Financial Gravity Companies, Inc. 10-K

Item 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2020. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on its evaluation, management concluded as of September 30, 2020 that its disclosure controls and procedures were not effective because of material weaknesses in our internal control over financial reporting, described below in Management’s Report on Internal Control Over Financial Reporting. Notwithstanding the identified material weaknesses, management believes the financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP. Management’s Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. The Company’s Chief Executive Officer and Chief Financial Officer assessed the effectiveness of its internal control over financial reporting as of September 30, 2020. In making this assessment, its management used the criteria based on the framework in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2020, its internal control over financial reporting was not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles. The Company’s Chief Executive Officer and Chief Financial Officer reviewed the results of their assessment with its board of directors. 13 Based on its evaluation under this framework, management concluded that its internal control over financial reporting was not effective as of the evaluation date due to the factors stated below. · Insufficient Resources : The Company has inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting to be able to have appropriately designed and operating entity level controls including risk assessment; information and communication; monitoring; and financial reporting. · Inadequate Segregation of Duties: The Company has inadequate number of personnel to properly segregate duties to implement control procedures. This annual report does not include an attestation report of its Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report. Inherent Limitations on Effectiveness of Controls Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financial Reporting During the period covered by this report, the following change was made in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting: · The Company has implemented a check disbursement policy that includes the following key control points: first, all disbursements are generated out of a payment system, e.g., Bill.com, after approval of non-recurring items by the controller and one member of the leadership team; second, any disbursement amount of $25,000.00 or more requires approval by the Board of Directors. As an additional control, all disbursements are reviewed with the end of the month review of financial statements by one member of the leadership team. All disbursements controlled through the payment system require approval of invoices by the department that controls the vendor relationship. The leadership team currently comprises the following members: The Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Chief Legal Officer (the head of accounting services). Item 9B. OTHER INFORMATION. None. 14 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE. Directors and Executive Officers Set forth below is certain information regarding the persons who were directors and executive officers at any time during the fiscal year 2020. Name Age Position with the Company Scott Winters 50 Chairman of the Board, Chief Executive Officer John Pollock 53 Executive Vice President – Sales, MPath CEO and Board Member Paul Williams 64 Vice Chairman of the Board, Chief Financial Officer and Treasurer Jennifer Winters 48 Secretary, Chief Operating Officer and Board Member Edward A. Lyon 56 Chief Tax Strategist, TMN CEO and Board Member William Nelson, Jr. 50 Chief Investment Officer, Sofos CEO and Board Member Gary Nemer 74 Chief Legal Counsel, Head of Accounting Services Scott Winters, August 15, 2019, Financial Gravity Companies, Inc. (the “Company”) appointed Mr. Scott Winters to serve as Chief Executive Officer and Co-Chairman of the Board for the Company. Prior to joining the Company, from 2016 to present, Mr. Winters was a major stockholder of Presidential Brokerage, Inc., a broker dealer and investment advisory firm. From 2003 to 2017 Mr. Winters was CEO, Chairman of the Board and Co-Founder of Eqis Capital Management, an investment advisory and wealth management firm. John Pollock was CEO/Founder of Business Legacy, Inc. from 2002, Pollock Advisory Group from 2007, was the former CEO and Chairman of Financial Gravity Companies, Inc. (the Company), and is currently Co-Chairman of the Board and Executive Vice President – Sales. Mr. Pollock served as CEO and Chairman of Financial Gravity since its inception until August 2019 and has been a major shareholder of the Company. Paul O. Williams, 64, has served on the Financial Gravity Companies, Inc. (OTCQB: FGCO) Board of Directors and as Vice Chairman since 2015, and has served as our Chief Financial Officer & Secretary – Treasurer from 2016 until August 2019. He currently still serves as Vice-Chairman, Chief Financial Officer & Treasurer. He graduated from Austin College in Sherman, Texas in 1978 and the Institute for Organization Management in Washington, DC in 1982. Since 2007, Mr. Williams has served as Chief Executive Officer of Bison Financial Group, Inc., a corporate financial advisory and business development firm serving middle market growth companies. Mr. Williams also serves as an officer and director of two other public companies. On behalf of Curtis Mathes Corporation (OTC: TLED) based in Frisco, TX since 2013, Mr. Williams currently serves as Chairman, Chief Executive Officer & Chief Financial Officer. On behalf of Lux Amber Corp. (OTC: LXAM) based in Frisco, TX since 2017, Mr. Williams currently serves as Vice Chairman, President & Chief Financial Officer. Mr. Williams also serves as an officer and director of three other private companies. Mr. Williams currently serves as: Vice Chairman of Dynamic Chemical Solutions, Inc. in Frisco, TX since 2016; Chairman, Co-Chief Executive Officer & Chief Financial Officer of Platinum BioSciences, Inc. in Prosper, TX since 2019; and Chairman & Chief Financial Officer of Pruven Industries, Inc. in Plano, TX since 2020. 15 Edward A. Lyon has been the Company’s Chief Tax Strategist and a Director since October 2015. From 2005 until 2015, he was Partner-in-Charge of Content at Tax Coach Software, which he founded in 2005. Mr. Lyon received a B.A. in History from Hamilton College in 1986 and a J.D. from the University of Cincinnati College of Law in 1991. Mr. Lyon’s specific experience, qualifications, attributes or skills that led to the conclusion that he should serve as a director for the Company. Jennifer Winters August 27th, the Board appointed Jennifer Winters to serve as Corporate Secretary. She will also serve as Executive Vice President. Mrs. Winters served as a Co-Founder of Eqis Holdings, Inc. from 2007 to 2017. She also served on their Board of Directors from 2010 to 2017. In addition, she served as Chief Compliance Officer of Eqis Capital Management, Inc. from 2007 to 2015. She also served as their Executive Vice President from 2015 to 2017. Jennifer Winters is the spouse of Scott Winters, the Chief Executive Officer of the Company. William Nelson, Jr. appointed to serve as Chief Executive Officer of Sofos Investment, Inc., Company’s money management subsidiary. Prior to joining the Company, from 2016 to present, Mr. Nelson was a major stockholder of Presidential Brokerage, Inc., a broker dealer and investment advisory firm. From 2003 to 2017 Mr. Winters was the Chief Investment Officer, Board Member and Co-Founder of Eqis Capital Management, an investment advisory and wealth management firm. Gary Nemer, 74, Mr. Nemer serves as Chief Legal Counsel of Company and as a Board Member of Forta. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires officers, directors and persons who beneficially own more than 10% of a class of our equity securities registered under the Exchange Act to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us during fiscal year 2020 and Forms 5 and amendments thereto furnished to us with respect to fiscal year 2020, or written representations that Form 5 was not required for fiscal year 2020, we believe that all Section 16(a) filing requirements applicable to each of our officers, directors and greater-than-ten percent stockholders were fulfilled in a timely manner. We have notified all known beneficial owners of more than 10% of our common stock of their requirement to file ownership reports with the Securities and Exchange Commission. Code of Ethics The Company has adopted a code of ethics that applies to its principal executive, financial, and accounting officers and is included as an exhibit with this filing. No Committees of the Board of Directors; No Financial Expert The Company does not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of its Board of Directors. Nor does it have an audit committee “financial expert”. At present, its entire Board of Directors acts as its audit committee. None of the members of its Board of Directors meets the definition of “audit committee financial expert” as defined in Item 407(d) of Regulation S-K promulgated by the Securities and Exchange Commission. It has not retained an audit committee financial expert because it does not believe that it can do so without undue cost and expense. Moreover, it believes that the present members of the Board of Directors, taken as a whole, have sufficient knowledge and experience in financial affairs to effectively perform their duties. 