Reliance Global Group Inc.

07/25/2024 | Press release | Distributed by Public on 07/25/2024 14:11

Quarterly Report for Quarter Ending June 30, 2024 (Form 10-Q)

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 June 30, 2024

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: 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 No.)

300 Blvd. of the Americas, Suite 105 Lakewood, NJ08701

(Address of principal executive offices) (Zip Code)

732-380-4600

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 NasdaqCapital Market
Series A Warrants RELIW The NasdaqCapital 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 Rule 12b-2 of the Act).

Yes ☐ No

At July 25, 2024, the registrant had 1,239,407shares of common stock, par value $0.086per 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. 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 26
Item 4. Controls and Procedures. 26
PART II
Item 1. Legal Proceedings. 27
Item 1A. Risk Factors. 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 27
Item 3. Defaults Upon Senior Securities. 28
Item 4. Mine Safety Disclosures. 28
Item 5. Other Information. 28
Item 6. Exhibits 28
2

Reliance Global Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

June 30, December 31,
2024 2023
Assets
Current assets:
Cash $ 1,405,824 $ 1,329,016
Restricted cash 1,409,787 1,409,895
Accounts receivable 945,823 1,298,863
Accounts receivable, related parties 7,451 6,603
Other receivables 167,292 899
Prepaid expense and other current assets 385,987 333,756
Total current assets 4,322,164 4,379,032
Property and equipment, net 140,483 139,999
Right-of-use assets 1,013,703 739,830
Intangibles, net 6,152,752 11,042,757
Goodwill 6,693,099 6,693,099
Other non-current assets 21,791 20,292
Total assets $ 18,343,992 $ 23,015,009
Current liabilities:
Accounts payable and other accrued liabilities $ 1,420,697 $ 835,483
Short term financing agreements 108,525 56,197
Current portion of loans payables, related parties 443,853 454,953
Other payables 14,434 7,414
Current portion of long-term debt 1,471,233 1,390,766
Current portion of leases payable 263,369 285,171
Earn-out liability, current portion - 159,867
Total current liabilities 3,722,111 3,189,851
Loans payable, related parties, less current portion 660,875 897,529
Long term debt, less current portion 10,289,853 11,026,971
Leases payable, less current portion 781,586 484,335
Warrant liabilities 326 268,993
Total liabilities 15,454,751 15,867,679
Stockholders' equity:
Preferred stock, $0.086par value; 750,000,000shares authorized and 0issued and outstanding as of June 30, 2024 and December 31, 2023, respectively - -
Common stock, $0.086par value; 117,647,059shares authorized and 1,037,027and 280,117issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 89,184 24,089
Additional paid-in capital 48,638,079 46,125,206
Accumulated deficit (45,838,022 ) (39,001,965 )
Total stockholders' equity 2,889,241 7,147,330
Total liabilities and stockholders' equity $ 18,343,992 $ 23,015,009

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

3

Reliance Global Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2024 2023 2024 2023
Revenue
Commission income $ 3,233,342 $ 3,195,905 $ 7,315,780 $ 7,135,008
Total revenue 3,233,342 3,195,905 7,315,780 7,135,008
Operating expenses
Commission expense 886,364 829,274 2,162,905 1,912,600
Salaries and wages 1,955,152 1,771,064 3,786,814 3,526,957
General and administrative expenses 991,633 1,125,211 2,366,523 1,962,978
Marketing and advertising 76,983 109,860 204,025 246,432
Change in estimated acquisition earn-out payables - 543,233 47,761 1,019,925
Depreciation and amortization 469,788 655,449 1,003,941 1,309,227
Asset impairments - - 3,922,110 -
Total operating expenses 4,379,920 5,034,091 13,494,079 9,978,119
Loss from operations (1,146,578 ) (1,838,186 ) (6,178,299 ) (2,843,111 )
Other (expense) income
Interest expense (365,970 ) (370,905 ) (735,646 ) (722,462 )
Interest expense, related parties (37,525 ) (51,153 ) (78,134 ) (92,629 )
Other income (expense), net 11 (16,979 ) 22 (13,297 )
Recognition and change in fair value of warrant liabilities 60,667 (1,592,509 ) 156,000 2,673,723
Total other (expense) income (342,817 ) (2,031,546 ) (657,758 ) 1,845,335
Loss from continuing operations before tax (1,489,395 ) (3,869,732 ) (6,836,057 ) (997,776 )
Income (loss) from discontinued operations before tax - 2,814,445 - (1,846,048 )
Net loss $ (1,489,395 ) $ (1,055,287 ) $ (6,836,057 ) $ (2,843,824 )
Basic (loss) earnings per share
Continuing operations $ (2.76 ) $ (24.21 ) $ (14.77 ) $ (7.93 )
Discontinued operations $ - $ 17.61 $ - $ (14.68 )
Basic (loss) earnings per share $ (2.76 ) $ (6.60 ) $ (14.77 ) $ (22.61 )
Diluted (loss) earnings per share
Continuing operations $ (2.76 ) $ (24.21 ) $ (14.77

)

$ (7.93 )
Discontinued operations $ - $ 17.61 $ - $ (14.68 )
Diluted (loss) earnings per share $ (2.76 ) $ (6.60 ) $ (14.77 ) $ (22.61 )
Weighted average number of shares outstanding - Basic 539,133 159,795 462,773 125,791
Weighted average number of shares outstanding - Diluted 539,133 159,795 462,773 125,791

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

4

Reliance Global Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

Common Stock

Additional

Paid-in

Accumulated
Shares Amount capital Deficit Total
Balance, December 31, 2023 280,117 $ 24,089 $ 46,125,206 $ (39,001,965 ) $ 7,147,330
Common share payments for earn-outs - 17,628 - 17,628
- -
Common shares issued for ATM share sales 11,036 949 123,699 124,648
-
Common shares issued for abeyance share conversions 42,545 3,659 (3,659 ) -
-
Common share-based compensation 1,149 99 18,466 - 18,565
Net loss - - - (5,346,663 ) (5,346,663 )
Balance, March 31, 2024 334,847 $ 28,796 $ 46,281,340 $ (44,348,628 ) $ 1,961,508
Common share payments for earn-outs 30,029 2,582 (2,582 ) - -
Common shares issued for ATM share sales 302,677 26,032 1,917,664 - 1,943,696
Common shares issued for abeyance share conversions 59,471 5,115 (5,115 ) - -
Common shares issued for Series B warrants 39,569 3,403 109,263 - 112,666
Common shares issued for Series G warrants 192,236 16,532 (16,532 ) - -
Common share-based compensation 60,373 5,192 240,574 - 245,766
Common shares issued for services 17,825 1,533 113,467 - 115,000
Net loss - - - (1,489,395 ) (1,489,395 )
Balance, June 30, 2024 1,037,027 $ 89,184 $ 48,638,079 $ (45,838,022 ) $ 2,889,241
5
Common Stock

Additional

Paid-in

Accumulated
Shares Amount Capital Deficit Total
Balance, December 31, 2022 71,740 $ 6,170 $ 35,896,852 $ (26,991,983 ) $ 8,911,039
Common share payments for earn-outs 6,433 553 981,925 - 982,478
Common share payments for related party convertible debt 3,926 338 644,662 - 645,000
Common shares issued for reverse stock split round up 902 77 (4,723 ) - (4,646 )
Common shares issued in 2023 private placement 9,120 784 3,445,700 - 3,446,484
Common share-based compensation - - 43,797 - 43,797
Net loss - - - (1,788,538 ) (1,788,538 )
Balance, March 31, 2023 92,121 $ 7,922 $ 41,008,213 $ (28,780,521 ) $ 12,235,614
Common shares issued for services 6,621 570 377,425 - 377,995
Common share payments for earn-outs 20,721 1,782 1,431,918 - 1,433,700
Common shares issued for vested stock awards 1,307 112 (112 ) - -
Common share-based compensation - - 35,367 - 35,367
Net loss - - - (1,055,287 ) (1,055,287 )
Balance, June 30, 2023 120,770 $ 10,387 $ 42,852,810 $ (29,835,808 ) $ 13,027,389

