SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                 FORM 10-Q

             Quarterly Report Pursuant to Section 13 or 15 (d)
                  of the Securities Exchange Act of 1934

                 For the Quarterly Period Ended June 30, 2000

                         Commission File Number 0-7092

                           RELIABILITY INCORPORATED
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)


             TEXAS                                 75-0868913
-------------------------------       -----------------------------------
(State or other jurisdiction of       (I.R.S. Employer Identification No.)
 incorporation or organization)



         16400 Park Row
         Post Office Box 218370
         Houston, Texas                                        77218-8370
----------------------------------------                       ----------
(Address of principal executive offices)                        (Zip Code)




                                (281) 492-0550
             ----------------------------------------------------
             (Registrant's telephone number, including area code)

Indicate  by  check  mark  whether  the  registrant  (1)  has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities  Exchange Act of
1934  during the preceding 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.

                   YES     X          NO
                      -----------       -----------

Indicate  the  number  of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                6,645,765 -- Common Stock -- No Par Value
                          as of August 3, 2000











                                     1
<PAGE>

                         RELIABILITY INCORPORATED
                                 FORM 10-Q

                             TABLE OF CONTENTS

                               June 30, 2000


                      PART I - FINANCIAL INFORMATION

                                                                 Page No.


Item 1.  Financial Statements:

         Consolidated Balance Sheets:
            June 30, 2000 and December 31, 1999                     3-4

         Consolidated Statements of Operations:
            Six Months Ended June 30, 2000 and 1999                   5
            Three Months Ended June 30, 2000 and 1999                 6

         Consolidated Statements of Cash Flows:
            Six Months Ended June 30, 2000 and 1999                   7

         Notes to Consolidated Financial Statements                8-15

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                    16-21

Item 3.  Quantitative and Qualitative Disclosure of Market Risk      21


                        PART II - OTHER INFORMATION

Item 1.
  through
Item 5.  Not applicable.

Item 6.  Exhibits and Reports on Form 8-K.                           22

Signatures                                                           23


The information furnished  in  this  report  reflects  all adjustments (none of
which were other than normal recurring accruals) which are,  in  the opinion of
management, necessary to a fair statement of the results of the interim periods
presented.















                                     2
<PAGE>


                      PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                         RELIABILITY INCORPORATED
                        CONSOLIDATED BALANCE SHEETS
                              (In thousands)

                                  ASSETS

                                                 June 30,    December 31,
                                                   2000          1999
                                                (unaudited)    (Note 1)

Current assets:
  Cash and cash equivalents                      $13,747      $13,573
  Accounts receivable                              3,269        1,267
  Inventories                                      1,577        1,616
  Deferred tax assets                                287          351
  Refundable income taxes                              -          551
  Other current assets                               590          580
                                                  ------       ------
    Total current assets                          19,470       17,938
                                                  ------       ------
Property, plant and equipment at cost:
  Machinery and equipment                         14,443       13,981
  Building and improvements                        4,955        5,021
  Land                                               530          530
                                                  ------       ------
                                                  19,928       19,532
    Less accumulated depreciation                 12,958       11,937
                                                  ------       ------
                                                   6,970        7,595
                                                  ------       ------

Assets held for sale                               2,035        2,135
Investments and other assets                       1,057          647
Goodwill, net of accumulated
  amortization of $89 ($61 in 1999)                  306          334
                                                  ------       ------
                                                 $29,838      $28,649
                                                  ======       ======


















                          See accompanying notes

                                     3
<PAGE>

                         RELIABILITY INCORPORATED
                        CONSOLIDATED BALANCE SHEETS
                     (In thousands, except share data)

                   LIABILITIES AND STOCKHOLDERS' EQUITY

                                                 June 30,    December 31,
                                                   2000           1999
                                               (unaudited)     (Note 1)

Current liabilities:
  Accounts payable                               $   818        $   291
  Accrued liabilities                              1,448          1,029
  Income taxes payable                               460            145
  Accrued shut-down and restructuring costs           25             72
                                                  ------         ------
      Total current liabilities                    2,751          1,537
                                                  ------         ------

Deferred tax liabilities                             574            718

Stockholders' equity:
  Common stock, without par value;
    20,000,000 shares authorized; 6,664,665
    and 6,631,765 shares issued in 2000 and
    1999, respectively                             9,597          9,389
  Retained earnings, net of $7,772 in
    treasury stock retired during 1999            16,949         17,053
  Accumulated other comprehensive income (loss)       48            (48 )
  Less treasury stock, at cost,
    19,600 shares in 2000                            (81 )            -
                                                  ------         ------
      Total stockholders' equity                  26,513         26,394
                                                  ------         ------
                                                 $29,838        $28,649
                                                  ======         ======

























                          See accompanying notes

                                     4
<PAGE>

                         RELIABILITY INCORPORATED
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share data)

                         Six Months Ended June 30,

                                                   2000           1999
                                                       (unaudited)

Revenues                                          $9,156         $9,281

Costs and expenses:
  Cost of revenues                                 5,870          5,650
  Marketing, general and administrative            2,874          3,042
  Research and development                           726            872
  Provision for asset impairment                     100              -
                                                   -----         ------
                                                   9,570          9,564
                                                   -----         ------
Operating (loss)                                    (414 )         (283 )
Interest income, net                                 461            324
                                                   -----         ------
Income before income taxes                            47             41
                                                   -----         ------
Provision (benefit) for income taxes:
  Current                                            279             37
  Deferred                                          (128 )           82
                                                   -----         ------
                                                     151            119
                                                   -----         ------
Net (loss)                                        $ (104 )       $  (78 )
                                                   =====         ======

