UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC. 20549


                                   FORM 10-QSB
(Mark One)
[x]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934

         For the quarterly period ended March 31, 1997

[ ]      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: 1-13088

                  DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
                 (Name of small business issuer in its charter)

            Delaware                                     65-0014636
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)

                 16910 Dallas Parkway, Suite 100, Dallas, Texas  75248 
                    (Address of principal executive offices;)
                            
                                 (972) 248-1922
                           (Issuer's telephone number)

   ------------------------------------------------------------------------

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


         Check whether issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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  outstanding of the common stock of the registrant
on April 30, 1997, the latest practicable date, was 7,315,022.



Transitional Small Business Disclosure Format (check one): Yes[ ] No[X]



<PAGE>



                                TABLE OF CONTENTS


Item                                                              Numbered
Number                                                              Page

Part I

     1.  Financial Statements....................................     1

     2.  Management's Discussion and Analysis or
         Plan of Operation.......................................     7


Part II

     1.  Legal Proceedings.......................................     11

     2.  Changes in Securities...................................    N/A

     3.  Defaults Upon Senior Securities.........................    N/A

     4.  Submission of Matters to a Vote of Security
         Holders................................................     N/A

     5.  Other Information......................................     N/A

     6.  Exhibits and Reports on Form 8-K.......................      12



                                     
<PAGE>


          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

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

           ASSETS  


Current assets:
        Cash and cash equivalents                                           $     (225,305)                $      615,037
        Marketable securities                                                      887,087                      1,900,050
        Accounts receivable, net of  allowance for doubtful accounts
         $520,000 at March 31, 1997 and $414,000 at June 30, 1996                4,274,615                      3,719,265
        Inventories                                                              2,170,526                      2,862,911
        Prepaid expenses and other current assets                                  722,646                        614,210
                                                                            --------------                  -------------
             Total current assets                                                7,829,569                      9,711,473
                                                                            --------------                  -------------

Property, plant and equipment, net                                               5,450,309                      5,469,304
Other assets                                                                       399,174                         81,343
Loans receivable, related parties                                                  414,300                        413,369
                                                                            --------------                  -------------
                  Total assets                                                  14,093,352                 $   15,675,489
                                                                            ==============                  =============


         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Revolving line of credit                                                 2,897,495                  $   1,625,325
       Current portion, long-term debt                                          1,846,588                        935,127
       Accounts payable                                                           761,931                      3,032,236
       Accrued liabilities                                                        419,210                        362,520
                                                                            -------------                   ------------
             Total current liabilities                                          4,545,191                      5,955,208


Long-term debt, less current portion                                              529,810                      1,666,063
Deferred tax liability                                                            417,675                        157,216
Commitments and contingencies

Stockholders' Equity:
     Preferred stock, 10,000,000 shares of $.00001 par value per
      authorized;  Series A convertible preferred stock, 100,000
      authorized and 0 and 100,000 shares issued and outstanding
      March 31, 1997 and June 30, 1996, respectively                                    0                             10
     Common stock, 25,000,000 shares of $.0002 par value per share
      authorized; 7,314,922 and 6,332,116 issued and 7,075,457
      6,125,162 shares outstanding as of March 31, 1997 and
      June 30, 1996, respectively                                                   1,463                          1,266
     Additional paid-in capital                                                 8,511,508                      8,479,318
     Retained earnings                                                            530,873                      1,030,152
     Investment in Millennia, Inc.                                            (1,084,983)                    (1,084,983)
     Net unrealized holding loss on investment securities                       (738,218)                      (528,761)
                                                                            -------------                   ------------
             Total stockholders' equity                                         7,220,643                      7,897,002
                                                                            -------------                   ------------
       
             Total liabilities and stockholders' equity                        14,093,352                  $  15,675,489
                                                                            =============                   ============

