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~~March 3031, ~~2017~~2018

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

☐ 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 ☒ ~~Form~~ ~~10-K~~The ~~12/31/2016;~~Company ~~Form~~has ~~10-Q~~not ~~3/31/2017;~~filed its Quarterly Report on Form 10-Q 6/for the quarterly period ending June 30~~/2017~~, 2018.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒☐ No ☐☒ See above

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 ☐ ~~Smaller reporting company ☒~~ (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~~October 1730, ~~2017~~2018, the issuer had 40,~~772~~954,~~597~~115 shares of common stock issued and outstanding.

Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION 2 Item 1. Condensed Consolidated Financial Statements (unaudited) 2 Condensed Consolidated Balance Sheets as of ~~September~~March 3031, ~~2017~~2018 (unaudited) and December 31, ~~2016~~2017 2 Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2017~~2018 and ~~September~~March 3031, ~~2016~~2017 (~~Unaudited~~unaudited) 3 Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September~~March 3031, ~~2017~~2018 and ~~September~~March 3031, ~~2016~~2017 (~~Unaudited~~unaudited) 4 Notes to Condensed Consolidated Financial Statements (unaudited) 5 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 1917 Item 3. Quantitative & Qualitative Disclosures about Market Risks 24 Item 4. Controls and Procedures 24 PART II OTHER INFORMATION 25 Item 1. Legal Proceedings 25 Item 1A. Risk Factors 25 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25 Item 3. Defaults upon Senior Securities 2625 Item ~~4. Mine Safety Disclosures 26 Item~~ 5. Other Information 2625 Item 6. Exhibits 2625

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~~NOTE ABOUT~~ 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 ~~include~~are based on current expectations, ~~among~~estimates ~~other~~and ~~things~~projections about our business based, in part, on assumptions made by management. These statements ~~regarding:~~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 ~~the~~discussion ~~growth~~and analysis of financial condition and results of operations are based upon our ~~business~~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 ~~expectations~~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 ~~factors~~carrying values of assets and liabilities that ~~influence~~are ~~our~~not ~~success;~~readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates.

■ our plans to continue to invest in systems, facilities, and infrastructure, increase our hiring and grow our business;

■ our plans for our BAM-FX™ and the strategy and timing of sales plans and regulatory approvals;

■ our belief about our sales growth and growth of our business and research capabilities;

■ our belief regarding when and if we will be able to have sufficient revenues to fund operations

■ our ability to obtain funding and the sufficiency of our sources of funding;

■ our expectation that our cost of revenues, development expenses, sales and marketing expenses, and general and administrative expenses will increase;

■ fluctuations in our capital expenditures;

■ our plans for potential business partners and other business relationships;

as well as other statements regarding our future operations, financial condition and prospects, and business strategies. 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" in our Registration Statement on Form 10-12g filed with the U.S. Securities and Exchange Commission (“SEC”) as amended, 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 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 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 assets, bad debts, impairment, stock based compensation, and contingencies. 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.

Unless we have indicated otherwise or the context otherwise requires, references in the prospectus to “Zero Gravity,” “ZGSI,” the “Company,” “we,” “us” and “our” or similar terms are to Zero Gravity Solutions, Inc. and its subsidiaries.

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PART I. FINANCIAL INFORMATION

Item 1. CONDENSED Consolidated Financial Statements

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance ~~Sheets~~Sheet

	September 30, 2017			December 31, 2016
	March 31, 2018			December 31, 2017
	(Unaudited)
		(unaudited)
ASSETS
CURRENT ASSETS
Cash	$	~~130~~44,~~309~~423		$	~~232~~13,~~394~~862
Accounts receivable, trade, net		34,055			121,747
Accounts receivable, net		563			1,393
Other current assets		97,323			282,409
Prepaid expenses		167,288			216,139
Inventory		8268,~~611~~193			3368,~~401~~643
Total current assets		~~344~~280,~~298~~467			~~669~~300,~~951~~037
Property and equipment - net		~~110~~98,~~055~~011			~~119~~104,~~057~~590
OTHER ASSETS
Deposit		4,617			3,617
Deposits		4,817			4,617
Intellectual property, net		11,830			5,500
Intellectual property		11,086			11,458
Advance on future royalties - related parties		311,950			277,038
Advance on future royalties - related parties, net		-			319,441
Total other assets		~~328~~15,~~397~~903			~~286~~335,~~155~~516
TOTAL ASSETS	$	~~782~~394,~~750~~381		$	1740,~~075,163~~143
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	681,848		$	480,853
Accounts payable and other payables	$	659,139		$	693,695
Accounts payable- related party		101,541			75,000
Accounts payable, related party		82,500			80,097
Accrued interest		7,083			2,500
Accrued interest, related party		50,544			32,250
Deferred compensation, related party		12,500			12,500
Note payable - related party		500,000			500,000
Convertible Note payable - related party		500,000			500,000
Note payable		-154,822			~~195~~204,~~355~~419
Total current liabilities		1,295,889			1,263,708
Total liabilities (all current)		1,466,588			1,525,461
LONG TERM LIABILITIES
Notes payable - related parties net of discount of $59,928		540,072			-
Note payable, net of discount of $22,340 and $18,218		277,660			181,782
Total long term liabilities		540,072			-
Notes payable, related parties, net of discount of $168,306 and $97,796		1,831,694			1,002,204
TOTAL LIABILITIES		1,835,961			1,263,708
Total long-term liabilities		2,109,354			1,183,986
Commitments
Total Liabilities		3,575,942			2,709,447
Commitments (Note 4)
STOCKHOLDERS' DEFICIT
Common stock; 100,000,000 shares authorized, at $0.001 par value, 40,266,264 and 38,973,264 shares issued and outstanding, respectively		40,473			38,973
Common stock; 100,000,000 shares authorized, at $0.001 par value, 40,705,731 and 40,650,397 shares issued and outstanding, at March 31, 2018 and December 31, 2017, respectively		40,706			40,650
Additional paid-in capital		2122,~~018~~334,~~081~~630			1621,~~126~~970,~~129~~266
Accumulated deficit		(2225,~~111~~556,~~765~~897	)		(1623,~~353~~980,~~647~~220	)
Total stockholders' deficit		(13,~~053~~181,~~211~~561	)		(~~188~~1,~~545~~969,304	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	~~782~~394,~~750~~381		$	1740,~~075,163~~143

See accompanying notes to unaudited condensed consolidated financial statements

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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,
	2017			2016			2017			2016
REVENUE
Sale of Goods	$	4,355		$	16,174		$	65,545		$	36,488
Total revenue		4,355			16,174			65.545			36,488
COST OF REVENUE
Cost of goods sold		157			1,015			10,263			3,663
Royalty expense		218			809			2,092			1,825
Total cost of revenue		375			1,824			12,355			5,488
GROSS PROFIT		3,980			14,350			53,190			31,000
OPERATING EXPENSES
General and administrative		1,492,884			1,583,678			5,623,117			5,036,518
Research and development		41,041			133,195			140,030			347,360
Total operating expenses		1,533,925			1,716,873			5,763,147			5,383,878
LOSS FROM OPERATIONS		(1,529,945	)		(1,702,523	)		(5,709,957	)		(5.352.878	)
OTHER INCOME (EXPENSE)
Other income		-			441			-			2,511
Interest expense		(18,386	)		(12,308	)		(45,101	)		(37,132	)
Accretion of debt discount		(2,673	)		(9,339	)		(2,673	)		(122,631	)
Foreign currency loss		(387	)		-			(387	)		-
Total other income (expense)		(21,446	)		(21,206	)		(48,161	)		(157,252	)
NET LOSS	$	(1,551,391	)	$	(1,723,729	)	$	(5,758,118	)	$	(5,510,130	)
NET LOSS PER SHARE - BASIC AND DILUTED	$	(0.04	)	$	(0.04	)	$	(0.15	)	$	(0.14	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED		40,323,242			38,751,597			38,948,632			38,495,040

(Unaudited)

	Three months Ended March 31,
	2018			2017
REVENUE
Sale of Goods	$	3,470		$	255
Total Revenue		3,470			255
COST OF REVENUE
Cost of Goods Sold		377			21
Royalty Expense		173			13
Total Cost of Revenue		550			34
GROSS PROFIT		2,920			221

OPERATING EXPENSES
General and administrative		1,409,696			2,705,198
Research and development		84,817			76,381
Total operating expenses		1,494,513			2,781,579
LOSS FROM OPERATIONS		(1,491,593	)		(2,781,358	)
OTHER INCOME (EXPENSE)
Interest expense		(61,099	)		(13,946	)
Accretion of debt discount		(23,642	)		-
Loss on disposal of asset		(343	)		-
Total other income (expense)		(85,084	)		(13,946	)
NET LOSS	$	(1,576,677	)	$	(2,795,304	)
NET LOSS PER SHARE - BASIC AND DILUTED	$	(0.04	)	$	(0.07	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED		40,671,851			40,042,764

See accompanying notes to unaudited condensed consolidated financial statements

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows ~~(Unaudited)~~

	Nine Months Ended
	September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,758,118	)	$	(5,510,130	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		18,414			11,441
Amortization expense		646			-
Common stock issued for services		150,000			25,000
Warrants issued for services		655,128			11,899
Stock options issued as compensation		108,388			1,678,118
Amortization of debt issuance costs		2,673			122,631
Warrant modification expense		926,885			-
Changes in operating assets and liabilities:
Accounts receivable		87,693			7,257
Other current assets		(19,685	)		(9,180	)
Prepaid expenses		204,771			100,039
Advance on future royalties - related parties		(34,912	)		(55,115	)
Inventory		(49,210	)		(6,624	)
Deposit		(1,000	)		3,117
Accounts payable and accrued expenses		227,537			248,026
Net cash used in operating activities		(3,480,791	)		(3,373,521	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid to acquire intellectual property		(6,976	)		-
Cash paid to purchase equipment		(9,412	)		(73,331	)
Net cash used in investing activities		(16,388	)		(73,331	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of notes payable		(195,355	)		(128,481	)
Proceeds from exercise of warrants – related party		1,185,000			-
Payment of offering costs - related party		(33,750	)		-
Proceeds of notes payable and warrants - related party		600,000			-
Proceeds from sale of common stock		1,977,999			1,717,500
Payment of offering costs		(138,800	)		(151,500	)
Net cash provided by financing activities		3,395,094			1,437,519
NET DECREASE IN CASH		(102,085	)		(2,009,333	)
CASH AT BEGINNING OF PERIOD		232,394			2,851,118
CASH AT END OF PERIOD	$	130,309		$	841,785
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest	$	45,101		$	12,086
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued as direct offering costs	$	168,268		$	152,575

(Unaudited)

	Three months Ended
	March 31,
	2018			2017

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss	$	(1,576,677	)	$	(2,795,304	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		6,235			6,107
Amortization expense		372			138
Bad debt expense		4,060			-
Common stock issued for services		-			150,000
Warrants issued for services		57,570			283,039
Stock options issued as compensation		71,254			76,644
Loss on disposal of asset		343			-
Advance on future royalties - related parties reserve		123,560			-
Impairment expense		203,208			-
Amortization of debt discounts		23,642			-
Warrant modification expense		-			926,885
Changes in operating assets and liabilities:
Accounts receivable, trade		(3,230	)		92,670
Prepaid expenses		48,851			60,110
Advance on future royalties - related parties		(7,327	)		(21,992	)
Inventory		450			(47,394	)
Deposit		(200	)		(200	)
Accounts payable, related party		2,403			-
Accounts payable and other payables		(34,556	)		(2,114	)
Accrued interest, related party		18,294			-
Accrued interest		4,584			-

Net cash used in operating activities		(1,057,164	)		(1,271,411	)

CASH FLOWS FROM FINANCING ACTIVITIES

Payments of notes payable		(49,597	)		(65,118	)
Payments of notes payable - related party		(100,000	)		-
Proceeds from exercise of warrants – related party		-			1,185,000
Payment of offering costs - related party		(27,000	)		(33,750	)
Proceeds of notes payable		100,000			-
Proceeds of notes payable – related party		1,000,000			-
Proceeds from sale of common stock		166,002			688,500
Payment of offering costs		(1,680	)		(53,400	)

Net cash provided by financing activities		1,087,725			1,721,232

NET INCREASE IN CASH		30,561			449,821

CASH AT BEGINNING OF PERIOD		13,862			232,394

CASH AT END OF PERIOD	$	44,423		$	682,215

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID FOR:

Income Taxes	$	-		$	-
Interest	$	61,099		$	13,946

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued as equity direct offering costs	$	377		$	22,970
Warrants issued as debt discount	$	71,274		$	-

See accompanying notes to unaudited condensed consolidated financial statements

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations

Zero Gravity Solutions, Inc. (the “Company”) is ana ~~agricultural~~ biotechnology company focused on commercializing ~~technologies~~ technology derived from and designed for ~~space~~spaceflight with significant applications on ~~earth~~Earth. These technologies are focused on improving world agriculture by providing valuable solutions to challenges facing ~~world~~humanity including ~~agriculture.~~threats ~~The~~to Company’s two primary categories of technologies aimed at sustainable agriculture are: 1) BAM-FX, a cost effective, ionic micronutrient delivery system for plants currently being introduced commercially into world agriculture ~~markets by the Company’s wholly owned subsidiary BAM Agricultural Solutions, Inc.~~ and ~~2) Directed Selection, utilized in~~ the ~~development~~ability ~~and~~to ~~production,~~feed in the ~~prolonged~~world’s ~~zero/micro~~rapidly ~~gravity~~growing ~~environment of the International Space Station (“ISS”), of large volumes of non-GMO, novel, patentable stem cells with unique and beneficial characteristics~~population.

