UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington. D.C. 20549


                                   FORM 10-QSB


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended July 31, 1997

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from______to_______

                         Commission file number 1-12835


                         GENERAL AMERICAN ROYALTY, INC.
             (Exact name of registrant as specified in its charter)


                  Delaware                                        75-2468002
         (State or other jurisdiction of                        (I.R.S. Employer
         incorporation or organization)                      Identification No.)

                          One Energy Square, Suite 717
                             4925 Greenville Avenue
                                  Dallas, Texas
                    (Address of principal executive offices)
                                    75206
                                   (Zip Code)
                                 (214) 361-8535
              (Registrants' telephone number, including area code)

         Indicate 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___

         As of July 31,  1997,  there were  921,500  shares of the  Registrant's
Common Stock, par value $.001 per share, outstanding.

         Traditional Small Business Disclosure Format (check one):
Yes____ No____

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1  -  FINANCIAL STATEMENTS

                         GENERAL AMERICAN ROYALTY, INC.
                                  BALANCE SHEET

<TABLE>
<S>                                                                                <C>             <C>    


                                                                                   July 31, 1997   October 31,
                                                                                     (Unaudited)     1996
                                                                                   -------------   ----------
                                     ASSETS
Current assets:
   Cash                                                                                $  54,294    $  37,916
   Accounts receivable - oil & gas                                                        23,816       29,608
   Accounts receivable - officers                                                          5,554        3,135
   Accounts receivable - other                                                             1,650        1,650
   Prepaid costs and expenses                                                              9,443        2,834
                                                                                       ---------    ---------

      Total current assets                                                                94,757       75,143

Equipment, less accumulated depreciation of $241                                           1,429         --
Royalty interests in oil and gas properties, less accumulated
   depletion of $63,921 and $21,381 respectively                                         503,275      545,815
Deferred financing costs, net of amortization of $83,846                                    --         25,154
Other assets, net of amortization of $175 and $100 respectively                            4,060        3,929
                                                                                       ---------    ---------

         Total assets                                                                  $ 603,521    $ 650,041
                                                                                       =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable                                                                    $  11,797    $  10,022
   Accounts payable - shareholder                                                           --          3,000
   Notes payable to shareholder, current portion                                         300,000       33,333
                                                                                       ---------    ---------

      Total current liabilities                                                          311,797       46,355

Notes payable to shareholder                                                                --        136,667
                                                                                       ---------    ---------
         Total liabilities                                                               311,797      183,022
                                                                                       ---------    ---------

Stockholders' equity:
Common Stock, $.001 par value, 20,000,000 shares authorized,
   921,500 and 910,000 issued and outstanding, respectively                                  922          910
Preferred stock, $.001 par value, 5,000,000 shares authorized,
   no shares issued or outstanding                                                          --           --
Additional paid-in capital                                                               653,957      598,219
Accumulated deficit                                                                     (363,155)    (132,110)
                                                                                       ---------    ---------

         Total stockholder's equity                                                      291,724      467,019
                                                                                       ---------    ---------

             Total liabilities and stockholder's equity                                $ 603,521    $ 650,041
                                                                                       =========    =========
</TABLE>

The accompanying notes are an integral part of the financial statements.
<PAGE>



                         GENERAL AMERICAN ROYALTY, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<S>                                                  <C>           <C>          <C>          <C>     

                                                          Three Months Ended       Nine Months Ended
                                                                July 31                July 31
                                                               ---------              ---------

                                                           1997       1996         1997         1996       
                                                      ---------    ---------    ---------    ---------
                                               
Revenues:

  Oil and gas royalty income, net of
    severance and ad valorem taxes                    $  28,748    $  13,056    $ 121,853    $  16,529
                                                      ---------    ---------    ---------    ---------

Costs and expenses

  General and administrative                             78,522       13,115      264,741       35,776
  Amortization of deferred financing costs                 --          6,708       25,154        6,708
  Depletion, depreciation and amortization               14,304        5,910       42,856        7,276
  Interest expense                                        9,887          368       20,147          368
                                                      ---------    ---------    ---------    ---------

                                                        102,713       26,101      352,898       50,128
                                                      ---------    ---------    ---------    ---------


Net loss                                              $ (73,965)   $ (13,045)   $(231,045)   $ (33,599)
                                                      =========    =========    =========    ========= 

