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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____

 

Commission file number of the issuing entity: 001-40020

 

RELIANCE GLOBAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Florida   46-3390293

(State or other jurisdiction

of incorporation or organization)

  

(I.R.S. Employer

Identification Number)

 

524210

(Primary Standard Industrial Code Classification Number)

 

300 Blvd. of the Americas, Suite 105 Lakewood, NJ 08701

732-380-4600

(Address, including zip code, and telephone number, including area code of registrant’s principal executive offices)

 

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   RELI   The Nasdaq Capital Market
Series A Warrants   RELIW   Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes: ☒ No: ☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes: ☒ No: ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company, in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐   Accelerated filer ☐
Non-accelerated filer ☒   Smaller reporting company ☒
Emerging Growth Company ☐    

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act).

 

Yes: ☐ No: ☒

 

At November 14, 2022 the registrant had 18,054,469 shares of common stock, par value $0.086 per share, outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

PART I  
Item 1. Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 33
Item 4. Controls and Procedures. 33
PART II  
Item 1. Legal Proceedings. 33
Item 1A. Risk Factors. 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 34
Item 3. Defaults Upon Senior Securities. 34
Item 4. Mine Safety Disclosures. 34
Item 5. Other Information. 34
Item 6. Exhibits 34

 

2
 

 

Reliance Global Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 

  

September 30,

2022

  

December 31,

2021

 
Assets          
Current assets:          
Cash  $1,615,054   $4,136,180 
Restricted cash   1,409,562    484,542 
Accounts receivable   1,025,120    1,024,831 
Accounts receivable, related parties   1,159    7,131 
Note receivables   -    - 
Other receivables   37,674    - 
Prepaid expense and other current assets   399,506    2,328,817 
Total current assets   4,488,075    7,981,501 
           
Property and equipment, net   199,030    130,359 
Right-of-use assets   1,327,361    1,067,734 
Investment in NSURE, Inc.   1,350,000    1,350,000 
Intangibles, net   14,359,973    7,078,900 
Goodwill   33,486,107    10,050,277 
Other non-current assets   23,284    16,792 
Total assets  $55,233,830   $27,675,563 
           
Liabilities and stockholders’ equity (deficit)          
Current liabilities:          
Accounts payable and other accrued liabilities  $1,221,583   $2,759,160 
Other payables   1,241,341    81,500 
Chargeback reserve   1,350,533    - 
Short term Financing Agreements   309,993    - 
Current portion of long-term debt   1,026,541    913,920 
Current portion of leases payable   538,018    276,009 
Earn-out liability, current portion   2,283,380    3,297,855 
Warrant commitment   -    37,652,808 
Total current liabilities   7,971,389    44,981,252 
           
Loans payable, related parties, less current portion   1,679,560    353,766 
Long term debt, less current portion   12,640,673    7,085,325 
Leases payable, less current portion   833,395    805,326 
Earn-out liability, less current portion   635,647    516,023 
Warrant liabilities   3,107,578    - 
Total liabilities   26,868,242    53,741,692 
Stockholders’ equity (deficit):          
Preferred stock, $0.086 par value; 750,000,000 shares authorized and 0 issued and outstanding as of September 30, 2022 and December 31, 2021   -    - 
Common stock, $0.086 par value; 2,000,000,000 shares authorized and 18,054,469 and 10,956,109 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively   1,551,358    940,829 
Additional paid-in capital   34,314,591    26,451,187 
Stock subscription receivable   -    (20,000,000)
Accumulated deficit   (7,500,361)   (33,458,145)
Total stockholders’ equity (deficit)   28,365,588    (26,066,129)
Total liabilities and stockholders’ equity (deficit)  $55,233,830   $27,675,563 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

3
 

 

Reliance Global Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

   2022   2021   2022   2021 
  

Three months ended

September 30,

  

Nine months ended

September 30,

 
   2022   2021   2022   2021 
Revenue                    
Commission income  $4,153,361   $2,581,636   $12,596,268   $7,096,213 
Total revenue   4,153,361    2,581,636    12,596,268    7,096,213 
                     
