<PAGE>
                      
                                   FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


(X )     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
         OCTOBER 31, 1997.
         -----------------

                                       OR

(   )    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
         FROM             TO          .
              ---------      ---------



                             COMMISSION FILE NUMBER

                                     0-18288
                                     -------

                        DIRECT CONNECT INTERNATIONAL INC.
                        ---------------------------------
             (Exact name of registrant as specified in its charter)


         Delaware                                               22-2705223
         --------                                               ----------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

266 Harristown Road
Glen Rock, New Jersey                                              07452
---------------------                                              -----
(Address of principal executive                                 (Zip Code)
offices)

Registrant's telephone number, including area code - (201) 445-2101
                                                     --------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports)  and (2) has been  subject to such  filing
requirements for the past 90 days.

                                  YES  X     NO
                                      ---       ---

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of October 31, 1997: 9,062,066
                                      ---------






<PAGE>



                DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY

                                                       INDEX

PART I.      FINANCIAL INFORMATION                              PAGE NO

             Item 1.        Financial Statements          

                            Condensed Consolidated
                            Balance Sheets -
                            October 31, 1997 and
                            April 30, 1997                         3

                            Condensed Statements
                            Of Consolidated
                            Operations - Three
                            Months Ended October 31,
                            1997 and October 31, 1996 and
                            Six Months Ended October 31,
                            1997 and October 31, 1996              4

                            Condensed Statements
                            Of Consolidated Cash
                            Flows - Six Months
                            Ended October 31, 1997
                            and October 31, 1996                   5

                            Notes to Financial Statements          6

             Item 2.        Management's Discussion
                            and Analysis of Results
                            of Operations and
                            Financial Condition                  7 - 13

PART II.     OTHER INFORMATION

             Item 6.        Exhibits and Reports
                            on Form 8-K                            13

             Signatures                                            14




                                                        


<PAGE>

PART 1.     FINANCIAL INFORMATION

           ITEM 1. FINANCIAL STATEMENTS
<TABLE>
                  Direct Connect International Inc. and Subsidiary
                           Consolidated Balance Sheets
                                                                        
                                     ASSETS
<CAPTION>
                                               October 31, 1997   April 30, 1997
                                               ----------------   --------------
                                                  (Unaudited)
<S>                                                <C>               <C>    
Current assets
    Cash and cash equivalents                         $59,710           $32,939
    Accounts receivable                                18,617            22,857
    Notes receivable                                  269,270               ---
    Notes receivable-officers                          93,390            90,404
    Investments                                           ---            13,001
    Prepaid financing costs and other expenses         12,324            56,314 
                                                       ------            ------
                   Total current assets               453,311           215,515
                                                      -------           -------

Property and equipment , at cost
    Furniture and fixtures                             42,543            42,543
    Molds, tools and dies                             267,498           267,498
                                                      -------           -------
                                                      310,041           310,041
    Less: accumulated depreciation                    276,183           263,083
                                                      -------           -------
                                                       33,858            46,958
                                                       ------            ------

Investment in Glasgal                               3,003,970         1,694,395
Security deposits                                         700               700
                                                    ---------         ---------
                                                    3,004,670         1,695,095
                                                    ---------         ---------

                    Total assets                   $3,491,839        $1,957,568
                                                   ==========        ==========


                     LIABILITIES and STOCKHOLDERS' EQUITY

Current liabilities                                
    Accounts payable                                 $495,372          $534,901
    Accrued expenses and taxes payable                138,926            85,564
    Notes payable-officers and stockholders             ---             253,680
    Notes payable-other, current portion            2,119,999         1,404,661
    Investment, warrants to sell Glasgal                ---             300,000
                                                    ---------         ---------
             Total current liabilities              2,754,297         2,578,806
                                                    ---------         ---------

