AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8,DECEMBER 30, 2020

REGISTRATION NO. 333-_______333-249381

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 2 TO FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

RELIANCE GLOBAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Florida

(State or other jurisdiction of incorporation or organization)

46-3390293

I.R.S. Employer Identification Number

524210

(Primary Standard Industrial Code Classification Number)

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

732-380-4600

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

Copies to:

Mr. Ezra Beyman

Chief Executive Officer

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

732-380-4600

(Address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:

Approximate date of proposed sale to public: As soon as practicable on or after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 7(a)(2)(B) of the Securities Act.:

CALCULATION OF REGISTRATION FEE

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission (the “Commission”), acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement relating to these securities that has been filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED OCTOBER 8,DECEMBER 30, 2020

RELIANCE GLOBAL GROUP, INC.

Class A Units Consisting of Shares of Common Stock

and Series A Warrants to Purchase Shares of Common Stock and Series B Warrants to Purchase Common Stock

This is a firm commitment public offering of ____ our Class A Units, each consisting of one share of our common stock, par value $0.0001 per share, and a Series A Warrant to purchase one share our common stock and a Series B Warrant to purchase one share of our common stock (and the shares issuable from time to time upon exercise of the warrants) pursuant to this prospectus based on an assumed offer price of $____ for each unit of a share and a Series A Warrant and a Series B Warrant (“Class A Unit”) and an $____ assumed initial public offering (these assumptions are used throughout this preliminary prospectus). Each Series A Warrant will have an exercise price of $____ (assumed) per share, will be exercisable upon issuance and will expire five years from issuance. Each Series B Warrant will have an exercise price of $____ (assumed) per share, will be exercisable upon issuance and will expire one year from issuance. Prior to this offering, there has been no public market for our Class A Units, common stock or warrants. We expect the public offering price will be $______ per Class A Unit.

The components of the Units will begin to trade separately on the first trading day following the one yearone-year anniversary of the date of this prospectus, unless our underwriter, determines that an earlier date is acceptable. In no event will separate trading of the securities comprising the Units commence until we issue a press release announcing when such separate trading will begin. Once the components of the Units begin trading separately, the Units will be delisted and will cease trading. Notwithstanding the foregoing, the holder of a Unit may commence separately trading the share of common stock and Series A Warrant in a Unit at any time after the 60th day after the date of this prospectus unless our underwriter determines that an earlier date is acceptable.

Our common stock is quoted on the OTCQB Venture Market under the symbol “RELI.” On October 7,December __, 2020, the last reported sale price of our common stock on OTCQB Venture Market was $0.1346_____ per share. The Company is currently controlled by its major shareholder and CEO, Ezra Beyman and will likely remain a controlled company upon closing of this offering. The Company will not avail itself of any controlled company exemptions from corporate governance requirements from Nasdaq or otherwise.

You should read this prospectus, together with additional information described under the heading “Where You Can Find More Information,” carefully before you invest in any of our securities.

We have applied to have our units and common stock listed on The NASDAQ Capital Market under the symbols “RELIU” and “RELI” respectively. No assurance can be given that our application will be approved. In conjunction therewith, we have also applied to have the Series A Warrants listed on The NASDAQ Capital Market under the symbol “RELIW”.

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 6 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

(1) The assumed public offering price and underwriting discount corresponds to in respect of the Class A Units (a) an assumed public offering price per share of common stock of $____ and (b) an assumed public offering price per Series A Warrant of $____ and Series B Warrant of $____. This is an assumed offering price of $____ per Class A Unit.

(2) Does not include a non-accountable expense allowance equal to 1% of the gross proceeds of this offering payable to Kingswood Capital Markets, division of Benchmark Investments, Inc., the representative of the underwriters. See “Underwriting” for a description of compensation payable to the underwriters. We have agreed to issue warrants to the representative of the underwriters. See “Underwriting” on page 6264 of this prospectus for a description of the compensation arrangements.

We have granted a 45-day option to the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional (i) ____ Class A Units or (ii) if Kingswood Capital Markets, division of Benchmark Investments, Inc., as representative of the underwriters, determines that the units shall detach and our shares of common stock and the warrants underlying the units shall begin to trade separately during such 45-day period, an additional _____ shares of common stock at a price of $____ per share and/or ____ additional Series A Warrants at a price of $0.01 per warrant and/or ______ Series B Warrants at a price of $0.01 per warrant, in each case, the underwriting discounts and commissions, to cover over-allotments, if any.

The underwriter expects to deliver our Class A Units against payment on or about [ ], 2020.

KINGSWOOD CAPITAL MARKETS

Divisiondivision of Benchmark Investments, Inc.

The date of this prospectus is           , 2020.

TABLE OF CONTENTS

You should rely only on information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. Neither the delivery of this prospectus nor the sale of our securities means that the information contained in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy our securities in any circumstances under which the offer or solicitation is unlawful or in any state or other jurisdiction where the offer is not permitted. The information contained in this prospectus is accurate only as of its date regardless of the time of delivery of this prospectus or of any sale of common stock.

No person is authorized in connection with this prospectus to give any information or to make any representations about us, the securities offered hereby or any matter discussed in this prospectus, other than the information and representations contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.

For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. Our management’s estimates have not been verified by any independent source, and we have not independently verified any third-party information. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Note Regarding Forward-Looking Statements.”

PROSPECTUS SUMMARY

This summary highlights selected information from this prospectus and does not contain all of the information that you should consider in making your investment decision. You should carefully read the entire prospectus and any related free writing prospectus, including the risks of investing in our securities discussed under the heading “Risk Factors” contained in the prospectus supplement and any related free writing prospectus.

The terms “Reliance,” the “Company,” “we,” “our” or “us” in this prospectus refer to Reliance Global Group, Inc. and its wholly-owned subsidiaries, unless the context suggests otherwise.

OUR BUSINESS

About Reliance Global Group, Inc.

Reliance Global Group, Inc. (formerly known as Ethos Media Network, Inc.) was incorporated in Florida on August 2, 2013. In September 2018, Reliance Global Holdings, LLC, a related party, purchased a controlling interest in the Company. Ethos Media Network, Inc. was renamed Reliance Global Group, Inc. on October 18, 2018.

We operate as a company managingvarious insurance agencies in assets instates across the insurance markets, as well as other related sectors.US. Our focus is to grow the Company by organic growth, and also, where and when opportunities which are economically feasible are presented, pursuing an aggressive acquisition strategy, initially and primarily focused upon wholesale and retail insurance agencies. The CompanyEzra Beyman is controlled bycurrently the same management team asCEO of Reliance Global Group, Inc. and the Chairman of Reliance Global Holdings, LLC (“Reliance Holdings”), and both Companies share a management team. Reliance Holdings is a New York based firm that is the owner and operator of numerous companies with core interests in real estate and insurance. Our relationship with Reliance Holdings provides us with significant benefits: (1) experience, knowhow, and industry relations in both sectors; (2) a source of acquisition targets currently under Reliance Holdings’ control; and (3) financial and logistics assistance. We are led and advised by a management team that offers over 100 years of combined business expertise in real estate, insurance, and the financial service industry.

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 are currently in negotiations with several non-affiliated parties and expect to complete a number of material insurance asset transactions throughout the course of 2020.2021. As of December 31, 2019, we have acquired six insurance agencies, including both affiliated and unaffiliated companies. In addition to the acquisition of UIS Agency, LLC in August 2020, an unaffiliated niche transportation insurance agency we are in the process of continuing our investments in NSureNSURE Inc. As of October 8,November 23, 2020, our total investment in Nsure,NSURE, Inc., a digital insurance agency, amounted to $1.350 million. Reliance Holdings has committed to fund the Company for at least the next 12 months in the event that the capital raise is not successful. Additionally, we are in the process of closing on an acquisition that will make the Company cash positive. Specifically, the target agency reports over 145 affiliated offices in approximately 40 states nationwide. In addition, they have established relationships with over 120 well-known local and national carriers. The target agency has experienced steady organic growth and is generating over $150 million in recurring annual premiums. In addition, the audited financials for the company reflect over $2.5 million in net income in 2019, and we anticipate the transaction will be immediately accretive to our earnings. Moreover, the combination of this target acquisition with the cash flow of our existing portfolio, should ensure very strong, positive cash flow of the combined entities going forward.

Long term, we seek to conduct all transactions and acquisitions through the direct operations of the Company. However, in some instances, Reliance Global Holdings could act as a place holderplaceholder to facilitate the acquisition process, with those properties later transferred to us. In addition, we andwhereby Reliance Holdings planwill acquire the prospective asset and ultimately transfer it to conduct future transactionsthe Company at a later date. This would be necessary for example in orderthe case of a material acquisition that would require an audit. Reliance Holdings would acquire the asset and hold it as the audit is in process and transfer it to transfer additional assets to us, with the final goal of transferring mostCompany upon successful completion of the desirable properties, excluding assets thataudit. However, the Reliance Holdings owns via joint venture or with third parties.will ultimately, upon successful completion of the audit, transfer the asset to the Company and the Company will pay for the consideration of the asset.

Over the next 12 months, we plan to focus on the expansion and growth of our business through two different channels: continued asset acquisitions in insurance markets; and organic growth of our current insurance operations through geographic expansion and market share growth. Additionally, Reliance Holdings has committed to funding the Company for a period of no less than 12 months from the issuance of its condensed financial statements as of the filing of this registration statement.

Historically, the Company has been able to fund its acquisitions through the use of debt provided by its principal lender Oak Street Funding, LLC (“Oak Street”). Management believe that Oak Street will continue to support the Company’s acquisition plans. Further the Company plans to use the proceeds from the sale of securities to fund acquisitions. The Company may also issue common stock to sellers as consideration for acquisition. The is no assurance that Oak Street will continue to support the Company’s acquisitions, or the Company will be successful in raising additional capital through sales of securities.

Employees

As of October 7,December 1, 2020, we had 3943 full-time employees. We believe our employee relations to be good.

Corporate Information

Reliance Global Group, Inc. (formerly known as Ethos Media Network, Inc.) was incorporated in Florida on August 2, 2013. In September 2018, Reliance Global Holdings, LLC, a related party, purchased a controlling interest in the Company. Ethos Media Network, Inc. was renamed Reliance Global Group, Inc. on October 18, 2018. Our corporate website is www.relianceglobalgroup.com. Our website and the information contained in, or accessible through, our website will not be deemed to be incorporated by reference into this prospectus and does not constitute part of this prospectus. Our principal executive office is located at 300 Blvd. of the Americas, Suite 105 Lakewood, NJ 08701, and our phone number is 732-380-4600732-380-4600.

The Offering

The number of shares of common stock that will be outstanding after this offering set forth above is based upon 362,183,326356,938,348 shares of common stock outstanding as of October 7,December 4, 2020, and excludes the following:

SUMMARY FINANCIAL DATA

The following table summarizes our financial data. We derived the summary financial statement data as of and for the years ended December 31, 2019 and 2018 and sixnine months ended JuneSeptember 30, 2020 and 2019, set forth below from our financial statements and related notes, each of which are incorporated by referenceincluded in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the information presented below together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our financial statements, the notes to those statements and the other financial information appearing herein.

Consolidated Condensed Operations in U.S. Dollars (except share and per share data)

Condensed Audited Consolidated Balance Sheets in U.S. Dollars

Consolidated Condensed Operations in U.S. Dollars (except share and per share data)

Condensed Consolidated Balance Sheet in U.S. Dollars

RISK FACTORS

Investing in our securities involves a high degree of risk. Before making an investment decision, you should consider carefully the risks, uncertainties and all risk factors set forth in this prospectus supplement and the base prospectus to which it, which may be amended, supplemented or superseded from time to time by the other reports we file with the Commission in the future.

Risks related to this offering

Future sales or other issuances of our common stock could depress the market for our common stock.

Sales of a substantial number of shares of our common stock, or the perception by the market that those sales could occur, whether through this offering or other offerings of our securities, could cause the market price of our common stock to decline or could make it more difficult for us to raise funds through the sale of equity in the future.

We have broad discretion to use the net proceeds from this offering and our investment of these proceeds pending any such use may not yield a favorable return.

Because we have not designated the amount of net proceeds from this offering to be used for any particular purpose, our management will have broad discretion as to the application of the net proceeds from this offering, as described below in “Use of Proceeds,” and could use them for purposes other than those contemplated at the time of the offering. Our management may use the net proceeds for corporate purposes that may not improve our financial condition or market value of our common stock.

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock as of JuneSeptember 30, 2020, before giving effect to this offering. At a public offering price of $___ per share, which was our closing price in the OTCQB Venture Market on ______ __, 2020, and after deducting estimated offering expenses and estimated sales agent commissions payable by us, our as adjusted net tangible book value per share after giving effect to the sale of shares of our common stock in the aggregate amount of $_____ at the assumed offering price would be $____. Accordingly, purchasers of shares of our common stock in this offering will incur immediate and substantial dilution of approximately $____ per share, representing the difference between the as adjusted book value per share of our securities after the offering and the book value per share of our securities prior to the offering as of JuneSeptember 30, 2020. If the price at which the shares of our common stock are sold in this offering increases, the dilution experienced by such purchasers will increase proportionately. Furthermore, ifas of September 30, 2020, the approximate remaining outstanding$4,900,000 amount of the note ispayable to Reliance Holdings (which bears no interest and has no set term) $0 will be converted into common stock of the Company at the same price as the offering of a share of common stock in this offering, or if outstanding options or warrants are exercised, you could experience further dilution. For a further description of the dilution that our stockholders will experience immediately after this offering, see the section in this prospectus entitled “Dilution” in this prospectus.

Our shares will be subject to potential delisting if we do not maintain the listing requirements of the NASDAQ Capital Market.

NASDAQ has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing, or de-listing from NASDAQ, would make it more difficult for shareholders to dispose of our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.

Our ability to have our common stock and warrants traded on the NASDAQ is subject to us meeting applicable listing criteria.

We have applied for our common stock and warrants to be listed on NASDAQ, a national securities exchange. The NASDAQ requires companies desiring to list their common stock to meet certain listing criteria including total number of shareholders: minimum stock price, total value of public float, and in some cases total shareholders’ equity and market capitalization. Our failure to meet such applicable listing criteria could prevent us from listing our common stock on NASDAQ. In the event we are unable to have our shares traded on NASDAQ, our common stock could potentially trade on the OTCQX or the OTCQB, each of which is generally considered less liquid and more volatile than the NASDAQ. Our failure to have our shares traded on NASDAQ could make it more difficult for you to trade our shares, could prevent our common stock trading on a frequent and liquid basis and could result in the value of our common stock being less than it would be if we were able to list our shares on NASDAQ.

Our stock price can be volatile, which increases the risk of litigation, and may result in a significant decline in the value of your investment.

The trading price of our common stock has historically been, and is likely to continue to be, highly volatile and subject to wide fluctuations in price in response to various factors, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose part or all of your investment in our common stock. These factors include, but are not limited to, the following:

These broad market and industry factors may materially affect the market price of our common stock, regardless of our development and operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. Due to the volatility of our stock price, we are currently and may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention in the future attention and resources from our business.

Risks Related to Our Business

The Company has a limited operating history.

Since the change of control which took place in September of 2018, the Company’s operations have been limited to acquiring the insurance agencies as described in the “Insurance Operations” and “Overview”. Investors will have little basis upon which to evaluate the Company’s ability to achieve the Company’s business objectives which are to acquire, own and operate insurance agencies and multi-family apartment buildings.agencies.

The Company has limited resources and there is significant competition for business combination opportunities. Therefore, the Company may not be able to acquire other assets or businesses.

