UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
[X]xQUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2013March 31, 2014
  
[  ]oTRANSITION REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              _____ to              _____..
 
Commission File Number 0-7092  
 
RELIABILITY INCORPORATED
(Name of registrant in its charter)
   
TEXAS 75-0868913
(State or other jurisdiction of  incorporation or organization) (I.R.S. Employer Identification Number)
   
53 Forest Avenue, First Floor Old Greenwich, Connecticut  06870
(Address of principal executive offices) (Zip Code)
   
(203) 542-7020542-0235
(Issuer’s telephone number, including area code)  
 
410 Park Avenue - 15th Floor, New York, NY 91362
(Former name, former address and former fiscal year, if changed since last report.)
 
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.    x YES o NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]o
 
Accelerated filer [  ]o
Non-accelerated filer [  ]o
(Do not check if a smaller reporting company)
 
Smaller reporting company [X]x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    xYES o NO
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 13,513,33316,914,693 shares of Common Stock, no par value, as of November 8, 2013.May 6, 2014.

 
 
 

RELIABILITY INCORPORATED
Quarterly Report on Form 10-Q
For the Three Months Ended September 30, 2013March 31, 2014
INDEX

PART I. FINANCIAL INFORMATION 
   
Item 1.
Unaudited Financial Statements
Balance Sheets as of September 30, 2013 and December 31, 20122
   
 
Balance Sheets as of March 31, 2014 and December 31, 2013
 2
Statements of Operations for the Three Months Ended September 30,March 31, 2014 and 2013 and 2012
3
   
 
Statements of OperationsCash Flows for the NineThree Months Ended September 30,March 31, 2014 and 2013 and 2012
4
   
 Statements of Cash Flows for the Nine Months ended September 30, 2013 and 20125
Notes to Unaudited Financial Statements
6-85-7
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations9-108-9
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
109
   
Item 4.
Risk Controls and Procedures
109
   
PART II. OTHER INFORMATION11
Item 1.
Legal Proceedings
10
Item 1a.
Risk Factors
10
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
10
Item 3.
Defaults Upon Senior Securities
10
Item 4.
Mine Safety Disclosures
10
Item 5.
Other Information
10
Item 6.
Exhibits
10
   
Signatures
1211
  
Exhibits
1312


 
1
 

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements
Item 1.    Financial Statements

RELIABILITY INCORPORATED
UNAUDITED BALANCE SHEETS
 
 September 30, 2013 December 31, 2012  
March 31,
2014
 
December 31,
2013
 
ASSETS
Current assets:          
Cash and cash equivalents $230 $486  $8,465 $450 
Total current assets 230 486   8,465  450 
           
     
Total Assets $230 $486  $8,465 $450 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:          
Accounts payable and accrued liabilities $2,288 $10,372  $2,733 $34,580 
Loans from officers 10,000 3,000 
       
Total current liabilities 12,288 13,372   2,733  34,580 
           
Stockholders’ equity (deficit):          
Preferred stock, without par value; 1,000,000 shares authorized, none issued and outstanding      - - 
Common stock, without par value; 300,000,000 shares authorized; 13,867,633 shares issued 9,862,150 9,862,150 
Common stock, without par value; 300,000,000 shares authorized; 17,268,993 and 13,867,633 shares issued at March 31, 2014 and December 31, 2013, respectively 9,912,150 9,862,150 
Accumulated deficit (8,779,691) (8,780,519) (8,811,901) (8,801,763)
Less treasury stock at cost, 354,300 shares (1,094,517) (1,094,517)  (1,094,517)  (1,094,517)
           
Total stockholders’ deficit (12,058) (12.886)
Total stockholders’ equity (deficit)  5,732   (34,130)
           
Total Liabilities and Stockholders’ Deficit $230 $486 
Total liabilities and stockholders’ equity (deficit) $8,465 $450 
 
The accompanying notes are an integral part of these statements.
 

 
2
 

RELIABILITY INCORPORATED
UNAUDITED STATEMENTS OF OPERATIONS
 
 
Three months ended
September 30,
  Three months ended March 31, 
 2013 2012  2014 2013 
Revenues $- $- 
Operating expenses:          
General and administrative $5,354 $4,890  $9,888  $4,327 
Total expenses 5,354 4,890 
Total cost and expenses  9,888   4,327 
Operating loss (5,354) (4,890)  (9,888)  (4,327)
          
Loss Before Income Taxes (9,888) (4,327)
Income Taxes 250 0 
        
Net Loss $(5,354) $(4,890) $(10,138) $(4,327)
Basic and Diluted Loss Per Share (0.00) (0.00)
     
Basic and diluted loss per share $- $- 
Weighted average shares:          
Basic 13,513,333 13,513,333   16,385,593   13,513,333 
Diluted 13,513,333 13,513,333   16,385,593   13,513,333 

The accompanying notes are an integral part of these statements.
 

