What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-14 compared with 2020-06-15 · 569 added, 514 removed, 355 unchanged (75% of the section changed)

3 unchanged sentences

in thousands, except per share data)

March 31, 2020

December 31, 2019

and cash equivalents

receivables, net of allowance for doubtful accounts

receivable from related parties

expenses and other current assets

current assets

Cash and cash equivalents

Trade receivables, net of allowance for doubtful accounts

Notes receivable from related parties

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Other intangible assets, net

LIABILITIES AND SHAREHOLDER’S EQUITY

plant and equipment, net

intangible assets, net

AND STOCKHOLDER’S EQUITY

taxes payable

portion of mortgage loan payable

current liabilities

Accounts payable

Accrued expenses

Accrued payroll

Deferred revenue

Income taxes payable

Notes payable

Current portion of mortgage loan payable

Other current liabilities

Total current liabilities

Mortgage loan payable, net of current portion

Total liabilities

Commitment and contingencies (Note 7)

Subsequent events (Note 12)

SHAREHOLDER’S EQUITY

Common stock, without par value, 300,000,000 shares authorized, 300,000,000 issued and outstanding as of March 31, 2020 and as of December 31, 2019

Additional paid-in capital

Retained earnings

Total shareholder’s equity attributable to Reliability Inc.

Noncontrolling interest in consolidated affiliates

Total liabilities and shareholder’s equity

current liabilities

loan payable, net of current portion

term debt (Note 4)

and contingencies (Note 6)

events (Note 11)

STOCKHOLDERS’

stock, without par value, 300,000,000 shares authorized, 300,000,000 issued and outstanding as of June 30, 2020 and December

paid-in capital

stockholders’

equity attributable to Reliability Inc.

Noncontrolling

interest in consolidated affiliates

liabilities and stockholders’

accompanying notes are an integral part of these statements.

2 unchanged sentences

in thousands, except per share data)

For the Three Months Ended

Revenue earned

Service revenue

Cost of revenue

Selling, general and administrative expenses

Operating income(loss)

Other income (expense)

Interest income

Interest expense

Other expense

Income (loss) before taxes on income

Income tax benefit/(expense)

Consolidated net income (loss)

Less net income attributable to noncontrolling interest in consolidated affiliates

Net income (loss) attributable to Reliability Inc.

Net income per share:

Share used in per share computation:

the Three Months Ended

general and administrative expenses

income (loss)

income (expense)

(loss) before income tax benefit

net income (loss)

income (loss) attributable to noncontrolling interest in consolidated affiliates

income (loss) attributable to Reliability Inc.

income per share:

used in per share computation:

accompanying notes are an integral part of these statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

the Three Months Ended March 31, 2020 and 2019

CONSOLIDATED STATEMENTS OF OPERATIONS

in thousands, except per share data)

Controlling Interest

Non - Controlling

Balance, December 31, 2018

the Six Months Ended

general and administrative expenses

income (loss)

income (expense)

(loss) before income tax benefit

net income (loss)

income (loss) attributable to noncontrolling interest in consolidated affiliates

income (loss) attributable to Reliability Inc.

income per share:

used in per share computation:

accompanying notes are an integral part of these statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Six Months Ended June 30, 2020 and 2019

in thousands, except per share data)

December 31, 2018

Recapitalization

VIE consolidation

Balance, March 31, 2019

Balance, December 31, 2019

VIE consolidation

Balance, March 31, 2020

consolidation

June 30, 2019

December 31, 2019

consolidation

June 30, 2020

accompanying notes are an integral part of these statements.

2 unchanged sentences

in thousands)

For the Three Months Ended

Cash flows from operating activities:

Adjustments to reconcile net income (loss)

to net cash provided by operating activities:

Depreciation and

Accrued interest

Changes in operating

assets and liabilities:

Trade receivables

Prepaid expenses

and other current assets

Accounts payable

Accrued payroll

Accrued expenses

Deferred revenue

Other liabilities

the Six Months Ended

flows from operating activities:

income (loss)

to reconcile net income (loss) to net cash provided by operating activities:

and amortization

on disposal of property, plant, and equipment

in operating assets and liabilities:

expenses and other current assets

taxes payable

cash provided by operating activities

Cash flows from investing activities:

Cash from merger

flows from investing activities:

of fixed assets

cash provided by (used in) investing activities

Cash flows from financing activities:

Net (repayment) of

line-of-credit

Repayment of notes

Borrowing of notes

Advances to related

cash used in financing activities

Net increase (decrease)

in cash and cash equivalents

Cash and cash

equivalents, beginning of period

Cash and cash

equivalents, end of period

accompanying notes to consolidated financial statements are an integral part of these financial statements.

cash used in investing activities

flows from financing activities:

repayment of line-of-credit

from long term debt (PPP)

of long term debt

borrowing of notes payable

Repayment/(advances)

from/to related parties

cash provided by (used in) financing activities

increase in cash and cash equivalents

and cash equivalents, beginning of period

and cash equivalents, end of period

accompanying notes are an integral part of these statements.

AND SUBSIDIARIES

1 unchanged sentence

in thousands)

For the Three Months Ended

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Supplemental disclosures of non-cash financing activities:

Non-cash impact of recapitalization from merger

Liabilities assumed in merger

Conversion of shareholder loan to equity in merger

VIE net asset consolidated

VIE liabilities consolidated

VIE reduction in equity

the Six Months Ended

disclosures of cash flow information:

paid during the period for:

disclosures of non-cash financing activities:

impact of recapitalization from merger

assumed in merger

of shareholder loan to equity in merger

net assets consolidated

liabilities consolidated

reduction in equity

accompanying notes are an integral part of these statements.

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Incorporated (“Reliability”

or the “Company”) is a leading provider of employer of record and temporary

media and information technology (“IT”) staffing services that operates, along with its wholly owned subsidiary, The

Maslow Media, Inc., (“MMG”

or the “Company”) is a leading provider of employer of record (EOR) and temporary

staffing services for media and information technology (“IT”) that operates, along with its wholly owned subsidiary,

The Maslow Media, Inc., (“MMG”

or “Maslow”), primarily within the United States of America (the “U.S.”)

in three industry segments:

Employer of Record (“EOR”), Staffing and Video Production segment provides script to screen

media talent.

EOR which is a unique workforce management solution, representing 81.3% of the revenue.

Our Staffing segment provides

skilled field talent on a nationwide basis for IT and finance and accounting client partner projects.

Our staffing includes revenue

derived from permanent placement.

Video Production involves assembling and providing crews for special projects that can last

anywhere from a week to six months.

Employer of Record (“EOR”), Staffing and Video Production segment which provides script

to screen media talent.

EOR which is a unique workforce management solution, represents 78.2% of the year to date revenue.

Staffing segment provides skilled field talent on a nationwide basis for IT and finance and accounting projects.

includes revenue derived from permanent placement.

Video Production involves assembling and providing crews for special projects

that can last anywhere from a week to six months.

was incorporated under the laws of the State of Texas in 1953, but the then principal business of the Company started in 1971

and was closed down in 2007.

was closed down in 2007.

The Company completed a reverse merger with MMG (the “Merger”) on October 29, 2019.

Company acquired the customer contracts and trade receivables and assumed certain liabilities of Intelligent Quality Solutions

(“IQS”) in exchange for a reduction of notes receivable from Vivos Holdings LLC (“Vivos Holdings”), the

previous sole shareholder of MMG, (the “Acquisition”) on December 1, 2019.

The owners of Vivos Holdings and their

transferees who were issued shares of Reliability Common Stock include Naveen Doki, Silvija Valleru, Shirisha Janumpally (through

Judos Trust and Federal Systems), and Kalyan Pathuri (through Igly Trust) together own approximately 84% of the issued and outstanding

shares of Reliability Common Stock and are referred to herein as “Vivos”

acquired the customer contracts and trade receivables and assumed certain liabilities of Intelligent Quality Solutions (“IQS”)

in exchange for a reduction of notes receivable from Vivos Holdings LLC (“Vivos Holdings”), the previous sole shareholder

of MMG, (the “Acquisition”) on December 1, 2019.

