What changed in this filing

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Item 1. Financial Statements

2019-02-19 compared with 2018-08-22 · 380 added, 476 removed, 561 unchanged (60% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2018

December 31, 2018

September 30, 2018

CURRENT ASSETS

Cash and cash equivalents

8 unchanged sentences

Intellectual Property

Total other assets

LIABILITIES AND STOCKHOLDERS’

2 unchanged sentences

Accrued expenses

Deferred revenue

Line of Credit

Notes payable

1 unchanged sentence

NOTES PAYABLE

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’

1 unchanged sentence

$0.001 par value;

35,837,900 shares issued and outstanding as of June 30, 2018 and 35,737,900 shares issued and outstanding as of September 30, 2017.

35,837,900 shares issued and outstanding as of December 31, 2018 and 35,737,900 shares issued and outstanding as of September 30, 2018

Additional paid-in capital

2 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’

The accompanying notes are an integral part

The accompanying notes are in integral part

of these consolidated financial statements.

3 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

Investment management fees

Service income

Rental income

Total revenue

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Net operating loss

OTHER INCOME (EXPENSE)

Other (expense) income

OTHER EXPENSE

Interest expense

Total other (expense) income

$ (1,051,141 )

EARNINGS PER SHARE - Basic and Diluted

The accompanying notes are an integral part

Total other expense

LOSS PER SHARE - Basic and Diluted

The accompanying notes are in integral part

of these consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

$ (1,051,141 )

Adjustments to reconcile net loss to net cash used in operating activities

8 unchanged sentences

Deferred revenue

Pre-merger liabilities

Net cash used in operating activities

1 unchanged sentence

Cash paid for purchase of property and equipment

Cash from the sale of investment

Purchases of trademarks

Net cash (used in) provided by investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

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Net cash provided by financing activities

NET CHANGE IN CASH AND CASH EQUIVALENTS

TOTAL INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

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Cash paid during the period for:

Non-cash activities:

Settlement of payables owed by legacy Pacific Oil Company Stockholders

The accompanying notes are an integral part

The accompanying notes are in integral part

of these consolidated financial statements.

4 unchanged sentences

Financial Gravity Companies, Inc.

and Subsidiaries

(the “Company”) located in Allen, Texas and provides integrated tax, business, and financial solutions to small businesses,

and Subsidiaries (the

“Company”) is located in Allen, Texas and provides integrated tax, business, and financial solutions to small businesses,

small business owners and high net worth individuals.

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Holdings, Inc., Financial Gravity Operations, Inc., Financial Gravity Tax, Inc., Financial Gravity Wealth, Inc., Financial Gravity

Business, LLC, Financial Gravity Ventures, LLC., SASH Corporation (doing business as Metro Data Processing) and Tax Master Network,

LLC (formally known as Tax Coach Software, LLC.)

Business, LLC, Financial Gravity Ventures, LLC., and Tax Master Network, LLC.

(“TMN”) (formerly known as Tax Coach

Software, LLC.)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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recorded when received.

The allowance for doubtful accounts was $0 as of June 30, 2018 and $14,482 as of September 30, 2017.

The allowance for doubtful accounts was $0 as of December 31, 2018 and $21,876 as of September 30, 2018.

In the normal course of business, the Company

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a four-year estimated life.

During each of the three and nine months ended June 30, 2018 and 2017, the Company recorded amortization

expense of $2,806 and $8,418, respectively, on this intangible asset, which is included in depreciation and amortization expense

in the accompanying consolidated statements of operations.

Accumulated amortization at June 30, 2018 was $30,868 and $22,450 at

September 30, 2017.

During each of the quarters ended December 31, 2018 and 2017, the Company recorded amortization expense

of $2,806, respectively, on this intangible asset, which is included in depreciation and amortization expense in the accompanying

consolidated statements of operations.

Accumulated amortization at December 31, 2018 was $36,481 and $33,675 at September 30, 2018.

Proprietary Content

The proprietary content acquired as

a part of the TMN purchase has been recognized in the accompanying consolidated balance sheets at $525,100, the value

attributed to such content on the date of the purchase.

The proprietary content is being amortized on a straight-line basis

over an eight-year estimated life.

During each of the three and nine months ended June 30, 2018 and 2017, the Company

recorded amortization expense of $16,409 and $49,227 on this intangible asset, which is included in depreciation and

amortization expense in the accompanying consolidated statements of operations.

Accumulated amortization at June 30, 2018 was

$180,503 and $131,276 at September 30, 2017.

The proprietary content acquired as a part

of the TMN purchase has been recognized in the accompanying consolidated balance sheets at $525,100, the value attributed to such

content on the date of the purchase.

The proprietary content is being amortized on a straight-line basis over an eight-year estimated

During each of the quarters ended December 31, 2018 and 2017, the Company recorded amortization expense of $16,410 on this

intangible asset, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Accumulated amortization at December 31, 2018 was $213,321 and $196,912 at September 30, 2018.

The trade name acquired as a part of the

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Management has determined that the trade name has an indefinite life and does not consider the value

of the trade name recorded in the accompanying consolidated balance sheets to be impaired as of June 30, 2018 and September 30,

of the trade name recorded in the accompanying consolidated balance sheets to be impaired as of December 31, 2018 and September

Non-compete Agreements

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five-year term of the non-compete clause of the agreement.

During each of the three and nine months ended June 30, 2018 and 2017,

the Company recorded amortization expense of $1,315 and $3,945, respectively, on this intangible asset, which is included in depreciation

and amortization expense in the accompanying consolidated statements of operations.

Accumulated amortization at June 30, 2018

was $14,465 and $10,520 at September 30, 2017.

During each of the quarters ended December 31, 2018 and 2017, the Company

recorded amortization expense of $1,315 on this intangible asset, which is included in depreciation and amortization expense in

the accompanying consolidated statements of operations.

Accumulated amortization at December 31, 2018 was $17,095 and $15,780 at

September 30, 2017.

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

Financial Gravity’s goal is to preserve its trade secrets and operate without infringing on the proprietary rights

of other parties.

The Company accounts for Intellectual

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have an indefinite life and do not consider the value of Intellectual Property recorded in the accompanying consolidated balance

sheet to be impaired as of June 30, 2018 and September 30, 2017.

sheet to be impaired as of December 31, 2018 and September 30, 2018.

Goodwill represents the excess of the value

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The Company assesses qualitative factors in order

to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The qualitative

factors evaluated by the Company include:

macro-economic conditions of the local business environment, overall financial performance,

and other entity specific factors as deemed appropriate.

If, through this qualitative assessment, the conclusion is made that it

is more likely than not that a reporting unit’s fair value is less than its carrying amount, a two-step impairment test is

Management determined, by assessing the qualitative factors, that it is more likely than not that the fair value of

the reporting unit is greater than its carrying value.

