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 September 30, 1996

{ }  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;
                                telephone number)

                                 (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 October 31, 1996, the latest practicable date, was 6,465,610.






<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................................................. N/A

     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.................................. N/A




<PAGE>


                                                        

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

<S>                                                                     <C>                     <C>                    

                                                                            September 30,              June 30,
                                                                                1996                     1996
                                                                             (Unaudited)              (Audited)
                                                                           ----------------         ---------------

           ASSETS

Current assets:
        Cash and cash equivalents                                        $         252,673        $        615,037
        Marketable securities                                                    1,905,976               1,900,050
        Accounts receivable, net of  allowance for doubtful accounts
        of $433,000 at September 30, 1996 and $414,000 at June 30, 1996          5,376,204               3,719,265
        Inventories                                                              2,921,173               2,862,911
        Prepaid expenses and other current assets                                  819,074                 614,210
                                                                           ----------------         ---------------
             Total current assets                                               11,275,100               9,711,473
                                                                           ----------------         ---------------

Property, plant and equipment, net                                               5,670,565               5,469,304
Other assets                                                                       281,265                  81,343
Loans receivable, related parties                                                  414,110                 413,369
                                                                           ----------------         ---------------
                  Total assets                                           $      17,641,040        $     15,675,489
                                                                           ================         ===============

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
        Revolving line of credit                                         $       2,039,944        $      1,625,325
        Current portion, long-term debt                                            913,715                 935,127
        Accounts payable                                                         4,211,045               3,032,236
        Accrued liabilities                                                        339,039                 362,520
                                                                           ----------------         ---------------
             Total current liabilities                                           7,503,743               5,955,208
                                                                           ----------------         ---------------

Long-term debt, less current portion                                             1,505,333               1,666,063
Deferred tax liability                                                             547,631                 157,216

Commitments and contingencies

Stockholders' Equity:
        Series A convertible preferred stock, 10,000,000 shares of $.0001
           par value per share authorized; 80,000 and 100,000 shares issued
           and outstanding as of September 30, 1996 and June 30, 1996,
           respectively, $1,000,000 liquidation preference                               8                      10
        Common stock, 25,000,000 shares of $.0002 par value per share
           authorized; 6,465,610 and 6,332,116 issued and 6,152,273
           and 6,125,162 shares outstanding as of September 30, 1996 and
           June 30, 1996, respectively                                               1,293                   1,266
        Additional paid-in capital                                               8,479,293               8,479,318
        Retained earnings                                                        1,095,817               1,030,152
        Investment in S.O.I. Industries, Inc.                                  (1,084,983)             (1,084,983)
        Net unrealized holding loss on investment securities                     (407,095)               (528,761)
                                                                           ----------------         ---------------
             Total stockholders' equity                                          8,084,333               7,897,002
                                                                           ----------------         ---------------

                  Total liabilities and stockholders' equity             $      17,641,040        $     15,675,489
                                                                           ================         ===============


                      The accompanying notes are an integral part of the financial statements


</TABLE>


                                       1
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                                      <C>                     <C> 
                                                                                 For the three months ended
                                                                                       September 30,
                                                                                1996                     1995
                                                                           ----------------         ----------------

Net sales                                                                $       7,019,937        $       5,386,471
                                                                           ----------------         ----------------
Costs and Expenses:
     Cost of goods sold (exclusive of depreciation
       and amortization, shown separately below)                                 5,567,126                4,084,326
     Selling expenses (exclusive of depreciation
       and amortization, shown separately below)                                   305,878                  253,579
     General and administrative expenses (exclusive
       of depreciation and amortization, shown
       separately below)                                                           623,545                  459,909
     Depreciation and amortization                                                 355,251                  298,071
                                                                           ----------------         ----------------
          Total costs and expenses                                               6,851,800                5,095,885
                                                                           ----------------         ----------------
               Operating profit                                                    168,137                  290,586
                                                                           ----------------         ----------------

Other income (expense):
     Realized gains from investment transactions                                    71,119                  116,011
     Interest and other income                                                           0                   11,430
     Interest expense                                                            (108,508)                (176,363)
                                                                           ----------------         ----------------
                                                                                  (37,389)                 (48,922)
                                                                           ----------------         ----------------
               Income from continuing operations before
                    provision for income taxes                                     130,748                  241,664
Provision for income taxes                                                          65,331                   93,564
                                                                           ----------------         ----------------

               Income from continuing operations                                    65,417                  148,100

