UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB
 

(Mark one)
      XX        QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 
    -----
                EXCHANGE ACT OF 1934

                           For the quarterly period ended September 30, 1997

                TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE 
    -----       ACT OF 1934

                  For the transition period from ______________ to _____________


                              Commission File Number: 1-13088
                                                      -------
                                          
                  DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
        (Exact name of small business issuer as specified in its charter)
  
         Delaware                                65-0014636
  ------------------------                  ------------------------         
  (State of incorporation)                  (IRS Employer ID Number)

                16910 Dallas Parkway, Suite 100, Dallas, TX 75248
                -------------------------------------------------
                    (Address of principal executive offices)

                                 (972) 248-1922
                                 --------------
                           (Issuer's telephone number)





Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  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

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 
         November 12, 1997: 7,451,386
Transitional Small Business Disclosure Format (check one):    YES       NO X
                                                                 ----     ---- 

<PAGE>

                  DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION

              Form 10-QSB for the Quarter ended September 30, 1997

                                                 Table of Contents


                                                                           Page
Part I - Financial Information

  Item 1   Financial Statements                                              3

  Item 2   Management's Discussion and Analysis or Plan of Operation        11


Part II - Other Information

  Item 1   Legal Proceedings                                                13

  Item 2   Changes in Securities                                            13

  Item 3   Defaults Upon Senior Securities                                  13

  Item 4   Submission of Matters to a Vote of Security Holders              13

  Item 5   Other Information                                                13

  Item 6   Exhibits and Reports on Form 8-K                                 13


<PAGE>

<TABLE>
                                                                             2


Part 1 - Item 1 - Financial Statements

                  DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                      September 30, 1997 and June 30, 1997
<S>                                                                             <C>                <C>    

                                                                                (Unaudited)       (Audited)
                                                                                September 30,      June 30,
               ASSETS                                                               1997             1997  
                                                                                -------------      --------      
Current Assets
   Cash on hand and in bank                                                     $    274,000     $  229,740
   Marketable securities                                                           3,177,245        657,562
   Accounts receivable, net of allowance for doubtful
      accounts of approximately $1,000,000, respectively                           2,419,914      3,219,433
   Recoverable income taxes                                                          420,003        374,000
   Intercompany accounts receivable                                                        -         39,678
   Inventories                                                                     1,295,961      1,679,011
   Prepaid expenses and other current assets                                          98,080        128,385
                                                                                -------------    ----------
         Total current assets                                                      7,685,203      6,327,809
                                                                                -------------    ----------

Property and Equipment, net                                                        5,612,593      5,823,634
                                                                                -------------    ----------
Other Assets                                                                         166,002        193,859
                                                                                -------------    ----------
TOTAL ASSETS                                                                     $13,463,798    $12,345,302
                                                                                =============    ==========
   LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Revolving line of credit                                                     $  2,168,148   $  2,485,346
   Current portion of long-term debt                                               1,564,728      1,564,728
   Cash overdraft                                                                          -        174,616
   Accounts payable                                                                2,268,191      2,577,706
   Advances from affiliates                                                           98,962              -
   Accrued liabilities                                                               617,656         387,646
                                                                                -------------    -----------
         Total current liabilities                                                 6,717,685       7,190,042
                                                                                -------------    -----------
Long-term Debt, net of current maturities                                            465,711         509,366
                                                                                -------------    -----------
Commitments and Contingencies

Stockholders' Equity
   Common stock - $0.0002 par value.  25,000,000 shares authorized.
      7,451,386 and 7,315,022 shares issued and outstanding, respectively.             1,490           1,463
   Additional paid-in capital                                                      8,605,573       8,511,509
   Accumulated deficit                                                            (3,507,460)    (2,417,237)
   Investment in Millennia, Inc.                                                           -      (1,529,157)
   Unrealized holding gain on marketable securities                                1,180,799          79,316
                                                                                -------------     -----------
         Total shareholders' equity                                                6,280,402       4,645,894
                                                                                -------------     -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                       $13,463,798     $12,345,302
                                                                                =============     ===========
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.  The  financial  information  presented  herein has been prepared by
management without audit by independent certified public accountants. 
</TABLE>

                                                                              3

<PAGE>


                  DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 Three months ended September 30, 1997 and 1996
                                   (Unaudited)
<TABLE>
<S>                                                                             <C>               <C>    

