Customer Three [Member]
Concentration Risk, Percentage			17.90%		18.60%

XML

Note 1 - Organization and Summary of Significant Accounting Policies - Summary of Inventory (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Raw materials	$ 21,904	$ 23,562
Finished product	54,024	45,081
Total Inventory	$ 75,928	$ 68,643

XML

Note 2 - Property and Equipment (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Depreciation, Total	$ 18,770	$ 18,414

XML

Note 2 - Property and Equipment - Summary of Property and Equipment (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Property and Equipment, Gross	$ 157,359	$ 156,865
Accumulated Depreciation	(67,514)	(52,275)
Property and Equipment - Net	89,845	104,590
Computer Equipment [Member]
Property and Equipment, Gross	13,032	15,332
Equipment and Furniture [Member]
Property and Equipment, Gross	136,734	133,940
Leasehold Improvements [Member]
Property and Equipment, Gross	$ 7,593	$ 7,593

XML

Note 3 - Related Party Transactions (Details Textual)								1 Months Ended						3 Months Ended			9 Months Ended		12 Months Ended
	Jul. 19, 2018 USD ($) $ / shares shares	Jul. 02, 2018 USD ($) $ / shares shares	Jun. 29, 2018 USD ($) $ / shares shares	May 02, 2018 USD ($) $ / shares shares	Mar. 12, 2018 USD ($) $ / shares shares	Mar. 08, 2018 USD ($)	Jan. 17, 2018 USD ($)	Oct. 31, 2017 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) $ / shares shares	Aug. 31, 2017 USD ($) $ / shares shares	Jul. 31, 2016 $ / shares	Jul. 31, 2015 USD ($) $ / shares shares	Mar. 31, 2015 USD ($)	Sep. 30, 2018 USD ($) $ / shares	Mar. 31, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) $ / shares shares	Sep. 30, 2018 USD ($) $ / shares	Sep. 30, 2017 USD ($) $ / shares shares	Dec. 31, 2017 USD ($) $ / shares	Dec. 31, 2015 USD ($)	May 31, 2018 USD ($) $ / shares shares	Mar. 09, 2018 $ / shares shares	Jan. 31, 2018 USD ($) $ / shares shares	Jan. 18, 2018 $ / shares shares	Dec. 14, 2017 USD ($)	Dec. 31, 2016 $ / shares
Proceeds from Related Party Debt																	$ 2,700,001	$ 600,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares														$ 1.77			$ 1.77		$ 1.86							$ 1.53
Accounts Payable, Related Parties, Current														$ 67,069			$ 67,069		$ 80,097
Accretion Expense														132,976		$ 2,673	205,938	2,673
Prepaid Royalties, Related Party, Noncurrent																			319,441
Provision for Doubtful Accounts																	4,060
General and Administrative Expense, Total														1,003,056		$ 1,492,884	3,553,188	$ 5,623,117
Unsecured Promissory Note [Member]
Debt Instrument, Interest Rate, Stated Percentage																									10.00%
Debt Instrument, Unamortized Discount, Total																			18,652
Debt Instrument, Face Amount																									$ 200,000
Unsecured Promissory Note [Member] | Other Expense [Member]
Amortization of Debt Discount (Premium)														2,351			7,410
First Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares																							5,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares																							$ 3	$ 3
Warrants and Rights Outstanding, Term																							5 years	5 years
Director [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares									50,000							50,000		50,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares									$ 3							$ 3		$ 3
Warrants and Rights Outstanding, Term									5 years							5 years		5 years
Director [Member] | Unsecured Promissory Note [Member]
Proceeds from Related Party Debt			$ 1,000,000
Director [Member] | Unsecured Promissory Note [Member] | Third Note [Member]
Proceeds from Related Party Debt						$ 200,000
Debt Instrument, Interest Rate, Stated Percentage						10.00%
Debt Instrument, Unamortized Discount, Total						$ 14,281									$ 14,281
Lender Fees																	6,000
Debt Instrument, Face Amount															$ 200,000
Director [Member] | Unsecured Promissory Note [Member] | Fifth Note [Member]
Proceeds from Related Party Debt				$ 300,001
Debt Instrument, Interest Rate, Stated Percentage				10.00%
Debt Instrument, Unamortized Discount, Total				$ 21,452																	$ 21,452
Lender Fees				$ 9,000
Debt Instrument, Face Amount																					$ 300,000
Director [Member] | Unsecured Promissory Note [Member] | Other Expense [Member] | Third Note [Member]
Amortization of Debt Discount (Premium)														2,556			5,695
Director [Member] | Unsecured Promissory Note [Member] | Other Expense [Member] | Fifth Note [Member]