The owners of Vivos Holdings and their transferees who were issued

shares of Reliability Common Stock include Naveen Doki, Silvija Valleru, Shirisha Janumpally (through Judos Trust and Federal

Systems), and Kalyan Pathuri (through Igly Trust) together own approximately 86% of the issued and outstanding shares of Reliability

Common Stock and are referred to herein as “Vivos”

or the “Vivos Shareholders.”

acquisition of IQS has enabled Maslow to expand its staffing capabilities into the IT realm.

of presentation

unaudited condensed consolidated interim financial statements include the accounts of the Company and all wholly owned divisions,

including its 100% owned subsidiary, Maslow Media Group, Inc.

All significant intercompany accounts and transactions have been

eliminated in consolidation.

unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted

in the U.S (“U.S.

unaudited consolidated interim financial statements include the accounts of the Company and all wholly owned subsidiaries, including

its 100% owned subsidiary, MMG.

All significant intercompany accounts and transactions have been eliminated in consolidation.

unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in

the U.S (“U.S.

GAAP”) for interim financial information and with instructions to Form 10-Q.

Operating results of

the interim periods are not necessarily indicative of financial results for the full year.

These unaudited condensed consolidated

financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

In preparing these unaudited condensed

consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of

assets and liabilities as of the date of the condensed consolidated financial statements and the reported amount of revenues and

expenses during the reporting periods.

Operating results of the

interim periods are not necessarily indicative of financial results for the full year.

These unaudited consolidated financial

statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

In preparing these unaudited consolidated financial

statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities

as of the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting

Actual results could differ from those estimates.

Significant estimates and assumptions

included in the Company’s condensed consolidated financial statements relate revenue recognition, allowances for doubtful

accounts, recoverability of notes receivable, useful lives for depreciation and amortization, loss contingencies, allocation of

purchase price in connection with business combinations, valuation allowances for deferred income taxes, and the assumptions used

for web site development cost classifications.

further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on

Form 10-K for the year ended December 31, 2019.

Significant estimates and assumptions included in the Company’s

consolidated financial statements relate revenue recognition, allowances for doubtful accounts, recoverability of notes receivable,

useful lives for depreciation and amortization, loss contingencies, allocation of purchase price in connection with business combinations,

valuation allowances for deferred income taxes, and the assumptions used for web site development cost classifications.

further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual

report on Form 10-K for the year ended December 31, 2019 and the Company’s quarterly report on Form 10-Q for the quarter

ended March 31, 2020.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

Reclassification

amounts in the 2019 consolidated financial statements have been reclassified to conform to the current year presentation.

Concentration

of Credit Risk

the quarter ended March 31, 2020, 33.4% of revenue came from AT&T Services, Inc.

(inclusive of its DirecTV division) (“AT&T”)

and 9.4% from Janssen Pharmaceuticals (which includes workforce partners Johnson & Johnson).

AT&T and Janssen accounted

for 39% and 8.6% of revenue for year ended March 31, 2019.

the three and six months ended June 30, 2020, 17.9% and 27.5%, respectively of revenue came from AT&T Services, Inc.

of its DirecTV division) (“AT&T”) and 15.1% and 11.4% respectively from Janssen Pharmaceuticals (which includes

workforce partners Johnson & Johnson).

For the three months ended June 30, 2020, 10.1% of revenue came from Goldman Sachs

For the three and six months ended June 30, 2019, 36.9% and 38.1%, respectively of revenue came from AT&T and 10.4%

and 9.6% respectively from Janssen Pharmaceuticals.

No other client exceeded 10% of revenues.

Janssen, and Goldman Sachs accounted for 22.4%, 26.3%, and 15.4% of accounts receivable as of June 30, 2020.

As of June 30, 2019,

AT&T, Janssen, and Goldman Sachs accounted for 46.9%, 15.8%, and 10.2% of accounts receivable, respectively.

LIQUIDITY AND GOING CONCERN

accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern.

On May 5, 2020 (the “Effective Date”), MMG received the proceeds of a loan pursuant to a promissory note (the “Note”)

under the Paycheck Protection Program with TBK Bank, SSB (“Lender”), in the amount of $5,216 (the “PPP Loan”).

The Paycheck Protection Program (“PPP”) was established under the recently enacted Coronavirus Aid, Relief, and Economic

Security Act (the “CARES Act”) and is administered by the U.S.

Small Business Administration (“SBA”).

The Lender’s affiliate, Advance Business Capital LLC (d/b/a Triumph Business Capital), is currently the Company’s

factor under its existing Factoring and Security Agreement, dated November 4, 2016, as amended and modified.

Paycheck Protection Program Flexibility Act (PPPFA) signed into law on June 5, 2020, resulted in the SBA issuing two revisions

on June 11 and June 12, 2020 to the First Interim Final Rule, which was originally posted on the Treasury and SBA websites on

April 2, 2020 and published in the Federal Register on April 15, 2020 (85 Fed.

of June 30, 2020, $2,390 of the PPP funds had been utilized with 99% covering payroll costs.

As of June 30, 2020, $2,826 of the

PPP funds remained available and the Company intends to apply the permitted twenty-four week measuring period, allowing the Company

additional weeks to put toward payroll costs of the Company].

The Company believes that the funds have been employed to achieve

a high level of forgiveness.

as the Company intends to apply for forgiveness in accordance with the latest PPP rules.

the Company believes that a significant portion of the PPP Loan will be forgiven, no assurance can be given that any of such PPP

Loan will, in fact, be forgiven.

June, the Company made required repayments of principal and interest of approximately $140 pursuant to the convertible notes described

in Note 4 below.

Payments under the remaining outstanding notes with an aggregate value of approximately $952 will be made over

a 4-month period as these notes reach maturity.

INCORPORATED AND SUBSIDIARIES

1 unchanged sentence

in thousands, except per share data)

LIQUIDITY AND GOING CONCERN

accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a

going concern.

On May 5, 2020 (the “Effective Date”), MMG received the proceeds of a loan pursuant to into a promissory

note (the “Note”) under the Paycheck Protection Program with TBK Bank, SSB (“Lender”), in the amount of

$5,216 (the “PPP Loan”).

The Paycheck Protection Program (“PPP”) was established under the recently enacted

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S.

Small Business

Administration (“SBA”).

The Lender’s affiliate, Advance Business Capital LLC (d/b/a Triumph Business Capital),

is currently the Company’s factor under its existing Factoring and Security Agreement, dated November 4, 2016, as amended

and modified.

Company intends to apply for forgiveness of the required repayment of some or all of the PPP Loan in accordance with the PPP.

The Company believes that a significant portion of the PPP Loan will be so forgiven, however no assurance can be given that any

of such PPP Loan will, in fact, be forgiven.

The accompanying unaudited consolidated financial statements do not include any adjustments

to reflect the possible future effects on the forgiveness of the PPP Loan.

If the PPP Loan is not forgiven in significant part,

and the other challenges facing the Company are not resolved favorably, the Company may cease to continue as a going concern.

Company’s ongoing liquidity position is facing pressures due to the loss of business resulting from the COVID-19 Pandemic

as well as increased pressure to make cash payments pursuant to the Settlement Agreements (filed as exhibits 10.4, 10.5 and 10.6

Company’s ongoing liquidity position is facing additional pressures due to the loss of business resulting from the COVID-19

In the second quarter, the business saw a year over year comparative drop in revenue by 46%, attributable in large part

to the impact of the COVID-19 Pandemic.

If this business does not return to historical levels, a significant portion of the PPP

loan may not be forgiven, and if other challenges facing the Company are not resolved favorably, the Company may cease to continue

as a going concern.

Company continues to face pressure to make cash payments pursuant to the Settlement Agreements (filed as exhibits 10.4, 10.5 and

10.6 the Company’s Current Report on Form 8-K filed on October 30, 2019) prior to the Company’s anticipated liquidation

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Shareholders that are the counterparties to the Liquidation Agreement are not cooperating with the Company to liquidate the shares

subject thereto as contemplated thereby.

No assurance can be given that the Company will return to its pre-Pandemic revenue levels,

how long it will take to enforce the requirements of the Liquidation Agreement, and the actual amount of PPP Loan forgiven.

a result, the Company face hurdles to maintaining sufficient liquidity to continue to operate, in which case the Company might

be forced to liquidate or seek to reorganize under applicable bankruptcy statutes.

subject thereto.