                                                                                 Three months     Three months
                                                                                    ended            ended
                                                                                 September 30,    September 30,
                                                                                     1997             1996   
                                                                                --------------    -------------     
Net sales                                                                         $2,205,858       $7,019,937
                                                                                --------------    -------------
Costs and Expenses
   Cost of goods sold, exclusive of depreciation and amortization                  1,993,808        5,567,126
   Selling expenses, exclusive of depreciation and amortization                      117,075          305,878
   General and administrative expenses, exclusive of depreciation
      and amortization                                                               937,905          623,545
   Depreciation and amortization                                                     366,501          355,251
                                                                                --------------    -------------
      Total costs and expenses                                                     3,415,289        6,851,800
                                                                                --------------    -------------
Income (loss) from operations                                                     (1,209,431)         168,137
                                                                                --------------    -------------
Other income (expense)
   Realized gains (losses) from sales of marketable securities                      (173,130)          71,119
   Gain on sale of fixed assets                                                      130,045                -
   Interest and other income                                                         277,622                -
   Interest expense                                                                 (115,329)        (108,508)
                                                                                --------------     ------------
Income (loss) from continuing operations
   before provision for income taxes                                              (1,090,223)         130,748

Provision (benefit) for income taxes                                                       -           65,331
                                                                                --------------     ------------
Income (loss) from continuing operations                                          (1,090,223)          65,417

Discontinued operations
   Gain from operations of discontinued business, net                                      -              250
                                                                                --------------     ------------
Net income (loss)                                                                $(1,090,223)    $     65,667
                                                                                ==============     ============
Income (loss) per weighted-average share
   of common stock outstanding
      From continuing operations                                                      $(0.15)           $0.01
      From discontinued operations                                                         -                -
                                                                                -------------      ------------
         Total                                                                        $(0.15)           $0.01
                                                                                =============      ============
Weighted-average number of shares of
   common stock outstanding                                                        7,386,168        6,152,723

                                                                                =============      ============
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.  The  financial  information  presented  herein has been prepared by
management without audit by independent certified public accountants. 4
</TABLE>
 


<PAGE>

                  DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 Three months ended September 30, 1997 and 1996
                                   (Unaudited)
<TABLE>
<S>                                                                             <C>           <C>     <C>

                                                                                Three months  Three months
                                                                                   ended         ended
                                                                                September 30, September 30,
                                                                                    1997          1996        
Cash Flows from Operating Activities                                            ------------- -------------
   Net income (loss)                                                            $(1,090,223)  $     65,667
   Adjustments to reconcile net income (loss) to
      net cash provided by (used in) operating activities
         Depreciation and amortization                                              366,501        355,251
         Gain on disposition of fixed assets                                       (130,045)             -
         (Gain) Loss on sale of marketable securities                               173,130        (71,119)
         Compensation settlement paid with common stock                              94,091              -
         Provision for bad debts                                                          -         18,777
         (Increase) decrease in:
            Accounts receivable                                                     799,519     (1,675,716)
            Inventories                                                             383,050        (58,262)
            Prepaid expenses and other                                              (15,698)      (404,788)
         Increase (decrease) in:
            Accounts payable                                                       (309,515)     1,178,809
            Accrued liabilities                                                     230,010        (23,481)
            Deferred tax liability                                                        -        390,415
                                                                                ------------     ----------
Net cash provided by (used in) operating activities                                 528,677       (224,447)
                                                                                ------------     ----------
Cash Flows from Investing Activities
   Cash received from or (advanced to) affiliates                                   138,640           (741)
   Cash used to purchase marketable securities                                     (644,752)             -
   Cash received from sale of marketable securities                                 582,579        186,859
   Proceeds from sale of property and equipment                                     167,867              -
   Purchases of property and equipment                                             (193,282)      (556,512)
                                                                                -------------    -----------
Net cash used in investing activities                                                51,052       (370,394)
                                                                                -------------    -----------
Cash Flows from Financing Activities
   Reduction of cash overdraft                                                     (174,616)             -
   Net long-term debt repayments                                                    (43,655)      (182,142)
   Net short-term borrowings (repayments)                                          (317,198)       414,619
                                                                                -------------    -----------
Net cash provided by (used in) financing activities                                (535,469)       232,477
                                                                                -------------    -----------
Increase (Decrease) in Cash and Cash Equivalents                                     44,260       (362,364)
Cash and cash equivalents at beginning of period                                    229,740        615,037
                                                                                -------------    -----------
Cash and cash equivalents at end of period                                      $   274,000       $252,673         
                                                                                =============    ===========
Supplemental Disclosures of Interest and Income Taxes Paid
      Interest paid during the period                                           $    115,329       $110,638
                                                                                =============    ===========
      Income taxes paid (refunded)                                              $     46,003   $          -
                                                                                =============    ===========
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.  The  financial  information  presented  herein has been prepared by
management without audit by independent certified public accountants. 
</TABLE>
                                                                           5