</TABLE>

     
    The accompanying notes are an integral part of the financial statements


                                       1
<PAGE>

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
<S>                                                    <C>               <C>                  <C>               <C>
                                                         For the three months ended              For the nine months ended
                                                                  March 31,                              March 31,
                                                                  ---------                              ---------
                                                            1997             1996                 1997              1996
                                                        -------------    -------------        -------------     -------------

Net sales                                             $    3,981,243   $    5,929,998       $   19,795,659    $   19,211,980
                                                        -------------    -------------        -------------     -------------
Costs and Expenses:
     Cost of goods sold                                    3,601,034        4,396,183           16,243,305        14,858,921
     Selling expenses                                        306,313          297,762              947,473           861,914
     General and administrative expenses                     615,816          523,126            1,803,528         1,367,597
     Depreciation and amortization                           379,477          315,792            1,108,458           921,412
                                                                                              -------------     -------------
                                                        -------------    -------------
          Total costs and expenses                         4,902,640        5,532,863           20,102,764        18,009,844
                                                        -------------                         -------------     -------------
                                                                         -------------
               Operating (loss) profit                     (921,397)          397,135            (307,105)         1,202,136
                                                        -------------    -------------        -------------     -------------

Other income (expense):
     Realized gains (losses) from investment
       transactions                                            7,454          311,069               99,536           367,989
     Interest and other (expense) income                     (5,393)           10,182              (5,393)            47,312
     Interest expense                                      (106,212)        (149,775)            (317,904)         (529,704)
                                                        -------------                         -------------     -------------
                                                                         -------------
                                                           (104,151)          171,476            (223,761)         (114,403)
                                                        -------------    -------------        -------------     -------------
           (Loss) income from continuing operations
             before (benefit) provision for income taxes (1,025,548)          568,611            (530,866)         1,087,733
                
(Benefit) provision for income taxes                       (226,053)          226,720             (33,311)           427,720
                                                        -------------    -------------        -------------     -------------

           (Loss) income from continuing operations        (799,495)          341,891            (497,555)           660,013
    

Discontinued operations:
     Gain (loss) from operations of
     discontinued operation                                    2,963            6,159              (1,722)           101,519
          
                                                        -------------    -------------        -------------     -------------

                    Net (loss) income                 $    (796,532)   $      348,050       $    (499,277)    $      761,532
                                                        =============    =============        =============     =============

Preferred dividends                                                0               0               250,000                 0
                                                        -------------    ------------         -------------     -------------

Net loss (income) attributable to common
   stockholders                                      $     (796,532)   $     348,050        $    (749,277)    $      761,532

                                                      ===============   =============        ==============    ==============

Weighted average shares of common stock
      outstanding                                          7,040,497        5,732,182            6,461,977         5,487,449
                                                       ==============   ==============       ==============    ==============

(Loss) earnings per share:

     Continuing operations                            $       (0.11)   $         0.06       $       (0.12)    $         0.12
     Discontinued operations                                    0.00             0.00                 0.00              0.02
                                                        -------------    -------------        -------------     -------------
           Net (loss) income                          $       (0.11)   $         0.06       $       (0.12)    $         0.14
                                                        =============    =============        =============     =============
</TABLE>

     The accompanying notes are an integral part of the financial statements

                                       2
<PAGE>

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>
<S>                                                                         <C>                     <C>
                                                                                 For the nine months ended
                                                                                         March 31,
                                                                                 1997                    1996
                                                                            ----------------        ----------------
Cash flows from operating activities:
     Net income                                                           $       (499,277)       $         761,532
                                                                            ----------------        ----------------
     Adjustments  to  reconcile  net  income  to  net  cash  used  
       in  operating activities:
         Depreciation and amortization                                            1,108,458                 921,412
         Gain on sale of marketable securities                                     (99,536)               (367,989)
         Provision for bad debts                                                    105,833                 131,417
         Increase in accounts receivable                                          (661,183)             (1,469,536)
         Decrease in inventories                                                    692,385                 114,103
         (Increase) decrease in prepaid expenses and other                        (426,267)                 183,911
         Decrease in accounts payable                                           (2,270,305)             (1,007,680)
         Increase in accrued liabilities                                             56,690                 197,187
         Increase in deferred tax liability                                         260,456                       0
                                                                            ----------------        ----------------
              Net cash used in operating activities                             (1,732,746)               (535,643)
                                                                            ----------------        ----------------