Net loss per common share                             $   (0.08)   $   (0.02)   $   (0.26)   $   (0.04)
                                                      =========    =========    =========    =========
Weighted average number of common
  shares outstanding                                    921,150      767,987      904,870      753,661
                                                      =========    =========    =========    =========

</TABLE>














The accompanying notes are an integral part of the financial statements.
<PAGE>



                         GENERAL AMERICAN ROYALTY, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
                                                                        
<S>                                                               <C>          <C>    
                                                                      Nine Months Ended
                                                                           July 31,
                                                                      1997         1996
                                                                     -------------------


Cash flows from operating activities:
Net loss                                                          $(231,045)   $ (33,599)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depletion, depreciation and amortization                             42,856        7,276
Amortization of deferred financing costs                             25,154        6,707
Decrease (increase) in accounts receivable                            3,373      (16,529)
Increase in prepaid expenses                                         (6,610)        (569)
Noncash payment of stock for services                                  --            508
(Decrease) increase in accounts payable                              (1,224)      11,805
Increase in other assets                                               (206)      (3,001)
                                                                  ---------    ---------

Net cash used in operating activities                              (167,702)     (27,402)

Cash flows from investing activities:
Purchase of equipment                                                (1,670)        --
Purchase of royalty and mineral interests                              --       (203,153)
                                                                  ---------    ---------

Net cash used in investing activities                                (1,670)    (203,153)

Cash flows from financing activities:
Issuance of common stock                                             55,750      102,558
Proceeds from borrowings                                            500,000      140,000
Payments on borrowings                                             (370,000)        --
                                                                  ---------    ---------

Net cash provided by financing activities                           185,750      242,558
                                                                  ---------    ---------

Net increase in cash                                                 16,378       12,003

Cash at beginning of period                                          37,916         --
                                                                  ---------    ---------

Cash at end of period                                             $  54,294    $  12,003
                                                                  =========    =========

</TABLE>






The accompanying notes are an integral part of the financial statements.
<PAGE>


                         GENERAL AMERICAN ROYALTY, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (Unaudited)
<TABLE>
<S>                                      <C>        <C>        <C>         <C>          <C>    


                                      
                                                               Additional                Total
                                           Common Stock         Paid-In    Accumulated  Stockholders'
                                          Shares    Amount      Capital     Deficit     Equity

Balance at October 31, 1996              910,000   $     910   $ 598,219   $(132,110)   $ 467,019

Exercise of common stock
    warrants net of costs                 11,500          12      55,738        --         55,750

 Net loss                                   --          --          --      (231,045)    (231,045)
                                                               ---------   ---------    ---------


Balance at July 31, 1997                 921,500   $     922   $ 653,957   $(363,155)   $ 291,724
                                         =======   =========   =========   =========    =========
</TABLE>

























The accompanying notes are an integral part of the financial statements.
<PAGE>



                         GENERAL AMERICAN ROYALTY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)




The balance sheet of General American Royalty,  Inc., the "Company",  at October
31, 1996 has been taken from the Company's audited financial  statements at that
date.  The balance sheet at July 31, 1997,  the statements of operations for the
three  months and nine months  ended July 31, 1997 and 1996,  the  statement  of
changes in stockholders'  equity for the nine months ended July 31, 1997 and the
statements  of cash flows for the nine months  ended July 31, 1997 and 1996 have
been prepared by the Company,  without audit. The financial statements have been
prepared in conformity with generally accepted accounting principles and contain
such  adjustments as management  feels are necessary to present  fairly,  in all
material  aspects,  the  financial  position  and results of  operations  of the
Company.

1.  Summary of Significant Accounting Policies:
-----------------------------------------------

The Company was  incorporated  on December  28, 1992 in the state of Delaware as
Hermes  Capital  Management,  Inc. and was inactive until it changed its name on
October 23, 1995 to General American Royalty, Inc. The Company is engaged in the
business  of  acquiring  and  managing  producing  crude  oil and  gas  royalty,
overriding royalty and mineral interests in Texas and New Mexico.

Royalty Interests in Oil and Gas Properties
-------------------------------------------

Costs  of  acquiring   interests  in  producing  royalty  interests,   including
evaluation  costs,  are capitalized and depleted on a straight line basis over a
period of 10 years,  since overall U.S.  proved reserves are about 8 to 10 times
overall  production.  The  Company  owns  a  large  number  of  interests  whose
acquisition costs are not individually significant. The Company annually reviews
significant  properties for impairment  comparing estimated future cash flows to
the carrying  amount of the asset.  If  impairment  is  indicated,  the asset is
written down to its fair value based upon its expected  future  discounted  cash
flows.

