US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31,1998.
Commission File Number: 0-27382.
SC&T INTERNATIONAL, INC.
----------------------------------------------------------
(Exact name of small business as specified in its charter)
ARIZONA 86-0737579
- ------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer Identification)
incorporation or organization)
15695 North 83rd Way, Scottsdale, Arizona 85260
-----------------------------------------------
(Address of principal executive offices)
(602) 368-9490
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity as of December 8, 1998 latest practicable date: 25,903,684 shares
of Common Stock, par value $0.01 per share.
Transitional Small Business Disclosure Format (Check one): Yes [X] No [ ]
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Information
Consolidated Balance Sheet as of October 31,1998 3
Consolidated Statements of Operations for the Three
Months Ended October 31,1998 and October 31,1997 5
Consolidated Statement of Shareholders' Equity for
the Three Months Ended October 31,1998 6
Consolidated Statements of Cash Flows for the Three
Months Ended October 31,1998 and October 31,1997 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis 10
PART II OTHER INFORMATION
Item 1 Litigation 14
Item 2 Change in Securities 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security-Holders 14
Item 5 Other Information 15
Item 6 Exhibits & Reports on Form 8-K 15
SIGNATURES 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
October 31,1998
ASSETS
Current assets:
Cash $ 74,997
Receivables 1,962,069
Inventory 1,765,252
Other current assets 340,812
----------
Total Current Assets 4,143,130
Property and equipment, less accumulated
depreciation of $399,574 586,558
Other assets 144,507
----------
Total Assets $4,874,195
==========
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
October 31,1998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,143,519
Common stock payable 103,130
Advances From Factor 399,311
Accounts payable 1,066,650
Accrued expenses 185,434
------------
Total current liabilities 2,831,394
Commitments and contingencies
Deferred Income-Long Term 181,727
Shareholders' equity:
Common stock, $0.01 par; authorized 75,000,000 shares;
25,903,684 shares issued and outstanding 259,038
Series A preferred stock, $0.01 par; authorized 5,000,000
shares; 18 shares issued and outstanding
Series B preferred stock, $100,000 Stated Value,
15 shares issued and outstanding 1,500,000
Additional paid-in capital 13,252,528
Currency translation (54,275)
Accumulated deficit (13,096,217)
------------
Total shareholders' equity 1,861,074
------------
Total Liabilities and Equity $ 4,874,195
============
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended October 31, 1998 and 1997
1998 1997
---- ----
Net sales $ 1,846,697 $ 1,330,158
Cost of goods sold 1,145,391 1,058,806
------------ ------------
Gross profit 701,306 271,352
Selling, general and administrative expenses:
Payroll and payroll taxes 332,264 408,618
Selling and promotion 376,993 462,586
Office and administrative 241,664 431,569
Research and development 14,663 71,624
Consulting fees 2,548 77,035
Other 4,201 9,381
------------ ------------
972,333 1,460,813
------------ ------------
Loss from operations (271,027) (1,189,461)
Other income (expense)
Royalty income 112,201 --
Interest income/(expense) (3667) 5,267
------------ ------------
Income (Loss) before extraordinary items (162,493) (1,184,194)
Prior Period Adjustment 230,711 --
------------ ------------
Net loss $ 68,218 $ (1,184,194)
============ ============
Net loss from operations per common share $ .0 $ (.05)
============ ============
Net loss per common share $ .0 $ (.05)
============ ============
Weighted average common shares outstanding 24,729,695 23,135,273
============ ============
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Three Months Ended October 31,1998
Common Stock Preferred Stock Additional
------------------- --------------- Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
Balance at April 30,1998 23,153,684 $231,536 188 $1,500,002 $13,280,028
Preferred stock issuance costs -- -- -- -- --
Issuance of common stock 2,750,000 27,500 -- -- --
Preferred stock conversion -- -- 155 (2) --
Currency translation -- -- -- -- --
Net loss -- -- -- -- --
---------- -------- --- ---------- -----------
Balance at July 31,1998 25,903,684 $259,037 33 $1,500,000 $13,280,028
========== ======== === ========== ===========
Treasury Stock
-------------- Currency Accumulated
Shares Amount Translation Deficit
Balance at April 30,1998 -- $ -- $ 58,782 $(13,254,736)
Preferred stock issuance costs -- -- -- --
Issuance of common stock -- -- -- --
Preferred stock conversion -- -- -- --
Currency translation -- -- (4507) --
Net loss -- -- -- 68,218
--- ---- -------- ------------
Balance at July 31,1998 -- -- $ 54,275 $(13,186,518)
=== ==== ======== ============
The accompanying notes are an integral part of
these consolidated financial statements.
