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 Period Ended March 31, 1999

                         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.

                    6,631,765 -- Common Stock -- No Par Value
                            as of May 7, 1999







                                     1
<PAGE>


                         RELIABILITY INCORPORATED
                                 FORM 10-Q

                             TABLE OF CONTENTS

                              March 31, 1999


                      PART I - FINANCIAL INFORMATION

                                                                 Page No.


Item 1.  Financial Statements (unaudited):

         Consolidated Balance Sheets:
            March 31, 1999 and December 31, 1998                    3-4

         Consolidated Statements of Operations:
            Three Months Ended March 31, 1999 and 1998                5

         Consolidated Statements of Cash Flows:
            Three Months Ended March 31, 1999 and 1998                6

         Notes to Consolidated Financial Statements                7-12

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                    13-17

Item 3.  Quantitative and Qualitative Disclosure of Market Risk      17

                        PART II - OTHER INFORMATION

Item 1.
  through
Item 3.  Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders         18

Item 5.  Not applicable.

Item 6.  Exhibits and Reports on Form 8-K.                           18

Signatures                                                           19


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,
                                                   1999          1998
                                                (unaudited)

Current assets:
  Cash and cash equivalents                      $13,964      $15,702
  Accounts receivable                              2,149        2,178
  Inventories                                      1,271        1,301
  Deferred tax assets                                525          572
  Other current assets                               488          441
                                                  ------       ------
    Total current assets                          18,397       20,194
                                                  ------       ------
Property, plant and equipment at cost:
  Machinery and equipment                         14,517       14,390
  Building and improvements                        4,934        5,023
  Land                                               530          530
                                                  ------       ------
                                                  19,981       19,943
    Less accumulated depreciation                 10,764       10,407
                                                  ------       ------
                                                   9,217        9,536
                                                  ------       ------

Assets held for sale                               2,135        2,193
Other assets, net of accumulated amortization      1,349        1,323
                                                  ------       ------
                                                 $31,098      $33,246
                                                  ======       ======



















                          See accompanying notes

                                     3
<PAGE>

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

                   LIABILITIES AND STOCKHOLDERS' EQUITY

                                                March 31,    December 31,
                                                   1999           1998
                                               (unaudited)

Current liabilities:
  Note payable to shareholder                    $   534        $   534
  Accounts payable                                   639            547
  Accrued liabilities                              1,460          3,045
  Income taxes payable                               188            335
  Current maturities on long-term debt                 -            274
  Accrued restructuring reserve                      134            300
                                                  ------         ------
      Total current liabilities                    2,955          5,035
                                                  ------         ------

Deferred tax liabilities                             707            634
Commitments and contingencies                          -              -

Stockholders' equity:
  Common stock, without par value;
    20,000,000 shares authorized; 7,838,527
    and 7,811,278 shares issued in 1999 and
    1998, respectively                             9,461          9,340
  Retained earnings                               25,819         26,081
                                                  ------         ------
                                                  35,280         35,421
  Less treasury stock, at cost, 1,206,762
    shares in 1999 and 1998                        7,844          7,844
                                                  ------         ------
      Total stockholders' equity                  27,436         27,577
                                                  ------         ------
                                                 $31,098        $33,246
                                                  ======         ======



















                          See accompanying notes

                                     4
<PAGE>

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

                       Three Months Ended March 31,
                                  (unaudited)

                                                   1999          1998

Revenues                                          $4,320       $11,480

Costs and expenses:
  Cost of revenues                                 2,759         5,863
  Marketing, general and administrative            1,503         2,399
  Research and development                           476           614
  Provision for restructuring                          -           100
                                                   -----        ------
                                                   4,738         8,976
                                                   -----        ------
Operating income (loss)                             (418 )       2,504
Interest income, net                                 158            44
                                                   -----        ------
Income (loss) before income taxes                   (260 )       2,548
                                                   -----        ------
Provision (benefit) for income taxes:
  Current                                           (118 )         698
  Deferred                                           120            63
                                                   -----        ------
                                                       2           761
                                                   -----        ------
Net income (loss)                                 $ (262 )     $ 1,787
                                                   =====        ======
Earnings (loss) per share:
  Diluted                                         $ (.04 )     $   .29
                                                   =====        ======
  Basic                                           $ (.04 )     $   .29
                                                   =====        ======
Weighted average shares:
  Diluted                                          6,616         6,210
                                                   =====        ======
  Basic                                            6,616         6,061
                                                   =====        ======
















