U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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 December 31, 1997.



__________        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
                                                   February 5, 1998)


                                        1
<PAGE>


                              PART. I FINANCIAL INFORMATION


Item 1.          Financial Statements

                             BRYAN STEAM CORPORATION
                     CONDENSED CONSOLIDATED INCOME STATEMENT

<TABLE>
<CAPTION>
                                       Unaudited        Unaudited          Unaudited         Unaudited
                                                 For the                               For the
                                             Six months Ended:                  Fiscal Quarter Ended:
                                       31-Dec-97         31-Dec-96         31-Dec-97         31-Dec-96
                                       (Current           (Prior           (Current            (Prior
                                         Year)             Year)             Year)              Year)
                                      ------------------------------     -------------------------------
<S>                                   <C>               <C>               <C>               <C>         
Gross sales less
      discounts, returns
      and allowances                  $ 14,574,659      $ 13,910,753      $  7,291,174      $  7,197,531
                                      ------------      ------------      ------------      ------------

Cost and expenses --

Cost of goods sold                    $  9,644,806      $  9,031,931      $  4,891,292      $  4,671,997
Selling, general and
      administrative expenses            3,153,847         3,222,524         1,726,894         1,727,684

Total cost and expenses               $ 12,798,653      $ 12,254,455      $  6,618,186      $  6,399,681

Operating income                      $  1,776,006      $  1,656,298      $    672,988      $    797,850

Other income and (expenses)
      Interest income                 $     34,231      $     38,608      $     24,851      $     22,030
      Freight income                        48,812            47,523             4,735            22,643
      Interest expense                     (11,641)          (51,189)          (10,035)          (13,576)
                                      ------------      ------------      ------------      ------------
Total other income and (expenses)     $     71,402      $     34,942      $     19,551      $     31,097
                                      ------------      ------------      ------------      ------------
Income (or Loss) before
      taxes on income and
      extraordinary items             $  1,847,408      $  1,691,240      $    692,539      $    828,947
                                      ------------      ------------      ------------      ------------
Provision for taxes
      on income                            770,400           660,858           287,107           344,524
                                      ------------      ------------      ------------      ------------

Net income (or loss)                  $  1,077,008      $  1,030,382      $    405,432      $    484,423
                                      ============      ============      ============      ============

Earnings per share*                   $       5.63      $       5.39      $       2.12      $       2.53
                                      ============      ============      ============      ============

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 periods involved.


<PAGE>

                             BRYAN STEAM CORPORATION
                                  PERU, INDIANA
                           CONSOLIDATED BALANCE SHEET



<TABLE>
<CAPTION>
                                                           Unaudited         Unaudited
ASSETS                                                    December 31,        June 30,
                                                              1997             1997
                                                         ------------      ------------
CURRENT ASSETS
<S>                                                      <C>               <C>         
      Cash and cash equivalents                          $    590,500      $    368,879
      Investment securities                                 1,330,331         1,466,686
      Accounts receivable (net)                             5,128,759         4,814,745
      Prepaid expenses                                        390,544           282,644
      Prepaid income taxes                                         --            27,528
      Inventory                                             4,453,598         4,479,203
                                                         ------------      ------------
            TOTAL CURRENT ASSETS                         $ 11,893,732      $ 11,439,685
                                                         ------------      ------------

FIXED ASSETS
      Land, buildings, equipment                         $  9,171,595      $  8,976,634
      Less:  Accumulated depreciation                       3,624,795         3,400,512
                                                         ------------      ------------
            TOTAL FIXED ASSETS                           $  5,546,800      $  5,576,122
                                                         ------------      ------------

OTHER ASSETS
      Noncompete agreement (Net of amortization)         $    140,726      $    180,000
      Other amortizable assets (Net of amortization)           19,701            21,791
      Deposits                                                  5,171             5,171
                                                         ------------      ------------
            TOTAL OTHER ASSETS                           $    165,598      $    206,962
                                                         ------------      ------------

TOTAL ASSETS                                             $ 17,606,130      $ 17,222,769
                                                         ============      ============

