RELIABILITY INC 10-Q

Item 1. Financial Statements RELIABILITY INC. AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share data) September 30, December 31, 2021 2020 ASSETS CURRENT ASSETS Cash and cash equivalents $ 104 70 Trade receivables, net of allowance for doubtful accounts 8,311 6,870 Notes receivable from related parties 4,949 4,258 Prepaid expenses and other current assets 240 289 Total current assets 13,604 11,487 Property, plant and equipment, net 54 76 Other intangible assets, net 178 203 Goodwill 518 518 Total assets $ 14,354 12,284 LIABILITIES AND SHAREHOLDER’S EQUITY CURRENT LIABILITIES Factoring $ 939 2,999 Accounts payable 675 936 Accrued expenses 316 375 Accrued payroll 1,040 691 Deferred revenue 184 182 Income taxes payable 1,030 292 Other current liabilities 3 42 Total current liabilities 4,187 5,517 PPP loan payable - 5,250 Total liabilities 4,187 10,767 Commitment and contingencies (Note 7) - Subsequent events (Note 10) - SHAREHOLDER’S EQUITY Common stock, without par value, 300,000,000 shares authorized, 300,000,000 issued and outstanding as of September 30, 2021, and as of December 31, 2020 Additional paid-in capital 750 750 Retained earnings 9,417 767 Total shareholder’s equity 10,167 1,517 Total liabilities and shareholder’s equity $ 14,354 12,284 The accompanying notes are an integral part of these statements. 3 RELIABILITY INC. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) For the Three Months Ended September 30, 2021 2020 Revenue earned Service revenue $ 6,941 $ 6,201 Cost of revenue Cost of revenue 6,138 5,547 Gross profit 803 654 Selling, general and administrative expenses 866 1,086 Operating loss ( 63 ) ( 432 ) Other income (expense) Interest income 81 29 Interest expense ( 15 ) ( 30 ) Other income (expense) 1,813 4 Income (loss) before income tax (expense) benefit 1,816 ( 429 ) Income tax (expense) benefit ( 405 ) 237 Consolidated net income (loss) 1,411 ( 192 ) Net income (loss) attributable to noncontrolling interest in consolidated affiliates Net income (loss) attributable to Reliability Inc. $ Net income per share: Basic $ 0.01 $ 0.00 Diluted $ 0.01 $ 0.00 Share used in per share computation: Basic 300,000,000 300,000,000 Diluted 300,000,000 300,000,000 The accompanying notes are an integral part of these statements. 4 RELIABILITY INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) For the Nine Months Ended September 30, 2021 2020 Revenue earned Service revenue $ 17,809 $ 20,199 Cost of revenue Cost of revenue 15,542 17,790 Gross profit 2,267 2,409 Selling, general and administrative expenses 2,554 3,438 Operating loss ( 287 ) ( 1,029 ) Other income (expense) Interest income 235 92 Interest expense ( 78 ) ( 283 ) Other income (expense) 9,855 ( 1 ) Income (loss) before income tax (expense) benefit 9,725 ( 1,221 ) Income tax (expense) benefit ( 1,075 ) 286 Consolidated net income (loss) 8,650 ( 935 ) Net income (loss) attributable to noncontrolling interest in consolidated affiliates - 182 Net income (loss) attributable to Reliability Inc. $ 8,650 ( 753 ) Net income per share: Basic $ 0.03 0.00 Diluted $ 0.03 0.00 Share used in per share computation: Basic 300,000,000 300,000,000 Diluted 300,000,000 300,000,000 5 RELIABILITY INC. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY For the Nine Months Ended September 30, 2021, and 2020 (amounts in thousands, except per share data) Controlling Interest Non-Controlling Additional Interest in Common Stock Paid-in Retained Consolidated Total Shares Amount Capital Earnings Total Affiliates Equity Balance, December 31, 2019 300,000,000 - 750 1,840 2,590 ( 313 ) 2,277 Net loss - - - ( 935 ) ( 935 ) 182 ( 753 ) VIE consolidation - - - - - 29 29 VIE disposal - - - ( 102 ) ( 102 ) 102 - Balance, September 30, 2020 300,000,000 - 750 803 1,553 - 1,553 Balance, December 31, 2020 300,000,000 $ - $ 750 $ 767 1,517 - 1,517 Net income - - - 8,650 8,650 8,650 Net income (loss) - - - 8,650 8,650 - 8,650 Balance, September 30, 2021 300,000,000 - 750 9,417 10,167 - 10,167 The accompanying notes are an integral part of these statements. 6 RELIABILITY INC. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) For the Nine Months Ended September 30, 2021 2020 Cash flows from operating activities: Net income (loss) $ 8,650 ( 753 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 16 59 Accrued interest ( 246 ) ( 62 ) (Gain)/Loss on disposal of property and equipment 38 ( 176 ) Gain on forgiveness of PPP loan payable ( 5,216 ) - Changes in operating assets and liabilities: Accounts receivables ( 1,441 ) 2,508 Prepaid expenses and other current assets 48 161 Accounts payable ( 260 ) ( 517 ) Accrued payroll 350 323 Accrued expenses ( 59 ) ( 141 ) Deferred revenue 2 ( 162 ) Other liabilities ( 2 ) ( 95 ) Income taxes payable 738 ( 559 ) Net cash provided by operating activities $ 2,618 586 Cash flows from investing activities: Purchase of fixed assets ( 6 ) ( 38 ) Net cash used in investing activities $ ( 6 ) ( 38 ) Cash flows from financing activities: Net borrowing/(repayment) of line-of-credit ( 2,061 ) ( 5,204 ) Proceeds from long term debt (PPP) - 5,216 Repayment of note payable ( 37 ) - Borrowing of note payable - ( 773 ) Advances to related Parties ( 480 ) - Repayment of notes receivable from related parties - 61 Net cash used in financing activities $ ( 2,578 ) ( 700 ) Net decrease in cash and cash equivalents 34 ( 152 ) Cash and cash equivalents, beginning of year 70 275 Cash and cash equivalents, end of year $ 104 123 The accompanying notes are an integral part of these statements. 7 RELIABILITY INC. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (amounts in thousands) For the Nine Months Ended September 30, 2021 2020 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest 78 239 Income taxes 344 301 Supplemental disclosures of non-cash investing and financing activities: The Company received forgiveness from the SBA of its PPP loan payable 5,216 - The accompanying notes are an integral part of these statements. 