Item
1.01. Entry into a Material Definitive Agreement.
On November 20, 2019, Maslow Media Group, Inc., a Virginia corporation (the “Purchaser”), a wholly
owned subsidiary of Reliability Incorporated, a Texas corporation (the “Company”), entered into an Asset Purchase Agreement
(the “Purchase Agreement”), to be effective on December 1, 2019, with Vivos Holdings Inc., a Delaware Corporation (the
“Seller”).
Pursuant
to the Purchase Agreement, the Purchaser agreed to Purchase from the Seller, certain assets, properties, and rights of the Seller
related to full service software quality management and testing solutions constituting Intelligent Quality Solutions Inc., as
further described in the Purchase Agreement (referred to herein together as “IQS” or the “Transferred Assets”).
Intelligent
Quality Solutions, Inc. or “IQS” was founded in 2005 as an IT consulting company focusing exclusively on staff augmentation
in support of client software testing needs. IQS has since evolved into a full service Software Quality Management solutions provider,
offering a wide range of Quality Management services.
The Transferred Assets more specifically consist of the following: (i) working capital required to run the
business of IQS (ii) all information exclusively related to the customers of IQS, including customer agreements, customer contact
and account information, historical data for each customer including work logs, project notes, revenue, and refunds or adjustments;
(iii) a list containing the business name, contact name, business postal mailing address, telephone number and email contact address
of each customer that previously used or presently uses IQS; (iv) the Seller’s IQS customer lists, lists or reports of agreements
related exclusively to IQS and financial data related exclusively to IQS; (v) the registered trademarks and service marks, trademark
and service mark applications, common law trademarks and service marks, logos, tag lines, Internet domains, URLs, domain names,
and naming rights associated exclusively with IQS; (vi) IQS marketing collateral in published, electronic, digital or other form,
which is deemed current and is in use prior to December 5, 2019 (the “Closing Date” of the Purchase Agreement); (vii)
fixed assets such as computers, servers and office furniture which are used by IQS personnel; (viii) any other assets material
to the operation of IQS or which Seller exclusively uses for IQS, including but not limited to customer and prospect databases;
(ix) the lease(s) for the premises from which the principal business of IQS are provided, and the furniture therein; (x) normal
and customary accounts receivable from customers of IQS and certain accounts payable applicable to the cost of revenue to vendors
other than vendors who are creditors pursuant to any type of commercial factoring agreement and (xi) with respect to customers
of IQS, any other information which, while not exclusively related to a customer of IQS, the Seller would in good faith believe
a reasonable purchaser would or should want to know about an IQS customer.
Not
included in the Transferred Assets, are the following: (i) employment agreements between IQS and its employees, agents and consultants;
(ii) any assets used in the business of the Seller as currently conducted that do not relate to IQS; (iii) any credit card debt
or unpaid expenses from prior periods; (iv) any accounts payable not attributable to cost of revenue or debt incurred by operation
of IQS and (v) any debt prior to the Closing Date of the Purchase Agreement which arises from a factoring agreement.
Pursuant to the Purchase Agreement, the Purchaser agreed to pay the Seller in exchange for the Transferred
Assets, an amount equal to 4.5 times the trailing twelve months (“TTM”) of EBITDA generated by the Transferred Assets
as of the month end prior to the Closing Date, or October 31, 2019, reduced by a working capital shortfall adjustment, if any,
as further described in the Purchase Agreement, which totaled as of the date of the Purchase Agreement, $1,417,717 (collectively,
this amount is hereafter referred to as the “Purchase Price”), with such Purchase Price to be applied, at closing to
reduce the existing debt owed by Vivos Holdings, LLC, a Virginia limited liability company (“VHLLC”), to the Purchaser.
The Purchase Price may be increased or decreased, depending upon the valuation of the TTM EBITDA as confirmed by an independent
valuation expert, and an appraisal of the Transferred Assets, as determined by the same independent valuation expert.
Pursuant
to the Purchase Agreement, the Purchaser will not assume any liabilities, other than liabilities arising after the date execution
of the Purchase Agreement in connection with any of the Transferred Assets, including but not limited to accounts payable applicable
to cost of revenue.
Pursuant
to the Purchase Agreement, the Seller agreed to provide engineering, accounting or other reasonable assistance to the extent that
is reasonably necessary to transfer the Transferred Assets to Purchaser and continue to provide and pay for the server hosting
and bandwidth necessary to operate the IQS business in the manner in which it has been operating, for a period from closing of
the Purchase Agreement until December 31, 2019.
The
Purchase Agreement includes customary representations, warranties and covenants by the respective parties.
The
foregoing description of the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and incorporated herein by reference.
There can be no assurance that the Purchase Agreement will close as planned, or at all.