Discontinued operations:
     Gain from operations of discontinued operation,
     net of related income taxes of $0 and $38,600
     for the three months ended September 30, 1996
       and 1995, respectively                                                          250                   59,001
                                                                           ----------------         ----------------

                    Net income                                           $          65,667        $         207,101
                                                                           ================         ================

Weighted average shares of common
     stock outstanding                                                           6,152,723                5,313,641
                                                                           ================         ================

Earnings per share:
     Continuing operations                                               $            0.01        $            0.03
     Discontinued operations                                                          0.00                     0.01
                                                                           ----------------         ----------------
       Net income                                                        $            0.01        $            0.04
                                                                           ================         ================


                      The accompanying notes are an integral part of the financial statements

</TABLE>


                                       2
<PAGE>




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

<TABLE>
<CAPTION>
<S>                                                                     <C>                        <C>   
                                                                                For the three months ended
                                                                                       September 30,
                                                                                1996                     1995
                                                                           ----------------         ----------------
Cash flows from operating activities:
     Net income                                                          $          65,667        $         207,101
                                                                           ----------------         ----------------
     Adjustments  to  reconcile  net  income  to  net  cash
      used  in  operating activities:
        Depreciation and amortization                                              355,251                  298,071
        Gain on sale of marketable securities                                     (71,119)                (116,011)
        Provision for bad debts                                                     18,777                   75,000
        Increase in accounts receivable                                        (1,675,716)                (802,236)
        (Increase) decrease in inventories                                        (58,262)                  277,618
        Increase in prepaid expenses and other                                   (404,788)                     (29)
        Increase (decrease) in accounts payable                                  1,178,809                (286,811)
        (Decrease) increase in accrued liabilities                                (23,481)                  218,177
        Increase in deferred tax liability                                         390,415                        0
                                                                           ----------------         ----------------
             Net cash (used in) operating activities                             (224,447)                (129,120)
                                                                           ----------------         ----------------

Cash flows from investing activities:
     (Increase) decrease in loans receivable, related parties                        (741)                  109,418
     Change in marketable securities - available for sale                          186,859                  512,644
     Capital expenditures                                                        (556,512)                (330,319)
                                                                           ----------------         ----------------
             Net cash (used in) provided by investing activities                 (370,394)                  291,743
                                                                           ----------------         ----------------

Cash flows from financing activities:
     Net long-term repayments                                                    (182,142)                (179,150)
     Net short-term borrowings                                                     414,619                  260,000
                                                                           ----------------         ----------------
             Net cash provided by financing activities                             232,477                   80,850
                                                                           ----------------         ----------------

(Decrease) increase in cash and cash equivalents                                 (362,364)                  243,473
Cash and cash equivalents at beginning of period                                   615,037                  284,837
                                                                           ----------------         ----------------
Cash and cash equivalents at end of period                               $         252,673        $         528,310
                                                                           ================         ================

Supplemental disclosures of cash flow information:

Cash paid during the period for:
     Interest (non-capitalized)                                          $         110,638        $         161,704
                                                                           ================         ================
     Income taxes                                                        $                        $
                                                                                         -                        -
                                                                           ================         ================



                      The accompanying notes are an integral part of the financial statements

</TABLE>

                                       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,  (D/B/A  MagneTech
         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 $2,313,071 as of September
         30, 1996.  The  marketable  securities  portfolio  contains  unrealized
         losses of $407,095,  resulting  in a carrying  value of  $1,905,976  at
         September 30, 1996.  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:
          
                                       September 30,                 June 30,
                                           1996                        1996
                                           ----                        ----




         Raw materials                $       2,066,096        $       1,891,393
         Work-in-process                        684,061                  769,254
         Finished goods                         171,016                  202,264
                                       ----------------         ----------------
                                      $       2,921,173        $       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:

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

                                                                   September 30,            June 30,
                                                                      1996                   1996
                                                                      ----                   ----

         Land                                                   $        73,000        $          73,000
         Buildings and improvements                                     611,588                  546,703
         Machinery and equipment                                     10,104,494                9,612,867
                                                                 ---------------        ----------------
                                                                     10,789,082               10,232,570
         Less accumulated depreciation                               (5,118,517)              (4,763,266)
                                                                 ---------------        ----------------
         Net property, plant and equipment                      $     5,670,565        $       5,469,304
                                                                 ===============        ================
</TABLE>


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

          The Company has a revolving  line of credit  agreement  for  aggregate
          borrowings of up to $4,000,000. Interest is payable on all outstanding
          cash  advances at the bank's  prime  lending rate plus 3/8% (8.625% at
          September 30, 1996).  Any unpaid principal and accrued interest is due
          on  demand,  but no later  than  August  1996.  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 September  30, 1996,  $2,040,000  has been drawn upon the Company's
          line of credit.