Earnings (loss) per share:
  Basic                                           $ (.01 )       $ (.01 )
                                                   =====         ======
  Diluted                                         $ (.01 )       $ (.01 )
                                                   =====         ======

Weighted average shares:
  Basic                                            6,657          6,624
                                                   =====         ======
  Diluted                                          6,657          6,624
                                                   =====         ======

















                          See accompanying notes

                                     5
<PAGE>



                         RELIABILITY INCORPORATED
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share data)

                        Three Months Ended June 30,

                                                    2000          1999
                                                       (unaudited)

Revenues                                           $4,554        $4,961

Costs and expenses:
  Cost of revenues                                  2,973         2,891
  Marketing, general and administrative             1,489         1,539
  Research and development                            333           396
  Provision for asset impairment                      100             -
                                                    -----         -----
                                                    4,895         4,826
                                                    -----         -----
Operating income (loss)                              (341 )         135
Interest income, net                                  237           166
                                                    -----         -----
Income (loss) before income taxes                    (104 )         301
                                                    -----         -----
Provision (benefit) for income taxes:
  Current                                             134           155
  Deferred                                            (88 )         (38 )
                                                    -----         -----
                                                       46           117
                                                    -----         -----
Net income (loss)                                  $ (150 )      $  184
                                                    =====         =====

Earnings (loss) per share:
  Basic                                            $ (.02 )      $  .03
                                                    =====         =====
  Diluted                                          $ (.02 )      $  .03
                                                    =====         =====

Weighted average shares:
  Basic                                             6,668         6,632
                                                    =====         =====
  Diluted                                           6,668         6,659
                                                    =====         =====















                          See accompanying notes

                                     6
<PAGE>
                         RELIABILITY INCORPORATED
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)

                         Six Months Ended June 30,
                                                    2000          1999
                                                      (unaudited)
Cash flows from operating activities:
  Net (loss)                                      $  (104 )     $   (78 )
  Adjustments to reconcile net (loss) to
    cash provided (used) by operating activities:
      Depreciation and amortization                 1,119         1,307
      Provision (benefit) for deferred income taxes  (128 )          82
      Provision for inventory obsolescence             53            16
      Provision for asset impairment                  100             -
      (Gain) on disposal of fixed assets              (37 )         (31 )
  Changes in operating assets and liabilities:
      Accounts receivable                          (2,002 )        (658 )
      Inventories                                     (14 )         (43 )
      Refundable income taxes                         551             -
      Other current assets                             46          (185 )
      Other long-term assets                         (343 )           -
      Accounts payable                                527            90
      Accrued liabilities                             419        (1,433 )
      Income taxes payable                            315           (60 )
      Cash payments charged to shut-down
        and restructuring reserve                     (47 )        (100 )
                                                   ------        ------
          Total adjustments                           559        (1,015 )
                                                   ------        ------
Net cash provided (used) by
  operating activities                                455        (1,093 )
                                                   ------        ------
Cash flows from investing activities:
  Expenditures for property and equipment            (466 )        (690 )
  Proceeds from sale of equipment                      37            31
  Increase in other long-term assets                    -             7
                                                   ------        ------
Net cash (used) in investing activities              (429 )        (652 )
                                                   ------        ------
Cash flows from financing activities:
  Proceeds from issuance of common stock
    pursuant to stock option plan                     262           128
  Borrowings under revolving credit facility          591             -
  Payments under revolving credit facility           (591 )           -
  Payments on long-term debt                            -          (274 )
  Payment on note payable to shareholder                -          (534 )
  Purchase of treasury stock                          (81 )           -
  Other                                               (54 )          (7 )
                                                   ------        ------
Net cash provided (used) by financing activities      127          (687 )
                                                   ------        ------
Effect of exchange rate changes on cash                21             -
                                                   ------        ------
Net increase (decrease) in cash                       174        (2,432 )

Cash and cash equivalents:
  Beginning of period                              13,573        15,702
                                                   ------        ------
  End of period                                   $13,747       $13,270
                                                   ======        ======
                          See accompanying notes

                                     7
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               June 30, 2000

1.  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business
-----------------------

    Reliability  Incorporated  ("Reliability"  or  the  "Company") is a  United
States  based corporation with operations in the United States,  Singapore  and
Costa Rica.  The  Company  and  its subsidiaries are principally engaged in the
design, manufacture and sale of equipment used to test and condition integrated
circuits. In addition, a subsidiary  of the Company operates a service facility
which conditions and tests integrated  circuits  as  a  service  to others. The
Company's testing products are sold to companies that manufacture semiconductor
products and are shipped to locations in the U.S., Europe, Asia and Pacific Rim
countries.  Services,  as  of  June 30, 2000, are provided principally  to  two
customers in Singapore. The Company  acquired,  in  December  1998, assets of a
company that provided services to customers in Austin, Texas and Singapore. The
Company  closed  the  Austin  facility  in  September  1999. Another subsidiary
manufactures  and  sells  power sources, primarily a line of  DC  to  DC  power
converters. Power sources are  sold to U.S., European and Asian based companies
that design and sell electronic equipment.