The Company expects to encounter intense competition from other entities having a business objective similar to the Company’s, which are also competing for acquisitions. Many of these entities are well established and have extensive experience in identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human, financial and other resources than the Company does, and the Company’s financial resources are limited when contrasted with those of many of these competitors.Company. While the Company believes that there are numerous potential target businesses that it could acquire, the Company’s ability to compete in acquiring certain sizable target businesses might be limited if the Company’s limited financial resources are less than that of its competitors. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.

The Company may be unable to obtain additional financing, if required, to complete an acquisition, or to Company the operations and growth of existing and target business, which could compel the Company to restructure a potential business transaction or abandon a particular business combination.

To date, much of our capital for acquiring insurance agencies and operating the ones we have acquired has come from funds provided by Reliance Global Holdings our affiliate, and from loans from unaffiliated lenders. We may be required to seek additional financing. We cannot assure you that such financing would be available on acceptable terms, if at all. If additional financing proves to be unavailable, we would be compelled to restructure or existing business, or abandon a proposed acquisition or acquisitions. In addition, if we consummate additional acquisitions, we may require additional financing to Company the operations or growth of that business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of our business.

Our inability to retain or hire qualified employees, as well as the loss of any of our executive officers, could negatively impact our ability to retain existing business and generate new business.

Our success depends on our ability to attract and retain skilled and experienced personnel. There is significant competition from within the insurance industry and from businesses outside the industries for exceptional employees, especially in key positions. If we are not able to successfully attract, retain and motivate our employees, our business, financial results and reputation could be materially and adversely affected.

Losing employees who manage or support substantial customer relationships or possess substantial experience or expertise could adversely affect our ability to secure and complete customer engagements, which would adversely affect our results of operations. Also, if any of our key personnel were to join an existing competitor or form a competing company, some of our customers could choose to use the services of that competitor instead of our services. While our key personnel are generally prohibited by contract from soliciting our employees and customers for a two-year period following separation from employment with us, they are not prohibited from competing with us.

In addition, we could be adversely affected if we fail to adequately plan for the succession of our senior leaders and key executives. We cannot guarantee that the services of these executives will continue to be available to us. The loss of our senior leaders or other key personnel, or our inability to continue to identify, recruit and retain such personnel, or to do so at reasonable compensation levels, could materially and adversely affect our business, results of operations, cash flows and financial condition.

Our growth strategy depends, in part, on the acquisition of other insurance intermediaries, which may not be available on acceptable terms in the future or which, if consummated, may not be advantageous to us.

Our growth strategy partially includes the acquisition of other insurance intermediaries. Our ability to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our operations, and expand into new markets requires us to implement and continuously improve our operations and our financial and management information systems. Integrated, acquired businesses may not achieve levels of revenues or profitability comparable to our existing operations, or otherwise perform as expected. In addition, we compete for acquisition and expansion opportunities with firms and banks that may have substantially greater resources than we do. Acquisitions also involve a number of special risks, such as diversion of management’s attention; difficulties in the integration of acquired operations and retention of personnel; increase in expenses and working capital requirements, which could reduce our return on invested capital; entry into unfamiliar markets or lines of business; unanticipated problems or legal liabilities; estimation of the acquisition earn-out payables; and tax and accounting issues, some or all of which could have a material adverse effect on our results of operations, financial condition and cash flows. Post-acquisition deterioration of operating performance could also result in lower or negative earnings contribution and/or goodwill impairment charges.

A cybersecurity attack, or any other interruption in information technology and/or data security and/or outsourcing relationships, could adversely affect our business, financial condition and reputation.

We rely on information technology and third party vendors to provide effective and efficient service to our customers, process claims, and timely and accurately report information to carriers and which often involves secure processing of confidential sensitive, proprietary and other types of information. Cybersecurity breaches of any of the systems we rely on may result from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions, any of which could expose us to data loss, monetary and reputational damages and significant increases in compliance costs. An interruption of our access to, or an inability to access, our information technology, telecommunications or other systems could significantly impair our ability to perform such functions on a timely basis. If sustained or repeated, such a business interruption, system failure or service denial could result in a deterioration of our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner or perform other necessary business functions. We have from time to time experienced cybersecurity breaches, such as computer viruses, unauthorized parties gaining access to our information technology systems and similar incidents, which to date have not had a material impact on our business.

Additionally, we are an acquisitive organization and the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risk as we might not adequately identify weaknesses in the targets’ information systems, which could expose us to unexpected liabilities or make our own systems more vulnerable to attack. In the future, any material breaches of cybersecurity, or media reports of the same, even if untrue, could cause us to experience reputational harm, loss of clients and revenue, loss of proprietary data, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard clients’ information or financial losses. Such losses may not be insured against or not fully covered through insurance we maintain.

While we have invested and continue to invest in technology security initiatives, policies and resources and employee training, entirely eliminating all risk of improper access to private information is not possible. The cost and operational consequences of implementing, maintaining and enhancing further system protections measures could increase significantly as cybersecurity threats increase. As these threats evolve, cybersecurity incidents will be more difficult to detect, defend against and remediate. Any of the foregoing may have a material adverse effect on our business, financial condition and reputation.

Rapid technological change may require additional resources and time to adequately respond to dynamics, which may adversely affect our business and operating results.

Frequent technological changes, new products and services and evolving industry standards are influencing the insurance businesses. The Internet, for example, is increasingly used to securely transmit benefits, property and personal information, and related information to customers and to facilitate business-to-business information exchange and transactions.

We are continuously taking steps to upgrade and expand our information systems capabilities. Maintaining, protecting and enhancing these capabilities to keep pace with evolving industry and regulatory standards, and changing customer preferences, requires an ongoing commitment of significant resources. If the information we rely upon to run our businesses was found to be inaccurate or unreliable or if we fail to effectively maintain our information systems and data integrity, we could experience operational disruptions, regulatory or other legal problems, increases in operating expenses, loss of existing customers, difficulty in attracting new customers, or suffer other adverse consequences.

Changes in data privacy and protection laws and regulations, or any failure to comply with such laws and regulations, could adversely affect our business and financial results.

We are subject to a variety of continuously evolving and developing laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. Significant uncertainty exists as privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements. These laws apply to transfers of information among our affiliates, as well as to transactions we enter into with third party vendors. These and similar initiatives around the world could increase the cost of developing, implementing or securing our servers and require us to allocate more resources to improved technologies, adding to our information technology and compliance costs. In addition, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase. The enactment of more restrictive laws, rules, regulations or future enforcement actions or investigations could impact us through increased costs or restrictions on our business, and noncompliance could result in regulatory penalties and significant legal liability.

Because our insurance business is highly concentrated in Michigan, New Jersey, Montana and Ohio, adverse economic conditions, natural disasters, or regulatory changes in these regions could adversely affect our financial condition.

A significant portion of our insurance business is concentrated in Michigan, New Jersey, Montana and Ohio. For the year ended December 31, 2019, and the period from August 1, 2018 through December 31, 2018 we derived $4,450,785 and $390,770 respectively or 100%, of our annualized revenue, respectively, from our operations located in these regions (FYE 2019 - Michigan – 42.14%, New Jersey – 8.36%, Montana – 23.29% and Ohio – 26.22% and FYE 2018 – Michigan 100%). For the 3 and 69 months ended JuneSeptember 30, 2020 we derived revenues of approximately $900,287 (47%$812,000 (48%) and $1,749,678 (48%$2,437,000 (46%), respectively from Michigan, $489,826 (25%$318,000 (19%) and $853,885 (23%$1,171,000 (22%), respectively from Montana, $537,598$469,000 (28%) and $1,017,150$1,486,000 (28%), respectively from Ohio and $98,031$82,000 (5%) and $149,855$232,000 (4%), respectively from New Jersey. The insurance business is primarily a state-regulated industry, and therefore, state legislatures may enact laws that adversely affect the insurance industry. Because our business is concentrated in these four states, we face greater exposure to unfavorable changes in regulatory conditions in those states than insurance intermediaries whose operations are more diversified through a greater number of states. In addition, the occurrence of adverse economic conditions, natural or other disasters, or other circumstances specific to or otherwise significantly impacting these states could adversely affect our financial condition, results of operations and cash flows. We are susceptible to losses and interruptions caused by hurricanes or other weather conditions, and other possible events such as terrorist acts and other natural or man-made disasters. Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate or may not continue to be available at commercially reasonable rates and terms.

If we fail to comply with the covenants contained in certain of our agreements, our liquidity, results of operations and financial condition may be adversely affected.

The Oak Street credit agreements, in the aggregate principal amount of $9,328,151,$9,210,546, as of JuneSeptember 30, 2020, that govern our debt contain various covenants and other limitations with which we must comply and also contain provisions which cause a “cross default” if we default our obligations under other material contracts to which we are parties. AtThe credit agreement contains customary and usual events of default. Upon an event of default, the lender has customary and usual remedies to cure these defaults including, but not limited to, the ability to accelerate the indebtedness.

The Senior Funded Debt to EBIDTA ratio stated in the covenant “shall be no greater than 4.0 to 1.0”. As of June 30, 2020, the ratio was 4.97 with the Company thereby, defaulting on the covenant. As of June 30, 2020, the Company obtained a covenant waiver in order to continue to be in compliance with the financial covenants and other limitations contained in each of these agreements. However, failure to comply with material provisions of our covenants in these agreements or other credit or similar agreements to which we may become a party could result in a default, rendering them unavailable to us and causing a material adverse effect on our liquidity, results of operations and financial condition. In the event of certain defaults, the lenders thereunder would not be required to lend any additional amounts to us and could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable. If the indebtedness under these agreements or our other indebtedness, were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full.

fullFor the six months ended June 30, 2020, we did not meet the senior funded debt to EBITDA covenant of our loan agreement. On August 11, 2020 the Company received a covenant waiver from its lender, Oak Street. The waiver adjusted covenant terms going forward are set forth as follows: “As long as the conditions precedent set forth below are satisfied as determined by Oak Street in its sole discretion and the Borrower pays Oak Street a waiver fee in the amount of $2,000, Oak Street will waive the Defaults and agree to reset the Financial Covenants as follows:.

Due to the covenant waiver on June 30, 2020, Oak Street and the Company signed an amended agreement on August 11, 2020, to update its covenant so that, the Company should remain in compliance. The amendment states that for the 9/30/2020 and 12/31/2020 covenant test, the ratio of Senior Funded Debt to EBIDTA shall be no greater than 5.0 to 1.0. Beginning at 3/31/2021 and thereafter the Senior Funded Debt to EBIDTA ratio shall be reduced to no greater than 4.0 to 1.0.

As of the date of this Registration Statement, we are in compliance and do not believe we are at further risk of noncompliance.

Certain of our agreements contain various covenants that limit the discretion of our management in operating our business and could prevent us from engaging in certain potentially beneficial activities.

The restrictive covenants in our debt agreements may impact how we operate our business and prevent us from engaging in certain potentially beneficial activities. In particular, among other covenants, our debt agreements require us to maintain a minimum ratio of Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted for certain transaction-related items (“Consolidated EBITDA”), to consolidated interest expense and a maximum ratio of consolidated net indebtedness to Consolidated EBITDA. Our compliance with these covenants could limit management’s discretion in operating our business and could prevent us from engaging in certain potentially beneficial activities.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our financial position and results of operations and therefore our business.

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 it estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates. Our critical accounting estimates are the estimates of fair value used to measure the assets acquired and liabilities assumed in business combination transactions. These estimates are based on valuation models that may include unobservable inputs such as forecasted future cash flows. To perform our goodwill impairment analysis, we estimate the fair value of our reporting units using valuation techniques that rely on unobservable inputs. We use option pricing models to estimate the fair value of compensatory stock options issued to employees and consultants. Our deferred tax assets have been reduced by a valuation allowance that represents our estimate of deferred tax assets that may not be realized. We estimate our incremental borrowing rate used to calculate our lease liabilities and right-of use assets base on our most recent borrowings.

Improper disclosure of confidential information could negatively impact our business.

We are responsible for maintaining the security and privacy of our customers’ confidential and proprietary information and the personal data of their employees. We have put in place policies, procedures and technological safeguards designed to protect the security and privacy of this information; however, we cannot guarantee that this information will not be improperly disclosed or accessed. Disclosure of this information could harm our reputation and subject us to liability under our contracts and laws that protect personal data, resulting in increased costs or loss of revenues.

Our business, results of operations, financial condition and liquidity may be materially adversely affected by certain actual and potential claims, regulatory actions and proceedings.

We are subject to various actual and potential claims, regulatory actions and other proceedings including those relating to alleged errors and omissions in connection with the placement or servicing of insurance and/or the provision of services in the ordinary course of business, of which we cannot, and likely will not be able to, predict the outcome with certainty. Because we often assist customers with matters involving substantial amounts of money, including the placement of insurance and the handling of related claims that customers may assert, errors and omissions claims against us may arise alleging potential liability for all or part of the amounts in question. Also, the failure of an insurer with whom we place business could result in errors and omissions claims against us by our customers, which could adversely affect our results of operations and financial condition. Claimants may seek large damage awards, and these claims may involve potentially significant legal costs, including punitive damages. Such claims, lawsuits and other proceedings could, for example, include claims for damages based upon allegations that our employees or sub-agents failed to procure coverage, report claims on behalf of customers, provide insurance companies with complete and accurate information relating to the risks being insured or appropriately apply funds that we hold for our customers on a fiduciary basis. In addition, given the long-tail nature of professional liability claims, errors and omissions matters can relate to matters dating back many years. Where appropriate, we have established provisions against these potential matters that we believe to be adequate in the light of current information and legal advice, and we adjust such provisions from time to time according to developments.

While most of the errors and omissions claims made against us (subject to our self-insured deductibles) have been covered by our professional indemnity insurance, our business, results of operations, financial condition and liquidity may be adversely affected if, in the future, our insurance coverage proves to be inadequate or unavailable, or if there is an increase in liabilities for which we self-insure. Our ability to obtain professional indemnity insurance in the amounts and with the deductibles we desire in the future may be adversely impacted by general developments in the market for such insurance or our own claims experience. In addition, regardless of monetary costs, these matters could have a material adverse effect on our reputation and cause harm to our carrier, customer or employee relationships, or divert personnel and management resources.

Risks Related to the Insurance Industry

We may experience increased competition from insurance companies, technology companies and the financial services industry, as well as the shift away from traditional insurance markets.

The insurance intermediary business is highly competitive and we actively compete with numerous firms for customers, properties 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. A number of insurance companies are engaged in the direct sale of insurance, primarily to individuals, and do not pay commissions to agents and brokers. In addition, and to the extent that banks, securities firms, private equity companies, and insurance companies affiliate, the financial services industry may experience further consolidation, and we therefore may experience increased competition from insurance companies and the financial services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of financial services, including insurance intermediary services.

In addition, there has been an increase in alternative insurance markets, such as self-insurance, captives, risk retention groups and non-insurance capital markets. While we collaborate and compete in these segments on a fee-for-service basis, we cannot be certain that such alternative markets will provide the same level of insurance coverage or profitability as traditional insurance markets.

Lastly, our multifamily residential communities compete for residents with other housing alternatives, including other rental apartments and condominiums, and, to a lesser degree, single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale. Competitive residential housing as well as household formation and job creation in a particular area could adversely affect our ability to lease apartment homes and to increase or maintain rental rates.

Worsening of Current U.S. economic conditions as a result of the COVID-19 pandemic may adversely affect our business.

If economic conditions were to worsen, a number of negative effects on our business could result, including declines in values of insurable exposure units, declines in insurance premium rates, the financial insolvency of insurance companies, the reduced ability of customers to pay, declines in the stock of residential housing or declines in property values. Also, if general economic conditions are poor, some of our customers may cease operations completely or be acquired by other companies, which could have an adverse effect on our results of operations and financial condition. If these customers are affected by poor economic conditions, but yet remain in existence, they may face liquidity problems or other financial difficulties that could result in delays or defaults in payments owed to us, which could have a significant adverse impact on our consolidated financial condition and results of operations. Any of these effects could decrease our net revenues and profitability.

