Financial Gravity Companies, Inc. 10-K

Item 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2019. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on its evaluation, management concluded as of September 30, 2019 that its disclosure controls and procedures were not effective because of material weaknesses in our internal control over financial reporting, described below in Management’s Report on Internal Control Over Financial Reporting. Notwithstanding the identified material weaknesses, management believes the financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP. 11 Management’s Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. The Company’s Chief Executive Officer and Chief Financial Officer assessed the effectiveness of its internal control over financial reporting as of September 30, 2019. In making this assessment, its management used the criteria based on the framework in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2019, its internal control over financial reporting was not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles. The Company’s Chief Executive Officer and Chief Financial Officer reviewed the results of their assessment with its board of directors. Based on its evaluation under this framework, management concluded that its internal control over financial reporting was not effective as of the evaluation date due to the factors stated below. · Insufficient Resources : The Company has inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting to be able to have appropriately designed and operating entity level controls including risk assessment; information and communication; monitoring; and financial reporting. · Inadequate Segregation of Duties: The Company has inadequate number of personnel to properly segregate duties to implement control procedures. This annual report does not include an attestation report of its Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report. Inherent Limitations on Effectiveness of Controls Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financial Reporting During the period covered by this report, the following change was made in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting: · The Company has implemented a robust check disbursement policy that includes the following key control points: first, the controller who handles check disbursements is not an authorized signer on any bank account and cannot sign checks; second, any disbursement amount less than $5,000.00 requires written approval from one (1) member of the leadership team; third, any disbursement amount of more than $5,000.00 and equal to or less than $24,999.99 requires written approval of two (2) members of the leadership team; fourth, any disbursement amount of $25,000.00 or more requires approval by the Board of Directors; and fifth, all disbursements are reviewed and approved by the Chief Operating Officer. As an additional control, all disbursement checks are signed by the CEO when available, and if the CEO is unable to sign, disbursement checks are signed by a member of the leadership team. All disbursements are controlled through a formal check disbursement process that includes an official check disbursement request form. This form is reviewed and signed by the appropriate parties as referenced above. The leadership team currently comprises the following members: The Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Chief Tax Strategist, the Chief Sales Officer, and the Director of Operations. 12 Item 9B. OTHER INFORMATION. None. 13 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE. Directors and Executive Officers Set forth below is certain information regarding the persons who were directors and executive officers at any time during the fiscal year 2019. Name Age Position with the Company Scott Winters 49 Co-Chairman of the Board, Chief Executive Officer John Pollock 52 Co-Chairman of the Board, Executive Vice President - Sales Paul Williams 63 Vice Chairman of the Board, Chief Financial Officer, Secretary and Treasurer Jennifer Winters 47 Secretary, Executive Vice President Dan Sundby 56 Former Chief Sales Officer Edward A. Lyon 54 Chief Tax Strategist and Board Member George Crumley 51 Former Assistant Secretary, former Assistant Treasurer and former Board Member Gary Nemer 73 Board Member David Myers 67 Board Member Michael Ashby 66 Board Member Todd Bourgeois 58 Board Member Debbie Buckner 56 Former President, former Chief Operating Officer, and former Board Member Scott Winters, 49, August 15, 2019, Financial Gravity Companies, Inc. (the “Company”) appointed Mr. Scott Winters, age 49, to serve as Chief Executive Officer and Co-Chairman of the Board for the Company. Prior to joining the Company, from 2016 to present, Mr. Winters has served as Owner of Presidential Wealth Management, an investment advisory and wealth management firm. From 2003 to 2017 Mr. Winters was CEO, Chairman of the Board and Co-Founder of Eqis Capital Management, also an investment advisory, and wealth management firm. John Pollock , 52, was CEO/Founder of Business Legacy, Inc. from 2002, Pollock Advisory Group from 2007, was the former CEO and Chairman of Financial Gravity Companies, Inc. (the Company), and is currently Co-Chairman of the Board and Executive Vice President – Sales. Mr. Pollock’s specific experience, qualifications, attributes or skills that led to the conclusion that he should serve as a director for the Company: · Has served as CEO and Chairman of Financial Gravity since its inception until August 2019. · A seasoned manager Paul O. Williams, 63, has served on the Financial Gravity Companies, Inc. (OTC: FGCO) Board of Directors and as Vice Chairman of the Board since 2015, and has served as our Chief Financial Officer and Secretary – Treasurer from 2016 until August 2019. He currently still serves as Vice-Chairman, Chief Financial Officer and Treasurer. He graduated from Austin College in Sherman, Texas in 1978 and the Institute for Organization Management in Washington, DC in 1982. Since 2007, Mr. Williams has served as Chief Executive Officer of Bison Financial Group, Inc., a corporate financial advisory and business development firm serving middle market growth companies. Mr. Williams also serves as an officer and director of two other public companies. On behalf of Worldwide Specialty Chemicals, Inc. based in Dallas, TX, Mr. Williams has served as Vice Chairman of the Board and Chief Financial Officer since 2019. On behalf of Light Engine Design Corp. (OTC: TLED) based in Phoenix, AZ, Mr. Williams has served as Chairman of the Board and Chief Financial Officer since 2018. Mr. Williams also serves as an officer and director of three other private companies. Mr. Williams currently serves as: Vice Chairman of the Board of Dynamic Chemical Solutions, Inc. in Frisco, Texas since 2016; Chairman of the Board & Chief Financial Officer of Curtis Mathes, Inc. in Frisco, Texas since 2013. 14 Within the last five years, on behalf of Halo Companies, Inc. (OTC: HALN), Mr. Williams previously served as Vice Chairman of the Board, Treasurer, and Assistant Secretary from 2009 to 2018, and served as Chief Financial Officer from 2009 to 2012 and from 2015 to 2018. The breadth of Mr. Williams’ entrepreneurial and financial services experience led the Board of Directors to the conclusion that he is qualified to serve as a director for the Company. Mr. Williams’ specific experience, qualifications, attributes or skills that led to the conclusion that he should serve as a director for the Company: · Over 40 years of business experience, primarily in capital markets, mergers, and acquisitions · Has served as both officer and director of other public companies · Financial Gravity is the fourth public company for which Mr. Williams has served as Chief Financial Officer · Within the last 5 years, Mr. Williams served as Vice-Chairman of the Board and Chief Financial Officer at Halo Companies, Inc., a public company, and Chairman of the Board and Chief Financial Officer of Light Engine Design Corp., a public company Dan Sundby , 56 served as Chief Sales Officer for Financial Gravity until March 2019. Edward A. Lyon , 54, has been the Company’s Chief Tax Strategist and a Director since October 2015. From 2005 until 2015, he was Partner-in-Charge of Content at Tax Coach Software, which he founded in 2005. Mr. Lyon received a B.A. in History from Hamilton College in 1986 and a J.D. from the University of Cincinnati College of Law in 1991. Mr. Lyon’s specific experience, qualifications, attributes or skills that led to the conclusion that he should serve as a director for the Company: · The founder of Tax Coach Software, managing the company for 11 years · A deep knowledge of accounting and financial services industries · A nationally-recognized expert on tax planning · The author of 8 books, and has appeared on over 500 radio and television broadcasts to speak about his areas of expertise Jennifer Winters, 47, August 27 th , the Board appointed Jennifer Winters to serve as Corporate Secretary. She will also serve as Executive Vice President. In order for Jennifer Winters to assume the role of Corporate Secretary, Mr. Paul Williams relinquished that role. Mr. Williams will continue to serve the Company as Vice Chairman of the Board, Chief Financial Officer and Treasurer. Mrs. Winters is an accomplished executive, having served as a Co-Founder of Eqis Holdings, Inc. from 2007 to 2017. She also served on their Board of Directors from 2010 to 2017. In addition, she served as Chief Compliance Officer of Eqis Captial Management, Inc. from 2007 to 2015. She also served as their Executive Vice President from 2015 to 2017. Jennifer Winters is the spouse of Scott Winters, the Chief Executive Officer of the Company. George E. Crumley , 51, was on the Board of Directors from January 2015 until March of 2019. Gary Nemer, 73, From 2016 to present, Mr. Nemer has served as a Board Member and Chairman of the Board of Directors of Presidential Brokerage, Inc., an investment advisory and wealth management firm. Mr. Nemer also serves on the Board of Directors of Eqis Capital Management, also an investment advisory and wealth management firm. Mr. Nemer graduated from the USC Gould School of Law at the University of Southern California and is a practicing attorney in the San Francisco area. 15 David Myers , 67, has been on the Board of Directors since August 28, 2019. From 2013 to March 2019, he served as Vice President, Strategy & Analytics for McGraw-Hill Education, a learning science company and one of the “big three” educational publishers that provide customized educational content, software, and services for pre-K through postgraduate education. At McGraw-Hill, he was responsible for market analytics, market research, pricing strategy, business and competitive intelligence, state adoption planning and strategic planning. From 2011 to 2013, Mr. Myers served as Senior Manager, Business Development for Mimio Interactive Teaching Technologies, which provides i nnovative, engaging, and affordable educational technology and solutions that provide a better way to learn. At Mimio, he was responsible for developing a team and implementing a suite of business intelligence programs (market research, competitive intelligence, global market share and financial scenario models). Mr. Myers’ specific experience, qualifications, attributes or skills that led to the conclusion that he should serve as a director for the Company: · A deep understanding of the role technology plays as an enabler of competitive business advantage · Deep experience building and leading skilled teams · Adept at applying marketing analytics, market research, pricing strategy and competitive intelligence to the strategic planning for enterprises · Skills in team-building, analytics, operations and organizational optimization Michael Ashby , 66, has been on the Board of Directors since August 28, 2019. Since March 2015, he has managed a variety of consulting engagements -- both domestic and internationally – through his personal consulting company. In January 2015, he served as a consultant for Ashby OpsComm, an industrial consulting and engineering firm. In that role, Mr. Ashby as Startup Manager for the Al Hosn super sour gas plant startup in the UAE – and successfully brought on line the largest sour gas processing plant in the world with no major incidents . Mr. Ashby also spent over a decade with Occidental Petroleum in a series of management roles with ever-growing responsibility, most recently as World Wide Engineering Chief of Surface Operations and Engineering responsible for operations and technical support of all business units across the globe . Mr. Ashby’s specific experience, qualifications, attributes or skills that led to the conclusion that he should serve as a director for the Company: · Decades of experience working in complex project management · Strong people skills at all levels of an organization, from front-line workers to senior management · Superior planning and execution skills Todd Bourgeois , 58, has been on the Board of Directors since August 28, 2019. Mr. Bourgeois has had a long career with Coca-Cola Bottlers, Inc. (from 1982 forward), most recently as Vice President of Business Integration for Coca-Cola Southwest Beverages. In his most recent role, Mr. Bourgeois was responsible for leading a team that spearheaded all Critical Business Transformation Projects throughout Coca Cola Southwest Beverages, Inc. including formulation of ROI Synergy initiatives as well as Operational Plans for execution of these projects. He reported directly to the CEO of Coca-Cola Southwest Beverages and managed a Team of Project Coordinators, Analysts and multiple external consultant teams (McKinsey, Deloitte, Accenture). Mr. Bourgeois’ specific experience, qualifications, attributes or skills that led to the conclusion that he should serve as a director for the Company: · Over 30 years of experience managing diverse teams for a broad range of business improvement projects · Experience managing large sales and marketing organizations Debbie Buckner , 56, was on the Board of Directors from August 28, 2018 through August 22, 2019. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires officers, directors and persons who beneficially own more than 10% of a class of our equity securities registered under the Exchange Act to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us during fiscal year 2019 and Forms 5 and amendments thereto furnished to us with respect to fiscal year 2019, or written representations that Form 5 was not required for fiscal year 2019, we believe that all Section 16(a) filing requirements applicable to each of our officers, directors and greater-than-ten percent stockholders were fulfilled in a timely manner. We have notified all known beneficial owners of more than 10% of our common stock of their requirement to file ownership reports with the Securities and Exchange Commission. 16 Code of Ethics The Company has adopted a code of ethics that applies to its principal executive, financial, and accounting officers and is included as an exhibit with this filing. No Committees of the Board of Directors; No Financial Expert The Company does not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of its Board of Directors. Nor does it have an audit committee “financial expert”. At present, its entire Board of Directors acts as its audit committee. None of the members of its Board of Directors meets the definition of “audit committee financial expert” as defined in Item 407(d) of Regulation S-K promulgated by the Securities and Exchange Commission. It has not retained an audit committee financial expert because it does not believe that it can do so without undue cost and expense. Moreover, it believes that the present members of the Board of Directors, taken as a whole, have sufficient knowledge and experience in financial affairs to effectively perform their duties. Item 11. EXECUTIVE COMPENSATION. Summary Compensation Table The particulars of compensation paid to the following persons during the fiscal period ended September 30, 2019 and 2018 are set out in the summary compensation table below: · our Chief Executive Officer (Principal Executive Officer); · our Chief Financial Officer (Principal Financial Officer); · each of our three most highly compensated executive officers, other than the Principal Executive Officer and the Principal Financial Officer, who were serving as executive officers at the end of the fiscal year ended September 30, 2019 and 2018; and · up to two additional individuals for whom disclosure would have been provided under the item above but for the fact that the individual was not serving as our executive officer at the end of the fiscal year ended September 30, 2019 and 2018. (collectively, the “ Named Executive Officers ”): 17 SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary Bonus Stock Awards Option Awards All Other Total Scott Winters 2019 $ 31,250 – – – – $ 31,250 CEO, Principal Executive Officer*** 2018 – – – – – – John Pollock 2019 $ 52,994 – – – $ 152,250 $ 205,244 Executive Vice President – Sales*** 2018 $ 23,660 – – – $ 203,000 $ 226,660 Debbie Buckner 2019 $ 137,500 $ 214,594 $ 352,094 President and Chief Operating Officer Paul Williams 2019 $ 96,000 – – – – $ 96,000 CFO, Principal Financial Officer 2018 $ 96,000 – – – – $ 96,000 Dan Sundby Former CSO**** 2018 $ 132,797 $ 15,000 – $ 116,292 – $ 264,089 Dave Crowley 2019 $ 30,000 $ 81,666 – – – $ 111,666 Former Principal Advisor**** 2018 $ 258,158 $ 20,000 – – – $ 278,158 Edward A. Lyon 2019 $ 42,000 – – – $ 198,000 $ 240,000 CTS 2018 $ 42,000 – – – $ 198,000 $ 240,000 ***Current salary is $250,000 annually, with no other compensation. ****Separated in March 2019. (1) The Company recognizes the fair value of the stock-based compensation awards as wages in the accompanying statements of operations on a straight-line basis over the vesting period based on the Black-Scholes option pricing model based on a risk-free rate from 1.50% to 2.89% in 2019 and 1.49% to 2.55% in 2018, dividend yield of 0%, expected life of 10 years and volatility of 25.32% to 34.05%. The aggregate grant date fair value of the option award is $232,596, to be recognized over the term of the option award. Except as described below, none of the Named Executive Officers has an employment agreement. Edward A. Lyon, a member of the Board of Directors, is party to an employment agreement. which provides for base salary of $42,000 per year, plus management fees of $198,000 annually, paid semi-monthly. Mr. Lyon serves as the General Manager, responsible for supervising the business and affairs of Tax Master Network. (*) For Mr. Pollock, the amount shown in the Summary Compensation Table under the heading All Other Compensation represents amounts paid by the Company to a consulting firm owned and controlled by Mr. Pollock, in compensation for services not related to his roles as an officer and director of the Company. (**) For Mr. Lyon, the amount shown in the Summary Compensation Table under the heading All Other Compensation represents amounts paid by the Company to a consulting firm owned and controlled by Mr. Lyon, in compensation for services not related to his roles as an officer and director of the Company. Summary Compensation Except as described above, the Company has no employment agreements with any of its Directors or executive officers. For the fiscal year ended September 30, 2019, no outstanding stock options or other equity-based awards were re-priced or otherwise materially modified. No stock appreciation rights have been granted to any of the Directors or executive officers and none of the Directors or executive officers exercised any stock options or stock appreciation rights. There are no non-equity incentive plan agreements with any of the Directors or executive officers. 18 Outstanding Equity Awards at Fiscal Year-end Dan Sundby has options currently vesting and the options are fully vested. Compensation of Directors This section is not applicable as there was no director compensation for year ended September 30, 2019. Employment Contracts, Termination of Employment, Change-in-Control Arrangements Certain executives have compensation agreements that include payments to be made by us upon termination of service without cause, up to one year of annual salary. There are no arrangements for Directors, officers, employees or consultants that would result from a change-in-control, other than vesting as described in the stock option grant agreement and plan. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information with respect to the beneficial ownership, as of September 30, 2019, of the Company’s common stock, which is the Company’s only outstanding class of voting securities, and the voting power resulting from such beneficial ownership, by 19 Beneficial Owner (1) Amount of Beneficial Ownership (1) Percentage of Shares John Pollock (2) 15,060,462 36.3% Dave Crowley (2, 4) 3,000,000 7.2% Keith VandeStadt (2, 4, 5) 2,821,500 6.8% Edward A. Lyon (2) 2,593,500 6.3% Paul Williams (2) 1,900,927 4.7% Michael Ashby (2, 6) 1,346,806 3.2% Dan Sundby (2, 3) 354,167 * Todd Bourgeois (2, 7) 325,000 * George Crumley (2, 5) 150,000 * David Myers (2, 5) 150,000 * Debbie Buckner (2) – – Directors and executive officers as group (nine persons) 21,880,862 52.8% (1) Each beneficial owner has sole voting and investment power with respect to all shares attributable to that owner. (2) The address for each such beneficial owner is 800 N. Watters Road, Suite 150, Allen, Texas 75013. (3) Includes 291,667 shares subject to options that are currently vested, plus an additional 208,333 shares subject to options that vest within 10 months not used. (4) Non-director or executive officer with more than 5% ownership. (5) Represents shares subject to options that are currently vested. (6) Includes 150,000 shares subject to options that are currently vested, and 1,196,806 shares of common stock. (7) Includes 175,000 shares subject to options that are currently vested, and 150,000 shares of common stock. (8) Scott Winters has 75,000 fully vested stock options. * indicates an ownership percentage of less than one percent. Changes in Control On September 30, 2019, the Company entered into a merger agreement with Forta Financial Group, Inc. (formerly Presidential Brokerage, Inc.) (“Forta”), to acquire Forta in exchange for Company stock. The merger is awaiting FINRA approval. When approved, the Forta shareholders will own more than 50% of the Company. John Pollock will remain the largest shareholder. Securities authorized for issuance under equity compensation plans. 20 The following table provides information as of the end of the most recently completed fiscal year, with respect to Company compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance. Equity Compensation Plan Information A (1) B C Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in Column A) Equity compensation plans approved by security holders (2015 Stock Option Plan) - (2,4) $ – – (4) Equity compensation plans not approved by security holders (2016 Stock Option Plan)(6) 20,000,000 (3) 0.20 13,239,354 (5) Total 20,000,000 (4) $ 0.20 13,239,354 (1) As consequence of the Merger, outstanding options of the 2015 Plan in the amount of 2,200,346 of the Company’s shares have vested. (2) Shares subject to stock options under 2015 Stock Option Plan. (3) Shares subject to stock options under 2016 Stock Option Plan. (4) The 2015 Stock Option Plan was replaced by the 2016 Stock Option Plan. (5) Shares available for grant of stock options to employees, directors and consultants under the 2016 Stock Option Plan. (6) Subsequent to the fiscal year end, the 2016 Stock Option has been amended to the 2016 Omnibus Incentive Plan, adding Stock Appreciation Rights (“SAR”) as incentive offerings. Since the amendment, SAR grants have been issued as incentive offerings to advisors for affiliating with the Company. Following is a brief description of the material features of each compensation plan under which equity securities of the Company are authorized for issuance. The 2015 Stock Option Plan and the 2016 Stock Option Plan were adopted without approval of Company security holders. The Company has granted stock options to certain employees and contractors under its 2015 Stock Option Plan, assumed from Financial Gravity Holdings and under its 2016 Stock Option Plan. The Company is authorized to issue an aggregate of 20,000,000 options, of which 13,239,354 remain available for issuance at September 30, 2019, as non- statutory (non-qualified) stock options, under the 2016 Stock Option Plan. Currently outstanding options under the 2015 and 2016 Stock Option Plans vest over a period of no greater than two years and expire ten years from the grant date. 21 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Transactions with Related Persons, Promoters and Certain Control Persons Except as set forth below, none of the Company’s directors or officers, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to the Company’s shares, nor any relative or spouse of any of the foregoing persons, has had any material interest, direct or indirect, in any transaction to which the Company was a party, and in which the amount involved exceeds the lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years. Company entered into an agreement to purchase 100% of the stock of Forta. Scott Winters, Gary Nemer and William Nelson, Jr. own, in aggregate, in excess of 80% of the shares of stock of Forta. Neither Mr. Winters nor Mr. Nemer voted as Board Members on the approval of the acquisition of Forta stock. TaxTuneup, LLC, which is an entity owned by Mr. Edward A. Lyon, a current director of the Company, received approximately 43% of the shares of Financial Gravity Holdings issued in the Tax Coach Software Transaction, then having an approximate value of $864,500. As a consequence of such issuance, Mr. Lyon is the beneficial owner of 6.8% of the Company’s common stock as of September 30, 2019 (after giving effect to the Merger). Additionally, Van Data, LLC, which is an entity owned Keith VandeStadt, a greater than 5% beneficial shareholder of the Company, received approximately 47% of the shares of Financial Gravity Holdings issued in the Tax Coach Software Transaction, then having an approximate value of $940,500. As a consequence