6
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended October 31,1998 and 1997
1998 1997
---- ----
Cash flows from operating activities:
Net Profit (loss) $ 68,218 $(1,184,194)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 51,915 46,788
(Increase) decrease in accounts receivable (712,688) (663,050)
Decrease in allowance for doubtful accounts 36,316
(Increase) decrease in inventories (24,037) 498,440
(Increase) decrease in advances on purchases of
inventory
(Increase)decrease in other current assets (24,063)
Loan amortization 2438
Increase in prepaid expenses (164,377)
Increase in other assets (612)
Increase (Decrease) in accounts payable 896,213 (377,551)
Increase (Decrease)n accrued expenses (115,027) 126,129
--------- -----------
Net cash used in operating activities 217 (1,539,359)
--------- -----------
Cash flows from investing activities:
Purchase of property and equipment 63,478 (87,313)
Development costs 8071 (95,498)
Loans to related parties -- --
--------- -----------
Net cash used in investing activities 71,549 (182,811)
--------- -----------
Cash flows from financing activities:
Currency translation
Net borrowings under line of credit agreement
Principal payments on short-term debt
Principal payments on long-term debt
Proceeds from note payable, related party
Net repayments on related party loans
Net borrowings on notes payable, bank
Preferred stock issuance costs
Repayments to factor (10,297) 0
--------- -----------
Net cash (used in)provided by
financing activities (10,297) 0
--------- -----------
Net (decrease)increase in cash 61,469 (1,722,170)
Cash, beginning of period 13,528 1,867,874
--------- -----------
Cash, end of period $ 74,997 $ 145,704
========= ===========
The accompanying notes are an integral part of
these consolidated financial statements.
7
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. Interim financial reporting:
The accompanying unaudited Consolidated Financial Statements for SC&T
International, Inc. (the "Company") have been prepared in accordance with the
generally accepted accounting principles for interim financial information and
the instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations, and cash flows for the periods
presented have been made. The results of operations for the three month period
ended October 31,1998 is not necessarily indicative of the operating results
that may be expected for the entire fiscal year ending April 30,1999.
Reclassification:
Certain prior period amounts have been reclassified to conform to the current
period presentation.
2. Common Stock:
On October 22, 1997, the Company's shares of common stock, which was traded
under the symbol SCTI, were delisted from the Nasdaq Small cap market. This
action was taken as a direct result of the Company's failure to meet the filing
requirement as stated in marketplace Rule 4310(c)(14). The failure to meet the
filing requirement was the result of the untimely resignation of the Company's
accounting firm, Toback & Company. The Company has complied with all reporting
requirements in a timely manner since retaining Evers & Company in October,
1997. The company has completed and filed its 10K report for the year ended
April 30,1998.
The company has entered into agreements with the holders of 99% of the Series A
Preferred Stock hereby all of their shares of Series A Preferred Stock are
tendered for conversion at a fixed conversion price of $1.00 per share ( the
"Fixed Conversion "). The holders of Series A Preferred Stock waive all other
conversion rights which they may have pursant to any agreement. In addition to
the fixed conversion price, the holders of the Series A Preferred Stock will
also receive warrants to purchase one-third of the number of shares which they
receive pursant to the Fixed Conversion price at a price of $1.75 per share
subject to ordinary anti-dilution provisions ( the "Warrant Shares"). The
Company did not have an adequate nimber of authorized shares to cover the
warrants, employee stock options and the remaining preferred shareholders. In
order to allow the Company to have sufficient shares for these transactions, the
President of the Company retuned 1,648,444 of his shares to the Company.