16 Item 11. EXECUTIVE COMPENSATION. Summary Compensation Table The particulars of compensation paid to the following persons during the fiscal period ended September 30, 2020 and 2019 are set out in the summary compensation table below: · our Chief Executive Officer (Principal Executive Officer); · our Chief Financial Officer (Principal Financial Officer); · each of our three most highly compensated executive officers, other than the Principal Executive Officer and the Principal Financial Officer, who were serving as executive officers at the end of the fiscal year ended September 30, 2020 and 2019; and · up to two additional individuals for whom disclosure would have been provided under the item above but for the fact that the individual was not serving as our executive officer at the end of the fiscal year ended September 30, 2020 and 2019. (collectively, the “ Named Executive Officers ”): SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary Option/SAR Awards (1) All Other Total Scott Winters, CEO 2020 $ 264,507 $ 10,225 $ 274,732 2019 $ 31,250 – – $ 31,250 John Pollock, EVP - Sales 2020 $ 250,000 $ 10,225 $ 260,225 2019 $ 52,994 – $ 152,250 $ 205,244 Paul Williams, CFO 2020 $ 96,000 $ 10,225 – $ 106,225 2019 $ 96,000 – – $ 96,000 Edward A. Lyon, CEO TMN 2020 $ 42,000 $ 10,225 $ 198,000 $ 250,225 2019 $ 42,000 – $ 198,000 $ 240,000 Jennifer Winters, COO 2020 $ 57,769 $ 132,804 $ 190,573 2019 $ 10,000 – $ 10,000 William Nelson, CEO Sofos 2020 $ 57,769 $ 132,804 $ 190,573 2019 $ 10,000 – $ 10,000 __________________________ (1) 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 1.32% in the quarter ended June 30, 2020 and 1.50% to 2.89% in 2019, dividend yield of 0%, expected life of 10 years and volatility of 159% in 2020 and volatility of 25% to 34.05% in 2019. Each of the Named Executive Officers has an employment agreement. Edward A. Lyon, a member of the Board of Directors, is party to an employment agreement. which provides for base salary of $42,000 per year, plus management fees of $198,000 annually, paid semi-monthly. Mr. Lyon serves as the General Manager, responsible for supervising the business and affairs of Tax Master Network. 17 Summary Compensation For the fiscal year ended September 30, 2020, no outstanding stock options or other equity-based awards were re-priced or otherwise materially modified. There are no non-equity incentive plan agreements with any of the Directors or executive officers. Outstanding Equity Awards at Fiscal Year-end The following stock option and stock appreciation rights granted to executive officers are outstanding: Issue Date Expiry Date Issued To Current Strike Price Issued Awards 2020/03/05 2030/03/05 Edward Lyon $0.17 250,000.00 2020/03/05 2030/03/05 Jennifer Winters $0.17 250,000.00 2020/02/28 2030/02/28 Jennifer Winters $0.30 500,000.00 2020/02/28 2030/02/28 Jennifer Winters $0.05 500,000.00 2020/03/05 2030/03/05 John Pollock $0.17 250,000.00 2020/03/05 2030/03/05 Paul Williams $0.17 250,000.00 2020/03/05 2030/03/05 Scott Winters $0.17 250,000.00 2015/09/01 2025/09/01 Scott Winters $0.33 75,000.00 2020/03/05 2030/03/05 William Nelson $0.17 250,000.00 2020/02/28 2030/02/28 William Nelson $0.30 500,000.00 2020/03/05 2030/03/05 William Nelson $0.17 250,000.00 Compensation of Directors This section is not applicable as there was no director compensation for year ended September 30, 2020. Employment Contracts, Termination of Employment, Change-in-Control Arrangements Certain executives have compensation agreements that include payments to be made by us upon termination of service without cause, up to one year of annual salary. There are no arrangements for Directors, officers, employees or consultants that would result from a change-in-control, other than vesting as described in the stock option grant agreement and plan. 18 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information with respect to the beneficial ownership, as of September 30, 2020, of the Company’s common stock, which is the Company’s only outstanding class of voting securities, and the voting power resulting from such beneficial ownership, by Beneficial Owner (1) Amount of Beneficial Ownership (1) Percentage of Shares Scott Winters (3) 13,705,176 16.4% William Nelson, Jr. 13,705,176 16.4% John Pollock 15,060,462 18.0% Edward A. Lyon 2,593,500 3.1% Paul Williams 1,896,414 2.3% Gary Nemer (2) 13,705,175 16.4% Directors and executive officers as group (six persons) 60,665,903 72.6% ___________________________ (1) Each beneficial owner has sole voting and investment power with respect to all shares attributable to that owner. (2) Non-director or executive officer with more than 5% ownership. (3) Scott Winters has 75,000 fully vested stock options. Changes in Control On May 21, 2020, the Company merged with Forta. The Forta shareholders will own more than 50% of the Company. John Pollock is currently the largest shareholder. 19 Securities authorized for issuance under equity compensation plans. The following table provides information as of the end of the most recently completed fiscal year, with respect to Company compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance. Equity Compensation Plan Information A (1) B C Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in Column A) Equity compensation plans not approved by security holders (2015 Stock Option Plan) – (2) $ – – (2) Equity compensation plans approved by security holders (2016 Stock Option Plan) 20,000,000 (1) 0.20 13,027,304 (3) Total 20,000,000 $ 0.20 13,027,304 _____________________ (1) Shares subject to stock options under 2016 Stock Option Plan. (2) The 2015 Stock Option Plan was replaced by the 2016 Stock Option Plan. (3) Shares available for grant of stock options to employees, directors and consultants under the 2016 Stock Option Plan. The 2015 Stock Option Plan was adopted without approval of Company security holders, the 2016 Stock Option, as amended and restated, was adopted with approval of Company security holders. The Company has granted stock options to certain employees and contractors under its 2015 Stock Option Plan, assumed from Financial Gravity Holdings and under its 2016 Stock Option Plan. The Company is authorized to issue an aggregate of 20,000,000 options, of which 13,027,304 remain available for issuance at September 30, 2020 under the 2016 Stock Option Plan. Currently outstanding options under the 2015 and 2016 Stock Option Plans vest over a period of no greater than five years and expire ten years from the grant date. 20 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Transactions with Related Persons, Promoters and Certain Control Persons Except as set forth below, none of the Company’s directors or officers, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to the Company’s shares, nor any relative or spouse of any of the foregoing persons, has had any material interest, direct or indirect, in any transaction to which the Company was a party, and in which the amount involved exceeds the lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years. The following Directors of Financial Gravity received shares in the merger transaction: Scott Winters 13,705,176 and William Nelson, Jr. 13,705,176 shares. TaxTuneup, LLC, which is an entity owned by Mr. Edward A. Lyon, a current director of the Company, received shares of Financial Gravity Holdings issued in the transaction by which Financial Gravity acquired TMN, then having an approximate value of $864,500. As a consequence of such issuance, Mr. Lyon is the beneficial owner of 3.1% of the Company’s common stock as of September 30, 2020. During fiscal year 2020 and 2019, TaxTuneup, LLC, an entity owned by Mr. Edward A. Lyon, received the sums of $198,000 and $198,000, respectively, from the Company, in compensation for strategic tax planning recommendations and research, business consulting and writing of books and tax planning and TMN related content. Director Independence; Board Leadership Structure The Company’s common stock is quoted through the OTC System. For purposes of determining whether members of the Company’s Board of Directors are “independent,” the Company’s Board