EX-99.5 7 ex99-5.htm EX-99.5

 

Exhibit 99.5

 

UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

 

RELIANCE GLOBAL GROUP, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2024

(UNAUDITED)

 

On September 6, 2024, Reliance Global Group, Inc. (the “Company” or “Reliance”), entered into an amended and restated Stock Exchange Agreement (as further amended on October 29, 2024 and February 20, 2025, (this “Agreement”) among Spetner Associates, Inc., a Missouri corporation (“SAI”); Jonathan Spetner (“Mr. Spetner”) (a “Seller”); and Agudath Israel of America, a New York corporation (“Agudath”) (a “Seller”). Mr. Spetner and Agudath may be referred to herein collectively as (the “Sellers”) and each individually as a “Seller”. Capitalized terms not defined herein, will have the meaning as defined in the Stock Exchange Agreement. Pursuant to the terms of the Stock Exchange Agreement, the Company will acquire from the Sellers certain or all of the issued and outstanding Equity Securities of SAI, all of which are held beneficially and of record by the Sellers. The Sellers represent and warrant that the Sellers hold, jointly, beneficially and of record, and as tenants by the entirety, 100, shares of common stock, par value $1.00 per share of SAI (the “SAI Common Stock”), which shares of SAI Common Stock (the “SAI Shares”) represent 100% of the issued and outstanding Equity Securities of SAI. The Company shall acquire the SAI Shares in two Closings, with the Company to acquire 80% of the SAI Shares, (the “First Closing Shares”) at the First Closing, and with the Company to have the option at the Company’s sole discretion, to acquire the remaining 20% of the SAI Shares, being all the remaining SAI Shares (the “Second Closing Shares”), at the Second Closing to occur on a date prior to the third annual anniversary of the First Closing Date. The aggregate purchase price for the First Closing Shares is $16,050,000, payable through a combination of cash, common stock, par value $0.086 per share, of the Company (the “Company Common Stock”), and promissory notes. The Second Closing Shares purchase price will be equal to the product of ten times 20% of SAI’s final annual EBITDA for the most recent fiscal year ended, prior to the Second Closing.

 

The First Closing purchase price shall be paid as follows: cash of $6,500,000 (the “Cash Payment”) payable to Mr. Spetner; (ii) a promissory note in the aggregate principal amount of $2,500,000 payable to Agudath, (iii) issuance to the Sellers, jointly, of Company Common Stock up to 9.9% of the total outstanding shares of the Company, and (iv) if required any remaining portion of the First Purchase Price will be paid via the issuance of a promissory note of the Company to Mr. Spetner, as described further in Note 3 to this unaudited pro forma condensed consolidated financial information. The transaction contemplated by The Stock Exchange Agreement, which includes the aforementioned terms’ is referred to herein as the (“Transaction”).

 

The following unaudited pro forma condensed consolidated financial information is based on the historical consolidated financial statements of the Company and the historical consolidated financial statements of Spetner Associates, Inc. to reflect the planned acquisition of SAI by the Company and the Company’s anticipated financing for the acquisition. We anticipate that the First Closing will be accounted for as a business combination using the authoritative guidance contained in Accounting Standards Codification (ASC) topic 805 Business Combinations (ASC 805) as the Company is obtaining control SAI by virtue of it acquiring 80% of the common stock of SAI. The Transaction accounting adjustments are described below and in the footnotes to the condensed consolidated pro forma financial statements.

 

The Transaction adjustments reflect management’s preliminary estimates of the fair value of purchase consideration and the fair values of tangible and intangible assets acquired, fair value of the noncontrolling interest and liabilities assumed in the planned acquisition along with the anticipated financing of the acquisition. Since these unaudited pro forma condensed consolidated financial statements have been prepared based on preliminary estimates of the fair value of noncontrolling interest and fair values of assets acquired and liabilities assumed, the actual amounts to be reported in future filings may differ materially from the amounts used in the pro forma condensed consolidated financial statements. The Transaction accounting adjustments also reflect adjustments for certain assets and lines of business that the seller will be excluding from the sale.

 

The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only, in accordance with Article 11 of Regulation S-X, and are not intended to represent or to be indicative of the results of operations or financial position that the Company would have reported had the planned acquisition been completed as of the dates set forth in the unaudited pro forma condensed consolidated financial statements due to various factors. The unaudited pro forma condensed consolidated statement of financial position does not purport to represent the future financial position of the Company, and the unaudited pro forma condensed consolidated statements of operations do not purport to represent the future results of operations of the Company.