No assurance can be given that the beneficiaries of the Settlement Agreement will continue to forebear.

assurance can be given that the Company will return to its pre-Pandemic revenue levels, how long it will take to enforce the requirements

of the Liquidation Agreement, the Company’s ability to tap the capital markets using common stock, and the actual amount

of PPP Loan forgiveness.

As a result, the Company faces hurdles to maintaining sufficient liquidity to continue to operate, in

which case the Company might be forced to liquidate or seek to reorganize under applicable bankruptcy statutes.

Company is quoted on the OTC Marketplace under the symbol “RLBY”.

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and did not have a material impact on the Company’s consolidated financial statements.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

Pronouncements Not Yet Adopted

1 unchanged sentence

The guidance removes certain exceptions to the general income tax

accounting principles and clarifies and amends existing guidance to facilitate consistent

of the accounting principles.

accounting principles and clarifies and amends existing guidance to facilitate consistent application of the accounting principles.

The new guidance is effective for us as of January 1, 2021.

The Company is assessing the impact

of the adoption of this guidance on its consolidated financial statements.

a result of the Acquisition on December 1, 2019, our IT staffing division first quarter revenues were $798, which was an 8% improvement

over the performance of IQS a year ago.

The gross profit in the first quarter of $234 was 14% better than a year ago.

Gross margins

improved to 29% from 28% a year ago.

for the three months ended March 31, 2020 and 2019, respectively, are below.

For comparability, the three months ended March 31,

2019 presents proforma (unaudited) data to include IQS operations in Company as if it were acquired on January 1, 2019.

Operating income

Net income (loss)

Company has notes payable in the amount of $916 as of March 31, 2020 which was $890 on December 31, 2019, respectively pursuant

to a convertible debt offering that commenced June 13, 2019.

The Company is assessing the impact of the adoption of this guidance

on its consolidated financial statements.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

Company has notes payable in the amount of $802 as of June 30, 2020 and $890 as of December 31, 2019, respectively, pursuant to

a convertible debt offering that commenced June 13, 2019.

The offering was conducted pursuant to Section 4(a)(2) of the Securities

1 unchanged sentence

The notes bear interest at 12% per year, with the balance due and

payable within 1 year from the issuance date unless earlier converted into shares of Company Common Stock upon the issuance by

Reliability of Company Common Stock for gross proceeds of at least $5,000.

Warrants can only be redeemable if the proceeds of

$5,000 are obtained by the Company from the sale of equity securities.

February 2020, we took out a $250 6-month term loan from Triumph at 10% APR, in order to meet our cash obligations.

2020 t , in the face of the COVID 19 lockdown, Triumph offered a 2-month payment holiday and to extend the note payment,

payable within 1 year from the issuance date, unless earlier converted into shares of Company Common Stock.

Warrants, issued in

connection with these notes, can only be exercised if the proceeds of $5,000 are obtained by the Company from the sale of equity

securities within 5 years of issuance.

February 2020, the Company took out a $250 6-month term loan from Triumph at 10% APR, in order to meet our cash obligations.

April 7, 2020, in the face of the COVID 19 lockdown, Triumph offered a 2-month payment holiday and to extend the note payment,

which ultimately was agreed to end in February 2021.

the Maslow Media Group was initially acquired by Vivos Holdings, LLC in December 2016, Reliability’s corporate status was

changed from an S Corp to a C Corp due to its new ownership structure.

This triggered an accelerated tax event, a $215 estimated

annual impact per year for four years, that Reliability is working with the IRS to pay off.

As of March 31, 2020, the tax liability

was $802 compared to $817 as of December 31, 2019.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

As of June 30, 2020, $195 was outstanding under the term loan arrangement.

the Maslow Media Group was initially acquired by Vivos Holdings, LLC in December 2016, Maslow’s corporate status was changed

from an S Corp to a C Corp due to its new ownership structure.

This triggered an accelerated tax event, a $215 estimated annual

impact per year, for four years, that the Company is working with the IRS to pay off.

As of June 30, 2020, the tax liability was

$703 compared to $817 as of December 31, 2019.

Business Capital

15 unchanged sentences

in respect to invoicing and reserve account balance.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

accordance with the agreement, a reserve amount is required for the total unpaid balance of all purchased accounts multiplied

by a percentage equal to the difference between one hundred percent and the advanced rate percentage.

As of March 31, 2020, the

As of June 30, 2020, the

required amount was 10%.

2 unchanged sentences

receivable were sold with full recourse.

Proceeds from the sale of receivables were $6,857 for the three months ended March 31,

The total outstanding balance under the recourse contract was $4,169 March 31, 2020 and $5,508 as of December 31, 2019.

Proceeds from the sale of receivables were $9,307 and $13,299 for the six months ended

June 30, 2020 and 2019, respectively.

Proceeds from the sales of receivables were $2,450 and $6,683 for the three months ended

June 30, 2020 and 2019, respectively.

The total outstanding balance under the recourse contract was $1,042 on June 30, 2020 and

$5,508 as of December 31, 2019.

Factoring Facilities are collateralized by substantially all the assets of the Company.

1 unchanged sentence

may demand that the Company repurchase the receivable or debit the reserve account.

Total finance line fees for the three months

ended March 31, 2020 and 2019 totaled $14 and $12, respectively.

Capital Management

the Acquisition, the Company continued factoring IQS Receivables with IQS’s factor, Wilco Capital Management (formerly known

as First Avenue Funding, LLC) (“Wilco”).

As of March 31, 2020, the outstanding balance was $0 as this relationship

ended on March 31, 2020, when Triumph bought out this factoring relationship.

Total finance line fees for the three and

six months ended June 30, 2020 and 2019 totaled $14, $18, $15 and $27, respectively.

April 29, 2020, MMG was approved for a $5,216 loan through the Payroll Protection Program (the “PPP”) with a term

of two (2) years and an interest rate of 1% per annum.

The PPP provides that the Company may apply for forgiveness of this loan

if the loan proceeds were used for payroll and certain other specified operating expenses while maintaining specified headcount

requirements.

The accrued interest on the PPP loan as of June 30, 2020 was $8.

June 5 th , 2020 , The Paycheck Protection Program Flexibility Act (the “PPPF Act”) went into effect

providing more flexibility to participants in the PPP which included extending the time to begin repayment of the PPP loan until

the amount of forgiveness, if any, is determined, which could be as late as December 31, 2020.

The Company may apply for forgiveness

earlier if we determine that doing so will maximize the amount of loan forgiveness.

date the Company ultimately decides to apply for forgiveness will be dependent on maximizing headcount which, in turn will determine

the extent of forgiveness.

the Company has rehired previously furloughed employees, and hired new employees based on various necessities, there are many

other dynamic factors that will impact revenue producing and SG&A headcount between now and December 31, 2020.

no assurance can be given that all or any portion of this loan will be forgiven.

VARIABLE INTEREST ENTITY (“VIE”)

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to as a thinly capitalized structure.

the Company has neither any decision-making authority over VREH, nor financial interest in the operations of VREH, the Company

is required to consolidate its financial statements with those of VREH for the reasons mentioned above, as it is considered the

primary beneficiary of the VIE.

As a result of the Company terminating the lease on April 30, 2020, VREH will no longer be considered

a VIE after April 30, 2020.

assets and liabilities of the consolidated VIE are comprised of the following as of March 31, 2020 and December 31, 2019:

the Company had neither any decision-making authority over VREH, nor financial interest in the operations of VREH, the Company

was required to consolidate its financial statements with those of VREH for the reasons mentioned above, as it is considered the

primary beneficiary of the VIE through April 30, 2020.

assets and liabilities of the consolidated VIE are comprised of the following as of June 30, 2020 and December 31, 2019:

Office equipment

2 unchanged sentences

Total net assets consolidated

addition, the related party note receivable with the VIE of $749 and $772 was eliminated for the period ending March 31, 2020

and December 31, 2019, respectively.

potential financial exposure to loss as a guarantor could equal all the book value of the related party mortgage loan payable,

a total of approximately $1,779 and $1,790 as of March 31, 2020 and December 31, 2019, respectively with $46 due within the next

To date, the Company has not been called on for any loan repayment guarantee.

a result of the consolidation, the notes receivable held between Maslow and VREH was eliminated in consolidation.

for details on the related party notes receivable.

the Company terminated the lease on April 30, 2020, thus VREH is no longer considered a VIE required to be consolidated.

deconsolidated this entity effective April 30, 2020.

a result, the related party note receivable with the VIE in the amount of $772 was eliminated for the period ending December 31,

2019, respectively.

