SECURITIES AND EXCHANGE COMMISSION
Washington, DC   20549

Form 10-Q



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

	OR

( ) 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended May 29, 1998	Commission File Number:  0-45


                	SHELDAHL, INC.
	(exact name of registrant as specified in its charter)



            Minnesota                               	41-0758073
(State or other jurisdiction of     	(IRS Employer Identification Number)
incorporation or organization)		




           Northfield, Minnesota                        	55057
(Address of principal executive offices)	              (zip code)



Registrant's telephone number, including area code:  507-663-8000.

As of July 1, 1998, 9,640,659 shares of the Registrant's common stock were 
outstanding.

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 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:
<PAGE>


PART I: FINANCIAL INFORMATION

SHELDAHL, INC. AND SUBSIDIARY
	CONSOLIDATED STATEMENTS OF OPERATIONS
	Unaudited
                                                	Nine Months Ended

                                               	May 29,     	May 30,
(in thousands, except for per share data)       	1998        	1997


Net sales	                                     	$88,633     	$78,273
Cost of sales                                   	83,131      	69,964
                                             			_______	     _______

Gross profit                                     	5,502       	8,309

Expenses:
Sales and marketing                              	7,416       	6,833
General and administrative                       	6,056	       4,997
Research and development	                         3,048	       3,302
Restructuring costs                              	8,500   	        -
Impairment charges                               	3,300	           -
Interest                                         	1,688         	708
                                              		_______	     _______

Loss before income taxes and
 Cumulative effect of change
 in method of accounting                       	(24,506)     	(7,531)

Benefit (provision) for
 income taxes                                   	(2,952)      	2,560
                                              			_______	    _______

Net loss before cumulative effect
 of change in method of accounting
 for start-up costs                            	(27,458)    	(4,971)

Cumulative effect of change in
 method of accounting for
 start-up costs                                 	(5,205)          	-
                                              			_______	    _______

Net loss before preferred dividends	            (32,663)    	(4,971)

Convertible preferred stock dividends             	(455)          	-
                                              			_______	    _______

Net loss applicable to common
 shareholders                                 	$(33,118)	   $(4,971)
                                              			=======	    =======

Net loss per common share:
Basic:
  Net loss before change in
    method of accounting                        	$(2.96)    	$(0.56)
                                              			=======	    =======
  Change in method of accounting                	$(0.56)    	$     -
                                              			=======	    =======
  Net loss per common share                     	$(3.57)    	$(0.56)
                                              			=======	    =======

Diluted:
  Net loss before change in
   	method of accounting                        	$(2.96)  	  $(0.56)
                                              			=======	    =======
  Change in method of accounting                	$(0.56)    	$     -
                                              			=======	    =======
  Net loss per common share                     	$(3.57)    	$(0.56)
                                              			=======    	=======

Number of shares outstanding:
  Basic                                          		9,267	      8,952
  Diluted	                                        	9,267      	8,952

The accompanying notes are an integral part of these statements.
<PAGE>

SHELDAHL, INC. AND SUBSIDIARY
	CONSOLIDATED STATEMENTS OF OPERATIONS
	Unaudited

                                                 	Three Months Ended

                                                 	May 29,     	May 30,
(in thousands, except for per share data)         	1998        	1997


Net sales                                      		$31,890     	$27,593
Cost of sales                                    	29,094      	24,865
                                             	 		_______	     _______

Gross profit                                      	2,796       	2,728

Expenses:
Sales and marketing	                               2,501       	2,227
General and administrative	                        2,115	       1,697
Research and development                          	1,046         	983
Restructuring costs	                               4,500	           -
Impairment charges                                	3,300           	-
Interest                                            	566         	412
                                               		_______	     _______

Loss before income taxes                       	(11,232)     	(2,591)
 
Benefit (provision) for income taxes            	(7,792)         	880
                                      			        _______	     _______

Net loss before preferred dividends            	(19,024)     	(1,711)

Convertible preferred stock dividends              	(96)	           -
                                              			_______	     _______

Net loss applicable to common
 shareholders                                 	$(19,120)    	$(1,711)
                                              			=======     	=======

Net loss per common share - basic               	$(1.98)     	$(0.19)
                                              			=======     	=======

Net loss per common share - diluted             	$(1.98)     	$(0.19)
                                              			=======	     =======

Number of shares outstanding:
  Basic	                                          	9,634	       8,989
  Diluted	                                        	9,634	       8,989
<PAGE>

