RELIABILITY INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Report of Independent Registered Public Accounting Firms PCAOB ID NO: 820 25 Audited Consolidated Financial Statements of Reliability, Incorporated. Consolidated Balance Sheets as of December 31, 2025, and 2024 27 Consolidated Statements of Operations for the years ended December 31, 2025, and 2024 28 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2025, and 2024 29 Consolidated Statements of Cash Flows for the years ended December 31, 2025, and 2024 30 Notes to Consolidated Financial Statements 32 24 18012 Sky Park Circle, Suite 200 Irvine, California 92614 tel 949-852-1600 fax 949-852-1606 www.rjicpas.com REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Reliability Incorporated: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Reliability Incorporated and Subsidiary (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and 2024, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt About the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred recurring losses, has experienced liquidity constraints, and is dependent on receivables-based financing arrangements and management’s ability to execute its plans to improve liquidity and operating performance. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the Audit Committee of the Board of Directors and that: (1) related to accounts or disclosures that are material to the consolidated financial statements and (2) involve challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they are related. Receivable Purchase Agreements — Technical Accounting under ASC 860 The Company entered into receivable purchase agreements with financial institutions during 2025 under which certain trade receivables were transferred to the purchasers. As described in Note 8 to the consolidated financial statements, management concluded that transfers under these arrangements that met program eligibility qualified for sale accounting under ASC 860, Transfers and Servicing , and accordingly derecognized the related receivables, recorded the related discounts and fees as loss on sale, and presented the related cash proceeds and settlements within operating cash flows. 25 We identified the accounting for the receivable purchase agreements as a critical audit matter because evaluating management’s conclusion involved especially challenging auditor judgment regarding the interpretation of the contractual provisions and the application of ASC 860. In particular, significant judgment was required to evaluate whether the transferred receivables were legally isolated from the Company and its creditors, whether the purchasers had the practical ability to pledge or exchange the transferred receivables, whether the Company retained effective control over the transferred receivables, and whether the limited repurchase provisions were consistent with sale accounting rather than secured borrowing treatment. In addition, judgment was required to evaluate the presentation of the related fees and discounts in the statement of operations and the classification of the related cash flows and disclosures in the consolidated financial statements. The primary procedures we performed to address this critical audit matter included, among others: ● reading the executed receivable purchase agreements and related amendments; ● evaluating management’s technical accounting analysis under ASC 860; ● involving professionals with specialized knowledge and skill to assist in evaluating the legal isolation support obtained by management; ● assessing whether the contractual terms provided the purchasers with the ability to pledge or exchange the transferred receivables and whether the Company retained effective control; ● testing a sample of receivable transfers during the year and agreeing the amounts sold, cash proceeds received, and related fees and discounts to supporting documentation; ● evaluating the Company’s presentation of the related amounts in the statements of operations and statement of cash flows; and ● assessing the adequacy of the related financial statement disclosures. We have served as the Company’s auditor since 2009. Ramirez Jimenez International CPAs PCAOB ID No.820 Irvine, California March 31, 2026 26 RELIABILITY INCORPORATED AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share data) 2025 2024 December 31, 2025 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 483 $ 522 Trade receivables, net of allowance for credit losses 1,594 4,785 Other receivables 28 4 Notes receivable from related parties 6,357 5,847 Prepaid expenses and other current assets 341 336 Total current assets 8,803 11,494 Other intangible assets, net 2 2 Property, plant and equipment, net 40 60 Total assets $ 8,845 $ 11,556 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Factoring liability $ 455 $ 2,375 Accounts payable 728 734 Accrued expenses 323 288 Accrued payroll 381 568 Deferred revenue 235 207 Note payable, current 34 26 Total current liabilities 2,156 4,198 LONG TERM LIABILITIES Note payable, net of current 16 21 Total long-term liabilities 16 21 Total liabilities 2,172 4,219 Commitment and contingencies (Note 10) STOCKHOLDERS’ EQUITY Common stock, without par value, 300,000,000 shares authorized, 300,000,000 issued and outstanding as of December 31, 2025, and 2024 Additional paid-in capital 750 750 Retained earnings 5,923 6,587 Total stockholders’ equity 6,673 7,337 Total liabilities and stockholders’ equity $ 8,845 $ 11,556 The accompanying notes to consolidated financial statements are an integral part of these financial statements. 