EXHIBIT 13(C) - FORM 10-Q FOR THE PERIOD ENDING SEPTEMBER 30, 1997
------------------------------------------------------------------

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


     (X)  QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15 (D) OF THE  SECURITIES
          EXCHANGE ACT OF 1934

         FOR THE QUARTERLY PERIOD ENDED:  SEPTEMBER 30, 1997

                                       OR

     (    ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
          EXCHANGE ACT OF 1935

         FOR THE TRANSITION PERIOD FROM              N/A       to      N/A
                                                     ----------------------

                          Commission File No.: 0-15543

                        METAL RECOVERY TECHNOLOGIES, INC.

             (Exact name of Registrant as specified in its charter)

               415 East 151st Street, East Chicago, Indiana 46312

                            Telephone: (219) 397-6261

A Delaware Corporation                  Employer Identification No.:  71-0628061

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 12, 13 or 15 (d) of the  Securities  Exchange Act of 1939
during the  proceeding 12 months (or for such shorter period that the Registrant
was  required to file such  report(s),  and (2) has been  subject to such filing
requirements for the past 90 days:


                                 Yes (X) No ( )

Number of shares  outstanding of the  Registrant's  Common Stock as of September
30, 1997: 32,171,665

The Securities and Exchange  commission has not approved or disapproved the Form
10-Q, or passed on the accuracy or adequacy or of this report.

<PAGE>


TABLE OF CONTENTS

                                                                            PAGE
PART I - Financial Data

         Item 1 -- Financial Statements:

          Consolidated Balance Sheets 
               as of September 30, 1997 and December 31,1996                   1

          Consolidated Statement of Operations: 
               for the Three (3) Months ended September 30, 1997 & 1996        3

          Consolidated Statement of Operations:  
               for the Nine (9) Months ended September 30, 1997 & 1996         4

          Consolidated Statement of Cash Flows for the Nine(9) Months 
               ended September 30, 1997 & 1996                                 5

          Notes to consolidated financial statements                           6


         Item 2 - Management's discussion and analysis of
                  financial condition and results of operations.               7


PART II - Other Information

         Item 1 - Legal Proceedings                                            8

         Item 2 - Changes in Securities                                        9

         Item 3 -- Defaults on Senior Securities                               9

         Item 4 - Submissions of Matters to a Vote of Security Holders         9

         Item 6 - Exhibits and Reports on Form 8-K                             9

         Item 27 - Financial Data Schedule                                    11


<PAGE>




                        METAL RECOVERY TECHNOLOGIES, INC

                           Consolidated Balance Sheets
                                      as of
                    September 30, 1997 and December 31, 1996


                                                    Sep 30        Dec 31
                                                     1997          1996
                                                        (Unaudited)

ASSETS:
Current Assets:
      Cash & equivalents ...................   $    11,551   $     6,778
      Accounts Receivable ..................          --            --
      Inventories ..........................        18,372        65,370
      Other current assets .................          --          97,355
                                               -----------   -----------

            Total current assets ...........        29,923       169,503
                                               -----------   -----------

 Property & equipment:
      Leasehold improvements ...............       348,255       348,255
      Equipment and Construction in-progress     2,245,395     2,178,823
      Vehicles .............................         8,136        31,062
      Furniture & Fixtures .................        33,845        33,845
                                               -----------   -----------

Total property and equipment ...............     2,635,631     2,591,985
Less accumulated depreciation, depletion
            and amortization ...............          --            --
                                               -----------   -----------

            Net property & equipment .......     2,635,631     2,591,985
                                               -----------   -----------

Other assets:
      Concessions, rights, patents, goodwill    12,905,749    12,905,749
      Organization costs ...................     4,395,791     2,112,367
      Other assets .........................        14,400        53,400
                                               -----------   -----------

            Total other assets .............    17,315,940    15,071,516
                                               -----------   -----------

             TOTAL ASSETS ..................   $19,981,494   $17,833,004
                                               -----------   -----------







                                       -1-

<PAGE>


<TABLE>
<CAPTION>
                        METAL RECOVERY TECHNOLOGIES, INC

                     Consolidated Balance Sheets - continued

                                                             Sep 30          Dec 31
                                                              1997            1996
                                                                   (Unaudited)
LIABILITIES:
<S>                                                    <C>             <C>   
Current liabilities:
      Current maturities of long-term indebtedness .   $  1,050,000    $      4,580
      [Legal Settlement]
      Notes payable ................................         37,943          49,894
      Accounts payable .............................      3,097,249       1,503,991
      Due to former officer & director .............           --            55,098
      Convertible loans ............................      3,213,532       3,288,010
                                                       ------------    ------------

            Total current liabilities ..............      7,398,724       4,901,573
                                                       ------------    ------------

Long-term liabilities:
      DOE Grant ....................................        505,000         505,000
      Legal settlement (See Part II, Item 1(b)) ....      2,200,000            --
      Capital lease ................................           --             4,182
                                                       ------------    ------------

            Total long-term liabilities ............      2,705,000         509,182
                                                       ------------    ------------

            TOTAL LIABILITIES ......................     10,103,724       5,410,755
                                                       ------------    ------------

STOCKHOLDERS' EQUITY:
      "Series A" Preferred stock, $10 par value
            100,000 shares authorized 46,965
            shares outstanding at December 31, 1996            --           469,650
      "Series B" Preferred stock, $10 par value
            2,500,000 shares authorized, 21,375
            shares outstanding .....................         44,373          44,373
      Commonstock, par value of $.001;
            100,000shares authorized; 32,171,665
            and 20,707,597 issued and
            outstanding at September 30, ...........         32,172          20,707
            1997 and December 31, 1996, respectively
      Additional paid-in capital ...................     64,371,599      62,355,161
      Retained deficit .............................    (54,570,374)    (50,467,642)
                                                       ------------    ------------

      TOTAL STOCKHOLDERS' EQUITY ...................      9,877,770      12,422,249
                                                       ------------    ------------

      TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .....   $ 19,981,494    $ 17,833,004
                                                       ============    ============
                                                                                                                         ===========
</TABLE>


      See accompanying notes which are an integral part of these statements





                                       -2-

<PAGE>



<TABLE>
<CAPTION>

                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statement of Operations
                                     for the
                Three (3) Months ended September 30, 1997 & 1996

                                                              Sep 30          Sep 30
                                                               1997            1996
                                                                    (Unaudited)

<S>                                                     <C>             <C>   
Sales (See Part I, Item 2, "Statement of Operations")   $       --      $       --
Cost of sales                                                   --              --
                                                        ------------    ------------

      Gross profit ..................................           --              --
                                                        ------------    ------------

Operating expenses:
      Selling, general & administrative .............        207,904          70,421
                                                        ------------    ------------

            Total operating expenses ................        207,904          70,421
                                                        ------------    ------------

            Loss from operations ....................       (207,904)        (70,421)
                                                        ------------    ------------

Non operating income (expense):
      Interest expense ..............................           --           (20,350)
                                                        ------------    ------------

            Total non operating expense .............           --           (20,350)
                                                        ------------    ------------

            Net loss ................................   $   (207,904)   $    (90,771)
                                                        ============    ============

Weighted average number of
      Common shares outstanding .....................     29,764,050      14,758,319

      (Loss) per share ..............................   $    (0.0069)   $    (0.0061)

</TABLE>

      See accompanying notes which are an integral part of these statements







                                       -3-

<PAGE>



<TABLE>
<CAPTION>

                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statement of Operations
                                     for the
                 Nine (9) Months ended September 30, 1997 & 1996

                                                            Sep 30         Sep 30
                                                             1997           1996
                                                                 (Unaudited)

<S>                                                    <C>            <C> 
Sales (See Part I, Item 2,"Statement of Operations")   $      --      $      --
Cost of sales ......................................          --             --
                                                       -----------    -----------

      Gross profit .................................          --             --
                                                       -----------    -----------

Operating expenses:
      Selling, general & administrative ............       826,351        222,218
                                                       -----------    -----------

            Total operating expenses ...............       826,351        222,218
                                                       -----------    -----------

            Loss from operations ...................      (826,351)      (222,218)
                                                       -----------    -----------

Non operating income (expense):
      Legal settlement (see Part II, Item 1) .......    (3,250,000)          --   
      Interest expense .............................       (26,381)       (47,850)
                                                       -----------    -----------

            Total non operating expense ............    (3,276,381)       (47,850)
                                                       -----------    -----------

            Net loss ...............................   $(4,102,732)   $  (270,068)
                                                       ===========    ===========

Weighted average number of
      Common shares outstanding                       26,527,177      14,410,875

      (Loss) per share                             $    (0.1547)   $    (0.0187)

</TABLE>

      See accompanying notes which are an integral part of these statements










                                       -4-

<PAGE>



<TABLE>
<CAPTION>

                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statements of Cash Flows
                                     for the
                 Nine (9) Months ended September 30, 1997 & 1996