3
RELIABILITY INCORPORATED
UNAUDITED STATEMENTS OF CASH FLOWS
  Three months ended March 31, 
  2014  2013 
Cash flows from operating activities:      
Net loss $ (10,138) $(4,327)
Adjustments to reconcile net loss to net cash used in operating activities:        
Changes in operating assets and liabilities:        
Accounts payable and accrued liabilities  (31,847)  (8,106)
Net cash used by operating activities  (41,985)  (12,433)
         
Cash flows from financing activities:        
Loans from officers  -   15,000 
    Issuance of stock for cash  50,000   - 
Net cash provided by financing activities  50,000   15,000 
Net increase in cash and cash equivalents  8,015   2,567 
Cash and cash equivalents:        
Beginning of period  450   486 
End of period $ 8,465  $3,053 
Supplemental disclosure of cash flow information:  -   - 
       Cash paid during the period for:        
       Interest $-  $- 
       Income taxes  250   - 
 
The accompanying notes are an integral part of these statements.
 
3
RELIABILITY INCORPORATED
UNAUDITED STATEMENTS OF OPERATIONS
  
Nine months ended
September 30,
 
  2013  2012 
Revenues $-  $- 
Operating expenses:        
General and administrative $14,172  $13,588 
Total expenses  14,172   13,588 
         
Other income  15,000   0 
         
Net Income (Loss) $828  $(13,588)
Basic and Diluted Income (Loss) Per Share  (0.00)  (0.00)
Weighted average shares:        
Basic  13,513,333   13,368,889 
Diluted  13,513,333   13,368,889 
The accompanying notes are an integral part of these statements.
 
4
 
RELIABILITY INCORPORATED
UNAUDITED STATEMENTS OF CASH FLOWS
  
Nine months ended
September 30,
 
  2013  2012 
Cash flows from operating activities:      
Net Income (Loss) $828  $(13,588)
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Changes in operating assets and liabilities:        
Accounts payable and accrued liabilities  (8,084)  (6,533)
Net cash used in operating activities  (7,256)  (20,121)
         
Cash flows from financing activities:        
       Issuance of stock for cash      19,000 
Loans from officers  7,000   - 
Net cash provided by financing activities  7,000   19,000 
Net decrease in cash and cash equivalents  (256)  (1,121)
Cash and cash equivalents:        
Beginning of period  486   4,393 
End of period $230  $3,272 
Supplemental disclosure of cash flow information:        
Cash paid during the period for:        
Interest $-  $- 
Income taxes $-  $- 
Supplemental disclosure of non-cash financing activity:        
Repayment of loans from officers through the issuance of common stock  -   5,000 
         
         
The accompanying notes are an integral part of these statements.
5

RELIABILITY INCORPORATED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 2013March 31, 2014

1.  OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Liquidity
The CompanyReliability Incorporated (the Company) was incorporated under the laws of the State of Texas in 1953, but the principal business of the Company as described in this report, started in 1971, butand was closed down in 2007. The Company had two wholly owned subsidiaries, Reliability Singapore, Pte Ltd. and Reliability Contractors of Florida, neither of which is now operating. The Company has no further operating activities and is now a shell company.

Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. However, theThe Company has no further operating activities.concluded that it should look for acquisitions or identify a merger partner.  There can be no assurances that the Company will be able to successfully completesuccessful in completing such a merger or acquisitiontransaction or be able to maintain sufficient liquidity over a period of time that will allow it to continue to seek a merger or acquisition,carry out these actions, in which case the Company might be forced to liquidate or seek protection under the Federal bankruptcy statutes, or both.

The accompanying 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 liabilities that may result from the possible inability of the Company to continue as a going concern.

Pursuant to an agreement dated as of June 14, 2013, theThe Company relinquished its former ticker symbol (REAL) to an unrelated third party for consideration of $15,000 that was recorded as other income in the quarter ended June 30, 2013.  We are nowis quoted on the OTCQB marketplaceof the OTC Marketplace under the symbol “RLBY”.

Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q. Accordingly they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim periodsperiod ended September 30, 2013March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.2014.