Our business, and therefore our results of operations and financial condition, may be adversely affected by conditions that result in reduced insurer capacity.

Our results of operations depend on the continued capacity of insurance carriers to underwrite risk and provide coverage, which depends in turn on those insurance companies’ ability to procure reinsurance. Capacity could also be reduced by insurance companies failing or withdrawing from writing certain coverages that we offer to our customers. We have no control over these matters. To the extent that reinsurance becomes less widely available or significantly more expensive, we may not be able to procure the amount or types of coverage that our customers desire and the coverage we are able to procure for our customers may be more expensive or limited.

Quarterly and annual variations in our commissions that result from the timing of policy renewals and the net effect of new and lost business production may have unexpected effects on our results of operations.

Our commission income (including profit-sharing contingent commissions and override commissions) can vary quarterly or annually due to the timing of policy renewals and the net effect of new and lost business production. We do not control the factors that cause these variations. Specifically, customers’ demand for insurance products can influence the timing of renewals, new business and lost business (which includes policies that are not renewed), and cancellations. In addition, we rely on insurance companies for the payment of certain commissions. Because these payments are processed internally by these insurance companies, we may not receive a payment that is otherwise expected from a particular insurance company in a particular quarter or year until after the end of that period, which can adversely affect our ability to forecast these revenues and therefore budget for significant future expenditures. Quarterly and annual fluctuations in revenues based upon increases and decreases associated with the timing of new business, policy renewals and payments from insurance companies may adversely affect our financial condition, results of operations and cash flows.

Profit-sharing contingent commissions are special revenue-sharing commissions paid by insurance companies based upon the profitability, volume and/or growth of the business placed with such companies generally during the prior year. Over the last three years these commissions generally have been in the range of 3.0% to 3.5% of our previous year’s total core commissions and fees. Due to, among other things, potentially poor macroeconomic conditions, the inherent uncertainty of loss in our industry and changes in underwriting criteria due in part to the high loss ratios experienced by insurance companies, we cannot predict the payment of these profit-sharing contingent commissions. Further, we have no control over the ability of insurance companies to estimate loss reserves, which affects our ability to make profit-sharing calculations. Override commissions are paid by insurance companies based upon the volume of business that we place with them and are generally paid over the course of the year. Because profit-sharing contingent commissions and override commissions materially affect our revenues, any decrease in their payment to us could adversely affect our results of operations, profitability, and our financial condition.

Our business practices and compensation arrangements are subject to uncertainty due to potential changes in regulations.

The business practices and compensation arrangements of the insurance intermediary industry, including our practices and arrangements, are subject to uncertainty due to investigations by various governmental authorities. Certain of our offices are parties to profit-sharing contingent commission agreements with certain insurance companies, including agreements providing for potential payment of revenue-sharing commissions by insurance companies based primarily on the overall profitability of the aggregate business written with those insurance companies and/or additional factors such as retention ratios and the overall volume of business that an office or offices place with those insurance companies. Additionally, to a lesser extent, some of our offices are parties to override commission agreements with certain insurance companies, which provide for commission rates in excess of standard commission rates to be applied to specific lines of business, such as group health business, and which are based primarily on the overall volume of business that such office or offices placed with those insurance companies. The legislatures of various states may adopt new laws addressing contingent commission arrangements, including laws prohibiting such arrangements, and addressing disclosure of such arrangements to insureds. Various state departments of insurance may also adopt new regulations addressing these matters which could adversely affect our results of operations.

We may have unforeseen risks as a result of the COVID-19 pandemic

The spread of the coronavirus (COVID-19) outbreak in the United States has resulted in economic uncertainties which may negatively impact the Company’s business operations. While the disruption is expected to be temporary, there is uncertainty surrounding the duration and extent of the impact. The impact of the coronavirus outbreak on the financial statements cannot be reasonably estimated at this time.

Adverse events such as health-related concerns about working in our offices, the inability to travel and other matters affecting the general work environment could harm our business and our business strategy. While we do not anticipate any material impact to our business operations as a result of the coronavirus, in the event of a major disruption caused by the outbreak of pandemic diseases such as coronavirus, we may lose the services of our employees or experience system interruptions, which could lead to diminishment of our business operations. Any of the foregoing could harm our business and delay the implementation of our business strategy and we cannot anticipate all the ways in which the current global health crisis and financial market conditions could adversely impact our business.

Management is actively monitoring the global situation on its financial condition, liquidity, operations, industry and workforce. Given the daily evolution of the coronavirus and the global responses to curb its spread, the Company is not able to estimate the effects of the coronavirus on its results of operations, financial condition or liquidity for fiscal year 2020.

Risk of lack of knowledge in distant geographic markets

Although the Company intends to focus its investments in locations with which we are generally familiar, the Company runs a risk of experiencing underwriting challenges or issues associated with a lack of familiarity in some markets. Each market has nuances and idiosyncrasies that affect values, marketability, desirability, and demand for individual assets that may not be easily understood from afar. While we believe we can effectively mitigate these risks in a myriad of ways, there is no guarantee that investments in any geographic market will perform as expected.

Potential liability or other expenditures associated with potential environmental contamination may be costly.

Various federal, state and local laws subject multifamily residential community owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials that may be present in the land or buildings of a multifamily residential community. Potentially hazardous materials may include polychlorinated biphenyls, petroleum-based fuels, lead-based paint or asbestos, among other materials. Such laws often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with investigation and remediation actions, damages to natural resources and for potential fines or penalties in connection with such damage or with respect to the improper management of hazardous materials. Moreover, private plaintiffs may potentially make claims for investigation and remediation costs they incur, or personal injury, disease, disability or other infirmities related to the alleged presence of hazardous materials at a multifamily residential community. In addition to potential environmental liabilities or costs associated with our current multifamily residential communities, we may also be responsible for such liabilities or costs associated with communities we acquire or manage in the future, or multifamily residential communities we no longer own or operate.

Laws benefiting disabled persons may result in our incurrence of unanticipated expenses.

Under the Americans with Disabilities Act of 1990 (the “ADA”), all places intended to be used by the public are required to meet certain federal requirements related to access and use by disabled persons. The Fair Housing Amendments Act of 1988 (the “FHAA”) requires multifamily residential communities first occupied after March 13, 1991, to comply with design and construction requirements for disabled access. For those multifamily residential communities receiving federal funds, the Rehabilitation Act of 1973 also has requirements regarding disabled access. These and other federal, state and local laws may require structural modifications to our apartment communities or changes in policy practice or affect renovations of the communities. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. Although we believe that our multifamily residential communities are substantially in compliance with present requirements, we may incur unanticipated expenses to comply with the ADA, the FHAA and the Rehabilitation Act of 1973 in connection with the ongoing operation or redevelopment of our multifamily residential communities.

We compete in a highly regulated industry, which may result in increased expenses or restrictions on our operations.

We conduct business in several states of the United States of America and are subject to comprehensive regulation and supervision by government agencies in each of those states. The primary purpose of such regulation and supervision is to provide safeguards for policyholders rather than to protect the interests of our shareholders, and it is difficult to anticipate how changes in such regulation would be implemented and enforced. As a result, such regulation and supervision could reduce our profitability or growth by increasing compliance costs, technology compliance, restricting the products or services we may sell, the markets we may enter, the methods by which we may sell our products and services, or the prices we may charge for our services and the form of compensation we may accept from our customers, carriers and third parties. The laws of the various state jurisdictions establish supervisory agencies with broad administrative powers with respect to, among other things, licensing of entities to transact business, licensing of agents, admittance of assets, regulating premium rates, approving policy forms, regulating unfair trade and claims practices, determining technology and data protection requirements, establishing reserve requirements and solvency standards, requiring participation in guarantee funds and shared market mechanisms, and restricting payment of dividends. Also, in response to perceived excessive cost or inadequacy of available insurance, states have from time to time created state insurance funds and assigned risk pools, which compete directly, on a subsidized basis, with private insurance providers. We act as agents and brokers for such state insurance funds and assigned risk pools in Michigan as well as certain other states. These state funds and pools could choose to reduce the sales or brokerage commissions we receive. Any such reductions, in a state in which we have substantial operations could affect the profitability of our operations in such state or cause us to change our marketing focus. Further, state insurance regulators and the National Association of Insurance Commissioners continually re-examine existing laws and regulations, and such re-examination may result in the enactment of insurance-related laws and regulations, or the issuance of interpretations thereof, that adversely affect our business. Certain federal financial services modernization legislation could lead to additional federal regulation of the insurance industry in the coming years, which could result in increased expenses or restrictions on our operations. Other legislative developments that could adversely affect us include: changes in our business compensation model as a result of regulatory developments (for example, the Affordable Care Act); and federal and state governments establishing programs to provide health insurance or, in certain cases, property insurance in catastrophe-prone areas or other alternative market types of coverage, that compete with, or completely replace, insurance products offered by insurance carriers. Also, as climate change issues become more prevalent, the U.S. and foreign governments are beginning to respond to these issues. This increasing governmental focus on climate change may result in new environmental regulations that may negatively affect us and our customers. This could cause us to incur additional direct costs in complying with any new environmental regulations, as well as increased indirect costs resulting from our customers incurring additional compliance costs that get passed on to us. These costs may adversely impact our results of operations and financial condition.

Although we believe that we are in compliance in all material respects with applicable local, state and federal laws, rules and regulations, there can be no assurance that more restrictive laws, rules, regulations or interpretations thereof, will not be adopted in the future that could make compliance more difficult or expensive.

Risks Related to Investing in our Securities

We may experience volatility in our stock price that could affect your investment.

The market price of our common stock may be subject to significant fluctuations in response to various factors, including: quarterly fluctuations in our operating results; changes in securities analysts’ estimates of our future earnings; changes in securities analysts’ predictions regarding the short-term and long-term future of our industry; changes to the tax code; and our loss of significant customers or significant business developments relating to us or our competitors. Our common stock’s market price also may be affected by our inability to meet stock analysts’ earnings and other expectations. Any failure to meet such expectations, even if minor, could cause the market price of our common stock to decline. In addition, stock markets have generally experienced a high level of price and volume volatility, and the market prices of equity securities of many listed companies have experienced wide price fluctuations not necessarily related to the operating performance of such companies. These broad market fluctuations may adversely affect our common stock’s market price. In the past, securities class action lawsuits frequently have been instituted against companies following periods of volatility in the market price of such companies’ securities. If any such litigation is initiated against us, it could result in substantial costs and a diversion of management’s attention and resources, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The Company’s CEO has a controlling common stock equity interest.

OurAt September 30, 2020, our CEO, Ezra Beyman, is the beneficial owner of approximately 62.49% of the common stock.stock, consisting of 93,016,503 common shares and 33,811,991 preferred shares that are  convertible to common at 1 for 10 at his discretion, and at closing of the offering which is the subject of this prospectus, the outstanding amount of the loan from Reliance Holdings to us, in the principal amount of approximately $4.9 million, will also convert into common stock of the Company at the same price per share as the per share price of our common stock in the public offering. As such he has the ability to control any actions which require shareholder approval. If there is an annual or special meeting of stockholders for any reason, our CEO has total discretion regarding proposals submitted to a vote by shareholders as a consequence of his significant equity interest. Accordingly, the Company’s CEO will continue to exert substantial control until such time, if ever, that he no longer has majority voting control.

Other risks involving our Company and its securities

There are generic risksThe Company is at present, and may likely be, upon closing of the public offering which involve an investment in our securities:is the subject of this prospectus, a controlled company, but the Company will not rely on any controlled company exemptions from Nasdaq corporate governance requirements or otherwise.

Broad discretion of management

Any person who invests in the Company’s common stock will do so without an opportunity to evaluate the specific merits or risks of any prospective acquisition. As a result, investors will be entirely dependent on the broad discretion and judgment of management in connection with the selection of acquisitions. There can be no assurance that determinations made by the Company’s management will permit us to achieve the Company’s business objectives.

Future sales or other dilution of our equity could adversely affect the market price of our common stock.

We grow our business organically as well as through acquisitions. One method of acquiring companies or otherwise Companying our corporate activities is through the issuance of additional equity securities. The issuance of any additional shares of common or of preferred stock or convertible securities could be substantially dilutive to holders of our common stock. Moreover, to the extent that we issue restricted stock units, performance stock units, options or warrants to purchase shares of our common stock in the future and those options or warrants are exercised or as the restricted stock units or performance stock units vest, our stockholders may experience further dilution. Holders of our common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our stockholders. The market price of our common stock could decline as a result of sales of shares of our common stock or the perception that such sales could occur.

The price of our common stock may fluctuate significantly, and this may make it difficult for you to resell shares of common stock owned by you at times or at prices you find attractive.

The trading price of our common stock may fluctuate widely as a result of a number of factors, including the risk factors described above many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have adversely affected and may continue to adversely affect the market price of our common stock. Among the factors that could affect our stock price are:

Stockholder class action lawsuits may be instituted against us following a period of volatility in our stock price. Any such litigation could result in substantial cost and a diversion of management’s attention and resources.

The Company’s shares of common stock are traded on the OTCQB, with limited liquidity.

Our common stock currently trades on the OTCQB. There can be no assurance that there will be a liquid trading market for the Company’s common stock. In the event that a liquid trading market commences, there can be no assurance as to the market price of the Company’s shares of common stock, whether any trading market will provide liquidity to investors, or whether the current trading market will be sustained.

We intend to apply for listing of our common stock the Nasdaq Capital Market. We can provide no assurance that our common stock or the warrants will qualify to be listed, and, if listed, that our common stock will thereafter always meet the Nasdaq Capital Market continued listing standards.

Our common stock is currently quoted on the OTCQB. We intend to immediately apply for our common stock and Class A Warrants to be listed on the Nasdaq Capital Market; however, we can provide no assurance that our application will be approved, and that an active trading market on the Nasdaq Capital Market for our common stock and the warrants will develop and continue. If our common stock remains quoted on or reverts to an over-the-counter system rather than being listed on a national securities exchange, you may find it more difficult to dispose of shares of our common stock or obtain accurate quotations as to the market value of our common stock. The completion of this offering is conditioned on our common stock being approved for listing on the Nasdaq Capital Market or another securities exchange. As of the date of this memorandum, we have not applied to any other securities exchange to list our common stock.

If the Nasdaq Capital Market approves our application to list our common stock and we are not able to comply with the applicable continued listing standards of the Nasdaq Capital Market, the Nasdaq Capital Market could delist our common stock.

We intend in the near future to apply to list our common stock on the Nasdaq Capital Market. There is no assurance that our common stock or will ever be listed on the Nasdaq Capital Market. Should our common stock be listed on the Nasdaq Capital Market, in order to maintain that listing, we must satisfy minimum financial and other continued listing standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply with such applicable continued listing standards.

Possible issuance of additional securities.

Our Articles of Incorporation authorize the issuance of 2,000,000,000 shares of common stock, par value $0.001 per share. As of JuneSeptember 30, 2020, we had 356,742,548363,516,660 shares issued and outstanding. We may be expected to issue additional shares in connection with our pursuit of new business opportunities and new business operations. To the extent that additional shares of common stock are issued, our shareholders would experience dilution of their respective ownership interests. If we issue shares of common stock in connection with our intent to pursue new business opportunities, a change in control of the Company may be expected to occur. The issuance of additional shares of common stock may adversely affect the market price of our common stock, in the event that an active trading market commences.

Dividends unlikely.

