What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-05-16 · 148 added, 135 removed, 104 unchanged (73% of the section changed)

9 unchanged sentences

See the sections entitled “Forward-Looking

Statements” and “Risk Factors” included in this Form 10-Q for the six months ended March 31, 2022.

Statements” and “Risk Factors” included in this Form 10-Q for the nine months ended June 30, 2022.

Plan of Operations

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is an RIA, registered with the Securities and Exchange Commission, and provides asset management services to individuals and businesses.

FGAM had in excess of $170,000,000 in assets under management as of March 31, 2022.

FGAM had in excess of $100,000,000 in assets under management as of June 30, 2022.

Financial Gravity Enhanced Markets, LLC (“FGEM”)

23 unchanged sentences

Tax services and financial advisory services,

including Tax Blueprint® and Tax Operating System® services through TMN, as well as investment advisory services by TMN subscribers

to their clients through FGFOS.

Family Office Services including wealth management

services through FGFOS, investment advisory services through FGAM, insurance services through FGEM, and stock brokerage services through

Results of Operations for the three and six

months ended March 31, 2022 compared to the three and six months ended March 31, 2021

For the three months ended March 31, 2022, revenue

decreased approximately $107,000 to approximately $1,575,000 from approximately $1,682,000 for the three months ended March 31, 2021.

The principal components of the decrease in revenue are:

reduction of revenue of approximately $650,000 from winding down of Forta, an

increase of revenue from FGFOS of approximately $380,000, increases in revenue for FGAM and TMN of approximately $115,000, and minor changes

in other units as compared to the three months ended March 31, 2021.

For the six months ended March 31, 2022, revenue decreased approximately

$218,000 to approximately $3,171,000 from $3,389,673 for the six months ended March 31, 2021.

including Tax Blueprint® services through TMN, as well as investment advisory services by TMN subscribers to their clients through

Family Office Services.

Family Office Services include wealth management services through FGFOS, investment advisory services through

FGAM, insurance services through FGEM, and stock brokerage services through FGIS.

Results of Operations for the three and nine

months ended June 30, 2022 compared to the three and nine months ended June 30, 2021

For the three months ended June 30, 2022, revenue

decreased approximately $330,000 to approximately $1,347,000 from approximately $1,677,000 for the three months ended June 30, 2021.

principal components of the decrease in revenue are:

reduction of revenue of approximately $770,000 from winding down of Forta, an increase

of revenue from FGFOS of approximately $553,000, decreases in revenue for FGAM and TMN of approximately $218,000, and minor changes in

other units as compared to the three months ended June 30, 2021.

For the nine months ended June 30, 2022, revenue decreased approximately

$548,000 to approximately $4,518,000 from $5,066,000 for the nine months ended June 30, 2021.

The principal components of the decrease

in revenue are:

decrease in revenue of approximately $1,255,000 from winding down of Forta, increased investment management revenue from

FGAM of approximately $140,000, and increase in revenue from FGFOS of approximately $720,000, an increase from insurance sales from FGEM

of approximately $260,000, and minor changes on other operating units as compared to the six months ended March 31, 2021.

decrease in revenue of approximately $2,026,000 from winding down of Forta, decreased investment management revenue from

FGAM of approximately $283,000, and increase in revenue from FGFOS of approximately $1,272,000, an increase from insurance sales from

FGEM of approximately $443,000, and minor changes on other operating units as compared to the nine months ended June 30, 2021.

Operating Expenses

Cost of services activity increased approximately

$252,000 to approximately $274,700 for the three months ended March 31, 2022 from $22,683 for the three months ended March 31, 2021.

of services activity increased approximately $235,000 to approximately $293,000 for the six months ended March 31, 2022 from $58,230 for

the six months ended March 31, 2021.

