FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     of the Securities Exchange Act of 1934


For Quarter ended January 31, 1998
Commission file number 0-8006

                              ENERGY RESERVE, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          ARIZONA                                                86-0220617
------------------------------                               -------------------
(State or other jurisdiction of                                 (IRS Employer
incorporation or organization)                               Identification No.)

69 McAdenville Rd., Belmont, NC 28012

Registrant's telephone number, including area code (704) 825-8146

Former name, former address and former fiscal year, if changed since last report

                100 West Clarendon, Suite 450, Phoenix, AZ 85013

Indicated  by check  mark  whether  the  registrant  (1) has filed  all  reports
required to be filed by section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days.
                                                                 Yes X   No
                                                                    ----   ----
                       APPLICABLE ONLY TO ISSUERS INVOLVED
                        IN BANKRUPTCY PROCEEDINGS DURING
                            THE PRECEDING FIVE YEARS:

Indicated  by check mark  whether the  registrant  has filed all  documents  and
reports  required  to by filled by Sections  12, 13, or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
                                                                 Yes     No
                                                                    ----   ----
                       APPLICABLE ONLY TO CORPORATE USERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Class - Common Stock, without Par Value
19,905,188 Shares Outstanding at March 1, 1998
<PAGE>

                      ENERGY RESERVE, INC. AND SUBSIDIARIES
                                      INDEX

                                                           Page
                                                           ----
FACE SHEET                                                   1

INDEX                                                        2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS                                3

         Consolidated Balance Sheets at
         January 31, 1998 and April 30, 1997                 4

         Consolidated Statements of
         Operations and Accumulated Deficit
         Three Months Ended January 31, 1998 and 1997        5
         Nine Months Ended January 31, 1998 and 1997         6

         Statement of Cash Flows
         Nine Months Ended January 31, 1998 and 1997         7

         Notes to Consolidated Financial Statements          8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF
         OPERATIONS                                       9-11

PART II. OTHER INFORMATION AND SIGNATURE                    12




                                        2
<PAGE>

                                                                       FINANCIAL
                                                                     INFORMATION


                       ENERGY RESERVE INC AND SUBSIDIARIES


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Energy  Reserve,  Inc. and its  subsidiaries,  Twin Chart,  Inc., its subsidiary
Transit  Services,  Inc.,  Energy  Reserve  Holdings,  Inc.  and Energy  Reserve
Financial  Corporation  (collectively  the  Company),  engage in the business of
acquiring, developing and selling oil, gas and mineral properties, and producing
and selling  crude oil and natural gas for its own account in the United  States
and in the manufacture and distribution of temperature recording instruments.

The Consolidated  Financial Statements included herein have been prepared by the
Company,  without audit, pursuant to the rules and regulations of the Securities
and Exchange  Commission.  Certain information and footnote disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations,  although the Company believes that the disclosures are adequate to
make the  information  presented  not  misleading.  It is  suggested  that these
condensed  financial  statements  be  read in  conjunction  with  the  financial
statements  and data notes thereto  included in the  Company's  annual report on
Form 10-K for the year ended April 30, 1997.

In the opinion of the Company,  all  adjustments  have been  included  which are
necessary for the preparation of the balance sheets of Energy Reserve,  Inc. and
consolidated  subsidiaries  at January 31, 1998 and April 30, 1997 and to a fair
statement of the results of operations  for the three months and the nine months
ended January 31, 1998 and January 31, 1997.












                                       3
<PAGE>
                     ENERGY RESERVE. INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                                                     January 31,    April 30,
                                                       1998           1997
                                                       ----           ----
ASSETS
CURRENTS ASSETS:
  Cash                                             $   778,162    $ 1,118,019
  Accounts receivable                                1,131,316      1,131,873
  Inventory (Note A)                                   801,033        757,492
  Investment in securities                              64,500         64,500
  Notes receivable-current portion                     624,535         39,579 
  Prepaid expenses                                     198,705         10,508
                                                   -----------    -----------
TOTAL CURRENT ASSETS                                 3,606,251      3,121,971