For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2012.2013.

Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Cash Equivalents
For the purposes of the statements of cash flows, the Company considers all highly liquid cash investments that mature in three months or less when purchased, to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value.

Stock Options
Compensation cost relating to stock-based payments, including grants of employee stock options, is recognized in financial statements based on the fair value of the equity instruments issued on the grant date.  The Company recognized the fair value of stock-based compensation awards as compensation expense in its statement of operations on a straight line basis, over the vesting period.
 

 
65
 

RELIABILITY INCORPORATED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 2013March 31, 2014

Income Taxes
Income taxes are provided under the asset and liability method. Deferredmethod and reflect the net tax assets and liabilities are recognized for the future tax consequences attributable toeffects of temporary differences between the financial statement carrying amountstax basis of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable incomereported amounts in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment datefinancial statements. The Company establishes valuation allowances when the realization of specific deferred tax assets is subject to significant uncertainty. The Company has recordedrecords no tax benefits on its operating losses, as the losses will have to be carried forward and realization of any benefit is uncertain.

Earnings Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Since the exercise price of the Company’s outstanding stock options exceeded the average market price of its common shares during the periods presented, the options would have been anti-dilutive and were not considered in these calculations.

Fair Value of Financial Instruments
The carrying values of the Company’s current assets and liabilities approximated fair value due to their short maturity or nature.

Recently Issued Accounting Pronouncements
There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
2. INCOME TAXES

The Company has substantial U.S. net operating loss carryforwards that will expire in 2023 through 2030. These carryforwards are subject to certain limitations on annual utilization and in the event of a change in ownership, as defined by tax law. See Note 2 to the Company’s financial statements in its Form 10-K for the year ended December 31, 2012.2013.

The Company’s income tax returns remain subject to examination for the years 20092010 through 20122013 for federal and state purposes.
3. STOCK OPTION PLAN

Under the Company’s Amended and Restated 1997 Stock Option Plan (Option(the Option Plan), no further option grants are allowed after February 26, 2007, but options theretofore granted remain in effect until satisfied or terminated pursuant to the Option Plan.

At December 31, 2006, all options were fully vested; thus no further stock option expense has been recorded related to the Option Plan. The weighted-average remaining contractual term, as of December 31, 2012,2013, was 3.802.5 years for outstanding and exercisable options. There were no options exercised and none that expired or were canceled during the years ended December 31, 20122013 and 20112012 or during the quarter ended September 30, 2013.March 31, 2014. As of September 30, 2013March 31, 2014 and December 31, 2012,2013, there were 370,000 options outstanding under the Company’s Stock Option Plan which are exercisable at a weighted average price of $.21$0.21 until July 18,19, 2016, when they expire.  


6

4. STOCKHOLDERS’ EQUITY

InAs previously reported on the Company’s Form 8-K, on January 2012,15, 2014, the Company issued 1,500,0003,401,360 shares of common stock to its officers, Jay GottliebLone Star Value Investors, LP, an entity controlled by a director and Gregg Schneider, at $0.016 per share,officer of the Company, for a totalcash proceeds of $24,000.$50,000.  The proceeds of this issuance provided cash of $19,000 andwill be used to assist in funding the repayment of $5,000 of Loans from officers.Company’s operating expenses.
7
RELIABILITY INCORPORATED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 2013