Stockholders' equity 
  Convertible preferred stock:
    Authorized 5,000,000 shares, $.001
    par value; issued and outstanding-
    5,000,000 shares                                    5,000             5,000
  Common stock:
    Authorized 15,000,000 shares, $.001
    par value; issued and outstanding-
    9,062,066 shares                                    9,062             9,062
  Capital in excess of par value                    5,148,449         5,128,449
  Accumulated deficit                              (4,424,969)       (5,668,408)
  Accumulated other comprehensive income                ---             (95,341)
                                                    ---------         ---------
    Total stockholders' equity                        737,542          (621,238)
                                                      -------          -------- 
    Total liabilities and stockholders'
     equity                                        $3,491,839        $1,957,568
                                                   ==========        ==========

</TABLE>

<PAGE>

<TABLE>

                               Direct Connect International Inc. and Subsidiary 
                                    Consolidated Statements of Operations
<CAPTION>
                                                  For The                                     For The
                                             Three Months Ended                          Six Months Ended
                                             ------------------                          ----------------
                                      October 31, 1997   October 31, 1996       October 31, 1997    October 31, 1996
                                      ----------------   ----------------       ----------------    ----------------
                                                (Unaudited)                                 (Unaudited)
<S>                                        <C>                <C>                  <C>               <C>    
Revenues:
    Sales                                  $     ---          $259,838             $     ---           $431,587
                                           ---------          --------             ---------           --------

Costs and expenses
    Cost of goods sold                           ---           124,713                    ---           288,190
    Royalties/licensing fees                     ---             6,881                    ---            22,690
    Product development cost                     ---             6,000                    ---            12,000
    Advertising and promotion                    ---             4,539                    ---             4,539
    Depreciation                               6,549             6,549                 13,100            13,100
    General and administrative expenses      332,218           316,370                567,702           551,034
    Less:  management fees                   (35,731)         (164,658)               (42,407)         (419,658)
                                             -------          --------                -------          -------- 
                                             303,036           300,394                538,395           471,895
                                             -------           -------                -------           -------


Operating income (loss)                     (303,036)          (40,556)              (538,395)          (40,308)

Gain on sale of securities                    352,934          696,885              1,875,548         1,613,820
Interest income                                 5,954              707                  6,728               772
Other income                                      277            1,094                    277             3,372
Interest expense                              (41,168)         (25,510)              (100,719)          (51,263)
                                              -------          -------               --------           ------- 
Net income                                    $14,961         $632,620             $1,243,439        $1,526,393
                                              =======         ========             ==========        ==========
Income per common share                         $0.00            $0.04                  $0.08             $0.10
                                              =======         ========             ==========        ==========

</TABLE>











<PAGE>

<TABLE>


                               Direct Connect International Inc. and Subsidiary

                                      Consolidated Statements of Cash Flows
<CAPTION>
                                                                        For The Six Months Ended
                                                                        ------------------------
                                                                October 31, 1997    October 31, 1996
                                                                ----------------    ----------------
                                                                            (Unaudited)
<S>                                                               <C>                 <C>    
Cash flows from operating activities
     Net income                                                   $1,243,439          $1,526,393
                                                                  ----------          ----------
     Adjustments to reconcile net income
        to net cash (used in) operating activities:
        Depreciation                                                  13,100              13,100
        Gain on sale of Glasgal stock                             (1,950,018)         (1,613,820)
        Loss on sale of Mark Solutions Stock                          74,469                 ---
     Decrease (increase) in assets
        Accounts receivable                                            4,240               8,291
        Prepaid financing costs and expenses                          43,990              33,719
     Increase (decrease) in liabilities
        Accounts payable                                             (39,529)           (620,642)
        Accrued expenses and taxes payable                            53,362             265,762
                                                                  ----------          ----------
     Total adjustments                                            (1,800,386)         (1,913,590)
                                                                  ----------          ---------- 
     Net cash (used in) operating activities                        (556,947)           (387,197)
                                                                  ----------          ----------