LIABILITIES AND NET WORTH

CURRENT LIABILITIES
      Accounts payable - trade                           $    302,407      $    851,512
      Capital lease obligations                                44,710             8,632
      Loans payable - Line of Credit - Norwest Bank            45,400            45,400
      Accrued commissions                                   1,236,579           807,617
      Accrued property taxes                                  238,526           254,251
      Accrued federal income tax                               56,106                --
      Accrued state income tax                                  4,837             4,837
      Accrued taxes & other expenses                          155,913           365,624
      Current portion of long-term debt                         1,257            24,300
      Deferred federal income tax                              70,071            70,071
      Deferred state income tax                                16,085            16,085
                                                         ------------      ------------
            TOTAL CURRENT LIABILITIES                    $  2,171,891      $  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                                        $  2,519,807      $  2,830,938
                                                         ------------      ------------

NET WORTH
      Capital stock                                      $    810,272      $    810,272
      Treasury stock, at cost                                 (28,727)          (28,727)
      Retained earnings                                    14,304,778        13,610,286
                                                         ------------      ------------
            TOTAL NET WORTH                              $ 15,086,323      $ 14,391,831
                                                         ------------      ------------

TOTAL LIABILITIES AND NET WORTH                          $ 17,606,130      $ 17,222,769
                                                         ============      ============
</TABLE>


<PAGE>

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

<TABLE>
<CAPTION>
                                                       Unaudited        Unaudited
                                                      Jul 01, 1997     Jul 01, 1996
                                                           to               to
                                                      Dec 31, 1997     Dec 31, 1996
                                                      ------------     ------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                    <C>              <C>        
      Net income                                       $ 1,077,008      $ 1,030,382
      Non-cash items included in net income
            Amortization                                    41,364           26,801
            Depreciation                                   224,283          228,938
            Changes in:
                 Inventory                                  25,605          371,788
                 Accounts receivable                      (314,014)         389,567
                 Prepaid expenses                         (107,900)        (160,485)
                 Prepaid income taxes                       27,528           76,942
                 Accounts payable                         (549,105)        (211,413)
                 Commissions payable                       428,962          403,318
                 Accrued county property taxes             (15,725)          13,072
                 Accrued taxes & other expenses           (209,711)        (133,073)
                 Federal income taxes payable               56,106               --
                                                       -----------      -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES              $   684,401      $ 2,035,837
                                                       -----------      -----------

CASH FLOW FROM INVESTING ACTIVITIES
      Purchases of plant and equipment                 $  (194,961)     $  (695,964)
      Redemptions of investment securities                 136,355          291,087
                                                       -----------      -----------
NET CASH (USED) BY INVESTING ACTIVITIES                $   (58,606)     $  (404,877)
                                                       -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Payments on long-term debt                       $   (23,746)     $  (633,598)
      Dividends paid                                      (380,428)        (284,257)
                                                       -----------      -----------
NET CASH (USED) BY FINANCING ACTIVITIES                $  (404,174)     $  (917,855)
                                                       -----------      -----------

NET INCREASE (DECREASE) IN CASH & EQUIVALENTS          $   221,621      $   713,105

CASH & CASH EQUIVALENTS
      July 01,                                         $   368,879      $   304,739
      December 31,                                         590,500        1,017,844
                                                       -----------      -----------
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS          $   221,621      $   713,105
                                                       ===========      ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
      Cash paid during the period for:
            Interest (Net of amount capitalized)       $    11,641      $    51,189

            Income taxes                               $   661,603      $   498,346
</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 period  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  December  31, 1997 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 second quarter of $405,432 is
                  down  (16.30%)  from  the  net  income  of  $484,423  for  the
                  corresponding  quarter last year. The decrease in consolidated
                  net income results from the $132,880 decrease in net income of
                  Bryan Steam  Corporation (the Parent) and the $14,737 decrease
                  in the net  income of  M.E.M.C.O.  These  decreases  more than
                  offset the $68,626 increase in the net income of Wendland Mfg.
                  Co. for the quarter as compared to the  corresponding  quarter
                  of the prior fiscal year. The Parent's  decrease in net income
                  results from an increase in labor costs which  increased  cost
                  of goods sold.

                  Consolidated  sales for the quarter  increased  1.30% from the
                  corresponding  quarter last year, and increased 4.77% over the
                  same  year to date  period  last  year.  Cost  of  goods  sold
                  increased a  corresponding  4.69% from the same quarter a year
                  ago, and increased  6.79% over last year for the year to date.
                  The  $93,643  increase in  consolidated  sales for the quarter
                  results  primarily  from the  Parent's  sales for the  quarter
                  having increased $148,666 over the corresponding  quarter last
                  year.  This increase  results from the Parent  having  shipped
                  more units  during the  current  quarter  than during the same
                  quarter  a  year  ago.  Consolidated   selling,   general  and
                  administrative  expenses decreased .04% from the corresponding
                  quarter a year ago, and 2.13% for the year to date,  primarily
                  from the efforts of all companies to control selling,  general
                  and administrative expenses.

                  The consolidated working capital ratio at December 31, 1997 of
                  5.47 to 1 is up from  4.67 to 1 at  year-end,  and up from the
                  5.26 ratio of a year ago.  Consolidated  cash and  equivalents
                  are up $221,621  (60.01%)  from  year-end,  and down  $427,344
                  (41.99%)  from the  same  quarter  a year  ago as a result  of
                  collections  from higher  sales and an increase in more liquid
                  investments.   Consolidated  investment  securities  decreased
                  $136,355  (9.30%) from year-end,  and increased  $4,864 (.37%)
                  from the same quarter a year ago.  Accounts  receivable are up
                  (6.52%) from year-end, and up (14.13%) from the same quarter a
                  year ago,  as a result of having  increased  sales  during the
                  current period as compared to the same period last year.

                                                               (6)


<PAGE>




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


                  Inventory  dropped  $25,605  (.57%) from  year-end.  Inventory
                  increased  $623,376 (16.28%) over the same quarter a year ago,
                  as the  company  built  up its  inventory  to  meet  increased
                  demand.

                  Consolidated   trade  accounts  payable   decreased   $549,105
                  (64.49%) to a historically  customary level from year-end, and
                  decreased  $39,259  from  a  year  ago.  Consolidated  accrued
                  commissions  increased  $428,962  (53.11%)  from year-end as a
                  result of an  increase  in accounts  receivable  and  somewhat
                  slightly slower collections.

                  Production  continues  at  near  capacity.   The  consolidated
                  backlog  of  orders  at  December  31,  1997,  was  steady  at
                  $4,404,928.  The plants are operating  first shifts  totalling
                  176  employees  and  second  shifts  totalling  14  employees.
                  Thirteen  workers  are on layoff from the first  shift.  . The
                  Parent 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  $194,961 has been utilized) will continue
                  to be funded internally.

                                                               (7)


<PAGE>






                           PART II. OTHER INFORMATION

Item 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                  At the Annual  Meeting  of the  Stockholders  held  October 3,
1997, the following votes were cast in respect of the nominees for director:

                                                    VOTES
                                 ----------------------------------------------
        Director                   For             Withheld         Abstentions
        --------                 -------           --------         -----------
    Harold V. Koch               153,439                 0               0
    Albert J. Bishop             153,439                 0               0
    H. Jesse McVay               153,439                 0               0
    G.N. Summers                 129,041            24,398               0
    Jack B. Jackson              153,438                 1               0
    James B. Lockhart, Jr.       153,316               123               0
    Bryan D. Herd                153,439                 0               0


Item 5.           Other Information

     Certain  significant  shareholders of the Company have approached the board
of directors to discuss potential opportunities to liquidate a portion or all of
their  interests in the Company.  In response to these  inquiries,  the board is
exploring alternatives available to the Company to facilitate such a liquidation
opportunity.

Item 6.           Exhibits and reports on Form 8-K

                  (b) No reports on Form 8-K were filed during the quarter ended
December 31, 1997.


                                                               (8)


<PAGE>



                                   SIGNATURES

                  Pursuant  to  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:  February 16, 1998


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

                                    Date:  February 16, 1998


                                       (9)