UNITED STATES  
  
               SECURITIES AND EXCHANGE COMMISSION  
  
                     Washington, D.C. 20549  
  
                            FORM 10-QSB  
  
  
Quarterly Report Pursuant to Section 13 or 15(d) of the   
Securities Exchange Act of 1934  
  
For the Quarter Ended       September 30, 1998  
  
Commission file Number   1-3489
  
                     
                         CLARY CORPORATION
----------------------------------------------------------------------------
            (Exact name of Registrant as specified in its charter)

          California                                           95-0630196
----------------------------------------------------------------------------
(State or other jurisdiction of                         (I.R.S. Employer
 incororation or organization)                           Identification No.

1960 So. Walker Avenue     Monrovia, California                    91016
------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code   (626) 359-4486
                                  

                                     N/A
----------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.

Indicated by check 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 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 
                                   -----     -----
                                   
As of October 29, 1998, there were 1,807,419 shares of common stock out-  
standing.
 
              Transitional Small Business Disclosure Format

                                Yes   X   No
                                    -----    -----

<PAGE>


PART 1

ITEM #1 - FORM 10-QSB

                               CLARY CORPORATION
                            (Statement of Operations)

<TABLE>
<CAPTION>
PROFIT AND LOSS INFORMATION          Three Months Period Ended September 30,
                                           1998              1997
-----------------------------------       ---------------------------------  
<S>                                            <C>               <C>

Sales and other revenue                   $   837,000         $ 1,397,000       

Cost and expenses:
  Cost of products sold                       580,000             909,000     
  Engineering and product development          97,000              76,000
  Selling and service                         191,000             291,000
  General and administrative                   81,000              82,000  
  Interest expense                             35,000              36,000
                                            ---------           ---------
                                              984,000           1,394,000
                                            ---------           ---------

   Net (loss) earnings                     $ (147,000)        $     3,000
                                             =========          =========       
   Net (loss) earnings per common share    $     (.08)        $      -0-
                                             =========          =========       
                                           
    
  Average number of shares                   1,807,419          1,807,319  

    
  Dividends per share                         None               None      
   



<PAGE>


                           CLARY CORPORATION
                        Statement of Operations
                        -----------------------



</TABLE>
<TABLE>
<CAPTION>
PART I
ITEM #1 - FORM 10-QSB

                                 Nine Month Period Ended September 30,
                                 --------------------------------------
Profit and Loss Information              1998                 1997
---------------------------              -----                ----
<S>                                      <C>                  <C>

Net Sales and Other Revenue           $ 2,792,000           $ 3,398,000   

Cost and expenses:
 Cost of products sold                  1,968,000             2,257,000
 Engineering and Product Development      288,000               250,000 
 Selling and Service                      569,000               557,000
 General and Administrative               238,000               228,000
 Interest expense                         106,000                99,000
                                        ---------             ---------
                                        3,169,000             3,391,000
                                       
(Loss) earnings before income taxew      (377,000)                7,000

Income tax expense                          1,000                 1,000
                                        ---------             ---------
    Net (loss) earnings               $  (378,000)          $     6,000
                                         ========                 =====
    Net (loss) earnings per common
    share                             $      (.21)          $       -0-
                                         ========                 =====   
                                          

Average number of shares                1,807,419             1,807,319

Dividends per share                        None                  None



</TABLE>
<TABLE>

<CAPTION>

                             CLARY CORPORATION
                       CONSOLIDATED BALANCE SHEETS
                      -----------------------------
   ASSETS                               Sept. 30, 1998    Dec. 31, 1997
----------------------------------      --------------    -------------
<S>                                         <C>                 <C>
CURRENT ASSETS
--------------
<S>
   Cash                                  $   184,000        $   321,000   
   Cash restricted                             ---              300,000
   Notes and accounts receivable less
    allowance for doubtful amounts
    of $13,000 in 1998 and $14,000 in 
    1997.                                    493,000            759,000 
   Inventories, principally finished
    goods and work-in-process              1,710,000          1,442,000
   Prepaid expenses and other assets          68,000             47,000
                                           ---------          ---------
          Total Current Assets           $ 2,455,000        $ 2,869,000

PROPERTY, PLANT AND EQUIPMENT
-----------------------------
   Machinery and equipment                 1,407,000          1,374,000
   Dies, jigs and fixtures                    31,000             31,000
   Leasehold improvements                     71,000             68,000
                                           ---------          ---------
                                           1,509,000          1,473,000
   Less:  Accumulated depreciation
          and amortization                 1,389,000          1,366,000
                                           ---------          ---------
                                             120,000            107,000
OTHER ASSETS
------------
   Miscellaneous                              65,000             59,000
                                           ---------          ---------
                                              65,000             59,000
          
