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 April 30, 1998

                                       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 1005
                             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 April 30, 1998,  there were 1,031,500  shares of the Registrant's
Common Stock, par value $.001 per share, outstanding.

         Traditional Small Business Disclosure Format (check one):
Yes    No  X
   ---    ---

<PAGE>

<TABLE>
<CAPTION>

                         PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                         GENERAL AMERICAN ROYALTY, INC.
                                  BALANCE SHEET

                                                              April 30, 1998   October 31,
                                                               (Unaudited)        1997
                                                              --------------  ------------
<S>                                                                             <C>    

                                     ASSETS
Current assets:
   Cash                                                        $     6,009    $    14,967
   Accounts receivable-oil & gas                                     9,404         26,224
   Accounts receivable - officers                                    2,784           --
   Accounts receivable-other                                         1,650          1,750
   Prepaid expenses                                                  4,328          4,819
                                                               -----------    -----------

Total Current Assets                                                24,175         47,760

Royalty interest in oil and gas properties, less accumulated
   depletion of $87,658 and $100,230                               247,385        466,966
Prepaid Consulting Fees                                             41,768         50,717
Other assets, net of amortization of $6,740 and $4,496               5,247          7,491
                                                               -----------    -----------
Total Assets                                                   $   318,575    $   572,934
                                                               ===========    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                            $    54,926    $    24,886
   Accounts payable-shareholder                                       --            4,808
   Note payable shareholder                                         39,247        300,000
                                                               -----------    -----------
Total current liabilities                                           94,173        329,694
                                                               -----------    -----------
Commitments

Total liabilities                                                   94,173        329,694
                                                               -----------    -----------
Stockholders' equity:
Common stock, $.001 par value, 20,000,000 shares
   authorized, 1,031,500 issued and outstanding                      1,032          1,032
Preferred stock, $.001 par value, 4,000,000 shares
   authorized, no shares issued or outstanding
Additional paid-in capital                                       1,245,647      1,245,647
Accumulated deficit                                             (1,022,277)    (1,003,439)
                                                               -----------    -----------
Total stockholders' equity                                         224,402        243,240
                                                               -----------    -----------
      Total liabilities and stockholders' equity               $   318,575    $   572,934
                                                               ===========    ===========

</TABLE>

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


<PAGE>

<TABLE>

<CAPTION>
                         GENERAL AMERICAN ROYALTY, INC.
                             STATEMENT OF OPERATIONS
                                   (Unaudited)


                                                   Three Months Ended           Six Months Ended
                                                       April 30,                    April 30,
                                               -------------------------    --------------------------
                                                    1998           1997           1998           1997
                                                   ------         ------         ------         ------
<S>                                                                             <C>        <C>    

Revenues:
Oil and gas royalty income                     $    11,766   $    58,516    $    53,522    $   111,623
Other income                                         7,547          --            7,547           --
Gain on sale of royalty interests                   90,931          --           90,931           --
                                               -----------   -----------    -----------    -----------
         Total revenues                            110,242        58,516        152,000        111,623
                                               -----------   -----------    -----------    -----------
Cost and expenses:
   Production taxes and transportation costs         1,309        10,761          5,790         18,518
   General and administrative                       49,439       102,097        114,299        186,219
   Amortization of deferred financing costs            728          --            1,863         25,154
   Depreciation, depletion and amortization         11,671        14,299         31,354         28,552
   Interest Expense                                  6,896         5,118         17,532         10,260
                                               -----------   -----------    -----------    -----------
         Total Cost and expense                $    70,043   $   132,275    $   170,838    $   268,703
                                               -----------   -----------    -----------    -----------
Net income, (loss)                             $    40,201   $   (73,759)   $   (18,838)   $  (157,080)
                                               ===========   ===========    ===========    ===========
Net income (loss) per common share                     .04          (.08)          (.02)          (.17)
                                               ===========   ===========    ===========    ===========
Weighted average number of
   common shares outstanding                     1,031,500       911,055      1,031,500        910,505
                                               ===========   ===========    ===========    ===========


</TABLE>















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


<PAGE>

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


                                                           Six Months Ended
                                                                April 30,
                                                        ----------------------
                                                            1998         1997
                                                           ------       ------
Cash flows from operating activities:
      Net loss                                          $ (18,838)   $(157,080)
   Adjustments to reconcile net loss to net cash used
      in operating activities
         Depreciation, depletion and amortization          31,354       28,552
         Amortization of deferred financing costs           1,863       25,154
         Gain on sale of royalty interests                (90,931)        --
         Change in accounts receivable                     14,136        1,675
         Change in prepaid expenses                         9,438       (3,497)
         Change in accounts payable                        25,232       20,912
         Change in other assets                              --           (206)
                                                        ---------    ---------
Net cash used in operating activities                     (27,746)     (84,490)
                                                        ---------    ---------
Cash flows from investing activities:
     Purchase of equipment                                   --         (1,125)
     Sale of royalty interests                            279,541         --
                                                        ---------    ---------
Net cash used in investing activities                     279,541       (1,125)
                                                        ---------    ---------
Cash flows from financing activities:
         Issuance of common stock                            --         32,000
         Proceeds from borrowings                          15,000      200,000
         Payments on borrowings                          (275,753)    (170,000)
                                                        ---------    ---------
         Net cash provided by financing activities       (260,753)      62,000
                                                        ---------    ---------
Net decrease in cash                                       (8,958)     (23,615)

Cash at beginning of period                                14,967       37,916
                                                        ---------    ---------
Cash at end of period                                   $   6,009    $  14,301
                                                        =========    =========


Supplemental Information:
   Cash paid for interest                               $  18,912    $   9,735
                                                        =========    =========






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


<PAGE>

<TABLE>
<CAPTION>

                         GENERAL AMERICAN ROYALTY, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (Unaudited)



                                                           Additional                     Total
                                     Common Stock           Paid-In     Accumulated    Stockholders'
                                  Shares       Amount       Capital       Deficit        Equity
                              -----------   -----------   -----------   -----------    -----------
<S>                                                                             <C>    <C>     

Balance at October 31, 1997     1,031,500   $     1,032   $ 1,245,647   $(1,003,439)   $   243,240

Net loss                             --            --            --         (18,838)       (18,838)
                              -----------   -----------   -----------   -----------    -----------
Balance January 31, 1998        1,031,500   $     1,032   $ 1,245,647   $(1,022,277)   $   224,402
                              ===========   ===========   ===========   ===========    ===========



</TABLE>

















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


<PAGE>

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



The accompanying  unaudited financial  statements reflect the financial position
as of April 30,  1998 and the  results of  operations  and cash flows of General
American Royalty,  Inc. (the "Company") for the three and six month period ended
April 30, 1998 and April 30, 1997. The financial  statements  have been prepared
in conformity  with generally  accepted  accounting  principals 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:
    ------------------------------------------

General American Royalty,  Inc. (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 oil and gas royalty, overriding royalty and mineral interests in Texas
and New Mexico.

Cash and Cash Equivalents
-------------------------

The Company  considers  all highly  liquid debt  instruments  purchased  with an
original maturity of three months or less to be cash equivalents.

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 the
estimated  lives of the related  reserves.  The Company  estimated  the lives of
reserves to be ten years in fiscal  year 1996 and revised the  estimate to seven
years in fiscal year 1997.  This  change in  accounting  estimate  resulted in a
decrease  in net  income and in basic and  diluted  net income per share for the
three  months  ended April  30,1998 of $3,444 and $.003,  an increase in the net
loss and basic and diluted net loss per share and for the six months ended April
30, 1998 of $9,292 and $.009. The Company owns a large number of interests whose
acquisition costs are not individually significant. The Company annually reviews
significant properties for impairment by comparing undiscounted estimated future
net cash flows to the carrying  amount of the asset. If impairment is indicated,
the asset is written down to its estimated fair value




<PAGE>


                         GENERAL AMERICAN ROYALTY, INC.
                    NOTES TO FINANCIAL STATEMENTS, Continued



Other Property
--------------

Property and equipment is primarily  office  equipment,  and is carried at cost.
Depreciation is provided using the  straight-line  method over estimated  useful
lives of three years. Gain or loss on retirement or sale or other disposition of
assets is included in income in the period of disposition.