Cash flows from investing activities:
     (Increase) decrease in loans receivable, related parties                         (931)                 142,158
     Change in marketable securities - available for sale                           903,042               2,612,005
     Increase in other assets and other liabilities                                       0                  11,723
     Capital expenditures                                                       (1,089,463)               (693,965)
                                                                            ----------------        ----------------
              Net cash (used in) provided by investing activities                 (187,352)               2,071,921
                                                                            ----------------        ----------------

Cash flows from financing activities:
     Net long-term repayments                                                     (224,792)               (541,973)
     Net short-term borrowings (repayments)                                       1,272,170               (840,000)
     Issuance of common stock                                                        32,378                  55,000
                                                                            ----------------         ---------------
              Net cash provided by (used in) financing activities                 1,079,756             (1,326,973)
                                                                            ----------------        ----------------

(Decrease) increase in cash and cash equivalents                                  (840,342)                 209,305
Cash and cash equivalents at beginning of period                                    615,037                 284,837
                                                                            ----------------        ----------------
Cash and cash equivalents at end of period                                $       (225,305)       $         494,142
                                                                            ================        ================

Supplemental disclosures of cash flow information:

Cash paid during the period for:
     Interest (non-capitalized)                                           $         286,006       $         544,129
                                                                            ================        ================
     Income taxes                                                         $               -       $         146,000
                                                                            ================        ================

</TABLE>

     The accompanying notes are an integral part of the financial statements

                                       3
<PAGE>

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


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

          The  accompanying   consolidated   financial  statements  include  the
          accounts of Digital  Communications  Technology  Corporation  and its
          wholly-owned  subsidiaries,  Tapes Unlimited,  Inc. and DCT - Internet
          Corporation.  The  operations  of Tapes  Unlimited,  Inc.  which  were
          formerly  consolidated  with the operations of the Company,  have been
          segregated as discontinued  operations.  All significant  intercompany
          transactions have been eliminated.

          Certain  information  and footnote  disclosures  normally  included in
          financial  statements  prepared in accordance with generally  accepted
          accounting  principles  have been  condensed  or  omitted  from  these
          unaudited internal financial  statements.  These financial  statements
          should be read in conjunction with the financial  statements and notes
          thereto included in the Company's annual audited financial statements.

          Certain  amounts in the prior period  financial  statements  have been
          reclassified to conform with current year presentation.

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

          In the opinion of management,  the  accompanying  unaudited  financial
          statements  contain  all  adjustments,   (consisting  of  only  normal
          recurring  accruals)  necessary  to conform  with  generally  accepted
          accounting  principles.  The  results of  operations  for the  periods
          presented are not necessarily indicative of the results to be expected
          for the full year.

2.       Marketable Securities

          Marketable  securities  consist of equity securities with an aggregate
          cost, based on specific identification,  of $1,625,314 as of March 31,
          1997. The marketable  securities  portfolio contains unrealized losses
          of $738,227,  resulting  in a carrying  value of $887,087 at March 31,
          1997.  The unrealized  losses are reported as a separate  component of
          stockholders'  equity. All of the Company's  securities are classified
          as available for sale securities.

