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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GROGENESIS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

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GROGENESIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

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GROGENESIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

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GROGENESIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

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GROGENESIS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

GroGenesis, Inc. (“we,” “us,” “our,” or the “Company”) was incorporated pursuant to the laws of Nevada on May 19, 2010 under the name Lisboa Leisure, Inc.  On October 18, 2013, we amended our articles of incorporation in order to change our name to GroGenesis, Inc. and to affect a forward split of our issued and outstanding shares of common stock such that every one share of common stock issued and outstanding prior to the split be exchanged for 25 post-split shares of common stock and that the Company's post-forward split authorized capital consisted of 200,000,000 shares of common stock with a par value of $0.001. The name change and split were conditions precedent to our asset acquisition agreements with Joseph Fewer of Aylmer, Ontario and Steven Moseley of Paris, Tennessee, whereby we agreed to purchase certain assets necessary for the operation of a plant growth surfactant manufacture and sales business.

On September 9, 2013, we entered into an asset purchase agreement with Joseph Fewer and Stephen Moseley, whereby we agreed to acquire all rights, title, and interest in and to the assets relating to our initial product, AgraBurst™, (the “APA”). In consideration of Joseph Fewer selling the intellectual property comprising AgraBurst™ to us, including the technology described in the United States provisional patent application number 61/897,584 - "Composition and Method for Enhancing Plant Growth", as well as all related assets necessary for operating a plant growth enhancement product manufacture and sales business as a going concern, we issued to Mr. Fewer 12,500,000 post forward-split common shares in our capital. The APA also required that we complete a forward split of our common stock such that 25 new shares of common stock are exchanged for each currently issued share of common stock outstanding, and that 74,000,000 shares of post-forward-split common stock held by our former president be returned to treasury.  We completed this forward-split on November 1, 2013.

During our fiscal year ending May 31, 2016, we developed further enhancements to our AgraBurst™ formula to make it an all-natural, premium organic, non-GMO nano-surfactant for farmers, fertilizer manufacturers and commercial lawn and turf companies.  Now called AgraBurst PRO™ and as our flagship product, it is considered an agricultural input which improves the ability of the plant (crop, turf, tree, vine etc.) to enhance the efficient access of added nutrients incorporated in fertilizers, resulting in less fertilizer needed as well as improved water retention in soil.  By optimizing the plant's uptake of applied pest and weed controls and fertilizers, producers can minimize other input costs while reducing the health risk to farm workers due to its non-toxic properties.  AgraBurst PRO™ (the “Product”) is formulated for organic and non-GMO producers and those food growers seeking to convert to non-GMO and organic food production.  We believe application of our Product can begin the process of improving the health of the soil while reducing the use of conventional chemical agricultural inputs.  Our strategy is to capitalize on the convergence of consumer demand, retailer demand/compliance and legislative drive toward environmental responsibility.

The Company incorporated a 51% owned subsidiary, American Water Sanitation, LLC, on October 21, 2016 with the state of South Dakota.  All intercompany transactions have been eliminated in consolidation.

Basis of Presentation

The 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. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring adjustments, unless otherwise indicated) necessary to present fairly the financial position and results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year.

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These consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended May 31, 2017 (including the notes thereto) set forth on Form 10-K.  The Company uses as guidance Accounting Standard Codification (ASC) as established by the Financial Accounting Standards Board (FASB).

Significant Accounting Policies

For reference to a complete list of significant accounting policies, these consolidated financial statements should be read in conjunction with the financial statements of the Company for the year ended May 31, 2017 (including the notes thereto) set forth on Form 10-K.

During the three months ended August 31, 2017, there were several new accounting pronouncements issued by the Financial Accounting Standards Board.  Each of these pronouncements, as applicable, has been or will be adopted by the Company.  Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

NOTE 2 - GOING CONCERN AND MANAGEMENT LIQUIDITY PLANS

As of August 31, 2017, the Company had an accumulated deficit of approximately $5,311,425. For the three months ended August 31, 2017 and 2016, the Company incurred operating losses of $325,928 and $437,128 respectively, and used cash in operating activities of $356,202 and $136,862, respectively.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  The Company recognizes it will need to raise additional capital in order to fund operations, meet its payment obligations and execute its business plan.  There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will generate revenues, become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds on favorable terms, it will have to develop and implement a plan to further extend payables and to raise capital through the issuance of debt or equity on less favorable terms until sufficient additional capital is raised to support further operations.  There can be no assurance that such a plan will be successful.  If the Company is unable to obtain financing on a timely basis, the Company could be forced to sell its assets, discontinue its operations and/or pursue other strategic avenues to commercialize its technology.

Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP for interim consolidated financial statements, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business.  The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily represent realizable or settlement values.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

The Company’s property, plant and equipment consist of the following:

Depreciation expense was $2,470 and $3,722 for the three months ended August 31, 2017 and 2016, respectively.

On July 11, 2016, the Company exchanged its trade show booth and manufacturing facility assets with a net book value of $94,926 for the return of 5,000,000 shares of the Company’s common stock (see Note 4, 5). The Company currently outsources its product manufacturing to third parties.

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NOTE 4 - RELATED PARTIES

As of August 31, 2017, the Company owes a former COO of the Company $46,417, which is unsecured, non-interest bearing and due on demand. The former COO resigned as our Chief Operating Officer on September 17, 2015.

As of August 31, 2017, the Company owes a former CFO of the Company $27,500, which is unsecured, non-interest bearing and due on demand. The former CFO started working for the Company on August 1, 2014 and resigned in April 2015.

As of August 31, 2017, the Company owes the former President of the Company $46,791 for loans, general and administration expenses and travel expenses paid on behalf of the Company, and consulting services provided by the former President. The amount includes a loan for $18,762 which bears interest at 8.0% and matured on May 26, 2017.  The note currently is in default and bears interest at the default interest rate of 15.0% beginning May 26, 2017.  Total accrued interest is $2,249 as of August 31, 2017.  The remaining amount due of $25,781 is unsecured, non-interest bearing and due on demand.  The former President resigned as President, CEO, CFO, and as a director of the Company on September 18, 2015.

As of August 31, 2017, the Company owes the spouse of the former President of the Company $4,000 for general and administration support services provided to the Company. The amount is unsecured, non-interest bearing and due on demand.

As of August 31, 2017, the Company had loans of $10,825 from shareholders. These amounts are unsecured, non-interest bearing and have no fixed terms of repayment. The Company has not yet formalized loan agreements for these loans.

On July 11, 2016, the Company entered into a Rescission Agreement and Mutual Release (the “Rescission Agreements”) separately with two shareholders, whereby the shareholders agreed to rescind any business agreements, including existing consulting agreements, whether verbal or in writing, and in conjunction with such rescission, agreed to return an aggregate total of 5,500,000 shares of the Company’s Common Stock to the Company for cancellation. In conjunction with Rescission Agreements, the Company and the shareholders consented to a mutual release of any claims, current or contemplated. In connection with one of the Agreements, the Company exchanged its trade show booth and manufacturing facility assets with a net book value of $94,926 for the return of 5,000,000 shares of the Company’s common stock, which is included in the 5,500,000 aggregate shares returned.  In connection with the second Rescission Agreement, the shareholder agreed to rescind their consulting agreement and return 500,000 shares of the Company’s common stock.  These 5,500,000 shares are reflected as treasury stock as of August 31, 2017 and May 31, 2017.

NOTE 5 - CAPITAL STOCK

Effective November 1, 2013, the number of common shares authorized that may be issued by the Company increased from 75,000,000 common shares to 200,000,000 common shares with a par value of $0.001 per share.

Effective November 1, 2013, the Company completed a 25:1 forward split of the Company's issued and outstanding common stock.  Every one share of common stock issued and outstanding prior to the split was exchanged for 25 post-split shares of common stock.  All share and per share amounts have been restated retroactively.

From October 2016 through May 2017, the Company completed private placements (the “October PPM”) consisting of 3,760,000 units at a price of $0.10 per share for total proceeds of $376,000.  Each unit consisted of one share of our common stock and two warrants to purchase one share of common stock.  The warrants have an exercise price of $0.15 and have a three-year term.  These units include 350,000 units not yet issued as of this filing date that are reflected as common stock subscribed totaling $35,000 as of August 31, and May 31, 2017.

