Financial Gravity Companies, Inc. 10-K

Item 1. BUSINESS. General Financial Gravity Companies, Inc. (“Financial Gravity” or the “Company”) was incorporated under the laws of the State of Nevada on December 5, 2005. Its principal executive offices are located at 800 N. Watters Rd., Suite 120, Allen, Texas 75013. The Company’s telephone number is 469- 342-9100. The Company’s stock symbol is FGCO. Unless otherwise provided in footnotes, all references from this point forward in this Report to “Financial Gravity,” “we,” “us,” “our company,” “our,” or the “Company” refer to the combined Financial Gravity Companies, Inc. entity, together with its subsidiaries. Business Overview The Company was incorporated in Nevada on December 5, 2005 as Kat Racing, Inc. On January 4, 2013, the Articles of Incorporation were amended to change the name of the Company to Prairie West Oil & Gas, Ltd. On July 26, 2013, the Articles of Incorporation were amended to change the name of the Company to Pacific Oil Company. On October 31, 2016, following a reverse merger transaction (the “Merger”), the Articles of Incorporation were amended to change the name of the Company to Financial Gravity Companies, Inc. The accounting acquirer (legal acquiree) in the Merger, Financial Gravity Holdings, Inc. (“Financial Gravity Holdings”), was incorporated in Texas on September 29, 2014. On the effective date of the Merger, the business of Financial Gravity Holdings became the only business of Pacific Oil Company (currently named Financial Gravity Companies, Inc.). Also pursuant to the Merger, each of the shares of Financial Gravity Holdings common stock issued and outstanding prior to the Merger was automatically converted into and exchangeable for an equivalent number of fully paid and non-assessable shares of Company common stock. The accounting acquirer (legal acquiree) in the reverse merger transaction, Financial Gravity Holdings, is now a subsidiary of the Company. Business Legacy, Inc., founded in 2002, and Pollock Advisory Group, founded in 2007, were added on September 29, 2014, as subsidiaries. During fiscal year 2015, the Company acquired as additional subsidiaries, Cloud9b2b, LLC and SASH Corporation (dba Metro Data Processing). During fiscal year 2016, the Company acquired an additional subsidiary, Tax Coach Software, LLC. The Company and its subsidiaries deliver a wide range of accounting, tax planning and management services to high net worth individuals and businesses nationwide. Organic growth has come in four key areas. · Partner Program · Tax Services, including Tax Blueprint® and ongoing Tax Operating System® services · Wealth Management Services · Other Products and Services (Insurance and other miscellaneous products and services). All future growth is expected to come from these four key areas, as well as through organic growth, acquisitions, and strategic alliances. Products and Services The following outline briefly describes Financial Gravity’s various subsidiaries and the products and services they offer: 1 Financial Gravity Holdings, Inc. Financial Gravity Holdings engages in the acquisition and integration of financial and other businesses which will deliver a wide range of accounting, tax planning and management services to high net worth individuals and businesses in the Dallas/Fort Worth region. Financial Gravity Operations, Inc. Financial Gravity Operations manages operational expenses for the shared services of the subsidiaries. This entity integrates the delivery of Financial Gravity Tax, Business, and Wealth Solutions to Financial Gravity’s growing customer base around the country. This integration is what sets Financial Gravity apart from its peers. Financial Gravity Tax, Inc. formerly Business Legacy, Inc. Financial Gravity Tax is a bookkeeping, tax planning and payroll service provider for small companies and individuals. Financial Gravity has developed a precise procedure that has proven to be very successful in delivering lower taxes, higher profit, and greater wealth for small business owners. The process begins with an extensive and comprehensive review of the client’s needs. This assessment sets the requirements for the program that is subsequently developed. The second step is to use the client’s custom Tax Blueprint® to build that business entity and documentation that captures the identified savings. Financial Gravity Wealth, Inc. formerly Pollock Advisory Group, Inc. Financial Gravity Wealth is a registered investment advisor and provides asset management services. An RIA is an advisor or firm engaged in financial planning and wealth management business and is registered either with the Securities and Exchange Commission (SEC) or state securities authorities. An RIA has a fiduciary duty to its clients, which means that the RIA has a fundamental obligation to provide suitable investment advice and always act in the clients’ best interests. Financial Gravity Business, LLC formerly Cloud9b2b, LLC Financial Gravity Business provides business consulting services to Small Business Owners that identify way to leverage a business’ current assets (people, platforms and processes) and reduce exposure to risk, both short-term and long-term, while simplifying the business and increasing profitability. Financial Gravity Business is the only non-product centric business system for financial advisors that helps them serve the needs of the small business owner without needing to sell a financial services product such as a life insurance policy or a 401(k) plan. To broaden the skillset of CPAs, the Company has created the Certified Tax Master® designation and partner program for CPA’s and Enrolled Agents. Financial Gravity Ventures, LLC formerly Cloud9Accelerator, LLC Financial Gravity Ventures holds acquired companies and business assets until they are integrated into the main stream Financial Gravity business structure. Sash Corporation dba Metro Data Processing Metro Data Processing provides payroll services, software and support solutions to business owners. The business accounts of Sash Corporation dba Metro Data Processing (MDP) were sold to Automatic Data Processing (ADP) during fiscal 2018. Subsequent to the sale, MDP filed for dissolution and all financial accounts were closed prior to fiscal year end. Tax Master Network, LLC formerly Tax Coach Software, LLC Tax Master Network® provides three primary services including monthly subscriptions to the “TaxCoach” software system, coaching and email marketing services. Tax Coach Software (TCS) was a key acquisition in fiscal year 2016. TCS supports over 550 CPA and Enrolled Agent professionals, training them to add crucial tax planning services to support clients. TCS developed the Certified Tax Master® for this group and rolled out new client systems in mid-2016. Competition The market is comprised of a very large selection of varied suppliers that provide financial advisory, accounting, and tax needs. These include accounting firms, certified public accountants (“CPA's”), bookkeeping businesses, estate planners, lawyers, wealth management consultants, estate offices, private offices, banks, and large financial institutions. However, many of these firms are either too big to provide the customized services that small business owners are seeking, are too expensive, or simply do not have the customized services that Financial Gravity offers to meet the needs of small business owners and high net worth individuals. Financial Gravity has a unique product and service delivery model that has been proven to work over the past years. Financial Gravity believes that its superior products, services and overall customer service will enable it to achieve its target sales and revenue. 2 In addition, Financial Gravity considers a number of its small to medium-sized business competitors to potentially be attractive acquisition targets. Intellectual Property Financial Gravity maintains copyrights or trademarks on all of its printed marketing materials, the financialgravity.com website and other web pages, and proprietary software. Financial Gravity’s goal is to preserve its trade secrets and operate without infringing on the proprietary rights of other parties. To help protect its proprietary know-how, which is not patentable, Financial Gravity currently relies and will in the future rely on trade secret protection and confidentiality agreements to protect its interests. To this end, Financial Gravity requires all its employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to Financial Gravity of the ideas, developments, discoveries and inventions important to its business. Employees As of September 30, 2018, the Company had approximately 16 full-time employees. None of the Company’s employees are covered by a collective bargaining agreement. The Company believes that it maintains good relations with its employees. Legal Proceedings From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and other legal matters, arising in the ordinary course of its business or otherwise. A subsidiary of the Company is currently involved in one legal proceeding, the outcome of which will not be material to its ability to operate or market its services, its consolidated financial position, results of operations or cash flows. Government Regulation The services provided by Financial Gravity, through its subsidiaries, are extensively regulated by federal and state authorities in the United States. Financial Gravity believes it is in compliance with federal and state qualification and registration requirements in order that it may continue to provide services to its clients consistent with applicable laws and regulations.