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, 1998

                                       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,
1998 73,572,844

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

<PAGE>


TABLE OF CONTENTS

                                                                            PAGE
PART I - Financial Data

         Item 1 -- Financial Statements:

             Consolidated Balance Sheets
                     as of June 30, 1998 and December 31, 1997                 1

             Consolidated Statement of Operations:
                      for the Three (3) Months ended June 30, 1998 & 1997      3

             Consolidated Statement of Cash Flows for the Six (6) Months
                      ended June 30, 1998 & 1997                               4

             Notes to consolidated financial statements                        5


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


PART II - Other Information

         Item 1 - Legal Proceedings                                            9

         Item 3 -- Defaults on Senior Securities                              10

         Item 4 - Submissions of Matters to a Vote of Security Holders        10

         Item 6 - Exhibits and Reports on Form 8-K                            10

         Item 27 - Financial Data Schedule                                    10


<PAGE>


<TABLE>



                        METAL RECOVERY TECHNOLOGIES, INC

                           Consolidated Balance Sheets
                                      as of
                       June 30, 1998 and December 31, 1997

<CAPTION>
                                                                             June 30           Dec 31
                                                                               1998             1997
                                                                                    (Unaudited)

ASSETS:
Current Assets:
<S>                                                                        <C>              <C>           
      Cash & equivalents                                                   $       65,319   $       43,247
      Accounts Receivable                                                               -                -
      Inventories                                                                  18,372           18,372
                                                                         ----------------------------------

            Total current assets                                                   83,691           61,619
                                                                         ----------------------------------

 Property & equipment:
      Leasehold improvements                                                      537,601          537,601
      Equipment and Construction in-progress                                    2,488,687        2,435,654
      Furniture & Fixtures                                                         33,845           33,845
                                                                         ----------------------------------

Total property and equipment                                                    3,060,133        3,007,100
Less accumulated depreciation, depletion
            and amortization                                                            -                -
                                                                         ----------------------------------

                    Net property & equipment                                    3,060,133        3,007,100
                                                                         ----------------------------------

Other assets:
      Concessions, rights, patents, goodwill                                   12,906,606       12,906,606
      Organization costs                                                        4,740,555        4,198,149
      Other assets                                                                 14,400           14,400
                                                                         ----------------------------------

            Total other assets                                                 17,661,561       17,119,155
                                                                         ----------------------------------

             TOTAL ASSETS                                                    $ 20,805,385     $ 20,187,874
                                                                         ==================================


</TABLE>










                                       -1-

<PAGE>


<TABLE>


                        METAL RECOVERY TECHNOLOGIES, INC

                     Consolidated Balance Sheets - continued
<CAPTION>
                                                                             June 30           Dec 31
                                                                               1998             1997
                                                                                    (Unaudited)
LIABILITIES:
Current liabilities:
<S>                                                                        <C>                           <C>
      Current maturities of long-term indebtedness                         $      205,000                $
      [Legal Settlement]                                                                         1,635,000
      Notes payable                                                                41,241           39,184
      Accounts payable                                                          2,405,904        2,328,330
      Convertible loans                                                         2,698,959        3,285,794
                                                                         ----------------------------------

           Total current liabilities                                            5,351,104        7,288,308
                                                                         ----------------------------------

Long-term liabilities:
      DOE Grant                                                                   505,000          505,000
      Legal settlement (See Part II, Item 1(b))                                 2,200,000        1,650,000
      Capital lease                                                                 6,975            6,975
                                                                         ----------------------------------

           Total long-term liabilities                                          2,711,975        2,161,975
                                                                         ----------------------------------


STOCKHOLDERS' EQUITY:
      "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; 73,572,844 and
           38,390,501 issued and outstanding at June 30, 1998                      73,572           38,390
           and December 31, 1997, respectively
      Additional paid-in capital                                               67,457,288       65,031,531
      Retained deficit                                                       (54,832,927)     (54,376,703)
                                                                         ----------------------------------

           TOTAL STOCKHOLDERS' EQUITY                                          12,742,306       10,737,591
                                                                         ----------------------------------

           TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                          $ 20,805,385     $ 20,187,874
                                                                         ==================================


      See accompanying notes which are an integral part of these statements

</TABLE>








                                       -2-

<PAGE>



<TABLE>


                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statement of Operations
                                     for the
                   Three (3) Months ended June 30, 1998 & 1997
<CAPTION>
                                                                             June 30          June 30
                                                                               1998             1997
                                                                                    (Unaudited)

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

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

Operating expenses:
      Selling, general & administrative                                           147,474          305,188
                                                                        
            Total operating expenses                                              147,474          305,188
                                                                         
            Loss from operations                                                (147,474)        (305,188)
                                                                         
Non operating income (expense):

                                                                         ----------------------------------
      Legal Settlement                                                                  -      (3,250,000)
                                                                         ----------------------------------

      Interest expense                                                                  -         (13,442)

                                                                         ----------------------------------



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

                                                                         ----------------------------------

            Net loss                                                       $    (147,474)   $   (3,568,630
                                                                         ==================================

Weighted average number of
      Common shares outstanding                                                54,046,666       26,567,879

      (Loss) per share                                                    $      (0.0027)  $      (0.1343)


      See accompanying notes which are an integral part of these statements

</TABLE>


                                       -3-

<PAGE>

<TABLE>




                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statements of Cash Flows
                                     for the
                    Six (6) Months ended June 30, 1998 & 1997
<CAPTION>
                                                                               June 30          June 30
                                                                                1998              1997
                                                                                     (Unaudited)
Cash flows provided by (used for)
      operations:

<S>                                                                            <C>            <C>           
      Net loss                                                                 $  (456,224)   $  (3,894,829)
      Net changes in current assets and liabilities
            excluding long-term indebtedness                                         77,574        1,142,591
                                                                          -----------------------------------

            Net cash provided by (used for)
               operating activities                                               (378,650)       (2,752,238
                                                                          -----------------------------------

Cash flows provided by (used for)
      investment activities:

      Increase in Plant & equipment and
            additions to Organization costs                                        (53,033)         (74,162)
      Additions to Organizational costs                                           (542,406)      (1,538,632)
                                                                          -----------------------------------
      Decrease in Other assets                                                            -           27,278

                                                                          -----------------------------------

            Net cash used by investing activities                                 (595,439)      (1,585,516)
                                                                          -----------------------------------

Cash flows provided by (used for)
      financing activities:

      Increase (decrease) in long term debt                                       (880,000)        3,247,766
      Increase (decrease) in convertible debt                                     (586,835)        (179,665)
      Increase (decrease) in notes payable                                            2,057         (12,922)
      Redemption of "Series A" Preferred Stock                                            -        (469,650)
      Issued common stock                                                            35,182            8,158
      Received from additional paid-in capital                                    2,425,757        1,742,997
                                                                          -----------------------------------

            Net cash provided by financing activities                               996,161        4,336,684
                                                                          -----------------------------------

            Increase (decrease) in cash                                              22,072          (1,070)
            Cash & equivalents at beginning of year                                  43,247            6,778
                                                                          -----------------------------------

            Cash & equivalents at June 30, 1998 & 1997                       $       65,319      $     5,708
                                                                          ===================================


      See accompanying notes which are an integral part of these statements
</TABLE>

                                       -4-

<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 during the first
half of 1998. All labor costs  associated with  administration,  construction at
East Chicago and technical development are also included.

(e) Depreciation and Amortization 
--------------------------------- 
Metal Recovery Industries (US), Inc. is in the developmental stage and therefore
neither  depreciation nor amortization was taken in the accounting periods shown
in this report.








                                       -5-


<PAGE>


(f)  Convertible Loans
---  -----------------
Continued operations have, and will (see "Liquidity" below),  require loans from
various  entities who hold security under a collateral  agreement with Plenbrick
Ltd.  During 1996,  1997 and 1998 MRTI issued  convertible  debt in exchange for
funds used to administer and construct its operations. As of June 30, 1998, this
indebtedness was $2,698,959.  These loans contain anti-dilution provisions,  and
are secured, pro rata, by liens on the shares of MRI(US), as well as its assets.
On April 22nd 1998 MRTI entered  into a contract  with Zinc  Investments  Inc of
Geneva  Switzerland  to provide in stages  the sum of  $3,000,000  to finance an
engineering upgrade of the company's plant at East Chicago.

In order to facilitate  the  investment  the assets of MRI(US) were  transferred
with the  approval of Plenbrick  Ltd (MRTI's  chief  collateral  lender) to Zinc
Recovery  (East  Chicago) Inc, a newly formed  wholly owned  subsidiary of MRTI.
This enabled Zinc  Investments  Inc to also take security over the assets of the
corporation at its facility in East Chicago.

The signing of the agreement with Zinc Investments Inc encouraged members of the
Plenbrick  syndicate  to make  further  loans of $111,000  during the  reporting
quarter.  However,  the weak share price is  currently  causing  concern and may
result in terms being renegotiated. (See below)






































                                       -6-

<PAGE>


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

                               Financial Condition
                               -------------------

There was an increase in property  and  equipment  and other  assets at June 30,
1998,of $53,033 compared to December 31, 1997. (See "Liquidity" below).

                                    Liquidity
                                    ---------

At December 31, 1997, and June 30, 1998 the Company had unused  convertible loan
facilities of $950,000 and $644,000  respectively.  However the  company's  weak
share price has meant that  members of the  Plenbrick  Ltd  syndicate  have been
resistant to making further loans without changing their conversion terms. Their
attitude is also affected by the fact that under new securities  regulations the
loans cannot be converted into shares of MRTI for 1 year and thereafter can only
be sold in  accordance  with  rule  144  (17CFR230.144)  of the  Securities  and
Exchange Commission.  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.