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As consideration for entering into the October PPM, the Company granted to participating investors in the Company’s previous private placements new terms on their common stock purchase warrants acquired under the previous private placements (“Previous Warrants”) as follows: (1) change the exercise term of the Previous Warrants from the date of issuance date to three years, (2) reduce the exercise price of the Previous Warrants from $0.20 to $0.15, and (3) add an additional warrant for one share of common stock with the foregoing terms.  There was no additional accounting required for these warrants.

From June 2017 through August 2017, the Company completed private placements consisting of 4,518,222 units at a price of $0.10 per share for total proceeds of $451,822.  Each unit consisted of one share of our common stock and two warrants to purchase one share of common stock.  The warrants have an exercise price of $0.15 and have a three-year term.  These units have not yet been issued as of this filing date and are reflected as common stock subscribed, totaling $451,822 as of August 31, 2017.

NOTE 6 - WARRANTS

As of August 31, 2017, there were 10,220,000 whole share purchase warrants outstanding and exercisable. The warrants have a weighted average remaining life of 1.95 years and a weighted average exercise price of $0.182 per whole warrant for one common share. The warrants had an aggregate intrinsic value of $0 as of August 31, 2017.

Whole share purchase warrants outstanding at August 31, 2017 are as follows:

NOTE 7 - COMMITMENTS

On September 9, 2013, the Company entered into an Asset Purchase Agreement whereby the Company agreed to acquire intellectual property as well as all related assets necessary for operating a plant growth enhancement product ("Plant Surfactant") manufacture and sale business. The agreement was closed on February 7, 2014. In consideration, the Company issued 12,500,000 shares of restricted common stock.  In addition, the Company also agreed to incorporate a subsidiary that will hold these assets and conduct operations, and execute a consulting agreement with the former President of the Company whereby he would receive $7,000 per month. The consulting agreement will become effective on the date that the Company raises a minimum of $500,000 to fund operations, which had not yet occurred as of the date of the former President’s resignation. The Company incorporated this subsidiary on October 21, 2016 with the state of South Dakota under the name American Water Sanitation, LLC, of which the Company has a 51% ownership.

On September 9, 2013, the Company entered into an Asset Purchase Agreement whereby the Company agreed to acquire certain equipment used in conjunction with the production, marketing and sale of the Plant Surfactant. The agreement closed on February 7, 2014. In consideration, the Company issued 5,000,000 shares of restricted common stock.  On July 11, 2016, this Asset Purchase Agreement was rescinded and the shares were returned to the treasury.

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On September 9, 2013, the Company entered into an Easement Agreement whereby the Company agreed to acquire the exclusive right to 10 acres of farm property located in Aylmer, Ontario, Canada, to operate as a demonstration farm in order to evaluate and exhibit the effects of using the plant surfactant for an initial term of 3 years. In consideration, the Company issued 2,500,000 shares of restricted common stock with a fair value of $25,200, which was recognized as a prepaid expense and is being amortized over the three-year term.  During the periods ended August 31, 2017 and 2016, the Company recognized $0 and $2,100, respectively, as rent expense, leaving a balance of $0 remaining as a prepaid expense as of August 31, 2017.

On July 18, 2016, the Company entered into an Exchange Agreement (the “Exchange Agreement”) separately with two shareholders, whereby on the Effective Date (as defined below) each shareholder agreed to (i) surrender 10,000,000 shares of Common Stock of the Company, and (ii) assign such Common Stock to the Company for cancellation thereof pursuant to an Assignment of Interest; and whereby, in exchange, the Company shall (i) cancel the Shareholder’s Common Stock, (ii) issue each shareholder 20,000 shares of a new class of capital stock, namely a Series A Preferred Stock of $0.001 par value (the “Exchange Stock”), and (iii) enter the exchange on the books and records of the Company. “Effective Date” means the date the Exchange Agreement, including the Assignment of Interest, has been fully executed and delivered, the Company has obtained shareholder approval of the establishment of the class of Series A Preferred Stock and the Certificate of Designation establishing the Series A Preferred Stock has been filed with the Nevada Secretary of State. The Effective Date has not yet occurred as of the date of this filing.

