RELIABILITY INC 10-Q

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