| 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 FGH, FGO, Cloud9 (from the date of acquisition), including Cloud9B2B and Cloud9 Accelerator,
LLC, PAG (from the date of acquisition), BLI (from the date of acquisition), TCS (from the date of acquisition), and MDP (from
the date of acquisition), (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 $17,014 and $-0- as of September 30, 2017 and 2016, 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. 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 income as incurred. Customer Relationships The customer
relationships acquired from the TCS purchase have been recognized in the accompanying consolidated balance sheets at $44,900,
the value attributed to it on the date of the purchase (see Note 9). The customer relationships are being amortized on a straight-line
basis over a four- year estimated life. During the years ended September 30, 2017 and 2016, the Company recorded amortization
expense of $11,225 on this intangible asset, which is included in depreciation and amortization expense in the accompanying consolidated
statements of operations. Accumulated amortization at September 30, 2017 and 2016 was $22,450 and $11,225, respectively. Future amortization
of customer relationships is estimated to be as follows for the years ended September 30:
2018 $ 11,225
2019 11,225
$ 22,450 Proprietary
Content The proprietary
content acquired as a part of the TCS purchase has been recognized in the accompanying consolidated balance sheets at $525,100,
the value attributed to it on the date of the purchase (see Note 9). The proprietary content is being amortized on a straight-line
basis over an eight- year estimated life. During the years ended September 30, 2017 and 2016, the Company recorded amortization
expense of $65,638 on this intangible asset, which is included in depreciation and amortization expense in the accompanying consolidated
statements of operations. Accumulated amortization at September 30, 2017 and 2016 was $131,276 and $65,638, respectively. Future amortization
of proprietary content is estimated to be as follows for the years ended September 30:
2018 $ 65,638
2019 65,638
2020 65,638
2021 65,638
2022 65,638
Thereafter 65,634
$ 393,824 Trade Name The trade name
acquired as a part of the TCS purchase has been recognized in the accompanying consolidated balance sheets at $69,300, the value
attributed to it on the date of the purchase (see Note 9). Management has determined that the trade name has an indefinite life
and does not consider the value of the trade name recorded in the accompanying consolidated balance sheet to be impaired as of
September 30, 2017 and 2016. Non-compete
Agreements Non-compete agreements
established as a part of the TCS purchase have been recognized in the accompanying consolidated balance sheets at $26,300, the
value attributed to them on the date of the purchase (see Note 9). The non-compete agreements are being amortized on a straight-line
basis over the five-year term of the non-compete clause of the agreement. During the years ended September 30, 2017 and 2016,
the Company recorded amortization expense of $5,260 on this intangible asset, which is included in depreciation and amortization
expense in the accompanying consolidated statements of operations. Accumulated amortization at September 30, 2017 and 2016 was
$10,520 and $5,260, respectively. Future amortization
of the non-compete agreements is estimated to be as follows for the years ended September 30:
2018 $ 5,260
2019 5,260
2020 5,260
$ 15,780 Trademarks The Company accounts
for trademarks in accordance with GAAP and accordingly, trademarks are stated at cost. Trademarks with indefinite lives are not
amortized but are tested for impairment at least annually. Management has determined that the trademarks have an indefinite life
and do not consider the value of trademarks recorded in the accompanying consolidated balance sheet to be impaired as of September
30, 2017 and 2016. 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 its 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 its 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 its carrying value. Management does not consider the value of goodwill
recorded for TCS in the accompanying consolidated balance sheet to be impaired as of September 30, 2017, and 2016. However, goodwill
attributed to Cloud9 and MDP was deemed to be impaired as of September 30, 2016 as that business offering has been discontinued. The fair values
of the assets acquired, and liabilities assumed were determined primarily using the income approach, which determines the fair
value for the asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are
discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. The fair
value of relationships were determined by projecting expected cash flows and subtracting the portion of the cash flow derived
by the relevant contributory assets. The accompanying consolidated balance
sheets, consolidated statements of operations, changes in stockholders’ equity and cash flows include the results of operations
of the acquired subsidiaries from the date of acquisition. Goodwill consists
of the following:
Goodwill at September 30, 2015 $ 662,967
Goodwill generated from acquisition of TCS 1,094,702
Impairment of Cloud9 (592,369 )
Impairment of MDP (70,598 )
Goodwill at September
30, 2016 1,094,702
Goodwill at September 30, 2017 $ 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, 2017 and 2016. 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 2014 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 35,361,321 and 31,626,189 for years ended September
30, 2017 and 2016, respectively. For the years
ended September 30, 2017 and 2016, approximately 2,817,146 and 2,200,346 common stock options, respectively, were not added to
the diluted average shares because inclusion of such shares would be antidilutive. Revenue Recognition FG Wealth 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. FG Tax and MDP generate service income
from its consulting and other professional services performed. Commission revenue
is derived from the sale of annuities and premiums on life insurance policies held by third parties. The revenue is recognized
at the time the policy is issued. 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. TaxCoach Software
has 3 types of services that are charged and collected on a month to month subscription basis (TaxCoach basic membership, All-Stars
coaching, and Wire Service weekly broadcast email). None of these programs come with a long-term commitment or contract, and there
is no up-front payment beyond the monthly subscription fee. Cancellations are processed within the month requested and memberships
are closed at the end of the period for which the most recent payment was made. Members are not entitled to refunds for unused
memberships. Advertising Advertising costs
are charged to operations when incurred. Advertising and marketing expense was $375,499 and $402,402 for the years ended September
30, 2017 and 2016, respectively. Stock-Based Compensation The Company recognizes
the fair value of the stock-based compensation awards as wages in the accompanying statements of operations on a straight-line
basis over the vesting period based on the Black-Scholes option pricing model based on a risk-free rate from 0.85% to 1.41% in
2017 and 0.97% in 2016, dividend yield of 0%, expected life of 2 years and volatility of 43% to 137%. 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. 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. On May 23,
2017, the Company and GHS Investments, LLC (“GHS Investments”) entered into an Equity Financing Agreement (the “Agreement”).
The Agreement was filed as an exhibit to a registration statement on Form S-1, filed with the Securities and Exchange Commission
on September 18, 2017. The Agreement contemplates a series of transactions, pursuant to which the Company will “put”
shares of its common stock to GHS in consideration of the payment to the Company of eighty percent (80%) of the “Market
Price” of such shares. “Market Price” shall mean the average of the two lowest trading prices of the Company’s
Common Stock during the ten (10) consecutive trading days preceding the receipt of the applicable put notice. Accordingly, on
each instance the Company exercises a put option, the Company will know in advance, both the number of shares issuable upon exercise
of the put option, and the dollar amount of the purchase price for such shares. The maximum purchase price for shares to be purchased
by GHS Investments under the Agreement is $11,000,000. To facilitate the sale of the shares so purchased by GHS Investments, the
Company agreed to file a registration statement with the Securities and Exchange Commission. The Company also entered into a Registration
Rights Agreement with GHS Investments, pursuant to which the Company has agreed to provide certain registration rights under the
Securities Act of 1933, the rules and regulations promulgated thereunder, and applicable state securities laws. The Agreement
will terminate (i) when GHS Investments has purchased an aggregate of $11,000,000 of the common stock of the Company, or (ii)
36 months after the effective date of the Agreement, or (iii) at such time that the registration statement is no longer in effect. Additionally,
the Company is also actively seeking growth of its service offerings, both organically and via new client relationships. Management,
in the ordinary course of business, is trying to raise additional capital through sales of common stock as well as seeking financing
via equity or debt, or both from third parties. 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 an increased debt service cash obligation, the imposition of covenants that restrict the Company’s
operations or the Company’s ability to perform on its current debt service requirements. The consolidated financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Future Accounting
Pronouncements In February 2016,
the FASB issued ASU Update No. 2016-02 Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets
and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement,
and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a
finance or operating lease. However, unlike current GAAP - which requires only capital leases to be recognized on the balance
sheet - the new ASU will require both types of leases to be recognized on the balance sheet. ASU 2016-02 is effective for the
years beginning after December 15, 2018 and for all periods presented. Early application of the amendments in this ASU is permitted.
The Company does not expect any significant financial impact to the financial statements upon adoption of this standard. In March 2016,
the FASB issued ASU Update No. 2016-07, Investments – Equity Method and Joint Ventures (Topic 323). The amendments in this
Update eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in
the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained
earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the
investment had been held. ASU 2016-07 is effective for the years beginning after December 15, 2016. Early application of the amendments
in this ASU is permitted. The Company does not expect any significant financial impact to the financial statements upon adoption
of this standard. In March 2016,
the FASB issued ASU Update No. 2016-08, Revenue from Contracts with Customers (Topic 606). The amendments in this Update are intended
to improve the operability and understandability of the implementation guidance on principal versus agent considerations by clarifying
the criteria in determining a principal versus agent relationship. The core principle of the guidance is that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, an entity
should apply the following five steps: (1) identify contracts with customers, (2) identify the performance obligations in the
contracts, (3) determine the transaction price, (4) allocate the transaction price to the performance obligation in the contract,
and (5) recognize revenue as the entity satisfies performance obligations. The new guidance is effective for annual reporting
periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted
for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. We are
currently evaluating what impact adoption of this guidance will have on our financial position, results of operations, cash flows
and disclosures. The Company does not expect any significant financial impact to the financial statements upon adoption of this
standard. In March 2016,
the FASB issued ASU Update No. 2016-09, Compensation – Stock Compensation (Topic 718). The amendments in this Update are
to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification
of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual
periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has yet to do a full analysis
on the impact this will have but will do during the next fiscal year. The Company does not expect any significant financial impact
to the financial statements upon adoption of this standard. |