                          See accompanying notes

                                     5
<PAGE>
                         RELIABILITY INCORPORATED
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                        Three Months Ended March 31,
                                  (unaudited)
                                                    1999          1998
Cash flows from operating activities:
  Net income (loss)                               $ (262 )     $ 1,787
  Adjustments to reconcile net income (loss) to
    cash provided (used) by operating activities:
      Depreciation and amortization                  604           485
      Change in deferred tax assets and liabilities  120            63
      Provision for inventory obsolescence             2             3
      Loss (gain) on disposal of fixed assets         19             -
      Provision for restructuring, net of
        cash payments                                  -           100
  Increase (decrease) in operating assets
    and liabilities:
      Accounts receivable                             29          (821 )
      Inventories                                     28         1,047
      Other current assets                           (47 )          78
      Accounts payable                                92          (854 )
      Accrued liabilities                         (1,585 )      (2,053 )
      Income taxes payable                          (147 )         463
      Cash payments charged to
        restructuring reserve                        (29 )           -
                                                  ------        ------
          Total adjustments                         (914 )      (1,489 )
                                                  ------        ------
Net cash (used) provided by
  operating activities                            (1,176 )         298
                                                  ------        ------
Cash flows from investing activities:
  Expenditures for property, plant and equipment    (390 )        (417 )
  Decrease in other long-term assets                 (19 )           -
                                                  ------        ------
Net cash (used) in investing activities             (409 )        (417 )
                                                  ------        ------
Cash flows from financing activities:
  Payments on long-term debt                        (274 )        (197 )
  Proceeds from issuance of common and treasury
    stock pursuant to stock option and employee
    stock savings plans                              128           169
  Other                                               (7 )          19
                                                  ------        ------
Net cash (used) by financing activities             (153 )          (9 )
                                                  ------        ------
Net (decrease) in cash                            (1,738 )        (128 )
Cash and cash equivalents:
  Beginning of period                             15,702         7,108
                                                  ------        ------
  End of period                                  $13,964       $ 6,980
                                                  ======        ======
Supplemental disclosures:
  Interest paid                                  $    10       $    43
                                                  ======        ======
  Income taxes paid                              $    35       $   201
                                                  ======        ======

                          See accompanying notes

                                     6
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              March 31, 1999

    1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

    Reliability  Incorporated  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,  the
Company and  a  subsidiary  operate service facilities which condition and test
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, 1999, are provided principally to two customers; one in  the U.S. and
one in Singapore. The Company closed a U.S. services facility in April 1998 and
acquired,  in  December  1998,  assets  of a company that provides services  to
customers in Austin, Texas and Singapore.  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, 1998 have been reclassified to conform to the 1999 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, 1999  are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999.

    The balance sheet at December  31,  1998  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, 1998.








                                     7
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              March 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.

Comprehensive Income

    During  the  first  quarter of 1999 and 1998,  total  comprehensive  income
(loss) amounts were $(262,000) and $1,787,000, respectively, which are the same
as net income (loss).

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 on income (loss) before income taxes and the amounts
determined by applying the statutory  U.S.  tax  rate of 34% are analyzed below
(in thousands) for the three month periods ended:

                                                         March 31,
                                                    1999          1998

    Provision at statutory rate                    $ (88 )       $ 866

    Tax effects of:
      Lower effective income tax rates related
        to undistributed foreign earnings             (1 )        (107 )
      Foreign losses for which a tax benefit is
        not available                                 83             -
      Foreign tax benefit of export processing
        exemption                                      -           (22 )
    State income taxes                                 -            13
    Other                                              8            11
                                                    ----          ----
      Provision for income taxes                   $   2         $ 761
                                                    ====          ====







                                     8
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 1999


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,
                                                   1999          1998

    Raw materials                                 $  956        $1,071
    Work-in-progress                                 274           180
    Finished goods                                    41            50
                                                  ------         -----
                                                  $1,271        $1,301
                                                  ======         =====

    Inventories   are  presented  net  of  reserves  for  excess  and  obsolete
inventories of $777,000  and  $775,000 at March 31, 1999 and December 31, 1998,
respectively.