The Exchange Stock shall have a (a) redemption right, whereby each share of Exchange Stock shall be redeemable at $5.00 by the Company at such time that the Company (i) reports sales revenue of no less than $12,000,000 for any consecutive twelve (12) month period, (ii) reports earnings before interest, taxes, depreciation and amortization (EBITDA) of no less than $1,000,000 in any quarterly or annual report filed with the Securities Exchange Commission (the “SEC”), or (iii) achieves a current ratio (current assets divided by current liabilities) of 2.0 or greater as calculated based on any quarterly or annual report filed with the SEC; and a (b) Conversion Right, whereby each share of Exchange Stock shall be convertible by the holder into 500 shares of Common Stock of the Company, or back into their original amount of shares, upon (i) the Company filing a voluntary petition in bankruptcy, is adjudged bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, or (ii) Richard Kamolvathin, the Company’s current Chief Executive Officer resigns all of his positions from the Company and ceases to provide any services to the Company.

NOTE 8 - SUBSEQUENT EVENTS

Management has evaluated all activity and concluded that no subsequent events have occurred that would require recognition in these financial statements or disclosure in the notes to these financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management's current views with respect to future events and financial performance.  Forward-looking statements are projections in respect of future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology.  Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based.  Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” set forth in our Annual Report on Form 10-K for the fiscal year ended May 31, 2017, as filed with the U.S. Securities and Exchange Commission (“SEC”) on August 28, 2017, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.  These risks include, by way of example and not in limitation:

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substantial doubt about our ability to continue as a going concern;

·

our ability to obtain additional financing on terms that are acceptable to us or at all;

·

our ability to successfully commercialize our product to increase sales so that we are operationally profitable;

·

absence of contracts with customers or suppliers;

·

our ability to maintain and develop relationships with customers and suppliers;

·

the impact of competitive products and pricing or our ability to maintain pricing;

·

our ability to successfully acquire, develop or commercialize new products;

·

our expectation that the demand for our products services will eventually increase;

·

federal legislation and state legislative and regulatory initiatives relating to the agricultural industry;

·

supply constraints or difficulties;

·

general economic and business conditions;

·

our ability to successfully recruit and retain qualified personnel in order to continue our operations; and

·

our ability to successfully implement our business plan.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC.  We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law.  We believe that our assumptions are based upon reasonable data derived from and known about our business and operations.  No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

As used in this quarterly report and unless otherwise indicated, the terms “we,” “us,” “our,” “GroGenesis” or the “Company” refer to GroGenesis, Inc. and its wholly-owned Subsidiary, American Water Sanitation, LLC (“AWS”).  Unless otherwise specified, all dollar amounts are expressed in United States dollars.  Our common stock is currently listed on the OTC Market, Pink Tier, under the symbol “GROG.”

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Business Description and Corporate Overview

We are a sustainable agricultural services enterprise offering food growers and turf producers an organic, nano-surfactant that enhances soil and crop health.  Our flagship product, AgraBurst PRO™, is a proprietary, all-natural, non-GMO agricultural input which improves the ability of the plant (crop, turf, tree, vine etc.) to enhance the efficient access of added nutrients incorporated in fertilizers, resulting in less fertilizer needed as well as improved water retention in soil.  By optimizing the plant's uptake of applied pest and weed controls and fertilizers, producers can minimize other input costs while reducing the health risk to farm workers due to its non-toxic properties.  AgraBurst PRO™ (the “Product”) is formulated for organic and non-GMO producers and those food growers seeking to convert to non-GMO and organic food production.  We believe the application of our Product can begin the process of improving the health of the soil while reducing the use of conventional chemical agricultural inputs.  Our strategy is to capitalize on the convergence of consumer demand, retailer demand/compliance and legislative drive toward environmental responsibility.

