<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
         JANUARY 31,1999.
         ----------------
                                       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.)

637 Wyckoff Avenue #194
Wyckoff, New Jersey                                          07481
-------------------                                          -----
(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 January 31, 1999: 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 -
                      January 31, 1999 and
                      April 30, 1998                                  3

                      Condensed Consolidated
                      Statements of
                      Operations - Three
                      Months Ended January 31,
                      1999 and January 31, 1998 and                   4
                      Nine months ended January 31, 1999
                      and January 31, 1998

                      Condensed Consolidated
                      Statements of Cash
                      Flows - Nine Months
                      Ended January 31, 1999
                      and January 31, 1998                            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

                                   (Unaudited)

<CAPTION>
                                                               ASSETS

                                                January 31, 1999  April 30, 1998
                                                ----------------  --------------
<S>                                           <C>                <C>    

Current assets

     Cash and cash equivalents                       $51,341       $437,869
     Investments in Datatec, at cost                 264,815      1,548,107
     Prepaid expenses and other current assets           100         50,265
     Notes receivable Omnet Corp.                    308,708              0
     Notes receivable Image Tech. Corp.               50,000              0
                                                     ---------------------------
                     Total current assets            674,964      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                          108,585         99,195
                                                     ---------------------------
                                                     108,585         99,195
                                                     ===========================
                     Total assets                   $793,406     $2,135,436
                                                     ===========================

                  LIABILITIES AND STOCKHOLDERS' EQUITY 
       

Current Liabilities                                
       Accounts payable                              $317,689      $355,647
       Accrued expenses and taxes payable             220,475       229,573
       Notes payable-other,  current portion          955,761     2,241,362
       Notes payable-officer                           30,000             0
                                                    ----------------------------
                     Total current liabilities      1,523,925      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                        (5,905,530)    (5,866,157)
                                                  ------------------------------
            Total stockholders' equity              (730,519)      (691,146)
                                                  ------------------------------
            Total liabilities and stockholders'
                  equity                            $793,406     $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         Nine Months Ended
                                      -------------------         ------------------
                                     January 31     January 31    January 31    January 31
                                        1999           1998          1999          1998
                                        ----           ----          ----          ----  
                                            (Unaudited)                  (Unaudited)
                                            -----------                  -----------
<S>                                 <C>            <C>             <C>           <C>   
  
Revenues:
   Sales                                 $0             $0             $0            $0
                                    ------------   ------------    ------------  ------------ 
   
Costs and expenses
   Depreciation                          ---           6,549           ---           19,649
   General and administrative expenses 253,509       247,529         717,730        815,231
   Less: management fees                 ---           ---             ---          (42,407)
                                    ------------   ------------    ------------  ------------
                                       253,509       254,078         717,730        792,473
                                    ------------   ------------    ------------  ------------

Operating income (loss)               (253,509)     (254,078)       (717,730)      (792,473)
Gain (loss) on sale of securities      (10,754)      156,888         695,608      2,032,436
Interest income                          6,810        12,031          14,240         18,759
Other income                            45,000         ---            60,000            277
Interest expense                       (17,296)      (44,913)        (91,491)      (145,632)
                                    ------------   ------------    ------------  ------------   
Net income (loss)                     (229,749)      (130,072)       (39,373)     1,113,367
                                    ============   ============    ============  ============

Earnings (loss) per common share       ($0.03)        ($0.01)        ($0.00)         $0.07
                                    ============   ============    ============  ============













</TABLE>


                                        4

<PAGE>



<TABLE>


                 Direct Connect International Inc. and Subsidiary
                     Consolidated Statements of Cash Flows
<CAPTION>

                                                                   For The Nine Months Ended
                                                            ---------------------------------------
                                                            January 31, 1999      January 31, 1998
                                                            ----------------      ----------------
                                                                           (Unaudited)
<S>                                                       <C>                    <C>    

Cash flows from operating activities
      Net income                                                ($39,373)             $1,113,367
                                                          ------------------     ------------------
      Adjustments to reconcile net income (loss)
         to net cash provided by (used in)operating activities:
         Depreciation                                              ---                    19,650
         Gain on sale of Datatec stock                         (695,608)              (2,106,905)
         Loss on sale of Mark Solutions stock                      ---                    74,469
      Decrease (increase) in assets
         Accounts receivable                                       ---                    14,990
         Prepaid expenses and other current assets               50,165                   54,478
      Increase (decrease) in liabilities
         Accounts payable                                       (37,958)                  13,318
         Accrued expenses and taxes payable                      (9,098)                  26,141
                                                           ------------------    ------------------
      Total adjustments                                        (692,499)              (1,903,859)
                                                           ------------------    ------------------
      Net cash (used in) operating activities                  (731,872)                (790,492)
                                                           ------------------    ------------------

Cash flow from investing activities
      Notes receivable-officers, increase                        (9,390)                  (5,443)
      Proceeds from sale of Datatec stock                     1,978,900                2,396,189
      Increase in due from IBN, Inc.                              ---                    227,399
      Increase in due from Funatics, Inc.                         ---                     59,304
      Increase in due from Omnet                               (358,708)                   ---
      Disposal of molds, tools, and dies                          ---                      5,375
      Acquisition of office equipment                            (9,857)                   ---
      Acquisition of Datatec stock                                ---                 (1,856,325)
      Proceeds from sale of Mark Solutions stock                  ---                     33,873
                                                           ------------------    ------------------
      Net cash provided by  investing activities              1,600,945                  860,372
                                                           ------------------    ------------------
Cash flows from financing activities
      Decrease in notes payable -officer and stockholders         ---                   (253,680)
      Increase in notes payable-officer                          30,000                    ---
      Increase in notes payable-other                            91,440                  784,421
      Decrease in notes payable-other                        (1,377,041)                 (51,004)
      Increase in paid in capital                                 ---                     20,000
                                                           ------------------    ------------------
      Net cash provided by (used in) by financing activities (1,255,601)                 499,737
                                                           ------------------    ------------------
Net increase (decrease) in cash and cash  equivalents          (386,528)                 569,617
Cash and cash equivalents at beginning of period                437,869                   32,939
                                                           ------------------    ------------------
Cash and cash equivalents at end of period                      $51,341                 $602,556
                                                           ==================    ==================

Supplemental disclosure of a cash flows information
     Cash paid during the nine months for interest
                                                               $237,344                 $  ---
                                                          --------------------   ------------------

</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 January 31, 1999, (b) the results of operations for the three months
         and nine  months  ended  January  31, 1999 and January 31, 1998 and (c)
         changes in cash flows for the nine  months  ended  January 31, 1999 and
         January 31, 1998.

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 January 31, 1999 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
         $4,680,000 at December 31, 1998  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 nine months ended
January  31,1999,  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 nine months  periods ended January  31,1999 were $0,
and $0 for the same periods in the prior fiscal year.

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  January  31,1999,  the  Company  did not have a backlog  of orders  from its
customers.

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

Gross Profit percentage for the three months ended January 31,1999 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 ($41,056) and $769,848 for the three and nine months ended January
31,1999 as compared to  approximately  $169,000 and $2,051,000 for the three and
nine months  ended  January  31,1998.  The decrease for the three month and nine
month period ended  January  31,1999 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 nine months ended January  31,1999,  the Company received from
its management arrangement with Evolutions,  Inc. (EVO) $0 as compared to $0 and
$42,407 for the three and nine months ended  January  31,1998,  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 nine months ended January
31,1999 were $253,509 and $717,730 as compared to $247,529 and  $815,231 for the
three and nine months ended January 31,1998.  Professional fees were $42,940 and
$111,300  for the three and nine  months  ended  January  31,1999 as compared to
$24,844 and $98,326 for the three and nine months ended  January 31,  1998.  The
increases were due to additional  services  required to explore various business
opportunities.

For the three and nine months ended January 31,1999,  salaries were $114,033 and
$312,047  as compared to  $107,295  and  $381,985  for the three and nine months
ended January  31,1998.  Such  decrease for the nine month period  resulted from
reductions in payroll.

Travel and entertainment  expenses amounted to $17,511 and $51,057 for the three
and nine  months  ended  January 31, 1999 as compared to $22,538 and $69,382 for
the three and nine months ended January 31,1998.  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  $986,100.  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 225,047 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.

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. 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



                                        9
<PAGE>

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.

In November  1998,  the  Company and Omnet  Technology  Corp.  (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 nine months ended January  31,1999 the Company used cash from operations
in the amount of $731,872 as compared to using $790,492 from  operations for the
nine  months  ended  January  31,1998.  The  Company  used  $1,255,601  from its
financing  activities due to a reduction in the Company's  notes payable for the
nine months ended  January  31,1999.  During the nine months  ended  January 31,
1998, the Company obtained approximately $499,737 from its financing activities.

For the nine months ended January 31,1999, cash of $1,600,945 from the Company's
investing activities was provided as compared to providing $286,966 for the nine
months ended January 31, 1998.  Included in the amount for the nine months ended
January  31,1999  were  proceeds  in the amount of  $1,978,900  from the sale of
503,271  shares of Datatec  stock.  Cash flows for the nine months ended January
31,1998  included  $2,396,189  from the sale of 256,667  shares of Datatec stock
held by the  Company.  The  Company  also used  $1,856,325  of such  proceeds to
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
January 31,1999,  the Company's obligation under this line of credit amounted to
approximately  $90,000.  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.


                                       10
<PAGE>

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,  which has been paid. 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 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.

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 Medical Device  Alliance,  Inc.  (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


                                       11
<PAGE>

acquisition of certain outstanding notes of the Company by MDA, all of which are
past due,  aggregating  approximately  $651,000 at January 31, 1999, 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 herein, there may be a
further  adjustment in the exercise price and the number of shares issuable upon
such exercise.

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 Datatec

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<PAGE>

common stock, 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 1998, 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.  Such  notes  have been  paid.  The time for
exercise of the 1994 Warrants expired on November 23, 1998.

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

Deferred  income tax assets as of April  30,1998 and January  31,1999  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  November  30,  1998,  regarding  a
                           proposed   merger   between  the  Company  and  Image
                           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:    March 12, 1999                         By /s/Peter L. Schneider
         --------------                            ---------------------
                                                      Peter L. Schneider
                                                      President and Chief
                                                      Operating Officer

Date:    March 12, 1999                         By/s/Barry A. Rosner
         --------------                            ---------------------
                                                      Barry A. Rosner
                                                      Treasurer and Chief
                                                      Financial Officer

















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