What changed in this filing

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Item 1. Financial Statements

2019-08-12 compared with 2019-05-14 · 423 added, 350 removed, 654 unchanged (54% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2019

September 30, 2018

Current Assets

Cash and equivalents

Cash and Cash Equivalents

Accounts receivable

2 unchanged sentences

Total Current Assets

Property and equipment

Customer relationship

Proprietary content

Non-compete agreements

Property and equipment, net

Customer relationship, net

Proprietary content, net

Non-Compete Agreements, net

Intellectual Property

4 unchanged sentences

Accrued expenses and other current liabilities

Related party loan

Line Of Credit

2 unchanged sentences

Notes Payable

Commitments and contingencies

Stockholders’

Additional capital paid-in

Additional Paid In Capital

Accumulated Deficit

Total Stockholders’

Total Liabilities and Stockholder's Equity

Total Liabilities and Stockholders’

The accompanying notes are an integral part

2 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Nine Months Ended

Total Revenue

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Total Operating Expenses

Operating (Loss)

Other (expense) income

Operating Income (Loss)

Interest Expense

Total other (expense) income

$ (1,051,141 )

Loss Per Share - Basic and Diluted

1 unchanged sentence

of these consolidated financial statements.

Gravity Companies, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS' EQUITY

Financial Gravity Companies, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS' EQUITY

Number of Shares Issued and Outstanding

1 unchanged sentence

Additional Paid In Capital

Accumulated Deficit

Balance at September 30, 2017

Common stock Sale of common stock,

$ (4,054,998 )

Common stock issued under a private placement memorandum

Stock based employee compensation expense

Balance at September 30, 2018

$ (5,575,630 )

Stock based employee compensation expense

Balance at March 31, 2019

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

Stock options in lieu of expenses, as cost of sales

Debt exchanged for Stock

Balance at June 30, 2019

$ (6,112,168 )

The accompanying notes are an integral part

of these consolidated financial statements.

Financial Gravity Companies, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended March 31, 2019

Six Months Ended

March 31,2019

March 31,2018

Nine Months Ended

Cash flows from operating activities:

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

in) operating activities:

$ (1,051,141 )

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

Stock based compensation

Stock options issued for services

Impairment of intangible

Changes in operating assets and liabilities

1 unchanged sentence

Accounts receivable - related party

Prepaid expenses

Accounts payable - trade

Prepaid expenses and other current assets

Accounts payable - trade, current

Accrued expenses and other liabilities

Deferred revenues

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

1 unchanged sentence

Purchase of trademark

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities

Borrowings from line of credit

Borrowings from notes payable

2 unchanged sentences

Proceeds from sale of common stock

Net cash provided by (used in) financing activities

Net (decrease) in cash and cash equivalents

Net cash provided by financing activities

Net increase(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

6 unchanged sentences

NATURE OF BUSINESS

Financial Gravity Companies, Inc.

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.

Financial Gravity is a holding company of best of breed financial

services companies including brokerage, wealth management, estate planning, family office services, risk management, business

and personal tax planning, business consulting, and financial advisor services.

Financial Gravity's mission is to synergistically

bring together companies that create symbiotic advantages to each other in order to bring a complete financial experience to the

clients that we serve.

The wholly-owned subsidiaries of the Company include:

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

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

A summary of the significant accounting

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recorded when received.

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

The allowance for doubtful accounts was $0 and $21,876 as of June 30, 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 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 March 31, 2019 was $39,287 and $33,675 at September 30, 2018.

During each of the three and nine months ended June 30, 2019 and 2018, 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, 2019 was $42,094 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

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 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, 2019 and 2018, the Company recorded amortization expense

of $16,410 and $49,228 on this intangible asset, which is included depreciation and amortization expense in the accompanying consolidated

statements of operations.

Accumulated amortization at June 30, 2019 was $246,140 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 is now fully impaired as of March 31, 2019.

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

the asset has been fully written off.

Non-compete Agreements

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

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

During each of the three and nine months ended June 30, 2019 and 2018,

the Company recorded amortization expense of $1,315 and $3,945 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

Accumulated amortization at June 30, 2019 was $19,725

and $15,780 at September 30, 2018.