8 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION Nature of Operations Reliability, Inc. 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 Group, Inc (“MMG”), (collectively, “Reliability” or the “Company”), primarily within the United States of America in four industry segments: Employer of Record (“EOR”), Recruiting and Staffing, Permanent Direct Placements, and Video and Multimedia Production which provides script to screen media talent. Our Staffing segment provides skilled field talent on a nationwide basis for Media, IT and finance and accounting client partner projects. Our Staffing segment occasionally received requests for (direct) placements. Because of an uptick in direct hire requests in 2021, factoring in the much higher margins that business derives, MMG decided to add Permanent (Direct) Placement as a stand-alone business segment. Video Production involves assembling and providing crews for special projects that can last anywhere from a week to 6 months. Reliability was incorporated under the laws of the State of Texas in 1953, but the then principal business of the Company started in 1971 was closed down in 2007. The Company completed a reverse merger with MMG (the “Merger”) on October 29, 2019. Company Background Vivos Holdings LLC, the previous sole shareholder of MMG 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. Vivos Holdings, LLC and Vivos Real Estate Holdings, LLC and Mr. Doki have outstanding notes with MMG that date back to acquisition of MMG in November 2016 (See Note 9) (collectively “Vivos Debtors”). Mrs. Janumpally, Mr. Doki, and Mr. Pathuri also have common ownership combinations in a number of other entities [Vivos Holdings, LLC. Vivos Real Estate Holdings, LLC (“VREH”), Vivos Holdings, Inc., Vivos Group, Vivos Acquisitions, LLC., and Federal Systems, LLC], (collectively referred to herein as “Vivos Group”). On or about February 17, 2020, the Company, as plaintiff, filed a complaint with the Circuit Court of Montgomery County, Maryland against Vivos Debtors (“Vivos Default Claim”) (See Note 7). On or about May 6, 2020, the Vivos Debtors and other Vivos Group members, specifically. Kaylan Pathuri (“Pathuri”), Judos Trust by Shirisha Janumpally, its trustee (“Judos”) and Igly Trust by Kaylan Pathuri, its trustee, (“Igly”) responded to the Vivos Default Claim with a Counterclaim and Third-Party Complaint (the “Vivos Default Counterclaim”). On June 5, 2020, Reliability commenced an arbitration seeking to address purported merger violations before the American Arbitration Association (“AAA”). The remedy for the nature and extent of the alleged violations, per the merger agreement, is the forfeiture of Vivos Group shares. On September 7, 2021, the Company entered in Arbitration and Tolling Agreements with alleged shareholder Naveen Doki, M.D., and his affiliates and all other persons who were parties to the pending litigation previously reported in the Texas, New York and Maryland courts and before the American Arbitration Association. The Agreements call for the stay or dismissal of the pending litigation, with the parties agreeing to resolve their disputes before a single arbitrator in Maryland (See Note 7). Basis of presentation The unaudited condensed consolidated interim financial statements include the accounts of the Company and all wholly owned divisions, including its 100 % owned subsidiary, MMG. All significant intercompany accounts and transactions have been eliminated in consolidation. These 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 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, 2020. 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 periods. Actual results could differ from those estimates. Significant estimates and assumptions included in the Company’s consolidated financial statements relate to 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. For 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, 2020. Concentration of Credit Risk For the nine months ended September 30, 2021, 26.7 % of revenue came from AT&T Services, Inc. (inclusive of its DirecTV division) (“AT&T”), 15.7 % from Goldman Sachs, 12.8 % from Janssen Pharmaceuticals (which includes workforce partners Ortho McNeil and Johnson & Johnson), and 11 % from Morgan Stanley. Combined, this totals 66.4 % of revenue. AT&T, Goldman Sachs, Janssen, and Morgan Stanley accounted for 27.6 %, 8.8 %, 10.9 % and 5.7 %, respectively, in revenue for the same time period ended September 30, 2020. No other client has exceeded 10% of revenues in 2021. 9 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) NOTE 2. LIQUIDITY AND GOING CONCERN Going Concern Management considers on a regular basis, the Company’s ability to continue as a going concern. The factors which have impacted the business and our liquidity are; ● Notification from the SBA on June 10, 2021, that our PPP Loan totaling $ 5,275 in principal and interest had been 100% forgiven; ● Eligibility for Employee Retention Credits (“ERC”) resulting in refunds totaling $ 3,221 and payroll credits in the third quarter totaling $ 1,156 ; ● Operating loss in third quarter ending September 30, 2021, of $ 63 which is a $ 368 improvement over the third quarter operating loss a year ago and $ 161 in the second quarter; ● Elimination of the ERC by Congress’ passing infrastructure bill, retroactively effective September 30, 2021; ● 2020 tax return submission with net operating loss carry back of $ 339 which will reduce tax liabilities; ● Operating loss of approximately $ 287 for the nine months ended September 30, 2021; ● Payment of $ 475 on July 21, 2021, to satisfy a Vivos Group debt that was supposed to have been paid by the Vivos Group and covered by the Liquidation Agreement (see notes 2 and 7), but Vivos refuses to cooperate; ● 2021 estimated tax of $ 1,075 based on current year operations; ● Ability to finance over $ 3,000 in accounts receivable (based on unfactored portion on September 