RELIABILITY INC 10-Q

Item 1. Financial Statements RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share data) March 31, December 31, 2025 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 264 $ 522 Trade receivables, net of allowance for credit losses 3,264 4,785 Other receivables - 4 Notes receivable from related parties 5,973 5,847 Prepaid expenses and other current assets 360 336 Total current assets 9,861 11,494 Other intangible assets, net 2 2 Property, plant and equipment, net 51 60 Total assets $ 9,914 $ 11,556 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Factoring liability $ 1,163 $ 2,375 Accounts payable 537 734 Accrued expenses 240 288 Accrued payroll 720 568 Deferred revenue 210 207 Note payable, current 25 26 Total current liabilities 2,895 4,198 LONG-TERM LIABILITIES Note payable, net of current 15 21 Total long-term liabilities 15 21 Total liabilities 2,910 4,219 Commitment and contingencies (Note 6) - - STOCKHOLDERS’ EQUITY Common stock, without par value, 300,000,000 shares authorized, 300,000,000 issued and outstanding as of March 31, 2025 and December 31, 2024 - - Additional paid-in capital 750 750 Retained earnings 6,254 6,587 Total stockholders’ equity 7,004 7,337 Total liabilities and stockholders’ equity $ 9,914 $ 11,556 The accompanying notes are an integral part of these financial statements. 3 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) For the Three Months Ended March 31, 2025 2024 Revenue earned Service revenue $ 4,746 5,295 Cost of revenue Cost of revenue 4,105 4,586 Gross profit 641 709 Selling, general, and administrative expenses 1,023 947 Operating loss ( 382 ) ( 238 ) Other income (expense) Interest income from related parties 126 70 Interest income 1 15 Interest expense ( 52 ) ( 16 ) Other income (expense) ( 26 ) ( 93 ) Loss before income tax (expense) benefit ( 333 ) ( 262 ) Income tax (expense) benefit - 130 Consolidated net loss $ ( 333 ) ( 132 ) Net loss per share: Basic $ 0.00 $ 0.00 Diluted $ 0.00 $ 0.00 Share used in per share computation: Basic 300,000,000 300,000,000 Diluted 300,000,000 300,000,000 The accompanying notes are an integral part of these statements. 4 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the three Months Ended March 31, 2025 and 2024 (amounts in thousands, except per share data) Additional Common Stock Paid-in Retained Total Shares Amount Capital Earnings Equity Balance, December 31, 2023 300,000,000 $ - $ 750 $ 7,181 $ 7,931 Net loss - - - ( 132 ) ( 132 ) Balance, March 31, 2024 300,000,000 $ - $ 750 $ 7,049 $ 7,799 Balance, December 31, 2024 300,000,000 $ - $ 750 $ 6,587 $ 7,337 Balance 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 The accompanying notes are an integral part of these statements. 5 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) For the Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 333 ) $ ( 132 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 8 2 Accrued interest ( 126 ) ( 70 ) Changes in operating assets and liabilities: Trade receivables 1,524 ( 54 ) Retention credit receivable - ( 10 ) Other receivables - ( 269 ) Prepaid expenses and other current assets ( 24 ) 163 Accounts payable ( 197 ) 44 Accrued payroll 153 8 Accrued expenses ( 47 ) ( 5 ) Deferred revenue 1 11 Income taxes payable - - Net cash provided by (used in) operating activities 959 ( 312 ) Cash flows from investing activities: Purchase of fixed assets 1 - Net cash provided by (used in) investing activities 1 - Cash flows from financing activities: Proceeds from the factoring facility 2,222 ( 25 ) Repayments to the factoring facility ( 3,434 ) - Repayment of note payable ( 6 ) - Net cash used in financing activities ( 1,218 ) ( 25 ) Net decrease in cash and cash equivalents ( 258 ) ( 337 ) Cash and cash equivalents, beginning of period 522 822 Cash and cash equivalents, end of period $ 264 $ 485 The accompanying notes are an integral part of these statements. 