Company Overview
Organizational structure
Zero Gravity Solutions, Inc. (“we”, “us”, “our”, the "Company", “ZGSI” or the "Registrant"), a Nevada corporation, is an agricultural based biotechnology company focused on commercializing technology derived from, and designed for long term spaceflight and planetary colonization with significant applications to agriculture on Earth. These technologies are focused on improving world agriculture by providing valuable solutions to challenges facing humanity, including climate change stress and soil degradation threats to agricultural production and the increasing inability to feed the world’s rapidly growing population. The Company’s business model focuses on two primary business segments: 1) BAM-FX™ which is a cost effective, ionic nutrient delivery platform for plants that delivers minerals and micronutrients systemically at the cellular level of a plant, and 2) 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 International Space Station. 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 wholly owned subsidiaries BAM Agricultural Solutions, Inc. (“BAM Inc.”) oversees BAM-FX™ commercial introduction and business development through product trials and validation with crop growers and distributors that have established business networks in agricultural markets, manufacturing, sales and agronomy support. Zero Gravity Life Sciences Inc. (“ZGLS”) is responsible for any space research projects, life science applications of our technology and conducting research on future BAM Inc. product lines. We believe that the separation of these functions and the corresponding allocation of management by expertise will enable us to improve our performance and provide focus on our different business activities.
Operating Activity
The Company is focused on near-term revenue generation through the introduction of the Company’s first commercial product, BAM-FX™, to domestic and international agricultural markets. BAM-FX™ is an enabling technology platform, registered as a fertilizer application with thirty-three (33) domestic states and approved for commercial import and sale in Chile, Colombia, China, Paraguay and Brazil.
During 2017, the Company devoted significant resources to domestic and international trials with both growers and independent third parties. Commercial agricultural markets generally adopt new products after a number of years of successful trials showing consistent results. The Company believes that BAM-FX™ has begun to gain market recognition and acceptance. With continuing product technical support for application timing and dosage rates, validation of the technology attributes and proper product pricing providing growers an appropriate return on their investment, the Company expects to see growers purchase commercial quantities of BAM-FX™ either directly from the company or through the Company’s distributors during 2018, domestically and internationally.
In excess of one hundred and fifty trials were conducted during 2017. The trials included both grower experience and third-party validation on crops including, but not limited to, tomato, grape, berry, onion, soybean, wheat, cotton, melon, stone fruit, corn, tobacco and cannabis. We believe successful grower experience trials positively affect marketing effort by word of mouth. For commercial markets to develop rapidly, third party validation trials are necessary. A number of third-party validation trials planned for 2017 were not funded due to lack of financial resources. As a result, our team of six agronomists and certified crop advisors confined their 2017 efforts to identifying appropriate product application timing in crop growth cycles and dosage rates to maximize yield, quality and plant health.
For 2018, the Company plans to focus on a limited number of crops that have high market value for the grower and have shown significant yield and quality improvement from prior tests. Final trial results for tobacco crops from 2017 were completed during the first quarter of 2018 and showed an increase in crop yield of 25% using BAM-FX™ over the control crop in certain trials. Although we believe that these yields are replicable in growing conditions conducted, we continue to refine our application protocols for yield improvement in both domestic and international growing conditions. The Company expects to target tobacco crop growers in 2018 in addition to growers in other high market value crops, with which successful trials have been conducted including grape, soy bean, avocado and berries. Also, based upon significant improvements in yield and quality on medicinal cannabis from testing with growers in Mendocino and Humboldt Counties in California, the Company will add cannabis to its list of target crops for 2018.
BAM Agricultural Solutions, Inc., has entered into a License and Distribution Agreement with a group of Mexican businessmen with longstanding relationships with markets in Mexico and a successful history in building companies in Mexico and in the US. The initial crops they will be working with are avocados and strawberries.
Domestic commercial activity:
The Company began conducting domestic product trials on a variety of crops in laboratory and academic settings as well as in field applications on grower/end-user crops during 2014 and expanded field applications with those and additional trial participants in subsequent years. Results from trials during 2016 on a variety of field crops, vegetables and fruits, a number of which were validated by independent accredited third-party laboratories or academic institutions, showed significant yield, nutrient and biomass improvements for crops treated.
In 2016, the Company shifted its sales focus from direct sales to growers toward developing relationships with potential channel partners. In general, a channel partner is an established agricultural product distributor and/or service provider with which the Company has executed a distribution agreement. Three distribution agreements with agricultural product distributors in Ohio and California were signed during 2016, two of which are active, including an agreement with Pinnacle Agriculture Distribution, Inc., ("Pinnacle"). Pinnacle is a multifaceted agricultural retail distribution business with operations including agricultural chemicals, fertilizer bulk handling and precision agricultural services. During 2017, the Company executed distribution agreements with two additional regional domestic channel partners, one in Ohio and one in Pennsylvania. We expect our channel partner strategy will begin generating product revenue during the 2018 growing season, given sustained technical support for the product introduction process with their customers and appropriate product pricing for the channel partner’s financial incentive and growers’ investment return.
While continuing to focus on a channel partner strategy and our technical product development fieldwork, the Company began discussions with three large prospective domestic agricultural industry leaders. The goal is to explore technological synergies and product integration strategies adding BAM-FX™ into their existing product lines to enhance the effectiveness of their products. We believe the Company’s technology is a delivery platform or product enhancement that, when incorporated into other agricultural products, for example fertilizer, the resulting product's effectiveness is improved. The Company plans to pursue these opportunities as part of its 2018 business strategy.
International commercial activity:
International business development efforts that begun in 2015 continued throughout fiscal 2017. The Company’s international business strategy, in general, is to engage existing agricultural entities, which have strong distribution channels within a country, that are financially able to introduce new products into local agricultural markets. We have initiated business development activities through existing management relationships or trusted referrals. The Company undertakes the cost of developing the relationship, provides technical product support including research, trial data and product application protocols. The local entity contracts directly with the Company and incurs the cost of business development efforts within the country. By the end of 2017, we completed two years of product efficacy and business development work in India and one year in China, Colombia, Paraguay and Brazil. Product efficacy and registration for import in Haiti began in 2017.
The Company executed an exclusive distribution agreement with a distributor in Paraguay during 2016, with a minimum purchase requirement of seventy-four thousand (74,000) gallons during the first year of the agreement to maintain exclusivity. We expected to deliver an initial order of BAM-FX™ to our Paraguay distributor during the fourth quarter of 2016. The order was delayed until the second quarter 2017, due to the distributor’s need to finalize Paraguay’s government product testing requirements for commercial import and obtain import approval from Servicio Nacional de Calidad y Sanidad Vegetal y de Semillas ("SENAVE"), the government agency overseeing agricultural imports. BAM-FX™ tests were successfully completed by the Paraguay Agricultural and Technological Center (CETAPAR) in January 2017 and submitted to SENAVE. BAM-FX™ was registered and approved for commercial sale in Paraguay during the second quarter of 2017.
The distributor in Paraguay completed commercial soybean trials and compiled results from trials begun in 2017 during the first quarter of 2018, which showed grower benefits resulting in an increased return on their investment. We are currently evaluating and exploring mutually beneficial business models to exploit this market, which will include re-negotiating the terms of our existing distribution agreement. The distributor in Paraguay, with the Company's financial support, began to target sales to sub-distributors and commercial growers of row crops, primarily wheat, corn and soybeans during 2017. If the Company reaches acceptable terms with our distributor, we believe these ongoing efforts will result in a pragmatic strategy to begin realizing revenue during the third quarter of 2018.
