RLBY 10-K & 10-Q changes, risk factors and insider trading

An investment in our Common Stock should be considered high risk.

An investment in RLBY should be considered high risk and requires long-term commitment, with no certainty of return.

We face risks related to health pandemics, wars, inflation, and other widespread outbreaks of contagious disease, such as COVID-19 and its variants, or other potential causes of global instability which could significantly disrupt our operations and impact our financial results.

The demand for staffing services is closely tied to general economic conditions. One notable shift in the industry has been the widespread adoption of remote work, which has negatively impacted the media staffing sector. Some companies have chosen not to restore their pre-pandemic workforce levels or leveraged new technology to create a more efficient operation, requiring fewer personnel to meet their needs. With conversations expanding towards more return-to-work initiatives, staffing services demand may potentially increase. Employee turnover may increase with individuals looking to remain in a remote position.

Future public health developments, including potential new viruses or variants of COVID-19, introduce additional uncertainties. The impact on our business will depend on various factors, including vaccine distribution, government regulations at federal, state, and local levels, and evolving client policies aimed at mitigating health risks. Given these uncertainties, we remain focused on agility, proactive workforce planning, and diversifying our service offerings to navigate potential disruptions effectively.

Disputes between Reliability and the Vivos Group put our growth plans on hold as Reliability cannot tap the public markets for capital.

Approximately 84.4% of Company’s Common Stock is owned by two groups of related parties (“Vivos Group”), as outlined below. However, during the period of receivership, Vivos Group owners or holders of all common stock shares are ineligible to vote those shares per the arbitration awards (see Item 3).

Related Party Indebtedness; Default.

Prior to the Merger, shareholders of Vivos (“Vivos Debtors”), directly and through affiliated entities, borrowed funds from Maslow (the “Related Party Debt”). As of December 31, 2019, the aggregate outstanding balance including principal and interests was approximately $4,169.

The Related Party Debt is currently in default, and as of December 31, 2024, had a balance of $5,847. In August 2022, Maslow learned it had prevailed in arbitration against the Vivos Group. In May and October of 2023, the Company secured three supplemental awards. On January 29, 2024, these arbitration awards entered as judgments in Reliability’s case against the Vivos Group, allowing the appointed Receiver to pursue collection efforts.

Additionally, prior to the Merger, members of the Vivos Group incurred financial obligations through their other business ventures and caused Maslow to become co-obligor or guarantor, pledging Maslow’s assets as security. In 2021, Maslow paid approximately $450 to satisfy obligations incurred before the Merger.

In September 2022, MMG discovered, after it was concealed by the codefendants and their counsel, that a lawsuit filed by Vivos IT, LLC against Second Wind Consultants (“SWC”) in May 2019 included MMG as a plaintiff. The lawsuit, which accused SWC of fraud in the inducement and unjust enrichment, was initiated by five parties including Vivos IT, LLC, Maslow Media Group, Inc., Suresh Venkat Doki, Naveen Doki, and Silvija Valleru. The case related to a debt restructuring services agreement secured by the Vivos Group for their then-owned entities, including Maslow Media Group, Inc., Health Care Resources Network, Inc., Mettler & Michael, Inc., 360 IT Professionals, Inc., and US IT Solutions, Inc.

Unbeknownst to MMG management, SWC countersued all plaintiffs on September 30, 2019, seeking to collect an unpaid balance of $403. This litigation was not disclosed to Maslow management or Reliability prior to the Merger’s closing on October 29, 2019. On December 18, 2024, MMG and other original parties settled with Second Wind Consultants. MMG’s portion was $10.

It is highly likely that the initial portion of the recovered arbitration award will be in shares of our common stock rather than cash, which could negatively impact the Company’s liquidity and working capital.

As of December 31, 2024, the Vivos Group’s outstanding Notes Receivable obligation was $5,847. However, the composition of Vivos Group assets available to settle this obligation remains uncertain. Management anticipates that common stock will be used to satisfy the initial portion of the overall liability. With awarded legal fees and the fraud award of $1,000, the total liability as of February 28, 2025, was $8,280.

The Company could be subject to unknown liabilities incurred by its previous sole shareholder, Vivos Holdings, LLC.