2.  NOTE PAYABLE TO SHAREHOLDER AND CREDIT AGREEMENTS

    The note payable to shareholder  at  March  31, 1999 represents the balance
due to Basic Engineering Services and Technology Labs, Inc. ("BEST") related to
the acquisition of assets that was completed in December  1998. The note is due
June 3, 1999 and bears interest at 6%.

    Reliability maintains a line of credit with Wells Fargo  Bank  Texas.  N.A.
which  permits  the Company to borrow up to $4 million until December 31, 1999.
Interest is payable  at  the  bank's  prime  rate minus 1/4% (7.5% at March 31,
1999). The unpaid principal of the note is due  December  31,  1999.  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 before income taxes plus non-cash  items and interest
expense. 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, 1999, and there were  no
balances outstanding under  the  agreement  at  March  31, 1999 or December 31,
1998.

    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 March 31,
1999).  There were no balances outstanding  at  March  31,  1999,  but  amounts
utilized  under  letter  of  credit  commitments totaled $264,000, resulting in
credit availability of $25,000 at March 31, 1999. 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.

                                     9
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 1999

    Interest  income  (expense), for the three month periods ended March 31, is
presented net as follows (in thousands):
                                                     1999         1998

    Interest income                                 $168          $87
    Interest (expense)                               (10 )        (43 )
                                                     ---           --
    Interest income, net                            $158          $44
                                                     ===           ==

3.  SEGMENT INFORMATION

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

                                                   Three Months Ended
                                                        March 31,

                                                      1999      1998
                                                      ----      ----

    Revenues from external customers:
      Testing Products                              $   966   $ 5,650
      Services                                        2,832     4,775
      Power Sources                                     522     1,055

    Intersegment revenues:
      Testing Products                                   55        47
      Services                                            6       135
      Eliminations                                      (61 )    (182 )
                                                     ------    ------
                                                    $ 4,320   $11,480
                                                     ======    ======
    Operating income (loss):
      Testing Products                              $  (838 ) $ 1,159
      Services                                          657     1,322
      Power Sources                                    (144 )     120
      General corporate expenses                        (93 )     (97 )
                                                     ------    ------
        Operating income (loss)                     $  (418 ) $ 2,504
                                                     ======    ======














                                    10
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 1999

    Total assets by reportable segment as of the dates indicated are as follows
(in thousands):
                                               March 31,   December 31,
                                                 1999         1998

    Testing Products                           $ 5,880      $ 6,702
    Services                                     8,722        9,584
    Power Sources                                1,754        1,651
    General corporate assets                    14,742       15,309
                                                ------       ------
                                               $31,098      $33,246
                                                ======       ======

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

4.  SHUT-DOWN AND RESTRUCTURING OF FACILITIES AND ASSETS HELD FOR SALE

    The  Company's North Carolina Services facility accounted for approximately
4% and 10%  of  consolidated  revenues  in  1998  and  1997,  respectively, and
provided services to one customer. The customer notified the Company in January
1998 that it was necessary to reduce the output of DRAMs burned-in  and  tested
by the Company's Durham facility. The customer ceased sending product, and  the
Company  shut  down the facility in April 1998. The Company recorded a $100,000
impairment reserve  related  to  the  land  and  building located at the Durham
facility in 1998 in order to state these assets at the lower of carrying amount
or fair value, less cost to sell. The land and a building located in Durham are
presented  as  assets  held for sale in the accompanying  consolidated  balance
sheet. The assets held for  sale  are  being  actively  marketed,  although  no
assurances can be given that they will be sold during 1999.

    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. Texas
Instruments  revenues  at the Singapore facility accounted for 21% and  32%  of
consolidated  revenues  for  the  years  ended  December  31,  1998  and  1997,
respectively. 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 includes $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. Fixed asset  disposals totaling $137,000 were charged
to the accrued restructuring reserve in the first quarter of 1999.







                                      11
<PAGE>

                         RELIABILITY INCORPORATED
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               March 31, 1999

5.  ACQUISITION

    On  December  3,  1998, the Company acquired  certain  assets  and  assumed
certain  liabilities  from   BEST.  The  assets  acquired  included  equipment,
furniture  and  fixtures,  contracts,  work-in-progress,  backlog,  proprietary
rights, books and records, customer lists and goodwill. The liabilities assumed
consisted of employee-related  obligations. The operations acquired are located
in  Austin, Texas and Singapore and  are  used  to  operate  burn-in  and  test
services   laboratories,   providing   such   services  to  integrated  circuit
manufacturers. The results of operations related  to this acquisition have been
included in the Company's consolidated financial statements  since  December 3,
1998.

6.  EARNINGS PER SHARE

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

                                                  Three Months Ended
                                                       March 31,
                                                 1999          1998

    Net income (loss)                           $ (262 )      $1,787
                                                 =====         =====

    Weighted average shares outstanding          6,616         6,061

      Net effect of dilutive stock options
        based on the treasury stock method           -           149
                                                 -----         -----
      Weighted average shares and
        assumed conversions                      6,616         6,210
                                                 =====         =====
    Earnings per share:
      Diluted                                   $ (.04 )      $  .29
                                                 =====         =====
      Basic                                     $ (.04 )      $  .29
                                                 =====         =====

    Stock  options  related  to the purchase of 608,000 and 253,000  shares  of
common stock were not included in the computation of diluted earnings per share
for the first quarters of 1999  and  1998,  respectively, because including the
options in the calculations would have been antidilutive.

    The  Company,  in  December 1998, issued 475,000  shares  of  Common  Stock
related to the acquisition of assets from BEST.









                                      12
<PAGE>


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

                              March 31, 1999

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, 1998
and March 31, 1998 are generally attributable to changes  in  cash  flows  from
operating  activities,  acquiring  certain  assets  from  BEST  during 1998 and
accelerating  payments  on  a  mortgage during 1998 and 1999. In addition,  the
shut-down,  in 1998, of the Company's  North  Carolina  Services  facility  and
changes in operations  at  the  Company's  Singapore  facility did, during late
1998, and will in 1999, affect the Company's future 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
three months ended March 31, and twelve months ended December 31:

                                   March 31,   December 31,   March 31,
                                    1999           1998         1998

  Working capital:
    Working capital (thousands)    $15,442       $15,159       $13,257
    Current ratio                 6.2 to 1      4.0 to 1      3.5 to 1
  Equity ratios:
    Total liabilities to equity        0.1           0.2           0.3
    Assets to equity                   1.1           1.2           1.3
  Profitability ratios:
    Gross profit                      36 %          51 %          49 %
    Return on revenues                (6)%          13 %          16 %
    Return on assets (annualized)     (3)%          13 %          25 %
    Return on equity (annualized)     (4)%          15 %          32 %




                                    13
<PAGE>

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

                              March 31, 1999

The  Company's  financial  condition  improved throughout 1998 and has remained
strong during 1999. Working capital increased  to  $15.4  million  at March 31,
1999, from $13.3 million at March 31, 1998, and the ratio of current  assets to
current liabilities increased from 3.5 to 1 at March 31, 1998, to 6.2 to  1  at
March 31, 1999. Beginning in the fourth quarter of 1998, the Company's revenues
and  level  of  operations  declined.  Assets  such  as accounts receivable and
inventories decrease during periods of declining production  and  are converted
to  cash. Cash provided by certain components of cash flows from operations  in
1998  and  in  1999 were used to reduce and pay off a mortgage payable, acquire
assets from BEST,  purchase  fixed  assets,  increase  the amount of short-term
interest-bearing cash investments and, in 1999, reduce accrued liabilities.

    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 credit facility was  $4.0 million
at  March  31,  1999.  The  Company's  Singapore  subsidiary  maintains a small
overdraft facility to support the subsidiary's credit commitments.

    Decreased demand for the Company's products and services, during the latter
half of 1998, resulted in a decline in backlog from $16.7 million  at March 31,
1998  to  $1.8 million at December 31, 1998. Backlog increased during  1999  to
$2.5 million  at  March 31, 1999. The increase resulted from a modest change in
demand for products  sold  by the Company. The operating effects resulting from
the changes in backlog and the corresponding changes in operations, during 1998
and  1999,  affected  various elements  of  cash  provided  by  operations,  as
reflected in the Consolidated Statements of Cash Flows.

