| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation and Principles of Consolidation The
accompanying consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles
generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the
accounting of Reliance Global Group, Inc., and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated
in consolidation. Liquidity As
of December 31, 2022, the Company’s reported cash and restricted cash aggregated balance was approximately $ 1,910,000 ,
current assets were approximately $ 3,265,000 ,
while current liabilities were approximately $ 7,794,000 .
As of December 31, 2022, the Company had a working capital deficit of approximately $ 4,529,000 and
stockholders’ equity of approximately $ 8,911,039 .
For the year ended December 31, 2022, the Company reported net income of approximately $ 6,466,162 ,
offset by a non-cash, non-operating measurement gain on the warrant commitment of approximately $ 29,065,000 .
The Company reported negative cash flows from operations of approximately $ 3,190,000 .
The Company completed a capital offering in February 2021 and January 2022 that raised net proceeds of approximately $ 10,496,000 and
$ 17,853,000 ,
respectively. As noted in Note 17 - Subsequent Events 3,446,000 Management believes the company’s financial position and continued ability to raise
capital to be reasonable and sufficient. Based on our assessment, we do not believe there are any conditions or events that, in the aggregate, raise substantial
doubt about the Company’s ability to continue as a going concern within one year of filing these financial statements with the Securities
and Exchange Commission (“SEC”). Use
of Estimates The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosures in the financial statements and accompanying notes. Management
bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could
differ materially from those estimates. Cash and Restricted Cash Cash
consists of checking accounts. The Company considers all highly liquid investments with an original maturity of three months or less
to be cash equivalents. Restricted
cash includes cash pledged as collateral to secure obligations and/or all cash whose use is otherwise limited by contractual provisions. At times, some cash balances held in banks may exceed the Federal Deposit Insurance Corporation, or FDIC, standard
deposit insurance limit of $ 250,000 The
reconciliation of cash and restricted cash reported within the applicable balance sheet accounts that sum to the total of cash and restricted
cash presented in the statement of cash flows is as follows: SCHEDULE
OF RESTRICTED CASH IN STATEMENT OF CASH FLOW
December 31, 2022 December 31, 2021
Cash $ 505,410 $ 4,136,180
Restricted cash 1,404,359 484,542
Total cash and restricted cash $ 1,909,769 $ 4,620,722 Property
and Equipment Property
and equipment is stated at cost, less accumulated depreciation. Depreciation is recognized over an asset’s estimated useful life
using the straight-line method beginning on the date an asset is placed in service. The Company regularly evaluates the estimated remaining
useful lives of the Company’s property and equipment to determine whether events or changes in circumstances warrant a revision
to the remaining period of depreciation. Certain capitalized software has been reclassified in the consolidated balance sheet from property
and equipment, net to intangibles, net and comparative periods have been adjusted accordingly. Maintenance and repairs are charged to
expense as incurred. Estimated useful lives of the Company’s Property and Equipment are as follows: SCHEDULE
OF ESTIMATED USEFUL LIVE PROPERTY AND EQUIPMENT
Useful Life (in years)
Computer equipment 5
Office equipment and furniture 7
Leasehold improvements Shorter of the useful life or the lease term Fair
Value of Financial Instruments Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The three levels of the fair value hierarchy are as follows: Level
1 — Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets and liabilities; Level
2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly
or indirectly for substantially the full term of the asset or liability; and Level
3 — Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market
participants would use in pricing the asset or liability, including assumptions about risk. As
of December 31, 2022 and 2021 respectively, the Company’s balance sheet includes certain financial instruments, including cash,
notes receivables, accounts payable, and short and long-term debt. The carrying amounts of current assets and current liabilities approximate
their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
The carrying amounts of long-term debt approximate their fair value as the variable interest rates are based on a market index. Warrant
Liabilities: Warrant Liabilities SCHEDULE
OF EARN OUT LIABILITY
December 22, 2022 December 22, 2021
Stock price $ 0.57 $ 6.44
Volatility 105.0 % 90 %
Time to Expiry 4.01 5
Dividend yield 0 % 0 %
Risk free rate 4.1 % 1.10 % The
following reconciles the warrant liabilities for the years ended December 31, 2022 and 2021: SCHEDULE
OF RECONCILES WARRANT COMMITMENT
Years ended December 31, 2022 and 2021
Series B Warrant Commitment Series B warrant liabilities Placement agent warrants Total
Beginning balance, December 31, 2020 - - - -
Initial recognition 20,244,497 - - 20,244,497
Unrealized (gain) loss 17,408,311 - - 17,408,311
Ending balance, December 31, 2021 $ 37,652,808 $ - $ - $ 37,652,808
Beginning balance, December 31, 2021 $ 37,652,808 $ - $ - $ 37,652,808
Initial recognition - 55,061,119 1,525,924 56,587,043
Unrealized (gain) loss 17,408,311 (48,668,869 ) (1,477,024 ) (32,737,582 )*
Warrants exercised or transferred (55,061,119 ) (8,000 ) - (55,069,119 )
Ending balance, December 31, 2022 - 6,384,250 48,900 6,433,150
* Recognition and change in fair value of warrant liabilities per income statement is $ 29,064,958 3,672,624 Earn-out
liabilities: SCHEDULE
OF FAIR VALUE MEASUREMENTS
December 31, 2022 December 31, 2021
Valuation technique Discounted cash flow Discounted cash flow
Significant unobservable input Projected revenue and probability of achievement Projected revenue and probability of achievement The
Company values its Level 3 earn-out liability related to the Barra Acquisition using a Monte Carlo simulation in a risk-neutral framework
(a special case of the Income Approach). The following summarizes the significant unobservable inputs: SCHEDULE
OF EARN OUT LIABILITY
December 31, 2022
WACC Risk Premium: 14.0 %
Volatility 50.0 %
Credit Spread: 7.7 %
Payment Delay (days) 90
Risk free rate USD Yield Curve
Discounting Convention: Mid-period
Number of Iterations 100,000 Undiscounted
remaining earn out payments are approximately $ 2,967,592 SCHEDULE
OF GAIN OR LOSSES RECOGNIZED FAIR VALUE
December
31, December
31,
Beginning
balance – January 1 $ 3,813,878 $ 2,931,418
Acquisitions
and Settlements (1,104,925 )
1,160,562
Period
adjustments:
Fair
value changes included in earnings * 524 (278,102 )
Ending
balance $ 2,709,478 $ 3,813,878
Less:
Current portion (2,153,478 ) (3,297,855 )
Ending
balance, less current portion 556,000 516,023
* Recorded
as a reduction to general and administrative expenses Deferred
Financing Costs The
Company has recorded deferred financing costs as a result of fees incurred by the Company in conjunction with its debt financing activities.
These costs are amortized to interest expense using the straight-line method which approximates the interest rate method over the term
of the related debt. As of December 31, 2022, and 2021, unamortized deferred financing costs were $ 313,829 134,528 Business
Combinations The
Company accounts for its business combinations using the acquisition method of accounting. Under the acquisition method, assets acquired,
liabilities assumed, and consideration transferred are recorded at the date of acquisition at their respective fair values. Definite-lived
intangible assets are amortized over the expected life of the asset. Any excess of the purchase price over the estimated fair values
of the net assets acquired is recorded as goodwill. Goodwill
represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination.
Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred. If the business combination
provides for contingent consideration such as earn-outs, the Company records the contingent consideration at fair value at the acquisition
date. The Company remeasures fair value as of each reporting date and changes resulting from events after the acquisition date, are recognized
as follows: 1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent
settlement is accounted for within equity, or 2) if the contingent consideration is classified as a liability, the changes in fair value
and accretion costs are recognized in earnings. Identifiable
Intangible Assets, net Finite-lived
intangible assets such as customer relationships assets, trademarks and tradenames are amortized over their estimated useful lives, generally
on a straight-line basis for periods ranging from 3 20 Goodwill
and other indefinite-lived intangibles The
Company records goodwill when the purchase price of a business acquisition exceeds the estimated fair value of net identified tangible
and intangible assets acquired. Goodwill is assigned on the acquisition date and tested for impairment at least annually,
or more frequently when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not
declined below its carrying value. Similarly, indefinite-lived intangible assets (if any) other than goodwill are tested annually or
more frequently if indicated, for impairment. If impaired, intangible assets are written down to fair value based on the expected discounted
cash flows. Financial
Instruments The
Company evaluates issued financial instruments for classification as either equity or liability based on an assessment of the financial
instrument’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC
480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the financial instruments
issued are freestanding pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and, if applicable whether the financial
instruments meet all of the requirements for equity classification under ASC 815, including whether the financial instruments are indexed
to the Company’s own Common Stock, among other conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of issuance and as of each subsequent reporting period end date while the financial instruments
are outstanding. Financial instruments that are determined to be liabilities under ASC 480 or ASC 815 are held at their initial fair
value and remeasured to fair value at each subsequent reporting date, with changes in fair value recorded as a non-operating, non-cash
loss or gain, as applicable. The
Company’s financial instruments consist of derivatives related to the warrants issued with the securities purchase agreement as
discussed in Note 9, Warrant Liabilities Revenue
Recognition The
Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers The
Company’s revenue is primarily comprised of agency commissions earned from insurance carriers (the “Customer” or “Carrier”)
related to insurance plans produced through brokering, producing and servicing agreements between insurance carriers and members. The
Company defines a “Member” as an individual, family or entity currently covered or seeking insurance coverage. The
Company focuses primarily on agency services for insurance products in the “Healthcare” and property and casualty, which
includes auto (collectively “P&C”) space, with nominal activity in the life insurance and bond sectors. Healthcare includes
plans for individuals and families, Medicare supplements, ancillary and small businesses. The Company also earns revenue in the “Insurance
Marketing” space as discussed further below. Consideration
for all agency services typically is based on commissions calculated by applying contractual commission rates to policy premiums. For
P&C, commission rates are applied to premiums due, whereas for healthcare, commission rates, including override commissions, are
applied to monthly premiums received by the Carrier. The
Company has two forms of billing practices, “Direct Bill” and “Agency Bill”. With Direct Bill, Carriers bill
and collect policy premium payments directly from Members without any involvement from the Company. Commissions are paid to the Company
by the Carrier in the following month. With Agency Bill, the Company bills Members premiums due and remits them to Carriers net of commission
earned. The
following outlines the core principles of ASC 606: Identification
of the contract, or contracts, with a customer Identification
of the performance obligations in the contract Determination
of the transaction price Allocation
of the transaction price to the performance obligations in the contract Recognition
of revenue when, or as, the Company satisfies a performance obligation Healthcare
revenue recognition: The
Company identifies a contract when it has a binding agreement with a Carrier, the Customer, to provide agency services to Members. There
typically is one performance obligation in contracts with Carriers, to perform agency services that culminate in monthly premium cash
collections by the Carrier. The performance obligation is satisfied through a combination of agency services including, marketing carrier’s
insurance plans, soliciting Member applications, binding, executing and servicing insurance policies on a continuous basis throughout
a policy’s life cycle which includes and culminates with the Customer’s collection of monthly premiums. No commission is
earned if cash is not received by Carrier. Thus, commission revenue is earned only after a month’s cash receipts from Members’
dues is received by the Customer. Each month’s Carrier cash collections is considered a separate unit sold and transferred to the
Customer i.e., the satisfaction of that month’s performance obligation. Transaction
price is typically stated in a contract and usually based on a commission rate applied to Member premiums paid and received by Carrier.
