EXHIBIT 13(B) - FORM 10-Q FOR THE PERIOD ENDING JUNE 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: JUNE 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 June 30,
1997: 28,865,938

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 June 30, 1997 and December 31, 1996                   1

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

         Consolidated Statement of Operations:
                   for the Six (6) Months ended June 30, 1997 & 1996           4

         Consolidated Statement of Cash Flows for the Six (6) Months
                   ended June 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>



<TABLE>
<CAPTION>

                        METAL RECOVERY TECHNOLOGIES, INC

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


                                                                                Jun 30            Dec 31
                                                                                 1997             1996
                                                                                      (Unaudited)

<S>                                                                                <C>             <C>    
ASSETS:
Current Assets:
      Cash & equivalents                                                     $         5,708         $ 6,778
      Accounts Receivable                                                              9,213               -
      Inventories                                                                     62,600          65,370
      Other current assets                                                             9,137          97,355
                                                                           ----------------------------------

            Total current assets                                                      86,658          169,503
                                                                           ----------------------------------

 Property & equipment:
      Leasehold improvements                                                         348,255         348,255
            Equipment and Construction-in-progress                                 2,275,911       2,178,823
      Vehicles                                                                         8,136          31,062
      Furniture & Fixtures                                                            33,845          33,845
                                                                           ----------------------------------

Total property and equipment                                                       2,666,147       2,591,985
Less accumulated depreciation, depletion
            and amortization
                                                                                           -               -
                                                                           ----------------------------------

                    Net property & equipment                                       2,666,147       2,591,985
                                                                           ----------------------------------

Other assets:
      Concessions, rights, patents, goodwill                                      12,905,749      12,905,749
      Organization costs                                                           3,650,999       2,112,367
      Other assets                                                                    26,122          53,400
                                                                           ----------------------------------

            Total other assets                                                    16,582,870      15,071,516
                                                                           ----------------------------------

             TOTAL ASSETS                                                       $ 19,335,675    $ 17,833,004
                                                                           ==================================


</TABLE>







                                       -1-

<PAGE>



                        METAL RECOVERY TECHNOLOGIES, INC

                     Consolidated Balance Sheets - continued
<TABLE>
<CAPTION>

                                                                               Jun 30              Dec 31
                                                                                1997               1996
                                                                                      (Unaudited)
<S>                                                                                <C>               <C>    
LIABILITIES:
Current liabilities:
      Current maturities of long-term indebtedness                           $     1,054,128   $         4,580
      Notes payable                                                                   36,972            49,894
      Accounts payable                                                             2,619,905         1,503,991
      Due to Former officer & director                                                     -            55,098
      Convertible loans                                                            3,108,345         3,288,010
                                                                         --------------------------------------

            Total current liabilities                                              6,819,350         4,901,573
                                                                         --------------------------------------

Long-term liabilities:
      DOE Grant                                                                      505,000           505,000
      Legal settlement (See Item 1(b) in Part II)                                  2,200,000                 -
      Capital lease                                                                    2,400             4,182
                                                                         --------------------------------------

            Total long-term liabilities                                            2,707,400           509,182
                                                                         --------------------------------------

            TOTAL LIABILITIES                                                      9,526,750         5,410,755
                                                                         --------------------------------------

STOCKHOLDERS' EQUITY:
      "Series A" Preferred stock, $10 par value; 100,000 shares
            authorized; zero and 46,965 shares outstanding at
            June 30, 1997 and December 31,1996, respectively                               -           469,650
      "Series B" Preferred stock, $10 par value
            2,500,000 shares authorized, 21,375
            shares outstanding                                                        44,373            44,373
      Common stock, par value of $.001;
            100,000,000 shares authorized; 28,865,938 and
            20,707,597 issued and outstanding at June 30, 1997
            and December 31, 1996, respectively                                       28,865            20,707
      Additional paid-in capital                                                  64,098,158        62,355,161
      Retained deficit                                                          (54,362,471)      (50,467,642)
                                                                         --------------------------------------

            TOTAL STOCKHOLDERS' EQUITY                                             9,808,925        12,422,249
                                                                         --------------------------------------

            TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                            $ 19,335,675      $ 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 June 30, 1997 & 1996



                                                                                       Jun 30           Jun 30
                                                                                        1997             1996
                                                                                             (Unaudited)

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

      Gross profit
                                                                                                 -                -
                                                                                   ---------------------------------

Operating expenses:
            Total operating expenses                                                       305,188           57,756
                                                                                   ---------------------------------

            Loss from operations                                                         (305,188)         (57,756)
                                                                                   ---------------------------------

Non operating income (expense):
      Legal settlement (see Item 1(b) in Part II)                                      (3,250,000)                -
      Interest expense                                                                    (13,442)         (13,750)
                                                                                   ---------------------------------

            Total non operating expense                                                (3,263,442)         (13,750)
                                                                                   ---------------------------------

             Net loss                                                                $ (3,568,630)    $    (71,506)
                                                                                   =================================

Weighted average number of
      Common shares outstanding                                                         26,567,879       14,709,653

      Loss per share                                                                 $    (0.1343)    $    (0.0048)

</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
                    Six (6) Months ended June 30, 1997 & 1996



                                                                                  Jun 30           Jun 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                                              618,448           146,434
                                                                             -----------------------------------

            Total operating expenses                                                  618,448           146,434
                                                                             -----------------------------------

            Loss from operations                                                    (618,448)         (146,434)
                                                                             -----------------------------------

Non operating income (expense):
       Legal settlement (see Item 1(b) in Part II)                                (3,250,000)                 -
       Interest expense                                                              (26,381)          (27,500)
                                                                                     
                                                                             -----------------------------------

            Total non operating expense                                           (3,276,381)          (27,500)
                                                                             -----------------------------------

             Net loss                                                           $ (3,894,829)    $    (173,934)
                                                                             ===================================

Weighted average number of
       Common shares outstanding                                                   24,908,741        14,237,153

       Loss per share                                                              $ (0.1564)   $      (0.0122)

</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
                    Six (6) Months ended June 30, 1997 & 1996

                                                                                       Jun 30            Jun 30
                                                                                        1997              1996
                                                                                             (Unaudited)

Cash flows provided by (used for)
      operations:

<S>                                                                                    <C>              <C>         
      Net loss                                                                         $ (3,894,829)    $  (173,934)
      Net changes in current assets
            and liabilities excluding long-term indebtedness                               1,142,591       (121,064)
                                                                                 ------------------------------------

            Net cash used by operating activities                                        (2,752,238)       (294,998)
                                                                                 ------------------------------------

Cash flows provided by (used for)
      investment activities:

      Net changes to plant & equipment                                                      (74,162)       (927,029)
      Additions, deletions to Organization costs                                         (1,538,632)               -
      Decrease in Other assets                                                                27,278
                                                                                                                   -
                                                                                 ------------------------------------

            Net cash used by investing activities                                        (1,585,516)       (927,029)
                                                                                 ------------------------------------

Cash flows provided by (used for)
      financing activities:

      Increase in long-term debt                                                           3,247,766               -
      Increase (decrease) in convertible debt                                              (179,665)         431,384
      Decrease in notes payable                                                             (12,922)        (68,500)
      Redemption of "Series A" Preferred Stock                                             (469,650)               -
      Issued Common stock                                                                      8,158           2,835
      Received from Additional Paid-in Capital                                             1,742,997         930,733
                                                                                 ------------------------------------

            Net cash provided by financing activities                                      4,336,684       1,296,452
                                                                                 ------------------------------------

            Increase (decrease) in cash                                                      (1,070)          74,425
            Cash & equivalents at beginning of year                                            6,778         200,855
                                                                                 ------------------------------------

            Cash & equivalents at June 30, 1997 & 1996                                   $     5,708      $  275,280
                                                                                 ====================================
</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 zinc bearing solutions,  other chemicals and scrap steel
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
second 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 June
30, 1997, this  indebtedness was $2,814,409,  plus accrued interest of $293,936,
for a  total  amount  payable  of  $3,108,345.  Loans  with  principal  balances
amounting to $2,699,409  are  exercisable  at rates ranging from 25 to 43.33 per
share, at various times, 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 June 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
                                    ---------

As of December  31, 1996,  the Company had, in addition to its existing  cash on
hand, unused convertible loan facilities aggregating approximately $1.7 million.
During the first  quarter of this year,  $520,000  of this unused  facility  was
drawn down and used to administer  and construct  the Company's  operations.  At
June 30,  1997,  the  Company had unused  convertible  loan  facilities  of $1.2
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 that it will have sufficient  working  capital,  existing,  or
proposed new facilities  available to allow the Company to reach full production
and to pay off trade creditors.