of such issuance, Mr. VandeStadt is the beneficial owner of 7.4% of the Company’s common stock as of September 30, 2019 (after giving effect to the Merger). In the Tax Coach Software Transaction, the shares of Financial Gravity Holdings common stock received by TaxTuneup, LLC (owned by Mr. Lyon), do not include any of the shares of Financial Gravity Holdings common stock received by Van Data, LLC (owned by Mr. VandeStadt). Their respective holdings of Company common stock are completely separated. During fiscal 2019 and 2018, TaxTuneup, LLC, an entity owned by Mr. Edward A. Lyon, received the sums of $198,000 and $198,000, respectively, from the Company, in compensation for strategic tax planning recommendations and research, business consulting and writing of books and tax planning and Tax Master Network® related content. During fiscal year 2019 and 2018, the Company paid $60,000 and $138,980, respectively, to Van Data, LLC, a consulting firm owned and controlled by Keith VandeStadt, in compensation for maintaining the Tax Coach Software application and data, making enhancements and modifications to software as needed, maintaining server platform and web environment, applying updates to licensed content, and other services agreed upon in writing. During fiscal 2019 and 2018, a company owned and controlled by Mr. John Pollock (Fourly Enterprises, LLC) received the sum of $152,500 and $203,000, respectively, from the Company, in compensation for strategic business planning and consulting, business development, process and technology development. 22 Director Independence; Board Leadership Structure The Company’s common stock is quoted through the OTC System. For purposes of determining whether members of the Company’s Board of Directors are “independent,” the Company’s Board utilizes the standards set forth in the NASDAQ Stock Market Marketplace Rules. At present, the Company’s entire Board serves as its Audit, Compensation and Nominating Committees. The Company’s Board of Directors has determined that, of the Company’s present directors, each of Gary Nemer, David Myers, Michael Ashby, and Todd Bourgeois, constituting four of the eight members of the Board, is an “independent director,” as defined under NASDAQ’s Marketplace Rules, for purposes of qualifying as independent members of the Board and an Audit, Compensation and Nominating Committee of the Board, but that Scott Winters, John Pollock, Paul Williams and Edward A. Lyon are not “independent directors” since they currently serve as executive officers of the Company. The Company’s Board of Directors is of the view that the current leadership structure is suitable for the Company at its present stage of development, and that the interests of the Company are best served by the combination of the roles of Chairman of the Board and Chief Executive Officer. As a matter of regular practice, and as part of its oversight function, the Company’s Board of Directors undertakes a review of the significant risks in respect of the Company’s business. Such review is conducted in concert with outside professionals (including legal counsel) with expertise in substantive areas germane to the Company’s business. With the Company’s current governance structure, the Company’s Board of Directors and senior executives are, by and large, the same individuals, and consequently, there is not a significant division of oversight and operational responsibilities in managing the material risks facing the Company. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The following information summarizes the fees billed to us by Whitley Penn LLP for professional services rendered for the fiscal years ended September 30, 2019 and 2018, respectively. Audit Fees . Fees billed for services by Whitley Penn LLP were $76,177 for fiscal year 2019 and $103,238 for fiscal year 2018. Audit fees include fees associated with the annual audit and the reviews of the Company’s quarterly reports on Form 10-Q, and other SEC filings. Audit-Related Fees. None Tax Fees . Fees billed or remainder to be billed for tax services by Whitley Penn LLP were $13,500 for fiscal year 2019 and $13,500 for fiscal year 2018 All Other Fees. None Consistent with SEC policies regarding auditor independence, the audit committee has responsibility for appointing, setting compensation, approving and overseeing the work of the independent auditor. In recognition of this responsibility, the audit committee pre-approves all audit and permissible non-audit services provided by the independent auditor. The Board of Directors serves as the audit committee for the Company. 23 PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) Financial Statements and financial statement schedules (1) and (2) The financial statements and financial statement schedules required to be filed as part of this report are set forth in Item 8 of Part II of this report. (3) Exhibits. See Item 15(b) below. (b) Exhibits required by Item 601 of Regulation S-K Exhibit No. Description 14.1 Code of Ethics 31.1 Sarbanes-Oxley Section 302(a) Certification of John Pollock 31.2 Sarbanes-Oxley Section 302(a) Certification of Paul Williams 32.1 Sarbanes-Oxley Section 906 Certifications 101.INS XBRL Instance Document 101.SCH XBRL Schema Document 101.CAL XBRL Calculation Linkbase Document 101.DEF XBRL Definition Linkbase Document 101.LAB XBRL Label Linkbase Document 101.PRE XBRL Presentation Linkbase Document 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: January 13, 2020 By: /s/ Scott Winters Scott Winters Chief Executive Officer (Principal Executive Officer) Date: January 13, 2020 By: /s/ Paul Williams Paul Williams Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Capacity Date /s/ Scott Winters Co-Chairman, CEO January 13, 2020 Scott Winters (principal executive officer) /s/ Paul Williams Vice Chairman, CFO January 13, 2020 Paul Williams (principal financial officer) /s/ John Pollock Co-Chairman, EVP January 13, 2020 John Pollock /s/ Jennifer Winters Secretary, EVP, Director January 13, 2020 Jennifer Winters /s/ Edward A. Lyon Director January 13, 2020 Edward A. Lyon /s/ William R. Nelson Director January 13, 2020 William R. Nelson 25 FINANCIAL GRAVITY COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM SEPTEMBER 30, 2019 AND 2018 CONTENTS Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2 CONSOLIDATED FINANCIAL STATEMENTS F-3 CONSOLIDATED BALANCE SHEETS F-3 CONSOLIDATED STATEMENTS OF OPERATIONS F-4 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY F-5 CONSOLIDATED STATEMENTS OF CASH FLOW F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Financial Gravity Companies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Financial Gravity Companies, Inc. (the “Company”), as of September 30, 2019 and 2018, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2019 and 2018, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company's auditor since 2016. /s/ Whitley Penn LLP Dallas, Texas December 30, 2019 F- 2 Financial Gravity Companies, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS As of September 30, 2019 2018 ASSETS CURRENT ASSETS Cash and cash equivalents $ 36,053 $ 32,220 Trade accounts receivable, net 147,377 15,907 Accounts receivable - related party – 1,791 Prepaid expenses and other current assets 12,010 25,657 Total current assets 195,440 75,575 OTHER ASSETS Property and equipment, net 139,991 138,286 Customer relationships, net – 11,225 Proprietary content, net 262,550 328,188 Trade name – 69,300 Non-compete agreements, net 5,260 10,520 Intellectual Property 53,170 48,940 Goodwill 1,094,702 1,094,702 TOTAL ASSETS $ 1,751,113 $ 1,776,736 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable - trade $ 174,749 $ 105,435 Accrued expenses 146,872 132,989 Deferred revenue 94,733 – Line of credit 63,919 59,646 Notes payable 13,393 356,173 Total current liabilities 493,666 654,243 NOTES PAYABLE 23,534 676,233 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY Common stock, $0.001 par value; 300,000,000 shares authorized; 41,436,033 shares issued and outstanding as of September 30, 2019 and 35,837,900 shares issued and outstanding as of September 30, 2018 41,436 35,838 Additional paid-in capital 7,391,592 5,986,052 Accumulated deficit (6,199,115 ) (5,575,630 ) Total stockholders’ equity 1,233,913 446,260 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,751,113 $ 1,776,736 The accompanying notes are an integral part of these consolidated financial statements. F- 3 Financial Gravity Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended September 30, 2019 2018 REVENUE Investment management fees $ 1,884,117 $ 1,775,838 Commissions and Service income 2,190,931 2,111,155 Total revenue 4,075,048 3,886,993 OPERATING EXPENSES Cost of services 54,927 85,998 Professional services 141,835 827,272 Depreciation and amortization 