6 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (amounts in thousands) For the Three Months Ended March 31, Supplemental disclosures of cash flow information: 2025 2024 Cash paid during the year for: Interest $ 52 $ 16 Income taxes $ - $ ( 130 ) 7 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025 (amounts in thousands, except per share data) NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION Nature of Operations Reliability, Inc. is a leading provider of Employer of Record and temporary Media and Information Technology (“IT”) staffing services that operates, along with its wholly owned subsidiary, The Maslow Media Group, Inc (“MMG”), (collectively, “Reliability” or the “Company”), primarily within the United States of America in four industry segments: Employer of Record (“EOR”), Recruiting and Staffing, Direct Hire, and Video and Multimedia Production, which provides script-to-screen services. Our Staffing segment provides skilled field talent on a nationwide basis for Media, IT, and finance and accounting client partner projects. Video Production involves assembling and providing crews for special projects, webcasting, live events, post-production services, and production management. Reliability was incorporated under the laws of the State of Texas in 1953, but the then principal business of the Company started in 1971 was closed down in 2007. The Company completed a reverse merger with MMG (the “Merger”) on October 29, 2019. Company Background Linda Maslow founded MMG initially in 1988 and incorporated the firm under the name The Maslow Media Group Inc. in March 1992. On November 9, 2016, Linda Maslow sold the business to Vivos Holdings, LLC (“Vivos Holdings”) owned by Dr. Naveen Doki (“Dr. Doki”) and Silvija Valleru (“Ms. Valleru”). In 2019, Vivos Holdings collaborated on a share swap of MMG for other Vivos companies with individuals who included, but were not limited to, Dr. Doki, Shirisha Janumpally (“Mrs. Janumpally”), wife of Dr. Doki, Kalyan Pathuri (“Mr. Pathuri”) husband of Silvija Valleru, Igly Trust, and Judos Trust. These parties also have common ownership combinations in a number of other entities: Vivos Holdings, LLC, Vivos Real Estate Holdings, LLC (“VREH”), Vivos Holdings, Inc., Vivos Group, Vivos Acquisitions, LLC, and Federal Systems, LLC, (collectively referred to herein as “Vivos Group”). As a result of the Merger, on October 29, 2019, MMG became a wholly owned subsidiary of Reliability, and the Vivos Group (Vivos Holdings, LLC, officially) acquired approximately 84 % of the issued and outstanding shares of Reliability which were distributed by Vivos Holdings, LLC. Upon purchasing MMG and thereafter, the Vivos Group began borrowing monies from MMG starting with $ 1,400 in 2016, and by the end of 2019 the balance had reached $ 3,418 , which included a $ 3,000 guarantee from Dr. Doki. Vivos Holdings, LLC, Vivos Real Estate Holdings, LLC, and Dr. Doki are collectively referred to as “Vivos Debtors.” Additionally, Reliability became aware of debt obligations that included MMG as a borrower or guarantor that the Vivos Group failed to disclose to Reliability. This and the attempted collection of the guarantee and debt from the Vivos Group set off a chain of legal events culminating in an arbitration hearing and award in 2022. We refer below to the disputes between Reliability and the Vivos Group as the “Vivos Matter.” A series of legal actions and hearings took place starting in March of 2020 through September of 2021, culminating in an agreement to settle through arbitration. On August 31, 2022, the arbitrator issued an award (the “Award”) with the Company and MMG prevailing on their claims. The awards included citing fraud damages. Supplemental awards were subsequently issued on May 17, 2023, October 10, 2023, and finally, on October 27, 2023. Summarily, MMG was awarded the totals of all notes the Vivos Group had with MMG for its borrowings, the contracted interest, attorneys’ fees and expenses of $ 1,209 , and a contract damage of $ 1,000 to be satisfied by the transfer of their shares of the Company common stock to the Company equal in value to $ 1,000 . 8 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025 (amounts in thousands, except per share data) The May 17, 2023 award also appointed a rehabilitative receiver (the “Receiver”) whose primary function is to collect the contract and fraud damages, including costs, expenses, and fees provided in the awards. With respect to the receivership, the Vivos Group owners or holders of all of the shares of common stock of the Company were declared not to be entitled to vote any of those shares at any annual or special meetings of the shareholders of the Company during the period of the receivership. On December 29, 2023, the Circuit Court for Montgomery County, Maryland signed orders entering all three arbitration awards as judgments in Reliability’s case against the Vivos Group. These orders became final on January 29, 2024, when the appeal period expired for the defendants. The judgments are good for 12 years and can be enrolled in other states. Reliability has collectible judgments