| NATURE OF OPERATIONS AND BASIS OF PRESENTATION | 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 Upon
purchasing MMG and thereafter, the Vivos Group began borrowing monies from MMG starting with $ 1,400 3,418 3,000 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 . RELIABILITY
INCORPORATED AND SUBSIDIARY NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March
31, 2024 (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 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 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 is now eligible to pursue. 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, 2024, the Vivos Debtor balance was $ 5,571 7,779 Basis
of presentation The
unaudited condensed consolidated interim financial statements include the accounts of the Company and all wholly owned divisions, including
its 100 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, 2023. Concentration
of Credit Risk For
the three months ended March 31, 2024, 30.6 %
of revenue came from one customer, 15.5 %
from a second customer and 12.7 %
from a third. Combined, this totals 58.8 %
of revenue. In 2023, the top two companies were the only ones above the 10% mark and accounted for 25.2 %
and 12.4 %,
respectively, which is 37.6 %
combined. The aforementioned same three clients improved upon their combined concentration in 2023 when this group garnered 44.6 %
share of the revenue. No
other client has exceeded 10% of revenues for
the three months ended March 31, 2024 or 2023. RELIABILITY
INCORPORATED AND SUBSIDIARY NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March
31, 2024 (amounts
in thousands, except per share data) |