    The consolidated financial statements  include  the accounts of the Company
and  its  subsidiaries,  all  of  which  are  wholly  owned.   All  significant
intercompany  balances  and transactions have been eliminated in consolidation.
Certain amounts in the consolidated  financial  statements for the period ended
December 31, 1999 have been reclassified to conform to the 2000 presentation.

    The  accompanying  unaudited consolidated financial  statements  have  been
prepared  in  accordance with  generally  accepted  accounting  principles  for
interim financial  information  and  with  the  instructions  to  Form 10-Q and
Article  10  of  Regulation  S-X. Accordingly, they do not include all  of  the
information and footnotes required  by generally accepted accounting principles
for  complete  financial  statements.  In   the   opinion  of  management,  all
adjustments (consisting of normal recurring accruals)  considered necessary for
a  fair  presentation  have been included. Operating results  for  the  interim
period ended June 30, 2000  are  not necessarily indicative of the results that
may be expected for the year ending December 31, 2000.

    The balance sheet at December  31,  1999  has been derived from the audited
financial statements at that date, but does not  include all of the information
and footnotes required by generally accepted accounting principles for complete
financial  statements.  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, 1999.

Accounting Estimates
--------------------

    The preparation  of  financial  statements  in  conformity  with  generally
accepted  accounting  principles  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.
                                       8
<PAGE>

                            RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               June 30, 2000

Recent Accounting Pronouncements
--------------------------------

    In December 1999,  the  Securities  and  Exchange  Commission  issued Staff
Accounting  Bulletin  No.  101,  or  SAB  101, Revenue Recognition in Financial
Statements. SAB 101 provides guidance on applying generally accepted accounting
principles  to  revenue recognition in financial  statements.  The  Company  is
required to adopt  SAB  101  in  the  fourth  quarter  of 2000. The Company has
reviewed the release and does not currently believe that  any  changes  will be
required  in its current revenue recognition policies, practices or procedures.
The Company  will  complete  evaluation of the provisions of SAB 101 during the
third quarter of 2000.

Income Taxes
------------

    Deferred income taxes are  provided  under the liability method and reflect
the net tax effects of temporary differences  between  the  tax basis of assets
and  liabilities  and  their  reported  amounts  in the consolidated  financial
statements.

    The differences between the effective rate reflected  in  the provision for
income taxes and the amounts determined by applying the statutory U.S. tax rate
of 34% to income (loss) before income taxes are analyzed below  (in  thousands)
for the six month periods ended:

                                                          June 30,
                                                    2000           1999

    Provision at statutory rate                     $ 16           $ 14

    Tax effects of:
      Foreign losses for which a tax benefit is
        not available                                160            135
      Lower effective income tax rates related
        to undistributed foreign earnings            (38 )          (44 )
    Other                                             13             14
                                                     ---            ---
        Provision for income taxes                  $151           $119
                                                     ===            ===

Inventories
-----------

    Inventories  are  stated  at the lower of standard cost (which approximates
first-in, first-out) or market  (replacement  cost or net realizable value) and
include (in thousands):

                                                  June 30,    December 31,
                                                   2000          1999

    Raw materials                                 $  842        $  966
    Work-in-progress                                 495           149
    Finished goods                                   240           501
                                                   -----         -----
                                                  $1,577        $1,616
                                                   =====         =====

                                       9
<PAGE>
                           RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               June 30, 2000

    Inventories  are  presented  net  of  reserves  for   excess  and  obsolete
inventories  of $478,000 and $428,000 at June 30, 2000 and December  31,  1999,
respectively.

Investments in Marketable Equity and Debt Securities
----------------------------------------------------

    Investments  are  classified  as  held  to  maturity  or available-for-sale
securities under the provisions of Statement of Financial Accounting  Standards
No.  115,  "Accounting  for Certain Investments in Debt and Equity Securities."
Management determines the  appropriate  classification  of  its  investments in
equity  and  debt  securities  at  the  time  of purchase and reevaluates  such
determinations at each balance sheet date.

    Marketable equity securities are classified  as  available-for-sale and are
carried  at their fair value on the balance sheet, with  unrealized  gains  and
losses (net  of  applicable  income taxes (benefit) of $24,000 and $(24,000) at
June 30, 2000 and December 31,  1999)  reported  as  a  separate  component  of
stockholders'  equity.  Equity  securities  are  stated  at  market  value,  as
determined  by the most recently published trade price of the securities at the
balance sheet date.

    The investment  in  preferred  stock  at  June 30, 2000 is classified as an
available-for-sale security. The preferred stock  represents a convertible bond
that was converted into 562,000 shares of preferred  stock  of  the  issuer  in
January  2000 and is stated at cost. It is not practicable to estimate the fair
value of the  preferred  stock, as the issuer is in the early stages of product
development.  The  following  table  summarizes  the  Company's  investment  in
securities (in thousands) at the dates indicated.

                                                 June 30,    December 31,
                                                   2000          1999

    Preferred stock, at cost                        $500          $  -
    Convertible bond, at amortized cost                -           500
    Marketable equity securities, at cost            422           422
    Unrealized net gains (losses) on
      marketable securities                           72          (72)
                                                     ---           ---
                                                     994           850
    Amount classified as current                     280           203
                                                     ---           ---
                                                    $714          $647
                                                     ===           ===

Supplemental Cash Flow Information
----------------------------------

    Interest and income  taxes paid during the six month periods ended June 30,
are presented below (in thousands):

                                                    2000          1999

    Interest paid                                   $  1          $ 18
                                                     ===           ===
    Income taxes paid                               $104          $ 94
                                                     ===           ===


                                      10
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               June 30, 2000

Stock option plan
-----------------

    Shareholders approved,  in  April  2000, an amendment to the Company's 1997
Stock Option Plan to increase the number of shares of Common Stock reserved for
issuance under the Plan from 1,000,000 to 1,500,000.

