What changed in this filing

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Item 1. Financial Statements

2020-03-03 compared with 2019-08-12 · 563 added, 768 removed, 309 unchanged (81% of the section changed)

1 unchanged sentence

Financial Gravity Companies, Inc.

CONSOLIDATED BALANCE SHEETS

June 30, 2019

and Subsidiaries

BALANCE SHEETS

December 31, 2019

September 30, 2019

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Cash and cash equivalents

Accounts receivable

Accounts receivable - related party

Trade accounts receivable, net

Prepaid expenses and other current assets

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Property and equipment, net

Customer relationship, net

Right to use lease asset

Proprietary content, net

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Intellectual property

Total Other Assets

Liabilities and Stockholder's Equity

LIABILITIES AND STOCKHOLDERS’

CURRENT LIABILITIES

Accounts payable - trade

Accrued expenses and other current liabilities

Related party loan

Accrued expenses

Deferred revenue

Line of credit

Notes Payable - current

Total Current Liabilities

Lease liability - current

Notes payable

Total current liabilities

Notes payable - net of current

Lease liability - non-current

Total non-current liabilities

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’

Common stock, $0.001 par value;

300,000,000 shares authorized;

41,524,589 shares issued and outstanding as of December 31, 2019 and 41,436,033 shares issued and outstanding as of September 30, 2019

Additional paid-in capital

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Total stockholders’

Total Liabilities and Stockholders’

The accompanying notes are an integral part

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying notes are in integral part

of these consolidated financial statements.

Financial Gravity Companies, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

and Subsidiaries

STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Nine Months Ended

Total Revenue

Investment Management Fee

Investment management fees

Service income

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General and administrative

Management fees - related party

Salaries and wages

Total operating expenses

Operating Income (Loss)

Net operating loss

OTHER EXPENSE

Interest expense

$ (1,051,141 )

Total other expense

LOSS PER SHARE - Basic and Diluted

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Financial Gravity Companies, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS' EQUITY

and Subsidiaries

STATEMENTS OF CHANGES IN STOCKHOLDERS’

For the three-month periods ended

December 31, 2019 and 2018

Number of Shares Issued and Outstanding

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$ (5,575,630 )

Common stock issued under a private placement memorandum

Stock based employee compensation expense

Balance at December 31, 2018

$ (5,775,002 )

Balance at September 30, 2019

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Stock based employee compensation expense

Stock options in lieu of expenses, as cost of sales

Debt exchanged for Stock

Balance at June 30, 2019

Stock options exercised

Private Placement stock issue

Balance at December 31, 2019

$ (6,211,157 )

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Financial Gravity Companies, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

and Subsidiaries

Three Months Ended December 31,

STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES

$ (1,051,141 )

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

Adjustments to reconcile net loss to net cash used in

operating activities

Depreciation and amortization

Stock based compensation

Stock options issued for services

Impairment of intangible

Right of use of lease asset

Changes in operating assets and liabilities:

Accounts receivable

Accounts receivable - related party

Prepaid expenses and other current assets

Accounts payable - trade, current

Prepaid expenses

Accounts payable - trade

Accrued expenses and other liabilities

Deferred revenues

Deferred revenue

Lease liability

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

Purchase of trademark

Cash paid for purchase of property and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings from line of credit

Borrowings from notes payable

Payments on line of credit

Borrowings from lines of credit

Proceeds from notes payable

Payments on notes payable

Proceeds from sale of common stock

Payments on line of credit

Proceeds from the sale of common stock

Net cash provided by financing activities

Net increase(decrease) in cash and cash equivalents

TOTAL INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS AT END OF PERIOD

Cash Paid for Interest

The accompanying notes are an integral part

Supplemental disclosures of cash flow information:

Cash paid during the period for:

The accompanying notes are in integral part

of these consolidated financial statements.

Financial Gravity Companies, Inc.

Financial Gravity Companies,

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF BUSINESS

Financial Gravity is a holding company of best of breed financial

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

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

Financial Gravity's mission is to synergistically

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

clients that we serve.

The wholly-owned subsidiaries of the Company include:

Financial Gravity Tax, Inc., Financial Gravity Wealth,

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

(“TMN”) (formerly

known as Tax Coach Software, LLC.)

Financial Gravity is a parent company of

best of breed financial services companies including brokerage, wealth management, estate planning, family office services, risk

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

Financial Gravity's mission

is to synergistically bring together companies that create symbiotic advantages to each other in order to bring a complete financial

experience to the clients that we serve.

Financial Gravity

Companies, Inc.

and Subsidiaries (the “Company”) is located in Allen, Texas.

The wholly-owned subsidiaries of the

organization include:

Financial Gravity Holdings, Inc.

(dissolved February 13, 2019), Financial Gravity Operations, Inc.

February 12, 2019), Financial Gravity Tax, Inc (sold October 31, 2019)., Sofos Investments, 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).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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cash equivalents.

Receivables include trade accounts receivable

and are carried at the invoiced amount less an estimate made for doubtful accounts based on management’s review of outstanding

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 June 30, 2019 and September 30, 2018, respectively.

Trade accounts receivable are carried at

the invoiced amount less an estimate made for doubtful accounts based on management’s review of outstanding balances.

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

The allowance for doubtful accounts was $0 as of December 31, 2019 and September 30, 2019, respectively.

In the normal course of business, the Company

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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.

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 income as incurred.

Customer Relationships

The customer relationships acquired as

part of the TMN purchase have been recognized in the accompanying consolidated balance sheets at $44,900, the value attributed

to such relationships on the date of the purchase.

The customer relationships are being amortized on a straight-line basis over

a four-year estimated life.

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

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

in the accompanying consolidated statements of operations.