BAM-FX™ was introduced to the South American countries of Colombia and Brazil during 2016. The Company contracted with Fundacao de Apoio A Pesquisa Agricola (FUNDAG), a private nonprofit entity established under the laws and registered with the Brazilian government, which provided positive product test results for the Brazilian government’s product registration and import approval process. A Brazilian channel partner was identified during 2017, introduced to the Company by one of the Company’s agronomy and science consultants affiliated with the University of Florida, familiar with agricultural markets and distributors in Brazil. The channel partner is finalizing the registration of the product for import and sale.
The Company contracted with an independent Colombian laboratory during 2016 to test and provide evidence of effectiveness of BAM-FX™ for the Colombian government’s registration and approval to commercially import product, which we received during 2017. The Company engaged an import-export company with existing business affiliations and operations in Colombia during 2016 to introduce BAM-FX™ to commercial agricultural markets in Colombia, pursuant to a foreign business development consulting agreement. The Company expects to negotiate and conclude product distribution agreements with Colombian entities during 2018.
Pursuant to a non-exclusive distribution agreement executed in 2015 for certain countries in the Asia Pacific markets, a distributor engaged a potential sub-distributor in India during 2016, Nurture Earth R&D Pvt. Ltd, Nurture Earth. Nurture Earth conducted a number of trials during 2016 and 2017 primarily on pigeon pea, cotton, vegetables and tomato. Some vegetable results showed yield improvements of approximately fifty percent (50%). Tomato trials showed a yield increase of approximately forty eight percent (48%) of harvested fruit weight and approximately eighty three percent (83%) in seeds. Furthermore, seed treat results on pigeon pea showed positive germination and survival results using specific product dilution rates. The Company expects to complete registration to import BAM-FX™ in India for commercial sale during the third quarter of 2018.
The Company contracted a business development entity with offices in the US and China, Asia 21 Communications, LLC, "Asia 21", as its project manager for marketing and product testing in China during 2017. The results of the trails during 2017 in China were positive in certain crops and have encouraged growers to replicate the trials in 2018, the second year of tests in grapes, rice and tobacco. Trials in wheat, soybean, berries, tomato and stone fruit showed either marginally improved crop yield or yield less than ten percent (10%), which growers consider statistically insignificant. We believe these marginal results are due to application protocols which were not optimized. A number of potential distributors have been identified in China, however, the Company has no formal distribution agreements with distributors in China, at this time. Although we expect to generate nominal revenue from sales to growers through Asia 21, we do not expect to generate significant revenue through distributors in China until 2019. On February 12, 2018, the Company was notified that BAM-FX™ was approved for import and commercial sale within China.
During the fourth quarter of 2017, the Company entered into a distribution agreement with a group for product sale and distribution to the government of Haiti. The distributor’s contract for sale and distribution is currently being finalized with the government of Haiti with an expected initial order of 50,000 gallons of BAM-FX™ during 2018. Orders pursuant to the distribution agreement are currently pending Haitian government approval for import and sale. The approval, depends upon results of product efficacy testing with expected completion during the third or fourth quarter of 2018.
After a review of ongoing costs associated with the Company’s operations in Chile and potential for near term commercial sales and collection of accounts receivable, the Company determined during the fourth quarter of 2017 that the cost associated with penetrating and maintaining the Chilean market would require significant additional resource commitments during 2018, which we determined would be better utilized in markets with shorter term sales prospects. The Company began supporting the Chilean operations financially during 2015. Initially the Company expected the Chilean operation would obtain and provide its own financing to support operating as a distributor in the country. The expected funding was not secured and the probability of obtaining funding during 2018 appeared unlikely. We believe it is necessary to engage an established and financially stable distributor to continue developing the market for BAM-FX™ in Chile. The Company expects to resume business development efforts when financial resources are available to identify, engage and support a distributor.
We employ the technical talents of certified crop advisors and agronomists, both domestically and internationally, to support our commercialization and revenue generation efforts. During 2016, the Company added qualified sales management and agronomy personnel to develop domestic channel partner relationships and provide technical product support to growers and channel partners. During the second half of 2017, the Company began to focus on crops with high market value for growers enabling the grower to realize a return on the cost of purchasing and applying BAM-FX™. As a result of the change in focus, the Company began to reduce the number of technical consultants and advisors employed domestically. Internationally, in India, China and Paraguay, the Company has maintained or increased the use of contracted technical and business development talent to introduce BAM-FX™ into those markets.
During the third quarter of 2016, the Company formed an agronomy and science team to integrate agronomy and crop advisor personnel and centralize technical product know-how in Asia and North and South America. The agronomy and science team provides technical support to growers and channel partners in those markets. In addition, the team maintains the Company’s relationships with science advisors at the NASA-Ames Research Center, NASA ARC, which were developed pursuant to a Reimbursable Space Act Agreement ("RSAA") executed in January 2016. The Company expects to maintain its domestic agronomy trained personnel during 2018 while adding technical consultants, as needed, for business development in the Asia Pacific and South American markets.
Domestic Retail Market Activity
During 2016, the Company began developing a business strategy to enter the home and garden retail market with a specially formulated ready to use offering of BAM-FX™. During 2017, the Company applied for the trademark, Gardner’s Choice, the name of the planned retail product. On January 10, 2018 the Company received notice of allowance for the Gardner's Choice trademark from USPTO and expects to receive official registration during 2018.
Although we expected to test market acceptance using pilot programs in certain big box stores during 2017, the Company determined that additional product development work was needed. During 2017, product efficacy, stability and safety validation work was expanded beyond the work initiated in 2016 which, we expect to complete during the third quarter of 2018. We engaged a seasoned retail market and brand consultant to assist us with our retail product business strategy and roll out during 2017 and designated personnel within the Company to execute the strategy.
The Company executed a non-exclusive distribution agreement in 2017 with CustomQuest, Inc., a subsidiary of Victory Wholesale Group, to lead the introduction into the retail market through their existing infrastructure and relationships. Sales and presentation materials for retail consumers and buyers, product packaging and retail point-of-sale displays have been developed along with a strong electronic and social media presence. The Company has contracts in place with a product fulfillment vendor to mix, bottle, label and ship the product. The Company also works with a service group to provide state registration and regulatory and compliance assistance.
Our response from attending industry trade shows, including the Ace Hardware 2018 Spring Convention and the GIE Expo 2017, and initial marketing efforts to several co-op and big box buyers at both regional and national levels has been positive with strong interest in third quarter 2018 product placement. We expect additional follow on activities to encourage sales which, include increased marketing through traditional, electronic and social media.
Specialty Crop Activity
In 2016, a licensed grower in Mendocino Country provided the Company anecdotal information on significant yield improvement the grower realized by applying BAM-FX™ to cannabis plants. The grower conducted the work without the Company’s participation. As a result of yield improvement reported, the Company participated in two independent trials during 2017 on medical cannabis in California with growers licensed with the State of California. A trial in Mendocino County resulted in an increase in cannabinoid levels from 15% in the control crop to approximately 23% for the crop treated with BAM-FX™. Complete yield results were not available for this trial as wildfires caused partial crop damage. A second trial in Humboldt County, California, with a licensed grower, showed an approximate forty four percent (44%) yield increase using BAM-FX™ over the control group.
With the positive trial results obtained and the number of inquiries the Company received about the use of BAM-FX™ on cannabis crops during the fourth quarter of 2017, the Company has added cannabis and hemp as target crops for 2018. The Company will restrict its business activities to sale and distribution of product, providing the picks and shovels to growers. During 2018, the Company expects to refine and optimize product formulations for this market, which is expected to create premium pricing for the product.