2.  CREDIT AGREEMENTS

    Reliability maintains a line of credit  with  Wells  Fargo Bank Texas, N.A.
which  permits  the  Company to borrow up to $1 million until  April  1,  2001.
Interest is payable at  the  bank's  prime  rate  minus 1/4% (9.25% at June 30,
2000).  Any  unpaid  principal  of  the note is due April  1,  2001.  The  loan
agreement provides for a revolving line of credit, secured by substantially all
assets of the Company which are located  in  the  U.S.,  except  for  land  and
buildings.  The  credit  facility  requires  compliance  with certain financial
covenants  related  to the Company's current ratio, debt service  coverage  and
funded debt to net income  (as  defined)  and  total  liabilities  to total net
worth.  The  agreement  prohibits the payment of cash dividends by the  Company
unless otherwise agreed to  by the bank. The Company was in compliance with the
financial requirements of the  agreement  at  June  30, 2000, and there were no
balances outstanding under the agreement at June 30, 2000 or December 31, 1999.

    The Company's Singapore subsidiary maintains an agreement  with a Singapore
bank  to  provide an overdraft facility to the subsidiary of 500,000  Singapore
dollars (U.S.  $289,000)  at  the  bank's  prime rate plus 2% (7.5% at June 30,
2000).  There  were  no balances outstanding at  June  30,  2000,  but  amounts
utilized under letter  of  credit  commitments  totaled  $239,000, resulting in
credit availability of $50,000 at June 30, 2000. The loan  is collateralized by
all assets of the subsidiary and requires maintenance of a minimum net worth of
the  Singapore subsidiary. Payment of dividends requires written  consent  from
the bank,  and  continuation of the credit facility is at the discretion of the
bank.

    Interest income  (expense)  for  the  six  month  periods ended June 30, is
presented net as follows (in thousands):
                                                    2000          1999

    Interest income                                 $462          $339
    Interest (expense)                                (1 )         (15 )
                                                     ---           ---
    Interest income, net                            $461          $324
                                                     ===           ===














                                      11
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               June 30, 2000

3.  SEGMENT INFORMATION

    The   following  table  sets  forth  reportable  segment  information   (in
thousands) for the periods indicated:

                                     Six Months         Three Months
                                   Ended June 30,      Ended June 30,

                                   2000     1999        2000      1999

    Revenues from external
     customers:
      Testing Products            $4,062   $2,344      $1,956    $1,379
      Services                     4,298    5,870       2,297     3,038
      Power Sources                  796    1,067         301       544

    Intersegment revenues:
      Testing Products                77       80          55        25
      Services                         6        6           6         -
      Eliminations                   (83 )    (86 )       (61 )     (25 )
                                   -----   ------       -----     -----
                                  $9,156   $9,281      $4,554    $4,961
                                   =====   ======       =====     =====
    Operating income (loss):
      Testing Products            $ (257 ) $ (779 )    $ (213 )  $ (102 )
      Services                       566      909         328       441
      Power Sources                 (417 )   (207 )      (249 )     (92 )
      Provision for asset
        impairment                  (100 )      -        (100 )       -
      General corporate expenses    (206 )   (206 )      (107 )    (112 )
                                   -----   ------       -----     -----
        Operating income (loss)   $ (414 ) $ (283 )    $ (341 )  $  135
                                   =====   ======       =====     =====

    Total assets by reportable segment as of the dates indicated are as follows
(in thousands):
                                               June 30,    December 31,
                                                 2000          1999

    Testing Products                           $ 7,805       $ 6,687
    Services                                     5,249         5,783
    Power Sources                                1,596         1,647
    General corporate assets                    15,188        14,532
                                                ------        ------
                                               $29,838       $28,649
                                                ======        ======

    For the  periods  indicated  above,  there  were no material changes in the
accounting policies and procedures used to determine segment income or loss.








                                      12
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               June 30, 2000

4.  EARNINGS PER SHARE

    The  following  table  sets  forth the computation  of  basic  and  diluted
earnings per share (in thousands, except per share data):

                                          Six Months      Three Months
                                        Ended June 30,    Ended June 30,

                                         2000     1999     2000    1999

    Net income (loss)                 $ (104 ) $  (78 )  $ (150 ) $  184
                                       =====    =====     =====   =====

    Weighted average shares
      outstanding                      6,657    6,624     6,668   6,632

    Net effect of dilutive stock
      options based on the
      treasury stock method                -        -         -      27
                                       -----    -----     -----   -----
    Weighted average shares and
      assumed conversions              6,657    6,624     6,668   6,659
                                       =====    =====     =====   =====
    Earnings (loss) per share:
      Basic                           $ (.01 ) $  (.01 ) $ (.02 ) $  .03
                                       =====    =====     =====   =====
      Diluted                         $ (.01 ) $ (.01 )  $ (.02 ) $  .03
                                       =====    =====     =====   =====

    Options to purchase 265,000, 598,000  and 339,000 shares of common stock of
the Company were excluded from the computation  of the diluted (loss) per share
during the first half of 2000, first half of 1999  and  the  quarter ended June
30, 2000, respectively, as inclusion of these options in the calculations would
have been anti-dilutive.























