Reliance Global Group, Inc. (Form: 8-K/A, Received: 03/25/2022 15:58:19)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

AMENDMENT NO. 1 TO FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

January 14, 2022

(Date of earliest event reported)

RELIANCE GLOBAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Florida

001-40020

46-3390293

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

300 Blvd. of the Americas, Suite 105 Lakewood, NJ		08701
(Address of principal executive offices)		(Zip Code)

732-380-4600

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

	☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

	☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

	☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

	☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transmission period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.086 par value per share	RELI	The Nasdaq Capital Market
Series A Warrants to purchase shares of common stock, par value $0.086 per share	RELIW	The Nasdaq Capital Market

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 8-K and other reports filed by Reliance Global Group, Inc. (“Reliance” or the “Company”) from time to time with the Securities and Exchange Commission (collectively, the “Filings”) contain or may contain forward looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. When used in the filings the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the negative of these terms and similar expressions as they relate to the Company or Company’s management identify forward looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to the Company’s industry, the Company’s operations and results of operations and any businesses that may be acquired by the Company. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Although the Company’s management believes that the expectations reflected in the forward looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with the Company’s pro forma financial statements and the related notes filed with this Form 8-K.

EXPLANATORY NOTE

This Amendment No. 1 to the Current Report on Form 8-K (this “Amendment”) is being filed by Reliance Global Group, Inc., a Florida corporation (the “Company”) for the purpose of amending Item 9.01 Financial Statements and Exhibits of that certain Current Report on Form 8-K originally filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on January 14, 2022 (the “Original Form 8-K”) in connection with the completion of the acquisition as disclosed therein. As indicated in the Original Form 8-K, this Amendment is being filed to provide the financial statements and pro forma financial information required by Items 9.01(a) and (b) of Form 8-K, which were not previously filed with the Original Form 8-K as permitted by the rules of the SEC.

FORWARD-LOOKING STATEMENTS

This Amendment, including the Exhibits attached hereto, contains “forward-looking statements” and information within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the risks set forth from time to time in the Company’s filings with the SEC. Readers of this release are cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date stated, or if no date is stated, as of the date of this Current Report. The Company undertakes no obligation to publicly update or revise the forward-looking statements contained herein to reflect changes events or circumstances after the date of this release, unless required by law.

Item 9.01. Financial Statements and Exhibits.

(a) Financial statements of business acquired.

The following financial statements of Medigap, Inc. are being filed as exhibits hereto and are incorporated by reference herein:

Exhibit 99.1 — Medigap, Inc. audited financial statements, including the independent auditor’s report as of and for the year ended December 31, 2021.

(b) Pro forma financial information.

The following pro forma financial information is being filed as an exhibit hereto and is incorporated by reference herein:

Exhibit 99.2 — Unaudited pro forma condensed combined financial statements and explanatory notes for the Company the year ended December 31, 2021.

(d) Exhibits.

Exhibit 99.1 — Medigap, Inc. audited financial statements, including the independent auditor’s report as of and for the year ended December 31, 2021.

Exhibit 99.2 — Unaudited pro forma condensed combined financial statements and explanatory notes for the Company for the year ended December 31, 2021.

104 Cover Page Interactive Data

SIGNATURE

Pursuant to the requirements 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.

	RELIANCE GLOBAL GROUP, INC.

Dated: March 25, 2022	By:	/s/ Ezra Beyman
		Ezra Beyman Chief Executive Officer

Exhibit 99.1

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm	1

Balance Sheets as of December 31, 2021 and 2020	2

Statements of Operations for the years ended December 31, 2021 and 2020	3

Statements of Shareholder’s Deficit for the years ended December 31, 2021 and 2020	4

Statements of Cash Flows for the years ended December 31, 2021 and 2020	5

Notes to Financial Statements for the years ended December 31, 2021 and 2020	6-12

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

BALANCE SHEETS

DECEMBER 31, 2021 AND DECEMBER 31, 2020

	December 31,			December 31,
	2021			2020
ASSETS
Current assets:
Cash	$	333,855		$	387,383
Accounts receivable		68,535			34,375
Other receivable		-			62,027
Prepaid expense and other current assets		4,725			6,009
Employee retention credit refund receivable		318,962			-
Total current assets		726,077			489,794

Property and equipment, net		20,666			29,239
Right-of-use asset, net		307,041			454,681
Total assets	$	1,053,784		$	973,714

LIABILITIES AND SHAREHOLDER’S DEFICIT
Current liabilities:
Accounts payable and other accrued liabilities	$	157,266		$	265,128
Chargeback reserve		1,287,461			625,482
Current portion of lease payable		145,311			138,287
Total current liabilities		1,590,038			1,028,897