Amortization of Debt Discount (Premium)														3,841			5,572
Director [Member] | Unsecured Promissory Note [Member] | Maximum [Member] | Fifth Note [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares				$ 3
Director [Member] | Unsecured Convertible Promissory Note [Member]
Debt Instrument, Interest Rate, Stated Percentage			10.00%
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares			1,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares			$ 1
Debt Instrument, Unamortized Discount, Total			$ 414,416
Warrants and Rights Outstanding, Term			2 years
Lender Fees																	30,000
Amortization of Debt Discount (Premium)														56,617			56,617
Director [Member] | Unsecured Convertible Promissory Note [Member] | Maximum [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares			$ 3
Director [Member] | Convertible Related Party Note Issued On July 2, 2018 [Member]
Proceeds from Related Party Debt		$ 250,000
Debt Instrument, Interest Rate, Stated Percentage		10.00%
Debt Instrument, Unamortized Discount, Total		$ 103,613
Debt Instrument, Convertible, Conversion Price | $ / shares		$ 3
Lender Fees		$ 7,500
Director [Member] | Convertible Related Party Note Issued On July 2, 2018 [Member] | Other Expense [Member]
Amortization of Debt Discount (Premium)														13,699			13,699
Director [Member] | Convertible Related Party Note Issued On July 19, 2018 [Member]
Proceeds from Related Party Debt	$ 250,000
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Debt Instrument, Unamortized Discount, Total	$ 103,609
Debt Instrument, Convertible, Conversion Price | $ / shares	$ 3
Lender Fees	$ 7,500
Director [Member] | Convertible Related Party Note Issued On July 19, 2018 [Member] | Other Expense [Member]
Amortization of Debt Discount (Premium)														11,111			11,111
Director [Member] | Promissory Note [Member]
Proceeds from Related Party Debt									$ 500,000
Debt Instrument, Interest Rate, Stated Percentage									10.00%							10.00%		10.00%
Debt Instrument, Unamortized Discount, Total									$ 52,166							$ 52,166		$ 52,166
Director [Member] | Promissory Note [Member] | Other Expense [Member]
Amortization of Debt Discount (Premium)														6,574			19,508
Director [Member] | Warrants Issued with Debt [Member] | Measurement Input, Expected Dividend Rate [Member]
Warrants and Rights Outstanding, Measurement Input												0
Director [Member] | Warrants Issued with Debt [Member] | Measurement Input, Price Volatility [Member]
Warrants and Rights Outstanding, Measurement Input												1.842
Director [Member] | Warrants Issued with Debt [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input												0.0166
Director [Member] | Warrants Issued with Debt [Member] | Measurement Input, Expected Term [Member]
Warrants and Rights Outstanding, Measurement Input												5
Director [Member] | Warrants Issued with Convertible Promissory Note [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares	250,000	250,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 1	$ 1
Warrants and Rights Outstanding, Term	2 years	2 years
Director [Member] | Third Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares															20,000							20,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares															$ 3							$ 3
Warrants and Rights Outstanding, Term															5 years							5 years
Director [Member] | Fifth Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares				30,000																	30,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 3																	$ 3
Warrants and Rights Outstanding, Term				5 years																	5 years
Director [Member] | Notes Payable [Member]
Proceeds from Related Party Debt												$ 500,000
Debt Instrument, Interest Rate, Stated Percentage												8.50%
Debt Instrument, Unamortized Discount, Total												$ 227,258
Debt Instrument, Convertible, Conversion Price | $ / shares											$ 1.25
Debt Instrument, Convertible, Number of Equity Instruments											400,000
Interest Expense, Related Party																	21,250	21,250	42,500
Accounts Payable, Related Parties, Current																			10,625
Director [Member] | Notes Payable [Member] | Warrants Issued with Debt [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares												350,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares												$ 3
