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Item 1A. Risk Factors

2021-12-30 compared with 2021-01-12 · 149 added, 162 removed, 17 unchanged (95% of the section changed)

RISK FACTORS.

The Company’s limited operating

history may not serve as an adequate basis to judge its future prospects and results of operations .

Financial Gravity has

a relatively limited operating history.

Its limited operating history and the unpredictability of the wealth management and insurance

industries make it difficult for investors to evaluate its business.

An investor in its securities must consider the risks, uncertainties

and difficulties frequently encountered by companies in rapidly evolving markets.

The Company will need additional

financing to implement its business plan.

The Company will need additional financing to fully implement its business plan

in a manner that not only continues to expand an already established direct-to-consumer approach, but also allows the Company to

establish a stronger brand name in all the areas in which it operates, and to attract new advisors, insurance professionals and

tax service providers.

In particular, the Company will need additional financing to:

The Company’s limited operating history may not serve as

an adequate basis to judge its future prospects and results of operations .

Financial Gravity has a relatively limited operating

Its limited operating history and the unpredictability of the wealth management and insurance industries make it difficult for

investors to evaluate its business.

An investor in its securities must consider the risks, uncertainties and difficulties frequently encountered

by companies in rapidly evolving markets.

The Company will need additional financing to implement its business

The Company will need additional financing to fully implement its business plan in a manner that not only continues to expand

an already established direct-to-consumer approach, but also allows the Company to establish a stronger brand name in all the areas in

which it operates, and to attract new advisors, insurance professionals and tax service providers.

In particular, the Company will need

additional financing to:

Effectuate its business plan and further develop its product and service lines;

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Increase its marketing efforts and lead generation.

There are no assurances that additional

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

If additional financing is not available, the Company will need to reduce,

defer or cancel development programs, planned initiatives and overhead expenditures.

The failure to adequately fund its capital

requirements could have a material adverse effect on the Company’s business, financial condition, and results of operations.

Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s

stockholders and incurring additional indebtedness could involve the imposition of covenants that restrict the Company’s

The Company’s products and

services are subject to changes in applicable laws and regulations .

The Company’s business is particularly

subject to changing federal and state laws and regulations related to the provision of financial services to consumers.

The Company’s

continued success depends in part on its ability to anticipate and respond to these changes, and the Company may not be able to

respond in a timely or commercially appropriate manner.

If the Company fails to adjust its products and services in response to

changing legal and/or regulatory requirements, the ability to deliver its products and services may be hindered, which in turn

could have an adverse effect on the Company’s business, financial condition and results of operations.

The Company may continue to encounter

substantial competition in its business .

The Company believes that existing and new competitors will continue to

improve their products and services, as well as introduce new products and services with competitive price and performance characteristics.

The Company expects that it must continue to innovate, and to invest in product development and productivity improvements, to compete

effectively in the several markets in which the Company participates.

The Company’s competitors could develop a more efficient

product or service or undertake more aggressive and costly marketing campaigns than those implemented by the Company, which could

adversely affect the Company’s marketing strategies and have an adverse effect on the Company's business, financial condition

and results of operations.

Important factors affecting the Company's

current ability to compete successfully include:

There are no assurances that additional financing

will be available on favorable terms, or at all.

If additional financing is not available, the Company will need to reduce, defer or cancel

development programs, planned initiatives and overhead expenditures.

The failure to adequately fund its capital requirements could have

a material adverse effect on the Company’s business, financial condition, and results of operations.

Moreover, the sale of additional

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

could involve the imposition of covenants that restrict the Company’s operations.

The Company’s products and services are subject to changes

in applicable laws and regulations .

The Company’s business is particularly subject to changing federal and state

laws and regulations related to the provision of financial services to consumers.

The Company’s continued success depends in part

on its ability to anticipate and respond to these changes, and the Company may not be able to respond in a timely or commercially appropriate

If the Company fails to adjust its products and services in response to changing legal and/or regulatory requirements, the ability

to deliver its products and services may be hindered, which in turn could have an adverse effect on the Company’s business, financial

condition and results of operations.

The Company may continue to encounter substantial

competition in its business .

The Company believes that existing and new competitors will continue to improve their products

and services, as well as introduce new products and services with competitive price and performance characteristics.

The Company expects

that it must continue to innovate, and to invest in product development and productivity improvements, to compete effectively in the several

markets in which the Company participates.

The Company’s competitors could develop a more efficient product or service or undertake

more aggressive and costly marketing campaigns than those implemented by the Company, which could adversely affect the Company’s

marketing strategies and have an adverse effect on the Company's business, financial condition and results of operations.

Important factors affecting the Company's current

ability to compete successfully include:

lead generation and marketing costs;

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In periods of reduced demand for the Company's

products and services, the Company can either choose to maintain market share by reducing product and service pricing to meet the

competition, or maintain its product and service pricing, which would likely sacrifice market share.

Sales and overall profitability

may be reduced in either case.

In addition, there can be no assurance that additional competitors will not enter the Company's

existing markets, or that the Company will be able to continue to compete successfully against its competition.

The Company may not successfully

manage its growth .