   TOTAL ASSETS                          $ 2,640,000        $ 3,035,000
                                           =========          =========
<PAGE>

PART I
ITEM #1 - FORM 10-QSB

                              CLARY CORPORATION
                     CONSOLIDATED BALANCE SHEETS (Continued)
                     ---------------------------------------


</TABLE>
<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY      Sept. 30, 1998       Dec. 31, 1997
------------------------------------      --------------       -------------
<S>                                           <C>                <C>

CURRENT LIABILITIES
-------------------
 Notes payable                             $   695,000         $   725,000
 Accounts payable and accrued expenses         717,000             681,000
 Accrued payroll and related expenses           63,000              98,000
 Customer deposits                              29,000              17,000
                                               -------             -------
          Total Current Liabilities        $ 1,504,000         $ 1,521,000 

9-1/2% Convertible Subordinated Notes
  due October 17, 2000                         600,000             600,000

STOCKHOLDERS' EQUITY
--------------------
 Preferred stock                                55,000              55,000
 Common stock and additional stated 
   value arising from conversion of 
   preferred stock                           2,509,000           2,509,000
 Additional paid-in capital                  5,099,000           5,099,000
    Beginning of year deficit               (6,749,000)         (6,749,000)
 Current years' loss                          (378,000)             ---
                                             ---------           ---------
          Total Equity                         536,000             914,000
                                             ---------           ---------

 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY  $ 2,640,000         $ 3,035,000
                                             =========           =========
</TABLE>

<PAGE>



                             CLARY CORPORATION
                         STATEMENTS OF CASH FLOWS
                         ------------------------
                                     
<TABLE>
<CAPTION>                                   For the Nine Month Period Ended  
                                            --------------------------------
                                                    September 30,
                                                    ------------
                                              1998             1997

                                              ----             ----
<S>                                           <C>              <C>

Cash flows from operating activities:
  Operating (loss) earnings                 $  (378,000)     $    6,000
 Adjustments to reconcile net (loss)  
  earnings to net cash (used for)      
  provided by Operating Activities:

    Depreciation and amortization                23,000          39,000
    (Used) for losses on accts. rec.             (1,000)         (6,000)
    Change in assets and liabilities:
     Decrease in cash restricted                300,000            --- 
     Decrease(increase) in accts. receivable    265,000        (408,000)
     (Increase) decrease in inventory          (268,000)        371,000
     (Increase) in prepaid expenses             (19,000)        (34,000)
     (Increase) in other assets                  (6,000)          ---
     Increase in accts. payable and accrued
       expenses                                   1,000          76,000
     Increase(decrease) in customer deposits     12,000          (2,000)
                                                -------         -------
       Net cash (used for) provided by
          Operating Activities:                 (71,000)         42,000
         

Cash Flows from Investing Activities:

     Capital expenditures                       (36,000)        (28,000)
                                                 ------          ------
     Net Cash (used for) Investing
         Activities:                            (36,000)        (28,000)

Cash Flows from Financing Activities:

     Net (repayments) borrowings under
       line-of-credit                           (30,000)         75,000
                                                 ------          ------
     Net Cash (used for) provided by
       Financing Activities                     (30,000)         75,000        
        
                                                 ------          ------
Net (decrease) increase in cash and cash
   equivalents                                 (137,000)         89,000

Cash and cash equivalents at beginning of
period                                          321,000         123,000
                                                -------         -------
Cash and cash equivalents at end of period   $  184,000      $  212,000
                                                =======         =======
</TABLE>



<PAGE>



PART I
ITEM #2 - FORM 10-QSB 

MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------

Results of Operation
--------------------
   Sales and other revenues for the third quarter of 1998 decreased
$560,000 or 40.0% from the third quarter of 1997.  The reduction was      
the result of older programs using the Registrant's imported products   
being phased out and newer programs using the Registrant's newly 
developed digital products not achieving expectations.  Recently, 
several customers have shown interest in the new line (need a sales
forecast to expand this area for potential sales).  However, the 
Registrant feels it will continue to show operation losses for the
next several months before it returns to profits in the first or
second quarter of 1999.

   Cost of sales decreased $329,000 or 36.2% over the two periods.
This decrease was due to the sales decrease.  Selling and administra-
tive expenses decreased $99,000 or 34.0% due primarily to reduced
commissions on the decreased sales and secondly to reduced advertising
costs.  Engineering and development cost increased $21,000 or 35.0%
due to increased efforts to prepare products for the marketplace.  The
net loss of $147,000 was due to lost margins on the decreased sales.

Liquidity and Capital Requirements 
----------------------------------
   The Registrant is negotiating with a financial company to supply
further credit to finance its immediate need for working capital.  Due
to its current losses, the short-term credit lines it now has is not
sufficient for these needs.  Although the Registrant is confident their
negotiations will be successful, there are no assurances these expanded
lines of credit will be granted.

   The Registrant's short-term secured borrowing agreement with the bank
was renewed for one year on May 1, 1998.  At the present time, the 
Registrant is not meeting the Working Capital covenant of this Agreement
and is negotiating with the bank to ease the requirement until the 
renewal date.  Again, although the Registrant is confident their nego-
tiations will be successful, there is no assurance the bank will ease
the loan requirement.

Listing Requirement
-------------------
   The Registrant has been notified by the Pacific Exchange that its 
$1.00 par common stock which is traded on this Exchange was not in
compliance with its listing maintenance requirement for share bid price.
The Registrant stock is currently being monitored by the Exchange to
make sure it makes tangible progress toward attaining compliance within
a reasonable period of time.

<PAGE>

PART I                                                     FORM 10-QSB

Item #2


YEAR 2000 COMPLIANCE
-------------------- 
 
   Clary Corporation manufactures Uninterruptible Power Systems that 
provide clean continuous power for commercial, medical, industrial and
military applications.  Questions concerning issues related to the 
processing of dates are not applicable to our equipment.  The millenium
or century change will not impact the operation of a Clary UPS and will
not result in any loss of power to equipment being supplied power by a
Clary UPS through internal unit fault.

   Most Clary equipment manufactured to date does not have microprocessors.
Of the equipment that does have a microprocessor and electronically stores
a date; this date is for customer reference only and is not a factor in 
the actual operation.

   Clary Corporation has no plans to modify any prior models with regard
to the way they handle dates.

   Internally, Clary Corporation has obtained Y2K compliant versions of
our Accounting and Manufacturing software programs.  These will be 
installed prior to Q1 1999.

   Some of our customers use third party software installed in a host
computer to communicate with our equipment.  Clary has supplied its
customers the names, addresses and phone numbers of software suppliers
to contact regarding the host software.




<PAGE>

PART I
ITEM #3 - FORM 10-QSB

                          CLARY CORPORATION
                          -----------------

                     NOTES TO PART I OF THIS REPORT
                     ------------------------------


NOTE 1.     As of September 30, 1998, the Registrant has 12,688 shares of
common stock reserved for conversion of preferred stock and 600,000 shares
reserved for the conversion of the 9-1/2% convertible subordinated notes.
In addition, the Registrant has reserved 26,000 shares of common stock for
purchase by officers or employees under its 1984 Incentive Stock Option
Plan and an additional 100,000 shares reserved for purchase by officers
and key employees under its 1996 Employee Incentive Stock Option Plan.
Also, the Company has 40,000 shares of common stock for purchase by its
Executive Vice President under a non-qualified stock option plan.

NOTE 2.    This report reflects all adjustments which are, in the 
opinion of management, necessary to present a fair statement of the
results for the interim period.  The report has not been reviewed by
our independent public accountants and is, therefore, unaudited.




<PAGE>

FORM 10-QSB

                            CLARY CORPORATION
                                PART II
                            OTHER INFORMATION
                            -----------------

Item 1   Legal Proceedings - None of any significance

Item 2   Change in Securities - Inapplicable

Item 3   Defaults Upon Senior Securities - Inapplicable

Item 4   Submission of Matters to a Vote of Security Holders - Inapplicable

Item 5   Other Information - Inapplicable

Item 6   Exhibits and Reports on Form 8K - None

<PAGE>
    Pursuant to the requirements of the Securities and Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.
 
                                       CLARY CORPORATION
                                          (Registrant)
<TABLE>
<CAPTION>

         SIGNATURE                           TITLE
         =========                           =====

<S>                                          <C>
/s/ John G. Clary                  President, Chief Executive Officer, 
-----------------                  Chairman of the Board and Director
John G. Clary

/s/ Donald G. Ash                  Treasurer, Chief Financial Officer,
-----------------                  Assistant Secretary and Director
Donald G. Ash


<PAGE>

</TABLE>