3.       Inventory

          Inventories  are  valued at the lower of cost  (weighted  average)  or
          market and consisted of the following:

                                               March 31,             June 30,
                                                 1997                  1996
                                           ----------------      ---------------

         Raw materials                   $        1,385,262     $     1,891,393
         Work-in-process                            609,801             769,254
         Finished goods                             175,463             202,264
                                           ----------------      ---------------
                                                  2,170,526           2,862,911
                                           ================      ===============


                                      4
<PAGE>
                                                      

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)


4.       Property, Plant and Equipment
         -----------------------------

         Property, plant and equipment consist of the following:

                                                                    
                                             March 31,               June 30,
                                              1997                     1996
                                         ----------------        ---------------
         Land                                      73,000                 73,000
         Buildings and improvements               750,057                546,703
         Machinery and equipment               10,447,031              9,612,867
                                         ----------------        ---------------
                                               11,270,088             10,232,570
         Less acccumulated depreciation       (5,819,779)            (4,763,266)
                                         ----------------        ---------------
         Net property, plant 
           and equipment                        5,450,309              5,469,304
                                         ================        ===============


5.       Revolving Lines of Credit
         -------------------------

          The Company has a revolving  line of credit  agreement  for  aggregate
          borrowings of up to $5,000,000. Interest is payable on all outstanding
          cash advances at the bank's base lending rate (closely  related to the
          bank's prime  interest  rate) plus 1/2%. At March 31,  $2,897,495  has
          been drawn upon the Company's  line of credit with an interest rate of
          9.0%. Any unpaid principal and accrued interest is due on demand,  but
          no later than October 31, 1998.  The line of credit is  collateralized
          by accounts  receivable,  inventory  and  equipment.  The terms of the
          agreement  require,  among other  provisions,  that the Company comply
          with  requirements  for  maintaining   certain  cash  flow  and  other
          financial  ratios and restricts the payment of cash  dividends.  As of
          March 31,  the  Company  failed  to meet  certain  of these  financial
          covenants,  but is in  negotiations  with the bank to either  cure any
          events of non-compliance or obtain a waiver of the covenants.

6.       Long Term Debt
         --------------

         Long term debt consists of the following:

                                              March 31,             June 30,
                                               1997                  1996
                                         ------------------    -----------------
         Various mortgages and notes
         payable with interest rates 
         ranging from 7.63% to 1% over
         prime.  Monthly payments range
         from $3,198 to $29,000 and
         expiration dates range from 1997
         to 2007.                                  596,364             2,601,190



                                      5
<PAGE>

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)


6.       Long Term Debt, Continued:
         --------------------------

         Loan payable to bank in monthly installments plus
         interest at the bank's base rate (prime) plus 1/2%,
         maturing October 1998; collateralized by accounts 
         receivables, inventory and equipment.  The terms
         of the agreement require, among other provisions,
         that the Company comply with certain 
         ratios and covenants. 
                                                       1,780,034              0
                                                    ------------     ----------
                                                       2,376,398      2,601,190
         Less current portion                        (1,846,588)      (935,127)
                                                    ------------     ----------
                                                   $     529,810    $ 1,666,063
                                                    ============     ==========

          Under the terms of certain  of the above  agreements,  the  Company is
          required to comply with certain ratios and covenants.  As of March 31,
          the Company failed to meet certain of these  financial  covenants.  As
          such, all amounts due under these agreements are classified as current
          liabilities until the next measurement date.


7.       Preferred Stock:
         ----------------

          On May 6, 1996 the Company sold 100,000 shares of Series A Convertible
          Preferred  Stock (  Preferred  Stock")  in a  private  placement.  The
          Preferred Stock is convertible  into Common Stock at the discretion of
          the holder at the lesser of (i) 20% discount on the previous  five day
          average  closing bid at conversion,  or (ii) previous five day average
          closing bid price at closing.  The holder may convert up to 20% of the
          Preferred  Stock every 30 days  beginning June 15, 1996. The Preferred
          Stock is convertible for a term of three years, and accrues  dividends
          at a rate of 7% per annum  (dividends  are rescinded if the shares are
          converted in the first year).  The holders of the preferred  shares do
          not have any voting rights.