189,070 113,122 General and administrative 533,805 747,897 Marketing 131,529 266,930 Salaries and wages 3,501,744 3,259,446 Total operating expenses 4,552,910 5,300,665 Net operating loss (477,862 ) (1,413,672 ) OTHER EXPENSE Interest expense (145,623 ) (106,960 ) Total other expense (145,623 ) (106,960 ) NET LOSS $ (623,485 ) $ (1,520,632 ) LOSS PER SHARE - Basic and Diluted $ (0.02 ) $ (0.04 ) The accompanying notes are an integral part of these consolidated financial statements. F- 4 Financial Gravity Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the years ended September 30, 2019 and 2018 Number of Shares Issued and Outstanding Common Stock Par Value Amount Additional Paid-In-Capital Accumulated Deficit Total Balance at September 30, 2017 35,737,900 $ 35,738 $ 5,679,668 $ (4,054,998 ) $ 1,660,408 Common stock issued under a private placement memorandum 100,000 100 99,900 – 100,000 Stock based employee compensation expense – – 206,484 – 206,484 Net Loss – – – (1,520,632 ) (1,520,632 ) Balance at September 30, 2018 35,837,900 $ 35,838 $ 5,986,052 $ (5,575,630 ) $ 446,260 Stock based employee compensation expense _ _ 364,814 – 364,814 Stock options in lieu of expenses, as marketing expenses – – 38,660 – 38,660 Common stock issued upon conversion of debt 5,598,133 5,598 1,002,066 – 1,007,664 Net Loss – – – (623,485 ) (623,485 ) Balance at September 30, 2019 41,436,033 $ 41,436 $ 7,391,592 $ (6,199,115 ) $ 1,234,023 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Financial Gravity Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended September 30, 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (623,485 ) $ (1,520,632 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Depreciation and amortization 189,070 113,122 Common stock issued in exchange for services 38,660 – Stock based compensation 364,814 206,484 Bad debt expense – 21,876 Changes in operating assets and liabilities Trade accounts receivable, net (131,470 ) 72,012 Accounts receivable - related party 1,791 2,715 Prepaid expenses 13,647 38,946 Accounts payable - trade 127,997 53,621 Accrued expenses 75,283 10,437 Deferred revenue 33,333 (95,601 ) Net cash provided by (used in) operating activities 89,640 (1,097,020 ) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for purchase of property and equipment (39,353 ) (41,783 ) Purchases of trademarks (4,229 ) (18,856 ) Net cash used in investing activities (43,582 ) (60,639 ) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings from line of credit 14,521 77,561 Payments on line of credit (10,248 ) (110,089 ) Borrowings from note payable 202,205 740,000 Payments on note payable (248,703 ) (62,013 ) Proceeds from the sale of common stock – 100,000 Net cash (used in) provided by financing activities (42,225 ) 745,459 TOTAL CHANGE IN CASH AND CASH EQUIVALENTS 3,833 (412,200 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 32,220 444,420 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 36,053 $ 32,220 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 101,061 $ 95,756 Accrued interest converted to equity $ 58,683 $ – Notes payable converted to equity $ 948,981 $ – The accompanying notes are an integral part of these consolidated financial statements. F- 6 Financial Gravity Companies, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NATURE OF BUSINESS Financial Gravity Companies, Inc. and Subsidiaries (the “Company”) located in Allen, Texas. The wholly-owned subsidiaries of the organization include: Financial Gravity Holdings, Inc. (dissolved February 13, 2019), Financial Gravity Operations, Inc. (dissolved February 12, 2019), Financial Gravity Tax, Inc (sold October 31, 2019)., Sofos, Inc. (formerly Financial Gravity Wealth, Inc.), MPath Advisor Resources, LLC. (formerly Financial Gravity Business, LLC), Financial Gravity Ventures, LLC., Tax Master Network, LLC, and SASH Corporation (inactive and awaiting dissolution). Financial Gravity Holdings, Inc. (“FGH”) was established on September 29, 2014 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. FGH was merged into the Company, February 13, 2019 and subsequently dissolved. Financial Gravity Operations, Inc. (“FGO”) was established as a wholly-owned subsidiary of FGH in Texas on September 29, 2014. FGO did not have any activity through September 30, 2014. Activity commenced in 2015 for FGO related to the management of operational expenses for the shared services of the subsidiaries. FGO was merged into the FGH, February 12, 2019 and subsequently dissolved. MPath Advisor Resources, LLC. (formerly Financial Gravity Business, LLC.) (“MPath”) MPath is an insurance marketing organization and provides insurance products and services to insurance agents or agencies. Financial Gravity Ventures, LLC. (“FGV”) formerly Cloud9 Accelerator, LLC was acquired by Cloud9 Holdings Company (Cloud9) effective December 31, 2014 and holds acquired companies and business assets until they are integrated into the main stream Financial Gravity business structure. FGV did not have any financial activity through September 30, 2019. Financial Gravity Tax, Inc. (“FG Tax”) formerly Business Legacy, Inc., (“BLI”) was acquired by FGO for no cost effective December 1, 2015 and is located in Allen, Texas. BLI is a bookkeeping, tax planning, tax preparation, and payroll service provider to small companies and individuals. FG Tax was sold October 31, 2019. Sofos, Inc. (formerly Financial Gravity Wealth, Inc.) (“Sofos”) Sofos is a registered investment advisor, located in Allen, Texas. Sofos provides asset management services. SASH Corporation, an Oklahoma corporation doing business as Metro Data Processing (“MDP”) was acquired August 12, 2015. The purchase was made by Cloud9Accelerator, LLC. MDP was located in Tulsa, Oklahoma, and provided payroll services, software, and support solutions to business owners. This business was sold during fiscal 2019 for a net gain of $28,585. MDP is inactive and awaiting dissolution. Tax Master Network, LLC (“TMN”), was acquired effective October 1, 2015, and is an Ohio limited liability company. The purchase was made by FGH. TMN, located in Cincinnati, Ohio, provides three primary services including monthly subscriptions to the “Tax Coach” software system, coaching and email marketing services. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting polices consistently applied in the preparation of the accompanying consolidated financial statement in accordance with accounting principles generally accepted in the United States of America (“GAAP”) is as follows. Basis of Consolidation The consolidated financial statements include the accounts of Financial Gravity Companies, FGW, FGT, and TMN , (collectively referred to as the “Company”). All significant intercompany accounts and transactions have been eliminated on consolidation. F- 7 Cash and Cash Equivalents The Company considers all highly liquid investments with an initial maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash balances at several financial institutions located throughout the United States, which at times may exceed insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Trade Accounts Receivable Trade accounts receivable are carried at the invoiced amount less an estimate made for doubtful accounts based on management’s review of outstanding balances. The collectability of the Company’s accounts receivable is reviewed on an ongoing basis, using historical payment trends and a review of specific accounts. Accounts receivable are written off after all reasonable collection efforts have been exhausted and when management determines the amounts to be uncollectible. Recoveries of receivables previously written off are recorded when received. The allowance for doubtful accounts was $0 and $21,876 as of September 30, 2019 and 2018, respectively. In the normal course of business, the Company may extend credit to its customers, on an unsecured basis, substantially all of whom are located in the United States of America. The Company does not believe that they are exposed to any significant risk of loss on accounts receivable. Prepaid Expenses Prepaid expenses consist of expenses the Company has paid for prior to the service or good being provided. These prepaid expenses will be recorded as expense at the time the service has been provided. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to earnings over their estimated service lives by the straight-line method. Maintenance and repairs are charged to earnings as incurred; major repairs and replacements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Property and equipment operated under material leases which transfer substantially all benefits and risks associated with the assets to the Company are capitalized. An asset and liability equal to the present or fair value, if appropriate, of minimum payments over the term of the leases are recorded. Amortization of the asset is computed using the straight-line method. Expenses associated with all other leases (operating leases) are charged to expense as incurred. Customer Relationships The customer relationships acquired from the TMN purchase have been recognized in the accompanying consolidated balance sheets at $44,900, the value attributed to it on the date of the purchase. The customer relationships are being amortized on a straight-line basis over a four- year estimated life. During the years ended September 30, 2019 and 2018, the Company recorded amortization expense of $11,225 on this intangible asset, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations. Accumulated amortization at September 30, 2019 and 2018 was $44,900, and $33,675 respectively. This has been fully amortized as of September 30, 2019. 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 it on the date of the purchase. The proprietary content is being amortized on a straight-line basis over an eight- year estimated life. During the years ended September 30, 2019 and 2018, the Company recorded amortization expense of $65,638 on this intangible asset, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations. Accumulated amortization at September 30, 2019 and 2018 was $262,550 and $196,912, respectively. F- 8 Future amortization of proprietary content is estimated to be as follows for the years ended September 30: 2020 $ 65,638 2021 65,638 2022 65,638 2023 65,636 $ 262,550 Trade Name The trade name acquired as a part of the TMN purchase has been recognized in the accompanying consolidated balance sheets at $69,300, the value attributed to it on the date of the purchase. Management has determined that the trade name had no future value and considers the value of the trade name recorded in the accompanying consolidated balance sheet to be impaired as of September 30, 2019. Accordingly, this asset was fully written off in 2019. Non-compete Agreements Non-compete agreements established as a part of the TMN purchase have been recognized in the accompanying consolidated balance sheets at $26,300, the value attributed to them on the date of the purchase. The non-compete agreements are being amortized on a straight-line basis over the five-year term of the non-compete clause of the agreement. During the years ended September 30, 2019 and 2018, the Company recorded amortization expense of $5,260 on this intangible asset, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations. Accumulated amortization at September 30, 2019 and 2018 was $21,040 and $15,780, respectively. Future amortization of the non-compete agreements is estimated to be as follows for the years ended September 30: 2020 $ 5,260 Intellectual Property The Company accounts for intellectual property in accordance with GAAP and accordingly, intellectual property are stated at cost. Intellectual property with indefinite lives are 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 September 30, 2019 and 2018. Goodwill Goodwill represents the excess of the value of the purchase price and related costs over the identifiable assets from business acquisitions. The Company conducts an annual impairment assessment, at the reporting unit level, of its recorded goodwill. The Company assesses qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than it is 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 is carrying amount, a two-step impairment test is performed. Management determined, by assessing the qualitative factors, that it is more likely than not that the fair value of the reporting unit is greater than it carries value. Management does not consider the value of goodwill recorded for TMN in the accompanying consolidated balance sheets to be impaired as of September 30, 2019, and 2018. Goodwill consists of the following: Goodwill at September 30, 2018 $ 1,094,702 Goodwill at September 30, 2019 $ 1,094,702 F- 9 Income Taxes The Company accounts for Federal and state income taxes pursuant to GAAP, which requires an asset and liability approach for financial accounting and reporting for income taxes based on tax effects of differences between the financial statement and tax basis of assets and liabilities. The Company accounts for all uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 – Income Taxes (“ASC 740”). ASC 740 provides guidance on de-recognition, classification, interest and penalties and disclosure related to uncertain income tax positions. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. There was no accrued interest or penalties as of September 30, 2019 and 2018. From time to time, the Company is audited by taxing authorities. These audits could result in proposed assessments of additional taxes. The Company believes that its tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from those of the Company, which could result in the imposition of additional taxes. The Company’s Federal returns since 2016 are still subject for examination by taxing authorities. Earnings Per Share Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for the reporting period. Average number of common shares were 37,825,239 and 35,830,228 for years ended September 30, 2019 and 2018, respectively. For the years ended September 30, 2019 and 2018, approximately 2,788,476 and 3,361,538 common stock options, respectively, and 25,000 and 200,000 warrants, respectively, were not added to the diluted average shares because inclusion of such shares would be antidilutive. Revenue Recognition The Company adopted the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates (“ASU”) ASU 2014-09, Revenue from Contracts with Customers October 1, 2018 on a modified basis. As the initial adoption of the standard did not have a material impact on the Company's financial condition or results of operations, no cumulative effect was recognized at the date of initial application. The Company also had no significant changes to systems, processes, or controls. The Company derives its revenues primarily from six components: Investment Management Fees, Tax Master Network subscriptions, Tax Operating System subscriptions, Financial Advisor subscriptions, Tax BluePrint sales, and Insurance Sales. 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. Revenue is recognized as earned, at the end of each period. FG Tax generates service income from its consulting and other professional services performed. Revenue recognized as service is provided. Commission revenue is derived from the sale of annuities and premiums on life insurance policies held by third parties. The revenue is recognized when commissions are received from insurers and issuers of the products. Revenue represents gross billings less discounts, and are 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 has five levels of services that are charged and collected on a month to month subscription basis. 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. Any subscription fees paid for a future period are deferred in the financial statements. TMN also sells Tax Blueprint®. These are tax planning strategies guides, to save customers taxes through the implementation of the recommended tax strategies. After an initial assessment, the customers pay half of the year one tax savings. Revenue is deferred until the customer reviews and accepts the final Tax Blueprint® document and returns an executed delivery agreement. F- 10 Advertising Advertising costs are charged to operations when incurred. Advertising and marketing expense were $131,529 and $266,930 for the years ended September 30, 2019 and 2018, respectively. Stock-Based Compensation The Company recognizes the fair value of the stock-based compensation awards as wages in the accompanying statements of operations on a straight-line basis over the vesting period based on the Black-Scholes option pricing model based on a risk-free rate of 1.50% to 2.89% in 2019 and 1.49% to 2.55% in 2018, dividend yield of 0%, expected life of 10 years and volatility of 25.32% to 34.05%. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the Company will need to manage additional asset units under contract and/or additional financing to fully implement its business plan, including continued growth and establishment of a stronger brand. 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 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. Additionally, the Company is also actively seeking growth of its service offerings, both organically and via new client relationships. Management, in the ordinary course of business, is trying to raise additional capital through sales of common stock as well as seeking financing via equity or debt, or both from third parties. There are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders and incurring additional indebtedness could involve an increased debt service cash obligation, the imposition of covenants that restrict the Company’s operations or the Company’s ability to perform on its current debt service requirements. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. F- 11 Future Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses, which amends how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, which applies to trade accounts receivable and the calculation of the allowance for uncollectible accounts receivable. The new standard will become effective for the Company for annual and interim periods beginning after December 31, 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this accounting guidance will have on the consolidated financial statements. Since the Company currently uses an expected losses from customers method, the Company does not anticipate the adoption of ASU 2016-13 will have a material impact on the Company's financial condition or results of operations. In January 2017, the FASB issued ASU No. 2017-04 Intangibles-Goodwill and Other Simplifying the Test for Goodwill Impairment, which provides guidance to simplify the subsequent measurement of goodwill by eliminating the Step 2 procedure from the goodwill impairment test. The new guidance is effective for the Company beginning with the fourth quarter of 2020. The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on the Company's financial condition or results of operations. In February 2018, the FASB issued ASU Update No. 2018-02 Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP - which requires only capital leases to be recognized on the balance sheet - the new ASU will require both types of leases to be recognized on the balance sheet. ASU 2018-02 is effective for the years beginning after December 31, 2019 and for all periods presented. Early application of the amendments in this ASU is permitted. The Company does not expect any significant financial impact to the financial statements upon adoption of this standard. In March 2018, the FASB issued ASU Update No. 2018-07, Investments – Equity Method and Joint Ventures (Topic 323). The amendments in this Update eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. ASU 2018-07 is effective for the years beginning after December 31, 2018. Early application of the amendments in this ASU is permitted. The Company does not expect any significant financial impact to the financial statements upon adoption of this standard. In March 2018, the FASB issued ASU Update No. 2018-09, Compensation – Stock Compensation (Topic 718). The amendments in this Update are to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2018-09 is effective for annual periods beginning after December 31, 2018, and interim periods within those annual periods. The Company has yet to do a full analysis on the impact this will have but will do during the next fiscal year. The Company does not expect any significant financial impact to the financial statements upon adoption of this standard. 2. PROPERTY AND EQUIPMENT Property and equipment consist of the following at September 30: Estimated Service Lives 2019 2018 Furniture, fixtures and equipment 2 to 5 years $ 93,073 $ 53,271 Internally developed software 10 years 152,000 152,000 245,073 205,721 Less accumulated depreciation and amortization 105,082 67,435 $ 139,991 $ 138,286 Depreciation expense was $37,647 and $31,899 during the years ended September 30, 2019 and 2018, respectively. F- 12 3. INTELLECTUAL PROPERTY Intellectual property consists of the following: Trademarks at September 30, 2017 $ 30,085 Trademarks purchased at cost 18,855 Trademarks at September 30, 2018 $ 48,940 Trademarks purchased at cost 4,230 Trademarks at September 30, 2019 $ 53,170 4. LINE OF CREDIT The Company has a revolving line of credit with Wells Fargo Bank, N.A. in the amount of $67,500. Amounts drawn under this line of credit are due on demand, and monthly interest and principal payments are required. The interest rate on the line of credit is 9.5%. This line of credit is collateralized by the personal guarantee of the majority stockholder. Line of credit balance was $63,919 and $59,646 for the years ended September 30, 2019 and 2018, respectively. 5. 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%. First year payment is equal to 10% of the loan value. A second-year payment equal to 10% of the loan was issued on December 1, 2019 with monthly principal and interest of $4,614 starting on year three. The remaining principal and accrued interest of this note is due on the maturity date, July 15, 2021. On December 1, 2019, the original note payable was amended. Payments from December 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. 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 September 30, 2019 and 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. The remaining principal and accrued interest of this note was due on the maturity date, August 15, 2020. On December 31, 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. 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 September 30, 2019 and 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 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, August 15, 2020. On December 31, 2019, the original note payable was amended. The new interest rate on the note is 15%. Payment on the note is deferred until December 31, 2020. Interest for the deferment period will be capitalized into the amount due, December 31, 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 December 31, 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 September 30, 2019 and 2018, respectively. On October 2, 2017 the Company entered 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%. 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 principal and accrued interest of this note is due on the maturity date, October 2, 2020. On December 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 2, 2020. Interest 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. 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 September 30, 2019 and 2018, respectively. F- 13 On October 2, 2017 the Company entered 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. 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 and $100,000 at September 30, 2019 and 2018, respectively. On November 2, 2017 the Company entered into a Promissory Note Payable with Michael and Donna Dade (Dade) in the amount of $340,000. 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 $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 December 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, 2020. 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. On June 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 September 30, 2019 and 2018, respectively. On March 15, 2018 the Company entered into 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 December 31, 2019, the original note payable was amended. 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. 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 September 30, 2019 and 2018, respectively. On November 29, 2018 the Company entered into a Promissory Note Payable with Knight Capital in the amount of $155,000. 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 $0 at September 30, 2019. 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. The note is in settlement of tax penalties and interest he incurred, that were proximately caused by the Company’s actions. The monthly 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 September 30, 2019 and 2018, was $29,401 and $0 respectively. On April 12, 2019, the Company entered into a promissory note payable with a related party, John Pollock, the current EVP, in the amount of $15,000, and bears interest at 2.76%. The note is scheduled to be repaid in full by December 1, 2019. The outstanding balance on September 30, 2019 and 2018, was $7,526 and $0 respectively. The Company’s maturities of debt subsequent to September 30, 2019 are as follows: 2020 $ 13,393 2021 6,229 2022 17,305 $ 36,927 F- 14 6. ACCRUED EXPENSES Accrued expenses consist of the following at September 30: 2019 2018 Accrued payroll $ 19,502 $ 19,689 Accrued operating expenses 113,013 113,300 Deferred rent 14,357 – $ 146,872 $ 132,989 7. INCOME TAXES The Company elected C Corporation tax status from inception. Net operating losses (“NOL”) since that date total $5,624,574 as of September 30, 2019 and may be carried forward to offset future taxable income; accordingly, no current provision for income tax has been recorded in the accompanying statements of operations. NOL carry-forward benefits begin to expire in 2035. The following table summarizes the difference between the actual tax provision and the amounts obtained by applying the statutory tax rates to the income or loss before income taxes for the years ended September 30: 2019 2018 Tax benefit calculated at statutory rate 21.00% 24.25% Expense not deductible (1.83% ) (0.16% ) State tax, net of federal benefit – (0.45% ) Effect of rate change – (26.99% ) Changes to valuation allowance (19.17% ) 3.35% Provision for income taxes –% –% A deferred tax liability or asset is determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense or benefit in the accompanying consolidated statements of operations are the result of changes in the assets and liabilities for deferred taxes. The measurement of deferred tax assets is reduced, if necessary, by the amount for any tax benefits that, based on available evidence, are not expected to be realized. Income tax expense is the current tax payable or refundable for the year plus or minus the net change in the deferred tax assets and liabilities. Deferred income taxes of the Company arise from the temporary differences between financial statement and income tax recognition of NOL carry-forwards. The deferred tax assets and liabilities in the accompanying consolidated balance sheets include the following components at September 30: 2019 2018 Net non-current deferred tax assets: Net operating loss carry-forward $ 1,181,160 $ 1,098,314 Property and equipment 6,921 3,456 1,188,081 1,101,770 Net non-current deferred tax liabilities: Intangible assets 10,319 7,996 Net 1,177,762 1,093,774 Less valuation allowance (1,177,762 ) (1,093,774 ) Net deferred taxes $ – $ – F- 15 The Tax Cuts and Jobs Act (the “Tax Act”), which was enacted December 22, 2018, reduced the corporate income tax rate effective December 1, 2019 from 35% to 21%. Among the other significant tax law changes that potentially affect the Company are the limitations on the deduction for interest incurred in 2019 or later of up to 70% of its taxable income for the carryforward year and the limitation of the utilization of post 2018 net operating loss carryforwards. The Company does not anticipate material changes to its income tax provision as a result of the passage of the Tax Act until pretax law change net operating losses are fully utilized or expire in 2026. The Company has remeasured certain deferred federal tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The deferred tax assets of the Company were reduced by $408,041 as a result of this remeasurement. This change was fully offset by the corresponding change in the valuation allowance. The Company is still analyzing certain aspects of the Tax Act, and refining its calculations, which could potentially affect the measurement of those balances or potentially give rise to new deferred tax amounts. The Company’s estimates may also be affected in the future as the Company gains a more thorough understanding of the Tax Act, and how the individual states are implementing this new law. 8. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS Leases The Company conducts operations from leased premises leased through 2024. Some of these leases provide for payment of taxes, insurance, utilities and maintenance. The Company also leases certain equipment under operating leases. Total rent expense for the years ended September 30, 2019 and 2018 was $135,041 and $118,126, 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. Minimum future annual rental payments under non-cancelable operating leases having original terms in excess of one year are as follows: 2020 $ 123,144 2021 110,444 2022 96,016 2023 97,752 Thereafter 32,584 $ 459,940 Legal Proceedings From time to time, we are a party to or are otherwise involved in legal proceedings, claims and other legal matters, arising in the ordinary course of our business or otherwise. Management does not believe that there are any current, material legal proceedings ongoing at this time. 9. STOCKHOLDERS’ EQUITY Common Stock The Company is authorized to issue up to 300,000,000 shares of common stock, par value $0.001 per share. Preferred Stock The Company does not have a preferred stock authorization in its articles of incorporation. Financial Gravity Holdings, a subsidiary of the Company, has authorized the issuance of up to 10,000,000 shares of preferred stock, by action of the Board of Directors. The preferred stock authorization has not been formalized via the filing of an amendment to the certificate of formation of Financial Gravity Holdings. The rights and obligations of the preferred stock are as determined by the Board of Directors at the time of issuance. Financial Gravity Holdings was dissolved February 13, 2019. F- 16 For each of the Company and Financial Gravity Holdings, its subsidiary, there were no preferred shares issued or outstanding as of September 30, 2019 and 2018. Warrants 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. Additional Common Stock Issuances During the years ended September 30, 2019 and 2018, 0 and 100,000 shares were issued, for $0 and $100,000 respectively. 10. STOCK OPTION PLAN Effective February 27, 2015, the Company established the 2015 Stock Option Plan (the “2015 Plan”). 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 and exercised under the Plan is 9,000,000. Eligible individuals include any employee of the Company or any director, consultant, or other person providing services to the Company. The expiration date and exercise price are as established by the Board of Directors of the Company. The last date any options were granted under the 2015 Plan was March 14, 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 maximum number of shares of stock that may be issued and exercised under the Plan is 20,000,000. Eligible individuals include any employee of the Company or any director, consultant, or other person providing services to the Company. The expiration date and exercise price are as established by the Board of Directors of the Company. The first date any options were granted under the 2016 Plan was December 19, 2016. Stock option activity is summarized as follows: Shares Under Option Value of Shares Under Option Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding - September 30, 2017 2,817,146 $ 317,561 $ 0.67 101 months Granted 895,000 119,736 0.27 113 months Exercised – – – – Canceled or expired 80,596 20,052 0.27 – Outstanding - September 30, 2018 3,361,538 417,245 0.58 101 months Granted 2,269,650 472,048 0.21 113 months Exercised – – – Canceled or expired 3,112,712 338,838 0.24 Outstanding - September 30, 2019 2,788,476 $ 550,455 $ 0.29 99 months Exercisable - September 30, 2019 2,707,209 $ 0.29 98 months All outstanding 2015 Plan stock options at September 30, 2016 became immediately vested upon the completion of the reverse merger with Pacific Oil Company. Most of the stock options granted under the 2016 Plan have 2-year vesting periods but there were 650,000 and 20,000 options that vested at issuance during fiscal 2018 and 2019, respectively. Total compensation expense included in salaries and wages of previously unamortized stock compensation was $364,814 and $206,484 for the years ended September 30, 2019 and 2018, respectively. Unamortized share-based compensation expense as of September 30, 2019 amounted to $12,871 which is expected to recognize over the next 1.84 years. F- 17 11. RELATED PARTY TRANSACTIONS Accounts receivable due from the largest stockholder of the entity, included in accounts receivable – related party in the accompanying consolidated balance sheets was $0 and $1,791 as of September 30, 2019 and September 30, 2018, respectively. Management fees paid to the majority stockholder of the entity, included in salaries and wages in the accompanying consolidated statements of operations were $152,500 and $203,000 for fiscal 2019 and 2018, respectively. Included in salaries and wages were consulting fees paid to a related party as a condition to the TMN acquisition. The agreement requires payments each month totaling $21,500. The total paid under this agreement in fiscal 2019 and 2018 respectively, were $258,000 and $403,160. On April 12, 2019 the Company entered into a loan agreement with John Pollock, Executive Vice President 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 September 30, 2019 was $7,526. 12. SUBSEQUENT EVENTS September 30, 2019, the Company entered into a merger agreement with Forta Financial Group, Inc. (formerly Presidential Brokerage, Inc.) (“Forta”), to acquire Forta in exchange for Company stock. 45,797,684 shares of Financial Gravity Companies, Inc. will be issued in exchange for the stock of Forta. Companies will assume approximately $860,000 of Forta debt and receive approximately $1,220,000 in Forta assets. Subsequent to September 30, 2019, the Company applied to FINRA for approval of the merger. The merger is subject to FINRA approval and will be finalized upon such approval. F- 18