                                                                Sep 30            Sep 30
                                                                 1997              1996
                                                                       (Unaudited)

<S>                                                           <C>            <C>
Cash flows provided by (used for)
      operations:

      Net loss ............................................   $(4,102,732)   $  (270,068)
      Net changes in current assets and liabilities
            excluding long-term indebtedness ..............     1,596,084        995,946
                                                              -----------    -----------

            Net cash provided by (used for)
               operating activities .......................    (2,506,648)       725,878
                                                              -----------    -----------

Cash flows provided by (used for)
      investment activities:

      Increase in Plant & equipment and
            additions to Organization costs ...............    (2,327,070)    (1,971,839)
      Decrease in Other assets ............................        39,000           --
                                                              -----------    -----------

            Net cash used by investing activities .........    (2,288,070)    (1,971,839)
                                                              -----------    -----------

Cash flows provided by (used for)
      financing activities:

      Increase in long term debt ..........................     3,241,238           --
      Issued common stock .................................        11,465          3,899
      Redemption of "Series A" preferred shares ...........      (469,650)          --
      Received from additional paid-in capital ............     2,016,438      1,245,170
                                                              -----------    -----------

            Net cash provided by financing activities .....     4,799,491      1,249,069
                                                              -----------    -----------

            Increase (decrease) in cash ...................         4,773          3,108
            Cash & equivalents at beginning of year .......         6,778        200,855
                                                              -----------    -----------

            Cash & equivalents at September 30, 1997 & 1996   $    11,551    $   203,963
                                                              ===========    ===========

</TABLE>

      See accompanying notes which are an integral part of these statements



                                       -5-

<PAGE>


                        METAL RECOVERY TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  BASIS OF PRESENTATION
Metal Recovery Technologies, Inc., ("MRTI") presents all financial statements in
United States  dollars and under  generally  accepted  accounting  principles as
practiced in the United States.

Metal  Recovery  Technologies,  Inc.  (formerly  Malvy  Technology,  Inc.  - the
Company),  was from 1993 to the  latter  part of 1995  primarily  engaged in the
development and testing of the Malvy anti-theft  device and the marketing of the
Malvy device concept to the public and automotive manufacturers.  This division,
however, went into receivership in October, 1995. Prior thereto, the Company was
engaged  primarily in the business of mining and developing  precious  metals in
Alaska,  the  production  of oil and gas in  Oklahoma  and  New  Mexico  and the
transmission of gas through a pipeline  operating in Oklahoma.  These operations
were disposed of during 1995.

On April 27, 1995, the Company  completed the  acquisition of all of the capital
of  Metal  Recovery  Industries  (International),  Inc.  and  its  wholly  owned
subsidiary,  Metal Recovery  Industries  (US),  Inc.  (hereafter  referred to as
"MRI(US)"),  a US  corporation  engaged in the recovery of zinc from  galvanized
steel.  To reflect the  importance  of the  acquisition  of this  business,  the
company's  name was  changed  from  Malvy  Technology,  Inc.  to Metal  Recovery
Technologies,  Inc. Dr. William Morgan, the inventor of the process,  joined the
Board of Directors on May 10, 1995.

(b)  INTERIM FINANCIAL STATEMENTS
The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information  and the  instructions  to Form  10-Q.  Accordingly,  the
consolidated  financial  statements  do not  include  all  the  information  and
disclosures  required by generally accepted  accounting  principles for complete
financial statements.  In management's  opinion, all adjustments  (consisting of
normal recurring  accruals)  considered  necessary for a fair  presentation have
been  included.  Operating  results  for  interim  periods  are not  necessarily
indicative  of  results to be  expected  for the full  year.  While the  Company
believes that the disclosures presented are adequate to make the information not
misleading, it is suggested that these consolidated financial statements be read
in conjunction with the latest audited  financial  statements and notes included
in the Company's Form 10-K.

(c)  INVENTORIES
Inventories  consist of scrap steel,  zinc bearing solutions and other chemicals
at the company's plant in East Chicago, Indiana.

(d)  ORGANIZATION COSTS
The  company has elected to continue  its  practice of  capitalizing  all of its
expenses associated with the raising of capital,  obtaining financing,  locating
and acquiring  equipment,  obtaining  customers and  suppliers,  installing  and
testing equipment, and certain other administrative activities through the third
quarter of 1997.

(e) DEPRECIATION AND AMORTIZATION 
Metal Recovery Industries (US), Inc. is in the
developmental  stage and therefore no depreciation nor amortization was taken in
the accounting periods shown in this report.



