U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-QSB

(Mark One)


   X     QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934

                   For Quarterly Period Ended March 31, 1998.

                                       OR

-----    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

              For the transition period from _______ to ____________.


Commission File No. 0-3366

                             BRYAN STEAM CORPORATION
        (Exact name of small business issuer as specified in its charter)

          NEW MEXICO                                   35-0202050
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

                               POST OFFICE BOX 27
                                 PERU, IN 46970
          (Address of principal executive offices, including zip code)

                                 (765) 473-6651
                (Issuer's telephone number, including area code)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 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 90 days.

                        Yes   X                No _______


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

     COMMON STOCK                                     191,284
   (Title of class)                        (Number of shares outstanding
                                                   May 5, 1998)

Transitional Small Business Disclosure Format (check one):  Yes       No   X
                                                               -----     -----



                                                               -1-


<PAGE>


                          PART I. FINANCIAL INFORMATION

Item            Financial Statements
1.

                             BRYAN STEAM CORPORATION
                     CONDENSED CONSOLIDATED INCOME STATEMENT

<TABLE>
<CAPTION>
                                         Unaudited            Unaudited      Unaudited            Unaudited
                                                    For the                            For the
                                               Nine months Ended:                 Fiscal Quarter Ended
                                         31-Mar-98          31-Mar-97         31-Mar-98           31-Mar-97
                                         (Current          (Preceding          (Current           (Preceding
                                           Year)             Year)              Year)               Year)
                                       ---------------------------------     --------------------------------
<S>                                    <C>                <C>                <C>                <C>         
Gross sales less
    discounts, returns
    and allowances                     $ 20,145,396       $ 19,403,679       $  5,570,737       $  5,492,926
                                       ------------       ------------       ------------       ------------
Cost and expenses --

Cost of goods sold                     $ 13,499,953       $ 12,745,873       $  3,855,147       $  3,713,942
Selling, general and
    administrative expenses               4,796,937          4,949,672          1,643,090          1,727,148
                                       ------------       ------------       ------------       ------------
Total cost and expenses                $ 18,296,890       $ 17,695,545       $  5,498,237       $  5,441,090
                                       ------------       ------------       ------------       ------------
Operating income                       $  1,848,506       $  1,708,134       $     72,500       $     51,836
                                       ------------       ------------       ------------       ------------
Other income and (expense)
    Interest income                    $     72,925       $     68,498       $     38,694       $     29,890
    Freight income                           69,202             64,143             20,390             16,620
    Interest expense                        (16,698)           (71,463)            (5,057)           (20,274)
                                       ------------       ------------       ------------       ------------
Total other income and (expenses)      $    125,429       $     61,178       $     54,027       $     26,236
                                       ------------       ------------       ------------       ------------
Income (or loss) before
    taxes on income and
    extraordinary items                $  1,973,935       $  1,769,312       $    126,527       $     78,072

Provisions for taxes
    on income                               823,131            672,210             52,731             11,352
                                       ------------       ------------       ------------       ------------
Net income (or loss)                   $  1,150,804       $  1,097,102       $     73,796       $     66,720
                                       ============       ============       ============       ============


Earnings per share*                    $       6.02       $       5.74       $       0.39       $       0.35
                                       ============       ============       ============       ============

Dividends per share                    $       2.00       $       1.50       $       2.00       $       1.50
                                       ============       ============       ============       ============
</TABLE>


*Based on 191,284 shares of Common Stock issued and  outstanding  throughout the
period.
<PAGE>

                             BRYAN STEAM CORPORATION
                                  PERU, INDIANA
                           CONSOLIDATED BALANCE SHEET

                                                 Unaudited          Unaudited
ASSETS                                           March 31,           June 30,
                                                   1998               1997
                                               ------------       ------------
CURRENT ASSETS
        Cash and cash equivalents              $    810,974       $    368,879
        Investment securities                     1,330,331          1,466,686
        Accounts receivable (net)                 4,138,696          4,814,745
        Prepaid expenses                            437,901            282,644
        Inventory                                 4,730,526          4,479,203
        Prepaid income taxes                             --             27,528
                                               ------------       ------------
            TOTAL CURRENT ASSETS               $ 11,448,428       $ 11,439,685
                                               ------------       ------------

FIXED
ASSETS
        Land, buildings, equipment             $  9,290,195       $  8,976,634
        Less:  Depreciation                       3,761,335          3,400,512
                                               ------------       ------------
        accumulated
            TOTAL FIXED ASSETS                 $  5,528,860       $  5,576,122
                                               ------------       ------------

OTHER
ASSETS
        Noncompete agreement
          (Net of amortization)                $    124,814       $    180,000
        Other amortizable assets (Net of             27,543             21,791
        amortization)
        Deposits                                      5,171              5,171
                                               ------------       ------------
            TOTAL OTHER ASSETS                 $    157,528       $    206,962
                                               ------------       ------------

TOTAL                                          $ 17,134,816       $ 17,222,769
                                               ============       ============
ASSETS

LIABILITIES AND NET WORTH

CURRENT
LIABILITIES
        Accounts payable - trade               $    284,162       $    851,512
        Capital lease obligations                    40,185              8,632
        Line of credit - Norwest Bank                54,900             45,400
        Accrued commissions                         694,566            807,617
        Accrued property taxes                      278,011            254,251
        Accrued income taxes                         48,779              4,837
        Accrued taxes & other expenses              137,185            365,624
        Current portion of long-term debt             2,837             24,300
        Deferred federal income tax                  70,071             70,071
        Deferred state income tax                    16,085             16,085
                                               ------------       ------------
            TOTAL CURRENT LIABILITIES          $  1,626,781       $  2,448,329
                                               ------------       ------------

LONG-TERM LIABILITIES
        Long-term debt                         $     45,272       $     45,272
        Capital lease obligations                     8,187             44,968
        Deferred federal income tax                 229,926            229,926
        Deferred state income tax                    50,609             50,609
        Dividends payable                            13,922             11,834
                                               ------------       ------------
            TOTAL LONG-TERM LIABILITIES        $    347,916       $    382,609
                                               ------------       ------------

TOTAL LIABILITIES                              $  1,974,697       $  2,830,938
                                               ------------       ------------

NET WORTH
        Capital stock                          $    810,272       $    810,272
        Treasury stock, at cost                     (28,727)           (28,727)
        Retained earnings                        14,378,574         13,610,286
                                               ------------       ------------
            TOTAL NET WORTH                    $ 15,160,119       $ 14,391,831
                                               ------------       ------------

TOTAL LIABILITIES AND NET WORTH                $ 17,134,816       $ 17,222,769
                                               ============       ============
<PAGE>


                             BRYAN STEAM CORPORATION
                                  PERU, INDIANA
                COMPARATIVE CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                        Unaudited           Unaudited
                                                       July 1, 1996        July 1, 1996
                                                            to                  to
                                                      Mar. 31, 1997       Mar. 31, 1997
                                                      -------------       -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                     <C>               <C>        
        Net income                                      $ 1,150,804       $ 1,097,102
        Non-cash items included in net income
            Amortization                                     49,434            44,658
            Depreciation                                    360,823           346,129
            Changes in:
                Inventory                                  (251,323)          437,909
                Accounts receivable                         676,049           798,227
                Prepaid expenses                           (155,257)         (184,975)
                Prepaid income taxes                         27,528            66,835
                Accounts payable                           (567,350)         (229,805)
                Commissions payable                        (113,051)           31,424
                Accrued county property tax                  23,760            90,165
                Accrued taxes & expenses                   (228,439)          (94,662)
                Accrued income taxes                         43,942                --
                                                        -----------       -----------