Income Taxes
------------

The Company follows  Statement of Financial  Standards No. 109,  "Accounting for
Income Taxes," which requires the  recognition of deferred tax  liabilities  and
assets based on the difference between the financial statement and the tax basis
of assets  and  liabilities  using  enacted  tax rates in effect in the years in
which the differences are expected to reverse.
<PAGE>


                         GENERAL AMERICAN ROYALTY, INC.
                    NOTES TO FINANCIAL STATEMENTS, Continued
                                   (Unaudited)




Use of Estimates
----------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent assets and liabilities at the date of financial  statements,  and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.

New Accounting Standards
------------------------

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting Standards ("SFAS") No. 128, entitled "Earnings per Share" in February
1997.  SFAS No. 128 requires  standards to replace the  presentation  of primary
earnings per share  ("EPS") with a  presentation  of basic EPS. It also requires
dual  presentation of basic and diluted EPS on the face of the income  statement
for all entities  with complex  capital  structures.  The Company is required to
adopt the computation,  presentation and disclosure requirements of SFAS No. 128
for the fiscal year ended October 31, 1998. The Company's basic and diluted loss
per share under SFAS No. 128 would have each been $0.08 for the three months and
$0.26 for the nine months ended July 31, 1997, respectively.

2.  Notes Payable
-----------------

On June 20, 1997, the Company entered into a $300,000  financing  agreement with
Eagle  Equity  Oil & Gas L.P.,  a Dallas  based  lender and  shareholder  of the
Company.  The Company has  collateralized  the loan with  mortgages and deeds of
trust on certain royalty  interests in crude oil and gas properties,  a personal
guarantee by James F. Smith,  President of the Company and a term life insurance
policy on Mr. Smith for $300,000.

The full  principal  amount of $300,000 plus any accrued  interest is payable on
December  31,  1997,  and bears  interest  at a 14% rate per annum.  Interest is
payable  monthly  commencing  on  July  20,  1997.  From  the  proceeds  of this
financing,  $200,000  was used to pay off the note payable to State Bank & Trust
Company.

3.  Stockholders Equity
-----------------------

As of July 31, 1997, 11,500 of the 90,000 common stock purchase  warrants,  from
the Company's  initial  offering,  had been  exercised.  The net proceeds to the
Company from the exercise of these  warrants was $55,750.  The remaining  78,500
warrants expired on July 31, 1997.

4.  Related Party Transactions
------------------------------

As of July 31, 1997 the Company has accounts  receivable for travel advances due
from one officer of approximately $5,554.

5.  Income Taxes:
-----------------

The Company has net loss carryforwards  which will begin to expire in 2011. None
of the benefit of the net  operating  loss has been  recognized in the financial
statements.

6.  Year-end Balance Sheet:
---------------------------

The  year-end  condensed  balance  sheet  was  derived  from  audited  financial
statements,  but does not include all disclosures required by generally accepted
accounting principles.

<PAGE>



                         GENERAL AMERICAN ROYALTY, INC.

                For the three and nine months ended July 31, 1997



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


LIQUIDITY AND CAPITAL RESOURCES

         Sales of crude oil and natural gas from royalty and overriding  royalty
interests  have been the  Company's  principal  internal  source  of  liquidity.
Monthly sales have not reached a sufficient  level to cover  administrative  and
overhead expenses. Growth in the Company's sales is expected to be the result of
acquiring additional producing crude oil and natural gas royalty interests.

         The  Company  has  completed  offerings  of its equity  securities  and
incurred  bank debt  during the past year as its  primary  sources  of  external
capital.  Proceeds from these financings were used to acquire royalty  interests
in  producing  crude oil and  natural  gas wells and for  working  capital.  The
Company  intends  to  direct  its  efforts  and  resources   toward   developing
opportunities to increase its crude oil and natural gas reserves.

         Specifically,  the Company  anticipates  that proceeds from the sale of
its  equity  securities  in  public  and  private  offerings  will  serve as the
principal source of capital for acquisition of royalty  interests and retirement
of debt. In June 1997 the Company borrowed $300,000 from an entity controlled by
a shareholder  and used the proceeds to repay a $200,000 bank loan. Debt secured
by producing  royalty  interests  will be a source of short term  financing  for
royalty acquisition activities.