SHELDAHL, INC. AND SUBSIDIARY
	CONSOLIDATED BALANCE SHEETS

                                 	ASSETS
	unaudited
(In thousands)                                   	May 29,   	August 29,
                                                  	1998       	1997
Current assets:
Cash and cash equivalents                	        $   885	    $ 5,567
Accounts receivable, net                          	17,490	     15,880
Inventories                                       	14,838     	13,078
Prepaid expenses and other
 current assets                                      	848        	406
Deferred taxes                                         	-        	765
                                                		_______	    _______
Total current assets                              	34,061     	35,696
                                                 	_______	    _______

Construction in process                           	30,444     	19,303
Land and buildings                                	27,353     	26,467
Machinery and equipment	                          107,328    	112,071
Less: accumulated depreciation                  	(64,181)	   (57,036)
                                                		_______	    _______
Net plant and equipment                          	100,944    	100,805
                                                 	_______	    _______

	Deferred taxes                                        	-	      2,187
                                               			_______	    _______
Other assets                                         	660        	679
                                                		_______    	_______

                                              			$135,665   	$139,367
                                               			=======	    =======

                       	LIABILITIES AND SHAREHOLDERS INVESTMENT

Current liabilities:
Current maturities of
 long-term debt                                 	$ 15,332	    $   818
Accounts payable                                   	9,833      	7,309
Customer overpayment                               	9,334          	-
Accrued salaries                                   	1,707	      1,606
Other accruals                                     	5,031      	3,020
Restructuring reserves                              5,264	          -
                                                		_______	    _______
Total current liabilities                         	46,501	     12,753
                                                 	_______    	_______

Long-term debt	                                    32,051     	40,869
                                                		_______	    _______

Other non-current liabilities	                      7,214      	2,813
                                                		_______	    _______

Shareholders investment:
Preferred stock                                        	8         	15
Common stock	                                       2,410	      2,258
Additional paid-in capital                        	66,863     	66,923
Retained earnings (deficit)                     	(19,382)     	13,736
                                                 	_______	    _______

Total shareholders investment                     	49,899     	82,932
                                                 	_______	    _______

                                                	$135,665   	$139,367
                                                 	=======    	=======
<PAGE>

SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited

                                               		Nine Months Ended

(in thousands)	                                   May 29,     	May 30,
                                                  	1998        	1997

Operating activities:
Net loss                                     		$ (32,663)   	$ (4,971)
Adjustments to reconcile net loss
   to net cash provided by
	 operating activities:
Depreciation and amortization                     	10,808      	7,378
Deferred income taxes                              	2,952	    (2,559)
Non-cash restructuring charges                     	8,500          	-
Non-cash impairment charges                        	3,300          	-
Non-cash change in method of
 accounting                                        	5,205          	-

Net change in other operating activities:
Accounts receivable                              	(1,610)	     2,864
Inventories                                      	(1,760)   	(1,350)
Prepaid expenses and other current
 assets                                            	(442)	      (43)
Other assets	                                          19         	1
Accounts payable and accrued
 liabilities                                       	3,907       	996
Other non-current liabilities                       	(39)        	36
                                                 	_______	   _______
Net cash provided by (used in)
 operating activities                            	(1,823)     	2,352
                                               			_______	   _______

Investing activities:
Capital expenditures, net                       	(17,764)  	(25,805)
                                                		_______	   _______

Financing activities:
Customer overpayment                               	9,334         	-
Borrowings under revolving credit
 facilities, net	                                   4,125    	22,625
Proceeds from long-term debt	                       2,334       	791
Repayments of long-term debt	                       (814)     	(434)
Preferred stock issuance cost                      	(300)         	-
Proceeds of stock option exercises                   	226       	859
                                                		_______	   _______

Net cash provided by financing activities	         14,905    	23,841
                                               			_______	   _______

Increase (decrease) in cash                      	(4,682)       	388
                                               			_______	   _______

Cash and cash equivalents at beginning
 of period                                         	5,567       	904
                                               			_______	   _______

Cash and cash equivalents at end
 of period                                       	$   885   	$ 1,292
                                               			=======	   =======

Supplemental cash flow information:
Income taxes paid                                	$    36	   $   266
                                                		=======	   =======
Interest paid	                                    $ 2,901   	$ 1,961
                                                		=======  	 =======
<PAGE>

SHELDAHL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

These condensed and unaudited consolidated financial statements have been 
prepared by the Company pursuant to the rules and regulations of the 
Securities and Exchange Commission.  In the opinion of management, these 
condensed unaudited consolidated financial statements reflect all adjustments, 
of a normal and recurring nature, necessary for a fair statement of the 
interim periods, on a basis consistent with the annual audited financial 
statements.  Certain information, accounting policies and footnote disclosures 
normally included in financial statements prepared in accordance with 
generally accepted accounting principles have been condensed or omitted 
pursuant to such rules and regulations.  Although these disclosures should be 
considered adequate, the Company strongly suggests that these condensed 
unaudited financial statements be read in conjunction with the financial 
statements and summary of significant accounting policies and notes thereto 
included in the Company's latest annual report on Form 10-K.