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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 March 31, 2019 or September 30, 2018.

Intellectual Property are stated at cost.

Intellectual Property with indefinite lives is not amortized but tested for impairment at least annually.

Management has determined

that the Intellectual Property has an indefinite life and does not consider the value of Intellectual Property recorded in the

accompanying consolidated balance sheets to be impaired as of June 30, 2019 or September 30, 2018.

Goodwill represents the excess of the value

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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 March 31, 2019 or September 30, 2018.

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

The fair values of the assets acquired,

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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.

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

equity and consolidated

statements of 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 March 31, 2019 and September

There was no accrued interest or penalties as of June 30, 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 35,837,900 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

Average number of common shares were 38,993,226 and 35,837,900 for the three months ended June 30, 2019 and 2018, respectively.

Average number of common shares were 36,949,650 and 35,823,648 for the nine months ended June 30, 2019 and 2018, respectively.

For the three months and nine months ended

June 30, 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

The antidilutive shares for June 30, 2019 include 50,000 warrants, and 3,699,338 in options.

the three months and nine months ended June 30, 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

The antidilutive shares for June 30, 2018 include 350,000

warrants and 3,080,646 in options.

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discounts, and is calculated net of sales taxes, as applicable.

Amounts invoiced for work not yet completed are shown as deferred

revenue in the accompanying consolidated balance sheets.

Tax Master Network, Inc.

Monthly subscription billings are recognized as revenue as collected.

Tax Master Network, LLC.

has 3 types of

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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.

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

1 unchanged sentence

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.

was 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”)

prior 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

Therefore, no quantitative adjustment was required to be made

to the prior periods presented on the unaudited consolidated financial statements after the adoption of ASC 606.

Advertising costs are charged to operations

when incurred.

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.

Advertising and marketing expense were $48,330 and $82,307 for the three months ended, and $109,995 and $142,845

for the nine months ended June 30, 2019 and 2018, 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 of 2.89% rates in 2019 and 1.49%

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%.

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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”

filed as an exhibit to a registration statement on Form S-1, filed with the Securities and Exchange Commission (“SEC”)

on September 18, 2017.

The agreement was approved by the SEC November 13, 2018.

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.

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

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

AND EQUIPMENT

Property and equipment consist of the following at March 31,

PROPERTY AND EQUIPMENT

Property and equipment consist of the following at June 30,

2019 and September 30, 2018:

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Depreciation expense was $9,967 and $7,587 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.

months ended June 30, 2019 and June 30, 2018, respectively, and $27,943 and $20,649 during the nine months ended June 30, 2019

and June 30, 2018, respectively.

INTELLECTUAL PROPERTY

Intellectual property consists of the following:

3 unchanged sentences

Intellectual property purchased at cost

Intellectual property at March 31, 2019

Intellectual property at June 30, 2019

LINE OF CREDIT

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the personal guarantee of the majority stockholder.

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

Line of credit balance $67,005 and $59,646 under the line of credit at June

30, 2019 and September 30, 2018.

On August 9, 2017 the Company entered

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

NOTES PAYABLE

On August 9, 2017 the Company entered into

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

The interest rate on the note is 10%.

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

Payments from January 2019, through July 2019

to be interest only.

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.

On June 15, 2019, Fink and the Company entered into an agreement to convert the note into

common shares of the Company and the note and accrued interest were settled in full as of that date.

The outstanding balance was

$0 and $100,000 at June 30, 2019 and September 30, 2018 respectively.

On August 9, 2017 the Company entered into

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

The interest rate on the note was 10%.

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.

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 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.

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

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 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.

On June 15, 2019, Ashby and the Company entered into an agreement to convert

the note into common shares of the Company and the note and accrued interest were settled in full as of that date.

The outstanding

balance was $0 and $92,406 at June 30, 2019 and September 30, 2018, respectively.

On September 5, 2017 the Company entered

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

(Heleon) in the amount of $100,000.

The interest rate on the

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

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.

On 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.

Payment on the note is deferred until January

Interest for the deferment period will be capitalized into the amount due, January 15, 2020, resulting in a new Amount

The New Amount Due plus interest will amortize over the following 24 months, with the first payment due January 15, 2020.

On June 15, 2019, Heleon and the Company entered into an agreement to convert the note into common shares of the Company and the

note and accrued interest were settled in full as of that date.

The outstanding balance was $0 and $100,000 at June 30, 2019 and

September 30, 2018, respectively.

On October 2, 2017 the Company entered

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

into a Promissory Note Payable with Indy and Sybil Bally (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.

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

The remaining

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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 June 15, 2019, Bally

and the Company entered into an agreement to convert the note into common shares of the Company and the note and accrued interest

were settled in full as of that date.

The outstanding balance was $0 and $100,000 at June 30, 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.

into a Promissory Note Payable with Paul Frueh (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 $76,385 at March 31, 2019

and $100,000 at September 30, 2018.

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.

On June 15, 2019, Frueh and the Company entered

into an agreement to convert the note into common shares of the Company and the note and accrued interest were settled in full

as of that date.

The outstanding balance was $0 at June 30, 2019 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.

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

The interest rate on the note was

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

The remaining

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

On January 20, 2019, the original note

payable was amended.

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

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

On January 20, 2019, the

original note payable was amended.

The new interest rate on the note is 15%.

Payment on the note is deferred until February 20,

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.

Interest 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.

15, 2019, Dade and the Company entered into an agreement to convert the note into common shares of the Company and the note and

accrued interest were settled in full as of that date.

The outstanding balance was $0 and $340,000 at June 30, 2019 and September

30, 2018, respectively.

On March 15, 2018 the Company entered into

a Promissory Note Payable with Helen Janssen in the amount of $200,000.

a Promissory Note Payable with Helen Janssen (Janssen) in the amount of $200,000.

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 $9,229 starting on year two.

The remaining principal and

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

On January 15, 2019, the original note payable was

payment is equal to 10% of the loan value with monthly principal and interest of $9,229 starting on year two.

The remaining principal

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

On January 15, 2019, the original note payable

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.

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.

On June 15, 2019, Janssen

and the Company entered into an agreement to convert the note into common shares of the Company and the note and accrued interest

were settled in full as of that date.

The outstanding balance was $0 and $200,000 at June 30, 2019 and September 30, 2018, respectively.

On November 29, 2018 the Company entered

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

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

The outstanding balance was $8,770 and $0 at June 30, 2019 and September 30, 2018,

respectively.

On April 19, 2019 the Company entered into

a Promissory Note Payable with Charles O’Banon (“O’Banon”), a customer, in the amount of $32,205.

is in settlement of tax penalties and interest he incurred, that were proximately caused by the Company’s actions.

principal and interest payments are $623, with a balloon payment of $14,048 in April 2022.

The note is being repaid over 36 months

and bears an interest rate of 6%.

The Company has instituted abatement efforts on O’Banon;s behalf, with the taxing authority.

Should the abatement efforts be successful, all monies paid O’Banon by the Company shall be returned.

Should the abatement

efforts result in mitigation, any monies paid by the Company, in excess of the mitigated amounts, shall be returned.

The outstanding

balance on June 30, 2019 was $30,813.

The Company’s maturities

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

of debt subsequent to June 30, 2019 are as follows:

EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses consist of the following

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

March 31, 2019

at June 30, 2019, and September 30, 2018:

September 30,

Deferred Rent

Corporate credit card

Accrued operating expenses

For the three and six months ended March

For the three and nine months ended June

30, 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

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.

net losses, certain nondeductible expenses, 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 March 31, 2019 and September 30, 2018:

March 31, 2019

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

September 30,

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Net deferred taxes

CONTINGENCIES AND CONCENTRATIONS

The Company conducts operations from

leased premises leased through 2024.

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

The Company conducts operations from 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 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.

The Company also

leases certain equipment under operating leases.

Total rent expense for the three months ended June 30, 2019 and June 30, 2018

was $43,768 and $28,385 respectively and for the nine months ended June 30, 2019 and 2018 was $99,258 and $90,765, 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 March 31, 2019 are as follows:

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, 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

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

Management does not believe that there are any 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 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.

During the nine months ended June 30, 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.

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 nine month periods ended June 30, 2019, the Company recognized $183,750 in share based compensation

expense related to this award, which is included in salaries and wages in the accompanying consolidated statements of operations.

