Item
1.01 Entry into Material Definitive Agreements
ASSET
PURCHASE AGREEMENT
On
December 21, 2021, Reliance Global Group, Inc., a Florida corporation (the “Company”) entered into an Asset Purchase Agreement
(“Asset Purchase Agreement”) with Healthcare Insurance Company, LLC and the sole member thereof (collectively, the “Seller”)
to purchase the Medicare supplement and related health insurance business of the Seller for a purchase price of $16,638,750 in cash and
shares of common stock of the Company worth $2,936,250 (valued based upon the average closing price of a share of the Company’s
common stock for 180 trading days prior to closing) to be issued . Closing shall take place on or before April 1, 2022 and is contingent
upon the Company’s ability to close on financing proceeds sufficient to pay the cash purchase price for the business being sold
plus working capital. The Asset Purchase Agreement contains customary representations and warranties and other commercial provisions
for a transaction of this nature.
On
December 22, 2021, the Company and the Seller entered into an Amendment to the Asset Purchase Agreement (“Amendment”). The
Amendment contains the following substantive amendments to the Agreement: (i) the cash portion of the purchase price is increased to
$18,138,750, and the total purchase price is increased to $20,096,250; and (ii) the number of shares of Company common stock being issued
is reduced to 1, 957,500, with half being released from lockup on December 21, 2022 and the balance being released from lockup on December
21, 2023.
PRIVATE
PLACEMENT
On
December 22, 2021, the Company entered into a securities purchase agreement (“Purchase Agreement”) with several
institutional buyers (the “Buyers”) for the purchase and sale of (i) warrants (the “Series B Warrants”)
to purchase an aggregate of up to 9,779,952 shares of the Company’s common stock, par value $0.086 per share
(the “Common Stock”), (ii) an aggregate of 2,670,892 shares of Common Stock (the “Common Shares”), and
(iii) 9,076 shares (the “Preferred Shares”) of the Company’s newly-designated Series B convertible preferred
stock, par value $0.086 per share (the “Series B Preferred”), with a stated value of $1,000 per share, initially convertible
into an aggregate of 2,219,084 shares of Common Stock at a conversion price of $4.09 per share in a private placement (the
“Private Placement”). The aggregate purchase price for the Common Shares, the Preferred Shares and the Warrants is approximately
$20,000,000.
Each
Buyer shall receive Series B Warrants that are exercisable into a number of shares of Common Stock equal to 200% of the sum of the (i)
Common Shares to be issued to such Buyer at the closing, and (ii) Conversion Shares initially issuable upon conversion of the Preferred
Shares to be issued to such Buyer at the closing, at the initial $4.09 conversion price.
The
purchase price per Common Share and accompanying Series B Warrants is $4.09. The purchase price per Preferred Share and accompanying
Series B Warrants is $1,000.
The
consummation of the transactions contemplated by the Purchase Agreement is subject to customary closing conditions. A copy of the Purchase
Agreement is attached to this Form 8-K as Exhibit 10.1.
The
terms of the Series B Preferred to be issued in the Private Placement shall be as set forth in the form of Certificate of Designation
of the Series B Preferred attached as Exhibit 10.4 to this Current Report on Form 8-K. The Series B Preferred will be convertible into
Common Stock at the election of the holder at any time at an initial conversion price of $4.09 (the “Conversion Price”).
The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like. No dividends
will be payable on the Series B Preferred, except that holders of Series B Preferred would be entitled to receive any dividends paid
on account of the Common Stock, on an as-converted basis. The holders of Series B Preferred have no voting rights on account of the Series
B Preferred, other than with respect to certain matters affecting the rights of the Series B Preferred.
The
terms of the Series B Warrant to be issued in the Private Placement shall be as set forth in the form of Series B Warrants attached as
Exhibit 10.3 to this Current Report on Form 8-K. The Series B Warrant has an exercise price of $4.09 per share, subject to customary
adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full
ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common
Stock at a price below the then-applicable exercise price (subject to certain exceptions, including a floor price of $3.84 per share
of Common Stock, until the Company has received shareholder approval for the sale of securities in the Private Placement). The Series
B Warrant will be exercisable commencing on the date of issuance, and will expire five years from the date of issuance.
Pursuant
to the terms of the Purchase Agreement, at the closing of the Private Placement, the Company will enter into a registration rights agreement
(the “Registration Rights Agreement”) with the Buyer to register the Common Shares and the shares of Common Stock underlying
the Series B Warrants and Series B Preferred Shares. The form of the Registration Rights Agreement is attached to this Form 8-K as Exhibit
10.2.
The
Common Shares, the Series B Warrant and underlying shares and the Series B Preferred Shares and underlying shares (the “Securities”),
each to be issued by the Company pursuant to the Purchase Agreement, have not been registered under the Securities Act, and may not be
offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company is relying
on the private placement exemption from registration provided by Section 4(a)(2) of the Securities Act and by Rule 506 of Regulation
D, and in reliance on similar exemptions under applicable state laws. No form of general solicitation or general advertising was conducted
in connection with the issuance. The Securities contain (or will contain, where applicable) restrictive legends preventing the sale,
transfer, or other disposition of such securities, unless registered under the Securities Act, or pursuant to an exemption therefrom.
The disclosure contained in this Current Report on Form 8-K does not constitute an offer to sell or a solicitation of an offer to buy
any securities of the Company, and is made only as required under applicable rules for filing current reports with the Commission.
The
Company engaged EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”) as the Company’s placement agent
for the Private Placement pursuant to a Placement Agent Agreement (the “PAA”) dated as of December 22, 2021. Pursuant to
the PAA, the Company agreed to pay EF Hutton a cash placement fee equal to 8.0% of the gross proceeds of the Private Placement, an
additional cash fee equal to 2.0% of the gross proceeds raised by the Company in the offering for non-accountable expenses, and also
agreed to reimburse EF Hutton up to $70,000 for accountable expenses, including legal fees and expenses. In addition, EF Hutton will
receive warrants to purchase up to 244,499 shares of Common Stock, which is equal to 5.0% of the total number of shares of Common
Stock (including upon conversion of the Preferred Shares) issued in the Private Placement, at an exercise price of $4.09 per share
(the “Representative Warrants”). The Representative Warrants are exercisable six (6) months after the date of the
closing and expire five (5) years after such closing. The Representative Warrants will be initially exercisable at a price per share
equal to the exercise price of the Warrants issued in the Private Placement. Subject to FINRA Rule 5110, the Placement Agent will be
entitled to the same registration rights as the Buyers in the Private Placement. The Representative Warrants may be exercised in
whole or in part, shall provide for “cashless exercise”, and shall provide for customary anti-dilution protection for
stock splits, combinations and the like.
The
foregoing summaries of the terms of the Purchase Agreement, the Certificate of Designation for the Series B Preferred, the Series B Warrant,
the Registration Rights Agreement and the Asset Purchase Agreement are subject to, and qualified in their entirety by, such documents,
which are incorporated herein by reference.
The
representations, warranties and covenants contained in the Purchase Agreement and Asset Purchase Agreement were made solely for the benefit
of the parties each respective agreements and may be subject to limitations agreed upon by the contracting parties. In addition, such
representations, warranties and covenants (i) are intended as a way of allocating the risk between the parties to each respective agreement
and not as statements of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material
by stockholders of, or other investors in, the Company. Accordingly, the Purchase Agreement and Asset Purchase Agreement are filed with
this report only to provide investors with information regarding the terms of the applicable transactions, and not to provide investors
with any other factual information regarding the Company. Stockholders should not rely on the representations, warranties and covenants
or any descriptions in each such agreement as characterizations of the actual state of facts or condition of the Company. Moreover, information
concerning the subject matter of the representations and warranties may change after the dates of the Purchase Agreement of Asset Purchase
Agreement, which subsequent information may or may not be fully reflected in public disclosures.
Item
3.02 Unregistered Sale of Securities
See
Item 1.01 above.