 

The unaudited pro forma condensed consolidated financial information is presented to illustrate the estimated effects of the planned acquisition and the related financing, and should be read in conjunction with the following:

 

  i. The audited financial statements and accompanying notes of the Company as of and for the fiscal year ended December 31, 2024 (as contained in its Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 7, 2025);
  ii. The audited financial statements of SAI as of and for the year ended December 31, 2024, included elsewhere in this prospectus.

 

F-1

 

 

RELIANCE GLOBAL GROUP, INC. AND SUBSIDIARIES

Pro Forma Condensed Consolidated Balance Sheets

December 31, 2024

(Unaudited)

 

   Historical   Pro Forma 
  

Reliance

Global Group,

Inc. (As of

December 31,

2024)

  

Spetner

Associates,

Inc.  (As of

December 31,

2024)

  

Transaction

Accounting

Adjustments

    

Pro Forma

Consolidated

(As of

December 31,

2024)

 
                    
Assets                  
                       
Current assets:                       
Cash and cash equivalents  $372,695   $2,782,170   $(2,343,941)  (A) (D) (F)  $810,924 
Restricted cash   1,424,999    -    -      1,424,999 
Accounts receivable   1,460,314    148,249    -      1,608,563 
Accounts receivable, related parties   7,813    -    -      7,813 
Other receivables   42,184         -      42,184 
Cash balance plan assets   -    332,443    -      332,443 
Prepaid expenses and other current assets   681,450    -    (329,431)     352,019 
Total current assets   3,989,455    3,262,862    (2,673,372)     4,578,945 
                       
Property and equipment, net   133,908    17,097    (17,097)  (E)   133,908 
Right-of-use-assets   1,052,926    -    -      1,052,926 
Intangibles, net   5,423,897    -    -      5,423,897 
Goodwill & Other identifiable intangibles   6,693,099    -    19,143,579   (A)   25,836,678 
Other non-current assets   21,792    -    -      21,792 
Total Assets  $17,315,077   $3,279,959   $16,453,110     $37,048,146 
                        
Liabilities and Stockholders’ equity (deficit)                       
                        
Current Liabilities                       
Accounts payable and other accrued liabilities  $1,186,968   $123,692   $(123,692)  (D)  $1,186,968 
Short term financing agreements   58,829    -    -       58,829 
Premiums due - insurance carriers   -    2,066,050    (2,066,050)  (D)   - 
Current portion of loans payables, related parties   453,177    711    (711)     453,177 
Other payables   38,814    -    -       38,814 
Current portion of long-term debt   1,591,919    7,829    (7,829)  (D)   1,591,919 
Current portion of leases payable   244,057    -    -       244,057 
Profit Sharing Plan Liability   -    131,201    (131,201)  (D)   - 
Total current liabilities   3,573,764    2,329,483    (2,329,483)     3,573,764 
                        
Long Term Liabilities                       
Loans payable, related parties, less current portion   428,052    -    -      428,052 
Long term debt, less current portion   9,468,400    14,458    (14,458)  (D)   9,468,400 
Promissory Note Payable to Sellers   -    -    6,481,144   (A)   6,481,144 
Leases payable, less current portion   847,293    -    -      847,293 
Warrant liabilities   326    -    -       326 
Total Liabilities   14,317,835    2,343,941    4,137,203      20,798,979 
                        
Stockholders’ Equity (deficit)                       
Preferred stock   -    -    -      - 
Common stock   193,484    100    348,078   (A) (C) (F)   541,662 
Additional paid in capital   50,877,307    912,359    7,978,888   (A) (C) (E) (F)   59,768,554 
Retained earnings   (48,073,549)   (59,870)   59,870   (C)   (48,073,549)
Accumulated other comprehensive income   -    83,429    (83,429)  (C)   - 
Total stockholders’ equity (deficit)   2,997,242    936,018    8,303,407   (C)   12,236,667 
Noncontrolling Interest   -    -    4,012,500   (A)   4,012,500 
Total Equity   2,997,242    936,018    12,315,907      16,249,167 
Total liabilities and stockholder’s equity  $17,315,077   $3,279,959   $16,453,110     $37,048,146 

 

F-2

 

 

RELIANCE GLOBAL GROUP, INC. AND SUBSIDIARIES

Pro Forma Condensed Consolidated Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2024

(Unaudited)

 