1)	Inventories, which are valued at the lower of first-in first-out cost or 
market, consists of (in thousands):

                          	May 29, 1998     	August 29, 1997

Raw materials	                $4,693            	$ 3,069
Work-in-process	               6,431              	6,484
Finished goods	                3,714              	3,525
                            	_______	            _______
                            	$14,838            	$13,078
                            	=======	            =======

2)  Convertible Preferred Stock.

	As of May 29, 1998, 7,650 shares of preferred stock remained outstanding.  
This preferred stock, with a stated value of $7.7 million, is convertible 
to 	common stock at any time at the option of the holders.  The conversion 
price fluctuates, subject to a 	maximum, based on the price of the Company's 
common stock during the 30 trading day period immediately 	prior to 
conversion.  As of May 29, 1998, the conversion price was estimated to be 
$9.00 per share, 	and if converted in its entirety, the Series B Preferred 
Stock would represent approximately 850,000 additional shares of common 
stock.

	As of May 29, 1998, the Company accrued dividends on this preferred stock 
of approximately $281,000, which 	are payable in cash or common stock, at 
the Company's option, on the date the preferred stock is converted into 
common stock.

3)  Restructuring Costs.

	In February 1998, a restructuring charge of $4.0 million was recorded 
related to the culmination of the Company's business process design 
initiative that began two years ago.  Due to significant productivity 
benefits resulting from the initiative, the Company is reducing the size of 
its salaried workforce.  The resulting workforce reduction involves 
layoffs, early retirement offerings, reassignments and reclassifications of 
positions.  The restructuring costs provide for approximately $2.5 million 
for severance and early retirement salary costs, approximately $1.3 million 
for medical, dental and other benefits being provided to the affected 
individuals, and approximately $0.2 million for outplacement and other 
costs.  Approximately 65 people will be affected.

In May 1998, an additional restructuring charge of $4.5 million was 
recorded.  This restructuring charge relates to the closing of the 
Company's Aberdeen, South Dakota assembly facility and reducing its 
Northfield production workforce.  The restructuring costs provide for 
approximately $2.6 million for severance costs, approximately $0.6 million 
for medical, dental and other benefits being provided to the affected 
individuals, approximately $1.0 million for equipment disposal and losses 
related to the closure of the Aberdeen facility, and approximately $0.3 
million for outplacement and other costs.  Approximately 240 jobs will be 
affected.

As of May 29, 1998, approximately $75,000 has been charged to the Company's 
restructuring reserves and 41 employees have terminated employment with the 
Company.

4)  Per Share Information.

In February 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.  This 
new standard replaces prior EPS reporting requirements and requires a dual 
presentation of basic and diluted EPS.  Basic EPS excludes dilution and is 
computed by dividing net income by the weighted average amount of common 
shares outstanding for the period.  Diluted EPS reflects the potential 
dilution that could occur if securities or other contracts to issue common 
stock were exercised or converted into common stock.  As with current EPS 
reporting requirements, the standard requires common equivalent shares to 
be excluded in loss periods, as they are anti-dilutive. 

(in thousands except           	 Nine Months Ended	      Three Months Ended
	per share data)               	5/29/98	    5/30/97    	5/29/98    	5/30/97
                               		_____	      _____	      _____	      _____
	Basic EPS:

	Net loss applicable to
	common shareholders         	$ (33,118)  	$ (4,971)  	$ (19,118)  	$ (1,711)

	Weighted average common
	shares outstanding	               9,267	      8,952       	9,634      	8,989

	Number of shares                 	9,267	      8,952       	9,634	      8,989

	Net income per share	          $ (3.57)	   $ (0.56)	    $ (1.98)	   $ (0.19)

	The Company's outstanding preferred shares and options have been computed 
to be anti-dilutive, and therefore are excluded from the calculation of 
diluted EPS and therefore diluted EPS equals basic EPS for the periods 
presented above.