                                       -6-


<PAGE>


(f)  CONVERTIBLE LOANS
Continued operations have, and will (see "Liquidity" below),  require loans from
various  entities.  During 1995, 1996 and 1997 MRTI issued  convertible  debt in
exchange  for funds used to  administer  and  construct  its  operations.  As of
September 30, 1997, this  indebtedness was $2,851,360,  plus accrued interest of
$362,172, for a total amount payable of $3,213,532.  These loans are exercisable
at various rates and at various times, and contain anti-dilution provisions, and
are secured, pro rata, by liens on the shares of MRI(US), as well as its assets.



                         PART I - Financial Information
                                     ITEM 2
                     Management's Discussion and Analysis of
          Consolidated Financial Condition and Statement of Operations

                               FINANCIAL CONDITION

The increase in property and  equipment  and other assets at September 30, 1997,
compared  to  December  31,  1996  is due to  additional  cash  expended  in the
development of the Company's facility in East Chicago.

                                    LIQUIDITY

At June 30, 1997,  the Company had unused  convertible  loan  facilities of $1.1
million,  however,  there  have been  ongoing  negotiations  with  lenders  over
conversion  terms owing to the weakness in the  Company's  share price which has
meant  delays in  receiving  funds.  The Company  believes it can resolve  these
difficulties and is working diligently to do so. Without additional funding, the
Company will not have sufficient  working capital available to allow the Company
to reach full production and to pay off trade creditors.

During the current reporting period, loans totaling $275,000,  plus commissions,
were converted into 3,305,727 shares of the Company's common stock.

During the current reporting period,  the Company entered into an agreement with
Olympic Continental Resources, LLC (OCR). OCR is a joint venture between Olympic
Steel, Inc. (NASDAQ:ZEUS),  Atlas, Inc., and Uwe Schmidt (OCR's president). This
five year exclusive  purchase/buying  agreement will provide up to $3,000,000 in
credit  towards the future  purchase of scrap.  In addition  OCR will  provide a
comprehensive  range of support and  services.  The Company is also  negotiating
with OCR regarding the Company's  current  financing  needs for the East Chicago
and  other  facilities.  The  details  of the OCR  agreement  are  shown  in the
Company's  Form 8-K filing dated  September  17, 1997 which is  incorporated  by
reference herein.

Subsequent to this reporting  period,  but prior to the filing of this document,
4,454,168 shares of common stock were issued as a conversion of $495,200 of debt
to equity.


                            STATEMENTS OF OPERATIONS
                    NINE MONTHS ENDED SEPTEMBER 30, 1997 VS.
                      NINE MONTHS ENDED SEPTEMBER 30, 1996

There was no change in  "Revenues"  compared to the same period a year ago.  The
company had  sales/revenues of $352,585 during the first three quarters of 1997,
but because of the  election to  capitalize  all  organization  costs during the
development  stage of the Company,  these revenues were offset against the costs
capitalized.

The increase in year to date  "operating  expenses" is mainly due to  litigation
expenses,  the  non-capitalized  expenditures  of the  officers,  and the  costs
associated with public relation  activities.  The Company has adopted the policy
of  capitalizing  all costs  associated with the development of its East Chicago
facility until the plant

                                       -7-


<PAGE>


reached full production levels. These costs include the development,  marketing,
installing and testing of equipment and administrative  activities.  Because the
officers  are  involved  in  matters  other than those  costs  applicable  to be
capitalized, an increase in the operating expenses has occurred. Owing to delays
and problems with  production,  the Company has continued,  for all of 1997, its
policy of capitalizing  costs associated with the  commissioning of the plant in
East Chicago,  Indiana.  For the quarters ended March 31, June 30, and September
30, 1997 the costs associated with capitalized  equipment and organization costs
amounted to $804,556,  $808,238,  and $714,276,  respectively.  Management  will
continually  review  this  policy but has set a target for the first  quarter of
1998 to discontinue  this policy when the plant is processing  steel scrap on an
operational basis.

The  Company  reported a net loss for the nine  months of $0.1547  per  weighted
average number of shares outstanding  compared to a loss of $0.0187 per weighted
average  number of shares  outstanding  for the same period the  previous  year.
Besides the increased  operating  expenses from the previous  year,  the Company
settled a lawsuit in the amount of  $3,250,000  which is  reflected  in the nine
month Income  Statement.  Details  concerning this lawsuit are found in Part II,
Item 1. The loss per share  excluding  the  lawsuit  settlement  would have been
$0.0321 per share.