utilizes the standards set forth in the NASDAQ Stock Market Marketplace Rules. At present, the Company’s entire Board serves as its Audit, Compensation and Nominating Committees. The Company’s Board of Directors does not have any independent members for purposes of qualifying as independent members of the Board and an Audit, Compensation and Nominating Committee of the Board as defined under NASDAQ’s Marketplace Rules. The Company’s Board of Directors is of the view that the current leadership structure is suitable for the Company at its present stage of development, and that the interests of the Company are best served by the combination of the roles of Chairman of the Board and Chief Executive Officer. As a matter of regular practice, and as part of its oversight function, the Company’s Board of Directors undertakes a review of the significant risks in respect of the Company’s business. Such review is conducted in concert with outside professionals (including legal counsel) with expertise in substantive areas germane to the Company’s business. With the Company’s current governance structure, the Company’s Board of Directors and senior executives are, by and large, the same individuals, and consequently, there is not a significant division of oversight and operational responsibilities in managing the material risks facing the Company. 21 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The following information summarizes amounts expensed for services provided us by Whitley Penn LLP for assurance and tax services, and Weaver Tidwell, LLP assurance services for the fiscal years ended September 30, 2020 and 2019, respectively. Assurance Services. Fees expensed for services by Whitley Penn LLP were $83,035 for fiscal year 2020 and $76,177 for fiscal year 2019. Assurance fees include fees associated with the annual audit and the reviews of the Company’s quarterly reports on Form 10-Q, and other SEC filings. Fees expensed for service by Weaver Tidwell, LLP related to the 2020 Forta FINRA audit and the audit, third quarter 10-Q and the 8-K filings of the Company and its subsidiaries were $102,000. Tax Fees. Fees expensed for tax services by Whitley Penn LLP were $28,500 in fiscal year 2020 and $13,500 for fiscal year 2019. All Other Fees. None Consistent with SEC policies regarding auditor independence, the audit committee has responsibility for appointing, setting compensation, approving and overseeing the work of the independent auditor. In recognition of this responsibility, the audit committee pre-approves all audit and permissible non-audit services provided by the independent auditor. The Board of Directors serves as the audit committee for the Company. 22 PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) Financial Statements and financial statement schedules (1) and (2) The financial statements and financial statement schedules required to be filed as part of this report are set forth in Item 8 of Part II of this report. (3) Exhibits. See Item 15(b) below. (b) Exhibits required by Item 601 of Regulation S-K Exhibit No. Description 14.1 Code of Ethics 23.1 Consent of Whitley Penn LLP 31.1 Sarbanes-Oxley Section 302(a) Certification of John Pollock 31.2 Sarbanes-Oxley Section 302(a) Certification of Paul Williams 32.1 Sarbanes-Oxley Section 906 Certifications 101.INS XBRL Instance Document 101.SCH XBRL Schema Document 101.CAL XBRL Calculation Linkbase Document 101.DEF XBRL Definition Linkbase Document 101.LAB XBRL Label Linkbase Document 101.PRE XBRL Presentation Linkbase Document 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: January 11, 2021 By: /s/ Scott Winters Scott Winters Chief Executive Officer (Principal Executive Officer) Date: January 11, 2021 By: /s/ Paul Williams Paul Williams Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: January 11, 2021 By: /s/ Scott Winters Scott Winters Chief Executive Officer (Principal Executive Officer) Date: January 11, 2021 By: /s/ Paul Williams Paul Williams Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Capacity Date /s/ Scott Winters CEO, Chairman of the Board January 11, 2021 Scott Winters (principal executive officer) /s/ Paul Williams Vice Chairman, CFO January 11, 2021 Paul Williams (principal financial officer) /s/ Edward A. Lyon Director January 11, 2021 Edward A. Lyon /s/ John Pollock Director January 11, 2021 John Pollock /s/ Jennifer Winters Director January 11, 2021 Jennifer Winters /s/ William Nelson Director January 11, 2021 William Nelson, Jr. 24 FINANCIAL GRAVITY COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS SEPTEMBER 30, 2020 AND 2019 CONTENTS Page REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS F-2 CONSOLIDATED FINANCIAL STATEMENTS F-3 CONSOLIDATED BALANCE SHEETS F-3 CONSOLIDATED STATEMENTS OF OPERATIONS F-4 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY F-5 CONSOLIDATED STATEMENTS OF CASH FLOW F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Financial Gravity Companies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Financial Gravity Companies, Inc. (the “Company”), as of September 30, 2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company incurred a net loss and a net use of operating cash in the current year and currently has a retained deficit that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 2020. Fort Worth, Texas January 11, 2021 F- 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Financial Gravity Companies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Financial Gravity Companies, Inc. (the “Company”), as of September 30, 2019, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2019, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. We served as the Company's auditor from 2016 through 2019. Dallas, Texas January 13, 2020 F- 3 Financial Gravity Companies, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS As of September 30, 2020 2019 ASSETS CURRENT ASSETS Cash and cash equivalents $ 482,854 $ 36,053 Trade accounts receivable, net 114,970 147,377 Current right to use lease 259,645 Prepaid expenses and other current assets 238,324 12,010 Total current assets 1,095,793 195,440 OTHER ASSETS Property and equipment, net 81,712 139,991 Proprietary content, net 143,643 262,550 Non-compete agreements, net – 5,260 Intellectual Property 53,170 53,170 Goodwill 8,475,305 1,094,702 TOTAL ASSETS $ 9,849,624 $ 1,751,113 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable – trade $ 107,674 $ 174,749 Accrued expenses 1,067,392 146,872 Related Party Payables 69,838 Contract Liabilities 76,470 94,733 Line of credit 54,112 63,919 Capital Lease Payable 259,645 Notes payable 23,596 13,393 Total current liabilities 1,658,728 493,666 NOTES PAYABLE 712,982 23,534 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY Common stock, $0.001 par value; 300,000,000 shares authorized; 83,618,412 shares issued and outstanding as of September 30, 2020 and 41,436,033 shares issued and outstanding as of September 30, 2019 83,618 41,436 Additional paid-in capital 14,385,086 7,391,592 Accumulated deficit (6,990,790 ) (6,199,115 ) Total stockholders’ equity 7,477,914 1,233,913 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,849,624 $ 1,751,113 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Financial Gravity Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended September 30, 2020 2019 REVENUE Investment management fees $ 1,969,845 $ 1,884,117 Service income 1,281,611 2,190,931 Commissions 436,024 Total revenue 3,687,480 4,075,048 OPERATING EXPENSES Cost of services 73,071 54,927 Professional services 375,363 141,835 Depreciation and amortization 166,586 189,070 General and administrative 672,784 533,805 Marketing 125,161 131,529 Salaries and wages 3,186,305 3,501,744 Total operating expenses 4,599,270 4,552,910 Net operating loss (911,790 ) (477,862 ) Other Income 129,800 Interest Expense 9,685 (145,623 ) NET OTHER INCOME/EXPENSE 120,116 (145,623 ) NET LOSS $ (791,675 ) $ (623,485 ) LOSS PER SHARE - Basic and Diluted $ (0.01 ) $ (0.02 ) · Rounded up The accompanying notes are an integral part of these consolidated financial statements. F- 5 Financial Gravity Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the years ended September 30, 2020 and 2019 Number of Shares Issued and Outstanding Common Stock Par Value Amount Additional Paid-In Capital Accumulated Deficit Total Balance at September 30, 2018 35,837,900 $ 35,838 $ 5,986,052 $ (5,575,630 ) $ 446,260 Stock based employee compensation expense – – 364,814 – 364,814 Stock options in lieu of marketing expenses – – 38,660 – 38,660 Common stock issued upon conversion of debt 5,598,133 5,598 1,002,066 – 1,007,664 Net loss – – – (623,485 ) (623,485 ) Balance at September 30, 2019 41,436,033 41,436 7,391,592 (6,199,115 ) 1,233,913 Stock based employee compensation expense – – 59,196 – 59,196 Stock options exercised 116,375 115 67 – 182 Private Placement stock