Warrants and Rights Outstanding												$ 416,618
Director [Member] | Consulting Agreement [Member]
Accounts Payable, Related Parties, Current														65,000			65,000		75,000
Related Party Transaction, Amounts of Transaction													$ 200,000
General and Administrative Expense, Total																				$ 200,000
Employee [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares										10,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares										$ 3
Warrants and Rights Outstanding, Term										5 years
Employee [Member] | Promissory Note [Member]
Proceeds from Related Party Debt										$ 100,000
Debt Instrument, Interest Rate, Stated Percentage										10.00%
Debt Instrument, Unamortized Discount, Total										$ 10,435
Employee [Member] | Promissory Note [Member] | Other Expense [Member]
Amortization of Debt Discount (Premium)														1,314			3,907
Rio Vista [Member] | Unsecured Promissory Note [Member]
Proceeds from Related Party Debt								$ 500,000
Debt Instrument, Interest Rate, Stated Percentage								10.00%
Debt Instrument, Unamortized Discount, Total								$ 50,229															$ 35,590
Debt Instrument, Face Amount																							$ 500,000
Rio Vista [Member] | Unsecured Promissory Note [Member] | Other Expense [Member]
Amortization of Debt Discount (Premium)														6,330			18,784
Rio Vista [Member] | Warrants Issued to Rio Vista [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares								50,000															50,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares								$ 3															$ 3
Warrants and Rights Outstanding, Term								5 years															5 years
Corporate Counsel [Member] | Unsecured Promissory Note [Member] | First Note [Member]
Debt Instrument, Interest Rate, Stated Percentage																							10.00%
Debt Instrument, Unamortized Discount, Total																							$ 3,831
Debt Instrument, Face Amount																							$ 100,000
Corporate Counsel [Member] | Unsecured Promissory Note [Member] | Other Expense [Member] | First Note [Member]
Amortization of Debt Discount (Premium)															$ 3,831
Investor [Member] | Unsecured Promissory Note [Member] | First Note [Member]
Proceeds from Related Party Debt							$ 500,000
Debt Instrument, Interest Rate, Stated Percentage							10.00%
Debt Instrument, Face Amount							$ 500,000
Investor [Member] | Unsecured Promissory Note [Member] | Second Note [Member]
Debt Instrument, Interest Rate, Stated Percentage																								10.00%
Debt Instrument, Unamortized Discount, Total							$ 35,590
Lender Fees																	15,000
Investor [Member] | Unsecured Promissory Note [Member] | Other Expense [Member] | Second Note [Member]
Amortization of Debt Discount (Premium)														7,215			20,111
Investor [Member] | First Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares																								50,000
BPI [Member] | Unsecured Promissory Note [Member] | Third Note [Member]
Proceeds from Related Party Debt					$ 200,000
BPI [Member] | Unsecured Promissory Note [Member] | Fourth Note [Member]
Debt Instrument, Interest Rate, Stated Percentage					10.00%
Debt Instrument, Unamortized Discount, Total					$ 14,279										14,279
Debt Instrument, Convertible, Conversion Price | $ / shares					$ 3
Lender Fees																	6,000
Debt Instrument, Face Amount															$ 200,000
Accretion Expense														$ 19,781			$ 20,279
BPI [Member] | Fourth Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares					20,000										20,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares					$ 3										$ 3
Warrants and Rights Outstanding, Term					5 years										5 years
Key Employee and Principal Stockholder and Current Director [Member] | Royalty Agreement [Member]
Deferred Compensation Arrangement with Individual, Maximum Contractual Term																	25 years
Payment of Royalties Equal to Percent of Gross Sales														5.00%			5.00%
Minimum Monthly Payment Amount to Offset Future Royalty Obligations														$ 2,500			$ 2,500
Revenue from Related Parties														0		$ 4,355	33,070	$ 65,545
Prepaid Royalties, Related Party, Noncurrent														0			0		$ 319,441
Provision for Doubtful Accounts														$ 6,020			129,580
Key Employee and Principal Stockholder and Current Director [Member] | Royalty Agreement Patent Defense [Member]
Legal Fees																	$ 203,208