<PAGE>


          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


Note 1 - Basis of Presentation

Digital Communications  Technology Corporation (DCT or Company) is an integrated
communications  company,  primarily  engaged in large  quantity  duplication  of
prerecorded  videocassettes  for customers in the entertainment and a wide range
of other industries.  The Company also provided mobile satellite uplink services
of breaking  news  stories and of  entertainment,  sporting and other events for
major television networks and news gathering  organizations in the United States
and  internationally.  Additionally,  DCT-Internet  Corporation (a  wholly-owned
subsidiary)  provides  professional  internet  website  design,  maintenance and
hosting for corporate clients worldwide.

DCT, a Delaware  corporation,  was  incorporated  on November 12, 1987 under the
name MagneTech  Corporation as a wholly-owned  subsidiary of S.O.I.  Industries,
Inc.  (now  Millennia,  Inc.).  The Company's  shareholders  changed the name to
Digital  Communications  Technology  Corporation on April 29, 1994. DCT's Common
Stock has  traded on the  American  Stock  Exchange  since May 23,  1994.  As of
September 30, 1997,  Millennia,  Inc. owned  approximately 10.5%of the Company's
issued and outstanding Common Stock.

The Company offers its reproduction  services to  entertainment  companies and a
wide range of  industrial  customers,  including  advertising  agencies,  direct
selling  organizations  and  educational  groups  throughout  the United States,
Canada and Latin America.

The Company's  satellite operation consisted of one mobile KU band unit which is
capable of transmitting  live or pre-recorded  programming  from any location to
commercial satellites. The Company's satellite customers include local, national
and international broadcast network and/or cable television outlets, with signal
origination points located  principally in the Southeastern  United States. This
operation was terminated in September 1997 and the related equipment was sold to
an unrelated third party.

The Company  purchases bulk  quantities of videotape ( pancake") and empty video
cassettes ( shells") for its reproduction business from several manufacturers at
market  prices in the United States and the Pacific Rim. The videotape and video
cassettes  are  readily  available  on the  open  market.  The  majority  of the
Company's  video   duplication   equipment  is  manufactured  by  several  major
manufacturers  in Japan and purchased  from domestic  distributors.  The Company
purchases  its materials and  equipment  from several  major  manufacturers  and
believes that the loss of any of its suppliers or  manufacturers  would not have
an adverse material effect on the Company's  business,  financial  condition and
results of operations.

The  accompanying  consolidated  financial  statements  include the  accounts of
Digital Communications  Technology Corporation (d/b/a Magnatech Corporation) and
its  wholly-owned   subsidiary,   DCT-Internet   Corporation.   All  significant
intercompany   transactions   have  been   eliminated  in   consolidation.   The
consolidated entities are referred to as Company.

During interim periods, the Company follows the accounting policies set forth in
its Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934 on Form 10-KSB filed with the  Securities and Exchange  Commission.  The
June 30, 1997 consolidated balance sheet data was derived from audited financial
statements  of the  Company,  but does not include all  disclosures  required by
generally  accepted  accounting  principles.   Users  of  financial  information
provided for interim  periods should refer to the annual  financial  information
and footnotes  contained in its Annual Report Pursuant to Section 13 or 15(d) of
The  Securities  Exchange Act of 1934 on Form 10-KSB when  reviewing the interim
financial results presented herein.



<PAGE>

                                                                            6


          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued


Note 1 - Basis of Presentation - continued

In the opinion of management,  the accompanying  interim  financial  statements,
prepared in accordance with the instructions for Form 10-QSB,  are unaudited and
contain  all  material   adjustments,   consisting  only  of  normal   recurring
adjustments  necessary to present  fairly the  financial  condition,  results of
operations  and cash flows of the Company  for the  respective  interim  periods
presented.  The  current  period  results  of  operations  are  not  necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending June 30, 1998.