Accumulated amortization at June 30, 2019 was $42,094 and $33,675 at

September 30, 2018.

February 2016, the FASB issued ASU 2016-02 Leases, which changed financial reporting as it relates to leasing transactions to

recognize a lease liability, measured on a discounted basis;

and a right-of-use asset, for the lease term.

In July 2018, the

FASB issued ASU No.

2018-10 Codification Improvements to Topic 842, Leases and ASU No.

2018-11 Leases (Topic 842):

Improvements.

In March 2019, the FASB issued ASU No.

2019-1 Codification Improvements to Topic 842, Leases.

adopted these ASUs on October 1, 2019 on a modified retrospective basis.

The Company did not elect the

hindsight practical expedient and did elect the package of practical expedients to not reassess prior conclusions related to

contracts containing leases, lease classification and initial direct costs for all leases.

initial adoption of the standard recognized right-of-use assets of $323,097 and lease liabilities

of $337,454 on the Company’s statement of financial position with no impact on the Company's results of

The Company had no significant changes to processes or controls.

The Company leases all their office

space through an operating lease, which expires at January 31, 2024.

Many of the lease agreements obligate the Company to pay real

estate taxes, insurance and certain maintenance costs, which are accounted for separately.

The Company’s lease agreements

do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement

is an operating lease at inception.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

other leases are recorded on the balance sheet as right-of-use assets and lease liabilities for the lease term.

Lease assets and

lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include

options to extend or terminate the lease when they are reasonably certain to be exercised.

The present value of lease payments

is determined primarily using the incremental borrowing rate based on the information available at lease commencement date.

Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in general and

administrative expenses.

Proprietary Content

The proprietary content acquired as a

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

to such content on the date of the purchase.

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

estimated life.

During each of the three and nine months ended June 30, 2019 and 2018, the Company recorded amortization expense

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

statements of operations.

Accumulated amortization at June 30, 2019 was $246,140 and $196,912 at September 30, 2018.

The trade name acquired as a part of the

TMN purchase has been recognized in the accompanying consolidated balance sheets at $69,300, the value attributed to such name

on the date of the purchase.

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

the asset has been fully written off.

The proprietary content acquired as a part

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

content on the date of the purchase.

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

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

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

Accumulated amortization at December 31, 2019 was $278,959 and $262,550 at September 30, 2019.

Non-compete Agreements

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

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

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

amortization expense in the accompanying consolidated statements of operations.

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

and $15,780 at September 30, 2018.

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

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

in the accompanying consolidated statements of operations.

Accumulated amortization at December 31, 2019 was $22,355 and $21,040

at September 30, 2019.

Intellectual Property

Financial Gravity maintains copyrights

or trademarks on all of its printed marketing materials, the financialgravity.com website and other web pages, and proprietary

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

of other parties.

Intellectual Property are stated at cost.

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

Management has determined

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

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

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 sheets

to be impaired as of December 31, 2019 and September 30, 2019.

Goodwill represents the excess of the value

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The Company assesses qualitative factors in order

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

The qualitative factors evaluated by the Company include macro-economic conditions of the local business environment, overall financial

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

qualitative factors evaluated by the Company include:

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

performance, and other entity specific factors as deemed appropriate.

If, through this qualitative assessment, the conclusion is

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

impairment test is performed.

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

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

Management does not consider the value of goodwill

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

The fair values of the assets acquired,

and liabilities assumed were determined primarily using the income approach, which determines the fair value for the asset based

on the present value of cash flows projected to be generated by the asset.

Projected cash flows are discounted at a rate of return

that reflects the relative risk of achieving the cash flow and the time value of money.

The fair value of relationships was determined

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

The accompanying consolidated balance

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

equity and consolidated

statements of cash flows include the results of operations of the acquired subsidiaries from the date of acquisition.

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 December 31, 2019 and September 30, 2019.

The Company accounts for federal and state

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tax benefits as a component of income tax expense.

There was no accrued interest or penalties as of June 30, 2019 and September

There was no accrued interest or penalties as of December 31, 2019 and September

From time to time, the Company is audited

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Company’s Federal returns since 2016 are still subject for examination by taxing authorities.

Loss Per Share

Basic loss per common share is computed

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

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

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

For the three months and nine months ended

June 30, 2019, approximately 3,940,326 common stock shares were not added to the diluted average shares because inclusion of such

shares would be antidilutive.

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

the three months and nine months ended June 30, 2018, approximately 3,430,646 common stock shares were not added to the diluted

average shares because inclusion of such shares would be antidilutive.

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

warrants and 3,080,646 in options.

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

Average number of common shares were 41,495,070 and 35,837,900 for the three months ended December 31, 2019 and 2018, respectively.

For the three months ended December 31, 2019,

approximately 2,161,605 common stock equivalents were not added to the diluted average shares because inclusion of such equivalents

would be antidilutive.

For the three months ended December 31, 2018, approximately 3,840,121 common stock equivalents were not

added to the diluted average shares because inclusion of such equivalents would be antidilutive.

Revenue Recognition

Financial Gravity Wealth, Inc.

investment management fees for services provided by the Company.

Investment management fees include fees earned from assets under

management by providing professional services to manage client investments.

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.

Sofos Investments, Inc.

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.

Investment management fees are calculated as a percentage of assets

under management for the period.

Investment management fees are Revenue is recognized as earned, at the end of each period.

are withdrawn from investor assets monthly, in arrears.

Financial Gravity Tax, Inc.

generates service

income from consulting and other professional services performed.

generates service income from its

consulting and other professional services performed.

Revenue recognized as service is provided.

Subscription income is billed

to client credit card monthly, on the monthly anniversary of client sign-up.

Commission revenue is derived from the

sale of annuities and premiums on life insurance policies held by third parties.

The revenue is recognized at the time the policy

The revenue is recognized when commissions are

earned from insurers and issuers of the products.

Commissions are received after products are issued and in force.

Revenue represents gross billings less

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

Monthly subscription billings are recognized as revenue as collected.

Tax Master Network, LLC.

has 3 types of

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

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

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

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to refunds for unused memberships.

Recent Accounting Pronouncement

In May 2014, the FASB issued Accounting

Standards Update No.

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

revenue recognition guidance under U.S.

The guidance requires entities to recognize revenue using the following five-step

identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price,

allocate the transaction price to the performance obligations in the contract, and recognize revenue as the entity satisfies each

performance obligation.

Adoption of this standard could result in retrospective application, either in the form of recasting all

prior periods presented or a cumulative adjustment to equity in the period of adoption.

The guidance was effective for annual and

interim reporting periods beginning after December 15, 2017.

On October 1, 2018 we adopted ASU 2014-09

using the full retrospective method.

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

was no impact to its consolidated financial statements, results of operations or liquidity.

When comparing the Company’s

prior revenue recognition to the new applied revenue recognition under Accounting Standards Codification (“ASC”) 606,

there was no change to the amount or timing of revenue recognized.

Therefore, no quantitative adjustment was required to be made

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

Any subscription fees paid for a future period are deferred in the financial statements.

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.

income is billed to client credit card monthly, on the monthly anniversary of client sign-up.

TBP sales are billed to the client

after a preliminary assessment and client approval to move forward.

Revenue recognized in 2020, that was included in the deferred

revenue liability at the beginning of the year, is $61,400.

Advertising costs are charged to operations

when incurred.

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

for the nine months ended June 30, 2019 and 2018, respectively.

Advertising and marketing expense were $21,113 and $31,644 for the three months ended December 31, 2019 and 2018,

respectively.

Stock-Based Compensation

The Company recognizes

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

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

1.49% to 2.55% in 2018, dividend yield of 0%, expected life of 2 years and volatility of 35% to 40%.

the fair value of stock-based compensation awards as wages in the accompanying statements of operations for employee grants, commissions

for non-employee grants, and stock appreciation rights grants, on a straight-line basis over the vesting period, using the Black-Scholes

option pricing model, which is based on risk-free rate of 2.89% rates in 2020 and 1.49% to 2.55% in 2019, dividend yield of 0%,

expected life of 10 years and volatility of 35% to 40%.

Use of Estimates

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Actual results could differ from these estimates.

All adjustments that, in the opinion of

management, are necessary for a fair presentation for the periods presented have been reflected in the financial statements.

The accompanying unaudited

consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting

principles in the United States (“GAAP”), pursuant to the applicable rules and regulations of the SEC.

information furnished herein reflects all adjustments (consisting only of normal recurring adjustments) that are, in the

opinion of management, necessary to present a fair statement of the financial position and operating results of the Company

as of and for the respective periods.

However, these operating results are not necessarily indicative of the results expected

for a full fiscal year or any other future period.

Certain information and footnote disclosures normally included in annual

financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations.

management of the Company believes, to the best of their knowledge, that the disclosures herein are adequate to make the

information presented not misleading.

The Company has determined that there were no subsequent events that would require

disclosure or adjustments to the accompanying consolidated financial statements through the date the financial statements

The accompanying unaudited consolidated financial statements should be read in conjunction with the audited

consolidated financial statements of the Company for the fiscal year ended September 30, 2019, included in its

Annual Report on Form 10K.

Going Concern

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The Agreement was

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

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

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

shares of its common

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

of such shares.

“Market Price”

shall mean the average of

the two lowest trading prices of the Company’s Common Stock during the ten (10) consecutive trading days preceding the receipt

of the applicable put notice.

Accordingly, on each instance the Company exercises a put option, the Company will know in advance,

both the number of shares issuable upon exercise of the put option, and the dollar amount of the purchase price for such shares.

The maximum purchase price for shares to be purchased by GHS Investments under the Agreement is $11,000,000.

To facilitate the

sale of the shares so purchased by GHS Investments, the Company agreed to file a registration statement with the Securities and

Exchange Commission.

The Company also entered into a Registration Rights Agreement with GHS Investments, pursuant to which the

Company has agreed to provide certain registration rights under the Securities Act of 1933, the rules and regulations promulgated

thereunder, and applicable state securities laws.

The Agreement will terminate (i) when GHS Investments has purchased an aggregate

of $11,000,000 of the common stock of the Company, or (ii) 36 months after the effective date of the Agreement, or (iii) at such

time that the registration statement is no longer in effect.

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

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

Accordingly, on each instance the Company

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

the dollar amount of the purchase price for such shares.

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

under the Agreement is $11,000,000.

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

file a registration statement with the Securities and Exchange Commission.

The Company also entered into a Registration Rights

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

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

The Agreement will terminate

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

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

Additionally, the Company is also actively

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Future Accounting Pronouncements

In February 2017, the FASB issued ASU Update

2017-02 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.

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 2017-02 is effective for the years beginning after December 15, 2018

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 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 October 1, 2020.

PROPERTY AND EQUIPMENT

Property and equipment consist of the following at June 30,

Property and equipment consist of the following at December

31, 2019 and September 30, 2019:

Service Lives

December 31, 2019

September 30, 2019

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Depreciation expense was $6,167 and $8,272 during the three

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

and June 30, 2018, respectively.

months ended December 31, 2019 and 2018, respectively.

INTELLECTUAL PROPERTY

Intellectual property consists of the following:

Intellectual property at September 30, 2017

Intellectual property purchased at cost

Intellectual property at September 30, 2018

Intellectual property purchased at cost

Intellectual property at June 30, 2019

Trademarks at September 30, 2018

Trademarks purchased at cost

Trademarks at September 30, 2019

Trademarks purchased at cost

Trademarks at December 31, 2019

At December 31, 2019, the remaining lease term and weighted

average discount rate for operating leases was 4.3 years and 10%, respectively.

For the three months ended December 31, 2019,

the Company's cash paid for the operating lease was $23,136.

The undiscounted annual future minimum lease payments consist

of the following at:

Total lease payments

Present values of lease liabilities

LINE OF CREDIT

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the personal guarantee of the majority stockholder.

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

30, 2019 and September 30, 2018.

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 January 1, 2019 with monthly principal

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

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

date, July 15, 2021.

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

Payments from January 2019, through July 2019 to

be interest only.

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

and interest will be due and payable.

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

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

The outstanding balance was

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

On August 9, 2017 the Company entered into

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

The interest rate on the note was 10%.

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

The remaining

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

On January 15, 2019, the original note

payable was amended.

The new interest rate on the note is 15%.

The remaining principal and accrued interest of this note is now

due on the maturity date, July 15, 2022.

A second-year payment equal to 15% of the loan was issued on February 6, 2019 with monthly

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

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

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

The outstanding

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

On September 5, 2017 the Company entered

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

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

The interest rate on the

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

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

On January 15, 2019,

the original note payable was amended.

The new interest rate on the note is 15%.

Payment on the note is deferred until January

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

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

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

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

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

September 30, 2018, respectively.

On October 2, 2017 the Company entered

into a Promissory Note Payable with Indy and Sybil Bally (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 January 20, 2019, the original note

payable was amended.

The new interest rate on the note is 15%.

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

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

The New Amount

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

On June 15, 2019, Bally

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

were settled in full as of that date.

The outstanding balance was $0 and $100,000 at June 30, 2019 and September 30, 2018, respectively

On October 2, 2017 the Company entered

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

The interest rate on the note is 10%.

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

The remaining principal

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

On June 15, 2019, Frueh and the Company entered

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

as of that date.

The outstanding balance was $0 at June 30, 2019 and $100,000 at September 30, 2018.

On November 2, 2017 the Company entered

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

The interest rate on the note was

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

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

On January 20, 2019, the

original note payable was amended.

The new interest rate on the note is 15%.

Payment on the note is deferred until February 20,

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

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

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

accrued interest were settled in full as of that date.

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

30, 2018, respectively.

On March 15, 2018 the Company entered into

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

The interest rate on the note is 10%.

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

The remaining principal

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

On January 15, 2019, the original note payable

The new interest rate on the note is 15%.

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

Interest for the

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

The New Amount Due

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

On June 15, 2019, Janssen

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

were settled in full as of that date.

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

On November 29, 2018 the Company entered

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 $8,770 and $0 at June 30, 2019 and September 30, 2018,

Line of credit balance was $62,019 and $63,919 at December 31, 2019 and September

30, 2019, respectively.

On April 19, 2019 the Company entered into

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

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

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

The note is being repaid over 36 months

and bears an interest rate of 6%.

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

NOTES PAYABLE

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 June 30, 2019 was $30,813.

The Company’s maturities

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

EXPENSES AND OTHER CURRENT LIABILITIES

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

The outstanding balance on December 31, 2019 and September 30, 2019 was $27,483, and $29,401 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

The note was originally scheduled to be repaid in full by December 1, 2019.

The Company is currently working on extending

this repayment period.

The outstanding balance on December 31, 2019 and September 30, 2019, was $5,058, and $7,529 respectively.

The Company’s maturities of debt

subsequent to December 31, 2019 are as follows:

ACCRUED EXPENSES

Accrued expenses consist of the following

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

at December 31, and September 30, 2019:

December 31, 2019

September 30, 2019

Deferred Rent

Corporate credit card

Accrued payroll

Accrued operating expenses

For the three and nine months ended June

Deferred rent

For the three months ended December 31,

2019 and 2018, the effective tax rate of 0% varies from the U.S.

federal statutory rate primarily due to state income taxes,

net losses, certain nondeductible expenses, and an increase in the valuation allowance associated with the net operating loss

carryforwards.

Our deferred tax assets related to net operating loss carryforwards remain fully reserved due to uncertainty of

utilization of those assets.

federal statutory rate primarily due to state income taxes, net

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

allowance associated with the net operating loss carryforwards.

Our deferred tax assets related to net operating loss carryforwards

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

A deferred tax liability or asset is determined

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The deferred tax assets and liabilities

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

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

September 30,

Net non-current deferred tax assets:

Net deferred tax assets:

Net operating loss carry-forward

Property and equipment

Net non-current deferred tax liabilities:

Net deferred tax liabilities:

Intangible assets

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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

The Company conducts operations from premises

leased through 2024.

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

The Company also

leases certain equipment under operating leases.

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

was $43,768 and $28,385 respectively and for the nine months ended June 30, 2019 and 2018 was $99,258 and $90,765, respectively.

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

The difference between rental expense and rental

payments is recorded as deferred rent within accrued expenses in the accompanying consolidated balance sheets.

Management expects

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

Future minimum rental obligations as of

June 30, 2019 are as follows:

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

Management does not believe that there are any current, material legal proceedings ongoing at this time.

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.

The legal proceedings that the Company is involved in, the outcomes are considered

to be immaterial to our ability to operate or market our services, our consolidated financial position, results of operations

or cash flows.

STOCKHOLDERS’

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

During the nine months ended June 30, 2019

During the three months ended December

31, 2019 and 2018, the Company sold 75,757 shares and 0 shares, respectively, for $25,000 and $0, respectively.