5)  The Company adopted Statement of Position No. 98-5, Reporting on the Costs 
of Start-Up Activities (SOP 98-5), during the third quarter of 1998 which 
requires the expensing of these items as incurred, versus capitalizing and 
expensing them over a period of time.  The early adoption of SOP 98-5 
resulted in a cumulative effect of a change in method of accounting of 
approximately $5.2 million, related to costs capitalized by the Company 
from its Micro Products venture.  The adoption of SOP 98-5 was applied 
retroactively to the beginning of fiscal 1998, and the Company's first and 
second quarters have been restated to reflect this change in method of 
accounting, in accordance with the provisions of SOP 98-5 and Accounting 
Principles Board Opinion No. 20, Accounting Changes.

6)  In June 1998, the Company executed a new credit agreement which provides 
the Company with up to $60 million in financing and completely replaces the 
Company's prior credit facilities.  This agreement provides the Company 
with up to $60 million in financing and completely replaces the prior 
credit facilities.  The new agreement provides three separate facilities: a 
revolver facility of up to $25 million based on the Company's working 
capital; a term facility for $16 million based on the appraised value of 
the Company's unencumbered equipment; and a bridge facility for $19 
million.  Interest on the revolver and the term facility will be charged at 
the base rate (prime rate) plus 1%.  Interest on the bridge facility will 
be charged at base plus 3%.  The bridge facility also carries a deferred 
interest charge of 13.5 percent due at payment of the facility.  Once the 
bridge facility is paid off, interest on the remaining two facilities will 
then be charged at the base rate.  The agreement also calls for the 
issuance of warrants at a price to be determined based on future events.  
The minimum number of warrants will be 100,000.  The maximum number of 
warrants will be 250,000.  The bridge facility calls for principal 
amortization of $5.0 million on August 28, 1998, $4.5 million on November 
30, 1998, and $3.2 million on May 31, 1999 and November 30, 1999, with the 
remaining balance due on May 31, 2001.  The term loan calls for interest 
only payments until January 1, 1999, when monthly principal payments of 
$205,000 begin.  All unamortized term facility amounts are due May 31, 
2001.  The revolving facility requires monthly interest payments and is due 
May 31, 2001.  The agreement requires certain covenants that restrict the 
payments of cash dividends, capital expenditures, maintain certain levels 
of net worth and net income, and maintain certain levels of cash flows from 
operations as defined.

The May 29, 1998 balance sheet reflects the new credit agreement in the 
classification of bank debt as current and non-current liabilities.
<PAGE>


SHELDAHL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED OPERATING RESULTS AND FINANCIAL CONDITION

Nine Months Ended May 29, 1998, and May 30, 1997 

Recent Developments:

The Company's unaudited results for the third quarter of fiscal 1998, 
including a pretax charge for restructuring costs and asset impairment charges 
as well as further charges relating to a tax asset allowance and the adoption 
of a FASB pronouncement on start-up costs, resulted in a net loss applicable 
to common shareholders for the nine months and quarter ended May 29, 1998 of 
$33.1 million or $3.57 per share and $19.0 million or $1.98 per share, 
respectively.  For the most recent quarter, the Company's core business 
generated operating pretax profit of $1.4 million, while its Micro Products 
business posted an operating pretax loss of $4.9 million.  The core business, 
based on increased sales and reduced costs, improved operating pretax profits 
by $2.8 million for the third quarter, as compared to the second quarter.  
Gross margin in the core business rose to 19.1 percent compared to 12.7 
percent last quarter.  Additionally, for the nine months ended May 29, 1998, 
the loss was due in part to the following:

- The Company's decision to move approximately 240 jobs from its Northfield, 
Minnesota and Aberdeen, South Dakota facilities to Mexico resulted in a 
restructuring charge of $4.5 million in the third quarter of 1998.  This 
charge relates to the cost of staff reductions, the sale of certain assets 
and the closing of the Company's Aberdeen assembly facility.  The Company 
expects that 200 of the affected jobs will move to Mexico by the close of 
its 1998 fiscal year, with the balance completed in the third quarter of 
fiscal 1999.

- The write down of equipment amounting to $3.3 million in the third quarter 
of 1998, principally at the Company's Longmont, Colorado facility, which 
equipment, based upon analysis by management and anticipated production 
processes, is not expected to contribute to the Company's future cash 
flows.

- The decision and analysis performed by management, based upon recent 
restructuring, write-offs and continued losses at the Company's Micro 
Products venture, to provide a valuation allowance for its net deferred tax 
assets, resulted in a $7.8 million charge to income during the third 
quarter of 1998.  As a result, the Company will not reflect in immediate 
future periods any tax provision or benefit until such net deferred tax 
assets are offset by reported pretax profits or that the degree of 
certainty increases as to the future profit performance of the Company to 
allow for the reversal of the valuation allowance for deferred tax assets.