Subsequent to year end, the Board of Directors approved the issuance of 15
shares of Series B Preferred Stock at $100,000 stated value per share to the
President in exchange for 1,500,000 shares of common stock returned. The
preferred shares are convertible into common stock at the rate of 12 shares for
every $1 of face value of the Series B Preferred stock. In addition, the
President received $150,000 in cash for the additional 148,444 shares returned.
The transaction has been retroactively applied to the 1998 financial statements.
Mr. Copland and his affiliates have indicated they intend to convert the Series
B Preferred stock into common stock.
8
<PAGE>
SC&T INTERNATIONAL, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
The conversion is expected to be completed in December, 1998. Mr. Copland and
his affiliates will be issued a total of 18,000,000 common shares.
3. Proxy Appproval
In July, 1998 shareholders of the Company approved two motions. The first, to
increase the number of authorized shares by 50,000,000 bringing the total to
75,000,000. The second motion approved was to authorize a reverse split.
Management's current intent is not to reverse the stock until the Company' share
price has increased and the Company reaches profitability. At this time the
Company has not set a date for a reverse split, but does not expect a reverse
split before the Company's fourth quarter of fiscal 1999 or until such time as
the common share value has improved.
4. Commitments and Contingencies
Operating leases:
In October 1996, the Company purchased approximately 1.24 acres of land located
at the Scottsdale Airpark in Scottsdale, Arizona. The Company completed
construction of approximately 12,000 square feet of warehouse space and
approximately 6,000 square feet of executive office space in April 1997. The
Company has subsequently sold the building on June 30, 1997 and effective July
1, 1997 leased the building back from the buyer.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this report on form 10SB that are not purely
historical are forward-looking statements within the meaning of the Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Act of 1934,
including statements regarding the Companiy's "expectaions," "anticipation,"
"intentions," "beliefs," or "strategies," regarding the future. Forward-looking
statements include statements regarding revenue, margins, expenses and earnings
analysis for the remainder of the fiscal year 1999 and thereafter; future
products or product development strategy; and liquidity and anticipated cash
needs and availability. All forward looking statements included in this document
are based on information available to the Company on the date of this report,
and the Company assunes no obligation to update any such forward-looking
statement. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements.
OVERVIEW
SC&T International, Inc. (the "Company") was formed in June 1993. The Company
develops and markets accessory and peripheral products for the computer and
video game industries under its PLATINUM SOUND and PER4MER registered trademarks
and its AIR RACER trademark. The Company's products include sub-woofer and
speaker sound enhancement systems, headphone & microphone accessory items, PC
volume controllers, and the largest assortment of PC and video arcade racing
wheels and game controller products for Nintendo, Sony Playstation and IBM-PC's.
SC&T,s Per4mer line has expanded and now comprises products that offer Force
Feed Back, Optical and Tilt technologies. It has also successfully launched its
Air Racer controller, an innovative item which is a racing wheel, fight yoke and
game controller, all in one. SC&T plans to take a very aggressive positioning
for its line of Per4mer products in 1999.
The Company's multimeda keyboards line has been discontinued in favor of a
second generation product targeted at the corporate market. This second
generation product, which, features an enhanced Voice Recognition product, has
been completed, but at this time has not been introduced into the market.
However, the Company is entering into license agreements with other keyboard
manufacturers which will provide SC&T with additional income from the
U.S.technology patents it holds for this technology.
The Company continues to reduce operating costs, while increasing both its
distribution base and gross margins on products sold. Over the past 2-3 months,
new an improved retail and reseller alliances have been made both by the
Company's North American and European operations. SC&T Is very optimistic about
adding many more customers and increasing the number of products currently sold
by these customers. The Company's Chairman is also planning a more active role
in the Company's global sales operations, which SC&T hopes will increase the
number of customers for the Company.