Manufacturing Operations
We operate a manufacturing facility in Okeechobee, Florida. Manufacturing is conducted on an as needed batch process. During 2016, the Company made process improvements and modifications to existing equipment and facilities to enhance efficiency, comply with regulatory requirements, control the quality of raw materials used in production and consistently provide customers a quality product. The Company added a second product mixing line to increase production capability for expected product demand and a reverse osmosis water treatment system for consistent water quality. These improvements addressed product variability resulting from raw material inputs. Manufacturing operations during the second half of 2017 concentrated on process and procedure documentation, quality control and production precision.These efforts addressed variances that could affect product performance. The benefits expected from these efforts include consistent product chemistry and process replication, providing the ability to scale and replicate the production process in other locations.
Directed Selection™
The Company’s long-term objectives include the commercialization of ZGSI’s space derived Directed Selection™ technology, which predicts that plant and animal stem cells exposed to prolonged microgravity in space can be endowed with new characteristics beneficial to society. In previous years, with our collaborators, the National Aeronautics and Space Administration (“NASA”), the United States Department of Agriculture (“USDA”), and the University of Florida, we conducted scientific studies on six NASA sponsored flights to the International Space Station (“ISS”). These experiments demonstrated that the gene expression of plant cells in zero/microgravity changes substantially, and furthermore, provided us with strong evidence that these changes can be directed toward beneficial attributes.
Future Directed Selection™ research will aim to produce new varieties of proprietary, patentable stem cells for plants with desirable traits, such as the ability to better survive environmental challenges (i.e
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temperature or climate change) or to resist disease. Adaptive changes in the plant will be accomplished without the need for additive or subtractive genetic engineering, thus eliminating public concerns about genetically modified organisms (“GMO”). The plant still uses the capabilities that are a natural part of its genetic potential through altered gene expression that enables adaptation toward valuable traits. Another important aspect of our space derived intellectual property capitalizes on space flight experiments showing the unique effects of zero/microgravity on mammalian cells. Space-based technology imparts the likely ability to reproduce undifferentiated multi-potent human stem cells in substantially larger quantities and more rapidly than is possible on Earth. Long-term goals include revolutionary advancements in stem cell differentiation, cellular macrostructure assembly, vascularization and wound healing. Because both humans and animals use very similar metabolic pathways, we also expect to produce patented stem cells that can provide beneficial treatments to commercial livestock. We believe that this area may lead to significant future business opportunities for the Company. We expect that research funding will be deferred beyond 2018 unless cash flows from our operations provide sufficient funds to support those efforts or funding is designated by equity investors or grants.
Research and Development Activity
The Company developed scientific relationships with NASA ARC, Ohio State University. UC Davis, Utah state, University of Iowa and Penn State University during 2016 to understand and validate the science incorporated in BAM-FX™ and identify additional commercial attributes. The Company did not have the financial resources to fully exploit these relationships during 2017 due to financial constraints.
Pursuant to the Company's Reimbursable Space Act Agreement, with NASA ARC, the Company has access to NASA scientists and laboratories. Because the RSAA is reimbursable agreement, whereby the Company reimburses NASA for technical services, the Company retains ownership of intellectual property resulting from the research work performed.
NASA ARC used its unique, ground-based, controlled environment facilities and research personnel to address a series of questions relevant to both ZGSI and NASA during 2016 through the first half of 2017. The scientific data is jointly evaluated by ZGSI and NASA ARC to determine utility of the ZGSI products to commercial agriculture and NASA applications. First year research pursuant to the RSAA was completed during the first half of 2017. The studies were conducted in both soil pots and hydroponic systems with near optimal nutrient supply. The results, which showed a significant improvement in plant productivity, suggest that the effects of BAM-FX™ include improvement in nutrient use efficiency and enhancement of photosynthetic efficiency which causes an increase in the amount of biomass produced per unit of light energy absorbed by the plant.
As jointly agreed and based on evaluation of the scientific data, space flight opportunities have been identified to test our potential role in achieving NASA goals in plant-based space biology and life support pursuits. On February 21, 2017, the Company’s research experiment using BAM-FX™ was successfully delivered to the ISS, launched from the Kennedy Space Center on February 18, 2017. In collaboration with NASA and Inrinsyx Technologies Corporation (“Intrinsyx”), the experiments studied the growth and nutritional effects of BAM-FX™ in broccoli seedlings in microgravity, advancing scientific knowledge to promote the growth of fresh, nutrient-dense food for astronauts on long duration space missions. In a report issued by Intrinsyx, the space flight experiment test was successful as the results obtained during space flight supported the initial hypothesis that using BAM-FX™ in plant growth media enhanced broccoli growth for both roots and shoots over untreated controls with an approximate doubling of growth size and fivefold greater dry weights obtained on orbit. The Company had an additional launched research equipment on June 3, 2017 in collaboration with Intrinsyx and will have third launched research experiment during the third quarter of 2018.
From the scientific work of NASA ARC, ZGSI expects to understand BAM-FX’s mode of action and physiological effects leading to increased yields currently observed on earth in commercial agricultural systems and address the science questions of interest to ZGSI and queries from channel partners. Additionally, ZGSI expects to discover if BAM-FX™ truly has applications for growing plants in the controlled conditions of spaceflight and for human colonization of other worlds. ZGSI plans to optimize BAM-FX™ application methods in both controlled environment agricultures on earth and in space flight applications.
Pending adequate financial resources, we plan to fund additional research and continue working with NASA ARC in 2018 to finalize: the preliminary results of our 2016 and 2017 studies; identify the scientific evidence of the action of BAM-FX™ within the plant structure; and refine predictable crop and environmental dosage application rates to support precision agricultural applications for growers.
During January 2017, Intrinsyx and NASA ARC jointly issued results of their research showing BAM-FX™ is compatible with glyphosate resistant crops, primarily Roundup Ready crops. Roundup Ready crops are crops genetically modified to be resistant to the herbicide Roundup. Roundup is the brand name of an herbicide produced by Monsanto Corporation with the active ingredient, glyphosate. Glyphosate is a broad-spectrum systemic herbicide and plant desiccant or drying agent. The 2014 Agricultural Chemical Use Survey published by the United States Department of Agriculture’s National Agricultural Statistics Service reported that glyphosate was applied to 38% of domestic planted acres. The result of this joint scientific research allowed the Company to remove labeling and instructions warning against use with glyphosate, thereby eliminating a significant marketing impediment for our product.
We believe the Company’s proprietary technologies enable the development of a diverse product line with unique solutions to big problems, representing significant potential revenue and profit opportunities. Due to the market scope and the associated regulatory requirements to reach full profit potential, ZGSI’s strategy is to enter into channel partnerships by executing distribution agreements, domestically and internationally, with industry-leading agriculture product distributors which could leverage our collective resources and expedite revenue generation. In addition, we believe our proprietary technologies represent a delivery platform or enabling system that could enhance the performance of agricultural inputs for other agricultural companies’ products. We initiated discussions related to product integration strategies with three companies during 2017. These companies expressed interest in the following collaborative efforts: integration of our technology in retail fertilizer products; integration of our technology in wholesale fertilizer products; and seed treat applications to improve germination and add new competitive product claims. We believe collaborative product integration and associated research will be a significant component of our business activity in 2018.
Corporate History and Structure
Zero Gravity Solutions, Inc. was initially incorporated in the State of Idaho as Hazelwood-Gable, Inc. on August 19, 1983 to engage in the business of developing mineral resources. The Company engaged in limited operations until 2003. On June 19, 2002, the Company changed its corporate domicile to the State of Nevada and, on November 25, 2003, changed its name to American Thorium, Inc. On December 10, 2003, the Company entered into an agreement to acquire certain mining claims and changed its name to Thorium Nuclear Energy, Inc. on March 5, 2004. On March 8, 2006, the Company changed its name to Hazelwood Ventures, Inc. and began looking for new business ventures. On June 14, 2006, the Company changed its name to Monarch Molybdenum & Resources, Inc. and on November 27, 2007 entered into a merger agreement, whereby it was to acquire certain mining claims from Thorium Energy, Inc. and changed the Company's name to Thorium Energy, Inc. The merger agreement was rescinded on March 19, 2008 and the Company changed its name to Monolith Ventures Inc. on April 2, 2008 and with the intent to acquire or merge with one or more businesses. On December 30, 2011, the Company acquired ElectroHealing Holdings, Inc., which held certain patents, patent applications and other technologies and/or licenses pertaining to medical device technology and changed its name to ElectroHealing Technologies, Inc. on January 12, 2012. Subsequent to the transaction, management re-evaluated the merits and benefits of the ElectroHealing Holdings, Inc. acquisition and began to explore possible alternatives. Accordingly, we executed a rescission agreement on December 20, 2012 that returned the previously acquired patents and technologies in exchange for the cancellation of the shares of our common stock previously issued in the acquisition.
