FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

         FOR THE QUARTERLY PERIOD ENDED:  SEPTEMBER 30, 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 September
30, 1998: 90,289,629.

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 September 30, 1998 and December 31, 1997           1

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

                  Consolidated Statement of Operations:
                      for the Nine (9) Months ended September 30, 1998 & 1997  4

                  Consolidated Statement of Cash Flows for the Nine (9) Months
                      ended September 30, 1998 & 1997                          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                            10

         Item 27 - Financial Data Schedule                                    10


<PAGE>

<TABLE>
<CAPTION>



                        METAL RECOVERY TECHNOLOGIES, INC

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


                                                                              Sep 30           Dec 31
                                                                               1998             1997
                                                                                    (Unaudited)

ASSETS:
Current Assets:
<S>                                                                                <C>             <C>    
      Cash & equivalents                                                           $3,082          $43,247
      Accounts Receivable                                                               -                -
      Inventories                                                                  18,372           18,372

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

            Total current assets                                                   21,454           61,619
                                                                         ----------------------------------

 Property & equipment:
      Leasehold improvements                                                      673,980          537,601
      Equipment and Construction in-progress                                    2,890,059        2,435,654
      Furniture & Fixtures                                                         33,845           33,845
                                                                         ----------------------------------

Total property and equipment                                                    3,597,884        3,007,100
Less accumulated depreciation, depletion
            And amortization                                                            -                -
                                                                         ----------------------------------

                    Net property & equipment                                    3,597,884        3,007,100
                                                                         ----------------------------------

Other assets:
      Concessions, rights, patents, goodwill                                   12,906,606       12,906,606
      Organization costs                                                        4,801,433        4,198,149
      Other assets                                                                 14,400           14,400
                                                                         ----------------------------------

            Total other assets                                                 17,722,439       17,119,155
                                                                         ----------------------------------

             TOTAL ASSETS                                                     $21,341,777      $20,187,874
                                                                         ==================================




</TABLE>






                                       -1-

<PAGE>

<TABLE>
<CAPTION>


                        METAL RECOVERY TECHNOLOGIES, INC

                     Consolidated Balance Sheets - continued

                                                                              Sep 30           Dec 31
                                                                               1998             1997
                                                                                    (Unaudited)
LIABILITIES:
Current liabilities:
<S>                                                                              <C>            <C>       
      Current maturities of long-term indebtedness                               $175,000       $1,635,000
      [Legal Settlement]
      Notes payable                                                                41,241           39,184
      Accounts payable                                                          2,953,686        2,328,330
      Convertible loans                                                         2,592,459        3,285,794
                                                                         ----------------------------------

            Total current liabilities                                           5,762,386        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
                                                                         ----------------------------------

            TOTAL LIABILITIES                                                   8,474,361        9,450,283
                                                                         ----------------------------------

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; 90,289,629 and
            38,390,501 issued and outstanding at September 30,                     90,289           38,390
            1998 and December 31, 1997, respectively
      Additional paid-in capital                                               67,702,071       65,031,531
      Retained deficit                                                       (54,969,317)     (54,376,703)
                                                                         ----------------------------------

            TOTAL STOCKHOLDERS' EQUITY                                         12,867,416       10,737,591
                                                                         ----------------------------------

            TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                          $21,341,777      $20,187,874
                                                                         ==================================

</TABLE>

      See accompanying notes which are an integral part of these statements







                                       -2-

<PAGE>

<TABLE>
<CAPTION>



                        METAL RECOVERY TECHNOLOGIES, INC

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

                                                                              Sep 30           Sep 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                                           136,390          207,904
                                                                         ----------------------------------

            Total operating expenses                                              136,390          207,904
                                                                         ----------------------------------

            Loss from operations                                                (136,390)        (207,904)
                                                                         ----------------------------------

Non operating income (expense):
      Interest expense                                                                  -                -
                                                                         ----------------------------------

            Total non operating expense                                                 -                -
                                                                         ----------------------------------

            Net loss                                                            (136,390)        (207,904)
                                                                         ==================================

Weighted average number of
      Common shares outstanding                                                83,746,381       29,764,050

      (Loss) per share                                                          $(0.0016)        $(0.0069)

</TABLE>

      See accompanying notes which are an integral part of these statements













                                       -3-

<PAGE>


<TABLE>
<CAPTION>


                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statement of Operations
                                     for the
                 Nine (9) Months ended September 30, 1998 & 1997

                                                                              Sep 30           Sep 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                                           592,614          826,351
                                                                         ----------------------------------

            Total operating expenses                                              592,614          826,351
                                                                         ----------------------------------

            Loss from operations                                                (592,614)        (826,351)
                                                                         ----------------------------------

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

            Total non operating expense                                         (592,614)      (3,276,381)
                                                                         ----------------------------------

            Net loss                                                            (592,614)      (4,102,732)
                                                                         ==================================

