LIQUIDITY AND GOING CONCERN

6 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

LIQUIDITY AND GOING CONCERN

NOTE 2. LIQUIDITY AND GOING CONCERN

Going Concern

Management considers on a regular basis, the Company’s ability to continue as a going concern. The factors which have impacted the business and our liquidity are;

● Notification from the SBA on June 10, 2021, that our PPP Loan totaling $5,275 in principal and interest had been 100% forgiven;

● Eligibility for Employee Retention Credits (“ERC”) resulting in a refund in April 2021 in the amount of $1,440;

● Continued eligibility for ERCs in the second quarter resulting in additional credits of $153 in the second quarter;

● Operating loss of approximately $224 for the six months ended June 30, 2021;

● Operating loss of $161 for the three months ended June 30, 2021;

● The pandemic resulting decline in client demand for our services continuing through the present;

● Difficulties in raising cash via public market for organic and inorganic growth, due to lack of unissued authorized shares available for Company use, despite having public company cost structure;

● Inability to realize approximately $4.4M in notes receivables from Vivos Debtors; and

● Contingent liabilities, described further in Note 6.

RELIABILITY INCORPORATED AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

(amounts in thousands, except per share data)

All these conditions noted above, most notably the adverse impact of COVID 19 on sales and a scenario where the presumption is all debts come due with an inability to raise cash through equity given the unavailability of unissued authorized shares, raise substantial doubt about the Company’s ability to continue as a going concern. There can be no assurances that the Company will be successful in managing the impact of the foregoing or its ability to maintain sufficient liquidity over a period of time that will allow it to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liability that may result from the possible inability of the Company to continue as a going concern.

The Company’s ongoing liquidity position is facing pressures due to the loss of business resulting from the COVID-19 pandemic as well as increased pressure to make cash payments, which ultimately took place on July 21, 2021, (See Note 10: Subsequent Events) pursuant to the Settlement Agreements (filed as exhibits 10.4, 10.5 and 10.6 the Company’s Current Report on Form 8-K filed on October 30, 2019) prior to the Company’s anticipated liquidation of the shares of Company Common Stock pledged pursuant to the Agreement for the Contingent Liquidation of the Common Stock of Reliability Incorporated (as successor in interest to MMG Media Group, Inc.), dated October 28, 2019 (the “Liquidation Agreement”) (filed as exhibit 10.30 to the Company’s Current Report on Form 8-K filed on October 30, 2019). The Vivos Group that are the counterparties to the Liquidation Agreement are not cooperating with the Company to liquidate the shares subject thereto as contemplated thereby. No assurance can be given that the Company will return to its pre-pandemic revenue levels, and how long it will take to enforce the requirements of the Liquidation Agreement. As a result, the Company faces hurdles to maintaining sufficient liquidity to continue to operate, in which case the Company might be forced to liquidate or seek to reorganize under applicable bankruptcy statutes.

The Company is quoted on the OTC Marketplace under the symbol “RLBY”.