PPP loan payable		125,200			125,200
Lease payable, less current portion		193,478			340,136
Total liabilities		1,908,716			1,494,233

Commitments and contingencies

Shareholder’s deficit		(854,932	)		(520,519	)
Total liabilities and Shareholder’s deficit	$	1,053,784		$	973,714

The accompanying notes are an integral part of these financial statements

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

	December 31,			December 31,
	2021			2020
REVENUE
Revenue	$	5,113,503		$	5,668,107
Total revenue		5,113,503			5,668,107

OPERATING EXPENSES
Commission expense		594,900			238,925
Compensation expense		2,253,811			2,765,074
Marketing and advertising		2,010,691			2,078,035
General and administrative expenses		515,587			540,997
Depreciation and amortization		8,573			8,130
Total operating expenses		5,383,562			5,631,161

(Loss) income from operations		(270,059	)		36,946

OTHER INCOME (EXPENSE)
Interest income (expense), net		(487	)		(1,544	)
Employee retention credit income		333,437			-
PPP loan forgiveness		125,200			-
Total other income (expense)		458,150			(1,544	)

Net income	$	188,091		$	35,402

The accompanying notes are an integral part of these financial statements

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

STATEMENTS OF SHAREHOLDER’S DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

	Shareholder’s deficit

BALANCE, December 31, 2019	$	(41,010	)

Distributions		(514,911	)

Net income		35,402

BALANCE, December 31, 2020	$	(520,519	)

Distributions		(522,504	)

Net income		188,091

BALANCE, December 31, 2021	$	(854,932	)

The accompanying notes are an integral part of these financial statements

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2021 AND 2020

	December 31,			December 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	188,091		$	35,402
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,573			8,130
Non-cash lease expense		8,006			8,904
PPP loan forgiveness		(125,200	)		-
Change in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable		(34,160	)		66,289
Other receivable		62,027			(62,027	)
Prepaid expense and other current assets		1,284			(4,789	)
Employee retention credit refund receivable		(318,962	)		-
Increase in:
Accounts payables and other accrued liabilities		(107,862	)		34,015
Chargeback reserve		661,979			122,565
Net cash provided by operating activities		343,776			208,489

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		-			(9,000	)
Net cash used in investing activities		-			(9,000	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from PPP loan payable		125,200			125,200
Distributions to Shareholder		(522,504	)		(514,911	)
Net cash used in financing activities		(397,304	)		(389,711	)

Net decrease in cash		(53,528	)		(190,222	)
Cash at beginning of year		387,383			577,605
Cash at end of year	$	333,855		$	387,383

SUPPLEMENTAL DISCLOSURE OF CASH AND NON-CASH TRANSACTIONS:
Cash paid for interest	$	522		$	1,617

The accompanying notes are an integral part of these financial statements

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Note 1 – Organization and Description of Business

MediGap Healthcare Insurance Company, LLC (the “Company”) operates as an insurance agency earning commission revenue by selling bound insurance policies with all renewal rights to companies. The Company is based in Boca Raton, Florida and was founded in 2017 as a Florida Limited Liability Company.

COVID-19

There have been recent outbreaks in several countries, including the United States, of the highly transmissible and pathogenic coronavirus (“COVID-19”). The outbreak of such Covid-19 resulted in a widespread health crisis that adversely affected general commercial activity and the economies and financial markets of many countries, including the United States. Although to date, the Company has not been adversely affected by Covid-19, the measures taken by the governments of countries affected could adversely affect the Company’s business, financial condition, and results of operations.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Liquidity

As of December 31, 2021, the Company’s reported cash balance was approximately $334,000, current assets were approximately $726,000, while current liabilities were approximately $1,590,000. As of December 31, 2021, the Company had a working capital deficit of approximately $864,000 and Shareholder’s deficit of $855,000. For the year ended December 31, 2021, the Company reported net income of approximately $188,000 and positive cash flows from operations of $344,000. Management believes the company’s financial position to be reasonable and sufficient, providing ample liquidity for the foreseeable future.

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and disclosure in the accompanying notes. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: accounts receivable realization, operating expense accruals, and revenue recognition.

Cash

Cash consists of checking accounts.

Accounts Receivable

Accounts receivable consists primarily of amounts due to the Company in relation to commissions owed to the Company. The Company assesses the collectability of all receivables on an ongoing basis by considering its historical credit loss experience, current economic conditions, and other relevant factors. Based on this analysis, the Company has determined that no allowance for doubtful accounts was necessary at December 31, 2021 or 2020.

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Property and Equipment

Property and equipment are stated at cost. Depreciation is recorded over the shorter of the estimated useful life or the lease term of the applicable assets using the straight-line method beginning on the date an asset is placed in service. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Estimated useful lives of the Company’s Property and Equipment are as follows:

	Useful Life (in years)
Furniture and equipment		7
Leasehold improvements		Shorter of the useful life or the lease term
Computer equipment		5

Income Taxes

The Company has elected to be treated as an S corporation for federal and state purposes. As an S corporation, the company is not liable for federal or state income taxes. Accordingly, no provision for federal and state income taxes have been reflected in the accompanying combined financial statements although each company is liable for state franchise taxes. Instead, the taxable income or loss of each company is allocated and taxable to the respective member.

The Company accounts for uncertainties in income taxes under the provisions of FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” (the “Subtopic”). The Subtopic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The Subtopic prescribes a recognition threshold and measurement attitude for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Subtopic provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

At December 31, 2021 and 2020, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The 2017 through 2020 tax years generally remain subject to examination by federal and most state tax authorities.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions to the general principles in Topic 740 and simplifies other areas of the existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted this pronouncement January 1, 2021, which did not have a material effect on the consolidated financial statements.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers, which at its core, recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.

The following outlines the core principles of ASC 606:

Identification of the contract, or contracts, with a customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Identification of the performance obligations in the contract. Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

Determination of the transaction price. The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer.

Allocation of the transaction price to the performance obligations in the contract. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis.

Recognition of revenue when, or as, the Company satisfies a performance obligation. The Company satisfies performance obligations either over time or at a point in time, as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised good or service to the customer.

The Company earns commission revenue by selling bound insurance policies with all renewal rights to insurance marketing organizations (the “Customer”). The Customers utilize innovative actuarial models to value and price policies purchased based on future projections. Customers pay a one-time commission per policy purchased to selling agencies based on a pre-agreed formula outlined in the parties’ contractual agreement. Commission payments are subject to chargeback in the event a policy is cancelled or lapses within 3 months of a policy’s effective date or until the first three payments are received from the insured party, depending on the Customer Contract.

The Company identifies a contract when it has a binding agreement to sell issued insurance policies to the Customer.

There is one performance obligation in Customer contracts, to sell the rights in Company procured issued insurance policies to the Customer. The performance obligation is satisfied when the rights to an issued policy have been transferred to the Customer.

Transaction price is stated in a contract and is a set range of commission amounts based on each policy sold. There are two variable components to consideration received:

	a)	Commissions are only earned once a policy is “Placed”, defined as, an active policy sold to the Customer where the Customer has received the initial insurance carrier payment with respect to such policy. The Company requires end-user insured parties to pay the initial premium to the insurance carrier upon issuance of a policy. Insurance carrier in turn pays Customer its initial payment soon thereafter. Thus, upon sale of an issued policy to Customer, the Company has provided a bound issued policy and ensured first premium payment has been completed by insured party. This results in virtual assurance that the Customer will receive its initial insurance carrier payment, and it is more than probable that a significant revenue reversal will not occur. The Company thus considers all policies sold to the Customer to be Placed for revenue recognition purposes.
	b)	Commission revenue is subject to chargeback in full if a policy is cancelled or lapses within three months from the policy effective date or if the insured party does not make the first three payments of the policy. The Company uses historical activity as well as current factors to estimate the unconstrained variable consideration for recognition per the expected value method. A chargeback reserve liability is credited for the difference between cash consideration received and variable consideration recognized. At each reporting period, the Company remeasures the chargeback reserve liability and recognizes any change as an increase or decrease to the then current period revenue. As of December 31, 2021 and 2020, the chargeback reserve liability was $1,287,461 and $625,482.

With one performance obligation, allocation of transaction price is normally not necessary.

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

The Company recognizes revenue at a point in time when it satisfies its performance obligation and control of an insurance policy transfers to the Customer. Transfer of control occurs when the Company submits the Policy to the Customer.

Customers generally pay the Company weekly, and accruals are recorded as necessary at period end.

General and Administrative

General and administrative expenses primarily consist of personnel costs for the Company’s administrative functions, professional service fees, office rent, all employee travel expenses, and other general costs.

Marketing and Advertising

The Company’s direct channel expenses primarily consist of costs for e-mail marketing and newspaper advertisements. The Company’s online advertising channel expense primarily consist of social media ads. Advertising costs for both direct and online channels are expensed as incurred. Marketing and advertising costs were $2,010,691 and $2,078,035 for the years ended December 31, 2021 and 2020, respectively.

