[X]
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QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2013
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[ ]
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TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _____ to _____.
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RELIABILITY INCORPORATED
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(Name of registrant in its charter)
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TEXAS
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75-0868913
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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53 Forest Avenue, Old Greenwich, Connecticut
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06870
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(Address of principal executive offices)
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(Zip Code)
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(203) 542-7020
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(Issuer’s telephone number, including area code)
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410 Park Avenue - 15th Floor, New York, NY 91362
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(Former name, former address and former fiscal year, if changed since last report.)
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Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
(Do not check if a smaller reporting company)
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Smaller reporting company [X]
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PART I. FINANCIAL INFORMATION
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Item 1.
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Unaudited Financial Statements
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Balance Sheets as of September 30, 2013 and December 31, 2012
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2
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Statements of Operations for the Three Months Ended September 30, 2013 and 2012
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3
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Statements of Operations for the Nine Months Ended September 30, 2013 and 2012
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4
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Statements of Cash Flows for the Nine Months ended September 30, 2013 and 2012
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5
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Notes to Unaudited Financial Statements
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6-8
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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9-10
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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10
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Item 4.
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Controls and Procedures
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10
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PART II. OTHER INFORMATION
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11
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Signatures
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12
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Exhibits
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13
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Item 1. Financial Statements
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September 30, 2013
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December 31, 2012
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|||||||
ASSETS
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||||||||
Current assets:
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Cash and cash equivalents
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$
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230
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$
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486
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Total current assets
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230
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486
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||||||
Total Assets
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$
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230
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$
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486
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
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||||||||
Current liabilities:
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Accounts payable and accrued liabilities
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$
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2,288
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$
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10,372
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Loans from officers
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10,000
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3,000
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Total current liabilities
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12,288
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13,372
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Stockholders’ equity (deficit):
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||||||||
Preferred stock, without par value; 1,000,000 shares authorized, none issued and outstanding
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Common stock, without par value; 300,000,000 shares authorized; 13,867,633 shares issued
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9,862,150
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9,862,150
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||||||
Accumulated deficit
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(8,779,691
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)
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(8,780,519
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)
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Less treasury stock at cost, 354,300 shares
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(1,094,517
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)
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(1,094,517
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)
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Total stockholders’ deficit
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(12,058)
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(12.886
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)
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Total Liabilities and Stockholders’ Deficit
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$
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230
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$
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486
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Three months ended
September 30,
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2013
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2012
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Revenues
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$
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-
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$
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-
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Operating expenses:
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General and administrative
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$
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5,354
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$
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4,890
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Total expenses
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5,354
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4,890
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Operating loss
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(5,354
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)
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(4,890
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)
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Net Loss
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$
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(5,354
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)
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$
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(4,890
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)
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Basic and Diluted Loss Per Share
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(0.00
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)
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(0.00
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)
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Weighted average shares:
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Basic
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13,513,333
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13,513,333
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Diluted
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13,513,333
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13,513,333
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Nine months ended
September 30,
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2013
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2012
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Revenues
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$
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-
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$
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-
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Operating expenses:
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General and administrative
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$
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14,172
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$
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13,588
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Total expenses
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14,172
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13,588
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Other income
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15,000
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0
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Net Income (Loss)
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$
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828
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$
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(13,588
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)
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Basic and Diluted Income (Loss) Per Share
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(0.00
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)
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(0.00
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)
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Weighted average shares:
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Basic
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13,513,333
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13,368,889
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Diluted
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13,513,333
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13,368,889
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Nine months ended
September 30,
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2013
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2012
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Cash flows from operating activities:
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Net Income (Loss)
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$
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828
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$
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(13,588
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)
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Adjustments to reconcile net income (loss) to net cash used in operating activities:
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Changes in operating assets and liabilities:
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Accounts payable and accrued liabilities
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(8,084
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)
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(6,533
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)
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Net cash used in operating activities
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(7,256
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)
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(20,121
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)
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Cash flows from financing activities:
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Issuance of stock for cash
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19,000
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Loans from officers
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7,000
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-
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Net cash provided by financing activities
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7,000
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19,000
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Net decrease in cash and cash equivalents
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(256
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)
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(1,121
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)
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Cash and cash equivalents:
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Beginning of period
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486
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4,393
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End of period
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$
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230
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$
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3,272
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Supplemental disclosure of cash flow information:
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Cash paid during the period for:
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Interest
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$
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-
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$
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-
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Income taxes
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$
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-
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$
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-
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Supplemental disclosure of non-cash financing activity:
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Repayment of loans from officers through the issuance of common stock
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-
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5,000
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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Item 4. Risk Controls and Procedures
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CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
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31.2
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CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
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32.1
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CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2
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CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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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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RELIABILITY INCORPORATED
(Registrant)
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November 8, 2013
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/s/ Jeffrey E. Eberwein
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Jeffrey E. Eberwein
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President and Chief Executive Officer
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/s/ Jeffrey E. Eberwein
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Jeffrey E. Eberwein
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Chief Financial Officer
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Exhibit No.
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Description
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31.1
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CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
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31.2
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CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
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32.1
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CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2
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CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101
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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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1.
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I have reviewed this quarterly report on Form 10-Q of Reliability Incorporated for the period ended September 30, 2013;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the registrant is made known to us by others
within that entity, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Dated November 8, 2013
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/s/ Jeffrey E. Eberwein
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Jeffrey E. Eberwein
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Chief Executive Officer and Principal Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Reliability Incorporated for the period ended September 30, 2013;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the registrant is made known to us by others
within that entity, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: November 8, 2013
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/s/ Jeffrey E. Eberwein
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Jeffrey E. Eberwein
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Chief Financial Officer and Principal Financial Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 8, 2013
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/s/ Jeffrey E. Eberwein
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Jeffrey E. Eberwein
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Chief Executive Officer and Principal Executive Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 8, 2013
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/s/ Jeffrey E. Eberwein
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Jeffrey E. Eberwein
|
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Chief Financial Officer and Principal Financial Officer
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Unaudited Statements of Operations (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Unaudited Statements Of Operations | ||||
Revenues | ||||
Operating expenses: | ||||
General and administrative | 5,354 | 4,890 | 14,172 | 13,588 |
Total expenses | 5,354 | 4,890 | 14,172 | 13,588 |
Operating loss | (5,354) | (4,890) | ||
Other income | 15,000 | 0 | ||
Net Loss | $ (5,354) | $ (4,890) | $ 828 | $ (13,588) |
Basic and Diluted Loss Per Share | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 |
Weighted average shares: | ||||
Basic | 13,513,333 | 13,513,333 | 13,513,333 | 13,368,889 |
Diluted | 13,513,333 | 13,513,333 | 13,513,333 | 13,368,889 |
Subsequent Events
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Subsequent Events | |
Note 5. SUBSEQUENT EVENTS | On October 1, 2013, the Company sold and issued 6,786,588 shares (the Control Shares) of the Companys 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 Companys common stock for $23,392 (approximately $0.0147 per share) from Greggory Schneider, and (ii) 5,199,088 shares of the Companys 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 Companys 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 Companys board of directors effective as of October 1, 2013 and Jeffrey E. Eberwein and Kyle Hartley were each appointed to the Companys 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 Companys 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, 2013 that require recognition or disclosure in the financial statements. |
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Operations and Summary of Significant Accounting Policies
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Operations And Summary Of Significant Accounting Policies | |
Note 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Operations and Liquidity
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, but 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.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. However, the Company has no further 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.
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, the 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 now quoted on the OTCQB 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 periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
For further information, refer to the financial statements and footnotes thereto included in the Companys annual report on Form 10-K for the year ended December 31, 2012.
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.
Income Taxes
Income taxes are provided under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts 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 income 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 date. The Company establishes valuation allowances when the realization of specific deferred tax assets is subject to significant uncertainty. The Company has recorded 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 Companys 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. |
Stock Option Plan
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9 Months Ended |
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Sep. 30, 2013
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Stock Option Plan | |
Note 3. STOCK OPTION PLAN | Under the Companys Amended and Restated 1997 Stock Option Plan (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, was 3.80 years for outstanding and exercisable options. There were no options exercised and none that expired or were canceled during the years ended December 31, 2012 and 2011 or during the quarter ended September 30, 2013. As of September 30, 2013 and December 31, 2012, there were 370,000 options outstanding under the Companys Stock Option Plan which are exercisable at a weighted average price of $.21 until July 18, 2016, when they expire. |
Operations and Summary of Significant Accounting Policies (Policies)
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9 Months Ended |
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Sep. 30, 2013
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Operations And Summary Of Significant Accounting Policies Policies | |
Operations and Liquidity | 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, but 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.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. However, the Company has no further 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.
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, the 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 now quoted on the OTCQB 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 periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
For further information, refer to the financial statements and footnotes thereto included in the Companys annual report on Form 10-K for the year ended December 31, 2012. |
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. |
Income Taxes | Income taxes are provided under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts 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 income 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 date. The Company establishes valuation allowances when the realization of specific deferred tax assets is subject to significant uncertainty. The Company has recorded 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 Companys 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. |
Stockholders' Equity
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9 Months Ended |
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Sep. 30, 2013
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Stockholders' equity (deficit): | |
Note 4. STOCKHOLDERS' EQUITY | In January 2012, the Company issued 1,500,000 shares of common stock to its officers, Jay Gottlieb and Gregg Schneider, at $0.016 per share, for a total of $24,000. The issuance provided cash of $19,000 and the repayment of $5,000 of Loans from officers. |