5. SUBSEQUENT EVENTS
On October 1, 2013, the Company sold and issued 6,786,588 shares (the “Control Shares”) of the Company’s common stock, to Jeffrey E. Eberwein, as trustee of the Jeffrey E. Eberwein Revocable Trust U/A 10-01-2010, for an aggregate purchase price of $100,000 pursuant to that certain Stock Purchase Agreement by and between the Company and Mr. Eberwein dated as of October 1, 2013 (the “Stock Purchase Agreement”).
Also on October 1, 2013, and immediately after issuance of the Control Shares, the Company acquired (i) 1,587,500 shares of the Company’s common stock for $23,392 (approximately $0.0147 per share) from Greggory Schneider, and (ii) 5,199,088 shares of the Company’s common stock for $76,608 (approximately $0.0147 per share) from Jay Gottlieb (collectively, the “Company Redemptions”) pursuant to that certain Stock Redemption Agreement by and between the Company and Mr. Schneider dated as of October 1, 2013 and that certain Stock Redemption Agreement by and between the Company and Mr. Gottlieb dated as of October 1, 2013 respectively.  As a result of the Company Redemptions, the Company repurchased a total of 6,786,588 shares of the Company’s common stock for an aggregate purchase price of $100,000.
In connection with the transactions described in the Stock Purchase Agreement, Michael Pearce and Joshua Krom each resigned from the Company’s board of directors effective as of October 1, 2013 and Jeffrey E. Eberwein and Kyle Hartley were each appointed to the Company’s board of directors effective as of October 1, 2013.  Ron Gutterson also resigned from the board of directors effective as of September 19, 2013. Additionally, also in connection with the transactions described in the Stock Purchase Agreement, Mr. Gottlieb resigned from his executive positions as President, Chief Executive Officer, Secretary and Treasurer of the Company and Mr. Schneider resigned from his executive position as Chief Financial Officer of the Company.  Immediately following the resignations of Messrs. Gottlieb and Schneider, Mr. Eberwein was appointed to the executive positions of President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of the Company.   In addition Mr. Gottlieb has resigned his position as chairman of the board of directors, but shall remain a member of the board of directors.  Mr. Eberwein was appointed chairman of the board of directors.
All of the shares of the Company’s common stock issued pursuant to the Stock Purchase Agreement were issued pursuant to Section 4(2) or Regulation D of the Securities Act of 1933, as amended (the “Securities Act”).  Mr. Eberwein is an accredited investor, as defined under Rule 501 of the Securities Act. None of the securities issued are convertible.
In addition, as set forth in the Stock Purchase Agreement, Mr. Gottlieb forgave funds in the amount of $10,000 previously loaned or advanced to the Company, which loans and advances remained outstanding as of the date of the Stock Purchase Agreement.
As a result of the transactions above, a change of control of the Company occurred.  For additional detail please refer to the Form 8-K filed on October 3, 2013 in connection with such change of control transaction (the “October 8-K”).

No other material subsequent events have occurred since September 30, 2013March 31, 2014 that require recognition or disclosure in the financial statements.
 

 
87
 
 
RELIABILITY INCORPORATED
MANAGEMENT’S DISCUSSION AND ANALYSIS
September 30, 2013March 31, 2014
 
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis and other parts of this report contain forward-looking statements that involve risks and uncertainties, as well as current expectations and assumptions. From time to time, the Company may publish forward-looking statements, including those that are contained in this report, relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company’s business include, but are not limited to, its ability to maintain sufficient working capital, adverse changes in the economy, the ability to attract and maintain key personnel, its ability to identify andor complete mergersan acceptable merger or acquisitions,acquisition, and future results related to acquisitions, mergersacquisition, merger or investment activities. The Company’s actual results could differ materially from those anticipated in these forward-looking statements, including those set forth elsewhere in this report. The Company assumes no obligation to update any such forward-looking statements.

CRITICAL ACCOUNTING POLICIES AND COMMENTS RELATED TO OPERATIONS

The Company has defined a critical accounting policy as one that is both important to the portrayalThis discussion and analysis of the Company’sour financial condition and results of operations andare based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the management of the Companyus to make difficult, subjective or complex judgments. Estimatesestimates and assumptions about future eventsjudgments that affect the reported amounts of assets, liabilities, revenues and their effects cannot be perceived with certainty. The Company bases its estimatesexpenses based on historical experience and on various other assumptionsfactors that are believed to be reasonable under the circumstances, thecircumstances. Actual results of which form the basis for making judgments. Thesemay differ from these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. under different assumptions or conditions.

There have been no material changes or developments in the Company’s evaluation of the accounting estimates and the underlying assumptions or methodologies that it believes to be Critical Accounting Policies and Estimates as disclosed in its Form 10-K for the year ended December 31, 2012.2013.

Management’s Discussion included in the Form 10-K for the year ended December 31, 20122013 includes discussion of various factors related to the decline in the Company’s revenues and items related to the Company’s results of operations and liquidity. There have been no other significant changes in most of the factors discussed in the Form 10-K and many of the items discussed in the Form 10-K are relevant to 20132014 operations; thus the reader of this report should read Management’s Discussion included in Form 10-K for the year ended December 31, 2012.2013.
 
RESULTS OF OPERATIONS

Revenues
Revenues for the ninethree months ended September 30, 2013March 31, 2014 were zero, since all operations have been discontinued. However, the Company received $15,000were discontinued as of other income during the nine months ended September 30, 2013 in connection with the agreement to relinquish the right to its stock ticker symbol.2007.

General and Administrative
General and administrative expenses for the three months and nine months ended September 30, 2013March 31, 2014 were $5,354 and $14,172, respectively, and were $4,890 and $13,588, respectively,$9,888 compared to $4,327 for the comparable periodssame period in 2012.
2013.  The increase is due to higher legal expenses in 2014 as compared to 2013.
 

 
98
 
RELIABILITY INCORPORATED
MANAGEMENT’S DISCUSSION AND ANALYSIS
September 30, 2013

LIQUIDITY AND CAPITAL RESOURCES

The Company has undertaken steps to reduce its expenses and improve the Company’s liquidity, including the previous sale and discontinuance of all operations.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. However, the Company has currently has no operating activities. There can be no assurances that the Company will be able to successfully complete a merger or acquisition or be able to maintain sufficient liquidity to continue to seek a merger or acquisition, in which case the Company might be forced to liquidate or seek protection under the Federal bankruptcy statutes, or both.

Net cash used by operating activities during the ninethree months ended September 30, 2013March 31, 2014 was $7,256$41,985 compared to $20,121$12,433 in the comparable period of 2012.2013.   The increase was attributable to a larger net loss and a decrease in accounts payable and accrued liabilities.

The Company did sell common stock in the three month period ended March 31, 2014 generating cash proceeds of $50,000.  In the three months ended March 31, 2013, the Company received $15,000 in loans from officers.
 
Item 3.   Quantitative and Qualitative Disclosures About Market Risk
Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Not applicable.
 
Item 4.   Risk Controls and Procedures
Item 4.    Risk Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.  The Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that as of September 30, 2013, thesethe disclosure controls and procedures as of the end of the period covered by this report were effective to ensuresuch that allthe information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Principal Executive Officer and Principal Financial Officer to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Changes in Internal Control over Financial Reporting. There were no changes in the Company’s internal controls over financial reporting, known to the Principal Executive Officer and Principal Financial Officer, that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


 
109
 

RELIABILITY INCORPORATED
OTHER INFORMATION
September 30, 2013March 31, 2014
PART II - OTHER INFORMATION

ITEMItem 1.   LEGAL PROCEEDINGSLegal Proceedings

From time to time, we may be involved in various disputes and litigation matters arising in the normal course of business. We are not involved in any legal proceedings that are expected to have a material adverse effect on our financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, given the size of our Company, there exists the possibility of a material adverse impact on our results of operations of the period in which the ruling occurs. Our estimate of the potential impact on our financial position or overall results of operations for new legal proceedings could change in the future.None.

ITEM 1A. RISK FACTORSItem 1a.   Risk Factors

In addition to the other information set forth in this Quarterly Report, stockholders 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, 2012,2013, 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.

ITEMItem 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSUnregistered Sales of Equity Securities and Use of Proceeds

None.As previously reported on the Company’s Form 8-K filed on January 17, 2014, on January 15, 2014 the Company issued 3,401,360 shares of its common stock, no par value, in a private placement to Lone Star Value Investors, LP at $0.0147 per share for total cash proceeds of $50,000.  The proceeds of this issuance will be used to assist in funding the Company’s operating expenses.

There were no repurchases of Company securities made by or on behalf of the Company during the period covered by this report.
 
ITEMItem 3.    DEFAULTS UPON SENIOR SECURITIESDefaults upon Senior Securities

NoneNone.

ITEMItem 4.    MINE SAFETY DISCLOSURESMine Safety Disclosures

NoneNot applicable.

ITEM 4. OTHER INFORMATIONItem 5.     Other Information

None.
 
ITEMItem 6.   EXHIBITSExhibits:
 
The following exhibits are filed as part of this report:

31.1 CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
31.2 CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
32.1 CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail (XBRL).
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RELIABILITY INCORPORATED
(Registrant)
November 8, 2013
/s/ Jeffrey E. Eberwein
Jeffrey E. Eberwein
President and Chief Executive Officer
/s/ Jeffrey E. Eberwein
Jeffrey E. Eberwein
Chief Financial Officer
12
INDEX TO EXHIBITS
Exhibit No.Description
31.1
CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
31.2
CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
32.1
CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail (XBRL).
 
 
 
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

RELIABILITY INCORPORATED
(Registrant)
May 7, 2014
/s/ Kyle Hartley
Kyle Hartley
President and Chief Executive Officer
/s/ Kyle Hartley
Kyle Hartley
Chief Financial Officer
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INDEX TO EXHIBITS

Exhibit No.Description
31.1CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
31.2CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
32.1CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail (XBRL).
_______
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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