Loss Per Share
--------------

Loss per share is calculated in accordance with Financial  Accounting  Standards
Board  Statement No. 128,  "Earnings  Per Share".  Earnings or loss per share is
based on the  weighted  average  number of shares  of common  stock  outstanding
during the period. As of April 30, 1998 the Company had no outstanding  options,
warrants or other potentially dilutive securities.

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

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and  consist of taxes  currently  due,  if any,  plus net
deferred taxes related primarily to differences  between the bases of assets and
liabilities  for  financial  and income tax  reporting.  Deferred tax assets and
liabilities  represent the future tax return  consequences of those differences,
which will either be taxable or deductible  when the assets and  liabilities are
recovered  or settled.  Deferred  tax assets  include  recognition  of operating
losses that are available to offset future  taxable  income and tax credits that
are available to offset future income taxes. Valuation allowances are recognized
to limit recognition of deferred tax assets where  appropriate.  Such allowances
may be reversed when circumstances provide evidence that the deferred tax assets
will more likely than not be realized.

Continuation as a Going Concern
-------------------------------

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue as a going  concern.  The Company has  negative  working
capital of $69,998 at April 30, 1998 and has  suffered  significant  losses from
operations,  which  raise  substantial  doubt about its ability to continue as a
going concern. It is management's  opinion that sufficient capital can be raised
from various  sources to provide funding to reduce short term debt and allow the
Company to acquire  additional  producing  royalty  interests that will generate
sufficient cash flow to cover general and administrative expenses.




<PAGE>

                         GENERAL AMERICAN ROYALTY, INC.
                    NOTES TO FINANCIAL STATEMENTS, Continued


Use of Estimates and Certain Significant Estimates
--------------------------------------------------

The  preparation  of the  Company's  financial  statements  in  conformity  with
generally accepted accounting  principles  requires the Company's  management to
make  estimates  and  assumptions  that  affect the  amounts  reported  in these
financial  statements and accompanying  notes.  Actual results could differ from
those  estimates.  Significant  assumptions  are required in the  estimation  of
future net cash flows,  which as described  above may affect the amount at which
oil and gas properties are recorded.  It is at least  reasonably  possible those
estimates  could be  revised  in the  near  term and  those  revisions  could be
material.

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

As of April 30, 1998,  the Company has a $39,247  note payable to a  shareholder
that bears interest at 14% and was due on March 31, 1998. The original principal
balance of $307,500  was reduced by $268,253 on March 26, 1998,  using  proceeds
from the sale of  royalty  interests.  As the note  payable  is  technically  in
default on April 30,  1998,  the entire  principal  balance  is  reflected  as a
current  liability in the accompanying  balance sheet.  Interest on this note is
payable  monthly.  The note is  collateralized  by all  royalty  and  overriding
royalty  interests of the Company and is personally  guaranteed by the Company's
president.

In  connection  with the note  above,  the Company  recorded  $5,961 of deferred
financing  costs.  For the three and six months ended April 30,  1998,  $728 and
$1,863, respectively, of this amount was charged to operations.

3.  Related Party Transactions
    --------------------------

As of April 30, 1998 the Company has accounts  receivable  from travel  advances
due from the Company's president of approximately $2,780.

4.  Equity Transactions
    -------------------

During fiscal 1997, the Company issued  options to three  corporate  entities in
exchange for financial public  relations and investment  banking  services.  The
fair  market  value of the  options at the date of grant was  $590,000.  Of this
amount,  $50,717 was  recorded as prepaid  consulting  fees of which  $4,475 and
$8,949 of  amortization  expense  was  included  in general  and  administrative
expense for the three and six months  ended April 30,  1998,  respectively.  The
prepaid  consulting  fees are being  amortized  over the three  year life of the
contracts. The remainder of the fair market value of the options was expensed in
the year ended October 31, 1997.


