US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January,31 1999.
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)
7625 East Redfield Road, Suite 200, Scottsdale, Arizona 85260
-------------------------------------------------------------
(Address of principal executive offices)
(602) 368-9490
----------------------------------------------------
(Registrant's telephone number, including area code)
15695 North 83rd Way, Scottsdale, Arizona 85260
-----------------------------------------------
(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 March 9, 1999 latest practicable date: 44,118,268 shares
of Common Stock, par value $0.01 per share.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Information
Consolidated Balance Sheet as of January 31, 1999 3
Consolidated Statements of Operations for the Three Months
Ended January 31, 1999 and January 31, 1998 5
Consolidated Statement of Shareholders' Equity for the Three
Months Ended January 31, 1999 6
Consolidated Statements of Cash Flows for the Three Months
Ended January 31, 1999 and January 31,1998 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
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
January 31,1999
ASSETS
Current assets:
Cash $ 50,919
Receivables 1,841,718
Inventory 1,491,665
Other current assets 236,964
----------
Total Current Assets 3,621,266
Property and equipment, less accumulated
depreciation of $455,292 512,929
Other assets 149,038
----------
Total Assets $4,283,233
==========
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
January 31,1999
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,131,780
Common stock payable 103,130
Advances From Factor 215,443
Accrued expenses 268,125
-----------
Total current liabilities 2,718,478
Commitments and contingencies Deferred Income-Long Term 175,808
Contingent Liability 113,069
Shareholders' equity:
Common stock, $0.01 par; authorized 75,000,000 shares;
26,118,268 shares issued and outstanding 261,183
Series A preferred stock, $0.01 par; authorized
5,000,000 shares; 16 shares issued and outstanding
Series B preferred stock, $100,000 Stated Value, 15 shares
issued and outstanding 1,500,000
Additional paid-in capital 13,250,382
Currency translation (123,755)
Accumulated deficit (13,611,932)
-----------
Total shareholders' equity 1,275,878
-----------
Total Liabilities and Equity $ 4,283,233
===========
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 January 31, 1999 and 1998
1999 1998
------------ ------------
Net sales $ 1,067,454 $ 2,375,262
Cost of goods sold 587,004 1,519,916
------------ ------------
Gross profit 480,450 855,346
Selling, general and administrative expenses:
Payroll and payroll taxes 327,099 335,740
Selling and promotion 182,832 294,018
Office and administrative 272,291 364,779
Research and development 19,111 55,974
Consulting fees 16,669 33,828
Other 241,358 105,485
------------ ------------
Total Operating Expenses 1,059.360 1,189,824
Loss from operations (578,910) (334,478)
Gain from sale of assets 5,919
Other income (expense)
Royalty income 21,659
Interest income/(expense) (65,475) (3,826)
------------ ------------
Income(Loss) before extraordinary items (616,807) (338,304)
Prior Period Adjustment -- --
------------ ------------
Net loss $ (616,807) $ (338,304)
============ ============
Net loss from operations per common share $ (.02) $ (.01)
============ ============
Net loss per common share $ (.02) $ (.01)
============ ============
Weighted average common shares outstanding 26,024,967 23,135,263
============ ============
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 January 31,1999
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
-------------------- ----------------- paid-in
Shares Amount Shares Amount capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balance at October 31,1998 25,903,684 $259,037 15 $1,500,000 $13,280,028
Adjustment prior quarter -- -- -- -- --
Preferred stock issuance costs -- -- -- -- --
Issuance of common stock 214,584 2,146 -- -- (2,146)
Preferred stock conversion -- -- -- -- (27,500)
Currency translation -- -- -- -- --
Net loss -- -- -- -- --
---------- -------- -- ---------- -----------
Balance at January 31,1999 26,118,268 $261,183 15 $1,500,000 13,250,382
========== ======== == ========== ===========
Treasury Stock
---------------- Currency Accumulated
Shares Amount translation deficit
------ ------ ----------- -------
Balance at October 31,1998 -- $ -- $ 54,275 $(13,186,518)
Adjustment prior quarter -- -- (191,391) 191,391
Preferred stock issuance costs -- -- -- --
Issuance of common stock -- -- -- --
Preferred stock conversion -- -- --
Currency translation -- -- 13,361 --
Net loss -- -- -- (616,807)
-- ----- --------- ------------
Balance at January 31,1999 -- $ -- $(123,755) $(13,611,932)
== ===== ========= ============
</TABLE>
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 January 31,1999 and 1998
1999 1998
---- ----
Cash flows from operating activities:
Net Profit (loss) $(616,807) $(338,304)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 52,010 55,655
(Increase) decrease in accounts receivable 120,352 (281,117)
(Increase) Decrease in allowance for
doubtful accounts (111,996)
(Increase)decrease in inventories 273,587 320,269
(Increase) decrease in advances on purchases
of inventory (160,536)
(Increase)decrease in other current assets
Loan amortization
(Increase) Decrease in prepaid expenses 99,636 (177,811)
Increase( Decrease) in contingent liabilities 11,069
Increase (Decrease) in accounts payable (11,739) 910,195
Increase (Decrease)in accrued expenses 82,690 (157,531)
--------- ---------
Net cash used in operating activities (271) 69,893
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (110,522)
Development costs (6,345)
Revaluation of fixed assets 17,911
Loans to related parties (10,509)
--------- ---------
Net cash used in investing activities 17,911 (127,376)
--------- ---------
Cash flows from financing activities:
Currency translation 29,081 (119,096)
Reclassification of Payable to Contingent Liability 113,069
Repayments to factor (183,868)
Net cash (used in)provided by financing activities (41,718) (119,096)
--------- ---------
Net (decrease)increase in cash (24,078) (176,579)
Cash, beginning of period 74,997 462,874
--------- ---------
Cash, end of period $ 50,919 $ 286,295
========= =========
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 January 31, 1999 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 pursuant 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 pursuant 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 number 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 returned 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 recently converted the Series B Preferred
stock into common stock. Mr. Copland and his affiliates have been issued a total
of 18,000,000 common shares.
8
<PAGE>
3. Proxy Approval
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. At this
time the Company has not set a date for a reverse split, but does expect a
reverse split in the near future.
4. Commitments and Contingencies - Operating Lease
In February, 1999 the Corporate Headquarters were relocated. The Company has a
three year lease for office and warehouse space located at Scottsdale Airpark in
Scottsdale, Arizona. The lease commenced on March 1, 1999 and expires on
February 28, 2002.
5. Third Quarter - Extraordinary Expenses
Despite very successful efforts to reduce its global operating expenses, the
company experienced unforeseen costs not anticipated for the quarter, many of
which were a direct result of the Asia economic problems of late 1998. These
costs should not be considered reoccurring. Management was not pleased with the
Company's third quarter financial results, which were caused primarily due to
the following factors:
1. The Company was forced to utilize air freight (versus sea shipping) to ship
its customers Christmas orders. Air freight costs exceeded $200,000 USD.
Despite this action, some products did not make the customers shelves in
time for Christmas sales.
2. Product returns of nearly $350,000 were experienced primarily in January,
1999 and were due to our late Fall shipments to customers. This was
predicated by SC&T's inability to get product out of the orient via sea
containers in time to meet customers commitments. These returns and the
lost sales had an adverse impact on the companies profit objectives.
3. Late deliveries caused the company to offer price concessions/reductions to
maintain shelf space that amounted to $160K during this period.
4. The Company's factoring charges increased dramatically for the quarter due
to delayed payments by retailers. The Company is looking into alternate and
lower financing sources.
5. The Company's start up expenses for the Asian operation were taken in full
during the third quarter and amounted to $153,000.
In summary, if the Company had not been confronted with the above costs, it
would certainly have posted its second consecutive quarterly profit. Based on
these resullts, management is implementing plans that are intended to avoid
similar situations in the future.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The statements contained in this report on form 10-QSB 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 Company's " expectations," "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 assumes 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 multimedia 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 more customers and increasing the number of products currently sold by
these customers. In January of 1999 the company's chairman officially assumed
the sales responsibilities for the company's North and South American markets.
SC&T Believes his involvement will have a significant impact on revenues during
1999.
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.
10
<PAGE>
OPERATING RESULTS OF THE COMPANY FOR THE THREE MONTH PERIOD ENDED
JANUARY 31, 1999 AND 1998.