The three and six month increases consist primarily of Forta's custodian's termination charge of

Compensation expense decreased approximately $340,000

to approximately $1,195,000 for the three months ended June 30, 2022 from approximately $1,535,000 for the three months ended June 30,

The decrease was principally due to a decrease at Forta as it winds down ($541,457) and the increased salary and commission expense

at FGCO (approximately $281,000) and FGFOS ($166,978) and other smaller amounts at the other operating units.

Compensation expense decreased

approximately $405,000 to approximately $3,865,000 for the nine months ended June 30, 2022 from approximately $4,271,000 for the nine

months ended June 30, 2021.

The decrease was principally due to a decrease at Forta as it winds down (approximately $1,035,000) and the

increased salary and commission expense at FGCO (approximately $581,000) and FGFOS (approximately $351,000) and other smaller amounts

at the other operating units.

Cost of services activity decreased approximately

$19,500 to approximately $9,500 for the three months ended June 30, 2022 from approximately $29,000 for the three months ended June 30,

Cost of services activity increased approximately $215,000 to approximately $302,000 for the nine months ended June 30, 2022 from

$87,000 for the nine months ended June 30, 2021.

The three and nine-month increases consist primarily of Forta's custodian's termination

charge of $250,000.

Professional services expenses include legal expense,

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Professional services expenses increased approximately $14,000 to approximately $108,000 for

the three months ended March 31, 2022 from $97,074 for the three months ended March 31, 2021 This increase is primarily due to an increase

in legal fees and accounting arising from Forta operations.

Professional services expenses decreased approximately $9400 to approximately

$220,000 for the six months ended March 31, 2022 from $229,804 for the six months ended March 31, 2021 This increase is primarily due

to small increases in legal fees and accounting arising from FGCO and Forta operations.

the three months ended June 30, 2022 from approximately $123,000 for the three months ended June 30, 2021.

This increase is primarily

due to an increase in legal fees and accounting arising from Forta operations.

Professional services expenses decreased approximately

$24,000 to approximately $328,000 for the nine months ended June 30, 2022 from approximately $353,000 for the nine months ended June 30,

2021 This increase is primarily due to small increases in legal fees and accounting arising from FGCO and Forta operations.

Depreciation and amortization expenses include

depreciation on fixed assets and amortization of definite lived intangibles.

Depreciation and amortization expenses decreased approximately

$11,000 to approximately $21,000 for the three months ended March 31, 2022 from $32,174 for the three months ended March 31, 2021.

decrease is due to deceleration of depreciation of certain assets.

Depreciation and amortization expenses decreased approximately $24,000

to approximately $43,000 for the six months ended March 31, 2022 from $67,504 for the six months ended March 31, 2021.

The decrease is

due to deceleration of depreciation of certain assets.

Depreciation and amortization expenses stayed flat to approximately

$22,000 for the three months ended June 30, 2022 from $22,000 for the three months ended June 30, 2021.

Depreciation and amortization

expenses decreased approximately $24,000 to approximately $65.000 for the nine months ended June 30, 2022 from $89,000 for the nine months

ended June 30, 2021.

The decrease is due to deceleration of depreciation of certain assets.

General and administrative expenses decreased

approximately $98,000 to approximately $124,000 for the three months ended March 31, 2022 from $221,398 for the three months ended March

approximately $220,000 to approximately $120,000 for the three months ended June 30, 2022 from approximately $340,000 for the three months

ended June 30, 2021.

The decrease is primarily due to the wind down of Forta.

General and administrative expenses decreased approximately

to approximately $267,000 for the six months ended March 31, 2022 from approximately $558,100 for the six months ended March 31, 2021.

The decrease is primarily due to the winding down of Forta ($340,000 in reductions), and smaller changes in overhead at the other operating

units including:

$507,000 to approximately $389,000 for the nine months ended June 30, 2022 from approximately $896,000 for the nine months ended June

The decrease is primarily due to the winding down of Forta ($340,000 in reductions), and smaller changes in overhead at the

other operating units including:

(FGCO - approximately $98,000 in increases, and TMN - approximately $65,000 in decreases).

