| RELATED PARTY TRANSACTIONS | NOTE
8. RELATED PARTY TRANSACTIONS Stock
Purchase Agreement On
November 9, 2016, Vivos Holdings LLC, the former owner of MMG, acquired 100 1,750 1,400 350 The promissory note was to be paid in twenty-four equal installments,
including interest at 4.5%, in the amount of approximately $15, commencing six months after closing, with the last payment on March
1, 2019 2,503 Notes
Receivable The
Company has notes receivable from Vivos Holdings, LLC and VREH, a member of Vivos Group, both related party affiliates due to their ownership
percentage in the Company. In January 2021, MMG began applying the legal minimum rate of interest which per Virginia statute is 8.0 4.5 5.5 RELIABILITY
INCORPORATED AND SUBSIDIARY NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March
31, 2022 (amounts
in thousands, except per share data) In
connection with the Vivos/MMG Purchase Agreement, on November 15, 2016, MMG executed a promissory note receivable with Vivos
Holdings LLC in the amount of $ 1,400 1,773 September 20, 2023 2.5 15 3,420 38 On
November 15, 2017, MMG executed an intercompany promissory note receivable with VREH in the amount of $ 772 781 3.5 30 823 11 On
June 12, 2019, MMG entered into a Personal Guaranty agreement with Dr. Doki, pursuant to which Dr. Naveen Doki personally guaranteed
to MMG repayment of $ 3,000 5 As
of February 2020, the Company filed a lawsuit against the majority shareholder, pursuant to the personal guaranty agreement for defaulting
on the outstanding notes receivables. In
summary, the Vivos Group receivable totaled $ 4,258 2,007 5,039 4,985 On
September 5, 2019, MMG entered into a Secured Promissory Note agreement with Vivos, pursuant to which MMG issued a secured promissory
note to the Vivos Group in the principal amount of $ 750 .
The note bears interest at 2.5 %
per year and requires the Vivos Group to make monthly payments to MMG of $ 10
beginning December 1, 2019, with balance due
and payable on November
1, 2026 . Upon an event of default, which occurs
upon failure of Vivos to make any monthly payment due under the terms of the note, MMG has the right to declare the entire unpaid balance
of the note due and payable. The note is secured by 30,000,000
shares of Company Common Stock, which is due
and payable upon a default by Vivos, which occurs upon failure of Vivos to make any monthly payment due under the terms of the note.
In addition, both Dr. Doki and Silvija Valleru personally guaranty the repayment of the note by the Vivos Group. Dr. Doki
and Silvija Valleru were beneficial owners of Vivos and are also 5% or greater beneficial owners of Company Common Stock, which is qualified
by the Merger Arbitration complaint. On December 31, 2021, the total outstanding balance was $ 790 ,
which includes interest for period of $ 5 .
As of March 31, 2021, the total outstanding balance was $ 795 ,
which includes interest for period of $ 5 . Debt
Settlement Agreements On
July 21, 2021, MMG settled the obligation which Vivos Holdings, LLC had obligated MMG to in July 2018, with Libertas Funding, LLC and
Kinetic for $ 475 On
March 6, 2022, MMG received a notice of default, acceleration, and demand for payment-in-full from FVCBank due to incurable events of
default on behalf of Borrower Vivos Real Estate Holdings LLC. RELIABILITY
INCORPORATED AND SUBSIDIARY NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March
31, 2022 (amounts
in thousands, except per share data) Related
Party Relationships On
October 29, 2019, prior to the Merger, pursuant to the Merger Agreement, Dr. Doki and Silvija Valleru became beneficial owners
of 206,606,528
and 51,652,908
shares of RLBY Common Stock, respectively, equal
to 68.9 %
and 17.2 %
of the total number of shares of RLBY Common Stock outstanding after giving effect to the Merger, respectively. The Company is seeking
damages which if granted will likely be the remedy set forth within the Merger Agreement which is primarily the relinquishment in whole
or in part shares of Company Common Stock received by the Respondents in connection with the Merger. On
June 27, 2019, prior to the Merger, MMG entered into a Securities Purchase Agreement with Hawkeye Enterprises, Inc., a company owned
and controlled by Mark Speck (“Mr. Speck”), an officer and then director of Maslow. Pursuant
to this agreement, MMG issued to Hawkeye Enterprises 16,323 (on a post-Merger basis) shares of Company Common Stock, a warrant (as defined
below) for 81,616 50 50 12 56 On
July 31, 2019, prior to the Merger, MMG entered into a Securities Purchase Agreement with Mr. Speck, the Company issued to this individual
a Warrant for 81,616 50 50 12 56 On
July 31, 2019, prior to the Merger, MMG entered into a Securities Purchase Agreement with Nick Tsahalis, an executive officer and director
of MMG. Pursuant to this agreement, the Company issued to this individual 32,646 16,323 a
post-Merger basis) shares of the MMG Common Stock, and a Convertible Promissory Note of same date in the initial principal amount of
$ 100 100 12 112 On
September 18, 2019, in anticipation of the closing of the Merger and intending that it be assumed by MMG after the closing of the Merger,
Hawkeye entered into a letter of intent (the “LOI”) regarding the potential acquisition of a complementary business. MMG
was then prohibited from entering into the LOI directly. In connection with the LOI, Hawkeye paid a non-refundable deposit of $ 75 83 The
term “warrant” herein refers to warrants issued by MMG and assumed by the Company as a result of the Merger. The terms of
all Warrants are the same other than as to the number of shares covered thereby. The Warrant may be exercised at any time or from time
to time during the period commencing at 10:00 a.m. Eastern time on first business day following the completion of the Qualified Financing
(as defined below) and expiring at 5:00 p.m. Eastern time on the fifth annual anniversary thereof (the “Exercise Period”).
For purposes herein, a “Qualified Financing” means the issuance by the Company, other than certain excluded issuances of
shares of Common Stock, in one transaction or series of related transactions, which transaction(s) result in aggregate gross proceeds
actually received by the Company of at least $ 5,000 120 5,000 RELIABILITY
INCORPORATED AND SUBSIDIARY NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March
31, 2022 (amounts
in thousands, except per share data) On
September 7, 2021, the Company entered in Arbitration and Tolling Agreements with alleged shareholder Dr. Doki, and his
affiliates and all other persons who were parties to the pending litigation previously reported in the Texas, New York and Maryland
courts and before the American Arbitration Association. The Agreements call for the stay or dismissal of the pending litigation,
with the parties agreeing to resolve their disputes before a single arbitrator in Maryland. The parties also agreed to maintain the
status quo in corporate governance and related matters pending a final non-appealable judgment confirming any award in arbitration.
The parties also signed a Tolling Agreement to toll the statute of limitations following the dismissal of a pending
litigation. |