- The adoption by the Company of Statement of Position No. 98-5, Reporting on 
the Costs of Start-Up Activities, which requires the expensing of these 
items as incurred, versus capitalizing and expensing them over a period of 
time.  The early adoption of this statement resulted in a cumulative effect 
of a change in method of accounting of approximately $5.2 million, related 
to costs capitalized by the Company from its Micro Products venture.  The 
adoption of this statement was applied retro-actively to the beginning of 
fiscal 1998, and the Company's first and second quarters have been restated 
to reflect this change in method of accounting, in accordance with the 
provisions of SOP 98-5 and APB 20.  The Company's depreciation and 
amortization expense is reduced by almost $0.5 million per quarter as a 
result of the adoption of reporting for start-up costs and the write down 
of certain equipment, which was noted above.

Sales:

The Company's net sales increased $10.4 million, or 13.2%, from $78.2 million 
for the nine months ended May 30, 1997, to $88.6 million for the nine months 
ended May 29, 1998. The automotive market sales for the nine months ended May 
29, 1998, increased 15.4% to $61.8 million.  This increase in sales reflects 
the demand recovery from the numerous automotive industry work stoppages that 
affected all of fiscal 1997 and increases in demand of Novaflex HD 
interconnect products to both the automotive and datacom markets.

Sales to the datacom market increased 28.8% to $11.2 million for the nine 
months ended May 29, 1998.  Sales of Novaflex HD accounted for approximately 
half of the $2.5 million increase.  The remainder of the increase in the 
datacom market is represented by increased sales of Novaclad and other 
laminated materials plus increased sales of approximately $0.8 million of 
high-density ViaThin substrates.  Sales to all other markets reflect a 
decrease of $.4 million, or 2%, for the nine months ended May 29, 1998, and is 
detailed below.

Sales by Market
Nine Months Ended

(in thousands)       May 29, 1998   May 30, 1997   Gross Change   % Change

Automotive             $61,776        $53,555        $8,221        15.4%
Datacommunications      11,169          8,670         2,499        28.8%
Industrial               5,662          6,047         (385)       (6.4%)
Consumer                 2,582          3,200         (618)      (19.3%)
Aerospace/Defense        7,444          6,801           643         9.5%
                       _______        _______       _______      _______
                       $88,633        $78,273       $10,360        13.2%

Gross Profit:

Gross profit declined $2.8 million from $8.3 million for the nine months ended 
May 30, 1997 to $5.5 million for the nine months ended May 29, 1998.  As 
reflected in the chart below, the Micro Products gross loss increased by 22%, 
or $1.6 million to $9.0 million.  The increase relates primarily to increased 
depreciation expense.  The combined Materials and Interconnect business units' 
gross profit declined $1.2 million to $15.5 million, or 16.5% of sales.  The 
primary reasons for the lower gross profit are related to increased 
depreciation and higher labor costs, and less favorable product mix due to a 
higher concentration of Novaflex HD sales, which at current operating levels, 
have less margin.

Nine Months Ended       May 29, 1998                 May 30, 1997
(in millions)
              Interc and   Micro   Total     Interc and   Micro   Total
              Materials    Prod    Company   Materials    Prod    Company
Sales          $87,812    $  821   $88,633    $77,947    $   326  $78,273
Cost of sales   73,314     9,817    83,131     62,266      7,698   69,964
Gross profit    14,498   (8,996)     5,502     15,681    (7,372)    8,309
% of sales       16.5%       N/A      6.2%      20.1%        N/A    10.6%

Sales and marketing expense increased $583,000, or 8.5%, from $6.8 million for 
the nine months ended May 30, 1997, to $7.4 million for the nine months ended 
May 29, 1998.  Increased sales staffing, travel costs, and commission expenses 
were offset by declines in consulting costs.  The majority of the increase was 
related to additional support for Micro Products.

General and administrative expenses increased $1.1 million, or 21%, from $5.0 
million for the nine months ended May 30, 1997, to $6.0 million for the nine 
months ended May 29, 1998.  Increased staffing, salaries, consulting, 
depreciation, and outside maintenance costs were incurred to support improved 
information systems.  General and administrative expenses totaled 6.8% of 
sales for the nine months ended May 29, 1998, and 7.1% of sales for the nine 
months ended May 30, 1997.

Research and development expenses decreased $254,000, or 8%, from $3.3 million 
for the nine months ended May 30, 1997, to $3.0 million for the nine months 
ended May 29, 1998.  The decrease is a combination of increased depreciation 
offset by a decline in outside consulting and testing services.  Research and 
development expenses totaled 3.4% of sales for the nine months ended May 29, 
1998, and 4.2% in sales for the nine months ended May 30, 1997.