On December 31, 1994, the Company purchased SC&T Europe, a marketing and
distribution company located in Antwerp, Belgium. The Company, in an effort to
reduce its European operating costs, consolidated its European distribution
operations into one central facility located in the United Kingdom, in May 1997.
The Company formed SC&T Europe Limited, located in Portsmouth England. The
Belgium office was closed in August, 1998. All current marketing and
distribution operations, including a United Kingdom domestic sales force, is now
being handled out of the United Kingdom operations.
The expansion in the number of customers and the corresponding increase in
revenue since commencing operations, the Company's total revenue exceed
operating expenses revenue, resulting in a net profitof approximately $68,000
10
<PAGE>
for the three months ended October 31,1998. The Company's primary costs are for
research and development, tooling for new products, inventory, trade shows, and
selling and promotion activities. Although these expenses were kept to a minimum
during the quarter, the Company expects these costs to increase at a reduced
rate when compared to the expected rate of increase in sales. In addition,
operating results may be influenced by factors such as the demand for the
Company's products, the timing of new product introductions by both the Company
and its competitors, pricing by both the Company and its competitors, inventory
levels, the Company's ability to develop and market new products, the Company's
ability to manufacture its products at high quality levels and at commercially
reasonable costs, the timing and levels of sales and marketing expenditures, and
general economic conditions.
Operating results of the Company for the thre month period ended October 31,1998
and 1997.
NET SALES
Net sales for the three months ended October 31,1998 increased $516,000 or 39%
compared to the three months ended October 31,1997. The sales increase is
attributed to the Company,s new product Air Racer introduced in September.
GROSS PROFIT
The Company's gross profit percentage for the three months ended October 31,1998
was $701,000 or 38% in contrast to a gross profit of 20% for the quarter ended
July 31,1997. Gross profit margins are affected by several factors, including
the product mix between the Company's products. Typically, products sell at
gross profit margins ranging from 20% to 40%. The Company anticipates that new
products will initially sell at higher gross profit margins. However, there can
be no assurance that higher margins will be maintained over the life of the
product.
PAYROLL AND PAYROLL TAXES
The Company's payroll and payroll tax expense decreased from approximately
$409,000 for the three months ended October 31,1997 to approximately $332,000
for the three months ended October 31, 1998, or approximately 19%. Substantial
cost decreases were made in health insurance, executive salaries, and relocation
costs.
SELLING AND PROMOTION
The Company's selling and promotion expenses decreased from approximately
$463,000 for the three months ended October 31,1997 to approximately $377,000
for the three months ended October 31,1998, or a decrease of approximately 18%.
This represents an decrease in selling and promotion expenses, as a percentage
of sales from 35% for the three months ended October 31,1997 to 20% for the
three months ended October 31,1998. Approximately 60% of the decrease was in
travel expense and the balance was due to the discontinuance of sponsorship
expenses of Kool Toyota Racing Series. The Company maintains a personal services
agreement with its driver which allows the Company to utilize his figure and
involvement in motor sports racing on its line of Per4mer racing products.
OFFICE AND ADMINISTRATION
The Company's office and administrative expenses decreased from approximately
$432,000 for the three months ended October 31,1997 to approximately $242,000
for the three months ended October 31,1998, or approximately 44%. As a
percentage of net sales, office and administrative expenses decreased from 32%
to 13%. Major cost reductions were made in legal expense $140,000 and general
office overhead expenses $50,000.
