UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

                      For Quarter Ended September 30, 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:    333-15127

                          AZUREL LTD. AND SUBSIDIARIES
             (Exact Name of Registrant as Specified in its Charter)

            Delaware                                              13-3842844
  State or other jurisdiction of                              (I.R.S. Employer
  incorporation or organization                             Identification No.)

                     590 Madison Avenue, New York, NY 10022
               (Address of principal executive office) (Zip Code)

                                 (212) 317- 0712
               (Registrant's 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

The number of shares of registrant's Common Stock, $.001 par value,  outstanding
as of November 14, 1997 was 5,302,079 shares.


<PAGE>
<TABLE>
<CAPTION>

                          AZUREL LTD. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS



                                                                                                September 30,        December 31,
                                                                                                   1997                 1996
                                                                                            ------------------   ------------------
                                                                                                 (Unaudited)
                                                                        ASSETS
<S>                                                                                      <C>                   <C>  
CURRENT ASSETS:
     Cash                                                                                 $            694,697 $                  -
     Restricted cash                                                                                   284,366              268,731
     Accounts receivable, net of allowance for
         doubtful accounts of $50,000                                                                1,999,589            1,515,407
     Note receivable affiliate                                                                         255,679              255,679
     Inventories                                                                                     1,091,213            1,241,509
     Prepaid expenses                                                                                  495,293               50,641
     Due from stockholders and related parties                                                          13,915              184,480
     Other current assets                                                                               35,497              106,891
                                                                                            ------------------   ------------------
         TOTAL CURRENT ASSETS                                                                        4,870,249            3,623,338

MACHINERY AND EQUIPMENT, net                                                                         1,435,115              571,507

DEFERRED FINANCING COSTS                                                                                     -               32,797

DEFERRED REGISTRATION COSTS                                                                                  -              175,514

FORMULAE AND CUSTOMER LISTS, net                                                                     3,023,277            3,175,107

GOODWILL, net                                                                                            4,912                5,107

OTHER ASSETS                                                                                            50,470               60,470
                                                                                            ------------------   ------------------

                                                                                          $          9,384,023 $          7,643,840
                                                                                            ==================   ==================

                                                         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Cash overdraft                                                                       $                  - $             10,635
     Accounts payable                                                                                  789,195            1,058,163
     Accrued expenses                                                                                  260,038              944,430
     Accrued payroll taxes and penalties                                                                70,669              519,323
     Customer advances                                                                                  57,760               57,760
     Current portion of long-term debt                                                               2,332,865            1,551,816
     Current portion of capital lease obligations                                                        6,098               19,770
                                                                                            ------------------   ------------------
         TOTAL CURRENT LIABILITIES                                                                   3,516,625            4,161,897
                                                                                            ------------------   ------------------

LONG-TERM DEBT                                                                                       1,250,984            3,189,054

CAPITAL LEASE OBLIGATIONS                                                                                    -               20,322

STOCKHOLDERS'  EQUITY:
     Preferred stock, $.001 par value, authorized 1,000,000, none  
         issued or outstanding                                                                               -                    -
     Common stock, $.001 par value, authorized 24,000,000 shares,
         issued and outstanding 5,302,079 and 3,878,747 shares                                           5,390                3,879
     Additional paid-in-capital                                                                      7,376,283            2,382,190
     Accumulated deficit                                                                            (2,763,084)          (2,111,327)
                                                                                             ------------------   ------------------
                                                                                                     4,618,589              274,742
     Less stock subscriptions receivable                                                                (2,175)              (2,175)
                                                                                             ------------------   ------------------
         TOTAL STOCKHOLDERS'  EQUITY                                                                 4,616,414              272,567
                                                                                             ------------------   ------------------

                                                                                          $          9,384,023 $          7,643,840
                                                                                             ==================   ==================
                                                                                                             -                    -

                       See notes to financial statements.