<PAGE>

                         GENERAL AMERICAN ROYALTY, INC.
                    NOTES TO FINANCIAL STATEMENTS, Continued



5.  Stock Based Compensation
    ------------------------

Incentive Stock Option Plan
---------------------------

In September  1997,  the Board of Directors  approved an incentive  stock option
plan for certain key officers and directors under which 2,500,000  shares of the
Company's common stock may be issued.  The plan must be ratified and approved by
the Company's shareholders. There were 2,100,000 options granted to key officers
and directors  during the three and six months ended April 30, 1998. The options
are exercisable at $5.25 per share and expire in November 2002. The market price
at the date of grant was $5.00 per share.

On June 11, 1998,  all of the 2,100,000  options  which had been  granted,  were
terminated at the direction of the board of directors.















<PAGE>



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



LIQUIDITY AND CAPITAL RESOURCES


         Since 1996 the Company has relied upon the  proceeds  from the sales of
crude oil and natural gas from royalty and overriding  royalty  interests as its
principal  internal source of liquidity.  Cash generated from such sales has not
reached a sufficient level to cover administrative and overhead expenses. Growth
in the  Company's  sales  during  the past two  years  has  been the  result  of
acquiring additional producing crude oil and natural gas royalty interests.

         The Company  utilized sales of its common stock and secured debt during
the previous  year as its primary  sources of external  capital.  Proceeds  from
these sources were used to acquire royalty  interests in producing crude oil and
natural gas wells and for working  capital.  During 1996, the Company  purchased
royalty,  overriding  royalty and mineral interests in several producing oil and
gas properties.

         After  closing  the unit  equity  offering  in 1997,  the  Company  was
prohibited from obtaining additional equity capital until January 1998 to comply
with securities regulations on integration of offerings. This has restricted the
Company's  ability  to  acquire  royalty  assets  and to repay  short-term  debt
obligations as they become due with permanent equity capital.  During the fiscal
year ended October 1997 and the six months ended April 30, 1998, the Company did
not acquire any mineral and royalty interests.

         In March  1998  the  Company  sold  its  royalty  interests  in  twelve
Fruitland  Coal  Seam  wells  located  in  San  Juan  County,  New  Mexico.  The
transaction  was recorded to give effect to the sale as of February 1, 1998. The
properties  were sold pursuant to a preferential  right to repurchase  agreement
with a shareholder that owns less than 5% of the Company's common stock. The net
sales  proceeds of $279,541  were used to reduce the Company's  short-term  debt
obligation of $307,500 by $268,253 and the balance was used for working capital.
These  interests had a net book value of $188,610,  which  resulted in a gain of
$90,931. During the 19 months the Company owned the properties,  net revenues of
approximately $115,600 were recorded.



<PAGE>



         At April 30, 1998, the Company's short term debt obligation was reduced
to  $39,247.  This  obligation  was due on March 31,  1998 and is expected to be
repaid with  proceeds from the sale of additional  producing  royalty  interests
owned by the Company, a private placement of equity securities or by refinancing
with  another  lender.  If the  Company  is unable  to  satisfy  or extend  this
obligation,  it may have an adverse  impact on the  Company's  ability to obtain
debt secured by producing  royalty  interests as an interim  source of financing
for royalty acquisition activities.  When necessary the Company may sell certain
of its mineral and royalty interests to satisfy such debt obligations.

         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 prices have been subject to material fluctuations. A
material  or lengthy  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 61% of the Company's oil and gas sales.



RESULTS OF OPERATIONS


Three and Six Months Ended April 30, 1998 Compared
to the Three and Six Months Ended April 30, 1997


Revenues

         Oil and Gas Royalty Income. Revenues for the three and six months ended
April 30, 1998 were $11,766 and $53,522  compared  with $58,516 and $111,623 for
the  comparable  periods in 1997.  The 80%  decrease in  revenues  for the three
months  ended April 30, 1998 as compared to the same period in 1997 is primarily
attributable to the sale of royalty interests, which accounted for approximately
56% of the Company's total revenues,  and to decreased crude oil and natural gas
production of  approximately  23% and 19%  respectively,  and a approximate  32%
decrease  of in the  price  of crude  oil,  although  natural  gas  prices  were
comparable  for both  periods.  The 52%  decrease in revenues for the six months
ended April 30, 1998 as compared to the same period in 1997 is also attributable
to the sale of royalty  interests  which  accounted  for sales only in the first
three months and due to the  decreased  crude oil and natural gas  production of
approximately  22% each and an approximate  34% decrease in the price of natural
gas, and a 28% decrease in crude oil prices.





<PAGE>


         Other Income.  In March and April of 1998 the Company  granted  mineral
         ------------
leases  from fee  minerals  owned by the  Company to two  unrelated  oil and gas
entities. In consideration for the granting of those leases the Company received
$7,547.  If  economically  productive  oil and or gas wells are drilled on those
leases the Company will be entitled to royalty  payments  from the revenues they
generate.

         Gain on  Sale of  Royalty  Interests.  In  March  of 1998  the  Company
         ------------------------------------
recognized a gain of $90,931,  on the sale of royalty  interests in twelve wells
located in San Juan  County,  New  Mexico..  The net  proceeds of $279,541  were
offset by the net book value of $188,610.


Costs and Expenses

         Production  Taxes  and  Transportation  Costs.   Production  taxes  and
         ---------------------------------------------
transportation  costs,  as a percentage of gross  revenues,  decreased 7% and 6%
respectively,  for the three and six months  ended April 30, 1998 as compared to
the three and six months  ended April 30,  1997.  The  decrease is  attributable
primarily to the royalty  interests which were sold and a new gas sales contract
which eliminated  processing and transportation  costs on those same properties,
which had sales only in the first three months of the quarter.

         General  and  Administrative   Expenses.   General  and  administrative
         ---------------------------------------
expenses  ("G&A")  decreased  from  $102,097  and $186,219 for the three and six
months ended April 30, 1997 to $49,439 and $114,299 for the comparable period in
1998.  The  decrease in G&A expenses  for 1998 is  primarily  attributable  to a
decrease in salaries paid to certain officers,  expensing of deferred  financing
costs in 1997 and costs  associated  with becoming a public company  incurred in
1997.

         Depletion,  Depreciation and Amortization.  Depletion, depreciation and
         -----------------------------------------
amortization ("DD&A"), decreased to $11,671 for the three months ended April 30,
1998  compared to $14,299 for the  comparable  period in 1997.  The decrease was
attributable to the sale of royalty interests, even though there was an increase
due to a change in estimated life used in the straight line depletion of royalty
interests  in oil and gas  properties  as  described  in Note 1 of the "Notes To
Financial  Statements".  For the six months  ended  April 30, 1998 and 1997 DD&A
increased  from  $28,552 to  $31,354.  The  increase  is  attributable  to above
mentioned  change in depletion and to the inclusion of three months of depletion
on the royalty interests which were sold.

         Interest  expense.  The  increase in interest  expense  from $5,118 and
         -----------------
$10,260 for the three and six months  ended April 30, 1997 to $8,696 and $17,532
for the three and six months  ended April 30, 1998 is two fold,  more debt and a
higher  interest rate. The Company had debt of $200,000 at a rate of 10% in 1997
as compared to $307,500 at a rate of 14% in 1998.



<PAGE>



                           PART II - OTHER INFORMATION


ITEM 5 - OTHER INFORMATION

         On June 10,  1998  George  E.  Green  became a member  of the  board of
directors of the registrant.


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

         Item 3(i) and (ii).  The articles of  incorporation  and by-laws,  as 
filed in Item 2 of Part III of the  Company's  Form 10-SB dated March 26,  1997,
are hereby incorporated by reference.

         Item 27     Financial data schedule.

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




                                   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     June 12, 1998                      /s/    James F. Smith
     -------------------                  -----------------------
                                          James F. Smith,
                                          President and Chief Executive Officer



Date    June 12, 1998                       /s/    Sam E. Nicholson
     ------------------                   -------------------------
                                           Sam E. Nicholson,
                                           Treasurer and Chief Financial Officer