Cash flows from investing activities
     Notes receivable-officers, increase                              (2,986)            (13,276)
     Increase in Due from Kidsview, Inc.                                 ---            (108,648)
     Increase in investment in Evolutions, Inc.                          ---          (1,800,000)
     Increase in due from IBN Inc.                                  (219,270)                ---
     Increase in due from Funatics Inc.                              (50,000)                ---
     Acquisition of property and equipment                               ---              (1,369)
     Proceeds from sale of Glasgal stock                           2,196,768           1,828,100
     Acquistion of Glasgal stock                                  (1,856,325)                ---
     Proceeds from sale of Mark Solutions stock                       33,873                 ---
                                                                   ---------           ---------
     Net cash provided by (used in) investing activities             102,060             (95,193)
                                                                   ---------           ---------
Cash flows from financing activities
     Increase in notes payable-officers and stockholders                 ---               2,097
     Decrease in notes payable-officers and stockholders            (253,680)                ---
     Increase in notes payable-other                                 755,178           1,624,129
     Decrease in notes payable-other                                 (39,840)         (1,158,857)
     Increase in paid in capital                                      20,000                 ---
                                                                     -------             -------
     Net cash provided by financing activities                       481,658             465,272
                                                                     -------             -------
Net increase (decrease) in cash and cash equivalents                  26,771             (17,118)
Cash and cash equivalents at beginning of period                      32,939              67,886
                                                                     -------             -------
Cash and cash equivalents at end of period                           $59,710             $50,768
                                                                     =======             =======

Supplemental disclosures of cash flows information
     Cash paid during the six months for interest                   $100,719             $51,263
                                                                    --------             -------


</TABLE>






<PAGE>



                        DIRECT CONNECT INTERNATIONAL INC.
                                 AND SUBSIDIARY

                          Notes to Financial Statements

1.       In the opinion of  management,  the  accompanying  unaudited  financial
         statements contain all adjustments, consisting only of normal recurring
         adjustments,  necessary to present fairly (a) the financial position as
         of October 31, 1997,  (b) the results of  operations  for the three and
         six months ended  October 31, 1997 and October 31, 1996 and (c) changes
         in cash flows for the six months ended October 31, 1997 and October 31,
         1996.

2.       Refer to the  audited  financial  statements  for the fiscal year ended
         April 30, 1997 for details of accounting policies and accounts, none of
         which have changed significantly in composition since that date.

3.       Financial results for the interim period ended October 31, 1997 may not
         be indicative of the financial results for the fiscal year ending April
         30, 1998.

4.       The  Company has  available  carry  forward  losses  applicable  to the
         reduction  of future  Federal  income taxes  aggregating  approximately
         $2,400,000  at October 31, 1997 and which expire  during  various years
         through 2011.
























<PAGE>


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

RESULTS OF OPERATIONS

General
-------

The Company had no revenues from  operations  for the three and six months ended
October 31, 1997, and unless the Company  develops  additional  product lines or
enters into management  arrangements with other companies, as it has done in the
past but which have terminated, the Company will have to sell assets to continue
its operations.  In November 1997, the Company entered into a non-binding letter
of intent to merge with Medical Device Alliance,  Inc., a company engaged in the
business of distributing  ultrasonic  surgical  systems which are being marketed
for the aspiration of soft tissue by plastic surgeons.

Net Sales
---------

Net sales for the three and six month periods ended October 31, 1997 amounted to
$0 and $0, respectively, as compared to $259,838 and $431,587 respectively,  for
the same periods in the prior fiscal year.

The Company intends to develop additional product lines;  however,  there can be
no assurance that it will be able to do so on a commercially  viable basis given
the limited  resources of the Company.  If such product  lines are so developed,
the Company may be required to sell or license such product lines, depending on,
among other factors, its financial resources.

At October 31, 1997, the Company did not have a backlog of confirmed orders from
its customers.