Weighted average number of
      Common shares outstanding                                                76,228,888       26,527,177

      (Loss) per share                                                          $(0.0078)        $(0.1547)

</TABLE>

      See accompanying notes which are an integral part of these statements













                                       -4-

<PAGE>

<TABLE>
<CAPTION>



                        METAL RECOVERY TECHNOLOGIES, INC

                      Consolidated Statements of Cash Flows
                                     for the
                 Nine (9) Months ended September 30, 1998 & 1997

                                                                               Sep 30            Sep 30
                                                                                1998              1997
                                                                                     (Unaudited)

Cash flows provided by (used for)
      Operations:

<S>                                                                              <C>            <C>         
      Net loss                                                                   $(592,614)     $(4,102,732)
      Net changes in current assets and liabilities
            Excluding long-term indebtedness                                    (1,525,922)        1,596,084
                                                                          -----------------------------------

            Net cash provided by (used for)
               operating activities                                             (2,118,536)      (2,506,648)
                                                                          -----------------------------------

Cash flows provided by (used for)
      Investment activities:

      Increase in Leasehold Improvements,
      Equipment & Contruction in Progress &
            Additions to Organization costs                                     (1,194,068)      (2,327,070)
      Decrease in Other assets                                                            -           39,000
                                                                          -----------------------------------

            Net cash used by investing activities                               (1,194,068)      (2,288,070)
                                                                          -----------------------------------

Cash flows provided by (used for)
      Financing activities:

      Increase in long term debt                                                    550,000        3,241,238
      Issued common stock                                                            51,899           11,465
      Redemption of "Series A" preferred shares                                           -        (469,650)
      Received from additional paid-in capital                                    2,670,540        2,016,438
                                                                          -----------------------------------

            Net cash provided by financing activities                             3,272,439        4,799,491
                                                                          -----------------------------------

            (decrease)/ increase in cash                                           (40,165)            4,773
            Cash & equivalents at beginning of year                                  43,247            6,778
                                                                          -----------------------------------

            Cash & equivalents at September 30, 1998 & 1997                          $3,082          $11,551
                                                                          ===================================

</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  and  other  chemicals  at the
company's plant in East Chicago, Indiana.

(d)  Organization Costs
The  company has elected to continue  its  practice of  capitalizing  all of its
expenses associated with the raising of capital,  obtaining financing,  locating
and acquiring  equipment,  obtaining  customers and  suppliers,  installing  and
testing equipment, and certain other administrative activities through the third
quarter of 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
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 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 September 30, 1998,
this indebtedness was $2,592,459 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.

The signing of the agreement with Zinc Investments Inc encouraged members of the
Plenbrick  syndicate  to make  further  loans of $125,000  during the  reporting
quarter.  However,  the weak share price is  currently  causing  concern and may
result in terms being renegotiated.




                         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 September
30, 1998,of $590,784 compared to December 31, 1997. (See "Liquidity" below).

                                    Liquidity

At December 31, 1997, and September 30, 1998 the Company had unused  convertible
loan  facilities  of $950,000 and $519,000  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 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 period, loans totaling $261,500 were converted into
8,716,785 shares of the Company's common stock.








                                       -7-


<PAGE>


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 have commenced although  completion of the improvements is entirely
dependent on the  willingness of Plenbrick Ltd and Zinc  Investments Inc to make
loans.



                            Statements of Operations
                    Three Months Ended September 30,1998 vs.
                      Three Months Ended September 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 general  overheads.  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 September  30,1998,  the costs associated with  capitalized  equipment and
organization costs amounted to $598,629 compared to a figure of $714,276 for the
same period during 1997.

The Company  reported a net loss for the three  months of $0.0016  per  weighted
average number of shares outstanding  compared to a loss of $0.0069 per weighted
average number of shares outstanding for the same period the previous year.



                           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.








                                       -8-


<PAGE>


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
developments 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  made  the  initial  payment  negotiated  in the
agreement and renegotiated the terms and conditions  originally agreed upon. The
final settlement is being renegotiated and is expected to be an amount of $3.45m
payable as follows:

An initial payment of $25,000

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

A further payment of $175,000.

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

During the previous  reporting  period the company paid the initial  $25,000 and
placed 12 million shares in escrow.  During the current reporting period, due to
the company's  declining  share price the company placed an additional 8 million
shares in escrow.  The 20 million  shares have been  recorded in the accounts at
$1,050,000  being the amount  due.This  amount,  however,  is subject to further
adjustment  determined  on the actual share price  achieved  when the shares are
eventually sold.

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.

A group of creditors owed approximately $400,000 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 and  negotiations  are
continuing..

Item 3 - Defaults upon Senior Securities
As of September 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.






                                       -9-


<PAGE>


Item 6 - Exhibits and Reports on Form 8-K
During the current  reporting  period the Company filed six 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: _____18th November, 1998_________



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


                     Date: _____18th November, 1998_________

























                                      -10-