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 March 31, 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.

                6,668,265 -- Common Stock -- No Par Value
                          as of May 12, 2000










10Q12K.doc
                                     1
<PAGE>

                         RELIABILITY INCORPORATED
                                 FORM 10-Q

                             TABLE OF CONTENTS

                              March 31, 2000


                      PART I - FINANCIAL INFORMATION

                                                                 Page No.


Item 1.  Financial Statements:

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

         Consolidated Statements of Operations:
            Three Months Ended March 31, 2000 and 1999                5

         Consolidated Statements of Cash Flows:
            Three Months Ended March 31, 2000 and 1999                6

         Notes to Consolidated Financial Statements                7-13

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                    14-18

Item 3.  Quantitative and Qualitative Disclosure About Market Risk   18


                        PART II - OTHER INFORMATION

Item 1.
  through
Item 3.  Not applicable.                                             19

Item 4.  Submission of Matters to a Vote of Security Holders         19

Item 5.  Not applicable.                                             19

Item 6.  Exhibits and Reports on Form 8-K.                           19

Signatures                                                           20


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

                                                 March 31,   December 31,
                                                   2000          1999
                                                (unaudited)    (Note 1)

Current assets:
  Cash and cash equivalents                      $13,237      $13,573
  Accounts receivable                              3,156        1,267
  Inventories                                      1,331        1,616
  Refundable income taxes                            551          551
  Other current assets                               827          580
  Deferred tax assets                                196          351
                                                  ------       ------
    Total current assets                          19,298       17,938
                                                  ------       ------
Property, plant and equipment, at cost:
  Machinery and equipment                         14,006       13,981
  Buildings and improvements                       5,021        5,021
  Land                                               530          530
                                                  ------       ------
                                                  19,557       19,532
    Less accumulated depreciation                 12,494       11,937
                                                  ------       ------
                                                   7,063        7,595
                                                  ------       ------

Assets held for sale                               2,135        2,135
Investments                                          730          647
Goodwill, net of accumulated amortization
  of $75 and $61 in 2000 and 1999, respectively      320          334
                                                  ------       ------
                                                 $29,546      $28,649
                                                  ======       ======


















                          See accompanying notes

                                     3
<PAGE>

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

                   LIABILITIES AND STOCKHOLDERS' EQUITY

                                                March 31,    December 31,
                                                   2000          1999
                                               (unaudited)     (Note 1)

Current liabilities:
  Accounts payable                               $   443        $   291
  Accrued liabilities                              1,250          1,029
  Income taxes payable                               238            145
  Accrued shut-down and restructuring costs           38             72
                                                  ------         ------
      Total current liabilities                    1,969          1,537
                                                  ------         ------

Deferred tax liabilities                             667            718

Stockholders' equity:
  Common stock, without par value;
    20,000,000 shares authorized;
    6,678,765 and 6,631,765 shares issued
    in 2000 and 1999, respectively                 9,573          9,389
  Retained earnings, net of $7,772 in
    treasury stock retired in 1999                17,099         17,053
  Accumulated other comprehensive income (loss)      238            (48 )
                                                  ------         ------
      Total stockholders' equity                  26,910         26,394
                                                  ------         ------
                                                 $29,546        $28,649
                                                  ======         ======



























                          See accompanying notes

                                     4
<PAGE>

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

                       Three Months Ended March 31,

                                                    2000          1999
                                                       (unaudited)

Revenues                                           $4,602        $4,320

Costs and expenses:
  Cost of revenues                                  2,897         2,759
  Marketing, general and administrative             1,385         1,503
  Research and development                            393           476
                                                    -----         -----
                                                    4,675         4,738
                                                    -----         -----
Operating income (loss)                               (73 )        (418 )
Interest income, net                                  224           158
                                                    -----         -----
Income (loss) before income taxes                     151          (260 )
                                                    -----         -----
Provision (benefit) for income taxes:
  Current                                             145          (118 )
  Deferred                                            (40 )         120
                                                    -----         -----
                                                      105             2
                                                    -----         -----
Net income (loss)                                  $   46        $ (262 )
                                                    =====         =====

Earnings (loss) per share:
  Basic                                            $  .01        $ (.04 )
                                                    =====         =====
  Diluted                                          $  .01        $ (.04 )
                                                    =====         =====

