NATURE OF OPERATIONS AND BASIS OF PRESENTATION	3 Months Ended
Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
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, Permanent Direct Placements, and Video and Multimedia Production which provides script to screen media talent. Our Staffing segment provides skilled field talent on a nationwide basis for Media, IT and finance and accounting client partner projects. Our Staffing segment occasionally received requests for (direct) placements. Because of an uptick in direct hire requests in 2021, factoring in the much higher margins that business derives, MMG decided to add Permanent (Direct) Placement as a stand-alone business segment. Video Production involves assembling and providing crews for special projects that can last anywhere from a week to 6 months. 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* 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 2018, Vivos Holdings and several other Vivos companies, (“Vivos Group”) engaged an investment banker who approached management of Reliability to discuss a potential reverse merger transaction. The other investors who collaborated on a share swap of MMG for other Vivos companies were Shirisha Janumpally (“Mrs. Janumpally”), wife of Dr. Doki, and Kalyan Pathuri (“Mr. Pathuri”), husband of Silvija Valleru. These 4 individuals, Dr. Doki, Mrs. Janumpally, Mr. Pathuri, and Mrs. Valleru 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”). The reverse merger was consummated on October 29, 2019. As a result of the Merger, 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. On October 29, 2019, MMG became a wholly owned subsidiary of Reliability by merging R-M Merger Sub, Inc., a Virginia corporation and a wholly owned subsidiary of Reliability, with and into Maslow, with MMG being the surviving corporation (the “Merger”). The Merger is more fully described in our Current Report on Form 8-K filed on October 30, 2019. The Company ceased to be a “shell” company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) by virtue of its ownership of MMG following the Merger. The acquisition of MMG also resulted in a “change in control” of Reliability. On or about February 25, 2020, the Company, as plaintiff, filed a complaint with the Circuit Court of Montgomery County, Maryland against Vivos Holdings, LLC, Vivos Real Estate Holdings, LLC and Dr. Doki (collectively “Vivos Debtors”), to enforce Maslow’s rights under certain promissory notes and a personal guarantee made by the Dr. Doki. On or about May 6, 2020, the Defendants filed a counterclaim and third-party complaint for Damages, declaratory and injunctive Relief and jury Demand (the “Counterclaim”). RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2022 (amounts in thousands, except per share data) The Company also began pursuing arbitration in New York in 2020 which was the contractual remedy for breaches of the Merger agreement between MMG and Reliability. It is the Company’s contention that the Vivos Group failed to disclose several material pieces of information to Reliability management pre-merger as was required by the Merger agreement. Additionally, the Vivos Group declined to honor a number of commitments made to Reliability including a $3,000 promissory note and an agreement to shield the Company from their personal debt per the “Liquidation Agreement” (See 1A and Item 3). Per the Merger Agreement, these breaches can lead to a loss of up to all shares in Reliability for the Vivos group. On December 23, 2020, at a hearing in the Maryland Circuit Court of Montgomery County, Maryland, a motion by the Vivos Group to compel a shareholder meeting was summarily dismissed. On January 20, 2021, Defendants and Counter/Third-Party Plaintiffs, Vivos, VREH, Dr. Doki, Mr. Pathuri, Igly, Judos, by counsel, filed a Notice of Appeal on the dismissal. However, the deadline to pursue the appeal lapsed absent additional filings by the Vivos Group. On July 21, 2021, MMG settled the obligation which with it had been committed by Vivos Holdings, LLC in July 2018, with Libertas Funding, LLC and Kinetic for $475. This debt belonged to Vivos Holdings LLC, and the aforementioned Liquidation Agreement, had been created as a safeguard to shelter MMG should Vivos Holdings, LLC default, which actually transpired prior to the Merger closing in October 2019. (See Section 1A). On September 7, 2021, the Company entered to Arbitration and Tolling Agreements with the (the “Agreements”) Vivos Group 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. On March 21, 2022, the Company began its arbitration proceedings against the Vivos Group. MMG contends the Vivos Group committed merger violations which could result in relinquishment in whole or in part shares of Company common stock received by the Respondents in connection with the Merger. We anticipate an arbitration decision in the third quarter 2022. We refer below to the disputes between Reliability and the Vivos Group as the “Vivos Matter.” “Upon a 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.” *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 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021. RELIABILITY INCORPORATED AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2022 (amounts in thousands, except per share data) *Concentration of Credit Risk* For the three months ended March 31, 2022, 24.2% of revenue came from AT&T Services, Inc. (inclusive of its DirecTV division) (“AT&T”), 21.4% from Goldman Sachs, and 11.2% from Janssen Pharmaceuticals (which includes workforce partners Ortho McNeil and Johnson & Johnson). Combined, this totals 56.8% of revenue. AT&T, Goldman Sachs, Janssen, and Morgan Stanley accounted for 24.6%, 15.4%, 9.2% and 13.6%, respectively, in revenue for the same period ended March 31, 2021. No other client has exceeded 10% of revenues in 2022 or 2021.

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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, Permanent Direct Placements, and Video and Multimedia Production which provides script to screen media talent. Our Staffing segment provides skilled field talent on a nationwide basis for Media, IT and finance and accounting client partner projects. Our Staffing segment occasionally received requests for (direct) placements. Because of an uptick in direct hire requests in 2021, factoring in the much higher margins that business derives, MMG decided to add Permanent (Direct) Placement as a stand-alone business segment. Video Production involves assembling and providing crews for special projects that can last anywhere from a week to 6 months.

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

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 2018, Vivos Holdings and several other Vivos companies, (“Vivos Group”) engaged an investment banker who approached management of Reliability to discuss a potential reverse merger transaction. The other investors who collaborated on a share swap of MMG for other Vivos companies were Shirisha Janumpally (“Mrs. Janumpally”), wife of Dr. Doki, and Kalyan Pathuri (“Mr. Pathuri”), husband of Silvija Valleru.

These 4 individuals, Dr. Doki, Mrs. Janumpally, Mr. Pathuri, and Mrs. Valleru 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”).

The reverse merger was consummated on October 29, 2019. As a result of the Merger, 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.

On October 29, 2019, MMG became a wholly owned subsidiary of Reliability by merging R-M Merger Sub, Inc., a Virginia corporation and a wholly owned subsidiary of Reliability, with and into Maslow, with MMG being the surviving corporation (the “Merger”). The Merger is more fully described in our Current Report on Form 8-K filed on October 30, 2019.

The Company ceased to be a “shell” company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) by virtue of its ownership of MMG following the Merger. The acquisition of MMG also resulted in a “change in control” of Reliability.

On or about February 25, 2020, the Company, as plaintiff, filed a complaint with the Circuit Court of Montgomery County, Maryland against Vivos Holdings, LLC, Vivos Real Estate Holdings, LLC and Dr. Doki (collectively “Vivos Debtors”), to enforce Maslow’s rights under certain promissory notes and a personal guarantee made by the Dr. Doki. On or about May 6, 2020, the Defendants filed a counterclaim and third-party complaint for Damages, declaratory and injunctive Relief and jury Demand (the “Counterclaim”).

RELIABILITY INCORPORATED AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(amounts in thousands, except per share data)

The Company also began pursuing arbitration in New York in 2020 which was the contractual remedy for breaches of the Merger agreement between MMG and Reliability. It is the Company’s contention that the Vivos Group failed to disclose several material pieces of information to Reliability management pre-merger as was required by the Merger agreement. Additionally, the Vivos Group declined to honor a number of commitments made to Reliability including a $3,000 promissory note and an agreement to shield the Company from their personal debt per the “Liquidation Agreement” (See 1A and Item 3). Per the Merger Agreement, these breaches can lead to a loss of up to all shares in Reliability for the Vivos group.

On December 23, 2020, at a hearing in the Maryland Circuit Court of Montgomery County, Maryland, a motion by the Vivos Group to compel a shareholder meeting was summarily dismissed. On January 20, 2021, Defendants and Counter/Third-Party Plaintiffs, Vivos, VREH, Dr. Doki, Mr. Pathuri, Igly, Judos, by counsel, filed a Notice of Appeal on the dismissal. However, the deadline to pursue the appeal lapsed absent additional filings by the Vivos Group.

On July 21, 2021, MMG settled the obligation which with it had been committed by Vivos Holdings, LLC in July 2018, with Libertas Funding, LLC and Kinetic for $475. This debt belonged to Vivos Holdings LLC, and the aforementioned Liquidation Agreement, had been created as a safeguard to shelter MMG should Vivos Holdings, LLC default, which actually transpired prior to the Merger closing in October 2019. (See Section 1A).

On September 7, 2021, the Company entered to Arbitration and Tolling Agreements with the (the “Agreements”) Vivos Group 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.

On March 21, 2022, the Company began its arbitration proceedings against the Vivos Group. MMG contends the Vivos Group committed merger violations which could result in relinquishment in whole or in part shares of Company common stock received by the Respondents in connection with the Merger. We anticipate an arbitration decision in the third quarter 2022.

We refer below to the disputes between Reliability and the Vivos Group as the “Vivos Matter.”

“Upon a 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.”

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 are not necessarily indicative of the results to be expected for the full year.

For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021.

RELIABILITY INCORPORATED AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(amounts in thousands, except per share data)

Concentration of Credit Risk

For the three months ended March 31, 2022, 24.2% of revenue came from AT&T Services, Inc. (inclusive of its DirecTV division) (“AT&T”), 21.4% from Goldman Sachs, and 11.2% from Janssen Pharmaceuticals (which includes workforce partners Ortho McNeil and Johnson & Johnson). Combined, this totals 56.8% of revenue. AT&T, Goldman Sachs, Janssen, and Morgan Stanley accounted for 24.6%, 15.4%, 9.2% and 13.6%, respectively, in revenue for the same period ended March 31, 2021. No other client has exceeded 10% of revenues in 2022 or 2021.