RELIABILITY INC 10-Q

Item 1. Financial Statements RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share data) June 30, December 31, 2025 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 262 $ 522 Trade receivables, net of allowance for credit losses 2,652 4,785 Other receivables 19 4 Notes receivable from related parties 6,100 5,847 Prepaid expenses and other current assets 291 336 Total current assets 9,324 11,494 Other intangible assets, net 2 2 Property, plant and equipment, net 55 60 Total assets $ 9,381 $ 11,556 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Factoring liability $ 827 $ 2,375 Accounts payable 345 734 Accrued expenses 129 288 Accrued payroll 999 568 Deferred revenue 212 207 Note payable, current 39 26 Total current liabilities 2,551 4,198 LONG-TERM LIABILITIES Note payable, net of current 31 21 Total long-term liabilities 31 21 Total liabilities 2,582 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 June 30, 2025 and December 31, 2024 - Additional paid-in capital 750 750 Retained earnings 6,049 6,587 Total stockholders’ equity 6,799 7,337 Total liabilities and stockholders’ equity $ 9,381 $ 11,556 The accompanying notes are an integral part of these statements. 3 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) 2025 2024 For the Three Months Ended June 30, 2025 2024 Revenue earned Service revenue $ 4,718 $ 6,041 Cost of revenue Cost of revenue 4,005 5,237 Gross profit 713 804 Selling, general, and administrative expenses 966 986 Operating loss ( 253 ) ( 182 ) Other income (expense) Interest income from related parties 127 210 Interest income 1 1 Interest expense ( 36 ) ( 20 ) Other expense ( 44 ) ( 136 ) Loss before income tax (expense) benefit ( 205 ) ( 127 ) Income tax (expense) benefit - ( 7 ) Consolidated net loss $ ( 205 ) $ ( 134 ) Net income 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 INC. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) 2025 2024 For the Six Months Ended June 30, 2025 2024 Revenue earned Service revenue $ 9,465 $ 11,336 Cost of revenue Cost of revenue 8,110 9,824 Gross profit 1,355 1,512 Selling, general, and administrative expenses 1,989 1,933 Operating loss ( 634 ) ( 421 ) Other income (expense) Interest income from related parties 253 280 Interest income 1 16 Interest expense ( 88 ) ( 35 ) Other income (expense) ( 70 ) ( 229 ) Loss before income tax (expense) benefit ( 538 ) ( 389 ) Income tax (expense) benefit - 122 Consolidated net loss $ ( 538 ) $ ( 267 ) Net loss per share: Basic $ 0.00 $ 0.00 Diluted $ 0.00 $ 0.00 Shares 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. 5 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the Six Months Ended June 30, 2025 and 2024 (amounts in thousands, except per share data) Shares Amount Capital Earnings Equity 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 - - - ( 133 ) ( 133 ) Balance, March 31, 2024 300,000,000 750 7,049 7,799 Net loss - - - ( 134 ) ( 134 ) Balance, June 30, 2024 300,000,000 $ - $ 750 $ 6,914 $ 7,664 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 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 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) 2025 2024 For the Six Months Ended June 30, 2025 2024 Cash flows from operating activities: Net loss $ ( 538 ) ( 267 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 16 4 Accrued interest ( 253 ) ( 265 ) Changes in operating assets and liabilities: Trade receivables 2,133 ( 749 ) Other receivables ( 15 ) ( 5 ) Prepaid expenses and other current assets 45 260 Accounts payable ( 389 ) 199 Accrued payroll 432 349 Accrued expenses ( 160 ) ( 56 ) Deferred revenue 4 ( 6 ) Net cash provided by (used in) operating activities 1,275 ( 536 ) Cash flows from investing activities: Purchase of fixed assets ( 11 ) ( 58 ) Net cash used in investing activities ( 11 ) ( 58 ) Cash flows from financing activities: - Proceeds from the factoring facility 5,038 1,405 Repayments to the factoring facility ( 6,586 ) ( 1,362 ) Proceeds from issuing short-term debt 14 - Proceeds from issuing long-term debt 25 - Repayment of long-term debt ( 15 ) - Net cash provided by (used in) financing activities ( 1,524 ) 43 Net decrease in cash and cash equivalents ( 260 ) ( 551 ) Cash and cash equivalents, beginning of period 522 822 Cash and cash equivalents, end of period $ 262 $ 271 The accompanying notes are an integral part of these statements. 7 RELIABILITY INCORPORATED AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (amounts in thousands) Supplemental disclosures of cash flow information: 2025 2024 For the Six Months Ended June 30, Supplemental disclosures of cash flow information: 2025 2024 Cash paid during the year for: Interest $ 88 $ 20 Income taxes $ - $ 7 8 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 9 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (amounts in thousands, except per share data) On August 31, 2022, the Company and MMG were granted arbitration awards against the Vivos Group, with supplemental awards issued on May 17, 2023, October 10, 2023, and October 27, 2023 which included an award citing fraud damages. 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 . These awards were entered as final judgments by the Circuit Court for Montgomery County, Maryland on December 29, 2023, and became final on January 29, 2024. The judgments, which total approximately $ 8.49 million plus accrued interest, are enforceable for 12 years and may be enrolled in other states. While the Company is pursuing enforcement of these judgments, there can be no assurance as to the timing or amount of any recovery, or whether recovery will be in cash, equity, or other assets Per Maryland law, the enrolling of judgements enables MMG to apply 10 % interest to the Vivos Debtor balance beginning December 29, 2023. MMG began applying the additional interest in the second quarter 2025. 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 June 30, 2025, the Vivos Debtor balance was $ 6,100 . The Award value in totality currently aggregates $ 8,490 , independent of legal fees after the award and interest. NOTE 2. MANAGEMENT’S PLAN Although the Company incurred net losses after taxes of $ 538 for the six months ended June 30, 2025, and $ 594 and $ 740 for the years ended December 31, 2024 and 2023, respectively, management has evaluated whether these conditions or events raise substantial doubt about the Company’s ability to continue as a going concern for at least the 12 months following the issuance of these financial statements. Based on this assessment, management believes it is probable the Company will continue as a going concern and meet its financial obligations through August 14, 2026, thereby alleviating substantial doubt. This conclusion reflects management’s view that the Company has sufficient liquidity and working capital resources to fund operations for at least the next 52 weeks, as well as the ability to take actions, if necessary, to align costs with revenue fluctuations. This assessment is based on the following key factors: ● Cash Flow Forecast : Management has prepared a 52-week cash flow forecast from August 14, 2025, which projects sufficient cash and working capital to fund operations. ● Reduction in Legal Fees : Legal expenses related to non-operational activities, $ 86 through the first six months of 2025 and are expected to continue decreasing in 2025. ● 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 in 2025. ● 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 110 days. This acceleration in cash flow will ensure more cash is on hand and reduce our cost of capital. ● Factoring Availability : As of August 14, 2025, the Company had access to additional borrowing under its factoring facility of up to 93 % of unfactored invoices, totaling approximately $ 1,361 . ● Cost Flexibility : If necessary, the Company can align costs more closely with revenues. The Company suspended accrual of all employee bonuses for 2025 in the second quarter. 10 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (amounts in thousands, except per share data) 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. The accompanying unaudited 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 presentation 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 to be 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. There have been no material changes to the accounting policies discussed in Note 3 to the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 31, 2025. Concentration of Credit Risk For the six months ended June 30, 2025, 31.0 % of revenue came from one customer, and 23.6 % from a second customer. Combined, this totals 54.6 % of revenue for the top two contributors greater than 10%. In 2024, three companies ascended 10% of revenue contribution accounting for 27.2 %, 21.7 %, and 13.5 %, respectively, which combined totaled 62.4 %. No other client has exceeded 10% of revenues for the six months ended June 30, 2025 or 2024. From an accounts receivable (A/R) perspective, two clients dominated our balance at the end of the quarter on June 30, 2025, with one at $ 1,357 or 52.4 % and the other at $ 409 or 15.8 % of $ 2,591 in trade receivables. A year ago, the same two clients represented $ 1,563 or 41.7 %, and $ 885 or 23.6 % of the $ 3,746 in A/R, respectively. In the periods ended June 30, 2025 and 2024, no other client represented 10% or more in A/R. Recently Issued Accounting Pronouncements Not Yet Adopted 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 year end December 31, 2025 consolidated financial statements and disclosures as the Company did not have an interim tax effect to disclose. On November 4, 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). The ASU requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for public business entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. 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 year end December 31, 2025 consolidated financial statements and disclosures. 11 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (amounts in thousands, except per share data) NOTE 4. ACCOUNTS RECEIVABLE Accounts receivable consist of the following: SCHEDULE OF ACCOUNTS RECEIVABLE June 30, 2025 December 31, 2024 Accounts receivable, unfactored $ 1,763 $ 2,313 Unbilled receivables 62 97 Accounts receivable, factored 827 2,375 Total Accounts Receivable $ 2,652 $ 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. Because the factoring arrangement is full recourse, it is accounted for as a secured borrowing under ASC 860, Transfers and Servicing , rather than as a sale of receivables. For the six months ended June 30, 2025, the Company received $ 5,038 in proceeds from the sale of receivables and repaid $ 6,586 under the agreement. This compares to $1,405 in proceeds and $1,362 in repayments for the period ended June 30, 2024. The outstanding balance under the factoring arrangement was $ 827 as of June 30, 2025, $ 1,163 on March 31, 2025, and $ 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, 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, 2025, the aggregate current portion of these obligations was $ 39 , with the long-term portion totaling $ 31 . 12 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (amounts in thousands, except per share data) 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 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 an award in favor of the Company and MMG, including fraud damages. Supplemental awards were issued on May 17, 2023, October 10, 2023, and October 27, 2023. The awards granted MMG the total of all notes receivable from the Vivos Group, contracted interest, attorneys’ fees and expenses of $ 1,209 , and a contract damage of $ 1,000 to be satisfied by the transfer of the Vivos Group’s shares of the Company Common Stock to the Company equal in value to $ 1,000 . 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 outlining the Receiver’s powers. On December 29, 2023, the Circuit Court for Montgomery County, Maryland entered all three arbitration awards as final judgments which became effective on January 29, 2024 after the appeal period expired. These judgments, totaling approximately $ 8,490 plus accrued interest, are enforceable for 12 years and may be enrolled in other states. On May 19, 2025, the Receiver submitted final recommendations, calculations, and a proposed order to the arbitrator. The response deadline was initially set for July 7, 2025, but was extended to August 6, 2025 after Vivos Holdings retained new counsel. On August 8, 2025, the arbitrator granted both parties until September 5, 2025 to submit replies to each other’s filings. On June 11, 2025, the Company’s subsidiary entered into a Memorandum of Understanding (“MOU”) to settle a California wage-and-hour matter that also included a representative claim under the California Private Attorneys General Act (“PAGA”). The MOU contemplates a gross settlement of $ 125,000 , inclusive of all attorneys’ fees, costs, PAGA penalties, an individual settlement amount for the plaintiff, and settlement administration expenses, payable in installments following court approval. The agreement includes an “escalator” provision that may increase the gross settlement if the number of compensable pay periods exceeds agreed thresholds and is contingent upon final court approval. As of June 30, 2025, the settlement remains subject to court approval, and no liability has been recorded in the Company’s consolidated financial statements. 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. 13 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (amounts in thousands, except per share data) 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.” The table below is a summary of Vivos Group related party notes receivable which, as of June 30, 2025, total $ 6,100 . Based on management’s current expected credit loss (“CECL”) assessment, which considered legal judgments in favor of Company and the ongoing receivership process supporting recovery and collectability, no allowance for credit losses has been recorded. 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 Accrued interest 86 21 20 127 Balance on June 30, 2025 $ 4,211 $ 938 $ 951 $ 6,100 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, the Second Wind Consulting (“SWC”) matter was also resolved with MMG’s portion being $ 10 . Related Party Costs RLBY’s Other expense portion of Other Income totaling approximately $ 41 in the second quarter and $ 68 for the six months ended June 30, 2025, 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. 14 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (amounts in thousands, except per share data) 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 (“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 structure and are regularly reviewed by our Chief Executive Officer (our chief operating decision-maker or “CODM”) to allocate resources and assess performance. No additional segment expense categories (beyond cost of services) are regularly provided to the CODM. 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-month and six-month periods ended June 30, 2025 and 2024, respectively: SCHEDULE OF GROSS PROFIT PERFORMANCE BY SEGMENT Gross Profit Performance by Segment For the Three Months Ended June 30: June 30, 2025 June 30, 2024 Business Segment Revenue Gross Profit GM % Business Segment Revenue Gross Profit GM % EOR $ 3,573 $ 442 12.3 % EOR $ 5,243 $ 628 12.0 % Staffing $ 1,098 $ 252 22.9 % Staffing $ 713 $ 143 20.0 % Video Production $ 34 $ 8 23.9 % Video Production $ 58 $ 8 14.4 % Direct Hire $ 13 $ 11 90.0 % Direct Hire $ 27 $ 25 92.4 % Total $ 4,718 $ 713 15.1 % Total $ 6,041 $ 804 13.3 % 15 RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (amounts in thousands, except per share data) For the Six Months Ended June 30: June 30, 2025 June 30, 2024 Business Segment Revenue Gross Profit GM % Business Segment Revenue Gross Profit GM % EOR $ 7,328 $ 894 12.2 % EOR $ 9,815 $ 1,187 12.1 % Staffing $ 2,030 $ 419 20.6 % Staffing $ 1,380 $ 265 19.2 % Video Production $ 84 $ 21 25.0 % Video Production $ 90 $ 11 11.7 % Direct Hire $ 23 $ 21 91.3 % Direct Hire $ 51 $ 49 95.4 % Total $ 9,465 $ 1,355 14.3 % Total $ 11,336 $ 1,512 13.3 % NOTE 10. SUBSEQUENT EVENTS The Company has evaluated subsequent events through August 14, 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 our disclosures in the accompanying unaudited condensed consolidated financial statements. 16