Gross Profit
------------

Gross Profit  percentage  for the three months ended  October 31, 1997 was 0% as
compared to 52% for the three  months  ended  October  31,  1996.  Gross  Profit
percentage  for the six months ended  October 31, 1997 was 0% as compared to 33%
for the six months ended  October 31, 1996.  Such decrease for the three and six
months ended  October 31, 1997 was a result of no sales during the three and six
months ended October 31, 1997.

Royalties/Licensing Fees
------------------------

Royalties/licensing fees are variable expenses which increase as sales increase.
For the three and six month periods ended October 31, 1997,  the Company paid $0
and $0, respectively,  as compared to $6,881 (or 3% of sales) and $22,690 (or 5%
of  sales)  for  the  three  and six  month  periods  ended  October  31,  1996,
respectively.  The  decrease in  royalties  was a result of no sales  during the
three and six months ended October 31, 1997.



                                                        





<PAGE>



Other Income
------------

Other income amounted to approximately $360,000 and $1,880,000 for the three and
six months  ended  October 31, 1997 as compared to  approximately  $700,000  and
$1,615,000 for the three and six months ended October 31, 1996. Other income for
the six months ended October 31, 1997 is primarily  comprised of the gain on the
sale of 221,667 shares of common stock of Glasgal Communications, Inc. (Glasgal)
held by the Company.

General and Administrative Expenses
-----------------------------------

For the three and six months ended October 31, 1997,  the Company  received from
its  management  arrangement  with  Evolutions,  Inc. (EVO) $35,731 and $42,407,
respectively, as compared to $164,658 and $419,658,  respectively, for the three
and six months ended October 31, 1996, which covers the monthly reimbursement of
the back office costs incurred by the Company in connection  with its operations
as it relates to supporting the product lines which were sold to EVO. The reason
for the decrease was the reduction in activity in connection  with the Company's
management  arrangements  on  behalf  of  EVO,  which  terminated  in May  1997.
Additional  costs were  incurred by the Company after the  termination  date for
which the Company was  reimbursed  during this  period.  Set forth below are the
principal components.

General and  administrative  expenses for the three and six month  periods ended
October  31,  1997 were  $332,218  and  $567,902,  respectively,  as compared to
$316,370 and $551,034,  respectively,  for the three month and six month periods
ended October 31, 1996.  For the three month and six month periods ended October
31, 1997 there were no commissions  as compared to $0 and $8,469,  respectively,
for the three month and six month periods ended October 31, 1996.  This decrease
resulted  because  there  were  no  sales  upon  which  commissions  are  based.
Professional fees were $36,459 and $73,983,  respectively, for the three and six
month  periods  ended  October 31,  1997 as  compared  to $59,100  and  $71,149,
respectively,  for the three and six month periods ended October 31, 1996.  This
decrease for the three months  ended  October 31, 1997 was due  primarily to the
timing of the  Company's  annual audit and fees  associated  with the  Company's
financing  activities.  Letter of credit and foreign office expenses amounted to
$34,069 and  $34,069,  respectively,  for the three month and six month  periods
ended October 31, 1997 as compared to $10,344 and $23,343, respectively, for the
three month and six month periods ended October 31, 1996.  This increase was due
primarily  to  the  activity  by  Amerawell   Products,   Ltd.,   the  Company's
wholly-owned   subsidiary,   in  connection   with  the  terminated   management
arrangement with EVO.

For the three and six month  periods  ended  October  31,  1997,  salaries  were
$191,883  and  $274,690,  respectively,  as compared to $138,288  and  $247,563,
respectively,  for the three and six month periods ended October 31, 1996.  Such
increases  resulted from additions to payroll in  anticipation  of the Company's
development of new business opportunities.