          Effective  November  7, 1996,  the Company  entered  into a new credit
          faciliy  with Bank One,  N.A.  ("Bank")  which  replaced  the existing
          facility with NBD Bank, N.A. The new financing consists of a revolving
          line of credit, term loans and a long term lease agreement.  Under the
          revolving  line of  credit,  borrowings  can be made up to  $5,000,000
          based upon collateral  values as determined  under the agreement.  The
          term loans  consist of a  $1,800,000  secured  term loan and a capital
          expenditure term loan facility for up to $1,950,000, based upon 80% of
          the  acquisition  costs of new machinery and equipment.  The long term
          lease  agreement  is  collateralized  with new  equipment in excess of
          $700,000.  All of the above agreements are  collateralized by accounts
          receivable,  inventory and equipment. The facility has a two year term
          and  includes  interest  rates at .50%  above  the  Bank's  base  rate
          (closely related to the Bank's prime interest rate).








                                       5
<PAGE>




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


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

         Long-term debt is summarized as follows:

         Various  mortgages and notes  payable with 
         interest  rates ranging from  8.75% to 1%
         over prime.  Monthly  payments range from
         $3,198 to $29,000 and expiration dates
         range from 1997 through 2007.                  $       2,419,048

         Less current portion                                    (913,715)
                                                        -----------------
                                                        $       1,505,333
                                                        =================
                                                                






                                       6
<PAGE>





Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview
--------

         Digital Communications Technology Corporation ("the Company") continued
to experience  rapid sales growth for the three months ended September 30, 1996.
Net sales  increased  by over 30% from the  corresponding  quarter  of the prior
year. However, the Company continued to experience a decline in operating profit
from approximately $291,000 to $168,000 for the three months ended September 30,
1995 and 1996,  respectively.  Increases  in cost of goods sold and  general and
administrative expenses, particularly legal fees associated with the shareholder
derivative lawsuit (approximately  $96,000),  contributed to the lower operating
profits.

Liquidity
---------

         The Company utilized  approximately  $224,000 and $129,000 in cash from
operating  activities  for the three months ended  September  30, 1996 and 1995,
respectively.  The  Company's  operating  cash  position is due primarily to the
large increase in accounts  receivable which was partially offset by an increase
in accounts payable. In addition, increases in prepaid expenses and other assets
contributed to the current operating cash position.

         Accounts receivable increased approximately $1,676,000 from the balance
at June 30, 1996. The increase is due to the corresponding increase in net sales
for the current three month period. 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  76 days at September 30, 1996. The increase is due to significant
billings that occurred in the last week of September.  These billings negatively
affected the average days in collection  by  increasing  the balance of accounts
receivable  at  the  end  of the  quarter.  The  Company  continues  to  receive
competitive  pressures  from  its  customers  to  grant  longer  payment  terms.
Management will continue to focus on this area to improve credit and collections
efforts.

         Accounts  payable  increased  approximately  $1,179,000  for the  three
months  ended  September  30, 1996 as  compared  to a decrease of  approximately
$287,000 for the same period ended  September 30, 1995. The increase in accounts
payable in the current  period is due  primarily  to the growth in sales  volume
that has dictated additional raw material,  equipment,  and supply purchases. In
addition, efforts to maintain a low outstanding balance on the revolving line of
credit have contributed to the increase.

         Prepaid expenses and other assets  increased by approximately  $405,000
for the first quarter ended  September 30, 1996.  This  significant  increase is
primarily  the result of the  increase of prepaid  income taxes and deferred tax
assets in the current period. Prepaid income taxes are due to the overpayment of
estimated  taxes and the  anticipated  refunds due to the  Company's net taxable
loss in the prior fiscal year.

         Overall inventory levels remained  relatively  consistent from June 30,
1996  to   September   30,  1996.   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.  Management will continue
to focus on  ensuring  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 and by minimizing the amount of raw materials purchased.

                                       7
<PAGE>


     Approximately $370,000 in net cash was used in investing activities for the
first quarter ended September 30, 1996 as compared to approximately  $292,000 in
cash provided by investing activities for the corresponding quarter of the prior
year.  The primary  reason for this  change in  position is the  decrease in the
funds invested in the Company's  marketable  securities  portfolio.  The Company
intends to continue to invest 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.

     The Company utilized its line of credit to provide  approximately  $414,000
for working  capital needs during the three months ended  September 30, 1995 and
repaid  approximately   $182,000  in  long-term  debt.   Management  intends  to
selectively utilize its line of credit to fund working capital requirements when
needed,  and expects to reduce the amount  outstanding  on the line of credit as
collections on sales are received.

         During the three month period ended  September 30, 1996,  the Company's
cash needs were met primarily through operations.  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 $557,000 in equipment and leasehold
improvements  for the first  quarter  ended  September  30,  1996.  These larger
capital  expenditures  during  the most  recent  quarter  related  primarily  to
expenditures for duplication,  loading, packaging, and leasehold improvements at
the  Company's  Indianapolis  facility.  The Company plans to continue to expand
current operating facilities at both the Fort Lauderdale and Indianapolis plants
in order to fully meet the high volume demands of the retail-sell-through market
and the fall selling season.  The Company intends to finance these  expenditures
through operations and through separate financing arrangements.

Results of Operations
---------------------

         Overall growth in the Company's  target markets led to continued  sales
growth  in  the  current  year.  Net  sales  increased  approximately  30%  from
$5,386,000 to $7,020,000 for the three months ended September 30, 1995 and 1996,
respectively. Significant sales increases were experienced as orders were filled
to meet  the  holiday  buying  season  demands.  As in the  prior  fiscal  year,
management's  focus on the  retail-sell-through  market  resulted  in this sales
surge.  This market centers on sales of pre-recorded  video tapes which are sold
at the  retail  level.  The  Company's  customer  base has  become  increasingly
dominated by the companies which  distribute  these  pre-recorded  videos to the
retail  sell-through  market,  and  management  has  positioned  the  Company to
capitalize on this portion of the video industry.

         Operating  profit did not match the  increased  sales,  declining  from
approximately  $291,000  (5.4% of net sales) to $168,000 (2.4% of net sales) for
the three months ended September 30, 1995 and 1996, respectively. The decline in
operating  profit is due to  increases  in cost of goods  sold and  general  and
administrative  expenses,  particular legal fees associated with the shareholder
derivative lawsuit (approximately $96,000).


                                       8
<PAGE>




         Cost of goods sold, as a percentage of sales,  increased to 79% for the
three  months ended  September  30, 1996 as compared to 76% for the three months
ended  September  30,  1995.  The  increased  cost of  goods  sold  is  directly
attributable  to increased  usage of temporary  labor and the cost of offloading
excess production volumes. Use of these outside sources was unavoidable in order
complete customer orders that exceeded existing capacity at both facilities. The
lack of sufficient  capacity was due to unexpected delays in the installation of
new capacity.  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,  increased consultant fees were incurred in the current
period  as  hands-on   outside   experts  were   utilized  to   accelerate   the
implementation  of  expanded   capacity  and  new  management   methods  in  the
Indianapolis  facility.  Management  recognizes  that cost  containment  through
efficiency  gains and  productivity  improvements  is essential to the Company's
continued  profitable  growth and will  continue  to  analyze  and  monitor  the
Company's performance in this area.

         Selling  expenses  increased in relative  proportion to the increase in
net sales for the three months ended  September 30, 1996. As a percentage of net
sales, selling expenses remained relatively consistent,  decreasing from 4.6% to
4.4% for the three months ended September 30, 1995 and 1996, respectively.

         General and  administrative  expenses  increased  for the first quarter
ended  September  30,  1996 to  approximately  $624,000  (8.8% of net  sales) as
compared to approximately  $460,000 (8.5%) for the  corresponding  period of the
prior year. The slight  increase in the percentage of 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.

         The  Company   realized   income  from   securities   transactions   of
approximately  $71,000 for the three months ended September 30, 1996 as compared
to approximately  $116,000 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 from approximately  $176,000 to $109,000 for
the three months ended September 30, 1995 and 1996, respectively.  This decrease
is due to decreased borrowings on the Company's line of credit.

     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
$59,000 net of income  taxes,  for the three  months ended  September  30, 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  in the income from  discontinued  operations  for the three
months ended  September 30, 1995.  Such efforts are still  ongoing,  but did not
produce significant recoveries for the three months ended September 30, 1996.



                                       9
<PAGE>




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
<PAGE>





                                   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:  November 7, 1996
    -----------------------------------------
     Douglas L. Miller, Vice-President and
     Chief Financial Officer