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: MARCH 31, 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 March 31,
1998 39,807,169

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 March 31, 1998 and December 31, 1997              1
                
              Consolidated Statement of Operations:
                       for the Three (3) Months ended March 31, 1998 & 1997    3

              Consolidated Statement of Cash Flows for the Three (3) Months
                       ended March 31, 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                                            8

         Item 2 - Changes in Securities                                        8

         Item 3 -- Defaults on Senior Securities                               8

         Item 4 - Submissions of Matters to a Vote of Security Holders         8

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

         Item 27 - Financial Data Schedule                                     8


<PAGE>


<TABLE>
<CAPTION>


                        METAL RECOVERY TECHNOLOGIES, INC

                           Consolidated Balance Sheets
                                      as of
                      March 31, 1998 and December 31, 1997


                                                                             March 31          Dec 31
                                                                               1998             1997
                                                                                    (Unaudited)
<S>                                                                       <C>                <C>  
ASSETS:
Current Assets:
      Cash & equivalents                                                   $       20,399     $     43,247
      Accounts Receivable                                                               -                -
      Inventories
                                                                                   18,371           18,372
                                                                         ----------------------------------

            Total current assets                                                   38,770           61,619
                                                                         ----------------------------------

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

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

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

Other assets:
      Concessions, rights, patents, goodwill                                   12,906,606       12,906,606
      Organization costs                                                        4,494,603        4,198,149
      Other assets                                                                 14,400           14,400
                                                                         ----------------------------------

            Total other assets                                                 17,415,609       17,119,155
                                                                         ----------------------------------

             TOTAL ASSETS                                                    $ 20,461,479     $ 20,187,874
                                                                         ==================================


</TABLE>







                                       -1-

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<TABLE>
<CAPTION>


                        METAL RECOVERY TECHNOLOGIES, INC

                     Consolidated Balance Sheets - continued

                                                                             March 31          Dec 31
                                                                               1998             1997
                                                                                    (Unaudited)
<S>                                                                        <C>               <C>   
LIABILITIES:
Current liabilities:
      Current maturities of long-term indebtedness                          $   1,835,000     $  1,635,000
      [Legal Settlement]                                                                        
      Notes payable                                                                39,184           39,184
      Accounts payable                                                          2,440,280        2,328,330
      Convertible loans                                                         3,481,200        3,285,794
                                                                         ----------------------------------

           Total current liabilities                                            7,795,664        7,288,308
                                                                         ----------------------------------

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

           Total long-term liabilities                                          2,161,975        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; 39,807,169 and
           38,390,501 issued and outstanding at March 31 1998                      39,807           38,390
           and December 31, 1997, respectively
      Additional paid-in capital                                               65,105,113       65,031,531
      Retained deficit                                                       (54,685,453)     (54,376,703)
                                                                         ----------------------------------

           TOTAL STOCKHOLDERS' EQUITY                                          10,503,840       10,737,591
                                                                         ----------------------------------

           TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                          $ 20,461,479     $ 20,187,874
                                                                         ==================================


      See accompanying notes which are an integral part of these statements


</TABLE>





                                       -2-

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<TABLE>
<CAPTION>


                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statement of Operations
                                     for the
                  Three (3) Months ended March 31, 1998 & 1997

                                                                             March 31         March 31
                                                                               1998             1997
                                                                                    (Unaudited)

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

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

Operating expenses:
      Selling, general & administrative                                           108,750          313,260
                                                                         ----------------------------------

            Total operating expenses                                              108,750          313,260
                                                                         ----------------------------------

            Loss from operations                                                (108,750)        (313,260)
                                                                         ----------------------------------

Non operating income (expense):
      Interest expense                                                          (200,000)         (12,939)
                                                                         ----------------------------------

            Total non operating expense                                         (200,000)         (12,939)
                                                                         ----------------------------------

            Net loss                                                       $    (308,750)  $     (326,199)
                                                                         ==================================

Weighted average number of
      Common shares outstanding                                                38,862,333       23,249,603

      (Loss) per share                                                    $      (0.0079)  $      (0.0140)


                  See accompanying notes which are an integral part of these statements




</TABLE>



                                                      -3-

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<TABLE>
<CAPTION>


                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statements of Cash Flows
                                     for the
                  Three (3) Months ended March 31, 1998 & 1997