Management does not consider the value of goodwill recorded for TMN in the

accompanying consolidated balance sheets to be impaired as of June 30, 2018 and September 30, 2017.

to determine whether it is more likely than not that the fair value of a reporting unit is less than it’s carrying amount.

The qualitative factors evaluated by the Company include:

macro-economic conditions of the local business environment, overall

financial performance, and other entity specific factors as deemed appropriate.

If, through this qualitative assessment, the conclusion

is made that it is more likely than not that a reporting unit’s fair value is less than it’s carrying amount, a two-step

impairment test is performed.

Management determined, by assessing the qualitative factors, that it is more likely than not that

the fair value of the reporting unit is greater than it’s carrying value.

Management does not consider the value of goodwill

recorded for TMN in the accompanying consolidated balance sheets to be impaired as of December 31, 2018 and September 30, 2018.

The fair values of the assets acquired,

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tax benefits as a component of income tax expense.

There was no accrued interest or penalties as of June 30, 2018 and September

There was no accrued interest or penalties as of December 31, 2018 and September

From time to time, the Company is audited

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by dividing net losses available to common stockholders by the weighted average number of common shares outstanding for the reporting

Average number of common shares were 35,837,900 and 34,886,089 for the three months ended June 30, 2018 and 2017, respectively.

Average number of common shares were 35,827,925 and 35,137,625 for the nine months ended June 30, 2018 and 2017, respectively.

For the periods ended June 30, 2018 and 2017, 3,430,646 and 2,340,171 common stock options and warrants were excluded from diluted

loss per share as they were antidilutive.

Average number of common shares were 35,837,900 and 35,812,952 for the quarters ended December 31, 2018 and 2017, respectively.

For the quarter ended December 31, 2018,

approximately 3,840,121 common stock shares were not added to the diluted average shares because inclusion of such shares would

be antidilutive.

The antidilutive shares for December 31, 2018 include 350,000 warrants and 3,490,121 in options.

For the quarter

ended December 31, 2017, approximately 3,430,646 common stock shares were not added to the diluted average shares because inclusion

of such shares would be antidilutive.

The antidilutive shares for December 31, 2017 include 350,000 warrants and 3,080,646 in

Revenue Recognition

3 unchanged sentences

professional services to manage client investments.

FG Tax and MDP generate service income

from consulting and other professional services performed.

FG Tax generates service income from consulting

and other professional services performed.

Commission revenue is derived from the

5 unchanged sentences

revenue in the accompanying consolidated balance sheets.

Tax Master Network (formally known

as Tax Coach Software) has 3 types of services that are charged and collected on a month to month subscription basis (Tax Coach

basic membership, All-Stars coaching, and Wire Service weekly broadcast email).

None of these programs come with a long-term commitment

or contract, and there is no up-front payment beyond the monthly subscription fee.

Cancellations are processed within the month

requested and memberships are closed at the end of the period for which the most recent payment was made.

Members are not entitled

to refunds for unused memberships.

Tax Master Network has 3 types of services

that are charged and collected on a month to month subscription basis (Tax Master basic, elite, and advanced membership, All-Stars

coaching, Networker and Wire Service weekly broadcast email).

None of these programs come with a long-term commitment or contract,

and there is no up-front payment beyond the monthly subscription fee.

Cancellations are processed within the month requested and

memberships are closed at the end of the period for which the most recent payment was made.

Members are not entitled to refunds

for unused memberships.

Recent Accounting Pronouncement

In May 2014, the FASB issued

Accounting Standards Update No.

2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes

nearly all existing revenue recognition guidance under U.S.

The guidance requires entities to recognize revenue using

the following five-step model:

identify the contract with a customer, identify the performance obligations in the contract,

determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize

revenue as the entity satisfies each performance obligation.

Adoption of this standard could result in retrospective

application, either in the form of recasting all prior periods presented or a cumulative adjustment to equity in the period

The guidance was effective for annual and interim reporting periods beginning after December 15, 2017.

On October 1, 2018 we adopted ASU

2014-09 using the full retrospective method.

The Company completed its review of its material revenue streams and determined

that there will be no impact to its consolidated financial statements, results of operations or liquidity.

When comparing the

Company’s current revenue recognition to the new applied revenue recognition under Accounting Standards Codification

(“ASC”) 606, there was no change to the amount or timing of revenue recognized.

Therefore, no quantitative

adjustment was required to be made to the prior periods presented on the unaudited condensed consolidated financial

statements after the adoption of ASC 606.

Advertising costs are charged to operations

when incurred.

Advertising and marketing expense for the three months ended June 30, 2018 and 2017 was $67,783 and $131,508, respectively;

and $206,018 and $307,977 for the nine months ended June 30, 2018 and 2017.

Advertising and marketing expense were $31,644 and $60,937 for the quarters ended December 31, 2018 and 2017, respectively.

Stock-Based Compensation

1 unchanged sentence

the fair value of stock-based compensation awards as wages in the accompanying statements of operations on a straight-line basis

over the vesting period, using the Black-Scholes option pricing model, which is based on risk-free rates of 0.85% to 2.55% in 2018

and 0.97% in 2017, dividend yield of 0%, expected life of 2 years and volatility of 43% to 137%.

over the vesting period, using the Black-Scholes option pricing model, which is based on risk-free of 2.89% rates in 2019 and 1.49%

to 2.55% in 2018, dividend yield of 0%, expected life of 2 years and volatility of 35% to 40%.

Use of Estimates

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growth and establishment of a stronger brand.

The Company is actively seeking growth

of its service offerings, both organically and via new client relationships.

Management, in the ordinary course of business, is

trying to raise additional capital through sales of common stock as well as seeking financing via equity or debt, or both from

third parties.

On May 23, 2017, the Company and GHS Investments,

LLC (“GHS Investments”) entered into an Equity Financing Agreement (the “Agreement”).

The Agreement was

filed as an exhibit to a registration statement on Form S-1, filed with the Securities and Exchange Commission on September 18,

The Agreement contemplates a series of transactions, pursuant to which the Company will “put”

shares of its common

stock to GHS in consideration of the payment to the Company of eighty percent (80%) of the “Market Price”

of such shares.

“Market Price”

shall mean the average of the two lowest trading prices of the Company’s Common Stock during the

ten (10) consecutive trading days preceding the receipt of the applicable put notice.

Accordingly, on each instance the Company

exercises a put option, the Company will know in advance, both the number of shares issuable upon exercise of the put option, and

the dollar amount of the purchase price for such shares.

The maximum purchase price for shares to be purchased by GHS Investments

under the Agreement is $11,000,000.

To facilitate the sale of the shares so purchased by GHS Investments, the Company agreed to

file a registration statement with the Securities and Exchange Commission.