The  costs  of  the  Company's  products  are  subject,  from  time-to-time,  to
inflationary  pressures  and  commodity  price  fluctuations.  In addition,  the
Company from time-to-time experiences increases in costs 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  any effects of
inflation on its operations by monitoring and controlling these costs.

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  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Note 2 - Summary of Significant Accounting Policies

a) Marketable securities

     Marketable  securities  consist of equity securities which had an aggregate
     cost of  approximately  $1,996,446  at September 30, 1997.  The  marketable
     securities   portfolio  contains  net  unrealized  gains  of  approximately
     $1,180,799,  resulting in a net carrying amount of approximately $3,177,245
     at September  30,  1997.  The  unrealized  gains are reported as a separate
     component of  stockholders'  equity.  The Company's  marketable  securities
     portfolio is classified as "available for sale" securities.

     During the first  quarter of Fiscal  1998,  the  Company  reclassified  its
     holdings in Millennia,  Inc., consisting of approximately 730,627 shares at
     a historical cost of approximately  $1,867,782, to its "available for sale"
     portfolio.  These costs and related effects of unrealized holding gains are
     included in the amounts shown in the preceding paragraph.

b) Pending changes in accounting standards

     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial  Accounting  Standards No. 128,  Earnings Per Share (FAS 128).
     FAS 128  specifies new  standards  designed to improve the EPS  information
     provided in financial statements by simplifying the existing  computational
     guidelines,  revising  the  disclosure  requirements,  and  increasing  the
     comparability  of EPS data on an international  basis.  Some of the changes
     made  to  simplify  the  EPS  computations  include:  (a)  eliminating  the
     presentation  of primary  EPS and  replacing  it with  basic EPS,  with the
     principal difference being that common stock equivalents are not considered
     in computing basic EPS, (b) eliminating the modified  treasury stock method
     and  the  three  percent  materiality  provision,   and  (c)  revising  the
     contingent share provisions and the supplemental EPS data requirements. FAS
     128 also makes a number of changes to existing disclosure requirements. FAS
     128 is effective for financial  statements  issued for periods ending after
     December  15,  1997,  including  interim  periods.  The Company has not yet
     determined the impact of the implementation of FAS 128.

<PAGE>

                                                                             7
                         
          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued


Note 2 - Summary of Significant Accounting Policies - continued

b) Pending changes in accounting standards - continued

     In June 1997, the Financial  Accounting Standards Board issued Statement of
     Financial  Accounting Standards No. 130,"Reporting  Comprehensive  Income"
     (SFAS 130).  SFAS 130  establishes  standards  for reporting and display of
     comprehensive  income. The purpose of reporting  comprehensive income is to
     present a measure of all  changes in equity  that  result  from  recognized
     transactions   and  other   economic   events  of  the  period  other  than
     transactions  with owners in their  capacity as owners.  SFAS 130  requires
     that an enterprise  classify items of other  comprehensive  income by their
     nature in a financial  statement and display the accumulated capital in the
     equity section of the balance sheet. SFAS 130 is effective for fiscal years
     beginning after December 15, 1997, with earlier application permitted.  The
     Company has not yet determined the impact, if any, of the implementation of
     SFAS 130.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
     Financial Accounting  Standards No. 131,  "Disclosures About Segments of an
     Enterprise and Related  Information" (SFAS 131). SFAS 131 specifies revised
     guidelines for determining an entity's  operating segments and the type and
     level of financial  information to be disclosed.  Once  operating  segments
     have been determined, SFAS 131 provides for a two-tier test for determining
     those  operating  segments  that would need to be  disclosed  for  external
     reporting purposes.  In addition to providing the required  disclosures for
     reportable  segments,  SFAS 131 also requires disclosure of certain "second
     level" information by geographic area and for  products/services.  SFAS 131
     also makes a number of changes to existing  disclosure  requirements.  SFAS
     131 is effective for fiscal years  beginning  after December 15, 1997, with
     earlier  application  encouraged.  The Company has not yet  determined  the
     impact, if any, of the implementation of SFAS 131.