issue 75,757 76 24,924 – 25,000 Stock issued in exchange for services 382,932 383 49,617 – 50,000 Forta acquisition 41,607,315 41,608 6,859,690 – 6,901,298 Net loss – – – (791,675 ) (791,675 ) Balance at September 30, 2020 83,618,412 $ 83,618 $ 14,385,086 $ (6,990,790 ) $ 7,477,914 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Financial Gravity Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended September 30, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (791,675 ) $ (623,485 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Loss on disposal of equipment 20,200 Depreciation and amortization 166,586 189,070 Common stock issued in exchange for services 50,000 38,660 Stock based compensation 80,275 364,814 Changes in operating assets and liabilities Trade accounts receivable, net 53,289 (131,470 ) Accounts receivable - related party 1,791 Prepaid expenses 42,807 13,647 Accounts payable - trade (85,291 ) 127,997 Related party payables (20,000 ) Accrued expenses (47,419 ) 75,283 Deferred revenue (18,263 ) 33,333 Net cash provided by (used in) operating activities (549,491 ) 89,640 CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for purchase of property and equipment (4,340 ) (39,353 ) Net cash Forta 710,154 (4,229 ) Net cash provided by investing activities 705,814 (43,582 ) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings from line of credit 14,521 Payments on line of credit (9,807 ) (10,248 ) Borrowings from note payable 283,345 202,205 Payments on note payable (8,242 ) (248,703 ) Proceeds from the sale of common stock 25,182 – Net cash (used in) provided by financing activities 290,478 (42,225 ) TOTAL CHANGE IN CASH AND CASH EQUIVALENTS 446,801 3,833 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 36,053 32,220 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 482,854 $ 36,053 Supplemental disclosures of cash flow information: Interest Paid $ 7,285 $ 101,061 Accrued interest converted to equity $ – $ 58,683 Noncash investing and financing activities Common stock issued for acquisition $ 6,901,298 $ – Common stock to be issued for acquisition $ 699,117 $ – Note payable issued related to acquisition $ 52,000 $ – Note payable assumed in acquisition $ 377,700 $ – Notes payable converted to equity $ – $ 948,981 The accompanying notes are an integral part of these consolidated financial statements. F- 7 Financial Gravity Companies, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NATURE OF BUSINESS Financial Gravity Companies, Inc. and Subsidiaries (the “Company”) located in Allen, Texas. The wholly-owned subsidiaries of the organization include: Sofos, Inc. (formerly Financial Gravity Wealth, Inc.), MPath Advisor Resources, LLC. (formerly Financial Gravity Business, LLC), TMN, LLC, Forta Financial Group, Inc. and SASH Corporation (inactive and awaiting dissolution). 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. Sofos, Inc. (formerly Financial Gravity Wealth, Inc.) (“Sofos”) Sofos is a registered investment advisor, located in Allen, Texas. Sofos provides asset management services. TMN was acquired effective October 1, 2015 and is an Ohio limited liability company. The purchase was made by FGH. TMN, located in Cincinnati, Ohio, provides three primary services including monthly subscriptions to the “Tax Coach” software system, coaching and email marketing services. Forta Financial Group, Inc. was acquired effective May 21, 2020 and is a securities broker dealer, a registered investment advisor and a licensed insurance agency. The Company is a registered broker-dealer with the Securities and Exchange Commission (''SEC") and with the Financial Industry Regulatory Authority ("FINRA"). The Company is also a member of the Securities Investor Protection Corporation ("SIPC"). The Company's securities activities is limited to introducing and forwarding securities on a fully disclosed basis to a carrying broker-dealer. The Company as a matter of policy does not hold funds or securities for customers or owe money or securities to customers. Pursuant to Rule 15c3-1 of the Securities Exchange Act of 1934, the Company is required to maintain minimum net capital of $100,000 and ratio of aggregate indebtedness to net capital shall not exceed 15 to 1. On September 30, 2020, the Company's net capital was $427,728 and the aggregate indebtedness to net capital was 86.77%. The Company is exempt from certain provisions of Rule 15c3-3 of the Securities Exchange Act of 1934. Such exemption is in accordance with paragraph (k) (2) (ii) of the Rule. SEGMENT REPORTING We manage our business in four reportable segments. Each of our subsidiaries is treated as a segment. We evaluate the performance of our operating segments based on a segment’s share of consolidated operating income Therefore, for instance, the tax unit was sold for $150,000 in October of 2019 (for $150,000) because the Company did not see growth potential in the unit’s accounting and direct tax advice operations. Certain growth operations of the tax unit, including the tax operating system, have been taken over by TMN. CONSOLIDATING STATEMENTS OF OPERATIONS Year Ended September 30, 2019 FGC FGT Sofos TMN Uncl. TOTAL Ordinary Income/Expense Income Service Income $ 4,928 $ 716,859 $ 486,976 $ 982,168 $ (0 ) $ 2,190,931 Investment Management Fees 0 2,692 1,881,425 0 0 1,884,117 Total Income 4,928 719,551 2,368,401 982,168 (0 ) 4,075,048 Gross Profit 4,928 719,551 2,368,401 982,168 (0 ) 4,075,048 Expense Compensation Expense 12,715 1,023,390 1,418,505 1,047,134 0 3,501,743 Cost of services 3,172 25,765 2 28,760 0 54,927 Depreciation & Amortization 0 10,953 4,165 173,952 0 189,070 General and Administrative 75 165,071 132,204 236,277 178 533,805 Marketing 1 25,199 16,496 89,791 42 131,530 Professional Services (45,000 ) 43,526 73,793 69,516 (0 ) 141,835 Total Expense (29,036 ) 1,293,904 1,645,166 1,645,429 220 4,555,683 Net Ordinary Income 33,964 (574,354 ) 723,235 (663,261 ) (220 ) (477,862 ) Total Other Expense (2,850 ) 20,582 96,992 28,126 0 145,623 Net Other Income 2,850 (20,582 ) (96,992 ) (28,126 ) 0 (145,623 ) Net Income $ 36,815 $ (594,936 ) $ 626,244 $ (691,387 ) $ (220 ) $ (623,484 ) F- 8 CONSOLIDATING STATEMENTS OF OPERATIONS Year Ended September 30, 2020 Eliminations FGC FGT (A) Forta (B) MPath Sofos TMN TOTAL Ordinary Income/Expense Income Broker Dealer $ 0 $ 0 $ 0 $ 436,024 $ 0 $ 0 $ 0 $ 436,024 Service Income 0 70 69,721 77,024 73,882 42,902 1,018,012 1,281,611 Investment Management Fees (140,420 ) 0 0 757,290 0 1,352,975 0 1,969,845 Income from Inv in Subsidiaries (73,660 ) 73,660 0 0 0 0 0 0 Total Income (214,080 ) 73,730 69,721 1,270,339 73,882 1,395,877 1,018,012 3,687,480 Gross Profit (214,080 ) 73,730 69,721 1,270,339 73,882 1,395,877 1,018,012 3,687,480 Expense Compensation Expense (140,420 ) 1,530,836 (78 ) 808,670 1,972 641,566 343,759 3,186,305 Cost of services 0 (2,773 ) 4,410 33,784 0 0 37,651 73,071 Depreciation & Amortization 0 152,173 0 64 0 0 14,350 166,586 General and Administrative 0 267,623 1,620 275,497 8,221 30,227 89,596 672,784 Marketing 0 85,111 2,411 20,568 3,300 658 13,112 125,161 Professional Services 0 276,761 0 93,095 456 2,055 2,997 375,363 Total Expense (140,420 ) 2,309,731 8,363 1,231,678 13,949 674,505 501,465 4,599,270 Net Ordinary Income (73,660 ) (2,236,000 ) 61,358 38,661 59,933 721,372 516,547 (911,790 ) Other Income/Expense Other Income © 0 129,800 0 0 0 0 0 129,800 Other Expense 0 44,738 0 (34,999 ) 0 0 (55 ) 9,685 Net Other Income 0 85,062 0 34,999 0 0 55 120,116 Net Income $ (73,660 ) $ (2,150,939 ) $ 61,358 $ 73,660 $ 59,933 $ 721,372 $ 516,602 $ (791,675 ) (A) Discontinued Operation (B) Starting from May 21, 2020 (C) Includes sale of tax unit F- 9 BUSINESS ACQUISITION On September 30, 2019, the Company entered into a merger agreement with Forta Financial Group, Inc. (“Forta” or “FFGI”, formerly, Presidential Brokerage, Inc.), to acquire 100% of the stock of Forta in exchange for 45,785,879 shares of Company common stock. Forta is a broker dealer, registered investment advisor and an insurance brokerage, subject to FINRA, SEC and insurance regulation. The acquisition transaction closed on May 21, 2020. Forta’s financial performance is included in Company’s consolidated statements starting as of May 21, 2020. The Company acquired Forta in May of 2020 in exchange for stock. A liability of $699,117 has been recorded for 4,178,564 shares of common stock related to the acquisition remaining to be issued as of September 30, 2020. Forta is a broker dealer, and its acquisition presented the Company with an opportunity to compete in the broker dealer market, and to try to grow in this area of financial services. Forta also has key employees who assumed vital executive leadership roles within the Company, including key executives who will focus on improving operations and growth opportunity. Forta also contributed key operating