Concentration of Credit Risk

Cash

The Company maintains principally all cash balances in various financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. The exposure to the Company is solely dependent upon daily bank balances and the respective strength of the financial institutions. The Company has not incurred any losses on these accounts. At December 31, 2021 and 2020, amounts in excess of insured limits was $78,294 and $130,825, respectively.

Revenue

For the year ended December 31, 2021 one customer represented 92% of revenue, and for the year ended December 31, 2020, two customers represented 62% and 32% of revenue, respectively. No other customer accounted for more than 10% of the Company’s commission revenues for the years ended December 31, 2021 and 2020.

Accounts Receivable

For the year ended December 31, 2021, two customers accounted for 79% and 21% of accounts receivable, respectively, and for the year ended December 31, 2020, one customer accounted for 93% of accounts receivable.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators and past due securities. The standard is effective for the Company beginning July 1, 2020, including interim periods within those annual periods, the Company is currently evaluating the impact this standard will have on its financial statements.

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption.

Note 3 – Employee Retention Credit Refund Receivable

On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA”). The ARPA includes several provisions, such as measures that extend and expand the employee retention credit, previously enacted under the CARES Act, through December 31, 2021. For the year ended December 31, 2021, the Company recorded an employee retention credit of $333,437 as employee retention credit income on the statements of operations, and $318,962 as an employee retention credit refund receivable on the balance sheets for the amount not received. The Company has recorded these amounts at December 31, 2021 as management believes collection is probable as the conditions in order to receive the refund have been met.

Note 4 – Property and Equipment

Property and equipment at December 31, 2021 and 2020 consisted of the following:

	December 31,			December 31,
	2021			2020
Furniture and equipment	$	24,201		$	24,201
Computer equipment		13,174			13,174
Leasehold improvements		9,000			9,000
Property and equipment, gross		46,375			46,375
Less accumulated depreciation		(25,709	)		(17,136	)
Property and equipment, net	$	20,666		$	29,239

Depreciation expense was $8,573 and $8,130 for the years ended December 31, 2021 and 2020, respectively.

Note 5 – Accounts Payable and Other Accrued Liabilities

Significant components of accounts payable and other accrued liabilities at December 31, 2021 and 2020 were as follows:

	December 31, 2021		December 31, 2020

Accounts payable	$	35,500	$	144,351
Accrued expenses		77,301		79,270
Accrued credit card payables		44,465		41,507
	$	157,266	$	265,128

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Note 6 – PPP Loan Payable

On April 29, 2020, the Company entered into a loan agreement with Idaho First Bank for a loan of $125,200 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act. This loan was evidenced by a promissory note dated April 29, 2020 and matures two years from the disbursement date. This loan bore interest at a rate of 1.00% per annum, with the first six months of interest deferred. Principal and interest were payable monthly commencing seven months after the disbursement date and could be prepaid by the Company at any time prior to maturity with no prepayment penalties. This loan contained customary events of default relating to, among other things, payment defaults or breaches of the terms of the loan. Upon the occurrence of an event of default, the lender may require immediate repayment of all amounts outstanding under the note. Payments must be paid on the 1st day of each month.

Under the terms of the PPP, up to the entire amount of principal and accrued interest may be forgiven to the extent loan proceeds are used for qualifying expenses as described in the CARES Act and applicable implementing guidance issued by the U.S. Small Business Administration (“SBA”) under the PPP. The Company has used the entire loan amount for designated qualifying expenses, and on April 30, 2021, the loan balance and accrued interest outstanding were forgiven in full.

On February 2, 2021, the Company entered into a loan agreement with Idaho First Bank for a second loan of $125,200 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act. This loan is evidenced by a promissory note dated February 2, 2021 and matures two years from the disbursement date. This loan bears interest at a rate of 1.00% per annum, with the first six months of interest deferred. Principal and interest are payable monthly commencing seven months after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. This loan contains customary events of default relating to, among other things, payment defaults or breaches of the terms of the loan. Upon the occurrence of an event of default, the lender may require immediate repayment of all amounts outstanding under the note. Payments must be paid on the 1st day of each month. As of December 31, 2021, the Company has repaid a total of $0 on this loan.

Note 7 – Leases

Operating lease

ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease, initially measured at the present value of the lease payments. The Company’s lease consists of an operating lease on office space with a related party, Rotelli Pizza and Pasta, Inc. From September 1, 2020 through December 31, 2021 the Company subleased a portion of the office space to a related party of the Company.

Lease expense, net of sublease income, for the years ended December 31, 2021 and 2020 was $133,158 and $152,996, respectively.

In accordance with ASU 2016-02, right-of-use assets are amortized over the life of the underlying lease. As of December 31, 2021 and 2020, the Company reflected a right of use asset of $307,041 and $454,681, respectively.