30, 2021); ● The pandemic-resulting decline in client demand for our services continuing through the present; ● Difficulties in raising cash via public markets for organic and inorganic growth, due to lack of unissued authorized shares available for Company use, despite having public company cost structure; ● Inability to realize approximately $ 4.9 M in notes receivables from Vivos Group; ● Contingent liabilities, described further in Note 7. All these conditions noted and factored in above, but from a prevailing operational view there is still substantial doubt about the Company’s ability to continue as a going concern as the underlying business has yet to recover from COVID-19 with revenue levels down as much as 35% from 2019 standards. There is also the risk that the arbitration (see Note 7) outcome is not in the Company’s favor, and or the $ 4.9 M in notes receivable is not realized in a timely fashion. As far as cash equivalents, once the $ 3,221 in ERC is fully refunded, the Company will have sufficient capital resources, but these are based on government stimulus programs. Therefore, there can be no assurances that the Company will be successful in managing the impact of the foregoing or its ability to maintain sufficient liquidity over a period of time that will allow it to continue as a going concern. The accompanying interim consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liability that may result from the possible inability of the Company to continue as a going concern. The Company’s ongoing liquidity position is facing pressures due to the loss of business resulting from the COVID-19 pandemic, as well as ongoing outside legal costs related to Doki Group disputes and increased pressure to make cash payments for Doki group MCA obligations, which ultimately took place on July 21, 2021, 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 of the shares of Company Common Stock pledged pursuant to the Agreement for the Contingent Liquidation of the Common Stock of Reliability Incorporated (as successor in interest to MMG Media Group, Inc.), dated October 28, 2019 (the “Liquidation Agreement”) (filed as exhibit 10.30 to the Company’s Current Report on Form 8-K filed on October 30, 2019). The Vivos Group 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 and how long it will take to enforce the requirements of the Liquidation Agreement. As a result, the Company could face hurdles 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. 10 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) The Company is quoted on the OTC Marketplace under the symbol “RLBY”. NOTE 3. ACCOUNTS RECEIVABLE Accounts Receivable can be broken down as follows SCHEDULE OF ACCOUNTS RECEIVABLE 2021 2020 September 30, December 31, 2021 2020 Accounts Receivable Trade receivables $ 4,406 6,629 Other receivables (ERC Refund) 3,221 Unbilled receivables 684 241 Less allowance for doubtful accounts - - Total Accounts Receivable 8,311 6,870 NOTE 4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Adopted Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting , that provides optional relief to applying reference rate reform to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR), which will be discontinued by the end of 2021. Also, in January 2021, the FASB issued ASU No. 2021-01 Reference Rate Reform (Topic 848)—Scope , to clarify that cash flow hedges are eligible for certain optional expedients and exceptions for the application of subsequent assessment methods to assume perfect effectiveness as previously presented in ASU 2020-04. The amendments in this update are effective for us immediately and may be applied through December 31, 2022. The adoption of this update is not expected to have a material impact on our consolidated financial position and results of operations. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a business combination. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this update will be effective for the Company beginning with fiscal year 2023, with early adoption permitted. The adoption of the amendments in this update is not expected to have a material impact on our consolidated financial position and results of operations. 11 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) The Company does not believe any other recently issued but not yet effective accounting pronouncement, if adopted, would have a material effect on its present or future consolidated financial statements. NOTE 5. DEBT Convertible Debt The Company had notes payable in the amount of $ 890 as of December 31, 2019, pursuant to a convertible debt offering that MMG commenced June 13, 2019. Pursuant to this agreement, MMG issued to each individual a warrant for 0.5 shares of Company Common Stock and a convertible promissory note of same date in the initial principal amount of $50, in exchange for $ 50 . The notes bore interest at 12 % per year with the balance becoming due 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 . Since no conversion occurred, the notes were paid in full as they became due over a 3-month period between June 2020 and September 2020. Warrants can only be redeemable if the proceeds of $ 5,000 are secured within 5 years of note issuance, which expires correspondingly to each note between June and October 2024. Tax Liabilities When MMG was initially acquired by Vivos Holdings, LLC in December 2016, MMG’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 MMG has been working with the IRS to pay. As of September 30, 2021, the tax liability was $ 1,030 compared to $ 292 as of December 31, 2020. The Company also has accrued current incremental income taxes of $ 1,075 YTD, $ 396 of which was recorded in Q3, as of September 30, 2021, relating to its current operations. Factoring Facilities Triumph Business Capital On November 4, 2016, MMG entered into a factoring and security agreement with Triumph Business Capital (“TBC”). Pursuant to the agreement, MMG received advances on its