The Company’s ~~mission~~owns isproprietary ~~to improve~~technology ~~life~~for onits ~~earth~~initial bycommercial ~~applying~~product, ~~its~~BAM-FX™ that ~~intellectual~~can ~~property~~boost the nutritional value and ~~technology~~enhance ~~designed~~the ~~for~~immune ~~and~~system ~~derived~~of ~~from~~food ~~six~~crops ~~NASA~~without ~~enabled~~the ~~flights~~use of ~~the~~Genetic ~~ISS~~Modification. The Company’s ~~initial~~focus ~~projects~~is ~~are~~the ~~directed~~commercialization toof ~~providing~~BAM-FX™ in ~~solutions~~both todomestic ~~critical~~and ~~world~~international ~~food~~markets. ~~crop~~The ~~challenges~~Company’s headquarters are located in Boca Raton Florida.

The Company owns proprietary technology for its first 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

The Company has a ~~limited~~working ~~operating~~capital ~~history~~deficiency as of March 31, ~~recurring~~2018, ~~losses~~and a loss from operations and anegative ~~working~~cash ~~capital~~flows ~~deficiency~~from atoperating ~~September~~activities ~~30,~~for ~~2017~~the quarter then ended. At ~~September~~March 3031, ~~2017~~2018, the Company had an approximate cash ~~balances~~balance of $~~130~~44,000, and a working capital deficiency of approximately $(~~952~~1,186,000), ~~total~~and ~~stockholders’~~had ~~deficit~~a loss from operations of approximately $(1,~~053~~577,000), and annegative ~~accumulated~~cash ~~deficit~~flows from operating activities of approximately $(221,~~112~~057,000) for the quarter then ended. To date, the Company has ~~in large part~~ 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. ~~The~~Management ~~Company~~has ~~estimates~~evaluated ~~that~~its ~~the~~ability ~~costs~~to ~~associated~~continue ~~with~~as ~~the~~a ~~execution~~going ofconcern ~~its~~for ~~2017~~the ~~business~~next ~~plan~~twelve ~~may~~months ~~exceed~~from ~~$450,000~~the ~~per~~issuance ~~month,~~of ~~with~~these ~~limited~~March or31, no2018 ~~revenue~~unaudited incondensed ~~certain~~consolidated ~~months~~financial statements, orand ~~for~~has andetermined ~~extended~~that ~~period~~there ofis ~~time.~~substantial ~~Management~~doubt ~~has~~as ~~evaluated~~to its ability to continue as a going concern. ~~for~~The ~~the~~Company ~~next~~has ~~twelve~~satisfied ~~months~~its obligations using cash from ~~the~~successful ~~issuance~~capital ofraising ~~these~~efforts ~~September~~through 30March 31, ~~2017~~2018, however there are no assurances that such successful efforts will continue for up to a year after these unaudited condensed consolidated financial statements, ~~and~~are ~~has~~issued. ~~determined~~The ~~that~~unaudited ~~there~~condensed isconsolidated ~~substantial~~financial ~~doubt~~statements asdo not include any adjustments to ~~its~~reflect ~~ability~~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. ~~Financial resources are required to carry receivable balances due from the distributors and assist with end user validation and acceptance.~~ To fund these capital needs, the Company has and continues to raise capital through a private placement ~~offering~~offerings in connection with its investment banker and through its internal efforts, as well as raising funds through issuances of debt. Subsequent to March 31, 2018, the Company has raised approximately $2,350,000 in debt financing and approximately $745,000 through the sale of common stock (Note 7). 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. Subsequent to September 30, 2017, the Company raised approximately $300,000 through its private placement and received $500,000 from the issuance of an unsecured promissory note to a trust which a member of its Board of Directors is a beneficiary of (Note 8).

Management’s strategic plans include the following:

-● ~~continuing~~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.

- pursuing additional capital raising opportunities;

- continuing to explore and execute prospective partnering or distribution opportunities; and

- identifying unique market and product application opportunities that represent potential positive cash flow.

Basis of Presentation

Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for complete financial statements. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments and an adjustment to prior period results (Note 2)) have been made which are necessary for a fair financial statement presentation. The interim results for the period ended September 30, 2017, are not necessarily indicative of results for the full fiscal year. These unaudited financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2016.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~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 months ended March 31, 2018 and 2017, our cash flows for the three months ended March 31, 2018 and 2017, and our financial position as of March 31, 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 consolidated financial statements have been condensed or omitted from these interim 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 Report on Form 10-K for the period 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 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 consolidated financial statements. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited 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 consolidated financial statements presented within, relate to our principal operating segment. Customers in the United States accounted for 100% of our revenues. We do not have any property or equipment outside of the United States.

Principles of Consolidation

The accompanying unaudited ~~interim~~ 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 March 31, 2018 and 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,
	March 31,		December 31,
	2017		2016
	2018		2017
Raw materials	$	23,~~920~~562	$	923,~~081~~562
Finished product		44,~~741~~631		545,~~082~~081
Consignment inventory		13,950		19,238
Total Inventory	$	68,193	$	68,643
Total Inventory	$	82,611	$	33,401

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 atbelieves ~~September~~that ~~30, 2017 maintained~~ its ~~cash~~credit ~~balance~~risk ~~with~~exposure ~~two~~is ~~major national financial institutions~~limited. The ~~bank~~Company ~~balance~~has atnever ~~September~~suffered ~~30,~~a ~~2017~~loss ~~did~~due ~~not~~to ~~exceed~~excess ~~the FDIC limits~~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.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

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 ~~takes~~considers ~~into account~~ the future cash flows) ~~(Note 2)~~.

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~~recognition and ~~Accounts~~accounts ~~Receivable~~receivable

~~Revenue~~We isrecognize ~~recognized~~revenues ~~when~~from the ~~following~~sale ~~four basic criteria have been met: (i) persuasive evidence~~ of anagricultural ~~arrangement~~biotechnology ~~exists;~~products ~~(ii)~~to ~~delivery~~distributors ~~has occurred~~ and ~~risk~~customers ofpursuant ~~loss has passed; (iii) the seller's price~~ to the ~~buyer~~provisions isof ~~fixed~~ASC or606, ~~determinable;~~“Revenue ~~and (iv) collectability is reasonably assured~~Recognition”.

~~The~~Revenues ~~Company~~for ~~determined~~agricultural ~~that~~chemical ~~no reserve~~products ~~for~~are ~~estimated~~recognized ~~product~~when ~~returns~~title ~~and~~to ~~allowances~~the ~~was~~products ~~necessary~~is ~~during~~transferred ~~the~~which ~~three~~may ~~and~~be ~~nine~~upon ~~month~~shipment ~~periods~~to ~~ended~~the ~~September~~customer ~~30,~~or ~~2017~~receipt ~~and~~by ~~2016.~~the ~~Determination~~customer of the ~~reserve for estimated~~ product. ~~returns~~We ~~and~~recognize ~~allowances~~revenue isto ~~based~~depict onthe ~~management's~~transfer ~~analyses~~of ~~and~~goods ~~judgments~~or ~~regarding~~services ~~certain~~to ~~conditions.~~customers ~~Should~~in ~~future~~amounts ~~changes~~that inreflect ~~conditions~~the ~~prove~~consideration ~~management's~~(that ~~conclusions~~is, ~~and~~payment) ~~judgments~~to onwhich ~~previous~~the ~~analyses~~company expects to be ~~incorrect,~~entitled ~~revenue~~in ~~recognized~~exchange for ~~any~~those ~~reporting~~goods ~~period~~or ~~could be materially affected~~services.

When amounts are billed to customers for shipping and handling fees they are included in net sales, and the related 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 three months ended March 31, 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 March 31, 2018, two customers accounted for 100% of total accounts receivable. Each of these customers represented 85.8%, and 14.2%, respectively. During the period ended March 31, 2018, two customers accounted for 100% of net sales 75% and 25% respectively. 0% of sales for the quarter were to customers outside of the U.S.

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. During the period ended March 31, 2017, one customer accounted for 22.8% of net sales.

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 March 31, 2018 and December 31, 2017 was $0 and $32,663, respectively.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

AtCost ~~September 30, 2017, three customers accounted for 88.2%~~ of ~~total accounts receivable each representing 47.9%, 27.3% and 12.9% 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 31 2017 three customers accounted for 69.0% of net sales, Each of these customers represented 33.6%, 22.9% and 13.0% respectively. At December 31, 2016, five customers accounted for 99.4% of accounts receivable. Each of these five customers represented 40.3%, 24.1%, 13.0%, 11.7%, and 10.3%, respectively. During the three months ended September 30, 2017 one customer accounted for 50% of net sales for the nine months ended September 30, 2016, two customers accounted for 40.3% of net sales, each representing 22.0% and 18.4%, respectively.

~~The~~Cost ~~Company~~of sales 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~~comprised ~~will not be collected. When estimating the allowance, the Company takes into consideration such factors as its day-to-day knowledge~~ of ~~the~~material ~~financial position of specific clients~~costs, ~~and~~invoiced ~~the~~shipping ~~industry~~ costs and ~~size~~royalty ~~of its clients~~expense. ~~The Company has an allowance for doubtful accounts of $0 and $83,697 as of September 30, 2017 and December 31, 2016.~~

~~Stock Based Compensation~~ Warrants

The Company recognizes the cost of ~~employee~~warrants ~~services~~issued ~~received~~with indebt ~~exchange~~as ~~for~~debt ~~an award of equity instruments~~ discount in the consolidated financial statements ~~and~~which is ~~measured~~recorded ~~based~~at on the ~~grant~~warrants ~~date~~relative fair value ofwhich is ~~the~~measured ~~award. Stock~~ based ~~compensation~~on ~~expense is recognized over~~ the ~~period~~grant ~~during~~date ~~which~~fair anvalue ~~employee~~of ~~is required to provide service in exchange for~~ the award ~~(generally the vesting period)~~. The Company estimates the fair value of each ~~stock award~~ 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 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 (totaling 13,550,332, shares and 14,044,842 shares for the periods ended March 31, 2018 and December 31, 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.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

~~Costs~~The ~~equal~~Company todoes ~~these~~not ~~fair~~have ~~values~~an ~~are~~accrual ~~recognized~~for ~~ratably~~uncertain ~~over~~tax ~~the~~positions ~~requisite~~as ~~service~~of March ~~period~~31, ~~based~~2018 onand December ~~the~~31, ~~number~~2017. The ofCompany ~~awards~~files ~~that~~corporate ~~are~~income ~~expected~~tax toreturns ~~vest,~~with orthe inInternal ~~the~~Revenue ~~period~~Service ofand ~~grant~~the ~~for~~States ~~awards~~where ~~that~~the ~~vest~~Company ~~immediately~~determines ~~and~~it ~~have~~is norequired ~~future~~to ~~service~~do ~~condition~~so. The ~~expense~~Company’s ~~resulting~~policy ~~from~~is ~~share-based~~to ~~payments~~recognize isinterest ~~recorded~~and inpenalties ~~general~~accrued ~~and~~on ~~administrative~~any unrecognized tax benefits as a component of income tax expense. We At March 31, 2018, the Company did not have ~~elected~~any toaccrued ~~account for~~interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the ~~forfeiture of~~periods ~~awards as~~ended March ~~they~~31, ~~occur.~~2018 or 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 the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.Reclassifications

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

~~Loss~~Recently ~~per~~Issued ~~share~~Accounting is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted loss per share is calculated by dividing the Company’s net loss available to common shareholders 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. 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 and stock options are not considered in the calculation as the impact of the potential common shares (the weighted average being approximately 12,944,000 shares and 12,205,000 three-months ended September 30, 2017 and 2016 respectively and 12,581,000 and 11,279,000 shares for the nine months ended September 30, 2017 and 2016 respectively), would be to decrease the net loss per share.Pronouncements

~~Income~~In May ~~Taxes~~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 Dec. 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.

~~The~~In March ~~Company~~2016, ~~accounts~~the ~~for~~FASB ~~income~~issued ~~taxes~~ASU ~~under~~No. 2016-02, Leases. The main difference between the ~~asset~~provisions of ASU No. 2016-02 and ~~liability~~previous ~~method,~~U.S. inGAAP ~~which~~is ~~deferred~~the ~~tax~~recognition of right-of-use assets and lease liabilities ~~are~~by ~~recognized~~lessees for ~~the~~those ~~future~~leases ~~tax~~classified ~~consequences~~as ~~attributable~~operating toleases ~~differences~~under ~~between~~previous ~~the~~U.S. ~~financial~~GAAP. ~~statement~~ASU ~~carrying~~No. ~~amounts~~2016- of02 ~~existing~~retains ~~assets~~a ~~and~~distinction ~~liabilities~~between finance leases and ~~their~~operating ~~respective~~leases, ~~tax~~and ~~basis~~the recognition, measurement, and ~~operating~~presentation ~~loss~~of expenses and ~~tax~~cash ~~credit~~flows ~~carry~~arising ~~forwards.~~from ~~Deferred~~a ~~tax~~lease ~~assets~~by ~~and~~a ~~liabilities~~lessee ~~are~~have ~~measured~~not ~~using~~significantly ~~enacted~~changed ~~tax~~from ~~rates~~previous ~~expected~~U.S. toGAAP. ~~apply~~For toleases ~~taxable~~with ~~income~~a interm ~~the~~of ~~years~~12 inmonths ~~which~~or ~~those~~less, ~~temporary~~a ~~differences~~lessee ~~are~~is ~~expected~~permitted to bemake ~~recovered~~an oraccounting ~~settled.~~policy ~~The~~election ~~effect~~by onclass ~~deferred~~of ~~tax~~underlying asset not to recognize right-of-use assets and lease liabilities. ofThe aaccounting ~~change~~applied inby ~~tax~~a ~~rates~~lessor is ~~recognized~~largely inunchanged ~~operations~~from inthat ~~the~~applied ~~period~~under ~~that~~previous ~~includes~~U.S. ~~the~~GAAP. ~~enactment~~In ~~date.~~transition, Alessees ~~valuation~~and ~~allowance~~lessors isare required to recognize and measure leases at the ~~extent~~beginning ~~any~~of ~~deferred~~the ~~tax~~earliest ~~assets~~period ~~may~~presented ~~not~~using bea ~~realizable~~modified retrospective approach. ~~The~~This ~~difference~~ASU inis ~~the~~effective ~~expected~~for ~~income~~public ~~tax~~business ~~benefit~~entities ~~and~~in nofiscal ~~benefit~~years, ~~recorded~~and ~~for~~interim ~~the~~periods ~~three~~within ~~and~~those ~~nine~~fiscal ~~months~~years, ~~ended~~beginning ~~September~~after December 3015, ~~2017~~2018. ~~and~~Early ~~2016~~adoption is ~~due~~permitted as of the beginning of any interim or annual reporting period. The Company has not finalized the analysis to determine the aneffect ~~increase~~of inthe standard, but believes that it will not have a material impact on the ~~valuation~~statement ~~allowance~~of operations.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

~~Recently~~In June ~~Issued~~2018, the Financial Accounting ~~Pronouncements~~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 ~~May~~July ~~2014~~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”), ~~No.~~which ~~2014~~changes the classification analysis of certain equity-~~09,~~linked ~~Revenue~~financial ~~from~~instruments ~~Contracts~~(or embedded features) with ~~Customers~~down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, ~~which~~a ~~supersedes~~down round feature no longer precludes equity classification when assessing whether the ~~revenue~~instrument ~~recognition~~is ~~guidance~~indexed into ~~Revenue~~an ~~Recognition~~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 (~~Topic~~or ~~605~~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, ~~and~~ASU 2017-11 requires entities tothat ~~recognize~~present ~~revenue~~earnings per share (EPS) in aaccordance ~~way~~with ~~that~~ASC ~~depicts~~Topic 260 to recognize the ~~transfer~~effect of ~~potential~~the ~~goods~~down orround ~~services~~feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to ~~customers~~common shareholders in anbasic ~~amount~~EPS. Convertible ~~that~~instruments ~~reflects~~with ~~the~~embedded ~~consideration~~conversion tooptions ~~which~~that ~~the~~have ~~entity~~down ~~expects~~round tofeatures beare ~~entitled~~now subject to inthe ~~exchange~~specialized guidance for ~~those~~contingent ~~goods~~beneficial orconversion ~~services.~~features ~~This~~in ~~new~~ASC ~~standard,~~470-20. For asthe ~~amended~~Company, isASU ~~now~~2017-11 is effective for ~~annual~~fiscal ~~reporting~~years, and interim periods within those fiscal years, beginning after December 15, ~~2017~~2018. Early adoption is permitted, ~~and~~including adoption in an interim ~~reporting~~period. ~~periods~~If ~~within~~an ~~that~~entity ~~reporting~~early adopts ASU 2017-11 in an interim period., ~~The~~any ~~standard~~adjustments ~~permits~~should be reflected as of the ~~use~~beginning of ~~either~~the ~~retrospective~~fiscal oryear ~~cumulative~~that ~~effect~~includes ~~transition~~that ~~methods,~~interim ~~and~~period ~~expects~~in toeither ~~use~~of the ~~retrospective~~following ~~transition~~ways: ~~method~~1. ~~Based~~Retrospectively ~~upon~~to ~~Managements'~~outstanding ~~current~~financial ~~assessment~~instruments with a down round feature by means of a cumulative-effect adjustment to the ~~standard,~~balance sheet as of the ~~Company~~beginning ~~does~~of ~~not~~the ~~anticipate any~~first ~~material~~fiscal ~~impact~~year ~~upon~~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 ~~adoption~~guidance on accounting changes in paragraphs 250-10-45-5 through 45-10. The Company is currently evaluating the potential effects of this ~~standard~~guidance on its consolidated financial statements.

InNOTE July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. ASU 2015-11 requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and retail inventory method (RIM) are excluded from this new guidance. This ASU replaces the concept of market with the single measurement of net realizable value and is intended to create efficiencies for preparers and more closely align U.S. GAAP with IFRS. This ASU is effective for public business entities in fiscal years and interim periods within those years, beginning after December 15, 2016.2 ~~The~~– ~~implementation~~PROPERTY ofAND ~~this standard did not have a material impact on the Company’s consolidated financial statements. The Company's disclosures reflect the adoption of this new standard.~~EQUIPMENT

In November 2015, the FASB issued ASU. No. 2015-17, Balance Sheet Classification of Deferred Taxes. ASU No. 2015-17 simplifies the presentation of deferred taxes on the balance sheet by requiring classification of all deferred tax items as noncurrent including valuation allowances by jurisdiction. The ASU is effective for public entities for annual and interim periods beginning after December 15, 2016, and interim periods within those annual reporting periods. The Company adopted this standard in the first quarter of 2017. The implementation of this standard did not have a material impact on the Company’s consolidated financial statements.

	March 31, 2018			December 31, 2017
Computer equipment	$	14,418		$	15,332
Equipment and furniture		133,940			133,940
Leasehold improvements		7,593			7,593
		155,951			156,865
Accumulated Depreciation		(57,940	)		(52,275	)
Property and Equipment - Net	$	98,011		$	104,590

InDepreciation ~~March~~expense 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,~~period ~~measurement,~~ended March ~~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~~31, a2018 ~~lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right-of-use assets~~ and ~~lease~~2017 ~~liabilities.~~was ~~The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. In transition~~$6, ~~lessees~~ 235 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$6, ~~and interim periods within those fiscal years~~107, beginning after December 15, 2018. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has not yet determined the effect of the standard on its ongoing reporting. respectively

NOTE 3 – RELATED PARTY NOTES AND TRANSACTIONS

Convertible Note Payable

In July 2015, 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 three months ended March 31, 2017 and 2018, the Company recorded interest expense of $10,389 and $10,625 respectively on the note and it is recorded in accrued interest - related party. The note is included in the current liabilities section of the unaudited consolidated balance sheets.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

In March 2016, the FASB issued ASU 2016-09, Compensation - ”Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions. Under ASU 2016-09, excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement. ASU 2016-09 also provides entities with the option to elect an accounting policy to continue to estimate forfeitures of stock-based awards over the service period (current GAAP) or account for forfeitures when they occur. Under ASU 2016-09, previously unrecognized excess tax benefits should be recognized using a modified retrospective transition. In addition, amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement, as well as changes in the computation of weighted-average diluted shares outstanding, should be applied prospectively. ASU 2016-09 is effective beginning in the first quarter of 2017. During the first quarter of 2017, the Company adopted ASU 2016-09 and elected to account for the forfeiture of awards as they occur, with no material impact.

Notes Payable
Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
August 2017	$	100,000	$	10,434	$	3,131	$	92,695
September 2017	$	500,000	$	52,166	$	15,148	$	462,982
October 2017	$	500,000	$	50,229	$	10,665	$	460,436
January 2018	$	100,000	$	3,831	$	3,831	$	-
January 2018	$	500,000	$	50,590	$	5,678	$	455,088
March 2018	$	200,000	$	20,281	$	555	$	180,274
March 2018	$	200,000	$	20,279	$	498	$	180,219
	$	2,000,000	$	203,980	$	35,674	$	1,831,694

~~NOTE~~In 2August –2017, ~~EMPLOYEE~~the ~~STOCK~~Company issued an unsecured promissory note to its in-~~BASED~~house ~~COMPENSATION~~corporate ~~ADJUSTMENT~~counsel TOin ~~PRIOR~~the ~~PERIOD~~principal ~~RESULTS~~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 period ended March 31, 2018, accretion of the debt discount was $1,287, included in other expenses on the statements of operations.

In ~~preparing~~September ~~the Company's December 31~~2017, ~~2016 consolidated financial statements,~~ the Company ~~determined~~issued ~~that~~ an ~~error~~unsecured ~~was~~promissory ~~made in~~note ~~the calculation~~to ofa ~~stock-based~~member ~~compensation~~of ~~expense~~its ~~under~~Board ~~ASC~~of ~~718 for~~Directors ~~certain~~in ~~awards~~the ~~granted~~principal ~~after~~face ~~January~~amount 1,of ~~2016~~$500,000. The ~~error~~promissory ~~related~~note tobears ~~management's~~interest ~~estimate~~at ofa ~~the~~rate ~~fair value~~ of ~~the~~10.0%, ~~Company's~~per ~~common~~annum, ~~stock~~payable ~~used in its Black-Scholes option pricing model~~quarterly. The ~~Company had~~ ~~recorded~~note ~~non-cash compensation~~is ~~expense~~payable ~~based~~in ~~upon~~full ~~the~~plus ~~then~~all ~~current~~unpaid ~~private~~interest ~~placement~~by ~~price~~September ~~of $1~~2019.25 ~~per~~In ~~share. The~~connection ~~$1.25~~with ~~price~~the ~~that~~note, ~~was~~the ~~used~~Company ~~during~~issued ~~2016~~five-year ~~did~~warrants ~~not~~to ~~fully~~purchase ~~consider~~up ~~other observable inputs and valuation techniques~~ to ~~determine a supportable price per share; therefore~~50,000 ~~management~~shares ~~re-evaluated~~of ~~such inputs and determined that~~ the ~~fair~~Company’s ~~value per~~ common ~~share~~stock ~~should~~at ~~have~~an ~~been~~exercise aprice ~~range~~ of ~~$0.78~~ - $13.2500 ~~for~~per ~~those~~share. ~~awards~~The ~~throughout~~relative ~~the~~fair ~~third~~value ~~quarter~~ of ~~2016 and $0.63 - $1.25 for~~ the ~~nine~~debt ~~months~~and ~~ended~~warrants ~~September~~recorded ~~30, 2016. The error~~ resulted in andebt ~~approximate~~discount ~~overstatement~~ of ~~stock-based compensation expense of~~ $~~263~~52,~~000~~166 inupon ~~the~~execution ~~third quarter~~ of ~~2016~~the note. ~~and~~For ~~$1,604,000 for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2016.~~2018, ~~The~~accretion ~~Company assessed the materiality~~ of ~~this misstatement in~~ the ~~2016~~debt ~~interim~~discount ~~period~~was ~~financial statements in accordance with the SEC's Staff Accounting Bulletin (SAB) No. 99~~$6, ~~Materiality~~431, ~~codified~~included in ~~ASC~~other ~~No.~~expenses ~~250,~~on ~~Presentation of Financial Statements, and concluded that~~ the ~~misstatement was not material to any interim period. In accordance with SAB 108, the Company has adjusted the quarter ended September 30, 2016 financial~~ statements. ~~There~~of ~~was no impact to total stockholders' equity or cash flows~~operations.

	Three Months Ended September 30, 2016
	As Originally Reported			Adjustment			As Corrected
General and administrative expenses	$	1,846,000		$	(263,000	)	$	1,583,000
Loss from operations	$	(1,965,000	)	$	263,000		$	(1,702,000	)
Net loss	$	(1,986,000	)	$	263,000		$	(1,723,000	)
Basic and diluted earnings (loss) per share	$	(0.05	)	$	0.01		$	(0.04	)

In October 2017, the Company issued to Rio Vista Investments, LLC, a Nevada limited liability company (“Rio Vista”), (i) an unsecured 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 warrant recorded resulted in debt discount of $50,229 upon execution of the promissory note. For the three months ended March 31, 2018, accretion of the debt discount was $6,193, 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.

	Nine months Ended September 30, 2016
	As Originally Reported			Adjustment			As Corrected
General and administrative expenses	$	6,640,000		$	(1,604,000	)	$	5,036,000
Loss from operations	$	(6,956,000	)	$	1,604,000		$	(5,352,000	)
Net loss	$	(7,114,000	)	$	1,604,000		$	(5,510,000	)
Basic and diluted earnings (loss) per share	$	(0.18	)	$	0.04		$	(0.14	)

In January 2018, the Company issued an unsecured note to its 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 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 date of maturity, 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 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 note plus an amount reasonably anticipated to be necessary to operate the Company over the succeeding 6 months. 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 $35,590 upon execution. The Company also incurred $15,000 in lender fees. For the three months ended March 31, 2018, accretion of the debt discount and lender fees was $5,678, 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 in lender fees. For the three months ended March 31, 2018, accretion of the debt discount and lender fees was $555, 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 in lender fees. For the three months ended March 31, 2018, accretion of the debt discount and lender fees was $498, 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 subsequently repaid during the quarter ended June 30, 2018. The warrant is exercisable within 5 years of issuance into shares of the Company’s common stock, at $3.00 per share.

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NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

	September 30, 2017			December 31, 2016
Computer equipment	$	15,332		$	15,332
Equipment and furniture		132.929			123,517
Leasehold improvements		7,593			7,593
		155,854			146,442
Accumulated depreciation		(45,799	)		(27,385	)
Property and equipment - net	$	110,055		$	119,057

Depreciation expense for the three-month periods ended September 30, 2017 and 2016 was $6,274 and $4,803, respectively. Depreciation expense for the nine-month periods ended September 30, 2017 and 2016 was $18,414 and $11,441, respectively.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

NOTE 4 – RELATED PARTY TRANSACTIONS

Notes Payable

In July 2015, a Director advanced the Company $500,000. Interest at a rate of 8.5% is payable quarterly, and the note was originally due in July 2016. In connection with the note, the Company issued five-year warrants to purchase 350,000 shares of the Company’s common stock at an exercise price of $3 per share. The relative fair value of the debt and warrants was recorded resulting in a debt discount of $227,258 upon execution of the agreement. For the three and nine months ended September 30, 2016, accretion of the debt discount was $9,339 and $122,631, respectively. The accretion of debt discount is presented in other expenses on the statements of operations. 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 the three and nine months ended September 30, 2017, $10,625 and $21,014 was recorded as interest expense, respectively, and $10,625 is included in accounts payable at September 30, 2017. In July 2017, the maturity date of the note was extended to July 2018, the other terms of this note including the conversion feature remain the same.

In August 2017, the Company issued an unsecured promissory note to its in-house corporate council 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 shall be repaid 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 was recorded resulting in debt discount of $10,435 upon execution of the promissory note. For the three and nine months ended September 30, 2017, accretion of the debt discount was $529. The accretion of debt discount is presented 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 shall be repaid 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 was recorded resulting in a debt discount of $52,166 upon execution of the promissory note. For the three and nine months ended September 30, 2017, accretion of the debt discount was $2,144. The accretion of debt discount is presented in other expenses on the statements of operations.

The quarterly accrued interest payment for the June quarter end was not paid timely on the July 2015 note to a Director. The Director has waived the provision of the agreement in regards to default, and the interest payments have been made and brought current.

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 ~~incurred~~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 $43,~~355~~ 470 and $~~16,174~~255 for the ~~three-month~~ periods ended March ~~September 30~~31, ~~2017~~2018 and ~~2016, respectively, and $65,545 and $36,488 for the nine months ended September 30,~~ 2017 ~~and September 30~~, ~~2016,~~ respectively. As of March ~~September 30~~31, ~~2017~~2018, and December 31, ~~2016~~2017, $~~311,950~~0 and $~~277~~319,~~038~~441 of prepaid royalties, respectively, are available to be offset against future royalty obligations. Management recorded an allowance for collectability of $123,560 during the three months ended March 31, 2018.

~~Exercise~~Included in advance of ~~Warrants~~future royalties was $203,208 in legal fees relating to patent defense. During the three months ended March 31, 2018, this amount was reclassified to an intangible asset patent defense fees and was determined to be impaired and charged to general and administrative expense.

OnConsulting March 1, 2017, the Company entered into an agreement with a member of its Board of Directors whereby 350,000 previously issued warrants were exercised in exchange for the issuance of 350,000 shares of the Company's common stock and a cash payment to the Company of $525,000. In connection with the transaction, the Company issued a new five-year warrant to purchase up to 350,000 shares of the Company's common stock at an exercise price of $4.50 per share.Agreement

On In March 162015, ~~2017,~~ the Company ~~also~~ entered into ana consulting agreement with a ~~second~~former ~~member~~Director. ofThe ~~its~~agreement ~~Board~~had ofa ~~Directors~~term ~~whereby~~of ~~400,000~~six ~~previously~~months ~~issued~~and ~~warrants~~required ~~were~~payments ~~exercised~~of ~~in exchange for the issuance~~ $200,000 of ~~400~~which $200,000 ~~shares~~was ofrecorded ~~the~~as ~~Company's~~a ~~common~~component ~~stock~~of general and aadministrative ~~cash~~expense ~~payment~~in to the ~~Company~~2015 statement of ~~$600,000~~operations. InAn ~~connection~~obligation ~~with~~of ~~the transaction~~$75,000 ~~the~~was ~~Company~~payable ~~issued a new five-year warrant~~ to ~~purchase~~the upformer toDirector ~~400,000~~and ~~shares~~is ofincluded ~~the~~in ~~Company's~~accounts ~~common~~payable ~~stock~~ at March an31, ~~exercise~~2018 ~~price~~and December of31, $42017.~~50 per share.~~

~~Inducement~~NOTE ~~charges~~4 – ~~of $926,885 relating to these transactions were expensed in March 2017 (Note 7).~~COMMITMENTS

Payable to Former Director

An obligation of $75,000 is payable to a former Director for past consulting services. This obligation is unsecured and non-interest bearing and is included in accounts payable at September 30, 2017 and December 31, 2016, respectively.

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ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

SEPTEMBER 30, 2017

(Unaudited)

NOTE 5 – COMMITMENTS

Lease Commitments

The Company leases its ~~offices~~office, building and ~~building~~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 will expire August 31, 2018. ~~The future minimum lease payments are $43,551 for 2017 and $27,734 for 2018.~~ Lease expense was $2654,~~521~~ 325 and $196,~~097~~942 for the ~~three~~periods ~~months~~ ended March ~~September 30~~31, ~~2017~~2018 and ~~2016, respectively. Lease expense was $46,626 and $37,433 for the nine months ended September 30,~~ 2017 ~~and 2016~~, 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 began to form 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. 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 March 31, 2018 the formation of Agro Space has not been completed and the investment has not been made.

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 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. 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 ~~shall~~provides ~~provide~~ funding and reimbursement for the costs incurred by NASA ARC under the SAA, ~~but~~and ~~shall~~owns ~~own~~ 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 ~~the~~ agreement. For the ~~three-months~~ period ended ~~September~~March 3031, ~~2017~~ 2018 and ~~2016~~2017, $0 and $9429,~~205~~610 respectively, ~~were~~ was expensed ~~under~~to ~~the~~research ~~agreement. For the nine months ended September 30, 2017~~ and ~~2016,~~development ~~$29,610~~expense ~~and~~pursuant ~~$249,934~~to ~~respectively, were expensed under~~ the ~~agreement~~SAA.

14NOTE 5 – NOTES PAYABLE

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 March 31, 2018 was $154,822.

Date of Note	Face Value		Debt Discount		Debt Discount Accretion		Carrying Value
December 2017	$	200,000	$	18,652	$	2,733	$	184,081
January 2018	$	100,000	$	7,124	$	703	$	93,579
	$	300,000	$	25,776	$	3,436	$	277,660

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 period ended March 31, 2018, accretion of the debt discount was $2,300, 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 (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 period ended March 31, 2018, accretion of the debt discount was $703, 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~~March 3031, ~~2017~~2018

(Unaudited)

NOTE 6 – ~~NOTE PAYABLE~~EQUITY

~~The~~2018 ~~Company had an outstanding note payable from financing corporate insurance premiums. The note carried a rate of interest of 6.5% and was fully paid during September 2017.~~transactions:

NOTE 7 – EQUITY

Common Stock

Private placement offerings

During 2016, the ~~nine~~Company ~~months~~commenced ~~ended~~a ~~September~~private ~~30,~~offering ~~2017~~of up to $10,000,000 of the Company’s ~~issued~~securities ~~659,333~~for ~~shares~~$3.00 per share of common stock. ~~pursuant~~Pursuant to ~~its~~the ~~October~~ 2016 ~~private~~ offering, ~~for~~the ~~$3.00~~Company ~~per~~sold 55,334 ~~share~~shares of common stock during the period ended March 31, 2018. ~~Proceeds~~Gross proceeds from the offering were $1166,~~977~~002,~~999~~ with offering costs of $~~138~~1,~~800~~680. In connection with the offering, the Company issued fully vested, non-forfeitable warrants to purchase up toto490 shares ~~44,916~~of common ~~shares~~stock with an exercise price of $3.00 per ~~common~~ share to the placement agent. These warrants are ~~included~~ netted in additional paid in capital as non-cash offering costs of the placement of $~~52,762~~377.

15Warrants

Warrants issued for services

During the period ended March 31, 2018, the Company issued fully vested, non-forfeitable five-year warrants to purchase up to 75,000 common shares at an exercise price of $3.00 per common share to consultants for services rendered. The value of those services was $57,570, 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.

Warrants issued with debt – related party

In January 2018, the Company issued to its 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 to its in-house corporate counsel. 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.

Table of Contents

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

~~Common~~The ~~stock~~following ~~issued~~is a summary of the Company’s warrant activity for ~~services~~the year ended March 31, 2018:

During the nine months ended September 30, 2017, the Company received services valued at $150,000, and issued 50,000 shares of common stock. This expense is included in general and administrative expenses.

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

180,490

3.00

Exercised

Cancelled/Forfeited

Outstanding and exercisable - March 31, 2018

10,893,665

1.88

2.6

2,861,010

~~During~~The aggregate intrinsic value in the ~~nine~~table ~~months~~above ~~ended~~represents ~~September~~the ~~30,~~total ~~2016,~~intrinsic value (the difference between the estimated fair value of the Company’s ~~issued~~stock ~~for~~price ~~services~~on March 31, 202018 and the exercise price,~~000~~ ~~shares~~multiplied by the number of ~~common~~in-the-money ~~stock~~warrants) ~~with~~that awould ~~value~~have ofbeen ~~$25~~received by the warrant holders,~~000.~~ had all warrant holders been able to, and in fact had, exercised their warrants on March 31, 2018.

~~The~~Stock ~~Company~~incentive ~~measured~~plan ~~and recognized the fair value of the transactions described above based upon the fair value of the non-employee consideration received, which was determined to be more reasonably measurable.~~options

~~Warrants~~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 three months ended March 31, 2018 the Company granted options to purchase up to 25,000 shares of common stock, to an employee with an exercise price of $1.25 per share and a term of 10 years. The estimated fair value of $19,208 of the grants for the three months ended March 31, 2108 was based upon the following management assumptions: For the period March 31, 2018, expected dividends of $0, volatility of 101.7% based on comparative volatility, risk free interest rates of 2.58%, and expected term of the options of 5 years.

~~During~~The ~~the~~Company ~~nine~~recognizes ~~months~~compensation ~~ended~~expense ~~September~~for ~~30,~~stock ~~2017,~~option grants based on the ~~Company~~fair ~~issued~~value ~~fully~~at ~~vested,~~the ~~non~~date of grant using the Black-~~forfeitable~~Scholes ~~warrants~~option topricing ~~purchase~~model. upAs tothe ~~555~~Company does not currently have reliably determined historic stock prices,~~000~~ ~~common~~the ~~shares~~Company atuses anmanagement ~~exercise~~estimates ~~price~~ of $3stock value.00 The ~~per~~Company ~~common~~uses ~~share~~historical data, among other factors, to ~~employees~~estimate the expected option life and ~~consultants~~the ~~for~~expected ~~services~~forfeiture rate. The ~~estimated~~Company ~~fair~~estimates ~~value~~expected term considering factors such as historical exercise patterns and the recipients of ~~$655,128 was~~the options granted. The risk-free rate is based ~~upon~~on the ~~following~~United ~~management~~States ~~assumptions:~~Treasury ~~expected~~Department ~~dividends~~yield curve in effect at the time of 0,grant ~~volatility~~for the expected life of ~~138~~the option.~~4-148.4%,~~ ~~risk-free~~The ~~interest~~Company ~~rates~~assumes an expected dividend yield of ~~1.63%~~zero -for 2all periods.~~05%~~ For employee, consultant and ~~expected~~director ~~life~~stock ofbased compensation, the ~~warrants~~Company used management's fair value estimates of 5$1.21 ~~years~~for the period March 31, 2018.

During the nine months ended September 30, 2016, the Company issued fully vested, non-forfeitable warrants to purchase up to 10,000 common shares at an exercise price of $2.00 per common share to employees and consultants for services. The estimated fair value of $11,899 was based upon the following management assumptions: expected dividends of 0, volatility of 184.2%, risk-free interest rates of 1.38%, and expected life of the warrants of 5 years.14

On July 16, 2015, Michael Smith, a Board member, received a 5-year cashless warrant to purchase up to 350,000 shares of common stock (at $3.00 per share) as additional consideration for a loan he made to the Company. On March 1, 2017, the Company and Mr. Smith entered into an Amendment No. 1 to the prior warrant, pursuant to which (a) the exercise price was decreased to $1.50 per share for that portion of the prior warrant to be exercised by Mr. Smith on such date and (b) the exercise of the prior warrant was to be on a cash basis. Subsequent to the execution of Amendment No.1, on March 1, 2017, Mr. Smith fully exercised the prior warrant. As a result of the prior warrant exercise, Mr. Smith received 350,000 shares of the Company's common stock in exchange for a cash payment of $525,000. As additional consideration for Mr. Smith's entry into Amendment No. 1 and exercise of the prior warrant, on March 1, 2017, the Company issued to Mr. Smith another five-year warrant (the "New Smith Warrant") to purchase up to 350,000 shares of the Company's common stock at an exercise price of $4.50 per share. The estimated fair value of this warrant of approximately $402,000 was based on the following assumptions: expected dividends of 0, volatility of 148.4%, risk-free interest rate of 1.89%, and expected life of the warrants of 5 years.

On February 19, 2016, Diamond B Capital, LLC (“Diamond B”) received from the Company a five-year warrant to purchase up to 400,000 shares of the Company’s common stock at an exercise price of $2.00 per share (the “Prior Diamond B Warrant”). Alexander M. Boies, a member of the Company’s Board of Directors, holds membership interests representing a 12% ownership interest in Diamond B. On March 16, 2017, the Company also entered into an Amendment No. 1 to the Prior Diamond B Warrant (the “Prior Diamond B Warrant Amendment”), pursuant to which the exercise price was decreased to $1.50 per share for that portion of the Prior Diamond B Warrant to be exercised by Diamond B on such date. Subsequent to the execution of the Prior Diamond B Warrant Amendment, on March 16, 2017, Diamond B fully exercised the Prior Diamond B Warrant (the “Prior Diamond B Warrant Exercise”). As a result of the Prior Diamond B Warrant Exercise, Diamond B received 400,000 shares of the Company’s common stock in exchange for a cash payment of $600,000. As additional consideration for Diamond B's entry into the Prior Diamond B Warrant Amendment and exercise of the Prior Diamond B Warrant, on March 9, 2017, the Company issued to Diamond B another five-year warrant (the "New Diamond B Warrant") to purchase up to 400,000 shares of the Company's common stock at an exercise price of $4.50 per share. The estimated fair value of this warrant of approximately $463,000 was based on the following assumptions: expected dividends of 0, volatility of 148.4%, risk-free interest rate of 1.89%, and expected life of the warrants of 5 years.

On February 27, 2017, an employee exercised a five-year warrant to purchase 40,000 shares of common stock, which had an original exercise price of $2.00 per share, at an exercise price of $1.50 per share for a cash payment of $60,000. In addition, the employee was given a five-year warrant to purchase up to 40,000 shares of common stock with an exercise price of $4.50 per share. The estimated fair value of this warrant of approximately $46,000 was based on the following assumptions: expected dividends of 0, volatility of 148.4%, risk-free interest rate of 2.05%, and expected life of the warrants of 5 years.

The modifications to the exercise price of the warrants are considered a conversion incentive, resulting in an expense (including the expense of the new warrants) of $926,885, recorded as general and administrative expense and additional paid in capital in the period ended June 30, 2017.

Table of Contents

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

The ~~following~~Company ishas aelected ~~summary~~to ofaccount ~~the Company’s warrant activity~~ for ~~the~~forfeitures ~~nine~~as ~~months~~they ~~ended September 30, 2017:~~occur.

							Weighted Average
	Number of Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
							Remaining
Outstanding - January 1, 2017		2,755,000		$	1.25
	Number of			Weighted Average			Contractual Life		Aggregate Intrinsic
Granted		440,000			3.00
	Warrants			Exercise Price			(in Years)		Value
Exercised		-			-
Outstanding – January 1, 2017		9,664,733		$	1.44			3.5	$	2,606,698
Cancelled/Forfeited		(30,000	)		(1.25	)
Granted		599,916			3.00
Outstanding - December 31, 2017		3,165,000		$	1.49			8.5	$	192,850
Granted		790,000			4.50
Exercisable - December 31, 2017		2,750,000		$	1.27			8.2	$	192,850
Exercised		(790,000	)		(1.50	)
Outstanding - January 1, 2018		3,165,000		$	1.25
Cancelled/Forfeited		-			-
Granted		25,000			3.00
Outstanding and exercisable - September 30, 2017		10,264,649		$	2.97			3.0	$	2,861,010
Exercised		-			-
Cancelled/Forfeited		(700,000	)		(1.25	)
Outstanding - March 31, 2018		2,490,000		$	1.58			8.4	$	-
Exercisable - March 31, 2018		2,072,500		$	1.33			8.2	$	-

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 March ~~September 30~~31, ~~2017~~2018 and the exercise price, multiplied by the number of in-the-money ~~warrants~~options) that would have been received by the ~~warrant~~option holders, had all ~~warrant~~option holders been able to, and in fact had, exercised their ~~warrants~~options on March ~~September 30~~31, ~~2017~~2018.

~~Stock incentive plan options~~15

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, 2017, the Company granted options to purchase up to 60,000 shares of common stock to employees and officers. The estimated fair value of $70,411 was based upon the following management assumptions: expected dividends of $0, volatility of 148.4%, risk-free interest rates of 1.89%-1.93%, and expected life of the options of 5 years.

					Weighted Average
					Remaining
	Number of		Weighted Average		Contractual Life		Aggregate Intrinsic
	Options		Exercise Price		(in Years)		Value
Outstanding – January 1, 2017		2,755,000	$	1.25		8.7	$	192,850
Granted		60,000		3.00
Exercised		-		-
Cancelled/Forfeited		-		-
Outstanding - September 30, 2017		2,815,000	$	1.29		9.5	$	412,500
Exercisable - September 30, 2017		2,752,500	$	1.22		9.4	$	412,500

Table of Contents

ZERO GRAVITY SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~SEPTEMBER~~March 3031, ~~2017~~2018

(Unaudited)

NOTE 8 7 – SUBSEQUENT EVENTS

~~Subsequent~~On toMay ~~September 30~~2, ~~2017~~2018, the Company received $300,001 from an accredited investor and member of our Board of Directors, and in exchange the Company issued ~~100~~ (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 ~~pursuant~~note tobears ~~its~~interest ~~October~~at ~~2016~~the ~~private~~rate ~~offering~~of ten percent (10%) per annum, payable quarterly in cash. ~~Proceeds~~The ~~from~~note ~~the~~is ~~issuance~~payable ~~were~~in ~~$300,000 with~~full ~~offering~~plus ~~costs~~all ofunpaid ~~$24~~interest thereon,~~000~~ by May 1, 2020. InPrepayment ~~connection~~of ~~with~~all ~~the~~unpaid ~~offering,~~principal ~~the~~and ~~Company~~interest ~~issued~~may ~~fully~~be ~~vested,~~made ~~non-forfeitable~~by ~~warrants~~the Company prior to ~~purchase~~the 7date of maturity,~~000~~ ~~common~~provided ~~shares~~that ~~with~~the anholder ~~exercise~~thereof ~~price~~shall ofreceive ~~$3.00~~a ~~per~~minimum ~~common~~amount ~~share~~of interest equal to one year of interest, based on the ~~placement~~full ~~agent~~principal amount.

On ~~October~~April 3024, ~~2017,~~2018 the Company ~~issued~~repaid toits ~~Rio Vista Investments, LLC, a Nevada limited liability company (“Rio Vista”), (i) an unsecured promissory note in the principal face amount of~~ $~~500~~200,000 ~~(the~~debt ~~“Note”)~~obligation ~~and (ii) a warrant~~ to ~~purchase~~Boies ~~up to 50~~Partners,~~000~~ ~~shares of the Company’s common stock (the “Warrant”)~~Inc. ~~The Note issued to Rio Vista bears interest at the rate of ten percent~~ (~~10%)~~See ~~per~~note ~~annum, such interest being payable by the Company to Rio Vista quarterly in cash. The Note shall be repaid in full by the Company, plus all unpaid interest, by October 26, 2019 (“Maturity Date”~~3)~~. Prepayment of all unpaid principal and interest may be made by the Company prior to the Maturity Date, without penalty or premium.~~

~~Additionally~~Effective on June 28, 2018, the Company ~~issued~~terminated toits ~~Rio~~private ~~Vista~~offering aof ~~five-year~~up ~~Warrant~~ to ~~purchase~~$10,000,000 of its securities, consisting of up to 503,~~000~~333,333 shares of its common stock at $3.00 per share, which was initiated in October 2016. Subsequent to March 31, 2018, the Company’s issued 248,384 shares of common stock atpursuant anto ~~exercise~~the ~~price~~2016 private offering. Gross proceeds from the subsequent shares were $745,151, with offering costs of $~~3.00~~24,000, ~~per~~and ~~share.~~warrants issued to the placement agent to purchase up to 7,000 shares of common stock.

~~Mr. Alexander~~On ~~Boies~~June 29, 2018, the Company initiated a ~~member~~new private offering of its securities (the ~~Company’s~~“June ~~board~~2018 Offering”) to certain prospective accredited investors, including certain members of ~~directors~~the Board of Directors and/or their respective affiliates, isconsisting aof ~~beneficiary~~up to $2,000,000 of ~~certain~~10% ~~trusts~~secured ~~that~~convertible ~~own~~promissory ~~Rio~~notes ~~Vista~~(the “June 2018 Offering Notes”), and two-year warrants to purchase up to 2,000,000 shares of Common Stock at an exercise price of $1.00 per share (the “June 2018 Offering Warrants”). The offering terminated on July 31, 2018, and consisted of one or more closings.

18On June 29, 2018, the Company received $1,000,000 from an affiliate of a member of our Board of Directors pursuant to the June 2018 Offering, and the Company issued a June 2018 Offering Note in exchange therefore, with a maturity date of June 28, 2020, and June 2018 Offering Warrants. A second 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 a June 2018 Offering Note in exchange therefore, with maturity dates of July 2, 2020 and July 17, 2020, respectively, and June 2018 Offering Warrants. In addition, 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. Pursuant to the June 2018 Offering, the Company issued June 2018 Offering Notes having an aggregate principal balance of $2,050,000, and June 2018 Offering Warrants to purchase, in the aggregate, up to 2,050,000 share of the Company’s common stock.

Subsequent to March 31, 2018, the Company issued fully vested, non-forfeitable five - year warrants to purchase 165,000 common shares at an exercise price of $3.00 per common share to consultants for services rendered

Table of Contents

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 ~~can~~are ~~improve~~ 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 ~~includes~~is ~~two~~currently focused on one primary business, ~~segments:~~generating 1)revenue from agricultural application of BAM-FX™, ~~which is~~ a cost effective, ~~ionic~~ micro-nutrient delivery platform for plants that ~~can~~efficiently ~~deliver~~delivers minerals and ~~micronutrients~~micro-nutrients ~~systemically~~to atplants. The ~~the~~Company's ~~cellular~~secondary ~~level of a plant; and 2)~~ business, Directed Selection™, ~~which~~ 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. ZGSI 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, ~~and~~ life science applications of our technology. ~~We believe that the separation of these functions~~ and ~~the~~conducting ~~corresponding~~research ~~allocation of management by expertise will enable us to improve our performance and provide focus~~ on ~~our~~future ~~different~~BAM ~~business~~Inc. ~~activities~~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™, ~~an ionic micro-nutrient delivery platform,~~ is licensed in and registered for sale as a fertilizer application with ~~thirty~~forty-~~two~~five (3245) domestic states and has been approved for import and commercial sales in Chile, Paraguay, Colombia, Brazil and ~~Paraguay~~China. ~~Commercial~~ ~~sales~~The ~~operations~~Company ~~commenced~~is inalso ~~Chile~~pursuing ~~during~~import ~~the~~approval ~~first~~through ~~quarter~~proper ofgovernmental ~~2017~~officials and ~~commenced~~agencies into ~~Paraguay~~begin ~~during~~commercial ~~the~~sales ~~third~~in ~~quarter~~Haiti, ofPhilippines ~~2017~~and India. International operations are conducted through in-country established businesses with which a distribution agreement has been executed.

~~During~~The ~~the~~Company ~~third~~began ~~quarter~~domestic ofproduct ~~2017,~~trials ~~the~~on ~~Company~~multiple ~~continued~~crops ~~its~~in ~~2016~~laboratory ~~product~~and ~~marketing~~academic ~~approach~~settings ofas ~~developing~~well ~~channel~~as ~~partners,~~in orfield ~~distributors,~~applications ~~for~~on ~~product~~grower/end-user ~~distribution~~crops during 2014 and ~~leveraging~~expanded ~~their~~field ~~existing~~applications ~~sales~~with those and ~~marketing~~additional ~~networks.~~trial Inparticipants ~~addition~~in tosubsequent ~~working~~years. ~~with~~Our ~~channel~~trials ~~partners’~~show significant ~~growers~~yield, wenutritional ~~continue~~value toand ~~expand our~~biomass ~~introduction~~improvements offor ~~BAM-FX™~~crops totreated. ~~first-time~~We ~~growers~~continue ~~through~~to ~~field~~use validation ~~domestically,~~trials ~~whereby~~with ~~specific~~growers ~~expected~~to ~~crop~~increase ~~results~~our ~~were~~understanding ~~identified at the inception~~ of ~~the~~application ~~validation~~rates ~~process~~ and ~~upon~~protocols ~~achieving~~for ~~the~~our ~~expected~~product ~~result,~~and ashow ~~grower would agree to purchase the product~~efficacy. These ~~validation~~ trials are ~~part~~critical ofin ~~our~~both ~~business~~market ~~development~~and ~~effort~~product ~~and~~development. ~~are~~During ~~expected~~the topast ~~create~~four years, ~~BAM-FX™~~the ~~brand~~Company ~~name~~increasingly ~~recognition~~focused ~~while~~on ~~potentially~~obtaining ~~providing~~third-party ~~pull~~validated results, through ~~business~~studies ~~for~~with ~~current~~academic ~~and~~institutions ~~prospective channel partners~~ and ~~company direct customers~~NASA, ~~thereby generating future revenue streams. In excess of 150 field validations are~~ in ~~process~~accordance aswith ofthe ~~September~~Company’s ~~30, 2017~~SAA.

During 2016, wethe ~~executed~~Company anshifted ~~exclusive~~domestic ~~distribution~~business ~~agreement~~development ~~with~~efforts from a ~~distributor~~direct into ~~Paraguay.~~grower ~~The~~approach ~~distribution~~to developing ~~agreement~~business isrelationships awith ~~three-year~~channel ~~agreement~~partners, ~~with~~in ageneral, ~~minimum~~large ~~initial~~agricultural ~~first-year~~product ~~order~~distributors ~~requirement~~with ofwhich ~~74,000~~the ~~gallons~~Company ofexecuted ~~BAM-FX™.~~a ~~Product~~distribution ~~delivery~~agreement. ~~pursuant~~Three todistribution ~~the~~agreements ~~agreement~~with ~~was~~agricultural ~~delayed~~product ~~until~~distributors ~~the~~in ~~second~~Ohio ~~quarter~~and ~~2017.~~California Inwere ~~the~~signed ~~second~~during ~~quarter~~2016 ofwith ~~2017,~~three ~~our~~additional ~~distributor~~ in ~~Paraguay~~2017, ~~obtained~~expanding ~~product~~into ~~import~~Pennsylvania. ~~approval~~These ~~from~~efforts ~~Servicio~~have ~~Nacional~~had delimited ~~Calidad~~success ydomestically, ~~Sanidad~~due ~~Vegetal~~to ylimited dethird ~~Semillas~~party ~~("SENAVE"),~~crop ~~the~~data ~~government~~from ~~agency~~USDA ~~overseeing~~ agricultural ~~imports.~~extension ~~BAM-FX™~~or ~~tests~~affiliated ~~were~~universities ~~successfully~~to ~~completed~~support bycrop ~~the~~yield ~~Paraguay Agricultural~~ and ~~Technological~~performance ~~Center~~predictability, ~~(CETAPAR)~~combined ineconomic ~~January~~factors ~~2017.~~including ~~We began~~ product ~~shipment~~pricing ~~during~~and ~~the~~risk ~~second~~aversion ~~quarter~~which, ofin ~~2017~~some ~~and~~instances, ~~anticipate recognizing revenue~~did ~~from~~not ~~this~~result ~~distributorby~~in ~~the~~sufficient ~~end~~return ofon ~~2017. We~~investment ~~have~~for ~~not~~channel ~~recognized~~partners ~~the~~or ~~revenue~~growers, ~~through~~and ~~September~~slow ~~30,~~adoption ~~2017~~practices asfound within the ~~Company~~agricultural ~~has~~industry. ~~not~~We ~~yet~~believe slow ~~determined~~adoption ~~that~~by ~~collectability~~channel partners is ~~reasonable~~due ~~assured. We expect~~ to ~~provide~~their ~~ongoing~~perceived ~~business~~commitment ~~development~~risk ~~and~~based ~~technical~~upon ~~product~~the ~~support~~Company’s ~~jointly~~lack ~~with~~of ~~our~~adequate ~~Chilean~~capital ~~branch~~and tocapital ~~our~~reserves ~~channel~~to ~~partner~~address inlong ~~Paraguay~~term ~~during~~operations ~~the~~and ~~remainder of 2017~~sustainability.

The Company isbegan ~~also~~to ~~pursuing~~see ~~import~~limited ~~approval~~success ~~through~~penetrating ~~proper~~domestic ~~governmental~~and ~~officials~~international markets during 2017. Domestically, the agronomy team conducted in excess of one hundred and ~~agencies~~fifty grower trials to ~~begin~~replicate ~~commercial~~positive ~~sales~~results from prior years using established product protocols and to refine product protocols on a variety of crops in ~~Indonesia~~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, ~~Brazil~~Texas, ~~Colombia~~Iowa, Kentucky and Pennsylvania. International trials were conducted in China, ~~Philippines~~India, ~~Haiti~~Paraguay, Colombia, Brazil and ~~India. The~~Chile ~~Company~~during ~~expects~~2017. toWe ~~conduct~~believe ~~its~~positive ~~international~~results ~~operations~~in ~~through~~soybean in~~-country~~ ~~established~~Paraguay ~~businesses~~could ~~with~~generate ~~which~~revenue ain ~~distribution~~2018 ~~agreement~~through ~~has~~a channel ~~been~~partner ~~executed~~in Paraguay. ~~Currently,~~We ~~distribution~~expect ~~agreements~~to ~~are~~begin generating revenue in ~~place~~other ~~for~~countries ~~Paraguay,~~during ~~South~~2018 ~~Africa~~as a result of our 2017 trial results and ~~Philippines~~expected positive results from trials in 2018. Our ~~The~~ability ~~Company~~to ~~directly~~sell ~~supports~~in ~~operating~~international ~~expenses~~markets ~~including~~is dependent ~~personnel~~upon ~~related~~obtaining ~~expenses~~government approval for ~~market~~commercial ~~development,~~import ~~sales~~ and ~~distribution~~sale in ~~Chile~~country and ~~business~~developing ~~development~~and ~~efforts~~maintaining strong working relationships with distributors in ~~Paraguay.~~those countries.

~~Our~~We ~~targeted~~developed ~~domestic~~a ~~channel~~ready ~~partners~~to ~~are~~use, inhome ~~general,~~and ~~large~~garden ~~agricultural~~ product, ~~distributors~~Gardener’s ~~with~~Choice, ~~which~~during ~~the~~2017 ~~Company~~for ~~has~~retail ~~executed~~markets. orIndependent ~~expects~~third toparties ~~execute~~successfully atested ~~distribution~~Gardener’s ~~agreement.~~Choice ~~Four~~for ~~domestic~~plant ~~distribution~~performance ~~agreements~~and ~~with~~consumer ~~agricultural~~safety ~~product~~during 2018. ~~distributors~~During inthe ~~Pennsylvania,~~fourth ~~Ohio~~quarter ~~and~~of ~~California~~2017, ~~have~~the ~~been~~Company ~~executed,~~showcased ~~including~~the anproduct ~~agreement~~concept ~~with~~at ~~Pinnacle~~a ~~Agriculture~~home ~~Distribution,~~and ~~Inc. ("Pinnacle").~~garden ~~The~~trade ~~agreement~~show ~~with~~and ~~Pinnacle~~generated ~~includes~~significant ~~three~~interest ~~distribution~~from ~~outlets~~prospective ~~in California~~purchasers. ~~Pinnacle~~During isthe afirst ~~multifaceted~~quarter ~~agricultural~~of ~~retail~~2018, ~~distribution~~the ~~business~~Company ~~with~~introduced ~~operations~~Gardener’s ~~including~~Choice ~~agricultural~~directly ~~chemicals,~~to ~~fertilizer~~Ace ~~bulk~~Hardware ~~handling~~retailers ~~and~~at ~~precision~~their ~~agricultural~~annual ~~services~~trade show. ~~Pinnacle~~We ~~services~~have ~~growers~~received ~~across~~positive ~~the~~feedback ~~United~~from ~~States.~~retailers ~~The~~and ~~other~~expect ~~three~~to ~~channel~~secure ~~partners~~purchase ~~service~~commitments ~~regional~~for ~~growers~~the inproduct ~~Ohio~~during ~~and~~the fourth ~~Pennsylvania~~quarter of 2018.

We believe we will obtain state registration for sale in all 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, 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. Manufacturing is conducted 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 March 31, 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 in 2015. 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 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.

On February 27, 2015, we closed a private offering that commenced in March 2013 and raised gross proceeds of $4,448,297 of which $1,253,800 was received during 2015. During May 2015, we began a second offering from which, as of December 31, 2015, we received $4,542,500 in gross proceeds. Direct offering costs relating to these offerings were $536,250 as of December 31, 2015. During 2016, we received an additional $1,717,500 in gross proceeds from this offering.

During 2016, the Company commenced a private offering of up to $10,000,000 of the Company’s securities consisting of 3,333,333 common shares for $3.00 per common share. Proceeds from the offering were $665,001 with offering costs of $53,200 as of December 31, 2017. During the three months ended March 31, 2018, proceeds from the offering were $166,002 with offering costs of $1,680.

We have generated nominal revenues from our operations thus far and expect that product sales will increase significantly 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.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our 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 Consolidated Financial Statements and accompanying notes. Note 1: Summary of Significant Accounting Policies in our Consolidated Financial Statements contains a description of the accounting policies used in the preparation of our financial statements as well as the consideration of recently issued accounting standards and the estimated impact these standards will have on our 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 Consolidated Financial Statements. In addition, there are other items within our 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 persuasive evidence of an arrangement to be a signed agreement, a binding contract with the customer 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 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.

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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~~During~~Results ~~the third quarter~~ of 2017, the Company continued to move its grower's return on investment sales and marketing approach beyond yield benefits to include benefits associated with yield uniformity, consistent timing of crop maturation, plant stability for efficient harvesting and geopolitical reasons, primarily internationally focused. The results from a number of our 2017 validation trials are expected to justify the return on investment calculations. Operations

During 2016, the Company directed its research to obtain technical third-party product validation, through studies with academic institutions and NASA-Ames Research Center, pursuant to the Company’s Reimbursable Space Act Agreement, RSAA. Preliminary results from NASA ARC biomass studies through the first quarter of 2017 show indications that BAM-FX™ applications increased photosynthetic efficiency within the plant leaf structure wherein light energy is converted into biomass and increased plant nitrogen use efficiency which increases the plant’s biomass production per unit of nitrogen, thereby  reducing the amount of nitrogen needed for biomass production. These findings are significantly beneficial to our product commercialization efforts. We expect to continue funding the RSAA during 2017; however, due to lack of financial resources, ongoing research has been deferred beyond the third quarter of 2017 until adequate funding is available.

For the quarter ended	March 31,			March 31,
	2018			2017			$ Change			% Change

Revenue	$	3,470		$	255		$	3,215			1,260.8	%

Cost of Revenue		550			34			516			1,517.6	%

Gross Profit		2,920			221			2,699			1,221.3	%
Operating Expenses		1,494,513			2,781,579			(1,287,066	)		(46.3	)%

Loss from Operations		(1,491,593	)		(2,781,358	)		1,289,765			46.4	%

Other Income / (Expense)		(85,084	)		(13,946	)		(71,138	)		(510.1	)%

Net Loss	$	(1,576,677	)	$	(2,795,304	)	$	1,218,627			43.6	%

Net Loss per share - Basic and Diluted	$	(0.04	)	$	(0.07	)	$	0.03			42.9	%

ToRevenue ~~support~~for ~~its~~the ~~commercialization~~period ~~and~~ended ~~revenue~~March ~~generation~~31, ~~efforts~~2018 was $3,470, ~~the~~an ~~Company~~increase ~~employs~~of ~~certified~~$3,215, ~~crop~~or ~~advisors~~1,260.8% ~~and~~over ~~agronomists~~$255 for the ~~technical~~period ~~requirements~~ended ofMarch ~~product~~31, ~~introduction~~2017. ~~both~~Revenue ~~domestically~~is generated from sales to distributors of agricultural products and to growers who have completed trials in ~~Chile.~~multiple ~~The~~crop-growing ~~agronomy~~seasons ~~and~~with ~~technical agricultural~~positive ~~personnel~~crop ~~develop~~attributes ~~channel~~from ~~partner~~applying ~~relationships~~BAM-FX™ to their crops. In general, ~~improve~~ ~~our~~growers ~~technical~~are ~~support~~sensitive to ~~growers~~perceived usage risks and ~~channel~~any ~~partners~~incremental cost associated with new agricultural products, generally continuing their use of traditional lower cost but less effective chelated zinc and ~~drive~~copper ~~scientific~~products. ~~academic~~The Company addressed its product pricing in 2017 and ~~NASA~~adjusted wholesale and retail prices during the first quarter of 2018 to provide growers a more compelling return on their product ~~studies~~purchase.

~~The~~For ~~Company~~the ~~manufactures~~period ~~BAM-FX™ in~~ended ~~its~~March ~~production~~31, ~~facility in Okeechobee~~2018, ~~Florida.~~cost ~~Manufacturing~~of isrevenue ~~conducted~~was on$550, an ~~as-needed~~increase ~~batch process. The Company continually performs regulatory and process efficiency reviews~~ of ~~manufacturing~~$516 ~~operations.~~over In$34 ~~February~~reported ~~2017,~~during the ~~Company~~same ~~hired~~period ain manufacturing plant manager, an experienced biochemical engineer, and expects to make ongoing process and quality assurance and control improvements and equipment modifications to existing equipment to enhance efficiencies2017. The ~~Company~~increase ~~expects~~in tocost ~~engineer,~~of ~~design~~revenue ~~and~~is ~~add~~directly arelated ~~continuous flow processing manufacturing facility in the Western United States~~ to ~~service~~our ~~expected~~increase ~~demand from customers~~ in ~~that~~revenue ~~region and~~for the ~~Asia~~period ~~Pacific~~ended ~~area. Engineering~~March 31, ~~design and construction are expected to begin during fiscal~~ 2018 ~~contingent upon~~over ~~product demand~~2017.

During 2015, our chief scientist 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. The new formulations address known plant deficiencies of boron, manganese, magnesium and iron and can be manufactured to include all or numerous combinations of these elements. The new formulations have been tested by an independent laboratory verifying the existence of, and ability to, combine those elements. We expect to further develop these formulations in a laboratory setting, perform efficacy trials on new formulations, and scale production during 2018, with the intent of adding several new specialized products to our current product offering during fiscal 2018.

Although we have started and realized nominal product sales, we anticipate that in the near term, ongoing expenses, including product marketing, manufacturing process improvement, developing and maintaining domestic and international distributor relationships and the addition of in-field sales and technical personnel, will be funded primarily by proceeds from sales of our securities.

During May 2015, we began a second-round private placement offering from which, during the first quarter of 2016, we received an additional $1,278,500 in gross proceeds.

During 2016, the Company commenced a new private offering of up to $10,000,000 of the Company’s securities. The offering consists of 3,333,333 common shares for $3.00 per common share. Proceeds from the offering were $1,977,999 with offering costs of $138,800 for the period ended September 30, 2017.

We have generated nominal revenues from our operations thus far and expect that product sales will increase significantly in 2018 primarily through our domestic and international channel partners.

We cannot, however, guarantee we will be successful in generating significant revenue for the remainder of 2017 or the beginning of 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 execute our 2018 business plan and realize revenues expected.

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~~Results~~Operating Expenses decreased by $1,287,066 to $1,494,513 for the period ended March 31, 2018 compared to $2,781,579 for the period ended March 31, 2017, or 46.3%. The decrease in operating expense is primarily due to $926,885 of ~~Operations~~expense for warrants issued as an inducement to convert previously issue warrants into common shares for the three months ended March 31, 2017 which were not reoccurring in 2018, a decrease of $380,957 of non-cash equity compensation paid to consultants, board members and employees, a decrease in audit fees of $54,878 and a decrease in employee and employee related benefits and travel expense of $232,176. These decreases were primarily offset by an increase in loss on royalty advance of $123,560 due to the need for an allowance for questionable collectability, an increase in impairment costs of $203,208 due to the impairment of intangible assets, an increase in rent expense of $34,221 due to the addition of a lab in California, and an increase in corporate insurance expense of $18,970.

For the three-months ended	September 30,			September 30,			$			%
	2017			2016			Change			Change
Revenue	$	4,000		$	16,000		$	(12,000	)		75.0	%
Cost of revenue		-			2,000			2,000			(100.0	)%
Gross profit		4,000			14,000			(10,000	)		71.4	%
Operating expenses		1,534,000			1,717,000			183,000			10.7	%
Loss from operations		(1,530,000	)		(1,703,000	)		173,000			20.7	%
Other income / (expense)		(21,000	)		(21,000	)		-			-	%
Net loss	$	(1,551,000	)	$	(1,724,000	)	$	173,000			10.0	%
Net loss per share - basic and diluted	$	(0.04	)	$	(0.04	)	$	-			-	%

Other Expense for the period ended March 31, 2018 increased by $71,138 to $85,084 from $13,946 for the period ended March 31, 2017. The increase in other expense is primarily due to an increase in interest expense of 47,153 offset by a decrease in accretion of debt discount of $23,642 in connection with the Company's promissory notes.

For the nine months ended	September 30,			September 30,			$			%
	2017			2016			Change			Change
Revenue	$	66,000		$	37,000		$	29,000			78.3	%
Cost of revenue		12,000			6,000			(6,000	)		(100.0	)%
Gross profit		54,000			31,000			23,000			74.1	%
Operating expenses		5,763,000			5,384,000			(379,000	)		(7.0	)%
Loss from operations		(5,709,000	)		(5,353,000	)		(356,000	)		(6.7	)%
Other income / (expense)		(48,000	)		(157,000	)		109,000			69.4	%
Net loss	$	(5,758,000	)	$	(5,510 ,000	)	$	(248,000	)		(4.5	)%
Net loss per share - basic and diluted	$	(0.15	)	$	(0.14	)	$	(0.01	)		7.1	%

Net Loss for the period ended March 31, 2018 decreased by $1,218,627 to $1,576,677 from net loss of $2,795,304 for the period ended March 31, 2017. The decrease in net loss is primarily due to a decrease in operating expense for the period ended March 31, 2018 of $1,287,066, offset by an increase in gross profit of $2,699 and an increase in other expense of $71,138.

Revenue for the three-months ended September 30, 2017 was $4,000, a decrease of $12,000 or 75.0% over $16,000 for the three-months ended September 30, 2016. Revenue for the nine months ended September 30, 2017 was $66,000, an imcrease of $29,000 or 78.3% over $37,000 for the nine months ended September 30, 2016. Revenue is generated both from sales to our channel partners, or distributors and directly to growers who have completed trials in multiple crop-growing seasons and realized positive crop attributes from applying BAM-FX™ to their crops. A majority of our efforts during the nine months ended September 30, 2017 supported channel partners’ through promotion, education, and technical support in use and application of our product by commercial end users or for additional validation trials. We expect to realize ongoing revenue from sales to channel partners as we provide sales and technical product support to replenish their inventory.

For the three-months ended September 30, 2017, cost of revenue was $0 a decrease of $2,000 or 100% over $2,000 for the three months ended September 31, 2016. For the nine months ended September 30, 2017, cost of revenue was $12,000, an increase of $6,000 over $6,000 reported during the same period in 2016 or 100.0%. The increase in cost of revenue is directly related to our changes in revenue for the three and nine months ended September 30, 2017 over 2016.

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Operating expenses decreased by $183,000 to $1,534,000 for the three-months ended September 30, 2017 compared to $1,717,000 for the three-months ended September 30, 2016, or 10.7%. The decrease in operating expense is primarily due to a decrease in non-cash equity compensation of $96,000; a decrease in R&D expenses of $127,000; a decrease in shipping expenses of $10,000; and a decrease in legal expense of $109,000 for services related to the Company’s intellectual property and general corporate matters; offset by an increase in sales, marketing and technical employee related and consultant expense for commercial product introduction, ongoing product validation trials and collection of and analysis of trial results of $55,000; an increase in audit expense of $64,000; an increase in bad debt expense of $16,000 and, an increase in insurance expense of $33,000 primarily due to an increase in directors and officers and product liability expense.

Operating expenses increased by $379,000 to $5,763,000 for the nine months ended September 30, 2017 compared to $5,384,000 for the nine months ended September 30, 2016, or 7.0%. The increase in operating expense is primarily due to a decrease in non-cash equity compensation of $994,000; a decrease in R&D expenses of $243,000; a decrease in shipping expenses of $51,000; a decrease in office expense, supplies and equipment of $33,000; and a decrease in legal expense of $227,000 for services related to the Company’s intellectual property and general corporate matters, offset by an increase in sales, marketing and technical employee related and consultant expense for commercial product introduction, ongoing product validation trials and collection of and analysis of trial results of $703,000; an increase in bad debt expense of $40,000; an increase in rent expense of $19,000; an increase in audit expense of $146,000; an increase in insurance expense of $95,000 primarily due to an increase in directors and officers and product liability expense; and an increase in non-cash inducement expense of $927,000 due to warrant conversions.

Other expense for the nine-month period ended September 30, 2017 decreased by $109,000 to $48,000 from $157,000 for the nine months ended September 30, 2016. The decrease in other expense is primarily due to a decrease in interest expense and accretion of debt discount in connection with the 8.5% Promissory Note executed on July 16, 2015, with a related party.

Net loss for the three-months ended September 30, 2017 decreased by $173,000 to $1,551,000 from net loss of $1,724,000 for the three-months ended September 30, 2016. The decrease in net loss is primarily due to a decrease in gross profit of $10,000; a decrease in operating expenses of $183,000. Net loss for the nine months ended September 30, 2017 increased by $248,000 to $5,738,000 from net loss of $5,510,000 for the nine months ended September 30, 2016. The increase in net loss is primarily due to an increase in operating expenses of $379,000 offset by an increase in gross profit of $23,000 and a decrease in other expenses of $109,000.

Use of Cash

Net Cash Used in Operating Activities

Net cash used in operating activities for the period ended ~~September~~March 3031, ~~2017~~2018 ~~increased~~decreased by $~~107~~214,000 to $31,~~481~~057,000 from $31,~~374~~271,000 for ~~nine~~period ~~months~~ ended ~~September~~March 3031, ~~2016~~2017. The ~~increase~~decrease in net cash used in operating activities is primarily due to an ~~increase~~decrease in net loss of $~~248~~1,218,000;, ana ~~increase~~decrease in ~~accounts~~advance ~~receivable~~on future royalties of $70138,000;, and a ~~net~~decrease ~~increase~~ in ~~accounts~~inventory ~~payable and accrued expenses~~ of $~~228~~48,000, ~~included in changes in operating assets and liabilities~~ offset by a decrease in ~~other~~non-cash ~~current~~warrant ~~assets~~modification expense of $~~116~~927,000, ~~and~~a andecrease ~~increase~~ in non-cash equity based compensation, ~~amortization~~ of ~~debt~~$381,000 and ~~discount~~a ~~and~~decrease ~~warrant~~in ~~inducement~~accounts ~~expense~~receivable of $592,000.

Net Cash Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2017 of $16,000 decreased $57,000 from the nine months ended September 30, 2016 of $73,000 due to a decrease in cash used to purchase equipment and acquire intellectual property.

Net Cash Provided by Financing Activities

Net cash provided by financing activities ~~increased~~decreased by $1633,~~958,~~000 to $31,~~395~~088,000 for the ~~nine~~period ~~months~~ ended ~~September~~March 3031, ~~2017~~2018 from $1,~~438~~721,000 for the ~~nine~~period ~~months~~ ended ~~September~~March 3031, ~~2016~~2017. The ~~increase~~decrease in net cash provided by financing activities is due primarily to ana ~~increase~~decrease in ~~the~~ proceeds from ~~the~~ exercise of warrants ~~from~~by related parties of $1,185,000, anand ~~increase~~a decrease in proceeds from ~~notes~~sale ~~payable~~ of ~~$600,000, a~~common ~~decrease~~stock innet of payment of offering costs of $13471,000 ~~and~~offset by an increase in proceeds from the ~~sale~~issuance of ~~common~~notes ~~stock~~payable to related parties of $~~260~~900,000 ~~offset~~and ~~by an~~notes ~~increase~~payable of $100,000, a decrease in payment of ~~offering~~notes ~~costs~~payable ~~for related party exercise~~ of ~~warrants of~~ $3416,000 and ana ~~increase~~decrease in ~~payments~~payment onof ~~notes~~related ~~payable~~party offering costs of $677,000.

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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 ~~2017~~2018 business plan may exceed $~~425~~350,000 per month. ~~for~~This ~~the~~expense ~~remainder~~rate ofis ~~the~~primarily ~~fiscal~~due ~~year~~to: ~~and~~an ~~into~~increase ~~fiscal~~in ~~2018~~costs ~~primarily~~of ~~due~~additional ~~to maintaining~~ personnel, personnel-related costs and ~~consultant~~promotional expenses to develop markets for domestic and international ~~markets~~sales ~~for the sale~~ of our product, BAM-FX™., ~~The~~our ~~Company~~retail ~~continues~~product, toGardner’s ~~analyze~~Choice, ~~its~~and ~~operating~~our ~~expenses~~cannabis ~~and~~market ~~has~~product ~~begun~~introduction; improvements to ~~reduce~~our ~~those~~manufacturing ~~expenses~~facility inand ~~the~~processes; ~~third~~and, research and ~~fourth~~product ~~quarters~~development related expense for expansion of ~~2017~~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~~March 3031, ~~2017~~2018 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 weto ~~will~~be ~~need~~needed to operate the business through mid-2018. The Company is active in its fundraising, and subsequent to March 31, 2018, the Company has raised $2,350,000.

~~The~~We ~~Company~~filed isa ~~active~~registration statement on Form 10 with the SEC that became effective in ~~its fundraising~~February 2015, ~~and~~which ~~subsequent~~requires us to ~~September~~operate ~~30,~~as ~~2017,~~a ~~the~~fully ~~Company~~reporting ~~received~~public ~~gross~~company. ~~proceeds~~We ofexpect ~~$300,000~~to ~~from~~continue ~~the~~to ~~sale~~incur ofadditional ~~shares~~personnel ofand ~~common~~professional ~~stock~~costs ~~pursuant~~associated towith aoperating ~~private~~as ~~offering~~a ~~begun~~fully ~~during~~reporting ~~fiscal~~public ~~2016~~company. InAccordingly, ~~October~~we ~~2017,~~have acknowledged the ~~Company~~need ~~issued~~to anobtain ~~unsecured~~additional ~~promissory~~funding ~~note~~ to aoperate ~~member of~~ the Company’s ~~Board~~and ofhave ~~Directors~~continued into ~~the~~raise ~~principal~~funds ~~face~~through ~~amount~~a ofprivate ~~$500,000~~offering.

In July 2015, a Director 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 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. In July 2017, the maturity date of this loan was further extended to July 2018. There were no changes to other terms of the note.21

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Adequate additional financing may not be realized from our 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~~March 3031, ~~2017~~2018, the Company had a cash balance of approximately $~~130~~44,000 compared to a cash balance of approximately $~~232~~14,000 atas of December 31, ~~2016~~2017.

Total assets were approximately $~~782~~394,000 and $1740,~~075,~~000 at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, respectively. Working capital (deficit) was $(~~952~~1,186,000) and $(~~594~~1,225,000) at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, respectively. The decrease in working capital (deficit) of $~~358~~39,000 during the period was primarily due to cash used in operating activities of $31,~~481~~057,000 offset by cash provided by ~~the~~financing ~~sale~~activities of ~~common stock, loan proceeds and exercise of warrants, net of offering expenses of~~ $31,~~590~~088,000~~; a increase in payments of notes payable of $67,000 and an decrease in cash paid to acquire assets and intellectual property~~. Total stockholders’ ~~equity~~deficit ~~decreased~~ increased by $~~864~~1,213,000 to ~~a deficit of (~~$1(3,~~053~~182,000) at ~~September~~March 3031, ~~2017~~2018 from ~~a deficit of (~~$~~189~~(1,969,000) at December 31, ~~2016~~2017.

Outlook

Required Capital Over the Next Year

~~Since~~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 ~~2017~~ 2018 expenses. Subsequent to ~~September~~December 3031, 2017 through ~~November~~June 1730, ~~2017~~2018, we issued ~~100~~303,~~000~~718 shares of common stock pursuant to our private offering for approximately $~~300~~911,000 in gross proceeds.

On ~~March~~or 1about January 17, ~~2017~~2018, the Company ~~entered~~received ~~into~~$500,000 from an ~~agreement~~accredited ~~with~~investor, aand ~~member~~in ofexchange ~~its~~the ~~Board~~Company ofissued ~~Directors~~to ~~whereby~~the ~~350,000~~investor ~~previously~~(a) ~~issued~~an ~~warrants~~unsecured ~~were~~promissory ~~exercised~~note indated ~~exchange~~January ~~for~~16, ~~the~~2018, ~~issuance~~maturing ofon ~~350~~October 26,~~000~~ ~~shares~~2019, ofin the ~~Company's~~principal ~~common~~face ~~stock~~amount ~~and a cash payment to the Company~~ of $~~525~~500,000. ~~In connection with~~ (the ~~transaction~~“First Note”), ~~the~~and ~~Company~~(b) ~~issued~~ a ~~new~~warrant ~~five-year~~dated ~~warrant~~January 18, 2018 to purchase up to ~~350~~50,000 shares of the Company'’s common stock atof an(the ~~exercise~~“First ~~price~~Warrant”). A member of ~~$4.50~~the ~~per~~Company’s ~~share~~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 ~~March~~or 16about January 18, ~~2017~~2018, the Company ~~also~~received ~~entered~~$100,000 ~~into~~from an ~~agreement~~accredited ~~with~~investor, aand ~~second~~in ~~member~~exchange ofthe ~~its~~Company ~~Board~~issued ofto ~~Directors~~the ~~whereby~~investor ~~400,000~~(a) ~~previously~~an ~~issued~~unsecured ~~warrants~~promissory ~~were~~note ~~exercised~~dated inJanuary ~~exchange~~19, ~~for~~2018, ~~the~~maturing ~~issuance~~on ofJanuary ~~400~~18,~~000~~ ~~shares~~2020, ofin the ~~Company's~~principal ~~common~~face ~~stock~~amount ~~and a cash payment to the Company~~ of $~~600~~100,000. ~~In connection with~~ (the ~~transaction~~“Second Note”), ~~the~~and ~~Company~~(b) ~~issued~~ a ~~new~~warrant ~~five-year~~dated ~~warrant~~January 19, 2018 to purchase up to ~~400~~10,000 shares of the Company'’s common stock ~~at an exercise price~~ of ~~$4.50~~(the ~~per~~“Second ~~share~~Warrant”).

InThe ~~August~~First ~~2017~~Note and Second Note shall collectively be referred to as the “January Notes”, and the ~~Company~~First ~~entered~~Warrant ~~into~~and ~~a two-year~~Second ~~promissory~~Warrant ~~note~~shall ~~bearing~~collectively ~~interest~~be ofreferred ~~10%~~to as the “January Warrants”. The Notes and ~~received $100~~Warrants were made on substantially the same terms,~~000~~ except as noted.

InThe ~~September 2017~~January Notes bear interest at the rate of ten percent (10%) per annum, such interest being payable by the Company ~~entered~~to ~~into~~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 (the “Maturity Date”). Prepayment of all unpaid principal and interest on each Note may be made by the Company prior to the Maturity Date, provided that the holder thereof shall receive a ~~two-year~~ ~~promissory~~minimum ~~note~~amount ~~bearing~~of interest equal to one year of ~~10%~~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 ~~received $500~~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,~~000~~ at $3.00 per share.

~~In October 2017, the Company entered into a two-year promissory note bearing interest of 10% and received $500,000.~~22

~~Without~~Table ~~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 through the fourth quarter of 2017; however, the Company is actively working on fundraising activities in order to continue operations through 2017 and into 2018.Contents

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 (as per each, the “Maturity Date”). 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.

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. 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. 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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~~The~~Without ~~sales~~consideration ~~cycle for new products, including our product BAM-FX™, in agriculture markets is a minimum~~ of ~~two~~any to three growing seasons. We have completed, domestically, two growing seasons and with certain growers, three growing seasons of validation trials and testing as a commercial product and believe that positive trial results on growers’ crops have contributed to product awareness and initial revenue. Weor ~~expect~~additional ~~our international market sales cycle will follow a similar timeframe. However~~fundraising, asat ~~important as~~ the ~~positive trial results are, third-party validation of the product~~Company’s ~~performance~~current ~~and~~rate ~~scientific proof~~ of ~~the product’s performance predictability and consistency~~expenditure, ~~which~~we ~~provides~~expect ~~the~~that ~~basis~~our tocurrent ~~compute~~capital ~~grower’s~~will ~~return~~not onbe ~~investment,~~sufficient ~~are equally important~~ to ~~our~~cover ~~channel partners in their purchasing decisions. The scientific studies commencing in 2016 with NASA under~~ our ~~RSAA~~future ~~concluded~~operating ~~during~~costs ~~the~~for ~~second~~twelve ~~quarter of 2017~~months. Observations from these studies include positive physiological plant function from BAM-FX applications. Continuing NASA's work during the second year of the RSAA could provide a scientific understanding of these observations. We expect to continue funding the RSAA during 2017; however, due to lack of financial resources, that research has been deferred until adequate funding is available.

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 consolidated Financial Statements, included in Note 1.

Item 3. Quantitative & Qualitative Disclosures about Market ~~RiskS~~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

~~During~~As of the ~~third~~end ~~quarter~~ of ~~2017~~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. ~~For discussion of material weaknesses refer to the December 31, 2016, Form 10-K item 9A, the material weaknesses have not been fully remediated.~~

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 quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Changes in Internal Controls Over Financial Reporting

There have been no additional changes to internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-(f) of the exchange act) that occurred during the last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A1 A. 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~~Proceeds

~~Each~~The ~~of the~~ transaction below ~~transactions were~~ was 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 ~~under~~thereunder. All proceeds received in connection with any of the ~~Securities~~following ~~Act~~transactions were used for general working capital purposes.

~~During~~Under ~~October~~our ~~2015,~~2016 ~~we commenced a new~~ private offering ~~of up to $10~~,~~000,000~~ ofthe ~~our~~Company ~~securities.~~issued ~~The $10~~55,~~000,000~~334 ~~offering~~shares ~~consists~~ of ~~8,000,000 Units at $1.25 per Unit each unit consisting of one share of the Company’s~~ common stock ~~and~~during ~~a five-year warrant to purchase an additional share of~~ the ~~Company’s~~period ~~common~~ended ~~stock~~March at31, $22018. ~~The~~Gross ~~Company~~proceeds ~~executed~~from ~~a side letter to investors in~~ the ~~original~~ offering towere ~~retroactively~~$166,002, ~~adjust~~with ~~the~~offering ~~terms~~costs of ~~the~~$1,680. ~~Company’s~~In ~~May~~connection ~~2015 offering~~ with the ~~terms of the new~~ offering~~. Through September 30~~, ~~2017,~~ the Company issued ~~4,936,000~~fully ~~shares of common stock and 4~~vested,~~936,000~~ non-forfeitable warrants to purchase an50,409 ~~additional~~shares ~~share~~ of ~~the Company’s~~ common stock ~~pursuant~~with toan ~~this~~exercise ~~offering~~price ~~(which~~of ~~includes~~$3.00 ~~the~~per ~~retroactive~~share ~~adjustment~~to ~~for~~ the ~~May~~placement ~~2015 offering).~~agent

During 2016, the Company commenced a private offering of up to $10,000,000 of the Company’s securities. The offering consists of 3,333,333 shares of the Company’s common stock at $3.00. During the nine months ended September 30, 2017, the Company issued 1,243,000 shares of common stock. In connection with the offering, the Company issued fully vested, non-forfeitable warrants to purchase 27,020 common shares with an exercise price of $3.00 per common share to the Company’s placement agent. For the year ended December 31, 2016, the Company issued 221,667 shares of common stock. In connection with the offering, the Company issued fully vested, non-forfeitable warrants to purchase 11,083 common shares with an exercise price of $3.00 per common share to the Company’s placement agent.

Subsequent to September 30, 2017 through November 17, 2017, the Company issued 100,000 shares of common stock pursuant to the Company’s private offering. In connection with the offering, the Company issued fully vested, non-forfeitable warrants to purchase 7,000 common shares with an exercise price of $3.00 per common share to the Company’s placement agent.

On March 1, 2017, the Company entered into an agreement with a member of its Board of Directors whereby 350,000 previously issued warrants were exercised in exchange for the issuance of 350,000 shares of the Company's common stock and a cash payment to the Company of $525,000. In connection with the transaction, the Company issued a new five-year warrant to purchase up to 350,000 shares of the Company's common stock at an exercise price of $4.50 per share.

On March 16, 2017, the Company also entered into an agreement with a second member of its Board of Directors whereby 400,000 previously issued warrants were exercised in exchange for the issuance of 400,000 shares of the Company's common stock and a cash payment to the Company of $600,000. In connection with the transaction, the Company issued a new five-year warrant to purchase up to 400,000 shares of the Company's common stock at an exercise price of $4.50 per share.

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Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None.

ITEM 6. EXHIBITS

31.1	Certification of Principal Executive 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.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document

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	Promissory Note, dated January 16, 2018, issued by the Company to Rio Vista Investments, LLC.	(4)
10.2	Warrant, dated January 18, 2018, issued by the Company to Rio Vista Investments, LLC.	(4)
10.3	Promissory Note, dated January 19, 2018,	(4)
10.4	Warrant, dated January 19, 2018	(4)
10.5	License and Business Development Agreement Mexico, dated February 20, 2018, between BAM Agricultural Solutions, Inc. and Pedro Lichtinger Waisman, Isaac Lichtinger Waisman and Victor Lichtinger Waisman.	(1)
10.6	Promissory Note, dated March 8, 2018, issued by the Company to Michael T. Smith.	(5)
10.7	Warrant, dated March 9, 2018, issued by the Company to Michael T. Smith.	(5)
10.8	Promissory Note, dated March 12, 2018, issued by the Company to Boies Partners, Inc.	(5)
10.9	Warrant, dated March 12, 2018, issued by the Company to Boies Partners, Inc.	(5)
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)
31.2	Certification of 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)
32.2	Certification of 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 March 31, 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 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 January 25, 2018.
(5)	Incorporated by reference from the Company’s Current Report on Form 8-K, filed with the SEC on March 14, 2018.

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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 17, 2017	By:	/s/ Timothy A. Peach
Dated: October 30, 2018	By:	/s/ Timothy A. Peach
		Timothy A. Peach, Chief Executive Officer
		Timothy A. Peach, Acting Chief Executive Officer
		(Principal Executive Officer) Chief Financial Officer
		(Principal Accounting Officer)

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Filing Compare · Zero Gravity Solutions, Inc.