<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, 1998.
         ----------------

                                       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.)

P.O. Box 14
Hawthorne, New Jersey                                             07507
---------------------                                             -----
(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, 1998: 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, 1998 and
                          April 30, 1998                                3

                          Condensed Consolidated Statements
                          Of Operations - Three
                          Months Ended October 31,
                          1998 and October 31, 1997 and                 
                          Six months ended October 31, 1998
                          and October 31, 1997                          4

                          Condensed Consolidated Statements
                          Of Cash Flows - Six Months
                          Ended October 31, 1998
                          and October 31, 1997                          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                                   14
  
            Signatures                                                  15


                                                         2


<PAGE>

       PART 1.  FINANCIAL INFORMATION

            ITEM 1. FINANCIAL STATEMENTS

<TABLE>
                Direct Connect International Inc. and Subsidiary

                           Consolidated Balance Sheets

<CAPTION>
                                                                                    ASSETS


                                                                   October 31, 1998       April 30, 1998
                                                                     -----------          --------------
                                                                      (Unaudited)
    <S>                                                           <C>                      <C>    

    Current assets
           Cash and cash equivalents                              $    95,162              $   437,869
           Investments in Datatec, at cost                            477,500                1,548,107
           Prepaid expenses and other current assets                    6,802                   50,265
           Note receivable Omnet Corp.                                303,793                        0
                                                                  -----------               ----------
                  Total current assets                                883,257                2,036,241
                                                                  -----------              -----------
                                                                                                                                
   Property and equipment, at cost
                                                                                                                                   
           Furniture and fixtures                                      17,425                    7,568
           Less: accumulated depreciation                               7,568                    7,568
                                                                  -----------              -----------
                                                                        9,857                        0
                                                                  -----------              -----------

  Notes Receivable - officers                                         106,304                   99,195
                                                                  -----------              -----------
                                                                      106,304                   99,195
                                                                  -----------              -----------

                  Total assets                                    $   999,418              $ 2,135,436
                                                                  ===========              ===========


                                   LIABILITIES and STOCKHOLDERS' EQUITY


Current liabilities
           Accounts payable                                       $    329,439             $   355,647
           Accrued expenses and taxes payable                          194,750                 229,573
           Notes payable-other, current portion                        975,999               2,241,362
                                                                    -----------             -----------
                  Total current liabilities                          1,500,188               2,826,582
                                                                    -----------             -----------

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                            5,160,949               5,160,949
           Accumulated deficit                                      (5,675,781)             (5,866,157)
                                                                   -----------             -----------
             Total stockholders' equity (deficit)                     (500,770)               (691,146)
                                                                   -----------             -----------
             Total liabilities and stockholders' equity           $    999,418             $ 2,135,436
                                                                   ===========             ===========

                                        
</TABLE>

                                       3

<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,         October 31,        October 31,            October 31,
                                        1998                1997               1998                   1997
                                        ----                ----               ----                   ----
                                               (Unaudited)                              (Unaudited)
                                               -----------                              -----------
<S>                                    <C>                <C>                 <C>                  <C>    

Revenues:
   Sales                                   $0                  $0                 $0                     $0
                                       ------------       ---------------     --------------        ---------------

Costs and expenses
   Depreciation                            ---               6,549                ---                   13,100
   General and administrative expenses   218,163           332,218              464,221                567,702
   Less: management fees                   ---             (35,731)               ---                  (42,407)
                                       --------------     ---------------     --------------        ---------------
                                         218,163           303,036              464,221                538,395
                                       --------------     ---------------     --------------        ---------------


Operating income (loss)                 (218,163)         (303,036)            (464,221)              (538,395)
Gain (loss) on sale of securities       (106,918)          352,934              706,362              1,875,548
Interest income                            5,568             5,954                7,430                  6,728
Other income                              15,000               277               15,000                    277
Interest expense                         (14,650)          (41,168)             (74,195)              (100,719)
                                       --------------     ---------------     --------------        ---------------
Net income  (loss)                     ($319,163)         $ 14,961            $ 190,376            $ 1,243,439
                                       ==============     ===============     ==============       ===============