Interest costs and activities for the noted periods are detailed below:

(in thousands)                   Nine Months Ended

                            May 29, 1998    May 30, 1997     Change

Gross interest expense        $ 3,063         $  1,961      $ 1,102
Capitalized interest          (1,375)          (1,253)        (122)
                              _______          _______      _______
Net interest                  $ 1,688         $    708      $   980

During the current nine months, significantly higher borrowings accounted for 
the increase in gross interest costs.  Total borrowings have increased nearly 
$16 million since the beginning of the fiscal year.

Including the restructuring costs, impairment charges, and actual performance 
for the period, the pretax operating loss for the nine months ended May 29, 
1998 was $24.5 million.  This compares with a pretax loss for the nine months 
ended May 30, 1997 of $7.5 million.

For the nine months ended May 29, 1998, the tax provision of $3.0 million 
reflects a change in estimate concerning the ultimate recovery of the 
Company's deferred tax assets.  Because of recent restructuring and write-
offs, as well as continuing losses at the Company's Micro Products venture, 
the Company has established an allowance for all of its tax assets.  This 
provision effectively writes down all tax assets to zero.  During the nine 
months of 1997, tax benefits were provided at 34%.

This results in a net loss before cumulative changes of accounting method of 
$27.5 million for the current nine month period.  This compares with a loss of 
$5.0 million for the nine months ended May 30, 1997.

Net loss before convertible stock dividends was $32.6 million, and after 
$455,000 of preferred stock dividends, net loss available to common 
shareholders was $33.1 million.  For the same period one year ago, net loss 
available to common shareholders was $5.0 million.

On a per share basis, after a $0.56 per share charge for adopting SOP 98-5, 
net loss available to common shareholders was $3.57 on both a basic and 
diluted basis.  Weighted average shares outstanding during the nine month 
period were approximately 9,267,000.
<PAGE>

SHELDAHL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED OPERATING RESULTS AND FINANCIAL CONDITION

Three Months Ended May 29, 1998, and May 30, 1997

Sales:

The Company's net sales increased $4.3 million, or 16%, from $27.6 million for 
the three months ended May 30, 1997, to $31.9 million for the three months 
ended May 29, 1998.  The automotive market sales for the three months ended 
May 29, 1998, increased 13% to $21.7 million.  This increase in sales reflects 
the demand recovery from the labor unrest that affected the three months ended 
May 29, 1997, and increased demand for HD Novaflex products in the automotive 
market.

Sales to the datacom market increased 40% to $4.5 million for the three months 
ended May 29, 1998.  HD Novaflex products used in computers and portable 
communication devices account for this increase.  Sales to all other markets 
are reflected below. 

Market                    Three Months Ended
(in thousands)        May 29, 1998   May 30, 1997   Gross Change    % Change

Automotive               $21,683       $19,272         $2,411         12.5%
Datacommunications         4,529         3,233          1,296         40.1%
Industrial                 1,814         2,019          (205)       (10.2%)
Consumer                   1,051         1,054            (3)         (.3%)
Aerospace/Defense          2,814         2,015            799         39.7%
                         _______       _______        _______       _______
                         $31,891       $27,593         $4,298         15.6%

Gross Profit:

In total, gross profit increased $70,000 from $2.7 million for the three 
months ended May 30, 1997 to $2.8 million for the three months ended May 29, 
1998.  The gross loss at Micro Products decreased $288,000 reflecting somewhat 
higher revenue and lower depreciation expenses.

The Interconnect and Materials gross margin declined $217,000 on $4.2 million 
more sales.  Lower margins on HD Novaflex products and higher overhead costs 
account for this decline.  HD Novaflex products accounted for 21% of 
Interconnect and Materials revenue.  These products are experiencing high 
demand and total gross margin dollars is expected to increase with greater 
throughput.  Increased depreciation and labor costs account for the increases 
in overhead expenses.

Three Months Ended           May 29, 1998                  May 30, 1997
(in millions)
                  Interc &     Micro     Total    Intercon &   Micro   Total
                  Materials    Prod     Company   Materials    Prod   Company

Sales              $31,537    $  353    $31,890    $27,382    $  211  $27,593
Cost of sales       25,522     3,572     29,094     21,150     3,715   24,865
Gross profit         6,015   (3,219)      2,796      6,232   (3,504)    2,728
% of sales           19.1%       N/A       8.8%      22.7%       N/A     9.9%

Sales and marketing expenses increased $274,000, or 12%, from $2.2 million for 
the three months ended May 30, 1997, to $2.5 million for the three months 
ended May 29, 1998.  Increased sales staffing, travel costs, and commission 
expense accounted for the increase.