Formation of ZGSI and the Company’s Current Structure
On December 3, 2012, we entered into a Patent Acquisition Agreement with John W. Kennedy whereby we acquired certain patents applications and technologies related to the Company’s current Directed Selection™ business segment. In connection with the acquisition of this technology, we changed our name to Zero Gravity Solutions, Inc. on January 11, 2013 to better reflect our new business endeavors, and issued 11,500,000 shares of our authorized, but previously unissued common stock. In connection with this acquisition, we moved our corporate headquarters from Salt Lake City, Utah to its current location at 190 NW Spanish River Boulevard, Suite 101, Boca Raton, FL 33431.
On July 30, 2013, John W. Kennedy assigned to the Company the entire right, title and interest in, to and under the invention and provisional patent application for Bioavailable Minerals for Plant Health which became the basis for the Company’s BAM-FX™ business segment.
The Company currently has two wholly owned subsidiaries: BAM Agricultural Solutions, Inc. (“BAM Inc.”) and Zero Gravity Life Sciences, Inc. (“ZGLS”). BAM Inc. is a Florida Corporation that holds and controls the manufacturing, sales and revenue generation of the Company's agricultural product, BAM-FX™. ZGLS is a Florida Corporation that holds and controls the Company’s Directed Selection™ business segment and the related research and development work. The Company had previously wholly owned Zero Gravity Solutions, LTD (ZGS Ltd.), and BAM Agricultural Solutions, LTD. (both private United Kingdom limited companies based in the United Kingdom) which had been created to service the Company's expected operations and interests in the European Union (EU). During the fourth quarter 2015, both UK companies were liquidated, and the financial resources redeployed to markets in the United States and Chile.
The Company currently has 29 employees, of which 22 are full-time employees. The Company has selected December 31st as its fiscal year end.
Principal Product Lines
BAM-FX™
BAM-FX™ is a mineral delivery platform for food crops. BAM-FX™ was originally developed by John W. Kennedy, our Chief Science Officer and former director, to grow food crops in space vehicles designed for deep space human missions, but has been found to have potentially far reaching applications for agriculture on Earth. BAM-FX™ is a proprietary formulation, currently including micronutrients zinc and copper, used to improve plant performance by providing a delivery platform that allows plants to more efficiently uptake nutrients. BAM-FX™ is not classified as a genetic modification (“GMO”). The BAM-FX™ formula, works as an enhancement of other agricultural plant treatment regiments. BAM-FX™ enhances the uptake of nutrients and it is capable of improving crop yields and potentially reducing input costs.
BAM-FX™ can be applied by seed soak/treat, soil application using drip irrigation systems or as a foliar treatment of the plant at later stages of the plant’s development.
Academic and grower product trials, validated by independent laboratories and academic institutions, showed BAM-FX™ treated plants exhibit faster germination, higher yields, increased plant resistance to harmful environmental factors and higher quality fruit and vegetables. Trials have shown that applications of BAM-FX™ on various crops reduces the need for multiple applications of other products, which we believe will save growers time and money while creating faster growing, healthier, and more robust plants. Additionally, we believe BAM-FX™ may provide significant value for farmers, growers, and world agriculture through:
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Observed increased plant stress tolerance;
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Faster time to maturity and harvest with higher farm yields for food crops;
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Improved delivery of targeted nutrients and minerals to crops requiring lower energy to uptake, creating a more robust plant and nutritious crop;
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Increased nutritional quality of grains and produce including the potential to engineer nutrition into our food; and
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Reduced ecological concerns associated with agricultural runoff pollution into water sources as phosphate or nitrate usage is improved.
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Food crops offer the best source of nutrition for humans since many supporting nutrients require organic carriers and are not normally absorbed by using vitamin and mineral supplements alone. As BAM-FX™ can be applied to any plant, we anticipate a substantial demand for BAM-FX™ to support improved crop health and nutrition.
BAM-FX™ Trials
In 2014, BAM-FX™ product development and commercialization activities spanned a wide range of studies in terms of crop plants, test parameters, geographic region, and potential customer base. In 2015, we conducted second season tests with a number of growers to replicate the first year’s positive results. The trials were primarily foliar applications during the growth cycle of the crops, including but not limited to wine grapes, table grapes, avocados, beans, tomatoes, rice, berries, stone fruit, corn, onions, barley, wheat, and leafy greens. In addition to showing product efficacy, the trials enabled us to begin branding BAM-FX™ and provided word of mouth support within the local farming community to attract potential channel partner interest in BAM-FX™ and its performance.
During 2016, we shifted some of our resources from field trials for performance data to scientific efforts with universities and NASA ARC to obtain third party data scientifically validating the results and understanding BAM-FX™ mode of action. Scientific efforts were conducted through NASA ARC under the RSAA and in connection with studies at the University of Florida, Tropical Research and Education Center ("TREC") which is a division of the University of Florida, Ohio State University, Penn State University, University of Iowa and Florida International University. BAM Inc. began a product marketing approach on grower’s field validations, whereby specific expected crop results were identified at the inception of the validation process and upon achieving the expected results over multi-year growing cycles, a grower would agree to purchase the product. In addition to being part of our business development effort, the Company expected to develop brand name recognition and provide pull through business for prospective channel partners.
The Company initiated trials on the effects of BAM-FX™ on medicinal cannabis with certified licensed growers on outdoor crops as well as crops in a highly controlled internal environment during 2017. The same positive results we have seen with commercial agriculture crops were also evidenced with cannabis.
The Company conducted in excess of one hundred and fifty (150) domestic trials in addition to trials conducted in India, China, Chile, Paraguay, Brazil and Columbia during 2017. The majority of our domestic trials were intended to either replicate prior year results or introduce BAM-FX™ to the grower and the grower’s agricultural input supplier, either an existing or potential channel partner. In addition, the Company’s agronomy team worked to identify protocols for application rates and timing for a number of crops to maximize BAM-FX™ performance. Based upon the result of those trials the Company identified a target list of crops for 2018 efforts which include berry, grape, avocado, soy bean, tobacco, cotton and cannabis. We expect to continue work on certain row and vegetable crops, however the emphasis for those crops is expected to include seed treat applications, which have shown significant potential economic benefit to growers.
Revenue Cycle
The commercialization cycle for new agricultural products is minimally two to three growing seasons. Our 2015 trials included a mix of independent laboratory tests, first year small-scale trials with growers and second season multiple acre trials with growers. Demonstrating consistent product performance is one key to obtain product orders from growers in the United States. During 2016, in connection with NASA ARC, we began developing product application dose rates and response curves scientifically to enable us to predict outcomes and support consistent performance.
Although United States growers have not historically been innovators and have required multiple growing season trials before adopting new products and technologies, our 2014 and 2015 domestic trial results were instrumental in opening commercial markets in Asia, Mexico and South American countries.
During the fourth quarter of 2016, the Company entered into an agreement with Global Biotech, S.A.S. a Colombia agricultural testing and analytic laboratory, to evaluate BAM-FX™ through a series of product application tests to obtain approval for commercial import. We received registration approval through the Colombia Institute of Agriculture (ICA) during 2017 for commercial import. We are working with a business development consultant to identify a Colombian channel partner to sell, market and distribute BAM-FX™ within Colombia.
The Company conducted initial market analysis in China with the assistance of a contractor, Asia 21, focusing on the sale and distribution of products and solutions into China and providing local operational support, management and services. Asia 21 has offices in the United States and China. Registration with the China Ministry of Agriculture for approval to import and sell BAM-FX™, which began during the fourth quarter of 2016, was received in February 2018. In connection with BAM-FX™ registration testing requirements, the Company contracted with the Shanghai Agricultural Institute to develop BAM-FX™ test data and technical reports for government import approval.
The Company began introducing BAM-FX™ to Asia Pacific markets in 2016, targeting potential distributors through existing business relationships. High-value crop and row crop product evaluation is currently in process in a number of Asia Pacific countries including India and Philippines.
During February 2017, the Company announced that it had signed an exclusive distribution agreement with Bison Africa Capital (Pty) Ltd. (“Bison”), an emerging investment holding company based in South Africa and a leader in building competitive and representative South Africa companies. The parties did not actively pursue South African markets in 2017 and have mutually agreed to continue business development efforts with the expectation of beginning the registration process for commercial sale during 2018.
DIRECTED SELECTION™
Directed Selection™ is a proprietary technological method designed to use the unique conditions of near-zero gravity in low earth orbit to create plants and animal cells that have beneficial traits that we believe would have value to society. This technology predicts that plant and animal stem cells exposed to prolonged microgravity in space can be endowed with new characteristics.
Life on Earth has always developed within the confines of gravity. About 50% of the energy expended by terrestrial-bound plants is dedicated to structural support in order to overcome gravity. By removing gravity from the equation, plant cells in a weightless environment have an excess of energy. This relatively benign environmental change causes the plant to engage its survival mechanisms, thereby enabling differential gene expression. The plant is able to adapt quickly to changing environments or disease-causing organisms, stressors that we introduce artificially while the plant is in microgravity thereby directing gene expression. This indicates that we can produce new varieties of plants, with required new attributes, faster than traditional methods.
All aspects of our Directed Selection™ technology must be conducted in a long-term microgravity environment, currently only available in space. We partnered with the University of Florida to conduct the initial experiments in order to validate the efficacy of this technology in space. Preliminary results showed that the Directed Selection™ technology was able to identify frost resistance capabilities in the Jatropha Curcas plant. This capability could allow cultivation in areas previously impossible.
The Company may use the Directed Selection™ platform technology to create more robust plant varieties adapted toward desirable characteristics. Directed Selection™ research may be aimed to produce new varieties of proprietary, patentable stem cells for plants with desirable traits like the ability to better survive environmental challenges (i.e
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temperature or climate change) or to resist disease. Adaptive changes in the plant could be accomplished without the need for additive or subtractive genetic engineering, thus eliminating public concerns about GMOs. The plant still uses the capabilities that are a natural part of its genetic potential through altered gene expression that enables adaptation toward valuable traits.
A key part of our future operations is the expansion of these patents to cover additional crops, animals and humans, and the specific methods and tools that are developed from our research and development. The Company possesses patent applications that contain claims covering biological processes in microgravity, including the growth of cellular plant and animal tissues in orbit, stem cell replication and related processes.
The second part of the Directed Selection™ technology pertains to the mass replication or propagation of stem cells in space, something that can be done on Earth but at much slower rates. Although stem cells can be produced on Earth, current methods are inadequate to create large quantities of healthy cells in short periods of time. Our technology would allow for the increased production of healthy stem cells. Tests, which occurred over six space missions, have provided initial proof-of-concept that the Directed Selection™ technology allows stem cells to replicate en masse. We believe it may eventually allow us to produce large quantities of undifferentiated pluripotent stem cells in the same environment for commercial sale to third parties.
Directed Selection™ Research
A series of space microgravity experiments were executed by means of six space shuttle flights to the ISS spanning from 2007 through 2011, linked to and supported by the NASA Space Act Agreement entered into by ZGSI’s founder, Mr. John W. Kennedy. A new five-year RSAA, signed during January 2016, with NASA ARC, provides us access to NASA scientists and laboratories to continue research on earth. In addition, we expect that there are opportunities through a collaboration with Space Florida to continue research on the ISS. Space Florida is an economic development organization devoted to space research and drives Florida economic development across the global space enterprise. In prior years, tests of chemical compounds, plant cells, and mammalian stem cells in microgravity were conducted in conjunction with the USDA, Agricultural Research Service Labs (Beltsville, MD) and TREC.
Proof
of
Concept Plant Research
to
Develop Jatropha Biofuel Strains.
The ZGSI space research program focused, in part, on Directed Selection™ of traits in plants, using microgravity. Initial research focused on in vitro cell culture methods for plants of interest for biofuels or valuable ornamentals. The tropical and sub-tropical plant, Jatropha Curcas (physic nut), produces an easily purified biodiesel or jet fuel, but Jatropha is intolerant of frost and subject to diseases like root rot, leaf spot, and rust. A Jatropha cultivar with a broader climate range, improved frost tolerance, and greater disease resistance, would be a valuable improvement to biofuel production. A parallel study of ornamentals tested an endangered orchid species, two types of tropical flowering tree, and a common plant model organism. Research encompassed a series of six flights, from 2007 through 2011, and was completed by Dr. Wagner Vendrame at TREC. Research support was provided by NASA, BioServe Space Technologies, the Vecellio Group, and Vecenergy Corporation.
Plant cells from test species were grown in microgravity aboard the ISS and returned to ground for follow-up testing. The series of experiments produced several important results. The research team discovered the means to produce and propagate plant stem cells using microgravity. Further, methods were developed to out-grow plants from microgravity stem cells. Plant cells in microgravity were able to form pro-embryonic masses, which would enable quick regeneration of clonal plant material in order to grow new, whole plants. Plant cells also had increased growth, and cell cultures acquired a high stress tolerance in microgravity based upon the ability to recover viable cells after a long-term (290 day) culture under very limited nutrient conditions. As predicted, plant cells grown in microgravity acquired different growth characteristics and differential gene expression, compared to growth in normal gravity conditions. Currently, proprietary Jatropha strains are in keeping at TREC. The Company expects to continue research efforts at the time sufficient financial resources are available.
Mammalian Stem Cell Research in Space
Mammalian stem cell research offers an immeasurable promise for human health through potential means of disease treatment or cure and for tissue or organ regeneration or repair. ZGSI scientists and collaborators recognized this valuable application of space research early on, in 2008, and used the STS-126 flight mission to attempt to grow porcine liver stem cells (PICM-19) in microgravity. The experiment verified that mammalian stem cells would propagate, differentiate, and even form biliary liver structures in microgravity. Cell viability was maintained and cell activity assays indicated that cells maintained hepatocyte detoxification function over the test period. An early stem cell experiment, the PICM-19 was an essential first step toward using microgravity to mass-propagate human differentiated or undifferentiated stem cells to accomplish a myriad of research goals. The Company has no current plan to finance additional research efforts
Timeline and Plan of Operations
While we believe we can realize sustainable revenue executing our plan to leverage our technology and resources by developing strong business relationships with our channel partners, integrate our technology into other agricultural companies’ products and introduce our lawn and garden retail product, Gardner’s Choice, we cannot guarantee we will be successful. 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. There can be no guarantee that we will be able to obtain the necessary levels of profitability or fundraising needed to remain operational on a long-term basis. Adequate additional financing 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 product development programs or any future commercialization efforts. We will need to generate significant revenues to achieve profitability, and we may never do so.
Zero Gravity Solutions, Inc.
The Company is a fully reporting company and as such, provides general and financial administration, SEC reporting compliance, marketing support and strategic planning to BAM Inc. and ZGLS. The Company also develops product marketing material, investor oriented materials and provides systems support and market reach on our websites and through social media programs.
During May 2016, the Company announced that it had closed the final tranche of its previous offering of the Company’s Units in an exempt private placement transaction (“Private Placement”). Each Unit in the Private Placement consisted of one share of the Company’s common stock and a five-year warrant to purchase one share of the Company’s common stock at $2.00 for $1.25 per Unit. The Company received gross proceeds of $6,260,000 million pursuant to the Private Placement.
During August 2016, the Company identified a need to raise additional funds to execute its business plan for the remainder of 2016 and future periods. In October 2016, the Company began addressing those requirements through a new private placement of common stock of up to $10,000,000 at $3.00 per share of common stock issued (the "2016 Private Placement").
For the fiscal year ended December 31, 2017, the Company issued 787,133 shares of common stock and received gross proceeds of $2,361,399 pursuant to its 2016 Private Placement.
Commencing in 2016, the Company in cooperation with Space Florida, provided management assistance and strategic planning in the organization of the Planetary Sustainability Institute ("PSI"), a non-profit entity chartered to engage in research and commercialization of new sustainable technologies at the Kennedy Space Center. We expect to continue to play an integral part in the development of PSI’s sustainable agricultural research programs in 2018.
The Company expects to continue providing strategic directives, management and financial support primarily to BAM Inc., including work with Intrinsyx on future BAM-FX™ related research missions to the ISS, as BAM Inc. executes its business strategy during 2018.
BAM Agricultural Solutions, Inc.
Execution of BAM Inc.’s 2018 business strategy is subject to obtaining sufficient funding. BAM Inc. expects to build product demand and brand recognition for BAM-FX™ by generating sales and revenue in domestic and international markets through channel partners, technology integration in other agricultural companies’ retail products and launching a lawn and garden retail product, Gardner’s Choice during 2018. This strategy entails identifying, engaging and cooperating with multiple channel partners to include BAM-FX™ as a component of their agricultural product offerings; engaging major agricultural retail or wholesale chemical companies to identify and implement technology integration strategies; and successfully introducing our retail product to big box stores.
The Company’s core product, BAM-FX™, is an aqueous solution containing ionic zinc and copper micronutrients, in addition to sulfur. Currently, the product is sold in a concentrated form with pre-application dilution in rates ranging from 1:100 to 1:2,000. BAM-FX™ can be used in irrigation or hydroponic, seed treat and foliar applications. Zinc and sulfur promote plant growth and yield. Copper promotes enzyme activities in plants and is essential for chlorophyll and seed production. We believe the combination of micronutrients with other product attributes enables the product to improve crop yields, promote growth and withstand environmental stress by improving the plant’s ability to more efficiently uptake nutrients either available or latent in soils. The composition of micronutrient contained in BAM-FX™ is a contributor to its performance as a growth stimulator. We plan to focus our 2018 sales, agronomy and science efforts on foliar, seed treat and irrigation applications. In 2018, we expect to show scientifically, for specifc crops, how and when, in terms of application timing, these benefits are best expressed during the plant’s life cycle.
BAM Inc. expects to narrow sales and marketing efforts geographically and to certain crops. The Company expects to support existing and expand domestic channel partner activity through 2018. Domestic crop focus for 2018 includes grape, berry, soybean, cotton, tobacco, cannabis and avocado.
Business development efforts, including additional product performance trails, are expected to continue in India and China. The Company received approval to import and sell BAM-FX™ in China during February 2018 and expects to receive approval for import and sale in India during the forth quarter of 2018.
The Company expects to introduce product into Brazil through ongoing efforts, which commenced in 2017, of a potential business partner currently applying for approval to import and sell within the country. Sale of product into Haiti is currently subject to Haitian government approval and is managed by a group of business professionals having high-level relationships within the country.
On February 13, 2018, the Company signed an exclusive business development and distribution agreement for introduction of BAM-FX™ into agricultural markets in Mexico. The initial collaboration in the business development process is expected to be avocado with secondary attention to berries. We expect our agronomy team will work with an agronomy expert in Mexico to develop protocols through numerous tests of BAM-FX™ in diverse geographies and soils. Assuming the success of the trials, we expect product introduction efforts to avocado growers could begin in 2019.
The Company started investigating the retail markets for ready-to-use home and garden applications in 2016 and developed a ready to use product, Gardner’s Choice, during 2017 with an expected market introduction in the third quarter of 2018. BAM Inc. signed a distribution agreement with CustomQuest, Inc., (“CustomQuest”), a subsidiary of
Victory Wholesale Group
, a respected national distributor of grocery and health and beauty care products to a diversified segment of retail/consumer markets. CustomQuest currently services over 25,000 retail locations and will utilize its infrastructure and resources to begin the rollout of Gardner’s Choice, a ready-to-use formula of BAM-FX™. The Company has identified and is currently working with a third-party vendor for product packaging and labeling fulfillment services and a second third-party vendor to assist with state registration requirements.
The Company believes that current field agricultural technical support and sales personnel are adequate for 2018. The Company’s personnel resources include five agronomists or certified crop advisors in California, the Midwest and Texas. In addition, the Company expects to maintain its current number of sales and sales support personnel.
We believe the Company’s manufacturing facility in Okeechobee, Florida, should have sufficient capacity to fulfill domestic and international orders for product demand in 2018. We have undertaken a number of changes in the manufacturing process to simplify production and more efficiently and consistently produce high quality product. The changes also enable the Company to provide standard operating processes and procedures to third party fulfillment entities for additional production capacity as demand requires.
Zero Gravity Life Sciences, Inc.
We expect ZGLS will assist with agricultural research and identify complimentary technologies for agricultural and any space related initiatives and assist in developing and testing new BAM-FX™-based formulations for specific crops and varying geographic soils and weather conditions. In addition, ZGLS will manage our intellectual property portfolio and assist BAM Inc. with patent strategies related to commercialization of new products. The Company also expects ZGLS to provide focus on the Company’s Planetary Sustainability Institute efforts in 2018 in cooperation with Space Florida.
Strategy for Growth
BAM Agricultural Solutions, Inc.
BAM Inc. is executing the commercial roll out of BAM-FX™ following three years of initial product testing with several universities, end product users, and laboratory work supplementing the science of BAM-FX™ during 2017 through work performed under the RSAA with NASA ARC. BAM-FX™ is licensed in a fertilizer product category and approved for sale in thirty-three states in the United States, China, Colombia, Paraguay and Chile. BAM Inc. is pursuing registration and approval from appropriate government authorities for commercial sale and distribution in Brazil, South Africa, Mexico, India, Haiti and the Philippines.
The Company expects to focus 2018 sales and marketing effort on certain crops, including grape, berry, tobacco, soybean, cotton, avocado and cannabis. Our 2017 trials also showed positive performance in vegetable and fruit crops. We plan to sell our product at wholesale to our distributors or channel partners domestically and internationally and to end-users in the absence of a distributor.
We expect to continue to develop our domestic channel partner network during 2018. International distributor agreements cover Colombia, Paraguay, Mexico and Haiti. We expect to conclude distribution agreements for China during 2018 and are currently working with distributors or potential distributors in business development efforts and for government registration for import and sale in Brazil, India, Philippines and Mexico. The Company curtailed operations in Chile during the fourth quarter of 2017 until adequate resources are available to address the Chilean markets or a channel partner is identified.
On February 20, 2018, BAM Inc. and 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, “Agro Space”, in which BAM will receive a twenty percent (20%) equity ownership interest.
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. The exclusivity of the rights licensed to Agro Space are conditioned upon (i) meeting specified revenue targets beginning on the third anniversary following the successful completion of specified local trials through the tenth anniversary thereof; and (ii) an expansion of 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.
The second phase of the Company’s 2018 sales and marketing strategy is to pursue alliances with large agricultural and chemical manufacturers to incorporate our core technology within their product lines to improve the performance and profitability of existing product lines. We are currently discussing these opportunities with three large-scale integrated agricultural input distributors and one fertilizer manufacturer. We expect each opportunity will involve significant technical analysis including product efficacy testing, which if successful, will represent potentially sizable product sales or licensing revenue.
Gardner’s Choice, a ready to use home and garden product, is expected to be introduced to big box stores and lawn and garden retailers in 2018. The Company has received positive response from purchasers during Gardner’s Choice presentation during the Ace Hardware 2018 Spring Convention and GIE Expo 2017 in the fourth quarter of 2017. We believe we will receive stocking orders from purchasers during the third quarter of 2018.
Recent changes in laws now make the possession of cannabis for medicinal or recreational uses legal in many countries throughout the world. The global legal market for such products in 2016 was $14.3 billion and is expected to reach $140 billion by 2027. These numbers anticipate approval of pending legislation in many countries that would once again allow for the large-scale farming of hemp, a variety of cannabis, which contains very low levels of the psychoactive agent known as THC. Twenty-five of the largest producers of cannabis in North America are reported to have under operation and construction more than seven million square feet of indoor capacity. Preliminary data has shown that BAM-FX™, added to a growers protocol, has produced up to a 44.79% increase in vegetative growth, in weight of processed buds per plant, as well as a significant improvement in quality, as measured by THC, terpene and cannabinoid levels. We will continue to pursue additional field studies to demonstrate the value of BAM-FX™ to the cannabis industry, including hemp. Currently, we are in discussions with groups representing the larger growing operations in the U.S., Israel, and Uruguay, who we expect will be conducting larger-scaled trials with cannabis plants grown under various conditions, and with several of the common varieties of plants under cultivation. We intend to work with these groups to demonstrate the value of BAM-FX™, to make it a preferred, or required, element in the growing process, to improve their competitive advantage. At the same time, we expect to continue discussions with regional distributors of products that target individual cannabis growers.
Currently, our sales and agronomy personnel are sufficient to support our domestic commercial and retail business strategies. As sale and distribution expands internationally, additional technical personnel will be required and added, on an as needed basis.
The Company’s growth strategy, in part, is to engage and support channel partners in domestic and international agricultural markets. We believe our sales approach for 2018 will focus primarily on target crops and select geographies with a combination of foliar and seed treat applications. Working with agricultural input distributors and chemical companies to incorporate our core technology into an existing product line to enhance performance is an integral component of our 2018 revenue strategy. In addition, our revenue strategy is expected to include the introduction of Gardner’s Choice into retail and lawn and garden venues.
Zero Gravity Life Sciences, Inc.
ZGLS’s short to mid-term plans includes the utilization of NASA and PSI relationships to research BAM-FX™ related to space program applications, as well as engaging in research based upon the Company’s zero/micro gravity intellectual property leading toward the development and patenting of unique stem cells developed on the ISS. These potentially patentable plant stem cell lines could lead to new global food cash crops resistant to climate change and other adverse environmental factors.
Intellectual Property
We have made protection of our intellectual property a strategic priority. We rely on a combination of patent applications, trademarks, trade secrets and other intellectual property laws to protect our proprietary rights.
Patent Applications
We are the owners or licensees of three U.S. patents and many U.S. and foreign pending patent applications that form an important part of our immediate and future business plans. We have been assigned or licensed the rights to these patent applications through agreements with our chief science officer and former director, John W. Kennedy.
We are the assignee of a portfolio of patent applications that pertain to the second-generation bioavailable mineral compositions BAM-FX™. The BAM-FX™ composition is highly useful as a nutrient additive that may fortify against disease or environmental stresses and promotes growth. The basis of which is the ability of the ionized micro nutrient platform to deliver selected minerals into a plant or other complex organism systemically. The U.S. Patent and Trademark Office issued U.S. Patent No. 9,266,785, titled Bioavailable Minerals for Plant Health, on February 23, 2016. The patent will expire on December 27, 2026. Related applications are pending in Chile, Thailand, and Malaysia as well as a child U.S. application.
We are also the licensee of a patent application that pertains to the use of artificial Superoxide Dismutase ("SOD") compositions for the treatment of several plant and animal diseases, including amyotrophic lateral sclerosis (also known as ALS disease). Superoxide is naturally produced by plants and animals, including humans, and its production is accelerated in times of trauma or stress. SOD is produced by the cells to counteract the effects of an over-production of superoxide. Adequate amounts of SOD may increase life-span in humans and may be capable of remediating (and saving) severely stressed plants. This patent application discusses an artificial SOD that can be easily applied and used for treating over-production of superoxide, particularly ALS and other neural disorders. Animal studies of the SOD are being discussed on an ongoing basis with NASA and academic entities. The plant and space radiation applications of the patent applications are being licensed to ZGSI exclusively from Mr. John W. Kennedy for specialized testing and research.
ZGSI is the exclusive assignee of a patent application and an issued U.S. Patent No. 9,816,071, both directed to the replication of stems cells in a weightless environment. These patent applications contain claims covering biological processes in microgravity, including the growth of cellular plant and animal tissues on-orbit, stem cell replication and related processes. The technology accelerates the evolution of organisms, particularly plants, to adapt the organism to thrive in a hostile environment including cold and/or arid climates. Plants adapted using the technology show increased tolerance for the selected hostile environment relative to traditional plants. Specific applications include the development of food crops that are tolerant of cold climates (e.g. frost resistant crops) and arid environments (drought resistant crops). A key part of our ongoing operations is the expansion of this technology to cover additional crops, animals and potentially humans, and the specific methodologies and tools that are developed from our R&D. It is therefore a part of our technology that holds much promise and, from a commercial standpoint, falls into the longer-term plans of the Company.
Trade Secrets
Parts of our portfolio of intellectual property includes trade secrets pertaining to the manufacturing of several of the materials previously mentioned. In particular, BAM-FX™ and its derivatives are made in a complex and very specific process utilizing purpose-built equipment. These manufacturing processes are a separate technology, distinct from the patent applications, and remain highly secure and confidential. Reverse engineering of a product is always possible with sufficient resources. We believe that the experience we have honed over several years of manufacturing these products gives us a substantial competitive edge over any potential newcomers.
Trademarks
In 2015, we filed a trademark application to protect BAM-FX™ which was registered with the USPTO on November 8, 2016. Our trademark "UNLOCKING NUTRITION FOR THE WORLD™" was registered with the USPTO on September 8, 2015. A U.S. trademark application for our ready-to-use consumer product, named Gardener’s Choice™, was filed on May 15, 2017. We anticipate the registration of this trademark to occur shortly. We also hold a number of other common law trademarks that we may register in the future.
As of January 19, 2018, the Company has the following trademark inventory:
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BAM AG SOLUTIONS
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EUTM
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BAM AGRICULTURAL SOLUTIONS
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Chile
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BAM AGRICULTURAL SOLUTIONS
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EUTM
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BAM AGRICULTURAL SOLUTIONS
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US
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BAM FX & Design
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Chile
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BAM-FX
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EUTM
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US
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DIRECTED SELECTION
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EUTM
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DIRECTED SELECTION
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GARDENER'S CHOICE
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UNLOCKING NUTRITION FOR THE WORLD
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US
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Strategic Relationships
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NASA – During January 2016, the Company executed a new five-year Reimbursable Space Act Agreement, (“RSAA”), with NASA ARC and an existing investor and contractor, Intrinsyx Technologies Corporation (“Intrinsyx”). The RSAA gives the Company access to NASA scientists and laboratories, which are assisting in identifying and documenting attributes of the Company’s product and potential applications in other segments of agricultural markets. The primary objectives of the RSAA are:
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To establish the scientific basis for action of ZGSI products:
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To quantify the impact of ZGSI products on plant growth and productivity:
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To evaluate and test the impact of ZGSI products on yield physiology of selected crops important to commercial agriculture and NASA applications: and
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To evaluate and test the potential utility of ZGSI products to NASA space biology, and life support applications.
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Intrinsyx Technologies Corporation (“Intrinsyx”) is an engineering and information technology services company that has delivered innovative, high-performance IT solutions for space systems and payloads to NASA for over 11 years. Intrinsyx is an important collaborator in our third-party funded field trials of our BAM-FX™ formulation. Intrinsyx also liaises with NASA to support our continued access to NASA-funded research and development on the ISS.
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The Tropical Research and Education Center of the University of Florida Institute of Food and Agricultural Sciences located in Homestead (“IFAS/TREC”) has conducted field trials on BAM-FX™ on multiple crops. TREC was the primary investigator during five trails of our Directed Selection™ technology on flights to the ISS.
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The Center for the Advancement of Science in Space (“CASIS”) is the new non-governmental organization responsible for the management of the United States’ portion of the ISS which has been designated as a national laboratory. We are continuing discussions with CASIS to use the facility at the Kennedy Space Center for lab support of our plant research.
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We continue our discussions with Space Florida to create a PSI, which in part, is expecting to be an agricultural innovation center for the purpose of combining knowledge gathered on the ISS with the need for improved ground focused applications.
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Government Regulations
Although BAM-FX™ is different than common fertilizers available, state regulatory agencies require us to register the product as a fertilizer. The BAM-FX™ product has been registered and issued a license as a liquid fertilizer in thirty-three states. The Company does not claim that BAM-FX™ is a fungicide, bactericide or pesticide, therefore alleviating regulatory oversight associated with those claims. All ingredients in the formulation are categorized as Generally Regarded as Safe (“GRAS”) by the United States Food and Drug Administration (“USFDA”).
With our Directed Selection™ technology utilized in the creation of new varieties of an existing plant’s stem cell with unique characteristics, the resulting plant is developed exclusively through differential gene expression by exposure of the indigenous genome of the original plant to microgravity. No foreign DNA or genetic material is added or introduced to the genome, thus it is not considered to be a GMO and the Company believes that it would likely not fall under regulations that GMOs face. We believe that plants developed with Directed Selection™ technology would be regulated by the USFDA as are other non-genetically modified plants and we do not expect regulation to significantly impact our business plan.
Application of the Directed Selection™ technology to develop human stem cells represents a long-term goal of the Company and therefore we have not fully investigated the level of regulation the resulting products may face. The Company will complete a full review of the applicable regulations before beginning any product development efforts.
We expect that any products utilizing our Superoxide Dismutase (SOD) patent license will be subject to regulatory control. At this time, we have not completed research or development efforts in this area determine how a product may be regulated, if developed, as it relates to our Directed Selection technology.
Competition
Global Market Insights estimates the market size for micronutrients exceeded $4.5 billion in 2014 and is estimated to surpass $8.5 billion by 2023 growing with a cumulative average growth rate of more than 8% from 2016 to 2023. Asia Pacific agricultural micronutrients markets account for over 50% of the total market. The North America market was estimated to exceed $950 million. Foliar applications accounted for more than 22% of the total 2014 volume. There are more than 1,000 major fertilizer manufactures and more than 2,000 suppliers currently servicing both the existing macronutrient and micronutrient markets. We compete with these suppliers and manufacturers who offer a broad product line, as a standalone zinc and copper based product.
A subset of manufacturers and suppliers market zinc and copper foliar products perceived to be similar to BAM-FX™. The products make beneficial use claims similar to those we make, which in most cases are not substantiated, and are generally sold for less than our BAM-FX™ wholesale price. Buyers often have a difficult task distinguishing BAM-FX™ efficacy from other suppliers of zinc and copper foliar micronutrients. We believe our channel partner marketing approach focused on third party field test results and scientific proof of our product claims, allows us to differentiate BAM-FX™ from other competitive products. We believe that our product improves a grower’s return on investment through improved yield and reduction in agricultural inputs when properly applied to crops under appropriate agricultural conditions.
During 2017, the Company increased its understanding of mode of action of the core technology in BAM-FX™. Initial research supports our theory that our core technology acts as a bio-stimulant. A plant bio-stimulant is any substance or microorganism applied to plants to enhance nutrition efficiency, abiotic stress tolerance (drought, extreme temperature, mineral toxicity) and/or crop quality traits, without regard of the bio-stimulant’s nutrients content. Plant bio-stimulants are also contained in numerous commercial agricultural products.
Government agencies and various organizations across the globe have encouraged farmers to adopt bio-stimulants according to Global Marker Insights. In June 2011, the European Bio-stimulants Industry Consortium was formed to foster bio-stimulants to improve yield with less resources with major goals of sustainable agricultural production, economic growth and green innovation. The acid based ingredient bio-stimulant worldwide market is expected to surpass $2.0 billion by 2024.
The bio-stimulant market is at a development stage with the most notable players outside the United States. These players have established markets and adequate financial and technical resources, with which, we may not be able to compete. We expect to develop a bio-stimulant product only in collaboration with a large agricultural or chemical products manufacturer or on behalf of a distributor of agricultural inputs.
Specialty crop markets, specifically for the United States cannabis industry, are estimated to be $6.5 billion in 2016, growing to $30 billion by 2021. Global markets are estimated to be $14.3 billion in 2016, projected to increase to $140 billion by 2027. We believe the potential market for our core technology in agricultural specialty crops, considering only North American markets at the end of 2017, could range from $35 to $75 million at a ten percent penetration rate. Although we believe that this agricultural market represents a significant revenue and growth opportunity for the Company, numerous competitive products currently exist and others are in development by large, well-established companies entering this market such as Scott’s Miracle-Gro Company. Although we believe that we will successfully develop products specifically addressing the specialty markets using our core technology, our ability to enter these markets and generate revenue will depend solely on our product’s performance.
Our core technology can be combined with existing fertilizer and herbicide formulations and conform to existing application protocols. Lab and field research indicates that, by blending BAM-FX™ with existing, widely distributed, “branded” products, we could enhance the performance of those products sold by other agricultural input companies, which we consider as industry collaborators, not competitors.
Competitive Advantage/Barriers to Entry:
The Company believes that ZGSI has adequately protected its intellectual property and has developed a strong, professional technical team that provide it a positive competitive position. We believe our competitive advantages include:
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Manufacturing methods for our core technology are trade secrets, which we believe would be cost prohibitive and time consuming to reverse engineer. This proprietary and confidential method of manufacturing has been developed and refined over two decades;
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Access to the ISS to continue utilizing that resource to advance our core technology;
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Innovation of our core technology for agricultural applications, which we expect will generate additional intellectual property and potentially patentable composition and process technology;
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Maintaining a working relationship with NASA ARC, USDA Agriculture Research Services Labs, and a number of educational institutions recognized as agricultural industry leaders;
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An experienced management team with many years in industry, business operations, corporate finance, intellectual property development and protection as well as a world-class scientific and senior advisory boards.
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Growing brand recognition.
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Our innovative technology helps provide nutritious food to the worlds rapidly expending population.
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Reports to Security Holders
We are required to file reports and other information with the U.S. Securities and Exchange Commission (“SEC”). You may read and copy any document that we file at the SEC's public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings are available to you free of charge at the SEC's web site at www.sec.gov. We file electronically with the SEC and, as a result, our information is available through the Internet site maintained by the SEC that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. This information may be found at www.sec.gov.