The Company does not expect to pay dividends for the foreseeable future. The payment of dividends will be contingent upon the Company’s future revenues and earnings, if any, capital requirements and overall financial conditions. The payment of any future dividends will be within the discretion of the Company’s board of directors as then constituted. It is the Company’s expectation that future Management following a business combination will determine to retain any earnings for use in its business operations and accordingly, the Company does not anticipate declaring any dividends in the foreseeable future.

Speculative Nature of Warrants.

The warrants offered in this offering do not confer any rights of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of our common stock at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the Series A Warrants may exercise their right to acquire the common stock and pay an exercise price of $____ per share ( 110%(110% of the public offering price of our common stock and warrants in this offering), prior to five years from the date of issuance, after which date any unexercised warrants will expire and have no further value, and holders of the Series B Warrants may exercise their right to acquire the common stock and pay an exercise price of $____ per share (100% of the public offering price of our common stock and warrants in this offering), prior to one year from the date of issuance, after which date any unexercised warrants will expire and have no further value. Moreover, following this offering, the market value of the warrants is uncertain and there can be no assurance that the market value of the warrants will equal or exceed their public offering price. There can be no assurance that the market price of the common stock will ever equal or exceed the exercise price of the warrants, and consequently, whether it will ever be profitable for holders of the warrants to exercise the warrants.

Our common stock is subject to the Penny Stock Rules of the SEC and the trading market in our common stock is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our common stock.

The Securities and Exchange Commission has adopted Rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 require:

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

State blue sky registration; potential limitations on resale of the Company’s common stock

The holders of the Company’s shares of common stock registered under the Exchange Act and those persons who desire to purchase them in any trading market that may develop in the future, should be aware that there may be state blue-sky law restrictions upon the ability of investors to resell the Company’s securities. Accordingly, investors should consider the secondary market for the Company’s securities to be a limited one.

It is the intention of the Company’s Management following the consummation of an acquisition to seek coverage and publication of information regarding the Company in an accepted publication manual which permits a manual exemption. The manual exemption permits a security to be distributed in a particular state without being registered if the Company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer’s balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. Furthermore, the manual exemption is a non-issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities.

Most of the accepted manuals are those published by Standard and Poor’s, Moody’s Investor Service, Fitch’s Investment Service, and Best’s Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This memorandum contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the “Part I,” “Risk Factors and “Business,” but are also contained elsewhere in this memorandum. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements include, but are not limited to, statements about:

You should read this Form S-1, including the section titled “Risk Factors,” completely and with the understanding that our actual results may differ materially from what we expect as expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

These forward-looking statements represent our estimates and assumptions only as of the date of this Form S-1 regardless of the time of delivery of this Form S-1 or any sale of our common stock. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Form S-1. All subsequent forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein.

Industry and Market Data

Unless otherwise indicated, information contained in this Form S-1 concerning our industry and the markets in which we operate, including our general expectations and market opportunity and market size, is based on information from various sources, including independent industry publications. In presenting this information, we have also made assumptions based on such data and other similar sources, and on our knowledge of, and our experience to date in the relevant industries and markets. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We believe that the information from these industry publications that is included in this Form S-1 is reliable. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the ____ Class A Units will be approximately $____ million, or approximately $______ million if the underwriter exercises in full its option to purchase additional shares, based on an assumed public offering price of $_____ per Class A Unit, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. This estimate excludes the proceeds, if any, from the exercise of common warrants in this offering. If all of the Series A common warrants sold in this offering were to be exercised in cash at an assumed exercise price of $____ per share, we would receive additional net proceeds of approximately $____ million. We cannot predict when or if these Series A common warrants will be exercised. It is possible that these Series A common warrants may expire and may never be exercised. Each $1.00 increase (decrease) in the assumed public offering price of $____ per Class A Unit would increase (decrease) the net proceeds to us from this offering by approximately $____ million, or approximately $____ million if the underwriter exercises its over-allotment option in full, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remain the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The expected use of net proceeds of this offering represents our current intentions based upon our present plan and business conditions. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. The amounts and timing of our actual use of net proceeds will vary depending on numerous factors. As a result, management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering.

Pending the use of the net proceeds of this offering, we intend to invest the net proceeds in short-term investment-grade, interest-bearing securities.

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

As of October 8,December 3, 2020, we had approximately 545546 shareholders of record of our common stock.

Our common stock is listed on the OTCQB Venture Market under the symbol “RELI”. We have applied for the listing of our common stock on NASDAQ under the symbol “RELI.” In conjunction therewith, we also have applied to have the warrants listed on The NASDAQ Capital Market under the symbol “RELIW” and Class A Units under the symbol “RELIU”. No assurance can be given that such application will be approved or that a trading market will develop. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Equity Compensation Plan Information

DIVIDEND POLICY

We have never paid any cash dividends on our common stock. We anticipate that we will retain funds and future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future following this offering. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements and other factors that our Board of Directors deems relevant. In addition, the terms of any future debt or credit financings may preclude us from paying dividends.

CAPITALIZATION

The following table sets forth our capitalization as of JuneSeptember 30, 2020:

You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing in each of our Annual Report for the fiscal year ended December 31, 2019 and Quarterly Report for the three and sixnine months ended JuneSeptember 30, 2020, which are set forth in this prospectus.

Numbers are expressed in U.S. dollars.

The number of shares of common stock that will be outstanding after this offering set forth above is based on 356,742,548363,516,660 shares of common stock outstanding as of JuneSeptember 30, 2020, and excludes the following:

DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the as adjusted net tangible book value (deficit) per share immediately after this offering. We calculate net tangible book value per share by dividing our net tangible book value (deficit), which is tangible assets less total liabilities less debt discounts, by the number of outstanding shares of our common stock as of June September30, 2020. Our historical net tangible book value (deficit) as of JuneSeptember 30, 2020, was approximately $____ million or $____ per share of our common stock.

After giving effect to the sale of ______ shares of our common stock at a public offering price of $____ per share (which was our closing price in the OTCQB Venture Market on October __, 2020), after deducting the underwriting discounts and commissions and estimated offering costs payable by us, our as adjusted net tangible book value (deficit) as of June 30, 2020, would have been approximately $                      million, or $                      per share of common stock. This represents an immediate increase in as adjusted net tangible book value of $                       per share to existing shareholders and an immediate dilution of $                      per share to investors purchasing shares of common stock in this offering at the public offering price.

The following table illustrates per share dilution as of JuneSeptember 30, 2020:

If the underwriters exercise in full their option to purchase up to                       additional shares of common stock at the public offering price of $                       per share, the as adjusted net tangible book value (deficit) after this offering would be $                       per share, representing an increase in net tangible book value (deficit) of $                       per share to existing shareholders and immediate dilution in net tangible book value (deficit) of $                       per share to investors purchasing our common stock in this offering at the assumed public offering price.

A $____ increase in the public offering price of $_____ per share (the last reported sale price of our common stock on The OTCQB Venture Market on October __, 2020) would result in an increase in our as adjusted net tangible book value after this offering of approximately $                       million, or approximately $                       per share, and the dilution per share to investors purchasing common stock in this offering would be approximately $                       per share, assuming that the number of shares of our common stock sold by us remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a decrease of $____ in the assumed public offering price of $                       per share would result in a decrease in our as adjusted net tangible book value after this offering of approximately $                       million, or approximately $                       per share, and the dilution per share to investors purchasing common stock in this offering would be $                       per share, assuming that the number of shares of our common stock sold by us remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We may also increase or decrease the number of shares of common stock we are offering from the number of shares of common stock set forth above. An increase of 1.0 million in the assumed number of shares of common stock sold by us in this offering would result in an increase in our as adjusted net tangible book value of approximately $                       million, or approximately $                       per share, and the dilution per share to investors purchasing common stock in this offering would be approximately $                       per share, assuming that the assumed public offering price per share of common stock remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A decrease of 1.0 million in the assumed number of shares of common stock sold by us in this offering would result in a decrease in our as adjusted net tangible book value after this offering of approximately $                       million, or approximately $                       per share, and the dilution per share to investors purchasing common stock in this offering would be approximately $                       per share, assuming that the assumed public offering price per share of common stock remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The information discussed above is illustrative only and will adjust based on the actual public offering price, the actual number of shares sold in this offering and other terms of this offering determined at pricing.

Earlier stock issuances, of our common stock, under private placements exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, to third parties, are as follows:

The discussion and table above assume exclude the following:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

BUSINESS

Some of the statements contained in this registration statement on Form S-1 of Reliance Global Group, Inc. (hereinafter the “Company”, “we” or “RELI” or the “Company”) discuss future expectations, contain projections of our plan of operation or financial condition or state other forward- looking information. In this registration statement, forward-looking statements are generally identified by the words such as “anticipate”, “plan”, “believe”, “expect”, “estimate”, and the like. Forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results or plans to differ materially from those expressed or implied. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions. A reader, whether investing in the Company’s securities or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this Registration Statement. Important factors that may cause actual results to differ from projections include, for example:

Overview

Reliance Global Group, Inc. (formerly known as Ethos Media Network, Inc.) was incorporated in Florida on August 2, 2013. In September 2018, Reliance Global Holdings, LLC, a related party, purchased a controlling interest in the Company. Ethos Media Network, Inc. was renamed Reliance Global Group, Inc. on October 18, 2018.

We operate as a holdings company investing in assets in the insurance market, as well as other related sectors.industry and purchase and manage various insurance agencies. Our focus is to grow the Company through internal business growth and by pursuing an aggressive acquisition strategy, initially and primarily focused upon wholesale and retail insurance agencies. The Company is controlled by the same management team as Reliance Global Holdings, LLC (“Reliance Holdings”), a New York based firm that is the owner and operator of numerous companies with core interests in real estate and insurance. Our relationship with Reliance Holdings provides us with significant benefits: (1) experience, knowhow, and industry relations; (2) a source of acquisition targets currently under Reliance Holdings’ control; and (3) financial and logistics assistance. We are led and advised by a management team that offers over 100 years of combined business expertise in real estate, insurance, and the financial service industry.

Our structure is set forth in the table below:

The Company intends to raise approximately $50,000,000$10,000,000 over the course of an initial and follow up raise which will not only enable it to meet Nasdaq shareholder equity requirements but will provide working capital for at least six (6) months thereafter. Furthermore, the Company intends to finance further acquisitions through a combination of working capital raised in this offering, continued acquisition debt from Oak Street Funding, LLC, its principal acquisition lender to date, issuance of stock and also future financings. As there is no assurance that any one or more sources will continue to support the Company’s acquisitions, the Company intends to pursue all four avenues.

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 are currently in negotiations with several affiliated and non-affiliated parties and expect to complete a number of material insurance asset transactions throughout the course of 2020. We have acquired seven insurance agencies, including both affiliated and unaffiliated companies.

Long term, we seek to conduct all transactions and acquisitions through our direct operations. However, in some instances, Reliance Holdings could act as a place holder to facilitate the acquisition process, with those propertiesassets later transferred to us. In addition, we and Reliance Holdings plan to conduct future transactions in order to transfer additional assets to us, with the final goal of transferring most of the desirable properties, excluding assets that Reliance Holdings owns via joint venture or with third parties.

Over the next 12 months, we plan to focus on the expansion and growth of our business through two different channels: continued asset acquisitions in insurance markets; and organic growth of our current insurance operations through geographic expansion and market share growth.

Carriers representing 10% or more of total revenue are presented in the table below:

No other single insurance carrier accounted for more than 10% of the Company’s commission revenues. The loss of any significant customer, including Priority Health and BCBS, could have a material adverse effect on the Company.

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 in order to achieve asset value appreciation while generating interim cash flows. In the insurance sector, our management team has over 100 years of experiences 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 will 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.

Our products offered span across a variety of states. We offer many products in the health industry including but not limited to Medicaid, Medicare, Medigap, and dental at both the individual and where available at the group level. Additionally, we have standard Personal and Commercial lines as well as a niche option for the commercial transportation industry. Our agencies are currently located in New York, New Jersey, Michigan, Ohio and Montana.

Within our agencies located in Michigan we currently write insurance products for under 65 individual health, over 65 Medicare products, group health insurance and other ancillary products. These products are primarily offered to Michigan residents.

In New Jersey and New York, we offer property and casualty insurance specializing in commercial transportation and trucking insurance. The population services with these products are primarily located in NY and NJ.

In Montana our agency offers individual health for under 65 population, over 65 Medicare products, group health insurance and other ancillary products. The primary focus of SWMIC is in the group health sector. These products are primarily offered to residents of Montana.

FIS offers insurance products to residents of Michigan, Ohio and Indiana. On the P&C (property and casualty) side they offer a variety of personal and commercial products such as home and auto insurance. On the health side they primarily focus on group health as well as Medicare products in addition to under 65 individual health and over 65 Medicare products.

Insurance Acquisitions and Strategic Activities

To date, we have acquired seven insurance brokerages (see table below), including both acquisitions of affiliated companies (i.e., owned by Reliance Holdings, LLC before the acquisition)acquisition by the issuer) and unaffiliated companies.companies, all of which were asset acquisitions except for Altruis, which was a stock purchase. 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.

The following table lists our activity in 2019 by number of agents, policies issued, and revenue recognized.

EBS/USBA:

On August 1, 2018, a related party to Reliance Holdings, US Benefits Alliance, LLC (“USBA”) acquired certain properties and assets of the insurance businesses of Family Health Advisors, Inc. and Tri Star Benefits, LLC (the “USBA Acquisition”). Also, on August 1, 2018, Employee Benefits, Solutions, LLC, (“EBS”), related party, acquired certain properties and assets of the insurance business of Employee Benefit Solutions, Inc. (the “EBS Transaction”, and, together with USBA Transaction, the “Common Control Transactions”).

On October 24, 2018, Reliance Holdings and the Company entered into a Bill of Sale agreement to transfer all of the outstanding membership interest in EBS LLC and USBA LLC. In exchange for the membership interest, the Board of Directors of the Company authorized and issued 16,400,000 shares of restricted common stock of the Company for all the membership interest of USBA LLC and EBS LLC.

The USBA Acquisition is beingwas accounted for as a business combination by Reliance Holdings. It was accounted for as a business combination in accordance with the acquisition method whereby the total purchase consideration was allocated to intangible assets acquired based on their respective estimated fair values. The acquisition method of accounting uses the fair value concept defined in ASC 820. ASC 805 requires, among other things, that assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their fair values as of the acquisition date. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing. The allocation of the purchase price in connection with the USBA Acquisition was calculated as follows:

Goodwill of $578,840 arising from the USBA Acquisition consisted of the value of the employee workforce and the residual value after all identifiable intangible assets were valued. Goodwill recognized pursuant to the FHA/TSBUSBA Acquisition is currently expected to be deductible for income tax purposes. Total acquisition costs for the FHA/TSBUSBA Acquisition incurred were $83,162 recorded as a component of General and administrative on the accompanying Consolidated Statement of Operations for the period from August 1, 2018 to December 31, 2018.

The operating results of the acquired business has been included in the Company’s Consolidated Statement of Operations for the period from August 1, 2018 to December 31, 2018 since the USBA common control date of October 24, 2018. The revenues of the acquired business for the period from August 1, 2018 through December 31, 2018 from the FHA/TSBUSBA Acquisition common control date was $135,425 and the net loss was $12,145.

The EBS Acquisition is beingwas accounted for as a business combination by Reliance Holdings. It was accounted for as a business combination in accordance using the acquisition method whereby the total purchase consideration was allocated to intangible assets acquired based on their respective estimated fair values. The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their fair values as of the acquisition date. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing.

The allocation of the purchase price in connection with the EBS Acquisition was calculated as follows:

Goodwill of $274,956 arising from the EBS Acquisition consisted of the value of the employee workforce and the residual value after all identifiable intangible assets were valued. Goodwill recognized pursuant to the EBS Acquisition is currently expected to be deductible for income tax purposes. Total acquisition costs for the EBS Acquisition incurred were $44,353 recorded as a component of General and administrative expenses on the accompanying Consolidated Statement of Operations for the period from August 1, 2018 to December 31, 2018.

