US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
AMENDMENT NO. 1
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
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(Address of principal executive offices)
(602) 368-9490
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(Registrant's telephone number, including area code)
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(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 6. Exhibits & Reports on Form 8-K 10
SIGNATURES 11
2
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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
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Total Assets $4,874,195
==========
The accompanying notes are an integral part of these
consolidated financial statements.
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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
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
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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.
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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.
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<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.
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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.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
27 Financial Data Schedule - (Incorporated by reference to the
Company's Form 10-QSB for the quarter ended October 31, 1998,
filed on December 15, 1998.
(b) REPORTS ON FORM 8-K
On June 17, 1998 the registrant filed an 8-K with the
Securities Exchange Commission to change its fiscal year from
March 31 to April 30.
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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 December 16, 1997
- ------------------------- and Chief Executive Officer
James L. Copland
/s/ Richard W. Elwood Director of Finance December 16, 1997
- -------------------------
Richard W. Elwood
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