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 June 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 September 15, 1997 was 5,258,747 shares.


<PAGE>

                          AZUREL LTD. AND SUBSIDIARIES

                                      INDEX


                                                                          Page
                                                                         Number
                                                                      ----------

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

     Consolidated Balance Sheets                                           1
     Consolidated Statements of Operations                                 2
     Consolidated Statements of Cash Flows                                 3
     Notes to Financial Statements                                         4

Item 2 - Management's Discussion and Analysis or
     Plan of Operation                                                     6

PART II - OTHER INFORMATION                                                8

SIGNATURE                                                                  9

<PAGE>
                                           AZUREL LTD. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                 June 30,           December 31,
                                                                                                   1997                 1996
                                                                                           ------------------   ------------------
                                                                                              (Unaudited)
                                                       ASSETS
<S>                                                                                    <C>                  <C>   

CURRENT ASSETS:
     Restricted cash                                                                    $            268,731 $            268,731
     Accounts receivable, net of allowance for
         doubtful accounts of $50,000                                                              1,902,923            1,515,407
     Note receivable affiliate                                                                       290,279              255,679
     Inventories                                                                                   1,160,153            1,241,509
     Prepaid expenses                                                                                 47,651               50,641
     Due from stockholders and related parties                                                             -              184,480
     Other current assets                                                                             72,643              106,891
                                                                                           ------------------   ------------------
         TOTAL CURRENT ASSETS                                                                      3,742,380            3,623,338

MACHINERY AND EQUIPMENT, net                                                                         498,768              571,507

DEFERRED FINANCING COSTS                                                                              38,545               32,797

DEFERRED REGISTRATION COSTS                                                                          186,630              175,514

FORMULAE AND CUSTOMER LISTS, net                                                                   3,073,887            3,175,107

GOODWILL, net                                                                                          4,977                5,107

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

                                                                                        $          7,605,657 $          7,643,840
                                                                                           ==================   ==================

                                    LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

CURRENT LIABILITIES:
     Cash overdraft                                                                      $             15,309 $             10,635
     Accounts payable                                                                               1,277,993            1,058,163
     Accrued expenses                                                                               1,065,206              944,430
     Accrued payroll taxes and penalties                                                              612,723              519,323
     Customer advances                                                                                 57,760               57,760
     Current portion of long-term debt                                                              3,767,839            1,551,816
     Current portion of capital lease obligations                                                      17,310               19,770
                                                                                           -------------------   ------------------
         TOTAL CURRENT LIABILITIES                                                                  6,814,140            4,161,897
                                                                                           -------------------   ------------------

LONG-TERM DEBT                                                                                      1,267,327            3,189,054

CAPITAL LEASE OBLIGATIONS                                                                              14,129               20,322

STOCKHOLDERS' (DEFICIT) 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 3,878,747 shares                                                        3,879                3,879
     Additional paid-in-capital                                                                     2,382,190            2,382,190
     Accumulated deficit                                                                           (2,873,833)          (2,111,327)
                                                                                           -------------------   ------------------
                                                                                                     (487,764)             274,742
     Less stock subscriptions receivable                                                               (2,175)              (2,175)
                                                                                           -------------------   ------------------
         TOTAL STOCKHOLDERS' (DEFICIT) EQUITY                                                        (489,939)             272,567
                                                                                           -------------------   ------------------

                                                                                        $          7,605,657 $          7,643,840
                                                                                           ==================   ==================
</TABLE>


                       See notes to financial statements.

                                       -1-

<PAGE>
                          AZUREL LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

<TABLE>
<CAPTION>


                                                             Three Months ended June 30,             Six Months Ended June 30,
                                                    -------------------------------------------------------------------------------
                                                         1997                 1996                 1997                1996
                                                    -----------------    -----------------    -----------------    ----------------
<S>                                              <C>                  <C>                  <C>                  <C>  

NET SALES                                         $         3,298,286  $                 -  $         6,031,468  $                -

COST OF GOODS SOLD                                          2,562,942                    -            4,670,452                   -
                                                    -----------------    -----------------    -----------------    ----------------

GROSS PROFIT                                                  735,344                    -            1,361,016                   -

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                  918,015              154,420            1,887,791             415,651
                                                    -----------------    -----------------    -----------------    ----------------

LOSS FROM OPERATIONS                                         (182,671)            (154,420)            (526,775)           (415,651)

