10-K: Reliability Inc. Reports Increased Revenue but Net Loss for Fiscal Year 2024 Amid Ongoing Legal Battles

Sentiment:

Annual Report 31 March 2025 5:24 PM

Reliability Inc. saw revenue growth in 2024, driven by its EOR segment, but still reported a net loss due to margin compression and legal expenses related to disputes with the Vivos Group.

Capital raiseThe company plans to tap the capital markets to pursue an acquisition growth strategy once it is able to issue additional shares.The company does not have any authorized shares that are not issued.No shares are expected to become available to the Company until an amendment to the Companys Certificate of Formation to increase the number of authorized shares of Common Stock or a stock split of the outstanding shares of Common Stock is approved.Such approval may not likely occur until the Vivos Matter is completely resolved.

Worse than expectedThe company experienced a net loss of $594,000 in 2024, although an improvement from the $740,000 net loss in 2023.Gross margin declined to 13.3% due to a shift towards lower-margin EOR services and increased use of 1099 contractors.

Summary

Reliability Inc., through its subsidiary Maslow Media Group, provides workforce solutions including Employer of Record (EOR) services, recruiting and staffing, and video production.
The company reported revenue of $23.98 million for the year ended December 31, 2024, an 11.8% increase from $21.45 million in 2023.
Despite the revenue increase, the company experienced a net loss of $594,000 in 2024, an improvement from the $740,000 net loss in 2023.
The company's gross profit increased by 5.0% to $3.19 million, but gross margin declined to 13.3% due to a shift in revenue mix towards lower-margin EOR services and increased use of 1099 contractors.
Selling, general, and administrative expenses increased to $3.90 million, driven by higher salaries and benefits, but offset by lower legal expenses.
The company is involved in ongoing legal proceedings with the Vivos Group, which has impacted its ability to access capital markets and execute its growth strategy.
The company's top three clients accounted for 63.6% of total revenue in 2024, highlighting a concentration risk.
Maslow's growth strategy focuses on expanding its media staffing, IT staffing, creative and marketing staffing, and EOR services.
The company expects to see an uptick in IT staffing in 2025 and is expanding its focus to include creative and marketing services.
Reliability intends to hold a shareholder meeting to evaluate and potentially advance strategic initiatives once the Vivos Matter is resolved.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. Revenue growth is positive, but the net loss and margin compression are concerning. The ongoing legal battle adds uncertainty. The sentiment is neutral, reflecting both positive and negative aspects.

Positives

Revenue increased by 11.8% to $23.98 million in 2024.
Net loss improved from $740,000 in 2023 to $594,000 in 2024.
The company is actively pursuing legal judgments against the Vivos Group.
The company is expanding its service offerings to include creative and marketing services.
The company implemented ADP as its payroll processor to improve efficiency and client experience.

Negatives

The company experienced a net loss of $594,000 in 2024.
Gross margin declined to 13.3% due to a shift towards lower-margin EOR services and increased use of 1099 contractors.
The company's revenue is highly concentrated among its top three clients.
The company is facing challenges in attracting and retaining qualified employees due to the legal dispute with the Vivos Group.
The company's ability to access capital markets and execute its growth strategy is impacted by the legal proceedings with the Vivos Group.

Risks

The ongoing legal dispute with the Vivos Group is preventing the company from accessing capital markets and executing its growth plans.
The company's revenue is highly concentrated among its top three clients, making it vulnerable to the loss of any of these clients.
The company is exposed to employment-related claims and costs, as well as periodic litigation.
The company's business is subject to various government regulations, and failure to comply could lead to financial liability and regulatory action.
The company faces significant competition from other companies that offer similar solutions.
The company may suffer from a lack of availability of additional funds.
The company services numerous geographic areas and therefore may be subject to risks such as natural disasters and travel-related disruptions.
A downturn of the U.S. or global economy could result in our clients using fewer workforce solutions or becoming unable to pay us for our services on a timely basis or at all, which would materially adversely impact our business.

Future Outlook

The company aims to accelerate growth in 2025 and beyond, with a focus on operational efficiency, client expansion, and profitability improvements. They expect to see an uptick in IT staffing and are expanding their focus to include creative and marketing services. The company may consider acquisitions of synergistic staffing companies to accelerate growth once the Vivos Matter judgements are recovered.

Industry Context

The workforce management industry, particularly temporary staffing, plays a crucial role in providing businesses with the flexibility to adjust their workforce in response to changing market conditions. The U.S. staffing market is expected to grow by 5% in 2025, following a 10% decline in 2024. Regulatory complexity continues to drive demand for EOR solutions, particularly among employers with multi-state operations.

Comparison to Industry Standards

The document mentions the Staffing Industry Analysts (SIA) and the American Staffing Association (ASA) as sources for industry data and trends.
The U.S. staffing market is projected to reach $217 billion in 2025, a 5% increase from 2024, according to SIA.
The ASA projects U.S. GDP growth of 1.7% in Q1 2025, which is significant given the strong correlation between staffing industry performance and GDP trends.
The document does not provide specific comparisons to named competitors or projects, but it does note that the staffing services market is highly fragmented and intensely competitive.