   Historical   Pro Forma 
  

Reliance

Global Group,

Inc. (For the

year ended

December 31,

2024)

  

Spetner

Associates,

Inc.  (For the

year ended

December 31,

2024)

  

Transaction

Accounting

Adjustments

    

Pro Forma

Consolidated

(For the

year ended

December 31,

2024)

 
                    
Revenue                   
Commission income  $14,054,361   $14,261,944   $(186,254)  (B)  $28,130,051 
Service and fee income   -    412,178    (27,670)  (B)   384,508 
Total revenue   14,054,361    14,674,122    (213,924)      28,514,559 
                        
Operating expenses (income)                       
Commission and enrollment expense  $4,189,599   $1,309,186   $(5,733)  (B)  $5,493,052 
Salaries and wages   7,226,810    3,516,128    (557,261)  (B)   10,185,677 
General and administrative expenses   4,219,635    1,444,369    (722,992)  (B)   4,941,012 
Marketing and advertising   357,697    -    -       357,697 
Pension expense   -    1,542    -       1,542 
Related party expenses   -    789,000    -       789,000 
Change in estimated acquisition earn-out payables   47,761    -    -       47,761 
Depreciation and amortization   1,786,068    10,258    -       1,796,326 
Asset impairments   3,922,110    -    -       3,922,110 
Total operating expenses   21,749,680    7,070,483    (1,285,986)      27,534,177 
                        
Net income (loss) from operations  $(7,695,319)  $7,603,639   $1,072,062      $980,382 
                        
Other income (expense)                   
Interest income (expense)  $(1,442,808)  $129,500   $(25,804)  (B)  $(1,339,112)
Interest related parties   (140,802)   -    -       (140,802)
Charitable contribution expense   -    (5,588,474)   2,308,735   (B)   (3,279,739)
Other income (expense), net   51,345    -    -       51,345 
Recognition and change in fair value of warrant liabilities   156,000    -    -       156,000 
Total other income (expense)  $(1,376,265)  $(5,458,974)  $2,282,931      $(4,552,308)
                        
Income (loss) before provision for income taxes  $(9,071,584)  $2,144,665   $3,354,993      $(3,571,926)
                        
Income tax expense   -    -    -       - 
Net (loss) income  $(9,071,584)  $2,144,665   $3,354,993      $(3,571,926)
                        
Noncontrolling Interest   -         (1,099,932)  (G)   (1,099,932)
Net (loss) income attributed to Reliance Global Group, Inc.  $(9,071,584)  $2,144,665   $2,255,061      $(4,671,858)
                        
Basic and diluted loss per share  $(9.01)              $(0.73)
Weighted average number of shares outstanding   1,007,020        5,380,156      

6,387,176

 
                        
Other comprehensive income                       
Net income (loss)  $(9,071,584)  $2,144,665   $3,354,993     $(3,571,926)
                        
Gain/loss in FV of Plan Asset  $-   $(726,615)  $-     $(726,615)
Other comprehensive (loss) income   (9,071,584)   1,418,050    3,354,993      (2,845,311)
                        
Noncontrolling Interest  $-   $   $283,610      $283,610 
Net Other comprehensive (loss) income attributed to Reliance Global Group, Inc.   (9,071,584)   1,418,050    3,071,383      (2,561,701)
                        
Non-GAAP Measure*                    
AEBITDA  $(321,224)  $2,025,423   $3,380,797      $5,084,996 

 

* See below for Non-GAAP Measure disclosures and reconciliation to Net Income.

 

F-3

 

 

Non-GAAP Measure

 

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

 

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

 

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

 

F-4

 

 

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

 

The following table provides a reconciliation from net loss to AEBITDA for the year ended December 31, 2024.

 

RELIANCE GLOBAL GROUP, INC. AND SUBSIDIARIES

Non-GAAP Net (Loss) to AEBITDA

For the Year Ended December 31, 2024

(Unaudited)

 

   Year Ended 
   December 31, 2024 
   Per 10K             
  

Reliance Global

Group, Inc. (For

the year ended

December 31,

2024)

  

Spetner

Associates, Inc.  

(For the year  ended

December 31, 2024)

  

Transaction

Accounting

Adjustments

  

Pro Forma Consolidated

(For the year ended

December 31, 2024)

 
                 
Net loss  $(9,071,584)  $2,144,665   $3,354,993   $(3,571,926)
Adjustments:                    
Interest and related party interest expense   1,583,610    (129,500)   25,804   1,479,914 
Depreciation and amortization   1,786,068    10,258    -    1,796,326 
Asset impairment   3,922,110    -    -    3,922,110 
Equity-based compensation to employees, directors and service providers   858,108    -    -    858,108 
Change in estimated acquisition earn-out payables   47,761    -    -    47,761 
Other (income) expense, net   (51,345)   -    -    (51,345)
Transactional costs   636,494    -    -    636,494 
Nonrecurring costs   123,554    -    -    123,554 
Recognition and change in fair value of warrant liabilities   (156,000)   -    -    (156,000)
Loss from discontinued operations before tax   -    -    -    - 
Total adjustments  $8,750,360   $(119,242)  $25,804  $8,656,922 
                     
AEBITDA  $(321,224)  $2,025,423   $3,380,797   $5,084,996 

 

F-5

 

 

RELIANCE GLOBAL GROUP, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2024

(UNAUDITED)

 

NOTE 1 — BASIS OF PRO FORMA PRESENTATION

 

The unaudited pro forma condensed consolidated financial information has been prepared by Reliance Global Group, Inc. (the “Company”) in connection with the Company’s acquisition of Spetner Associate, Inc.(“SAI”). On September 6, 2024, the Company and the shareholders of SAI entered into an amended and restated Stock Exchange Agreement, as amended on October 29, 2024 and February 20, 2025 (the “Stock Exchange Agreement”), pursuant to which the Company agreed to purchase, and the Shareholders of SAI agreed to sell 100% of the shares of SAI. The Transaction may be executed in two closings: In the First Closing the company will acquire 80% of the outstanding shares of SAI with the option to purchase the remaining 20% within three years. As the acquisition of the 80% of the outstanding shares represents a controlling financial interest in SAI, the Company will account for the First Closing as a business combination in accordance with the authoritative guidance contained in Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Under the guidance in ASC 805, the purchase consideration, the assets acquired, the liabilities assumed and the noncontrolling interest in the acquired entity are measured at fair value. Any excess of the purchase consideration and noncontrolling interest is recognized as goodwill.

 

The unaudited condensed consolidated pro forma financial information and related notes were prepared in accordance with Article 11 of Regulation S-X and are based on the historical consolidated financial statements of the Company and the historical consolidated financial statements of Spetner, as adjusted to give effect to the Transaction accounting adjustments described below.

 

The Transaction accounting adjustments to the pro forma statement of earnings have been prepared as if the Transaction occurred on January 1, 2024. The Transaction accounting adjustments to the pro forma balance sheet have been prepared as if the Transaction occurred on December 31, 2024. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed consolidated financial statements in accordance with Article 11 of Regulation S-X as amended. The pro forma adjustments are based on currently available information and certain estimates and assumptions, and therefore the actual effect of these Transactions may differ from the pro forma adjustments.

 

The Company’s and SAI’s historical financial statements were prepared in accordance with U.S. GAAP.

 

The audited consolidated financial statements and accompanying notes of Spetner as of and for the year ended December 31, 2024

 

The accompanying unaudited pro forma condensed consolidated financial information and related notes were prepared using the acquisition method of accounting in accordance with (“ASC 805”), with the Company considered the accounting acquirer of SAI. ASC 805 requires, among other things, that the assets acquired, and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the unaudited pro forma condensed consolidated balance sheet, the purchase price consideration has been allocated to the assets acquired and liabilities assumed of SAI based upon management’s preliminary estimate of their fair values as of December 31, 2024. The excess of the purchase price consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Accordingly, the purchase price allocation and related adjustments reflected in the unaudited pro forma condensed consolidated financial information are preliminary and subject to adjustment based on a final determination of fair value. The purchase price consideration as well as the estimated fair values of the assets and liabilities will be updated and finalized as soon as practicable, but no later than one year from the closing of the acquisition.

 

The transaction accounting adjustments are based upon available information and certain assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated financial information is provided for informational purposes only and does not purport to represent or be indicative of the consolidated results of operations or financial condition of the Company had the Transactions been completed as of the dates presented and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity.

 

F-6

 

 

NOTE 2 —ACCOUNTING POLICIES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

The unaudited pro forma consolidated financial statements do not reflect any differences in accounting policies. The Company has completed the review of SAI’s accounting policies and has concluded that differences between the accounting policies of the two companies are not material. Following the acquisition date, the Company will conduct a final review of the accounting policies of Spetner to determine if differences in accounting policies require adjustment. As a result of this review, the Company may identify differences that when adjusted, could have a material impact on this unaudited pro forma condensed consolidated financial information.

 

NOTE 3 —ESTIMATED PRELIMINARY PURCHASE CONSIDERATIONS

 

The aggregate value of the purchase price is approximately $16.0 million based on the agreed upon amended and restated agreement on February 20, 2025.

 

The table below presents the fair value of the total estimated preliminary purchase consideration to the stated First Closing Purchase Price per Agreement, as defined in the Stock Exchange Agreement, as amended.

 

   Amount 
Initial cash payment  $6,500,000 
Promissory note payable to seller consideration at closing   6,481,144 
Prepayment of common stock   568,856 
Agudath promissory note (planned payment at closing)   2,500,000 
Total preliminary purchase price for allocation per agreement  $16,050,000 

 

F-7

 

  

NOTE 4 — TRANSACTION ACCOUNTING ADJUSTMENTS TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

The Transaction accounting adjustments included in the unaudited pro forma consolidated balance sheet as of December 31, 2024, and the unaudited pro forma statement of operations for the year December 31, 2024 are as follows:

 

  A. Purchase consideration based on US GAAP

 

The Company expects to record a combination of cash payments, promissory notes, and common stock equity issuances as defined in the Stock Exchange Agreement. The Transaction reflects the purchase consideration, and the preliminary allocation of the assets acquired, and liabilities assumed based on their fair values on the acquisition date. The purchase consideration constitutes the following: an Initial Cash Payment of $6.5 million, the Agudath note of $2.5 million, the prepayment of Company Common Stock with an approximate value of $569,000 and an expected issuance of a promissory note to the Sellers with an estimated value of $6.5 million, resulting in an aggregate combined purchase value of $16.0 million (the “Purchase Consideration”) in exchange for 80% of the equity interests in Spetner. Total value of the entity is estimated at approximately $20.0 million, including the non-controlling interest, approximately at $4.0 million.

 

The table below presents the fair value of the total estimated preliminary purchase consideration to the stated First Closing Purchase Price, as defined in the Stock Exchange Agreement.

 

   Amount 

Initial cash payment

  $6,500,000 
Promissory note payable to seller consideration at closing   6,481,144 
Prepayment of common shares   568,856 
Agudath promissory note   2,500,000 
Total preliminary purchase price for allocation per agreement  $16,050,000 

 

The Company expects to account for the SAI acquisition as a business combination using acquisition accounting. The purchase consideration is as follows:

 

   December 31, 2024 
Cash and cash equivalents to Seller  $6,500,000 
Promissory note payable to sellers   6,481,144 
Prepayment of common stock   568,856 
Agudath promissory note   

2,500,000

 
Noncontrolling interest   4,012,500 
Total preliminary purchase consideration & noncontrolling interest  $20,062,500 

 

The Company recorded all its tangible and intangible assets and its liabilities at their preliminary estimated fair values on the acquisition date. The following represents the allocation of the estimated purchase consideration as if the Transaction had occurred on December 31, 2024:

 

   December 31, 2024 
Assets acquired     
Cash  $438,229 
Accounts receivable, net   148,249 
Cash balance plan assets   332,443 
Total assets acquired   918,921 
      
Goodwill and intangible assets   19,143,579 
Net fair value of assets acquired  $20,062,500 

 

F-8

 

 

  B. Adjustments to Statement of Operations for Lines of business not acquired

 

The adjustments reflect the lines of businesses included in the respective historical financial statement balances of SAI’s statement of operations for the year ended December 31, 2024, that the Company is not acquiring as part of the stock exchange agreement. Therefore, the following allocations of revenue and expense balances were removed from our historical balances for SAI.

 

   December 31, 2024 
   Transaction Accounting Adjustments 
Revenue     
Commission income  $(186,254)
Service and fee income   (27,670)
Total revenue   (213,924)
      
Operating expenses (income)     
Commission and enrollment expense  $(5,733)
Salaries and wages   (557,261)
General and administrative expenses   (722,992)
Total operating expenses   (1,285,986)
      
Other income (expense)     
Interest expense  $(25,804)
Charitable contribution expense   2,308,735 
Total other income (expense)  $2,282,931 

 

  C. Elimination of Historical SAI Equity Balance

 

The pro forma financial statements account for the SAI acquisition as a business combination in accordance with ASC 805 - Business Combinations, with the Company treated as the accounting acquirer and SAI treated as the accounting acquiree. As the accounting acquiree, SAI’s legal capital was eliminated, and the Company has acquired SAI’s assets and assumed SAI’s liabilities (if any). Therefore, the transaction adjustment eliminates the historical Equity balance of SAI to Additional paid in capital.