Property and equipment (net)                         3,681,191      3,748,808
Deposits                                                 3,890          3,890
Goodwill                                                48,726         78,687
                                                   -----------    -----------
                                                   $ 7,340,058    $ 6,953,356
                                                   ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued expenses            $   382,365    $   489,740
  Income taxes payable                                  21,995            400
  Current portion of long-term debt                    520,414        585,859
                                                   -----------    -----------
TOTAL CURRENT LIABILITIES                              924,774      1,075,999
Long-term debt                                         250,725        358,686
Minority interest                                           --          2,674
                                                   -----------    -----------
                                                     1,175,499      1,437,359
                                                   -----------    -----------
COMMITMENTS AND CONTINGENCIES (Note C )
STOCKHOLDERS' EQUITY
  Common stock, no par value: authorized
    100,000,000 shares; issued and outstanding
    19,905,188 shares at January 31, 1998
    and at April 30, 1997                            20,041,562    20,041,562
  Contributed Capital                                   220,872       220,872
  Retained earnings (deficit)                       (13,016,725)  (13,665,287)
  Deduct-notes receivable for common 
    stock issued                                       (875,650)     (875,650)
  Unrealized loss on securities                        (205,500)     (205,500)
                                                   ------------  ------------
TOTAL STOCKHOLDERS' EQUITY                            6,164,559     5,515,997
                                                   ------------  ------------
                                                   $  7,340,058  $  6,953,356
                                                   ============  ============

                        See notes to Financial Statement

                                       4
<PAGE>

                      ENERGY RESERVE INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT


                                                  Three Months Ended January 31,
                                                  -----------------------------
                                                       1998           1997    
                                                   ------------   ------------ 
REVENUE                                                                        
  Sales                                             $1,857,294    $  1,778,555 
                                                  ------------    ------------ 
COSTS AND EXPENSES                                                             
  Cost of sales                                        923,552         878,920 
  General and administrative expenses                  532,321         478,351 
  Sales expense                                        309,757         260,538 
  Interest expense                                      16,615          18,955 
  Depredation and depletion                              7,915          10,291 
                                                  ------------    ------------ 
TOTAL EXPENSE                                        1,790,160       1,647,055 
                                                  ------------    ------------ 
                                                                               
    INCOME (LOSS) FROM OPERATIONS                       67,134         131,500 
                                                                               
OTHER INCOME (EXPENSE)                                                         
  Other income (expense)                                (3,397)          7,178 
                                                  ------------    ------------ 
Earnings (loss) before income taxes                     63,737         138,678 
                                                                               
Provisions for income taxes (note B)                       830              -- 
                                                  ------------    ------------ 
NET EARNINGS (LOSS)                                     62,907         138,678 

ACCUMULATED DEFICIT, beginning of period           (13,079,632)    (14,087,641)
                                                  ------------    ------------ 
ACCUMULATED DEFICIT, end of period                $(13,016,725)   $(13,948,963)
                                                  ============    ============ 
EARNINGS PER SHARE:                                                            
  Net earnings (loss)                             $      0.003    $       0.01 
                                                  ============    ============ 



                                                                  
                       See notes to financial Statements



                                       5
<PAGE>

                      ENERGY RESERVE INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT


                                                  Nine Months Ended January 31,
                                                  -----------------------------
                                                       1998             1997    
                                                  -------------    ------------ 
REVENUE                                                                         
  Sales                                             $6,101,606     $  5,537,763 
                                                  ------------     ------------ 
COSTS AND EXPENSES                                                              
  Cost of sales                                      2,916,058        2,784,774 
  General and administrative expenses                1,492,942        1,342,327 
  Sales expense                                        934,844          773,781 
  Interest expense                                      51,521           52,728 
  Depredation and depletion                             29,963           30,753 
                                                  ------------     ------------ 
TOTAL EXPENSE                                        5,425,328        4,984,363 
                                                  ------------     ------------ 
                                                                                
    INCOME (LOSS) FROM OPERATIONS                      676,278          553,400 
                                                                                
OTHER INCOME (EXPENSE)                                                          
  Other income (expense)                                11,515           33,610 
                                                  ------------     ------------ 
Earnings (loss) before income taxes                    687,793          587,010 
                                                                                
Provisions for income taxes (note B)                    39,231               45 
                                                  ------------     ------------ 
NET EARNINGS (LOSS)                                    648,562          588,965 
                                                                                
ACCUMULATED DEFICIT, beginning of period           (13,665,287)     (14,535,928)
                                                  ------------     ------------ 
ACCUMULATED DEFICIT, end of period                $(13,016,725)    $(13,948,963)
                                                  ============     ============ 
EARNINGS PER SHARE:                                                             
  Net earnings (loss)                             $       0.03     $       0.03 
                                                  ============     ============ 





                                                                   
                       See notes to financial Statements


                                       6
<PAGE>

                      ENERGY RESERVE INC. AND SUBSIDIARIES

                            STATEMENT OF CASH FLOWS

                                                   Nine Months Ended January 31,
                                                   -----------------------------
                                                        1998           1997    
                                                     ----------     ---------  
CASH FLOW FROM OPERATlNG ACTIVITIES                                            
  Net earnings (loss)                                $  648,562     $ 586,965  
  Adjustments to reconcile net earnings                                        
   (loss) to net cash used by operating activities:                            
  Depreciation and depletion                             29,963        30,753  
                                                                               
CHANGES IN CURRENT ASSETS AND CURRENT LIABILITIES                              
(Increase) decrease in current assets:                                         
  Accounts receivable                                      (557)     (314,344) 
  Inventory                                             (51,541)      177,488  
  Prepaid expenses                                     (188,197)      (18,467) 
  Notes receivable and investments                     (584,956)        2,728  
                                                                               
Increase (decrease) in current liabilities:                                    
  Accounts payable and accrued expenses                 (85,780)     (238,682) 
  Current portion of long-term debt                     (65,445)      (87,055) 
                                                     ----------     ---------  
NET CASH FROM OPERATING ACTIVITIES                     (297,951)      139,386  
                                                     ----------     ---------  
CASH FLOW FROM INVESTING ACTIVITIES                                            
  Decrease in goodwill                                   28,967                
  Property and equipment-net                             39,762        (5,045) 
  Repurchase minority interest                           (2,764)           --  
                                                     ----------     ---------  
NET CASH FROM INVESTING ACTIVITIES                       66,055        (5,045) 
                                                     ----------     ---------  
CASH FLOW FROM FINANCING ACTIVITIES                                            
  Long-term debt                                       (107,961)     (136,610) 
  Deferred taxes                                             --         3,241  
                                                     ----------     ---------  
NET CASH FROM FINANCING ACTIVITIES                     (107,961)      133,369  
                                                     ----------     ---------  
NET INCREASE (DECREASE) IN CASH                        (339,857)          972  
                                                                               
CASH, beginning of period                             1,118,019       614,356  
                                                     ----------     ---------  
CASH, end of period                                  $  778,162     $ 615,328  
                                                     ==========     =========  
                                                                  


                       See notes to Financial Statements


                                       7
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          Quarter Ended January 31, 1998


NOTE A - INVENTORY

Inventory at January 31, 1998 and April 30, 1997 consists of the following:

                            January 31, 1998       April 30, 1997
                            ----------------       --------------
Raw materials                   307,566                279,338  
Work-in-progress                177,934                142,413  
Finished goods                  301,077                333,285  
Crude all                         2,456                  2,456  
                               --------               --------
                               $809,033               $757,492
                               ========               ========

NOTE B - INCOME TAXES

The Company and its subsidiaries  file  consolidated  Federal income tax returns
and separate State income tax returns.


NOTE C - COMMITMENTS AND CONTINGENCIES

There have been no changes in the disclosures of commitments,  contingencies and
litigation as contained in the  Company's  annual report Form 10-K for the year
ended April 30,1997.











                                       8
<PAGE>

                                                                       Financial
                                                                     Information


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 1998 the Company had a working capital of $2,681,477.  This is an
improvement  of $635,505  for the nine months  period May 1, 1997 to January 31,
1998.  This was  accomplished  from the operating  activities of the temperature
recording  industry  segment,   which  business  is  conducted  through  Transit
Services,  Inc.  under the style of Cox recorders,  together with  non-operating
income from the crude oil business segment.

The Company did not incur any long-term  debt during this period and  investment
in property and equipment was minimal, At present,  cash flow from operations is
adequate to meet the cash requirements and commitments of the Company.  However,
the Company plans to enter into equity, debt or other financing  arrangements to
meet its future financial needs for expansion and:

     (a)  To resume  drilling and work over activities at its 
          Chico Martinez oil field;
     (b)  To provide for general working capital needs;
     (c)  To repay outstanding liabilities.


COMPARISON OF OPERATIONS FOR QUARTER ENDED JANUARY 31, 1998 AND 1997

Net earnings for the third fiscal quarter ended January 31, 1998 were $62,907 as
compared to $138,678 for the same period of 1997. The  consolidated  income from
operations  for the third  quarter  ended  January  31, was  $67,134 for 1998 as
compared to $131,500 for 1997.


                                       9
<PAGE>

COMPARISON OF OPERATIONS FOR QUARTER ENDED - CONTINUED

The following  schedule  reflects the operations of the two industry segments of
the Company for the three months ended January 31, 1998 and 1997.

                                      Three Months Ended January 31,
                                      ------------------------------
                                   Oil Production      Temperature Recorders
                            -------------------------------------------------
                              1997           1998          1997       1998
                            ----------    ---------    ----------   ---------
Sales                       $     --      $     --     $1,778,555  $1,857,294
Cost of sales                    793         3,128        828,127     920,424
General & Administrative      19,746        35,097        458,605     512,884
Sales expense                     --            --        260,538     309,757
Interest                       8,119         8,258         10,836       8,357
Depreciation/Amortization        994           994          9,297       6,921
                            --------      --------     ----------  ----------
Income from operations       (29,652)      (47,477)       161,152      98,951
Other Income (loss)               --            --          7,178      12,263
                            --------      --------     ----------  ----------
Earnings (loss) before
  income taxes               (29,652)      (47,477)       168,330     111,214
Income taxes                      --           830             --          --
                            --------      --------     ----------  ----------
Net earnings (loss)         $(29,652)     $(48,307)    $  168,330  $  111,214
                            ========      ========     ==========  ==========

                                 OIL PRODUCTION

Net loss for the current period increased $18,655 over the prior year period for
the oil  production  segment.  There were no crude oil sales  during the current
quarter. Oil production at the Company's Chico-Martinez, Kern County, California
oil field was restarted in December 1996. Management anticipates increased crude
oil production activities including oil sales during the ensuing months. To this
goal,  management has budgeted an initial  expenditure of $150,000 over the next
few months. The increase of $15,351 in general and administrative expense is due
primarily to shareholder meeting expense in November 1997.

                             TEMPERATURE RECORDERS

Temperature recorder operations showed improvement in sales but not net earnings
for the three months  ended  January 31, 1998 as compared to the same period for
1997.  Sales increased  $78,739.  Cost of sales increased  $42,297,  however the
percentage of such cost relative to sales remained  constant at 49%. General and
administrative expense increased $54,279,  primarily due to development expenses
on new  products for this  industry  segment.  The increase in sales  expense of
$49,219 as  compared  to last  year's  quarter is  due to trade  shows  cost and
travel together with greater sales costs related to increased sales volume.

                                       10
<PAGE>
COMPARISON OF OPERATIONS FOR NINE MONTHS ENDED JANUARY 31, 1998 AND 1997

There was a  consolidated  net earnings of $648,562 for the period ended January
31,  1998,  as compared to net  earnings of $586,965  for the same period  ended
January 31, 1997.  However,  to afford  better  analysis and  comparison  of the
similar  periods  of 1998  and  1997,  the  following  schedule  segregates  the
operations by industry  segments and provides a comparison of the oil production
operations and the temperature recorder operations.