NET CASH PROVIDED BY OPERATING ACTIVITIES               $ 1,016,920       $ 2,403,007
                                                        -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
        Redemptions (purchases) of investment           $   136,355       $   193,450
        securities
        Purchases of plant and equipment                   (313,561)       (1,275,336)
                                                        -----------       -----------

NET CASH (USED) BY INVESTING ACTIVITIES                 $  (177,206)      $(1,081,886)
                                                        -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
        Payments on long-term debt                      $   (17,191)      $  (773,045)
        Dividends paid                                  $  (380,428)      $  (284,257)
                                                        -----------       -----------
NET CASH (USED) BY FINANCING ACTIVITIES                 $  (397,619)      $(1,057,302)
                                                        -----------       -----------
NET INCREASE (DECREASE) IN CASH                         $   442,095       $   263,819
                                                        ===========       ===========

CASH & CASH EQUIVALENTS
        July 1                                          $   368,879       $   304,739
        March 31                                        $   810,974       $   568,558
                                                        -----------       -----------

NET INCREASE (DECREASE) IN CASH                         $   442,095       $   263,819
                                                        ===========       ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
        Cash paid during the period for:
            Interest (Net of amount capitalized)        $    16,698       $    71,463
            Income taxes                                $   751,661       $   498,451
</TABLE>


<PAGE>


Item 1.        CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

               The unaudited interim consolidated  financial statements to which
               this management's discussion and analysis is attached reflect all
               adjustments which are, in the opinion of management, necessary to
               a  fair  statement  of  the  results  for  the  interim   periods
               presented.  All  such  adjustments  are  of a  normal,  recurring
               nature.

               The accompanying  consolidated  financial  statements include the
               accounts  of the Company  and of its  wholly-owned  subsidiaries.
               Intercompany  transactions  and balances have been  eliminated in
               consolidation.

               Pension  benefits  are  based on  taxable  earnings  and years of
               service.  The  Company's  policy is to fund at least the  minimum
               amounts required by Federal law and regulation.

               The  Company's  policy  regarding  investment  securities  is  to
               classify  them  as  current   assets.   None  of  the  investment
               securities  are  considered to be  available-for-sale  or trading
               securities  by the Company.  Gross  unrealized  holding gains and
               losses on investment securities classified as held to maturity at
               March 31, 1998 are not material to the accompanying  consolidated
               financial statements and are not reported therein.


                                                  - 5 -


<PAGE>



Item 2.        MANAGEMENT'S  DISCUSSION AND ANALYSIS OF  CONSOLIDATED  FINANCIAL
               CONDITION AND CONSOLIDATED RESULTS OF OPERATIONS

               Consolidated  net income  for the third  quarter of $73,796 is up
               (10.61%)  from the net  income of $66,720  for the  corresponding
               quarter  last  year.  The  increase  in  consolidated  net income
               results  primarily  from the  $197,193  increase in net income of
               Bryan Steam Corporation (the Parent) for the quarter, as compared
               to the  corresponding  quarter  of the prior  fiscal  year.  This
               increase more than offsets the $173,739 decrease in net income of
               Monticello Exchanger and Manufacturing Company  (M.E.M.C.O.),  an
               indirect  subsidiary  of the  Parent,  for the  quarter as to the
               corresponding quarter of the prior year. The Parent's increase in
               net income  results from  increased  sales and improved  margins,
               while M.E.M.C.O.'s decrease in net income was caused by decreased
               sales, lower margins and increased administrative costs.

               Consolidated  sales  for the  quarter  increased  1.42%  from the
               corresponding  quarter last year,  and  increased  3.82% over the
               same year to date period last year.  Cost of goods sold increased
               a  corresponding  3.80%  from the same  quarter a year  ago,  and
               increased 5.92% over last year for the year to date. Consolidated
               sales increased $77,811 from the corresponding  quarter last year
               despite the fact that M.E.M.C.O. had a $174,087 decrease in sales
               for the quarter over the same quarter a year ago. The increase in
               consolidated  sales  was  the  result  of a  modest  increase  of
               $136,935  (3.12%)  in  Parent's  sales  and a  $114,973  (18.86%)
               increase in the sales of Wendland  Manufacturing  Corp., (WMC), a
               subsidiary of the Parent, over the same quarter a year ago. While
               M.E.M.C.O.'s  total  sales for the quarter do reflect an increase
               in sales over both of the previous  current fiscal  quarters,  it
               also highlights  M.E.M.C.O.'s need to develop  additional product
               lines to supplement fluctuations in orders for their main product
               (exchangers).

               The consolidated  working capital ratio at March 31, 1998 of 7.04
               to 1, is up from 4.68 to 1 at year-end, and up from the 6.08 to 1
               ratio of a year ago.  Consolidated  cash and  equivalents  are up
               $442,095  (119.85%) from year-end,  and up $242,416 (42.64%) from
               the same quarter a year ago.  Consolidated  investment securities
               decreased  $136,335 (9.30%) from year-end,  and decreased $92,773
               (6.05%) from the same quarter a year ago. Accounts receivable are
               down (14.04%) from year-end, and up (3.59%) from the same quarter
               a year ago.

                                                            - 6 -


<PAGE>

Item 2.        MANAGEMENT'S  DISCUSSION AND ANALYSIS OF  CONSOLIDATED  FINANCIAL
               CONDITION AND CONSOLIDATED RESULTS OF OPERATIONS (CONTINUED)


               Inventory  increased  $251,323  (5.61%)  from  year-end  as  more
               work-in-progress was brought to finished, saleable condition, and
               increased (25.68%) from a year ago.

               Consolidated  trade accounts payable decreased  $567,350 (66.63%)
               to a historically  customary  level from  year-end.  Consolidated
               accrued commissions  decreased (14.00%) from year-end as a result
               of expected collections of accounts receivable.

               Production  continues at near capacity.  The consolidated backlog
               of orders at March 31, 1998,  was  $6,276,417,  up (14.45%)  from
               year-end. As of the date of this Quarterly Report, the plants are
               operating first shifts totaling 160 production  employees on a 40
               hour  work  week.  As of  the  date  of  this  Quarterly  Report,
               twenty-nine (29) workers are on layoff.

               As of  the  date  of  this  Quarterly  Report,  the  Company  has
               $1,000,000  available on its $1,000,000  revolving line of credit
               and $500,000 available on its $500,000 operating line of credit.

               Planned  capital  expenditures  this year of up to  $450,000  (of
               which approximately  $320,000 has been utilized) will continue to
               be funded internally.

               The Company has recently  entered into a new labor  contract (the
               "Labor Contract"), which will take effect May 17, 1998. The Labor
               Contract  has a  three-year  term and  provides  for hourly  wage
               increases   over  the  next  three   years  of  5%,  3%  and  3%,
               respectively. In addition, the Labor Contract provides that 5% of
               annual net after-tax profits will be paid to covered employees in
               fiscal year 1999, 2000 and 2001. The Labor Contract also provides
               for life and health insurance benefits.

                                                 - 7 -


<PAGE>



                           PART II. OTHER INFORMATION


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


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

                              (27)           Financial   Data   Schedule   (nine
                                             months ended March 31, 1998)

               (b)            No  reports  on Form 8-K  were  filed  during  the
                              quarter ended March 31, 1998.



                                   SIGNATURES


               In  accordance  with the  requirements  of the Exchange  Act, the
               registrant has duly caused this report to be signed on its behalf
               by the undersigned thereunto duly authorized.



                                BRYAN STEAM CORPORATION



                                                 By: /s/ H. Jesse McVay
                                                     ---------------------------
                                                     H. Jesse McVay, President

                                                     Date: May 15, 1998



                                                 By: /s/ Kurt Krauskopf
                                                     ---------------------------
                                                     Kurt Krauskopf, Secretary

                                                     Date: May 15, 1998




                                                               (8)