    Net cash used by operating  activities for the three months ended March 31,
1999 was $1.2 million, contrasted  with  $0.3 million provided by operations in
the first three months of 1998. The principal  items  contributing  to the cash
used by operations in 1999 were the net loss of $0.3 million and a $1.6 million
decrease in accrued liabilities. Cash used by operations in 1999 was reduced by
$0.6  million  of  depreciation and amortization. Accrued liabilities decreased
$1.6 million due to  payment of performance bonuses related to 1998 profits and
a general reduction in  most  items  included  in  accrued  liabilities  due to
payment of year-end accruals in the first quarter of 1999.

    Demand  for  Testing  Products sold by the Company remains very weak during
the early months of 1999 and  indications are that the weak demand may continue
for several more quarters. The  acquisition of certain services activities from
BEST in December 1998 and a general increase in demand, beginning in late 1998,
for Services provided by the Company  indicates, at this time, that revenues in
the Services segment could improve throughout  1999.  Based  on  the  Company's
current  low  backlog  level  and  the  uncertainty  concerning  demand for the
Company's  products  during  1999,  Reliability  is  not currently providing  a
revenue forecast for the year ending December 31, 1999.  The  current  forward-
looking  forecast  indicates  revenues  for the second quarter of 1999 will  be
approximately $4.7 to $5.1 million, compared  to first quarter 1999 revenues of
$4.3 million.

                                      14
<PAGE>


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

                              March 31, 1999

    Capital expenditures during the first three  months  of  1999 and 1998 were
$0.4 million and $0.4 million, respectively. Expenditures in both years include
equipment  required  by  the  Singapore  Services facility to support  services
provided by the subsidiary.

    Current projections indicate that the  Company's  cash  and cash equivalent
balances, future cash generated from operations and available  lines  of credit
will  be sufficient to meet the projected cash requirements of the Company  for
the remainder of 1999.

RESULTS OF OPERATIONS

    Three  months ended March 31, 1999 compared to three months ended March 31,
1998.

Revenues.  Revenues  for the 1999 three-month period were $4.3 million compared
to  $11.5 million for the  1998  period.  Revenues  in  the  Testing  Products,
Services  and  Power  Sources  segments  decreased $4.7, $2.0 and $0.5 million,
respectively.

    Revenues in the Testing Products segment  were  $1.0  million for the first
three months of 1999, which is a decrease of 83% over the same  period in 1998.
The  revenue  decrease  relates to the fact that the semiconductor industry  is
highly cyclical and experiences  periods  of  oversupply  and excess production
capacity. Beginning in mid 1998, the oversupply and excess  production capacity
began to affect demand for Testing Products sold by the Company, resulting in a
significant decrease in new orders for Testing Products sold  by  the  Company.
Volume  decreases  resulted  in  revenues  from  the  sale of CRITERIA products
decreasing  $3.8  million  and  revenues  from  the sale of INTERSECT  products
decreasing $0.9 million.

    Revenues in the Services segment for the 1999  period  were $2.8 million, a
decrease  of  41%  compared to the corresponding 1998 period. The  decrease  in
revenues in this segment  is  related  to  the shut-down of the Company's North
Carolina Services facility in April 1998 and  a  decrease  in  revenues  at the
Company's  Singapore  facility,  beginning  in October 1998, resulting from the
Micron  Technology  purchase  of the Singapore facility's  principal  customer,
Texas Instruments. The overall decrease was reduced by an increase in revenues,
in Austin, Texas and Singapore,  resulting  from  the  acquisition, in December
1998, of certain services activities of BEST.

    Revenues in the Power Sources segment were $0.5 million for the first three
months of 1999, reflecting a 51% decrease from the 1998  period.  Revenues were
affected,  in  1999,  by  changes  in  demand,  an  aging  product  line, price
competition and a decline in market penetration resulting in volume decreases.






                                    15
<PAGE>

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

                              March 31, 1999


Costs  and  Expenses.   Total  costs and expenses for the 1999 period decreased
$4.2 million or 47% compared to  the  62%  revenue  decrease.  Cost of revenues
decreased   $3.1   million,  marketing,  general  and  administrative  expenses
decreased $0.9 million  and  research  and  development expenses decreased $0.1
million.