Marketing expenses increased approximately $29,000

to approximately $41,000 for the three months ended March 31, 2022 from $12,234 for the three months ended March 31, 2021 Marketing expenses

increased by approximately $35,000 to approximately $68,000 for the six months ended March 31, 2022 from $32,780 for the six months ended

March 31, 2021.

The decreases are due to the Company shutting down some previous marketing channels, while new channels have yet to be

identified and implemented.

Compensation expense decreased approximately

$91,000 to approximately $1,309,000 for the three months ended March 31, 2022 from approximately $1,400,000 for the three months ended

March 31, 2021.

The decrease was principally due to a decrease at Forta as it winds down ($541,457) and the increased salary and commission

expense at FGCO (approximately $281,000) and FGFOS ($166,978) and other smaller amounts at the other operating units.

Compensation expense

decreased approximately $65,000 to approximately $2,670,000 for the six months ended March 31, 2022 from approximately $2,735,000 for

the six months ended March 31, 2021.

The decrease was principally due to a decrease at Forta as it winds down ($1,035,839) and the increased

salary and commission expense at FGCO (approximately $581,000) and FGFOS ($351,483) and other smaller amounts at the other operating

The Company experienced an increase in its net

loss of approximately $293,000 to a net loss of approximately $397,000 for the three months ended March 31, 2022 from a net loss of approximately

$104,000 for the three months ended March 31, 2021.

The Company experienced an increase in its net loss of approximately $175,000 to a

net loss of approximately $473,000 for the six months ended March 31, 2022 from a net loss of $298,147 for the six months ended March

The changes are primarily attributable to the reasons noted above.

Marketing expenses stayed flat at approximately

$23,000 for the three months ended June 30, 2022 from approximately $23,000 for the three months ended June 30, 2021.

Marketing expenses

increased by approximately $35,000 to approximately $91,000 for the nine months ended June 30, 2022 from approximately $56,000 for the

nine months ended June 30, 2021.

The increases are due to the Company spending more in marketing channels.

The Company experienced a decrease in its net

loss of approximately $7,100,000 to a net profit of approximately $47,000 for the three months ended June 30, 2022 from a net loss of

approximately $7,112,000 for the three months ended June 30, 2021.

The Company experienced a decrease in its net loss of approximately

$6,980,000 to a net loss of approximately $425,000 for the nine months ended June 30, 2022 from a net loss of $7,406,000 for the nine

months ended June 30, 2021.

The changes are primarily attributable to the reasons noted above, and PPP Loan forgiveness, and no write

off of goodwill in 2022.

Significant Accounting Policies

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Revenue Recognition and Accounts Receivable.

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 FGEM).

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 contract liabilities in the accompanying consolidated balance

Accrued revenues are recorded for investment management fees that are

paid in arrears.

The allowance for doubtful accounts was $0 and $0 as of March 31, 2022 and September 30, 2021, 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.

FGAM, FGFOS and Forta generated investment management fees for services

provided by the Company.

The Company derives its revenues primarily from

the following activities:

Investment Management Fees, Securities Brokerage Commissions, Tax Master Network 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 client investments.

to manage clients’ investments.

Fees are generally paid quarterly, in advance, for each quarter or monthly in arrears.

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 FGEM).

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 contract liabilities in the accompanying

consolidated balance sheets.

Accrued revenues are recorded for investment management

fees that are paid in arrears.

The allowance for doubtful accounts was $0 and $0 as of June 30, 2022 and September 30, 2021, 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.

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

FGAM, FGFOS and Forta generated 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 monthly period.

FGIS and Forta generated commission revenue from the sale of securities

and annuities and premiums on life insurance policies.

The revenue is recognized when commissions are earned, or when it is determined

that annuities or insurance products are sold, which is typically at trade date.

Commissions are received after products are sold, issued

FGEM generates revenue from insurance marketing services for insurance

agents, including sourcing of insurance policies through selling agreements.

Revenue is recognized when the policies have been accepted

by the issuer and it is probable the commission will be received.

Tax Master Network provides network subscription services to its TMN

members that are charged and collected on a month-to-month basis.

None of these programs come with a long-term commitment or contract,

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

Cancellations are processed within the month requested and memberships

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

Members are not entitled to refunds for unused memberships.

FGIS and Forta generated commission revenue from

the sale of securities and annuities and premiums on life insurance policies.

The revenue is recognized when commissions are earned, or

when it is determined that annuities or insurance products are sold, which is typically at trade date.

Commissions are received after

products are sold, issued or in force.

FGEM generates revenue from insurance marketing

services for insurance agents, including sourcing of insurance policies through selling agreements.

Revenue is recognized when the policies

have been accepted by the issuer and it is probable the commission will be received.

Tax Master Network provides network subscription

services to its TMN members that are charged and collected on a month-to-month basis.

None of these programs come with a long-term commitment

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

Cancellations are processed within the month requested

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

Members are not entitled to refunds for

unused memberships.

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

TMN also sells Tax Blueprint®.

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.

Trade deferred revenue is carried only for subscription revenues not

received in the period they apply to.

The allowance for doubtful accounts was $0 and $0 as of March 31, 2022 and September 30, 2021 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.

These are tax planning strategies guides, to save customers taxes through the implementation of the recommended tax strategies.

an initial assessment, the customers pay a fixed fee based on TMN's estimate of potential future 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.

Trade deferred revenue is carried only for subscription

revenues not received in the period they apply to.

The allowance for doubtful accounts was $0 and $0 as of June 30, 2022 and September

30, 2021 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.

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

Stock-Based Compensation.

The Company recognizes the fair value of stock-based

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

compensation awards as Compensation 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 0.59% in the quarter ended March 31, 2022, dividend yield of 0%, expected life of 10 years and volatility

is based on risk-free rate of 0.59% in the quarter ended June 30, 2022, dividend yield of 0%, expected life of 10 years and volatility

of 35% to 40% in 2021.

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Liquidity and Capital Resources

As of March 31, 2022, the Company had cash and

As of June 30, 2022, the Company had cash and

cash equivalents of $208,000.

The net decrease in cash was approximately $128,000, primarily due to cash used in operations.

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

For the six months ended March 31, 2022, the Company

reported $3,171,235 in revenue, a net loss of $472,736, decrease of cash of $128,170, and an accumulated deficit of $14,886,607.

Cash decreased during the nine months ending June 30, 2022 by approximately $98,000, primarily due to cash

used in operations.

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 nine months ended June 30, 2022, the Company

reported $3,171,235 in revenue, a net loss of $425,740, a decrease of cash of $98,100, and an accumulated deficit of $14,839,611.

operating results raise substantial doubt about our ability to continue as a going concern.

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of liabilities that may result from the outcome of these uncertainties.

On February 2, 2021, Forta received a PPP loan in the amount of $422,900.

This PPP loan bears a fixed interest rate of 1% over a five-year term, is guaranteed by the federal government, and does not require collateral.

On February 2, 2021, Forta received a PPP loan

in the amount of $422,900.

This PPP loan bears a fixed interest rate of 1% over a five-year term, is guaranteed by the federal government,

and does not require collateral.

The SBA has informed Forta that $339,070 of the outstanding principle is eligible for forgiveness.

Forta is evaluating the SBA’s

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.

Future growth plans will include efforts to increase tax and investment advisory activity through TMN members.

is evaluating the SBA’s conclusion.

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.

Future growth plans will include efforts to increase tax and investment advisory activity through

There is no guaranty that the Company will achieve these objectives.

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Interest Rate Risk.

Our business is sensitive to fluctuations in interest

Any significant increase in interest rates could have a material adverse effect on certain revenue generating transactions which

may affect Company’s ability to continue as a going concern.

Our business is sensitive

to fluctuations in interest rates.

Any significant increase in interest rates could have a material adverse effect on certain revenue

generating transactions which may affect Company’s ability to continue as a going concern.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis