What changed in this filing

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Item 1. Financial Statements

2020-05-29 compared with 2020-03-03 · 536 added, 508 removed, 364 unchanged (74% of the section changed)

1 unchanged sentence

Financial Gravity Companies, Inc.

and Subsidiaries

BALANCE SHEETS

December 31, 2019

CONSOLIDATED BALANCE

March 31, 2020

September 30, 2019

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Accounts payable - trade

Accrued expenses

Deferred revenue

Related party payables

Accrued expenses and other current liabilities

Contract liabilities

Line of credit

Lease liability - current

Lease Liability

Notes payable

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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

41,524,589 shares issued and outstanding as of March 31, 2020 and 41,436,033 shares issued and outstanding as of September 30, 2019

Additional paid-in capital

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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying notes are in integral part

The accompanying notes are an integral part

of these consolidated financial statements.

Financial Gravity Companies, Inc.

and Subsidiaries

STATEMENTS OF OPERATIONS

For the Three Months Ended

Investment management fees

Consolidated Statements of Operations

Total Revenue

Investment Management Fee

Service Income

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Total Operating Expenses

Net operating loss

OTHER EXPENSE

Operating Loss

Interest expense

Total other expense

Total other (expense) income

Loss Per Share - Basic and Diluted (1)

$ (0.01 ) (1)

__________________

(1) Earnings per share amount is rounded

up to $(0.01)

The accompanying notes are an integral part

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Financial Gravity Companies, Inc.

and Subsidiaries

STATEMENTS OF CHANGES IN STOCKHOLDERS’

For the three-month periods ended

December 31, 2019 and 2018

Number of Shares Issued and Outstanding

Common Stock Par Value Amount

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS' EQUITY

Number of Shares Issued

and Outstanding

Common Stock Par Value

Additional Paid-In-Capital

Accumulated Deficit

Balance at September 30, 2018

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Stock based employee compensation expense

Balance at December 31, 2018

$ (5,775,002 )

Balance at March 31, 2019

Balance at September 30, 2019

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Private Placement stock issue

Balance at December 31, 2019

Balance at March 31, 2020

($ 6,370,467 )

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Financial Gravity Companies, Inc.

and Subsidiaries

Three Months Ended December 31,

STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended March 31, 2020

Six Months Ended

March 31,2020

March 31,2019

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in

operating activities

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

Stock based compensation

Right of use of lease asset

Right of use lease asset

Changes in operating assets and liabilities

Accounts receivable

Accounts receivable - related party

Prepaid expenses

Accounts payable - trade

Accounts payable - trade and related party payables

Accrued expenses and other liabilities

Deferred revenue

Lease Liability

Net cash used in operating activities

Contract Liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Cash paid for purchase of property and equipment

Purchases of property and equipment

Purchase of trademark

Net cash used in investing activities

Cash flows from financing activities

Borrowings from lines of credit

Proceeds from notes payable

Payments on notes payable

Borrowings from notes payable

Borrowings from line of credit

Payments on line of credit

Proceeds from the sale of common stock

Net cash provided by financing activities

TOTAL INCREASE IN CASH AND CASH EQUIVALENTS

Payments on notes payable

Proceeds from sale of common stock

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosures of cash flow information:

Cash paid during the period for:

The accompanying notes are in integral part

Cash Paid for Interest

The accompanying notes are an integral part

of these consolidated financial statements.

Financial Gravity Companies,

and Subsidiaries

Financial Gravity Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF BUSINESS

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.

Financial Gravity Companies, Inc.

parent company of financial services companies including brokerage, wealth management, estate planning, family office services,

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

Gravity's mission is to bring together financial services companies that create comprehensive customer service synergies for the

clients that we serve.

Financial Gravity Companies, Inc., and

subsidiaries (the “Company”) is headquartered in Austin Texas, with locations in Allen, Texas and Cincinnati, Ohio.

The currently operating wholly-owned subsidiaries of the organization include:

Sofos Investments, Inc.

(formerly, Financial

Gravity Wealth, Inc.) (“Sofos”) Sofos is a registered investment advisor (“RIA”), registered with the Securities

and Exchange Commission, and provides asset management services to individuals and businesses, including financial planning, wealth

management and money management.

