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STRATEGIC INVESTMENTS AND BUSINESS COMBINATIONS | 3 Months Ended
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Mar. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
STRATEGIC INVESTMENTS AND BUSINESS COMBINATIONS | NOTE 3. STRATEGIC INVESTMENTS AND BUSINESS COMBINATIONS As of March 31, 2022, we have acquired nine insurance brokerages (see table below), including both acquisitions of affiliated companies (i.e., owned by Reliance Holdings before the acquisition) and unaffiliated companies. As our acquisition strategy continues, our reach within the insurance arena can provide us with the ability to offer lower rates, which could boost our competitive position within the industry.
Acquired |  | Date |  | Location |  | Line of Business |  | Status
U.S. Benefits Alliance, LLC (USBA) |  | October 24, 2018 |  | Michigan |  | Health Insurance |  | Affiliated
Employee Benefit Solutions, LLC (EBS) |  | October 24, 2018 |  | Michigan |  | Health Insurance |  | Affiliated
Commercial Solutions of Insurance Agency, LLC (CCS or Commercial Solutions) |  | December 1, 2018 |  | New Jersey |  | P&C – Trucking Industry |  | Unaffiliated
Southwestern Montana Insurance Center, Inc. (Southwestern Montana or Montana) |  | April 1, 2019 |  | Montana |  | Group Health Insurance |  | Unaffiliated
Fortman Insurance Agency, LLC (Fortman or Fortman Insurance) |  | May 1, 2019 |  | Ohio |  | P&C and Health Insurance |  | Unaffiliated
Altruis Benefits Consultants, Inc. (Altruis) |  | September 1, 2019 |  | Michigan |  | Health Insurance |  | Unaffiliated
UIS Agency, LLC (UIS) |  | August 17, 2020 |  | New York |  | Health Insurance |  | Unaffiliated
J.P. Kush and Associates, Inc. (Kush) |  | May 1, 2021 |  | Michigan |  | Health Insurance |  | Unaffiliated
Medigap Healthcare Insurance Company, LLC (Medigap) |  | January 10, 2022 |  | Florida |  | Health Insurance |  | Unaffiliated
J.P. Kush and Associates, Inc. Transaction On May 1, 2021, the Company entered into a Purchase Agreement with J.P. Kush and Associates, Inc. whereby the Company shall purchase the business and certain assets noted within the Purchase Agreement (the “Kush Acquisition”) for a total purchase price of $3,644,166. The purchase price was paid with a cash payment of $1,900,000, $50,000 in restricted shares of the Company’s common stock, in a transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and an earn-out payment. The Kush Acquisition was accounted for as a business combination in accordance with the acquisition method under the guidance in ASC 805-10 and 805-20. Accordingly, the total purchase consideration was allocated to intangible assets acquired based on their respective estimated fair values. The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their fair values as of the acquisition date. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing. The allocation of the purchase price in connection with the Kush Acquisition was calculated as follows: SCHEDULE OF ALLOCATION OF PURCHASE PRICE
Description |  | Fair Value |  |  | Weighted Average Useful Life (Years)
Accounts receivable |  | $ | 291,414 |  |  |
Trade name and trademarks |  |  | 685,400 |  |  | 5
Customer relationships |  |  | 551,000 |  |  | 10
Non-competition agreements |  |  | 827,800 |  |  | 5
Goodwill |  |  | 1,288,552 |  |  | Indefinite
Purchase consideration allocated |  | $ | 3,644,166 |  |  |
Goodwill of $1,288,552 arising from the Kush Acquisition consisted of the value of the employee workforce and the residual value after all identifiable intangible assets were valued. Goodwill recognized pursuant to the Kush Acquisition is currently expected to be deductible for income tax purposes. Total acquisition costs for the Kush Acquisition incurred were $58,092 recorded as a component of General and administrative expenses. The approximate revenue and net profit for the acquired business as a standalone entity per ASC 805 from January 1, 2021 to April 30, 2021 was $500,000 and $219,097, respectively. Pro Forma Information The results of operations of J.P. Kush and Associates, Inc. will be included in the Company’s consolidated financial statements as of the date of acquisition through the current period end. The following supplemental approximate pro forma combined financial information assumes that the acquisition had occurred at the beginning of the three months ended March 31, 2021: SCHEDULE OF PRO FORMA INFORMATION RELATED TO ACQUISITION
|  |  | March 31, |
|  | 2021 |
Revenue |  | $ | 2,695,843 |
Net Income (Loss) |  | $ | (450,868 | )
Earnings (Loss) per common share, basic |  | $ | (0.90 | )
Earnings (Loss) per common share, diluted |  | $ | (0.90 | )
Medigap Healthcare Insurance Company, LLC Transaction On January 10, 2022, the Company completed the acquisition of all assets of 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 $20,096,250 consisting of payment to Medigap of (i) $18,138,750 in cash and (ii) issuing to seller 40,402 shares of the Company’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. The acquisition of Medigap was accounted for as a business combination in accordance with the acquisition method pursuant to FASB Topic No. 805, Business Combination (ASC 805). Accordingly, the total purchase consideration was allocated to the assets acquired, and liabilities assumed based on their respective estimated fair values. The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their fair values as of the acquisition date. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing. The preliminary allocation of the purchase price in connection with the acquisition of Medigap was calculated as follows: SCHEDULE OF ALLOCATION OF PURCHASE PRICE
Description |  | Fair Value |  |  | Weighted Average Useful Life (Years)
Property, plant and equipment |  | $ | 20,666 |  |  | 5
Right-of-use asset |  |  | 317,787 |  |  |
Trade names |  |  | 340,000 |  |  | 15
Customer relationships |  |  | 4,550,000 |  |  | 12
Technology |  |  | 67,000 |  |  | 3
Backlog |  |  | 210,000 |  |  | 1
Chargeback reserve |  |  | (1,484,473 | ) |  |
Lease liability |  |  | (317,787 | ) |  |
Goodwill |  |  | 19,199,008 |  |  | Indefinite
|  | $ | 22,902,201 |  |  |
Trade name was measured at fair value using the relief-from-royalty method under the income approach. Significant inputs used to measure the fair value include an estimate of projected revenue from the trade name, a pre-tax royalty rate of 0.5% and a discount rate of 11.0%. Customer relationships were measured at fair value using the multiple-period excess earnings method under the income approach. Significant inputs used to measure the fair value include an estimate of projected revenue and costs associated with existing customers, and a discount rate of 11.0%. Technology was measured at fair value using the cost replacement method of the cost approach. Significant inputs used to measure the fair value include an estimate of cost to replace, an obsolescence rate of 40.3%. The value assigned to backlog acquired was estimated based upon the contractual nature of the backlog as of the acquisition date, using the income approach to discount back to present value the cash flows attributable to the backlog, using a discount rate of 11.0%. Goodwill of $19,199,008 arising from the acquisition of Medigap consisted of the value of the employee workforce and the residual value after all identifiable intangible assets were valued. Goodwill recognized pursuant to the acquisition of Medigap is currently expected to be deductible for income tax purposes. Total acquisition costs for the acquisition of Medigap incurred were $94,065 recorded as a component of General and administrative expenses. The approximate revenue and net profit or loss for the acquired business as a standalone entity per ASC 805 from January 10, 2022 to March 31, 2022 was $1,177,000 and a loss of $148,000, respectively. Pro Forma Information The results of operations of Medigap will be included in the Company’s consolidated financial statements as of the date of acquisition through the current period end. The following supplemental pro forma approximate combined financial information assumes that the acquisition had occurred at the beginning of the three months ended March 31, 2022 and 2021: SCHEDULE OF PRO FORMA INFORMATION RELATED TO ACQUISITION
|  |  | March 31, |  |  |  | March 31, |
|  | 2022 |  |  | 2021 |
Revenue |  | $ | 4,659,451 |  |  | $ | 3,602,106 |
Net Income (Loss) |  | $ | 9,355,584 |  |  | $ | (566,903 | )
Earnings (Loss) per common share, basic |  | $ | 7.65 |  |  | $ | 1.2 | )
Earnings (Loss) per common share, diluted |  | $ | 1.80 |  |  | $ | 1.2 | )

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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