The operating results of the acquired business has been included in the Company’s Consolidated Statement of Operations for the period from August 1, 2018 to December 31, 2018 since the EBS common control date. The revenues of the acquired business for the period from August 1, 2018 through December 31, 2018 from the EBS common control date was $246,965 and the net loss was $143,450.

CCS:

On December 1, 2018, Commercial Coverage Solutions LLC, a wholly-owned subsidiary of the Company (“CCS”) entered into a Purchase Agreement with Commercial Solutions of Insurance Agency, LLC (“CSIA”) whereby CCS shall purchasepurchased the business and certain assets of CSIA noted within the Purchase Agreement (the “CSIA Acquisition”) for a total purchase price of $1,200,000. The total purchase price iswas made up of (1) a cash payment of $1,080,000 (the “Cash Payment”) on the “Closing Date” or the first bank business day thereafter (i.e. December 1, 2018); (2) the balance of the purchase price, having a value of $120,000, shall be paid in the form of 761,905 shares of common stock in the Company, issued at a per-share price equal to Fifteen and 75/100 Cents ($0.1575) (the “Closing Shares”); and (3) the amount of any cash necessary to satisfy the required closing date working capital shall be set off against the Cash Payment by CCS. “Required closing date working capital” shall consistconsisted only of cash and pre-paid rent and/or security deposits or pre-payments or deposits for any assumed liabilities. The Closing Shares are to bewere transferred from the shares owned by Reliance Holdings and were transferred subsequent to December 31, 2019; and as a result, is a component of Loans payables, related parties on the accompanying Consolidated Balance Sheets.

The CSIA Acquisition is being accounted for as a business combination under the acquisition method whereby the total purchase consideration was allocated to tangible and intangible assets acquired based on their respective estimated fair values. The acquisition method requires, among other things, that assets acquired, and liabilities assumed in a business purchase combination be recognized at their fair values as of the acquisition. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing.

The allocation of the purchase price in connection with the CSIA Acquisition was calculated as follows:

Goodwill of $851,752 arising from the CSIA Acquisition consisted of the value of the employee workforce and the residual value after all identifiable intangible assets were valued. Goodwill recognized pursuant to the CSIA Acquisition is currently expected to be deductible for income tax purposes. Total acquisition costs for the CSIA Acquisition incurred were $113,247 recorded as a component of General and administrative expense on the accompanying Consolidated Statement of Operations for the period from August 1, 2018 to December 31, 2018.

The December 1, 2018 to December 31, 2018 operating results of the acquired business has been included in the Company’s Consolidated Statement of Operations for the period from August 1, 2018 to December 31, 2018 since the CSIA Acquisition date. The revenues of the acquired business for the period from December 1, 2018 through December 31, 2018 from the CSIA Acquisition was $8,380 and the net loss was $136,568.

SWMIC:

On April 1, 2019, Southwestern Montana Insurance Center, LLC (“SWMT”), a wholly owned subsidiary of Reliance Global Holdings, LLC, acquired Southwestern Montana Financial Center, Inc. SWMT is an insurance services firm which specializes in providing personalgroup and commercialindividual health lines of insurance. On September 17, 2019, Reliance Holdings, transferred all of the outstanding membership interest in SWMT to the Company.

On April 1, 2019, SWMT entered into a Purchase Agreement with Southwestern Montana Financial Center, Inc. whereby the SWMT shall purchase the business and certain assets noted within the Purchase Agreement (the “SWMT Acquisition”) for a total purchase price of $2,394,509. The purchase price was paid with a cash payment of $1,389,840, 500,000 in shares of the Company’s restricted common stock transferred from the shares owned by Reliance Holdings, and an earn-out payment equal to 32% of the final earn-out EBITDA multiplied by 5.00, which is payable in $300,000 in shares of the Company’s common stock with any amount in excess of $300,000 to be paid in cash. The balance of the earn-out liability as of December 31, 2019 was $522,553 and is included in long term debt on the balance sheet. SWMT was transferred to the Company from Reliance Global Holdings, LLC.Holdings. The SWMT Acquisition is beingwas accounted for as a business combination, by Reliance Holdings, in accordance under the acquisition method whereby the total purchase consideration was allocated to assets acquired and liabilities assumed based on their respective estimated fair values. The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their fair values as of the acquisition date. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing.

The allocation of the purchase price in connection with the SWMT Acquisition was calculated as follows:

Goodwill of $1,217,790 arising from the SWMT Acquisition consisted of the value of the employee workforce and the residual value after all identifiable intangible assets were valued. Goodwill recognized pursuant to the SWMT Acquisition is currently expected to be deductible for income tax purposes. Total acquisition costs for the SWMT Acquisition were $122,660, which were paid in full by Reliance Global Holdings, LLC, a related party.

The operating results of the acquired business has been included in the Company’s Consolidated Statement of Operations from the date of acquisition through December 31, 2019. The revenues of the acquired business for the period from April 1, 2019 to December 31, 2019 was $1,036,154 and the net loss was $23,104.

FIS:

On May 1, 2019, Fortman Insurance Services, LLC (“FIS”), a wholly owned subsidiary of Reliance Global Holdings, LLC, acquired Fortman Insurance Agency, LLC. FIS is an insurance services firm which specializes in providing personal and commercial lines of insurance.

On May 1, 2019, FIS entered into a Purchase Agreement with Fortman Insurance Agency, LLC whereby the FIS shall purchase the business and certain assets noted within the Purchase Agreement (the “FIS Acquisition”) for a total purchase price of $4,156,405. The purchase price was paid with a cash payment of $3,223,750, $500,000 in shares of the Company’s restricted common stock transferred from the shares owned by Reliance Holdings, and an earn-out payment equal to 10% of the final earn-out EBITDA multiplied by 6.25. The earn-out measurement period is 12 months commencing May 1, 2021 and ending April 30, 2022. The earn-out shall not accrue and shall be paid without interest within 60 days after the measurement period. The balance of the earn-out liability as of December 31, 2019 was $432,655 and is included in long term debt on the balance sheet. On September 17, 2019, FIS was transferred to the Company from Reliance Global Holdings, LLC.Holdings. The FIS Acquisition is beingwas accounted for as a business combination, by Reliance Holdings, in accordance with the Acquisition method whereby the total purchase consideration was allocated to intangible assets acquired based on their respective estimated fair values.The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their fair values as of the acquisition date. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing.

The allocation of the purchase price in connection with the FIS Acquisition was calculated as follows:

Goodwill of $1,269,731 arising from the FIS Acquisition consisted of the value of the employee workforce and the residual value after all identifiable intangible assets were valued. Goodwill recognized pursuant to the FIS Acquisition is currently expected to be deductible for income tax purposes. Total acquisition costs for the FIS Acquisition were $63,663, which were paid in full by Reliance Global Holdings, LLC, a related party.

The operating results of the acquired business has been included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2019. The revenues of the acquired business for the period from May 1, 2019 to December 31, 2019 was $1,166,778 and the net income was $9,773.

DuringOn September 17, 2019, Reliance Global Holdings, LLC transferred all of the outstanding membership interest in SWMT and FIS to the Company. In exchange for the membership interest, the Board of Directors of Reliance Inc. issued 14,839,011 shares of restricted common stock of Reliance Inc. for all the membership interest of SWMT and FIS.

Altruis:

On September 1, 2019, the Company entered into a Stock Purchase Agreement with Altruis Benefits Consulting, Inc. whereby the Company shall purchasepurchased the business and certain assets noted within the Purchase Agreement (the “ABC Acquisition”) for a total purchase price of $7,688,168. The purchase price was paid with a cash payment of $5,202,364, $578,040 in shares of the Company’s common stock, and an earn-out payment made annually for 3 years. Each year one-third of the earn-out shares held in escrow shall be released to the seller. The yearly earn-out payments are equal to 6.66% of the final earn-out EBITDA multiplied by 7.00. The earn-out measurement periods are the 12 months commencing September 1, 2019 and ending August 31, 2022. The balance of the earn-out liability as of December 31, 2019 was $1,894,842 and is included in long term debt on the balance sheet. The ABC Acquisition is being accounted for as a business combination in accordance with the acquisition method whereby the total purchase consideration was allocated to intangible assets acquired based on their respective estimated fair values. The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their fair values as of the acquisition date. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing.

The allocation of the purchase price in connection with the ABC Acquisition was calculated as follows:

Goodwill of $4,949,329 arising from the ABC Acquisition consisted of the value of the employee workforce and the residual value after all identifiable intangible assets were valued. Goodwill recognized pursuant to the ABC Acquisition is currently expected to be deductible for income tax purposes. Total acquisition costs for the ABC Acquisition incurred were $92,172 recorded as a component of General and administrative expenses on the accompanying Consolidated Statement of Operations for the year ended December 31, 2019.

The operating results of the acquired business has been included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2019. The revenues of the acquired business for the period from September 1, 2019 to December 31, 2019 was $625,036 and the net loss was $67,682.

UIS Agency, LLC:

On August 17, 2020, the Company entered into a Stock Purchase Agreement with UIS Agency LLC (“UIS) whereby the Company shall purchasepurchased the business and certain assets noted within the Purchase Agreement (the “UIS Acquisition”) for a total purchase price of $600,000.$883,334. The purchase price was paid with a cash payment of $101,696,$601,696, $200,000 in shares of the Company’s common stock $500,000 ofand an earn-out payment. Three cash installment payments tototaling $500,000 were or will be paid omdue on September 30, 2020, October 31, 2020 and December 31, 2020 in the amount of $100,000, $100,000 and $300,000 respectively. Additionally, an earn-out2020. Earn-out payment will be paid basedis dependent on the value of the Net Product Line Revenues being equal to or greater than $450,000 for the measurement period. The balance of the earn- out liability as describedof September 30, 2020 was $81,638 and is included in long term debt on the balance sheet.

Oak Street Funding LLC – Term Loans

Oak Street Funding LLC – Term Loans

On August 1, 2018, EBS and USBA entered into a Credit Agreement with Oak Street Funding LLC (“Oak Street”) whereby EBS and USBA borrowed $750,000 from Oak Street under a term loan. The term loan is secured by certain assets of the Company. Interest accrues at 5.00% on the basis of a 360-day year, maturing 120 months from the Amortization Date (September 25, 2018). For the period from August 1, 2018 to December 31, 2018, the Company incurred debt issuance costs associated with the Term Loan in the purchase agreement.amount of $22,188, which were deferred and are amortized to interest expense over the length of the Term Loan. The earn-out measurement period is 12 months commencing September 1, 2020 and ending August 31, 2021. As securityproceeds of the Term Loan were to be used for the installment payment, $600,000purpose of restricted common stockacquiring entities through the respective USBA and EBS acquisitions.

On April 1, 2019, SWMT entered into a Credit Agreement with Oak Street whereby SWMT borrowed $1,136,000 from Oak Street under a term loan. The term loan is secured by certain assets of the Company. The borrowing rate under the facility is a variable rate equal to Prime + 2.00% and matures 10 years from the closing date. For the year ended December 31, 2019, the Company incurred debt issuance costs associated with the term loan in the amount of $28,849, which were deferred and are amortized to interest expense over the length of the term loan. The proceeds of the term loan were to be used for the purpose of acquiring an entity through SWMT.

On May 1, 2019, FIS entered into a Credit Agreement with Oak Street whereby FIS borrowed $2,648,000 from Oak Street under a term loan. The term loan is secured by certain assets of the Company. The borrowing rate under the facility is a variable rate equal to Prime + 2.00% and matures 10 years from the closing date. For the year ended December 31, 2019, the Company shallincurred debt issuance costs associated with the Term Loan in the amount of $58,171, which were deferred and are amortized to interest expense over the length of the Term Loan. The proceeds of the term loan were to be heldused for the purpose of acquiring an entity through FIS.

On September 5, 2019, the Company entered into a Credit Agreement with Oak Street whereby the Company borrowed $4,128,000 from Oak Street under a term loan. The term loan is secured by an agreed upon escrow agent.certain assets of the Company. The borrowing rate under the facility is a variable rate equal to Prime + 2.00% and matures 10 years from the closing date. For the year ended December 31, 2019, the Company incurred debt issuance costs associated with the Term Loan in the amount of $94,105, which were deferred and are amortized to interest expense over the length of the Term Loan. The proceeds of the term loan were to be used for the purpose of acquiring ABC.

Oak Street Funding LLC – Senior Secured Amortizing Credit Facility (“Facility”)

On December 7, 2018, CCS entered into a Facility with Oak Street whereby CCS borrowed $1,025,000 from Oak Street under a senior secured amortizing credit facility. The borrowing rate under the Facility is a variable rate equal to Prime +1.50% and matures 10 years from the closing date. For the period from August 1, 2018 to December 31, 2018, the Company incurred debt issuance costs associated with the Facility in the amount of $25,506, which were deferred and are amortized over the length of the Facility. The proceeds of the term loan were to be used for the purpose of acquiring CSIA.

Aggregated cumulative maturities of long-term obligations (including the Term Loan and the Facility), excluding deferred financing costs, as of September 30, 2020 are:

As of the filing of this Registration Statement, the Company is in compliance with its covenants associated with the loans.

Results of Operations Year Ended December 31, 2019 and 2018

Results of Operations Three and SixNine Months Ended JuneSeptember 30, 2020

Revenues

The Company’s revenue is primarily comprised of commission paid by health insurance carriers related to insurance plans that have been purchased by a member who used the Company’s service. The Company defines a member as an individual currently covered by an insurance plan, including individual and family, Medicare-related, small business, and ancillary plans, for which the Company are entitled to receive compensation from an insurance carrier.

The Company reported revenues of $4,450,785 in our fiscal year ended December 31, 2019, as compared to $390,770 for the successor period from August 1, 2018 through year ended December 31, 2018. Our EBS & USBA unit reported revenues increased from $382,390 for the period from August 1, 2018 through December 31, 2018 to $1,161,036 for the year ended December 31, 2019 or an increase of $778,646. The increase is due principally to 12 months of revenue being reported in 2019 compare to five months in the 2018 period. CCS reported revenues increased from $8,380 for the period from August 1, 2018 through December 31,2018 to $378,956 for the year ended December 31, 2019. The Company acquired CCS in December 2018 and therefore reported only one month of revenue from CCS in the 2018 period. FIS, SWMT, and Altruis reported revenues of $1,186,951, $1,106,432, and $617,409, respectively in 2019. These revenues did not include bonus commissions as the assets were purchased in April, May and September of 2019, respectively and bonus commissions are typically paid out during the first quarter of the year. As FIS, SWMT and Altruis were acquired in April 2019, May 2019 and September 2019, respectively therefore, the Company did not report any revenues related to these reporting units in 2018.

The Company had revenues of $1,642,018$1,680,043 for the three months ended JuneSeptember 30, 2020, as compared to $1,017,022$1,327,290 for the three months ended JuneSeptember 30, 2019. The increase of $624,996 $352,753 was primarily due to the insurance agencies acquired in 2019 reporting revenue for the full year of 2020 compared to partial year of revenue for the agencies acquired in 2019. Altruis, which was purchased in September 2019, contributed approximately $590,000$335,000 towards the revenue increase. Additionally, the EBS and USBA agencies acquired during 2018 had increases of gross revenue of approximately 10% quarter over quarter.