During the prior reporting period,  the Company announced that the results of an
internal  production  review showed that an additional  investment of $2,000,000
would be  necessary  to  achieve a monthly  production  target of 9,000  tons of
scrap, and that the East Chicago, Indiana facility can become profitable as soon
as production reaches 45% of capacity. The ability to produce high quality black
scrap  and  marketable  zinc  products  has been  demonstrated  by the  existing
facility  but the need to optimize  the current  facility  while  continuing  to
produce creates operational  difficulties.  Accordingly,  the Company has scaled
back its  operations  with the  intention of making some major  operational  and
processing  additions and improvements to its plant operating  equipment.  These
improvements will last approximately  four to five additional months,  once they
are commenced.  During this retrofit and capacity  expansion the plant will have
little to no operating activity while major equipment installation or renovation
occurs.  The lack of liquidity  has hindered the progress of these  improvements
and caused continued delays in progressing as planned.


                           PART II - Other Information

ITEM 1 - LEGAL PROCEEDINGS
(a) LEVINE/CLASS ACTION
On November 6, 1995, an action entitled Levine vs. Metal Recovery  Technologies,
Inc., was filed in the United States District Court of Delaware by a shareholder
against the Company and certain present and former directors,  alleging breaches
of the federal securities laws, by reason of alleged material misrepresentations
by the  Company and the  Company's  alleged  failure to make  timely  disclosure
relating to its Malvy  operations.  In November,  1996, the Court  certified the
proposed  class.  On October 31, 1996, a second action was commenced by the same
plaintiff  against  the same  defendants  and  others,  including  a  number  of
brokerage  firms and their  representatives,  alleging a  conspiracy  to inflate
prices at which the  shares of the  Company's  common  stock  traded  during the
period specified therein. The Company has vigorously denied the allegations.

Without admitting liability,  the Company has reluctantly agreed to settle these
actions.  This  decision  was  taken  to avoid  mounting  legal  costs,  to free
management from the burdensome time involved in dealing with this matter, and to
achieve certainty as to the outcome of the proceedings. The uncertainty of these
proceedings  has  been  negatively  affecting  or  delaying  potential  business
transactions,  including  new  financing  arrangements  by the  Company  and its
subsidiary, Metal Recovery Industries (US), Inc.

The agreed  settlement,  which was finalized during the prior reporting  period,
was for $3.25  million.  The  payment  terms  were  over a four  year  period as
detailed in the Form 10-Q for the period  ended March 31,  1997,  and are hereby
incorporated  by reference.  The Company has  reflected the  provisions of these
agreements in the financial statements presented herein.


                                       -8-
<PAGE>

The Company has not made the initial payment  negotiated in the agreement and is
currently renegotiating the terms and conditions originally agreed upon.

(b) OTHER LITIGATION

The Company is involved in other  matters of litigation  related to  outstanding
balances  with  creditors  and in the  normal  course  of  business.  Management
believes  that none of these  matters,  upon  their  ultimate  resolution,  will
involve amounts material to the Company's statements.

ITEM 2 - CHANGES IN SECURITIES
During the prior reporting  period,  the Company redeemed all of its outstanding
"A Series"  preferred stock.  The holders of the "A Series"  preferred stock had
the right to elect the Board of Directors. The redemption of this class of stock
improved  the rights of the  holders  of the  remaining  classes  of  registered
securities.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
As of September 30, 1997,  the Company was not involved in any material  default
in the payment of principal or interest with respect to any senior indebtedness.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters  were  submitted  to a vote of  security  holders  during the quarter
covered by this report.

ITEM 6 - EXHIBITS  AND REPORTS ON FORM 8-K During the current  reporting  period
the Company  filed two  reports on Form 8-K,  which are hereby  incorporated  by
reference.  (Note:  a third 8-K  submission  was made in error on July 3, 1997 -
this transaction was re-filed October 14, 1997)

ITEM 27 - FINANCIAL DATA SCHEDULE

                                   SIGNATURES
                                   ----------

Pursuant to the requirements of Section 13 or 15 (d) 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.

                        Metal Recovery Technologies, Inc.


                              \s\ Michael S. Lucas
                      By: ________________________________
                       Michael S. Lucas, Chairman and CEO


                     Date: _______October XX, 1997_________



                                 \s\ Roy Pearce
                      By: _________________________________
                       Roy Pearce, Chief Financial Officer


                     Date: _______October XX, 1997_________


                                       -9-