                                                                              March 31          March 31
                                                                                1998              1997
                                                                                     (Unaudited)

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

      Net loss                                                                 $  (308,750)   $    (326,199)
      Net changes in current assets and liabilities
            excluding long-term indebtedness                                        107,537          (2,921)
                                                                          -----------------------------------

            Net cash provided by (used for)
               operating activities                                                 198,787        (329,120)
                                                                          -----------------------------------

Cash flows provided by (used for)
      investment activities:

      Increase in Plant & equipment and
            additions to Organization costs                                       (296,454)        (804,556)
      Decrease in Other assets                                                            -           30,500
                                                                          -----------------------------------

            Net cash used by investing activities                                 (296,454)        (774,056)
                                                                          -----------------------------------

Cash flows provided by (used for)
      financing activities:

      Increase (decrease) in long term debt
                                                                           
      Issued common stock                                                                 -          (1,104)
                                                                                      1,417            4,928
      Received from additional paid-in capital                                       73,582        1,095,109
                                                                          -----------------------------------

            Net cash provided by financing activities                                74,999        1,098,933
                                                                          -----------------------------------

            Increase (decrease) in cash                                           (22,848)           (4,243)
            Cash & equivalents at beginning of year                                 43,247             6,778
                                                                                     
                                                                          -----------------------------------

            Cash & equivalents at March 31, 19987 & 1997                     $       20,399      $     2,535
                                                                          ===================================


      See accompanying notes which are an integral part of these statements
                                       -4-
</TABLE>

<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
quarter of 1998.

(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.  During 1996, 1997 and 1998 MRTI issued  convertible  debt in
exchange for funds used to administer and construct its operations.  As of March
31, 1998, this  indebtedness was $3,016,344,  plus accrued interest of $464,856,
for a total amount  payable of  $3,481,200.  These loans  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

There was no increase in property  and  equipment  and other assets at March 31,
1998, compared to December 31, 1997. (See "Liquidity" below).

                                    Liquidity

At December 31, 1997, and March 31, 1998 the Company had unused convertible loan
facilities  of $950,000  and  $755,000  respectively.  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 $75,000, were converted into
1,416,668 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  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  will  last  approximately  four  to  five  months  once  they  are
commenced.

The  disappointments   concerning   production  created  significant   financial
problems.  Existing lenders were reluctant to commit  substantial  further funds
and it was difficult to find new sources of finance.  However in March 1998, the
company  entered  into a  conditional  agreement  with Zinc  Investments  Inc to
provide in stages the sum of  $3,000,000 to finance the  engineering  upgrade at
East  Chicago.  This  agreement  became  unconditional  in  April  1998  and the
engineering upgrade is expected to commence at the beginning of June 1998.








                                       -6-

<PAGE>


                            Statements of Operations
                      Three Months Ended March 31,1998 vs.
                        Three Months Ended March 31,1997

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 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  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 1998  quarters "non  operating"  expense of $200,000
relates to an increase in the settlement of the Class Action Lawsuit.  (See Part
11 other  information)  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 March 31,1998, the costs
associated  with  capitalized  equipment  and  organization  costs  amounted  to
$296,454 compared to a figure of $804,556 for the same period during 1997.

The Company  reported a net loss for the three  months of $0.0079  per  weighted
average number of shares outstanding  compared to a loss of $0.0140 per weighted
average number of shares outstanding for the same period the previous year.


































                                       -7-

<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  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-K for the period  ended  December  1997,  and are hereby
incorporated by reference. However, the Company has not made the initial payment
negotiated  in the  agreement  and is  currently  renegotiating  the  terms  and
conditions  originally  agreed upon. It is likely that the final settlement will
now be for $3.45m payable as follows:

An initial payment of $25,000

A further payment of $175,000 one month after making the initial payment.

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

With the exception of the first $200,000 payment,  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 current  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.

Item 3 - Defaults upon Senior Securities
As of March 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 two reports on Form 8-K,
which are hereby incorporated by reference.

Item 27 - Financial Data Schedule

                                       -8-

<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: _______May 13, 1998_________



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


                       Date: _______May 13, 1998_________

































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