NET SALES
See detailed comments provided in the Notes to Consolidated Financial Statements
on page 9 Item number five.
GROSS PROFIT
The Company gross profit percentage for the three months ended January 31, 1999
was $480,000 or 45% in contrast to a gross profit of 36% for the quarter ended
January 31, 1998. This was due to the release of new, higher margin, products
and the Company's ongoing and successful program to reduce its product costs.
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 slightly from $335,000
to $ 327,000 for the three months ended January 31, 1999. The Company will
continue to reduce staffing where possible in its ongoing efforts to reduce
operating costs.
SELLING AND PROMOTION
The Company's selling and promotion expenses decreased from approximately
$294,000 for the three months ended January 31, 1998 to approximately $182,000
for the three months ended January 31, 1999, or a decrease of approximately 38%.
Approximately 80% of the decrease was in travel expense and trade show expense
and the balance was due to the discontinuance of sponsorship expenses of CART
Fed X 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. In
1999, the Company will allocate funds only to areas where it can see a viable
return on its investment. Carte Blanche advertising has been eliminated.
OFFICE AND ADMINISTRATION
The Company's office and administrative expenses decreased from approximately
$365,000 for the three months ended January 31 1998 to approximately $272,000
for the three months ended January 31, 1999, or approximately 25%. Major cost
reductions were made in legal expense and general office overhead expenses.
DEVELOPMENT COST AMORTIZATION
Development cost amortization decreased from approximately $37,000 for the three
months ended January 31, 1998 to $19,000 for the three month period ended
January 31, 1999. 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.
11
<PAGE>
OTHER EXPENSE
Other expenses increased $136,000 due to start up cost associated with the
Company's Asia office.
NET PROFIT
The Company experienced operating losses of $617,000 for the third quarter. This
is an increase of $330K over the operating results for the period ended January
31, 1998. The increase is due to the reduction in sales and the unforeseen
expenses as described in item 5 in the Notes to Consolidated Financial
Statements, page 9.
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 payme
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 receivable. 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 implemented major cost reductions during the latter part of 1998, which
will be continued into 1999. These reductions have already improved the
Company's financial 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 and Platinum Sound products. Management is
working on new programs designed to reduce operating expenses while increasing
profit opportunities for its customers. SC&T is hopeful these efforts will
enhance revenues and continue to reduce operating expenses. The Company's new
manufacturing alliances has helped reduce product costs, and the company expects
ongoing cost reductions throughout 1999. Total revenue and product mix could be
materially and adversely 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
seasonally of sales and general economic conditions.
12
<PAGE>
The Company believes the accessory and peripheral products markets for the
personal computer and video gaming industries has a strong outlook for 1999, as
both the PC and Video gaming categories continue to grow. 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
discussed 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 10-K 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 has filed 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. Management 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
1.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.
2. Change in Company stock symbol
In December, 1999 the NASD changed the company's stock exchange symbol from SCTI
to SCTU. This change was made without prior notification to the company. We
apologize for any inconvenience this may have caused our stockholders.
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 March 16, 1999
- --------------------------- and Chief Executive Officer
/s/ Richard W. Elwood Director of Finance March 16, 1999
- ---------------------------
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-01-1999
<EXCHANGE-RATE> 1
<CASH> 50,919
<SECURITIES> 0
<RECEIVABLES> 1,841,718
<ALLOWANCES> 238,743
<INVENTORY> 1,491,665
<CURRENT-ASSETS> 3,621,266
<PP&E> 968,221
<DEPRECIATION> 455,292
<TOTAL-ASSETS> 4,283,233
<CURRENT-LIABILITIES> 2,718,478
<BONDS> 0
0
1,500,000
<COMMON> 261,183
<OTHER-SE> 485,305
<TOTAL-LIABILITY-AND-EQUITY> 4,283,233
<SALES> 1,067,454
<TOTAL-REVENUES> 1,067,454
<CGS> 587,004
<TOTAL-COSTS> 587,004
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 238,743
<INTEREST-EXPENSE> 65,726
<INCOME-PRETAX> (616,807)
<INCOME-TAX> 0
<INCOME-CONTINUING> (616,807)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (616,807)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
