RELIABILITY INC 10-Q

Item 1. Financial Statements RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share data) September 30, December 31, 2025 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 229 $ 522 Trade receivables, net of allowance for credit losses 2,350 4,785 Other receivables 25 4 Notes receivable from related parties 6,228 5,847 Prepaid expenses and other current assets 286 336 Total current assets 9,118 11,494 Other intangible assets, net 2 2 Property, plant and equipment, net 49 60 Total assets $ 9,169 $ 11,556 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Factoring liability $ 157 $ 2,375 Accounts payable 392 734 Accrued expenses 932 288 Accrued payroll 714 568 Deferred revenue 318 207 Notes payable, current 40 26 Total current liabilities 2,553 4,198 LONG-TERM LIABILITIES Notes payable, net of current 21 21 Total long-term liabilities 21 21 Total liabilities 2,574 4,219 Commitment and contingencies (Note 6) - STOCKHOLDERS’ EQUITY Common stock, without par value, 300,000,000 shares authorized, 300,000,000 issued and outstanding as of September 30, 2025 and December 31, 2024 Additional paid-in capital 750 750 Retained earnings 5,845 6,587 Total stockholders’ equity 6,595 7,337 Total liabilities and stockholders’ equity $ 9,169 $ 11,556 The accompanying notes are an integral part of these statements. 3 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) 2025 2024 For the Three Months Ended September 30, 2025 2024 Revenue earned Service revenue $ 5,417 $ 6,230 Cost of revenue Cost of revenue 4,668 5,396 Gross profit 749 834 Selling, general, and administrative expenses 977 958 Operating loss ( 228 ) ( 124 ) Other income (expense) Interest income from related parties 128 146 Interest income 2 2 Interest expense ( 43 ) ( 27 ) Other expense ( 62 ) ( 68 ) Loss before income tax (expense) benefit ( 203 ) ( 71 ) Income tax (expense) benefit - 5 Consolidated net loss $ ( 203 ) $ ( 66 ) Net income per share: Basic $ 0.00 $ 0.00 Diluted $ 0.00 $ 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 SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) 2025 2024 For the Nine Months Ended September 30, 2025 2024 Revenue earned Service revenue $ 14,882 $ 17,566 Cost of revenue Cost of revenue 12,779 15,220 Gross profit 2,103 2,346 Selling, general, and administrative expenses 2,966 2,891 Operating loss ( 863 ) ( 545 ) Other income (expense) Interest income from related parties 381 426 Interest income 3 17 Interest expense ( 131 ) ( 62 ) Other income (expense) ( 132 ) ( 297 ) Loss before income tax (expense) benefit ( 742 ) ( 461 ) Income tax (expense) benefit - 127 Consolidated net loss $ ( 742 ) $ ( 334 ) Net loss per share: Basic $ 0.00 $ 0.00 Diluted $ 0.00 $ 0.00 Shares 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. 5 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the Nine Months Ended September 30, 2025 and 2024 (amounts in thousands, except per share data) Shares Amount Capital Earnings Equity Additional Common Stock Paid-in Retained Total Shares Amount Capital Earnings Equity Balance, December 31, 2023 300,000,000 $ - $ 750 $ 7,181 $ 7,931 Net loss - - - ( 132 ) ( 132 ) Balance, March 31, 2024 300,000,000 750 7,049 7,799 Net loss - - - ( 134 ) ( 134 ) Balance, June 30, 2024 300,000,000 750 6,914 7,664 Net loss - - - ( 68 ) ( 68 ) Balance, September 30, 2024 300,000,000 $ - $ 750 $ 6,847 $ 7,597 Balance, December 31, 2024 300,000,000 $ - $ 750 $ 6,587 $ 7,337 Net loss - - - ( 333 ) ( 333 ) Balance, March 31, 2025 300,000,000 750 6,254 7,004 Net loss - - - ( 205 ) ( 205 ) Balance, June 30, 2025 300,000,000 $ - $ 750 $ 6,049 $ 6,799 Balance 300,000,000 $ - $ 750 $ 6,049 $ 6,799 Net loss - - - ( 204 ) ( 204 ) Balance, September 30, 2025 300,000,000 $ - $ 750 $ 5,845 $ 6,595 Balance 300,000,000 $ - $ 750 $ 5,845 $ 6,595 The accompanying notes are an integral part of these statements. 6 RELIABILITY RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) 2025 2024 For the Nine Months Ended September 30, 2025 2024 Cash flows from operating activities: Net loss $ ( 742 ) ( 334 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 23 15 Accrued interest ( 381 ) ( 326 ) Changes in operating assets and liabilities: Trade receivables 2,413 ( 1,027 ) Other Receivables - 9 Prepaid expenses and other current assets 50 244 Accounts payable ( 342 ) 18 Accrued payroll 148 118 Accrued expenses 644 100 Deferred revenue 109 ( 9 ) Net cash provided by (used in) operating activities 1,922 ( 1,192 ) Cash flows from investing activities: - Purchase of fixed assets ( 11 ) ( 58 ) Net cash used in investing activities ( 11 ) ( 58 ) Cash flows from financing activities: Proceeds from the factoring facility 6,453 4,996 Repayments to the factoring facility ( 8,670 ) ( 4,428 ) Proceeds from issuing short-term debt 14 - Proceeds from issuing long-term debt 25 - Repayment of long-term debt ( 26 ) Net cash provided by (used in) financing activities ( 2,204 ) 568 Net decrease in cash and cash equivalents ( 293 ) ( 682 ) Cash and cash equivalents, beginning of period 522 822 Cash and cash equivalents, end of period $ 229 $ 140 The accompanying notes are an integral part of these statements. 