The Company’s success will depend upon the expansion of its operations and the effective

management of its growth, which will place a significant strain on its management and on its administrative, operational, and financial

To manage this growth, it must expand its facilities, augment its operational, financial and management systems, and

hire and train additional qualified personnel.

products and services, the Company can either choose to maintain market share by reducing product and service pricing to meet the competition,

or maintain its product and service pricing, which would likely sacrifice market share.

Sales and overall profitability may be reduced

in either case.

In addition, there can be no assurance that additional competitors will not enter the Company's existing markets, or that

the Company will be able to continue to compete successfully against its competition.

The Company may not successfully manage

The Company’s success will depend upon the expansion of its operations and the effective management of

its growth, which will place a significant strain on its management and on its administrative, operational, and financial resources.

manage this growth, it must expand its facilities, augment its operational, financial and management systems, and hire and train additional

qualified personnel.

If it is unable to manage its growth effectively, its business would be harmed.

The Company relies on key executive

officers, and their knowledge of its business and technical expertise would be difficult to replace .

is highly dependent on its executive officers.

If one or more of the Company's senior executives or other key personnel are unable

or unwilling to continue in their present positions, the Company may not be able to replace them easily or at all, and the Company’s

business may be disrupted.

Competition for senior management personnel is intense, the pool of qualified candidates is very limited,

and it may not be able to retain the services of its senior executives or attract and retain high-quality senior executives in

Such failure could have a material adverse effect on the Company's business, financial condition and results of operations.

The Company may never pay dividends

to its common stockholders .

The Company currently intends to retain its future earnings to support operations and

to finance expansion;

The Company relies on key executive officers,

and their knowledge of its business and technical expertise would be difficult to replace .

The Company is highly dependent

on its executive officers.

If one or more of the Company's senior executives or other key personnel are unable or unwilling to continue

in their present positions, the Company may not be able to replace them easily or at all, and the Company’s business may be disrupted.

Competition for senior management personnel is intense, the pool of qualified candidates is very limited, and it may not be able to retain

the services of its senior executives or attract and retain high-quality senior executives in the future.

Such failure could have a material

adverse effect on the Company's business, financial condition and results of operations.

The Company may never pay dividends to its

common stockholders .

The Company currently intends to retain its future earnings to support operations and to finance expansion;

accordingly, the Company does not anticipate paying any cash dividends in the foreseeable future.

The declaration, payment, and amount of

any future dividends on common stock will be at the discretion of the Company's Board of Directors, and will depend upon, among

other things, earnings, financial condition, capital requirements, level of indebtedness and other considerations the Board of

Directors considers relevant.

There is no assurance that future dividends will be paid on common stock or, if dividends are paid,

the amount thereof.

The Company’s common stock

is quoted through the OTC Markets, which may have an unfavorable impact on its stock price and liquidity .

The Company’s

common stock is quoted on the OTC Markets, which is a significantly more limited market than the New York Stock Exchange or NASDAQ.

The trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, follow a

policy of not investing in OTC Markets stocks and certain major brokerage firms restrict their brokers from recommending OTC Markets

stocks because they are considered speculative and volatile.

The trading volume of the Company’s

common stock has been and may continue to be limited and sporadic.

As a result, the quoted price for the Company’s common

stock on the OTC Markets may not necessarily be a reliable indicator of its fair market value.

The declaration, payment, and amount of any future

dividends on common stock will be at the discretion of the Company's Board of Directors, and will depend upon, among other things, earnings,

financial condition, capital requirements, level of indebtedness and other considerations the Board of Directors considers relevant.

is no assurance that future dividends will be paid on common stock or, if dividends are paid, the amount thereof.

The Company’s common stock is quoted

through the OTC Markets, which may have an unfavorable impact on its stock price and liquidity .

The Company’s common

stock is quoted on the OTC Markets, which is a significantly more limited market than the New York Stock Exchange or NASDAQ.

volume may be limited by the fact that many major institutional investment funds, including mutual funds, follow a policy of not investing

in OTC Markets stocks and certain major brokerage firms restrict their brokers from recommending OTC Markets stocks because they are considered

speculative and volatile.

The trading volume of the Company’s common

stock has been and may continue to be limited and sporadic.

As a result, the quoted price for the Company’s common stock on the

OTC Markets may not necessarily be a reliable indicator of its fair market value.

Additionally, the securities of small capitalization

2 unchanged sentences

companies is generally volatile, with wide price fluctuations not necessarily related to the operating performance of such companies.

The Company’s common stock

is subject to price volatility unrelated to its operations .

The market price of the Company’s common stock could

fluctuate substantially due to a variety of factors, including market perception of the Company’s ability to achieve its

planned growth, operating results of the Company and of other companies in the same industry, trading volume in the Company’s

common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company

or its competitors.

The Company’s common stock

is classified as a “penny stock.”

Rule 3a51-1 of the Securities Exchange Act of 1934 establishes the definition

of a “penny stock,”

for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00

per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available

It is likely that the Company’s common stock will be considered to be a penny stock for the immediately foreseeable

For any transaction involving a penny stock,

unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny

stocks and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and

quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the

broker or dealer must obtain financial information and investment experience and objectives of the investor, make a reasonable

determination that transactions in penny stocks are suitable for that person, and make a reasonable determination that that person

has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also provide

disclosure to its customers, prior to executing trades, about the risks of investing in penny stocks in both public offerings and

in secondary trading, the commissions payable to both the broker-dealer and the registered representative, and the rights and remedies

available to an investor in cases of fraud in penny stock transactions.

Because of these regulations, broker-dealers

may not wish to furnish the necessary paperwork and disclosures and/or may encounter difficulties in their attempt to buy or sell

shares of the Company’s common stock, which may in turn affect the ability of Company stockholders to sell their shares.

Accordingly, the penny stock classification

adversely affects any market liquidity for the Company’s common stock and subjects the shares to certain risks associated

with trading in penny stocks.

These risks include difficulty for investors in purchasing or disposing of shares, difficulty in

obtaining accurate bid and ask quotations, difficulty in establishing the market value of the shares, and a lack of securities

analyst coverage.

The Company’s common stock

is subject to dilution.

Company’s plan for increasing revenue is to recruit advisors and other professionals.

of these recruits may be granted stock options or stock rights.

These shares are among the shares reserved in Company’s stock

option plan (see compensation plans discussion).

The Company’s performance may

be affected by COVID-19.

December 2019, a novel strain of coronavirus, referred to as COVID-19, was reported to have surfaced

in Wuhan, China.

The Company’s common stock is subject

to price volatility unrelated to its operations .

The market price of the Company’s common stock could fluctuate substantially

due to a variety of factors, including market perception of the Company’s ability to achieve its planned growth, operating results

of the Company and of other companies in the same industry, trading volume in the Company’s common stock, changes in general conditions

in the economy and the financial markets or other developments affecting the Company or its competitors.

The Company’s common stock is classified

as a “penny stock.” Rule 3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a “penny

stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an

exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available to us.

It is likely that

the Company’s common stock will be considered to be a penny stock for the immediately foreseeable future.

For any transaction involving a penny stock, unless

exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the

broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny

stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain

financial information and investment experience and objectives of the investor, make a reasonable determination that transactions in penny

stocks are suitable for that person, and make a reasonable determination that that person has sufficient knowledge and experience in financial

matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also provide disclosure

to its customers, prior to executing trades, about the risks of investing in penny stocks in both public offerings and in secondary trading,

the commissions payable to both the broker-dealer and the registered representative, and the rights and remedies available to an investor

in cases of fraud in penny stock transactions.

Because of these regulations, broker-dealers may

not wish to furnish the necessary paperwork and disclosures and/or may encounter difficulties in their attempt to buy or sell shares of

the Company’s common stock, which may in turn affect the ability of Company stockholders to sell their shares.

Accordingly, the penny stock classification adversely

affects any market liquidity for the Company’s common stock and subjects the shares to certain risks associated with trading in

penny stocks.

These risks include difficulty for investors in purchasing or disposing of shares, difficulty in obtaining accurate bid

and ask quotations, difficulty in establishing the market value of the shares, and a lack of securities analyst coverage.

The Company’s common stock is subject

Company’s plan for increasing revenue is to recruit advisors and other professionals.

Some of these recruits

may be granted stock options or stock rights.

These shares are among the shares reserved in Company’s stock option plan (see compensation

plans discussion).

FINRA Arbitrations .

had over 20 FINRA claims pending in 2021 that arise from the sale to clients of alternative investments (REITs, Business Development

Loan Funds, and Oil and Gas securities).

These income generating investments did not do as well as the stock markets, and the

performance has lagged the market.

While the exposure on these cases would not be material, the costs of defense for legal fees may

be substantial.

As part of its annual review of the performance of its subsidiaries, Company has decided to discontinue

Forta’s broker/dealer operation and that transition is now in progress.

The Company’s performance may be affected

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 States.

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.

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

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, over 50%t 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 remotely.

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.

In March 2020, the World Health Organization declared

the COVID-19 outbreak a pandemic.

The financial markets demonstrated significant volatility in reaction to the virus outbreak, and new

variants may contribute to volatility.

The effects of such COVID-19 variants on the economy are not known.

During periods of high volatility

and uncertainty many investors choose to stop ongoing investment activity.

Revenues of the Company are adversely affected when investors

reduce their investment activities.

In addition, over 50%t of Company’s revenues is based upon the value of assets under management.

If the investment portfolios of clients decrease in value, investment management fees may also decrease.

Any significant shutdown of the

economy for a sustained period will affect the Company’s revenue which could lead to losses.

UNRESOLVED STAFF COMMENTS.

The Company’s corporate offices are

located at 12600 Hill Country Blvd Suite R-275, Bee Cave, TX 78738.

TMN’s offices are located in Cincinnati,

Forta has offices in Greenwood Village,

Colorado Springs, and Loveland, Colorado

The Company’s corporate offices are located at 2501 Ranch Road

620 South, Suite 110, Lakeway, Texas 78734.

TMN’s offices are located in Cincinnati,

Forta has offices in Greenwood Village, Colorado.

Company has offices in Carmel, California.

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-K

Item 1A. Risk Factors