General and administrative expenses increased $418,000, or 25%, from $1.7 
million for the three months ended May 30, 1997, to $2.1 million for the three 
months ended May 28, 1998.  The increases were due to a variety of expenses 
including salaries, maintenance, and depreciation expense primarily incurred 
to support improved information systems.  General and administrative expenses 
totaled 7% of sales for the three months ended May 29, 1998, and 6% of sales 
for the three months ended May 30, 1997.

Research and development expenses increased $63,000, or 6%, from $983,000 for 
the three months ended May 30, 1997, to $1,046,000 for the three months ended 
May 29, 1998.  The increase is a combination of increased salaries and 
depreciation offset by a decline in outside consulting and travel cost. 

Interest costs and activities for the noted period are detailed below:

(in thousands)                Three Months Ended

                         May 29, 1998     May 30, 1997      Change

Gross interest expense      $ 1,141          $   811        $   330
Capitalized interest          (525)            (399)          (176)
                            _______          _______        _______
Net interest                $   566          $   412        $   154

During the current quarter, significantly higher borrowings accounted for the 
increase in gross interest costs. These borrowings were incurred to support 
capital expenditures and losses from Micro Products operation.

After the restructuring costs, impairment charges, and other expenses, the 
pretax operating loss for the three months ended May 29, 1998 was $11.2 
million.  This compares with a pretax loss for the three months ended May 30, 
1997 of $2.6 million.

For the three months ended May 29, 1998, the tax provision of $7.8 million 
reflects a change in estimate concerning the ultimate recovery of the 
Company's deferred tax assets.  Because of recent restructuring and write-
offs, as well as continuing losses at the Company's Micro Products venture, 
the Company has established an allowance for all of its tax assets.  This 
provision effectively writes down all tax assets to zero.  During the three 
months of 1997, tax benefits were provided at 34%.

Net loss before convertible stock dividends, including all charges and 
allowances, was $19.0 million.  After $96,000 of preferred stock dividends, 
net loss applicable to common shareholders was $19.1 million.  For the same 
period one year ago, net loss applicable to common shareholders was $1.7 
million.

On a per share basis, net loss applicable to common shareholder was $1.98 on 
both a basic and diluted basis.  Weighted average shares outstanding during 
the three months ended May 29, 1998 were approximately 9,634,000.

Financial Condition:

On June 19, 1998, the Company executed a new credit agreement with a group of 
lenders lead by Norwest Bank, N.A. as agent.  This agreement provides the 
Company with up to $60 million in financing and completely replaces the 
prior credit facilities.  The new agreement provides three separate 
facilities: a revolver facility of up to $25 million based on the 
Company's working capital; a term facility for $16 million based on the 
appraised value of the Company's unencumbered equipment; and a bridge 
facility for $19 million.  Interest on the revolver and the term facility 
will be charged at the base rate (prime rate) plus 1%.  Interest on the 
bridge facility will be charged at base plus 3%.  The bridge facility also 
carries a deferred interest charge of 13.5 percent due at payment of the 
facility.  Once the bridge facility is paid off, interest on the remaining 
two facilities will then be charged at the base rate (prime rate).  The 
agreement also calls for the issuance of warrants at a price to be 
determined based on future events.  The minimum number of warrants will 
be 100,000.  The maximum number of warrants will be 250,000.  The bridge 
facility calls for principal amortization of $5.0 million on August 28, 
1998, $4.5 million on November 30, 1998, and $3.2 million on May 31, 1999 
and November 30, 1999, with the remaining balance due on May 31, 2001.  The 
term loan calls for interest only payments until January 1, 1999, when 
monthly principal payments of $205,000 begin.  All unamortized term 
facility amounts are due May 31, 2001.  The revolving facility requires 
monthly interest payments and is due May 31, 2001.  The agreement requires 
certain covenants that restrict the payments of cash dividends, capital 
expenditures, maintain certain levels of net worth and net income, and 
maintain certain levels of cash flows from operations as defined.

The May 29, 1998 balance sheet reflects the new credit agreement in the 
classification of bank debt as current and non-current liabilities.

The Company anticipates the addition of new equity capital to enhance 
liquidity, to fund the payment of the bridge bank facility, and to provide 
additional funds for general corporate purposes.  Additional funds are 
expected before the end of the fiscal year in the amount of $25 - $35 
million, although there can be no assurance the Company can complete such 
financing.