                                      Nine Months Ended January 31,
                                      ------------------------------
                                  Oil Production        Temperature Recorders
                              -------------------------------------------------
                                1997         1998           1997         1998
                              --------     ---------     ----------   ---------
Sales                         $      0     $  17,734     $5,537,763  $6,083,872
Cost of sales                    2,078        11,021      2,782,566   2,905,037
General & Administrative        52,308        97,562      1,290,019   1,395,380
Sales expense                       --            --        773,781     934,844
Interest expense                24,285        24,774         28,443      26,747
Depreciation/Amortization        2,982         2,952         27,771      26,981
                              --------     ---------     ----------  ----------
INCOME (LOSS) FROM OPERATIONS  (81,783)     (118,605)       635,183     794,883
OTHER INCOME (EXPENSE):
Other income (expense)         164,076       (31,919)      (130,466)     43,434
                              --------     ---------     ----------  ----------
Earnings (loss) before
  income taxes                  82,293      (150,524)       504,717     838,317
Income taxes-minimum                45         6,985            -0-      37,246
                              --------     ---------     ----------  ----------
NET EARNINGS (LOSS)           $ 82,248     $(152,509)    $  504,717  $  801,071
                              ========     =========     ==========  ==========

                                 OIL PRODUCTION

Oil production  revenue  increased $17,734 in the current year nine month period
as  compared  to the prior  year.  Increased  cost of sales is  attributable  to
production  expenses which were not present in the prior year because of lack of
production.  The general and administrative  expenses increase of $45,254 is due
to shareholder  meeting expenses and administrative  expenses of a check cashing
operation now discontinued.

The $31,919 of other  expense is the loss on  disposition  of the check  cashing
business  operated for a short  period  within the oil segment  operations.  The
other  income of $164,078 for the prior year  resulted  from the  settlement  of
certain indebtness at less than the recorded debt.

                              TEMPERATURE RECORDERS

Current  year sales show an increase of $546,109  over the prior year which is a
10% increase. Cost of sales as a percentage to sales is 48% for 1998 as compared
to 50% for 1997.  The increase of $105,361 or 1.9% in general and  administative
expense resulted  primarily from  development  expense of new product lines. The
sales expense increase of $161,063 for the current nine month period as compared
to the prior year period is attributable  to trade show costs and travel,  sales
promotional  advertising  and  literature and greater sales costs related to the
increased sales volume.

Other income and expense  category shows an improvement  change of $173,900.  In
the prior  year  period  there  was a  $150,000  payment  as  complete  and full
settlement of a claim for royalties pertaining to prior years operations whereas
for the current year there was a $43,434 earnings of interest income.

Net earnings increased $296,354 or 58.7% for the current year as compared to the
prior year.
                                       11
<PAGE>


                                                                           OTHER
                                                                     INFORMATION

PART Il-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference  is made to the annual  report  Form 10-K of the  Company for the year
ended April 30, 1997,  relative to legal proceedings and litigation.  No changes
or determinations  have occurred on such proceedings  during the quarter covered
by this report.

ITEM 5. OTHER INFORMATION

Subsequent to January 31, 1998,  the date of this report,  the Company  received
payment in the amount of $3.5 million pursuant to the settlement of that certain
litigation with Pacific Gas & Electric  Company which was  disclosed on Form 8-K
dated July 22, 1997. The Company retained $2.274 million net of the $3.5 million
settlement after payment of costs and expenses of the eight year litigation.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  No exhibits are filed as a part of this report.

     (b)  There was no Form 8-K filed by the Company during the quarter ended 
          January 31, 1998.


                                   SIGNATURES

Pursuant  to the  requirements  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.

                              ENERGY RESERVE, INC.

Date  3/18/98      /s/ James L. Cox
    -----------    --------------------------------------------------------
                   James L. Cox, President, Chief Executive Officer and Director


Date  3/14/98      /s/ Alfred P. Sprenger
    -----------    --------------------------------------------------------
                   Alfred P. Sprenger, Chairman 

Date  3/14/98      /s/ Robert W. Dupree
    -----------    --------------------------------------------------------
                   Robert W. Dupree, Chief Financial Officer

                                       12