AgraBurst PRO™ is a specialized proprietary, premium organic, nano-surfactant, non-ionic (neutral charge) formulation of high quality food-grade ingredients with beneficial soil health and plant stimulant properties with significant potential to increase yields.  It acts as an environmentally-safe additive to producers' spray solution that enhances delivery and absorption activity in both soil and plant tissue by reducing the surface tension between the spray droplet and leaf surface, creating an adhesive liquid bond.  The spray droplets spread across the leaf surface thereby increasing the coverage area and plant exposure, resulting in the spray droplets sticking to the leaf surface where absorption is maximized instead of running off the leaf surface.  The Product enables the spray droplet to penetrate the leaf’s surface barrier (a waxy layer known as the “cuticle”) to improve absorption into the plant’s tissue and more effectively deliver the most efficient and recognizable form of nutrient, fertilizer and microbiology solutions.  The Product creates a Cationic Exchange Capacity (CEC) substrate, so that positively charged nutrients are held within the soil and not leached away and reducing the amount of fertilizer needed.

Our Product performs as a purified and activated organic matter carbon source and serves as an ideal additive to improve and accelerate the performance of all fertilizer programs.  It is non-toxic, completely biodegradable and, unlike synthetic chemicals or petroleum-based surfactants, will not bio-accumulate in the environment and tie up fertilizers and other valuable trace elements.  By decreasing water evaporation from the soil and increasing water retention, the Product renders plants to be more drought-resistant by developing stronger roots which are more able to withstand adverse weather conditions (wind and drought) and reach nutrients and water not available near the surface of the soil.

The Product also converts sustained plant energy into having a higher sugar holding capacity by acting as an organic electrolyte.  It not only increases the plant’s oxygen uptake capacity and nutrient conversion through photosynthesis by improving chlorophyll production resulting in greener and healthier leaves, but also increases the stomata (root) opening and transpiration (sweating), which is the primary nutrient exchange for soil microbiology which results in plants being fed more efficiently.  The foliar nano-surfactant improves the plant’s enzymatic processes, resulting in the stimulation of the plant’s immune system, reducing the need for pest and fungicide control application.  The plant’s natural oils in the formulation protect from infection and deter pests and fungus.  Significantly for the enhancement of soil health, AgraBurst PRO™ also stimulates microbial activity in the soil to de-compact soil with the natural plant extracts that provide vital trace elements and minerals which nutritionally supplement both the plant and soil microorganisms.

We were incorporated pursuant to the laws of Nevada on May 19, 2010 under the name Lisboa Leisure, Inc. On October 18, 2013, we amended our articles of incorporation in order to change our name to GroGenesis, Inc. and to affect a forward split of our issued and outstanding shares of common stock such that every one share of common stock issued and outstanding prior to the split be exchanged for 25 post-split shares of common stock and that the Company's post-forward split authorized capital consisted of 200,000,000 shares of common stock with a par value of $0.001.  On November 1, 2013, we completed a forward split of our common stock such that 25 new shares of common stock were exchanged for each then currently issued share of common stock outstanding.

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Use of Generally Accepted Accounting Principles (“GAAP”) Financial Measures

We use United States GAAP financial measures in the section of this report captioned “Management’s Discussion and Analysis or Plan of Operation” (MD&A), unless otherwise noted.  All of the GAAP financial measures used by us in this report relate to the inclusion of financial information.  This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere in this quarterly report.  All references to dollar amounts in this section are in United States dollars, unless expressly stated otherwise.

Recent Corporate Events

On September 8, 2017, Tyler Mackay was removed from his position as Chief Operating Officer of GroGenesis, Inc., a Nevada corporation (the “Company”).  The removal was a result of the Company desiring to pursue the next phase of its business plan and expand its management team in order to achieve its corporate goals.  On September 8, 2017, Michael Samp, age 46, was appointed as Chief Operating Officer of the Company.

Michael Samp, age 46, has been engaged in the development and growth of businesses on the Northern Plains for more than 25 years in the areas of business development, government relations, business operations and corporate finance.  Previous to his appointment as Chief Operating Officer of GroGenesis, Inc., Mr. Samp has been a consultant to GroGenesis, Inc. in the area of general management and operations since September 2015.  From November 2013 to May 2017, Mr. Samp served as Director of Business Operations for TNT Hospitality Group, leading business and operations of the 14 revenue centers of the $15M enterprise.  Prior to that, from November 2008 to November 2013, Mr. Samp served in management with Wal-Mart/Sam’s Club.  A former White House intern, Mr. Samp has consulted at executive level operations positions for 15 Super Bowls for the National Football League, was the project director for Ford Motor Company’s 100th Anniversary, and has worked with numerous Fortune 500 companies.  He was appointed in November of 2015 by South Dakota Governor Dennis Daugaard to serve as a member of The USS South Dakota (SSN790) Commissioning Committee.  Mr. Samp is an alumnus of Augustana University, a graduate of the University of South Dakota and completed his course work for his Master’s in Business (ABD) at the University of Sioux Falls.