7 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (amounts in thousands) Supplemental disclosures of cash flow information: 2025 2024 For the Nine Months Ended September 30, Supplemental disclosures of cash flow information: 2025 2024 Cash paid during the year for: Interest $ 131 $ 62 Income taxes $ - $ - 8 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (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, Direct Hire, and Video and Multimedia Production, which provides script-to-screen services. Our Staffing segment provides skilled field talent on a nationwide basis for Media, IT, and marketing and creative client partner projects. Video Production involves assembling and providing crews for special projects, webcasting, live events, post-production services, and production management. 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 Linda Maslow founded MMG initially in 1988 and incorporated the firm under the name The Maslow Media Group, Inc. in March 1992. On November 9, 2016, Linda Maslow sold the business to Vivos Holdings, LLC (“Vivos Holdings”) owned by Dr. Naveen Doki (“Dr. Doki”) and Silvija Valleru (“Ms. Valleru”). In 2019, Vivos Holdings collaborated on a share swap of MMG for other Vivos companies with individuals who included, but were not limited to, Dr. Doki, Shirisha Janumpally (“Mrs. Janumpally”), wife of Dr. Doki, Kalyan Pathuri (“Mr. Pathuri”) husband of Silvija Valleru, Igly Trust, and Judos Trust. These parties 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”). As a result of the Merger on October 29, 2019, MMG became a wholly owned subsidiary of Reliability, and the Vivos Group (Vivos Holdings, LLC, officially) acquired approximately 84 % of the issued and outstanding shares of Reliability which were distributed by Vivos Holdings, LLC. Upon purchasing MMG and thereafter, the Vivos Group began borrowing monies from MMG starting with $ 1,400 in 2016, and by the end of 2019 the balance had reached $ 3,418 , which included a $ 3,000 guarantee from Dr. Doki. Vivos Holdings, LLC, Vivos Real Estate Holdings, LLC, and Dr. Doki are collectively referred to as “Vivos Debtors.” Additionally, Reliability became aware of debt obligations that included MMG as a borrower or guarantor that the Vivos Group failed to disclose to Reliability. This and the attempted collection of the guarantee and debt from the Vivos Group set off a chain of legal events culminating in an arbitration hearing and award in 2022. We refer below to the disputes between Reliability and the Vivos Group as the “Vivos Matter.” A series of legal actions and hearings took place starting in March of 2020 through September of 2021, culminating in an agreement to settle through arbitration On August 31, 2022, the Company and MMG were granted arbitration awards against the Vivos Group, with supplemental awards issued on May 17, 2023, October 10, 2023, and October 27, 2023 which included an award citing fraud damages. Summarily, MMG was awarded the totals of all notes the Vivos Group had with MMG for its borrowings, the contracted interest, attorneys’ fees and expenses of $ 1,209 , and a contract damage of $ 1,000 to be satisfied by the transfer of their shares of the Company common stock to the Company equal in value to $ 1,000 . These awards were entered as final judgments by the Circuit Court for Montgomery County, Maryland on December 29, 2023, and became final on January 29, 2024. The judgments, which total approximately $ 8.49 million plus accrued interest, are enforceable for 12 years and may be enrolled in other states. 9 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (amounts in thousands, except per share data) While the Company is pursuing enforcement of these judgments, there can be no assurance as to the timing or amount of any recovery, or whether recovery will be in cash, equity, or other assets. Per Maryland law, the enrolling of judgements enables MMG to apply 10 % interest to the Vivos Debtor balance beginning December 29, 2023. MMG began applying the additional interest in the second quarter of 2024. Upon final resolution as to the underlying ownership and rights of certain shareholders, the Company intends to hold an annual meeting of shareholders within a reasonable time thereafter. As of September 30, 2025, the Vivos Debtor balance was $ 6,228 . The Award value in totality currently aggregates $ 8,649 , independent of legal fees after the award and interest. NOTE 2. MANAGEMENT’S PLAN Although the Company incurred net losses after taxes of $ 742 for the nine months ended September 30, 2025, and $ 594 and $ 740 for the years ended December 31, 2024 and 2023, respectively, management has evaluated whether these conditions or events raise substantial doubt about the Company’s ability to continue as a going concern for at least the 12 months following the issuance of these financial statements. Based on this assessment, management believes it is probable the Company will continue as a going concern and meet its financial obligations through November 30, 2026, thereby alleviating substantial doubt. This conclusion reflects management’s view that the Company has sufficient liquidity and working capital resources to fund operations for at least the next 52 weeks, as well as the ability to take actions, if necessary, to align costs with revenue fluctuations. This assessment is based on the following key factors: ● Cash Flow Forecast : Management has prepared a 52-week cash flow forecast from November 14, 2025, which projects sufficient cash and working capital to fund operations. ● Reduction in Legal Fees : Legal expenses related to non-operational activities are expected to continue decreasing in 2025 and 2026. ● Collection of Notes Receivable : Management anticipates that notes receivable from related parties will be settled through a combination of cash and stock, providing additional liquidity and potential access to capital markets over next several months. ● Client Financing Arrangement : A financing arrangement through JPMorgan for one of the Company’s largest clients has begun to expedite the cash conversion cycle. This acceleration in cash flow will ensure more cash is on hand to meet our obligations. ● Factoring Availability : As of November 11, 2025, the Company had access to additional borrowing under its factoring facility of up to 93 % of unfactored invoices, totaling approximately $ 1,553 . NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC and should be read in conjunction with the audited financial statements and notes thereto contained in our Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented, have been reflected herein. The results of operations for the periods presented herein are not necessarily indicative of the results to be expected for the full year. The primary statements are presented on a non-condensed basis; however, the accompanying notes are condensed and do not include all of the information and notes required by U.S. GAAP for complete annual financial statements. For 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, 2024. There have been no material changes to the accounting policies discussed in Note 3 to the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 31, 2025. Concentration of Credit Risk For the nine months ended September 30, 2025, two clients each accounted for more than 10% of total revenue, representing approximately 28.3 % and 28.1 %, respectively , or 56.4 % in total . For the same period in 2024, three clients exceeded the 10% revenue threshold, contributing approximately 26.2 %, 21.2 %, and 15.9 %, respectively, or 63.3 % in total. From an accounts receivable perspective, three clients represented a significant portion of the billed balance as of September 30, 2025. The largest client accounted for $ 374 or 27.9 % of total accounts receivable; the second largest accounted for $ 268 or 20.0 %; and the third accounted for $ 216 or 16.1 % of total accounts receivable of $ 1,341 . On September 30, 2024, the same two principal clients represented $ 1,555 or 46.3 %, and $ 884 or 26.3 % of total accounts receivable of $ 3,361 , respectively. 10 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (amounts in thousands, except per share data) Recently Issued Accounting Pronouncements Not Yet Adopted On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). The ASU enhances income tax transparency by requiring additional information on the rate reconciliation and cash taxes paid, disaggregated by jurisdiction. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024 (calendar year 2025 for the Company) and one year later for all other entities. Early adoption is permitted, and the guidance may be applied prospectively or retrospectively. Given the Company’s cumulative net operating losses, full valuation allowance against deferred tax assets, and minimal current tax liabilities, primarily limited to state minimum and franchise taxes; the adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. On November 4, 2024, the FASB issued ASU 2024-03 , Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). The ASU requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for public business entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Entities should adopt this guidance on a prospective basis, though retrospective application is permitted. The Company is currently evaluating how this ASU will impact its year end December 31, 2025 consolidated financial statements and disclosures. NOTE 4. ACCOUNTS RECEIVABLE Accounts receivable consist of the following: SCHEDULE OF ACCOUNTS RECEIVABLE September 30, 2025 December 31, 2024 Accounts receivable, unfactored $ 1,184 $ 2,313 Unbilled receivables 1,009 97 Accounts receivable, factored 157 2,375 Total Accounts Receivable $ 2,350 $ 4,785 NOTE 5. DEBT Factoring Facility The Company is party to a factoring and security agreement with Gulf Coast Bank and Trust (“Gulf”), which provides liquidity by enabling the Company to sell eligible accounts receivable (i.e., invoices) to Gulf in exchange for immediate cash advances. The proceeds from this agreement are primarily used to fund operating expenses, including employee compensation, vendor payments, and general overhead. Under the terms of the agreement, Gulf advances funds at an interest rate equal to the prime rate plus 2 %, with an additional advance fee of 15 basis points. The eligible advance amount is up to 93 % of the face value of an invoice. The agreement is structured on a month-to-month basis and requires the Company to comply with certain financial covenants, including those related to invoicing activity and minimum reserve account balances. Receivables are sold to Gulf on a full recourse basis, meaning the Company retains the risk of collection. Because the factoring arrangement is full recourse, it is accounted for as a secured borrowing under ASC 860, Transfers and Servicing , rather than as a sale of receivables. For the nine months ended September 30, 2025, the Company received $ 6,453 in proceeds from the sale of receivables and repaid $ 8,670 under the agreement. This compares to $ 4,496 in proceeds and $ 4,428 in repayments for the period ended September 30, 2024. The outstanding balance under the factoring arrangement was $ 157 as of September 30, 2025, $ 827 on June 30, 2025, $ 1,163 as of March 31, 2025, and $ 2,375 as of December 31, 2024. The factoring facility is collateralized by substantially all the assets of the Company. In the event of a default, the factor may demand that the Company repurchase the receivable or debit the reserve account. 11 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (amounts in thousands, except per share data) Receivables Purchase Programs During 2025, the Company began participating in receivables purchase programs with JPMorgan (“JPM”) and Mitsubishi UFJ Financial Group (“MUFG”) under which certain approved trade receivables may be sold on a non-recourse basis (other than limited breach-based repurchase obligations). Transfers that meet program eligibility are accounted for as sales under ASC 860 and the receivables are derecognized; related program discounts and fees are recorded as loss on sale. Cash proceeds and settlements are presented in operating cash flows. During the three and nine months ended September 30, 2025, we sold $ 1,670 and $ 2,264 of receivables under these programs, received $ 1,643 and $ 2,229 of cash proceeds, recognized $ 27 and $ 35 of discounts and fees recorded as loss on sale, and had $ 607 and $ 705 of derecognized receivables outstanding at period end. No repurchases occurred. Insurance Financing MMG also employs short term 10-month loan agreements annually to finance advance payments on Crime, EPLI, E&O, and D&O insurances. In 2024-2025, MMG entered into two loans totaling $ 140 with finance charges each over 10 months totaling approximately $ 6 . The combined APR for these loans is 5.0 %. Software Financing with Long Term Debt On October 30, 2024, the Company entered into a deferred payment agreement related to its ADP implementation, completed in January 2024. The total amount of $ 52 is payable over 24 months with an interest rate of 6.21 %. On April 4, 2025, the Company entered into a second deferred payment agreement totaling $ 39 , related to the implementation and multi-year licensing of the Datarails, analytics platform. This amount is payable over 36 months and carries a 0.0 % interest rate. As of September 30, 2025, the aggregate current portion of these obligations was $ 39 , with the long-term portion totaling $ 21 . NOTE 6. COMMITMENTS AND CONTINGENCIES From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these, or other matters may arise from time to time that may harm our business. Except as set forth below, we are not aware of any such legal proceedings or claims against the Company. A series of legal actions and hearings took place starting in February of 2020 with the Vivos Group over Merger agreement violations and Vivos Group debt obligations. Arbitration was agreed to in the fall of 2021 by both the Vivos Group and MMG with the proceedings commencing in February 2022. On August 31, 2022, the arbitrator issued an award in favor of the Company and MMG, including fraud damages. Supplemental awards were issued on May 17, 2023, October 10, 2023, and October 27, 2023. The awards granted MMG the total of all notes receivable from the Vivos Group, contracted interest, attorneys’ fees and expenses of $ 1,209 , and a contract damage of $ 1,000 to be satisfied by the transfer of the Vivos Group’s shares of the Company Common Stock to the Company equal in value to $ 1,000 . The May 17, 2023 award also appointed a Receiver whose primary function is to collect the contract and fraud damages, including costs, expenses, and fees provided in the awards. On October 10, 2023, the Arbitrator issued a Supplemental Award outlining the Receiver’s powers. 12 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (amounts in thousands, except per share data) On December 29, 2023, the Circuit Court for Montgomery County, Maryland entered all three arbitration awards as final judgments which became effective on January 29, 2024 after the appeal period expired. These judgments, totaling approximately $ 8,490 plus accrued interest, are enforceable for 12 years and may be enrolled in other states. On May 19, 2025, the Receiver submitted final recommendations, calculations, and a proposed order to the arbitrator. The response deadline was initially set for July 7, 2025, but was extended to August 6, 2025 after Vivos Holdings retained new counsel. On August 8, 2025, the arbitrator granted both parties until September 5, 2025 to submit replies to each other’s filings. On October 24, 2025, a non-evidentiary hearing was held in Bethesda Maryland related to the Receiver’s proposed order. Issuance of a written ruling from the arbitrator is expected in 2025. On June 11, 2025, the Company’s subsidiary, without admitting any fault, entered into a Memorandum of Understanding (“MOU”) to settle an immaterial legal settlement. Following court approval on October 9, 2025, $ 125 was recognized in operating expenses for the quarter ended September 30, 2025. This amount will be paid out over the next 5 months . NOTE 7. 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 8. 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 $ 1,400 was paid at settlement with proceeds from MMG. The Vivos Debtors subsequently entered into a promissory note receivable with MMG for the full stock purchase price. Between 2018 to present there was $ 2,217 in additional borrowings. Related Party Notes Receivable The Company has several notes receivable from related parties. Prior to the Merger, Vivos Holdings collaborated on a share swap of MMG for other Vivos companies with individuals who included, but were not limited to, Dr. Doki, Shirisha Janumpally (“Mrs. Janumpally”), wife of Dr. Doki, Kalyan Pathuri (“Mr. Pathuri”) husband of Silvija Valleru, Igly Trust, and Judos Trust. These parties 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], which are collectively referred to as the “Vivos Group.” The table below is a summary of Vivos Group related party notes receivable which, as of September 30, 2025, total $ 6,228 . Based on management’s current expected credit loss (“CECL”) assessment, which considered legal judgments in favor of Company and the ongoing receivership process supporting recovery and collectability, no allowance for credit losses has been recorded. 13 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (amounts in thousands, except per share data) SCHEDULE OF RELATED PARTY NOTES RECEIVABLE Note Description Acquisition Loan to Vivos, LLC Interco Loan to Vivos Real Estate, LLC Tax Note Total Notes Receivable Balance on December 31, 2024 $ 4,039 $ 897 $ 911 $ 5,847 Accrued interest 86 20 20 126 Balance on March 31, 2025 $ 4,125 $ 917 $ 931 $ 5,973 Accrued interest 86 21 20 127 Balance on June 30, 2025 $ 4,211 $ 938 $ 951 $ 6,100 Accrued interest 87 21 20 128 Balance on September 30, 2025 $ 4,298 $ 959 $ 971 $ 6,228 With awarded legal fees and the fraud award of $ 1,000 , the total liability as of September 30, 2025 was $ 8,649 . Related Party Costs Within Other Expense on the accompanying consolidated financial statements approximately $ 41 in the second quarter and $ 68 for the nine months ended September 30, 2025, were exclusively for receivership related costs for recovery of the arbitration award related to the Vivos Group. Related Party Relationships On October 29, 2019, prior to the Merger, Naveen Doki and Silvija Valleru became beneficial owners of Company Common Stock, equal to approximately 69 % and 17 %, respectively, of the total number of shares of the Company’s Common Stock outstanding after giving effect to the Merger. At the present time, the Vivos Group shall not be entitled to vote on any of their shares in Reliability at any annual or special meetings of the shareholders. The Receiver is empowered to recover the awards by seizing shares of the Company held by Dr. Naveen Doki and his affiliates, the Vivos Group. Once the judgments in favor of Reliability are satisfied, the restrictions on the rights of the Vivos Group shareholders imposed by the Award shall be lifted. NOTE 9. BUSINESS SEGMENTS The Company operates within four industry segments: EOR, Recruiting and Staffing (“Staffing”), Direct Hire, and Video Production. The EOR segment provides media field talent to a host of large corporate customers in all 50 states. The Recruiting and Staffing (“Staffing”) segment provides skilled Media and IT field talent on a nationwide basis for customers in a myriad of industries. Direct Hire fulfils direct placement requests by MMG clients for a wide variety of posts, including administrative, media, and IT professionals. The Video and Multimedia Production segment provides script-to-screen services for corporate, government, and non-profit clients, globally. Segment gross profit includes revenue and cost of services only. Currently, the Company is not allocating interest income, interest expense, depreciation expense, other income (expense), income tax benefit (expense) and sales, general, and administrative expenses at the segment level. Our operating segments align with our organizational structure and are regularly reviewed by our Chief Executive Officer (our chief operating decision-maker or “CODM”) to allocate resources and assess performance. No additional segment expense categories (beyond cost of services) are regularly provided to the CODM. We evaluate segments based on revenue and gross profit, which also guide our annual budgeting process. Monthly, our CODM reviews segment revenue and gross profit against the prior year and budget to inform working capital allocation decisions. The measure of segment assets is reported on the consolidated balance sheet as total assets. 14 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (amounts in thousands, except per share data) The following table provides a reconciliation of revenue and gross profit by reportable segment to consolidated results for the three-month and nine-month periods ended September 30, 2025 and 2024, respectively: SCHEDULE OF GROSS PROFIT PERFORMANCE BY SEGMENT Gross Profit Performance by Segment For the Three Months Ended September 30: September 30, 2025 September 30, 2024 Business Segment Revenue Gross Profit GM % Business Segment Revenue Gross Profit GM % EOR $ 4,299 $ 471 11.0 % EOR $ 5,293 $ 641 12.1 % Staffing $ 1,053 $ 265 25.2 % Staffing $ 822 $ 144 17.4 % Video Production $ 65 $ 13 19.8 % Video Production $ 87 $ 23 26.2 % Direct Hire $ - $ - - Direct Hire $ 28 $ 26 95.6 % Total $ 5,417 $ 749 13.8 % Total $ 6,230 $ 834 13.4 % For the Nine Months Ended September 30: September 30, 2025 September 30, 2024 Business Segment Revenue Gross Profit GM % Business Segment Revenue Gross Profit GM % EOR $ 11,627 $ 1,365 11.7 % EOR $ 15,108 $ 1,827 12.1 % Staffing $ 3,083 $ 683 22.2 % Staffing $ 2,202 $ 411 18.5 % Video Production $ 149 $ 34 22.8 % Video Production $ 177 $ 33 18.6 % Direct Hire $ 23 $ 21 90.0 % Direct Hire $ 79 $ 75 95.5 % Total $ 14,882 $ 2,103 14.1 % Total $ 17,566 $ 2,346 13.4 % NOTE 10. SUBSEQUENT EVENTS The Company evaluated subsequent events through November 14, 2025, the date these unaudited condensed consolidated financial statements were available to be issued. On October 24, 2025, a non-evidentiary hearing was held in Bethesda Maryland related to the Receiver’s proposed order. Issuance of a written ruling from the arbitrator is expected in 2025. This matter is a non-recognition subsequent event under ASC 855; no adjustments to the accompanying financial statements are required. The outcome and potential impact, if any, cannot be estimated at this time. 15