On April 22nd 1998 MRTI entered  into a contract  with Zinc  Investments  Inc of
Geneva,  Switzerland  to provide in stages the sum of  $3,000,000  to finance an
engineering upgrade of the company's plant at East Chicago. The proposed loan of
$3,000,000 is secured on the company's assets at East Chicago as described in 1f
above.  During the current reporting quarter the company had drawn down loans of
$392,000 from Zinc Investments Inc.

During the current  reporting period,  loans totaling  $1,305,940 were converted
into 21,765,675 shares of the Company's common stock.

During  1997,  Leon Lohman was  appointed  Vice  President  of  engineering  and
production and he determined  along with the assistance of SSOE (a leading A & E
partnership) that the technology was proven but the East Chicago plant was under
engineered.

Following the results of an internal  production  review the company  determined
that an additional  capital investment of circa $2,000,000 would be necessary to
achieve an annual  production  target of 110,000  tons of scrap.  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  created   operational   difficulties.
Accordingly,  the company  curtailed its operations with the intention of making
major  operational  and  processing  additions  and  improvements  to its  plant
operating  equipment.  These  improvements  commenced  in  April  1998  and  are
proceeding  satisfactorily with a target for completion and return to production
of October / November 1998. Completion of the improvements is entirely dependent
on the willingness of Plenbrick Ltd and Zinc Investments Inc to continue to make
loans.














                                       -7-

<PAGE>


                            Statements of Operations
                       Three Months Ended June 30,1998 vs.
                         Three Months Ended June 30,1997
                         -------------------------------

There was no change in "Revenues" compared to the same period a year ago.

The  decrease in the 1998  quarters  "operating  expenses"  compared to the 1997
quarter is mainly due to the reduction in litigation  expenses,  and a reduction
in general  overheads.  The 1997 quarters "non operating"  expense of $3,263,442
relates to the  settlement  of the Class  Action  Lawsuit.  (See Part 11 - other
information)  of  $3,250,000  and interest  payable of $13,442.  The Company has
adopted the policy of capitalizing  all costs associated with the development of
its East Chicago facility until the plant reaches full production levels.  These
costs include the  development,  marketing,  installing and testing of equipment
and administrative activities. Owing to delays and problems with production, the
Company has continued,  for 1998, its policy of  capitalizing  costs  associated
with the  commissioning of the plant in East Chicago,  Indiana.  For the quarter
ended  June  30,1998,  the  costs  associated  with  capitalized  equipment  and
organization costs amounted to $298,985 compared to a figure of $804,556 for the
same period during 1997.

The Company  reported a net loss for the three  months of $0.0027  per  weighted
average number of shares outstanding  compared to a loss of $0.1343 per weighted
average number of shares outstanding for the same period the previous year.



































                                       -8-

<PAGE>


                           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  financing  arrangements  which are  essential  for the
development of the company's facility at East Chicago.

The agreed  settlement,  which was finalized during 1997, was for $3.25 million.
The payment  terms were over a four year period as detailed in the Form 10-K for
the period  ended  December  1997,  and are hereby  incorporated  by  reference.
However,  the  Company  did not  make  the  initial  payment  negotiated  in the
agreement and renegotiated the terms and conditions  originally  agreed upon. It
is likely  that the final  settlement  will be an  amount of $3.45m  payable  as
follows:

An initial payment of $25,000

12 million  shares of the  company's  common stock placed into escrow to satisfy
$1,050,000

A payment of $175,000 payable prior to the 8/31/98.

Four annual  installments  of $550,000  commencing  one year from the  effective
date.

During the current  reporting  period the company  paid the initial  $25,000 and
placed 12 million shares in escrow.  The 12 million shares have been recorded in
the accounts at a price of 9c per share ($1,333,333) being the closing bid price
of the  company's  shares at the June 30 1998.  This amount is subject to future
adjustment  determined  on the actual share price  achieved  when the shares are
eventually sold.

With the exception of the first  $175,000  payable prior to August 31, 1998, the
Company has the option in its sole  discretion  to satisfy all or any portion of
its payment obligations in the form of cash, shares of unrestricted stock of the
Company or any combination thereof.

The  Company  has  reflected  the  provision  of the above  negotiations  in the
financial statements presented herein.

(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.

A group of creditors owed approximately $300,000 has recently threatened to push
the company into bankruptcy  unless a schedule of payments is agreed and adhered
to. An initial  payment of $10,000 was made in August 1998 pending  agreement of
the settlement terms.


                                       -9-


<PAGE>


Item 3 - Defaults upon Senior Securities
----------------------------------------
As of June 30,1998,  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 three reports on Form 8-K,
which are hereby incorporated by reference.

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: _______August 14, 1998_________



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


                      Date: _______August 14, 1998_________



















                                      -10-