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

6

Reliance Global Group, Inc. and Subsidiaries and Predecessor

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended June 30,
2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,836,057 ) $ (2,843,824 )
Adjustment to reconcile net income to net cash used in operating activities:
Depreciation and amortization 1,003,941 1,309,227
Asset impairments 3,922,110 -
Amortization of debt issuance costs and accretion of debt discount 23,442 23,442
Non-cash lease expense (income) 1,574 (4,355 )
Equity based compensation expense 264,331 79,164
Equity based payments to service providers 224,477 377,995
Recognition and change in fair value of warrant liability (156,000 ) (2,673,723 )
Earn-out fair value and write-off adjustments 47,761 1,019,925
Change in operating assets and liabilities:
Accounts receivable 353,040 15,444
Accounts receivable, related parties (847 ) (1,072 )
Other receivables (166,393 ) 10,816
Prepaid expense and other current assets (161,708 ) (303,322 )
Other non-current assets (1,500 ) -
Accounts payables and other accrued liabilities 585,215 (40,135 )
Other payables 7,020 115,988
Net cash used in continuing operating activities (889,594 ) (2,914,430 )
Net cash adjustments for discontinued operating activities - 907,329
Total net cash used in continuing and discontinued operating activities (889,594 ) (2,007,101 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment in NSURE - 900,000
Purchase of property and equipment (15,397 ) (13,010 )
Purchase of intangibles (21,134 ) (151,862 )
Net cash (used in) provided by investing activities (36,531 ) 735,128
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments of debt (680,093 ) (450,935 )
Principal repayments of short-term financings (106,460 )
Proceeds from short-term financings 158,788 58,707
Payments of loans payable, related parties (437,754 ) (649,870 )
Proceeds from common shares issued through an at the market offering 2,068,344 -
Earn-out liability payments - (344,225 )
Proceeds from private placement of shares and warrants - 3,446,484
Net cash provided by continuing financing activities 1,002,825 2,060,161
Net cash used in discontinued financing activities - (17,701 )
Total net cash provided by continuing and discontinued financing activities 1,002,825 2,042,460
Net increase in cash and restricted cash 76,700 770,487
Cash and restricted cash at beginning of year 2,738,911 1,909,769
Cash and restricted cash at end of year $ 2,815,611 $ 2,680,256

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

7

Reliance Global Group, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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"), was 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 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, 2023 (the "Form 10-K"), as the same may be amended from time to time. Capitalized terms not defined in this Quarterly Report on Form 10-Q refer to capitalized terms as defined in the Form 10-K. Certain prior period accounts and balances in these unaudited condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period's presentation.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Liquidity

As of June 30, 2024, the Company's reported cash and restricted cash aggregated balance was approximately $2,816,000, current assets were approximately $4,322,000, and current liabilities were approximately $3,722,000. As of June 30, 2024, the Company had working capital of approximately $600,000and stockholders' equity of approximately $2,889,000. For the six months ended June 30, 2024, the Company had a loss from operations of approximately $6,178,000, which includes a non-cash asset impairment loss of approximately $3,922,000, and net loss of approximately $6,836,000. During the first quarter of 2024, the Company entered into an At Market Issuance Sales Agreement (the "ATM Agreement") with EF Hutton LLC (the "Agent"), pursuant to which the Company may offer and sell, from time to time, through the Agent, shares of its common stock having an approximate aggregate remaining offering price of up to $1,728,825as of the date of filing of this Quarterly Report on Form 10-Q.

Although there can be no assurance that debt or equity financing will be available on acceptable terms, or at all, the Company believes its financial position and its ability to raise capital to be reasonable and sufficient. Based on our assessment, we do not believe there are conditions or events that, in the aggregate, raise substantial doubt about the Company's ability to continue as a going concern within one year of filing these unaudited financial statements with the Securities and Exchange Commission ("SEC").

Use of Estimates

The preparation of financial statements in conformity with U.S. 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.

8

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:

June 30, 2024 June 30, 2023
Cash $ 1,405,824 $ 1,274,743
Restricted cash 1,409,787 1,405,513
Total cash and restricted cash $ 2,815,611 $ 2,680,256

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 the fair value of its material Level 3 warrant liabilities at the balance sheet date, or at interim dates as applicable for warrant exercise transactions that may occur, using a binomial option pricing model. The following summarizes the significant unobservable inputs for valuations occurring during the periods ended:

June 30, 2024 December 31, 2023
Stock price $ 3.74 $ 9.18
Volatility 135.00 % 110.00 %
Time to expiry 4.53 4.99
Dividend yield 0 % 0 %
Risk free rate 4.30 % 3.80 %

The following reconciles fair value of the liability classified warrants:

Series B

Warrant

Liabilities

Placement

Agent Warrants

Total
Beginning balance, December 31, 2023 $ 268,667 $ 326 $ 268,993
Unrealized gain (95,333 ) - (95,333 )
Warrants exercised or exchanged - - -
Ending balance, March 31, 2024 $ 173,334 $ 326 $ 173,660
Unrealized gain (60,667 ) - (60,667 )
Warrants exercised or exchanged (112,667 ) - (112,667 )
Ending balance, June 30, 2024 $ - $ 326 $ 326

Earn-out liabilities: The Company utilizes two valuation methods to value its Level 3 earn-out liabilities: (a) the income valuation approach, and (b) the Monte Carlo simulation method. Key valuation and unobservable inputs for the income valuation approach include contingent payment arrangement terms, projected revenues and cash flows, rates of return, discount rates and probability assessments.

9

The following table summarizes the significant unobservable inputs used in the fair value measurements:

June 30, 2024 December 31, 2023
Valuation technique N/A Discounted cash flow
Significant unobservable input N/A 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:

The following table reconciles fair value of earn-out liabilities for the periods ended June 30, 2024, and December 31, 2023:

June 30, 2024 December 31, 2023
Beginning balance - January 1 $ 159,867 $ 2,709,478
Acquisitions and settlements - (3,260,403 )
Period adjustments:
Fair value changes included in earnings* 47,761 1,716,873
Earn-out payable in common shares (17,628 ) (159,867 )
Earn-out transferred to loans payable, related parties - (846,214 )
Earn-out payments (190,000 ) -
Ending balance - 159,867
Less: Current portion - (159,867 )
Ending balance, less current portion $ - $ -
* Recorded in the change in estimated acquisition earn-out payables caption on the condensed consolidated statements of operations.