                                                       



<PAGE>


Travel and  entertainment  expenses amounted to $9,637 and $46,844 for the three
and six month  periods ended October 31, 1997 as compared to $37,506 and $70,725
for the three and six month  periods  ended  October 31,  1996.  Such  decreases
resulted  from the  reduction  of  activity  caused  by the  termination  of the
management arrangement referred to above

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

During the next twelve months,  in addition to meeting its operating  needs, the
Company will have notes payable in the amount of approximately  $2,100,000.  The
Company  does not believe that it will be able to pay these  obligations  out of
operating revenues, and, accordingly,  it will have to seek additional financing
or sell assets to do so. The Company owns approximately 900,000 shares of common
stock of Glasgal  and may,  from time to time,  sell a portion  of such  shares.
There can be no assurance that the Company will be able to obtain such financing
or sell assets,  in which event such  obligations  will have a material  adverse
effect upon the Company's operations.

For the six months ended October 31, 1997 the Company used cash from  operations
in the amount of $556,947 as compared to using $387,197 from  operations for the
six months  ended  October 31,  1996.  The Company  obtained  $481,658  from its
financing  activities  for the six months ended  October 31, 1997 as compared to
obtaining  approximately  $465,272  for the six months  ended  October 31, 1996.
These amounts  resulted  primarily from borrowings  using the Company's  Glasgal
shares as collateral.

For the six months ended October 31, 1997,  the Company  provided  $102,060 from
its  investing  activities as compared to using $95,193 for the six months ended
October 31, 1996.  Included in the amount for the six months  ended  October 31,
1997 were proceeds in the amount of $2,196,768  from the sale of 565,522  shares
of Glasgal  stock and  proceeds in the amount of $33,872  from the sale of 8,334
shares of stock of Mark  Solutions,  Inc. held by the Company.  The Company also
used  $1,856,325 of such proceeds to acquire  480,000  shares of Glasgal  stock.
Cash flows for the six months ended  October 31, 1996 included  $1,828,100  from
the sale of 221,667  shares of Glasgal  stock.  Also included in that amount was
cash used to increase the Company's  advances to Kidsview,  Inc. by $108,648 and
to  increase  its  investment  in EVO by  $1,800,000.  In  connection  with  the
transactions  involving the Glasgal stock,  Glasgal relinquished certain options
regarding the purchase of shares of such stock from the Company,  and the option
granted to the Company by Glasgal to purchase additional shares of Glasgal stock
was increased.

In June 1997,  the  Company  entered  into a lending  arrangement  with  Barbara
Rosner,  wife of a director and chief financial officer of the Company,  whereby
she agreed to provide funds to the Company in the aggregate  amount of $225,000.
The Company agreed to issue to her secured  promissory  notes,  with interest at
the rate of 10% per annum,  to cover the loans as made from time to time.  As an
inducement  for her to make  the  loans,  the  Company  agreed  to  issue to her
warrants to  purchase  an  aggregate  of 100,000  shares of common  stock of the


                                                        





<PAGE>



Company at an exercise price of $.20 per share.  At October 31, 1997 the Company
received  $155,110  under such  lending  arrangement  and issued  notes for such
amount.  Such notes are secured by 69,100 shares of Glasgal  common  stock.  Two
notes aggregating  $115,000 became due in November 1997 and two additional notes
issued in August and September 1997 aggregating  $40,110,  and secured by 11,600
shares of Glasgal common stock, become due in December 1997.

In  September  1997,  the Company  entered  into a lending  arrangement  with an
individual  lender whereby the Company issued  secured  promissory  notes in the
aggregate  principal  amount of  $250,000.  Such notes are secured by a total of
62,000  shares of Glasgal  common stock and bear interest at the rate of 10% per
annum and became due in November 1997, as extended.  As an inducement for making
the loans, the Company agreed to pay such lender $25,000 as an inducement fee.

Of the proceeds received from such lending arrangements,  $155,000 were used for
the  Company's  operational  expenses and an aggregate of $265,000 was loaned to
two  companies,  evidenced  by 15% and  10%  promissory  notes  and  secured  by
inventory and receivables. Such lending arrangements provide for an aggregate of
$14,500 to be paid to the Company as an inducement  fee. The notes become due in
December 1997, as extended.  The purpose of such loans was to develop  potential
business  opportunities with such companies.  Messrs.  Peter Schneider and Y. S.
Ling,   the  President  and  an  Executive   Vice   President  of  the  Company,
respectively,  have an equity interest in one of such companies. In October 1997
the Company received advances  aggregating  $15,600 from a company controlled by
Peter Schneider.