 

   December 31, 2024 
Common Stock  $(100)
Additional paid-in capital   (912,359)
Retained Earnings   59,870 
Accumulated other comprehensive income   (83,429)
Total equity elimination  $(936,018)

 

F-9

 

 

  D. Settlement of Liabilities accounting adjustments

 

The adjustment reflects the settlement of SAI liabilities, as required by the Stock Exchange Agreement by reducing cash recognized in SAI’s historical audited balance sheet as of December 31, 2024. Accordingly, the following liability balances were assumed to be settled.

 

   December 31, 2024 
     
Cash and cash equivalents  $(2,343,941)
      
Liability Settlement     
Accounts payable and other accrued liabilities  $123,692 
Premiums due - insurance carriers   2,066,050 
Current portion of loans payable, related parties   711 
Current portion of long-term debt   7,829 
Long term debt, less current portion   14,458 
Profit Sharing Plan Liability   131,201 
    2,343,941 
      
Remaining Cash and cash equivalents  $810,924 

 

  E. Distribution to Share Holder’s – Purchase of Asset accounting adjustments

 

This adjustment reflects the net book value of $17,097 for an automobile that SAI will distribute to a shareholder prior to acquisition in accordance with the terms of the Share Exchange Agreement.

 

F-10

 

 

  F. Adjustment to reflect proposed financing for the transaction.

 

The adjustment gives effect to the assumed issuance and sale of 4,048,583 shares of Company common stock offered by us in this offering at an assumed public offering price of $2.470 per share, after deducting the underwriting discount of 8% and offering expenses of $200,000 payable by us and assuming no exercise by the underwriters of their option to purchase additional shares. Calculated as follows:

 

Proceeds from offering  Proceeds from Offering 
      
Shares Sold (assumed)   4,048,583 
Estimated Price (assumed)  $2.470 
Gross Proceeds  $10,000,000 
      
Less Offering Costs:     
Underwriting Discount  $800,000 
Expenses payable by Reliance   200,000 
Total offering costs   1,000,000 
Net Proceeds  $9,000,000 
      
Allocation to Common Stock:     
Par Value  $348,178 
Additional Paid in capital   8,651,822 
   $9,000,000 

 

  G. Non-Controlling Interest

 

The Company is acquiring 80% of SAI in the first closing therefore, a pro forma adjustment to reflect the non-controlling interest in the income of SAI as adjusted for the Transaction Accounting Adjustments. The calculation follows:

 

Spetner Associate, Inc.  Year Ended December 31, 2024 
Historical net income  $2,144,665 
Transaction Accounting Adjustments   3,354,993 
Pro forma net income of SAI   5,499,658 
Percent attributable to non-controlling interest  $20%
Income allocated to non-controlling Interest  $1,009,932 

 

F-11

 

 

NOTE 5 — PRO FORMA NET LOSS PER SHARE

 

The pro forma basic and diluted net loss per share amounts were calculated using the Company’s historical weighted average common shares outstanding for the years ended December 31, 2024, adjusted for incremental shares issued or to be issued by the Company in connection with the transactions described herein. The following table presents the computation of pro forma basic and diluted net loss per share:

 

   December 31, 
   2024 
Numerator:     
Net loss continuing operations     
      
Pro forma net loss from continuing operations attributable to Reliance  $(4,671,858)
Loss from continuing operations numerator   (4,671,858)
      
Denominator:     
Weighted average common shares outstanding, as reported   1,007,020 
Incremental Shares:     
Additional shares issued by the Company   848,666 
Offering shares   4,048,583 
Incremental shares pro forma   4,897,249 
Pro Forma Weighted average common shares outstanding (basic and diluted)   5,904,269 
Pro forma basic and diluted net loss per share continuing operations  $(0.79)

 

NOTE 6 — INCOME TAXES

 

The pro forma condensed consolidated financial statements do not include an income tax provision as it is more likely than not that the Company will not be able to utilize the loss carry forwards. Reliance is subject to U.S. federal income tax and various state tax jurisdictions. The Company and its U.S. subsidiaries file a consolidated federal income tax return and is taxed as a C-Corporation, whereby it is subject to federal and state income taxes.

 

F-12