Note 3 - Inventory

Inventories  are  valued  at the lower of cost or  market  using  the  first-in,
first-out method of accounting.  Inventory consists of the following  components
as of September 30, 1997 and June 30, 1997, respectively:

                                             September 30,        June 30,
                                                 1997              1997 
                                             -------------       ---------   
               Raw materials                 $   911,876        $1,164,970
               Work-in-process                   122,873           474,091
               Finished goods                    261,212            39,950
                                              $1,295,961        $1,679,011


<PAGE>

                                                                               
                         
          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued


Note 4 - Property and equipment

Property and equipment  consists of the following at September 30, 1997 and June
30, 1997, respectively:

                                                September 30,     June 30,
                                                    1997            1997  
                                                -------------    ----------  
     Machinery and equipment                    $  9,832,845   $  9,794,616
     Buildings and improvements                      332,440        332,440
     Leasehold improvements                        1,094,446        973,608
     Computer equipment                              451,300        447,087
     Furniture and fixtures                          304,055        304,055
     Transportation equipment                        260,154        269,966
                                                   12,275,24     12,121,772
     Accumulated depreciation                     (6,735,647)    (6,371,138)
                                                   5,539,593      5,750,634
     Land                                             73,000         73,000

     Net property and equipment                 $  5,612,593   $  5,823,634


Note 5 - Revolving Lines of Credit

The $5,000,000  line of credit facility allows the Company to borrow funds up to
a  certain  collateral  base.  The  collateral  base  is  comprised  of a  fixed
percentage of eligible  accounts  receivable  and  inventory,  as defined in the
credit agreement. On August 21, 1997, the Company's lending institution notified
the Company that the lending  institution  intends,  120 days  subsequent to the
notice, to stop making further advances on the line of credit and accelerate the
maturity  of the debt then owed.  As a result of this  action,  the  Company has
determined that it is in the best interest of the Company to obtain a substitute
lending  institution  and  is  currently  in  ongoing   negotiations  to  secure
replacement financing.


Note 6 - Litigation

The  Company  may from time to time be party to various  legal  actions  arising
during  the  ordinary  course of its  business.  In  addition,  the  Company  is
currently involved in the following litigation:

On March 4, 1996, Richard Abrons, allegedly on behalf of the Company, and Adrian
Jacoby, allegedly on behalf of an affiliate company,  Millennia,  Inc., formerly
known as S.O.I. Industries, Inc. ("Millennia"),  brought a purported shareholder
derivative  lawsuit  against the Company's board of directors - Kevin B. Halter,
Kevin B. Halter,  Jr., Gary C. Evans and James Smith - as well as Halter Capital
Corporation and Securities Transfer  Corporation.  In addition,  the Company and
Millennia  have  been  joined  as  "nominal  defendants."  In the  lawsuit,  the
plaintiffs  have alleged  breaches of fiduciary duty,  fraud,  and violations of
state  securities  laws. The plaintiffs  seek  unspecified  actual and exemplary
damages,  a  constructive  trust  against  the assets of the  defendants  and an
accounting of the affairs of the defendants  with respect to their dealings with
the  Company  and  Millennia.  In  addition,  the  plaintiffs  have  requested a
temporary  injunction  and the  appointment  of a receiver  for the  Company and
Millennia.

<PAGE>

                                                                              9


          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued


Note 6 - Litigation - continued

In 1995, Halter Capital Corporation  ("HCC"), in which Kevin B. Halter and Kevin
B. Halter,  Jr. (the "Halters") are principals,  negotiated the  satisfaction of
$1,217,000 in debt owed to creditors by Millennia's subsidiary, American Quality
Manufacturing Corporation ("AQM," since sold). The Halters are also officers and
directors  of  Millennia.  HCC  satisfied  these debts by  transferring,  in the
aggregate, 1,659,000 shares of Millennia common stock it owned to the creditors.
To repay HCC for the AQM  indebtedness  HCC paid,  Millennia  transferred to HCC
1,622,000 shares of DCT Common Stock it held as an investment.  With the payment
of DCT Common Stock to HCC and the salaries or other compensation  received from
Millennia by the Halters,  Mr. Evans and Mr. Smith,  plaintiffs assert that each
breached their duties of loyalty,  usurped corporate opportunities and committed
gross  mismanagement  by wrongfully  using  Millennia and DCT as instruments for
their own and HCC's pecuniary gain to the detriment of Millennia,  DCT and their
shareholders.  If any damages are ultimately  awarded to the  plaintiffs,  those
damages will be on behalf of, and for the benefit of, the Company and all of its
shareholders.  If they  are  successful,  the  plaintiffs  may  recover  certain
attorney's fees and costs.  This case is entitled  Richard Abrons et al v. Kevin
B. Halter et al, Cause No. 96-02169-G,  in the 134th Judicial  District,  Dallas
County,  Texas.  Even though the Company is a nominal  defendant in the lawsuit,
the Plaintiffs  have not sought to recover any damages  against the Company.  In
this type of lawsuit,  the Company is joined as a procedural matter to make it a
party to the lawsuit.

All of the defendants have answered and denied the allegations  contained in the
plaintiffs'  Petition.  A certain amount of discovery has been conducted by both
plaintiffs  and  defendants.  All of the  defendants  deny  all of the  material
allegations and claims in the Petition,  dispute the plaintiffs' contention that
it is a proper shareholder  derivative action, deny that the plaintiffs have the
right to pursue  this  lawsuit on behalf of the Company  and  Millennia  and are
vigorously  defending  the  lawsuit.  In  addition,  the  defendants  have filed
counterclaims  against the  plaintiffs  and third party  actions  against  Blake
Beckham,  Attorney at Law, Beckham & Thomas, L.L.P., Sanford Whitman, the former
CFO of the Company and Jack D. Brown Jr.,  the former  President of the Company,
seeking damages in excess of $50 million.  In its counterclaim,  the Company has
asserted that the filing of this lawsuit and the temporary restraining order the
plaintiffs  caused to be issued in the case  resulted in damages to the Company.
However,  the Company  does not believe  that the lawsuit  will have any further
material  impact  on the  operations  or  financial  condition  of the  Company.
Discovery is continuing and the matter has not been set for trial.

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 and pornographic 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.

<PAGE>

                                                                            10

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued


Note 6 - Litigation - continued

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.

The  Company  does not  believe  that it is  currently  involved  in any pending
actions  that will have a material  adverse  effect on its  business,  financial
condition and results of operations.




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                                                                            11

Part I - Item 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
   AND RESULTS OF OPERATIONS

(1)   Caution Regarding Forward-Looking Information

This  quarterly   report  contains   certain   forward-looking   statements  and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to  the  Company  or  management.   When  used  in  this  document,   the  words
"anticipate,"   "believe,"   "estimate,"   "expect"  and  "intend"  and  similar
expressions,  as they relate to the Company or its  management,  are intended to
identify forward-looking statements. Such statements reflect the current view of
the  Company   regarding  future  events  and  are  subject  to  certain  risks,
uncertainties  and  assumptions,  including the risks and  uncertainties  noted.
Should  one or more of  these  risks or  uncertainties  materialize,  or  should
underlying assumptions prove incorrect,  actual results may vary materially from
those  described  herein  as  anticipated,   believed,  estimated,  expected  or
intended. In each instance,  forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.


(2)   Results of Operations

Overview

Digital  Communications  Technology Corporation (DCT or Company) continues to be
impacted by industry-wide  trends towards slower retail sell-through of products
produced for the Company's customers and, accordingly, experiences significantly
reduced  sales  volume.  Further,  the  diminished  sales volume has  negatively
impacted  gross product  margins as the  Company's  fixed costs compose a higher
percentage  of each  customer's  order.  The  Company  continues  to  experience
elevated  general and  administrative  costs due to general overhead matters and
legal and professional costs related to the stockholder  derivative  litigation.
This litigation was scheduled for  arbitration  and mediation  during the fourth
calendar quarter of 1997.

Results of operations

The  Company   experienced   a  decline  in  first  quarter  sales  volume  from
approximately  $7.0  million for the three months  ended  September  30, 1996 to
approximately  $2.2  million for the three  months  ended  September  30,  1997.
Several factors  impacted this decline in sales  including,  but not limited to,
management's  evaluation  of the  Company's  customer  base and  elimination  of
inefficient  and  unprofitable  accounts  and the  overall  industry  decline in
product sales.

The  industry  wide  decline  continues  to be a result of a  continuing  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 further  slowing sales.  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, which are the Company's customers. In addition,  releases of theatrical
product into video  outlets  lacked any real hits to draw people into rental and
sell-through  activities.  The industry  consensus is that the overall  industry
sales activity during Calendar 1997 is significantly slower than expected.