In October 1995 the Company issued to two individual lenders promissory notes in
the aggregate principal amount of $350,000. Such notes are secured by a total of
200,000  shares of Glasgal common stock held by the Company and bear interest at
the rate of 10% per annum and  became  due in March  1997,  as  extended.  As an
inducement  for the  noteholders  to make the $350,000 loan to the Company,  the
Company  agreed to deliver  to such  holders an  aggregate  of 19,440  shares of
Glasgal  common  stock held by the  Company  and to deliver to such  holders (a)
warrants to purchase for a period of  twenty-four  months an aggregate of 19,440
shares of Glasgal common stock held by the Company at an exercise price of $2.00
per share, as adjusted, and (b) warrants to purchase for a period of twenty-four
months  an  aggregate  of  38,880  shares of the  Company's  common  stock at an
exercise price of $ .20 per share. The Company  negotiated with such noteholders
regarding  the  extension  for  repayment  of the  notes  and  will  deliver  an
additional  11,666  shares of Glasgal  common  stock as  consideration  for such
extension.

To continue its business, the Company will have to seek additional financing and
there can be no  assurance  that it will be able to obtain  such  financing.  No
assurance can be given as to the number of outstanding warrants, which represent
a potential  source of funds,  that will be exercised.  The Company is exploring
alternatives  to utilizing its equity  investments in connection  with financing
its operations and developing new products.



                                                      





<PAGE>



In order to supplement  its cash flow,  the Company,  on March 6, 1991,  entered
into loan  agreements  with several  investors  whereby the Company  borrowed an
aggregate of $282,000  for six months with  interest at the  semiannual  rate of
14.5%. As part of such transaction,  the Company issued to such investors,  in a
private  placement,  an aggregate  of 17,000  shares of its common  stock,  on a
restricted basis, for an aggregate  consideration of approximately  $22,000.  In
October 1991, the Company paid off $32,000 (plus accrued  interest) with respect
to such loans. At such time the Company  renegotiated  the balance of such loans
(plus accrued interest) and issued new notes, maturing in one year, amounting to
approximately $290,000 including interest thereon at the annual rate of 10%. The
Company is  obligated to pay such  investor the value of the note,  plus accrued
interest, aggregating, after giving effect to partial repayments,  approximately
$196,000 at October 31, 1997.  Such  obligation  was acquired by Medical  Device
Alliance,  Inc. If the Company is unable to pay this obligation out of operating
revenues,  it will have to seek  additional  financing  or sell a portion of its
equity  holdings in Glasgal to do so. There can be no assurance that the Company
will be able to obtain such  financing or sell such equity,  in which event this
obligation would have a material adverse effect upon the Company's operations.

Given the nature of the Company's  business,  the length of the typical  product
cycle in the toy business,  the need to respond  rapidly to  developments in the
marketplace  and to, if  necessary,  make rapid  changes  in  product  lines and
strategic  plans to meet the rapid  changes in the  marketplace,  the  Company's
planning   historically  has  been  limited  to  approximately  a  twelve  month
time-frame at any given time. It is  anticipated  that the Company will continue
to operate in a similar  fashion in the  future.  Accordingly,  analyses of long
term liquidity and capital requirements are not meaningful.