Weighted average shares:
  Basic                                             6,646         6,616
                                                    =====         =====
  Diluted                                           6,779         6,616
                                                    =====         =====


















                          See accompanying notes

                                     5
<PAGE>
                         RELIABILITY INCORPORATED
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)

                       Three Months Ended March 31,

                                                    2000          1999
                                                      (unaudited)
Cash flows from operating activities:
  Net income (loss)                               $    46       $  (262 )
  Adjustments to reconcile net income (loss) to
    cash (used) by operating activities:
      Depreciation and amortization                   574           604
      Provision for deferred income taxes             (40 )         120
      Provision for inventory obsolescence             42             2
      (Gain) loss on disposal of fixed assets         (37 )          19
  Changes in operating asset and liabilities:
      Accounts receivable                          (1,889 )          29
      Inventories                                     243            28
      Other current assets                             87           (43 )
      Accounts payable                                152            92
      Accrued liabilities                             221        (1,585 )
      Income taxes payable                             93          (147 )
      Cash payments charged to
        restructuring reserve                         (34 )         (29 )
                                                   ------        ------
          Total adjustments                          (588 )        (910 )
                                                   ------        ------
Net cash (used) by operating activities              (542 )      (1,172 )
                                                   ------        ------
Cash flows from investing activities:
  Expenditures for property and equipment             (28 )        (390 )
  Proceeds from sale of equipment                      37             -
  (Decrease) in other long-term assets                  -           (19 )
                                                   ------        ------
Net cash provided (used) by investing activities        9          (409 )
                                                   ------        ------

Cash flows from financing activities:
  Proceeds from issuance of common stock
    pursuant to stock option plan                     238           128
  Borrowings under revolving credit facility          446             -
  Payments under revolving credit facility           (446 )           -
  Payments on long-term debt                            -          (274 )
  Other                                               (54 )          (7 )
                                                   ------        ------
Net cash provided (used) by financing activities      184          (153 )
                                                   ------        ------
Effect of exchange rate changes on cash                13            (4 )
                                                   ------        ------
Net (decrease) in cash                               (336 )      (1,738 )
Cash and cash equivalents:
  Beginning of period                              13,573        15,702
                                                   ------        ------
  End of period                                   $13,237       $13,964
                                                   ======        ======
Supplemental disclosures:
  Interest paid                                   $     -       $    10
                                                   ======        ======
  Income taxes paid                               $    39       $    35
                                                   ======        ======

                            See accompanying notes

                                       6
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              March 31, 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 March 31, 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 March 31, 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  management  to  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.
                                       7
<PAGE>

                            RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              March 31, 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
(benefit) 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 three month periods ended:

                                                          March 31,
                                                    2000           1999

    Provision (benefit) at statutory rate          $  51          $ (88 )

    Tax effects of:
      Foreign losses for which a tax benefit is
        not available                                 65             83
      Lower effective income tax rates related
        to undistributed foreign earnings            (16 )           (1 )
    Other                                              5              8
                                                    ----            ---
        Provision for income taxes                 $ 105           $  2
                                                    ====            ===

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):

                                                  March 31,   December 31,
                                                   2000          1999

    Raw materials                                 $  706        $  966
    Work-in-progress                                 513           149
    Finished goods                                   112           501
                                                   -----         -----
                                                  $1,331        $1,616
                                                   =====         =====

    Inventories  are  presented   net  of  reserves  for  excess  and  obsolete
inventories of $465,000 and $428,000  at  March 31, 2000 and December 31, 1999,
respectively.










                                       8
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 2000

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  re-evaluates  such
determinations at each balance sheet date.

    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 $120,000  and  $(24,000) at March 31, 2000
and  December  31,  1999),  if  any,  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  preferred stock is classified as a held to maturity
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.

                                                 March 31,   December 31,
                                                   2000          1999

    Preferred stock, at cost                      $  500          $500
    Marketable equity securities, at cost            422           422
    Unrealized net gains (losses) on
      marketable securities                          358          (72)
                                                   -----           ---
                                                   1,280           850
    Amount classified as current                     550           203
                                                   -----           ---
                                                  $  730          $647
                                                   =====           ===

2.  CREDIT AGREEMENTS AND NOTE PAYABLE TO SHAREHOLDER

    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% (8.75% at  March  31,
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  March  31,  2000, and there were no
balances  outstanding  under the agreement at March 31, 2000  or  December  31,
1999.