which the Receiver has been eligible to pursue. In May 2025, MMG expects the Receiver to make a recommendation to the arbitrator. Upon final resolution as to the underlying ownership and rights of certain shareholders, the Company intends to hold an annual meeting of shareholders within a reasonable time thereafter. As of March 31, 2025, the Vivos Debtor balance was $ 5,973 . The Award value in totality currently aggregates $ 8,333 , independent of legal fees after the award and interest. Basis of presentation The unaudited condensed consolidated financial statements include the accounts of the Company and all wholly owned divisions, including its 100 % owned subsidiary, MMG. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC and should be read in conjunction with the audited financial statements and notes thereto contained in our Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of financial position and the results of operations for the periods presented, have been reflected herein. The results of operations for the periods presented herein are not necessarily indicative of the results expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2024. Concentration of Credit Risk For the three months ended March 31, 2025, $ 1,533 or 32.3 % of revenue came from one customer, and $ 1,166 or 24.6 % from a second customer. Combined, this totals $ 2,699 or 56.9 % of revenue. In 2024, three companies accounted for $ 1,621 or 30.6 %, $ 820 or 15.5 %, and $ 672 or 12.7 %, respectively, which combined, totals $ 3,113 or 58.8 %. No other client exceeded 10% of revenues for the three months ending March 31, 2025 and 2024. As of March 31, 2025, the Company had accounts receivable of $ 2,864 , of which $ 1,489 ( 52 %) was attributable to its second-largest client, $ 459 ( 16 %) to its largest client, and $ 334 ( 11.7 %) to its third-largest revenue-producing client for the quarter. Together, these three clients accounted for approximately $ 2,283 , or 79.7 % of total accounts receivable. For comparison, as of December 31, 2024, the same three clients—listed in the same order—represented $ 1,862 ( 44.2 %), $ 1,102 ( 23.5 %), and $ 611 ( 13.0 %) of accounts receivable, respectively, collectively comprising 80.7 % of the total A/R balance. 9 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025 (amounts in thousands, except per share data) NOTE 2. MANAGEMENT’S PLAN Although the Company incurred net losses after taxes of $ 333 , $ 594 , and $ 740 for the three months ended March 31, 2025 and the years ended December 31, 2024 and 2023, respectively, management believes the Company will continue as a going concern and meet its financial obligations as they become due in 2025 and beyond. This assessment is based on the following key factors: ● Cash Flow Forecast : Management has prepared a 52-week cash flow forecast from May 15, 2025, which projects sufficient cash and working capital to fund operations. ● Reduction in Legal Fees : Legal expenses are expected to decline in 2025, as the Company holds collectible judgments currently being pursued by a court-appointed receiver. ● Collection of Notes Receivable : Management anticipates that notes receivable from related parties will be settled through a combination of cash and stock, providing additional liquidity and potential access to capital markets. ● Client Financing Arrangement : A financing arrangement through JPMorgan for the Company’s second-largest client is expected to reduce the cash conversion cycle by approximately 90 days. This client generated $ 5.5 million in revenue in 2024, representing about 20 % of total revenue. ● Factoring Availability : As of May 3, 2025, the Company had access to additional borrowing under its factoring facility of up to 93 % of unfactored invoices, totaling approximately $ 1.5 million in available liquidity. ● Cost Flexibility : If necessary, the Company can align costs more closely with revenues by reducing personnel and software expenditures. Based on these factors, management believes the Company has adequate resources to meet its obligations as they come due for at least the next 12 months and that the use of the going concern basis of accounting remains appropriate. NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Pronouncements In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ASU No. 2024-03 , Income Statement - Reporting Comprehensive Income - Expense Recognition Disclosures . This ASU will require entities to provide enhanced disclosures related to certain expense categories included in income statement captions. The ASU aims to increase transparency and provide investors with more detailed information about the nature of expenses reported on the face of the income statement. The new standard does not change the requirements for the presentation of expenses in the face of the income statement. Under this ASU, entities are required to disaggregate, in a tabular format, expense captions presented on the face of the income statement — excluding earnings or losses from equity method investments — if they include any of the following expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation or depletion. For any remaining items within each relevant expense caption, entities must provide a qualitative description of the nature of those expenses. The new ASU is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on the related disclosures. On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09) . The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 largely follows the proposed ASU issued earlier in 2023 with several important modifications and clarifications discussed below. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024 (generally, calendar year 2025) and effective for all other business entities one year later. Entities should adopt this guidance on a prospective basis, though retrospective application is permitted. The Company is currently evaluating how this ASU will impact its consolidated financial statements and disclosures. The Company does not believe any other recently issued but not yet effective accounting pronouncement, if adopted, would have a material effect on its present or future consolidated financial statements. 10 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025 (amounts in thousands, except per share data) NOTE 4. ACCOUNTS RECEIVABLE Accounts receivable consist of the following: SCHEDULE OF ACCOUNTS RECEIVABLE March 31, 2025 December 31, 2024 Accounts receivable, unfactored $ 1,701 $ 2,313 Unbilled receivables 400 97 Accounts receivable, factored 1,163 2,375 Total Accounts Receivable $ 3,264 $ 4,785 NOTE 5. DEBT Factoring Facility The Company is party to a factoring and security agreement with Gulf Coast Bank and Trust (“Gulf”), which provides liquidity by enabling the Company to sell eligible accounts receivable (i.e., invoices) to Gulf in exchange for immediate cash advances. The proceeds from this agreement are primarily used to fund operating expenses, including employee compensation, vendor payments, and general overhead. Under the terms of the agreement, Gulf advances funds at an interest rate equal to the prime rate plus 2 %, with an additional advance fee of 15 basis points. The eligible advance amount is up to 93 % of the face value of an invoice. The agreement is structured on a month-to-month basis and requires the Company to comply with certain financial covenants, including those related to invoicing activity and minimum reserve account balances. Receivables are sold to Gulf on a full recourse basis, meaning the Company retains the risk of collection. For the three months ended March 31, 2025, the Company received $ 2,222 in proceeds from the sale of receivables and repaid $ 3,434 under the agreement. This compares to $ 9,132 in proceeds and $ 6,930 in repayments for the year ended December 31, 2024. The outstanding balance under the factoring arrangement was $ 1,163 as of March 31, 2025, down from $ 2,375 as of December 31, 2024. The factoring facility is collateralized by substantially all the assets of the Company. In the event of a default, the factor may demand that the Company repurchase the receivable or debit the reserve account. Insurance Financing MMG also employs short term 10-month loan agreements annually to finance advance payments on crime, EPLI, E&O, and D&O insurances. In 2024-2025, MMG entered into two loans totaling $ 140 with finance charges each over 10 months totaling approximately $ 6 . The combined APR for these loans is 5.0 %. Software Financing with Long Term Debt On October 30, 2024, MMG entered into an agreement which deferred $ 52 due for our ADP implementation that was concluded in January 2024, to be paid over 24 months, at 6.21 % interest. As of March 31, 2025, the current portion balance was $ 25 and the long term, $ 15 . NOTE 6. COMMITMENTS AND CONTINGENCIES From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in 11 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025 (amounts in thousands, except per share data) these or other matters may arise from time to time that may harm our business. Except as set forth below, we are not aware of any such legal proceedings or claims against the Company. A series of legal actions and hearings took place starting in March of 2020 with the Vivos Group over Merger agreement violations and Vivos Group debt obligations. Arbitration was agreed to in the fall of 2021 by both the Vivos Group and MMG with the proceedings commencing in February 2022. On August 31, 2022, the arbitrator issued the Award with the Company and MMG prevailing on their claims. The awards included citing of fraud damages. Supplemental awards were subsequently issued on May 17, 2023, October 10, 2023, and finally on October 27, 2023. Summarily, MMG was awarded the totals of all notes the Vivos Group had with MMG for its borrowings, the contracted interest, attorneys’ fees and expenses of $ 1,209 , and a contract damage of $ 1,000 to be satisfied by the transfer of their shares of the Company Common Stock to the Company equal in value to $ 1,000 . The aggregate amount of the Awards, which are now court judgements, totals $ 8,333 as interest continues to accrue on these awarded balances. The May 17, 2023 award also appointed a Receiver whose primary function is to collect the contract and fraud damages, including costs, expenses, and fees provided in the awards. On October 10, 2023, the Arbitrator issued a Supplemental Award appointing the Receiver to assist the Company in collecting the awarded amounts. In the award, the Arbitrator established the powers of the Receiver. On December 29, 2023, the Circuit Court for Montgomery County, Maryland signed orders entering all three arbitration awards as judgments in Reliability’s case against the Vivos Group. These orders became final on January 29, 2024, when the appeal period expired for the defendants. The judgments are good for 12 years and can be enrolled in other states. Reliability has collectible judgments which the Receiver has been eligible to pursue. NOTE 7. EQUITY The Company’s authorized capital stock consists of 300,000,000 shares of common stock, with no par value. All authorized shares of Company Common Stock are issued and outstanding. NOTE 8. RELATED PARTY TRANSACTIONS Stock Purchase Agreement On November 9, 2016, Vivos Holdings, LLC, the former owner of MMG, acquired 100 % of MMG through a stock acquisition exchange for a purchase price of $ 1,750 , of which $ 1,400 was paid at settlement with proceeds from MMG. The Vivos Debtors subsequently entered into a promissory note receivable with MMG for the full stock purchase price. Between 2018 to present there was $ 2,217 in additional borrowings. Related Party Notes Receivable The Company has several notes receivable from related parties. Prior to the Merger, Vivos Holdings collaborated on a share swap of MMG for other Vivos companies with individuals who included, but were not limited to, Dr. Doki, Shirisha Janumpally (“Mrs. Janumpally”), wife of Dr. Doki, Kalyan Pathuri (“Mr. Pathuri”) husband of Silvija Valleru, Igly Trust, and Judos Trust. These parties also have common ownership combinations in a number of other entities: Vivos Holdings, LLC, Vivos Real Estate Holdings, LLC (“VREH”), Vivos Holdings, Inc., Vivos Group, Vivos Acquisitions, LLC, and Federal Systems, LLC, which are collectively referred to as the “Vivos Group.” 12 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025 (amounts in thousands, except per share data) The table below is a summary of Vivos Group related party notes receivable which, as of March 31, 2025, totals $ 5,973 . SCHEDULE OF RELATED PARTY NOTES RECEIVABLE Note Description Acquisition Loan to Vivos, LLC Interco Loan to Vivos Real Estate, LLC Tax Note Total Notes Receivable Balance on December 31, 2024 $ 4,039 $ 897 $ 911 $ 5,847 Accrued interest 86 20 20 126 Balance on March 31, 2025 $ 4,125 $ 917 $ 931 $ 5,973 The Award value in totality is currently aggregated to $ 8,333 , independent of legal fees and interest. Debt Settlement Agreements In June 2023, VREH successfully sold the property at 22 Baltimore Road in Rockville, Maryland, relieving Maslow of any liability related to the building, which MMG had been signed as a guarantor for in 2017 without management’s knowledge. In September 2024, the Company received $ 91 from the bankruptcy proceedings and sale of the building. This amount was applied toward reducing the Vivos Group’s outstanding debt to MMG (see table above). In December 2024, he SWC matter was also resolved with MMG’s portion being $ 10 . Related Party Costs RLBY’s Other expense portion of Other Income totaled approximately $ 26 , were exclusively for receivership related costs for recovery of the arbitration award related to the Vivos Group. Related Party Relationships On October 29, 2019, prior to the Merger, Naveen Doki and Silvija Valleru became beneficial owners of Company Common Stock, equal to approximately 69 % and 17 % of the total number of shares of the Company’s Common Stock outstanding after giving effect to the Merger, respectively. At the present time, the Vivos Group shall not be entitled to vote any of their shares in Reliability at any annual or special meetings of the shareholders. The Receiver is empowered to recover the awards by seizing shares of the Company held by Dr. Naveen Doki and his affiliates, the Vivos Group. Once the judgments in favor of Reliability are satisfied, the restrictions on the rights of the Vivos Group shareholders imposed by the Award shall be lifted. NOTE 9. BUSINESS SEGMENTS The Company operates within four industry segments: EOR, Recruiting and Staffing (“Staffing”), Direct Hire, and Video Production. The EOR segment provides media field talent to a host of large corporate customers in all 50 states. The Recruiting and Staffing segment provides skilled Media and IT field talent on a nationwide basis for customers in a myriad of industries. Direct Hire fulfils direct placement requests by MMG clients for a wide variety of posts, including administrative, media, and IT professionals. The Video and Multimedia Production segment provides script-to-screen services for corporate, government, and non-profit clients, globally. Segment gross profit includes revenue and cost of services only. Currently, the Company is not allocating interest income, interest expense, depreciation expense, other income (expense), income tax benefit (expense) and sales, general, and administrative expenses at the segment level. Our operating segments align with our organizational 13 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025 (amounts in thousands, except per share data) structure and are regularly reviewed by our Chief Executive Officer (our chief operating decision-maker or “CODM”) to allocate resources and assess performance. We evaluate segments based on revenue and gross profit, which also guide our annual budgeting process. Monthly, our CODM reviews segment revenue and gross profit against the prior year and budget to inform working capital allocation decisions. The measure of segment assets is reported on the consolidated balance sheet as total assets. The following table provides a reconciliation of revenue and gross profit by reportable segment to consolidated results for the three months ended March 31, 2025 and 2024, respectively: Gross Profit Performance by Segment SCHEDULE OF GROSS PROFIT PERFORMANCE BY SEGMENT March 31, 2025 March 31, 2024 Business Segment Revenue Gross Profit GM % Business Segment Revenue Gross Profit GM % EOR $ 3,755 $ 452 12.0 % EOR $ 4,572 $ 560 12.2 % Staffing $ 932 $ 167 17.9 % Staffing $ 667 $ 123 18.4 % Video Production $ 49 $ 13 26.5 % Video Production $ 32 $ 3 9.4 % Direct Hire $ 10 $ 9 90.0 % Direct Hire $ 24 $ 23 95.8 % Total $ 4,746 $ 641 13.5 % Total $ 5,295 $ 709 13.4 % NOTE 10. SUBSEQUENT EVENTS The Company has evaluated subsequent events through May 15, 2025, the date on which the unaudited condensed consolidated financial statements were available to be issued. Based upon this evaluation, management has determined that no material subsequent events have occurred that would require recognition in or disclosures in the accompanying unaudited condensed consolidated financial statements, except as follows: On April 23, 2025, we entered into a Receivable Purchase Agreements with JP Morgan which will purchase one of our largest client’s invoices within 15 days of approval. The program uses a market index rate based on the Secured Overnight Financing rate (SOFR) and adds 80 basis points called a program rate. The APR on this loan as of May 3, 2025, was 5.15 % . On April 24, 2025, Reliability submitted its application for the new Over-the-Counter Identification (“OTCID”), which is scheduled to launch on July 1, 2025. OTCID is meant to replace the “Pink Current” tier, and is intended to establish baseline requirements for companies, including the submission of current information disclosures and management certifications. OTC Markets will still maintain the Pink Limited and Expert Market tiers for companies that do not meet the OTCID criteria. 14