In 1992, the Company, in order to regain listing on the NASDAQ Small Cap System,
to provide for operating  requirements and in contemplation of a possible change
in the  nature of the  Company's  business,  completed  a private  placement  of
securities in October 1992, in which  investors  subscribed for 100 Units,  each
Unit consisting of 50,000 shares of Convertible  Preferred Stock and 25,000 1992
Warrants to purchase  shares of Common  Stock,  for a total of  $3,000,000.  The
warrants  expired on June 30,  1997.  Such private  placement  was closed in two
stages,  the first of which  involved the purchase of 52-1/2 Units and closed in
July 1992,  with the balance of the Units offered (47-1/2 Units) being purchased
in October 1992. As a result of the consummation of such private placement,  (a)
the Redeemable  Class A Warrant  exercise price has been adjusted from $1.00 per
share to $.53 per share and the number of shares of Common Stock  issuable  upon
exercise of Redeemable Class A Warrants has been increased from 3,438,900 shares
to 6,488,517  shares of Common Stock so that each holder of a Redeemable Class A
Warrant  will be able to purchase  1.8868  shares of Common Stock for $1.00 upon
exercise of each Warrant and (b) the Redeemable  Class B Warrant  exercise price
has been  adjusted  from  $1.50 per  share to $ .75 per share and the  number of
shares of Common Stock issuable upon exercise of Redeemable Class B Warrants has
been increased from 1,719,450 shares to 3,438,900 shares of Common Stock so that
each holder of a  Redeemable  Class B Warrant will be able to purchase one share
of Common Stock per warrant upon exercise of such Warrant.

                                                      





<PAGE>



In order to provide for additional working capital,  to meet expenses related to
a proposed,  but not consummated,  merger with Glasgal, and to be in position to
assist Glasgal in solving its cash flow problems in contemplation of the merger,
the Company entered into lending  arrangements  with several  individuals  under
which the Company issued notes aggregating $780,000 plus interest thereon at the
annual  rate  of  8%  in  private  placements  pursuant  to  an  exemption  from
registration  under Section 4(2) of the  Securities Act of 1933, as amended (the
Act). Such outstanding notes matured between December 31, 1993, as extended, and
December  31, 1995.  At October 31, 1997,  such  outstanding  notes  amounted to
approximately $650,000 including accrued interest thereon after giving effect to
certain repayments. As an inducement for making such loans, it was intended that
the  holders  would  have an  opportunity  to convert  such  notes  into  equity
securities  when the Company next  undertook a private  placement,  the terms of
which  had not been  determined,  provided  that  the  holders  met  suitability
requirements  thereof. The Company believes that all of such holders either were
officers of the Company or relatives of officers of the Company who in all cases
were deemed to be suitable  investors or other  individuals  who had preexisting
personal  relationships  with  officers  or  directors  of the  Company  and, in
addition,  would have been deemed "accredited investors" as such term is defined
in Rule 501 of  Regulation D under the Act if an exemption had been sought under
Regulation  D. In view of the  Company's  default in payment of its  obligations
under the notes and its inability to afford the  noteholders  an  opportunity to
convert  such notes into  equity  securities,  several of the  noteholders  have
recently  contacted  the Company  and have  threatened  to  commence  litigation
against the Company to enforce the Company's  obligations  under the notes.  The
Company  intends  either  to pay off the  obligations  or to  convert  the notes
(including  accrued interest thereon) into Common Stock at a rate of five shares
of Common  Stock per dollar  subject to  stockholder  approval of an increase in
authorized  shares of Common  Stock in  connection  with a  proposed  meeting of
stockholders.  There  can be no  assurance  that  the  Company  will  be able to
effectuate such payment or conversion.  Litigation by noteholders to enforce the
notes would materially adversely affect the Company's operations.  Approximately
$1,500,000  of the  Company's  total  outstanding  notes have been  acquired  by
Medical Device Alliance, Inc.

The Company,  after  termination of the proposed Glasgal merger,  entered into a
common stock purchase agreement (the "Agreement") with Glasgal governing certain
equity  investments  which the  Company has made,  and in the future  intends to
make, in Glasgal common stock.  Pursuant to the  Agreement,  in January 1994 the
Company converted  outstanding  indebtedness of Glasgal owed to the Company into
equity of Glasgal which,  upon consummation of the Glasgal merger with Sellectek
Incorporated,   resulted  in  the  Company  owning   approximately  28%  of  the
outstanding  shares of Glasgal or 18.5% on a fully diluted  basis.  In addition,
the  Agreement  gives  Glasgal  the right to require  the Company to purchase an
additional  1,337,239  of shares of common stock of Glasgal at November 30, 1997
(the "Additional Shares"),  for an aggregate of approximately $8.4 million after
giving  effect  to  certain  warrant  solicitation  fees  (the  "Additional  DCI
Investment").  Glasgal may require this purchase if, and then only to the extent
that,  the Company  receives  proceeds  from the  exercise  of existing  Company
warrants.  There can be no assurance  that any or all of such  warrants  will be
exercised.  The Company has issued warrants to the public to purchase  6,448,517


                                                        




<PAGE>



shares of Common  Stock at $ .53 per share and  warrants to  purchase  3,438,900
shares of Common Stock at $ .75 per share.  Such  warrants will expire March 31,
1998,  as  extended.  The Company has the right to retain the first  $500,000 of
warrant exercise proceeds;  however,  such amount must be used by the Company to
purchase  shares of Common Stock of Glasgal if the  aggregate  amount of warrant
exercise  proceeds  applied to the purchase of Glasgal  common stock,  after the
earlier of the  expiration  of exercise of all  warrants or 24 months  after the
effectiveness of the registration statement covering the Common Stock underlying
the  warrants,  is less  than $8.4  million.  In view of the fact  that,  at the
present time and  throughout  1996, the price of the Common Stock has been below
the exercise  price of the  warrants,  it is impossible to predict the timing of
exercise of any of the  outstanding  warrants,  or if such warrants will ever be
exercised. The Company anticipates such an event will not arise for at least two
years and that, should such eventuality  arise, the Company will attempt to meet
such  obligation  either through loans (which may be secured by all or a portion
of its Glasgal  equity),  equity  financings  or some  combination  thereof.  If
Glasgal does not require the  Additional DCI  Investment,  the Company may still
purchase, on the same terms, the Additional Shares.

In November  1993, the Company issued to several  investors  secured  promissory
notes aggregating  $500,000 with interest thereon at the annual rate of 8%. Such
notes were secured by all the assets of the Company and matured on September 30,
1994, as extended,  and were paid off on October 6, 1994.  As an inducement  for
such investors to make such loan, the Company issued to such investors warrants,
which expire on November 23, 1998, to purchase an aggregate of 750,000 shares of
Common  Stock  at an  exercise  price of $ .05 per  share,  as  adjusted  ("1993
Warrants"). The proceeds from such transaction were loaned to Glasgal to fulfill
certain  commitments to Glasgal. As an inducement to extend the maturity date of
such notes to  September  30, 1994,  the Company  issued an aggregate of 500,000
additional  warrants ("1994  Warrants") to the holders of such notes on the same
terms and conditions as the 1993 Warrants  except that the exercise price of the
1994 Warrants is $ .20 per share. 

DEFERRED INCOME TAX ASSETS

Deferred  income tax assets as of April 30,  1997 and October 31, 1997 have been
reduced to zero due to uncertainties concerning their realization.

PART II.          OTHER INFORMATION

Item 6.           Exhibits and Reports on Form 8-K

                  Exhibits:

                       Financial Data Schedule

                  Reports on Form 8-K:

                       Form  8-K,  dated  November  17,  1997,  regarding  a
                       proposed  merger  between  the  Company  and  Medical
                       Device Alliance, Inc.

                                                       



<PAGE>




                                   SIGNATURES




Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                           DIRECT CONNECT INTERNATIONAL INC.
                                                    (Registrant)



Date:    December 12, 1997                         By /s/Peter L. Schneider
         -----------------                            ---------------------
                                                       Peter L. Schneider
                                                       President and Chief
                                                       Operating Officer

Date:    December 12, 1997                         By /s/Barry A. Rosner
         ----------------                             ------------------
                                                       Barry A. Rosner
                                                       Treasurer and Chief
                                                       Financial Officer