Earnings (loss) per common share          ($0.04)            $0.00               $0.01                  $0.08
                                       ==============     ===============     ==============        ===============


</TABLE>








                                       4



<PAGE>



<TABLE>



                Direct Connect International Inc. and Subsidiary

                      Consolidated Statements of Cash Flows
<CAPTION>

                                                                                For The Six Months Ended
                                                                     --------------------------------------------
                                                                      October 31, 1998          October 31, 1997
    <S>                                                              <C>                         <C>  

                                                                                      (Unaudited)
    Cash flows from operating activities
          Net income                                                       $190,376                  $1,243,439
                                                                     ------------------          ----------------
          Adjustments to reconcile net income (loss)
              to net cash provided by (used in) operating activities:
              Depreciation                                                    ---                        13,100
              Gain on sale of Datatec stock                                (706,362)                 (1,950,018)
              Loss on sale of Mark Solutions stock                            ---                        74,469
          (Increase) decrease in assets
              Accounts receivable                                             ---                         4,240
              Prepaid expenses and other current assets                      43,463                      43,990
          Increase (decrease) in liabilities
              Accounts payable                                              (26,208)                    (39,529)
              Accrued expenses and taxes payable                            (34,823)                     53,362
                                                                     ------------------          ----------------
          Total adjustments                                                (723,930)                 (1,800,386)
                                                                     ------------------          ----------------
          Net cash (used in) operating activities                          (533,554)                   (556,947)
                                                                     ------------------          ----------------


    Cash flows from investing activities
          Notes receivable-officers, increases                               (7,109)                     (2,986)
          Increase in due from IBN Inc.                                       ---                      (219,270)
          Increase in due from Funatics Inc.                                  ---                       (50,000)
          Increase in due from Omnet                                       (303,793)                       ---
          Proceeds from sale of Datatec stock                             1,776,969                   2,196,768
          Acquistion of  Datatec stock                                        ---                    (1,856,325)
          Proceeds from sale of Mark Solutions stock                          ---                        33,873
          Acquisition of equipment                                           (9,857)                       ---
                                                                     ------------------          ----------------
          Net cash provided by investing activities                       1,456,210                     102,060
                                                                     ------------------          ----------------
    Cash flows from financing activities
          Decrease in notes payable-officers and stockholders                 ---                      (253,680)
          Increase in notes payable-other                                     5,300                     755,178
          Decrease in notes payable-other                                (1,270,663)                    (39,840)
          Increase in paid in capital                                         ---                        20,000
                                                                     ------------------          ----------------
          Net cash (used in) provided by financing activities            (1,265,363)                    481,658
                                                                     ------------------          ----------------
    Net increase (decrease) in cash and cash equivalents                   (342,707)                     26,771
    Cash and cash equivalents at beginning of period                        437,869                      32,939
                                                                     ------------------          ----------------
    Cash and cash equivalents at end of period                              $95,162                     $59,710
                                                                     ==================          ================


    Supplemental disclosures of cash flows information
         Cash paid during the six months for interest                    $    ---                      $100,719
                                                                      ------------------         ----------------
</TABLE>




                                       5




<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, 1998, (b) the results of operations for the three months
         and six months  ended  October  31,  1998 and  October 31, 1997 and (c)
         changes in cash flows for the six months  ended  October  31,  1998 and
         October 31, 1997.

2.       Refer to the  audited  financial  statements  for the fiscal year ended
         April 30, 1998 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 31,1998 may not
         be indicative of the financial results for the fiscal year ending April
         30,1999.
4.       The Company  has  available  carry  forward  losses  applicable  to the
         reduction  of  future  Federal income  taxes aggregating  approximately
         $4,760,000 at December 31, 1997 and which expire during  various  years
         through 2012.

5.       As reported,  the  Company  holds  shares  of  common  stock of Glasgal
         Communications, Inc., now Datatec Systems, Inc. (Datatec).