                                       9
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 2000

    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. $293,000) at the bank's prime rate  plus  2%  (7.5%  at March 31,
2000).  There  were  no  balances  outstanding  at  March 31, 2000, but amounts
utilized  under letter of credit commitments totaled   $242,000,  resulting  in
credit availability of $51,000 at March 31, 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 three month periods  ended  March  31, is
presented net as follows (in thousands):

                                                    2000          1999

    Interest income                                 $225          $168
    Interest (expense)                                (1 )         (10 )
                                                     ---           ---
    Interest income, net                            $224          $158
                                                     ===           ===

3.  SEGMENT INFORMATION

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

                                                     Three Months Ended
                                                           March 31,

                                                       2000       1999
    Revenues from external customers:
      Testing Products                                $2,105     $  966
      Services                                         2,002      2,832
      Power Sources                                      495        522

    Inter-segment revenues:
      Testing Products                                    22         55
      Services                                             -          6
      Eliminations                                       (22 )      (61 )
                                                       -----      -----
                                                      $4,602     $4,320
                                                       =====      =====
    Operating income (loss):
      Testing Products                                   (43 )   $ (677 )
      Services                                           238        468
      Power Sources                                     (169 )     (116 )
      General corporate expenses                         (99 )      (93 )
                                                       -----      -----
        Operating income (loss)                       $  (73 )   $ (418 )
                                                       =====      =====







                                      10
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 2000

    Total assets by reportable segment as of the dates indicated are as follows
(in thousands):

                                               March 31,   December 31,
                                                 2000         1999

    Testing Products                           $ 7,828      $ 6,687
    Services                                     5,367        5,783
    Power Sources                                1,656        1,647
    General corporate assets                    14,695       14,532
                                                ------       ------
                                               $29,546      $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.

4.  EARNINGS PER SHARE

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

                                                    Three Months Ended
                                                         March 31,

                                                     2000         1999

    Net income (loss)                              $   46       $ (262 )
                                                    =====        =====

    Weighted average shares outstanding             6,646        6,616

    Net effect of dilutive stock options
      based on the treasury stock method              133            -
                                                    -----        -----
    Weighted average shares and
      assumed conversions                           6,779        6,616
                                                    =====        =====
    Earnings (loss) per share:
      Basic                                        $  .01       $ (.04 )
                                                    =====        =====
      Diluted                                      $  .01       $ (.04 )
                                                    =====        =====

    Options  to purchase 191,000 and 608,000 shares  of  common  stock  of  the
Company were excluded from the computation of diluted earnings (loss) per share
during 2000 and  1999,  respectively,  as  inclusion  of  these  options in the
calculations would have been anti-dilutive.









                                      11
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 2000

5.  SHUT-DOWN AND RESTRUCTURING OF FACILITIES

    The  following  table  reports  activity  in  the  accrued  shut-down   and
restructuring  accounts  during the three month period ended March 31, 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                                  (14 )      (27 )
                                                     ----       ----
                                                      (34 )     (200 )
                                                     ----       ----
    Disposal of Singapore assets                        -       (138 )
                                                     ----       ----
    Accrued costs at end of period                  $  38      $  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.
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. The restructuring provision included $207,000 for severance costs paid to
employees  who were terminated during 1998, $100,000  related  to  disposal  of
excess equipment  and  $200,000  related to costs associated with excess leased
facilities.






                                      12
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 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  for the three months ended March 31, 2000
was  $391,000. There were no items of comprehensive  income  during  the  three
month  period ended March 31, 1999; thus, comprehensive income was equal to the
$262,000 loss for the 1999 three month period.
















































                                      13
<PAGE>

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

                              March 31, 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 March 31, 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,  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, did and will in the future,  affect  the  Company's  financial
condition. In addition, purchasing marketable equity securities and changes  in
the levels of capital expenditures affected the Company's financial condition.

    Certain  ratios  and  amounts  monitored  by  management  in evaluating the
Company's  financial performance and resources are presented in  the  following
chart. The periods  presented  related  to the profitability ratios are for the
three months ended March 31, and twelve months ended December 31, 1999:

                                  March 31,    December 31,   March 31,
                                    2000           1999         1999

  Working capital:
    Working capital (in thousands) $17,329        $16,401      $15,442
    Current ratio                 9.8 to 1      11.7 to 1     6.2 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                       37%           35 %         36 %
    Return on revenues                  1%           (8)%         (6)%
    Return on assets (annualized)       1%           (4)%         (3)%
    Return on equity (annualized)       1%           (5)%         (4)%




                                    14
<PAGE>

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

                              March 31, 2000

The Company's financial condition remained  strong during 2000. Working capital
increased to $17.3 million at March 31, 2000,  from  $16.4  million at December
31, 1999, and the ratio of current assets to current liabilities increased from
6.2 to 1 at March 31, 1999, to 9.8 to 1 at March 31, 2000. The  increase in the
current  ratio resulted from 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 payable, acquire
assets in the Services  segment,  purchase fixed assets, maintain the amount of
short-term  interest-bearing cash investments  and,  in  1999,  reduce  accrued
liabilities, pay off a note and purchase certain equity securities. 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 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 used by operating activities for the three  months ended March 31,
2000  was $0.5 million, compared with $1.2 million used by  operations  in  the
first three months of 1999. The principal item contributing to the cash used by
operations  in  2000  was  a $1.9 million increase in accounts receivable. Cash
used by operations in 2000 was  reduced  by  $0.6  million  of depreciation and
amortization  and  a $0.3 million decrease in inventories. Accrued  liabilities
increased $0.2 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  are  paid  in  the  following  year.  The
increase  in  accounts  receivable 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. Inventories
decreased  due to shipments in the first quarter of 2000  of  Testing  Products
items that were  included  in  inventory  at December 31, 1999. The increase in
other current assets and investments relates  to  an increase in the unrealized
gains on marketable securities as of March 31, 2000.

Increases in demand for the Company's products resulted  in  backlog increasing
from $0.7 million at September 30, 1999, to $2.4 million at December  31,  1999
and  to  $3.2  million  at March 31, 2000. The current forward-looking forecast
indicates revenues for the second quarter of 2000 will be between $3.6 and $4.5
million, compared to revenues  of  $2.3  million for the fourth quarter of 1999
and $4.3 million for the first quarter of 1999, resulting in net income being a
breakeven or a small loss. The Company is  beginning to see some signs that new
orders may increase in the near future.  Some  of these signs are  increases in
demand


                                    15
<PAGE>
                         RELIABILITY INCORPORATED
                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                              March 31, 2000

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 should increase, but  actual  timing  of  the  increase  is
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. The
Company  is  currently  negotiating  with  a  customer to provide upgraded  and
additional capacity at the facility. These changes  could result in an increase
in revenues in the Services segment.

    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 traded in the $4.00 range during April 2000
and the Company has repurchased a total of 14,500 shares as of May 12, 2000.

    Capital expenditures during  the  first  three months of 2000 and 1999 were
$28,000 and $390,000, 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  $3.0 and $4.0 million. A significant
portion of the expenditures would be for equipment  required  by  the Singapore
subsidiary  to  support  changes  and  increases  in  services provided to  its
customers, as noted earlier in this discussion.

    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

    Three months ended March 31, 2000 compared to three months ended March  31,
1999.

Revenues.   Revenues for the 2000 three month period were $4.6 million compared
to $4.3 million  for  the 1999 period. Revenues in the Testing Products segment
increased $1.1 million,  Power Sources revenues decreased slightly and Services
revenues decreased $0.8 million.

    Revenues in the Testing  Products  segment  were $2.1 million for the first
quarter of 2000, which is an increase of 118% from  the  first quarter of 1999.
Revenues from the sale of CRITERIA products increased $0.2  million  or 40% and
revenues from the sale of INTERSECT products increased $0.9 million or 175%. An
increase  in demand for IC products sold by customers of the Company's  Testing
Products segment  resulted  in  an  increase  in the number of Criteria systems
upgraded during the 2000 quarter and the sale of  upgraded Intersect systems to
a customer.



                                      16
<PAGE>
                           RELIABILITY INCORPORATED
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                March 31, 2000

    Revenues in the Services segment for the 2000 period  were  $2.0 million, a
decrease  of  29%  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  increased 5% in the 2000 period  compared  to  the  1999  period  and
increased 33%  in  the  2000 period compared to the fourth quarter of 1999. The
increase at the Singapore  facility  resulted  from  product  mix  changes  and
increased  demand  for products sold by a customer of the subsidiary, resulting
from the customer introducing a new generation of microprocessors.