                                       -1-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                         AZUREL LTD. AND SUBSIDIARIES

                                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                                 (Unaudited)



                                                             Three Months ended Sept. 30,            Nine Months Ended Sept. 30,
                                                     -------------------------------------------------------------------------------
                                                            1997                 1996                 1997                1996
                                                     -----------------    -----------------    -----------------    ----------------
<S>                                               <C>                  <C>                  <C>                  <C>  
NET SALES                                          $         3,060,483  $           968,050  $         9,091,951  $         968,050

COST OF GOODS SOLD                                           2,204,093              764,759            7,301,895            764,759
                                                     -----------------    -----------------    ------------------   ----------------

GROSS PROFIT                                                   856,390              203,291            1,790,056            203,291

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                   644,316              317,641            2,130,579            733,292
                                                     -----------------    -----------------    -----------------    ----------------

INCOME (LOSS) FROM OPERATIONS                                  212,074             (114,350)            (340,523)          (530,001)

INTEREST INCOME                                                 15,635                    -               15,635                   -

INTEREST EXPENSE                                                91,138              147,538              326,869            465,122
                                                      -------------------------------------    -------------------------------------

NET INCOME (LOSS)                                  $           136,571  $          (261,888) $          (651,757) $        (995,123)
                                                     =================    =================    =================    ================


NET INCOME ( LOSS) PER COMMON SHARE                $              0.03  $             (0.10) $             (0.14)            (0.37)
                                                     =================    =================    =================    ================

WEIGHTED AVERAGE COMMON SHARES
     USED                                                    4,827,635            2,685,000            4,626,015          2,659,583
                                                     =================    =================    =================    ================
                                                                                                                                

          






                                      See notes to financial statements.

                                                    -2-


</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                                     AZUREL LTD. AND SUBSIDIARIES

                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                             (Unaudited)


                                                                                               Nine Months Ended September 30,
                                                                                         ------------------------------------------
                                                                                                  1997                  1996
<S>                                                                                  <C>                    <C>    
                                                                                         -------------------   --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                                 $            (651,757)$             (995,123)
                                                                                         -------------------   --------------------
                                                                               
     Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
         Depreciation                                                                                147,046                 16,629
         Amortization                                                                                152,025                 12,913
         Amortization of discount                                                                          -                217,169
         Amortization of deferred costs                                                                    -                      -
         Stock options issued for services                                                                 -                 37,500
         Stock issued for penalty                                                                          -                 50,000
         Interest converted into stock                                                                     -                 29,994
         Stock issued for services                                                                         -                120,000

     Changes in assets and liabilities:
         (Increase) decrease in accounts receivable                                                 (484,182)               (20,823)
         (Increase) decrease in note receivable affiliate                                                  -                      -
         (Increase) decrease in inventories                                                          150,296                 69,601
         (Increase) decrease in prepaid expenses                                                    (444,652)                   273
         (Increase) decrease in other current assets                                                  71,394                      -
         (Increase) decrease in other assets                                                          10,000                      -
         Increase (decrease) in accounts payable                                                    (268,968)               (30,298)
         Increase (decrease) in accrued expenses                                                    (684,392)                66,722
         Increase (decrease) in payroll taxes and penalties                                         (448,654)                     -
         Increase (decrease) in advances                                                                   -                      -
                                                                                         -------------------   --------------------
            TOTAL ADJUSTMENTS                                                                     (1,800,087)               569,680
                                                                                         -------------------   --------------------

         NET CASH USED IN OPERATING ACTIVITIES                                                    (2,451,844)              (425,443)
                                                                                         -------------------   --------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Purchase of machinery and equipment                                                        (118,160)               (28,954)
         Cash paid in acquisition of Private Label Group                                                   -               (215,059)
         Increase in other assets                                                                          -                (41,311)
                                                                                         -------------------   --------------------

         NET CASH USED IN INVESTING ACTIVITIES                                                      (118,160)              (285,324)