accounts receivable (i.e., invoices) through TBC to fund growth and operations. The proceeds of this agreement were used to pay operating costs of the business which include employee salaries, vendor payments and overhead expenses. On January 5, 2018, the agreement was amended to lower the factoring fee and interest rate for a term of one year. The agreement was amended again on January 19, 2018, to increase the maximum advance rate to $ 5,500 . In January 2020, a new agreement was negotiated with Triumph lowering advance rate from 18 basis points to 15 and the interest rate from prime plus 2.5 % to prime plus 2 %. The amount of an invoice eligible for sale to Triumph went from 90% to 93%. The agreement which previously renewed annually, is now month to month. MMG continues to be obligated to meet certain financial covenants in respect to invoicing and reserve account balance. In 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 September 30, 2021, the required amount was 10%. Any excess of the reserve amount is paid to MMG on a weekly basis, as requested. If a reserve shortfall exists for a period of ten-days, MMG is required to make payment to the financial institution for the shortage. Accounts receivable (A/R) were sold with full recourse. Proceeds from the sale of receivables were $ 1,756 for the three months ended September 30, 2021, compared to $ 10,175 in the same period ending September 30, 2020. 12 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) Maslow’s outstanding balance with TBC as of September 30, 2021, was $ 939 and $ 2,999 on December 31, 2020. The Factoring Facilities are collateralized by substantially all the assets of MMG. In the event of a default, the Factor may demand that the Company repurchase the receivable or debit the reserve account. Total finance line fees for the three months ended September 30, 2021, and 2020 comparatively totaled $ 15 and $ 30 , respectively. NOTE 6. VARIABLE INTEREST ENTITY (“VIE”) In December 2019, the Company’s executive management learned that prior to the Merger, in January 2017, one of the Company’s related parties, on behalf of MMG, executed a guarantee of obligations of Vivos Real Estate Holdings, LLC (“VREH”), under a mortgage loan for the purchase of the property at 22 Baltimore Rd., Rockville, Maryland. MMG leased this space on market terms. MMG challenges its status as a guarantor on the building. Although the Company has 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 as it was considered the primary beneficiary of the VIE. As a result of the Company terminating the lease on April 30, 2020, VREH was no longer to be considered a VIE after April 30, 2020. The 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 $ 1,734 as of June 30, 2021, (the latest information made available to the Company), with $ 21 unpaid in 2021 as VREH was behind on two of their mortgage payments. The loan is deemed to be in default with outstanding taxes due of $ 7 , a 2019 DSC ratio violation, failure to submit updated financials, and subsequent liens without bank written consent for $ 250 to another Vivos Group creditor. To date, the Company has not been called on for any loan repayment guarantee. The Company believes the building valuation is at or near the current mortgage amount. NOTE 7. COMMITMENTS AND CONTINGENCIES The Company is engaged from time to time in legal matters and proceedings arising out of its normal course of business, and currently also is involved in litigation outside of the normal course of business. The Company establishes a liability related to its legal proceedings and claims when it has determined that it is probable that the Company has incurred a liability and the related amount can be reasonably estimated. If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of the loss can be made. On September 28, 2018, Credit Cash filed a complaint against MMG, Vivos Holdings LLC, Vivos Acquisitions, LLC, Dr. Doki, Dr. Valleru (the “Credit Cash Defendants”) and other defendants in the United States Circuit Court of Montgomery County, Maryland for the District of New Jersey for, among other things, breach of contract of the MMG and HCRN Credit Facilities and their respective guaranties in relation to the November 15, 2017, agreement (the “Credit Cash Complaint”). On October 30, 2018, Credit Cash filed a motion to intervene in an action pending in New York State, Monroe County, filed by HCRN and LE Finance, LLC against the Credit Cash Defendants, and other defendants (“NY State Action”). On December 10, 2018, the Credit Cash Defendants entered into a settlement agreement for the purpose of settling certain claims related to the Credit Cash Complaint only. Pursuant to the settlement agreement, certain repayment terms were agreed upon between Credit Cash and the Credit Cash Defendants, but Credit Cash did not relinquish the right to pursue any claims related to the NY State Action, nor to pursue any remedies against any of the Credit Cash Defendants in relation to the November 15, 2017, agreement. Naveen Doki, Kalyan Pathuri, Shirisha Janumpally, and Federal Systems, LLC, (“Credit Cash Vivos Group”) executed and delivered to MMG that certain Agreement for the Contingent Liquidation of the Common Stock of MMG , dated as of October 28, 2019 (the “Liquidation Agreement”), pursuant to which the Credit Cash Vivos Group pledged to MMG the shares of Company Common Stock they received in the Merger to provide the capital required to satisfy the Credit Cash Defendants’ obligations under the Settlement Agreements. Members of the Credit Cash Vivos Group misrepresented upon the execution of the Liquidation Agreement the status of its obligations under the Settlement Agreement, which were, in fact, then in default. To date the Credit Cash Vivos Group 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, which actions will be dictated in part by the outcome of the Merger Arbitration wherein relinquishment of shares for certain claims may be an applied remedy. On or about March 16, 2020, Credit Cash entered its New Jersey confession of judgment with the Circuit Court of Montgomery County, Maryland. 