10-K: Reliability Inc. Navigates Revenue Dip, Boosts Margins

Reliability Incorporated reports a 13.6% revenue decline in 2025 but achieves gross margin improvement and resolves a significant legal dispute with the Vivos Group.

Summary

• Total revenue for 2025 was $20,717, a 13.6% decrease from $23,982 in 2024.
• Gross profit declined by 7.5% to $2,952 in 2025 from $3,192 in 2024, but consolidated gross margin improved to 14.2% in 2025 from 13.3% in 2024.
• Staffing revenue increased by 23.4% ($771) to $4,072 in 2025, with staffing gross margin expanding to 23.0% from 18.7% in 2024.
• Employer of Record (EOR) revenue decreased by 19.5% ($3,982) to $16,400 in 2025, primarily due to reduced activity from one significant enterprise client and clients ceasing operations.
• The Company reported an operating loss of $(830) in 2025, compared to $(707) in 2024, and a net loss of $(664) in 2025, up from $(594) in 2024.
• Operating Income Before Interest, Taxes, Depreciation and Amortization (OIBITDA) was $(43) in 2025, down from $2 in 2024.
• The Company resolved the long-standing Vivos Matter through a settlement agreement in February 2026, which provides for the transfer of 253,292,210 common shares back to the Company, expected to be held as treasury shares.
• Customer concentration remains high, with the top two clients representing 58.4% of total revenue and the top five clients representing 76.7% in 2025.
• Management implemented cost-management initiatives in 2025, including reduced corporate staffing levels, and expects revenue growth and reduced operating losses in 2026.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a challenging period marked by significant revenue contraction and increased net losses, alongside a going concern warning from auditors. While gross margin improvement and the resolution of the Vivos legal dispute are positive, the company's high customer concentration and reliance on financing for working capital present ongoing vulnerabilities.

Positives

• Consolidated gross margin improved to 14.2% in 2025, matching its historical peak, up from 13.3% in 2024, reflecting favorable changes in revenue mix.
• Staffing revenue increased by 23.4% ($771) in 2025, and staffing gross margin expanded significantly to 23.0% from 18.7% in 2024.
• Managed services and consulting activity saw substantial growth, contributing approximately $221 of incremental gross profit and 160 basis points to consolidated margin improvement.
• The Company successfully reached a settlement agreement in February 2026 for the Vivos Matter, which will result in the transfer of 253,292,210 common shares back to the Company, simplifying the capital structure and reducing future legal costs.
• Management implemented a streamlined cost structure and strengthened sales leadership in 2025, positioning the Company for future growth and improved operating leverage.
• Investment in commercial leadership, including a new Vice President of Sales and a Client Development Manager, with plans for an additional experienced sales resource in early 2026.
• The Company successfully transitioned to the OTC-ID market tier during 2025 and is evaluating advancement to higher OTC tiers (OTCQB or OTCQX).

Negatives

• Total revenue declined by 13.6% ($3,265) to $20,717 in 2025 from $23,982 in 2024, primarily due to reduced EOR revenue.
• EOR revenue decreased by 19.5% ($3,982) in 2025, largely attributable to reduced activity from one significant enterprise client and several clients ceasing operations.
• Net loss increased to $(664) in 2025 from $(594) in 2024.
• Operating Income Before Interest, Taxes, Depreciation and Amortization (OIBITDA) turned negative at $(43) in 2025, compared to $2 in 2024.
• The Company's auditor raised "Substantial Doubt About the Company's Ability to Continue as a Going Concern" due to recurring losses and dependence on receivables-based financing.
• High customer concentration persists, with the top two clients accounting for 58.4% of total revenue and the top five clients for 76.7% in 2025, posing a significant risk if business from these clients declines.
• The business model requires significant working capital, and the Company remains dependent on receivables-based financing arrangements and timely collections from a concentrated customer base.
• Direct Hire performance was lower in 2025, partially offsetting other margin improvements.

Risks

• Demand for staffing and employer-of-record (EOR) services is closely tied to general economic conditions, and downturns, labor market weakness, or reductions in client spending could reduce revenue and profitability.
• Broader economic events such as inflationary pressures, high interest rates, geopolitical instability, or public health events may adversely affect client operations, vendor payment behavior, and workforce demand, and could increase operating costs.
• The business model requires significant working capital, and delays in client payments or reduced access to receivables-based financing could adversely affect liquidity.
• The Company may not be able to raise additional capital on acceptable terms, if at all, and equity financings may dilute existing shareholders or incur costly debt with restrictive covenants.
• The capital structure and potential future issuances of shares, including shares held in treasury, could dilute existing shareholders and adversely affect the market price of common stock.
• Revenue and accounts receivable are highly concentrated among a small number of customers, and the loss of, or reduction in business from, one or more major customers could materially adversely affect results.
• The Company is exposed to employment-related claims and costs, including those related to discrimination, harassment, workplace safety, wage and hour compliance, and worker classification, which could result in costly litigation or regulatory actions.
• The Company assumes payroll and related obligations for its employees and is exposed to client credit risk, meaning it must fund payroll even if clients fail to pay on time.
• Workers' compensation and other insurance costs may increase, reducing margins and liquidity if the Company cannot pass these costs on to clients.
• Government regulation, including federal, state, and local employment laws, could increase compliance costs and expose the Company to penalties or liability.
• The success of the business depends on the ability to attract and retain qualified employees and field talent, and competition for such personnel could deteriorate service quality and constrain growth.
• The business depends on key members of management, and the loss of their services could disrupt operations and delay strategic initiatives.
• Cybersecurity incidents or data breaches could disrupt operations, harm reputation, result in contractual or regulatory liability, and increase costs.
• The Company could face disruption and increased costs from outsourcing or the use of third-party service providers.
• The Company's acquisition strategy creates risks, including integration difficulties, diversion of management attention, overvaluation, and unanticipated liabilities, and acquisitions may not be successful.
• Operations across numerous geographies may be affected by natural disasters, travel disruptions, terrorism, war, public health events, or other events beyond the Company's control.
• The market price of the common stock may be volatile or may decline regardless of operating performance due to various factors, including lack of analyst coverage and general market conditions.
• The common stock is subject to penny stock rules, which may reduce liquidity and increase transaction costs for investors.
• The Company does not intend to pay dividends for the foreseeable future.
• Restrictions on reliance on Rule 144 applicable to former shell companies may limit resale of restricted securities.
• The Company may have contingent liabilities arising from actions taken by prior owners or related parties that were not disclosed at the time of the Merger.
• Costs and risks associated with being a public company, including compliance with internal control requirements, may adversely affect the business.
• The common stock is not listed on a national securities exchange, and an active trading market may not develop, which could affect liquidity and the ability to raise capital.

Future Outlook

Management anticipates revenue growth in 2026 relative to 2025, driven by a streamlined cost structure, strengthened sales leadership, and a renewed focus on higher-margin service lines such as Staffing Solutions, managed services, and direct hire. The Company expects to reduce operating losses compared to 2025 through revenue growth, margin mix enhancement, and disciplined cost management. Hiring plans will remain targeted primarily toward revenue-generating roles, with additional expansion contingent upon sustained growth. The Company will continue to actively manage working capital and liquidity, evaluating funding sources based on cost of capital, timing, and client concentration considerations. Capital discipline will remain central to operational decision-making, and the Company continues to evaluate potential advancement to higher OTC tiers.

Management Comments

• Management views 2025 as a transitional year characterized by revenue contraction in certain service lines, expansion of staffing activities, cost realignment initiatives, and restructuring of the sales organization intended to support future growth.
• Management expects legal costs associated with award recovery and related proceedings to decline in 2026 following execution of a settlement agreement on February 16, 2026.
• Management anticipates revenue growth in 2026 relative to 2025, subject to client demand and broader economic conditions.
• Improved profitability is a key objective for 2026. Management expects to reduce operating losses compared to 2025 through revenue growth, margin mix enhancement, and disciplined cost management.
• Given current liquidity priorities, management views acquisition activity in 2026 as opportunistic rather than near-term dependent.
• Management remains focused on strengthening operating performance as the primary driver of long-term shareholder value.

Industry Context

StockSavvy.ai notes that Reliability Incorporated operates within the U.S. staffing market, which is projected for modest growth in 2026 following a a contraction in 2025, according to Staffing Industry Analysts (SIA). The industry is seeing continued adoption of flexible workforce models, integration of AI and automation in recruitment, and increasing demand for outsourced and managed services solutions due to regulatory complexity. Reliability's strategic shift towards higher-margin staffing and managed services aligns with these broader industry trends, particularly the rising interest in comprehensive outsourced workforce solutions and the need for compliance support in highly regulated environments. The company's focus on vertical expansion within existing accounts and diversification beyond media roles also reflects the industry's evolving needs for specialized talent across various sectors.

Comparison to Industry Standards

• The U.S. staffing market is projected to grow modestly in 2026 following a contraction in 2025, with cumulative growth of 10% between 2025 and 2030, according to Staffing Industry Analysts (SIA). Reliability's anticipated revenue growth in 2026 aligns with this modest industry recovery.
• The U.S. staffing market is large and highly fragmented, projected to reach $183 billion in 2026, a 2% increase from 2025. Reliability operates within specialized professional segments, which is a common strategy for smaller firms in a fragmented market.
• The American Staffing Association (ASA) projects U.S. GDP growth of 2.1% in Q1 2026, which is significant given the strong correlation between staffing industry performance and GDP trends. Reliability's performance is sensitive to these macroeconomic conditions.
• Industry surveys indicate a majority of talent acquisition functions now utilize AI-enabled tools, with growing deployment of autonomous agents. Reliability's filing does not explicitly detail its AI adoption but mentions reliance on third-party digital platforms for talent sourcing, which is a pervasive industry trend.

Management Changes

Corporate Governance

Legal Proceedings

• The Company and its subsidiary, The Maslow Media Group, Inc. (MMG), initiated legal actions against certain former shareholders and related parties (the Vivos Group) in March 2020, alleging violations of the Merger agreement and defaults under related party debt obligations.
• The disputes were submitted to binding arbitration in 2022, with awards issued in favor of the Company and MMG in 2022 and 2023, providing for recovery of principal amounts, contractual interest, attorneys' fees, and contract damages, totaling approximately $8,808 as of December 31, 2025.
• The arbitration awards were subsequently confirmed by the Circuit Court for Montgomery County, Maryland, and became final judgments in January 2024.
• In February 2026, the Company entered into a settlement agreement with members of the Vivos Group, providing for the transfer of an aggregate of 253,292,210 shares of the Company's common stock to the Company in satisfaction of amounts owed under the arbitration awards.
• As of the filing date (March 31, 2026), the Company has filed a motion with the court seeking entry of a consent judgment to effectuate the transfer of these shares, but the transfer process has not yet been completed.

Related Party Transactions

• Prior to and following the October 29, 2019 Merger, members of the Vivos Group were majority shareholders of the Company and were considered related parties, remaining so as of December 31, 2025, due to their ownership interests.
• Amounts due from the Vivos Group arose from acquisition-related borrowings and advances made prior to the October 29, 2019 merger, totaling $6,357 as of December 31, 2025, and $5,847 as of December 31, 2024.
• These related party obligations were incorporated into the final arbitration awards and related court judgments in the Vivos Matter.
• On February 16, 2026, the Company entered into a settlement agreement with the Vivos Group, where the Vivos Group agreed to transfer 253,292,210 shares of the Company's common stock to the Company in full satisfaction of the outstanding judgments and related obligations. This settlement occurred subsequent to December 31, 2025, and the share transfer process is ongoing.

Stakeholder Impact

• Shareholders: Face potential dilution from future equity financings, market price volatility, and limitations due to penny stock rules. The Vivos settlement, once completed, is expected to simplify the capital structure and may provide future flexibility for strategic transactions or equity-based financing. No cash dividends are planned for the foreseeable future.
• Employees: Experienced reduced corporate staffing levels in 2025 as part of cost-management initiatives. The Company is committed to maintaining a professional, respectful, and inclusive workplace, prohibiting discrimination, harassment, and retaliation. Approximately 15% of field talent workers are represented by a labor union.
• Customers: Some clients reduced EOR revenue, while others increased demand for staffing solutions. High client concentration means the loss of major clients could significantly impact revenue and service delivery.
• Creditors: The Company relies on receivables-based financing arrangements (factoring and purchase programs) to manage working capital, which increases financing costs and exposes it to liquidity sensitivities based on client payment timing and revenue concentration.
• Management: Devoted significant executive resources and incurred legal expenses related to the Vivos Matter in 2025, with expectations for these costs to decline in 2026. Management is focused on strengthening operating performance, managing liquidity, and pursuing strategic growth initiatives.

Next Steps

• Hold an annual meeting of shareholders following the resolution of ownership matters related to the Vivos settlement.
• Reduce legal costs associated with award recovery and related proceedings in 2026.
• Achieve revenue growth in 2026 relative to 2025.
• Reduce operating losses compared to 2025 through revenue growth, margin mix enhancement, and disciplined cost management.
• Increase the proportion of revenue from higher-margin Staffing Solutions, including managed services and direct hire.
• Continue to actively manage working capital and liquidity, evaluating funding sources based on cost of capital, timing, and client concentration considerations.
• Evaluate potential advancement to higher OTC tiers, including OTCQB or OTCQX.
• Complete the transfer of 253,292,210 shares from the Vivos Group to the Company's treasury.
• Potentially pursue recapitalization initiatives, strategic transactions, or equity-based financing opportunities using treasury shares.
• An additional experienced sales resource is expected to join in early 2026.

Key Dates

Recommendation

While Reliability Incorporated faces significant challenges, including a substantial revenue decline, recurring net losses, and a going concern warning, the company has made strategic moves to improve its gross margin mix by focusing on higher-margin staffing services. The resolution of the long-standing Vivos legal dispute, though not fully completed, removes a major overhang and offers future capital structure flexibility. The company's efforts to streamline costs and invest in sales leadership indicate a proactive approach to improving future performance. However, the high customer concentration and ongoing liquidity dependence warrant caution. A 'hold' recommendation reflects the mixed signals: the company is actively addressing its issues and has some positive strategic shifts, but the financial performance remains weak, and significant risks persist, making it unsuitable for a 'buy' or 'sell' at this juncture.

Keywords

workforce solutions, employer of record, EOR, staffing solutions, managed services, video production, direct hire, human capital, SEC filing, 10-K, financial performance, gross margin, revenue decline, Vivos settlement, OTC Markets, compliance, risk management, corporate governance, Reliability Incorporated, Maslow Media Group