11
<PAGE>
DEVELOPMENT COST AMORTIZATION
Development cost amortization decreased from approximately $72,000 for the three
months ended October 31, 1997 to $15,000 for the three month period ended
October 31, 1998. Development cost amortization represents amortization of costs
associated with development of new products. Such costs are amortized over a 12
month period commencing with the first sale of the product. NET PROFIT
The Company experinced its first profitable quarter since the inception of the
business. in 1995. Operating profir were $68,000 or 3.7%. This compares
favorably to operating losses of $1,184,000 for the quarter ended October
31,1997 and $917,000 operating loss for the quarter ended July 31,1998. Major
reasons for the operating improvement are attributable to the increase in gross
margins, ten percent reduction in overhead expenses, royalty income of $112,000
and a prior year adjustment for an over accrual of vendor royalty costs of
$231,000.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the Company's initial public offering, and its private placement
of Series A Preferred Stock in June 1996, the Company's working capital improved
to approximately $3,635,084 at September 30, 1997. The Company is required to
pay the costs of stocking inventory before the Company receives orders and
payment from its customers. Typically, the Company's customers do not pay the
Company for its products until approximately 60 days following delivery and
billing. As a result, the receipt of cash from operations typically lags
substantially behind the payment of the costs for purchase and delivery of the
Company's products.
Through July 1996, the Company financed operations by factoring its United
States receivables. Historically, the Company's European subsidiary financed
operations through a line of credit of approximately $182,000 denominated in
Belgian francs. In addition, to raise funds to meet its expenses, the Company
obtained inventory financing in April and May 1995 for an aggregate of
$1,000,000, completed a private placement in April 1995 of $1,500,000 for
2,000,000 shares of Common Stock, completed a private placement in September
1995 of $875,000 of 8% Subordinated Debentures. In December 1995, the Company
used approximately $1,875,000 of the $4,500,000 gross proceeds of its initial
public offering to repay the inventory financing and the 8% Subordinated
Debentures. In June 1996 the Company received gross proceeds of $10,510,000 for
an issuance of 1,051 shares of Series A Preferred Stock. The preferred
shareholders earn 8% accretion per annum up to the date of conversion.
BUSINESS OUTLOOK AND RISK FACTORS
SC&T Has implemented a major cost reduction program which will be maintained
into 1999. These initial efforts have already improved the Company's operations.
Management believes there is a growing acceptance in the global marketplace for
the Company's expanding product line. SC&T Products are currently sold in over
25 countries worldwide. The Company plans four to six new product introductions
by the end of 1999, which will expand its current line up of Per4mer products.
Management is working on new programs. They are designed to increase profit
opportunities for its customers, and SC&T is hopeful that it will enhance sales
revenues, while reducing future operating expenses. The Company has developed
new manufacturing alliances which has reduced costs due to increased volumes and
economies of scale. The Company expects further cost reductions throughout this
year. Total revenue and product mix could be materially and adversly affected by
many factors some of which are beyond the control of the Company. Those factors
include, but are not limited to, turnover in the Company's sales force,
competition from existing or new products, production delays, the Company's
ability to penetrate new markets and attract new customers, unexpected
postponement or cancellation of significant orders, lack of market acceptance of
the Company's products, manufacturing defects and seasonality of sales and
general economic conditions.
12
<PAGE>
BUSINESS OUTLOOK AND RISK FACTORS, CONTINUED
The Company believes the accessory and peripheral products markets for the
personal computer and video gaming indutries has a strong outlook. These markets
are characterized by sales growth, rapid technological change, frequent
introduction of new products, product upgrades and evolving industry standards.
The Company strives to provide market-leading solutions that address the
personal computer user interested in upgrading existing equipment. Due to the
risk factors discused and to other factors that generally affect high technology
companies, there can be no assurance that the Company will be able to
successfully penetrate these markets in the future.
The Company's 10K report for the year ended April 30,1998 contained a going
concern qualification. The Company does not dispute this qualification. Without
a substantial increase in revenues the Company will require additional working
capital through external sources to continue to fund its operations. Management
plans to actively explore debt and equity financing as well as holding
discussions with potential merging partners to obtain required financing.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LITIGATION
Pending or Threatened Litigation
A. Home Arcade v SC&T
In 1997, Home Arcade filed suit for breach of a license agreement, a suit which
alleges bad faith and fraud claims. Home Arcade has amended its complaint to
assert that SC&T has violated Home Arcade's trade name to performer wheel. SC&T
has vigorously asserted that the trade name was transferred to SC&T along with
the sale of the tooling. The compliant seeks damages in excess of $900,000,
however, the principal amounts are far less. The requested relief includes
trebling and punitive damages. Management has positively evaluated the issues of
breach and strongly disputes the principal amount. Management intends to
vigorously defend the case. Further, management is in the process of filing
counterclaims alleging that SC&T, among other things, actually incurred
significant losses as a result of Home Arcade's misrepresentations and breach of
the licensing agreement. The litigation is pending in Santa Clara County, San
Jose, California. It is expected to last approximately two years.