Revenue Recognition

The following table disaggregates the Company's revenue by line of business, showing commissions earned:

Three Months Ended June 30, 2024 Medical Life Property and Casualty Total
Three months ended June 30, 2024 $ 2,389,845 $ 38,744 $ 804,753 $ 3,233,342
Three months ended June 30, 2023 $ 2,526,713 $ 71,980 $ 597,212 $ 3,195,905
Six months ended June 30, 2024 $ 5,715,662 $ 94,961 $ 1,505,157 $ 7,315,780
Six months ended June 30, 2023 $ 5,822,458 $ 105,604 $ 1,206,946 $ 7,135,008

The following are customers representing 10% or more of total revenue:

Three Months Ended June 30,
Insurance Carrier 2024 2023
Priority Health 22 % 28 %
BlueCross BlueShield 11 % 12 %
10
Six Months Ended June 30,
Insurance Carrier 2024 2023
Priority Health 35 % 37 %
BlueCross BlueShield 12 % 13 %

No other single customer accounted for more than 10% of the Company's commission revenues during the three and six months ended June 30, 2024 and 2023. The loss of any significant customer could have a material adverse effect on the Company.

Income Taxes

The Company recorded noincome tax expense for the three and six months ended June 30, 2024 and 2023 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, 2024 and December 31, 2023, 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.

Recently Issued Accounting Pronouncements

We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements not already disclosed in the Form 10-K.

NOTE 2. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table rolls forward the Company's goodwill balance for the periods ended June 30, 2024, and December 31, 2023, adjusted for discontinued operations.

Goodwill
December 31, 2022 $ 14,287,099
Goodwill impairment recognized as of December 31, 2023 (7,594,000 )
December 31, 2023 6,693,099
June 30, 2024 $ 6,693,099

Asset Impairments:

During the quarter ended March 31, 2024, certain intangible assets stemming from discontinued operations which were originally transferred to the Company's operating entity, were determined to have carrying values exceeding fair value, and thus were considered impaired. These intangible assets consisted of customer relationships, and internally developed and purchased software, with respective net of accumulated amortization asset values of $3,802,438, $65,411, and $54,261. The write-offs resulted in a total asset impairment charge of $3,922,110, recorded in the asset impairment account on the unaudited condensed consolidated statements of operations for the six-month period ended June 30, 2024.

11

The following table sets forth the major categories of the Company's intangible assets and the weighted-average remaining amortization period as of June 30, 2024:

Weighted

Average Remaining Amortization

Period

(Years)

Gross

Carrying Amount

Accumulated

Amortization

Net Carrying

Amount

Trade name and trademarks 1.0 $ 1,807,188 $ (1,487,205 ) $ 319,983
Internally developed software 2.7 1,698,186 (773,371 ) 924,815
Customer relationships 6.3 7,372,290 (2,813,315 ) 4,558,975
Purchased software 2.0 564,396 (563,074 ) 1,322
Video production assets - 50,000 (50,000 ) -
Non-competition agreements 0.4 3,504,810 (3,157,153 ) 347,657
$ 14,996,870 $ (8,844,118 ) $ 6,152,752

The following table sets forth the major categories of the Company's intangible assets and the weighted-average remaining amortization period as of December 31, 2023:

Weighted

Average Remaining Amortization

period

(Years)

Gross

Carrying Amount

Accumulated

Amortization

Net Carrying

Amount

Trade name and trademarks 1.5 $ 1,807,189 $ (1,320,939 ) $ 486,250
Internally developed software 3.2 1,798,922 (650,029 ) 1,148,893
Customer relationships 8.0 11,922,290 (3,193,629 ) 8,728,661
Purchased software 0.3 667,206 (618,418 ) 48,788
Video production assets - 50,000 (50,000 ) -
Non-competition agreements 0.9 3,504,810 (2,874,645 ) 630,165
$ 19,750,417 $ (8,707,660 ) $ 11,042,757

The following table reflects expected amortization expense as of June 30, 2024, for each of the following five years and thereafter:

Years Ending December 31, Amortization Expense
2024 (remaining six months) $ 764,453
2025 1,397,041
2026 1,148,216
2027 807,696
2028 717,314
Thereafter 1,318,032
Total $ 6,152,752
12

NOTE 3. LONG-TERM DEBT AND SHORT-TERM FINANCINGS

Long-Term Debt

The composition of the long-term debt is as follows:

June 30,

2024

December 31,

2023

Oak Street Funding LLC Term Loan for the acquisition of EBS and USBA, variable interest of prime rate plus 2.5%, maturing August 2028, net of deferred financing costs of $9,060and $10,069as of June 30, 2024 and December 31, 2023, respectively $ 338,812 $ 369,602
Oak Street Funding LLC Senior Secured Amortizing Credit Facility for the acquisition of CCS, variable interest of prime rate plus 1.5%, maturing December 2028, net of deferred financing costs of $11,250and $12,525as of June 30, 2024, and December 31, 2023, respectively 557,497 604,830
Oak Street Funding LLC Term Loan for the acquisition of SWMT, variable interest of prime rate plus 2.0%, maturing April 2029, net of deferred financing costs of $6,997and $7,733as of June 30, 2024 and December 31, 2023, respectively 646,205 695,758
Oak Street Funding LLC Term Loan for the acquisition of FIS, variable interest of prime rate plus 2.0%, maturing May 2029, net of deferred financing costs of $28,117and $31,026as of June 30, 2024 and December 31, 2023, respectively 1,636,131 1,758,558
Oak Street Funding LLC Term Loan for the acquisition of ABC, variable interest of prime rate plus 2.0%, maturing September 2029, net of deferred financing costs of $32,409and $35,649as of June 30, 2024 and December 31, 2023, respectively 2,712,692 2,899,409
Oak Street Funding LLC Term Loan for the acquisition of Barra, variable interest of prime rate plus 2.5%, maturing May 2032, net of deferred financing costs of $166,049and $176,762as of June 30, 2024 and December 31, 2023, respectively 5,869,749 6,089,580
11,761,086 12,417,737
Less: current portion (1,471,233 ) (1,390,766 )
Long-term debt $ 10,289,853 $ 11,026,971

Oak Street Funding LLC - Term Loans and Credit Facilities

Years Ending December 31,

Maturities of

Long-Term Debt

2024 (remaining six months) $ 714,133
2025 1,552,772
2026 1,729,160
2027 1,925,603
2028 2,106,978
Thereafter 3,986,322
Total 12,014,968
Less: debt issuance costs (253,882 )
Total $ 11,761,086
13

Short-Term Financings

The Company has various short-term notes payable for financed items such as insurance premiums. These are normally paid in equal installments over a period of twelve months or less and carry interest rates ranging between 7.95% and 11.95% per annum. As of June 30, 2024, and December 31, 2023, balances outstanding on short-term financings were $108,525and $56,197, respectively.

NOTE 4. WARRANT LIABILITIES

Series B Warrants and PAW's

On June 18, 2024, the holder of the remaining Series B Warrants exercised all their remaining 50,980warrants via cashless exercises, thereby acquiring 39,569shares of the Company's common stock, $0.086 par value per share. The Series B Warrants effective exercise price per share as of the date of the exercises was $3.91.

For the three and six months ended June 30, 2024, net fair value gains and losses recognized for the Series B Warrants and PAW's, were gains of $60,667and $156,000, respectively, whereas for the three and six months ended June 30, 2023, net fair value gains and losses recognized were a loss of $1,592,509and a gain of $2,673,723, respectively, presented in the recognition and change in fair value of warrant liabilities account in the unaudited consolidated statements of operations.

As of June 30, 2024, there were 0and 959Series B Warrants and PAW's outstanding respectively, with respective fair values of $0and $326, presented in the warrant liability account on the condensed consolidated balance sheets. As of June 30, 2023, there were 78,383and 959Series B Warrants and PAW's outstanding, with respective fair values of $3,741,983and $326, presented in the warrant liability account on the unaudited condensed consolidated balance sheets.