Operating expenses                    
Commission expense   862,857    660,708    2,617,140    1,748,451 
Salaries and wages   2,114,730    1,188,267    6,373,697    3,217,441 
General and administrative expenses   1,253,097    755,130    5,465,384    2,961,881 
Marketing and advertising   726,115    65,010    1,922,520    143,110 
Depreciation and amortization   713,444    387,729    2,077,372    1,090,183 
Total operating expenses   5,670,243    3,056,844    18,456,113    9,161,066 
                     
Loss from operations   (1,516,882)   (475,208)   (5,859,845)   (2,064,853)
                     
Other income (expense)                    
Other expense, net   (280,340)   (120,025)   (580,900)   (421,192)
Recognition and change in fair value of warrant liabilities   7,919,315    -    32,398,530    - 
Total other income (expense)   7,638,975    (120,025)   31,817,630    (421,192)
                     
Net income (loss)  $6,122,093   $(595,233)  $25,957,785   $(2,486,045)
                     
Basic earnings (loss) per share  $ 0.35   $(0.05)  $ 1.10   $(0.25)
Diluted earnings (loss) per share  $ (0.10)  $(0.05)  $ (0.78)  $(0.25)
Weighted average number of shares outstanding - Basic   17,424,267    10,944,439    17,320,146    9,809,092 
Weighted average number of shares outstanding - Diluted   17,424,267    10,944,439    17,320,146    9,809,092 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

4
 

 

Reliance Global Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

 

   Shares   Amount   Shares   Amount   Shares   Amount   capital   Receivable   Deficit   Total 
   Reliance Global Group, Inc. 
   Preferred stock   Common stock   Common stock issuable   Additional paid-in   Subscription   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   capital   Receivable   Deficit   Total 
                                         
Balance, December 31, 2021   -   $-    10,956,109   $940,829    -   $-   $26,451,187   $(20,000,000)  $(33,458,145)  $(26,066,129)
                                                   
Share based compensation   -    -    -    -    -    -    739,960    -    -    739,960 
                                                   
Shares issued due to private placement   9,076    781    2,670,892    229,694    -    -    (230,424)   20,000,000    -    20,000,051 
                                                   
Shares issued pursuant to acquisition of Medigap   -    -    606,037    52,119    -    -    4,711,332    -    -    4,763,451 
                                                   
Exercise of Series A warrants   -    -    375,000    32,250    -    -    2,442,750    -    -    2,475,000 
                                                   
Issuance of prefunded Series C Warrants in exchange for common shares   -    -    (3,276,929)   (281,815)   -    -    281,815    -    -    - 
                                                   
Shares issued for vested stock awards   -    -    6,000    516    -    -    (516)   -    -    - 
                                                   
Net Income   -    -    -    -    -    -    -    -    9,340,000    9,340,000 
                                                   
Balance, March 31, 2022   9,076   $781    11,337,109   $973,593    -   $-   $34,396,104   $-   $(24,118,145)  $11,252,333 
                                                   
Share based compensation   -    -    -    -    -    -    179,083    -    -    179,083 
                                                   
Issuance of common stock for conversion of Series C warrants    -    -    3,276,929    281,815    -    -    (280,479)   -    -    1,336 
                                                   
Net Income   -    -    -    -    -    -    -    -    10,495,691    10,495,691 
                                                   
Balance, June 30, 2022   9,076   $781    14,614,038   $1,255,408    -   $-   $34,294,708   $-   $(13,622,454)  $21,928,443 
                                                   
Share based compensation   -    -    -    -    -    -    314,257    -    -    314,257 
                                                   
Issuance of common stock for conversion of Series D warrants   -    -    1,221,347    105,100    -    -    (104,305)   -    -    795 
                                                   
Shares issued due to conversion of preferred stock   (9,076)   (781)   2,219,084    190,850    -    -    (190,069)   -    -    - 
                                                   
Net Income   -    -    -    -    -    -    -    -    6,122,093    6,122,093 
                                                   
Balance, September 30, 2022   -   $-   18,054,469   $1,551,358       -   $     -   $34,314,591   $-   $(7,500,361)  $28,365,588

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

5
 

 

Reliance Global Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

 

   Shares   Amount   Shares   Amount   Shares   Amount   capital   Deficit   Total 
   Reliance Global Group, Inc. 
   Preferred stock   Common stock   Common stock issuable   Additional paid-in   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   capital   Deficit   Total 
Balance, December 31, 2020   395,640   $33,912    4,241,028   $363,517    23,341   $340,000   $11,559,239 - $(12,359,680)  $(63,012