B. SC&T V. Brian Johnson
In 1998 SC&T filed suit against a former sales person for recovery of moving
expenses pursuant to the moving expense agreement. These expenses became due
when Mr. Johnson resigned prior to one year from the agreement. SC&T , also,
alleges that Mr. Johnson submitted fraudulent reimbursement vouchers. Mr.
Johnson filed a counterclaim alleging he did not receive full compensation
during his tenure. Mnagement has evaluated the claims and intends to vigorously
prosecute its claims against Mr. Johnson and expects a positive judgment within
one year.
C. Jack of All Games v. SC&T
In June, 1997 Jack of All Games Entertainment, Inc., sued the Company in
Hamilton County, Ohio for breach of contract regarding the purchase of 5,000
steering wheel accessories. Jack of All Games is seeking approximately $180,000
in damages. Plaintiff claims the steering wheels it received were not
merchantable for the purpose for which they were intended The Company has
answered the compliant and denied all material allegations. It is anticipated
that the litigation of these issues will be concluded within one year.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY-HOLDERS
In July, 1998 Shareholders approved a motion to issue an additional 50,000,000
common stock from 25,000,000 to 75,000,000 and to allow the Company to reverse
common stock outstanding at a time deemed necessary by the Board of Directors.
14
<PAGE>
ITEM 5. OTHER INFORMATION
Year 2000 Readiness Statement
The year 2000 (Y2K) is an issue putting at risk systems, products and
specialized hardware utilizing date sensitive computer chips or software with
two-digit date fields will fail to properly recognize the year 2000. Such
failures could result in interruptions of the Company's business which could
have a material adverse impact on the Company. In response to the Y2K issue, The
Company will upgrade its current Platinum System 4.1A to 4.5A. The upgraded
system is fully Y2K ready and will be installed by June 30, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On June 17,1998 the registrant filed with the Securities Exchange Commission to
change its fiscal year from March 31 to April 30.
15
<PAGE>
SIGNATURES
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the date indicated.
SC&T INTERNATIONAL, INC.
Signature Capacity Date
--------- -------- ----
/s/ James L. Copland Chairman of the Board November 14, 1997
- ------------------------- and Chief Executive Officer
James L. Copland
/s/ Richard W. Elwood Director of Finance November 14, 1997
- -------------------------
Richard W. Elwood
16
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<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> OCT-31-1998
<EXCHANGE-RATE> 1
<CASH> 74,997
<SECURITIES> 0
<RECEIVABLES> 1,962,069
<ALLOWANCES> 393,119
<INVENTORY> 1,765,252
<CURRENT-ASSETS> 4,143,130
<PP&E> 986,132
<DEPRECIATION> 399,574
<TOTAL-ASSETS> 4,874,195
<CURRENT-LIABILITIES> 3,305,753
<BONDS> 0
0
1,500,000
<COMMON> 236,189
<OTHER-SE> 102,036
<TOTAL-LIABILITY-AND-EQUITY> 4,874,195
<SALES> 1,846,697
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<CGS> 1,145,391
<TOTAL-COSTS> 1,145,391
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 393,119
<INTEREST-EXPENSE> 4,059
<INCOME-PRETAX> (162,493)
<INCOME-TAX> 0
<INCOME-CONTINUING> (162,493)
<DISCONTINUED> 0
<EXTRAORDINARY> 230,711
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<NET-INCOME> 68,218
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</TABLE>