13 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) On October 9, 2018, MMG was named as a defendant along with six other defendants, all of which are entities related to the Vivos Group, in an Affidavit of Confession of Judgment (“COJ”) filed in the Supreme Court of the State of New York in relation to a case brought by Hop Capital, wherein the defendants collectively agree to pay a sum of $ 400 to Hop Capital. The claim brought by Hop Capital against the defendants in this case is in relation to a Merchant Agreement dated October 4, 2018; an agreement to which MMG was not a party. As such, MMG contends that being named in the COJ as a defendant was made in error and is currently seeking to have its name removed from the COJ. As of October 2021, we have not been contacted again on this matter, nor have we been notified on any developments The Company will defend itself from this case. On or about February 17, 2020, the Company, as plaintiff, filed a complaint with the Circuit Court of Montgomery County, Maryland against Vivos Holdings, LLC, Vivos Real Estate Holdings, LLC and Naveen Doki (“Vivos Debtors”), to enforce MMG’s rights under certain promissory notes and a personal guarantee made by the Vivos Debtors (“Vivos Default Claim”). This was settled on October 1st, 2021 with both parties mutually releasing each other of any claims On February 28, 2020, Healthcare Resource Network, LLC (“HCRN”) filed a complaint against MMG in the Circuit Court of Montgomery County, Maryland alleging that Maslow participated with members of the Vivos Group to financially harm the plaintiff. The plaintiff has not specified any alleged damage caused by MMG and the Company believes any claims are without merit. The Company will defend itself from this case. On March 16, 2020, CC Business Solutions, a division of Credit Cash NJ, LLC domesticated a foreign judgement in the Montgomery County Circuit Court system against HCRN, MMG, Vivos Holdings, LLC, Vivos Acquisitions, LLC, Naveen Doki and Silvija Valleru. This foreign judgement relates to Vivos Holdings adding MMG as a guarantor on a loan made to HCRN which is in default by HCRN and Vivos Holdings. Foreign judgement total is $ 820 . This judgement relates to the default on the settlement agreement dated December 10, 2018 , referenced above in the Credit Cash Complaint. On May 5, 2020, Libertas Funding, LLC (“Libertas”) domesticated a foreign judgement in the Montgomery County Circuit Court system against HCRN, MMG, Vivos Holdings, LLC, Vivos Acquisitions, LLC, Vivos IT, LLC, Vivos Global Services, LLC, Alliance Micro, Inc. and Naveen Doki. This foreign judgement from the State of New York relates to loans the Vivos Group took out by adding MMG additional collateral. This loan is currently in default. Foreign Judgement total is $ 229 . Maslow settled with Libertas/Kinetic (both judgements) this summer for $ 475 (See last 2 paragraphs below). On May 5, 2020, Kinetic Direct Funding (Kinetic”) domesticated a foreign judgement in the Montgomery County Circuit Court system against HCRN, MMG, US IT Solutions Inc., 360 IT Professionals, Alliance Micro, Inc. and Naveen Doki. This foreign judgement from the State of New York relates to loans the Vivos Group took out by adding MMG as additional collateral. This loan is currently in default. Foreign Judgement total is $ 579 . There were 4 total loans in the settlement, with the 3 domesticated judgements in Montgomery County circuit court relating to MMG totaling $ 1,038 . Maslow settled with Libertas/Kinetic (both judgements) this summer for $ 475 (See last 2 paragraphs below). 14 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) On or about May 6, 2020, the Vivos Debtors and other Vivos Group members, specifically. Pathuri, Judos, and Igly responded to the Vivos Default Claim with the “Vivos Default Counterclaim. The Company continues to believe that the Counterclaim has no merit and had planned to vigorously defend itself and its indemnified officers, directors and other parties as permitted by the Company’s organizational documents, when a trial on this matter was scheduled to begin on October 4, 2021, but both parties agreed on September 7 th , 2021, to resolve their disputes before a single arbitrator in Maryland, which calls for the stay or dismissal of the pending litigation. The agreement provides 150 days to resolve all pending matters through binding arbitration in Maryland. On or about June 5, 2020, the Company submitted a Claimant’s Notice of Intention to Arbitrate and Demand for Arbitration (the “Merger Arbitration”) with the American Arbitration Association in New York, and to the Respondents thereto: Naveen Doki; 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 “Merger Respondents”). The Merger Arbitration alleges that the Merger Respondents breached the Merger Agreement in a number of significant respects and may have committed fraud in connection with the Merger. The Company is seeking damages, which if granted will likely be the remedy set forth within the Merger Agreement which is in whole or in part shares of Company Common Stock received by the Merger Respondents in connection with the Merger. The Company has brought a motion to compel the Arbitration which is currently being decided by the Federal Courts in New York, but the Respondents countered with a motion to dismiss Reliability’s Petition to Compel Arbitration to the Federal Courts in New York. On August 4, the US District Court, Southern District of New York, denied the Respondents motion to dismiss. On June 12, 2020, Igly Trust, a Vivos entity, asked the Texas court for an injunction requiring the Company to provide a shareholder list and to hold a shareholder meeting. On October 20, 2020, the Texas court denied the injunction but, incongruously, dismissed all