Notwithstanding

that there remains potential financial exposure under the guarantee, to date, no payments under the guarantee have been requested.

COMMITMENTS AND CONTINGENCIES

10 unchanged sentences

The Company believes that it will be granted a judgment in its favor.

Maslow intends to continue to vigorously prosecute this

Maslow intends to continue to vigorously pursue this litigation.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

or about May 6, 2020, the Defendants filed with the Circuit Court of Montgomery County, Maryland a Counterclaim and Third-Party

3 unchanged sentences

organizational documents.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

or about June 5, 2020 the Company submitted a Claimant’s Notice of Intention to Arbitrate and Demand For Arbitration with

the American Arbitration Association in New York, and to the Respondents thereto:

The Company and the other Counterclaim defendants have moved to have the Debt Collection Suit and the

Counterclaim stayed pending the outcome of the Arbitration described below.

or about June 5, 2020 the Company submitted a Claimant’s Notice of Intention to Arbitrate and Demand For Arbitration (the

“Arbitration”) with the American Arbitration Association in New York, and to the Respondents thereto:

Silvija Valleru;

Shirisha Janumpally

(individually and in her capacity as trustee of Judos Trust);

Kalyan Pathuri (individually in his capacity as trustee of Igly

Trust) and Federal Systems (the “Respondents”).

The Arbitration alleges that the Respondents breached the Merger Agreement

in a number of significant respects and committed fraud in connection with the Merger.

The Company is seeking damages which will

likely be in whole or in part shares of Company Common Stock received by the Respondents in connection with the Merger.

expects to prevail in the Arbitration.

Shirisha Janumpally (individually and in her capacity as trustee of Judos Trust);

Kalyan Pathuri (individually

in his capacity as trustee of Igly Trust) and Federal Systems (the “Respondents”).

The Arbitration alleges that the

Respondents breached the Merger Agreement in a number of significant respects and committed fraud in connection with the Merger.

The Company is seeking damages which will likely be in whole or in part shares of Company Common Stock received by the Respondents

in connection with the Merger.

The Company expects to prevail in the Arbitration.

or about February 28, 2020, the Company obtained a temporary restraining order (the “TRO”) regarding any and all actions

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of the outcome.

February 28, 2020, Healthcare Resource Network, LLC filed a complaint against Maslow in the Circuit Court of Montgomery County,

The plaintiff has not specified any alleged damage caused by Maslow and the Company believes any claims are without

Igly Trust, a Vivos entity, brought a new action in Texas to compel the Company to provide it certain corporate

records, including the Company’s shareholder list.

The Company has moved to have this action stayed pending the outcome

of the Arbitration.

February 28, 2020, Healthcare Resource Network, LLC (“HCRN”) filed a complaint against Maslow in the Circuit Court

of Montgomery County, Maryland.

The plaintiff has not specified any alleged damage caused by Maslow and the

Company believes any claims are without merit.

The Company will defend itself from this case.

Since HCRN’s primary claim

relates to the improper actions of Vivos, the parties have been discussing the tolling of HCRN’s claims against the Company

while both the Company and HCRN, together or separately, resolve the matters against Vivos.

September 28, 2018, Credit Cash filed a complaint against Maslow, Vivos, Vivos Acquisitions, LLC, Dr.

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Agreement for the Contingent Liquidation of the Common Stock of Maslow Media Group, Inc., dated as of October 28, 2019 (the “Liquidation

Agreement”), pursuant to which such Vivos Shareholders pledged to Maslow the shares of Company Common Stock they received

in the Merger to provide the capital required to satisfy the Parties’

obligations under the Settlement Agreements.

these Vivos Shareholders have not cooperated with the Company to monetize those shares as contemplated by the Liquidation Agreement.

The Company will take appropriate action to enforce its rights under the Liquidation Agreement.

On or about March 16, 2020, Credit

Cash entered its New Jersey confession of judgment with the Circuit Court of Montgomery County, Maryland.

Agreement”), pursuant to which such Vivos Shareholders pledged to

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

the shares of Company Common Stock they received in the Merger to provide the capital required to satisfy the Parties’

under the Settlement Agreements.

To date these Vivos Shareholders have not cooperated with the Company to monetize those shares

as contemplated by the Liquidation Agreement.

The Company will take appropriate action to enforce its rights under the Liquidation

On or about March 16, 2020, Credit Cash entered its New Jersey confession of judgment with the Circuit Court of Montgomery

County, Maryland.

Company may be required to make cash payments pursuant to the Settlement Agreements (filed as exhibits 10.4, 10.5 and 10.6 the

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and Kinetic Direct Funding entered their New York confession of judgment with the Circuit Court of Montgomery County, Maryland,

The Vivos Shareholders that are the counterparties to the Liquidation Agreement are not cooperating with the Company to liquidate

the shares subject thereto as contemplated thereby.

The Company will enforce its rights under the Liquidation Agreement as expeditiously

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

and have approached the Company regarding payment, which the parties have been discussing.

The Vivos Shareholders that are the

counterparties to the Liquidation Agreement are not cooperating with the Company to liquidate the shares subject thereto as contemplated

The Company will enforce its rights under the Liquidation Agreement as expeditiously as possible.

Rather than bringing

another court action at this time, the Company expects to first attempt to enforce its rights under the Liquidation Agreement

in the Arbitration.

Company’s authorized capital stock consists of 300,000,000 shares of common stock, with no par value.

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), a related party affiliate and former owner

of Maslow Media Group , acquired 100% of the Company through a stock acquisition exchange for a purchase price of $1,750.

$1,400 was paid at settlement with proceeds from the Company and also entered into a promissory note to pay the remaining $350.

The promissory note was to be paid in twenty-four equal installments, including interest at 4.5%, in the amount of approximately

$15, commencing six months after closing with the last payment on March 1, 2019;

these payments were paid by the Company on behalf

of the Vivos.

Vivos subsequently entered into a promissory note receivable with the Company, described below, for the full stock

purchase price.

Company has notes receivable from Vivos and VREH, a member of Vivos, both related party affiliates.

of MMG, acquired 100% of the Company through a stock acquisition exchange for a purchase price of $1,750.

$1,400 was paid at settlement

with proceeds from the Company and also entered into a promissory note to pay the remaining $350.

The promissory note was to be

paid in twenty-four equal installments, including interest at 4.5%, in the amount of approximately $15, commencing six months

after closing with the last payment on March 1, 2019;

these payments were paid by the Company on behalf of the Vivos.

Vivos subsequently

entered into a promissory note receivable with the Company, described below, for the full stock purchase price.

Company has notes receivable from Vivos and VREH, a member of Vivos, both related party affiliate.

As disclosed in Note 6, the

Company is pursuing legal action to collect these notes.

connection with the stock purchase agreement noted above, on November 15, 2016, the Company executed a promissory note receivable

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fees due to Vivos.

As of March 31,2020, and December 31, 2019, the total outstanding balance was $2,685 and $2,666, which includes

As of June 30, 2020, and December 31, 2019, the total outstanding balance was $2,702 and $2,666, which includes

accrued interest receivable of $200 and $162, respectively.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

November 15, 2017, the Company executed an intercompany promissory note receivable with VREH in the amount of $772.

by the agreement, the loan consists of two periods, whereby the first period from November 15, 2017 until March 31, 2018, no principal

by the agreement, the loan consists of two periods, whereby the first period from November 15, 2017 until June 30, 2018, no principal

or interest payments are required.

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During the second period, interest is payable in 20 equal consecutive installments and the principal

balance plus accrued and unpaid interest is due March 31, 2023.

balance plus accrued and unpaid interest is due June 30, 2023.

Interest during both periods accrues at a rate of 3.5% annually.

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payments totaling $30 were made by Vivos.

As of March 31, 2020, and December 31, 2019, the total outstanding balance was $749

and $772, respectively.

The balances were eliminated during consolidation of the VIE.

As of June 30, 2020, and December 31, 2019, the total outstanding balance was $740 and

$772, respectively.

The December 31, 2019 balance was eliminated during consolidation of the VIE during this period.

June 12, 2019, Maslow entered into a Personal Guaranty agreement with Dr.

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pursuant to the personal guaranty agreement for defaulting on the outstanding notes receivables.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

September 5, 2019, Maslow entered into a Secured Promissory Note agreement with Vivos, pursuant to which Maslow issued a secured

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Doki and Silvija Valleru are beneficial owners of Vivos and are also 5% or greater beneficial owners of Company Common Stock.

As of March 31, 2020, and December 31, 2019, the total outstanding balance was $755 and $752, respectively, which includes interest

As of June 30, 2020, and December 31, 2019, the total outstanding balance was $759 and $752, respectively, which includes interest

of $9 and $2, respectively.

This note is in default and we are pursuing collection.

This note is in default and the Company is pursuing collection.

Settlement Agreements

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approximately May 20, 2019 (the “Maslow Credit Facility”).

addition, pursuant to the same agreement, Credit Cash advanced to Healthcare Resource Network, a company owned by Vivos (“HCRN”)

a credit facility in the principal amount of $1,005 (“HCRN Credit Facility”).

Each of Maslow, Vivos, Vivos Acquisitions,

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

addition, pursuant to the same agreement, Credit Cash advanced to HCRN a credit facility in the principal amount of $1,005 (“HCRN

Credit Facility”).

Each of Maslow, Vivos, Vivos Acquisitions, LLC, Dr.

Naveen Doki and Dr.

Silvija Valleru guaranteed the HCRN Credit Facility.

To secure repayment of their guarantee obligations,

the Company and Vivos granted to Credit Cash a security interest in all their assets.

On September 14, 2018, the Company defaulted

on the Maslow Credit Facility.

In addition, on same date, the HCRN Credit Facility went into default.

As a result, repayment on

both facilities was accelerated, with the full balance for each becoming immediately due and payable.

On December 10, 2018, the

Company, Vivos, Vivos Acquisitions, LLC, Dr.

Doki, and Dr.

Valleru and Credit Cash entered into a settlement agreement in connection

the November 15, 2017 agreement to govern the terms of the repayment of the HCRN Credit Facility and Maslow Credit Facility.

to the settlement agreement, the Company agreed to pay $10 per week until the entire balance of the Maslow Credit Facility was

Pursuant to a subsequent agreement dated May 17, 2019 not involving the Company, Vivos and Vivos Acquisitions, LLC agreed

to fully repay the HCRN Credit Facility via quarterly payments beginning June 30, 2019.

The HCRN Credit Facility is still being

repaid by Vivos, and as of October 29, 2019, has an outstanding balance of approximately $635.

The Company has a binding and enforceable

agreement with certain shareholders permitting Maslow to liquidate up to the full amount of Maslow equity held by such shareholders

in order to satisfy the shareholders’

Silvija Valleru guaranteed the

HCRN Credit Facility.

To secure repayment of their guarantee obligations, the Company and Vivos granted to Credit Cash a security

interest in all their assets.

On September 14, 2018, the Company defaulted on the Maslow Credit Facility.

In addition, on same

date, the HCRN Credit Facility went into default.

As a result, repayment on both facilities was accelerated, with the full balance

for each becoming immediately due and payable.

On December 10, 2018, the Company, Vivos, Vivos Acquisitions, LLC, Dr.

Valleru and Credit Cash entered into a settlement agreement in connection the November 15, 2017 agreement to govern the terms

of the repayment of the HCRN Credit Facility and Maslow Credit Facility.

Pursuant to the settlement agreement, the Company agreed

to pay $10 per week until the entire balance of the Maslow Credit Facility was paid off.

Pursuant to a subsequent agreement dated

May 17, 2019 not involving the Company, Vivos and Vivos Acquisitions, LLC agreed to fully repay the HCRN Credit Facility via quarterly

payments beginning June 30, 2019.

The HCRN Credit Facility is still being repaid by Vivos, and as of October 29, 2019, has an

outstanding balance of approximately $635.

The Company has a binding and enforceable agreement with certain shareholders permitting

Maslow to liquidate up to the full amount of Maslow equity held by such shareholders in order to satisfy the shareholders’

obligations under the Settlement Agreements.

The total outstanding balance owed by

the Company as of December 31, 2018 was $351.

As of March 31, 2020, the Company has repaid the outstanding balance due for the

Maslow Credit Facility under the settlement agreement in full.

The total outstanding balance owed by the Company as of December 31, 2018 was $351.

In September 2019, the Company has repaid the outstanding balance due for the Maslow Credit Facility under the settlement agreement

Company is facing pressure to make cash payments pursuant to the Settlement Agreements prior to the Company’s anticipated

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The resulting time gap may present a liquidity issue for the Company.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

Party Relationships

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exchange for $50.

The note bears interest at 12% per year, with balance due and payable on June 27, 2020.

As of March 31, 2020,

the amount under this agreement totaled to $54.

The note bears interest at 12% per year, with balance due and was paid in full at $56 on June 27, 2020.

July 31, 2019, prior to the Merger, the Company entered into a Securities Purchase Agreement with the same officer and director

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shares of Company Common Stock and a convertible promissory note of same date in the initial principal amount of $50, in exchange

The note bears interest at 12% per year, with balance due and payable on July 31, 2020.

As of March 31, 2020, the amount

under this agreement totaled to $55.

The note bears interest at 12% per annum, with balance due and payable on July 31, 2020.

As of June 30, 2020, principal

and accrued interest on this note was $56.

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

July 31, 2019 prior to the Merger, the Company entered into a Securities Purchase Agreement with Nick Tsahalis, an executive officer

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The note bears interest

at 12% per year, with balance due and payable on July 31, 2020.

As of March 31, 2020, the amount totaled to $108.

at 12% per annum, with balance due and payable on July 31, 2020.

As of June 30, 2020, the principal and accrued interest on this

note was $111.

September 18, 2019, in anticipation of the closing of the Merger and intending that it be assumed by Maslow after the closing

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would reimburse Hawkeye for the deposit.

On October 17, 2019, Hawkeye assigned, and Maslow agreed to assume the LOI and reimbursed

Hawkeye for the deposit.

On May 8, 2020, Maslow repaid the principal and accrued interest to Hawkeye, totaling $81.

On October 17, 2019, Hawkeye assigned, and Maslow agreed to assume the LOI and reimburse

Hawkeye for the deposit with an interest rate of 1.5% per month.

On May 8, 2020, Maslow repaid the principal and accrued interest

to Hawkeye, totaling $84.

term “warrant”

herein refers to warrants issued by Maslow and assumed by RLBY as a result of the Merger.

of all Warrants are the same other than as to the number of shares covered thereby.

The Warrant may be exercised at any time or

from time to time during the period commencing at 10:00 a.m.

Eastern time on first business day following the completion of the

Qualified Financing (as defined below) and expiring at 5:00 p.m.

Eastern time on the fifth annual anniversary thereof (the “Exercise

Period”).

terms of all Warrants are the same other than as to the number of shares covered thereby.

The Warrant may be exercised at any

time or from time to time during the period commencing at 10:00 a.m.

Eastern time on first business day following the

completion of the Qualified Financing (as defined below) and expiring at 5:00 p.m.

Eastern time on the fifth annual

anniversary thereof (the “Exercise Period”).

For purposes herein, a “Qualified Financing”

means the issuance by the Company, other than certain

excluded issuances of shares of Common Stock, in one transaction or series of related transactions, which transaction(s) result

in aggregate gross proceeds actually received by the Company of at least $5,000.

The exercise price per full share of RLBY Common

Stock shall be 120% of the average sale price of the RLBY Common Stock across all transactions constituting a part of the Qualified

Financing, with equitable adjustments being made for any splits, combinations or dividends relating to the RLBY Common Stock,

or combinations, recapitalization, reclassifications, extraordinary distributions and similar events, that occur following one

transaction constituting a part of the Qualified Financing and prior to one or more other transactions constituting a part of

the Qualified Financing (the “Exercise Price”).