27 RELIABILITY INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) 2025 2024 For the Years Ended December 31, 2025 2024 Revenue earned Service revenue $ 20,717 $ 23,982 Cost of revenue Cost of revenue 17,765 20,790 Gross profit 2,952 3,192 Selling, general and administrative expenses 3,782 3,899 Operating loss ( 830 ) ( 707 ) Other income (expense): Interest income from related parties 509 452 Interest income 5 18 Interest expense ( 105 ) ( 108 ) Other income (expense) ( 229 ) ( 249 ) Loss before income tax expense ( 650 ) ( 594 ) Income tax expense ( 14 ) - Net loss $ ( 664 ) $ ( 594 ) Net loss per share: Basic $ 0.00 $ 0.00 Diluted $ 0.00 $ 0.00 Weighted average common shares outstanding: Basic 300,000,000 300,000,000 Diluted 300,000,000 300,000,000 The accompanying notes to consolidated financial statements are an integral part of these financial statements. 28 RELIABILITY INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS’ EQUITY For the years ended December 31, 2025, and 2024 (amounts in thousands, except per share data) Shares Amount Capital Earnings Equity Additional Common Stock Paid-in Retained Total Stockholders’ Shares Amount Capital Earnings Equity Balance, January 1, 2024 300,000,000 $ - $ 750 $ 7,181 $ 7,931 Net loss - - ( 594 ) ( 594 ) Balance, December 31, 2024 300,000,000 $ - $ 750 $ 6,587 $ 7,337 Balance 300,000,000 $ - $ 750 $ 6,587 $ 7,337 Net loss - - ( 664 ) ( 664 ) Balance, December 31, 2025 300,000,000 $ - $ 750 $ 5,923 $ 6,673 Balance 300,000,000 $ - $ 750 $ 5,923 $ 6,673 The accompanying notes to consolidated financial statements are an integral part of these financial statements. 29 RELIABILITY INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) 2025 2024 For the Years Ended December 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 664 ) $ ( 594 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 28 23 Loss on receivable purchase agreements 73 Loss on Disposal of fixed assets 3 - Accrued interest ( 510 ) ( 452 ) Changes in operating assets and liabilities: Trade receivables 3,118 ( 1,786 ) Prepaid expenses and other current assets ( 5 ) 106 Accounts payable ( 6 ) 186 Accrued payroll ( 186 ) ( 69 ) Accrued expenses 36 ( 3 ) Deferred revenue 27 2 Net cash provided by (used in) operating activities $ 1,914 $ ( 2,587 ) Cash flows from investing activities: Purchase of fixed assets ( 11 ) ( 68 ) Net cash used in investing activities $ ( 11 ) ( 68 ) Cash flows from financing activities: Proceeds from the factoring facility 8,299 9,132 Repayments to the factoring facility ( 10,220 ) ( 6,930 ) Proceeds from issuing short term debt 9 51 Repayments of long term debt ( 5 ) ( 4 ) Payments on behalf of related parties ( 25 ) - Repayments of notes receivable from related parties - 106 Net cash (used in) provided by financing activities $ ( 1,942 ) 2,355 Net (decrease) increase in cash and cash equivalents ( 39 ) ( 300 ) Cash and cash equivalents, beginning of year 522 822 Cash and cash equivalents, end of year $ 483 $ 522 The accompanying notes to consolidated financial statements are an integral part of these financial statements. 30 RELIABILITY INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS, continued (amounts in thousands) For the years ended December 31, Supplemental disclosures of cash flow information: 2025 2024 Cash paid during the year for: Interest $ 105 $ 108 Income taxes (received) paid $ - $ - The accompanying notes to consolidated financial statements are an integral part of these financial statements. 31 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) NOTE 1 - NATURE OF OPERATIONS Reliability Incorporated operates, along with its wholly owned subsidiary, The Maslow Media Group, Inc. (“MMG” or “Maslow”), (collectively, “Reliability” or the “Company”) as a workforce management solutions company. MMG, for over 30 years, focused primarily on the media industry. That changed in late 2019 when MMG began providing staffing services in the area of IT. Now MMG fills roles in a variety of business functional areas, including administrative, IT, accounting and finance, HR, and sales. In servicing its clients, Reliability provides a variety of staffing services which include employer of record, temporary staffing services, and direct hire, primarily within the United States of America in four industry segments: Employer of Record (“EOR”), Staffing Solutions, Video and Multimedia Production resources, and Direct Hire. EOR, which is a unique workforce management solution, represented 79.2% of our revenue in 2025. Our Staffing Solutions segment provides skilled field talent on a nationwide basis for client partner projects. Video Production, for one, involves assembling and providing crews for special projects that can last anywhere from a week to 6 months. In 2021, MMG began building its direct hire business as a separate business segment, which added $ 