The Company had revenues of $3,646,332$5,326,375 for the sixnine months ended JuneSeptember 30, 2020, as compared to $1,383,086$2,710,376 for the sixnine months ended JuneSeptember 30, 2019. The increase of $2,263,246$2,615,999 was primarily due to the insurance agencies acquired in 2019 reporting revenue for the full yearnine months of 2020 compared to partial year of revenue for the agencies acquired in 2019. Altruis, which was purchased in September 2019, contributed approximately $1,160,000$2,204,000 towards the revenue increase. Additionally,The additional variance was primarily due to the EBSfact that SWMT and USBA agenciesFIS which were acquired during 2018 had increasesApril and May of gross revenue of approximately 10% quarter over quarter.2019 respectively.

Operating Expenses

The Company had total operating expenses of $7,554,696 in the year ended December 31, 2019, as compared to $1,211,151 (successor) for the period from August 1, 2018 through December 31, 2018. The increase in operating expense was due to (i) increased corporate overhead of approximately $2.7 million primarily related to the acquisition and integration of acquired businesses recognizing expenses for a full year for the entities acquired in 2018 and costs of operating the businesses acquired in 2019 and (ii) general increase in other line items comprising operating expenses in 2019 as compared to 2018.

The Company had total operating expenses of $2,772,213 for the three months ending September 30, 2020, as compared to $1,853,758 for the three months ending September 30, 2019. The increase in operating expense was due to (i) increased corporate overhead of approximately $860,000 primarily related to salaries, commission expense and professional fees as a result of the Companies expansion and (ii) general increase in other line items comprising operating expenses in 2020 as compared to 2019.

The Company had total operating expenses of $8,251,506 for the nine months ending September 30, 2020, as compared to $4,237,353 for the nine months ending September 30, 2019. The increase in operating expense was due to (i) $850,000 of additional stock option expense, (ii) $600,000 of depreciation and amortization related to the full nine months of expense for all agencies acquired during 2019, (iii) $1,881,000 related to salaries and commission expense as a result of the full nine months of expense for all agencies acquired during 2019 (iv) general increase in other line items comprising operating expenses in 2020 as compared to 2019.

Net (Loss)

The Company had net loss of $3,495,481 in the year ended December 31, 2019 as compared to net loss of $1,155,286 (successor) for the period from August 1, through December 31, 2018. The net loss increased due to the increased expenses noted above and offset by the increased revenues noted above.

The Company had total operating expensesnet loss of $2,667,461$1,231,567 for the three months ended JuneSeptember 30, 2020, as compared to $1,376,346$631,854 for the three months ended JuneSeptember 30, 2019. The increase of $1,291,115$599,713 was primarily due to the increased expenses noted above and offset by the increased revenues noted above.

The Company had net loss of $3,349,778 for the nine months endedSeptember30, 2020, as compared to $1,734,815 for the nine months ended September 30, 2019. The increase of $1,614,963 was primarily due to the increased expenses noted above and offset by the increased revenues noted above.

Liquidity and capital resources

On July 1, 2020, the Company entered into an agreement to provide additional lines of insurance to small business groups. These additional lines of insurance will provide revenue expansion opportunities and allows the Company to access an even larger insurance market. Additionally, management is planning to raise additional financing through an equity offering, although, there can be no assurance that additional equity financing will be available on terms acceptable to the company or at all.

As of December 31, 2019, the Company had a cash balance of $6,703 and working capital deficit of $4,020,803 compared with a cash balance of $12,456 (successor) and a working capital deficit of $1,049,976 at December 31, 2018. The increase in working capital deficit was caused by the increased working capital deficit of the entities acquired in 2019.

As of September 30, 2020, the Company had a cash balance of $13,282 and working capital deficit of $5,948,428 compared with a cash balance of $61,301 and a working capital deficit of $2,442,228 at September 30, 2019. The increase in working capital deficit was caused by the increased working capital deficit of the entities acquired in 2019.

The Company has incurred losses of $3,349,778 for the nine months ended September 30, 2020. In 2019, the Company acquired three additional agencies to grow the company and improve profitability. Since these acquisitions are recent, management’s plans to achieve operational efficiencies and reduce expenses to enable the Company to continue to meet its obligations for at least the next twelve months. Additionally, Reliance Holdings has committed to fund the Company for at least the next 12 months in the event that the capital raise is not successful.

The spread of the coronavirus (COVID-19) outbreak in the United States has resulted in economic uncertainties which may negatively impact the Company’s business operations. While the disruption is expected to be temporary, there is uncertainty surrounding the duration and extent of the impact. Currently the Company has not seen any material financial impact as a result of the coronavirus outbreak. However, management is actively monitoring the global situation on its financial condition, liquidity, operations, industry and workforce. 

Adverse events such as health-related concerns about working in our offices, the inability to travel and other matters affecting the general work environment could harm our business and our business strategy. While we do not anticipate any material impact to our business operations as a result of the coronavirus, in the event of a major disruption caused by the outbreak of pandemic diseases such as coronavirus, we may lose the services of our employees or experience system interruptions, which could lead to diminishment of our business operations. Any of the foregoing could harm our business and delay the implementation of our business strategy and we cannot anticipate all the ways in which the current global health crisis and financial market conditions could adversely impact our business.

To this effect on April 4, 2020, the Company entered into a loan agreement with First Financial Bank for a loan of $673,700 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act. The Company intends to use the entire loan amount for designated qualifying expenses and to apply for forgiveness in accordance with the terms of the PPP. This loan is evidenced by a promissory note dated April 4, 2020 and matures two years from the disbursement date. This loan bears interest at a rate of 1.00% per annum, with the first six months of interest deferred. Principal and interest are payable monthly commencing one year after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. This loan contains customary events of default relating to, among other things, payment defaults or breaches of the terms of the loan. Upon the occurrence of an event of default, the lender may require immediate repayment of all amounts outstanding under the note. The principal and interest of the loan are repayable in 18 monthly equal installments of $37,913 each. Interest accrued in the first six months is included in the monthly installments. Installments must be paid on the 24^th day of each month. As of September 30, 2020, the Company has repaid a total of $165,000 on this loan. As of September 30, 2020, the Company recorded $508,700 as loans payable in relation to the PPP loan. On November 17,  2020 the Company received notification from the SBA that the PPP loan has been forgiven in its entirety.

Cash Flows from Operating Activities

During the year ended December 31, 2019, cash flows used in operating activities was $373,934 compared with $141,469 (successor) of cash flow used during for the period from August 1, 2018 through December 31, 2018. The increase in cash flow used in operating activities was due to cash a full year of cash flows used in operation for the companies acquired in 2018, the cash flows used in operations of the companies acquired in 2019 and non-recurring corporate overhead.

Net cash used in operating activities for the nine months ended September 30, 2020 was $1,454,072, which includes a net loss of $3,349,778, offset by non-cash expenses of $1,784,329 principally related to share based compensation expense of $1,063,777, depreciation and amortization of $1,003,070, amortization of debt issuance costs of $17,165 offset by $300,000 of shares issued pursuant to earn-out agreement as well as changes of net working capital items in the amount of $111,377 principally related to the increase in general administrative expenseaccounts payable and accrued expenses of $602,535,$208,471, the increase in salariesother payables of $44,901, and wages of $254,830, thean increase in commissionsnon-current assets of $195,924 and the decrease in accounts receivables of $46,299.

Net cash used in operating activities for the nine months ended September 30, 2019 was $115,743, which includes a net loss of $1,734,815, offset by non-cash expenses of $1,815,295 principally related to share based compensation expense of $213,668,$581,999, depreciation and amortization of $411,180, and common stock issued of $822,116 and cash used from the changes in net working capital items in the amount of $196,223 principally related to the decrease in accounts payable and accrued expenses and other payables of $46,037 and the increase in depreciationprepaid expenses and amortizationother current assets of $217,417.$40,809, partially offset by the decrease in accounts receivables and other receivable of $110,693.

Cash Flows from Investing Activities

During the year ended December 31, 2019, cash flows used in investing activities were $11,879,652 compared to cash flow used in investing activities of $1,122,693 (successor) for the period from August 1, 2018 through December 31, 2018. The increase in cash used in investing activities was due to the increased use of cash of $10,250,825 for the entities acquired in 2019 and purchase of property and equipment of $506,134.

Net cash used in investing activities for the nine months ended September 30, 2020 was $2,151,966 due to the investment the Company made in NSURE, Inc. of $1,350,000 and the acquisition of UIS Agency LLC.

Net cash used in investing activities for the nine months ended September 30, 2019 was $11,879,567 related to the entities acquired in 2019.

Cash Flows from Financing Activities

During the year ended December 31, 2019, cash provided by financing activities was $12,643,965 as compared to $1,365,368 (successor) for the period from August 1, 2018 through December 31, 2018. The increase was primarily related to debt issued to unrelated lenders of $6,916,005 and debt issued to related parties of $3,366,542.

Net cash provided by financing activities for the nine months ended September 30, 2020 was $3,616,024 primarily related to proceeds from the PPP loan in the amount of $673,700, proceeds from related party loans payable in the amount of $1,651,815, and proceeds from the issuance of common stock for acquisitions in the amount of $1,866,667, partially offset by the repayments of the PPP loan in the amount of $165,000, repayment of debt in the amount of $245,178 and repayments of related party loans payable in the amount of $165,980.

Net cash provided by financing activities for the nine months ended September 30, 2019 was $12,455,546 primarily related to proceeds from borrowing of debt in the amount of $7,912,000, proceeds from related party loans payable in the amount of $3,363,457, the issuance of common stock for acquisition in the amount of 2,568,364 and loans acquired through acquisitions, related parties of $19,401, partially offset by the repayments of debt in the amount of $232,359.

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements as such term is defined in Regulation S-K.

Results of Operations Three and Nine Months Ended September 30, 2020

Revenues

The Company’s revenue is primarily comprised of commission paid by health insurance carriers related to insurance plans that have been purchased by a member who used the Company’s service. The Company defines a member as an individual currently covered by an insurance plan, including individual and family, Medicare-related, small business, and ancillary plans, for which the Company are entitled to receive compensation from an insurance carrier.

The Company reported revenues of $4,450,785 in our fiscal year ended December 31, 2019, as compared to $390,770 for the successor period from August 1, 2018 through year ended December 31, 2018. Our EBS & USBA unit reported revenues increased from $382,390 for the period from August 1, 2018 through December 31, 2018 to $1,161,036 for the year ended December 31, 2019 or an increase of $778,646. The increase is due principally to 12 months of revenue being reported in 2019 compare to five months in the 2018 period. CCS reported revenues increased from $8,380 for the period from August 1, 2018 through December 31,2018 to $378,956 for the year ended December 31, 2019. The Company acquired CCS in December 2018 and therefore reported only one month of revenue from CCS in the 2018 period. FIS, SWMT, and Altruis reported revenues of $1,186,951, $1,106,432, and $617,409, respectively in 2019. These revenues did not include bonus commissions as the assets were purchased in April, May and September of 2019, respectively and bonus commissions are typically paid out during the first quarter of the year. As FIS, SWMT and Altruis were acquired in April 2019, May 2019 and September 2019, respectively therefore, the Company did not report any revenues related to these reporting units in 2018.

The Company had revenues of $1,680,043 for the three months ended September 30, 2020, as compared to $1,327,290 for the three months ended September 30, 2019. The increase of $352,753 was primarily due to the insurance agencies acquired in 2019 reporting revenue for the full year of 2020 compared to partial year of revenue for the agencies acquired in 2019. Altruis, which was purchased in September 2019, contributed approximately $335,000 towards the revenue increase.

The Company had revenues of $5,326,375 for the nine months ended September 30, 2020, as compared to $2,710,376 for the nine months ended September 30, 2019. The increase of $2,615,999 was primarily due to the insurance agencies acquired in 2019 reporting revenue for the full nine months of 2020 compared to partial year of revenue for the agencies acquired in 2019. Altruis, which was purchased in September 2019, contributed approximately $2,204,090 towards the revenue increase. The additional variance was primarily due to the fac that SWMT and FIS which were acquired during April and May of 2019 respectively.

Operating Expenses

The Company had total operating expenses of $7,554,696 in the year ended December 31, 2019, as compared to $1,211,151 (successor) for the period from August 1, 2018 through December 31, 2018. The increase in operating expense iswas due to (i) increased corporate overhead of approximately $2.7 million primarily related to the acquisition and integration of acquired businesses recognizing expenses for a full year in 2020 for the entities acquired in 2018 and costs of operating the businesses acquired in 2019 and (ii) general increase in other line items comprising operating expenses in 2019 as compared to 2018.

The Company had total operating expenses of $2,772,213 for the three months ending September 30, 2020, as compared to $1,853,758 for the three months ending September 30, 2019. The increase in operating expense was due to (i) increased corporate overhead of approximately $860,000 primarily related to salaries, commission expense and professional fees as a result of the Companies expansion and (ii) general increase in other line items comprising operating expenses in 2020 as compared to 2019.

The Company had total operating expenses of $5,479,293$8,251,506 for the sixnine months ended Juneending September 30, 2020, as compared to $2,383,595$4,237,353 for the sixnine months ended Juneending September 30, 2019. The increase of $3,095,698in operating expense was primarily due to the increase the increase in general administrative(i) $850,000 of additional stock option expense, (ii) $600,000 of $1,136,153, the increase in salaries and wages of $868,090, the increase in commissions expense of $544,813, the increase in marketing and advertising of $24,010, and the increase in depreciation and amortization of $522,632. The increase in total operating expense is primarily related to the acquisitionfull nine months of expense for all agencies acquired during 2019, (iii) $1,881,000 related to salaries and integrationcommission expense as a result of the full nine months of expense for all agencies acquired businesses recognizing expenses for a full year in 2020 for the entities acquired induring 2019 and (ii)(iv) general increase in other line items comprising operating expenses in 2020 as compared to 2019.

Net (Loss)

The Company had net loss of $1,138,413$3,495,481 in the year ended December 31, 2019 as compared to net loss of $1,155,286 (successor) for the period from August 1, through December 31, 2018. The net loss increased due to the increased expenses noted above and offset by the increased revenues noted above.

The Company had net loss of $1,231,567 for the three months ended JuneSeptember 30, 2020, as compared to $426,208$631,854 for the three months ended JuneSeptember 30, 2019. 

The increase of $712,205$599,713 was primarily due to the increased expenses noted above and offset by the increased revenues noted above.

The Company had net loss of $2,118,211$3,349,778 for the sixnine months ended JuneSeptember 30, 2020, as compared to $1,102,961$1,734,815 for the sixnine months ended JuneSeptember 30, 2019. The increase of $1,015,250$1,614,963 was primarily due to the increased expenses noted above and offset by the increased revenues noted above.

Liquidity and capital resources

On July 1, 2020, the Company entered into an agreement to provide additional lines of insurance to small business groups. These additional lines of insurance will provide revenue expansion opportunities and allows the Company to access an even larger insurance market. Additionally, management is planning to raise additional financing through an equity offering, although, there can be no assurance that additional equity financing will be available on terms acceptable to the company or at all.

As atof December 31, 2019, the Company had a cash balance of $6,703 and working capital deficit of $4,020,803 compared with a cash balance of $12,456 (successor) and a working capital deficit of $1,049,976 at December 31, 2018. The increase in working capital deficit was caused by the increased working capital deficit of the entities acquired in 2019.

As at Juneof September 30, 2020, the Company had a cash balance of $270,304$13,282 and working capital deficit of $4,811,275$5,948,428 compared with a cash balance of $83,786$61,301 and a working capital deficit of $3,492,409$2,442,228 at JuneSeptember 30, 2019.

The increase in working capital deficit was caused by the increased working capital deficit of the entities acquired in 2019.

The Company has incurred losses of $2,118,211$3,349,778 for the sixnine months ended JuneSeptember 30, 2020. In 2019, the Company acquired three additional agencies to grow the company and improve profitability. Since these acquisitions are recent, management’s plans to achieve operational efficiencies and reduce expenses to enable the Company to continue to meet its obligations for at least the next twelve months. Additionally, Reliance Holdings has committed to fund the Company for at least the next 12 months in the event that the capital raise is not successful.

