RELIABILITY INC 10-Q

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.