Financial Gravity Companies, Inc.

What they do

Financial Gravity Companies, Inc. operates through wholly owned subsidiaries that support tax professionals and investment advisors. Tax Master Network (TMN) provides tax planning systems, coaching, and marketing services to over 300 CPAs and Enrolled Agents. Financial Gravity Family Office Services (FGFOS) and Financial Gravity Asset Management (FGAM) are registered investment advisors offering wealth management and asset management services. Financial Gravity Enhanced Markets (FGEM) provides insurance marketing, and Financial Gravity Investment Services (FGIS) is affiliated with a broker-dealer for securities transactions.

Revenue drivers

• Tax Master Network (TMN) — Monthly subscriptions to TMN systems, coaching, and marketing services; revenue is driven by member fees from over 300 tax professionals.
• Financial Gravity Family Office Services (FGFOS) — Registered investment advisor offering financial planning and wealth management; revenue increased approximately $553,000 in the quarter ended June 30, 2022, and $1.272 million in the nine months ended June 30, 2022.
• Financial Gravity Asset Management (FGAM) — Registered investment advisor with over $100 million in assets under management as of June 30, 2022; revenue decreased approximately $218,000 in the quarter and $283,000 in the nine months ended June 30, 2022.
• Financial Gravity Enhanced Markets (FGEM) — Insurance marketing organization; revenue increased approximately $443,000 in the nine months ended June 30, 2022.

Recent performance

For the three months ended June 30, 2022, revenue decreased approximately $330,000 to $1.347 million from $1.677 million in the prior year, due largely to a $770,000 reduction from winding down Forta. For the nine months ended June 30, 2022, revenue decreased $548,000 to $4.518 million from $5.066 million, with Forta's wind-down cutting $2.026 million. Compensation expense decreased in both periods, reflecting Forta's wind-down, offset by increases at FGCO and FGFOS. At June 30, 2022, the company had cash of $207,983, total assets of $3.9 million, and shareholder equity of $1.8 million. Annual revenue for fiscal 2021 was $6.7 million, with a net loss of $7.4 million.

Strategy

Management is shifting away from Forta's broker/dealer and RIA operations, which have been discontinued, and focusing on growing the family office and advisory businesses. Growth is expected from TMN tax planning services, FGFOS wealth management, FGAM investment advisory, FGEM insurance sales, and FGIS brokerage services. The company is leveraging its TMN member base to cross-sell investment advisory and insurance services. Management also plans to pursue additional financing to support expansion, marketing, and infrastructure.

Risks

• Limited operating history — The company has a relatively limited operating history, making it difficult to evaluate its future prospects.
• Additional financing needed — The company will need additional financing to execute its business plan, and such financing may not be available on favorable terms or at all.
• Regulatory changes — The financial services industry is subject to changing federal and state laws, and the company may not be able to adapt in a timely manner.
• Forta wind-down — The discontinuation of Forta's broker/dealer operations is causing significant revenue reductions and may create transition risks.

Outlook

Management has not provided specific forward-looking revenue or profit guidance. They expect to continue growing revenue from FGFOS and FGEM while managing the wind-down of Forta. The company will need additional funding to support its planned expansion and to maintain operations. There is uncertainty around the availability of such financing, which could require reductions or delays in planned initiatives.