In February 2019, the Company granted 2,000,000

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

The stock grant is subject to claw back,

subject to vesting.

500,000 shares vest immediately, and 500,000 shares vest on each of July 16, 2019, July 16, 2020, and

July 16, 2021.

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

back to the Company.

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

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

On June 15, 2019, the Company entered into

agreements, to convert notes payable into common stock.

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

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

Preferred Stock

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

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

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

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

In the 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.

STOCK OPTION PLAN

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The Board of Directors of the Company has the authority and discretion

to grant stock options.

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

Plan is superseded by the 2016 Plan.

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

to grant stock options and stock appreciation rights (SARs).

The maximum number of shares of stock that may be issued pursuant

to the exercise of options and SARs 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.

No option may be issued under the Plan after February 27, 2018.

Effective November 22, 2016, the Company

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

Stock option activity is summarized as

November 27, 2019 the Plan was amended

to allow grant of Stock Appreciation Rights.

During the three months ended December 31, 2019, one SAR was granted, and determinable.

$3,385 in stock based compensation expense was recorded during the period for this SAR.

The expense recorded to SAR liability,

because there is a cash settlement option for the SAR’s.

No other aspects of the plan were amended.

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

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Canceled or expired

Outstanding - June 30, 2019

Exercisable - June 30, 2019

All outstanding 2015 Plan stock options

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

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

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

Total compensation expense, included in salaries and

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

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

Unamortized share-based

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

Outstanding - September 30, 2019

Canceled or expired

Outstanding - December 31, 2019

Exercisable - December 31, 2019

Total compensation

expense, included in salaries and wages, of previously unamortized stock compensation was $7,085 and $48,254 for the three months

ended December 31, 2019 and 2018, respectively.

Unamortized share-based compensation expense as of December 31, 2019 amounted to

$5,633 which is expected to be recognized over the next 1.5 years.

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 June 30, 2019 and September 30, 2018, respectively.

Management fees paid to the largest stockholder

of the entity, included as management fees - related party in the accompanying consolidated statements of operations were $43,500

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

respectively.

Included in professional fees were consulting

of the entity, included as salaries and wages in the accompanying consolidated statements of operations were $0 and $43,500 for

three months ended December 31, 2019 and 2018, respectively.

Included in salaries and wages were consulting

fees paid to a related party as a condition to the TMN acquisition.

Two agreements require certain services at a fixed fee of $16,500

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

One agreement requires certain services

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

These contracts terminated

on September 30, 2018.

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

2019 and June 30, 2018 respectively.

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

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

statements of operations.

On April 12, 2019 the Company entered into

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

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

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

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

The agreement requires payments each month totaling $21,500.

The total paid under this agreement in the three months ended December 31, 2019 and 2018 respectively, were $21,500 and $43,500.

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 December 31, 2019 was $5,058 and at September 30, 2019 was $7,526 and is included in

notes payable on the accompanying balance sheets.

Management’s Discussion and Analysis of Financial

1 unchanged sentence

Forward-Looking Statements

The following Management’s

Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand

our historical results of operations during the periods presented and our financial condition.

This MD&A should be read in

conjunction with our financial statements and the accompanying notes and contains forward-looking statements that involve risks

and uncertainties and assumptions that could cause our actual results to differ materially from management’s expectations.

See the sections entitled “Risk Factors”

The following Management’s Discussion

and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand its historical

results of operations during the periods presented and its financial condition.

This MD&A should be read in conjunction with

its financial statements and the accompanying notes and contains forward-looking statements that involve risks and uncertainties

and assumptions that could cause its actual results to differ materially from management’s expectations.

See the sections

entitled “Forward-Looking Statements”

and “Risk Factors”

included in the Annual Report on Form 10K for

the fiscal year ended September 30, 2019.

Plan of Operations

Financial Gravity

Companies, Inc.

(“Financial Gravity”, “We”

or the “Company”), based in Allen, Texas, was formed

specifically to be the parent company of several subsidiaries that provide integrated tax, business, and financial solutions.

Gravity’s clients include small businesses, small business owners and high net worth individuals.

The Company’s services

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

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

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

In fiscal year 2015 the

Company acquired two firms:

Cloud9 Holdings Company (and its subsidiary Cloud9b2b) which was renamed Financial Gravity Business

and Sash Corporation, doing business as Metro Data Processing (a Tulsa, OK payroll processor).

In fiscal year 2016 the Company

acquired Tax Coach Software LLC.

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

Financial Gravity is a parent company of

best of breed financial services companies including brokerage, wealth management, estate planning, family office services, risk

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

Financial Gravity's mission

is to synergistically bring together companies that create symbiotic advantages to each other in order to bring a complete financial

experience to the clients that we serve.

Financial Gravity’s Subsidiaries:

Financial Gravity Holdings,

This entity was created to engage in the

acquisition and integration of financial and other businesses which will deliver a wide range of accounting, tax planning and management

services to high net worth individuals and businesses in the Dallas/Fort Worth region, with further expansion into other markets

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

Financial Gravity Holdings was merged into Financial

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

Financial Gravity Holdings, Inc.

Dissolved February 13, 2019.

Financial Gravity Operations, Inc .

This entity was created to raise capital

to take the company public and will be eliminated now that the public transaction is complete.

This entity integrates the delivery

of Financial Gravity Tax, Business, and Wealth Solutions to its growing customer base around the country.

This integration, impossible

to do for the small business marketplace until now, is what sets Financial Gravity apart from its peers.

This integration is handled

by Financial Gravity Companies, Inc.

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

and dissolved as of that date.

Financial Gravity Tax, Inc.

Financial Gravity has developed a precise

procedure that has proven to be very successful in delivering lower taxes, higher profit, and greater wealth for small business

The process begins with an extensive and

comprehensive review of the client’s needs.

This assessment sets the requirements for the program that is subsequently developed.

Next, Financial Gravity designs a unique "Tax Blueprint®"

which identifies several strategies for lowering the client's

The second step is to use the client’s

custom Tax Blueprint®

to build that business entity and documentation that captures the identified savings.

This is called

the Tax Operating System®

This process is repeated as required and tuned for optimal efficiency thus ensuring that the

client receives the best service and optimal solutions in the phases of the business cycle during the year.

Clients continue to

pay a monthly or weekly subscription fee as part of their TOS service for ongoing tax planning, tax return preparation, payroll

and bookkeeping services.

This business unit promises clients they’ll

pay the lowest legal, moral and ethical taxes possible.

Tax savings is the “tip of the spear”

in all its offerings.

No company has ever successfully married tax, wealth and business solutions together for Small Business Owners (SBOs) and high

net worth individuals.

(the Company guarantees to find double its initial fee in

tax savings), clients are quick to sign up for proactive tax planning.

Lowering their personal taxes then fuels insurance, wealth

and business services sales.

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

SBO’s look for two things from a

typical CPA and bookkeeping firm, (1).

Lower personal income taxes;

Numbers that help them run/grow their business better.

There is no national firm that provides these two services at any level.

Its tax planning sets us apart from typical accounting

and tax preparation firms.

The Company looks forward to setting up a client’s business to be tax efficient.

The typical service

model employed by CPA firms is oriented more toward compliance, which is the recording of historical data.

These providers work

on historical records instead of looking forward to proactively plan.

SBOs are growing more and more frustrated with accountants

who “put numbers in boxes”

when what’s truly needed is a partner to help advise them in how to be more efficient

in their business.

Many SBOs can’t read a P/L or Balance Sheet and even when they can, the data is often too old to act on.

As technology speeds up the pace of business real time data is becoming more important.

Most CPAs don’t even calculate tax

savings for their clients, as asking CPA’s to produce unique data to each client is outside the factory mentality of the

The average tax savings is over $20,000 per year per business owner.

Financial Gravity Tax is pursuing several M&A

and/or partnership opportunities to deliver on the product Bookkeeping with Purpose®, that will help deliver the promised tax

savings and producer actionable real time data.

Financial Gravity Wealth, Inc.

After saving thousands in taxes, clients

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

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

An RIA is an advisor or firm engaged in financial planning

and wealth management business and is registered either with the Securities and Exchange Commission (SEC) or state securities authorities.

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

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

The Department of labor's fiduciary rule

is officially dead.

Dissolved February 12, 2019.

Sofos Investments, Inc.

(formerly Financial Gravity Wealth, Inc.)

After saving thousands

in taxes, clients are happy to trust us with the management of their wealth, especially when treated to a different wealth management

Sofos is a Registered Investment Advisory firm.

An RIA is an advisor or firm engaged in financial planning and wealth

management business and is registered either with the Securities and Exchange Commission “SEC”

or state securities

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

suitable investment advice and always act in the clients’

best interests.

The Department

of Labor’s fiduciary rule is officially dead.

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

rule, states advisers

have to give conflict-free advice on retirement accounts, putting their clients' needs ahead of their own potential compensation.

Although the Department of labor’s Fiduciary Rule was struck down by the Fifth Circuit Court, we will still maintain the

fiduciary standard as a company, because we think it is best for the client.

Only 5% of all financial planners are RIAs.

rule, stated advisers have to give conflict-free advice on retirement accounts, putting their clients’

needs ahead of their

own potential compensation.

Although the Department

of Labor’s Fiduciary Rule was struck down by the Fifth Circuit Court, we will still maintain the fiduciary standard as a

company, because we think it is best for the client.

Only 5% of all

financial planners are RIAs.

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

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

their advice is considered less biased and more accurate.

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

attractive to the most profitable clients.

Financial Gravity Business, LLC

The complexity of Advanced Tax Planning

next fuels Financial Gravity Business services.

The first product that was developed with a partner is Advisor Architect.

product is designed to help financial advisors and accountants run their businesses better.

The Company intends to test the service

offering / coaching program with the first two markets where it has the most experience and then roll out the service offering

to other industries at a later date.

Clients spend some of their tax savings from Financial Gravity Tax planning for these services,

rendering them “cost neutral”.

The Company has also developed its Partner

Programs that teach financial advisors how to serve an underserved community, the Small Business Owner.

Financial Gravity Business

is the only non-product centric business system for financial advisors that helps them serve the needs of the small business owner

without needing to sell a financial services product like a life insurance policy or a 401(k) plan.

To broaden the skillset of CPAs, the Company

has created the Certified Tax Master®

designation and partner program for CPA’s and Enrolled Agents (“EA’s”).

To its knowledge, there is no program offering like this of its kind available elsewhere.

This program was created in Financial

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

Also, since RIAs are not compensated by

commissions on financial products, their advice is considered less biased and more accurate.

Coupled with tax savings, its status

as a RIA makes the Company very attractive to the most profitable clients.

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

This entity in the Company’s corporate

family employs its M&A strategy to acquire talent and build wealth for Financial Gravity Companies, Inc.

family employs its merger strategy to acquire talent and build wealth for Financial Gravity Companies, Inc.

and acquired companies.

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

Tax Master Network, LLC formerly Tax

Coach Software, LLC

Tax Master Network (TMN) was a key acquisition

in fiscal year 2016.

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

to support clients.

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

significant business development opportunities for Financial Gravity Wealth.

The Company developed the Certified Tax Master®

Tax Master Network, LLC

Tax Master Network “TMN”

a key acquisition in fiscal year 2016.

TMN supports over 300 CPA and Enrolled Agent professionals, training them to add crucial

tax planning services to support clients.

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

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

The Company developed the Certified

Tax Master®

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

Results of Operations for the three and nine months ended

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

For the three months ended June 30, 2019,

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

The decrease is principally driven

by elimination of intercompany management fees.

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

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

The decrease is principally driven by elimination of intercompany management

TMN also provides tax services through its “Tax

Blueprint®”

system which identifies several strategies for lowering the client's taxes.

Financial Gravity Tax, Inc.

no current operations.

It sold its bookkeeping and tax preparation business October 31, 2019, and all other operations are consolidated

Sash Corporation dba Metro Data Processing

Sash Corporation dba Metro Data Processing,

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

The client list was

sold to ADP in 2018.

This entity is now inactive and awaiting dissolution.

Results of Operations for the three months ended December

31, 2019 compared to the three months ended December 31, 2018

For the three months ended December 31,

2019, revenue decreased $157,515 to $841,750 from $999,265 for the three months ended December 31, 2018.

The principal components

of the decrease in revenue are:

the sale Financial Gravity Tax, causing a decrease in revenue of $50,666, to $69,593 in revenue

during the three months ended December 31, 2019 compared to $120,259 in the three months ended December 31, 2018;

TBP Revenue decreased

$86,000 to $24,000 for the three months ended December 31, 2019 compared to $110,000 in the three months ended December 31, 2018;

Investment Management Fees decreased $14,335 to $408,096 for the three months ended December 31, 2019 compared to $422,430 for

the three months ended December 31, 2018.

Operating Expenses

Cost of services increased by $1,903 to

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

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

The changes are related to credit

card processing fees.

Cost of services activity decreased $1,793 to $12,012 for the three months ended December 31, 2019 from $13,805 for the three months ended December 31, 2018.

services is credit card processing fees.

Professional services expenses include

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

Professional services

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

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

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

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

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

This consists primarily of a cessation

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

legal expense, professional fees, and business consulting.

Professional services expenses increased $50,519 to $115,333 for the

three months ended December 31, 2019 from $64,814 for the three months ended December 31, 2018.

This increase is primarily due

to an increase in legal fees of $45,856.

Depreciation and amortization expenses

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

In the three months ended March 31, 2019,

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

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

Depreciation and

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

June 30, 2018..

The increases are due to additional purchases of fixed assets and leasehold improvements purchased in the last

twelve months, and the aforementioned, one-time charge to amortization of the Trade Name asset.

Depreciation and amortization expenses decreased

$2,780 to $26,022 for the three months ended December 31, 2019 from $28,802 for the three months ended December 31, 2018.

is due to some assets becoming fully depreciated.

General and administrative expenses decreased $48,121

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

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

The decrease is primarily due to regular

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

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

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

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

These are related party fees.

to $98,831 for the three months ended December 31, 2019 from $146,952 for the three months ended December 31, 2018.

is primarily due to a decrease in technology expenses of $28,873 and a decrease in insurance expenses of $9,052.

Marketing expenses decreased $10,531 to

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

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

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

marketing in-house instead of outsourcing.

Salaries and wages expenses increased $224,511

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

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

The major drivers

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

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

nine months ended June 30,2019.

Additionally, there were staff increases, period over period.

The Company experienced an increase in

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

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

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

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

$21,113 for the three months ended December 31, 2019 from $31,644 for the three months ended December 31, 2018.

The decrease is

due to the Company shutting down some previous marketing channels, while new channels have yet to be identified and implemented.

Salaries and wages expenses decreased $292,384

to $578,812 for the three months ended December 31, 2019 from $871,196 for the three months ended December 31, 2018.

decrease was principally due to decreases in Salaries and Wages –

Outsourced, $160,465, Commissions, $118,999, and Stock

based compensation, $41,169.

The Company experienced a decrease in

its net loss of $187,330 to a net loss of $12,042 for the three months ended December 31, 2019 from a net loss of

$199,372 for the three months ended December 31, 2018, primarily attributable to the reasons noted above.

Significant Accounting Policies

Certain critical accounting policies affect

the more significant judgments and estimates used in the preparation of Financial Gravity’s consolidated financial statements.

the more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements.

These policies are contained in Note 1 to the consolidated financial statements.

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Actual results could differ from those estimates.

Revenue Recognition and Accounts

Investment management fees are recognized

as services are provided by the Company.

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

professional services to manage clients’

Revenue Recognition and Accounts Receivable.

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.

Sofos Investments, Inc.

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.

Investment management fees are calculated as a percentage of assets

under management for the period.

Investment management fees are Revenue is recognized as earned, at the end of each period.

are withdrawn from investor assets monthly, in arrears.

Financial Gravity Tax, Inc.

generates service income from its

consulting and other professional services performed.

Revenue recognized as service is provided.

Subscription income is billed

to client credit card monthly, on the monthly anniversary of client sign-up.

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

earned from insurers and issuers of the products.

Commissions are received after products are issued and in force.

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

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.

Subscription income is billed to

client credit card monthly, on the monthly anniversary of client sign-up.

TBP sales are billed to the client after a preliminary

assessment and client approval to move forward.

Revenue recognized in 2020, that was included in the deferred revenue liability

at the beginning of the year.

Services income is recognized as consulting

and other professional services are performed by the Company.

Income is recognized as services are delivered.

Commission revenue is derived from the

sale of premiums on life insurance policies held by third parties.

The revenue is recognized at the time the policy is issued.

The revenue is recognized as received from the insurer, issuer.