                                       6


                                                        


<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  31,1998,  and unless the Company  develops  business  opportunities  or
enters into management  arrangements with other companies, as it has done in the
past, the Company will have to sell assets to pay its obligations as they become
due.

Net Sales
---------

Net sales for the three and six months periods ended October 31,1998 and October
31,1997 were $0.

The Company will have to develop business  opportunities;  however, there can be
no assurance that it will be able to do so on a commercially viable basis.

At  October  31,1998,  the  Company  did not have a backlog  of orders  from its
customers.

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

Gross Profit  percentage for the three and six months ended October  31,1998 and
October 31,1997 was 0%.










                                       7







                                                     

<PAGE>



Gain (Loss) on Sale of Securities, Interest Income and Other Income
-------------------------------------------------------------------


Gain (Loss) on sale of securities,  interest income and other income amounted to
approximately  ($86,350) and $728,792 for the three and six months ended October
31,1998 as compared to  approximately  $360,000 and $1,880,000 for the three and
six months ended October 31,1997.  The decrease for the three month period ended
October  31,1998 was due to the  difference  in the number of shares and selling
price in  connection  with the sale of Datatec  shares held by the Company which
were sold at a loss.

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

For the three and six months ended October  31,1998,  the Company  received from
its management arrangement with Evolutions, Inc. (EVO) $0 as compared to $35,731
and $42,407 for the three and six months ended October 31,1997, 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 during April 1997.

General and  administrative  expenses for the three and six months ended October
31,1998 were  $218,163 and $464,221 as compared to $332,218 and $567,902 for the
three and six months ended October 31,1997.  Professional  fees were $36,615 and
$68,360  for the three and six  months  ended  October  31,1998 as  compared  to
$36,459 and $73,983 for the three and six months ended October 31, 1997.

For the three and six months ended  October  31,1998,  salaries were $97,150 and
$161,185 as compared to $191,883 and $274,690 for the three and six months ended
October 31,1997. Such decrease resulted from reductions in payroll.

Travel and entertainment  expenses amounted to $14,322 and $33,546 for the three
and six months ended  October 31, 1998 as compared to $9,637 and $46,844 for the
three and six months ended October 31,1997.  Such overall decrease resulted from
the reduction in business activity.















                                        8


<PAGE>



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  $975,999.  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 284,000 shares of common
stock of Datatec  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.

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 business  opportunities.  In August 1998, the
Company entered into a merger  agreement with Omnet  Technology Corp. Under such
agreement,  Omnet would merge into a merger-sub of the Company,  and the Company
would change its name to Omnet Technology  Holding Corp. Each Omnet  shareholder
would receive for each of its Omnet shares a combination of cash,  notes and the
pro-rata share of 60% of the Company's issued and outstanding  common stock on a
fully diluted basis. The agreement was subject to receipt by the Company's Board
of Directors of a fairness  opinion by an  independent  financial  consultant or
investment   banking  firm,   adequate  financing  to  be  raised  (expected  to
approximate  $8,000,000)  and shareholder  approval.  The Company has determined
that  it  was  not  in the  best  interests  of  its  shareholders  to  continue
negotiations  with Medical  Device  Alliance,  Inc.  (MDA)  regarding a proposed
merger  between  them  and,   accordingly,   the  Company  has  terminated  such
negotiations under a non-binding letter of intent with MDA.

In November  1998,  the  Company  and Omnet  mutually  terminated  their  merger
agreement.  The Company is the holder of a note issued by Omnet in the principal
amount  of  $300,000  with  interest  at the  rate of six and  one-half  percent
(6-1/2%)  per annum.  The note is due on August 19,  1999 and is  guaranteed  by
principal stockholders of Omnet.

For the six months ended October  31,1998 the Company used cash from  operations
in the amount of $533,554 as compared to using $556,947 from  operations for the
six months ended October 31,1997. The Company used $1,265,363 from its financing
activities due to a reduction in the Company's  notes payable for the six months
ended October 31,1998. During the six months ended October 31, 1997, the Company
obtained approximately $481,658 from its financing activities.

