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SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended
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Jun. 30, 2022
Accounting Policies [Abstract] |
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Reliance Global Group, Inc., formerly known as Ethos Media Network, Inc. (“RELI”, “Reliance”, or the “Company”) incorporated in Florida on August 2, 2013. Basis of Presentation and Principles of Consolidation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of recurring accruals) necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto, set forth in the Company’s annual report on Form 10-K for the year ended December 31, 2021. The accompanying unaudited condensed consolidated financial statements include the accounts of Reliance Global Group, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Restatement of Previously Issued Financial Statements Subsequent to the Company’s filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, with the Securities and Exchange Commission on August 15, 2022, the Company performed an evaluation of its accounting in connection with the calculations of its basic Earnings Per Share (“EPS”) and diluted EPS for the three and six month periods ended June 30, 2022, which concluded on May 12, 2023, and identified errors in such calculations. The errors resulted from improper application of sequencing rules, a miscalculation of the numerator used in the determination of diluted EPS, and a miscalculation of the denominator used in the determination of weighted average shares outstanding for both basic EPS and diluted EPS, and the Company determined that the errors required adjustments of the previously issued financial statements for the three and six months ended June 30, 2022. Accordingly, the Company restates its consolidated financial statements for the identified periods in this Form 10-Q/A as outlined further below and in Note 7 Earnings (Loss) Per Share. The following table sets forth the effects of the adjustments on affected items within the Company’s previously reported consolidated statements of operations for the three months ended June 30, 2022, and includes an increase to basic earnings per share in the amount of $1.42, an increase to diluted earnings per share in the amount of $10.11, a decrease to weighted average number of shares outstanding – basic of 180,062 shares, and a decrease to weighted average number of shares outstanding - diluted of 180,062 shares. SCHEDULE OF PREVIOUSLY REPORTED CONSOLIDATED STATEMENTS OF OPERATIONS
|  | Three Months Ended June 30, 2022 |
|  | As Reported |  |  | Adjustment |  |  | As Corrected |
Basic earnings (loss) per share |  |  | 8.40 |  |  |  | 1.42 |  |  |  | 9.82 |
Diluted earnings (loss) per share |  |  | (1.50 | ) |  |  | 10.11 |  |  |  | 8.61 |
Weighted average number of shares outstanding – Basic |  |  | 1,249,219 |  |  |  | (180,062 | ) |  |  | 1,069,157 |
Weighted average number of shares outstanding - Diluted |  |  | 1,399,286 |  |  |  | (180,062 | ) |  |  | 1,219,224 |
The following table sets forth the effects of the adjustments on affected items within the Company’s previously reported consolidated statements of operations for the six months ended June 30, 2022, and includes an increase to basic earnings per share in the amount of $1.34, an increase to diluted loss per share in the amount of $3.99, a decrease to weighted average number of shares outstanding – basic of 124,111 shares, and a decrease to weighted average number of shares outstanding - diluted of 274,080 shares.
|  | Six Months Ended June 30, 2022 |
|  | As Reported |  |  | Adjustment |  |  | As Corrected |
Basic earnings (loss) per share |  |  | 11.25 |  |  |  | 1.34 |  |  |  | 12.59 |
Diluted earnings (loss) per share |  |  | (8.85 | ) |  |  | (3.99 | ) |  |  | (12.84 | )
Weighted average number of shares outstanding – Basic |  |  | 1,149,219 |  |  |  | (124,111 | ) |  |  | 1,025,108 |
Weighted average number of shares outstanding - Diluted |  |  | 1,342,315 |  |  |  | (274,080 | ) |  |  | 1,068,236 |