The spread of the coronavirus (COVID-19) outbreak in the United States has resulted in economic uncertainties which may negatively impact the Company’s business operations. While the disruption is expected to be temporary, there is uncertainty surrounding the duration and extent of the impact. The impact of the coronavirus outbreak on the condensed consolidated financial statements cannot be reasonably estimated at this time.

Adverse events such as health-related concerns about working in our offices, the inability to travel and other matters affecting the general work environment could harm our business and our business strategy. While we do not anticipate any material impact to our business operations as a result of the coronavirus, in the event of a major disruption caused by the outbreak of pandemic diseases such as coronavirus, we may lose the services of our employees or experience system interruptions, which could lead to diminishment of our business operations. Any of the foregoing could harm our business and delay the implementation of our business strategy and we cannot anticipate all the ways in which the current global health crisis and financial market conditions could adversely impact our business.

To this effect on April 4, 2020, the Company entered into a loan agreement with First Financial Bank for a loan of $673,700 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act. The Company intends to use the entire loan amount for designated qualifying expenses and to apply for forgiveness in accordance with the terms of the PPP. This loan is evidenced by a promissory note dated April 4, 2020 and matures two years from the disbursement date. This loan bears interest at a rate of 1.00% per annum, with the first six months of interest deferred. Principal and interest are payable monthly commencing one year after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. This loan contains customary events of default relating to, among other things, payment defaults or breaches of the terms of the loan. Upon the occurrence of an event of default, the lender may require immediate repayment of all amounts outstanding under the note. The principal and interest of the loan are repayable in 18 monthly equal installments of $37,913 each. Interest accrued in the first six months is included in the monthly installments. Installments must be paid on the 24^th day of each month. As of JuneSeptember 30, 2020, the Company has repaid a total of $165,000 on this loan. As of JuneSeptember 30, 2020, the Company recorded $508,700 as loans payable in relation to the PPP loan.

Management is actively monitoring the global situation on its financial condition, liquidity, operations, industry and workforce. To date, there has been minimal to no effect to the Company due to the outbreak; however, the Company is unable to estimate any long-term effects the coronavirus will have on its results of operations, financial condition or liquidity for fiscal year 2020.

Cash Flows from Operating Activities

During the year ended December 31, 2019, cash flows used in operating activities was $373,934 compared with $141,469 (successor) of cash flow used during for the period from August 1, 2018 through December 31, 2018. The increase in cash flow used in operating activities was due to cash a full year of cash flows used in operation for the companies acquired in 2018, the cash flows used in operations of the companies acquired in 2019 and non-recurring corporate overhead.

Net cash used in operating activities for the sixnine months ended JuneSeptember 30, 2020 was $246,812,$1,454,072, which includes a net loss of $2,118,211,$3,349,778, offset by non-cash expenses of $1,513,601$1,784,329 principally related to share based compensation expense of $843,572 and$1,063,777, depreciation and amortization of $658,182, and$1,003,070, amortization of debt issuance costs of $11,443,$17,165 offset by $300,000 of shares issued pursuant to earn-out agreement as well as changes inof net working capital items in the amount of $357,798$111,377 principally related to the increase in accounts payable and accrued expenses of $186,899 and$208,471, the increase in other payables of $54,149,$44,901, and an increase in non-current assets of $195,924 and the decrease in accounts receivables of $103,822.$46,299.

Net cash used in operating activities for the sixnine months ended JuneSeptember 30, 2019 was $658,601,$115,743, which includes a net loss of $1,102,961,$1,734,815, offset by non-cash expenses of $530,274$1,815,295 principally related to share based compensation expense of $387,999 and$581,999, depreciation and amortization of $135,550,$411,180, and common stock issued of $822,116 and cash used from the changes in net working capital items in the amount of $85,914$196,223 principally related to the decrease in accounts payable and accrued expenses and other payables of $102,154$46,037 and the increase in prepaid expenses and other current assets of $19,008,$40,809, partially offset by the decrease in accounts receivables and other receivablesreceivable of $32,649.$110,693.

Cash Flows from Investing Activities

During the year ended December 31, 2019, cash flows used in investing activities were $11,879,652 compared to cash flow used in investing activities of $1,122,693 (successor) for the period from August 1, 2018 through December 31, 2018. The increase in cash used in investing activities was due to the increased use of cash of $10,250,825 for the entities acquired in 2019 and purchase of property and equipment of $506,134.

Net cash used in investing activities for the sixnine months ended JuneSeptember 30, 2020 was $1,200,000$2,151,966 due to the investment the Company made in NSURE, Inc. of $1,350,000 and the acquisition of UIS Agency LLC.

Net cash used in investing activities for the sixnine months ended JuneSeptember 30, 2019 was $5,530,831$11,879,567 related to the entities acquired in 2019.

Cash Flows from Financing Activities

During the year ended December 31, 2019, cash provided by financing activities was $12,643,965 as compared to $1,365,368 (successor) for the period from August 1, 2018 through December 31, 2018. The increase was primarily related to debt issued to unrelated lenders of $6,916,005 and debt issued to related parties of $3,366,542.

Net cash provided by financing activities for the sixnine months ended JuneSeptember 30, 2020 was $1,717,286$3,616,024 primarily related to proceeds from the PPP loan in the amount of $673,700, proceeds from related party loans payable in the amount of $373,000,$1,651,815, and proceeds from the issuance of common stock for acquisitions in the amount of $1,000,000,$1,866,667, partially offset by the repayments of the PPP loan in the amount of $165,000, repayment of debt in the amount of $132,254$245,178 and repayments of related party loans payable in the amount of $31,950.$165,980.

Net cash provided by financing activities for the sixnine months ended JuneSeptember 30, 2019 was $6,449,962$12,455,546 primarily related to proceeds from borrowing of debt in the amount of $3,784,000,$7,912,000, proceeds from related party loans payable in the amount of $2,799,056,$3,363,457, the issuance of common stock for acquisition in the amount of 2,568,364 and loans acquired through acquisitions, related parties of $19,401, partially offset by the repayments of debt in the amount of $114,159 and repayments of related party loans payable in the amount of $38,336.$232,359.

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements as such term is defined in Regulation S-K.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may vary under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Our management believes the accounting policies below are critical in the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, or complex judgments.

Business acquisitions: Accounting for acquisitions requires us to estimate the fair value of consideration paid and the individual assets and liabilities acquired, which involves a number of judgments, assumptions, and estimates that could materially affect the amount and timing of costs recognized in subsequent periods. Accounting for acquisitions can also involve significant judgment to determine when control of the acquired entity is transferred. We typically obtain independent third-party valuation studies to assist in determining fair values, including assistance in determining future cash flows, discount rates, and comparable market values. Items involving significant assumptions, estimates, and judgments include the following:

● Debt, including discount rate and timing of payments;

● Deferred tax assets, including projections of future taxable income and tax rates;

● Fair value of consideration paid or transferred;

● Intangible assets, including valuation methodology, estimations of future revenue and costs, and discount rates;

Contingencies: We are subject to the possibility of losses from various contingencies. Significant judgment is necessary to estimate the probability and amount of a loss, if any, from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired, and the amount of loss can be reasonably estimated. In accounting for the resolution of contingencies, significant judgment may be necessary to estimate amounts pertaining to periods prior to the resolution that are charged to operations in the period of resolution and amounts related to future periods.

Goodwill and intangible assets: We test goodwill for impairment in our fourth quarter each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value. For reporting units for which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is considered not impaired and we are not required to perform the goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the fair value of the reporting unit. For reporting units for which this assessment concludes that it is more likely than not that the fair value is below the carrying value, goodwill is tested for impairment by determining the fair value of each reporting unit and comparing it to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, we would record an impairment loss up to the difference between the carrying value and implied fair value.

Determining when to test for impairment, the reporting units, the assets and liabilities of the reporting unit, and the fair value of the reporting unit requires significant judgment and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates, and expenses and are developed as part of our long-range planning process. The same estimates are used in business planning, forecasting, and capital budgeting. We test the reasonableness of the output of our long-range planning process by calculating an implied value per share and comparing that to current stock prices, analysts’ consensus pricing, and management’s expectations. These estimates and assumptions are used to calculate projected future cash flows for the reporting unit, which are discounted using a risk-adjusted rate to estimate a fair value. The discount rate requires determination of appropriate market comparables. We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

We test other identified intangible assets with definite useful lives when events and circumstances indicate the carrying value may not be recoverable by comparing the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. We test intangible assets with indefinite lives annually for impairment using a fair value method such as discounted cash flows. Estimating fair values involves significant assumptions, including future sales prices, sales volumes, costs, and discount rates.

Income taxes: We are required to estimate our provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world. These estimates involve significant judgment and interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of the applicable year. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis in accordance with U.S. GAAP, which requires the assessment of our performance and other relevant factors. Realization of deferred tax assets is dependent on our ability to generate future taxable income. In recent periods, our results of operations have benefited from increases in the amount of deferred taxes we expect to realize, primarily from the levels of capital spending and increases in the amount of taxable income we expect to realize in Japan and the United States. Our income tax provision or benefit is dependent, in part, on our ability to forecast future taxable income in these and other jurisdictions. Such forecasts are inherently difficult and involve significant judgments including, among others, projecting future average selling prices and sales volumes, manufacturing and overhead costs, levels of capital spending, and other factors that significantly impact our analyses of the amount of net deferred tax assets that are more likely than not to be realized.

Revenue recognition:

All commission revenue is recorded net of any deductions for estimated commission adjustments due to lapses, policy cancellations, and revisions in coverage.

The Company earns additional revenue including contingent commissions, profit-sharing, override and bonuses based on meeting certain revenue or profit targets established periodically by the carriers (collectively the Contingent Commissions). The Contingent Commissions are earned when the Company achieves the targets established by the insurance carries. The insurance carriers notify the company when it has achieved the target. The Company only recognizes revenue to the extent that it is probable that a significant reversal of the revenue will not occur.

Stock-based compensation: Stock-based compensation is estimated at the grant date based on the fair value of the award and is recognized as expense using the straight-line amortization method over the requisite service period. For performance-based stock awards, the expense recognized is dependent on our assessment of the likelihood of the performance measure being achieved. We utilize forecasts of future performance to assess these probabilities and this assessment requires significant judgment.

Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires significant judgment, including estimating stock price volatility and expected option life. We develop these estimates based on historical data and market information which can change significantly over time. A small change in the estimates used can result in a relatively large change in the estimated valuation. We use the Black-Scholes option valuation model to value employee stock options and awards granted under our employee stock purchase plan. We estimate stock price volatility based on our historical volatility implied volatility derived from traded options on our stock.

Insurance Market Overview

There are three main insurance sectors: (1) property/casualty (P/C), which consists mainly of auto, home, and commercial insurance; (2) life/health (L/H), which consists mainly of life insurance and annuity products; and (3) accident and health, which is normally written by insurers whose main business is health insurance. The $3 trillion global insurance industry plays a huge role in the U.S. economy, with insurance spending in 2019 making up about 14.8% of the U.S.’s GDP (Source: OECD Insurance Statistics), as shown in the table below.

The U.S. remained the world’s largest insurance market, with a 28% market share of global direct premiums written in 2017. There were approximately 743 L/H insurers, 2,620 P/C insurers, and 1,130 health insurers licensed in the U.S. in 2017, with premiums of $638 billion, $640 billion, and $189 billion, respectively (Source: Agency Checklist’s U.S. Insurance Market Still the Largest—Federal Report Covers the State of the Industry, November 2018). Sustained economic growth, rising interest rates, and higher investment income are among the positive factors that have bolstered insurers’ results in 2018, setting the stage for enhanced top- and bottom-line growth in the years ahead for us as we benefit from growth in insurers’ business growth (Source: Deloitte’s 2019 Insurance Industry Outlook). “US insurer results deteriorated a bit but were still positive in the first half of 2019, with the industry posting an underwriting gain of US$5.4 billion (down from US$6.1 billion for the same period in 2018) and a profitable combined ratio of 97.3 (up from 96.2).” (Source: Deloitte’s 2020 Insurance Industry Outlook)

Insurance Agency Industry Overview

An insurance agency or broker, solicits, writes, and binds policies through many different insurance companies, as they are not directly employed by any insurance carrier. Thus, insurance agencies can decide which insurance carriers they would like to represent and which products they would like to sell. They are like a retail shop that sells insurance services and products created by the insurance carrier. The main difference between a broker and an agent has to do with who they represent. An agent represents one or more insurance companies, acting as an extension of the insurer. A broker represents the insurance buyer.

An insurance carrier, on the other hand, is a manufacturer of insurance services and products that the insurance agencies sell. They control the underwriting process, claims process, pricing, and the overall management of the insurance products. Insurance carriers do not sell their products through direct agents, but only through independent agencies. Insurance policies are created and administered by the insurance carrier.

A key operating difference between agencies and carriers is the risk profile. The potential financial risks to the insurance industry caused by unforeseen event such as natural disasters are the responsibility of the carriers (and their re-insurers). Agencies and brokers bear no insurance risk. Furthermore, an increase in damage caused by natural disasters generally boosts demand for insurance and results in possible premium increases. Since insurance brokers and agents are a central part of the distribution of these products, they normally benefit from this increase in demand and premiums despite damaged profit margins among these upstream underwriters and carriers. Natural disasters are inherently difficult to forecast but any increase in the frequency of these events holds the potential to boost insurance policy volumes, particularly for property and casualty products (Source: IBISWorld’s Insurance Brokers & Agencies Industry in the US, December 2018).

This risk difference is key, especially considering the changing climate which is contributing to more volatile weather patterns that is resulting in an increased rate of natural disasters. The economic costs of 2018’s 394 natural disaster events were estimated at $225 billion, with insurance covering $90 billion of the overall total and creating the fourth costliest year on record for insured losses, noting that 2017 and 2018 brought the costliest back-to-back years on record for both economic losses ($653 billion) due to weather-related events and for insured losses ($237 billion) (Source: Aon’s Weather, Climate & Catastrophe Insight – 2018 Insight Report, January 2019).

Since insurance brokers and agents are a central part to the distribution of these products, they normally benefit from this increase in demand and premiums, despite damaged profit margins among these upstream underwriters and carriers (Source: IBISWorld’s Insurance Brokers & Agencies Industry in the US, December 2018).

The U.S. insurance broker and agency industry has grown steadily over the five years through 2018 due to macroeconomic growth, beneficial legislation which has passed, and positive trends within the insurance sector, reaching revenues of $164 billion in 2018. Over the next few years through to 2023, the industry is expected to grow moderately as the macroeconomic landscape continues to improve (Source: IBISWorld’s Insurance Brokers & Agencies Industry in the US, December 2018). The solid growth within the insurance agency market has resulted in strong mergers and acquisition (M&A) activity within this sector. Mergers and acquisitions from insurance agents and brokers broke several records in 2018. There were a record 626 deals in the U.S. and Canada in 2018, including 330 transactions in the second half of the year and 148 transactions during the fourth quarter. Furthermore, there were 611 M&A deals in 2017, which had previously been the most active year (Source: Optis Partners’ Agent and Broker 2018 Year-end Merger & Acquisition Update, January 2019). The confluence of unrelenting market pressure to achieve sustainable growth, a lingering abundance of capital and capacity, improving global economies, and an upturn in interest rates may indicate that insurers should be prepared for a continued growth of M&A activity in 2019 and beyond.

Along with all other industries the insurance sector is increasing its presence in the online market. A J.D. Power study has found that “insurance customer expectations are being influenced by the user experience of all-digital brands such as Amazon and Netflix, and many insurers are falling short. Insurers have created attractive user interfaces but these lack functionality.” Currently the online market is less than approximately 10% or less of the entire market. In 2019 the Auto and Home insurance industry in the US had annual premiums of approximately $350B. Less than 10%Only a small portion of that was allocated to the online market. It is projected that at 2029 the combined annual premiums will be over $600B with approximately 66% of the business online.