Results of Operations

Comparison of the Three Months Ended August 31, 2017 to the Three Months Ended August 31, 2016

Revenue

We had revenues of $62,586 for the three months ended August 31, 2017, as compared to revenues of $0 for the same period in 2016.  Revenue increased by $62,586 as a result of intial sales of our AgraBurst PRO™.

Operating Expenses

Our expenses for the three months ended August 31, 2017 are summarized as follows in comparison to our expenses for the fiscal year ended May 31, 2016:

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Operating expenses decreased $89,236 from the three months ended August 31, 2016 compared to the three months ended August 31, 2017, an decrease of 20%.  The primary reason is a $176,273 decrease in consulting fees for the three months ended August 31, 2017, which includes a decrease of $210,273 in stock-based compensation.  General and administrative expenses increased $87,100 due primarily to increased travel and travel relate expenses during the three months ended August 31, 2017.

Other Income and Expense

Other income and expense for the three months ended August 31, 2017 and 2016 are summarized as follows:

Our loss on dispoal of fixed assets of $4,025 was a result of the disposal of a vehicle during the three months ended August 31, 2017.  

Liquidity and Capital Resources

As of August 31, 2017, we had cash on hand of $88,725 and a working capital deficiency of $303,961 as compared to cash equivalents on hand of $1,513 and a working capital deficiency of $426,475 as of May 31, 2017. The decrease in working capital deficiency is mainly due to a decrease in net loss, an increase in accounts receivable, and a decrease in related party payables for the three months ended August 31, 2017.

Private Placement Offerings

From October 2016 through May 2017, the Company completed private placements (the “October PPM”) consisting of 3,760,000 units at a price of $0.10 per share for total proceeds of $376,000. Each unit consisted of one share of our common stock and two warrants to purchase one share of common stock. The warrants have an exercise price of $0.15 and have a three-year term. These units include 350,000 units not yet issued as of this filing date that are reflected as common stock subscribed totaling $35,000 as of May 31, 2017.

As consideration for entering into the October PPM, the Company granted to participating investors in the Company’s previous private placements new terms on their common stock purchase warrants acquired under the previous private placements (“Previous Warrants”) as follows: (1) change the exercise term of the Previous Warrants from the date of issuance date to three years, (2) reduce the exercise price of the Previous Warrants from $0.20 to $0.15, and (3) add an additional warrant for one share of common stock with the foregoing terms.  There was no additional accounting required for these warrants.

From June 2017 through August 2017, the Company completed private placements consisting of 4,518,222 units at a price of $0.10 per share for total proceeds of $451,822. Each unit consisted of one share of our common stock and two warrants to purchase one share of common stock. The warrants have an exercise price of $0.15 and have a three-year term.  These units have not yet been issued as of this filing date that are reflected as common stock subscribed totaling $451,822 as of August 31, 2017.

Going Concern

The audited financial statements contained in this annual report on Form 10-K have been prepared assuming that the Company will continue as a going concern. We have accumulated losses through the period to August 31, 2017 of approximately $5 million as well as negative cash flows from operating activities.  Presently, we do not have sufficient cash resources to meet our plans in the twelve months following August 31, 2017. These factors raise substantial doubt about our ability to continue as a going concern.

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Management is in the process of evaluating various financing alternatives in order to finance our research and development activities and general and administrative expenses. These alternatives include raising funds through public or private equity markets and either through institutional or retail investors. Although there is no assurance that we will be successful with our fund-raising initiatives, management believes that we will be able to secure the necessary financing as a result of ongoing financing discussions with third party investors and existing shareholders.

The financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent on our ability to obtain additional financing as may be required and ultimately to attain profitability.  If we raise additional funds through the issuance of equity, the percentage ownership of current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all.  If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our future plans for developing our business and achieving commercial revenues.  If we are unable to obtain the necessary capital, we may have to cease operations.