Revenue represents gross billings less

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consolidated balance sheets.

Tax Master Network Software has 5 types

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

all-stars coaching, and networker).

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

payment beyond the monthly subscription fee.

Cancellations are processed within the month requested and memberships are closed

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

Tax Master Network has 3 types of services

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

and Wire Service weekly broadcast email).

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

up-front payment beyond the monthly subscription fee.

Cancellations are processed within the month requested and memberships are

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

Members are not entitled to refunds for unused memberships.

Trade accounts receivable are carried at

the invoiced amount less 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 review of specific

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.

Trade accounts receivable are carried

only for subscription revenues not received in the period they apply to.

The allowance for doubtful accounts was $0 and $0 as

of December 31, 2019 and September 30, 2019, respectively.

In the normal course of business, the Company

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Stock-Based Compensation.

The Company recognizes the fair value of

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

period, using the Black-Scholes option pricing model, which is based on risk-free rates of 2.89% in 2019 and 1.49% to 2.55% in

The Company recognizes the fair value

of stock-based compensation awards as wages in the accompanying statements of operations for employee grants, commissions for

non-employee grants, and stock appreciation rights grants, on a straight-line basis over the vesting period, using the

Black-Scholes option pricing model, which is based on risk-free rate of 2.89% rates in 2020 and 1.49% to 2.55% in 2019,

dividend yield of 0%, expected life of 10 years and volatility of 35% to 40%.

Liquidity and Capital Resources

As of June 30, 2019, the Company had cash

and cash equivalents of $35,876.

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

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

by financing activities of $37,201.

Net cash used by operating activities was

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

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

primarily by the following:

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

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

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

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

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

Net cash used by investing activities of

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

As of December 31, 2019, the Company had

cash and cash equivalents of $45,229.

The increase of $9,176 in cash and cash equivalents from September 30, 2019 was due to net

cash used in operating activities of $5,768 and net cash used in investing activities of $3,770, and net cash provided by financing

activities of $18,714.

Net cash used in operating activities was

$5,768 for the three months ended December 31, 2019, compared to $7,250 net cash used in operating activities for the three months

ended December 31, 2018.

The net cash provided by operating activities for the three months ended December 31, 2019 was due to

net loss of $12,042 adjusted primarily by the following:

(1) depreciation and amortization of $26,022, stock based compensation

of $7,085, decrease in Right of use of lease asset of $23,166, increase in accounts payable of $45,605, increase in prepaid expenses

of $27,254, an decrease in accrued expenses of $30,013, an decrease in deferred revenue of $28,048, decrease in trade accounts

receivable of $12,877 and a decrease in the Lease liability $23,136.

Net cash provided by financing activities

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

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

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

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

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

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

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

was $18,714 for the three months ended December 31, 2019, compared to net cash provided by financing activities of $70,798 for

the three months ended December 31, 2018.

Financing activities for the three months ended December 31, 2019 consisted primarily

of proceeds from the sale of common stock of $25,000, $1,502 in proceeds from the line of credit;

offset with payments made to

reduce the Company’s debt obligations in the amount of $7,788.

As shown below, at December 31, 2019, our

contractual cash obligations totaled approximately $89,502, all of which consisted of debt principal.

Payments due by period

Contractual obligations

2024 and beyond

Less than 1 year

Notes payable

Related party note

Operating leases

Lease liability

Line of Credit

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

In mitigation of

this concern, on May 23, 2017, the Company and GHS Investments, LLC (“GHS Investments”) entered into an Equity Financing

Agreement (the “Agreement”).

The Agreement was filed as an exhibit to a registration statement on Form S-1, filed with

the Securities and Exchange Commission (“SEC”) on September 18, 2017.

The agreement was approved by the SEC November

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

shares of its

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

“Market Price”

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

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

Accordingly, on each instance

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

option, and the dollar amount of the purchase price for such shares.

The maximum purchase price for shares to be purchased by GHS

Investments under the Agreement is $11,000,000.

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

agreed to file a registration statement with the Securities and Exchange Commission.

The Company also entered into a Registration

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

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

The Agreement will

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

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

The Company has a backlog of fees under

contract in addition to the Company’s accounts receivable balance.

The failure to adequately fund its capital requirements

could have a material adverse effect on our business, financial condition and results of operations.

Moreover, the sale of additional

equity securities to raise financing will result in additional dilution to the Company’s stockholders and incurring additional

indebtedness could involve the imposition of covenants that restrict our operations.

Management is trying to raise additional capital

through sales of common stock as well as seeking financing from third parties, via both debt and equity, to balance the Company’s

There are no assurances

that additional financing will be available on favorable terms, or at all.

If additional financing is not available, the Company

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

the cash flows generated by operations.

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

receivable balance.

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

financial condition and results of operations.

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

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

covenants that restrict its operations.

Management, in the normal course of business, is trying to raise additional capital through

sales of common stock as well as seeking financing from third parties, via both debt and equity, to balance the Company’s

cash requirements and to finance specific capital projects.

Off Balance Sheet Transactions and Related Matters

Other than operating leases discussed in

Note 8 to the consolidated financial statements, there are no off-balance sheet transactions, arrangements, obligations (including

contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material

effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital

expenditures or capital resources of the Company.

Quantitative and Qualitative Disclosures About Market

Other than operating leases discussed

in Note 4 to the consolidated financial statements, there are no off-balance sheet transactions, arrangements, obligations

(including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may

have, a material effect on financial condition, changes in financial condition, revenues or expenses, results of operations,

liquidity, capital expenditures or capital resources of the Company.

Quantitative and

Qualitative Disclosures About Market Risk

Interest Rate Risk.

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

What changed 10-Q

Item 1. Financial Statements