    The decrease in the gross profit from 49%  in  the  1998  quarter to 36% in
1999 is attributable to significant revenue decreases in all business segments.

    Marketing,  general  and  administrative  expenses  for  the  1999   period
decreased  $0.9  million.  The decrease in expenses is primarily related to the
Company's stringent expense control programs and a decrease in Testing Products
revenues which resulted in a  decrease  in  volume  related  expenses,  such as
commissions,  warranty  and  similar expenses and, in all business segments,  a
decrease in incentive compensation  expense accruals which are directly related
to the decrease in profitability. The shut-down of the Company's North Carolina
facility and a modest reduction in expenses  in the Power Products segment also
contributed to the decrease.

    Research and development costs decreased to  $476,000  in 1999, compared to
$614,000 in the 1998 quarter. The decrease relates primarily  to  the fact that
first  quarter  1998  costs  were  somewhat higher than normal. 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 change in net interest during the 1999 period reflects an  increase  in
interest  income  and a decrease in interest expense. Interest income increased
due to significant  increases in investable cash and interest expense decreased
due to the fact the Company accelerated payments on, and paid off, in 1999, the
mortgage related to the Houston facility.

    The Company's effective  tax  rate was 30% for the three months ended March
31, 1998, compared to a $2,000 provision  related  to the $262,000 loss for the
1999 period. The principal reason the Company's effective  benefit tax rate was
less  than  the  U.S.  statutory  rate in 1999 was that tax benefits  were  not
available to a foreign subsidiary due  to  net  operating loss limitations. The
effective  rate  for  1998 was less than the statutory  rate  due  to  a  lower
effective tax rate related  to  earnings  of the Singapore subsidiary and a tax
benefit from an export processing exemption in Costa Rica.

IMPACT OF YEAR 2000

    The Company disclosed information related  to  the  impact  of Year 2000 in
Form 10-K for the year ended December 31, 1998. There have been no  significant
changes  in  matters  related  to  the impact of Year 2000 on the Company,  and
readers are referred to Form 10-K for further information.




                                    16
<PAGE>


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

                              March 31, 1999

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,   Year   2000   compliance,  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, 1998.



































                                      17
<PAGE>


                         RELIABILITY INCORPORATED
                             OTHER INFORMATION

                       PART II.   OTHER INFORMATION


Items 1 through 3.

    Not applicable.

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

      (a)  Reliability Incorporated held its annual meeting of  shareholders on
    April 28, 1999.

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

        Larry Edwards
        W.L. Hampton
        John R. Howard
        Thomas L. Langford
        A.C. Lederer, Jr.
        Philip Uhrhan

      (c)  The only matter  voted  on  at  the  meeting  was  the  election  of
      directors. The results of the votes of shareholders are as follows:

    Director Nominee                     For                  Withheld

        Larry Edwards                 5,209,969                75,242
        W.L. Hampton                  5,193,375                91,836
        John R. Howard                5,182,615               102,596
        Thomas L. Langford            5,210,575                74,636
        A.C. Lederer, Jr.             5,156,615               128,596
        Philip Uhrhan                 5,209,575                75,636

Item 5. Not applicable.

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

    (a) The following exhibit is filed as part of this report:

        27   Financial Data Schedule.

      (b) Reports on Form 8-K.

        On  December  17, 1998, the Company filed its report on Form 8-K, dated
        December 3, 1998,  with respect to its acquisition of assets from Basic
        Engineering Services  and Technology Labs, Inc. (Item 2 of the report).
        On February 11, 1999, the  Company filed an amendment to such Form 8-K,
        filing the required financial statements.





                                    18
<PAGE>


                         RELIABILITY INCORPORATED
                                SIGNATURES

                              March 31, 1999



    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)







                                           BY /s/ Larry Edwards
May 11, 1999                               Larry Edwards
                                           President and
                                           Chief Executive Officer




                                           BY /s/ Max T. Langley
May 11, 1999                               Max T. Langley
                                           Sr. Vice President - Finance
                                           and Chief Financial Officer























                                    19
<PAGE>


                         RELIABILITY INCORPORATED

                             INDEX TO EXHIBITS


Exhibit                                                         Page
 Number                  Description of Exhibits               Number
-------                  -----------------------               ------

   27.      Financial Data Schedule                               21

















































                                    20