On June 15, 2019, the Company entered into

agreements, to convert notes payable into common stock.

Effective that date, the note holders were granted 5,598,133 shares, in

settlement of $1,007,664 in note obligations.

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 March 31, 2019 and September 30, 2018 for Financial Gravity

There were no preferred shares issued or outstanding as of June 30, 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,

an aggregate of 100,000 shares of the Company’s common stock had been sold for $100,000 for which the Company issued warrants

for the purchase of 25,000 shares of common stock of the Company at an exercise price of $1.25 per share for a 1 year term and

an additional 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

In the three months ended December 31,

2017, an aggregate of 100,000 shares of the Company’s common stock had been sold for $100,000 for which the Company issued

warrants for the purchase of 25,000 shares of common stock of the Company at an exercise price of $1.25 per share for a 1 year

term and an additional 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

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.

However, the Company determined that these warrants should

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

STOCK OPTION PLAN

Effective February 27, 2015, the Company

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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 Company.

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

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

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Canceled or expired

Outstanding - March 31, 2019

Exercisable - March 31, 2019

Outstanding - June 30, 2019

Exercisable - June 30, 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 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

during the nine month periods ended June 30, 2019 and 2018, respectively.

Total compensation expense, included in salaries and

wages, of previously unamortized stock compensation was $41,370 and $47,052 for the three months ended June 30, 2019 and 2018,

respectively, and $133,714 and $141,816 for the nine months ended June 30, 2019 and 2018, respectively.

Unamortized share-based

compensation expense as of June 30, 2019 amounted to $34,362 which is expected to be recognized over the next 1.25 years.

RELATED 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 March 31, 2019 and September 30, 2018, respectively.

was $0 and $1,791 as of June 30, 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,

and $56,250 for the three months ended June 30, 2019 and 2018, respectively, and $130,500 and $147,250 for the nine months ended,

respectively.

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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

$0 and $60,000 in professional fees were paid under these 3 agreements for the three months ended June 30,

2019 and June 30, 2018 respectively.

$0 and $180,000 in professional fees were paid under these 3 agreements for the nine months

ended June 30, 2019 and June 30, 2018, respectively and were included as professional services in the accompanying consolidated

statements of operations.

On April 12, 2019 the Company entered into

a loan agreement with John Pollock, CEO of the Company.

The note bears interest at 2.76%, and will be repaid in six equal installments

of $2,520, beginning July 1, 2019.

The balance of the loan at June 30, 2019 was $15,000.

Management’s Discussion and Analysis of Financial

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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.

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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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.

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.

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 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.

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

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.

Results of Operations for the three and nine months ended

June 30, 2019 compared to the three and nine months ended June 30, 2018

For the three months ended June 30, 2019,

revenues decreased $162,428 to $926,541 from $1,088,969 for the three months ended June 30, 2018.

The decrease is principally driven

by elimination of intercompany management fees.

For the nine months ended June 30, 2019, revenues decreased $245,934 to $3,087,063

from $3,332,997 for to the nine months ended June 30, 2018.

The decrease is principally driven by elimination of intercompany management

Operating Expenses

Cost of services increased by $1,903 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.

$15,473 for the three months ended June 30, 2019 from $13,570 for the three months ended June 30, 2018, and decreased by $20,454,

to $44,783 from $65,237 for the nine months ended June 30, 2019 and June 30, 2018, respectively.

The changes are related to credit

card processing fees.

Professional services expenses include

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Professional services

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.

expenses decreased $26,514 to $119,205 for the three months ended June 30, 2019 from $145,719 for the three months ended June 30,

This decrease is primarily due to the termination of consulting agreements, resulting in savings of $45,618 in three months

ended June 30, 2019, offset by increases in other professional services.

For the nine months ended June 30, 2019 and 2018, professional

services decreased $346,708, to $278,998 at June 30, 2019, from $625,706 at June 30, 2018.

This consists primarily of a cessation

of the consulting fee arrangements, resulting in savings of $264,275, and a decrease in legal fees of $70,680.

Depreciation and amortization expenses

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

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.

In the three months ended March 31, 2019,

the investment in Trade Name was deemed fully impaired, and a charge of $69,300 was recorded to amortization for this asset.

and amortization expenses increased $1,432 for the three months ended June 30, 2019, to $30,235, from $28,803.

Depreciation and

amortization expenses increased $76,594 to $158,835 for the nine months ended June 30, 2019 from $82,241 for the nine months ended

June 30, 2018..

The increases are 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 Trade Name asset.

General and administrative expenses decreased

$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.

$435,957 to $139,220 for the three months ended June 30, 2019 from $575,177 for the three months ended June 30, 2018 and decreased

$1,298,078 to $410,863 from $1,708,941 for the nine months ended June 30, 2019 and 2018.

The decrease is primarily due to regular

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Management fees decreased $12,750 to $43,500

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.

for the three months ended June 30, 2019 from $56,250 for the three months ended June 30, 2018, and decreased by $16,750 to $130,500

for the nine months ended June 30, 2019 from $147,250 for the nine months ended June 30, 2018.

These are related party fees.

Marketing expenses decreased $19,453 to

$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.

$48,330 for the three months ended June 30, 2019 from $67,783 for the three months ended June 30, 2018 and decreased $96,073, to

$109,945 from $206,018 for the nine months ended those dates.

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

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Salaries and wages expenses increased $224,511

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.

to $503,224 for the three months ended June 30, 2019 from $278,713 for the three months ended June 30, 2018 and increased $853,043

to $2,351,991 for the nine months ended June 30, 2019, from $1,498,948 for the nine months ended June 30, 2018.

The major drivers

of this are increases in payroll expenses $60,933 and $166,023 for the three and nine months ended June 30, 2019 respectively,

and compensation for stock grants awarded to an officer, $78,750 for the three months ended June 30, 2019, and $183,750 for the

nine months ended June 30,2019.

Additionally, there were staff increases, period over period.

The Company experienced an increase in

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,

its bottom line of $87,137 to a net loss of $16,941 for the three months ended June 30, 2019 from a net loss of $104,078 for the

three months ended June 30, 2018, primarily attributable to the reasons noted above, offset by an increase in interest expense

Likewise, for the nine months ended June 30, 2019 and 2018, the Net Loss improved by $514,603, to a loss of $536,538,

from a loss of $1,051,141 for the same period in 2018.

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Liquidity and Capital Resources

As of March 31, 2019, the Company had cash

As of June 30, 2019, the Company had cash

and cash equivalents of $35,876.

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:

(1) depreciation and amortization of $128,600, stock based compensation of

$197,344, increase in accounts payable –

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

The increase of $3,656 in cash and cash equivalents during the nine months ended June 30, 2019

was due to net cash used in operating activities of $964, net cash used by investing activities of $32,582, and net cash provided

by financing activities of $37,201.

Net cash used by operating activities was

$964 for the nine months ended June 30, 2019.

The net cash used in operating activities was due to net loss of $536,538 adjusted

primarily by the following:

(1) depreciation of $27,943, amortization of $61,592, stock based compensation of $317,464, stock issued

for services of $38,660, impairment of an intangible of $69,300, decrease in accounts receivable of $4,823, decrease in accounts

receivable related party of $ 1,791, increase in accounts payable –

trade of $84,194, a decrease in prepaid expenses of $10,577,

and a decrease in accrued expenses of $80,770.

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

$32,582 was comprised of purchases of PP&E of $28,352 and purchases of trademarks $4,230.

Net cash provided by financing activities

was $37,201 for the nine months ended June 30, 2019.

Cash provided by financing activities consists of borrowings on a line of

credit $14,100 and via notes payable of $202,205.

Cash used in financing activities consists of payments on the line of credit

$6,742 and payments on notes payable $172,362.

As shown below, at June 30, 2019, our contractual

cash obligations totaled approximately $697,225, all of which consisted of operating lease obligations and debt principal.

Payments due by period

Contractual obligations

2024 and beyond

Notes payable

Related party note

Operating leases

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additional financing to fund additional material capital expenditures and to fully implement its business plan.

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 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.

In mitigation of

this concern, 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 (“SEC”) on September 18, 2017.

The agreement was approved by the SEC November

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”

“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.

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