As of December 31, 2021, the weighted average remaining lease term for the operating leases is 2.00 years. The Company has adopted the practical expedient under FASB ASC 842-10-65-6 “Leases” and uses a published risk-free rate as the discount rate. The weighted average discount rate for the operating lease is 2.82%.

MEDIGAP HEALTHCARE INSURANCE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Future minimum lease payment under the operating lease consisted of the following:

Future Minimum Lease Payments
2022	$	166,222
2023		182,843
Total undiscounted lease payments		349,065
Less: imputed interest		(10,276	)
Present value of lease payable	$	338,789

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal Contingencies

The Company is subject to various legal proceedings and claims, either asserted or unasserted, arising in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe the outcome of any of these matters will have a material adverse effect on our business, financial position, results of operations, or cash flows, and accordingly, no legal contingencies are accrued as of December 31, 2021 and 2020. Litigation relating to the insurance brokerage industry is not uncommon. As such the Company, from time to time have been, subject to such litigation. No assurances can be given with respect to the extent or outcome of any such litigation in the future.

NOTE 9 – RELATED PARTIES

During 2021 and 2020, related parties, family members of the Sole Shareholder, Joseph Billoti, received compensation in the amount of $415,580 and $292,557, respectively.

In 2018, the Company entered into a related party lease agreement with an entity owned by a family member of the Sole Shareholder, incurring $151,352 and $150,000 of rent expense in 2021 and 2020, respectively, and additionally, the entity received $32,4200 and $31,750 of compensation in 2021 and 2020, respectively, for bookkeeping services.

During 2021 and 2020, related parties, entities owned by COO, Kyle Perine, received compensation in the amount of $188,700 and $169,200, respectively. Additionally, an entity owned by the COO received commissions of $40,192 and $0, respectively, for the years ended December 31, 2021 and 2020.

During 2021 and 2020, the Company received recorded cash receipts of revenues belonging to T65 Solutions, an entity owned by an executive employee of the Company. As of December 31, 2021, no amounts were owed to or from the affiliate. As of December 31, 2021 and 2020, the Company had amounts receivable from T65 Solutions of $0 and $62,027, respectively.

NOTE 10 – SUBSEQUENT EVENTS

The Company has completed an evaluation of all subsequent events through March 10, 2022 the date the financial statements were available to be issued, to ensure that this report includes appropriate disclosure of events both recognized in the December 31, 2021 financial statements and events which have occurred but were not recognized in the financial statements. The Company has concluded that no subsequent event has occurred that requires disclosure.

On January 10, 2022, the Company entered into an agreement with Reliance Global Group, Inc. (“RGG”) pursuant to which RGG purchased all of the assets of the Company for a purchase price in the amount of $20,096,250 consisting of payments of $18,138,750 in cash and issuances of 606,037 shares of RGG’s restricted common stock.

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On January 10, 2022, Reliance Global Group, Inc. (the “Company”) entered into an agreement (the “APA”) with Medigap Healthcare Insurance Company, LLC (“Medigap”) pursuant to which the Company purchased all of the assets of Medigap for a purchase price in the amount of $22,902,201 consisting to payment to Seller of (i) $18,138,750 in cash and (ii) issuing to Seller 606,037 shares of Buyer’s restricted common stock in a transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. The purchase price is subject to post-closing adjustment to reconcile certain pre-closing credits and liabilities of the parties. The shares issued to Medigap as part of the purchase price are subject to lock up arrangements pursuant to which 50% of those shares may be sold after the one year anniversary of the date of Closing the APA and the balance of the shares after the second year anniversary of the date of closing under the APA.

Also at the closing, the Company also entered into an employment agreement (“Employment Agreement”) with Kyle Perrin, formerly Medigap’s chief operating officer, for him to manage the acquired assets. Pursuant to the Employment Agreement, which has a three year term, Mr. Perrin is paid an annual salary of $200,000 with a one-time bonus of $100,000 within 30 days of the January 10, 2021 closing and is entitled to an annual bonus of 3.5% of EBITDA of the Company. He is also entitled to then offered Company benefits. He is the subject of a two year non-compete provision and standard industry termination for cause and good reason provisions apply.