The Company also entered into a Registration Rights

Agreement with GHS Investments, pursuant to which the Company has agreed to provide certain registration rights under the Securities

Act of 1933, the rules and regulations promulgated thereunder, and applicable state securities laws.

The Agreement will terminate

(i) when GHS Investments has purchased an aggregate of $11,000,000 of the common stock of the Company, or (ii) 36 months after

the effective date of the Agreement, or (iii) at such time that the registration statement is no longer in effect.

Additionally, the Company is also actively

seeking growth of its service offerings, both organically and via new client relationships.

Management, in the ordinary course

of business, is trying to raise additional capital through sales of common stock as well as seeking financing via equity or debt,

or both from third parties.

There are no assurances that additional financing will be available on favorable terms, or at all.

If additional

financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead

expenditures.

The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s

business, financial condition and results of operations.

Moreover, the sale of additional equity securities to raise financing

will result in additional dilution to the Company’s stockholders and incurring additional indebtedness could involve an increased

debt service cash obligation, the imposition of covenants that restrict the Company’s operations or the Company’s ability

to perform on its current debt service requirements.

The consolidated financial statements do not include any adjustments that

might be necessary if the Company is unable to continue as a going concern.

If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives

and overhead expenditures.

The failure to adequately fund its capital requirements could have a material adverse effect on the

Company’s business, financial condition and results of operations.

Moreover, the sale of additional equity securities to

raise financing will result in additional dilution to the Company’s stockholders and incurring additional indebtedness could

involve an increased debt service cash obligation, the imposition of covenants that restrict the Company’s operations or

the Company’s ability to perform on its current debt service requirements.

The consolidated financial statements do not include

any adjustments that might be necessary if the Company is unable to continue as a going concern.

Future Accounting Pronouncements

In January 2017, the FASB issued ASU No.

2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323).

2017-03 amends the Codification for SEC staff announcements made at two Emerging Issues Task Force (EITF) meetings.

At the September

2016 meeting, the SEC staff expressed its expectations about the extent of disclosures registrants should make about the effects

of the new FASB guidance (including any amendments issued prior to adoption) on revenue (ASU 2014-09), leases (ASU 2016-02) and

credit losses on financial instruments (ASU 2016-13) in accordance with SAB Topic 11.M.

That Topic requires registrants to disclose

the effect that recently issued accounting standards will have on their financial statements when adopted in a future period.

2017-03 incorporates these SEC staff views into ASC 250 and adds references to that guidance in the transition paragraphs of each

of the three new standards.

The ASU also conforms ASC 323-740-S99-2, which describes the SEC staff’s views on accounting

for investments in qualified affordable housing projects, to the guidance issued in ASU 2014-01.

The staff announced the change

at the November 2016 EITF meeting.

In November 2015, the FASB issued ASU No.

2015-17, Income Taxes (Topic 740):

Balance Sheet Classification of Deferred Taxes, part of the FASB’s simplification initiative.

ASU 2015-17 requires companies to classify deferred tax liabilities and assets as noncurrent.

ASU 2015-17 is effective for fiscal

years beginning after December 15, 2018.

Early application of the amendments in this ASU is permitted.

The Company does not expect

any significant financial impact to the financial statements upon adoption of this standard.

In February 2017, the FASB issued ASU Update

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financial impact to the financial statements upon adoption of this standard.

In March 2016, the FASB issued ASU Update

2016-08, Revenue from Contracts with Customers (Topic 606).

The amendments in this Update are intended to improve the operability

and understandability of the implementation guidance on principal versus agent considerations by clarifying the criteria in determining

a principal versus agent relationship.

The core principle of the guidance is that an entity should recognize revenue to depict

the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects

to be entitled in exchange for those goods or services.

To achieve this core principle, an entity should apply the following five

(1) identify contracts with customers, (2) identify the performance obligations in the contracts, (3) determine the transaction

price, (4) allocate the transaction price to the performance obligation in the contract, and (5) recognize revenue as the entity

satisfies performance obligations.

The new guidance is effective for annual reporting periods beginning after December 15, 2017,

including interim periods within that reporting period.

Early application is permitted for annual reporting periods beginning after

December 15, 2016, including interim periods within that reporting period.

We are currently evaluating what impact adoption of

this guidance will have on our financial position, results of operations, cash flows and disclosures.

The Company does not expect

any significant financial impact to the financial statements upon adoption of this standard.

PROPERTY AND EQUIPMENT

Property and equipment consist of the following at

June 30, 2018 and September 30, 2017:

Estimated Service Lives

June 30, 2018

Property and equipment consist of the following at December

31, 2018 and September 30, 2018:

Service Lives

December 31, 2018

September 30, 2018

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Less accumulated depreciation and amortization

Total depreciation expense for the three

months ended June 30, 2018 and 2017 was $7,587 and $3,800, respectively;

and $20,699 and $11,400 for the nine months ended June

30, 2018 and 2017, respectively.

Intellectual Property consist of the following:

Depreciation expense was $8,272 and $5,298 during the

quarters ended December 31, 2018 and 2017, respectively.

INTELLECTUAL PROPERTY

Intellectual property consists of the

Intellectual property at September 30, 2017

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Intellectual property purchased at cost

Intellectual Property at June 30, 2018

Intellectual property at December 31, 2018

LINE OF CREDIT

The Company has a revolving line of

credit with Wells Fargo Bank, N.A.

The Company has a revolving line of credit

with Wells Fargo Bank, N.A.

in the amount of $55,000.

Amounts drawn under this line of credit are due on demand, and

monthly interest and principal payments are required.

Amounts drawn under this line of credit are due on demand, and monthly interest

and principal payments are required.

The interest rate on the line of credit is 9.5%.

This line of credit is

collateralized by the personal guarantee of the majority stockholder.

Line of credit balance was $0 at June 30, 2018 and $0

at September 30, 2017.

This line of credit is collateralized by

the personal guarantee of the majority stockholder.

Line of credit balance $56,734 and $59,646 under the line of credit at December

31, 2018 or September 30, 2018.

NOTES PAYABLE

With the acquisition of Tax Master Network

(formally known as Tax Coach Software), LLC, the Company also acquired a promissory note payable to The Huntington National Bank.

The note permits maximum borrowings of $100,000.

Interest is paid monthly at prime plus 1.25% and the balance is due on demand.

The facility matures in February 2018, is collateralized by substantially all assets of Tax Master Network (formally known as Tax

Coach Software), LLC, and is secured by a personal guarantee from Keith VandeStadt, a significant stockholder of the Company.

balance outstanding under this note payable was $0 and $92,197 at June 30, 2018 and September 30, 2017, respectively.

The Company entered into a Business Loan

and Security Agreement to Small Business Financial Solutions, LLC, on October 28, 2016 in the amount of $100,000.

The transaction

is structured as an advance against assets.