37 and $ 95 in revenue and $ 33 and $ 90 in gross profit in 2025 and 2024 respectively. NOTE 2 - GOING CONCERN The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the years ended December 31, 2025 and 2024, the Company incurred net losses of $ 664 and $ 594 , respectively. In addition, the Company’s operations require significant working capital to fund payroll and related obligations in advance of collecting client receivables, and the Company remains dependent on receivables-based financing arrangements and timely collections from a concentrated customer base to meet its obligations as they come due. These conditions and events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these consolidated financial statements are issued. Management has developed plans to mitigate these conditions and events, which include continued use of existing receivables-based financing arrangements, cost containment and operating expense reductions, efforts to improve revenue and margin mix through higher-margin staffing and managed services, anticipated reductions in legal expenditures following the February 2026 Vivos settlement, and potential capital structure flexibility upon completion of the share transfer contemplated by that settlement. In connection with the anticipated return of a significant portion (approximately 84%) of the Company’s outstanding shares to treasury, management is also evaluating a range of potential strategic and financing alternatives, such as, but not limited to; M&A opportunities or other possible business combinations, strategic issuance of equity or equity-linked securities (including convertible instruments), capital raises, and other capital structure or financing transactions. Proceeds from any such transactions, if pursued, would be expected to support investments in business development, technology infrastructure, and other growth-oriented initiatives, as well as general working capital needs. These plans are not entirely within the Company’s control and may not be fully achieved, substantial doubt about the Company’s ability to continue as a going concern is not alleviated. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Company’s consolidated financial statements reflect the financial position and operating results of Reliability, including its wholly owned subsidiary, MMG. All intercompany transactions and balances have been eliminated in consolidation. All dollar amounts presented in this Form 10-K, unless otherwise specified, are expressed in thousands. Management Estimates The consolidated financial statements and related disclosures are prepared in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”). The Company must make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to revenue recognition, allowances for credit losses, and recoverability of notes receivable, useful lives for depreciation and amortization, loss contingencies, and the valuation allowances for deferred income taxes. Actual results may be materially different from those estimated. In making its estimates, the Company considers the current economic and legislative environment. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. 32 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) Concentrations For the year ended December 31, 2025, Clients A and B each accounted for 10% or more of the total revenue, with their respective contributions approximately 31.5 % and 26.9 % or 58.4 % combined. For the year ended December 31, 2024, Clients B, A, and D contributed 10% or more of the total revenue, with their respective share approximately 26.9 , 22.6 % and 14.1 % or 63.6 % combined. Looking at our top 5 client concentration in 2025, A, B, C and D and E represented a combined approximate 76.7 % of the total, compared to 69.5 % in 2024. As of December 31, 2025 two clients greater than 10% of accounts receivable outstanding were clients B at 41.3 % and A at 19.6 %. As of December 31, 2024, Clients A and B represented approximately 19.9 %, and 11.8 % of the total accounts receivable outstanding, respectively. Financial instruments, which potentially subject the Company to concentrations of credit risk, are primarily cash, notes receivable from related parties and accounts receivable. The Company performs continuing credit evaluations of its customers and does not require collateral. The Company has not experienced significant losses related to receivables. The Company at times may have cash in excess of the Federal Deposit Insurance Corporation (“FDIC”) limit. The Company has not experienced losses on these accounts and management believe the Company is not exposed to losses on such accounts. Approximately 15% of our field talent are represented by a labor union . Accounts Receivable, Contract Assets, and Contract Liabilities (Deferred Revenue) Receivables represent both trade receivables from customers in relation to fees for the Company’s services and unpaid amounts for benefit services provided by third-party vendors, such as healthcare providers for which the Company records a receivable for funding until the payment is received from the customer and a corresponding customer obligations liability until the Company disburses the balances to the vendors. The Company