assets, including in excess of $700,000 in cash, and annual revenues in excess of $3,000,000. Identification of Company as the Acquirer The acquisition was primarily effected by a merger and an exchange of Company’s common stock as the consideration paid to Forta stockholders by Company for their equity interests in Forta. We looked at all pertinent facts and circumstances identified in ASC 805-10-25-1, ASC 805-10-05-4 to be considered in identifying the acquirer in a business combination effected by exchanging equity interests. The standard recognizes that the acquirer usually is the entity that issues its equity interests, but that in some business combinations the issuing entity is the acquiree. In these situations, the accounting acquiror is different than the legal acquiror. The guidance provides the following factors to consider in identifying the accounting acquiror in a business combination like the acquisition that is effected by exchanging equity interests: The majority shares ended up being held by Forta shareholders. The original calculation was to be an even 50% for Forta and Company shareholders. However, the calculations included shares that were granted through the option plan at Company, and it was assumed that each of the option share grants would be exercised. As it turned out, the vast majority of the option shares were not exercised, so that ended up skewing the majority calculation in favor of the Forta shareholders. There were no other special or unusual voting arrangements, convertible securities or other financial instruments of the combined Company immediately after the acquisition. After the acquisition, the largest single minority interest would be held by a Company shareholder, John Pollock, and members of the Board of Directors and management of Company, some of whom were shareholders of Forta, would end up owning in excess of 40% of the voting shares of Company. There is no agreement on the election of Board members, and neither Forta nor Financial Gravity shareholders have any agreement to elect a majority of the Board. The factor is neutral. The composition of the senior management of the combined entity. Senior management is from Financial Gravity. Based upon the above, the Company has concluded that Financial Gravity will be treated as the acquirer. Purchase Price Allocation The purchase price of $7,652,415 was based upon the share price of Company’s stock as of May 21, 2020 and $52,000 note payable. We have used preliminary fair value estimates for the assets acquired and liabilities assumed for the acquisition. We believe significant synergies may arise from this acquisition, as a result of which the purchase price was in excess of the fair value of the net assets acquired and, as a result, we have preliminarily recorded goodwill of $7,380,603, which is based upon book value, to account for adjustments made. We have not yet finalized estimates that relate to certain tangible and intangible assets, including customer relationships, trade names, contracts. Our estimates and assumptions for these acquisitions are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). F- 10 Assets Acquired and Liabilities Assumed Forta Financial Group, Inc. Assets Acquired and Liabilities Assumed As of May 21, 2020 PURCHASE PRICE $ 7,652,415 ASSETS Current Assets Cash 710,154 Accounts Receivable 20,882 Other Current Assets 135,056 Total Current Assets 866,093 Other Assets 582,330 TOTAL ASSETS 1,448,423 LIABILITIES Liabilities Current Liabilities Total Accounts Payable 18,215 Total Other Current Liabilities 710,131 Total Current Liabilities 728,346 Long-Term Liabilities Total Long-Term Liabilities 448,265 Total Liabilities $ 1,176,611 Goodwill $ 7,380,603 The accompanying unaudited pro forma condensed combined financial statement of Financial Gravity Companies, Inc. (“Financial Gravity”, “FGCO” or the “Company”) is presented to illustrate the estimated effects of the acquisition of 100% of the stock of Forta Financial Group, Inc. (“Forta” or “FFGI”), which closed on May 21, 2020 (the “acquisition” or the “transaction”) on the historical financial position and results of operations of the Company. The unaudited pro forma condensed combined statement of operations is based upon and derived from and should be read in conjunction with Company’s and Forta’s historical audited financial statements for the year ended September 30, 2020 F- 11 UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS Forta’s results of operations have been included in the following financial statement for the twelve months ending September 30, 2020 prospectively from the assumed date of acquisition of October 1, 2019. Pro forma results have been prepared by adjusting historical results to include Forta’s results of operations. The unaudited pro forma results presented do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of October 1, 2019, nor does it indicate the results of operations in future periods. Additionally, the unaudited pro forma results do not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions on revenues, reduction of expenses, asset dispositions, or other factors. The impact of these items could alter the following pro forma results: FINANCIAL GRAVITY COMPANIES, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR YEAR ENDED SEPTEMBER 30, 2020 Financial Gravity (A) Forta (B) (A) Combined REVENUE Investment management fees $ 1,969,845 $ 987,942 $ 2,957,787 Service income 1,281,611 1,281,611 Commissions 436,024 1,419,031 1,855,055 Total revenue 3,687,480 2,406,972 6,094,452 OPERATING EXPENSES Cost of services 73,071 137,310 210,381 Professional services 375,363 100,000 475,363 Depreciation and amortization 166,586 166,586 General and administrative 672,784 474,443 1,147,227 Marketing 125,161 50,000 175,161 Salaries and wages 3,186,305 1,514,254 4,700,559 Total operating expenses 4,599,270 2,276,008 6,875,278 Net operating loss (911,790 ) 130,964 (780,826 ) Interest Expense 9,685 9,685 NET LOSS $ (921,475 ) $ 130,964 $ (790,511 ) LOSS PER SHARE - Basic and Diluted $ – $ – $ (0.01 ) ____________________ Rounded up A Derived from unaudited statement of operations of Company for the twelve months ended September 30, 2020. B Based upon anticipated operations for the period prior to the May 21, 2020 taking into account synergies that would have been provided by Company, Sofos and MPath. F- 12 BUSINESS DISPOSITION The tax unit provided Company’s proprietary the tax operating system, but that could be run more effectively by TMN, so the decision was made to transfer that activity to the TMN. The tax unit was left with minor tax and accounting operations, and those activities did not present a significant upside to the Company. As a result, the Company disposed of its tax unit. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting polices consistently applied in the preparation of the accompanying consolidated financial statement in accordance with accounting principles generally accepted in the United States of America (“GAAP”) is as follows. Basis of Consolidation The consolidated financial statements include the accounts of Financial Gravity Companies, Sofos, MPath, TMN and Forta (collectively referred to as the “Company”). All significant intercompany accounts and transactions have been eliminated on consolidation. Cash and Cash Equivalents The Company considers all highly liquid investments with an initial maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash balances at several financial institutions located throughout the United States, which at times may exceed insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Trade Accounts Receivable Trade accounts receivable are carried at the invoiced amount less an estimate made for doubtful accounts based on management’s review of outstanding balances. The collectability of the Company’s accounts receivable is reviewed on an ongoing basis, using historical payment trends and a review of specific accounts. Accounts receivable are written off after all reasonable collection efforts have been exhausted and when management determines the amounts to be uncollectible. Recoveries of receivables previously written off are recorded when received. The allowance for doubtful accounts was $0 and $0 as of September 30, 2020 and 2019, respectively. In the normal course of business, the Company may extend credit to its customers, on an unsecured basis, substantially all of whom are located in the United States of America. The Company does not believe that they are exposed to any significant risk of loss on accounts receivable. Prepaid Expenses Prepaid expenses consist of expenses the Company has paid for prior to the service or good being provided. These prepaid expenses will be recorded as expense at the time the service has been provided. F- 13 Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to earnings over their estimated service lives by the straight-line method. Maintenance and repairs are charged to earnings as incurred; major repairs and replacements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Property and equipment operated under material leases which transfer substantially all benefits and risks associated with the assets to the Company are capitalized. An asset and liability equal to the present or fair value, if appropriate, of minimum payments over the term of the leases are recorded. Amortization of the asset is computed using the straight-line method. Expenses associated with all other leases (operating leases) are charged to expense as incurred. Customer Relationships The customer relationships acquired from the TMN purchase have been recognized in the accompanying consolidated balance sheets at $44,900, the value attributed to it on the date of the purchase. The customer relationships are being amortized on a straight-line basis over a four- year estimated life. During the years ended September 30, 2020 and 2019, the Company recorded amortization expense of $0 and $11,225 respectively on this intangible asset, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations. Accumulated amortization at September 30, 2020 and 2019 was $44,900. This has been fully amortized as of September 30, 2019. Proprietary Content The proprietary content acquired as a part of the TMN purchase has been recognized in the accompanying consolidated balance sheets at $525,100, the value attributed to it on the date of the purchase. The proprietary content is being amortized on a straight-line basis over an eight- year estimated life. During the years ended September 30, 2020 and 2019, the Company recorded amortization expense of $114,955 and $65,638, respectively, on this intangible asset, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations. Accumulated amortization at September 30, 2020 and 2019 was $377,505 and $262,550, respectively. Future amortization of proprietary content is estimated to be as follows for the years ended September 30: 2021 $ 66,708 2022 66,708 2023 10,227 $ 143,643 Trade Name The trade name acquired as a part of the TMN purchase has been recognized in the accompanying consolidated balance sheets at $69,300, the value attributed to it on the date of the purchase. Management has determined that the trade name had no future value and considers the value of the trade name recorded in the accompanying consolidated balance sheet to be impaired as of September 30, 2019. Accordingly, this asset was fully written off. Non-compete Agreements Non-compete agreements established as a part of the TMN purchase have been recognized in the accompanying consolidated balance sheets at $26,300, and amortization of the non-compete agreements was $5,260 for each of the years ending September 30, 2020 and 2019. The non-compete agreements were fully amortized as of September 30, 2020. F- 14 Intellectual Property The Company accounts for intellectual property in accordance with GAAP and accordingly, intellectual property are stated at cost. Intellectual property with indefinite lives are not amortized but are tested for impairment at least annually. Management has determined that the intellectual property have an indefinite life and do not consider the value of intellectual property recorded in the accompanying consolidated balance sheet to be impaired as of September 30, 2020 and 2019. Goodwill Goodwill represents the excess of the value of the purchase price and related costs over the identifiable assets from business acquisitions. The Company conducts an annual impairment assessment, at the reporting unit level, of its recorded goodwill. The Company assesses qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than it is carrying amount. The qualitative factors evaluated by the Company include: macro-economic conditions of the local business environment, overall financial performance, and other entity specific factors as deemed appropriate. If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit’s fair value is less than it is carrying amount, a two-step impairment test is performed. Management determined, by assessing the qualitative factors, that it is more likely than not that the fair value of the reporting unit is greater than it carries value. Management does not consider the value of goodwill recorded for TMN in the accompanying consolidated balance sheets to be impaired as of September 30, 2020, and 2019. Goodwill consists of the following: 2020 2019 Net TMN Goodwill $ 1,094,702 $ 1,094,702 Forta Goodwill 7,380,603 0 Total Goodwill $ 8,475,305 $ 1,094,702 Income Taxes The Company accounts for Federal and state income taxes pursuant to GAAP, which requires an asset and liability approach for financial accounting and reporting for income taxes based on tax effects of differences between the financial statement and tax basis of assets and liabilities. The Company accounts for all uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 – Income Taxes (“ASC 740”). ASC 740 provides guidance on de-recognition, classification, interest and penalties and disclosure related to uncertain income tax positions. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. There was no accrued interest or penalties as of September 30, 2020 and 2019. From time to time, the Company is audited by taxing authorities. These audits could result in proposed assessments of additional taxes. The Company believes that its tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from those of the Company, which could result in the imposition of additional taxes. The Company’s Federal returns since 2016 are still subject for examination by taxing authorities. Earnings Per Share Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for the reporting period. Average number of common shares were 57,138,793 and 37,825,239 for years ended September 30, 2020 and 2019, respectively. For the years ended September 30, 2020 and 2019, approximately 6,972,696 and 2,788,476 common stock options, respectively, and 0 and 25,000 warrants, respectively, were not added to the diluted average shares because inclusion of such shares would be antidilutive. F- 15 Revenue Recognition The Company adopted the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates (“ASU”) ASU 2014-09, Revenue from Contracts with Customers October 1, 2019 on a modified basis. As the initial adoption of the standard did not have a material impact on the Company's financial condition or results of operations, no cumulative effect was recognized at the date of initial application. The Company also had no significant changes to systems, processes, or controls. The Company derives its revenues primarily from the following activities: Investment Management Fees, Securities Brokerage Commissions, Tax Master Network subscriptions, Tax Operating System subscriptions, Financial Advisor subscriptions, Tax BluePrint sales, and Insurance Sales. 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’ investments. Fees are generally paid quarterly, in advance, for each quarter or monthly in arrears. Revenues are earned over the period in which the service is provided, which is typically monthly. The Company generates services income which is recognized when consulting and other professional services are performed by the Company (primarily from TMN and MPath). Income is recognized as services are delivered. 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. Trade accounts receivable are carried only for investment management fees that are paid in arrears. The allowance for doubtful accounts was $0 and $0 as of September 30, 2020 and 2019, respectively. 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. The Company does not believe that it is exposed to any significant risk of loss on accounts receivable. Sofos generates investment management fees for services provided by the Company. Investment management fees include fees earned from assets under management by providing professional services to manage client investments. Revenue is recognized as earned, at the end of each period. Forta generates commission revenue from the sale of annuities and premiums on life insurance policies held by third parties. The revenue is recognized when commissions are received from insurers and issuers of the products. MPath generates revenue from insurance marketing services for insurance agents, including sourcing of insurance policies through selling agreements. Tax Master Network has five levels of network subscription services that are charged and collected on a month-to-month. None of these programs come with a long-term commitment or contract, and there is no up-front payment beyond the monthly subscription fee. Cancellations are processed within the month requested and memberships are closed at the end of the period for which the most recent payment was made. Members are not entitled to refunds for unused memberships. Any subscription fees paid for a future period are deferred in the financial statements. TMN also sells Tax Blueprint®. These are tax planning strategies guides, to save customers taxes through the implementation of the recommended tax strategies. After an initial assessment, the customers pay half of the year one tax savings. A contract liability is recognized when the customer payment is received. Revenue is deferred until the customer reviews and accepts the final Tax Blueprint® document and returns an executed delivery agreement. F- 16 The Company received revenue from Sofos’ operations that are primarily from investment management fees, including money management fees. investment management fees are based upon a percentage of assets under management and totaled $1,352,975 (or, $1,255,457 after inter-company eliminations of $140,420)) for the fiscal year. The Company received revenue from Forta’s operations from (the date of the merger) from the following sources from May 21, 2020 through fiscal year ending September 30,2020 including: Investment Advisory fees $ 757,290 Commission-based transactions 436,024 Insurance and Other Service Revenue 77,024 Total Revenue $ 1,270,339 The Company received revenue from TMN’s operations from the following sources during the fiscal year ending September 30,2020 including: TMN membership subscriptions $ 733,838 Tax Blueprints 224,000 Commissions/Referrals 60,174 Total $ 1,018,012 The Company received revenue from MPath’s operations from insurance sales of $73,882 during the fiscal year ending September 30,2020. In addition, there was revenue from discontinued operations and minor non-recurring revenue (~$70,000) Advertising Marketing costs are charged to operations when incurred. Marketing expenses were $125,161 and $131,529 for the years ended September 30, 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 1.3171% in the year ended September 30, 2020 and 2019 of 1.49% to 2.55% in 2019, dividend yield of 0%, expected life of 10 years and volatility of 159% and 35% to 40% in 2020 and 2019 respectively. SAR awards are new this year and are being treated as a liability award while the options are being treated as equity awards. While the fair value of the options are based on the Black Scholes assumptions included here, the SAR awards are based on assumptions at year end. Forfeitures are recorded as they occur.” Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. F- 17 Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the Company will need to manage additional asset units under contract and/or additional financing to fully implement its business plan, including continued growth and establishment of a stronger brand. For the year ended September 30, 2020, the Company reported $3,687,480 in revenue, a net loss of $791,675, use of cash in operations of $549,491, and an accumulated deficit of $6,990,790. These operating results raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties. On May 8, 2020, the Company received a PPP loan in the amount of $283,345. Additionally, on May 15, 2020, Forta received a PPP loan in the amount of $377,700. 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 expects that the full proceeds of the PPP loans will be eligible for forgiveness, which would result in an increase in capital of $661,045. Company’s plans for expansion include attracting additional clients through marketing efforts with its current and future brokerage, investment management and insurance agent representatives, as well as increasing the TMN membership and the investment advisory activity of the members to increase assets under management and Company’s revenue. Future growth plans will include efforts to increase advisory headcount through recruiting of individuals advisors and groups of advisors. There is no guaranty that the Company will achieve these objectives. Litigation From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and other legal matters, arising in the ordinary course of its business or otherwise. It is management’s opinion that there are no legal proceedings the outcome of which will be material to its ability to operate or market its services, its consolidated financial position, operating results or cash flows. Future Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses, which amends how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, which applies to trade accounts receivable and the calculation of the allowance for uncollectible accounts receivable. The new standard will become effective for the Company for 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 loss 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. The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on the Company's financial condition or results of operations. 2. PROPERTY AND EQUIPMENT Property and equipment consist of the following at September 30: Estimated Service Lives 2020 2019 Furniture, fixtures and equipment 2 to 5 years $ 407,580 $ 93,073 Internally developed software 5 years 152,000 152,000 559,580 245,073 Less accumulated depreciation and amortization 477,868 105,082 $ 81,712 4139,991 Depreciation expense was $42,419 and $37,647 during the years ended September 30, 2020 and 2019, respectively. F- 18 3. INTELLECTUAL PROPERTY Intellectual property consists of the following: Trademarks at September 30, 2019 $ 53,170 Trademarks at September 30, 2020 $ 53,170 4. LINE OF CREDIT The Company has a revolving line of credit with Wells Fargo Bank, N.A. in the amount of $67,500. Amounts drawn under this line of credit are due on demand, and monthly interest and principal payments are required. The interest rate on the line of credit is 9.5%. This line of credit is collateralized by the personal guarantee of the majority stockholder. Line of credit balance was $54,112 and $63,919 for the years ended September 30, 2020 and 2019, respectively. 5. NOTES PAYABLE On April 19, 2019, the Company entered into an unsecured 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, however the abatement was denied. The outstanding balance on September 30, 2020 and 2019, was $23,534 and $29,401 respectively. On August 31, 2020, the Company entered into an agreement with John DuPriest (DuPriest), a former officer of Forta, in settlement pursuant to employment termination. The parties entered into an unsecured promissory note to DuPriest in the amount of $52,000.00, bearing interest of 5%, payable over 26 months beginning with January 15, 2021 through February 15, 2023. On May 8, 2020, the Company received a Paycheck Protection Program (“PPP”) loan in the amount of $283,345. Additionally, on May 15, 2020, Forta received a PPP loan in the amount of $377,700. 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 expects that the full proceeds of the PPP loans will be eligible for forgiveness, which would result in an increase in capital of $661,045. Forta submitted its forgiveness application to the SBA in December of 2020, and Company is awaiting the SBA’s follow-up on its application for forgiveness. The Company’s maturities of debt subsequent to September 30, 2020 are as follows: 2021 $ 354,119 2022 372,019 2023 10,441 $ 736,579 F- 19 6. ACCRUED EXPENSES Accrued expenses consist of the following at September 30: 2020 2019 SAR Liability $ 31,793 $ – Accrued payroll 105,458 19,502 Commissions payable 16,783 – State Tax liability 3,165 – Federal Tax liability 3,355 – Credit Cards 12,798 – Other Accounts payable 699,117 – Accrued operating expenses 194,923 113,013 Deferred rent – 14,357 Deferred revenue – – $ 1,067,392 $ 146,872 7. INCOME TAXES The Company elected C Corporation tax status from inception. Net operating losses (“NOL”) since that date total $6,259,594 as of September 30, 2020 and may be carried forward to offset future taxable income; accordingly, no current provision for income tax has been recorded in the accompanying statements of operations. NOL carry-forward benefits begin to expire in 2035. The following table summarizes the difference between the actual tax provision and the amounts obtained by applying the statutory tax rates to the income or loss before income taxes for the years ended September 30: 2020 2019 Tax benefit calculated at statutory rate 21.00% 21.00% Expense not deductible (2.40% ) (1.83% ) State tax, net of federal benefit – – Effect of rate change – – Changes to valuation allowance (18.60% ) (19.17% ) Provision for income taxes –% –% A deferred tax liability or asset is determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense or benefit in the accompanying consolidated statements of operations are the result of changes in the assets and liabilities for deferred taxes. The measurement of deferred tax assets is reduced, if necessary, by the amount for any tax benefits that, based on available evidence, are not expected to be realized. Income tax expense is the current tax payable or refundable for the year plus or minus the net change in the deferred tax assets and liabilities. Deferred income taxes of the Company arise from the temporary differences between financial statement and income tax recognition of NOL carry-forwards. F- 20 The deferred tax assets and liabilities in the accompanying consolidated balance sheets include the following components at September 30: 2020 2019 Net non-current deferred tax assets: Net operating loss carry-forward $ 1,314,515 $ 1,181,160 Property and equipment 4,329 6,921 1,318,844 1,188,081 Net non-current deferred tax liabilities: Intangible assets 7,221 10,319 Net 1,311,623 1,177,762 Less valuation allowance (1,311,623 ) (1,177,762 ) Net deferred taxes $ 0 $ 0 8. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS Leases 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 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): Targeted Improvements. In March 2019, the FASB issued ASU No. 2019-1 Codification Improvements to Topic 842, Leases. 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 or controls. The Company leases their office space through an operating lease in Denver Colorado, which would have expired at May 31, 2021, but has been restructures (see Subsequent Events) and non-material offices leases in Cincinnati, Ohio and Loveland, Colorado. Company’s 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 date. 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. The Company terminated its lease in Allen Texas with the consent of the landlord. The termination agreement including a contingent stock issuance, but the landlord did not claim that the contingency conditions were met, and no stock had to be issued. The Company also leases certain equipment under operating leases. F- 21 Total rent expense for the year ended September 30, 2020 was $117,344 for Forta’s the Denver Lease (Greenwood Village – the lease ends in May 2021) from June through September 30, 2020, and Forta had small spaces in Loveland and Colorado Springs during 2020. In 2019, rent expense for Financial Gravity was $135,041. Rent expense is recorded on a straight-line basis over the term of the lease. The difference between rental expense and rental payments is recorded as deferred rent within accrued expenses in the accompanying consolidated balance sheets. Management expects that in the normal course of business, leases will be renewed or replaced by other leases. Minimum future annual rental payments under non-cancelable operating leases having original terms in excess of one year are as follows (however, the Leases have been restructured – see Subsequent Events): Denver Lease 2021 $ 146,680 Total: $ 146,680 Legal Proceedings From time to time, we are a party to or are otherwise involved in legal proceedings, claims and other legal matters, arising in the ordinary course of our business or otherwise. Management does not believe that there are any current, material legal proceedings ongoing at this time. 9. STOCKHOLDERS’ EQUITY Common Stock The Company is authorized to issue up to 300,000,000 shares of common stock, par value $0.001 per share. Preferred Stock The Company does not have a preferred stock authorization in its articles of incorporation. Financial Gravity Holdings, a subsidiary of the Company, has authorized the issuance of up to 10,000,000 shares of preferred stock, by action of the Board of Directors. The preferred stock authorization has not been formalized via the filing of an amendment to the certificate of formation of Financial Gravity Holdings. The rights and obligations of the preferred stock are as determined by the Board of Directors at the time of issuance. Financial Gravity Holdings was dissolved February 13, 2019. For each of the Company and Financial Gravity Holdings, its subsidiary, there were no preferred shares issued or outstanding as of September 30, 2020 and 2019. Warrants 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. F- 22 Additional Common Stock Issuances During the years ended September 30, 2020 382,932 shares were issued for services rendered, 75,757 in a private placement, 116,375 shares in stock option exercises, for $75,182 and 5,598,133 shares were issued in 2019 in exchange for debt, for $1,007,664. 41,607,315 have been issued in the Forta merger to Forta Shareholders. 10. STOCK OPTION PLAN Effective February 27, 2015, the Company established the 2015 Stock Option Plan (the “2015 Plan”). The Board of Directors of the Company has the authority and discretion to grant stock options. The maximum number of shares of stock that may be issued and exercised under the Plan is 9,000,000. Eligible individuals include any employee of the Company or any director, consultant, or other person providing services to the Company. The expiration date and exercise price are as established by the Board of Directors of the Company. The last date any options were granted under the 2015 Plan was March 14, 2016. Effective November 22, 2016, the Company established the 2016 Stock Option Plan (the “2016 Plan”). The Board of Directors of the Company has the authority and discretion to grant stock options. The maximum number of shares of stock that may be issued and exercised under the Plan is 20,000,000 and the maximum term of an award is 10 years. Eligible individuals include any employee of the Company or any director, consultant, or other person providing services to the Company. The expiration date and exercise price are as established by the Board of Directors of the Company. The first date any options were granted under the 2016 Plan was December 19, 2016. Stock option activity is summarized as follows: Shares under Option Value of Shares under Option Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding - September 30, 2018 3,361,538 417,245 $ 0.58 89 months Granted 2,269,650 472,048 $ 0.21 101 months Exercised – – Canceled or expired 3,112,712 338,838 $ 0.24 – Outstanding - September 30, 2019 2,788,476 550,455 $ 0.29 87 months Granted 5,600,000 1,361,200 $ 0.23 114 months Exercised 116,375 13,850 $ 0.09 93 months Canceled or expired 1,299,405 1,845,870 $ 0.27 Outstanding - September 30, 2020 6,972,696 51,935 $ 0.17 106 months Exercisable - September 30, 2020 1,357,634 $ 0.31 75 months All outstanding 2015 Plan stock options at September 30, 2016 became immediately vested upon the completion of the reverse merger with Pacific Oil Company. The stock options granted under the 2016 Plan have 2 to 5 -year vesting periods. Total compensation expense included in salaries and wages of previously unamortized stock compensation was $80,275 and $364,814 for the years ended September 30, 2020 and 2019, respectively. Unamortized share-based compensation expense as of September 30, 2020 amounted to $187,000 which is expected to recognize over the next 4.81 years. Stock appreciation rights representing 2.9 million shares included in the table above are recorded as liability with an accrual of $31,793 included in accrued expenses at September 30, 2020. F- 23 11. RELATED PARTY TRANSACTIONS Included in compensation expenses for TMN were consulting fees paid to a related party as a condition to the TMN acquisition. The agreement is with Tax Tuneup, LLC which is owned by Ed Lyon, the CEO of TMN. Through this arrangement, Tax Tuneup, LLC provides consulting services to TMN, including updating of the tax strategies to comply with tax law and rules. The payments each month are $17,000. The total paid under this agreement in fiscal 2020 and 2019 respectively, were $204,000 and $258,000. 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 to be repaid in six equal installments of $2,520, beginning July 1, 2019. The last two payments have been deferred, with the balance still accruing interest. The balance of the loan at September 30, 2020 and 2019 was $5,152 and $7,526, respectively. 12. SUBSEQUENT EVENTS In December 2020, with an effective date of August 30, 2020, the Company entered into an agreement with its landlord in Denver to reduce the size of its leased space. This will result in a reduction of Lease expenses of approximately $100,000 per year through the end of the tenancy. The current lease runs through 2024. On December 23, 2020, the rent for the lease in Loveland was reduced to $2500 per month, resulting is a reduction of costs of approximately $4000 per month. In December 2020 Company entered into a non-binding term sheet for the acquisition of two related companies with investment advisory practices. The term sheet contemplates that Company will be issuing shares 8,000,000 shares of its common stock in exchange for 100% ownership of the two companies. The owners of the two companies and some staff will become employees of one of Forta. The term sheet provides for a close of the transaction in January 2021. F- 24