In late April, the Company received an overpayment from a customer in the 
amount of $9.3 million.  The customer has been contacted and the overpayment
will be applied to the customer's accounts and the excess will be 
refunded.  The refund of the overpayment is expected to take place in 
July 1998.  Such payment is estimated to be $6.2 million, offsetting trade 
receivables due from the customer.

The Company's current ratio at May 29, 1998 was 0.73, reflecting $15.3 
million of current long-term debt and a $9.3 million liability for a 
customer overpayment in current liabilities.

On August 29, 1997, the Company sold an aggregate of 15,000 shares of Series B 
Convertible Preferred Stock, to the selling shareholders pursuant to the 
Convertible Preferred Stock Purchase Agreement among the Company and the 
selling shareholders.  The Series B Preferred Stock is entitled to 
dividends, payable in cash or shares of common stock at the election of 
the Company.  The conversion price for the Series B Preferred Stock is 
dependent on the market prices for the Company's common stock.  In 
connection with the issuance of the Series B Preferred Stock, the Company 
granted to each selling shareholder warrants to purchase shares of the 
Company's common stock.  The aggregate amount of shares of common stock 
the Company is obligated to issue under the warrants is 67,812 shares at 
an exercise price of $27.65 per share.  The Company also granted to the 
selling shareholders certain registration rights with respect to the shares 
of the Company's common stock issuable to the selling shareholders upon
conversion of the Series B preferred Stock, accrued dividends and the 
warrants.

Pursuant to the terms of the Agreement, the Company was given the right, 
subject to the satisfaction of certain conditions, to require the selling 
shareholders to purchase shares of Series C Convertible Preferred Stock, 
par value $1.00 per share, with terms identical to the Series B Preferred 
Stock for an aggregate additional purchase price of up at $15 million.  
However, one of the conditions to the Company's exercise of such right has 
failed to occur, since the Company's common stock has traded below $12.00 
for a period of five consecutive trading days.  As a result, the selling 
shareholders can refuse to purchase such shares of Series C Preferred 
Stock upon any attempted exercise by the Company of such right. The 
Company does not intend to seek funding of the Series C Preferred shares.

There were no conversions of Series B Preferred Stock during the third 
quarter.  $7.65 million or 7,650 shares of preferred remained outstanding 
at May 29, 1998.  If all of the Series B were converted at May 29, 1998, 
approximately 850,000 shares of common stock would be issued.

Prospective Information:

Significant events are currently taking place and will continue to take place 
during the next several months. The expected production ramp up at the Micro 
Products business is one of these events. The Company's ability to generate 
significant revenues with acceptable production costs will be critical.  
Failure to do so will result in continued losses from this business unit.

Also, margins in the core businesses have been unacceptably weak.  The 
Company is taking specific steps to increase gross margin dollars by 
reducing production costs and increasing throughput and related revenues.  
Demand for the Company's Novaflex HD products is expected to increase over 
the near term.  The Company has the capacity in place to meet this demand 
and expects greater revenue to result in greater gross margin dollars from 
this family of products.

The current strike at General Motors will have an adverse effect on the 
Company's revenue during the fourth quarter of fiscal 1998.  The Company's 
average weekly shipment to GM and first-tier suppliers supporting GM is 
$350,000 per week.

The Company is aware of computer programming problems associated with the 
year 2000 and has elected to install new year 2000 compliant systems which 
is expected to be in full use by early fiscal 1999. The Company is in the 
process of evaluating its remaining peripheral computer systems and has 
not made a determination of the year 2000 effect on these systems or the 
cost to correct any problems that should arise.  Additionally, the Company 
cannot reasonably estimate or anticipate problems or expenses due to a 
customer or supplier's system experiencing year 2000 problems.
<PAGE>

PART II - OTHER INFORMATION


SHELDAHL, INC. AND SUBSIDIARY
FORM 10-Q


Item 6.	Exhibits and Reports on Form 8-K

A) Exhibits

11 Statement regarding computation of earnings per share

27	Financial data schedule

27.1 Restated financial data schedule for the quarter ended 
     November 28, 1997

27.2 Restated financial data schedule for the quarter ended 
     February 27, 1998

B)	Reports on Form 8-K

No reports on Form 8-K were filed by the Registrant during the 
quarter ended May 29, 1998.

<PAGE>


	SIGNATURES


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.

SHELDAHL, INC.
(Registrant)


Dated:  July 13, 1998	           By	/s/ James E. Donaghy
                                 Chief Executive Officer

Dated:  July 13, 1998           	By	/s/ Edward L. Lundstrom
                                 President

Dated:  July 13, 1998	           By	/s/ John V. McManus
                                 Vice President, Finance
<PAGE>