provides an allowance for credit losses by specifically identifying accounts with a risk of collectability and providing an estimate of the loss exposure. Management considers all contract receivables as of December 31, 2025, and 2024 to be fully collectible, therefore an allowance for credit losses is not provided for. The Company records accounts receivable when its right to consideration becomes unconditional. Contract assets primarily relate to the Company’s rights to consideration for services provided that they are conditional on satisfaction of future performance obligations. The Company holds customer deposits of certain customers related to its EOR business to minimize cash flow impact and reduces risks of uncollectible trade receivables. The Company records contract liabilities (deferred revenue) when payments are made or due prior to the related performance obligations being satisfied. The Company does not have any material contract assets or long-term contract liabilities. As of December 31, 2025, and 2024, the Company’s deferred revenue totaled $ 235 and $ 207 , respectively. Fair Value Measurements The Company measures fair value based on the price that the Company would receive upon selling an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. Various inputs are used in determining the fair value of assets or liabilities. Inputs are classified into a three-tier hierarchy, summarized as follows: ● Level 1 – Quoted prices in active markets for identical assets or liabilities; ● Level 2 – Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the assets or liabilities; ● Level 3 – Significant unobservable inputs for the assets or liabilities. When Level 1 inputs are not available, the Company measures fair value using valuation techniques that maximize the use of relevant observable inputs (Level 2) and minimizes the use of unobservable inputs (Level 3).The carrying amounts reported as of December 31, 2025 and 2024 for cash and cash equivalents, trade receivables, prepaid expenses and other current assets, accounts payable and accrued expenses, and factoring liability approximate their fair values due to the short-term nature of these instruments or are based on interest rates available to the Company that are comparable to current market rates. It is not practicable to estimate the fair value of the notes receivable from related parties due to their related party nature. 33 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) Property and Equipment Property and equipment are stated at cost and are depreciated using primarily the straight-line method over the following estimated useful lives: furniture, fixtures, and computer equipment — 3 three to seven years ; leasehold improvements — over the shorter of the estimated useful life of asset or the lease term . Expenditures for renewals and betterments are capitalized whereas expenditures for repairs and maintenance are charged to income as incurred. Upon sale or disposition of property and equipment, the difference between the unamortized cost and the proceeds is recorded as either a gain or a loss. Depreciation and amortization expense for the years ended December 31, 2025, and 2024 totaled $ 29 and $ 23 , respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. Long-Lived Assets The Company reviews its long-lived assets, primarily fixed assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily at the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. The Company did not record an impairment expense for the years ended December 31, 2025, and 2024. Other Intangible Assets The Company has intangible assets with finite lives. Intangible assets with finite useful lives were amortized over their respective estimated useful lives, ranging from 3 three to ten years , based on a pattern in which the economic benefit of the respective intangible asset is realized. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligation(s) in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company derives its revenues from four segments: EOR, Staffing Solutions, Direct Hire and Video and Multimedia Production. Although Direct Hire is within the Staffing Solutions domain, we consider it a separate business segment. The Company under its Staffing Services umbrella, provides managed service, consulting and temporary staffing and Direct Hire services. Revenues are recognized when promised services are delivered to the client, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues as presented in the consolidated statements of operations represent services rendered to clients, less sales adjustments and allowances. Reimbursements, including those related to out-of-pocket expenses, and media equipment rentals are also included in revenues, and the related amounts of reimbursable expenses are included in cost of revenue. Staffing Solutions managed and Temporary staffing revenues: Field talent revenues from contracts with clients are recognized in the amount to which the Company has the right to invoice when the services are rendered by the Company’s field talent. Direct Hire staffing revenues: Direct Hire staffing revenues are recognized when employment candidates start their permanent employment. MMG estimates the effect of Direct Hire candidates who do not remain with its client through the guarantee period (generally 90 days) based on historical experience. Allowances, recorded as a liability, are established to estimate these losses. Fees to clients are generally calculated as a percentage of the new worker’s annual compensation. No fees for Direct Hire services are charged to employment candidates. Refer to Note 14 for disaggregated revenues by segment. Payment terms in our contracts vary by the type and location of our client partner and the services offered. The term between invoicing and when payment is due is not significant. There were no unsatisfied performance obligations as of December 31, 2025. There were no revenues recognized during the years ended December 31, 2025, and 2024 related to performance obligations that satisfied or partially satisfied in previous periods. There are no contract costs capitalized. The Company did no t recognize any contract impairments during the years ended December 31, 2025, and 2024. Transfers of Financial Assets Transfers of financial assets that do not qualify for sale accounting are reported as collateralized borrowings. Accordingly, the related assets remain on the Company’s balance sheet and continue to be reported and accounted for as if the transfer had not occurred. Cash proceeds from these transfers are reported as liabilities, with attributable interest expense recognized over the life of the related transactions. 34 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) Advertising The Company recognizes marketing and promotion expenses in selling, general and administrative expenses as the services are incurred. Total marketing and promotion expenses for the years ended December 31, 2025, and 2024 were $ 65 and $ 54 , respectively. Earnings (Loss) Per Share Basic earnings (loss) per common share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Income Taxes The Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and net operating loss and tax credit carry forwards, using enacted tax rates and laws that are expected to be in effect when the differences reverse. A valuation allowance is recorded against deferred tax assets in these cases when management does not believe that the realization is more likely than not. While management believes that its judgements and estimates regarding deferred tax assets and liabilities are appropriate, significant differences in actual results may materially affect the Company’s future financial results. The Company recognizes any uncertain income tax positions at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained . The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2025, and 2024, the Company did not record any accruals for interest and penalties. The Company does not foresee material changes to its uncertain tax positions within the next twelve months. The Company’s tax years remain subject to examination by tax authorities for U.S. federal income tax purposes beginning with the 2022 tax year and for state income tax purposes beginning with the 2021 tax year . Recently Issued Accounting Pronouncements In 2025, the FASB issued ASU 2025-05, which provides updated guidance on the accounting for internal-use software and cloud computing arrangements, including the capitalization and amortization of implementation costs. The Company does not develop internal-use software and primarily utilizes third-party hosted (SaaS) solutions. Accordingly, the adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-03 , Income Statement - Reporting Comprehensive Income - Expense Recognition Disclosures . This ASU will require entities to provide enhanced disclosures related to certain expense categories included in income statement captions. The ASU aims to increase transparency and provide investors with more detailed information about the nature of expenses reported on the face of the income statement. The new standard does not change the requirements for the presentation of expenses in the face of the income statement. Under this ASU, entities are required to disaggregate, in a tabular format, expense captions presented on the face of the income statement — excluding earnings or losses from equity method investments — if they include any of the following expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation or depletion. For any remaining items within each relevant expense caption, entities must provide a qualitative description of the nature of those expenses. The new ASU is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on the related disclosures. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures . In 2025, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis. The adoption impacted the presentation and disaggregation of income tax disclosures but did not affect the Company’s consolidated financial statements. Changes in valuation allowance reflect updates to the Company’s assessment of the realizability of deferred tax assets, primarily related to net operating losses. Income taxes paid represent cash payments made to taxing authorities, net of refunds received, during the period. Income taxes paid are disaggregated by federal, state, and foreign jurisdictions. The Company made income tax payments solely to jurisdictions in the United States during 2025, including California, Connecticut, Massachusetts, New Jersey, New York, Oregon and the District of Columbia. 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. 35 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) NOTE 4 – TRADE RECEIVABLES Contract receivables for the years ended December 31, 2025, and 2024 consist of the following: SCHEDULE OF CONTRACT RECEIVABLES 2025 2024 Accounts receivable, unfactored $ 979 $ 2,313 Unbilled receivables 127 97 Accounts receivable, factored 488 2,375 Total $ 1,594 $ 4,785 All the net trade receivables are pledged as collateral on a loan agreement. The unbilled receivables relate to services that were performed, and the related revenue was recognized but the Company has not invoiced for these services as of December 31, 2025. NOTE 5 – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment for the years ended December 31, 2025, and 2024 consist of the following: SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT 2025 2024 Office equipment $ 75 $ 76 Computer software 170 160 Property, plant and equipment, gross 245 236 Accumulated depreciation ( 205 ) ( 176 ) Property, plant and equipment, net $ 40 $ 60 NOTE 6 - ACCRUED EXPENSES Accrued expenses for the years ended December 31, 2025 and 2024 consist of the following: SCHEDULE OF ACCRUED EXPENSES 2025 2024 Accrued vendor costs $ 181 $ 155 Financed insurance payable 132 111 Other 10 22 Accrued expenses $ 323 $ 288 NOTE 7 - INCOME TAXES Income tax expense for the years ended December 31, 2025, and 2024 are comprised of the following: SCHEDULE OF INCOME TAX EXPENSE 2025 2024 Current federal income tax $ - $ - Current state income tax 14 - Deferred income tax - - Income tax expense $ 14 $ - Significant components of the Company’s deferred income tax assets (liabilities) are as follows at The Company has federal and state net operating loss carryforwards (“NOLs”) available to offset future taxable income. As of December 31, 2025, the Company had approximately $ 1,665 of total NOL carryforwards, consisting of $ 1,499 of federal NOLs and $ 166 of state NOLs. Federal NOLs generated in tax years beginning after December 31, 2017 do not expire but are subject to limitations on utilization. State NOLs may expire at various dates depending on the jurisdiction, if not utilized. The Company has not completed a formal analysis under Internal Revenue Code Section 382 to determine whether ownership changes have occurred that could limit the utilization of its NOL carryforwards. If such limitations apply, the amount of NOLs available to offset future taxable income could be significantly reduced. 36 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) SCHEDULE OF DEFERRED INCOME TAX ASSETS (LIABILITIES) 2025 2024 December 31, 2025 2024 Deferred tax assets (liabilities): Employee accruals $ 33 $ 39 Accrued workers’ compensation and other - 1 Federal and State net operating loss carry forwards 1,665 605 Other 1 1 Deferred tax liabilities: Intangibles 11 12 Fixed assets ( 2 ) ( 5 ) Deferred income taxes, net 1,708 653 Valuation allowance ( 1,708 ) ( 653 ) Deferred tax assets (liabilities) $ - $ - The income tax provision, reconciled to the tax computed at the statutory federal rate, is as follows: SCHEDULE OF INCOME TAX PROVISION, RECONCILED TO TAX COMPUTED AT STATUTORY FEDERAL RATE December 31, 2025 2024 Tax expense at federal statutory rate $ ( 158 ) 21.0 % $ ( 125 ) 21.0 % State income taxes, net 11 - 1.5 % ( 27 ) 4.6 % Permanent Differences 8 - 1.1 % 1 - 0.1 % Expired of NOL carryforwards 1,435 - 190.9 % - 0.0 % Prior year NOL true-up ( 2,336 ) 310.6 % 2 - 0.3 % Other deferred adjustments ( 4 ) 0.5 % - 0.0 % Change in valuation allowance 1,058 - 140.7 % 143 - 24.1 % Other, net - 0.0 % - 0.0 % Effect of deferred rate change - 0.0 % 6 - 1.1 % Income tax expense $ 14 - 2.1 % $ - 0.0 % Tax expense at federal statutory rate ( 21 %) NOTE 8 – TRANSFER OF FINANCIAL ASSETS During 2025, the Company entered into receivables purchase programs with JPMorgan (“JPM”) and Mitsubishi UFJ Financial Group (“MUFG”), under which certain eligible trade receivables may be transferred on a non-recourse basis, other than customary representations and warranties and limited breach-based repurchase obligations. The Company evaluated these transfers under ASC 860, Transfers and Servicing , and concluded that transfers under these programs are accounted for as sales when control over the receivables is surrendered. Accordingly, qualifying receivables are derecognized upon transfer, and the related discounts and fees are recognized as loss on sale of receivables in the consolidated statements of operations. Because the transferred receivables arise from the Company’s ordinary revenue-producing activities, cash proceeds from these transfers are classified within operating cash flows. During the year ended December 31, 2025, the Company sold $ 6,509 of receivables under the JPM program and $ 1,354 under the MUFG program and received cash proceeds of $ 6,455 and $ 1,211 , respectively. The Company recognized discounts and fees of $ 54 under the JPM program and $ 19 under the MUFG program, which were recorded as loss on