)

                                              
Share based compensation   -    -    -    -    -    -    246,966    -    246,966 
                                              
Shares issued for services   -    -    15,000    1,290    -    -    89,760    -    91,050 
                                              
Shares issued due to public offering, net of offering costs of $1,672,852   -    -    1,800,000    154,800    -    -    8,954,348    -    9,109,148 
                                              
Over-allotment shares from offering, net of offering costs of $250,928   -    -    270,000    23,220    -    -    1,343,153    -    1,366,373 
                                              
Warrants sold during public offering at quoted price   -    -    -         -    -    20,700    -    20,700 
                                              
Shares issued due to conversion of preferred stock   (394,493)   (33,812)   3,944,930    339,264    -    -    (305,452)   -    - 
                                              
Shares issued due to conversion of debt   -    -    633,333    54,467    -    -    3,745,533    -    3,800,000 
                                              
Rounding shares related to initial public offering   -    -    1,885    -    (3)   -    -    -    - 
                                              
Shares issued pursuant to software purchase   -    -    23,338    1,984    (23,338)   (340,000)   338,016    -    - 
                                              
Net loss   -    -    -    -    -    -    - -  (613,926)   (613,926)
                                              
Balance, March 31, 2021   1,147   $100    10,929,514   $938,542    -   $-   $25,992,263 - $(12,973,606)  $13,957,299 
                                              
Share based compensation   -    -    -    -    -    -    183,132    -    183,132 
                                              
Rounding shares related to initial public offering   20    -    -    -    -    -    -    -    - 
                                              
Shares issued pursuant to acquisition of Kush   -    -    14,925    1,284    -    -    48,716    -    50,000 
                                              
Net loss   -    -    -    -    -    -    - -  (1,276,886)   (1,276,886)
                                              
Balance, June 30, 2021   1,167   $100    10,944,439   $939,826    -   $-   $

26,224,111

 - $(14,250,492)  $

12,913,545

 
                                              
Share based compensation   -    -    -    -    -    -    146,225    -    146,225 
                                              
Rounding shares related to initial public offering   -    -    -    -    -    -    -    -    - 
                                              
Shares issued pursuant to acquisition of Kush   -    -    -    -    -    -    -    -    - 
                                              
Net loss   -    -    -    -    -    -    - -  (595,233)   (595,233)
                                              
Balance, September 30, 2021   1,167   $100    10,944,439   $939,826    -   $-   $26,370,336 - $(14,845,725)  $12,464,537 

 

The accompanying notes are an integral p9rt of these condensed consolidated financial statements

 

6
 

 

Reliance Global Group, Inc. and Subsidiaries and Predecessor

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   2022   2021 
  

Nine months ended

September 30,

 
   2022   2021 
Cash flows from operating activities:          
Net income (loss)  $25,957,785   $(2,486,045)
Adjustment to reconcile net income (loss) to net cash used in operating activities:          
Depreciation and amortization   2,077,372    1,090,183 
Amortization of debt issuance costs and accretion of debt discount   28,702    37,822 
Non-cash lease expense   30,451    2,331 
Stock compensation expense   1,233,300    667,373 
Earn-out fair value and write-off adjustments   132,445   - 
Recognition and change in fair value of warrant liabilities   (32,398,530)   - 
Change in operating assets and liabilities:          
Accounts payables and other accrued liabilities   (1,541,037)   (314,045)
Accounts receivable   92,297    (87,058)
Accounts receivable, related parties   5,972    (7,131)
Other receivables   (37,674)   3,825 
Other payables   34,841    (112) 
Charge back reserve   (133,940)   - 
Other non-current assets   (6,492)   (14,992)
Prepaid expense and other current assets   2,346,510    (196,471)
Net cash used in operating activities   (2,177,998)   (1,304,320)
           
Cash flows from investing activities:          
Purchase of property and equipment   (67,906)   (24,257)
Business acquisitions, net of cash acquired   (24,138,750)   (1,608,586)
Purchase of intangibles   (775,953)   (331,054)
Net cash used in investing activities   (24,982,609)   (1,963,897)
           
Cash flows from financing activities: