RELIABILITY INC 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2026 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________to ____________. Commission File Number 0-7092 RELIABILITY INCORPORATED (Exact name of registrant as specified in its charter) texas 75-0868913 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 22505 Gateway Center Drive , P.O. Box 71 , Clarksburg , Maryland 20871 (Address of principal executive offices) (Zip Code) (202) 965-1100 (Registrant’s telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name each exchange on which registered Common Stock, no par value RLBY N/A The Company’s common stock is quoted on OTCID under the symbol ‘RLBY’ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YES ☐ NO Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ YES ☐ NO Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ YES ☒ NO Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 46,707,790 shares of Common Stock, no par value, as of August 14, 2026. RELIABILITY INCORPORATED Quarterly Report on Form 10-Q As of June 30, 2026 and for the Three and Six Months Ended June 30, 2026 INDEX PART I. FINANCIAL INFORMATION 3 Item 1. Financial Statements 3 Unaudited Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 3 Unaudited Condensed Consolidated Statements of Operations For the Three Months Ended June 30, 2026 and 2025 4 Unaudited Condensed Consolidated Statements of Operations For the Six Months Ended June 30, 2026 and 2025 5 Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity For the Three Months Ended June 30, 2026 and 2025 6 Unaudited Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2026 and 2025 7 Notes to Unaudited Consolidated Financial Statements 9-15 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16-20 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 Item 4. Controls and Procedures 20 PART II. OTHER INFORMATION 21 Item 1. Legal Proceedings 21 Item 1A. Risk Factors 21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Mine Safety Disclosures 23 Item 5. Other Information 23 Item 6. Exhibits 23 Signatures 24 Exhibits 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except share and per share data) June 30, December 31, 2026 2025 ASSETS CURRENT ASSETS Cash and cash equivalents $ 470 $ 483 Trade receivables, net of allowance for credit losses 1,759 1,467 Unbilled receivables 216 127 Other receivables 28 28 Notes receivable from related parties - 6,357 Prepaid expenses and other current assets 301 341 Total current assets 2,774 8,803 Other intangible assets, net 2 2 Property, plant and equipment, net 42 40 Total assets $ 2,818 $ 8,845 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Factoring liability $ 514 $ 455 Accounts payable 1,057 728 Accrued expenses 186 323 Accrued payroll 756 381 State income tax liability 3 - Deferred revenue 235 235 Notes payable, current 127 34 Total current liabilities 2,878 2,156 LONG-TERM LIABILITIES Notes payable, net of current 14 16 Total long-term liabilities 14 16 Total liabilities 2,892 2,172 Commitments and contingencies (Note 6) - - STOCKHOLDERS’ EQUITY Common stock, without par value, 300,000,000 shares authorized and issued; 46,707,790 and 300,000,000 shares outstanding as of June 30, 2026 and December 31, 2025, respectively - - Treasury stock, at cost, 253,292,210 shares as of June 30, 2026 ( 6,422 ) - Additional paid-in capital 750 750 Retained earnings 5,598 5,923 Total stockholders’ equity ( 74 ) 6,673 Total liabilities and stockholders’ equity $ 2,818 $ 8,845 The accompanying notes are an integral part of these statements. 3 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except share data and per share data) 2026 2025 For the Three Months Ended June 30, 2026 2025 Revenue earned Service revenue $ 5,017 4,718 Cost of revenue Cost of revenue 4,325 4,005 Gross profit 692 713 Selling, general, and administrative expenses 811 966 Operating loss ( 119 ) ( 253 ) Other Expenses Interest income from related parties 0 127 Interest income 1 1 Interest expense ( 23 ) ( 36 ) Other (expense) ( 58 ) ( 44 ) Loss before income tax (expense) benefit ( 199 ) ( 205 ) Income tax (expense) benefit ( 7 ) 0 Consolidated net loss $ ( 206 ) ( 205 ) Net loss per share: Basic $ ( 0.00 ) $ ( 0.00 ) Diluted $ ( 0.00 ) $ ( 0.00 ) Shares used in per share computation: Basic 49,522,148 300,000,000 Diluted 49,522,148 300,000,000 The accompanying notes are an integral part of these statements. 4 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except share data and per share data) 2026 2025 For the Six Months Ended June 30, 2026 2025 Revenue earned Service revenue $ 10,568 9,465 Cost of revenue Cost of revenue 9,106 8,110 Gross profit 1,462 1,355 Selling, general, and administrative expenses 1,666 1,989 Operating loss ( 204 ) ( 634 ) Other income (expense) Interest income from related parties 66 253 Interest income 1 1 Interest expense ( 44 ) ( 88 ) Expense ( 133 ) ( 70 ) Loss before income tax (expense) benefit ( 314 ) ( 538 ) Income tax (expense) benefit ( 11 ) 0 Consolidated net loss $ ( 325 ) ( 538 ) Net loss per share: Basic $ ( 0.00 ) $ ( 0.00 ) Diluted $ ( 0.00 ) $ ( 0.00 ) Shares used in per share computation: Basic 49,522,148 300,000,000 Diluted 49,522,148 300,000,000 The accompanying notes are an integral part of these statements. 5 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the Three Months Ended June 30, 2026 and 2025 (amounts in thousands, except share data and per share data) Shares Amount Capital Earnings Shares Amount Equity Common Stock Additional Paid-in Retained Treasury Stock Total Shares Amount Capital Earnings Shares Amount Equity Balance, December 31, 2025 300,000,000 $ - $ 750 $ 5,923 - $ - $ 6,673 Net loss - - - ( 119 ) - - ( 119 ) Balance, March 31, 2026 300,000,000 - 750 5,804 - - 6,554 Net loss - - - ( 206 ) - - ( 206 ) Treasury stock acquired in settlement of notes receivable ( 253,292,210 ) - - - 253,292,210 ( 6,422 ) ( 6,422 ) Balance, June 30, 2026 46,707,790 $ - $ 750 $ 5,598 253,292,210 $ ( 6,422 ) $ ( 74 ) 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 Balance 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 The accompanying notes are an integral part of these statements. 6 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands, except share data and per share data) 2026 2025 For the Six Months Ended June 30, 2026 2025 Cash flows from operating activities: Net loss $ ( 325 ) $ ( 538 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 11 16 Loss on receivable purchase agreements 60 - Loss on Disposal of fixed assets 3 - Accrued interest ( 66 ) ( 253 ) Changes in operating assets and liabilities: Trade receivables ( 441 ) 2,133 Other Receivables - ( 15 ) Prepaid expenses and other current assets 41 45 Accounts payable 329 ( 389 ) Accrued payroll 375 432 Accrued expenses ( 137 ) ( 160 ) Deferred revenue - 4 Income taxes payable 3 - Net cash provided by (used in) operating activities $ ( 147 ) $ 1,275 Cash flows from investing activities: Purchase of fixed assets $ ( 15 ) $ ( 11 ) Net cash provided by (used in) investing activities ( 15 ) ( 11 ) Cash flows from financing activities: Proceeds from the factoring facility 4,111 5,038 Repayments to the factoring facility ( 4,052 ) ( 6,586 ) Proceeds from issuing short-term debt 92 14 Proceeds from issuing long-term debt - 25 Repayment of long term debt ( 2 ) ( 15 ) Net cash provided by (used in) financing activities $ 149 ( 1,524 ) Net increase (decrease) in cash and cash equivalents ( 13 ) ( 260 ) Cash and cash equivalents, beginning of period 483 522 Cash and cash equivalents, end of period $ 470 $ 262 The accompanying notes are an integral part of these statements. 7 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (amounts in thousands) Supplemental disclosures of cash flow information: 2026 2025 For the Six Months Ended June 30, Supplemental disclosures of cash flow information: 2026 2025 Cash paid during the period for: Interest $ 44 $ 88 Income taxes $ 7 $ - Noncash settlement of related-party notes receivable through receipt of treasury shares $ 6,422 - 8 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2026 (amounts in thousands, except share data and per share data) NOTE 1. NATURE OF OPERATIONS Nature of Operations Reliability Incorporated operates through its wholly owned subsidiary, The Maslow Media Group, Inc. (“MMG” or “Maslow”) (collectively, the “Company,” “Reliability,” “we,” “our,” or “us”) as a workforce management solutions company providing specialized staffing, employer of record (“EOR”), managed services, video production staffing, and direct hire solutions. For more than 30 years, MMG primarily served the media and entertainment industries. Beginning in late 2019, the Company expanded its service offerings into broader professional staffing categories, including information technology, accounting and finance, human resources, administrative support, sales, and related professional services. The Company now services clients across a variety of industries throughout the United States. The Company currently operates across four principal business segments: Employer of Record (“EOR”), Staffing Solutions, Video and Multimedia Production Resources, and Direct Hire. EOR represented approximately 77.2% of consolidated revenue during the three months ended June 30, 2026 and 79.2% during the six months then ended. The Staffing Solutions segment provides skilled field talent on a nationwide basis for client partner projects, while Video Production supports specialized production crews and media-related staffing assignments that may range from short-duration projects to multi-month engagements. The Direct Hire segment focuses on permanent placement services and strategic recruiting assignments. In connection with the October 29, 2019 reverse merger transaction, the Company became involved in a series of disputes and arbitration proceedings with former controlling shareholders and related parties commonly referred to as the “Vivos Group.” Arbitration awards issued between 2022 and 2023, together with related court judgments and subsequent settlement agreements, resulted in the transfer of a substantial number of shares back to the Company and established certain monetary obligations owed by members of the Vivos Group. On February 16, 2026, the Company entered into a settlement agreement with certain members of the Vivos Group resolving various outstanding disputes and claims. The settlement resulted in 253,292,210 shares of the Company’s common stock being transferred to the Company on April 2, 2026, reducing the Company’s outstanding common shares to 46,707,790 as of that date. For accounting and presentation purposes, the returned shares were treated as treasury shares. NOTE 2. GOING CONCERN The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the six months ended June 30, 2026, the Company incurred a net loss of $ 325 . 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 expanded cost containment measures and operating expense reductions, re-financing, and discontinuing Receivables Purchase Program for higher cost Factoring, for cash flow purposes and other debt/equity structures. 9 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2026 (amounts in thousands, except share data and per share data) In connection with the return of approximately 84% of the Company’s previously outstanding common shares, management is 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. 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. However, these plans are not entirely within the Company’s control. Because 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 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. All dollar amounts presented in this Form 10-Q, unless otherwise specified, are expressed in thousands. The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with U.S. GAAP applicable to interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to Quarterly Reports on Form 10-Q. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations, changes in shareholders’ equity, and cash flows for the interim periods presented. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Interim operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2026. 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. 