For the six months ended October 31,1998,  cash of $1,456,210 from the Company's
investing  activities was provided as compared to providing $102,060 for the six
months ended  October 31, 1997.  Included in the amount for the six months ended
October  31,1998  were  proceeds  in the amount of  $1,776,969  from the sale of
448,271  shares of Datatec  stock.  Cash flows for the six months ended  October
31,1997  included  $2,196,768  from the sale of 565,522  shares of Datatec stock
held by the  Company.  The  Company  also used  $1,856,325  of such  proceeds to


                                       9


<PAGE>


acquire  480,000 shares of Datatec stock.  In connection  with the  transactions
involving the Datatec stock,  Datatec relinquished certain options regarding the
purchase of shares of such stock from the Company, and the option granted to the
Company by Datatec to purchase additional shares of Datatec stock was increased.


During 1998 in  consideration of providing an open line of credit of $225,000 to
the Company,  the Company issued to the wife of one of its officers  warrants to
purchase  100,000  shares of the Company's  common stock at an exercise price of
$.20 per share.  The time for  exercise  of such  warrants  expires in 2002.  At
October 31,1998,  the Company's obligation under this line of credit amounted to
approximately  $120,000.  This obligation is included under notes payable other,
and is secured by 40,000 shares of Datatec common stock owned by the Company.

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 Datatec  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 $30,000 as an inducement  fee.
Such notes have been paid.

Of the proceeds received from such lending arrangements,  $118,000 were used for
the  Company's  operational  expenses and an aggregate of $287,500 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 became due in
December  1997, as extended,  and have not been paid.  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 interest in one of such companies. Y.S. Ling
is a creditor and Peter  Schneider is both a creditor and  stockholder,  holding
less than 5% of the equity of such company. In October 1998, the Company,  which
had  previously  written off certain  indebtedness  (amounting to  approximately
$200,000)  from  such  company,  agreed  to accept  $60,000  in full  settlement
thereof.  The Company has been paid $30,000 with respect to this settlement.  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 Datatec common stock held by the Company and bear interest at
the rate of 10% per annum and became due on October 15, 1996.  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 19,444 shares of Datatec 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 19,444 shares of Datatec common
stock held by the Company at an exercise price of $2.00 per share,  as adjusted,
which were  exercised  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 time for exercise of such  warrants has
been extended for an indefinite period. The Company in 1998 recognized a gain of
approximately $100,000 as a result of these transactions.

                                       10

<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.
Such obligation was acquired by MDA, as set forth below.

The Company  intends  either to pay off its note  obligations  or to convert the
notes (including  accrued interest  thereon) into Common Stock at a rate of five
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.  In connection with the
acquisition of certain outstanding notes of the Company by MDA, all of which are
past due,  aggregating  approximately  $1,600,000 at April 30, 1998, the Company
delivered 228,571 shares of its Datatec stock in May 1998, in transferable form,
as collateral for such  obligations.  The Company has been advised that all such
shares were  subsequently  sold  resulting  in proceeds to MDA of  approximately
$976,000 in  reduction  of such  obligations.  The Company  recognized a gain of
approximately $750,000 in connection with the sale of these shares.

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. At July 31, 1997  approximately 53% of such Preferred Stock was
acquired by MDA. 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.  As a result of the
proposed merger with Image Technology Corp.,  referred to below,  there may be a
further  adjustment in the exercise price and the number of shares issuable upon
such exercise.

                                       11


<PAGE>

The Company  entered into a common stock purchase  agreement  (the  "Agreement")
with Datatec  governing  certain equity  investments which the Company has made,
and in the future  intends to make,  in Datatec  common  stock.  Pursuant to the
Agreement,  in January 1994 the Company  converted  outstanding  indebtedness of
Datatec owed to the Company into equity of Datatec which,  upon  consummation of
the Datatec merger with Sellectek  Incorporated,  resulted in the Company owning
approximately  28% of the  outstanding  shares  of  Datatec  or 18.5% on a fully
diluted basis. In addition, the Agreement gives Datatec the right to require the
Company to purchase an  additional  number of shares of common  stock of Datatec
equal to 13.5% of the then outstanding shares (the "Additional  Shares"), or 10%
on a fully diluted basis, for an aggregate of  approximately  $8.4 million after
giving effect to certain fees (the  "Additional  DCI  Investment").  Datatec 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  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 on March 31, 1999, 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 Datatec if the aggregate amount of warrant exercise proceeds applied to
the purchase of Datatec  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 1997, 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
Datatec equity),  equity financings or some combination thereof. If Datatec 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 expired 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 Datatec to fulfill
certain  commitments to Datatec. 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.  The time for  exercise of the 1994  Warrants
expired on November 23, 1998.

On December 1, 1998, the Company signed a merger  agreement (the Agreement) with
Image Technology Corp.  (Image) whereby the Company will merge into a subsidiary
of Image, and the Company will become the surviving corporation. Shareholders of
the Company will receive,  subject to adjustment,  an aggregate of approximately
25% of Image's issued and outstanding common stock.


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<PAGE>

The  Agreement  is subject to receipt by the  Company's  Board of Directors of a
fairness opinion by an independent  financial  consultant or investment  banking
firm and  shareholder  approval.  The  Agreement  is also subject to approval of
Image's shareholders.

In anticipation of the proposed merger, the Company will loan Image, for working
capital purposes,  the principal amount of $260,000 with interest at the rate of
six and one-half percent (6-1/2%) per annum. The promissory note, dated November
30, 1998,  evidencing  the obligation is due, in the event that the Agreement is
terminated by Image, on or before the 30th day after such termination.

The Agreement  provides that at the time of filing of the  Certificate of Merger
in Delaware, the Company will have at least $1,000,000 of unrestricted free cash
together with a sufficient sum of liquid  tangible assets to pay all outstanding
liabilities and all other fees of the Company in connection with the merger.  In
addition,  Image will use its best efforts to raise a minimum of  $2,000,000  of
additional  capital during the period ending  September 30, 1999. If Image fails
to raise such additional  capital,  then the holders of Image's common stock, at
the date of  execution  of the  Agreement,  will be entitled  to increase  their
aggregate  holdings so as to be equivalent to 85% of the  outstanding  shares of
Image common stock at the time of filing of the Certificate of Merger.

Image's  principal  business is conducted  through Court Record  Services,  Inc.
which is one of the  leading  providers  of Records  and Briefs for the  Federal
Courts of  Appeal  and the U.S.  Supreme  Court to law  libraries  and the legal
profession.  Image has significant assets in its vast collections of microfilmed
and digitized  Records and Briefs of the U.S.  Federal  Courts of Appeal and the
U.S.  Supreme Court.  The collection also includes cases for appellate courts of
the states of New York and  Pennsylvania.  These assets enable Image through its
CourtRecordServices.com  web site to offer  Records  and Briefs  instantaneously
through the Internet to the  attorney,  professor or law  librarian who requires
such information.

The assets of the Company  will assist Image to achieve its goal of becoming the
proprietary supplier of judicial Records and Briefs over the Internet.

DEFERRED INCOME TAX ASSETS
--------------------------

Deferred  income tax assets as of April  30,1998 and October  31,1998  have been
reduced to zero due to uncertainties concerning their realization.





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<PAGE>




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 August 20, 1998, regarding a proposed
                           merger between the Company and Omnet Technology Corp.























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<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 14, 1998                       By /s/Peter L. Schneider
                                                    ---------------------
                                                       Peter L. Schneider
                                                       President and Chief
                                                       Operating Officer

Date:    December 14, 1998                       By /s/Barry A. Rosner
                                                    ------------------
                                                       Barry A. Rosner
                                                       Treasurer and Chief
                                                       Financial Officer






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