The accompanying unaudited pro forma condensed combined financial statements (“unaudited pro forma financial information”) has been prepared based on the historical financial statements of the Company and Medigap after giving effect to the purchase agreement to acquire Medigap. The pro forma financial information is intended to provide information about how the acquisition of Medigap has affected the Company’s historical consolidated financial statements. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 combines the historical consolidated statement of operations of the Company for the period, derived from the Company’s December 31, 2021 consolidated financial statements, with the respective historical statement of operations of Medigap as if the acquisition of Medigap had occurred on January 1, 2021. The unaudited pro forma condensed combined balance sheet at December 31 ,2021 combines the historical consolidated balance sheet of the Company as derived from the Company’s December 31, 2021 consolidated financial statements, and the historical balance sheet of Medigap as of December 31, 2021 on a pro forma basis as if the acquisition of medigap occurred on the same balance sheet date.

The unaudited pro forma financial information should be read in conjunction with the accompanying notes to the unaudited pro forma financial information and:

	●	The historical consolidated financial statements of the Company for the year ended December 31, 2021;

	●	the historical financial statements of Medigap for the year ended December 31, 2021 as included in this Current Report on Form 8-K/A.

	●	the announcement of the entry into and closing of the Asset Purchase Agreement with Medigap as included in the Current Report on Form 8-K filed with the SEC on January 14, 2022.

The unaudited pro forma financial information has been presented for illustrative purposes only and do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition of Medigap occurred on the dates indicated. Further, the unaudited pro forma financial information also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma transaction accounting adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

Reliance Global Group, Inc.

Pro Forma Condensed Combined Balance Sheet

December 31, 2021

(Unaudited)

	Historical						Pro Forma
	Reliance Global Group, Inc. and Subsidiaries			Medigap Healthcare Insurance Company LLC			Transaction Accounting Adjustments			Notes	Pro Forma Combined
ASSETS
Current assets:
Cash	$	4,136,180		$	333,855		$	(619,305	)	(a) (d) (e)	$	3,850,730
Restricted cash		484,542			-			-				484,542
Accounts receivable		1,024,831			68,535			(68,535	)	(d)		1,024,831
Accounts receivable, related parties		7,131			-			-				7,131
Prepaid expense and other current assets		2,328,817			4,725			(2,151,425	)	(d) (e)		182,117
Employee retention credit refund receivable		-			318,962			(318,962	)	(d)		-
Total current assets		7,981,501			726,077			(3,158,227	)			5,549,351
Property and equipment, net		130,359			20,666			-				151,025
Right-of-use asset, net		1,067,734			307,041			12,208		(c)		1,386,983
Investment in NSURE, Inc.		1,350,000			-			-				1,350,000
Intangibles, net		7,078,900			-			4,665,000		(c)		11,743,900
Goodwill		10,050,277			-			19,503,996		(c)		29,554,273
Other non-current assets		16,792			-			-				16,792
Total assets	$	27,675,563		$	1,053,784		$	21,022,977			$	49,752,324
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and other accrued liabilities	$	2,759,160		$	157,266		$	(2,303,966	)	(d)	$	612,460
Other payables		81,500			-			-				81,500
Current portion of long-term debt		913,920			-			-				913,920
Current portion of leases payable		276,009			145,311			3,362		(c)		424,682
Chargeback reserve		-			1,287,461			-				1,287,461
Earn-out liability, current portion		3,297,855			-			-				3,297,855
Warrant derivative liability		37,652,808			-			-				37,652,808
Total current liabilities		44,981,252			1,590,038			(2,300,604	)			44,270,687

Loan payables, related parties, less current portion		353,766			-			-				353,766
Long term debt, less current portion		7,085,325			-			-				7,085,325
PPP loan payable		-			125,200			(125,200	)	(d)		-
Leases payable, less current portion		805,326			193,478			(22,902	)	(c)		975,902
Earn-out liability, net of current portion		516,023			-			-				516,023
Total liabilities		53,741,692			1,908,716			(2,448,706	)			53,201,702

Stockholders’ equity (deficit):
Preferred stock, $0.086 par value; 750,000,000 shares authorized and 9,076 issued and outstanding as of December 31, 2021		-			-			781		(e)		781
Common stock, $0.086 par value; 2,000,000,000 shares authorized and 14,233,038 issued and outstanding as of December 31, 2021		940,829			-			281,816		(b) (e)		1,222,645
Stock subscription receivable		(20,000,000	)		-			20,000,000		(e)		-
Additional paid-in capital		26,451,187			-			2,334,154		(b) (e)		28,785,341
Accumulated deficit		(33,458,145	)		(854,932	)		854,932		(d)		(33,458,145	)
Total stockholders’ equity (deficit)		(26,066,129	)		(854,932	)		23,471,683				(3,449,378	)
Total liabilities and stockholders’ equity (deficit)	$	27,675,563		$	1,053,784		$	21,022,977			$	49,752,324

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information

Reliance Global Group, Inc.