the Vivos plaintiffs for lack of personal jurisdiction. The Company appealed the dismissal because the court had jurisdiction over Igly Trust once it made affirmative claims in Texas and because the Court’s order denying the injunction is an important precedent for establishing that the directors under Texas law retain control of shareholder lists and determining the timing of shareholder meetings. On December 23, 2020, at a hearing in the Maryland Circuit Court of Montgomery County, Maryland, a motion by the Vivos Group to compel a shareholder meeting was summarily dismissed. On January 20, 2021, Defendants and Counter/Third-Party Plaintiffs, Vivos, VREH, Doki, Pathuri, Igly, Judos, by counsel, filed a Notice of Appeal on the dismissal. However, the deadline to pursue the appeal lapsed absent additional filings by the Vivos Group. On July 21, 2021, Maslow settled the obligation which with it had been committed by Vivos Holdings, LLC in July 2018, with Libertas and Kinetic for $ 475 . The agreement which included $ 100 in legal fees, released MMG from all claims judgements and obligation against MMG but did not release Naveen Doki, Silvija Valleru, Judos Trust, Igly Trust, Srinivas Kalidindi, Shirisha Janumpally, Federal Systems, Kalyan Pathuri, US IT Solutions Inc., 360 IT Professionals Inc., Alliance Micro Inc. Viv’s IT LLC, Vivos Global Holdings LLC, Vivos Acquisitions LLC, or Vivos Holdings from the remaining obligation. This debt belonged to Vivos Holdings LLC, and the aforementioned Liquidation Agreement, (See Note 2) had been created as a safeguard to shelter MMG should Vivos default, which actually transpired prior to the merger closing in October 2019. Maslow felt compelled to settle Vivos’ Holdings at this time due to 1) added pressure placed by Libertas to collect a balance that now exceeded $1,700, 2) a desire to clear liens against the Company to improve its credit status, and 3) its ability to negotiate a much lower and separate settlement. Maslow is pursuing remedy for the $ 475 payment to Libertas with the Vivos Group through the arbitration process. In the meantime, the $ 475 has been added the Vivos Debtor balance which as of September 30, 2021, is $ 4,944 . 15 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) NOTE 8. EQUITY The Company’s authorized capital stock consists of 300,000,000 shares of common stock, with no par value. All authorized shares of Company Common Stock are issued and outstanding. NOTE 9. RELATED PARTY TRANSACTIONS Stock Purchase Agreement On November 9, 2016, Vivos Holdings LLC, the former owner of MMG, acquired 100 % of MMG through a stock acquisition exchange for a purchase price of $ 1,750 , of which: (i) $ 1,400 was paid at settlement with proceeds from MMG and (ii) a promissory note to pay the remaining $ 350 (“Vivos/MMG Purchase Agreement”). 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 MMG on behalf of the Vivos. Vivos subsequently entered into a promissory note receivable with the MMG, described below, for the full stock purchase price. No payment has ever been made against this note. Notes Receivable The Company has notes receivable from Vivos Holdings, LLC and VREH, a member of Vivos Group, both related party affiliates due to their ownership percentage in the Company. In January 2021, MMG began applying the legal rate of interest which per Virginia statute is 8.0 % on two of the three defaulted notes receivable below, which were so eligible. In connection with the Vivos/MMG Purchase Agreement, on November 15, 2016, MMG executed a promissory note receivable with Vivos Holdings LLC in the amount of $ 1,400 . As defined by the Vivos/MMG Purchase Agreement, the loan consists of two periods, whereby the first period from November 15, 2016, until September 30, 2018, no principal or interest payments were required. Interest would accrue monthly and a new loan in the amount of $ 1,773 would be subject to a second loan period. During the second loan period, interest shall be paid in 20 equal consecutive payments, quarterly. Principal plus any unpaid interest is due September 20, 2023 . Interest during both loan periods accrues at a rate of 2.5 %. Additionally, monthly payments of $ 15 are made on behalf of Vivos Holdings, Inc. to the seller by MMG. These payments, plus any other payments made by MMG on behalf of Vivos Holdings, LLC, are added to the principal balance of the promissory note receivable (“Vivos/MMG Purchase Agreement Note Receivable”). In 2018, all quarterly interest payments to be made in phase 2 were offset by the management fees due to Vivos Holdings. In January 2021, MMG began applying the legal rate of interest which per Virginia statute is 8.0 % on two of the three defaulted notes receivable, which were eligible. Only the $ 750 September 5, 2019, note is not eligible for a default rate of interest but is eligible for recovery of legal fees. As of September 30, 2021, the total outstanding balance was $ 2,767 which includes accrued interest receivable of $ 55 . The actual funds (additional eligible interest and legal fees) sought may be greater than what is represented herein per GAAP. On November 15, 2017, MMG executed an intercompany promissory note receivable with VREH in the amount of $ 772 . As defined by the agreement, the loan consists of two periods, whereby the first period from November 15, 2017, until September 30, 2018, no principal or interest payments are required. During the first loan period, interest accrued monthly and a new loan amount of $ 781 will be subject to a second loan period. During the second period, interest is payable in 20 equal consecutive installments and the principal balance plus accrued and unpaid interest is due September 30, 2023. Interest during both periods accrues at a rate of 3.5 % annually. In 2018, all quarterly interest payments to be made in Phase 2 were offset by the management fees due to Vivos Holdings, LLC. In addition, principal payments totaling $ 30 were made by the Vivos Group. As of September 30, 2021, the total outstanding balance was $ 774 . which includes accrued interest receivable of $ 15 . 