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Note 3 - Related Party Transactions - Notes Payable (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Convertible Notes Payable - Long Term, Debt discount	$ 224,080	$ 0
Convertible Notes Payable - Long Term, Carrying value	914,789
Related Party Notes Payable [Member]
Face value	2,100,001
Debt discount	214,153
Debt discount accretion	88,606
Carrying value	1,974,456
Related Party Notes Payable [Member] | Related Party Note Payable Dated August 2017 [Member]
Face value	100,000
Debt discount	10,435
Debt discount accretion	5,745
Carrying value	95,311
Related Party Notes Payable [Member] | Related Party Note Payable Dated September 2017 [Member]
Face value	500,000
Debt discount	52,166
Debt discount accretion	28,227
Carrying value	476,061
Related Party Notes Payable [Member] | Related Party Note Payable Dated October 2017 [Member]
Face value	500,000
Debt discount	50,229
Debt discount accretion	23,256
Carrying value	473,028
Related Party Notes Payable [Member] | Related Party Note Payable Dated January 2018 2 [Member]
Face value	500,000
Debt discount	50,590
Debt discount accretion	20,111
Carrying value	469,521
Related Party Notes Payable [Member] | Related Party Note Payable Dated March 2018 [Member]
Face value	200,000
Debt discount	20,281
Debt discount accretion	5,695
Carrying value	185,414
Related Party Notes Payable [Member] | Related Party Note Payable Dated May 2018 [Member]
Face value	300,001
Debt discount	30,452
Debt discount accretion	5,572
Carrying value	275,121
Convertible Debt [Member]
Face value	550,000
Debt discount	244,549
Debt discount accretion	20,469
Convertible Debt [Member] | Convertible Related Party Note Payable Dated July 2015 [Member]
Face value	500,000
Debt discount
Debt discount accretion
Carrying value	500,000
Convertible Debt [Member] | Related Party Notes Payable [Member]
Face value	2,000,000
Debt discount	666,638
Debt discount accretion	81,427
Carrying value	1,414,789
Convertible Notes Payable - Current, Face value	500,000
Convertible Notes Payable - Current, Debt discount
Debt discount accretion, current
Convertible Notes Payable - Current, Carrying value	500,000
Convertible Notes Payable - Long Term, Face value	1,500,000
Convertible Notes Payable - Long Term, Debt discount	666,638
Debt discount accretion, noncurrent	81,427
Convertible Notes Payable - Long Term, Carrying value	914,789
Convertible Debt [Member] | Convertible Related Party Note Payable Dated June 2018 [Member]
Face value	1,000,000
Debt discount	444,416
Debt discount accretion	56,617
Carrying value	612,201
Convertible Debt [Member] | Convertible Related Party Note Issued On July 2, 2018 [Member]
Face value	250,000
Debt discount	111,113
Debt discount accretion	13,699
Carrying value	152,586
Convertible Debt [Member] | Convertible Related Party Note Issued On July 19, 2018 [Member]
Face value	250,000
Debt discount	111,109
Debt discount accretion	11,111
Carrying value	$ 150,002