Maslow, subsequent to the Merger with Reliability, discovered that unbeknownst to them at the time of origination that it was guarantor or direct obligor for loans, advances, or other liabilities for the benefit of the Vivos Group and related entities. For example, we became aware of being a party to the SWC lawsuit in September 2022. Legal fees for the SWC matter which resulted in a $10 settlement, were approximate additional $170. There may be additional obligations of other Vivos Group entities for which Maslow may have liability as a result of these arrangements that are not known to the management of Maslow. These liabilities could have a material adverse effect on the Company and the value of the Common Stock. Reliability periodically runs lien checks to detect if there are any other new uncommunicated pre-existing liabilities on the record.

The Arbitration outcome could lead to a new shareholder base where the new affiliated parties decide a different strategic direction for the Company and take appropriate action.

If a new shareholder base is the outcome of the arbitration, a new shareholder base may decide to change the strategic direction of the Company in a significant way. This might include, but is not limited to, capitalization plans, whether the Company remains a public company, merger and acquisition plans, corporate structure, and executive management.

The success of our business depends on our ability to attract and retain qualified employees that possess the skills demanded by clients and intense competition may limit the ability to attract and retain such qualified employees.

For the Company’s staffing, executive recruiting, and video production services, the success of the Company depends on the ability to attract and retain qualified employees who possess the skills and experience necessary to meet the requirements of clients or to successfully bid for new client projects. The legal dispute with the Vivos Group has negatively impacted the Company’s ability to attract and retain some top talent The ability to attract and retain qualified employees could be impaired by improvement in economic conditions resulting in lower unemployment, increases in compensation, or increased competition. During periods of economic growth, the Company faces increasing competition from other staffing companies for retaining and recruiting qualified temporary and permanent employees, which in turn leads to greater advertising and recruiting costs and increased salary expenses. These problems can be exacerbated by the fact that the Company often must attract and retain employees with skills specific to the video production industry, which narrows the pool of available, qualified employees that the Company may draw upon. If the Company cannot attract and retain qualified temporary and permanent employees, the quality of its services may deteriorate and the financial condition, business, and results of operations may be materially adversely affected.

Our success depends to a large degree on growth in market acceptance of human resources outsourcing and related services we provide.

Because the majority of our revenues currently come from EOR services, a substantial portion of our success depends on the willingness of clients to outsource their contingent staffing requirements to a third-party service provider. Many companies have invested in substantial personnel, infrastructure, and financial resources in their own internal HR organizations, and therefore, may be reluctant to switch to our solution. Companies may not engage us for other reasons, including a desire to maintain control over all aspects of their HR activities, a belief that they manage their HR activities more effectively using their internal administrative organizations, perceptions about the expenses associated with our services, perceptions about whether our services comply with laws and regulations applicable to them or their businesses, or other considerations that may not always be evident. We also lost some of our headcounts with existing clients who decided to convert placed resources to their payroll. This has had a modest impact on our business with a few clients. Additional concerns or considerations may also emerge in the future. We must address our potential clients’ concerns and explain the benefits of our approach in order to convince them to change the way that they manage their HR activities, particularly in parts of the United States where our Company and solution are less well-known. If we are not successful in addressing potential clients’ concerns and convincing companies that our solution can fulfil their HR needs, then the market for our solution may not develop as we anticipate, thus our business may not grow.

Any significant or prolonged economic downturn could result in clients using fewer staffing and executive recruiting services offered by the Company, terminating their relationship with the Company, or becoming unable to pay for services on a timely basis or at all.

Because demand for the types of services our Company offers is sensitive to changes in the level of economic activity, the Company’s business has in the past, and may in the future, suffer during economic downturns. Demand for the services we provide is highly correlated to changes in the level of economic activity and employment. Consequently, as economic activity begins to slow down, it has been the Company’s experience that companies tend to reduce their use of our services, resulting in decreased revenues and profit levels. In addition, the Company may experience pricing pressure during economic downturns, which could have a negative impact on the results of operations. Further, many of our clients are corporate media departments and broadcast networks. As a result, any industry downturn that affects these kinds of companies could have a major effect on our business.

The deterioration of the financial condition and business prospects of clients could reduce their need for the staffing and executive recruiting services we provide and could result in a significant decrease in the Company’s revenues and earnings derived from these clients. In addition, during economic downturns, companies may slow down the rate at which they pay their vendors, seek more flexible payment terms, or become unable to pay their debts as they become due.