NOTE 5. EQUITY

Common Stock

The Company is authorized to issue 117,647,059shares of common stock, $0.086par value. Each share of issued and outstanding common stock entitles the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the Company upon liquidation or dissolution.

During the first quarter of 2024, the Company issued 11,036shares through its ATM program, 42,545pursuant to abeyance share conversions and 1,149shares for equity-based compensation.

On July 1, 2024, the Company effectuated a 1-for-17 reverse stock splitof the Company's issued and outstanding common stock (the "Reverse Split-2024"). The par value remained unchanged following the Reverse Split-2024. All share and per share information as well as common stock and additional paid-in capital have been retroactively adjusted to reflect the Reverse Split-2024 for all periods presented, unless otherwise indicated. The Reverse Split-2024 resulted in a rounding addition of approximately 110,350shares valued at par, totaling $9,490for which shares were issued in July 2024.

During the second quarter of 2024, the Company issued 302,677shares through its ATM program, 59,471pursuant to abeyance share conversions, 60,373shares for equity-based compensation, 30,029shares for repayment of an earn-out liability, 39,569shares on the exercise of Series B warrants, 192,236shares for the exercise of Series G warrants, and 17,825shares for service rendered.

As of June 30, 2024, and December 31, 2023, there were 1,037,027and 280,117shares of common stock outstanding, respectively.

Abeyance Shares

During the first and second quarters of 2024 respectively, upon request from an institutional investor, the Company converted 42,545and 59,471abeyance shares into common stock, thereby issuing 42,545and 59,471common shares, resulting in zero abeyance shares outstanding as of June 30, 2024.

Series G Warrants

Pursuant to the terms of the Series G Warrants, during the second quarter of 2024, the Series G Warrant exercise price reset from $11.16per share to $3.96per share, as a result of sales of our common stock pursuant to the ATM Agreement discussed below. On June 18, 2024, the holder of the Series G Warrants exercised all of its 247,678warrants, via cashless exercises, thereby acquiring 192,236shares of the Company's common stock, which resulted in noremaining Series G Warrants outstanding as of June 30, 2024.

14

At Market Program (the "ATM")

On February 15, 2024, the Company entered into the ATM Agreement with the Agent, pursuant to which the Company may offer and sell, from time to time through the Agent, shares of its common stock having an aggregate maximum offering price as determined by the then in effect prospectus supplement to the base prospectus included in the registration statement (the "ATM Capacity"). Any shares offered and sold in the ATM offering will be issued pursuant to the Company's effective shelf registration statement on Form S-3 (File No. 333-275190), which was declared effective by the SEC on November 7, 2023, and related prospectus supplements and accompanying base prospectus relating to the ATM offering. Under the Agreement, the Agent may sell shares by any method permitted by law and deemed to be an "at-the-market" offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). The offering of shares pursuant to the ATM Agreement will terminate upon the earlier of (i) the sale of all of the shares subject to the ATM Agreement, or (ii) the termination of the ATM Agreement by the Agent or the Company, as permitted therein. The Company agreed to pay to the Agent in cash, upon each sale of shares pursuant to the ATM Agreement, an amount equal to 3.5% of the gross proceeds from each such sale. The Company agreed to reimburse the Agent for certain specified expenses in connection with entering into the ATM Agreement.

During the six months ended June 30, 2024, the Company sold 313,713shares of common stock under the ATM Agreement, at an average price of $5.3492, receiving proceeds, net of $141,631in agent commissions and legal and other fees, of $2,068,344. From the net sale proceeds, $146,174was received in July 2024 and is recorded in the other receivables account in the unaudited condensed consolidated balance sheets as of June 30, 2024.As of the date of filing of this Quarterly Report on Form 10-Q, the net remaining ATM Capacity was $1,728,825.

Equity-based Compensation

Total stock-based compensation expense recorded in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2024, and 2023 was $245,766and $35,367, respectively. Total stock-based compensation expense recorded in the unaudited condensed consolidated statements of operations for the six months ended June 30, 2024 and 2023 was $264,331and $79,164, respectively.

NOTE 6. EARNINGS (LOSS) PER SHARE

Basic earnings per common share ("EPS") applicable to common stockholders is computed by dividing earnings applicable to common stockholders by the weighted-average number of common shares outstanding.

If there is a loss from operations, diluted EPS is computed in the same manner as basic EPS is computed. Similarly, if the Company has net income but its preferred dividend adjustment made in computing income available to common stockholders results in a net loss available to common stockholders, diluted EPS would be computed in the same manner as basic EPS.

The following calculates basic and diluted EPS:

Three Months Three Months
Ended Ended
June 30, 2024 June 30, 2023
Loss from continuing operations $ (1,489,395 ) $ (3,869,732 )
Net loss continuing operations, numerator, basic computation (1,489,395 ) (3,869,732 )
Recognition and change in fair value of warrant liabilities - -
Net loss from continuing operations, numerator, diluted computation $ (1,489,395 ) $ (3,869,732 )
Weighted average common shares, basic 539,133 159,795
Effect of Series B Warrants - -
Weighted average common shares, dilutive 539,133 159,795
Loss per common share - basic $ (2.76 ) $ (24.21 )
Loss per common share - diluted $ (2.76 ) $ (24.21 )
15
Six Months Six Months
Ended Ended
June 30, 2024 June 30, 2023
Loss from continuing operations $ (6,836,057 ) $ (997,776 )
Net Loss continuing operations, numerator, basic computation (6,836,057 ) (997,776 )
Recognition and change in fair value of warrant liabilities - -
Net loss from continuing operations, numerator, diluted computation $ (6,836,057 ) $ (997,776 )
Weighted average common shares, basic 462,773 125,791
Effect of Series B Warrants - -
Weighted average common shares, dilutive 462,773 125,791
Loss per common share - basic $ (14.77 ) $ (7.93 )
Loss per common share - diluted $ (14.77 ) $ (7.93 )

Additionally, the following are considered anti-dilutive securities excluded from weighted-average shares used to calculate diluted net loss per common share:

For the Three Months Ended

June 30, 2024

June 30, 2023

Shares subject to outstanding common stock options 510 649
Shares subject to outstanding Series A warrants 6,647 6,647
Shares subject to outstanding PAW's

959

959

Shares subject to outstanding Series F warrants - 123,840
Shares subject to PA Warrants 3,096 3,096
Shares subject to unvested stock awards 52 205
For the Six Months Ended

June 30, 2024

June 30, 2023

Shares subject to outstanding common stock options 510 649
Shares subject to outstanding Series A warrants 6,647 6,647
Shares subject to outstanding PAW's 959 959
Shares subject to outstanding Series F warrants - 123,840
Shares subject to PA Warrants 3,096 3,096
Shares subject to unvested stock awards 52 205

NOTE 7. LEASES

Operating lease expense for the three months ended June 30, 2024, and 2023 was $102,073and $123,326, respectively. Operating lease expense for the six months ended June 30, 2024, and 2023 was $207,029and $239,296respectively. As of June 30, 2024, the weighted average remaining lease term and weighted average discount rate for the operating leases were 5.08years and 8.35%, respectively.

16

Future minimum lease payments under these operating leases consisted of the following:

Fiscal year ending December 31, Operating Lease Obligations
2024 (remaining six months) $ 180,322
2025 265,399
2026 229,522
2027 215,325
2028 182,190
Thereafter 225,136
Total undiscounted operating lease payments 1,297,894
Less: Imputed interest (252,939 )
Present value of operating lease liabilities $ 1,044,955

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 and nolegal contingencies are accrued as of June 30, 2024, and December 31, 2023. Litigation relating to the insurance brokerage industry is not uncommon. As such the Company, from time to time has been subject to such litigation. No assurances can be given with respect to the extent or outcome of any such litigation in the future.