16 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) On June 12, 2019, MMG entered into a Personal Guaranty agreement with Dr. Doki, pursuant to which Dr. Naveen Doki personally guaranteed to MMG repayment of $ 3,000 of the balance of the Promissory Note issued to Vivos on November 15, 2017, within the 2019 calendar year via cash, stock, or other business assets acceptable to the Company. Dr. Doki is a 5 % or greater beneficial holder of Company Common Stock, and therefore is a related party. As of February 2020, the Company filed a lawsuit against the majority shareholder, pursuant to the personal guaranty agreement for defaulting on the outstanding notes receivables. In summary, the Vivos Group receivable totaled $ 4,258 on December 31, 2020, which included $ 2,007 of additional borrowings over the period between November 2016 and December 31, 2109. As of September 30, 2021, the receivable totaled $ 4,944 . On September 5, 2019, MMG entered into a Secured Promissory Note agreement with Vivos, pursuant to which MMG issued a secured promissory note to Vivos in the principal amount of $750. The note bears interest at 2.5 % per year and requires Vivos to make monthly payments to MMG of $ 10 beginning December 1, 2019, with balance due and payable on November 1, 2026 . Upon an event of default, which occurs upon failure of Vivos to make any monthly payment due under the terms of the note, MMG has the right to declare the entire unpaid balance of the note due and payable. The note is secured by 30,000,000 shares of Company Common Stock, which is due and payable upon a default by Vivos, which occurs upon failure of Vivos to make any monthly payment due under the terms of the note. In addition, both Naveen Doki and Silvija Valleru personally guaranty the repayment of the note by Vivos. Naveen Doki and Silvija Valleru were beneficial owners of Vivos and are also 5 % or greater beneficial owners of Company Common Stock, which is qualified by the Merger Arbitration complaint. As of September 30, 2021, the total outstanding balance was $ 780, which includes interest of $ 12 . In January 2021, MMG began charging the Maryland minimum interest rate by law allowed for defaulted totals as this note is in default and we are pursuing collection via the Vivos Default Claim. Debt Settlement Agreements On August 10, 2017, the Vivos Group executed a receivable advance agreement with Argus Capital Funding. MMG received a net advance of $ 487 in exchange for $ 705 of MMG’s accounts receivable. Included in this loan is a fee of $ 218 . The agreement was refinanced on November 15, 2017, when Vivos, and Vivos Acquisitions, LLC, via Dr. Naveen Doki and Dr. Silvija Valleru entered into an agreement with CC Business Solutions, a division of Credit Cash NJ, LLC (“Credit Cash”) pursuant to which Credit Cash advanced to the Company $ 600 in exchange for $ 780 of the Company’s accounts receivable, to be repaid fully by approximately May 20, 2019 (the “Maslow Credit Facility”). In addition, pursuant to the same agreement, Credit Cash advanced to Healthcare Resource Network, a company owned by the Vivos Group (“HCRN”) a credit facility in the principal amount of $ 1,005 (“HCRN Credit Facility”). Each of MMG, Vivos Holdings, Vivos Acquisitions, LLC, Mr. Naveen Doki and Mrs. Silvija Valleru guaranteed the HCRN Credit Facility. To secure repayment of their guaranteed obligations, the Company and Vivos Holdings 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 were accelerated, with the full balance for each becoming immediately due and payable. On December 10, 2018, the Company, Vivos Holdings, Vivos Acquisitions, LLC, Mr. Doki, and Mrs. 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 Holdings and Vivos Acquisitions, LLC agreed to fully repay the HCRN Credit Facility via quarterly payments beginning September 30, 2019. The HCRN Credit Facility is still being repaid by Vivos Holdings, and as of October 29, 2019, had an outstanding balance of approximately $ 635 . 17 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) 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 to satisfy the shareholders’ obligations under the Settlement Agreements. As of December 31, 2019, the Company had repaid the outstanding balance due for the Maslow Credit Facility under the Settlement Agreement in full. MMG was facing pressure to make cash payments pursuant to the Settlement Agreements prior to the Company’s anticipated liquidation of the shares of Company Common Stock pledged pursuant to the Liquidation Agreement. So, on July 21, 2021, as explained in Note 7, Maslow signed a settlement agreement with Kinetic Direct Funding, LLC and Libertas Funding, LLC for $ 475 in order to remove MMG from the remaining obligation owed by the Vivos Group which we were informed was $ 1,773 . The Vivos Group that are the counterparties to the Liquidation Agreement are not cooperating with the Company to liquidate the shares subject thereto as contemplated thereby. The anticipated arbitration process could have this matter settled in the first quarter 2022. However, no assurance can be given how long it will take to enforce the requirements of the Liquidation Agreement. Having made the payment may at some point present a liquidity issue for the Company. On August 9 th , 2021, Reliability filed an additional claim in the Debt Collection Suit and Vivos Default Counterclaim in the Circuit Court of Montgomery County, Maryland against Doki, Valleru, Pathuri, Janumpally, Igly, and Judos, that the Respondents breached the Merger Agreement in a number of significant respects and committed fraud in connection with the Merger. On September 7, 2021, the Company entered in Arbitration and Tolling Agreements with alleged shareholder Naveen Doki, M.D., and his affiliates and all other persons who were parties to the pending litigation previously reported in the Texas, New York and Maryland courts and before the American Arbitration Association. The Agreements call for the stay or dismissal of the pending litigation, with the parties agreeing to resolve their disputes before a single arbitrator in Maryland. The parties also agreed to maintain the status quo in corporate governance and related matters pending a final non-appealable judgment confirming any award in arbitration. The parties also signed a Tolling Agreement to toll the statute of limitations following the dismissal of a pending litigation. Related Party Relationships On October 29, 2019, prior to the Merger, pursuant to the Merger Agreement, Naveen Doki and Silvija Valleru became beneficial owners of 206,606,528 and 51,652,908 shares of RLBY Common Stock, respectively, equal to 68.9 % and 17.2 % of the total number of shares of RLBY Common Stock outstanding after giving effect to the Merger, respectively. The Company is seeking damages which if granted will likely be the remedy set forth within the Merger Agreement which is primarily the relinquishment in whole or in part shares of Company Common Stock received by the Respondents in connection with the Merger. On June 27, 2019, prior to the Merger, MMG entered into a Securities Purchase Agreement with Hawkeye Enterprises, Inc., a company owned and controlled by Mark Speck (“Mr. Speck”), an officer and then director of Maslow. Pursuant to this agreement, MMG issued to Hawkeye Enterprises 16,323 (on a post-Merger basis) shares of Company Common Stock, a warrant (as defined below) for 81,616 (on a post-Merger basis) shares of Company Common Stock and a convertible promissory note of same date in the initial principal amount of $ 50 , in exchange for $ 50 . The note bore interest at 12 % per year, with the balance of $ 56 paid in full on June 26, 2020. 18 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) On July 31, 2019, prior to the Merger, MMG entered into a Securities Purchase Agreement with Mr. Speck, the Company issued to this individual a Warrant for 81,616 (on a post-Merger basis) shares of MMG Common Stock and a convertible promissory note of same date in the initial principal amount of $ 50 , in exchange for $ 50 . The note bore interest at 12 % per year, with balance of $ 56 paid in full on August 4, 2020. On July 31, 2019, prior to the Merger, MMG entered into a Securities Purchase Agreement with Nick Tsahalis, an executive officer and director of MMG. Pursuant to this agreement, the Company issued to this individual 32,646 (on a post-Merger basis) shares of MMG Common Stock, and a Warrant to purchase 16,323 (on a post-Merger basis) shares of the MMG Common Stock, and a Convertible Promissory Note of same date in the initial principal amount of $ 100 , in exchange for $ 100 . The note bore interest at 12 % per year, with balance of $ 112 becoming due and paid in full on July 31, 2020. On September 18, 2019, in anticipation of the closing of the Merger and intending that it be assumed by MMG after the closing of the Merger, Hawkeye entered into a letter of intent (the “LOI”) regarding the potential acquisition of a complementary business. MMG was then prohibited from entering into the LOI directly. In connection with the LOI, Hawkeye paid a non-refundable deposit of $ 75 with the understanding that after the closing of the Merger, the LOI would be assigned to the Company and the Company would reimburse Hawkeye for the deposit. On October 17, 2019, Hawkeye assigned, and MMG agreed to assume the LOI and reimbursed Hawkeye for the deposit. The reimbursement took place on May 8, 2020, totaling $ 83 . The term “warrant” herein refers to warrants issued by MMG and assumed by RLBY as a result of the Merger. The 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”). Convertible 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. NOTE 10. BUSINESS SEGMENTS The Company operates within four industry segments: EOR, Recruiting and Staffing, Permanent (Direct) Placements and Video and Multimedia Production. The EOR segment provides media field talent to a host of large corporate customers in all 50 states. The Recruiting and Staffing segment provides skilled media and IT field talent on a nationwide basis for customers in a myriad of industries. Permanent Placements was added as a segment this quarter as the Company took on clients who will have the Company source candidates for permanent hire on a regular basis. The Video and Multimedia Production segment provides Script to Screen services for corporate, government and non-profit clients, globally. 19 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (amounts in thousands, except per share data) The following table provides a reconciliation of revenue by reportable segment to consolidated results for the three and nine months ended September 30, 2021, and 2020, respectively: For the three months ended September 30: SCHEDULE OF RECONCILIATION OF REVENUE AND OPERATING INCOME BY REPORTABLE SEGMENT TO CONSOLIDATED RESULTS 2021 2020 Revenue: EOR $ 5,705 $ 4,874 Recruiting and Staffing 962 1,107 Permanent Placement 38 - Video and Multimedia Production 236 215 Other - 5 Total $ 6,941 $ 6,201 For the Nine months ended September 30: 2021 2020 Revenue: EOR $ 14,186 $ 15,826 Recruiting and Staffing 2,658 3,547 Permanent Placement 68 - Video and Multimedia Production 897 796 Other - 30 Total $ 17,809 $ 20,199 NOTE 11. SUBSEQUENT EVENTS The Company has evaluated subsequent events through November 15, 2021, 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: On November 5, 2021, Congress passed H.R. 3684) infrastructure bill which terminated early the ERC program, making wages paid after Sept. 30, 2021, ineligible for the credit. It is expected that monies the Company has been credited in the 4 th quarter will reduce the 941 refund portions owed. The Company awaits IRS guidance on how this will be handled, given the retroactive nature of the legislation. 20