Tax Master Network, LLC, runs the Tax Master

(“TMN”) that provides four primary services including monthly subscriptions to the TMN systems, coaching

and email marketing services.

TMN currently supports over 300 Certified Public Accountants (“CPA”) and Enrolled Agent

professionals, training them to add crucial tax planning services to support clients.

TMN has developed the Certified Tax Master®

for this group and includes client acquisition and retention systems.

TMN also offers tax planning services through the Tax Blueprint®,

which includes an extensive review of the client’s tax needs.

The initial assessment sets the requirements for a custom Tax

Blueprint®

for each client to use as guide to implementation of the identified tax savings strategies.

Finally, TMN offers

the Tax Operating System, which is a system for integrating and executing tax planning strategies.

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.

Inactive subsidiaries 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).

(dissolved February 12, 2019), Financial

Gravity Tax, Inc (a small bookkeeping and payroll service businesses that was sold in October 2019, and SASH Corporation (inactive).

On September 30, 2019, the Company entered

into an agreement to acquire 100% of the shares of stock of Presidential Brokerage, Inc, a California corporation.

Subsequent to

the entering into the agreement, Presidential changed its name to Forta Financial Group, Inc.

(“Forta”).

Upon completion

of the acquisition of the Forta stock, Forta will become a wholly owned subsidiary of the Company.

Forta is a broker-dealer, a

registered investment advisor, and a licensed insurance agent.

It primarily operates in Colorado.

The merger was approved by FINRA

on April 27, 2020.

Management believes that the acquisition of Forta will be finalized prior to June 1, 2020.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

The allowance for doubtful accounts was $0 as of March 31, 2020 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.

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;

In 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

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.

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.

Targeted Improvements.

In March 2019, the FASB issued ASU No.

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.

The Company 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.

The 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 operations.

The Company had no significant changes to processes

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.

All 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

The 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

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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.

During each of the three months ended March 31, 2020 and 2019, and the six months ended March 31, 2020 and 2019, the Company

recorded amortization expense of $16,410 and $32,818 respectively, on this intangible asset, which is included in depreciation

and amortization expense in the accompanying consolidated statements of operations.

Accumulated amortization at March 31, 2020

was $295,368 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 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.

During each of the three and six months ended March 31, 2020 and 2019,

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

amortization expense in the accompanying consolidated statements of operations.

Accumulated amortization at March 31, 2020 was

$23,670 and $21,040 at September 30,2019.

Intellectual Property

The Company accounts for intellectual property

in accordance with GAAP and accordingly, intellectual property are stated at cost.

Intellectual property with indefinite lives

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

Management has determined that the intellectual property have

an indefinite life and do not consider the value of intellectual property recorded in the accompanying consolidated balance sheets

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

Intellectual property is 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 March 31, 2020 and September 30, 2019.

Goodwill represents the excess of the value

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

qualitative factors evaluated by the Company include:

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

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.

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

the accompanying consolidated balance sheets to be impaired as of December 31, 2019 and September 30, 2019.

The Company accounts for federal and state

income taxes pursuant to GAAP, which requires an asset and liability approach for financial accounting and reporting for income

taxes based on tax effects of differences between the financial statement and tax basis of assets and liabilities.

The Company accounts for all uncertain

tax positions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

the accompanying consolidated balance sheets to be impaired as of March 31, 2020 and September 30, 2019.

The Company records federal and state income,

which requires an asset and liability approach for financial accounting and reporting for income taxes based on tax effects of

differences between the financial statement and tax basis of assets and liabilities.

The Company accounts for all uncertain tax positions in accordance

with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 –

Income Taxes (“ASC 740”).

ASC 740 provides guidance on de-recognition, classification, interest and penalties

and disclosure related to uncertain income tax positions.

ASC 740 provides guidance on de-recognition, classification, interest and penalties and

disclosure related to uncertain income tax positions.

The Company recognizes accrued interest and penalties related to unrecognized

tax benefits as a component of income tax expense.

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

There was no accrued interest, penalties or uncertain tax positions as of March

31, 2020 and September 30, 2019.

From time to time, the Company is audited

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Earnings Per Share

Basic earnings per common share is computed

Basic loss 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,

Average number of common shares were 41,524,589 and 35,837,900 for the quarters ended March 31, 2020 and 2019, respectively.

Average number of common shares were 41,495,070 and 35,837,900 for the six months ended March 31, 2020 and 2019, respectively.

For the three and six months ended March 31, 2020, approximately 6,512,035 common stock equivalents were not added to the diluted

average shares because inclusion of such equivalents would be antidilutive.

For the three and six months ended March 31, 2019,

approximately 3,940,326 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

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

Investment Management Fees, TMN subscriptions, Financial Advisor subscriptions, Tax BluePrint sales, Insurance Sales and

Marketing Programs, and Tax Operating System subscriptions.

Sofos generates investment management fees

by providing professional services to manage client investments.

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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.

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

withdrawn from investor accounts monthly, in arrears.

Revenue is also derived from the sale of

annuities and premiums on life insurance policies issued by insurance companies to investment clients, and from insurance marketing

programs (through MPath Advisor Resources, LLC.).

The revenue is recognized after the insurance polies 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

Amounts invoiced for work not yet completed are shown as Contract Liabilities

in the accompanying consolidated balance sheets.

Tax Master Network has five levels of services

that are charged and collected on a month to month subscription basis.

None of these programs come with a long-term commitment

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

Cancellations are processed within the month

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

Members are not entitled

to refunds for unused memberships.

TMN has several levels of subscription

services that are charged and collected on a month to month basis.

None of these services comes with a long-term commitment or

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

Subscription income is billed to client credit

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

Cancellations are processed within the month requested and subscriptions

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.

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®

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, up to $10,000.

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.

Tax Blueprint®

are billed to the client after a preliminary assessment and client approval to move forward.

Revenue recognized in 2020 that is

included in Contract Liabilities as of September 30, 2019 is $61,400.

Advertising costs are charged to operations

when incurred.

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

respectively.

Advertising and marketing expense were $13,472 and $29,971 for the three months ended March 31, 2020 and 2019, respectively

and $34,585 and $61,615 for the six months ended March 31, 2020 and 2019 respectively.

Stock-Based Compensation

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%.

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 1.56% in the quarter ended March 31, 2020 and 1.49% to 2.55% in 2019, dividend

yield of 0%, expected life of 7 years and volatility of 100% in 2020 and volatility of 35% to 40% in 2019.

Use of Estimates

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Actual results could differ from these estimates.

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

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.

The 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.

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.

However, 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 adjustments to the accompanying consolidated financial statements through the date

the financial statements were issued.

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 10-K.

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

Company has not had to use this as a source of funding and expects it to expire with no impact on the

Company’s operations.

See Subsequent Events - Paycheck Protection Program.

Additionally, the Company is also actively

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Management, in the ordinary course

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

of business, will pursue raising additional capital through sales of common stock as well as seeking financing via equity or debt,

or both from third parties.

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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.

The new standard will become effective for the Company for fiscal years

beginning after December 31, 2019, with early adoption permitted.

In November of 2019, the FASB issued ASU 2019-10 Financial Instruments—Credit

Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates, which deferred the effective

date of ASU Topic No.

2016-13 to fiscal years beginning after December 15, 2022.

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.

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PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December

Property and equipment consist of the following at March 31,

2020 and September 30, 2019:

Service Lives

December 31, 2019

Estimated Service Lives

March 31, 2020

September 30, 2019

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Less accumulated depreciation and amortization

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

months ended December 31, 2019 and 2018, respectively.

Depreciation expense was $4,061 and $9,967

during the three months ended March 31, 2020 and March 31, 2019, respectively, and $12,359 and $18,239 during the six months ended

March 31, 2020 and March 31, 2019, respectively.

INTELLECTUAL PROPERTY

Intellectual property consists of the following:

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:

Intellectual property at September 30, 2018

Intellectual property purchased at cost

Intellectual property at September 30, 2019

Intellectual property purchased at cost

Intellectual property at March 31, 2020

has conducted some of its operations from leased premises.