INCORPORATED AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share data)

note warrants were not valued and included as liability on balance sheet because of uncertainty around their pricing, value and

low probability at this juncture in receiving the $5,000 trigger.

issuance by the Company, other than certain excluded issuances of shares of Common Stock, in one transaction or series of

related transactions, which transaction(s) result in aggregate gross proceeds actually received by the Company of at least

The exercise price per full share of RLBY Common Stock shall be 120% of the average sale price of the RLBY Common

Stock across all transactions constituting a part of the Qualified Financing, with equitable adjustments being made for any

splits, combinations or dividends relating to the RLBY Common Stock, or combinations, recapitalization, reclassifications,

extraordinary distributions and similar events, that occur following one transaction constituting a part of the Qualified

Financing and prior to one or more other transactions constituting a part of the Qualified Financing (the “Exercise

Price”).

note warrants were not valued and included as a liability on the Company’s balance sheet because of uncertainty around their

pricing, value and low probability at this juncture in receiving the $5,000 trigger.

$125 of the convertible notes reached maturity

at the end of June 2020, resulting in return of principal with interest of $140.

December 1, 2019, the Company acquired assets of IQS from Vivos Holdings Inc.

as described in Note 1 above.

Company is involved in a number of disputes with Vivos as described in Note 6 above.

BUSINESS SEGMENTS

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segment provides Script to Screen services for corporate, government and non-profit clients, globally.

following table provides a reconciliation of revenue by reportable segment to consolidated results for the three months ended

March 31, 2020 and 2019, respectively:

Recruiting and Staffing

Video and Multimedia Production

MORTGAGE LOAN ON REAL ESTATE

described in Note 6, VREH executed a mortgage loan for the purchase of the property at 22 Baltimore Rd., Rockville, Maryland with

the Company as a guarantor of this loan on January 22, 2018.

The loan was in the amount of $1,875 with an interest rate of 4.5%

annually for the first 60 months of the loan and changes to 5.25% annually on January 28, 2023 for 59 months.

The monthly payments

during repayment period is $11 with a lump sum payment of $1,393 on December 28 th , 2027.

The outstanding balance on

this mortgage loan as of March 31, 2020 was $1,779.

mortgage loan as of March 31, 2020 is as follows:

Mortgage Loan

Less current portion of mortgage loan payable

Mortgage loan payable, net of current portion

INCORPORATED AND SUBSIDIARIES

1 unchanged sentence

in thousands, except per share data)

future maturities of the mortgage loan for the next five years and thereafter is as follows:

Years Ending December 31:

following table provides a reconciliation of revenue by reportable segment to consolidated results for the three and six months

ended June 30, 2020 and 2019, respectively:

three months ended:

Recruiting and Staffing

Video and Multimedia Production

six months ended

Recruiting and Staffing

Video and Multimedia Production

CONTINGENT LIABILITY

described in Note 5, on January 22, 2018, VREH executed a mortgage loan for the purchase of the property at 22 Baltimore Rd.,

Rockville, Maryland, and the Company executed a guarantee of this loan.

The loan was in the amount of $1,875 with an interest

rate of 4.5% annually for the first 60 months of the loan and increasing to 5.25% annually on January 28, 2023 for the remaining

The monthly payments during repayment period is $11 with a lump sum payment of $1,393 on December 28, 2027.

The outstanding

balance on this mortgage loan as of June 30, 2020 was $1,768.

The Company has not yet been called on to make any payments under

its guarantee.

SUBSEQUENT EVENTS

Company has evaluated subsequent events through June 11, 2020, the date on which the unaudited condensed consolidated financial

statements were available to be issued.

Based upon this evaluation, management has determined that no material subsequent events

have occurred that would require recognition in or disclosures in the accompanying unaudited condensed consolidated financial

statements, except as follows:

April 30, 2020, the Company terminated the lease of the property at 22 Baltimore Road.

See Note 6for further details.

continue working from their homes, as they have since March 16 due to COVID-19, using the Company’s cloud-based infrastructure

to carry out their duties.

May 5, 2020, MMG received the PPP Loan.

See Note 2 for further details.

December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China.

In January 2020, this coronavirus

spread to other countries, including the United States, and efforts to contain the spread of this coronavirus intensified.

March 30, Maryland governor Larry Hogan issued a stay at home order which resulted in the Company moving to a work from home model.

Whereas we were prepared for this situation and were able to adapt quickly, our business began to suffer from companies and governors

in the other 49 states simultaneously or subsequently issuing similar orders.

began to observe the negative impact as our client partners demand began to wane in all segments.

We reacted as soon as March

20, 2020 when we instituted furloughs and cut administrative pay by 10% and executive pay by 15%.

Other non-essential costs were

targeted for reduction or discontinuance.

this uncertain time, our critical priorities are the health and safety of our team members, field talent, candidates and client

Much of our billable workforce began working from home dependent on client instructions.

Some clients in the healthcare

space were still able to have employees and contractors come to their facilities due tom essential service exceptions.

administrative staff continues to be productive using our web-based applications from their homes.

Furthermore, we do not believe

these protocols have materially adversely impacted our internal controls, financial reporting systems or our operations.

the Company expects that the impact of this coronavirus will be materially negative in the short term.

The full financial impact

cannot be reasonably estimated at this time but is materially affecting our business.

Revenues began declining during the last

two weeks of March with the pain being the highest on the EOR business with reductions of approximately 35%.

extent to which the coronavirus impacts our results will depend on future developments, which are uncertain and cannot be predicted,

including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus

or treat its impact, circumstances permitting people to return to work, among others.

expect that the social distancing measures, the reduced operational status of our client partners, reductions in production at

certain client partners facilities, and general business uncertainty will continue to significantly effect demand in all our segments

in the second quarter, and possibly beyond.

Company has evaluated subsequent events through August 12, 2020, the date on which the unaudited consolidated financial statements

were available to be issued.

No other material subsequent events have occurred that would require recognition in or disclosures

in the accompanying unaudited consolidated financial statements, except that on July 15, 2020, Larry Gaffey, a member of the Board

of Directors of the Company and a member of the Audit and Compensation Committees thereof, notified the Company of his intention

to retire from the Company’s Board of Directors for personal reasons, effective July 15, 2020.

Gaffey did not advise

the Company of any disagreement with the Company on any matter relating to its operations, policies or practices.

company repaid $588 in bridge loan notes which reached maturity between July 22, 2020 and July 31, 2020, including notes held

by Nick Tsahalis ($100), and Mark Speck ($50).

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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and similar references to future periods.

These statements

are not a guarantee of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict.

These statements are

not a guarantee of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict.

Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic

1 unchanged sentence

differ materially from what is expressed or forecasted in these forward-looking statements.

Important factors that could

cause actual results to differ materially from these forward-looking statements include, but are not limited to:

the impact of

the COVID-19 pandemic on us and our clients;

our ability to access the capital markets by pursuing additional debt and equity

financing to fund our business plan and expenses on terms acceptable to the Vivos Shareholders or at all;

negative outcome of

pending and future claims and litigation and our ability to comply with our contractual covenants, including in respect of our

The uncertainties surrounding the

impact of the COVID-19 pandemic continues to make forward looking assumptions and estimates very volatile.

Moreover, the contradictory

advice between the federal and state governments regarding such matters as reopening schools, social distancing and mask requirements

make it even more difficult to predict the timing of a return to pre-pandemic levels, particularly in the media production space.

Important factors that could cause actual results to differ materially from these forward-looking statements include, but are

not limited to:

the continuing impact of the COVID-19 pandemic on us and our clients;

our ability to access the capital markets

by pursuing additional debt and equity financing to fund our business plan and expenses on terms acceptable to the Vivos Shareholders

negative outcome of pending and future claims and litigation and our ability to comply with our contractual covenants,

including in respect of our debt;

potential loss of clients and possible rejection of our business model and/or sales methods;

weakness in general economic

conditions and levels of capital spending by customers in the industries we serve;

weakness or volatility in the financial and

capital markets, which may result in the postponement or cancellation of our customers’

projects or the inability of our

customers to pay our fees;

weakness in general economic conditions and levels of capital spending by customers in the industries we serve;

weakness or volatility

in the financial and capital markets, which may result in the postponement or cancellation of our customers’

the inability of our customers to pay our fees;

delays or reductions in U.S.

government spending;

credit risks associated with our customers;

market pressures;

credit risks associated with

our customers;

competitive market pressures;

the availability and cost of qualified labor;

our level of success in attracting, training and retaining qualified

management personnel and other staff employees;

changes in tax laws and other government regulations, including the impact of

health care reform laws and regulations;

the possibility of incurring liability for our business activities, including, but not

limited to, the activities of our temporary employees;

our level of success in attracting,

training and retaining qualified management personnel and other staff employees;

changes in tax laws and other government regulations,

including the impact of health care reform laws and regulations;

the possibility of incurring liability for our business activities,

including, but not limited to, the activities of our temporary employees;

our performance on customer contracts;

and government policies, legislation

or judicial decisions adverse to our businesses.

Readers are cautioned not to place undue reliance on these forward-looking statements,

which speak only as of the date hereof.

We assume no obligation to update such statements, whether as a result of new information,

future events or otherwise, except as required by law.

We recommend readers to carefully review the entirety of this Quarterly

Report, the “Risk Factors”

in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December

31, 2019 and the other reports and documents we file from time to time with the Securities and Exchange Commission (“SEC”),

particularly our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

and government

policies, legislation or judicial decisions adverse to our businesses.

Readers are cautioned not to place undue reliance on these

forward-looking statements, which speak only as of the date hereof.

We assume no obligation to update such statements, whether

as a result of new information, future events or otherwise, except as required by law.

We recommend readers to carefully review

the entirety of this Quarterly Report, the “Risk Factors”

in Item 1A of the Company’s Annual Report on Form

10-K for the year ended December 31, 2019 and the other reports and documents we file from time to time with the Securities and

Exchange Commission (“SEC”), particularly our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

following discussion and analysis of our financial condition and results of operations, our expectations regarding the future

performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements.

These forward-looking statements are subject to risks, uncertainties and other factors including those described in “Item

performance of our business and the other non-historical statements in the discussion and analysis are forward-looking

These forward-looking statements are subject to risks, uncertainties and other factors including those described

in “Item 1A.

Risk Factors”

of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 with the SEC.

actual results may differ materially from those contained in any forward-looking statements.

You should read the following discussion

together with our financial statements and related notes thereto and other financial information included in this Quarterly Report

on Form 10-Q.

of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019

with the SEC.

Our actual results may differ materially from those contained in any forward-looking statements.

read the following discussion together with our financial statements and related notes thereto and other financial

information included in this Quarterly Report on Form 10-Q.

ACCOUNTING POLICIES AND COMMENTS RELATED TO OPERATIONS

discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated

financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that

affect the reported amounts of assets, liabilities, revenues and expenses based on historical experience and various other factors

that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions

or conditions.

discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial

statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation

of these unaudited consolidated financial statements requires us to make estimates and judgments that affect the reported amounts

of assets, liabilities, revenues and expenses based on historical experience and various other factors that are believed to be

reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions.

have been no material changes or developments in the Company’s evaluation of the accounting estimates and the underlying

9 unchanged sentences

OF OPERATIONS

for the three months ended March 31, 2020 was $8,801 which was $500 greater than for the same period in 2019 which was $8,301.

IQS revenue was the main driver of the increase as the IT staffing division delivered $798 in revenue.

revenue improved by 185% as the IQS IT division accounted for $798 of growth.

The IQS IT staffing division improved $64 or 8%

to a year ago when it was a standalone company.

Media staffing grew as well by 9% to $495 as our client base expanded, and several

cyclical projects had longer durations than a year ago.

1 st quarter comparative revenues fell by $270 (4%) from $7,419 a year ago to $7,149 on March 31, 2020.

of COVID-19 Pandemic

December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China.

In January 2020, this coronavirus

spread to other countries, including the United States, and efforts to contain the spread of this coronavirus intensified.

March 30, 2020, Maryland governor Larry Hogan issued a stay at home order which resulted in the Company moving to a work from

We reacted as soon as March 20, 2020 when we instituted furloughs and cut administrative pay by 10% and executive

Other non-essential costs were reduced or eliminated Whereas we were prepared for this situation and were able to

adapt quickly, our business began to suffer from companies and governors in the other 49 states simultaneously or subsequently

issuing similar orders.

of our billable workforce began working from home dependent on client instructions.

Some IT staffing clients in the healthcare

space were still able to have employees and contractors come to their facilities due to essential service exceptions.

we still began to observe stronger negative impact in the media space as our client partners demand began to wane in all segments.

In April and May combined we saw a 49% decline in revenue when compared to same periods in 2019.

April 29, 2020 we were formally approved by TBK bank and the SBA for Payroll Protection (PPP) lending.

With the board approving

the loan provisions in the loan documents presented to us on the same day, May 4th, the proceeds totaling $5,216 were then released

on May 5, 2020.

of June 30, 2020, we had deployed $2.390 in PPP funds, and had $2.826 remaining in PPP funds.

The Company believes that 99% of

the PPP funds deployed have been for eligible payroll per the SBA regulations governing fund eligibility for fund use and forgiveness.

our administrative staff continued to be productive using our web-based applications from the safety of their homes, management

decided to terminate its lease at 22 Baltimore Road with Vivos Real Estate, affording Vivos Real Estate 30 days of notice prior

to the effective termination date of April 30, 2020.

Because our lease was on a month to month basis, there was no penalty or

negative consequences associated with this action.

We do not believe our work from home protocols have materially adversely impacted

our internal controls, financial reporting systems or our operations.

this period, our critical priorities continue to be the health and safety of our team members, field talent, candidates and client

extent to which the coronavirus impacts our results will depend on future developments, which are uncertain and cannot be predicted,

including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus

or treat its impact, circumstances permitting people to return to work, among others.

expect that the social distancing measures, the reduced operational status of our client partners, reductions in production at

certain client partners facilities, and general business uncertainty will continue to significantly effect demand in all our segments

throughout the remainder of 2020, and possibly beyond.

for the three months ended June 30, 2020 was $5,197, a decrease of $4,420 or 46 %, due to

reduced demand for services resulting from the COVID-19 pandemic.

EOR revenue dropped 56% and Video and Multimedia production

declined by 44%, as clients curtailed studio and on-site productions due mostly to stay at home / shelter in place state orders.

Staffing Revenues however increased 136% due to IQS IT staffing which was not in place a year ago.

IQS staffing revenues when

compared to its pre-acquisition records as a stand-alone company, declined in the second quarter by $283 from $926 to $643, or

for the first two quarters ending June 30, 2020, totaled $13,998 was 22% off the pace of a year ago when it was $17,917 due to

the causes stated above which began in mid-March 2020.

of Revenue / Gross Profit

Profit was $1,032 representing 12% of revenues, which was $195 greater than the gross profit in the first quarter of 2019.

contribution to gross profit was at $234 which represents 23% of the Company’s gross profit.

margin at approximately 29% led the improvement in overall gross margin which in 2019 was approximately 10.5% before the acquisition

IQS margin increased from 28% average in 2019 to 29%, can be attributed to Maslow’s benefit structure that was less

and Administrative

and administrative expenses for the three months ended March 31, 2020 were $1,091 as compared to $654 in the comparable period

The increase in comparative three-month periods is due to costs associated with being a public company and higher legal

costs which together totaled approximately $452 of the difference.

$131 of the remaining $202 difference was in IQS administrative

salaries and other operating costs such as rent.

Company recognized interest expense in the amount of $138 during the three months ended March 31, 2020, compared to $84 during

the prior year period.

The increase is directly attributed to $850 in convertible notes being carried and approximately $10 in

additional interest Maslow had to incur for IQS factoring in the first quarter.

It was noted in our 10-K that Vivos’

of IQS to Company included an undisclosed lien which Vivos refused to settle after it became known.

Consequently, the Company

had to continue to use Vivos’

higher cost factoring facility at approximately 16% as opposed to Maslow’s at an approximate

1 st quarter APR of 7.65%.

Company incurred a net loss in first quarter of $237 compared to net profit in 2019 of $77.