INTEREST EXPENSE                                              104,542               45,064              235,731             317,584
                                                    --------------------------------------    -------------------------------------

NET LOSS                                          $          (287,213) $          (199,484) $          (762,506) $         (733,235)
                                                    =================    =================    =================    ================


NET LOSS PER COMMON SHARE                         $             (0.07) $             (0.07) $             (0.20) $            (0.28)
                                                    =================    =================    =================    ================

WEIGHTED AVERAGE COMMON SHARES
     USED                                                   3,878,747            2,685,000            3,878,747           2,659,583
                                                    =================    =================    =================    ================
                                                                                                                                 

          

</TABLE>


                       See notes to financial statements.

                                       -2-

<PAGE>
                          AZUREL LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                                 Six Months Ended June 30,
                                                                                         ------------------------------------------
                                                                                                  1997                  1996
                                                                                         -------------------   --------------------
<S>                                                                                   <C>                   <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                                 $            (762,506)$             (733,235)
                                                                                         -------------------   --------------------
                                                                                     
     Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
         Depreciation                                                                                 87,534                    198
         Amortization                                                                                101,350                      -
         Amortization of discount                                                                          -                163,162
         Amortization of deferred costs                                                               35,121                      -
         Stock options issued for services                                                                 -                 37,500

     Changes in assets and liabilities:
         (Increase) decrease in accounts receivable                                                 (387,516)                     -
         (Increase) decrease in note receivable affiliate                                            (34,600)                     -
         (Increase) decrease in inventories                                                           81,356                      -
         (Increase) decrease in prepaid expenses                                                       2,990                (15,909)
         (Increase) decrease in other current assets                                                  34,248                      -
         (Increase) decrease in other assets                                                               -                (37,225)
         Increase (decrease) in accounts payable                                                     219,830                      -
         Increase (decrease) in accrued expenses                                                     234,829                146,269
         Increase (decrease) in payroll taxes and penalties                                           93,400                      -
         Increase (decrease) in advances                                                                   -                      -
                                                                                         -------------------   --------------------
            TOTAL ADJUSTMENTS                                                                        468,542                293,995
                                                                                         -------------------   --------------------

         NET CASH USED IN OPERATING ACTIVITIES                                                      (293,964)              (439,240)
                                                                                         -------------------   --------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Purchase of machinery and equipment                                                         (14,795)               (20,476)
                                                                                         -------------------   --------------------


CASH FLOW FROM FINANCING ACTIVITIES:
         Increase (decrease) in cash overdraft                                                         4,674                      -
         (Increase) decrease in restricted cash                                                            -                      -
         (Increase) decrease in due from stockholders                                                      -                (92,100)
         (Increase) decrease in due from the Private Label Group                                           -               (500,000)
         (Increase) decrease in deferred financing costs                                             (40,869)                28,958
         (Increase) decrease in deferred registration costs                                          (11,116)               (81,047)
         Payment of capital lease obligations                                                         (8,653)                     -
         Proceeds from long-term debt                                                                571,500                460,000
         Payment of long-term debt                                                                  (206,777)              (310,000)
         Issuance of common stock                                                                          -              1,267,450
                                                                                         -------------------   --------------------

         NET CASH PROVIDED BY FINANCING ACTIVITIES                                                   308,759                773,261


NET INCREASE IN CASH                                                                                       -                313,545

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

CASH, end of period                                                                    $                   - $              317,126
                                                                                         ===================   ====================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
     Cash paid during the year for:
         Interest                                                                      $               2,128 $                6,520
                                                                                         ===================   ====================
         Taxes                                                                         $                   - $                    -
                                                                                         ===================   ====================
     Non cash activities:
         Issuance of common stock through long-term debt                               $                   - $              163,095
                                                                                         ===================   ====================
         Purchase of equipment through capital lease obligations                       $                   - $               11,304
                                                                                         ===================   ====================


                       See notes to financial statements.

                                       -3-


</TABLE>



<PAGE>


                          AZUREL LTD. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

                         SIX MONTHS ENDED JUNE 30, 1997

                                   (Unaudited)


1.       BASIS OF PRESENTATION

         The accompanying  consolidated financial statements as of June 30, 1997
         and for the six and three  months ended June 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 six months
         ended June 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 six months
         ended  June 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.        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 $2,174,790 of which  $1,758,750 was paid by
                  the  delivery  of  the  Company's  promissory  notes  and  the
                  remainder in cash.

                  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:



                                       -4-

<PAGE>




Purchase Price, including acquisition costs              $      2,174,790
Liabilities assumed                                             4,754,844
Assets Acquired:
  Inventories                                                  (1,490,774)
  Accounts receivable, net                                     (1,523,020)
  Fixed assets, net                                              (518,872)
  Other assets                                                   (154,762)
  Formulae and customer list                                   (3,237,000)
                                                       --------------------
Goodwill                                                 $          5,206
                                                       ====================

                  Included in assets acquired are certain intangible  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 six months ended June 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 six months
                  ended  June  30,  1996 and the  Private  Label  Group  for the
                  quarter  and  six  months  ended  June  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.

                             Three months ended                 Six months ended
                               June 30, 1996                      June 30, 1996
                   ----------------------------        -------------------------
Net sales          $                 2,417,285        $               4,964,111
Net loss                              (359,535)                        (879,113)
Net loss per share                       (0.13)                           (0.33)
Shares used in computation           2,685,000                        2,659,583

         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 six months ended June 30, 1997.

         4.       SUBSEQUENT EVENT

                  On July  30,  1997  the  Company  successfully  completed  its
                  initial public offering.  The Company raised gross proceeds of
                  $  5,400,000   before  offering   expenses  and   underwriters
                  discounts  pursuant to the sale of the Company's  common stock
                  and redeemable warrants.


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

         FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 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 six months and three months ended June 30, 1997
         were $6,031,468 and $3,298,286 respectively,  compared to zero revenues
         in the  comparable  period of the  prior  year,  as Azurel  had not yet
         consumated the acquisition of PLC. The sales reported,  resulted almost
         entirely from the acquisition of PLC which was acquired in August 1996.
         The six months and three months ended June 30, 1997  includes  revenues
         of $56,993 and $3,811 for Azurel International sales respectively.



                                       -5-

<PAGE>



         Cost of sales was  $4,670,452  and  $2,562,942  for the six  months and
         three months ended June 30, 1997, with no  corresponding  data from the
         same periods of 1996 as Azurel had not yet consumated  the  acquisition
         of PLC.  Gross  profit as a  percentage  of revenue was 23% for the six
         months  ended June 30, 1997 and 22% for the three months ended June 30,
         1997. The cost of sales resulted  almost  entirely from the acquisition
         of PLC in August 1996, and the results of PLC's  operations for the six
         months period.

         Selling,  general and  administrative  expenses  for the six months and
         three  months  ended June 30,  1997 were  $1,887,791  and  $918,015  as
         compared to $415,651  and $154,  420 for the six and three months ended
         June 30,  1996.  The  increase in selling,  general and  administrative
         expenses was due to the acquisition of PLC and the expenses  related to
         its operations,  compared to the minimal operating expenses  associated
         with a minimal revenue producing company.

         For the six months and three months ended June 30, 1997,  the Company's
         net  income  included   non-cash  expenses  of  $224,005  and  $98,483,
         respectively.  Such  expense was  incurred  principally  as a result of
         depreciation  and  amortization of assets acquired with the acquisition
         of PLC.

         Interest  expense was  $235,731  for the six months ended June 30, 1997
         and $104,542  for the three  months  ended June 30,  1997,  compared to
         $317,584 for the six months and $45,064 for the three months ended June
         30, 1996,  reflecting interest paid on bridge loans utilized to provide
         interim  financing  pending  an  initial  public  offering,  which  was
         successfully completed on July 30, 1997 as well as interest expense for
         PLC operations.

         As a result of all the above factors, net losses for the six months and
         three months ended June 30, 1997 was $762,506 and $287,213, as compared
         to a net loss of $733,235  for the six months ended June 30, 1996 and a
         net loss of $199,484 for the three months ended June 30, 1996.

         Liquidity and Capital Resources

         The  Company's  primary  source of liquidity is accounts  receivable of
         $1,902,923, notes receivable of $290,279 and inventory of $1,160,153.

         In July 1997,  the Company  successfully  completed  an initial  public
         offering.  The  Company  raised  gross  proceeds of  $5,400,000  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.

         To date,  inflation  has not had a  material  effect  on the  Company's
         business.





                                       -6-

<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



                                       -7-

<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/ Constantine Bezas
                                                Constantine Bezas
                                                President and Director



         Dated : October 1, 1997


                                       -8-