    Revenues in the  Power  Sources  segment  were  $0.5  million for the first
quarter of 2000, reflecting a 5% decrease from the 1999 period.  Revenues  were
affected  by  general reductions in demand, price competition, an aging product
line and a decline in market penetration.

Costs and Expenses.   Total  costs  and  expenses for the first quarter of 2000
decreased  $0.1  million or 1% compared to the  7%  revenue  increase  of  $0.3
million.  Cost of revenues  increased  $0.1  million;  marketing,  general  and
administrative  expenses  decreased  $0.1  million and research and development
expenses decreased $0.1 million.

    The increase in gross profit from 36% in the 1999 period to 37% in the 2000
period  is  attributable to an increase in the  gross  profit  in  the  Testing
Products segment  resulting  from  volume increases reduced by decreases in the
gross profit in the Services and Power  Sources  segments.  The decrease in the
Power  Sources segment relates to price decreases related to price  competition
and the decrease in the Services segment relates 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 $0.1 million. The decrease is related  to  a decrease in expenses due
to closing of the Austin Services facility and the effect  of stringent expense
controls,  reduced  somewhat by increases in volume related expenses,  such  as
commissions, warranty  and  similar  expenses  resulting  from  the increase in
revenues in the Testing Products segment

    Research  and  development  expenses  for  the  2000 period decreased  $0.1
million.  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 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,
reduced by a 6% decrease in cash investments.

    The Company's effective tax rate was 70% for the three-month  period  ended
March 31, 2000, compared to a $2,000 provision related to the $260,000 loss for
the  1999  period. The principal items affecting the Company's tax rate 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.


                                    17
<PAGE>

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

                              March 31, 2000

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 About 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.







































                                    18
<PAGE>
                         RELIABILITY INCORPORATED
                             OTHER INFORMATION

                       PART II.   OTHER INFORMATION

Items 1 through 3.

    Not applicable.

Item 4.  Submission of Matters to a Vote of Securities Holders.

      (a)  Reliability Incorporated held its annual meeting of shareholders  on
    April 26, 2000

      (b) At  the  meeting,  shareholders  elected  the  following  persons  as
    directors;  no  other  director continued in office except those elected at
    the meeting:

            Larry Edwards
            W. L. Hampton
            John R. Howard
            Thomas L. Langford
            Philip Uhrhan

      (c)  The  shareholders  of  Reliability  Incorporated  also  approved  an
    amendment to the Reliability  Incorporated  1997  Stock  Option  Plan.  The
    amendment  increased  the maximum number of shares of Common Stock reserved
    for issuance from 1,000,000  to  1,500,000.  A  copy of the amended Plan is
    attached to this report as Exhibit 10.1.

    The results of the votes of shareholders are as follows:

    Director Nominee:                 For         Abstain

    Larry Edwards                5,440,274        594,783
    W. L. Hampton                4,952,234      1,082,823
    John R. Howard               5,440,346        594,711
    Thomas L. Langford           4,968,046      1,067,011
    Philip Uhrhan                4,966,096      1,068,961

    Stock Option Plan:                For         Against      Abstain

                                 2,003,424  (1) 1,460,771      493,856

    (1) A  total of 2,077,006 shares did not cast votes  on  the  proposal.  In
        accordance   with   the   Company's   by-laws,  3,958,051  shares  were
        represented and entitled to vote on the proposal.

Item 5.  Not applicable.

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

    (a)  Exhibit No.   Description

            10.1       Reliability Incorporated Amended and Restated 1997
                       Stock Option Plan

            27.    Financial Data Schedule

      (b)  Reports  on Form 8-K. On February 15,  2000,  the  Company  filed  a
    Current Report on Form 8-K, with respect to its announcement on February 1,
    2000 of a plan to repurchase up to 1,500,000 shares of its common stock.

                                    19
<PAGE>
                         RELIABILITY INCORPORATED
                                SIGNATURES

                              March 31, 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)





May 12, 2000                              /s/Larry Edwards
                                          President and
                                          Chief Executive Officer





May 12, 2000                              /s/Max T. Langley
                                          Sr. Vice President - Finance
                                          and Chief Financial Officer
































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