Corporate costs much of which are

public company related totaling $477, more than accounts for the variance.

decrease in gross profit for the quarter ended June 30, 2020 was $346 or a 32% decrease in gross profit compared to a year ago.

IQS contribution to gross profit was at $216

which represents 29.9% of the Company’s 2 nd quarter gross profit.

margin at approximately 34% led the improvement in overall gross margin to 13.9%, an improvement over IQS’s 2019’s

second quarter gross margin of 11.1% which was before the acquisition of IQS.

IQS gross margin improvement from 31% gross margin

in the same period in 2019 to 34%, can mostly be attributed to Maslow’s benefit structure that is less costly.

profit for the six months ended June 30, 2020, of $1,755 was not nearly as pronounced at $151 or 7.9% less than it was a year

ago at $1,906.

The gross profit decline was not as steep due to IQS which had strong YTD margins of 32% while representing a much

higher percentage of the overall business due to the COVID-19 decline levels suffered by the EOR segment.

General and Administrative

general and administrative (SG&A) expenses for the three months ended June 30, 2020 were $1,240 as compared to $662 in 2019.

The increase is due to costs associated with being a public company and higher legal costs which totaled approximately $343 and

$69 respectively or $412 of the of the $578 difference.

The other major SG&A increase of $168 comes from IQS administrative

salaries and other IQS operating costs such as rent.

the six months ending June 30, 2020, SG&A expenses of $2,352 were $1,036 greater than 2019 with an identical paradigm to the

quarter with cost associated with being a public company and higher legal costs being the drivers, totaling approximately $674

and $143 respectively for a total of $817 of the $1,036 difference.

The remaining $219 increase can be attributed to in incremental

IQS administrative salaries and other costs offset by a reduction in other general and administrative spending.

Company recognized interest expense in the amount of $114 during the three months ended June 30, 2020, compared to $91 in 2019.

The decrease was attributable to the $850 in convertible notes being carried and offset by a large reduction in use of factoring

which was due to the reduction of revenues and the PPP funds which do not necessitate immediate borrowing for working capital.

the six months ending June 30, 2020, interest expense increased to $253 compared with $174 in 2019 primarily due to the $850 in

convertible notes the Company took on mostly in the third quarter of 2019.

factoring costs decreased year over year as the necessity to factor invoices was significantly diminished after receipt of the

Prior to receipt of the PPP funds, our average cash balance was $395, while employing 85-90% of factoring capabilities.

Use of PPP funds for payroll and rent enabled cash reserves to be fortified as our average cash improved to $458 from May 1 through

July 6, 2020.

Income (Loss)

Company incurred a net loss in the quarter ending June 30, 2020 of $324 compared to net profit in the same period 2019 of $286.

$346 decrease in gross profit coupled with corporate costs much of which are public company related ($343, see G&A) totaling

$459 exceed the $599 variance by $203 where the Company was able to reduce costs.

the six months ended June 30, 2020, the net loss was $561 versus a profit of 362 in the same period in 2019.

The $923 variance

can be attributed less to the $151 reduction in gross profit and more to the $842 in additional corporate costs, $673 of which

were public company related and $142 for legal fees.

AND CAPITAL RESOURCES

primary sources of liquidity are cash generated from operations via borrowings under our Factoring Facility with Triumph and receivables

enabling access to the 7% unfactored portion.

Because certain large clients have changed their payment practices announcing 60

and 90 day terms amounting to a unilateral extension to contractual terms by 30-60 days, we can be adversely impacted since Triumph,

and most other factoring institutions no longer provide credit after an account obligor pays 30 or more days from their contractual

primary sources of liquidity are cash generated from operations via traditional accounts receivable activities and via borrowings

under our Factoring Facility (up to 93%) with Triumph and receivables enabling access to the 7% unfactored portion.

Because certain

large clients have changed their payment practices announcing 60 and 90 day terms amounting to a unilateral extension to contractual

terms by 30-60 days, we can be adversely impacted since Triumph, and most other factoring institutions no longer provide credit

after an account obligor pays 30 or more days from their contractual terms.

primary use of cash are for payments to field talent, corporate and staff employees, related payroll liabilities, operating expenses,

3 unchanged sentences

factoring and other borrowing interest;

and debt payments.

Company expected to have promissory note for $3,000 repaid by Naveen Doki at the end of 2019.

In the first quarter the Company

continued to pursue repayment as the impact of not having that cash returned to the Company coupled approximately $900 more a

year in costs associated with being a public company and the inability to tap the capital markets due to not having any available

shares, resulted in cash challenges.

in March 2020, a national, lockdown began to unfold due to the COVID-19 pandemic.

and debt servicing payments.

Company expected to have promissory note receivable for $3,000 repaid by Naveen Doki at the end of 2019.

In the first quarter,

the Company continued to pursue repayment as the impact of not having that cash returned to the Company coupled with approximately

$900 more a year in costs associated with being a public company and the inability to tap the capital markets due to not having

any available shares, resulted in cash challenges.

as described in Note 6 to the Financial Statements above, Vivos Holdings LLC has defaulted its secured promissory note that would

have paid $10 per month to Company.

June, the Company made required repayments of principal and interest of approximately $140 pursuant to the convertible notes described

in Note 4 above.

Payments under the remaining outstanding notes with an aggregate value

approximately $952 will be made over a 4-month period, including $588 having been paid by August 3rd, as these notes reach maturity.

March 2020, a national, lockdown began to unfold due to the COVID-19 pandemic.

This resulted in a significant loss of business

starting the last week of March, resulting in a reduction of billing by approximately 35%.

Company responded swiftly on March 20, 2020 by taking steps to reduce its expenses and improve the Company’s liquidity,

including the furlough of six (6) general and administrative personnel and instituting pay-cuts across the board with executives

taking a larger cut which commenced.

Executives, including the Company’s CEO and CFO have had their salaries reduced by

fifteen percent.

starting the last week of March 2020, resulting in a reduction of billing by approximately 51% in the combined months of April

and May 2020.

May 5, 2020, MMG received the PPP Loan.

The Paycheck Protection Flexibility Act, was passed by Congress and signed by the President

June 3 rd , 2020.

By utilizing these funds for their intended purpose of payroll, with forgiveness potential over first

24 weeks, the Company has been able to free up cash to pay other expenses and obligations The Company intends to use the extended

24-week period to restore our workforce levels and wages to pre-pandemic levels to the extent we can in order to maximize achievement

of a high percentage of forgiveness.

cash provided by operating activities during the three months ended March 31, 2020 was $972 compared to $1,199 in the comparable

Subsequently, the Paycheck Protection Flexibility Act, was passed by Congress and signed

by the President on June 3, 2020 which among other changes and provisions allowed for the funds to be employed over a 24-week

period versus 8.

By utilizing these funds for their intended purpose of payroll, with forgiveness potential over the first 24

weeks, the Company has been able to free up cash to pay other expenses and obligations, while also improving our non-PPP working

As stated above under Interest, use of PPP funds for payroll and rent enabled cash reserves to be fortified to average

(Non PPP) working capital of $458 from May 1 through July 6, 2020, from a previous 4 month average of $395K.

employed to repay the convertible notes (see Note 4) in the second quarter totaled $140 and will require disbursement in the third

quarter of $700, and a fourth quarter principal and interest payments of $112.

Although the outlay of the $812 in the third and

early fourth quarter will have a substantial impact on cash flows, the Company expects to have sufficient working capital after

making these payments.

cash provided by operating activities during the six months ended June 30, 2020 was $2,054 compared to $1,395 in the comparable

period of 2019.

The change was attributable to an increase in legal and costs associated with being a public company during the

three months ended March 31, 2020.

The change was attributable to an increase in legal expenses and other costs associated with being a public company.

February 2020, Maslow took out a $250 6-month term loan from Triumph at 10% APR, in order to meet its cash obligations.

March 2020, the loan principal was increased by $75 with the remaining term extended 26 weeks to September 2020.

On April 7, 2020 t ,

in the face of the COVID 19 lockdown, Triumph offered a 2-month payment holiday and to extend the note payment, which was ultimately

agreed to be extended until February 2021.

On April 7, 2020,

in the face of the COVID 19 lockdown, Triumph offered a 2-month payment holiday and to extend the note payment to February 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements