What changed in this filing

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Item 1. Financial Statements

2019-05-14 compared with 2019-02-19 · 382 added, 319 removed, 622 unchanged (53% of the section changed)

1 unchanged sentence

Financial Gravity Companies, Inc.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 31, 2018

September 30,

Current Assets

Cash and cash equivalents

Receivables, net

Cash and equivalents

Accounts receivable

Accounts receivable - related party

1 unchanged sentence

Total Current Assets

Property and equipment, net

Customer relationships, net

Proprietary content, net

Non-compete agreements, net

Property and equipment

Customer relationship

Proprietary content

Non-compete agreements

Intellectual Property

LIABILITIES AND STOCKHOLDERS’

Total Other Assets

Liabilities and Stockholder's Equity

Current Liabilities

Accounts payable - trade

Accrued expenses

Accrued expenses and other current liabilities

Line of credit

Notes payable

Notes payable - current

Total Current Liabilities

Notes payable

COMMITMENTS AND CONTINGENCIES

Stockholders’

Common stock - 300,000,000 shares authorized;

$0.001 par value;

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

Additional capital paid-in

Accumulated deficit

Total Stockholders’

TOTAL LIABILITIES AND STOCKHOLDERS’

The accompanying notes are in integral part

Total Liabilities and Stockholder's Equity

The accompanying notes are an integral part

of these consolidated financial statements.

Financial Gravity Companies, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

Investment management fees

Total Revenue

Investment Management Fee

Service Income

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Total Operating Expenses

Net operating loss

OTHER EXPENSE

Operating (Loss)

Other (expense) income

Interest expense

Total other expense

Total other (expense) income

Loss Per Share - Basic and Diluted

The accompanying notes are in integral part

The accompanying notes are an integral part

of these consolidated financial statements.

Financial Gravity Companies, Inc.

Gravity Companies, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS' EQUITY

Number of Shares Issued and Outstanding

Common Stock Par Value Amount

Additional Paid-In Capital

Balance at September 30, 2017

Common stock Sale of common stock,

Stock based employee compensation expense

Balance at September 30, 2018

Stock based employee compensation expense

Balance at March 31, 2019

The accompanying notes are an integral part of these consolidated financial statements.

Financial Gravity Companies, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended December 31,

Six Months Ended March 31, 2019

Six Months Ended

March 31,2019

March 31,2018

Cash flows from operating activities:

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

Depreciation and amortization

Adjustments to reconcile net loss to net cash provided by (used

in) operating activities:

Stock based compensation

Changes in operating assets and liabilities

Receivables, net

Accounts receivable

Accounts receivable - related party

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Accounts payable - trade

Accrued expenses

Deferred revenue

Net cash used in operating activities

Accrued expenses and other liabilities

Deferred revenues

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Cash paid for purchase of property and equipment

Net cash used in investing activities

Purchases of property and equipment

Purchase of trademark

Net cash provided by (used in) investing activities

Cash flows from financing activities

Proceeds from notes payable

Payments on notes payable

Borrowings from notes payable

Payments on line of credit

Proceeds from the sale of common stock

Net cash provided by financing activities

TOTAL INCREASE IN CASH AND CASH EQUIVALENTS

Payments on notes payable

Proceeds from sale of common stock

Net cash provided by (used in) financing activities

Net (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosures of cash flow information:

Cash paid during the period for:

The accompanying notes are in integral part

Cash Paid for Interest

The accompanying notes are an integral part

of these consolidated financial statements.

Financial Gravity Companies, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Financial Gravity Companies, Inc.

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.

The Company’s focus is on helping clients build wealth, most often

with tax savings, lowering costs and improving efficiency.

and Subsidiaries

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

businesses, small business owners and high net worth individuals.

The Company’s focus is on helping clients build wealth,

most often with tax savings, lowering costs and improving efficiency.

The wholly-owned subsidiaries of the Company include:

Financial Gravity

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

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

(“TMN”) (formerly known as Tax Coach

Software, LLC.)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

(“TMN”) (formerly known as Tax

Coach Software, LLC.)

OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting

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recorded when received.

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

The allowance for doubtful accounts was $0 and $21,876 as of March 31, 2019 and September 30, 2018, respectively.

In the normal course of business, the Company

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a four-year estimated life.

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

During each of the three and six months ended March 31, 2019 and 2018, the Company recorded amortization

expense of $2,806 and $5,612, respectively, on this intangible asset, which is included in 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.

Accumulated amortization at March 31, 2019 was $39,287 and $33,675 at September 30, 2018.

Proprietary Content

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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.

During each of the three and six months ended March 31, 2019 and 2018, the Company recorded amortization expense of $16,410

and $32,819 on this intangible asset, which is included amortization expense in the accompanying consolidated statements of operations.

Accumulated amortization at March 31, 2019 was $229,731 and $196,912 at September 30, 2018.

The trade name acquired as a part of the

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on the date of the purchase.

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 December 31, 2018 and September

Management has determined that the trade name is now fully impaired as of March 31, 2019.

the asset has been fully written off, in the three months ended March 31, 2019.

Non-compete Agreements

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

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.

During each of the three and six months ended March 31, 2019 and 2018,

the Company recorded amortization expense of $1,315 and $2,630 on this intangible asset, which is included in depreciation and

amortization expense in the accompanying consolidated statements of operations.

Accumulated amortization at March 31, 2019 was

$18,410 and $15,780 at September 30,2018.

Intellectual Property

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of other parties.

The Company accounts for Intellectual

Property in accordance with GAAP and accordingly, Intellectual Property are stated at cost.

Intellectual Property with indefinite

lives is not amortized but are tested for impairment at least annually.

Management has determined that the Intellectual Property

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 December 31, 2018 and September 30, 2018.

The Company accounts for Intellectual Property

in accordance with GAAP and accordingly, Intellectual Property are stated at cost.

Intellectual Property with indefinite lives

is not amortized but are tested for impairment at least annually.

Management has determined that the Intellectual Property 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 March 31, 2019 or September 30, 2018.

Goodwill represents the excess of the value

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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

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.

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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.

recorded for TMN in the accompanying consolidated balance sheets to be impaired as of March 31, 2019 or September 30, 2018.

The fair values of the assets acquired,

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by projecting expected cash flows and subtracting the portion of the cash flow derived by the relevant contributory assets.

The accompanying consolidated balance sheets,

consolidated statements of operations and cash flows include the results of operations of the acquired subsidiaries from the date

of acquisition.

The accompanying consolidated balance

sheets, consolidated statements of operations, statement of changes in stockholders’

equity and cash flows include the results

of operations of the acquired subsidiaries from the date of acquisition.

The Company accounts for Federal and state

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tax benefits as a component of income tax expense.

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

There was no accrued interest or penalties as of March 31, 2019 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 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

Average number of common shares were 35,837,900 and 35,837,900 for the quarters ended March 31, 2019 and 2018, respectively.

Average number of common shares were 35,837,900 and 35,823,648 for the six months ended March 31, 2019 and 2018, respectively.

For the three months and six months ended

March 31, 2019, approximately 3,940,326 common stock shares were not added to the diluted average shares because inclusion of such

shares would be antidilutive.

The antidilutive shares for March 31, 2019 include 350,000 warrants and 3,590,326 in options.

the three months and six months ended March 31, 2018, 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 March 31, 2018 include 350,000

warrants and 3,080,646 in options.

Revenue Recognition

FG Wealth generates investment management

fees for services provided by the Company.

Investment management fees include fees earned from assets under management by providing

professional services to manage client investments.

FG Tax generates service income from consulting

and other professional services performed.

Financial Gravity Wealth, Inc.

investment management fees for services provided by the Company.

Investment management fees include fees earned from assets under

management by providing professional services to manage client investments.

Financial Gravity Tax, Inc.

generates service

income from consulting and other professional services performed.

Commission revenue is derived from the

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revenue in the accompanying consolidated balance sheets.

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.

Tax Master Network, Inc.

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.

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

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 of adoption.

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.

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

Advertising costs are charged to operations

when incurred.

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

Advertising and marketing expense were $29,971 and $82,307 for the quarters ended, and $61,615 and $142,845 for

the six months ended March 31, 2019 and 2018, respectively.

Stock-Based Compensation

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

PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December

AND EQUIPMENT

Property and equipment consist of the following at March 31,

2019 and September 30, 2018:

Service Lives

December 31, 2018

September 30,

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Less accumulated depreciation and amortization

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

Depreciation expense was $9,967 and $7,764 during the three

months ended March 31, 2019 and March 31, 2018, respectively, and $18,239 and $13,065 during the six months ended March 31, 2019

and March 31, 2018, respectively.

Intellectual property consists of the following:

Intellectual property at September 30, 2017

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Intellectual property purchased at cost

Intellectual property at December 31, 2018

Intellectual property at March 31, 2019

LINE OF CREDIT

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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

Line of credit balance $52,905 and $59,646 under the line of credit at March

31, 2019 and September 30, 2018.

On August 9, 2017 the Company entered

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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.

On January 1, 2019, the original note payable was amended.

Payments from January 2019, through July 2019

to be interest only.

Full principal and interest payments to commence August 9, 2019 until maturity, when all remaining principal

and interest will be due and payable.

The outstanding balance was $100,000 and $100,000 at March 31, 2019 and September 30, 2018

respectively.

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 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 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

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

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

On January 15, 2019, the

original note payable was amended.

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

into a Promissory Note Payable with Heleon Investment Company, Ltd.

in the amount of $100,000.

The interest rate on the note is

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

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

The remaining principal and accrued interest of

this note is now due on the maturity date, July 15, 2022.

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 three.

The outstanding balance was $80,776

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

and $92,406 at March 31, 2019 and September 30, 2018, respectively.

On September 5, 2017 the Company

entered into a Promissory Note Payable with Heleon Investment Company, Ltd.

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

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

January 15, 2019, the original note payable was amended.

The new interest rate on the note is 15%.

Payment on the note is

deferred until January 15, 2020.

Interest for the deferment period will be capitalized into the amount due, January 15, 2020,

resulting in a new Amount Due.

The New Amount Due plus interest will amortize over the following 24 months, with the first

payment due January 15, 2020.

The outstanding balance was $84,718 and $100,000 at March 31, 2019 and September 30, 2018,

respectively.

On October 2, 2017 the Company entered

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

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.

On January 20, 2019, the original note

payable was amended.

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.

Payment on the note is deferred until February 2, 2020.

for the deferment period will be capitalized into the amount due, February 2, 2020, resulting in a new Amount Due.

The New Amount

Due plus interest will amortize over the following 24 months, with the first payment due February 2, 2020.

The outstanding balance

was $88,562 and $100,000 at March 31, 2019 and September 30, 2018, respectively

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 $88,564 at December 31, 2018 and $100,000

at September 30, 2018.

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 $76,385 at March 31, 2019

and $100,000 at September 30, 2018.

On November 2, 2017 the Company entered

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

The outstanding balance was $314,181

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.

On January 20, 2019, the original note

payable was amended.

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.

Payment on the note is deferred until February 20, 2020.

for the deferment period will be capitalized into the amount due, February 20, 2020, resulting in a new Amount Due.

The New Amount

Due plus interest will amortize over the following 24 months, with the first payment due February 20, 2020.

The outstanding balance

was $314,181 and $340,000 at March 31, 2019 and September 30, 2018, respectively.

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 December

31, 2018 and September 30, 2018, respectively.

On January 15, 2019, the original note payable was

The new interest rate on the note is 15%.

Payment on the note is deferred until February 15, 2020.

Interest for the deferment

period will be capitalized into the amount due, February 15, 2020, resulting in a new Amount Due.

The New Amount Due plus interest

will amortize over the following 24 months, with the first payment due February 15, 2020.

The outstanding balance was $200,000

and $200,000 at March 31, 2019 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.

There is no interest rate associated with this note.

The repayment streams for this are calculated from a factoring of the receivables sold, and are payable in daily payments of

$1,504 and is due on the maturity date, July 11, 2019.

The outstanding balance was $89,960 and $0 at March 31, 2019 and September

30, 2018, respectively.

The Company’s maturities

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

ACCRUED EXPENSES

of debt subsequent to March 31, 2019 are as follows:

Accrued expenses consist of the following

at December 31, and September 30, 2018:

at March 31, 2019, and September 30, 2018:

March 31, 2019

September 30, 2018

Accrued payroll

Deferred Rent

Accrued operating expenses

For the three months ended December 31,

For the three and six months ended March

31, 2019 and 2018, 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

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.

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The deferred tax assets and liabilities

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

in the accompanying consolidated balance sheets include the following components at March 31, 2019 and September 30, 2018:

March 31, 2019

September 30, 2018

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Net deferred taxes

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

The Company conducts operations from leased

premises leased through 2024.

CONTINGENCIES AND CONCENTRATIONS

The Company conducts operations from

leased premises leased through 2024.

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

also leases certain equipment under operating leases.

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

The Company also leases certain equipment under operating leases.

Total rent expense for the three months ended March 31,

2019 and March 31, 2018 was $28,056 and $31,483 respectively and for the six months ended March 31, 2019 and 2018 was $55,612

and $62,966, respectively.

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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

December 31, 2018 are as follows:

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 March 31, 2019 are as follows:

Legal Proceedings

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are otherwise involved in legal proceedings, claims and other legal matters, arising in the ordinary course of our business or

A subsidiary of the Company is currently involved in one legal proceeding, the outcome of which will not be material

to our ability to operate or market our services, our consolidated financial position, results of operations or cash flows.

There are no current, material legal proceedings ongoing at this time.

STOCKHOLDERS’

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

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.

During the three months and six months

ended March 31, 2019 and 2018, the Company sold 0 shares and 100,000 shares, respectively, for $0 and $100,000, respectively.

In February 2019, the Company granted

2,000,000 common shares to an officer of the Company as part of an amended employment agreement.

The stock grant is subject

to claw back, subject to vesting.

500,000 shares vest immediately, and 500,000 shares vest on each of July 16, 2019,

July 16, 2020, and July 16, 2021.

The officer’s departure from the Company prior to those dates, shall result in the

unvested shares reverting back to the Company.

For the three and six month periods ended March 31, 2019, the Company

recognized $105,000 in share based compensation expense related to this award, which is included in salaries and wages in the

accompanying consolidated statements of operations.

Preferred Stock

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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 December 31, 2018 and September 30, 2017 for Financial Gravity

There were no preferred shares issued or outstanding as of March 31, 2019 and September 30, 2018 for Financial Gravity

Financial Gravity Holdings was merged into Financial Gravity Companies, February 13, 2019 and dissolved as of that date.

The authorization to issue preferred stock was terminated with the dissolution.

In the quarter ended December 31, 2017,

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an additional 25,000 shares of common stock of the Company at an exercise price of $1.50 for a 2-year term.

The Company follows the provisions of ASC

815, “Derivatives and Hedging”.

ASC 815 requires freestanding contracts that are settled in a company’s own stock

to be designated as an equity instrument, assets or liability.

Under the provisions of ASC 815, a contract designated as an asset

or liability must be initially recorded and carried at fair value until the contract meets the requirements for classification

The Company follows the provisions of

ASC 815, “Derivatives and Hedging”.

ASC 815 requires freestanding contracts that are settled in a company’s

own stock to be designated as an equity instrument, assets or liability.

Under the provisions of ASC 815, a contract designated

as an asset, or liability must be initially recorded and carried at fair value until the contract meets the requirements for classification

as equity, until the contract is exercised or until the contract expires.

However, the Company determined that these warrants should

be accounted for as equity and as such no determination of fair value was necessary.

Private Placement Memorandum, Financial

Gravity Holdings, Inc.

On October 31, 2014, Financial Gravity

Holdings issued a private placement memorandum (“PPM”) for stock purchases of up to 2,000,000 shares of common stock

at a cost of $1.00 and a par value of $0.00001, with a minimum purchase level of $50,000 per investor.

The subscription period

initially expired June 30, 2015, however, the Board of Directors extended the offering period indefinitely, and increased the number

of shares authorized for sale under the PPM incrementally to accommodate additional investor interest.

STOCK OPTION PLAN

However, the Company determined that these warrants

should be accounted for as equity and as such no determination of fair value was necessary.

Effective February 27, 2015, the Company

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The expiration date and exercise price are as established by the Board of Directors of the Company.

option may be issued under the Plan after February 27, 2017.

Plan is superseded by the 2016 Plan.

No option may be issued under the Plan after November 22,2016.

Effective November 22, 2016, the Company

established the 2016 Stock Option Plan (the “2016 Plan”).

The Board of Directors of the Company has the authority and

discretion to grant stock options.

The Board of Directors of the Company has the authority

and discretion to grant stock options.

The maximum number of shares of stock that may be issued pursuant to the exercise of options

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person providing services to the Company.

The expiration date and exercise price are as established by the Board of Directors of

The expiration date and exercise price are as established by the Board of Directors

of the Company.

No option may be issued under the Plan after ten years from the date of adoption of the 2016 Plan.

Stock option activity is summarized as follows:

Stock option activity is summarized as

Outstanding - September 30, 2017

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Canceled or expired

Outstanding - December 31, 2018

Exercisable - December 31, 2018

Outstanding - March 31, 2019

Exercisable - March 31, 2019

All outstanding 2015 Plan stock options

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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

during the periods ended March 31, 2019 and 2018, respectively.

Total compensation expense, included in salaries and wages, of

previously unamortized stock compensation was $44,091 and $54,184 for the three months ended March 31, 2019 and 2018, respectively,

and $92,345 and $94,764 for the six months ended March 31, 2019 and 2018, respectively.

Unamortized share-based compensation expense

as of March 31, 2019 amounted to $163,331 which is expected to be recognized over the next 1.5 years.

PARTY TRANSACTIONS

Accounts receivable due from the largest

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related party in the accompanying consolidated balance sheets

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.

was $0 and $1,791 as of March 31, 2019 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 $63,500 for the three months ended March 31, 2019 and 2018, respectively, and $87,000 and $113,500 for the six months ended,

respectively.

Included in professional fees were consulting

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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.

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

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 $109,500 in professional fees were paid under these 3 agreements for the three months ended March

31, 2019 and March 31, 2018 respectively.

$0 and $211,460 in professional fees were paid under these 3 agreements for the six months

ended March 31, 2019 and March 31, 2018, respectively and were included as professional services in the accompanying consolidated

statements of operations.

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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

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 Holdings was merged

into Financial Gravity Companies February 13, 2019 and dissolved as of that date.

Financial Gravity Operations, Inc.

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by Financial Gravity Companies, Inc.

Financial Gravity Operations was merged into Financial Gravity Holdings February 12, 2019

and dissolved as of that date.

Financial Gravity Tax, Inc.

Business Legacy, Inc.

Financial Gravity has developed a precise

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

Financial Gravity Ventures, LLC formerly

Cloud9Accelerator, LLC.

Financial Gravity Ventures, LLC

This entity in the Company’s corporate

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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®

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.

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.

Results of Operations for the three and six months ended

March 31, 2019 compared to the three and six months ended March 31, 2018

For the quarter ended March 31, 2019,

revenues increased $76,186 to $1,161,256 from $1,085,070 for the quarter ended March 31, 2018.

Revenue has increased slightly

across revenue streams.

For the six months ended March 31, 2019, revenues increased $50,552 to $2,055,521 from $2,004,969 for

to the six months ended March 31, 2018.

Revenue has increased slightly across revenue streams.

Operating Expenses

Cost of services activity increased $4,673

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.

Cost of services increased by $11,426 to

$15,505 for the quarter ended March 31, 2019 from $4,079 for the three months ended March 31, 2018, and increased by $16,099, to

$29,310 from $13,211 for the six months ended March 31, 2019 and March 31, 2018, respectively.

The increase is primarily related

to increased credit card processing fees.

Professional services expenses include

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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.

expenses decreased $91,257 to $91,325 for the three months ended March 31, 2019 from $182,582 for the three months ended March

This decrease is primarily due to the termination of a consulting agreement with DNU, resulting in savings of $110,935

in three months ended March 31, 2018, and legal fees, decrease of $40,495.

For the six months ended March 31, 2019 and 2018, professional

services decreased $198,844, consisting primarily of a cessation of the consulting fee arrangement, resulting in savings of 219,656,

and a decrease in legal fees of $82,919.

Depreciation and amortization expenses

include depreciation on fixed assets and amortization of definite lived intangibles.

Depreciation and amortization expenses increased

$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.

Additionally, in the three months ended March

31, 2019, the investment in Trademarks was deemed fully impaired, and a charge of $69,300 was recorded to amortization for this

Depreciation and amortization expenses increased $71,205 and $74,476 for the three months and six months ended March 31,

2019 compared to the same periods the prior year.

The increase is due to additional purchases of fixed assets and leasehold improvements

purchased in the last twelve months, and the aforementioned, one-time charge to amortization of the Trademark asset.

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.

$562,565 to $168,531 for the three months ended March 31, 2019 from $731,096 for the three months ended March 31, 2018 and decreased

$713,007 to $258,988 from $972,005 for the six months ended March 31, 2019 and 2018.

The decrease is primarily due to regular

reevaluation of costs, aimed at eliminating unnecessary costs, and reducing them by elimination, consolidation or renegotiation.

Management fees decreased $20,000 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.

for the three months ended March 31, 2019 from $63,500 for the three months ended March 31, 2018, and decreased by $26,500 for

the six months ending on those dates.

These are related party fees.

Marketing expenses decreased $52,336 to

$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.

$29,971 for the three months ended March 31, 2019 from $82,307 for the three months ended March 31, 2018 and decreased $81,230,

to $61,615 from $142,845 for the six months ended those dates.

The decrease is primarily due to the Company bringing more of the

marketing in-house instead of outsourcing.

Salaries and wages expenses increased $446,801

$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.

to $976,979 for the three months ended March 31, 2019 from $635,178 for the three months ended March 31, 2018 and increased $521,685

for the six months ending those dates.

The major drivers of this are increases in commissions paid, $147,668, and compensation

for stock grants awarded to an officer, of $105,000.

Additionally, there were some staff increases, period over period.

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.

its bottom line of $365,335 to a net loss of $316,695 for the three months ended March 31, 2019 from a net loss of $682,030 for

the three months ended March 31, 2018, primarily attributable to the reasons noted above, offset by an increase in interest expense

Likewise, for the six months ended March 31, 2019 and 2018, the Net Loss improved by $425,181, to a loss of $520,271,

from a loss of $945,452 for the same period in 2018.

Significant Accounting Policies

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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 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%.

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 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

As of March 31, 2019, the Company had cash

and cash equivalents of $5,086.

The decrease of $27,134 in cash and cash equivalents during the six months ended March 31, 2019

was due to net cash provided by operating activities of $6,862, net cash used by investing activities of $29,881, and net cash

used by financing activities of $4,115.

Net cash provided by operating

activities was $6,862 for the six months ended March 31, 2019.

The net cash used in operating activities was due to net loss

of $520,271 adjusted primarily by the following:

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$197,344, 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 $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.

trade of $132,368, and an increase in accrued expenses of $58,191.

Net cash used by investing activities of

$29,881 was comprised of purchases of PP&E, $29,006 and purchases of trademarks, $875.

Net cash used by financing activities was

$4,115 for the six months ended March 31, 2019.

Financing activities consisted of new borrowings through notes payable, $155,000,

net of reductions of amounts due on the line of credit, $6,742, and repayments on notes payable, $152,373.

As shown below, at March 31, 2019, our

contractual cash obligations totaled approximately $1,525,117, all of which consisted of operating lease obligations and debt

Payments due by period

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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