DEBT

9 Months Ended

Sep. 30, 2025

Debt Disclosure [Abstract]

DEBT

NOTE 5. DEBT

Factoring Facility

The Company is party to a factoring and security agreement with Gulf Coast Bank and Trust (“Gulf”), which provides liquidity by enabling the Company to sell eligible accounts receivable (i.e., invoices) to Gulf in exchange for immediate cash advances. The proceeds from this agreement are primarily used to fund operating expenses, including employee compensation, vendor payments, and general overhead.

Under the terms of the agreement, Gulf advances funds at an interest rate equal to the prime rate plus 2%, with an additional advance fee of 15 basis points. The eligible advance amount is up to 93% of the face value of an invoice. The agreement is structured on a month-to-month basis and requires the Company to comply with certain financial covenants, including those related to invoicing activity and minimum reserve account balances.

Receivables are sold to Gulf on a full recourse basis, meaning the Company retains the risk of collection. Because the factoring arrangement is full recourse, it is accounted for as a secured borrowing under ASC 860, Transfers and Servicing, rather than as a sale of receivables. For the nine months ended September 30, 2025, the Company received $6,453 in proceeds from the sale of receivables and repaid $8,670 under the agreement. This compares to $4,496 in proceeds and $4,428 in repayments for the period ended September 30, 2024. The outstanding balance under the factoring arrangement was $157 as of September 30, 2025, $827 on June 30, 2025, $1,163 as of March 31, 2025, and $2,375 as of December 31, 2024.

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.

RELIABILITY INCORPORATED AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025

(amounts in thousands, except per share data)

Receivables Purchase Programs

During 2025, the Company began participating in receivables purchase programs with JPMorgan (“JPM”) and Mitsubishi UFJ Financial Group (“MUFG”) under which certain approved trade receivables may be sold on a non-recourse basis (other than limited breach-based repurchase obligations). Transfers that meet program eligibility are accounted for as sales under ASC 860 and the receivables are derecognized; related program discounts and fees are recorded as loss on sale. Cash proceeds and settlements are presented in operating cash flows.

During the three and nine months ended September 30, 2025, we sold $1,670 and $2,264 of receivables under these programs, received $1,643 and $2,229 of cash proceeds, recognized $27 and $35 of discounts and fees recorded as loss on sale, and had $607 and $705 of derecognized receivables outstanding at period end. No repurchases occurred. 

Insurance Financing

MMG also employs short term 10-month loan agreements annually to finance advance payments on Crime, EPLI, E&O, and D&O insurances. In 2024-2025, MMG entered into two loans totaling $140 with finance charges each over 10 months totaling approximately $6. The combined APR for these loans is 5.0 %.

Software Financing with Long Term Debt

On October 30, 2024, the Company entered into a deferred payment agreement related to its ADP implementation, completed in January 2024. The total amount of $52 is payable over 24 months with an interest rate of 6.21%. On April 4, 2025, the Company entered into a second deferred payment agreement totaling $39, related to the implementation and multi-year licensing of the Datarails, analytics platform. This amount is payable over 36 months and carries a 0.0% interest rate. As of September 30, 2025, the aggregate current portion of these obligations was $39, with the long-term portion totaling $21.