Pro Forma Condensed Combined Consolidated Statement of Operations

December 31, 2021

(Unaudited)

	Historical						Pro Forma
	Reliance Global Group, Inc. and Subsidiaries			Medigap Healthcare Insurance Company LLC			Transaction Accounting Adjustments			Notes	Pro Forma Combined
REVENUE
Commission income	$	9,710,334		$	5,113,503		$	-			$	14,823,837
Total revenue		9,710,334			5,113,503			-				14,823,837

OPERATING EXPENSES
Commission expense		2,427,294			594,900			-				3,022,194
Salaries and wages		4,672,988			2,253,811			-				6,926,799
General and administrative expenses		3,589,221			515,587			-				4,104,808
Marketing and advertising		325,838			2,010,691			-				2,336,529
Depreciation and amortization		1,607,313			8,573			508,000		(f)		2,123,886
Total operating expenses		12,622,654			5,383,562			508,000				18,514,216

Loss from operations		(2,912,320	)		(270,059	)		(508,000	)			(3,690,379	)

Other expense, net		(533,337	)		-			-				(533,337	)
Recognition and change in derivative liability		(17,652,808	)		-			-				(17,652,808	)
Interest income (expense), net		-			(487	)		-				(487	)
Employee retention credit income		-			333,437			(333,437	)	(g)		-
PPP loan forgiveness		-			125,200			(125,200	)	(h)		-
		(18,186,145	)		458,150			(458,637	)			(18,186,632	)

Net (loss) income	$	(21,098,465	)	$	188,091		$	(966,637	)		$	(21,877,011	)

Basic and diluted loss per share	$	(2.09	)								$	(1.64	)
Weighted average number of shares outstanding		10,097,052						3,276,929		(b) (e)		13,373,981

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1 - Description of Transaction

The purchase consideration for Medigap was financed by the Company through a securities purchase agreement. On December 22, 2021, the Company entered into a securities purchase agreement (“Purchase Agreement”) with several institutional buyers (the “Buyers”) for the purchase and sale of (i) warrants (the “Series B Warrants”) to purchase an aggregate of up to 9,779,952 shares of the Company’s common stock, par value $0.086 per share (the “Common Stock”), (ii) an aggregate of 2,670,892 shares of Common Stock (the “Common Shares”), and (iii) 9,076 shares (the “Preferred Shares”) of the Company’s newly-designated Series B convertible preferred stock, par value $0.086 per share (the “Series B Preferred”), with a stated value of $1,000 per share, initially convertible into an aggregate of 2,219,084 shares of Common Stock at a conversion price of $4.09 per share in a private placement (the “Private Placement”). The aggregate purchase price for the Common Shares, the Preferred Shares and the Warrants is approximately $20,000,000, and the Private Placement was closed on January 5, 2022.

Note 2 - Basis of Pro Forma Presentation

The unaudited pro forma condensed combined balance sheet gives effect to the purchase of Medigap as if it occurred on December 31, 2021. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 gives effect to the acquisition as if it had occurred on January 1, 2021.

The historical unaudited pro forma condensed combined balance sheet for the year ended December 31, 2021 combines the Company’s historical consolidated balance sheet for the year ended December 31, 2021 with the balance sheet of Medigap for the year ended December 31, 2021.

The historical unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 combines the Company’s historical consolidated statement of operations for the year ended December 31, 2021 with the results of Medigap for the year ended December 31, 2021 as derived from the historical statement of operations of Medigap.

The acquisition was accounted for by the Company as a business combination using the acquisition method of accounting under ASC Topic 805, Business Combinations. Under the acquisition method of accounting, the purchase price was allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition, with any excess purchase price allocated to goodwill. To date, the Company has estimated a preliminary allocation of the purchase price to the assets acquired and liabilities assumed in the acquisition, and the final allocation of such purchase price will be determined as further information becomes available. The final purchase price allocation may differ from that reflected in the following unaudited pro forma condensed combined financial statements, and these differences may be material.

The pro forma adjustments reported in these unaudited pro forma condensed combined financial statements are based upon available information and certain assumptions that the Company’s management believes are reasonable. The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not intended to represent or be indicative of what the results of operations or financial condition would have been had the acquisition actually occurred on the dates indicated, nor is it meant to be indicative of future results of operations or financial condition for any future period or as of any future date. The unaudited pro forma condensed combined financial information of the Combined Company should be read in conjunction with the audited and unaudited historical financial statements and related notes of the Company and Medigap.

Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.