The Company has therefore, strategically invested in NSURE, Inc., “Americas First Digital Insurance Agency”®. As a result of NSURE, Inc.’s superior proprietary technology and unique approach, we are specifically positioned to take 5% of offline insurance distribution and bring it online. Nsure.com is completely redesigning the home and auto insurance shopping and purchasing experience – making it simpler and transparent while providing significant savings of money and time for consumers. Nsure.com achieves this by simplifying application processes, real time connection via API to over 35 top rated insurance carriers, instant accurate coverage recommendations and in-house insurance buying/policy binding capabilities amongst other efficiencies.

Agencies and Brokers Outlook

Insurance brokers and agencies play a critical role within the insurance market by distributing policies and consulting insurance underwriters and consumers. The industry is a vital component to the larger insurance sector as industry operators act as intermediaries between insurance providers and downstream consumers. Operators generate income via commissions earned on policies sold. Given the transaction-based nature of the industry, revenue primarily depends on three factors: (1) policy (premium) pricing; (2) demand for insurance; and (3) the popularity of using agents and brokers in the distribution process.

The U.S. insurance broker and agency industry has grown steadily over the five years to 2018 due to macroeconomic growth, beneficial legislation that has been passed, and positive trends in the insurance sector, achieving $164 billion in revenues in 2018. As disposable income levels rose during that period, consumers were better suited to pay for more expensive insurance policies. Furthermore, some legislation, such as the Private Patient Affordable Care Act (PPACA), mandates that consumers have health insurance, which industry operators help consumers purchase. This helped provide constant demand for insurance products and services provided by industry operators during the period. For the coming five years, through 2023, the industry is anticipated to grow moderately as the macroeconomic landscape continues to improve (Source: IBISWorld’s Insurance Brokers & Agencies Industry in the US, December 2018).

Insurer carriers have recently profited from a strong stock market, lower interest rates, and greater investment income, which has created an environment for greater top- and bottom-line growth. U.S. property and casualty carriers, in particular, have seen their insurable exposure base expand for both personal and commercial lines, perhaps in part due to faster gross domestic product (GDP) gains, lower unemployment, and greater consumer spending. Additionally, luck may be partially to credit for this improvement since insurers have benefitted from a relief in a record number of natural disaster losses, which provided some reprieve to the financial hit from relatively recent catastrophes, such as Hurricane Florence (August to September 2018), which caused major flood losses along with roughly $5 billion in insured damages, or Hurricane Michael (October 2018), with insured losses between $4.5 billion and $8 billion.

Insurance carriers should not continue to depend on the positive (though uncertain) fundamental economic strength of years past to maintain positive balance sheet momentum. In order to succeed, carriers must address foundational challenges, which include remaining relevant despite systemic economic changes combined with expanding consumer preferences. Some of the issues that insurers must address will fall within the areas of mergers and acquisitions (M&A), technology, product development, talent, regulation, as well as tax reform, as described below.

While the industry may need to address internal and external pressures, the impact from these issues will continue to fall within the individual insurer. Thus, since insurers control their own destinies, potentially the most significant factor is likely to be how committed and prepared insurers are to quickly adjust to changes in the economy, society, and technology, and respond accordingly.

Online Insurance and the NSureNSURE Opportunity

As discussed elsewhere in this Prospectus, in February 2020, we purchased a minority stake in Nsure.com, which is a licensed online insurance agency that utilizes state of the art digital technology, and seek to use this platform to develop business in the online insurance business which we believe represents an underutilized opportunity.

We estimate that only a mere 10%small portion of the multibillion dollarmultibillion-dollar personal home and auto insurance market is now online.online based on anecdotal remarks from persons generally that they still do not use online insurance. Moreover, the current insurance purchasing processes is time consuming and lacks transparency. Most of the current online sites are simply lead generators, which result in false insurance quotes, constant spam and aggressive sales pitches. We believe consumers are looking for an online platform that will replicate the services they could obtain from a traditional brick and mortar insurance agency, thus driving business toward the online site as we all migrate to online in this post COVID world.online.

Another key benefit to online insurance is the ability to combine seamlessly with electronic capabilities in processing, such as Nsure.com’s proprietary backend processing technology to support our traditional agency business. By implementing artificial intelligence, robotic process automation and automatic shopping for best rates at renewals, we believe we can dramatically reduce costs, and allow our agents to focus on selling new policies, creating a digitally empowered and scalable insurance agency model.

Specific benefits of the Nsure.com platform include:

Thus, we believe in the specific benefits of the online insurance business, and we believe that Nsure.com provides the platform to transform this segment of the industry.

On September 21, 2020, the Company purchased the domain 5minuteinsure.com. The domain was not in existence prior to the Company’s purchase. The Company is in the process of building out the website 5minuteinsure.com which it intends to ultimately utilize artificial intelligence and data mining, to provide competitive insurance quotes within 5 minutes, with minimal data input. This project is still at the initiation phase. In conjunction with this initiative, on October 8, 2020, the Company replaced its agreement with NSURE, which also utilizes artificial intelligence and data mining to provide competitive insurance quotes, allowing the Company to invest an additional $1,350,000 by December 20, 2020 at $6.457 per share for an additional 209,075 shares of Class A common stock as well as an additional $3,000,000 investment no later than March 31, 2021 at $9.224 per share for an additional 325,239 shares of Class A common stock.

Insurance M&A Overview

In the two years leading up to 2018, one in 10 insurance agencies were involved in some sort of M&A activity (Source: IA Buyer’s Guide: The 6 Stages of Acquiring an Agency, November 2017) and this trend does not seem to be slowing. Mergers and acquisitions of insurance agents and brokers broke several records in 2018. As shownset forth in the table below, there were a record 626 deals in the U.S. and Canada in 2018, including 330 transactions in the second half of the year and 148 transactions during the fourth quarter. In 2017, there were 611 M&A deals, which was previously the most active year (Source: Optis Partners’ Agent and Broker 20182019 Year-end Merger & Acquisition Update,, January 2019).2020, there was a record high of 649 transactions, surpassing 643 from 2018.The Private Equity-Backed / Hybrid group of buyers continues to increase their share of the total activity with 69% of all announced transactions in 2019, up from 67% in 2018 There were 131 unique buyers in 2019, down from 144 in 2018 and 177 in 2017.

The confluence of unrelenting market pressure to achieve sustainable growth, a lingering abundance of capital and capacity, improving global economies, and an upturn in interest rates may indicate that insurers should be prepared for continued growth of M&A activity in 2020. Specifically, we believe that the following factors are among the expected driving forces of an active insurance M&A market in the coming years:

Sustained U.S. economic growth, rising interest rates, and higher investment income are among the positive factors bolstering insurance companies’ results in 2019 and positioning them for bottom-line growth in the new year, making them attractive takeover targets.

These driving forces have facilitated the acquisition of insurance agencies, especially small- and mid-market companies looking at consolidation to grow and build out their portfolio capabilities, boost their bottom line, broaden their product portfolio or geographic reach, and strengthen future competitiveness.

The COVID-19 crisis may have an impact on the insurance industry for quite some time. Some factors to consider are:

Strain on investment portfolios – Insurance companies rely on their investment portfolios to generate returns. Markets have been in turmoil and, as a result, insurers’ investment portfolios may be significantly impacted. Additionally, interest income revenue streams may quickly dry up as interest rates continue to drop.

Delayed payments – Regulators are urging insurance companies to accept late premium payments with no penalty, putting a strain on cash flow. Despite liquidity being impacted, insurance companies are still being expected to pay out claims.

Decreased premium volume – Full or partial closing of businesses coupled with social distancing has led to decreased demand for insurance. Lower payroll levels lead to lower payroll-based premiums, such as those in workers’ compensation, and an uptick in layoffs results in fewer people buying houses, cars, and other insurable purchases. A decrease in premium volume means a decrease in income for insurers.

Coverage disputes – Pandemics are generally excluded from insurance policy coverage and therefore policy premium has not included the necessary charges to provide such coverage. A number of states are attempting to legislate to force insurance companies to provide insurance coverage for business interruption and other losses for claims resulting from the COVID-19 pandemic. There is uncertainty regarding which party will ultimately incur the additional cost for these adjustments.

We cannot presently estimate the full financial impact of the unprecedented COVID-19 pandemic on our business or predict the related federal, state and local civil authority actions, which are highly dependent on the severity and duration of the pandemic; however, we see opportunities which may arise as to changes in the markets. Due to the uncertainties associated with the COVID-19 pandemic and the indeterminate length of time it will affect, we have taken proactive measures to secure our liquidity position to be able to meet our obligations for the foreseeable future.

Employees

As of September 23,December 1, 2020, we had 3943 full-time employees. We believe our employee relations to be good.

Properties

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Listed below are the names of the directors and executive officers of the Company, their ages as of the date of this Form S-1, their positions held, and all commenced service with the Company on the date stated in 2020.their respective biographies.

Ezra Beyman:

2018 – Present: CEO of Reliance Global Group, Inc.

1985- Present: Chairman of Reliance Global Holdings, LLC and Affiliates

Ezra Beyman has served as the Chairman of our Board of Directors and our Chief Executive Officer since 2018. Mr. Beyman is the central force leading the success and growth of Reliance Global Holdings and RELI. Drawing on his nearly three decades of entrepreneurial experience in real estate and ten years in insurance, he has set his vision and acuity on one integrated goal: integrity and success. At one point in time Mr. Beyman’s portfolio of commercial and residential properties comprised of approximately 40,000 units, as well as several insurance companies. In 1985, he founded a small mortgage broker, together with his wife, which he operated in his basement. From there, his company rapidly grew into a dynamic force on the market. By 2008, he owned the third largest licensed mortgage brokerage in the U.S., having acquired numerous mortgage companies in the interim. He also expanded to real estate acquisition, having grown his portfolio to over three billion dollars. In expanding his investments, Mr. Beyman began exploring opportunities in other markets, acquiring several insurance agencies in both Florida and New Jersey. His latest venture includes entering the domains of warrantee and insurance carriers. Raised in the New York metropolitan area, Mr. Beyman spent his secondary and post-secondary school years at Mesivta Tifereth Yerushalayim, where he advanced his analytic abilities while mastering various areas of Talmudic studies, earning a position as one of the closest students of the Dean. He earned his First Talmudic degree in 1975. From early in his career, Mr. Beyman has worked closely with his wife, whom he made an equal equity partner in all his enterprises in 2009. He is now seeking to grow their enterprise in the post-recession era to peaks surpassing their previous successes. The Board determined that Mr. Beyman’s business experience makes him an ideal director for the Company.

Alex Blumenfrucht:

2018 - Present: CFO of Reliance Global Group, Inc.

2015 – 2018: Audit senior at Deloitte and Touche.Touché.

Alex Blumenfrucht has served as member of our board of directors and our Chief Financial Officer since 2018. Mr. Blumenfrucht serves as the Chief Financial Officer (CFO) of RELI and also serves as the CFO at Reliance Global Holdings. Prior to joining Reliance Global Holdings, Mr. Blumenfrucht served as an Audit & Assurance Professional at Deloitte & Touche,Touché, LLP where he successfully led audit teams on both public and privately held corporations. Mr. Blumenfrucht’s extensive experience in internal control, financial analysis, and reporting for both private and publicly traded companies is central to the Company’s management of finances, reporting, and controls.

Yaakov Beyman:

2018 – Present: Executive VP of Insurance Division, Reliance Global Group, Inc.

2012 – 2018: Executive VP of Insurance Division, Empire Insurance Holdings

Yaakov Beyman has served as the Executive Vice President of the Insurance Divisions since 2018. Mr. Beyman oversees the insurance operations of Reliance Global Holdings. He works from a platform that includes both strategizing the future vision of the insurance division and developing and implementing operational tools on a more granular level to grow the various insurance businesses. In his role as a strategist, Mr. Beyman has mapped a clear future: expand the various insurance products that RELI offers both geographically and in category. On the more hands-on level, Mr. Beyman (who holds insurance licenses in most of the continental U.S.) is heavily involved in marketing, maintaining state of the art technological models, financial management and distribution, and entity creation and maintenance. Combining his roles as the idea-generator and implementer, he is well-equipped to take the lead role in growing the insurance divisions to greater heights.Company.

Scott Korman:

Joined Board in 2019

1984 – Present: President of Nashone, Inc

2019 – Present: CEO, Illumina Radiopharmaceuticals LLC

2000 – 2019: Advisor at Main Street Resources

Scott Korman, 64,65, currently serves as President of Nashone, Inc., a private equity firm, which he founded in 1984. In this role, Mr. Korman is involved in financial advisory, M&A, and general management assignments. He is a founder and Managing Partner of Convergence Merchant Bank, as well as founderMember and CEO of Illumina Radiopharmaceuticals LLC, CEO of Red Mountain Medical Holdings, Inc., and founder of CDx Medical Holdings, Inc. Mr. Korman previously served as Chairman of Da-Tech Corporation, a Pennsylvania based contract electronics manufacturer and as Chairman and CEO of Best Manufacturing Group LLC, a leading manufacturer and distributor of uniforms, napery, service apparel, and hospitality and healthcare textiles. Mr. Korman also served as President and CEO of Welsh Farms Inc., a full-service dairy processor and distributor of milk, ice cream mix and ice cream products. Mr. Korman received a B.S. degree in Economics from the University of Pennsylvania Wharton School. He has served as a member of the Board of Directors of Tofutti Brands, Inc. since December 2011, and advises companies including Damina Advisors, CFO Squad, Beis Capital LLC and Cinch Delivers LLC. He also serves on the boards of various not-for-profit groups and was the founder of the Englewood Business Forum.groups. The Board determined that Mr. Korman’s business experience makes him an ideal director for the company.Company.

Ben Fruchtzweig:

Joined Board in 2019

2013 – Current: Mosdos Beis Abba

Ben Fruchtzweig, 56, brings decades of executive experience in accounting and financial services. He has served as Chief Comptroller/Financial Analyst at national financial services and investment companies. He received his NYS C.P.A license in 1987 and has worked at Deloitte Haskins and Sells and other leading accounting firms. Currently, Mr. Fruchtzweig lectures on a variety of topics including business ethics. He also serves on a voluntary basis as a trustee of a non-profit private foundation, which serves to provide the needed financial support, services and guidance to qualifying individuals and families. Mr. Fruchtzweig graduated Magna Cum Laude from Queens College/ C.U.N.Y. in June 1985. The Company’s Board believes that his strong accounting and finance background makes him a strong director.

Sheldon Brickman:

Joined Board in 2020

2013 – Present: President of Rockshore Advisors LLC

Sheldon Brickman has over 25 years of M&A advisory and business development experience, totaling more than $40 billion in deal value. He has worked for numerous multibillion-dollar insurance carriers, including assignments for such companies as AIG, Aetna and National General. Sheldon has assisted international companies (UAE, UK, Asia and Latin America), start-up operations, and regional insurance carriers. Mr. Brickman’s experience covers the property casualty and life/health markets, including working with insurance carriers, managing general agencies, wholesalers, retailers and third partythird-party administrators. The Board determined that Mr. Brickman’s M&A and insurance industry experience makes him an ideal director for the Company.

Family Relationships

There are no arrangements between our directors and any other person pursuant to which our directors were nominated or elected for their positions. Except for Ezra Beyman and Yaakov Beyman (father and son), there are no family relationships between any of our directors or executive officers.

Certain Legal Proceedings

Involvement in Certain Legal Proceedings

None of our directors and executive officers has been involved in any of the following events during the past ten years: