DEBT

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

DEBT

NOTE 5. DEBT

Factoring Facility & Insurance Financing

The Company is in a factoring and security agreement with Gulf Coast Bank and Trust (“Gulf”), which enables the Company to receive advances on its accounts receivable (i.e. invoices) through Gulf to fund growth and operations. The proceeds of this agreement are most frequently used to pay operating costs of the business, which include employee salaries, vendor payments, and overhead expenses.

Our arrangement calls for interest at prime plus 2%, and includes an advance rate of 15 basis points. The amount of an invoice eligible for sale to Gulf is 93%. This agreement is month-to-month. The Company continues to be obligated to meet certain financial covenants in respect to invoicing and reserve account balance.

Accounts receivables were sold with full recourse. Proceeds from the sale of receivables were $4,996 for the nine-month period ended September 30, 2024, compared to $3,297 for the same period ended on September 30, 2023. The total outstanding balance under the recourse contract was $741 on September 30, 2024, compared to $0 as of September 30, 2023, and $174 on December 31, 2023.

RELIABILITY INCORPORATED AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(amounts in thousands, except per share data)

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.

MMG also enters into short term 10-month loan agreements annually to finance advance payments on crime, EPLI, E&O, and D&O insurances. In 2023-2024, MMG entered into two loans totaling $150 with finance charges over 10 months totaling approximately $15.