<PAGE>



                                                                             12

Due to the Company's fixed costs,  cost of sales of approximately  $1.99 million
compose  approximately  90.4% of sales as opposed to approximately $5.57 million
or  79.3%  of  sales  for  the  periods  ended  September  30,  1997  and  1996,
respectively.  Management  continues to evaluate its fixed and variable costs in
relation to sales activity to strive towards  optimum  efficiency and profitable
operations.

Selling expenses decreased by approximately  $189,000 to approximately  $117,000
as compared to  approximately  $306,000 for the three months ended September 30,
1997 and 1996, respectively.  Management has reduced these costs in an effort to
better target quality  customers  that will best utilize the Compan's  facility
and operational methods.

General and  administrative  expenses  continue to be significantly  affected by
general corporate overhead and legal and professional fees. The Company incurred
aggregate  costs of  approximately  $938,000  during the first  three  months of
Fiscal 1998 as compared to approximately  $624,000 during the first three months
of Fiscal 1997. A significant  component of this increase was the September 1997
closing  and  relocation  of  the  Ft.  Lauderdale   facility  to  Indianapolis.
Management is of the opinion that the closing of the Ft. Lauderdale facility and
the sale of the assets of its  satellite  uplink  operation  will  significantly
contribute to future cost savings in these categories.


(3)   Liquidity and capital resources

During the first three months of Fiscal 1998, the Company  experienced  net cash
provided by operations of  approximately  $529,000 as compared to using net cash
in  operations  of  approximately  $(224,000)  during  the  same  period  of the
preceding  year.  Included  in this  net cash  flow  into  the  Company  was the
collection,  and affiliated  reduction,  of accounts receivable of approximately
$800,000 and the reduction of inventories of approximately  $383,000.  The funds
provided  by  these  inflows  were  utilized  to  reduce  accounts   payable  by
approximately $309,000.

Further  liquidity was provided by  approximately  $168,000 in proceeds from the
sale of the satellite  uplink  equipment to an unrelated third party.  This cash
inflow was offset by purchases of video duplication  equipment and facilities in
the Indianapolis facility of approximately $193,000.

The Company also utilized cash during the first quarter of Fiscal 1998 to reduce
a book cash  overdraft of  approximately  $175,000 and to lower the  outstanding
balance on the Company's revolving line of credit of approximately $318,000.

Overall,  the  Company's  available  cash on  hand  decreased  by  approximately
$188,000 from June 30, 1997 to September  30, 1997 with the net change  relating
to the overall increase in property and equipment at the Indianapolis  facility.
The net  change in cash  provided  by  operations  and the net cash used in debt
reductions basically offset.

The Company relocated and expanded the entire  Indianapolis  facility into a new
172,000 square foot building during Fiscal 1997. The  Indianapolis  plant opened
in June 1997 with an increased  operating 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.  As  mentioned  above,  the Company  added  approximately  $193,000 in
property  and  equipment  during the first  quarter of Fiscal  1998.  Due to the
capital intensive and high technology nature of the Company's business,  certain
levels of capital  acquisitions  for new  duplication  and production  equipment
and/or  upgrades  of  existing  equipment  will be  required to keep the Company
competitive in the marketplace.  Any such expenditures,  if necessary,  would be
financed through operations and separate financing/leasing  arrangements.  There
can be no  assurances,  however,  that the  Company  will  actually  incur these
budgeted expenditures.

<PAGE>

                                                                            13

Part II - Other Information

Item 1 - Legal Proceedings

   See the Notes to Consolidated Financial Statements

Item 2 - Changes in Securities

   None

Item 3 - Defaults on Senior Securities

   None

Item 4 - Submission of Matters to a Vote of Security Holders

     The Company has held no regularly scheduled,  called or special meetings of
     shareholders during the reporting period.

Item 5 - Other Information

   None

Item 6 - Exhibits and Reports on Form 8-K

September 25, 1997  Announcement  of closing all  operations in Ft.  Lauderdale,
            Florida including videotape duplication and mobile satellite uplink
            service operations. 
 







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<PAGE>



                                                                           14
                                   SIGNATURES


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

                                   DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION


November  13 , 1997                               /s/ Kevin B. Halter 
        ------                             -------------------------------------
                                                                 Kevin B. Halter
                                           Chairman and Chief Accounting Officer


                                                                      15
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