          Through March 1997, all 100,000 shares of Series A Preferred Stock had
          been converted,  pursuant to their original terms, into 968,430 shares
          of Common Stock at an average per share conversion price of $1.08. The
          terms of the  Preferred  Stock which  provided for a lower  conversion
          price than the quoted  market price of the Common Stock at the time of
          conversion resulted in an aggregate difference of $250,000. Such terms
          take into account a number of factors  affecting value,  including the
          ability  to market a  significant  number of shares of the  underlying
          common stock which were  negotiated at the time of the issuance of the
          Preferred Stock. Due to a recent SEC Staff Announcement  regarding the
          accounting for  convertible  debt and preferred  stock with discounted
          conversion  rates,  the  difference  has now been  accounted  for as a
          Preferred Stock dividend.  This difference was previously  recorded at
          the carrying amount of the Preferred Stock converted.



                                       6
<PAGE>

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

Overview

     Digital Communications Technology Corporation ("the Company") experienced a
significant  drop in net sales for the  quarter,  but was still above prior year
levels for the nine month period  ended March 31, 1997.  Net sales for the three
months ended March 31, 1997 decreased approximately 33%, while net sales for the
nine month period ended March 31, 1997 increased  approximately 3% in comparison
to the respective  periods of the prior year.  The large  operating loss for the
quarter  also  produced an  operating  loss for the nine months  ended March 31,
1997.  Increases in cost of goods sold and general and  administrative  expenses
contributed to the operating losses.

Liquidity

     The Company  utilized  approximately  $1,733,000  and $536,000 in cash from
operating  activities  for the nine  months  ended  March  31,  1997  and  1996,
respectively.  The  Company's  operating  cash  position is due primarily to the
large decrease in accounts payable and an increase in accounts  receivable which
was partially offset by a decrease in the level of inventory.

     Accounts  payable  decreased  approximately  $2,270,000 for the nine months
ended March 31, 1997 as compared to a decrease of  approximately  $1,001,000 for
the same period  ended March 31, 1996.  The decrease in accounts  payable in the
current period is due primarily to the decline in raw material  purchases  which
is a result of the declining sales volume.

     Accounts receivable  increased  approximately  $661,000 from the balance at
June 30,  1996,  while  the  Company's  accounts  receivable  collection  period
(measuring  how  quickly,   on  average,   the  Company  collects  its  accounts
receivable)   increased  from   approximately  61  days  at  June  30,  1996  to
approximately  65 days at March 31, 1997. The slight  increase in the collection
period  can be  attributed  to  slower  payments  from  some  of  the  Company's
customers.  However,  the  collection  period for the nine months  represents  a
dramatic  improvement  from the 85 day  period  for the six month  period  ended
December 31,  1996.  Management  will  continue to focus on this area to improve
credit and collections  efforts,  although there can be no assurances that these
efforts will be successful.

     Overall  inventory  levels declined by $692,000 from June 30, 1996 to March
31, 1997.  The  reduction is primarily  due to the decrease in sales volume that
has slowed the level of raw material  purchases.  Management has been successful
in its efforts to ensure that the least amount of operating  cash is invested in
inventory  by  insisting   that  shipments  of  raw  materials  are  made  on  a
just-in-time  basis.  Inventory levels,  particularly in the work-in-process and
finished goods  categories,  will fluctuate  somewhat  depending on the size and
number of video tape duplicating orders processed at any given time.  Typically,
the Company does not stock significant quantities of finished products, shipping
orders immediately upon completion.

     Approximately $187,000 in net cash was used in investing activities for the
nine month period ended March 31, 1997 as compared to  approximately  $2,072,000
in cash provided by investing  activities  for the  corresponding  period of the
prior year.  The primary  reason for this change in position is the  increase in
capital expenditures in the current period (see Capital Resources below).

                                       7
<PAGE>

     The Company utilized its line of credit to provide approximately $1,080,000
for working capital needs during the nine months ended March 31, 1997 and repaid
approximately  $225,000 in long-term  debt.  Management  intends to  selectively
utilize its line of credit to fund working capital requirements when needed.

     During the nine month period ended March 31, 1997, the Company's cash needs
were met primarily through operations and draws on the Company's line of credit.
Long-term  liquidity  needs are  anticipated  to be met through sales growth and
separate financing arrangements. Management anticipates that it will continue to
meet most  obligations  as they come due,  and no  vendor/supplier  problems are
expected.

Capital Resources

     The Company  invested  approximately  $1,089,000 in equipment and leasehold
improvements  for the nine month  period  ended  March 31,  1997.  These  larger
capital outlays  related  primarily to expenditures  for  duplication,  loading,
packaging, and leasehold improvements at both the Company's Indianapolis and Ft.
Lauderdale  facilities.   The  Company  recently  announced  the  expansion  and
relocation of the entire  Indianapolis  facility into a new 172,000  square foot
building.  The Indianapolis plant is scheduled to open in June with an increased
capacity of  approximately  20%. The new facility layout is designed to optimize
process flow, to reduce product handling and to minimize the total cycle time of
productions  from order entry to delivery.  In addition,  the Company intends to
make capital  expenditures in excess of $2,000,000 in the coming fiscal year and
intends to finance these  expenditures  through  operations and through separate
financing  arrangements.  There can be no assurances , however, that the Company
will actually incur these budgeted expenditures.

Results of Operations

     Overall  growth in the  Company's  target  markets led to  continued  sales
growth of  approximately  3% in the current  fiscal  year to date.  Net sales of
$19,796,000  for the nine month  period ended March 31, 1997 were the highest in
the Company's history,  compared with $19,212,000 for the same period last year.
However,  net sales for the three months ended March 31, 1997 decreased  sharply
by approximately 33% to $3,981,000, down from $5,930,000, the highest ever sales
for the quarter in the same period ended March 31, 1996. The  significant  sales
decrease in the quarter  ended March 31, 1997 can be  attributed  to an industry
wide decline in the quarter that is the result of a severe retail backlog caused
by the closure of many stores in several large retail chains. Product from these
chain  stores  went  back  into the  market,  providing  other  chains  with the
opportunity to buy distressed  merchandise  at  significantly  reduced cost, and
thus slowing further the third fiscal quarter sales which are traditionally very
slow. At the same time, other chains achieved sharp, margin-driven reductions in
inventory  levels by reducing in store  quantities and by returning  significant
amounts of unsold product to their vendors, our customers. In addition, releases
of  theatrical  product into video  outlets  lacked any real hits to draw people
into retail, and generally mild winter weather across the country reduced rental
and  sell-through  activity.  It is  important to note that the decline in sales
volume is not  attributable to a loss of any major accounts to competitors,  nor
have any of the  Company's  key  customers  gone out of  business.  The industry
consensus  is that the first few months of 1997 have been  significantly  slower
than expected.

                                       8
<PAGE>

     Operating   profit  also  fell   sharply,   declining   from  a  profit  of
approximately  $397,000 (6.7% of net sales) to a loss of approximately  $921,000
(-23.1%  of net  sales)  for the three  months  ended  March 31,  1996 and 1997,
respectively.  A lesser decline was  experienced for the nine months ended March
31,  1997 as  operating  profit  for  this  period  declined  from a  profit  of
approximately  $1,202,000  (6.3% of net sales) in the previous year to a loss of
$307,000 (-1.6% of net sales). Approximately $98,000 of the total operating loss
(31.9%) for the nine months ended March 31, 1997 is  attributable to losses from
one of the Company's subsidiaries,  DCT-Internet  Corporation ( DCTI"). DCTI has
experienced start up losses in its first year of operation as sales have not yet
covered its operating expenses.  The Company fully anticipates that DCTI's sales
will  continue to increase and that DCTI will provide  operating  profit for the
Company by the end of the calendar year.  There can be no  assurances,  however,
that actual results will meet these  projections.  The remaining decline for the
Company is due to increases  in cost of goods sold as a percentage  of sales and
general and administrative expenses.

     Cost of goods sold, as a percentage of sales, increased to 82% for the nine
months  ended March 31, 1997 as compared to 77% for the nine months  ended March
31, 1996. The increased cost of goods sold is directly attributable to increased
usage of temporary labor and the cost of offloading excess production volumes to
other  duplicators  during the first and second  fiscal  quarters.  Use of these
outside  sources  was  unavoidable  in order to  complete  customer  orders that
exceeded existing capacity at both facilities.  The lack of sufficient  capacity
was due to severely limited space in the current buildings and unexpected delays
in the  installation  of new  equipment.  Management has already taken the steps
necessary  to provide for the  increase  in sales  volume by  providing  for new
duplication  and packaging  equipment.  In addition,  due to the fixed nature of
several direct overhead components, particularly depreciation, the cost of goods
sold percentage will increase in periods where sales severely  decline - such as
the third quarter of fiscal 1997.  Management  recognizes that cost  containment
through  efficiency  gains and  productivity  improvements  is  essential to the
Company's continued  profitable growth and will continue to implement actions to
improve the  Company's  performance  in this area.  There can be no  assurances,
however, that any such actions will be successful.

     Selling expenses as a percentage of net sales increased  slightly from 4.5%
to 4.8% for the nine months  ended March 31,  1996 and 1997,  respectively.  The
increase is due to sales commissions  paid. 

     General and  administrative  expenses  increased  for the nine months ended
March 31, 1997 to  approximately  $1,804,000  (9.1% of net sales) as compared to
approximately  $1,368,000 (7.1%) for the corresponding period of the prior year.
The increase in the  percentage  of general and  administrative  expenses to net
sales is attributable to salary  increases and additional legal fees incurred in
connection  with the  shareholder  derivative  lawsuit.  See  discussion of this
matter in the Company's Form 10-KSB.

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     The Company  realized income from securities  transactions of approximately
$99,000  for the nine months  ended March 31, 1997 as compared to  approximately
$368,000  for the  corresponding  period of the prior year.  The gains were from
investment  transactions  associated  with the Company's  marketable  securities
portfolio. The Company invests funds in equity securities,  mainly listed on the
New York and  American  Stock  Exchanges,  and by  policy,  limits the amount of
exposure  in  any  one  equity  investment.  Such  investments  are  continually
monitored to reduce the risk of any adverse  stock market  volatility.  Cash not
invested in securities is placed on account with brokerage firms, which is swept
daily into a federally insured money market account, or placed on account with a
federally insured national bank.

     Interest expense decreased sharply from approximately  $530,000 to $318,000
for the nine  months  ended  March  31,  1996 and  1997,  respectively  and from
approximately $150,000 to $106,000 for the three months ended March 31, 1996 and
1997, respectively.  This decrease is due to reduced borrowings on the Company's
line of credit and the lack of interest  expense  related to any borrowings from
the Company's marketable securities portfolio.

     During June 1995,  the  Company's  management  decided to  discontinue  the
operations of Tapes Unlimited,  Inc. (TU).  Management believed that the cost of
maintaining the TU subsidiary  outweighed the benefits  provided to the Company.
The effect on net income of the  operations  of TU is  segregated on the face of
the income  statement  as  discontinued  operations,  and totaled  approximately
$95,000  net of income  taxes,  for the six  months  ended  December  31,  1995.
Although all operations at TU have ceased,  certain collection efforts are still
conducted  by the  Company  on  behalf of TU.  These  efforts,  along  with debt
forgiveness resulting from settlements with TU creditors, resulted in recoveries
which is reflected,  net of related  expenses,  in the income from  discontinued
operations  for the nine months  ended March 31,  1996.  Such  efforts are still
ongoing,  but did not produce  significant  recoveries for the nine months ended
March 31, 1997.

Other Items

     The costs of the Company's  products are subject to inflationary  pressures
and commodity  price  fluctuations.  In addition,  the Company from time to time
experiences  increases  in cost  of  materials  and  labor,  as  well  as  other
manufacturing and operating  expenses.  The Company's ability to pass along such
increased costs through  increased  prices has been difficult due to competitive
pressures.  The Company  attempts to minimize  the effects of  inflation  on its
operations by controlling these costs.

     The  Company's  sales  levels  generally  follow  the   retail-sell-through
markets,  which  typically  peak in the fall and early  winter  months as retail
demand and holiday  orders are met. The Company has  attempted to mitigate  this
seasonality  by  increasing  sales  efforts to lower  volume,  but higher margin
customers such as those involved with corporate  training video  duplication and
the video rental  market.  Finally,  management  intends to focus its  marketing
efforts  toward the mass  marketing  advertising  industry to help  mitigate the
seasonality  of  the  retail-sell-through   markets.  Even  by  utilizing  these
techniques, sales levels are still expected to be lower in the spring and summer
months.






                                      10
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                                     PART II

Item 1.  Legal Proceedings

     In  February  1996,   Convention  Tapes  International,   Inc.,  a  Florida
corporation,  filed a civil  action in the  Circuit  Court of the 11th  Judicial
Circuit for Dade County,  Florida,  against Tapes Unlimited,  Inc. and MagneTech
Corporation for damages "in excess of $50,000"  allegedly  resulting from breach
of  contract  and  warranty,   and  fraudulent   inducement   and/or   negligent
misrepresentation on the part of Tapes Unlimited.  MagneTech  Corporation is the
previous  name of the  Company,  and Tapes  Unlimited  was an  Orlando,  Florida
subsidiary of the Company from March 1994 until Tapes Unlimited was dissolved in
October  1995.  Tapes  Unlimited  ceased  operations  in  June  1995.  MagneTech
Corporation is a named  defendant  against whom plaintiff  asserts  vicarious or
successor  liability for its alleged damages,  claiming that Tapes Unlimited was
the "alter ego" or "mere instrumentality" of MagneTech.

     Upon  motion  of  the  defendants,  in  July  1996  the  civil  action  was
transferred to the Circuit Court in Orange County, Florida, Case No. CI96-5851.

     As best the Company  has been able to  determine,  in  February  1995 Tapes
Unlimited  duplicated  certain  videotapes for plaintiff from videotape  masters
provided by plaintiff.  Plaintiff alleges that the duplicates delivered by Tapes
Unlimited contained, in part, extraneous material which caused plaintiff to lose
the business of a certain account, as well as the prospective business of other,
unspecified persons. The plaintiff has since ceased doing business.

     The  Company  currently  has  pending a motion to dismiss  the matter  and,
therefore,  has not  filed a  substantive  response  to  plaintiff's  complaint.
Minimal  discovery and some settlement  discussions  occurred in summer of 1996.
Until the  court  rules on the  Company's  motion to  dismiss,  it is  uncertain
whether the Company must even defend the action.  Even  assuming that the motion
to  dismiss  is  denied,  the  validity  or depth of the claim is unknown to the
Company. Similarly, the probability of judgment, if any, and the potential range
of  monetary  award  thereon,  cannot be  evaluated  until  substantive,  formal
discovery is undertaken.  Meanwhile,  the Company  intends to vigorously  defend
this matter, procedurally and substantively.



                                       11
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Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     10.1     Lease agreement with Duke Realty, Inc.*

* Previously filed with the Securities and Exchange  Commission as an exhibit to
the Company's Registration  Statement on Form SB-2,  Registration No. 333-26509,
filed May 5, 1997.

(b)  Reports on Form 8-K

     The Company filed a current report on Form 8-K with the Commission on March
31, 1997 announcing the plan to issue Class A and Class B Warrants as a dividend
to shareholders of record as of April 30, 1997.

     The Company filed a current report on Form 8-K with the Commission on April
2, 1997  announcing  the  relocation  and  expansion of its  Indianapolis  plant
operations.







                                       12
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                                   SIGNATURES

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


DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION


By:  /s/ Douglas L. Miller                                   Date:  May 14, 1997
     ---------------------------------------------
     Douglas L. Miller, Vice-President and
     Chief Financial Officer

                           






                                      
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