Reliability (RLBY) 8-K Entry into a Material Definitive Agreement

RELIABILITY INC.

CONSOLIDATED BALANCE SHEET

June 30, 2019

	Maslow			Reliability		Adj.	Consolidated
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	155,667		$	7,737		$	163,404
Contract receivables		4,979,419						4,979,419
Due from employees		4,944						4,944
Prepaid expenses		82,691						82,691
Current maturity of notes receivable from related parties		3,573,639						3,573,639
Total current assets		8,796,360			7,737			8,804,097
PROPERTY AND EQUIPMENT, at cost
Office equipment		1,375						1,375
Computer equipment		42,984						42,984
Computer software		40,066						40,066
Leasehold improvements		5,725						5,725
Total property and equipment, at cost		90,150						90,150
Accumulated depreciation and amortization		(57,172	)					(57,172	)
Total property and equipment, net		32,978						32,978
Total assets	$	8,829,338		$	7,737		$	8,837,075

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RELIABILITY INC.

CONSOLIDATED BALANCE SHEET, continued

June 30, 2019

	Maslow		Reliability			Adj.	Consolidated
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	235,131					$	235,131
Loan from Stockholder or Affiliates			$	50,000				50,000
Accumulated Interest on Loans				25,342				25,342
Factoring		3,571,269						3,571,269
Accounts payable		796,748		8,584				805,332
Accrued payroll		400,920						400,920
Accrued liabilities		737,534						737,534
Deferred revenue		285,597						285,597
Short term debt		125,000						125,000
Income taxes payable		483,523						483,523
Total current liabilities		6,635,722		83,926				6,719,648
Long term debt, less current maturities				83,147				83,147
Deferred income taxes		343,664						343,664
Total liabilities		6,979,386		167,073				7,146,459
STOCKHOLDER’S EQUITY
Common stock, $1 par value, 400 shares authorized, 100 issued and outstanding		100						100
Common stock, without par value, 30,000,000 shares authorized; 17,268,993 shares issued				9,912,150				9,912,150
Retained earnings		1,849,852		(8,976,969	)			(7,127,117	)
Less treasury stock at cost, 354,300 shares				(1,094,517	)			(1,094,517	)
Total stockholder’s equity		1,849,952		(159,336	)			1,690,616
Total liabilities and stockholder’s equity	$	8,829,338	$	7,737			$	8,837,075

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Notes:

Assets

1. Current maturity of notes receivable from related parties: Notes increased by $ 258,655 in 6 months ending June 30^th, due to loans to former parent Vivos Holdings, LLC., and fees associated with reverse merger, largely legal expenses.

2. Prepaid Expenses: Prepaid dropped by $152,305, to $82,691, as all corporate insurance policies are amortized over a 12-month period.

Liabilities

3. Current maturities of long-term debt: Dropped by $558,511 to $235,131 as loans were repaid on schedule.

4. Short Term Debt: On June 19, 2019, Maslow issued a $125,000 promissory note with an annual interest rate of 12% with the option of converting the note into equity. The funds raised from the promissory note was to be used for working capital purposes. The Company is obligated to issue shares equal to 75% of the average sale price of a qualified financing transaction

5. Income tax payable was reduced by $180,359 from December 2018

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RELIABILITY INC.

CONSOLIDATED STATEMENT OF INCOME

For the Six Months Ended June 30, 2019

	Maslow			Reliability			Adj.	Consolidated
Revenue
Workforce Management		17,917,364							17,917,364
Cost of Revenue
Workforce Management		16,011,202							16,011,202
Gross profit		1,906,162							1,906,162
Operating Expenses
General and administrative expenses		1,357,728			7,984				1,365,712
Operating Profit		548,434			(7,984	)			540,450
Other Income/(Expense)
Interest income, related parties		45,509							45,509
Interest Expense		(168,398	)		(5,407	)			(173,805	)
Other		(51,472	)						(51,472	)
Income before taxes		374,073			(13,391	)			360,682
Income tax benefit		3,605							3,605
Net income	$	377,678			(13,391	)		$	364,287

Notes

1.	Revenues: First half 2019 Revenue of $17,917,364 is less than half a point lower than same time a year ago at $17,977,659.
2.	Cost of Revenue: At $16,011,202 is within 1% of a year ago.

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RELIABILITY INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2019

	Maslow			Reliability			Adj	Consolidated
A. Cash flows from operating activities:
Net Profit / (Loss)	$	377,678		$	(13,391	)		$	364,287
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation on Assets		11,901							11,901
Loss on disposal of property and equipment		2,591							2,591
Operating Profit before Working Capital Changes		392,170			(13,391	)			378,779
Changes in operating assets and liabilities:
Contract receivables		885,437							885,437
Due from related parties		(258,655	)						(258,655	)
Due from employee		1,175							1,175
Prepaid expenses		152,305							152,305
Accumulated Interest on Loans					2,478				2,478
Accounts payable		90,185			(7,377	)			82,808
Accrued Payroll		61,997							61,997
Accrued Liabilities		(37,686	)						(37,686	)
Deferred Income		50,204							50,204
Income Taxes Payable/Tax Paid		(180,359	)						(180,359	)
Cash Generated from Operations		764,603			(4,899	)			759,704
Net Cash from Operating Activities		1,156,773			(18,290	)			1,138,483
B. Cash flows from investing activities:
Purchase of fixed assets		(14,350	)						(14,350	)
Net Cash from Investing Activities		(14,350	)						(14,350	)
C.Cash flows from financing activities:
Long Term borrowings		(558,511	)		17,929				(540,582	)
Proceeds from issuing short term debt		125,000							125,000
Net payment on Line of Credit		(581,955	)						(581,955	)
Net cash from / (used) by financing activities		(1,015,466	)		17,929				(997,537	)
Net decrease in cash and cash equivalents		126,957			(361	)			126,596
Cash and cash equivalents at beginning of year		28,710			8,098				36,808
Cash and cash equivalents at end of year		155,667			7,737				163,404

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