The Company generally continues to receive commission payments from Carriers until a Member’s plan is cancelled or the Company
terminates its agency agreement with the Carrier. Upon termination, the Company normally will no longer receive any commissions from
Carriers even on business still in place. In some instances, trailing commissions could occur which would be recognized similar to other
Healthcare revenue. With one performance obligation, allocation of transaction price is normally not necessary. Healthcare
typically utilizes the Direct Bill method. The
Company recognizes revenue at a point in time, when it satisfies its monthly performance obligation and control of the service transfers
to the Customer. Transfer occurs when Member insurance premium cash payments are received by the Customer. The Customer’s receipt
of cash is the culmination and complete satisfaction of the Company’s performance obligation, and the earnings process is complete. With
Direct Bill, since the amount of monthly Customer cash receipts is unknown to the Company until the following month when notice is provided
by Customer to Company, the Company accrues revenue at each period end. Any estimated revenue accrued and recognized at a period-end
is trued up for financial reporting per actual revenue earned as provided by the Customer during the following month. P&C
revenue recognition The
Company identifies a contract when it has a binding agreement with a Carrier, the Customer, to provide agency services to Members. There
typically is one performance obligation in contracts with Customers, to perform agency services to solicit, receive proposals and bind
insurance policies culminating with policy placement. Commission revenue is earned at the time of policy placement. Transaction
price is typically stated in a contract and usually based on commission rates applied to Member premiums due. With one performance obligation,
allocation of transaction price is normally not necessary. P&C
utilizes both the Agency Bill and Direct Bill methods, depending on the Carrier. The
Company recognizes revenue at a point in time when it satisfies its performance obligation and control of the service transfers to the
Customer. Transfer occurs when the policy placement process is complete. With
both Direct Bill and Agency Bill, the Company accrues commission revenue in the period policies are placed. With Agency Bill, payment
is typically received from Members in the month earned, however with Direct Bill, payment is typically received from Carriers in the
month subsequent to the commissions being earned. Insurance
Marketing revenue recognition: Medigap,
a consolidated wholly owned subsidiary of the Company earns commission revenue by selling bound insurance policies with all renewal rights
to insurance marketing organizations (the “IM Customer”). The IM Customers utilize innovative actuarial models to value and
price policies purchased based on future projections. IM Customers pay a one-time commission per policy purchased to selling agencies
based on a pre-agreed formula outlined in the parties’ contractual agreement. Commission payments are subject to chargeback in
the event a policy is cancelled or lapses within 3 months of a policy’s effective date or until the first three payments are received
from the insured party, depending on the IM Customer Contract. The
Company identifies a contract when it has a binding agreement to sell issued insurance policies to the IM Customer. There
is one performance obligation in IM Customer contracts, to sell the rights in Company procured issued insurance policies to the IM Customer.
The performance obligation is satisfied when the rights to an issued policy have been transferred to the IM Customer. Transaction
price is stated in a contract and is a set range of commission amounts based on each policy sold. There are two variable components to
consideration received:
a) Commissions
are only earned once a policy is “Placed”, defined as, an active policy sold to the IM Customer where the IM Customer
has received the initial insurance carrier payment with respect to such policy. The Company requires end-user insured parties to
pay the initial premium to the insurance carrier upon issuance of a policy. Insurance carrier in turn pays IM Customer its initial
payment soon thereafter. Thus, upon sale of an issued policy to IM Customer, the Company has provided a bound issued policy and ensured
first premium payment has been completed by insured party. This results in virtual assurance that the IM Customer will receive its
initial insurance carrier payment, and it is more than probable that a significant revenue reversal will not occur. The Company thus
considers all policies sold to the IM Customer to be Placed for revenue recognition purposes.