During  the  current  reporting  period,  two  additional  convertible  loans of
$100,000  each were  entered  into with two  offshore  entities.  Both loans are
convertible  at any time prior to December 31, 1997,  into common  shares of the
Company under Regulation S at varying conversion prices.

An  additional  $100,000  was  raised  during  the  reporting  quarter  under  a
subscription  agreement resulting in the issuance of 500,000 shares at $0.20 per
share.

During  the prior  reporting  period,  $200,000  was  raised  by a  subscription
agreement under Regulation S resulting in the initial issuance of 571,428 shares
at $0.35 per share to an offshore entity. The amount of shares issued under this
agreement  was based  however on the lower of $0.35 per share or a 30% reduction
of the closing bid price of the  Company's  common stock on March 3, 1997.  This
resulted in the  issuance of an  additional  180,451  shares  during the current
reporting period for a per share price of $0.266.


                            Statements of Operations
                       Six Months Ended June 30, 1997 vs.
                         Six Months Ended June 30, 1996
                         ------------------------------

There was no change in  "Revenues"  compared to the same period a year ago.  The
company had  sales/revenues  of $108,945  during the first  quarter and $207,801
during the second quarter 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.



                                       -7-


<PAGE>


The increase in "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 had adopted the policy of capitalizing
all costs associated with the development of its East Chicago facility until the
plant reached full  production  levels.  These costs  included the  development,
marketing,  installing  and testing  equipment  and  administrative  activities.
Because the officers are involved in matters  other than those costs  applicable
to be capitalized,  an increase in the current period's  operating  expenses has
occurred.

Owing to delays and problems with production, the Company has continued, for the
first and second quarter of 1997, its policy of  capitalizing  costs  associated
with the  commissioning of the plant in East Chicago,  Indiana.  For the quarter
ended March 31, 1997 and the quarter ended June 30, 1997,  the costs  associated
with  capitalized  equipment  and  organization  costs  amounted to $804,556 and
$808,238,  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 six months of  $0.1564  per  weighted
average number of shares outstanding  compared to a loss of $0.0122 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 current
operating  period's Income Statement.  Details concerning this lawsuit are found
in Part II, Item 1(b).

During the  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  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.


                           PART II - Other Information

Item 1 - Legal Proceedings

(a)  Mr. Jack Alexander and "Morton Blue"
In September,  1994, the Company reached a settlement with a former chairman and
chief executive  officer of the Company,  Jack Alexander,  and certain  entities
related to him, in respect of amounts  claimed to be owed to them by the Company
on accounts of notes payable, loans and the redemption price of preferred stock.
Under the terms of the  settlement,  Mr.  Alexander  was to be paid $1.3 million
over a period  ending May,  1995.  The Company  had  re-negotiated  the terms of
payment to Mr. Alexander  several times. At the time of the final settlement the
Company owed Mr. Alexander a total of approximately $551,129. Mr. Alexander also
owned all of the shares of a class of preferred  stock which gave Mr.  Alexander
the right to elect the majority of the board of directors of the Company.

During 1996, Mr.  Alexander  assigned his interest in the settlement,  including
the shares of preferred stock to an entity  identified as "Morton Blue" (with an
address in the British Virgin Islands). The Company, having no ability to settle
the amount owed to Morton Blue in cash, negotiated an agreement with Morton Blue
to settle the  liability  and  redeem the  "Series  A"  Preferred  shares.  This
occurred by the issuance of 2,550,000 shares of the Company's common stock under
Regulation  S  of  the  Securities  and  Exchange  Commission.   Based  on  this
settlement,  Morton Blue holds 8.8% of the total number of shares outstanding at
June 30, 1997.





                                       -8-

<PAGE>



(b)  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.

Without admitting liability,  the Company has reluctantly agreed to settle these
actions.  This decision was primarily  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 by the Company's  subsidiary,  Metal Recovery  Industries
(US), Inc.

The agreed settlement,  which was finalized during the current reporting period,
is $3.25 million. The payment terms are over a four year period, are 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.

The Company is involved in other  matters of  litigation 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 current 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
materially  modified  the  rights of the  holders  of the  remaining  classes of
registered securities.

Item 3 - Defaults upon Senior Securities
The Company  has not been  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.

Item 27 - Financial Data Schedule












                                       -9-


<PAGE>


                                   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: _______August 11, 1997_________




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


                                       Date: _______August 11, 1997_________




























                                      -10-