RELIABILITY INC 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks from transactions we enter into the normal course of business. Our primary market risk exposure relates to interest rate risk, which currently is tied to the Prime Interest rate. INTEREST RATES Our Factoring Facility is priced at a variable interest rate of prime plus 2% with a 15-basis point advance rate with a floor of 4%. Accordingly, future interest rate increases could potentially put us at risk for an adverse impact on future earnings and cash flows. Our Amex BIP interest rate is paid upon invoice submission at a fixed percentage based on the submission total. Invoice(s) under $10 cost 2.05%, those between $10 and $200 cost 1.55% of the invoice total, and a submission of invoice or invoices greater than $200 is subject to a 1.05% cost. Since MMG submissions average between 10 and 200, our average fee is 1.55% for invoices payable in 90 days, averaging 100. This translates into an approximate APR of 6.2% which is 5.3% better than our factoring rate given the current prime interest rate as of March 17, 2024 of 8.5%. At a DSO of 52, our Factoring APR is approximately 11.5%. 37