                                      13
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               June 30, 2000


5.  SHUT-DOWN AND RESTRUCTURING OF FACILITIES

    The  following  table  reports  activity  in  the  accrued  shut-down   and
restructuring accounts during the six month period ended June 30, 2000 and year
ended December 31, 1999 (in thousands):

                                                     2000       1999

    Accrued costs at beginning of period            $  72      $ 300

    Provision for shut-down and restructuring:
      Employee severance                                -         30
      Other expenses                                    -         80
                                                     ----       ----
                                                        -        110
                                                     ----       ----
    Cash payments charged to accounts:
      Employee severance                                -        (72 )
      Lease payments                                  (20 )     (101 )
      Other payments                                  (27 )      (27 )
                                                     ----       ----
                                                      (47 )     (200 )
                                                     ----       ----
    Disposal of Singapore assets                        -       (138 )
                                                     ----       ----
    Accrued costs at end of period                  $  25      $  72
                                                     ====       ====

    The  Company's  Austin,  Texas  facility  (which  was  part of the Services
segment) provided services principally to one customer. The facility was closed
on September 30, 1999 because the customer notified the Company  that  it would
cease  sending  product  to  the  facility.  The  Company  recorded an $800,000
provision  for  shut-down  in  September  1999 related to the closing  of  this
facility. The Company did not include an accrual  for  future  rent obligations
related to the leased facility in Austin because it has entered into a sublease
agreement with a third party equal to the Company's remaining obligation  under
the lease agreement.

    Services   provided   to   Texas  Instruments  Incorporated  accounted  for
substantially all of the revenues  of the Company's Singapore Services facility
prior to the Company's acquisition of  certain assets and operations from Basic
Engineering Services and Technology Labs, Inc., in December 1998. On October 1,
1998, Micron Technology acquired the Texas  Instruments  facility  in Singapore
and informed the Company that it would continue to utilize the Company's  burn-
in  services, but at a significantly reduced level. Micron accounted for 8%  of
1999  fiscal  year  consolidated revenues and completely discontinued utilizing
the Company's services  during  the  fourth quarter of 1999. In connection with
the decrease in volumes at the Singapore  facility,  a  $507,000  provision for
restructuring was recorded in the fourth quarter of 1998.

    During  the second quarter 2000, the Company recorded a $100,000  provision
for asset impairment  related  to  assets-held-for sale resulting from the 1998
shut-down of the Company's North Carolina facility.



                                      14
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               June 30, 2000

6.    COMPREHENSIVE INCOME

      The only difference between total  comprehensive  income  (loss)  and net
income  (loss)  that  is  reported on the Consolidated Statements of Operations
arises from unrealized gains  and  losses on available-for-sale securities. The
Company's total comprehensive income  (loss)  (in  thousands)  for  the periods
indicated, are as follows:

                                         Six Months       Three Months
                                       Ended June 30,    Ended June 30,
                                        2000  1999        2000   1999

Net income (loss)                      $(104 )  $(78 )   $(150 )  $184

Unrealized net gains (losses) on
   marketable equity securities           96       -      (190 )     -
                                        ----     ---      ----     ---
Total comprehensive income (loss)      $  (8 )  $(78 )   $(340 )  $184
                                        ====     ===      ====     ===

7.    RELOCATION OF SINGAPORE FACILITIES

      The  Company  is  in  the  process  of  finalizing  plans  to combine two
Singapore  facilities  into  a  new  facility  in  order  to provide additional
capacity and to reduce operating costs. Costs related to this  relocation,  net
of  income tax benefits, are estimated to be $400,000 and $130,000 in the third
and fourth quarters of 2000, respectively. In addition to the cost that will be
recorded  as  expense,  additional  expenditures for leasehold improvements and
other plant and equipment costs will be capitalized.




























                                      15
<PAGE>


                           RELIABILITY INCORPORATED
                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                               June 30, 2000

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

     This  Management's Discussion and  Analysis  of  Financial  Condition  and
Results of Operations  and other parts of this document contain forward-looking
statements that involve risks and uncertainties. All forward-looking statements
included in this document  are based on information available to the Company on
the date hereof, and the Company  assumes  no  obligation  to  update  any such
forward-looking   statements.   The   Company's  actual  results  could  differ
materially  from those anticipated in these  forward-looking  statements  as  a
result of a number  of  factors,  including  those  set forth elsewhere in this
document.

FINANCIAL CONDITION

     The  primary  sources  of  Reliability's liquidity are  cash  provided  by
operations and working capital. The parent Company and its Singapore subsidiary
have substantial cash available to  support anticipated liquidity requirements.
The Company maintains lines of credit  to  supplement  the  primary  sources of
capital.  Changes in the Company's financial condition since December 31,  1999
and June 30,  1999  are  generally  attributable  to changes in cash flows from
operating activities, including the effect of operating at revenue levels below
historical  levels,  the  effects  of  changes  in operations  related  to  the
acquisition  of certain assets in the Services segment  in  December  1998  and
accelerating payments  on  and  payment  in  full of a mortgage during 1999. In
addition, significant changes in demand for products  and  services sold by the
Company, the shut-down of the Company's Austin, Texas Services facility in 1999
and changes in operations at the Company's Singapore subsidiary throughout 1999
and 2000 did, and will in the future, affect the Company's financial condition.
Also, purchasing marketable equity securities, changes in the levels of capital
expenditures  and  consolidating  the Company's Singapore operations  into  one
facility during the second half of  2000  have  affected  and  will  affect the
Company's financial condition.

    Certain  ratios  and  amounts  monitored  by  management  in evaluating the
Company's  financial resources and performance are presented in  the  following
chart. The periods  presented  related  to the profitability ratios are for the
six months ended June 30, and twelve months ended December 31:

                                  June 30,     December 31,   June 30,
                                    2000           1999         1999

  Working capital:
    Working capital (in thousands) $16,719        $16,401      $15,965
    Current ratio                 7.1 to 1      11.7 to 1     7.2 to 1
  Equity ratios:
    Total liabilities to equity        0.1            0.1          0.1
    Assets to equity                   1.1            1.1          1.1
  Profitability ratios:
    Gross profit                      36 %           35 %         39 %
    Return on revenues                (1)%           (8)%         (1)%
    Return on assets (annualized)     (1)%           (4)%         (1)%
    Return on equity (annualized)     (1)%           (5)%         (1)%

                                    16
<PAGE>

                         RELIABILITY INCORPORATED
                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                               June 30, 2000

     The Company's financial condition has remained strong during 2000. Working
capital increased to $16.7 million at June  30,  2000,  from  $16.4  million at
December 31, 1999, and the ratio of current assets to current liabilities was a
very healthy 7.1 to 1 at June 30, 2000. During 2000, the Company has maintained
a  strong  current  ratio and working capital. This is due to a decline in  the
level of operations during 1999 and 2000 compared to 1998, resulting in current
liabilities declining  at  a  faster  rate  than the decline in current assets.
Beginning in the fourth quarter of 1998, the  Company's  revenues  and level of
operations, compared to the corresponding prior year periods, declined.  Assets
such  as  accounts  receivable  and  inventories decreased during the period of
declining production and were converted  to  cash.  Cash  provided  by  certain
components  of  cash flows from operations in 1999 were used to reduce and  pay
off a mortgage, acquire  assets  in the Services segment, purchase fixed assets
and maintain the amount of short-term interest-bearing cash investments Also in
1999, cash was used to reduce accrued  liabilities, pay off a note and purchase
certain equity securities. The current ratio  of 11.7 to 1 at December 31, 1999
was unusually high due to the low level of operations during the latter part of
1999; thus, items such as accounts payable and  accrued  liabilities  were very
low. The Company continues to maintain stringent expense control measures, thus
minimizing  the negative impact on the Company's financial condition while  the
Company is operating at reduced revenue and profit levels.

    The Company  maintains  a  credit  facility with a financial institution to
provide  credit availability to supplement  cash  provided  by  operations,  if
required.  Credit  availability  provided  by  the  facility was reduced by the
Company  from  $4.0  million to $1.0 million in 1999. The  Company's  Singapore
subsidiary maintains a  small  overdraft  facility  to support the subsidiary's
credit commitments.

    Net cash provided by operating activities for the six months ended June 30,
2000 was $0.5 million, contrasted with $1.0 million used  by  operations in the
first  six  months  of  1999.  The  principal  item affecting cash provided  by
operations  in 2000 was a $2.0 million increase in  accounts  receivable.  Cash
provided by operations  in  2000  was increased by $1.1 million of depreciation
and  amortization  and a $0.6 million  decrease  in  refundable  income  taxes.
Accounts payable and  accrued  liabilities  increased  $0.9  million  in  2000,
resulting from a general increase in most items included in accrued liabilities
due  to  accrual  throughout the year of various items, such as property taxes,
that will be paid in  the  following  year  and an increase in revenues in 2000
compared to the latter part of 1999. A $0.3 million  increase  in  income taxes
payable  resulted from an increase in taxes on profits of a foreign subsidiary.
A significant  portion  of  the  increase  in  accounts receivable and the $0.3
million increase in other long-term assets resulted  from  the  fact  that  the
Company  sold $2.0 million of testing products in January 2000 and the accounts
receivable related to that sale will be collected in 23 monthly installments.

Backlog totaled  $2.5  million  at  June  30,  2000 compared to $2.4 million at
December 31, 1999. The current forward-looking forecast  indicates revenues for
the  third quarter of 2000 will be between $4.6 and $5.0 million,  compared  to
revenues  of  $2.3 million for the fourth quarter of 1999, $4.6 million for the
first  quarter of 2000 and $4.6 million for the


                                    17
<PAGE>
                         RELIABILITY INCORPORATED
                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                               June 30, 2000

second quarter  of  2000. Operations for the third quarter of 2000 are forecast
to result in a loss of  $0.5  per  diluted share, including relocation expenses
related to the Singapore operation. The Company is continuing to see some signs
that new orders may increase in the  near  future.  Some  of  these  signs  are
increases  in demand for products sold by the semiconductor industry, increases
in inquiries  by  certain  customers and forecasts by certain customers needing
new or retrofit capacity. In  general, these signs provide some visibility that
demand for the Company's products  may  increase,  but  actual  timing  of  any
increase  is  still  difficult to forecast. In addition, changes in product mix
and increases in demand  for  ICs  that  are sold by customers of the Singapore
Services facility have resulted in increased  demand  for  services provided by
the  facility  in  2000,  compared to the latter part of 1999. The  Company  is
finalizing plans to relocate  the  existing  two  facilities  into one facility
during the second half of 2000.

    During  January 2000, the Company's common stock traded between  $3.00  and
$4.00 per share.  The  Company  announced,  on  February  1,  2000,  a  plan to
repurchase  for cash up to 1.5 million shares of its common stock. Shares  that
are repurchased  would be used to issue stock when stock options are exercised,
make contributions to the Company's 401(k) plan, or for acquisitions. The stock
has traded above the January 2000 price range during most of the time since the
announcement was made.  The  stock  has traded in the $4.00 range during recent
periods of 2000 and the Company has repurchased  a total of 39,000 shares as of
August 3, 2000. The Company has limited purchases  at  higher  share prices and
the purchases are also subject to regulatory daily volume limitations.

    Capital  expenditures  during  the first six months of 2000 and  1999  were
$466,000 and $690,000, respectively.  A  significant portion of expenditures in
both years included equipment required by  the  Singapore subsidiary to support
services provided by the subsidiary. Current projections  indicate that capital
expenditures  for  2000  may  be between $2.0 and $3.0 million.  A  significant
portion of the expenditures will  be  for  equipment  required by the Singapore
subsidiary to support changes and increases in customers'  requirements  and to
consolidate  the current two facilities into one new location, as noted earlier
in this discussion.  Consolidation  of  two  facilities  into  one  facility is
projected to reduce future operating expense.

    Current  projections  indicate  that the Company's cash and cash equivalent
balances and available lines of credit will be sufficient to meet the projected
cash requirements of the Company for the remainder of 2000.

RESULTS OF OPERATIONS

    Six months ended June 30, 2000 compared to six months ended June 30, 1999.

Revenues.  Revenues for the 2000 six-month period were $9.2 million compared to
$9.3 million for the 1999 period. Revenues  in  the  Testing  Products  segment
increased  $1.7  million  while  revenues  in  the  Services  and Power Sources
segments decreased $1.5, and $0.3 million, respectively.




                                      18
<PAGE>
                           RELIABILITY INCORPORATED
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                 June 30, 2000

    Revenues in the Testing Products segment were $4.1 million  for  the  first
half of 2000, which is an increase of 73% from the first half of 1999. Revenues
from  the  sale  of  CRITERIA  products  decreased  $0.3  million or 21%, while
revenues from the sale of INTERSECT products increased $2.0  million  or  216%.
Changes  in demand during the 2000 period for IC products sold by customers  of
the Company's  Testing  Products  segment  resulted in changes in the number of
CRITERIA systems upgraded and the sale of refurbished  and  upgraded  INTERSECT
systems to customers.

    Revenues  in the Services segment for the 2000 period were $4.3 million,  a
decrease of 27%  compared  to  the  corresponding  1999  period.  The  decrease
resulted  from the closing of the Company's Austin, Texas Services facility  at
the end of  the  third  quarter  of  1999.  Revenues  at the Singapore Services
facility were basically flat in the 2000 period compared  to  the  1999 period,
but were up 15% in the second quarter of 2000 compared to the first  quarter of
2000. The increase at the Singapore facility resulted from product mix  changes
and  increased  demand for products sold by the two principal customers of  the
subsidiary and from  one  of  the  customers  introducing  a  new generation of
microprocessors.

    Revenues in the Power Sources segment were $0.8 million for  the first half
of 2000, reflecting a 25% decrease from the 1999 period. Revenues were affected
by  general reductions in demand, price competition, an aging product  line,  a
decline  in market penetration and cancellation of a distribution contract by a
distributor.

Costs and  Expenses.   Total  costs  and  expenses  for  the first half of 2000
increased  slightly compared to the 1% revenue decrease of  $125,000.  Cost  of
revenues increased  $220,000;  marketing,  general  and administrative expenses
decreased $168,000; research and development expenses decreased $146,000; and a
provision for asset impairment of $100,000 was recorded in the 2000 period.

    The decrease in gross profit from 39% in the 1999 period to 36% in the 2000
period  is attributable to all segments. The decrease  relates  to  volume  and
product mix  changes  at the Singapore facility, closing of the Austin Services
facility, volume decreases  in  the  Power  Sources  segment  and a lower gross
profits on products sold in the Testing Products segment in 2000 resulting from
product mix changes. In addition, there was a decrease in the Services  segment
related  to  an increase in depreciation expense resulting from a faster write-
off of certain  IC  testers,  due to an anticipated shorter product life of the
ICs that are processed on the testers.

    Marketing,  general  and  administrative   expenses  for  the  2000  period
decreased $168,000. The decrease was primarily related  to  a $292,000 decrease
in expenses related to the closing of the Austin Services facility in September
1999. The overall decrease, was affected by stringent expense  controls  and an
increase  in  Testing  Products  revenues  which  contributed to an increase in
volume related expenses, such as commissions, warranty and similar expenses.

    The increase in interest income during the 2000 period relates primarily to
interest earned on an accounts receivable amount that is being collected over a
two-year period and a general increase in interest rates paid on investments.


                                      19
<PAGE>

                           RELIABILITY INCORPORATED
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                 June 30, 2000

    The Company, in April 1998, closed a Services facility  in  North Carolina.
Land  and  a  building  previously  occupied by a services operation have  been
carried as assets held for sale. The  impairment  reserve related to the assets
was increased by $100,000 to $200,000 during the second  quarter  of  2000. The
increase  in  the  reserve  was based on updated information applicable to  the
assets' fair value, less cost to sell.

    Research and development  expenses  for the 2000 period decreased slightly.
Reliability is committed to a significant  research and development program and
development  costs  are  projected  to remain at  current  levels  or  increase
somewhat during the remainder of the year.

    The Company's operations reflected  net  tax  benefits  for  the  six-month
periods  ended  June  30,  2000  and  1999.  The  principal items affecting the
Company's tax benefit rates in both years were tax  benefits not available to a
foreign subsidiary due to limitations on net operating  loss  deductions  and a
lower effective tax rate related to earnings of the Singapore subsidiary.

    Three  months  ended  June 30, 2000 compared to three months ended June 30,
1999.

Revenues.  Revenues for the  2000 three-month period were $4.6 million compared
to $5.0 million for the 1999 period.  Revenues  in the Testing Products segment
increased  $0.6  million,  Power Sources revenues decreased  $0.3  million  and
Services revenues decreased $0.7 million.

    Revenues in the Testing  Products  segment were $2.0 million for the second
quarter of 2000, which is an increase of  42%  from the second quarter of 1999.
The increase is related to changes in demand relating  to  factors described in
the  six-month  discussion  above. Revenues from the sale of CRITERIA  products
decreased  $0.5  million and revenues  from  the  sale  of  INTERSECT  products
increased $1.1 million.

    Revenues in the  Services  segment for the 2000 period were $2.3 million, a
decrease of 24% compared to the  corresponding 1999 period. Eighty-five percent
(85%)  of  the decrease is related to  the  shutdown  of  the  Austin  Services
facility and the remaining 15% relates to the timing of product mix changes.

    Revenues  in  the  Power  Sources  segment were $0.3 million for the second
quarter of 2000, reflecting a 45% decrease  from the 1999 period. Revenues were
affected by general reductions in demand, an  aging  product line, a decline in
market  penetration  resulting in volume decreases and the  cancellation  of  a
distribution contract, as noted above in the six month discussion.

Costs and Expenses.  Total  costs  and  expenses for the second quarter of 2000
increased $69,000 or 1% compared to the 8%  revenue decrease of $0.4 million. A
$100,000 provision for asset impairment, as discussed  in  the  above six-month
discussion, was recorded in the 2000 quarter.

    The decrease in gross profit from 42% in the 1999 period to 35% in the 2000
period  is  attributable  primarily  to a decrease in the gross profit  in  the
Testing Products and Power Sources segments resulting from product mix


                                      20
<PAGE>

                         RELIABILITY INCORPORATED
                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                               June 30, 2000

changes in the Testing Products segment  and  volume  decreases  in  the  Power
Sources  segment.  In  addition, the decrease relates to volume and product mix
changes at the Singapore  facility,  closing  of  the Austin Services facility,
volume decreases in the Power Sources segment and the  effect of an increase in
depreciation expense at the Singapore facility, as discussed  in the above six-
month discussion.

    Marketing,  general  and  administrative  expenses  for  the  2000   period
decreased  slightly.  The decrease is related to a decrease in expenses due  to
closing of the Austin Services  facility  and  the  effect of stringent expense
controls.  The  decrease is affected by increases in volume  related  expenses,
such as commissions,  warranty and similar expenses resulting from the increase
in revenues in the Testing Products segment

    The change in net interest  reflects  an  increase in interest income and a
decrease in interest expense, as explained in the above six-month discussion.

    A $46,000 tax provision was recorded related  to  the  $104,000 loss before
income taxes for the three-month period ended June 30, 2000,  compared to a 39%
tax  rate  for the three month period ended June 30, 1999. The principal  items
affecting the  Company's  tax  rate  in  2000  and  1999  were tax benefits not
available to a foreign subsidiary due to net operating loss  limitations  and a
lower effective tax rate related to earnings of the Singapore subsidiary.

SAFE HARBOR STATEMENT

    "Safe Harbor" Statement under the Private Securities Litigation Reform  Act
of  1995:  Statements  in this Form 10-Q regarding Reliability's business which
are not historical facts are "forward looking statements" that involve risk and
uncertainties, including,  but  not  limited  to,  market acceptance of Company
products and services, the effects of general economic  conditions,  the impact
of  competition,  product  development  schedules,  problems  with  technology,
delivery  schedules,  future  results  related  to acquisitions and supply  and
demand changes for Company products and services  and  its  customers' products
and services. Actual results may materially differ from projections.

Item 3. Quantitative and Qualitative Disclosure of Market Risk.

     There  have  been  no  material  changes  in  the  market risk disclosures
reported in the Company's Annual Report on Form 10-K filed  for  the year ended
December 31, 1999.













                                    21
<PAGE>


                         RELIABILITY INCORPORATED
                             OTHER INFORMATION

                       PART II.   OTHER INFORMATION


Items 1 through 5.

    Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

    (a)  Exhibits

        27.1 Financial Data Schedule

      (b) Reports on Form 8-K.  There were no reports on Form 8-K  filed by the
    Company during the quarter ended June 30, 2000












































                                    22
<PAGE>


                         RELIABILITY INCORPORATED
                                SIGNATURES

                               June 30, 2000



    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)





August 11, 2000                           /s/Larry Edwards
                                          President and
                                          Chief Executive Officer





August 11,2000                            /s/Max T. Langley
                                          Sr. Vice President - Finance
                                          and Chief Financial Officer





























                                    23