The lender has a security interest in all collateral of the Company, and outstanding

under this note payable was $0 and $7,935 at June 30, 2018 and September 30, 2017, respectively.

On July 31, 2017, the Company entered into

a Promissory Note Payable with Fourly Enterprises, LLC (“Fourly”) in the amount of $50,000.

The interest rate on the

note is 20% with payments of $5,000 due monthly.

The note matures on August 16, 2018.

Fourly is owned by the majority stockholder

of the Company.

The outstanding balance was $12,949 and $46,461 at June 30, 2018 and September 30, 2017, respectively.

On August 9, 2017 the Company entered into

a Promissory Note Payable with Elmer Fink in the amount of $100,000.

On August 9, 2017 the Company entered

into a Promissory Note Payable with Elmer Fink in the amount of $100,000.

The interest rate on the note is 10%.

First year payment is

equal to 10% of the loan value with monthly principal and interest of $4,614 starting on year two.

The remaining principal and

accrued interest of this note is due on the maturity date, July 31, 2020.

The outstanding balance was $100,000 at June 30, 2018

and September 30, 2017.

First year payment

is equal to 10% of the loan value.

A second-year payment equal to 10% of the loan was issued on January 1, 2019 with monthly principal

and interest of $4,614 starting on year three.

The remaining principal and accrued interest of this note is due on the maturity

date, July 15, 2021.

The outstanding balance was $100,000 at December 31, 2018 and September 30, 2018.

On August 9, 2017 the Company entered into

a Promissory Note Payable with Mike and Terri Ashby in the amount of $100,000.

The interest rate on the note is 10%.

payment is equal to 10% of the loan value with monthly principal and interest of $4,614 starting on year two.

The interest rate on the note was 10%.

payment was equal to 10% of the loan value with monthly principal and interest of $4,614 starting on year two.

The remaining principal

and accrued interest of this note is due on the maturity date, August 15, 2020.

The outstanding balance was $100,000 at June 30,

2018 and September 30, 2017.

and accrued interest of this note was due on the maturity date, August 15, 2020.

The outstanding balance was $84,685 and $92,406

at December 31, 2018 and September 30, 2018.

Subsequent to December 31, 2018, the original note payable was amended.

A second-year

payment equal to 15% of the loan was issued on February 6, 2019 with monthly principal and interest of $4,614 starting on year

The new interest rate on the note is 15%.

The remaining principal and accrued interest of this note is now due on the maturity

date, July 15, 2022.

On September 5, 2017 the Company entered

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The outstanding balance was

$100,000 at June 30, 2018 and September 30, 2017.

$84,717 and $100,000 at December 31, 2018 and September 30, 2018.

On October 2, 2017 the Company entered

into a Promissory Note Payable with Indar and Sybil Bally in the amount of $100,000.

The interest rate on the note is 10%.

year payment is equal to 10% of the loan value with monthly principal and interest of $4,614 starting on year two.

into a Promissory Note Payable with Indy and Sybil Bally in the amount of $100,000.

The interest rate on the note was 10%.

year payment was equal to 10% of the loan value with monthly principal and interest of $4,614 starting on year two.

The remaining

principal and accrued interest of this note is due on the maturity date, October 2, 2020.

The outstanding balance was $100,000

and $0 at June 30, 2018 and September 30, 2017.

On October 2, 2017 the Company entered

into a Promissory Note Payable with Paul Frueh in the amount of $100,000.

The outstanding balance was $92,406 at

December 31, 2018 and $100,000 at September 30, 2017.

Subsequent to December 31, 2018, the original note payable was amended.

second-year payment equal to 15% of the loan was issued on February 6, 2019 with monthly principal and interest of $4,614 starting

on year three.

The new interest rate on the note is 15%.

The remaining principal and accrued interest of this note is now due on

the maturity date, January 2, 2022.

On October 2, 2017 the Company entered into a Promissory Note

Payable with Paul Frueh in the amount of $100,000.

The interest rate on the note is 10%.

First year payment

is equal to 10% of the loan value with monthly principal and interest of $4,614 starting on year two.

The remaining principal and

accrued interest of this note is due on the maturity date, October 20, 2020.

The outstanding balance was $100,000 and $0 at June

30, 2018 and September 30, 2017.

First year payment is equal to 10% of

the loan value with monthly principal and interest of $4,614 starting on year two.

The remaining principal and accrued interest

of this note is due on the maturity date, October 20, 2020.

The outstanding balance was $88,564 at December 31, 2018 and $100,000

at September 30, 2018.

On November 2, 2017 the Company entered

into a Promissory Note Payable with Michael and Donna Dade in the amount of $340,000.

The interest rate on the note is 10%.

year payment is equal to 10% of the loan value with monthly principal and interest of $15,689 starting on year two.

The interest rate on the note was 10%.

year payment was equal to 10% of the loan value with monthly principal and interest of $15,689 starting on year two.

The remaining

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The outstanding balance was $314,181

and $0 at June 30, 2018 and September 30, 2017.

at December 31, 2018 and $340,000 at September 30, 2017.

Subsequent to December 31, 2018, the original note payable was amended.

A second-year payment equal to 15% of the loan was issued on February 6, 2019 with monthly principal and interest of $15,233 starting

on year three.

The new interest rate on the note is 15%.

The remaining principal and accrued interest of this note is now due on

the maturity date, January 20, 2022.

On March 15, 2018 the Company entered into

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accrued interest of this note is due on the maturity date, February 15, 2021.

The outstanding balance was $200,000 and $0 at June

30, 2018 and September 30, 2017.

As to the Promissory Notes Payable to

Fourly Enterprises, LLC, Elmer Fink, Mike and Terri Ashby, Heleon Investment Company, Ltd., Indar and Sybil Bally, Paul Frueh,

Michael and Donna Dade, and Helen Janssen, all of such note holders are accredited investors.

In entering into the transactions

with such note holders, the Company relied upon the exemption afforded by Regulation D and Section 4(2) of the Securities Act,

as each holder was required to attest that (i) such note holder is acquiring the note for his, her or its sole account, for investment

and not with a view to the resale or distribution thereof and (ii) such note holder is either (A) is an “accredited investor,”

as defined in Regulation D of the Securities Act, or (B) has such knowledge and experience in financial and business matters that

the note holder is capable of evaluating the merits and risks of receiving the note.

The Company’s maturities of debt

subsequent to June 30, 2018 are as follows:

The outstanding balance was $200,000 and $0 at December

31, 2018 and September 30, 2018, respectively.

On November 29, 2018 the Company entered

into a Promissory Note Payable with Knight Capital in the amount of $155,000.

The interest rate on the note is 86.23%.

The principal

and accrued interest of this note are payable in daily payments of $1,504 and is due on the maturity date, July 11, 2019.