sale of receivables during 2025 in other income (expense) on the accompanying consolidated statement of operations. The difference between the carrying value of receivables sold and the cash proceeds received, totaling $ 73 for the year ended December 31, 2025, represents non-cash adjustments included in net income for purposes of reconciling net loss to net cash provided by operating activities in the consolidated statement of cash flows. These amounts are added back in the operating section of the consolidated statement of cash flows. The Company did not retain servicing assets or liabilities, beneficial interests, derivatives, or other significant continuing involvement in the transferred receivables, and its exposure under customary representations and warranties and limited breach-based repurchase obligations was not material as of December 31, 2025. NOTE 9 – DEBT Factoring Facility - Gulf Coast Bank and Trust Company The Company maintains a factoring and security agreement with Gulf Coast Bank and Trust Company, which under their lending arm, Gulf Coast Business Credit (“Gulf”), provides for the sale of certain receivables with full recourse. Under this arrangement, the Company receives advances of up to 93 % of eligible receivables, with the remaining balance held as a reserve. The reserve is released as underlying customer payments are collected. Because the Company retains recourse under this arrangement, transfers of receivables are accounted for as secured borrowings rather than sales. Proceeds from the sale of receivables were $ 8,299 and $ 9,132 for the years ended December 31, 2025, and 2024, respectively. Repayments totaled $ 10,220 and $ 6,930 for the years ending December 31, 2025, and 2024, respectively. Thus, the total outstanding balance under the recourse contract was $ 455 and $ 2,375 as of December 31, 2025, and 2024, respectively. 37 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) Financing costs associated with this facility totaled $ 105 and $ 108 for the years ended December 31, 2025 and 2024 , respectively. NOTE 10 – COMMITMENTS AND CONTINGENCIES From time to time, the Company may become involved in various lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse outcome in these or other matters could arise that may have an adverse effect on the Company’s business, financial condition, or results of operations. Except as described below, the Company is not currently aware of any material pending legal proceedings. Vivos Group Arbitration and Judgments Beginning in March 2020, the Company and its subsidiary Maslow Media Group, Inc. (“MMG”) initiated legal proceedings against members of the Vivos Group related to breaches of the Merger Agreement and outstanding debt obligations owed to MMG. In the fall of 2021, the parties agreed to resolve the dispute through arbitration, and arbitration proceedings commenced in February 2022. On August 31, 2022, the arbitrator issued an award (the “Award”) in favor of the Company and MMG, including findings of fraud damages. Supplemental awards were subsequently issued on May 17, 2023, October 10, 2023, and October 27, 2023. In aggregate, the arbitration awards provided for recovery of amounts owed under promissory notes issued by members of the Vivos Group, accrued contractual interest, attorneys’ fees and expenses of $ 1,209 , and contract damages of $ 1,000 to be satisfied through the transfer of shares of the Company’s common stock previously issued to the Vivos Group in connection with the merger. The total value of the awards on December 31, 2025 aggregated $ 8,808 . The May 17, 2023, supplemental award also appointed a Receiver whose primary responsibility was to assist in the enforcement and collection of the arbitration awards, including recovery of amounts owed and related damages, costs, and fees. On December 29, 2023, the Circuit Court for Montgomery County, Maryland entered orders confirming the arbitration awards as judgments in favor of Reliability Incorporated. These judgments became final on January 29, 2024, after the expiration of the appeal period and are enforceable for a period of twelve years, subject to renewal and enforcement in other jurisdictions. Settlement Agreement On February 16, 2026, the Company entered into a settlement agreement with the Vivos Group to resolve the outstanding judgments and enforcement matters. Under the terms of the settlement agreement, the Vivos Group agreed to transfer to the Company certain shares of the Company’s common stock previously issued to them in connection with the merger. Upon completion of the transfers, the shares will be returned to the Company and recorded as treasury shares. The settlement agreement provided specified time periods for the execution and delivery of the required transfer documentation. If the required transfers were not completed within the agreed timeframes, the Company could pursue enforcement of the judgments and related remedies through the courts. In March 2026, the Company filed a motion with the court seeking entry of a consent judgment to effectuate the transfer of these shares through the Company’s transfer agent. As of the date of this filing, the transfer process has not yet been completed. Management expects that resolution of this matter, including completion of the settlement transfers or enforcement of the related judgments, will reduce legal and administrative costs in future periods. NOTE 11 - 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 12 - RELATED PARTY TRANSACTIONS Former Related Party Relationship Prior to and following the October 29, 2019 Merger, members of the Vivos Group were majority shareholders of the Company and were considered related parties. As of December 31, 2025, the Vivos Group remained related parties due to their ownership interests. 38 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) Related Party Notes Receivable The amounts due from the Vivos Group arose from acquisition-related borrowings and advances made prior to the October 29, 2019 merger. These borrowings consisted of several promissory notes and related advances associated with the Maslow Media acquisition structure. Following arbitration proceedings concluded in 2022 and supplemental awards issued in 2023, the outstanding balances, together with accrued interest and related obligations, were incorporated into the final arbitration awards and related court judgments. As of December 31, 2025, and 2024, the aggregate balance due from members of the Vivos Group totaled $ 6,357 and $ 5,847 , respectively. Interest accrues pursuant to the terms of the arbitration awards and related agreements. Management evaluates the collectability of these amounts on an ongoing basis. On February 16, 2026, the Company entered into a settlement agreement with the Vivos Group pursuant to which members of the Vivos Group agreed to transfer to the Company shares of the Company’s common stock in full satisfaction of the outstanding judgments and related obligations. The settlement occurred subsequent to December 31, 2025, and did not require adjustment to the Company’s consolidated financial statements as of that date. As of the date of issuance of these financial statements, the transfer of the shares is in process pursuant to the settlement agreement. NOTE 13 - EMPLOYEE BENEFIT PLAN The Company provides a defined contribution plan (the “401(k) Plan”) for the benefit of its eligible full-time employees. The 401(k) Plan allows employees to make contributions subject to applicable statutory limitations. The Company currently does not match employee contributions. NOTE 14 - BUSINESS SEGMENTS The Company operates within four industry segments: EOR, Staffing Solutions, Direct Hire, and Video and Multimedia Production. The EOR segment provides media field talent to a host of large corporate customers in all 50 states. The Staffing Solutions 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. 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. The following table provides a reconciliation of revenue and gross profit by reportable segment to consolidated results for the years indicated: Gross Profit Performance by Segment SCHEDULE OF GROSS PROFIT PERFORMANCE BY SEGMENT 2025 2024 Business Segment Revenue Gross Profit GM % Business Segment Revenue Gross Profit GM % EOR $ 16,400 1,933 11.8 % EOR $ 20,382 $ 2,445 12.0 % Staffing $ 4,072 935 23.0 % Staffing $ 3,301 $ 617 18.7 % Video Production $ 208 51 24.5 % Video Production $ 204 $ 40 19.1 % Direct Hire $ 37 33 89.2 % Direct Hire $ 95 $ 90 94.7 % Total $ 20,717 2,952 14.2 % Total $ 23,982 $ 3,192 13.3 % 39 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands) NOTE 15- SUBSEQUENT EVENTS The Company has evaluated subsequent events occurring after December 31, 2025 through March 31, 2026, the date the consolidated financial statements were issued. On February 16, 2026, the Company and its subsidiary Maslow Media Group, Inc. entered into a Settlement Agreement and General Mutual Release with Vivos Holdings, LLC, Vivos Real Estate Holdings, LLC, Naveen Doki, Silvija Valleru, Suresh Doki, Shirisha Janumpally (individually and as trustee of Judos Trust), Kalyan Pathuri (individually and as trustee of Igly Trust), and Federal Systems, LLC (collectively, the “Respondents”). Under the terms of the agreement, the Respondents agreed to transfer an aggregate of 253,292,210 shares of the Company’s common stock to the Company in full satisfaction of the monetary judgments and other claims arising from the previously disclosed arbitration and related court proceedings. The agreement required Respondents to complete the transfer of the shares through the Company’s transfer agent within twenty ( 20 ) days of execution of the agreement. Since the Respondents had not completed the required transfer of shares within the specified time period, pursuant to the terms of the settlement agreement, the Company filed a motion with the court seeking entry of a consent judgment to effectuate the transfer of these shares through the Company’s transfer agent. As of the date of this filing, the transfer process has not yet been completed. Once the transfer is completed, the shares are expected to be returned to the Company and recorded as treasury shares. The settlement occurred subsequent to December 31, 2025 and did not require adjustment to the Company’s consolidated financial statements as of that date. 40 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.