At March 31, 2020, the remaining lease term and weighted average discount

rate for operating leases was 3.8 years and 10%, respectively.

For the three and six months ended March 31, 2020, the Company's

cash paid for the operating lease was $32,771, and $ 64,692, respectively.

In April 2020, the

Company tendered its main leased premises back to the landlord, and does not contemplate occupying the property in the future,

nor will there by a replacement property as the Company successfully operates remotely –

see Subsequent Events discussion.

The undiscounted annual future minimum lease payments

consist of the following at:

March 31, 2020

Total lease payments

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

This line of credit is collateralized by

the personal guarantee of the majority stockholder.

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

This line of credit is supported by the personal

guarantee of the majority stockholder.

Line of credit balance was $60,185 and $63,919 at March 31, 2020 and September 30, 2019,

respectively.

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

The outstanding balance on December 31, 2019 and September 30, 2019 was $27,483, and $29,401 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 outstanding balance on March 31, 2020 and September 30, 2019 was $26,511, 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.

into a loan agreement with John Pollock, Executive Vice President of the Company.

The note bears interest at 2.76%, and is due

on December 1, 2020.

See Related Party Transactions.

The Company’s maturities of debt

subsequent to December 31, 2019 are as follows:

subsequent to March 31, 2020 are as follows:

ACCRUED EXPENSES

Accrued expenses consist of the following

at December 31, and September 30, 2019:

December 31, 2019

at March 31, 2020, and September 30, 2019:

March 31, 2020

September 30, 2019

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Accrued operating expenses

SAR liability

Credit card payable

Deferred rent

For the three months ended December 31,

For the three and six months ended March

31, 2020 and 2019, the effective tax rate of 0% varies from the U.S.

federal statutory rate primarily due to state income taxes, net

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

federal statutory rate primarily due to state income taxes,

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

allowance associated with the net operating loss carryforwards.

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The deferred tax assets and liabilities

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

in the accompanying consolidated balance sheets include the following components at March 31, 2020 and September 30, 2019:

March 31, 2020

September 30, 2019

Net deferred tax assets:

Net non-current deferred tax assets:

Net operating loss carry-forward

Property and equipment

Net deferred tax liabilities:

Net non-current deferred tax liabilities:

Intangible assets

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Legal Proceedings

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.

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 believes the legal proceedings that the Company is involved in are 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 three months ended December

During the six months ended March 31, 2020

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

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

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.

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.

option may be issued under the Plan after February 27, 2018.

Effective November 22, 2016, the Company

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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 2016 Plan is 20,000,000.

Eligible individuals include any employee of the Company or any director, consultant, or other

person providing services to the Company.

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

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

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:

discretion 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 under the 2016 Plan is 20,000,000.

Eligible individuals include any employee of the Company

or any director, consultant, or other person providing services to the Company.

The expiration date and exercise price are as established

by the Board of Directors of the Company.

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

Stock option activity is summarized as

Shares Under Option

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Canceled or expired

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.

Outstanding - March 31, 2020

Exercisable - March 31, 2020

Unamortized share-based compensation expense

as of March 31, 2020 amounted to $773,410 which is expected to be recognized over the next 5 years.

Total compensation expense, included in

salaries and wages, of previously unamortized stock compensation was $11,030 and $44,091 for the three ended March 31, 2020 and

2019, respectively, and $16,251 and $92,345 for the six months ended March 31, 2020 and 2019, respectively.

On November 27, 2019 the 2016 Plan was

amended to allow grants of other equity related rights, including Stock Appreciation Rights.

During the three and six months ended

March 31, 2020, 4,350,000 options and SARs and 4,850,000 were granted respectively.

SARs are recorded as a liability, because there

is a cash settlement option.

RELATED PARTY TRANSACTIONS

Management fees paid to the largest stockholder

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.

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.

Company entered into an agreement to purchase

100% of the stock of Forta.

The transaction was valued at $9 million.

Scott Winters, Gary Nemer (a former board member) and William

own, in aggregate, in excess of 80% of the shares of stock of Forta.

As a result of the acquisition of the TMN

business in 2016, the Company is obligated to make payments to TaxTuneup, LLC, which is an entity owned by Edward A.

Lyon (a current

board member), each month totaling $16,500.

The total paid under these agreements in the three months ended March 31, 2020 and

2019 respectively, were $49,500 and $49,500, and for the six months ended March 31, 2020 and 2019 were $99,000 and $99,000.

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 March 31, 2020 was $5,092 and at September

30, 2019 was $7,526.

On February 28, 2020 and March 5, 2020,

the Board of Directions approved employment agreements that included employee stock options and stock appreciation rights to employees

that are also Board members and related parties totaling 3,450,000 in grants.

SUBSEQUENT EVENTS

On March 27, 2020, the U.S.

federal government

enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which includes provision for a Paycheck

Protection Program (“PPP”) administered by the U.S.

Small Business Administration (“SBA”).

The PPP allows

qualifying business to borrow up to $10 million calculated based on qualifying payroll costs.

PPP loans bear a fixed interest

rate of 1% over a two-year term, are guaranteed by the federal government, and do not require collateral.

The loans may be forgiven,

in part or whole, if the proceeds are used to retain and pay employees and for other qualifying expenditures.

The Company has applied

for a PPP loan in the amount of $283,345.

The loan was funded on May 8, 2020.

The Company expects to use the full proceeds of the

PPP loan in accordance with the provisions of the CARES Act.

In April 2020, the Company tendered its

main leased premises back to the landlord, and does not contemplate occupying the property in the future, nor will there by a replacement

property as the Company successfully operates remotely.

Management believes that the landlord will be able to re-lease the property,

and the remaining exposure to the Company under the lease is not material.

In December 2019, a novel strain of coronavirus, referred to

as COVID-19, was reported to have surfaced in Wuhan, China.

Since then, COVID-19 has spread to other countries, including the United

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

Further, the President of the United

States declared the COVID-19 pandemic a national emergency.

States in which we operate declared states of emergency related to

the spread of COVID-19 and issued executive orders directing individuals to stay at their place of residence for an indefinite

period of time.

The financial markets demonstrated significant volatility in

reaction to the virus outbreak.

There has been considerable strain on companies in many sectors of the economy.

Investors suffered

significant decreases in the value of their investment portfolios, and the economy has significantly shut down.

It is unclear when

the economy will start up again, and the lingering effects are not known.

During periods of high volatility and uncertainty many

investors choose to stop ongoing investment activity and sit on the sidelines until the markets become more stable.

The Company’s revenues are adversely affected when investors

reduce their investment activities.

In addition, part of Company’s revenues is based upon the value of assets under management.

If the investment portfolios of clients decrease in value, the fees charged for investment advice also decreases.

The Company could be affected by lack of access to its offices,

although that seems to have had little short term impact as employees have succeeded in maintaining productivity while working

The long term effects, however, may present significant issues.

Any significant shutdown of the economy for a sustained period

will affect the Company’s revenue which could lead to losses.

Management’s Discussion and Analysis of Financial

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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 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.

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”

Plan of Operations

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.

(“Financial Gravity”, “We”

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

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

Financial Gravity’s clients include small businesses, small business owners and high and middle 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 pursue acquisitions.

The primary acquisition targets currently include investment marketing and financial advisory and broker

dealer firms.

In fiscal year 2019, the Company entered into a purchase agreement with Forta, which management believes will be

consummated by June 1, 2020, or before.

The Company is actively identifying additional potential acquisition candidates to fuel

more rapid growth.

Financial Gravity’s Subsidiaries:

Financial Gravity Holdings, Inc.

Dissolved February 13, 2019.

Financial Gravity Operations, Inc .

Dissolved February 12, 2019.

The following outline briefly

describes Financial Gravity’s active subsidiaries and the products and services they offer:

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, 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 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 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

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.

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.

is a registered investment advisor (“RIA”), registered with the Securities and Exchange Commission, and provides asset

management services to individuals and businesses, including financial planning, wealth management and money management.

Tax Master Network, LLC through

the Tax Master Network®

provides monthly subscriptions services to the TMN systems, coaching and marketing services to over

300 Certified Public Accountants (“CPA”) and Enrolled Agent professionals, training them to add crucial tax planning

services to support clients.

TMN’s tax planning services include the Tax Blueprint®, Certified Tax Master®, and the

Tax Operating System.

MPath Advisor Resources, LLC (“MPath”)

MPath is an insurance marketing organization and provides insurance products and services to insurance agents or agencies.

Forta Financial Group, Inc.

(“Forta”) On

September 30, 2019, the Company entered into a merger agreement with Forta, to acquire Forta in exchange for Company stock.

merger is awaiting FINRA approval.

When approved, the Forta shareholders will own more than 50% of the Company.

Forta is a broker

dealer, registered investment advisor and an insurance brokerage, subject to FINRA, SEC and insurance regulation.

Organic growth has come in three key areas.

Tax Services and financial advisory services,

including Tax Blueprint®

and ongoing Tax Operating System®

services that are under development.

Brokerage and Wealth Management Services

and brokerage and investment advisory services after the Forta acquisition and money management and investment advisory

services through Sofos.

Other Products and Services (Insurance and other miscellaneous products and services).

All future growth is expected to come from

these key areas, organic growth, acquisitions, and strategic alliances.

Results of Operations for the three and six months ended

March 31, 2020 compared to the three and six months ended March 31, 2019

For the three months ended March 31, revenues decreased $544,576

to $616,680 from $1,161,256 for the three months ended March 31, 2019.

For the six months ended March 31, 2020, revenues decreased

$746,766 to $1,308,755 from $2,055,521 for to the six months ended March 31, 2019.

The principal components of the decrease in

revenue for the six months was the sale Financial Gravity Tax ($117,000), reduction in revenue from the sale of TBPS ($48,500),

reduction in the sale of insurance and commission products ($265,880), TMN subscriptions also fell ($169,000), as did referral

commissions ($37,570).

Operating Expenses

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.

Cost of services decreased by $859 to $14,646

for the quarter ended March 31, 2020 from $15,505 for the three months ended March 31, 2019, and decreased by $2,653, to $26,657

from $29,310 for the six months ended March 31, 2020 and March 31, 2019, respectively.

The decrease is primarily related to decreased

credit card processing fees.

Professional services expenses include

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Professional services expenses increased $43,821 to $70,646 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.

three months ended March 31, 2020 from $26,825 for the three months ended March 31, 2019.

Professional services increased $186,866

to $186,979 for the six months ended March 31, 2020 from $113 for the six months ended March 31, 2019.

The variances are comprised

of increases in legal fees of $15,765 for the three months ended March 31, 2020 and $61,620 for the six months ended March 31,

2020, and increases in “Professional Services –

of $24,825 for the three months and $102,076 for the six

months, respectively, related to implementing new technology offerings.

Depreciation and amortization expenses

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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.

$77,715 to $21,785 for the three months ended March 31, 2020 from $99,500 for the three months ended March 31, 2019.

is principally due to a charge of $69,300 in the three months ended March 31, 2019, to amortization, for the full impairment of

Depreciation and amortization decreased $80,793 to $47,807 for the six months ended March 31, 2020, from $128,600 for

the six months ended March 31, 2019.

The principal difference is the same charge to amortization for full impairment of Trademarks.

General and administrative expenses decreased

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.

$38,538 to $85,903 for the three months ended March 31, 2020 from $124,441 for the three months ended March 31, 2019.

administrative expenses decreased $89,654 to $181,812 for the six months ended March 31, 2020 from $271,466 for the six months

ended March 31, 2019.

The decreases in costs are across the board.

Marketing expenses decreased $16,499 to

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

$13,472 for the three months ended March 31, 2020 from $29,971 for the three months ended March 31, 2019.

Marketing expenses decreased

$26,988 to $34,585 for the six months ended March 31, 2020 from $61,573 for the six months ended March 31, 2019.

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.

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

and wages expenses decreased $ 558,861 to $ 570,209 for the three months ended March 31, 2020

from $1,129,070 for the three months ended March 31, 2019, and decreased $841,426 to $ 1,149,020 for the six months ended March

31, 2020 from $1,990,446 for the six months ended March 31, 2019.

The decrease was principally due to decreases in Commissions,

$244,700, and Stock based compensation, $136,814 for the three months ended March 31, 2020.

The decrease was principally due to

decreases in Commissions of $340,829, stock based compensation of $177,983 for the six months ended March 31, 2020.

The Company experienced a decrease in its

net loss of $153,916 to a net loss of $162,107 for the three months ended March 31, 2020 from a net loss of $316,023 for the three

months ended March 31, 2019.

The Company experienced a decrease in its net loss of $348,919 to a net loss of $171,352 for the six

months ended March 31, 2020 from a net loss of $520,271 for the six months ended March 31, 2019.

The decreases are primarily attributable

to the reasons noted above, and the proceeds from the sale of the FG Tax unit for $150,000.

Significant Accounting Policies

Certain critical accounting policies affect

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

the more significant judgments and estimates used in the preparation of Financial Gravity’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 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.

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’

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 as received from the insurer, issuer.

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

Revenue represents gross billings less

discounts, net of sales tax, as applicable.

Amounts invoiced for work not yet completed are shown as deferred revenue in the accompanying

consolidated balance sheets.

Tax Master Network has 3 types of services

that are charged and collected on a month to month subscription basis (Tax Master 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.

Amounts invoiced for work not yet completed are shown as Contract liabilities in the

accompanying consolidated balance sheets.

Tax Master Network has 5 levels of subscription

services that are charged and collected on a month to month basis (Tax Master basic, advance, and elite membership, all-stars coaching,

and networker).

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

monthly subscription fee.

Cancellations are processed within the month requested and memberships are closed at the end of the period

for which the most recent payment was made.

Members are not entitled to refunds for unused memberships.

Trade accounts receivable are carried

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.

Accounts receivable are primarily generated

from the TMN subscriptions (collected in advance), the sale of investment products and services (collected directly from the custodian

or issuer), and of products related to tax planning (collected in advance).

The accounts 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.

In the normal course of business, the Company

extends credit on an unsecured basis to its customers, substantially all of whom are located in the United States of America.

Company does not believe that it is exposed to any significant risk of loss on accounts receivable.

may extend credit on an unsecured basis to its customers, substantially all of whom are located in the United States of America.

The Company does not believe that it is exposed to any significant risk of loss on accounts receivable.

Stock-Based Compensation

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%.

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 1.56% in the quarter ending March 31,

2020 and 1.49% to 2.55% in 2019, dividend yield of 0%, expected life of 7 years and volatility of 100% in 2020 and 35% to 40%

Liquidity and Capital Resources

As of December 31, 2019, the Company had

As of March 31, 2020, the Company had

cash and cash equivalents of $22,579.

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.

The decrease of ($13,474) in cash and cash equivalents during the six months ended March

31, 2020 was primarily due to net cash used in operating activities and the sale of Financial Gravity Tax, Inc.

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.

$29,415 for the six months ended March 31, 2020.

The net cash used in operating activities was due to net loss of $171,352 adjusted

primarily by the following:

(1) depreciation and amortization of $47,807, stock based compensation of $16,251, and an increase

in Accounts payable –

trade and related party payables of $125,286.

Net cash provided by financing activities

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.

was $18,375 for the six months ended March 31, 2020.

This was principally due to payments on the line of credit ($6,996) and notes

payable ($2,890), offset by the sale of common stock ($25,000) option and SAR grant activity.

As shown below, at March 31, 2020, our

contractual cash obligations totaled approximately $460,010, which consisted of operating lease obligations and debt principal.

Payments due by period

Contractual obligations

Less than 1 year

Notes payable

12 unchanged sentences

receivable balance.

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

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

financial condition and results of operations.

1 unchanged sentence

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.

covenants that restrict our operations.

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

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

specific capital projects.

Off Balance Sheet Transactions and Related Matters

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.

is leveraged and, accordingly, is sensitive to fluctuations in interest rates.

Any significant increase in interest rates could

have a material adverse effect on our financial condition and ability to continue as a going concern.

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.

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