         The Company's revenues are substantially  affected by prevailing prices
for natural gas, crude oil and condensate. These prices are affected by numerous
factors over which the Company has no control.  Historically  the energy markets
have been very  volatile,  and there  can be no  assurances  that  crude oil and
natural gas prices will not be subject to material fluctuations in the future. A
material or long term  decline in crude oil and gas prices could have an adverse
effect on the Company's financial position and results of operations,  affecting
the economic productivity of an indeterminable number of producing properties in
which the Company  has  royalty or  overriding  royalty  interests.  Natural gas
accounts for approximately 90% of the Company's crude oil and natural gas sales.

<PAGE>




RESULTS OF OPERATIONS

Three and Nine Months Ended July 31, 1997 Compared
 to the Three and Nine Months Ended  July 31, 1996

Revenues

         Revenues  for the three  months and nine months ended July 31, 1997 are
significantly  higher than the same  periods in 1996 due to an increase in crude
oil and natural  gas sales that  resulted  from the  acquisition  of  additional
royalty and  overriding  royalty  interests.  The  acquired  interests  comprise
approximately  31%  of the  Company's  current  total  producing  reserves.  The
revenues for periods in 1996 consisted of production from fewer wells.

Costs and Expenses

     General  and  Administrative   Expenses.
     ----------------------------------------

General and administrative  expenses ("G&A") increased from $13,115 and $35,776,
respectively,  for the three and nine months  ended July 31, 1996 to $78,522 and
$264,741 for the  comparable  periods in 1997.  The increase in G&A expenses for
1997  resulted  from  an  increased  expansion  of  the  Company's   operational
activities and the costs incurred in connection  with becoming a publicly traded
entity.

     Depletion,  Depreciation and Amortization.
     ------------------------------------------

Depletion,  depreciation  and  amortization  ("DD&A"),  increased to $14,304 and
$42,856 respectively, for the three and nine months ended July 31, 1997 compared
to $5,910  and  $7,276  respectively  for the  comparable  period  in 1996.  The
increase is primarily due to the acquisition of additional producing royalty and
overriding  royalty  interests.  

     Interest  expense.
     ------------------

The Company first incurred  interest  bearing debt of $140,000 on July 24, 1996.
The  interest  expense  for the three and nine  months  ended July 31,  1997 was
incurred on a $200,000  note  payable to a financial  institution,  subsequently
paid off by the  incurrence of a $300,000  note payable to a shareholder  of the
Company.

NEW ACCOUNTING STANDARDS

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting Standards ("SFAS") No. 128, entitled "Earnings per Share" in February
1997.  SFAS No. 128 requires  standards to replace the  presentation  of primary
earnings per share  ("EPS") with a  presentation  of basic EPS. It also requires
dual  presentation of basic and diluted EPS on the face of the income  statement
for all entities  with complex  capital  structures.  The Company is required to
adopt the computation,  presentation and disclosure requirements of SFAS No. 128
for the fiscal year ended October 31, 1998. The Company's basic and diluted loss
per share under SFAS No. 128 would have each been $0.08 for the three months and
$0.26 for the nine months ended July 31, 1997, respectively.

<PAGE>



                           PART II - OTHER INFORMATION


ITEM 5 - OTHER INFORMATION

On September 8, 1997,  Daniel M. Vines,  George E. Green,  Douglas Weedon and J.
Donald Hill resigned as members of the  registrant's  board of directors.  Their
resignations were not a result of any  disagreements  with the registrant on any
matters relating to the registrant's operations, policies or practices.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.                                                         None.

(b)      Reports on Form 8-K.                                              None.




                                   SIGNATURES

         In accordance with the  requirements of the Securities  Exchange Act of
1934,  the  registrant  has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                           GENERAL AMERICAN ROYALTY, INC.
                                           ------------------------------
                                                    (Registrant)




Date:  September 12, 1997                  /S/ James F. Smith
                                           ------------------------------
                                           James F. Smith,
                                           President and Chief Executive Officer





Date:  September 12, 1997                  /S/ Sam E. Nicholson 
                                           ------------------------------ 
                                           Sam E. Nicholson,         
                                           Treasurer and Chief Financial Officer


<PAGE>