Earn-out liabilities

The Company, Southwestern Montana Insurance Center, LLC, a Montana limited liability company (the "Subsidiary"), Southwestern Montana Financial Center, Inc., a Montana corporation (the "Seller"), and Julie A. Blockey (the "Holder", and collectively with the Company, Subsidiary, and Seller, the "Parties") entered into a purchase agreement on or around April 1, 2019 (the "Purchase Agreement"), whereby the Company purchased the business and certain assets noted within the Purchase Agreement. On September 29, 2023, the Parties entered into a first amendment to the Purchase Agreement (the "First Amendment"). Pursuant to the First Amendment, the Parties agreed to a total remaining earn-out related balance of $500,000owed under the Purchase Agreement. In satisfaction of such remaining balance, the Company agreed to issue 10,272shares of the Company's restricted common stock, par value $0.086per share (the "Common Stock"), to the Holder. The First Amendment also stated that if the Nasdaq official closing price of the Common Stock is less than $41.31on March 29, 2024 (the "Calculation Date"), then a determination of the Make-Up Amount (as defined herein) will be made. The "Make-Up Amount" means $425,000 minus the Blockey Shares Value (10,272 multiplied by the Nasdaq official closing price of the Common Stock on the Calculation Date). The First Amendment further stated that the Company shall pay the Make-Up Amount with a combination of cash and Company shares. Accordingly, on the Calculation Date, a total Make-Up Amount of $367,496was determined, and as agreed upon by the Parties, will be payable, $190,000in cash, and the remaining balance via the issuance of 30,029of the Company's Common Stock, subsequently issued to the Seller during April, 2024. The $190,000cash balance was paid during the quarter ended June 30, 2024.

The following outlines changes to the Company's earn-out liability balances for the respective periods ended June 30, 2024 and December 31, 2023:

Fortman Montana Altruis Kush Barra Total
Ending balance December 31, 2023 $ - $ 159,867 $ - $ - $ - $ 159,867
Payments - (190,000

)

- - - -
Estimates and fair value adjustments - 47,761 - - - 47,761
Payable in common stock - (17,628 ) - - - (17,628 )
Ending balance June 30, 2024 $ - $ - $ - $ - $ - $ -
Fortman Montana Altruis Kush Barra Total
Ending balance December 31, 2022 $ 667,000 $ 500,001 $ 834,943 $ 147,534 $ 560,000 $ 2,709,478
Payments (1,433,700 ) (750,001 ) (929,168 ) (147,534 ) - (3,260,403 )
Estimates and fair value adjustments 1,612,914 569,734 94,225 - (560,000 ) 1,716,873
Payable in common stock - (159,867 ) - - - (159,867 )
Reclass to loans payable, related parties* (846,214 ) - - - - (846,214 )
Ending balance December 31, 2023 $ - $ 159,867 $ - $ - $ - $ 159,867
* The Company modified certain contingent earn-out payables by entering into fixed payment arrangements. Thus, remaining open balances are reclassified to the loans payable, related parties account on the consolidated balance sheet as of June 30, 2024 and December 31, 2023, respectively.
17

Definitive Acquisition Agreements

On May 14, 2024, the Company entered into a Stock Exchange Agreement (the "Stock Exchange Agreement") to acquire Spetner Associates ("Spetner"). Pursuant to the Stock Exchange Agreement, the Company agreed to: (i) acquire 80% of the issued and outstanding shares of common stock, par value $1.00per share, of Spetner (the "Spetner Common Stock") for $13,714,286(which amount was to be paid as $8,000,000in cash, the issuance of certain shares of the Company's common stock, and the Company's issuance of a promissory note); and (ii) have the sole option to acquire the remaining 20% of Spetner common stock for a predetermined amount based on a multiple of EBITDA.

NOTE 9. RELATED PARTY TRANSACTIONS

The following table summarizes the loans payable, related parties current and non-current accounts, as of the periods ended June 30, 2024 and December 31, 2023, and the interest expense related parties account for the three and six-month periods ended June 30, 2024 and June 30, 2023, as presented on the condensed consolidated balance sheets and condensed consolidated statements of operations, respectively:

Related Parties Payable Interest Expense, Related Parties
Current Portion Long Term Portion for the Three Months Ended for the Six Months Ended
Related Party June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023 June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023
Employee Payables 6,127 25,708 - - 577 1,730 2,307 3,459
Deferred Purchase Price Liability 256,173 233,504 111,554 247,055 17,335 49,423 37,167 89,170
Purchase Agreement Liability 181,553 195,741 549,321 650,475 19,613 - 38,660 -
Total 443,853 454,953 660,875 897,530 37,525 51,153 78,134 92,629
18

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Reliance Global Group, Inc. (the "Company") operates as a diversified company engaging in business in the insurance market, as well as other related sectors. Our focus is to grow the Company by pursuing an aggressive acquisition strategy, initially and primarily focused upon wholesale and retail insurance agencies.

In the insurance sector, our management has extensive experience acquiring and managing insurance portfolios in several states, as well as developing specialized programs targeting niche markets. Our primary strategy is to identify specific risk to reward arbitrage opportunities and develop these on a national platform, thereby increasing revenues and returns, and then identify and acquire undervalued wholesale and retail insurance agencies with operations in growing or underserved segments, expand and optimize their operations, and achieve asset value appreciation while generating interim cash flows.

As part of our growth and acquisition strategy, we continue to survey the current insurance market for value-add acquisition opportunities. As of June 30, 2024, we have acquired nine insurance agencies.

Over the next 12 months, we plan to focus on the expansion and growth of our business through continued asset acquisitions in insurance markets and organic growth of our current insurance operations through geographic expansion and market share growth. To that end, on May 14, 2024, the Company entered into a Stock Exchange Agreement (the "Stock Exchange Agreement") to acquire Spetner Associates ("Spetner"), a well-established benefits enrollment company that, through its BenManage benefits enrollment company, is a leading provider of voluntary benefits to over 75,000 employees throughout the United States. Pursuant to the Stock Exchange Agreement, the Company agreed to: (i) acquire 80% of Spetner's issued and outstanding shares of common stock, par value $1.00 per share (the "Spetner Common Stock") for $13,714,286 (which amount was to be paid as $8,000,000 in cash, the issuance of certain shares of the Company's common stock, and the Company's issuance of a promissory note; and (ii) have the sole option to acquire the remaining 20% of the Spetner Common Stock for a predetermined amount based on a multiple of EBITDA

Further, we launched our 5MinuteInsure.com ("5MI") Insurtech platform during 2021, which expanded our national footprint. 5MI is a high-tech proprietary tool developed by us as a business to consumer portal which enables consumers to instantly compare quotes from multiple carriers and purchase their car and home insurance in a time efficient and effective manner. 5MI taps into the growing number of online shoppers and utilizes advanced artificial intelligence and data mining techniques, to provide competitive insurance quotes in around 5 minutes with minimal data input needed from the consumer. The platform launched during the summer of 2021 and currently operates in 46 states offering coverage with up to 30 highly rated insurance carriers.

With the acquisition of Barra, we launched RELI Exchange, our business-to-business ("B2B") InsurTech platform and agency partner network that builds on the artificial intelligence and data mining backbone of 5MinuteInsure.com. Through RELI Exchange we on-board agency partners and provide them with an InsurTech platform white labeled, designed and branded specifically for their business. This combines the best of digital and human capabilities by providing our agency partners and their customers quotes from multiple carriers within minutes. Since its inception, RELI Exchange has increased its agent roster by more than 130%.

Business Operations

We've adopted a "One-Firm" strategy, pursuant to which Company owned and operated agencies come together to operate as one cohesive unit, which allows for efficient and effective cross-selling, cross-collaboration, and the effective deployment of the Company's human capital. This strategy also aims to enhance the Company's overall market presence across the U.S., with all business lines operating under the RELI Exchange brand. It's expected to benefit agents and clients by improving relationships with carriers, leading to better commission and bonus contracts due to higher business volumes. The approach also strengthens the capability of RELI Exchange agency partners in securing diverse insurance policies and fosters increased cross-selling opportunities. This unified strategy positions the Company for rapid scaling and integration of accretive acquisitions, expanding its industry reach.

19

Business Trends and Uncertainties

The insurance intermediary business is highly competitive, and we actively compete with numerous firms for customers and insurance companies, many of which have relationships with insurance companies, or have a significant presence in niche insurance markets that may give them an advantage over us. Other competitive concerns may include the quality of our products and services, our pricing and the ability of some of our customers to self-insure and the entrance of technology companies into the insurance intermediary business. Several insurance companies are engaged in the direct sale of insurance, primarily to individuals, and do not pay commissions to agents and brokers.

Financial Instruments

During the quarter ended June 30, 2024, the Company's financial instruments consisted of derivative warrants. These were accounted at fair value as of inception/issuance date, and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating, (non-cash) gain or loss. As of June 18, 2024, all of the remaining derivative warrants were exercised and there are currently none outstanding.

Insurance Operations

Our insurance operations focus on the acquisition and management of insurance agencies throughout the U.S. Our primary focus is to pinpoint undervalued wholesale and retail insurance agencies with operations in growing or underserved segments (including healthcare and Medicare, as well as personal and commercial insurance lines). We then focus on expanding their operations on a national platform and improving operational efficiencies to achieve asset value appreciation while generating interim cash flows. In the insurance sector, our management team has over 100 years of experience acquiring and managing insurance portfolios in several states, as well as developing specialized programs targeting niche markets. We plan to accomplish these objectives by acquiring wholesale and retail insurance agencies it deems to represent a good buying opportunity (as opposed to insurance carriers) as insurance agencies bear no insurance risk. Once acquired, we plan to develop them on a national platform to increase revenues and profits through a synergetic structure. The Company is initially focused on segments that are underserved or growing, including healthcare and Medicare, as well as personal and commercial insurance lines.

Insurance Acquisitions and Strategic Activities

As of the balance sheet date, we have acquired multiple insurance brokerages (see table below). 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. In furtherance of this strategy, on May 14, 2024, the Company entered into a Stock Exchange Agreement to acquire Spetner Associates ("Spetner") for cash, stock and issuance of a promissory note. Spetner is a well-established benefits enrollment company that, through its BenManage benefits enrollment company, is a leading provider of voluntary benefits to over 75,000 employees throughout the United States. Completion of the transaction is subject to standard and stipulated closing.

20
Acquired

Reliance 100%

Controlled Entity

Date Location Line of Business
U.S. Benefits Alliance, LLC (USBA) US Benefits Alliance, LLC October 24, 2018 Michigan Health Insurance
Employee Benefit Solutions, LLC (EBS) Employee Benefits Solutions, LLC October 24, 2018 Michigan Health Insurance
Commercial Solutions of Insurance Agency, LLC (CCS or Commercial Solutions) Commercial Coverage Solutions LLC December 1, 2018 New Jersey P&C - Trucking Industry
Southwestern Montana Insurance Center, Inc. (Southwestern Montana or Montana) Southwestern Montana Insurance Center, LLC April 1, 2019 Montana Group Health Insurance
Fortman Insurance Agency, LLC (Fortman or Fortman Insurance) Fortman Insurance Solutions, LLC May 1, 2019 Ohio P&C and Health Insurance
Altruis Benefits Consultants, Inc. (Altruis) Altruis Benefits Corporation September 1, 2019 Michigan Health Insurance
UIS Agency, LLC (UIS) UIS Agency, LLC August 17, 2020 New York P&C - Trucking Industry
J.P. Kush and Associates, Inc. (Kush) Kush Benefit Solutions, LLC May 1, 2021 Michigan Health Insurance
Barra & Associates, LLC RELI Exchange, LLC April 26, 2022 Illinois Health Insurance

Recent Developments

Reverse Stock Split

On July 1, 2024, the Company effectuated a 1-for-17 reverse stock split of the Company's issued and outstanding common stock (the "Reverse Split-2024"). The par value remained unchanged. All share and per share information, as well as common stock and additional paid-in capital, have been retroactively adjusted to reflect the Reverse Split-2024 for all periods presented, unless otherwise indicated. The Reverse Split-2024 resulted in a rounding addition of approximately 110,350 shares valued at par, totaling $9,490 for which shares were issued in July 2024.

Non-GAAP Measure

The Company believes certain financial measures which meet the definition of non-GAAP financial measures, as defined in Regulation G of the SEC rules, provide important supplemental information. Adjusted EBITDA ("AEBITDA"), our key financial performance metric, is a non-GAAP financial measure that is not in accordance with, or an alternative to, measures prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). "AEBITDA" is defined as earnings before interest, taxes, depreciation, and amortization (EBITDA) with additional adjustments as further outlined below. The Company considers AEBITDA an important financial metric because it provides a meaningful financial measure of the quality of the Company's operational, cash impacted and recurring earnings and operating performance across reporting periods. Other companies may calculate Adjusted EBITDA differently than we do, which might limit its usefulness as a comparative measure to other companies in the industry. AEBITDA is used by management in addition to and in conjunction (and not as a substitute) with the results presented in accordance with GAAP. Management uses AEBITDA to evaluate the Company's operational performance, including earnings across reporting periods and the merits for implementing cost-cutting measures. We have presented AEBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations and assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Consistent with Regulation G, a description of such information is provided below herein and tabular reconciliations of this supplemental non-GAAP financial information to our most comparable GAAP information are contained in this Quarterly Report on Form 10-Q under "Results of Operations".

21

We exclude the following items when calculating AEBITDA, and the following items define our non-GAAP financial measure AEBITDA:

Interest and related party interest expense: Unrelated to core Company operations and excluded to provide more meaningful supplemental information regarding the Company's core operational performance.
Depreciation and amortization: Non-cash charge, excluded to provide more meaningful supplemental information regarding the Company's core operational performance.
Goodwill and/or asset impairments: Non-cash charge, excluded to provide more meaningful supplemental information regarding the Company's core operational performance.
Equity-based compensation: Non-cash compensation provided to employees and service providers, excluded to provide more meaningful supplemental information regarding the Company's core cash impacted operational performance.
Change in estimated acquisition earn-out payables: An earn-out liability is a liability to the seller upon an acquisition which is contingent on future earnings. These liabilities are valued at each reporting period and the changes are reported as either a gain or loss in the change in estimated acquisition earn-out payables account in the consolidated statements of operations. The gain or loss is non-cash, can be highly volatile and overall is not deemed relevant to ongoing operations, thus, it's excluded to provide more meaningful supplemental information regarding the Company's core operational performance.
Recognition and change in fair value of warrant liabilities: This account includes changes to derivative warrant liabilities which are valued at each reporting period and could result in either a gain or loss. The period changes do not impact cash, can be highly volatile, and are unrelated to ongoing operations, and thus are excluded to provide more meaningful supplemental information regarding the Company's core operational performance.
Other income (expense), net: Includes non-routine income or expenses and other individually de minimis items and is thus excluded as unrelated to core operations of the company.
Transactional costs: This includes expenses related to mergers, acquisitions, financings and refinancings, and amendments or modification to indebtedness. Thes costs are unrelated to primary Company operations and are excluded to provide more meaningful supplemental information regarding the Company's core operational performance.
Non-recuring costs: This account includes non-recurring non-operational items, related to costs incurred for a legal suit the Company has filed against one of the third parties involved in the discontinued operations and was excluded to provide more meaningful supplemental information regarding the Company's core operational performance.
Loss from discontinued operations before tax: This account includes the net results from discontinued operations, and since discontinued, are unrelated to the Company's ongoing operations and thus excluded to provide more meaningful supplemental information regarding the Company's core operational performance.

Refer to the reconciliation of net (loss) income to AEBITDA, illustrated below in tabular format.

22

Results of Operations

RELIANCE GLOBAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS ANALYTICS

Comparison of the three months ended June 30, 2024 to the three months ended June 30, 2023

June 30, 2024 June 30, 2023 Value Fluctuation Percent Fluctuation Explanations
Commission income $ 3,233,342 $ 3,195,905 $ 37,437 1 % Increased commission income primarily driven by sustained organic growth.
Commission expense ("CE") 886,364 829,274 57,090 7 % Increased CE correlated to growth in revenues.
Salaries and wages ("S&W") 1,955,152 1,771,064 184,088 10 % Increased S&W primarily impacted by equity-based pay.
General and administrative expenses ("G&A") 991,633 1,125,211 (133,578 ) -12 % Decreased G&A was driven by

leaner operations and OneFirm related cost-cutting measures.

Marketing and advertising ("M&A") 76,983 109,860 (32,877 ) -30 % M&A decrease consistent with Company's current marketing strategy.
Change in estimated acquisition earn-out payables - 543,233 (543,233 ) -100 % Decrease pursuant to the settlement of all earn-out payables.
Depreciation and amortization ("D&A") 469,788 655,449 (185,661 ) -28 % Decrease due to impaired intangible assets no longer incurring D&A.
Total operating expenses 4,379,920 5,034,091 (654,171 ) -13 %
-
Loss from operations (1,146,578 ) (1,838,186 ) 691,908 -38 %
-
Other income (expense) -
Interest expense (365,970 ) (370,905 ) 4,935 -1 % Decrease was due to periodic paydowns on loan balances.
Interest related parties (37,525 ) (51,153 ) 13,628 -27 % Decrease was due to periodic paydowns on loan balances.
Other income (expense), net 11 (16,979 ) 16,990 -100 % Decrease due to certain minor non-recurring and non-significant other income/expense sources.
Recognition and change in fair value of warrant liabilities 60,667 (1,592,509 ) 1,653,176 -104 % Fluctuation per fair value changes in derivative warrant liabilities and warrants exercised.
Total other income (expense) (342,817 ) (2,031,546 ) 1,688,729 -83 %
Loss from continuing operations before tax (1,489,395 ) (3,869,732 ) 2,380,337 -62 %
Income from discontinued operations before tax - 2,814,445 (2,814,445 ) -100 % Discontinued operations did not re-occur during 2024.
Net income (loss) $ (1,489,395 ) $ (1,055,286 ) $ (434,109 ) 41 %
Non-GAAP Measure
AEBITDA $ (177,966 ) $ (178,630 ) $ 663 0 %
23

RELIANCE GLOBAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS ANALYTICS

Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023

June 30, 2024 June 30, 2023 Value Fluctuation Percent Fluctuation Explanations
Commission income $ 7,315,780 $ 7,135,008 $ 180,772 3 % Increased commission income primarily driven by sustained organic growth.
Commission expense ("CE") 2,162,905 1,912,600 250,305 13 % Increased CE correlated to growth in revenues.
Salaries and wages ("S&W") 3,786,814 3,526,957 259,857 7 % Increased S&W primarily impacted by equity-based pay.
General and administrative expenses ("G&A") 2,366,523 1,962,978 403,545 21 % Increased G&A driven by higher acquisition & legal costs related to M&A activity and regulatory filings.
Marketing and advertising ("M&A") 204,025 246,432 (42,407 ) -17 % M&A decrease consistent with Company's current marketing strategy
Change in estimated acquisition earn-out payables 47,761 1,019,925 (972,164 ) -95 % Decrease pursuant to the settlement of the majority of earn-out payables.
Depreciation and amortization ("D&A") 1,003,941 1,309,227 (305,286 ) -23 % Decrease due to impaired intangible assets no longer incurring D&A.
Asset impairment 3,922,110 - 3,922,110 Increase due to impairment of certain intangible assets.
Total operating expenses 13,494,079 9,978,119 3,515,960 35 %
-
Loss from operations (6,178,299 ) (2,843,111 ) (3,335,188 ) 117 %
-
Other income (expense) -
Interest expense (735,646 ) (722,462 ) (13,184 ) 2 % Increase was primarily due to elevated interest rates.
Interest related parties (78,134 ) (92,629 ) 14,495 -16 % Decrease was due to periodic paydowns on loan balances.
Other income (expense), net 22 (13,297 ) 13,319 -100 % Decrease due to certain minor non-recurring and non-significant other income/expense sources.
Recognition and change in fair value of warrant liabilities 156,000 2,673,723 (2,517,723 ) -94 % Fluctuation per fair value changes in derivative warrant liabilities.
Total other (expense) income (657,758 ) 1,845,335 (2,503,093 ) -136 %
Loss from continuing operations before tax (6,836,057 ) (997,776 ) (5,838,281 ) 585 %
Loss from discontinued operations before tax - (1,846,048 ) 1,846,048 -100 % Discontinued operations did not re-occur during 2024.
Net income (loss) $ (6,836,057 ) $ (2,843,824 ) $ (3,992,233 ) 140 %
Non-GAAP Measure
AEBITDA $ (251,620 ) $ (9,288 ) $ (242,332 ) 2609 %
24

Non-GAAP Reconciliation from Net (Loss) Income to AEBITDA

The following table provides a reconciliation from net loss to AEBITDA for the three and six months ended June 30, 2024 and June 30, 2023.

Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Net loss $ (1,489,395 ) $ (1,055,286 ) $ (6,836,057 ) $ (2,843,824 )
Adjustments:
Interest and related party interest expense 403,495 422,058 813,780 815,091
Depreciation and amortization 469,788 655,449 1,003,941 1,309,227
Asset impairment - - 3,922,110 -
Share-based compensation to employees, directors and service providers 333,897 413,362 488,808 457,158
Change in estimated acquisition earn-out payables - 543,233 47,761 1,019,925
Other (income) expense, net (11 ) 16,979 (22 ) 13,297
Transactional costs 119,203 - 373,096 -
Nonrecurring costs 45,724 47,513 90,963 47,513
Recognition and change in fair value of warrant liabilities (60,667 ) 1,592,509 (156,000 ) (2,673,723 )
(Income) loss from discontinued operations before tax

-

(2,814,445 ) - 1,846,048
Total adjustments 1,311,429 876,657 6,584,437 2,834,536
AEBITDA $ (177,966 ) $ (178,630 ) $ (251,620 ) $ (9,288 )

Liquidity and capital resources

As of June 30, 2024, we had a cash balance of approximately $2,816,000 and working capital of approximately $600,000, compared with a cash balance of approximately $2,739,000 and working capital of approximately $1,189,000 at December 31, 2023. During the first quarter of 2024, the Company entered into an At Market Issuance Sales Agreement with EF Hutton LLC as sales agent (the "ATM Agreement"), pursuant to which the Company may offer and sell, from time to time through the sales agent, shares of its common stock having an aggregate offering price as determined by the then in effect prospectus supplement to the base prospectus included in the registration statement (the "ATM Capacity").

During the six months ended June 30, 2024, the Company sold 313,713 shares of common stock under the ATM Agreement, at an average price of $5.3492, resulting in proceeds, net of $141,631 in agent commissions and legal and other fees, of $2,068,344. From the net sales proceeds, $146,174 was received in July 2024 and was recorded in the other receivables account in the unaudited condensed consolidated balance sheets as of June 30, 2024. As of the date of filing of this Quarterly Report on Form 10-Q, the net remaining ATM Capacity was $1,728,825.

Inflation

The Company generally may be impacted by rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits, and facility leases. The Company believes inflation could have a material impact on pricing and operating expenses in future periods due to the state of the economy and current inflation rates.

25

Off-balance sheet arrangements

We did not have any off-balance sheet arrangements, as such term is defined in Regulation S-K, during the six months ended June 30, 2024.

Cash Flows

Six Months Ended

June 30,

2024 2023
Net cash used in operating activities $ (889,594 ) (2,007,101 )
Net cash (used in) provided by investing activities (36,531 ) 735,128
Net cash provided by financing activities 1,002,825 2,042,460
Net increase in cash, cash equivalents, and restricted cash $

76,700

$ 770,487

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2024, was approximately $890,000, compared to net cash flows used in operating activities of approximately $2.0 million for the six months ended June 30, 2023. The cash used includes a net loss of approximately $6,836,000, decreased by approximate non-cash adjustments of $5,332,000 related to asset impairments of approximately $3,922,000, gain from recognition and change in fair value of warrant liabilities of approximately $156,000, depreciation and amortization of approximately $1,004,000, other adjustments totaling approximately $562,000, as well as a net increase in cash due to changes of net working capital items of approximately $615,000.

Investing Activities

During the six months ended June 30, 2024, cash flows used in investing activities approximated $36,500 compared to cash flows used in investing activities of approximately $735,000 for the six months ended June 30, 2023. The cash used is primarily related to the purchase of fixed tangible and intangible assets.

Financing Activities

During the six months ended June 30, 2024, approximate cash used in financing activities was $1.0 million, as compared to approximately $2.0 million provided for the six months ended June 30, 2023. Net cash used in financing activities relates to proceeds from common shares issued pursuant to the ATM Agreement totaling approximately $2,068,000, offset by net debt principal, net short-term financings, and related party payables repayments of approximately $1,066,000.

Significant Accounting Policies and Estimates

We describe our significant accounting policies in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, and our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal year 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024, and determined them to be effective as of June 30, 2024.

26

Changes in Internal Control over Financial Reporting

During fiscal year 2024, the Company revised its internal controls over its goodwill evaluation process to ensure that any testing performed at interim dates are rolled forward to the reporting date of the relevant financial statements. Aside from the foregoing, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

We are 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 June 30, 2024. Litigation relating to the insurance brokerage industry is not uncommon. As such we, 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.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should consider carefully the information disclosed in Part I, Item 1A, "Risk Factors," contained in our Annual Report on Form 10-K for the year ended December 31, 2023. Except as disclosed below, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, as amended from time to time.

Our shares of common stock are currently listed on Nasdaq. If we fail to satisfy the continued listing requirements of The Nasdaq Capital Market, such as the corporate governance requirements, minimum bid price requirement or the minimum stockholders' equity requirement, Nasdaq may take steps to delist our common stock. Any delisting would likely have a negative effect on the price of our common stock and would impair stockholders' ability to sell or purchase their common stock when they wish to do so.

As previously disclosed in the Current Report on Form 8-K filed on January 16, 2024 by the Company on January 12, 2024, the Company received written notice from Nasdaq's Listing Qualifications Department notifying the Company that for the preceding 30 consecutive business days (November 29, 2023 to January 11, 2024), the Company's common stock did not maintain a minimum closing bid price of $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2). The notice has no immediate effect on the listing or trading of the Company's common stock and the common stock continued to trade on Nasdaq under the symbol "RELI." In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a compliance period of 180 calendar days, or until July 10, 2024, to regain compliance with Nasdaq Listing Rule 5550(a) (2).

On July 16, 2024 Nasdaq's Listing Qualifications Department notified the Company that it had regained compliance with Nasdaq Listing Rule 5550(a)(2).

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table displays the unregistered sales of equity securities and use of proceeds.

Date of

Transaction

Transaction type

(e.g. new issuance,

cancellation,

shares returned to

treasury) and all

under Section

4(a)(2) of the

Securities
Act of 1933

Number of

Securities

Issued (or

cancelled) (1)

Class of Securities Value of Securities issued ($/per share) at Issuance Were the Securities issued at a discount to market price at the time of issuance? (Yes/No)

Individual/

Entity Securities

were issued to

(entities must have

individual

with voting /

investment

control

disclosed).

Reason for

Securities

issuance (e.g. for

cash or debt

conversion) OR

Nature of

Services

Provided (if

applicable)

Restricted or

Unrestricted

as of this

filing?

Exemption or Registration Type?
4/25/2024 New 30,029 Common 5.91 No Julie A. Blockey Acquisition

Restricted

4 (a)(2)
5/21/2024 New 17,825 Common 5.61 No Outside The Box Capital Inc. Services

Restricted

4 (a)(2)

(1) Gives effect to a 1:17 reverse stock split effective as of July 1, 2024

27

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

(a) None.

(b) There have been no material changes to the procedures by which security holders may recommend nominees to the Company's Board of Directors since the Company last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K.

(c) During the quarter ended June 30, 2024, no director or officer adoptedor terminated: (i) any contract, instruction or written plan for the purchase or sale of securities of the registrant intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a "Rule 10b5-1 trading arrangement"); and/or (ii) any "non-Rule 10b5-1 trading arrangement" as defined in Item 408(c) of Regulation S-K

Item 6. Exhibits

The following exhibits are filed or furnished with this Quarterly Report on Form 10-Q.

Exhibit No. Description
10.1 Reliance Global Group, Inc. 2024 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the registrant's registration statement on Form S-8 filed with the Securities and Exchange Commission on April 18, 2024).
10.2 Stock Exchange Agreement by and among Reliance Global Group, Inc., Jonathan S. Spetner, Michelle Spetner and Spetner Associates, Inc. dated May 14, 2024 (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2024).
10.3 Certificate of Amendment to the registrant's Amended and Restated Articles of Incorporation, as amended, dated June 26, 2024 (incorporated by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 26, 2024).
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1** Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer
101.INS* Inline XBRL Instance Document
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH* Inline XBRL Taxonomy Extension Schema Document
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101).

*Filed herewith

**Furnished herewith

28

SIGNATURES

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.
Date: July 25, 2024 By: /s/ Ezra Beyman
Ezra Beyman
Chief Executive Officer
(principal executive officer)
Date: July 25, 2024 By: /s/ Joel Markovits
Joel Markovits
Chief Financial Officer
(principal financial officer and principal accounting officer)
29