Note 3 – Accounting Policies

The accounting policies of the Company may vary materially from those of Medigap. During preparation of the unaudited pro forma condensed combined financial information, the Company has performed a preliminary analysis and is not aware of any material differences, and accordingly, this unaudited pro forma condensed combined financial information assumes no material differences in accounting policies between the two companies other than the pro forma reclassifications detailed in Note 5. Following the acquisition date, the Company will conduct a final review of the accounting policies of Medigap to determine if differences in accounting policies require adjustment or reclassification to the results of operations of Medigap, or reclassification of assets or liabilities to conform to the accounting policies and classifications of the Company. As a result of this review, the Company may identify differences that when adjusted or reclassified, could have a material impact on this unaudited pro forma condensed combined financial information.

Note 4 – Estimated Preliminary Purchase Consideration

The table below presents the total estimated preliminary purchase consideration:

	Amount
Cash Consideration	$	18,138,750
Share Consideration Price at Closing (606,037 common shares)		4,763,451
Total Purchase Price For Allocation	$	22,902,201

The shares issued to Medigap as part of the purchase price are subject to lock up arrangements pursuant to which 50% of those shares may be sold after the one year anniversary of the date of Closing the APA and the balance of the shares after the second year anniversary of the date of closing under the APA.

The estimated preliminary purchase consideration may change materially in connection the work being performed by a third-party valuation specialist to determine the fair value of the contingent share consideration and determination of the likelihood that the ambassador agreement can be successfully assigned. The share consideration included in the total estimated preliminary purchase consideration are estimated using the price of a share of the Company’s common stock at closing.

Note 5 – Reclassification Adjustments

Certain reclassifications have been made to Medigap’s historical balance sheet to conform the to the Company’s presentation as follows:

Presentation before reclassification		Presentation after reclassification		December 31, 2021
Shareholder’s deficit		Accumulated deficit		$	(854,932	)

Certain reclassifications have been made to Medigap’s historical statement of operations to conform to the Company’s presentation as follows:

Presentation before reclassification		Presentation after reclassification		For the Year Ended December 31, 2021
Compensation expense		Salaries and wages		$	2,253,811

Note 6 – Transaction Accounting Adjustments

a)	Represents the total cash consideration paid at closing for the acquisition Medigap of $18,138,750.

b)	Represents share consideration paid at closing. The Company issued 606,037 shares of common stock for the acquisition of Medigap with a fair value of $4,763,451 determined using the share price on the acquisition date of $7.86 (606,037 shares of common stock issued with a par value of $.0001). The shares issued to Medigap as part of the purchase price are subject to lock up arrangements pursuant to which 50% of those shares may be sold after the one year anniversary of the date of Closing the APA and the balance of the shares after the second year anniversary of the date of closing under the APA.

c)	Represents the estimate of goodwill in the amount of $19,503,996, acquired intangible assets in the amount of $4,665,000, the increase of the right-of-use asset by $12,208, and the decrease of the lease liability by $19,540, resulting from the acquisition of Medigap determined using the purchase consideration of $22,902,201 (refer to Note 4), net of assets and liabilities assumed of a net liability in the amount of $1,259,463.

d)	The historical accumulated deficit of Medigap of $854,932, and all assets and liabilities not acquired by the Company, were eliminated in the unaudited pro forma condensed combined balance sheet at December 31, 2021.

e)	On December 22, 2021, the Company entered into a securities purchase agreement (“Purchase Agreement”) with several institutional buyers (the “Buyers”) for the purchase and sale of (i) warrants (the “Series B Warrants”) to purchase an aggregate of up to 9,779,952 shares of the Company’s common stock, par value $0.086 per share (the “Common Stock”), (ii) an aggregate of 2,670,892 shares of Common Stock (the “Common Shares”), and (iii) 9,076 shares (the “Preferred Shares”) of the Company’s newly-designated Series B convertible preferred stock, par value $0.086 per share (the “Series B Preferred”), with a stated value of $1,000 per share, initially convertible into an aggregate of 2,219,084 shares of Common Stock at a conversion price of $4.09 per share in a private placement (the “Private Placement”). The aggregate purchase price for the Common Shares, the Preferred Shares and the Warrants is approximately $20,000,000, and the Private Placement was closed on January 5, 2022. Total cash received, net of transaction costs of $2,146,700, was $17,583,300.

f)	Represents the amortization of the intangible assets recorded in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021.

g)	Represents an adjustment for the year ended December 31, 2021 to eliminate the government grant income associated with the employee retention credit that was enacted under the CARES Act. The government grant income of $333,437 will be retained by the Seller.

h)	Represents an adjustment to eliminate the debt forgiveness income associated with loan proceeds under the Paycheck Protection Program, which was established under the congressionally approved Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). During the year ended December 31, 2021, Medigap received notification from the U.S. Small Business Administration that the entire amount of the loan was forgiven.

EXHIBIT 104

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)