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Note 4 - Commitments (Details Textual) - USD ($)		1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 20, 2018	Jan. 31, 2016	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 01, 2016
Share Price	$ 3
Research and Development Expense, Total			$ 16,710	$ 41,041	$ 138,625	$ 140,030
SAA [Member]
Research and Development Expense, Total					0	29,610
NASA ARC [Member] | SAA [Member]
Payments for Research Commitment		$ 373,750
Contractual Agreement, Period		5 years
BAM [Member]
License and Business Development Agreement, Consideration Received, to Purchase Shares in Connection to a Private Placement	$ 100,000
BAM [Member] | Argo Space [Member]
Contractual Agreement, Milestone Period	5 years
License and Business Development Agreement, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 900,000
Lichtinger Goup [Member]
Maximum Amount of Capital Contributed	$ 500,000
Argo Space [Member] | BAM [Member]
Equity Method Investment, Ownership Percentage	20.00%
Capital Contribution Threshold	$ 500,000
Cost Method Investments			0		0
Warehouse in Okeechobee [Member]
Lessee, Operating Lease, Term of Contract							2 years
Operating Leases, Future Minimum Payments Due, Next Twelve Months			$ 158,976	$ 76,034	$ 158,976	$ 76,034

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Note 5 - Convertible Notes Payable and Notes Payable (Details Textual) - USD ($)				1 Months Ended		3 Months Ended	9 Months Ended
	Jun. 29, 2018	Jan. 18, 2018	Dec. 14, 2017	Jul. 30, 2018	Dec. 31, 2017	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Jan. 19, 2018	Dec. 18, 2017	Dec. 31, 2016
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 1.86	$ 1.77	$ 1.77				$ 1.53
Proceeds from Notes Payable, Total							$ 750,000
Proceeds from Related Party Debt							$ 2,700,001	$ 600,000
Notes Payable, Other Payables [Member]
Debt Instrument, Interest Rate, Stated Percentage						7.50%	7.50%
Debt Instrument, Face Amount						$ 223,707	$ 223,707
Debt Instrument, Periodic Payment, Total							19,353
Long-term Debt, Total						38,706	38,706
Warrants Issued in Connection With the June 2018 Offering Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	2,050,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 1
Warrants and Rights Outstanding						853,518	853,518
Warrants Issued in Connection With the June 2018 Offering Notes [Member] | Private Placement [Member]
Warrants and Rights Outstanding, Term	2 years
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	2,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 1
Warrants Issued in Connection with Unsecured Promissory Note [Member]
Warrants and Rights Outstanding, Term									5 years	5 years
Class of Warrant or Right, Number of Securities Called by Warrants or Rights									10,000	50,000
Class of Warrant or Right, Exercise Price of Warrants or Rights									$ 3	$ 3
Other Current Shareholders [Member] | Warrants Issued in Connection With the June 2018 Offering Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	550,000			550,000
Warrants and Rights Outstanding	$ 228,049			$ 228,049
Secured Note [Member]
Debt Instrument, Unamortized Discount, Total						61,500	61,500
Debt Instrument, Face Amount	2,050,000
Secured Note [Member] | Accredited Investor [Member]
Related Party Debt, Maximum Amount Issuable	$ 2,000,000
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Secured Note [Member] | Other Current Shareholders [Member]
Proceeds from Issuance of Long-term Debt, Total	$ 550,000			$ 550,000
Debt Instrument, Unamortized Discount, Total	$ 16,500
Debt Instrument, Convertible, Conversion Price	$ 3
Unsecured Promissory Note [Member]
Debt Instrument, Interest Rate, Stated Percentage			10.00%
Debt Instrument, Unamortized Discount, Total					$ 18,652
Debt Instrument, Face Amount			$ 200,000
Proceeds from Notes Payable, Total					$ 200,000
Debt Instrument, Maturity Date			Dec. 13, 2019
Unsecured Promissory Note [Member] | Other Expense [Member]
Amortization of Debt Discount (Premium)						2,351	7,410
Unsecured Promissory Note 2 [Member]
Debt Instrument, Interest Rate, Stated Percentage		10.00%
Debt Instrument, Unamortized Discount, Total		$ 7,124
Debt Instrument, Face Amount		100,000
Proceeds from Related Party Debt		$ 100,000
Debt Instrument, Maturity Date		Jan. 18, 2020
Unsecured Promissory Note 2 [Member] | Other Expense [Member]
Amortization of Debt Discount (Premium)						$ 898	$ 2,486

XML

Note 5 - Convertible Notes Payable and Notes Payable - Convertible Notes Payable (Details) - Convertible Debt [Member]	Sep. 30, 2018 USD ($)
Face Value	$ 550,000
Debt Discount	244,549
Debt Discount Accretion	20,469
Carrying Value	325,920
Convertible Notes Payable, One [Member]
Face Value	50,000
Debt Discount	22,231
Debt Discount Accretion	1,923
Carrying Value	29,692
Convertible Notes Payable, Two [Member]
Face Value	50,000
Debt Discount	22,231
Debt Discount Accretion	1,923
Carrying Value	29,692
Convertible Notes Payable, Three [Member]
Face Value	25,000
Debt Discount	11,116
Debt Discount Accretion	873
Carrying Value	14,757
Convertible Notes Payable, Four [Member]
Face Value	250,000
Debt Discount	111,160
Debt Discount Accretion	9,233
Carrying Value	148,073
Convertible Notes Payable, Five [Member]
Face Value	25,000
Debt Discount	11,115
Debt Discount Accretion	934
Carrying Value	14,819
Convertible Notes Payable, Six [Member]
Face Value	50,000
Debt Discount	22,232
Debt Discount Accretion	1,924
Carrying Value	29,692
Convertible Notes Payable, Seven [Member]
Face Value	100,000
Debt Discount	44,464
Debt Discount Accretion	3,659
Carrying Value	$ 59,195

XML

Note 5 - Convertible Notes Payable and Notes Payable - Notes Payable (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Carrying value	$ 284,120	$ 181,782
Unsecured Promissory Note Payable Dated December 2017 [Member]
Face value	200,000
Debt discount	18,652
Debt discount accretion	7,410
Carrying value	188,758
Unsecured Promissory Note Payable Dated January 2018 3 [Member]
Face value	100,000
Debt discount	7,124
Debt discount accretion	2,486
Carrying value	95,362
Unsecured Promissory Note [Member]
Face value	300,000
Debt discount	25,776
Debt discount accretion	9,896
Carrying value	$ 284,120

XML

Note 6 - Equity (Details Textual) - USD ($)		1 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 29, 2018	Jul. 30, 2018	Jan. 31, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016	Jun. 30, 2018	May 31, 2018	May 02, 2018	Mar. 31, 2018	Mar. 12, 2018	Mar. 09, 2018	Mar. 08, 2018	Feb. 20, 2018	Jan. 19, 2018	Jan. 18, 2018	Dec. 18, 2017	Dec. 14, 2017	Oct. 31, 2017	Nov. 30, 2015
Payments of Stock Issuance Costs						$ 25,680	$ 138,800
Class of Warrant or Right, Exercise Price of Warrants or Rights				$ 1.77		$ 1.77		$ 1.86	$ 1.53
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						50,000		440,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price						$ 3		$ 3
Share Price																	$ 3
Employee Stock Option [Member]
Allocated Share-based Compensation Expense, Total						$ 146,277
Equity Incentive Plan 2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized																							4,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						25,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price						$ 3
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period						10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value						$ 38,441
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate				0.00%	0.00%	0.00%	0.00%
Share Price				$ 1.21		$ 1.21
Equity Incentive Plan 2015 [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Payments						$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate						101.70%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term						5 years
Equity Incentive Plan 2015 [Member] | Employee Stock Option [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate						2.58%
Equity Incentive Plan 2015 [Member] | Employee Stock Option [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate						2.69%
Director [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					50,000		50,000
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 3		$ 3
Warrants and Rights Outstanding, Term					5 years		5 years
Unsecured Promissory Note 2 [Member]
Debt Instrument, Face Amount																			$ 100,000
Debt Instrument, Unamortized Discount, Total																			$ 7,124
Secured Note [Member]
Debt Instrument, Face Amount	$ 2,050,000
Debt Instrument, Unamortized Discount, Total				$ 61,500		$ 61,500
Secured Note [Member] | Other Current Shareholders [Member]
Debt Instrument, Unamortized Discount, Total	16,500
Proceeds from Issuance of Long-term Debt, Total	$ 550,000	$ 550,000
Unsecured Promissory Note [Member]
Debt Instrument, Face Amount																					$ 200,000
Debt Instrument, Unamortized Discount, Total								$ 18,652
Unsecured Promissory Note [Member] | In-house Council [Member]
Proceeds from Issuance of Long-term Debt, Total			$ 100,000
Unsecured Promissory Note [Member] | Rio Vista [Member]
Debt Instrument, Face Amount			500,000
Debt Instrument, Unamortized Discount, Total			$ 35,590																			$ 50,229
Unsecured Promissory Note [Member] | Director [Member] | Third Note [Member]
Debt Instrument, Face Amount													$ 200,000
Debt Instrument, Unamortized Discount, Total													14,281			$ 14,281
Unsecured Promissory Note [Member] | Director [Member] | Fifth Note [Member]
Debt Instrument, Face Amount											$ 300,000
Debt Instrument, Unamortized Discount, Total											$ 21,452	$ 21,452
Unsecured Promissory Note [Member] | Director [Member] | Sixth Note [Member]
Debt Instrument, Face Amount										$ 1,000,000
Debt Instrument, Unamortized Discount, Total										$ 414,416
Unsecured Promissory Note [Member] | Director [Member] | Seventh Notes [Member]
Debt Instrument, Face Amount		$ 250,000
Unsecured Promissory Note [Member] | Director [Member] | Seventh Notes, One [Member]
Debt Instrument, Unamortized Discount, Total				103,613		103,613
Unsecured Promissory Note [Member] | Director [Member] | Seventh Notes, Two [Member]
Debt Instrument, Unamortized Discount, Total				$ 103,609		$ 103,609
Unsecured Promissory Note [Member] | BPI [Member] | Fourth Note [Member]
Debt Instrument, Face Amount													200,000
Debt Instrument, Unamortized Discount, Total													$ 14,279	$ 14,279
Warrants Issued for Services [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights				385,000		385,000
Class of Warrant or Right, Exercise Price of Warrants or Rights				$ 3		$ 3
Warrants and Rights Outstanding, Term				5 years		5 years
Warrants and Rights Outstanding				$ 296,271		$ 296,271
Warrants Issued in Connection with Unsecured Promissory Note [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																		10,000		50,000
Class of Warrant or Right, Exercise Price of Warrants or Rights																		$ 3		$ 3
Warrants and Rights Outstanding, Term																		5 years		5 years
Warrants Issued in Connection with Unsecured Promissory Note [Member] | In-house Council [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			5,000
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 3
Warrants and Rights Outstanding, Term			5 years
Warrants and Rights Outstanding			$ 3,831
Warrants Issued in Connection With the June 2018 Offering Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	2,050,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 1
Warrants and Rights Outstanding				$ 853,518		$ 853,518
Warrants Issued in Connection With the June 2018 Offering Notes [Member] | Other Current Shareholders [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	550,000	550,000
Warrants and Rights Outstanding	$ 228,049	$ 228,049
Warrants Issued to Rio Vista [Member] | Rio Vista [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			50,000																			50,000
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 3																			$ 3
Warrants and Rights Outstanding, Term			5 years																			5 years
Third Warrant [Member] | Director [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights													20,000		20,000
Class of Warrant or Right, Exercise Price of Warrants or Rights													$ 3		$ 3
Warrants and Rights Outstanding, Term													5 years		5 years
Fourth Warrant [Member] | BPI [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights													20,000	20,000
Class of Warrant or Right, Exercise Price of Warrants or Rights													$ 3	$ 3
Warrants and Rights Outstanding, Term													5 years	5 years
Fifth Warrant [Member] | Director [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights											30,000	30,000
Class of Warrant or Right, Exercise Price of Warrants or Rights											$ 3	$ 3
Warrants and Rights Outstanding, Term											5 years	5 years
Sixth Warrant [Member] | Director [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights										1,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights										$ 1
Warrants and Rights Outstanding, Term										2 years
Seventh Warrants [Member] | Director [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 1
Warrants and Rights Outstanding, Term		2 years
Seventh Warrants, Each Tranche[Member] | Director [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		250,000
Private Placement [Member]
Stock Issued During Period, Value, New Issues									$ 10,000,000
Shares Issued, Price Per Share									$ 3
Stock Issued During Period, Shares, New Issues						303,718
Proceeds from Issuance of Private Placement						$ 911,154
Payments of Stock Issuance Costs						$ 25,680
Private Placement [Member] | Fully Vested, Non-forfeitable Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights				7,490		7,490
Class of Warrant or Right, Exercise Price of Warrants or Rights				$ 3		$ 3
Adjustments to Additional Paid in Capital, Warrant Issued						$ 5,771
Private Placement [Member] | Warrants Issued in Connection With the June 2018 Offering Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	2,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 1
Warrants and Rights Outstanding, Term	2 years

XML

Note 6 - Equity - Warrant Activity (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Outstanding, number of warrants (in shares)	10,713,175	9,664,733
Outstanding, weighted average exercise price (in dollars per share)	$ 1.86	$ 1.53
Granted, number of warrants (in shares)	2,577,490	1,838,442
Granted, weighted average exercise price (in dollars per share)	$ 1.14	$ 2.01
Exercised, number of warrants (in shares)		(790,000)
Exercised, weighted average exercise price (in dollars per share)		$ 2
Cancelled/Forfeited, number of warrants (in shares)
Outstanding and exercisable, weighted average remaining contractual life (Year)	2 years 36 days	2 years 292 days
Outstanding and exercisable, aggregate intrinsic value	$ 2,687,519	$ 2,606,698
Outstanding, number of warrants (in shares)	13,290,665	10,713,175
Outstanding, weighted average exercise price (in dollars per share)	$ 1.77	$ 1.86

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Note 6 - Equity - Option Activity (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Dec. 31, 2016
Outstanding, number of options (in shares)	3,165,000	2,755,000
Outstanding, weighted average exercise price (in dollars per share)	$ 1.49	$ 1.25
Outstanding, weighted average remaining contractual life (Year)	7 years 328 days	8 years 182 days
Granted, number of options (in shares)	50,000	440,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 3	$ 3
Exercised, number of options (in shares)
Exercised, weighted average exercise price (in dollars per share)
Cancelled/Forfeited, number of options (in shares)	(1,595,000)	(30,000)
Cancelled/Forfeited, weighted average exercise price (in dollars per share)	$ 1.34	$ 1.25
Outstanding, number of options (in shares)	1,620,000	3,165,000	2,755,000
Outstanding, weighted average exercise price (in dollars per share)	$ 1.56	$ 1.49	$ 1.25
Outstanding, aggregate intrinsic value		$ 192,850
Exercisable, number of options (in shares)	1,519,375	2,750,000
Exercisable, weighted average exercise price (in dollars per share)	$ 1.30	$ 1.27
Exercisable, weighted average remaining contractual life (Year)	8 years 146 days	8 years 73 days
Exercisable, aggregate intrinsic value		$ 192,850

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Note 7 - Subsequent Events (Details Textual) - USD ($)	Nov. 18, 2018	Sep. 30, 2018	Dec. 31, 2017	Dec. 31, 2016
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 1.77	$ 1.86	$ 1.53
Subsequent Event [Member] | Affiliated Entity [Member]
Contract with Customer, Liability, Total	$ 250,000
Fully Vested, Non-forfeitable Warrants [Member] | Subsequent Event [Member]
Warrants and Rights Outstanding, Term	5 years
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	40,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 3
Warrants and Rights Outstanding	$ 30,870