b) Commission
revenue is subject to chargeback in full if a policy is cancelled or lapses within three months from the policy effective date or
if the insured party does not make the first three payments of the policy. The Company uses historical activity as well as current
factors to estimate the unconstrained variable consideration for recognition per the expected value method. A chargeback reserve
liability is credited for the difference between cash consideration received and variable consideration recognized. At each reporting
period, the Company remeasures the chargeback reserve liability and recognizes any change as an increase or decrease to the then
current period revenue. As of March 31, 2022 and December 31, 2021, the chargeback reserve liability was $1,585,435 and $0, respectively. With
one performance obligation, allocation of transaction price is normally not necessary. The
Company recognizes revenue at a point in time when it satisfies its performance obligation and control of an insurance policy transfers
to the IM Customer. Transfer of control occurs when the Company submits the Policy to the IM Customer. IM
Customers generally pay the Company weekly, and accruals are recorded as necessary at period end. Other
revenue policies: When
applicable, commission revenue is recognized net of any deductions for estimated commission adjustments due to lapses, policy cancellations,
and revisions in coverage. The
Company could earn additional revenue from contingent commissions, profit-sharing, override and bonuses based on meeting certain revenue
or profit targets established periodically by the Carriers (collectively, “Contingent Commissions”). Contingent Commissions
are earned when the Company achieves targets established by Carriers. The Carriers notify the Company when it has achieved the target.
The Company recognizes revenue for any Contingent Commissions at the time it is reasonably assured that a significant revenue reversal
is not probable, which is generally when a Carrier notifies the Company that it is on track or has earned a Contingent Commission. The
following table disaggregates the Company’s revenue by line of business, showing commissions earned: SCHEDULE
OF DISAGGREGATION REVENUE
Year ended December 31, 2022 Medical/Life Property and Casualty Total
Regular
EBS $ 798,412 $ - $ 798,412
USBA 52,470 - 52,470
CCS/UIS - 254,325 254,325
Montana 1,868,137 - 1,868,137
Fortman 1,274,649 842,961 2,117,610
Altruis 4,044,449 - 4,044,449
Kush 1,536,456 - 1,536,456
Medigap 4,994,002 - 4,994,002
RELI Exchange 312,239 777,784 1,090,023
Revenue $ 14,880,814 $ 1,875,070 $ 16,755,884
Year ended December 31, 2021 Medical/Life Property and Casualty Total
Regular
EBS $ 799,474 $ - $ 799,474
USBA 60,129 - 60,129
CCS/UIS - 333,874 333,874
Montana 1,744,515 - 1,744,515
Fortman 1,173,215 958,521 2,131,736
Altruis 3,313,453 - 3,313,453
Kush 1,327,153 - 1,327,153
Revenue $ 8,417,939 $ 1,292,395 $ 9,710,334 General
and Administrative General
and administrative expenses primarily consist of personnel costs for the Company’s administrative functions, professional service
fees, office rent, all employee travel expenses, and other general costs. Marketing
and Advertising The
Company’s direct channel expenses primarily consist of costs for e-mail marketing and newspaper advertisements. The Company’s
online advertising channel expense primarily consist of social media ads. Advertising costs for both direct and online channels are expensed
as incurred. Stock-Based
Compensation Stock-based
compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a
straight-line basis over the requisite service period, based on the terms of the awards. The fair value of the stock-based payments
to nonemployees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless there
is a contractual term for services in which case such compensation would be amortized over the contractual term. To the extent
possible, the Company will estimate and recognize expected forfeitures. Leases The
Company recognizes leases in accordance with Accounting Standards Codification Topic 842, “Leases” (“ASC 842”
or “ASU 2016-12”). This standard provides enhanced transparency and comparability by requiring lessees to record right-of-use
assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases are recognized as a
single lease expense, generally on a straight-line basis. The
Company is the lessee in a contract when the Company obtains the right to use an asset. We currently lease real estate and office space
under non-cancelable operating lease agreements. When applicable, consideration in a contract is allocated between lease and non-lease
components. Lease payments are discounted using the implicit discount rate in the lease. If the implicit discount rate for the lease
cannot be readily determined, the Company uses an estimate of its incremental borrowing rate. The Company did not have any contracts
accounted for as finance leases as of December 31, 2022, or 2021. Operating leases are included in the line items right-of-use assets,
current portion of leases payable, and leases payable, less current portion in the consolidated balance sheets. Right-of-use (“ROU”)
asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s
obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum
lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded
on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in the consolidated statement of operations.
The Company determines a lease’s term by agreement with lessor and includes lease extension options and variable lease payments
when option and/or variable payments are reasonably certain of being exercised or paid. Income
Taxes The
Company recognizes deferred tax assets and liabilities using enacted tax rates for the effect of temporary differences between the book
and tax basis of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than
not that some portion or all of the deferred tax asset will not be realized. In evaluating its ability to recover deferred tax assets
within the jurisdiction in which they arise, the Company considers all available positive and negative evidence, including the expected
reversals of taxable temporary differences, projected future taxable income, taxable income available via carryback to prior years, tax
planning strategies, and results of recent operations. The Company assesses the realizability of its deferred tax assets, including scheduling
the reversal of its deferred tax assets and liabilities, to determine the amount of valuation allowance needed. Scheduling the reversal
of deferred tax asset and liability balances requires judgment and estimation. The Company believes the deferred tax liabilities relied
upon as future taxable income in its assessment will reverse in the same period and jurisdiction and are of the same character as the
temporary differences giving rise to the deferred tax assets that will be realized. Seasonality A
greater number of the Company’s Medicare-related health insurance plans are sold in the fourth quarter during the Medicare annual
enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage. The majority of the Company’s
individual and family health insurance plans are sold in the annual open enrollment period as defined under the federal Patient Protection
and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act. Individuals and families generally
are not able to purchase individual and family health insurance outside of these open enrollment periods, unless they qualify for a special
enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state. Prior
Period Adjustments The
Company identified certain immaterial adjustments impacting the prior reporting period. Specifically, the Company identified adjustments
to correct certain asset and equity accounts in relation to historical purchase price allocation accounting and adjustments to true up
retained earnings for certain historical accrued revenues. The
Company assessed the materiality of the adjustments to prior period financial statements in accordance with Securities and Exchange Commission
Staff Accounting Bulletin No. (SAB) 99, Materiality Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements Accounting Changes and Error Corrections Accordingly,
the Company’s comparative consolidated financial statements and impacted notes have been revised from amounts previously reported
to reflect these adjustments. The following table illustrates the impact on previously reported amounts and adjusted balances presented
in the consolidated financial statements for the year ended December 31, 2021. SUMMARIZES
THE CHANGES TO THE PREVIOUSLY ISSUED FINANCIAL INFORMATION
Account 12/31/2020 As reported Adjustment 12/31/2020 Adjusted
Goodwill 9,265,070 (503,345 ) 8,761,725
Accumulated Deficit (12,482,281 ) 122,601 (12,359,680 ) Recently
Issued Accounting Pronouncements In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (“ASU 2016-13”), which requires the
measurement of expected credit losses for financial instruments carried at amortized cost, such as accounts receivable, held at the reporting
date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU is to provide financial
statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments
to extend credit held by a reporting entity at each reporting date. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements
to Topic 326, Financing Instruments—Credit Losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019.
On November 15, 2019, the FASB delayed the effective date of FASB ASC Topic 326 for certain small public companies and other private
companies. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, 2022 for SEC filers
that are eligible to be smaller reporting companies under the SEC’s definition. The Company adopted ASU 2020-06 on January 1, 2023,
which did not have a material impact on the consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions
to the general principles in Topic 740 and simplifies other areas of the existing guidance. ASU 2019-12 is effective for fiscal years
beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this
pronouncement January 1, 2021 which did not have a material effect on the consolidated financial statements. In
August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt-Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by
removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for
equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in
certain areas. The ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2020-06 on January 1,
2022, which did not have a ma |
