RELIABILITY INC

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, shareholders should carefully consider the factors discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Our capital structure, including the substantial increase in shares available for future issuance following the return of shares to the Company, and potential future issuances of shares could dilute existing shareholders and adversely affect the market price of our common stock.

We may seek to raise capital, pursue acquisitions, recapitalize the Company, or fund strategic initiatives through the issuance of equity securities, including shares available for future issuance following the return of shares to the Company, or through the issuance of convertible securities or warrants.

The sale or issuance of a substantial number of shares of common stock, or the perception that such sales may occur, could adversely affect the market price of our common stock and increase volatility. Any such issuance would dilute existing shareholders and could reduce earnings per share or voting power. In addition, the substantial increase in shares available for future issuance following the share transfer may create an overhang that could negatively impact investor perception or market pricing.

Changes in federal government spending priorities and operational directives may adversely affect our business. A portion of our revenue is derived from contracts with U.S. federal government agencies. Periodic budget reviews, cost-reduction initiatives, spending reallocations, hiring freezes, or other efficiency directives affecting federal agencies may result in reductions or delays in client spending on outsourced services, including media-related staffing and production support. While the Company does not believe any specific reductions experienced to date have had a material impact on its consolidated financial statements, broader federal spending constraints or operational restructuring initiatives could reduce demand for the Companys services within the public sector. In addition, uncertainty surrounding the timing and scope of such governmental actions may increase the difficulty of forecasting client demand and strategic planning.

Our business may be indirectly affected by the imposition of tariffs or other trade restrictions that impact our clients operations and profitability.

While our core operations are not directly exposed to international trade or tariff risk, a significant portion of our revenue is derived from media services provided to clients across various industries, some of which rely on global supply chains or imported goods. The imposition or escalation of tariffs, trade barriers, or similar regulatory actions, particularly those affecting cost of revenue to our clients, may reduce their gross margins and overall profitability. In response, clients may reduce discretionary expenditures, including advertising and media budgets, which could negatively impact our revenues and financial performance. Even perceived uncertainty around future trade policy could lead to more conservative client behavior, affecting campaign timing, spend, or scope.

Our business may be impacted by reductions in federal funding to client programs.

Several of our clients receive federal funding to support their operations. We have already experienced one instance in which a client significantly reduced media spend following the cessation of federal funds. Continued or expanded cuts in federal funding may similarly affect other client budgets and, in turn, our revenue.