10 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2026 (amounts in thousands, except share data and per share data) Recently Issued Accounting Pronouncements Adopted In 2025, the FASB issued ASU 2025-05, which provides updated guidance related to the accounting for credit losses on accounts receivable and contract assets under Topic 326. The Company adopted ASU 2025-05 effective January 1, 2026; however, based on its existing receivables portfolio, historical collection experience, and current credit monitoring practices, the adoption did not have a material impact on the Company’s consolidated financial statements, other than the required enhanced disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted In 2025, the FASB issued ASU 2025-06, Internal-Use Software, which provides updated guidance related to the accounting for internal-use software and cloud computing arrangements, including the capitalization and amortization of certain implementation costs. The standard is effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual reporting periods, with early adoption permitted. The Company primarily utilizes third-party hosted software solutions and does not expect adoption of the standard to have a material impact on its consolidated financial statements. However, the Company continues to evaluate the potential impact of the standard on future software implementation costs and system customizations associated with potential growth initiatives. On November 4, 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) , which requires enhanced disclosures regarding certain expense captions presented in the income statement. The standard 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 that the adoption of this standard may have on its consolidated financial statement disclosures. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements . The amendments clarify the entities and interim reporting methods subject to Topic 270, consolidate and clarify interim disclosure requirements, and provide a principles-based framework for determining when disclosures about significant events and changes since the most recent annual reporting period are required. The amendments are effective for public business entities for interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of adopting this guidance but does not expect adoption to have a material effect on its consolidated financial statements or related disclosures. In December 2025, the FASB issued ASU 2025-12, Codification Improvements . The amendments clarify, correct and improve various provisions of the Accounting Standards Codification across a broad range of topics, including earnings per share, credit losses, treasury stock, debt, leases and transfers of financial assets. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. Early adoption is permitted, including adoption on an issue-by-issue basis. The Company is currently evaluating the effect of adopting the amendments, including those applicable to treasury-stock transactions, but does not expect adoption to have a material effect on its consolidated financial statements or related disclosures. The Company evaluated ASU 2025-07 through ASU 2025-10 and ASU 2026-01 through ASU 2026-02 and determined that these pronouncements are not applicable to the Company’s current operations. Accordingly, adoption of these pronouncements is not expected to have a material effect on the Company’s consolidated financial statements or related disclosures. 11 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2026 (amounts in thousands, except share data and per share data) NOTE 4. ACCOUNTS RECEIVABLE Accounts receivable consist of the following: SCHEDULE OF ACCOUNTS RECEIVABLE June 30, 2026 December 31, 2025 Accounts receivable, factored $ 610 $ 488 Accounts receivable, unfactored 1,149 979 Unbilled receivables 216 127 Total accounts receivable $ 1,975 $ 1,594 NOTE 5. DEBT AND TRANSFER OF FINANCIAL ASSETS Factoring Facility The Company is party to a factoring and security agreement with Gulf Coast Business Credit (“Gulf”) the accounts receivable finance and asset-based lending division of Gulf Coast Bank & Trust Company; which provides liquidity by enabling the Company to obtain advances against 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. Eligible receivables are assigned or pledged to Gulf as collateral on a full-recourse basis, meaning the Company retains the risk of collection. Accordingly, the factoring arrangement is accounted for as a secured borrowing under ASC 860, Transfers and Servicing . For the six months ended June 30, 2026, gross proceeds and repayments under the facility were $ 4,111 and $ 4,052 , respectively, compared with $ 5,038 and $ 6,586 , respectively, for the six months ended June 30, 2025. The outstanding factoring liability was $ 514 as of June 30, 2026 and $ 455 as of December 31, 2025. 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. 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 six months ended June 30, 2026, the Company sold $ 4,126 and $ 737 of receivables under the JPM and MUFG programs, respectively, and received cash proceeds of $ 4,077 and $ 725 , respectively. The Company recognized an aggregate of $ 60 in discounts and fees as loss on sale. Derecognized receivables outstanding at June 30, 2026 were $ 757 and $ 143 under the JPM and MUFG programs, respectively. No repurchases occurred. There was no activity under these programs during the six months ended June 30, 2025. 12 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2026 (amounts in thousands, except share data and per share data) Insurance Financing MMG also uses short-term, 10-month financing arrangements to fund annual premiums for crime, employment practices liability, errors and omissions, and directors and officers insurance. During the 2025–2026 policy period, MMG entered into two premium-financing arrangements totaling $ 140 , with aggregate finance charges of approximately $ 6 and a combined annual percentage rate of approximately 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 June 30, 2026, the aggregate current portion of these obligations was $ 17 , with the long-term portion totaling $ 14 . NOTE 6. COMMITMENTS AND CONTINGENCIES The Company is subject to legal proceedings and claims that arise in the ordinary course of business. Management does not believe that the resolution of any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations, or cash flows, except as described below. Vivos Group Settlement As previously disclosed, the Company and its subsidiary, MMG were involved in litigation and arbitration proceedings with certain former shareholders and related parties associated with the Vivos Group arising from the October 29, 2019 merger transaction and related promissory note obligations. During prior periods, the Company obtained arbitration awards and related court judgments in its favor, including amounts related to promissory notes, accrued interest, attorneys’ fees, expenses, and other damages. On February 16, 2026, the Company entered into a settlement agreement with the Vivos Group to resolve the outstanding judgments and related enforcement matters. Pursuant to the settlement agreement and related consent judgment entered by the Circuit Court for Montgomery County, Maryland, the Vivos Group agreed to transfer an aggregate of 253,292,210 shares of the Company’s common stock to the Company. On April 7, 2026, the Company was notified by Equiniti Shareholder Services, LLC, its transfer agent, that the transfers were completed and effective as of April 2, 2026. The settlement created 253.3 million treasury shares that may be available for potential reissuance, subject to board approval, applicable law and any other required approvals. As of June 30, 2026, 300,000,000 shares of the Company’s common stock were issued, of which 46,707,790 shares were outstanding and 253,292,210 shares were held as treasury stock following completion of the settlement described above. NOTE 7. EQUITY The Company’s authorized capital stock consists of 300,000,000 shares of common stock, with no par value. As of June 30, 2026, 300,000,000 shares were issued, 46,707,790 shares were outstanding, and 253,292,210 shares were held as treasury stock. The treasury shares received in the Vivos settlement were recorded at $ 6,422 , corresponding to the carrying amount of the related-party notes receivable satisfied in the transaction. 13 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2026 (amounts in thousands, except share data and per share data) NOTE 8 – RELATED PARTY TRANSACTIONS During June 2026, an officer advanced a board approved $ 110 to the Company for working capital purposes. The advance is unsecured, bears interest at the prime interest rate per annum, and matures within 90 days. The amount remained outstanding as of June 30, 2026 and is included in Notes payable, current on the accompanying condensed consolidated balance sheet. 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. Upon completion of the settlement and share transfer described below, the Vivos Group ceased to hold an ownership interest in the Company and was no longer considered a related party as of June 30, 2026. Related Party Notes Receivable Amounts due from the Vivos Group arose from acquisition-related borrowings and advances made prior to the October 29, 2019 merger. These borrowings consisted primarily of 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. The amount due from members of the Vivos Group was $ 6,357 as of December 31, 2025. Including interest recognized through the settlement date, the carrying amount satisfied through the April 2, 2026 share transfer was $ 6,422 . Accordingly, no related-party notes receivable remained outstanding as of June 30, 2026. Settlement and Share Transfer 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 settlement of the outstanding judgments and related obligations. On April 2, 2026, pursuant to a consent judgment entered by the Circuit Court for Montgomery County, Maryland, an aggregate of 253,292,210 shares of the Company’s common stock were transferred to the Company. On April 7, 2026, the Company was notified by Equiniti Shareholder Services, LLC, its transfer agent, that the transfers were completed and effective as of April 2, 2026. As a result of the settlement and share transfer completed effective April 2, 2026, obligations owed by the Vivos Group, including amounts previously reflected as related-party notes receivable, were satisfied in full. The Company derecognized the $ 6,422 carrying amount of the notes receivable and recognized treasury stock in the same amount. The transaction was noncash. Following completion of the transaction, the Vivos Group no longer held an ownership interest in the Company and ceased to be considered a related party, and the transferred shares were no longer outstanding. 14 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2026 (amounts in thousands, except share data and per share data) NOTE 9. BUSINESS SEGMENTS The Company operates within four industry segments: Employer of Record (“EOR”), Recruiting and Staffing (“Staffing”), Direct Hire, and Video and Multimedia Production (“Video Production”). The EOR segment provides media field talent to a host of large corporate customers in all 50 states. The 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 Production segment provides script-to-screen services for corporate, government, and non-profit clients, globally. Segment revenue and gross profit are the measures regularly provided to and reviewed by the Company’s executive management team, consisting of the Chief Financial Officer and the Vice President of Human Resources, who also serves as Acting Principal Officer. These officers jointly perform the function of the chief operating decision maker (“CODM”). Segment gross profit is defined as segment revenue less cost of revenue. Cost of revenue is the only significant segment expense regularly provided to the CODM. There were no other segment items for any reportable segment during the periods presented. Interest income, interest expense, depreciation expense, other income and expense, income tax expense, and selling, general and administrative expenses are not allocated to or included in the results of the reportable segments. The CODM reviews segment revenue and gross profit to assess performance and inform resource-allocation decisions. Personnel resources, including recruiter staffing levels, are allocated based on multiple factors, including current and anticipated requisition demand, client requirements and overall business needs, and are not determined solely by historical segment results. Asset information by reportable segment is not regularly provided to or reviewed by the CODM. The following tables present revenue and gross profit by reportable segment for the three and six-month periods ended June 30, 2026 and 2025 and reconcile the segment measures to consolidated results. For the three months ended June 30, 2026, consolidated results include a $ 1 revenue reconciling item and a $ 1 reduction to gross profit relative to the sum of the reportable segments. For the six months ended June 30, 2026, consolidated gross profit includes a $ 1 reduction relative to the sum of the reportable segments. These differences reflect rounding and general-ledger reconciling items. Gross Profit Performance by Segment SCHEDULE OF GROSS PROFIT PERFORMANCE BY SEGMENT For the Three Months Ended June 30: June 30, 2026 June 30, 2025 Business Segment Revenue Gross Profit GM % Business Segment Revenue Gross Profit GM % EOR $ 3,873 $ 401 10.4 % EOR $ 3,573 $ 442 12.4 % Staffing $ 1,092 $ 280 25.6 % Staffing $ 1,098 $ 252 23.0 % Video Production $ 52 $ 11 21.2 % Video Production $ 34 $ 8 23.5 % Direct Hire $ - $ - - % Direct Hire $ 13 $ 11 84.6 % Total $ 5,017 $ 692 13.8 % Total $ 4,718 $ 713 15.1 % For the Six Months Ended June 30: June 30, 2026 June 30, 2025 Business Segment Revenue Gross Profit GM % Business Segment Revenue Gross Profit GM % EOR $ 8,368 $ 883 10.6 % EOR $ 7,328 $ 894 12.2 % Staffing $ 2,089 $ 550 26.3 % Staffing $ 2,030 $ 419 20.6 % Video Production $ 111 $ 29 26.1 % Video Production $ 84 $ 21 25.0 % Direct Hire $ - $ - - % Direct Hire $ 23 $ 21 91.3 % Total $ 10,568 $ 1,462 13.8 % Total $ 9,465 $ 1,355 14.3 % NOTE 10. SUBSEQUENT EVENTS The Company evaluated subsequent events through August 14, 2026, the date these unaudited condensed consolidated financial statements were issued. 15 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This section includes several forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current views with respect to future events and financial performance. All statements that address expectations or projections about the future, including, but not limited to, statements about our plans, strategies, adequacy of resources and future financial results (such as revenue, gross profit, operating profit, cash flow), are forward-looking statements. Some of the forward-looking statements can be identified by words like “anticipates,” “believes,” “expects,” “may,” “will,” “can,” “could,” “should,” “intends,” “project,” “predict,” “plans,” “estimates,” “goal,” “target,” “possible,” “potential,” “would,” “seek,” and similar references to future periods. These statements are not a guarantee of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: our ability to access the capital markets by pursuing additional debt and equity financing to fund our business plan and expenses; negative outcome of pending and future claims and litigation and our ability to comply with our contractual covenants, including in respect of our debt; potential loss of clients and possible rejection of our business model and/or sales methods; weakness in general economic conditions and levels of capital spending by customers in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our customers’ projects or the inability of our customers to pay our fees; delays or reductions in U.S. government spending; credit risks associated with our customers; competitive market pressures; the availability and cost of qualified labor; our level of success in attracting, training and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations, including the impact of health care reform laws and regulations; the possibility of incurring liability for our business activities, including, but not limited to, the activities of our temporary employees; our performance on customer contracts; and government policies, legislation or judicial decisions adverse to our businesses. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We assume no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required by law. We recommend readers to carefully review the entirety of this Quarterly Report, the “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, and the other reports and documents we file from time to time with the Securities and Exchange Commission (“SEC”), particularly our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. The following discussion and analysis of our financial condition and results of operations, our expectations regarding the future performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors including those described in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, with the SEC. Our actual results may differ materially from those contained in any forward-looking statements. You should read the following discussion together with our financial statements and related notes thereto and other financial information included in this Quarterly Report on Form 10-Q. CRITICAL ACCOUNTING POLICIES AND COMMENTS RELATED TO OPERATIONS This discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates are based on historical experience and other factors believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. 16 There have been no material changes or developments in the Company’s evaluation of its critical accounting policies and estimates from those disclosed in the Form 10-K for the year ended December 31, 2025. Management’s Discussion and Analysis included in the Form 10-K discusses various factors and trends relating to the Company’s results of operations, liquidity and capital resources. Many of those factors and trends remained relevant during the three and six months ended June 30, 2026. Accordingly, this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2025. RESULTS OF OPERATIONS Revenues Revenue for the three months ended June 30, 2026 was $5,017, an increase of $299, or 6.3%, compared with $4,718 for the three months ended June 30, 2025. For the six months ended June 30, 2026, revenue increased $1,103, or 11.7% to $10,568 from $9,465 in the comparable 2025 period. For the second quarter, EOR revenue increased $300, or 8.4%, to $3,873 from $3,573 in the prior-year quarter. For the six-month period, EOR revenue increased $1,040, or 14.2%, to $8,378 from $7,328. The growth was concentrated in lower-margin EOR activity, including increased 1099 EOR volume. Staffing revenue decreased $6, or 0.5%, to $1,092 from $1,098 in the prior-year quarter. For the six-month period, Staffing revenue increased $59, or 2.9%, to $2,089 from $2,030. Video Production revenue increased $18, or 52.9%, to $52 from $34 in the prior-year quarter and increased $27, or 32.1%, to $111 from $84 for the six-month period. Direct Hire generated no revenue during the three or six months ended June 30, 2026, compared with $13 and $23 during the respective 2025 periods. Cost of Revenue / Gross Profit Three Months Ended June 30, 2026 vs. 2025 Gross profit for the three months ended June 30, 2026 decreased $21, or 2.9%, to $692 from $713, while gross margin declined 130 basis points to 13.8% from 15.1%. Although revenue increased, the revenue mix shifted toward lower-margin EOR business, particularly 1099 activity, which more than offset margin contributions from higher-margin EOR w2 and Staffing services. EOR gross profit declined by $41, or 9.3%, to $402 from $440 in the prior-year quarter, while gross margin declined to 10.4% from 12.3%, primarily reflecting higher benefit utilization and other employment-related costs. Staffing improved in both profit and margin with gross profit increasing $28, or 11.1%, to $280 from $252 in the prior-year quarter, while quarterly Staffing gross margin advanced to 25.6% from 23.0%. Video Production gross profit increased $3 to $11 from $8 in the prior-year quarter, while gross margin declined to 21.2% from 23.5%. Six Months Ended June 30, 2026 vs. 2025 For the six months ended June 30, 2026, gross profit increased $107, or 7.9%, to $1,462 from $1,355; however, gross margin declined approximately 50 basis points to 13.8% from 14.3%. EOR represented a greater proportion of consolidated revenue however its margin declined as w2 margins were negatively impacted by higher benefit, workers compensation and leave costs.,. For the six-month period, EOR gross profit declined by $11, or 1.2%, to $883 from $894, while EOR gross margin declined to 10.6% from 12.2%. The margin compression reflected both a higher concentration of lower-margin 1099 activity and volume-pricing structures associated with certain larger client engagements, and w2 compression caused by higher benefit utilization. Staffing gross profit increased $131, or 31.3%, to $550 from $419, while gross margin improved to 26.3% from 20.6%, reflecting stronger performance and higher-margin managed-service arrangements. For the six-month period, Video Production gross profit increased by $8 to $29 from $21 and gross margin improved to 26.1% from 25.0%. 17 General and Administrative (“G&A”) Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2026 were $811, a decrease of $155, or 16.0%, compared with $966 in the same period of 2025. For the six-month period, SG&A decreased $323, or 16.2%, to $1,666 from $1,989. These reductions reflect cost-containment measures implemented during the second half of 2025 and second quarter 2026 resulting in lower recurring costs. Staff salaries and related benefit costs decreased approximately $133 during the quarter and $325 for the six-month period. Quarterly office payroll decreased approximately $128, with additional reductions in payroll taxes and benefits, partially offset by accrued leave expense and HRA contributions. Non-salary costs were down year over by $24 for the second quarter as savings were realized in legal fees, business insurance, payroll processing, communications, marketing and other administrative costs. These reductions were partially offset by an increase of approximately $27 in quarterly contract-services expense, principally reflecting the Company’s use of outsourced accounting resources following internal workforce reductions. Loaded salaries accounted for $325 (23.1%) of the savings, while non-salary expenses were reduced by $35. The paradigm was the same as far as where savings and increases lie, with contract services growing the most by $55, with approximately $57 of the increase in outsourced accounting services. Interest Expense Interest expense for the three months ended June 30, 2026 was $23, compared with $36 in the same period of 2025. For the six-month period, interest expense decreased to $44 from $88. The decreases reflected greater use of lower-cost receivables purchase programs, reduced reliance on traditional factoring for eligible receivables, and lower market interest rates. For the six months ended June 30, 2026, related-party interest income declined to $66 from $253, interest expense decreased to $44 from $88, and other expense increased to $136 from $70. Other income was $3 compared with $1 in 2025. The Company continued to use its receivables purchase programs to reduce the amount and duration of traditional factoring borrowings. Other Income (Expense) For the three months ended June 30, 2026, other income (credit card rebate) was $3 and other expense was $61 compared with no other income and other expense of $44 in the prior-year quarter. Loss on sales of receivables represented $27 of the $61. Related-party interest income decreased to zero from $127 following completion of the Vivos settlement. Including interest income and interest expense, total other expense, net, was $80 in the 2026 quarter, compared with total other income, net, of $48 in 2025. For the six months ended June 30, 2026, Other Expense totaled $136 which was $66 higher than $70 in same period a year ago, as legal fees concluding the Vivos Matter and $60 in l oss on receivable purchase agreements which were not in place a year ago. Operating Loss Operating loss improved by $134 to $119 for the second quarter of 2026 from $253 in the prior-year quarter. However, because of the loss of related-party interest income following the Vivos settlement and higher other expense, net loss was $206 compared with $205. For the six-month period, operating loss improved by $430 or 67.8% to $204 from $634 and net loss improved by $213 or 39.6% to $325 from $538. The settlement and related share transfer were completed during the second quarter of 2026. Although the Company incurred residual and other legal costs during the quarter, management expects expenses directly associated with enforcement of the Vivos awards and settlement to substantially conclude, apart from immaterial administrative or wind-down matters. LIQUIDITY AND CAPITAL RESOURCES Our working capital requirements are driven primarily by payroll for Employer of Record (“EOR”) field talent, corporate salaries, public-company costs, interest on financing arrangements, and the timing of collections on client accounts receivable. Enforcement activity related to the Vivos awards concluded following the settlement and share transfer completed in April 2026, although residual legal costs were incurred during the quarter. Because client payments, on average, lag field-talent payroll by approximately 60 days before considering receivables purchase programs, working capital demands can fluctuate and periodically create short-term liquidity pressure. 18 Due to the nature of our EOR business, where most contracted talent are W-2 employees paid known amounts on varying schedules, cash inflows from clients often do not align with required payroll disbursements. This mismatch necessitates our use of factoring and receivables financing to ensure timely fulfillment of payroll and other obligations. Our principal sources of liquidity include cash generated from operations via accounts receivable collections, borrowings under our Factoring Facility with Gulf, and two separate receivables purchase arrangements. These arrangements function similarly to factoring but operate through supplier payment programs facilitated by client-affiliated financial institutions. Our primary uses of cash include payments to field talent, corporate and staff employee payroll and related liabilities, operating expenses, public company costs (including D&O and general liability insurance premiums, SEC filing and audit fees, legal and professional services, stock transfer agent costs, and board compensation), as well as factoring and borrowing-related interest, taxes, and debt service. Several larger clients previously extended payment terms from approximately 30 days to between 60 and 90 days, increasing working capital demands and lengthening the Company’s cash conversion cycle. To mitigate the impact of these extended payment terms, the Company utilized lower cost receivables purchase programs with MUFG and JPMorgan, in addition to its factoring facility and client prepayment arrangements, which currently average approximately $25 biweekly. Collectively, these programs materially improved liquidity and accelerated cash conversion. As a result, trailing twelve months Days Sales Outstanding (DSO) improved from 51 days at the end of June 2025 to 22 days by June 30, 2026. Receivables Financing and Factoring Arrangements The Company maintains a receivables factoring facility with Gulf to provide working capital liquidity. Under this arrangement, eligible invoices are sold or advanced at a specified percentage of face value, with fees based on advance rates and interest spreads above prime. Factoring provides immediate liquidity but requires settlement upon ultimate client payment, and the effective cost of capital is influenced by client payment timing. In 2025, the Company also began utilizing receivables purchase programs administered by JPMorgan (“JPM”) and MUFG Bank Ltd. (“MUFG”) for certain invoices related to a large enterprise client. Under the JPM arrangement, invoices are purchased at a discount based on a rate of approximately 80 basis points over SOFR for the expected collection period, typically ranging from 100 to 105 days. During the six months ended June 30, 2026, the applicable SOFR rate averaged approximately 3.62%, resulting in an average annualized rate of approximately 4.42%. Under the MUFG arrangement, invoices are purchased at a discount based on a rate of approximately 235 basis points over SOFR for an expected collection period of approximately 60 days. During the six months ended June 30, 2026, the applicable SOFR rate averaged approximately 3.62%, resulting in an average annualized rate of approximately 5.97%. Compared to traditional factoring, both the JPM and MUFG programs provide a lower cost of capital for these receivables but typically result in funding within five to ten days after invoice approval rather than immediate advance. The Company evaluates funding alternatives based on cost of capital, timing requirements, and concentration exposure. 19 Trade Receivables As of June 30, 2026, 95.0% of accounts receivable were current compared to 96.8% a year earlier. Invoices aged 60 days or more represent 1.0% of our accounts receivable on June 30, 2026 compared to 3.2% a year ago. Our long-term credit performance remains strong, with total bad debt over the past seven years amounting to just $2. Capital Structure and Strategic Flexibility Following the MMG–Reliability merger, all 300 million authorized shares of the Company’s common stock had been issued in connection with the transaction and related matters. Effective April 2, 2026, pursuant to the previously disclosed settlement with the Vivos Group, 253,292,210 shares of the Company’s common stock were transferred to the Company. On April 7, 2026, the Company was notified by Equiniti Shareholder Services, LLC, its transfer agent, that the transfers had been completed effective April 2, 2026. Following the transfer, the shares were no longer outstanding. The reduction in outstanding shares provides the Company with increased flexibility to pursue future capital raising activities, mergers and acquisitions, investments in business development and technology infrastructure, other strategic transactions and growth-oriented initiatives, and general working capital purposes. As of June 30, 2026, the Company had cash of $470 and a working-capital deficit of $104, compared with working capital of $6,647 as of December 31, 2025. The decline in reported working capital primarily reflects the noncash settlement of $6,422 of related-party notes receivable. The Company’s liquidity position, however, was also adversely affected by $147 of cash used in operating activities during the six months ended June 30, 2026, together with the timing of accounts payable, accrued payroll and factoring obligations. During June 2026, the Company also received a board approved $110 unsecured advance from an officer to support short-term working-capital requirements. The Company continues to manage its liquidity through the collection of accounts receivable, availability under its factoring arrangement, management of operating expenditures and evaluation of additional financing alternatives. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures . The Acting Principal Officer and Chief Financial Officer evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Acting Principal Officer and Chief Financial Officer concluded that the disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Acting Principal Officer and Chief Financial Officer to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. (b) Changes in Internal Control over Financial Reporting . There were no changes in the Company’s internal controls over financial reporting, known to the Acting Principal Officer and Chief Financial Officer that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 20 RELIABILITY INC. OTHER INFORMATION June 30, 2026 PART II - OTHER INFORMATION Item 1. Legal Proceedings From time to time, the Company may become involved in lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse outcome could have a material effect on the Company’s business, financial condition, or results of operations. Except as described below, the Company is not currently a party to any material legal proceedings. Vivos Arbitration and Related Matters Beginning in March 2020, the Company and its wholly owned subsidiary, MMG, initiated legal actions against certain former shareholders and related parties (collectively, the “Vivos Group”) arising from alleged violations of the merger agreement and defaults under related party debt obligations. In the fall of 2021, the parties agreed to binding arbitration. Proceedings commenced in February 2022. On August 31, 2022, the arbitrator issued an award in favor of the Company and MMG. Supplemental awards were subsequently issued on May 17, 2023, October 10, 2023, and October 27, 2023 (collectively, the “Awards”). Under the Awards, MMG was granted recovery of outstanding related party indebtedness, contractual interest, attorneys’ fees and expenses of approximately $1,209, and fraud damages of $1,000, portions of which were to be satisfied through the transfer of shares of the Company’s common stock to the Company. The gross aggregate amount of the Awards totaled approximately $8,808 as of December 31, 2025. On December 29, 2023, the Circuit Court for Montgomery County, Maryland entered the Awards as judgments. The judgments became final on January 29, 2024. In February 2026, the Company entered into a settlement agreement with members of the Vivos Group providing for the transfer of an aggregate of 253,292,210 shares of the Company’s common stock to the Company in satisfaction of amounts owed under the awards. The difference between the aggregate Awards and the recorded receivable reflects amounts not recognized due to collectability considerations. The $6,422 carrying amount of the related-party notes receivable was satisfied in full through the April 2, 2026 share transfer. Accordingly, no balance due from the Vivos Group remained as of June 30, 2026. On April 2, 2026, pursuant to a consent judgment entered by the Circuit Court for Montgomery County, Maryland, an aggregate of 253,292,210 shares of the Company’s common stock were transferred to the Company. On April 7, 2026, the Company was notified by Equiniti Shareholder Services, LLC, its transfer agent, that the transfers had been completed effective April 2, 2026. Following the transfer, these shares were no longer outstanding. Item 1A. Risk Factors In addition to the other information set forth in this Quarterly Report, shareholders should carefully consider the factors discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. 21 Our capital structure, including the substantial increase in shares available for future issuance following the return of shares to the Company, and potential future issuances of shares could dilute existing shareholders and adversely affect the market price of our common stock. We may seek to raise capital, pursue acquisitions, recapitalize the Company, or fund strategic initiatives through the issuance of equity securities, including shares available for future issuance following the return of shares to the Company, or through the issuance of convertible securities or warrants. The sale or issuance of a substantial number of shares of common stock, or the perception that such sales may occur, could adversely affect the market price of our common stock and increase volatility. Any such issuance would dilute existing shareholders and could reduce earnings per share or voting power. In addition, the substantial increase in shares available for future issuance following the share transfer may create an overhang that could negatively impact investor perception or market pricing. Changes in federal government spending priorities and operational directives may adversely affect our business. A portion of our revenue is derived from contracts with U.S. federal government agencies. Periodic budget reviews, cost-reduction initiatives, spending reallocations, hiring freezes, or other efficiency directives affecting federal agencies may result in reductions or delays in client spending on outsourced services, including media-related staffing and production support. While the Company does not believe any specific reductions experienced to date have had a material impact on its consolidated financial statements, broader federal spending constraints or operational restructuring initiatives could reduce demand for the Company’s services within the public sector. In addition, uncertainty surrounding the timing and scope of such governmental actions may increase the difficulty of forecasting client demand and strategic planning. Our business may be indirectly affected by the imposition of tariffs or other trade restrictions that impact our clients’ operations and profitability. While our core operations are not directly exposed to international trade or tariff risk, a significant portion of our revenue is derived from media services provided to clients across various industries, some of which rely on global supply chains or imported goods. The imposition or escalation of tariffs, trade barriers, or similar regulatory actions, particularly those affecting cost of revenue to our clients, may reduce their gross margins and overall profitability. In response, clients may reduce discretionary expenditures, including advertising and media budgets, which could negatively impact our revenues and financial performance. Even perceived uncertainty around future trade policy could lead to more conservative client behavior, affecting campaign timing, spend, or scope. Our business may be impacted by reductions in federal funding to client programs. Several of our clients receive federal funding to support their operations. We have already experienced one instance in which a client significantly reduced media spend following the cessation of federal funds. Continued or expanded cuts in federal funding may similarly affect other client budgets and, in turn, our revenue. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. 22 Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information During the three months ended June 30, 2026, no director or officer of the Company adopted , modified , or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement, as defined in Item 408(a) of Regulation S-K. Item 6. Exhibits : The following exhibits are filed as part of this report: 31.1 Acting Principal Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934. 31.2 Chief Financial Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934. 32.1 Acting Principal and CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, (iv) the Statements of Changes in Stockholders’ Equity and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail (XBRL). 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RELIABILITY INCORPORATED (Registrant) August 14, 2026 /s/ John Pickeral Acting Principal Officer /s/ Mark R. Speck Secretary and Chief Financial Officer 24