Additionally, please refer to Note 7. Earnings (Loss) Per Share, where the Company has corrected and replaced that Note in its entirety. Liquidity As of June 30, 2022, the Company’s reported cash and restricted cash aggregated balance was approximately $4,397,000, current assets were approximately $6,101,000, while current liabilities were approximately $9,470,000. As of June 30, 2022, the Company had a working capital deficit of approximately $3,369,000 and stockholders’ equity of approximately $21,928,000. For the six months ended June 30, 2022, the Company reported loss from operations of approximately $4,343,000, a non-cash, non-operating gain on the recognition and change in fair value of warrant liabilities of approximately $24,479,000, resulting in an overall net income of approximately $19,836,000. For the six months ended June 30, 2022, the Company reported negative cash flows from operations of approximately $1,311,000. The Company completed a capital offering in January 2022 that raised net proceeds of approximately $17,853,000. Management believes the Company’s financial position and its ability to raise capital to be reasonable and sufficient. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates. Cash and Restricted Cash Cash and restricted cash reported on our Condensed Consolidated Balance Sheets are reconciled to the total shown on our Condensed Consolidated Statements of Cash Flows as follows: SCHEDULE OF RESTRICTED CASH IN STATEMENT OF CASH FLOW
|  | June 30, 2022 |  |  | June 30, 2021 |
Cash |  | $ | 2,979,769 |  |  | $ | 6,348,415 |
Restricted cash |  |  | 1,417,635 |  |  |  | 484,350 |
Total cash and restricted cash |  | $ | 4,397,404 |  |  | $ | 6,832,765 |
Fair Value of Financial Instruments Level 1 — Observable inputs reflecting quoted prices (unadjusted) in active markets for identical assets and liabilities; Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and Level 3 — Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk. Warrant Liabilities: The Company re-measures fair value of its Level 3 warrant liabilities at the balance sheet date, using a binomial option pricing model. The following summarizes the significant unobservable inputs not adjusting for any reverse stock splits: SCHEDULE OF FAIR VALUE OF WARRANT COMMITMENT
|  | June 30, 2022 |  |  | December 31, 2021 |
Stock price |  | $ | 2.11 |  |  | $ | 6.44 |
Volatility |  |  | 105 | % |  |  | 90 | %
Time to expiry |  |  | 4.51 |  |  |  | 5 |
Dividend yield |  |  | 0 | % |  |  | 0 | %
Risk free rate |  |  | 3.00 | % |  |  | 1.10 | %
The following reconciles fair value of the liability classified warrants: SCHEDULE OF RECONCILES WARRANT COMMITMENT
|  |  | Series B Warrant Commitment |  |  |  | Series B warrant liabilities |  |  |  | Placement agent warrants |  |  | Total |
|  | Three and Six Months ended June 30, 2022 |
|  | Series B Warrant Commitment |  |  | Series B warrant liabilities |  |  | Placement agent warrants |  |  | Total |
Beginning balance |  | $ | 37,652,808 |  |  | $ | - |  |  | $ | - |  |  | $ | 37,652,808 |
Initial recognition |  |  | - |  |  |  | 55,061,119 |  |  |  | 1,525,923 |  |  |  | 56,587,042 |
Unrealized (gain) loss |  |  | 17,408,311 |  |  |  | (31,980,437 | ) |  |  | (946,461 | ) |  |  | (15,518,587 | )
Warrants exercised or transferred |  |  | (55,061,119 | ) |  |  |  |  |  |  |  |  |  |  | (55,061,119 | )
Ending balance, March 31, 2022 |  | $ | - |  |  | $ | 23,080,682 |  |  | $ | 579,462 |  |  | $ | 23,660,144 |
Unrealized gain |  |  | - |  |  |  | (12,322,737 | ) |  |  | (310,514 | ) |  |  | (12,633,251 | )
Ending balance, June 30, 2022 |  |  | - |  |  |  | 10,757,945 |  |  |  | 268,948 |  |  |  | 11,026,893 |
|  |  | Series B Warrant Commitment |  |  |  | Total |
|  | December 31, 2021 |
|  | Series B Warrant Commitment |  |  | Total |
Beginning balance |  | $ | - |  |  | $ | - |
Initial recognition |  |  | 20,244,497 |  |  |  | 20,244,497 |
Unrealized gain |  |  | 17,408,311 |  |  |  | 17,408,311 |
Ending balance |  | $ | 37,652,808 |  |  | $ | 37,652,808 |