Legal Proceedings

A series of legal actions and hearings took place starting in March of 2020 with the Vivos Group over Merger agreement violations and Vivos Group debt obligations.
On August 31, 2022, the arbitrator issued the Award with the Company and MMG prevailing on their claims, including citing fraud damages.
Supplemental awards were subsequently issued on May 17, 2023, October 10, 2023, and finally on October 27, 2023.
On December 29, 2023, the Circuit Court for Montgomery County, Maryland signed orders entering all three arbitration awards as judgments in Reliabilitys case against the Vivos Group.
These orders became final on January 29, 2024, when the appeal period expired for the defendants.
In September 2022, MMG learned that a Vivos IT, LLC lawsuit against SWC in May 2019 included MMG as a plaintiff.
On December 18, 2024, MMG and other original parties settled with Second Wind Consultants.

Related Party Transactions

The company has several notes receivable from related parties, including Vivos Holdings, LLC and Vivos Real Estate, LLC.
Prior to the Merger, Vivos Holdings collaborated on a share swap of Maslow 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.
On October 29, 2019, prior to the Merger, Naveen Doki and Silvija Valleru became beneficial owners of Company Common Stock, equal to approximately 69 % and 17 % of the total number of shares of the Companys Common Stock outstanding after giving effect to the Merger, respectively.

Stakeholder Impact

Shareholders: The ongoing legal battle with the Vivos Group is impacting the company's ability to access capital markets and execute its growth strategy, potentially affecting shareholder value.
Employees: The company is facing challenges in attracting and retaining qualified employees due to the legal dispute with the Vivos Group.
Clients: The company is focused on improving client experiences and creating operational efficiencies through the implementation of ADP as its payroll processor.
Creditors: The company relies on its factoring relationship with Gulf Coast Bank and its BIP agreement with American Express for liquidity.

Next Steps

MMG expects the Receiver to make a recommendation to the arbitrator in March 2025 regarding the Vivos Matter.
The Company aims to transition to the OTCQB and/or OTCQX markets as a step toward an eventual listing on the NASDAQ Exchange.
Following the successful collection of Vivos-related debts, MMG intends to hold a shareholder meeting to evaluate and potentially advance these strategic initiatives.

Key Dates

Date	Description
1953	Reliability Incorporated was incorporated in Texas.
1988	Maslow was founded.
1992	Maslow was incorporated in Virginia.
2007	Reliability shut down its original business.
2016-11-09	Linda Maslow sold the business to Vivos Holdings, LLC.
2019-10-29	The reverse merger between Reliability and Maslow was consummated.
2020-03	Legal actions and hearings began with the Vivos Group.
2021-09	Arbitration was agreed to by both the Vivos Group and MMG.
2022-02	Arbitration proceedings began.
2022-08-31	The arbitrator issued an award with the Company and MMG prevailing on their claims.
2023-05-17	Supplemental awards were issued, appointing a rehabilitative receiver.
2023-06	VREH successfully sold the property at 22 Baltimore Road in Rockville, Maryland, relieving Maslow of any liability related to the building.
2023-08-24	Factoring arrangement had been sold to Gulf Coast Bank and Trust (Gulf), by Triumph who decided to sell its non-transportation portfolio.
2023-10-10	Supplemental awards were issued.
2023-10-27	Supplemental awards were issued.
2023-12-29	The Circuit Court for Montgomery County, Maryland signed orders entering all three arbitration awards as judgments in Reliabilitys case against the Vivos Group.
2024-01-10	The U.S. Department of Labor (DOL) published a final rule modifying its Wage and Hour Division regulations to replace its analysis for determining employee or independent contractor classification under the Fair Labor Standards Act (FLSA).
2024-01-29	Orders entering all three arbitration awards as judgments in Reliabilitys case against the Vivos Group became final.
2024-03-11	The U.S. Department of Labor (DOL) final rule modifying its Wage and Hour Division regulations went into effect.
2024-04	The company entered into a Buyer Initiated Payment (BIP) agreement with American Express (Amex).
2024-10	Workers compensation premiums rose 27.9%.
2024-10	The five-year eligibility for all holders of these Warrants expired.
2024-12-18	MMG and other original parties settled with Second Wind Consultants.
2024-12-31	As of December 31, 2024, there were 300,000,000 shares of the Companys common stock outstanding.
2025-01	New state laws on paid leaves, discrimination protections, child labor, medical marijuana, and workplace safety are set to take effect.
2025-01-27	As of January 27, 2025, the company had 23 team members (staff employees).
2025-03	MMG expects the Receiver to make a recommendation to the arbitrator.
2025-03-31	As of March 31, 2025, there were 300,000,000 shares of the Registrants common stock outstanding.

Keywords

Employer of Record, EOR, staffing, recruiting, video production, workforce management, Maslow Media Group, Reliability Inc., Vivos Group, legal proceedings, financial results

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