In late 2022 and early 2023, some of our clients announced layoffs, which led to a reduced usage of our staff in 2024. Our two largest clients, however, increased their business as measured by revenue by 2% and 6%, respectively, in 2024 over 2023.

In 2023, two of our top 20 clients informed us they were scaling back their media operations due to financial hardship. Thus, revenues for these two clients declined in revenue by a combined $492 in 2024 over 2023 and an additional $56 when comparing 2024 to 2022.

State unemployment insurance expense is a direct cost of doing business in the staffing industry. State unemployment tax rates are established based on a company’s specific experience rate of unemployment claims and a state’s required funding formula on covered payroll. Economic downturns have in the past, and may in the future, result in a higher occurrence of unemployment claims resulting in higher state unemployment tax rates. This would result in higher direct costs for us. In addition, many states’ unemployment funds were depleted during the recent economic downturn and many states have borrowed from the federal government under the Title XII loan program. Employers in all states receive a credit against their federal unemployment tax liability if the employer’s federal unemployment tax payments are current and the applicable participating state is also current with its Title XII loan program. If a state fails to repay such loans within a specific time period, employers in such states may lose a portion of their tax credit.

The Company is exposed to employment-related claims and costs, as well as periodic litigation that could materially adversely affect the Company’s financial condition, business, and results of operations.

Our business model involves employing individuals and placing such individuals in our clients’ workplaces. However, the Company has limited control over the work environments at client locations. As the employer of record, the Company assumes certain risks and potential liabilities related to workplace incidents involving both employees and clients, including:

The Company may incur fines and other losses and negative publicity with respect to any of these situations. Some of the claims may result in litigation, which is expensive and distracts attention from the operation of ongoing business.

The Company assumes the obligation to make wage, tax, and regulatory payments for our employees, and, as a result, is exposed to client credit risks.

The Company generally assumes responsibility for and manages the risks associated with employees’ payroll obligations, including liability for payment of salaries, wages, and certain taxes. These obligations are fixed, whether clients make payments as required by service contracts with the Company, which exposes the Company to credit risks of clients.

Workers’ compensation costs for employees may rise and reduce our margins and require more liquidity.

The Company is responsible for, and pays, workers’ compensation costs for individuals employed by the Company – both regular staff and client employees for which the Company is the employer of record. At times, these costs have risen substantially as a result of increased claims and claim trends, general economic conditions, changes in business mix, increases in healthcare costs, and government regulations. In October 2024, our premiums rose 27.9%. Although the Company carries insurance, unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates, and medical cost inflation could result in costs that are significantly different than initially reported. If future claims-related liabilities increase due to unforeseen circumstances, or if new laws, rules, or regulations are passed, costs could increase significantly. There can be no assurance that the Company will be able to increase the fees charged to clients in a timely manner and in a sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.

In 2024, revenue reliance was concentrated among five key clients, compared to seven in 2023 that each contributed more than 5% of total revenue. In 2024, three clients contributed 10% or more of total revenue with the top two accounting for 49.5% of total revenue and our top client alone representing 26.9%. The top five clients collectively generated 74.4% of total revenue.

In 2023, two clients exceeded the 10% revenue threshold, contributing a combined 40.3%, with the top client responsible for 25.1%.

The loss of or a substantial reduction in business from these customers would have a significant negative impact on our business and our operating results. We may not be successful in finding a client or clients that could replace the level of loss of these customers, and as such, it could have a negative impact on our revenue and results of operations for a prolonged period.

Improper disclosure of employee and client data could result in liability and harm to the reputation of the Company.

In 2024, MMG achieved improvements across key financial metrics, including revenue, gross profit, operating income, and net income. Revenue led the way with an increase of $2,531 (11.8%) over 2023, while gross profit rose by $153 (5.0%) to $3,192. For the second consecutive year, operating income improved, with operating loss narrowing to $707 from $749 in the prior year.

Our top five enterprise clients remained highly active in 2024, leveraging our personnel across various projects. Each generated at least $1,000 in revenue, with our largest client reaching a record $6,453 - an increase of $1,058 (19.6%) in their EOR business. Our second-largest client expanded by $2,171 (66.8%) to $5,420, while our third-largest client grew by $1,416 (71.7%) to $3,391, driven largely by broadcasting election-related events, which likely contributed to over half of its 2024 growth.

As a standalone entity, Maslow has remained profitable for the past seven years, as reflected in our OIBITDA, which was $2 in 2024 and $57 in 2023 (see Item 6).

We remain committed to accelerating growth in 2025 and beyond, with a focus on operational efficiency, client expansion, and profitability improvements.

2025 and beyond

While revenue growth was strong in 2024, margin compression due to increased reliance on EOR and 1099 contractors impacted profitability. Investments in sales, client services, and HR/payroll increased SG&A expenses, but cost savings in legal and corporate expenses helped offset some of these increases. Moving forward, strategic efforts will focus on continuing our revenue ascension, improving gross margins, diversifying revenue streams, and optimizing cost structures to enhance profitability.

All indications are for two of our three largest clients to produce similar if not greater revenues in 2025, while the other won’t have quite the same business levels in 2025 since last year’s election spurred increased EOR.

The additional staffing business development professionals we hired to grow the staffing side of our business saw progress in 2024 bringing in $822 in revenue from 10 new accounts. Additionally, we have several opportunities in the pipeline we expect to close in late first quarter or early second.

We expect our Direct Hire business to grow in 2025 as a number of existing clients have taken advantage of our expertise and speed of filling roles outside the Media space. This success should enable us to fill even more diverse functional openings in 2025 and beyond. As we do the same for our other large clients, so should our opportunity to increase our requisition volume and convert to fills and revenue.

EOR has been the Company’s primary revenue source for many years, and it represented 85.0% in 2024, an 1.9% increase from 83.2% in 2023. Our challenge over the past five years has been seeing several medium to large clients post COVID roll back their Media functions, activities and personnel. Economic conditions and specific esoteric issues affected at least one client, causing them to cease using outside media services altogether. Despite lower payrolls for some, the challenge with EOR is the complexity of managing HR and Payroll for a myriad group of clients who vary significantly in uniformity and have unique needs that absorb our staff’s attention. This client service intensity is somewhat unique to Media EOR than to other EOR providers due to the idiosyncratic ways that employee time is scheduled, tracked, recorded, and managed. This complexity is why we have added client service and HR personnel and technology to best service our gold star clients.

Hence, our goal is to maintain and build on our legacy client foundational relationships while putting our foot on the proverbial gas pedal to develop much more contingent contract staffing and direct hires. And in doing so, our goal is to increase our staffing business by supporting other functions outside of Media such as Administrative, Accounting and Finance, HR, and IT. To that end, we will add at least one more staffing-experienced sales representatives in the first half of 2025.

Virtual staffing is no longer a limited niche for certain companies and certain positions. Virtual scenarios are also favored by Generation Z, which values work-life balance as one of the most crucial factors when deciding on a company for which to work. Considering the benefits that remote working offers, and the keen interest shown by employees from different age groups, we believe that remote working will be prevalent in 2024 and beyond. This paradigm, however, should not adversely impact MMG, in that whether jobs are filled virtually or not, MMG has the pipeline of talent to fill these diversified roles.

Furthermore, we still believe given the changing nature of specialized staffing, there exists a greater opportunity to expand our EOR business as it offers businesses of all types and industries, more flexibility in on- and offboarding employees, as well as managing 1099 risk. As for staffing outside of Media, we believe it will grow, but there are also opportunities to get into staffing specialties which represent areas where we see the most rebound or a robust demand.

This shift in focus to staffing will also have a positive impact on gross margins. We expect blended staffing rates to be in the high teens to low 20s in the future, which with volume will resume our ascent in converting a much higher percentage of our revenues to gross profit.

As a result, we continued to move forward with our diversified offerings with an eye on our future specialization staffing strategy, updating our already expert operating model, and organizing our business to maximize acquisition and retention of client accounts.

Once the Vivos Matter judgements are recovered, the Company may consider moving forward with its original plans to increase outstanding shares, either by authorizing new shares or executing a reverse split to facilitate the acquisition of synergistic staffing companies to accelerate growth. Additionally, the Company aims to transition to the OTCQB and/or OTCQX markets as a step toward an eventual listing on the NASDAQ Exchange. Efforts are ongoing to meet the necessary requirements for OTCQB or OTCQX listing.

Following the successful collection of Vivos-related debts, MMG intends to hold a shareholder meeting to evaluate and potentially advance these strategic initiatives.

Maslow generated revenues totaling $23,982 in 2024, reflecting an increase of $2,531 (11.8%) from $21,451 in 2023. This growth was primarily driven by three EOR clients whose increased activity contributed an additional $4,121 in revenue when compared to same period ending December 31, 2023.

From a revenue concentration perspective, our top 10 clients accounted for $21,612 of revenues, representing 90.1% of the total $23,982 revenues in 2024. This was up from $18,526, or 86.4%, of the total $21,451 in 2023 revenues. The revenue share from these clients increased due to a higher level of engagement from our largest accounts.

In December 2024, rebates were issued totaled $70, an increase of $36 compared to $32 in 2023.

EOR revenue increased $740, or 19.7%, to $4,495 from $3,755 in the prior-year quarter. The increase was primarily driven by growth from our top client (A), which increased $1,096, or 94.0%.

Staffing revenue increased $65, or 7.0%, to $997 from $932 in the prior-year quarter. The increase was primarily attributable to higher revenue from 2 of our top 10 clients, which increased revenue contributions by $96 (30.5%), and $68 (41.7%). These increases were partially offset by lower activity from certain other staffing clients.

Video Production revenue increased $10, or 20.4%, to $59 from $49 in the prior-year quarter. The increase was primarily attributable to two new clients who accounted for $16 in revenue.

Gross profit and margin both increased in the first quarter 2026 compared to the same period in the prior year. Gross profit increased $129, or 20.1%, to $770 from $641, while gross margin improved to 13.9% from 13.5%. The improvement reflected a more favorable client and service mix, pricing realization, and improved execution within certain managed service arrangements.

Employer of Record (“EOR”) gross profit rose by $30 to $482 or 6.6% primarily driven by an $815 increase in 1099-related revenue, partially offset by a $60 decline in W-2 related revenue. As a result of the higher concentration of lower-margin 1099 labor, EOR gross margin decreased to 10.7% from 12.0% in the prior-year quarter. Margin compression was further impacted by discounted volume pricing structures associated with certain larger client engagements.

Staffing gross profit and gross margins expanded significantly during the quarter. Staffing gross profit increased to $270 from $167 in the prior-year quarter, representing a 61.7% increase. Staffing gross margin increased to 27.1%, compared to 17.9% in the prior-year quarter, representing the segment’s highest quarterly gross margin in more than ten years. The improvement was primarily driven by higher-margin managed service arrangements and improved delivery efficiencies. Managed service engagements generated approximately $669 in revenue and $199 in gross profit, representing gross margins of approximately 29.8%. Additionally, certain client engagements benefited from lower-than-anticipated delivery costs and improved resource utilization. One newer client engagement generated approximately $21 in revenue with gross margins approaching 35.7%.

Loaded salaries, including payroll taxes and benefits, decreased $164 year-over-year, primarily driven by a $102 reduction in wages and a $17 reduction in payroll taxes and benefits. In addition, the prior-year quarter included bonus accruals of $45, which were subsequently reversed later in 2025, compared to no bonus accruals in the current-year quarter.

During the quarter, approximately 30% of the Company’s accounts receivable were funded through structured receivables purchase arrangements, which reduced the need to factor funds, resulting in lower interest and factoring fees.

Other expense totaled $76 during the three months ended March 31, 2026, consisting primarily of $43 of legal expenses related to the Vivos matter. The remaining $33 was attributable to the losses on sale of receivables associated with the Company’s receivables purchase programs.

Although the volume of receivables sold was comparative to the prior year period, the Company’s overall cost of capital declined due to lower prime rates and comparatively favorable rates available under the receivables purchase programs.

By comparison, other expense totaled $26 during the three months ended March 31, 2025, consisting primarily of $23 related to the Vivos matter and $3 associated with the disposal of technology-related assets.

Management currently expects legal expenses associated with the Vivos matter to substantially conclude during the second quarter of 2026.

As of March 31, 2026, working capital totaled $6,532, compared to $6,646 as of December 31, 2025 and $6,966 as of March 31, 2025. Excluding the related-party notes receivable associated with the Vivos Group, which were subsequently satisfied through the share transfer completed effective April 2, 2026, adjusted working capital would have been $110 as of March 31, 2026, compared to $290 as of December 31, 2025 and $993 as of March 31, 2025.