Earn-out liabilities: The Company generally values its Level 3 earn-out liabilities using the income valuation approach. Key valuation inputs include contingent payment arrangement terms, projected revenues and cash flows, rate of return, and probability assessments. The following table summarizes the significant unobservable inputs used in the fair value measurements: SCHEDULE OF FAIR VALUE MEASUREMENTS
|  | June 30, 2022 |  |  | December 31, 2021 |
Valuation technique |  |  | Discounted cash flow |  |  |  | Discounted cash flow |
Significant unobservable input |  |  | Projected revenue and probability of achievement |  |  |  | Projected revenue and probability of achievement |
The Company values its Level 3 earn-out liability related to the Barra Acquisition using a Monte Carlo simulation in a risk-neutral framework (a special case of the Income Approach). The following summarizes the significant unobservable inputs: SCHEDULE OF EARN OUT LIABILITY
|  | June 30, 2022 |
WACC Risk Premium: |  |  | 14.6 | %
Volatility |  |  | 50 | %
Credit Spread: |  |  | 11 | %
Payment Delay (days) |  |  | 90 | %
Risk free rate |  |  | USD Yield Curve |
Discounting Convention: |  |  | Mid-period |
Number of Iterations |  |  | 100,000 |
Undiscounted remaining earn out payments are approximately $4,697,644 as of June 30, 2022. The following table reconciles fair value of earn-out liabilities for the period ending June 30, 2022: SCHEDULE OF GAIN OR LOSSES RECOGNIZED FAIR VALUE
|  | June 30, 2022 |  |  | December 31, 2021 |
Beginning balance – January 1 |  | $ | 3,813,878 |  |  | $ | 2,931,418 |
Acquisitions and Settlements |  |  |  |  |  |  |  |
JP Kush Acquisition |  |  | - |  |  |  | 1,694,166 |
Barra Acquisition |  |  | 600,000 |  |  |  | - |
CCS Write-off |  |  | - |  |  |  | (81,368 | )
Altruis partial settlement |  |  | (84,473 | ) |  |  | (452,236 | )
Montana final settlement |  |  | (326,935 | ) |  |  | - |
Period adjustments: |  |  |  |  |  |  |  |
Fair value changes and accretion included in earnings* |  |  | 354,963 |  |  |  | (278,102 | )
Ending balance |  | $ | 4,357,433 |  |  | $ | 3,813,878 |
Less: Current portion |  |  | (3,683,596 | ) |  |  | (3,297,855 | )
Ending balance, less current portion |  |  | 673,837 |  |  |  | 516,023 |
* | Recorded as a reduction to general and administrative expenses
Revenue Recognition The following table disaggregates the Company’s revenue by line of business, showing commissions earned: SCHEDULE OF DISAGGREGATION REVENUE
Three Months ended June 30, 2022 |  | Medical/Life |  |  | Property and Casualty |  |  | Total |
Regular |  |  |  |  |  |  |  |  |  |  |  |
EBS |  | $ | 184,851 |  |  | $ | - |  |  | $ | 184,851 |
USBA |  |  | 12,319 |  |  |  | - |  |  |  | 12,319 |
CCS/UIS |  |  | - |  |  |  | 57,195 |  |  |  | 57,195 |
Montana |  |  | 451,705 |  |  |  | - |  |  |  | 451,705 |
Fortman |  |  | 357,334 |  |  |  | 205,804 |  |  |  | 563,138 |
Altruis |  |  | 882,171 |  |  |  | - |  |  |  | 882,171 |
Kush |  |  | 425,449 |  |  |  | - |  |  |  | 425,449 |
Medigap |  |  | 1,359,976 |  |  |  | - |  |  |  | 1,359,976 |
Barra |  |  | 69,925 |  |  |  | 200,397 |  |  |  | 270,322 |
|  | $ | 3,743,730 |  |  | $ | 463,396 |  |  | $ | 4,207,126 |
Six Months ended June 30, 2022 |  | Medical/Life |  |  | Property and Casualty |  |  | Total |
Regular |  |  |  |  |  |  |  |  |  |  |  |
EBS |  | $ | 406,035 |  |  | $ | - |  |  | $ | 406,035 |
USBA |  |  | 25,906 |  |  |  | - |  |  |  | 25,906 |
CCS/UIS |  |  | - |  |  |  | 101,077 |  |  |  | 101,077 |
Montana |  |  | 958,426 |  |  |  | - |  |  |  | 958,426 |
Fortman |  |  | 689,933 |  |  |  | 403,064 |  |  |  | 1,092,997 |
Altruis |  |  | 2,187,043 |  |  |  | - |  |  |  | 2,187,043 |
Kush |  |  | 864,040 |  |  |  | - |  |  |  | 864,040 |
Medigap |  |  | 2,537,061 |  |  |  | - |  |  |  | 2,537,061 |
Barra |  |  | 69,925 |  |  |  | 200,397 |  |  |  | 270,322 |
|  | $ | 7,738,369 |  |  | $ | 704,538 |  |  | $ | 8,442,907 |
Three Months ended June 30, 2021 |  | Medical/Life |  |  | Property and Casualty |  |  | Total |
Regular |  |  |  |  |  |  |  |  |  |  |  |
EBS |  |  | 207,201 |  |  |  | - |  |  |  | 207,201 |
USBA |  |  | 15,395 |  |  |  | - |  |  |  | 15,395 |
CCS/UIS |  |  | - |  |  |  | 65,348 |  |  |  | 65,348 |
Montana |  |  | 404,740 |  |  |  | - |  |  |  | 404,740 |
Fortman |  |  | 276,634 |  |  |  | 226,337 |  |  |  | 502,971 |
Altruis |  |  | 729,874 |  |  |  | - |  |  |  | 729,874 |
Kush |  |  | 265,318 |  |  |  | - |  |  |  | 265,318 |
|  | $ | 1,899,162 |  |  | $ | 291,685 |  |  | $ | 2,190,847 |
Six Months ended June 30, 2021 |  | Medical/Life |  |  | Property and Casualty |  |  | Total |
Regular |  |  |  |  |  |  |  |  |  |  |  |
EBS |  | $ | 416,195 |  |  | $ | - |  |  | $ | 416,195 |
USBA |  |  | 27,620 |  |  |  | - |  |  |  | 27,620 |
CCS/UIS |  |  | - |  |  |  | 154,166 |  |  |  | 154,166 |
Montana |  |  | 939,856 |  |  |  | - |  |  |  | 939,856 |
Fortman |  |  | 526,435 |  |  |  | 434,109 |  |  |  | 960,544 |
Altruis |  |  | 1,750,878 |  |  |  | - |  |  |  | 1,750,878 |
Kush |  |  | 265,318 |  |  |  | - |  |  |  | 265,318 |
|  | $ | 3,926,302 |  |  | $ | 588,275 |  |  | $ | 4,514,577 |
The following, are customers representing 10% or more of total revenue: SCHEDULE OF CONCENTRATIONS OF REVENUES
Insurance Carrier |  | 2022 |  |  | 2021 |
|  | For the three months ended June 30, |
Insurance Carrier |  | 2022 |  |  | 2021 |
LTC Global |  |  | 30 | % |  |  | - | %
Priority Health |  |  | 20 | % |  |  | 31 | %
BlueCross BlueShield |  |  | - | % |  |  | 28 | %
Insurance Carrier |  | 2022 |  |  | 2021 |
|  | For the six months ended June 30, |
Insurance Carrier |  | 2022 |  |  | 2021 |
BlueCross BlueShield |  |  | 10 | % |  |  | 25 | %
Priority Health |  |  | 25 | % |  |  | 33 | %
LTC Global |  |  | 28 | % |  |  | - | %
No other single Customer accounted for more than 10% of the Company’s commission revenues. The loss of any significant customer, including Priority Health, BlueCross BlueShield and LTC Global could have a material adverse effect on the Company. Income Taxes The Company recorded no income tax expense for the three and six months ended June 30, 2022 and 2021 because the estimated annual effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives. As of June 30, 2022 and December 31, 2021, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized. Prior Period Adjustments The Company identified certain immaterial adjustments impacting prior reporting periods. Specifically, the Company identified adjustments to correct certain asset, liability and equity accounts in relation to historical purchase price allocation accounting, historical accrued revenues and true ups of the common stock issuable account. The Company assessed the materiality of the adjustments to prior period financial statements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. (SAB) 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and ASC 250, Accounting Changes and Error Corrections. Accordingly, the Company’s comparative condensed consolidated financial statements and impacted notes have been revised from amounts previously reported to reflect these adjustments. The following table illustrates the impact on previously reported amounts and adjusted balances presented in the condensed consolidated financial statements for the period ended June 30, 2022. SUMMARIZES THE CHANGES TO THE PREVIOUSLY ISSUED FINANCIAL INFORMATION
Account |  | 12/31/2020 As reported |  |  | Adjustment |  |  | 12/31/2020 Adjusted |
Earn-out liability |  |  | 2,631,418 |  |  |  | 300,000 |  |  |  | 2,931,418 |
Goodwill |  |  | 9,265,070 |  |  |  | (503,345 | ) |  |  | 8,761,725 |
Common stock issuable |  |  | 822,116 |  |  |  | (482,116 | ) |  |  | 340,000 |
Additional paid-in-capital |  |  | 11,377,123 |  |  |  | 182,116 |  |  |  | 11,559,239 |
Accumulated Deficit |  |  | (12,482,281 | ) |  |  | 122,601 |  |  |  | (12,359,680 | )
Account |  | 3/31/2021 As reported |  |  | Adjustment |  |  | 3/31/2021 Adjusted |
Common stock issuable |  |  | 482,116 |  |  |  | (482,116 | ) |  |  | 0 |
Additional paid-in-capital |  |  | 25,810,147 |  |  |  | 182,116 |  |  |  | 25,992,263 |
Accumulated Deficit |  |  | (13,123,609 | ) |  |  | 150,003 |  |  |  | (12,973,606 | )
Recently Issued Accounting Pronouncements We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements.

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