The outstanding

balance was $141,563 and $0 at December 31, 2018 and September 30, 2018, respectively.

The Company’s maturities

of debt subsequent to December 31, 2018 are as follows:

ACCRUED EXPENSES

Accrued expenses consist of the following

at June 30, 2018 and September 30, 2017:

June 30, 2018

at December 31, and September 30, 2018:

September 30,

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Accrued operating expenses

For the three months and nine-month periods

ended June 30, 2018 and 2017, the effective tax rate of 0% varies from the U.S.

federal statutory rate primarily due to state income

taxes, net losses, certain nondeductible expenses, changes in the federal statutory rate are from 35% to 21%, and an increase in

the valuation allowance associated with the net operating loss carryforwards.

Our deferred tax assets related to net operating

loss carryforwards remain fully reserved due to uncertainty of utilization of those assets.

For the three months ended December 31,

2018 and 2017, the effective tax rate of 0% varies from the U.S.

federal statutory rate primarily due to state income taxes, net

losses, certain nondeductible expenses, changes in the federal statutory rate are from 35% to 21%, and an increase in the valuation

allowance associated with the net operating loss carryforwards.

Our deferred tax assets related to net operating loss carryforwards

remain fully reserved due to uncertainty of utilization of those assets.

A deferred tax liability or asset is determined

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The deferred tax assets and liabilities

in the accompanying consolidated balance sheets include the following components at June 30, 2018 and September 30, 2017:

June 30, 2018

in the accompanying consolidated balance sheets include the following components at December 31, 2018 and September 30, 2018:

September 30,

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The Company conducts operations from leased

premises leased through 2024.

Some of these leases provide for payment of taxes, insurance, utilities and maintenance.

The Company also leases certain

equipment under operating leases.

Total rent expense for the three months ended June 30, 2018 and 2017 was $28,385 and $22,887,

respectively;

and $90,765 and $67,475 for the nine months ended June 30, 2018 and 2017, respectively.

Rent expense is recorded

on a straight-line basis over the term of the lease.

The difference between rental expense and rental payments is recorded as deferred

rent within accrued expenses in the accompanying consolidated balance sheets.

Management expects that in the normal course of business,

leases will be renewed or replaced by other leases.

also leases certain equipment under operating leases.

Total rent expense for the quarters ended December 31, 2018 and 2017 was

$27,556 and $31,079, respectively.

Rent expense is recorded on a straight-line basis over the term of the lease.

The difference

between rental expense and rental payments is recorded as deferred rent within accrued expenses in the accompanying consolidated

balance sheets.

Management expects that in the normal course of business, leases will be renewed or replaced by other leases.

Future minimum rental obligations as of

June 30, 2018 are as follows:

Contingencies

Effective October 1, 2015, the Company

completed the acquisition of Tax Master Network (formally known as Tax Coach Software), LLC, an Ohio limited liability company

("Tax Master Network (formally known as Tax Coach Software)").

The purchase was made by Financial Gravity Holdings, Inc.

Under the terms of the acquisition, the Company acquired 100% of Tax Master Network (formally known as Tax Coach Software)'s membership

interests, for shares of common stock of the Company.

The total number of shares of common stock issued to the owners of Tax Master

Network (formally known as Tax Coach Software) was 6,000,000 shares (as amended), at par value of $0.00001 per share, in exchange

for 100% of the membership interests of Tax Master Network (formally known as Tax Coach Software).

Certificates representing the

shares of common stock which served as the purchase price, were required to be deposited in escrow as of the effective date of

the acquisition.

As part of the purchase agreement documentation, the Sellers maintained the right to unwind the transaction under

certain conditions as described in the purchase agreement.

The Sellers also retained all rights as shareholders while shares were

held in escrow, including the right to vote.

On November 11, 2016, the parties to the

escrow agreement agreed (in a Company Distribution Notice) that the average daily closing price of the shares had exceeded the

$1.00 threshold and accordingly, the shares were released from escrow and the right to unwind the Tax Master Network (formally

known as Tax Coach Software) acquisition transaction terminated.

At September 30, 2016, Pacific Oil Company

had outstanding payables that the previous owners were in the process of liquidating.

The Company recorded $99,056 in pre-merger

payables at September 30, 2016.

The liabilities have been recorded on the Company’s financial statements but are expected

to be settled by the previous owners.

Shares of the Company were held in escrow to cover the possibility that these liabilities

will ultimately have to be settled by the Company.

During the quarter ended March 31, 2017, $61,365 had been settled.

The remaining

payable was settled during the fiscal year ended September 30, 2017.

December 31, 2018 are as follows:

Legal Proceedings

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300,000,000 shares of common stock, par value $0.001 per share.

During the three months ended June 30,

2018 and 2017, the Company sold 0 shares and 275,000 shares, respectively, for $0 and $275,000, respectively.

During the nine months ended June 30, 2018

During the three months ended December

31, 2018 and 2017, the Company sold 0 shares and 100,000 shares, respectively, for $0 and $100,000, respectively.

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The rights and obligations of the preferred stock are as determined by the Board of Directors at the time of

There were no preferred shares issued or outstanding as of June 30, 2018 and September 30, 2017 for Financial Gravity

As part of the sale of common shares starting

October 2016, the Company granted to investors who invest at value of $100,000 or above common stock purchase warrants (the "Warrants").

In the quarter ended December 31, 2016 there were three individual investments of $100,000 for which the Company issued warrants

for the purchase of 75,000 shares of common stock of the Company at an exercise price of $ 1.25 per share for a 1 -year term and

an additional 75,000 shares of common stock of the Company at an exercise price of $1.50 for a 2-year term.

In the quarter ended March 31, 2017 there

were two individual investments for an aggregate of $250,000 for which the Company issued warrants for the purchase of 50,000 shares

of common stock of the Company at an exercise price of $1.25 per share for a l-year term and an additional 50,000 shares of common

stock of the Company at an exercise price of $1.50 for a 2-year term.

In the quarter ended September 30, 2017,

there was one additional investment of $100,000 for which the Company issued warrants for the purchase of 25,000 shares of common

stock of the Company after exercise price of $1.25 per share for 1-year term and an additional 25,000 shares of common stock of

the Company at an exercise price of $1.50 for a 2-year term.

There were no preferred shares issued or outstanding as of December 31, 2018 and September 30, 2017 for Financial Gravity

In the quarter ended December 31, 2018,

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Canceled or expired

Outstanding –

June 30, 2018

Exercisable –

June 30, 2018

All outstanding 2015 Plan stock

options at September 30, 2016 became immediately vested upon the completion of the reverse merger with Pacific Oil Company.

Most of the stock options granted under the 2016 Plan have 2- year vesting periods but there were 45,000 options that vested

Total compensation expense, included in salaries and wages, of previously unamortized stock compensation was

$47,052 and $0 for the three months ended June 30, 2018 and 2017, and $141,816 and $50,000 for the nine months ended June 30,

2018 and 2017, respectively.

Unamortized share-based compensation expense as of June 30, 2018 amounted to $184,417 which is expected to

recognize over the next 1.50 years.

Outstanding - December 31, 2018

Exercisable - December 31, 2018

All outstanding 2015 Plan stock options

at September 30, 2016 became immediately vested upon the completion of the reverse merger with Pacific Oil Company.

stock options granted under the 2016 Plan have 2- year vesting periods but there were 150,000 and 0 options that vested at issuance

during the quarters ended December 31, 2018 and 2017, respectively.

Total compensation expense, included in salaries and wages,

of previously unamortized stock compensation was $48,254 and $54,184 for the quarters ended December 31, 2018 and 2017, respectively.

Unamortized share-based compensation expense as of December 31, 2018 amounted to $121,179 which is expected to be recognized over

the next 1.5 years.

RELATED PARTY TRANSACTIONS

Accounts receivable due from the majority

Accounts receivable due from the largest

stockholder of the entity, included in accounts receivable –

related party in the accompanying consolidated balance sheets

was $0 and $4,506 as of June 30, 2018 and September 30, 2017, respectively.

Management fees paid to the majority stockholder

of the entity, included as management fees - related party in the accompanying consolidated statements of operations were $56,250

and $50,000 for three months ended June 30, 2018 and 2017, respectively $147,250 and $153,000 for the nine months ended June 30,

2018 and 2017, respectively.

A board member who is also a stockholder

provided services to the Company.

Expenses for these services totaled $0 for the three months ended June 30, 2018 and 2017, respectively

and $0 and $9,000 respectively, for the nine months ended June 30, 2018 and 2017 and were included as general and administrative

expenses in the accompanying consolidated statements of operations.

was $0 and $1,791 as of December 31, 2018 and September 30, 2018, respectively.

Management fees paid to the largest

stockholder of the entity, included as management fees - related party in the accompanying consolidated statements of

operations were $43,500 and $50,000 for quarters ended December 31, 2018 and 2017, respectively.

Included in professional fees were consulting

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$17,000 per month, per agreement, commencing on November 1, 2015 with a 90-day termination clause.

One agreement requires certain services

at a fixed fee of $3,500 per month, commencing on November 1, 2015 with a 90-day termination clause.

$60,000 and $109,500 in professional

fees were paid under these 3 agreements for the three months ended June 30, 2018 and June 30, 2017, and $180,000 and $225,600 nine

months ended June 30, 2018 and March 31, 2017 respectively and were included as professional services in the accompanying consolidated

One agreement requires certain

services at a fixed fee of $3,500 per month, commencing on November 1, 2015 with a 90-day termination clause.

These contracts

terminated on September 30, 2018.

$0 and $101,960 in professional fees were paid under these 3 agreements for the three months

ended December 31, 2018 and December 31, 2017, respectively and were included as professional services in the accompanying consolidated

statements of operations.

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are focused on helping clients make more money and build wealth, most often with tax savings, lowering costs and improving efficiency.

In addition to expanding through client procurement and organic growth, Financial Gravity intends to make several acquisitions.

In addition to expanding through client procurement and organic growth, Financial Gravity intends to make a number of acquisitions.

The primary acquisition targets currently include accounting, bookkeeping, and financial advisory firms.

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In fiscal year 2016 the Company

acquired Tax Master Network (formally known as Tax Coach Software) LLC.

The Company is actively identifying additional potential

acquisition candidates to fuel more rapid growth.

acquired Tax Coach Software LLC.

The Company is actively identifying additional potential acquisition candidates to fuel more rapid

Financial Gravity’s Subsidiaries:

Financial Gravity Holdings,

This entity was created to engage 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, with further expansion into other markets

in accordance with its long-term growth rate and strategic business plan.

This entity was created to engage

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, with further expansion into

other markets in accordance with its long-term growth rate and strategic business plan.

Financial Gravity Operations, Inc.

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Financial Gravity Tax, Inc.

Business Legacy, Inc.

Financial Gravity has developed a precise

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and business services sales.

These multi-tiered sales provide 4-8 times multiple to a typical accounting or bookkeeping practice.

These multi-tiered sales provide a 4-8 times multiple to a typical accounting or bookkeeping practice.

SBO’s look for two things from a

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Financial Gravity Wealth, Inc.

After saving thousands in taxes, clients

are happy to trust us with the management of their wealth, especially when treated to a different wealth management experience.

Financial Gravity Wealth is a Registered Investment Advisory (RIA) firm.

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 his or her clients, which means that he or she has a fundamental obligation to provide suitable

investment advice and always act in the clients' best interests.

The Department of Labor’s Fiduciary

Rule is a new ruling, was phased in April 10, 2017 –

1, 2018, that will automatically elevate all financial professionals

who work with retirement plans or provide retirement planning advice to the level of a fiduciary, bound legally and ethically

to meet the standards of that status.

While the impact of this rule is uncertain, the Company is positioned to do what it has

always done, control advisor fees and reduce one of the biggest “fees”

in a mutual fund and ETF portfolio, which is

“tax friction”.

These taxes erode about 1% per year in performance.

After saving thousands in taxes, clients are happy to trust

us with the management of their wealth, especially when treated to a different wealth management experience.

Financial Gravity

Wealth is a Registered Investment Advisory (RIA) firm.

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.

a fiduciary duty to his or her clients, which means that he or she has a fundamental obligation to provide suitable investment

advice and always act in the clients' best interests.

The Department of labor's fiduciary rule is officially dead.

The fiduciary rule, also known officially as the “Conflict of Interest”

rule, states advisers have to give conflict-free

advice on retirement accounts, putting their clients' needs ahead of their own potential compensation.

Although the Department of labor’s Fiduciary Rule was

struck down by the Fifth Circuit Court, we will still maintain the fiduciary standard as a company, because we think it is best

for the client.

Only 5% of all financial planners are RIAs.

The advantage of the RIA model is lower cost to the client.

Also, since RIAs are not compensated by commissions on financial products,

their advice is considered less biased and more accurate.

Coupled with tax savings, its status as a RIA makes the Company very

attractive to the most profitable clients.

The advantage of

the RIA model is lower cost to the client.

Also, since RIAs are not compensated by commissions on financial products, their advice

is considered less biased and more accurate.

Coupled with tax savings, its status as an RIA makes the Company very attractive to

the most profitable clients.

Financial Gravity Business, LLC.

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This program was created in Financial

Gravity Business but will be sold and build revenue in the Tax Master Network (formally known as Tax Coach Software) platform.

Financial Gravity Ventures, LLC.

Gravity Business but will be sold and build revenue in the Tax Coach Software platform.

Financial Gravity Ventures, LLC formerly

Cloud9Accelerator, LLC.

This entity in the Company’s corporate

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As mentioned earlier, Financial Gravity is pursuing several acquisition opportunities.

Tax Master Network, LLC (formally known

as Tax Coach Software, LLC.)

Tax Master Network (formally known as Tax

Coach Software) (TMN) was a key acquisition in fiscal year 2016.

TMN supports over 550 CPA and Enrolled Agent professionals, training

them to add crucial tax planning services to support clients.

Not only did this acquisition bring high-end tax planning to Financial

Gravity, but the TMN customer base adds significant business development opportunities for Financial Gravity Wealth.

developed the Certified Tax Master®

Tax Master Network, LLC formerly Tax

Coach Software, LLC.

Tax Master Network (TMN) was a key

acquisition in fiscal year 2016.

TMN supports over 550 CPA and Enrolled Agent professionals, training them to add crucial tax

planning services to support clients.

Not only did this acquisition bring high-end tax planning to Financial Gravity, but the

TMN customer base adds significant business development opportunities for Financial Gravity Wealth.

The Company developed the

Certified Tax Master®

for this group and rolled out new client systems in mid-2016.

Sash Corporation (dba Metro Data Processing)

Sash Corporation Dba Metro Data Processing,

based in Tulsa, OK was the Company’s first acquisition and Metro Data Processing is based in Tulsa, OK.

The Company has been

a fixture in payroll processing in the Tulsa area for years and should prove to be a compelling storefront to begin selling additional

tax services.

The Company goes to market primarily via

Financial Advisors and accountants.

Its Partner Program is proven to provide financial professionals with recognized trademarked

service offerings, business support, and marketing materials.

These Intellectual Property/service marks include Financial Gravity®,

Tax Blueprint®, Tax Operating System®, Bookkeeping with Purpose®, Diversity Trinity®, Investor Peace University®,

Factor Based Investing™, Fractional Family Office®, TaxCoach™, and Certified Business Strategist™

allowing financial professionals in its Partner Program to add additional value to their clients and their business.

Over the past few years the Company has

undertaken significant effort, and invested considerable capital, in order to attract and maintain a qualified and capable staff,

develop proprietary solutions, and implement systems, procedures, and infrastructure to execute the business plan on a large scale.

Given the short time frame this current market opportunity has existed and due to the complexity of the model, the Company has

a significant competitive advantage over others who may try to execute the same business plan.

Significant effort and investment capital

has been incurred by the Company over the past few years in order to attract and maintain a qualified and capable staff, develop

proprietary solutions, and implement systems, procedures, and infrastructure to execute the business plan on a large scale.

the short time frame this current market opportunity has existed and due to the complexity of the model, the Company has a significant

competitive advantage over others who may try to execute the same business plan.

Results of Operations for the three and nine months ended

June 30, 2018 compared to the three and nine months ended June 30, 2018

For the three months ended June 30, 2018,

revenue increased $269,550 to $1,088,969 from $819,419 for the three months ended June 30, 2017.

For the nine months ended June

30, 2018, revenue increased $772,884 to $5,332,997 from $2,560,113 for the nine months ended June 30, 2017.

The increase in revenue

is due in part to the onboarding of new clients.

Results of Operations for the quarter ended December 31,

2018 compared to the quarter ended December 31, 2017

For the quarter ended December 31, 2018,

revenue increased $79,365 to $999,265 from $919,900 for the quarter ended December 31, 2017.

The increase in revenue is due to

the increase of insurance sales and assets under management.

Operating Expenses

Cost of services activity increased $4,673

$1,651 to $13,570 for the three months ended June 30, 2018 from $11,919 for the three months ended June 30, 2017.

increase is primarily related to more clients signing up, cost of services activity increased $12,357 to $65,237 for the nine

months ended June 30, 2018 from $52,883 for the nine months ended June 30, 2017.

The increase is primarily related to more

clients signing up.

Professional services expenses decreased

$178,577 to $145,719 for the three months ended June 30, 2018 from $324,296 for the three months ended June 30, 2017.

services expenses decreased $328,241 to $625,706 for the nine months ended June 30, 2018 from $953,947 for the nine months ended

June 30, 2017.

This decrease is primarily due to changes of outside representation.

to $13,805 for the quarter ended December 31, 2018 from $9,132 for the quarter ended December 31, 2018.

The increase is primarily

related to a credit card processing fee.

Professional services expenses include

legal expense, professional fees, contract labor, business consulting and computer and internet expense.

Professional services

expenses decreased $111,240 to $64,814 for the quarter ended December 31, 2018 from $176,054 for the quarter ended December 31,

This decrease is primarily due to the decrease of outside labor being used.

Depreciation and amortization expenses

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Depreciation and amortization expenses increased

$3,856 to $28,803 for the three months ended June 30, 2018 from $24,947 for the three months ended June 30, 2017.

and amortization expenses increased $7,850 to $82,241 for the nine months ended June 30, 2018 from $74,391 for the nine months

ended June 30, 2017.

The increase is primarily due to assets purchased during the fiscal year 2018.

General and administrative expenses increased

$467,508 to $575,177 for the three months ended June 30, 2018 from $107,669 for the three months ended June 30, 2017.

administrative expenses increased $1,324,464 to $1,708,941 from $384,477 for the nine months ended June 30, 2018 and 2017.

increase is primarily due to an increase in costs associated with independent agent’s commissions and consulting cost.

Management fees –

expenses increased

$6,250 to $56,250 for the three months ended June 30, 2018 from $50,000 for the three months ended June 30, 2017 and decreased

$5,750 to $147,250 for the nine months ended June 30, 2018 from $153,000 for the nine months ended June 30, 2017.

This decrease

is due to changes in the contract with Fourly, LLC.

$2,973 to $28,802 for the quarter ended December 31, 2018 from $25,829 for the quarter ended December 31, 2017.

The increase is

due to increase in assets purchased in the last twelve months.

General and administrative expenses decreased

$94,120 to $146,952 for the quarter ended December 31, 2018 from $241,072 for the quarter ended December 31, 2017.

is primarily due to the consolidation of vendors and renegotiation of contracts.

Management fees decreased $6,500 to $43,500

for the quarter ended December 31, 2018 from $50,000 for the quarter ended December 31, 2017.

The decrease is due to the

changes in the vendor contract with the Company.

Marketing expenses decreased $29,293 to

$67,783 for the three months ended June 30, 2018 from $131,508 for the three months ended June 30, 2017 and decreased $101,959

to $206,018 for the nine months ended June 30, 2017 from $307,977 for the nine months ended June 30, 2017.

This overall decrease

is from eliminating and consolidating marketing tools.