CASH FLOW FROM FINANCING ACTIVITIES:
         Increase (decrease) in cash overdraft                                                       (10,635)               (40,776)
         (Increase) decrease in restricted cash                                                      (15,635)               (84,461)
         (Increase) decrease in due from stockholders                                                170,565                (86,110)
         (Increase) decrease in due from the Private Label Group                                           -               (650,000)
         (Increase) decrease in deferred financing costs                                              32,797                 36,848
         (Increase) decrease in deferred registration costs                                          175,514                (11,000)
         Payment of capital lease obligations                                                        (33,994)                (1,585)
         Proceeds from long-term debt                                                                      -                848,492
         Payment of long-term debt                                                                (1,157,021)              (563,767)
         Costs incurred in connection with stock issuance                                         (1,434,890)              (240,455)
         Issuance of common stock                                                                  5,538,000              1,500,000
                                                                                         -------------------   --------------------

         NET CASH PROVIDED BY FINANCING ACTIVITIES                                                 3,264,701                707,186


NET INCREASE IN CASH                                                                                 694,697                 (3,581)

CASH, beginning of period                                                                                  -                  3,581
                                                                                         -------------------   --------------------

CASH, end of period                                                                    $             694,697 $                    -
                                                                                         ===================   ====================






                                                                 See notes to financial statements.

                                                                                -3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>



                                                                    AZUREL LTD. AND SUBSIDIARIES

                                                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                            (Unaudited)


                                                                                               Nine Months Ended September 30,
                                                                                         ------------------------------------------
                                                                                                 1997                  1996
                                                                                         -------------------   --------------------


<S>                                                                                   <C>                    <C>   
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
     Cash paid during the year for:
         Interest                                                                      $             326,869 $               22,879
                                                                                         ===================   ====================
         Taxes                                                                         $               5,644 $                    -
                                                                                         ===================   ====================
     Non cash activities:
         Issuance of common stock through long-term debt                               $                   - $              163,095
                                                                                         ===================   ====================
         Issuance of common stock in connection with acquisition of Private Label      $             892,496 $               21,250
                                                                                         ===================   ====================
         Conversion of debt to common stock                                            $                   - $              457,494
                                                                                         ===================   ====================
         Purchase of equipment through capital lease obligations                       $                   - $               11,304
                                                                                         ===================   ====================
         Assumption of debt in connection with acquisition of Private Label            $                   - $            1,805,813
                                                                                         ===================   ====================
         Intangible assets with acquisition of Private Label                           $                   - $            1,056,958
                                                                                         ===================   ====================
         Stock issued for services                                                     $             112,500 $              120,000
                                                                                         ===================   ====================
         Stock options issued for services                                             $                   - $               37,500
                                                                                         ===================   ====================
         Stock issued for penalty                                                      $                   - $               50,000
                                                                                         ===================   ====================





                                                               See notes to financial statements

                                                                               -4-


</TABLE>

<PAGE>


                          AZUREL LTD. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

                      NINE MONTHS ENDED September 30, 1997

                                   (Unaudited)


1.       BASIS OF PRESENTATION

         The accompanying  consolidated financial statements as of September 30,
         1997 and for the nine and three  months  ended  September  30, 1997 and
         1996 have not been audited by independent auditors,  but in the opinion
         of  management,  such  unaudited  statements  include  all  adjustments
         consisting  of  normal   recurring   accruals   necessary  for  a  fair
         presentation of the financial  position,  the results of operations and
         cash flows for the nine months ended September 30, 1997.

         The  consolidated  financial  statements  should be read in conjunction
         with  the  financial   statements  and  related  notes  concerning  the
         Company's  accounting  policies  and  other  matters  contained  in the
         Company's annual report on Form 10-KSB. The results for the nine months
         ended September 30, 1997 are not necessarily  indicative of the results
         expected for the full year ending December 31, 1997. Certain prior year
         amounts  have been  reclassified  to conform  with the  current  year's
         presentation.

2.        INCOME (LOSS) PER SHARE

             Per share  information  is computed  based on the weighted  average
           number  of  common  shares  and  dilutive  common  share  equivalents
           outstanding during the respective periods

3.        ACQUISITIONS

         a.       On August 22, 1996,  the Company  purchased  all of the issued
                  and outstanding capital stock of the Private Label Group for a
                  purchase  price of $3,067,284 of which  $1,758,750 was paid by
                  the  delivery  of  the  Company's  promissory  notes  and  the
                  remainder in cash and common stock.






                                       -5-

<PAGE>



                  The  acquisition of the Private Label Group has been accounted
                  for as a purchase  and  accordingly,  the assets  acquired and
                  liabilities assumed have been recorded at their estimated fair
                  values. The following table summarizes this acquisition:


   Purchase Price, including acquisition costs              $         3,067,284
   Liabilities assumed                                                4,754,844
   Assets Acquired:
      Inventories                                                    (1,490,774)
      Accounts receivable, net                                       (1,523,020)
      Fixed assets, net                                              (1,411,366)
      Other assets                                                     (154,762)
      Formulae and customer lists                                    (3,237,000)
   Goodwill                                                 $             5,206
                                                            ====================

                  Included in assets acquired are certain intangibles consisting
                  principally   of  formulae  and   customer   lists  valued  at
                  $2,285,000 and $952,000,  respectively.  The allocation of the
                  purchase  price of these  assets  was based on an  independent
                  appraisal.

                  Amortization  periods for formulae  and customer  lists are 15
                  and 19 years,  respectively.  Goodwill is being amortized over
                  20 years.

                  The results of operations  for the Private Label Group for the
                  quarter and nine months ended  September 30, 1997 are included
                  in the accompanying consolidated financial statements.

                  The following schedule combines the unaudited proforma results
                  of  operations  of the Company for the quarter and nine months
                  ended  September  30, 1996 and the Private Label Group for the
                  quarter and nine  months  ended  September  30, 1996 as if the
                  acquisition  had occurred on January 1, 1996 and includes such
                  adjustments   which   are   directly   attributable   to   the
                  acquisition.  It should not be  considered  indicative  of the
                  results that would have been achieved had the acquisitions not
                  occurred or the results that would have been  obtained had the
                  acquisition actually occurred on January 1, 1996.






                                       -6-

<PAGE>

<TABLE>
<CAPTION>


                                                                  Three months ended                 Nine months ended
                                                                  September 30, 1996                   September 30,
<S>                                                        <C>                                <C>
                                                                                                           1996
                                                           ----------------------------        -------------------------
                    Net sales                              $                  2,711,637        $               7,675,748
                    Net loss                                                  (241,682)                      (1,120,795)
                    Net loss per share                                           (0.06)                           (0.37)
                    Shares used in computation                                3,878,747                        3,065,971
</TABLE>

         b.       In October  1996,  the Company  acquired  all of the assets of
                  Scent  Overnight,  a  company  of which  the  Company's  Chief
                  Executive  Officer and  Chairman  of the Board,  is a majority
                  stockholder  for  (i)  a  $225,000   promissory  note  bearing
                  interest  at the rate of 9% per annum and (ii) the  assumption
                  of a  promissory  note of $210,000  plus  accrued  interest of
                  $15,400 which was assumed by the Company in September 1995.

                  The acquisition was accounted for under the purchase method of
                  accounting  with the basis  used to record the assets of Scent
                  Overnight as zero which is the  transferor's  historical  cost
                  basis.  The  assets  of  Scent  Overnight  consisted  of  only
                  intangible  assets which is primarily Scent  Overnight's name.
                  Scent had no  operations  during the year ended  December  31,
                  1996 and for the nine months ended September 30, 1997.

         4.       INITIAL PUBLIC OFFERING

                  On July  30,  1997  the  Company  successfully  completed  its
                  initial public offering.  The Company raised gross proceeds of
                  $  5,538,000   before  offering   expenses  and   underwriters
                  discounts  pursuant to the sale of the Company's  common stock
                  and redeemable warrants.



                                       -7-

<PAGE>




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

         FOR THE NINE MONTHS AND THREE MONTHS ENDED September 30, 1997 AND 1996

         Azurel, through its wholly-owned subsidiaries,  manufactures,  markets,
         and sells private label  cosmetics,  fragrances and skincare  products.
         Prior to the completion of the acquisitions of the subsidiaries, Azurel
         focused its operations on negotiating and consumating such acquisitions
         and developing and  implementing  marketing  strategies for its Branded
         Products.

         In August 1996, Azurel acquired the stock of Private Label Group (PLC),
         and in  October  1996,  Azurel  acquired  the stock of Scent  Overnight
         (currently Scent 1-2-3).

         Results of Operations.

         Total revenues for the nine months and three months ended September 30,
         1997 were $9,091,951 and $3,060,483 respectively,  compared to revenues
         of  $968,050  for the  comparable  periods  of the  prior  year.  These
         increases  are  attributable  to the fact that the  acquisition  of PLC
         occured in August of 1996 and cumulative  complete period sales figures
         for nine and three months were not reported  because the acquisition of
         PLC occurred in August of 1996.  The nine months and three months ended
         September 30, 1997 includes  revenues of $83,908 and $26,915 for Azurel
         International sales respectively.

         Cost of sales was  $7,301,895  and  $2,204,093  for the nine months and
         three  months  ended  September  30,  1997.  Cost of sales for the same
         periods of 1996 was $764,759 because the acquisition of PLC occurred in
         August of 1996. Gross profit as a percentage of revenue was 20% for the
         nine months ended September 30, 1997 and 28% for the three months ended
         September 30, 1997. The  improvement in gross profit  percentage in the
         quarter ended  September 30, 1997 was due to, among other things a more
         profitable  product  mix,  operating  efficiencies  and  improved  cost
         controls.

         Selling,  general and  administrative  expenses for the nine months and
         three months ended  September 30, 1997 were  $2,130,579 and $644,316 as
         compared to $733,292 and $317,  641 for the nine and three months ended
         September 30, 1996. The increase in selling, general and administrative
         expenses was due primarily to the  acquisition  of PLC and the expenses
         related to its  operations for complete nine and three month periods in
         1997.  Selling,  general and  administrative  expenses  for PLC in 1996
         occurred after the acquisition in August of 1996.

         For the nine months and three months  ended  September  30,  1997,  the
         Company's  net  income  included  non-cash  expenses  of  $299,071  and
         $75,066,  respectively.  Such  expense was  incurred  principally  as a
         result of  depreciation  and  amortization  of assets acquired with the
         acquisition of PLC.



                                       -8-

<PAGE>



         Interest  expense was $326,869 for the nine months ended  September 30,
         1997 and  $91,138  for the  three  months  ended  September  30,  1997,
         compared to $465,122  for the nine  months and  $147,538  for the three
         months ended  September  30, 1996,  reflecting  interest paid on bridge
         loans utilized to provide interim  financing pending the initial public
         offering,  which was successfully completed on July 30, 1997 as well as
         interest expense incurred for normal PLC operations.


         Liquidity and Capital Resources

         The  Company's  primary  source of liquidity is accounts  receivable of
         $1,999,589, notes receivable of $255,679 and inventory of $1,091,213.

         In July 1997,  the Company  successfully  completed  an initial  public
         offering.  The  Company  raised  gross  proceeds of  $5,538,000  before
         offering  expenses and underwriter  discounts and repayments of certain
         bridge loans,  pursuant to the sale of the  Company's  common stock and
         redeemable warrants.






                                       -9-

<PAGE>



         PART II - OTHER INFORMATION

         Item 1.      LEGAL PROCEEDINGS - NONE

         Item 2.      CHANGES IN SECURITIES - NONE
                      ---------------------

         Item 3.      DEFAULTS UPON SENIOR SECURITIES - NONE
                      -------------------------------

         Item 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
                      ---------------------------------------------------

         Item 5.      OTHER INFORMATION - NONE



                                      -10-

<PAGE>


                                                             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.


         AZUREL LTD. AND SUBSIDIARIES




                                                         /s/ Gerard Semhon
                                                             Gerard Semhon
                                                        Chief Executive Officer



                                                         /s/ Frank Desimone
                                                             Frank Desimone
                                                        Chief Financial Officer



         Dated : November 14, 1997


                                      -11-

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