Working Capital Deficiency

The increase in current assets is mainly due to an increase of cash, accounts receivable and prepaid expenses. The increase in current liabilities is primarily due to increase in accounts payable and accrued expenses. Management is attempting raise more capital in order to increase the Company’s cash position and pay down current liabilities.

Cash Flows

The increase in net cash used in operating activities in the three months ended August 31, 2017, as compared to the previous year is due primarily to an increase in cash-basis operating expenses.  The increase in cash used in investing activities is due to purchases of computer equipment during the three months ended August 31, 2017.  The increase in cash provided by financing activities is due to an increase in proceeds from the sale of common stock subscriptions.

Future Financing

Given our cash position of $88,725 as of August 31, 2017, management believes that our cash on hand and working capital are not insufficient to meet our current anticipated cash requirements.  We will require additional funds to implement our growth strategy for our business.  In addition, while we have received capital from various private placements that have enabled us to fund our operations, these funds have been largely used to develop our processes and purchase initial amounts of inventory, although additional funds are needed for other corporate operational and working capital purposes.  Therefore, not including the cash flow impact of any increases in our sales, we estimate that will need to raise an additional $1,000,000 to cover all of our operational expenses through the balance of this fiscal year ended May 31, 2018.  These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares.

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There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms.  The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Any failure to secure additional financing may force us to modify our business plan.  In addition, we cannot be assured of profitability in the future. If we are not able to obtain the additional financing on a timely basis should it be required, or generate significant material revenues from operations, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in the notes to our financial statements included herein for the fiscal year ended May 31, 2017.

Recently Adopted Accounting Pronouncements

For reference to a complete list of recently adopted accounting pronouncements, these consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended May 31, 2017 (including the notes thereto) set forth on Form 10-K.

Newly Issued Accounting Pronouncements

For reference to a complete list of newly issued accounting pronouncements, these consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended May 31, 2017 (including the notes thereto) set forth on Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Applicable

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our management carried out an evaluation, with the participation of our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act), as of the period covered by this report. Disclosure controls and procedures are defined as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation, our management (including our Chief Executive Officer and Chief Financial Officer) concluded that our disclosure controls and procedures were not effective as of August 31, 2017, based on the material weaknesses defined below:

i)

Lack of Formal Policies and Procedures. We utilize a third party independent contractor for the preparation of our financial statements. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions. The third party independent contractor is not involved in the day-to-day operations of our Company and may not be provided information from management on a timely basis to allow for adequate reporting/consideration of certain transactions.

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ii)

Audit Committee and Financial Expert.  We do not have a formal audit committee with a financial expert, and thus we lack the board oversight role within the financial reporting process.

iii)

Insufficient Resources.  We have insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls.  As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.

iv)

Entity Level Risk Assessment.  We did not perform an entity level risk assessment to evaluate the implication of relevant risks on financial reporting, including the impact of potential fraud related risks and the risks related to non- routine transactions, if any, on internal control over financial reporting.  Lack of an entity-level risk assessment constituted an internal control design deficiency which resulted in more than a remote likelihood that a material error would not have been prevented or detected, and constituted a material weakness.

We are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the near term, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.

Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Management believes that despite our material weaknesses set forth above, our condensed consolidated financial statements for the quarter ended August 31, 2017 are fairly stated, in all material respects, in accordance with U.S. GAAP.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended August 31, 2017 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.  We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or has a material interest adverse to our company.

ITEM 1A. RISK FACTORS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

From June 2017 through August 2017, the Company completed private placements consisting of 4,518,222 units at a price of $0.10 per share for total proceeds of $451,822.  Each unit consisted of one share of our common stock and two warrants to purchase one share of common stock.  The warrants have an exercise price of $0.15 and have a three-year term.  These units have not yet been issued as of this filing date that are reflected as common stock subscribed totaling $451,822 as of August 31, 2017.

This sale and issuance of common stock was exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involved in any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D thereunder.  The Company intends to use the proceeds of the sale for general working capital purposes.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

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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, thereunto duly authorized.

GROGENESIS, INC.

By:  /s/ Richard D. Kamolvathin

Richard D. Kamolvathin

Chief Executive Officer and Chief Financial Officer

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Date:  October 16, 2017

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