Salaries and wages expenses decreased $251,412

to $278,713 for the three months ended June 30, 2018 from $530,125 for the three months ended June 30, 2017 and increased $187,394

to $1,498,948 for the nine months ended June 30, 2017 from $1,311,554 for the nine months ended June 30, 2017.

Salaries and wages

decrease are due to restructuring of staff members (hiring and separating of employees).

The Company experienced a decrease in

its bottom line of $271,213 to a net loss of $104,078 for the three months ended June 30, 2018 from a net loss of $375,291 for

the three months ended June 30, 2017, and for the nine months ended June 30, 2018 an increase in loss of $323,228 to $1,051,141

from a net loss of $720,502 for the nine months ended June 30, 2017, these losses are primarily attributable to the reasons noted

$31,644 for the quarter ended December 31, 2018 from $60,937 for the quarter ended December 31, 2017.

The decrease is primarily

due to the Company bringing more of the marketing inhouse instead of outsourcing.

Salaries and wages expenses increased

$221,355 to $827,696 for the quarter ended December 31, 2018 from $606,341 for the quarter ended December 31, 2017.

wages increased due to the addition of staff members and the increase in commissions paid on investment management fee income.

The Company experienced an increase in

its bottom line of $71,481 to a net loss of $199,372 for the quarter ended December 31, 2018 from a net loss of $270,853 for the

quarter ended December 31, 2017, primarily attributable to the reasons noted above.

Significant Accounting Policies

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consolidated balance sheets.

Tax Master Network (formally TaxCoach Software)

has 3 types of services that are charged and collected on a month to month subscription basis (TaxCoach basic membership, All-Stars

coaching, and Wire Service weekly broadcast email).

None of these programs come with a long-term commitment or contract, and there

is no up-front payment beyond the monthly subscription fee.

Cancellations are processed within the month requested and memberships

are closed at the end of the period for which the most recent payment was made.

Members are not entitled to refunds for unused

Tax Master Network Software has 5 types

of services that are charged and collected on a month to month subscription basis (Tax Master basic, advance, and elite membership,

all-stars coaching, and networker).

None of these programs come with a long-term commitment or contract, and there is no up-front

payment beyond the monthly subscription fee.

Cancellations are processed within the month requested and memberships are closed

at the end of the period for which the most recent payment was made.

Members are not entitled to refunds for unused memberships.

Trade accounts receivable are carried at

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Stock-Based Compensation

The Company recognizes

the fair value of stock-based compensation awards as wages in the accompanying statements of operations on a straight-line basis

over the vesting period, using the Black-Scholes option pricing model, which is based on risk-free rates of 0.85% to 1.41% in 2018

and 0.97% in 2017, dividend yield of 0%, expected life of 2 years and volatility of 43% to 137%.

The Company recognizes the fair value of stock-based compensation

awards as wages in the accompanying statements of operations on a straight-line basis over the vesting period, using the Black-Scholes

option pricing model, which is based on risk-free rates of 2.89% in 2019 and 1.49% to 2.55% in 2018, dividend yield of 0%, expected

life of 2 years and volatility of 35% to 40%.

Liquidity and Capital Resources

As of June 30, 2018, the Company had cash

and cash equivalents of $160,510.

The decrease of $283,910 in cash and cash equivalents from September 30, 2017 was due to net

cash used in operating activities of $934,274 and net cash used in investing activities of $55,992, offset by net cash provided

by financing activities of $706,356.

Net cash used in operating activities

was $934,274 for the nine months ended June 30, 2018, compared to $646,936 net cash used in operating activities for the nine

months ended June 30, 2017.

The net cash used in operating activities for the nine months ended June 30, 2018 was due to net

loss of $1,051,141 adjusted primarily by the following:

(1) depreciation and amortization of $82,241, and accounts payable

trade of $66,612, and the increase in G&A of $467,508.

As of December 31, 2018, the Company had

cash and cash equivalents of $87,068.

The increase of $54,848 in cash and cash equivalents from September 30, 2018 was due to net

cash used in operating activities of $7,250 and net cash used in investing activities of $8,700, offset by net cash provided by

financing activities of $70,798.

Net cash used in operating activities was

$7,250 for the three months ended December 31, 2018, compared to $357,373 net cash used in operating activities for the three months

ended December 31, 2017.

The net cash used in operating activities for the quarter ended December 31, 2018 was due to net loss

of $199,372 adjusted primarily by the following:

(1) depreciation and amortization of $28,802, stock based compensation of $48,254,

increase in accounts payable –

trade of $48,822, increase in accrued expenses of $50,665, and a decrease in trade accounts

receivable of $15,191.

Net cash provided by financing activities

was $706,356 for the nine months ended June 30, 2018, compared to net cash provided by financing activities of $662,760 for the

nine months ended June 30, 2017.

Financing activities for the nine months ended June 30, 2018 consisted primarily of $740,000

in borrowings and $100,000 of proceeds from the sale of common stock;

offset with payments made to reduce the Company’s

debt obligations in the amount of $133,644.

As shown below, at June 30, 2018, our contractual cash obligations totaled approximately $1,103,349 ,

all of which consisted of operating lease obligations and debt principal.

was $70,798 for the three months ended December 31, 2018, compared to net cash provided by financing activities of $528,791 for

the three months ended December 31, 2017.

Financing activities for the three months ended December 31, 2018 consisted primarily

of $155,000 in proceeds from borrowings;

offset with payments made to reduce the Company’s debt obligations in the amount

As shown below, at December 31, 2018, our

contractual cash obligations totaled approximately $1,644,840, all of which consisted of operating lease obligations and debt principal.

Payments due by period

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Operating leases

Line of Credit

Total contractual cash obligations

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If additional financing is not available, the Company

will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures to supplement the cash

flows generated by operations.

The Company has a backlog of fees under contract in addition to the Company’s accounts receivable

The failure to adequately fund its capital requirements could have a material adverse effect on our business, financial

condition and results of operations.

Moreover, the sale of additional equity securities to raise financing will result in additional

dilution to the Company’s stockholders and incurring additional indebtedness could involve the imposition of covenants that

restrict our operations.

Management is trying to raise additional capital through sales of common stock as well as seeking financing

from third parties, via both debt and equity, to balance the Company’s cash requirements and to finance specific capital

will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures as a way to supplement

the cash flows generated by operations.

The Company has a backlog of fees under contract in addition to the Company’s accounts

receivable balance.

The failure to adequately fund its capital requirements could have a material adverse effect on our business,

financial condition and results of operations.

Moreover, the sale of additional equity securities to raise financing will result

in additional dilution to the Company’s stockholders and incurring additional indebtedness could involve the imposition of

covenants that restrict our operations.

Management is trying to raise additional capital through sales of common stock as well

as seeking financing from third parties, via both debt and equity, to balance the Company’s cash requirements and to finance

specific capital projects.

Off Balance Sheet Transactions and Related Matters

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements