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, 1999.
Commission File Number: 0-27382.
SC&T INTERNATIONAL, INC.
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(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 E. REDFIELD RD., SCOTTSDALE, ARIZONA 85260
-----------------------------------------------
(Address of principal executive offices)
(480) 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 10, 1999 latest practicable date: 4,551,064 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 Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis 9
PART II OTHER INFORMATION
Item 1 Litigation 13
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 14
Item 6 Exhibits & Reports on Form 8-K 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SC&T INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31,
1999
-------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 573
Accounts receivable (net of $325,112 allowance) 190,093
Inventories 1,042,098
Prepaid expenses and other assets 101,154
------------
Total current assets 1,333,918
PROPERTY AND EQUIPMENT, net 425,311
OTHER ASSETS 47,118
------------
TOTAL ASSETS $ 1,806,347
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,152,309
Accrued liabilities 234,982
Advances from factor 20,029
Capital lease obligations - current portion 13,809
------------
Total current liabilities 2,421,129
CAPITAL LEASE OBLIGATIONS - long-term portion 2,915
------------
TOTAL LIABILITIES 2,424,044
------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 33,332,747 shares
authorized, 4,551,064 issued and outstanding 45,512
Paid in capital 15,478,055
Currency translation 1,878
Accumulated deficit (16,143,142)
------------
TOTAL STOCKHOLDERS' EQUITY (617,697)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,806,347
============
The accompanying notes are an integral part of these financial statements
3
<PAGE>
SC&T INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 69,344 $ 1,846,697 $ 330,323 $ 2,926,679
COST OF SALES 37,758 1,145,391 325,342 2,096,231
----------- ----------- ----------- -----------
Gross profit 31,586 701,306 4,981 830,448
----------- ----------- ----------- -----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and benefits expense 44,374 332,264 288,516 657,728
Selling and promotion expense 57,010 376,993 176,079 592,528
Office and administrative expense 117,351 241,664 353,930 727,642
Research and development expense 2,937 14,663 3,151 36,615
Consulting fees 0 6,749 0 7,176
----------- ----------- ----------- -----------
Total selling, general and administrative
expenses 221,672 972,333 821,676 2,021,689
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (190,086) (271,027) (816,695) (1,191,241)
----------- ----------- ----------- -----------
OTHER (INCOME) AND EXPENSES
Interest income 0 0 (797) (3,720)
Interest expense and factoring charges 4,924 3,667 12,278 4,262
Royalty income (15,569) (112,201) (51,957) (112,201)
Other income (26,799) (230,711) (35,277) (230,711)
----------- ----------- ----------- -----------
Total other (income)/expense (37,444) (339,245) (75,753) (342,370)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (152,642) $ 68,218 $ (740,942) $ (848,871)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.03) $ 0.02 $ (0.16) $ (0.25)
=========== =========== =========== ===========
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 4,551,064 3,351,064 4,551,064 3,351,064
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
SC&T INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
October 31,
-------------------------
1999 1998
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($740,942) ($ 848,871)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 88,820 208,712
Non cash expenses 11,351 0
Changes in assets and liabilities:
Accounts receivable 210,007 (1,220,360)
Inventories 370,971 470,033
Prepaid expenses and other current assets 88,605 (152,577)
Other assets (23,647) (42,348)
Accounts payable (113,562) 821,643
Accrued liabilities (22,812) (368,193)
--------- -----------
Net cash (used in) provided by operating
activities (131,209) (1,131,961)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (19,638) 71,549
--------- -----------
Net cash (used in) provided by investing
activities (19,638) 71,549
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Currency translation 0 58,782
Payment of capital lease obligations (7,070) 0
Advances from (repayments to) factor (48,708) 215,067
--------- -----------
Net cash (used in) provided by financing
activities (55,778) 273,849
--------- -----------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (206,625) (786,563)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 207,198 861,560
--------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 573 $ 74,997
========= ===========
The accompanying notes are an integral part of these financial statements
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
I. INTERIM 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 periods ended
October 31, 1999 is not necessarily indicative of the operating results that may
be expected for the entire fiscal year ending April 30, 2000.
RECLASSIFICATION
Certain prior period amounts have been reclassified to conform to the current
period presentation.
COMMON STOCK
On October 22, 1997, the Company's shares of common stock, which was traded
under the symbol SCTI, were de-listed 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 since complied with all
reporting requirements in a timely manner. The company has completed and filed
its 10K report for the year ended April 30,1999
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 a reverse split. On April 23, 1999
The Company initiated a reverse stock split in a ratio of one (1) new share for
eighteen (18) of its shares of common stock.
COMMITMENTS AND CONTINGENCIES -- OPERATING LEASES
In February 1999, the Company relocated operations to a new location. The
Company has a three year lease on 8500 square feet of office and warehouse space
located at Scottsdale Airpark in Scottsdale, Arizona. The lease commenced on
March 1, 1999 and expires on February 28, 2002.
6
<PAGE>
II. ORGANIZATION AND BASIS OF PRESENTATION
SC&T International, Inc. (the "Company") was formed in 1993 for the purpose of
developing and marketing accessory and peripheral products for the computer and
video game industries. Its products are compatible with SEGA, Nintendo and Sony
Playstation games. The Company also markets audio speakers for PC's. The
Company's customers include many of the major electronics retailers in the
United States and overseas. A substantial portion of the Company's revenue is
generated internationally. It has wholly owned subsidiaries in the United
Kingdom and Hong Kong.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the accounts and
activities of SC&T International, Inc. and its wholly owned subsidiaries, SC&T
Europe, Limited (United Kingdom), SC&T Asia, Limited (Hong Kong) and SC&T
Europe, NV (Belgium), SC&T America, Inc. All significant intercompany
transactions and balances have been eliminated in consolidation.
Cash and cash equivalents includes all short-term highly liquid investments that
are readily convertible to known amounts of cash and have original maturities of
three months or less.
Inventories are stated at the lower of cost (first-in, first-out) or market.
Allowances are made for returned inventory to reflect estimated net realizable
value of those items.
Property and equipment are recorded at cost and depreciated on a straight-line
basis over the estimated useful lives of the assets ranging from 3 to 10 years.
Depreciation expense is not recorded for tooling acquired and not yet been
placed in service.
REVENUE RECOGNITION - The Company recognizes revenue when the product is
shipped. Products have warranties covering defects. Certain customers have
arrangements that provide the right to return unsold merchandise. The Company
provides an allowance to reflect estimated returns of product from customers and
warranty costs. The Company may also provide price protection to certain
customers. The Company records the price protection as a reduction of revenue at
the time of the price reduction.
RESEARCH AND DEVELOPMENT - The costs for new products are expensed as incurred.
INCOME TAXES - The Company provides for income taxes based on the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which among other things, requires that recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date of
financial statements.
7
<PAGE>
FOREIGN CURRENCY TRANSLATION - The foreign subsidiaries maintain their financial
statements in the local currencies which have been determined to be the
functional currencies. Assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the rates in effect at the balance sheet
date. Revenues and expenses are translated at average rates for the year.
Related translation adjustments are reported as a separate component of
stockholders' equity, whereas, gains and losses resulting from foreign currency
transactions are included in the results of operations.
FINANCIAL INSTRUMENTS - Financial instruments consist primarily of cash,
accounts receivable, and obligations under accounts payable, accrued expenses,
advances from factor, and capital lease instruments. The carrying amounts of
cash, accounts receivable, accounts payable, accrued expenses and advances from
factor approximate fair value because of the short maturity of those
instruments. The carrying value of the Company's capital lease arrangements
approximates fair value because the instruments were valued at the retail cost
of the equipment at the time the Company entered into the arrangements.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions which affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
LOSS PER SHARE - Basic loss per share is computed using the weighted average
number of shares of common stock outstanding for the period. Diluted loss per
share is computed using the weighted average number of shares of common stock
plus dilutive potential common shares outstanding for the period.
IV. INVENTORIES
Inventories consisted of the following at October 31, 1999:
Finished goods $ 941,379
Advances on purchases of inventory 124,748
In-transit items 80,967
Allowance for obsolescence (104,996)
-----------
Total inventory $ 1,042,098
===========
Advances on purchases of inventory are for inventory currently being
manufactured or anticipated to be manufactured in the near future. The Company
relies on a limited number of suppliers and one primary manufacturer for the
production of its products. Its suppliers and manufacturer are located in Hong
Kong, China and Taiwan.
8
<PAGE>
V. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at October 31, 1999:
Office furniture and equipment $ 290,628
Tools, dies and molds 528,030
Computer equipment 172,964
Warehouse equipment 11,303
-----------
Total 1,002,925
Less accumulated depreciation and amortization 577,614
-----------
Property and equipment - net $ 425,311
===========
VI. ADVANCES FROM FACTOR
The Company entered into a new factoring agreement in October 1998. The terms of
the agreement provide for advances up to 75% of receivables factored and a 2%
discount payable upon submission of invoices to factor. A discount fee of 10%
per day up to 90 days is charged from date of advance until payment by customer.
A 15% fee is charged for accounts unpaid after 90 days. Credit risk remains with
the Company except for account debtor bankruptcy. The agreement is secured by
all accounts receivable whether or not specifically purchased by the factor. The
balance at October 31, 1999 of $20,029 represents funds advanced in excess of
customer payments received by factor and allowance reserve maintained by factor.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this report on Form 10QSB 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 2000 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.
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. The
Company has entered 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 has not been issuing many news releases over the past months. This
should not be interpreted The Company has not been moving forward in continuing
to significantly reduce costs and identifying new market opportunities and
products for introduction.
The Company is not enamoured with the price wars and continuing lack of
profitability associated with the retail PC and Video Gaming accessory category.
Despite suffering losses much less than those of the competition The Company
will not rely on this category for its future success.
The Company has redirected its marketing focus in support of VM Labs Inc.
revolutionary new NUON technology for DVD players and Set-Top boxes. As a
strategic licensed partner of VM Labs the Company will target the more
lucrative, high volume, OEM channel for its accessory products, and it hopes to
report new sales alliances shortly.
10
<PAGE>
Over the last five months the Company has surveyed and identified new market
opportunities it feels confident has greater revenue potential than currently
exists in the PC and Video Gaming arena. The areas identified relate to the
automotive and emergency outdoor survival categories. These categories have a
combined presence of over 400,000 retail outlets compared to the under 50,000
that make up the current Video Game and PC arena.
The Company has made its product presentations to numerous major national
companies, who have expressed genuine interest in the new products. Seven new
products are under development that specifically address these industries, with
introductions to the North American market over the next quarter. The Company
plans an aggressive focus on the OEM, Private Label segment of this market, with
the secondary target being the retail side of the business.
In an ongoing effort to keep up with the times, identify new markets, and
address the growing sales revenues being derived from the Internet, the Company
is also planning a corporate name change which will easily identify the
Company's new product marketing direction. The name change should take place
shortly.
The Company is working towards a new round of capital funding which will fuel
and support the new marketing initiatives and product development programs. The
Company is confident it will succeed with these efforts.
The last two years have been a rough road for both the Company and its loyal
following of investors. SC &T's management is optimistic about the future
capability of its new products to extend the Company the opportunity to reach a
level of profitability over the next year.
The Company thanks its investors and shareholders for their continued support
while the Company positions itself for the launch of its new line of products.
OPERATING RESULTS OF THE COMPANY FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED
OCTOBER 31, 1999 AND 1998.
NET SALES
Net sales for the three months and six months ended October 31,1999 decreased
approximately $1,777,000 (96%) and $2,596,000 (89%) compared to the same periods
ended October 31,1998. The sales decrease is attributed to the Company's
seasonal slow sales and continued decreased sales from the Company's UK
subsidiary.
PAYROLL AND PAYROLL TAXES
The Company's payroll and payroll tax expense decreased from approximately
$332,000 and $658,000 for the three months and the six months ended October 31,
1998 to approximately $44,000 and $289,000 for the three months and six months
ended October 31, 1999. This reduction represents a 87% and 56% reduction in
salaries and related expenses for the three months and six months ended October
31, 1999. The Company has continued to reduce personnel while increasing
employee productivity. The Company is required to employ a base staff of
qualified personnel to maintain its operations.
11
<PAGE>
SELLING AND PROMOTION
The Company's selling and promotion expenses decreased from approximately
$377,000 and $593,000 for the three months and six months ended October 31, 1998
to approximately $57,000 and $176,000 for the three months and six months ended
October 31,1999. This decrease represents a 85% decrease from the same three
month period ended October 31, 1998 and a 70% decrease from the same six month
period ended October 31, 1998.
OFFICE AND ADMINISTRATION
The Company's office and administrative expenses decreased from approximately
$242,000 and $728,000 for the three and six months ended October 31,1998 to
approximately $117,000 and $354,000 for the three months and six months ended
October 31,1999. This represents approximately a 52% and 51%for these periods.
Major cost reductions were made in legal expense, occupancy costs, and general
overhead expenses.
RESEARCH, DEVELOPMENT AND CONSULTING FEES
Expenses related to research, development and consulting fees decreased from
approximately $21,400 and $43,800 for the three and six month periods ended
October 31, 1998 to approximately $2900 and $3200 for the three and six month
periods ended October 31, 1999. This decrease represents a 86% and 93% decrease
from the same periods the prior year.
OTHER INCOME/EXPENSE
Other income decreased to approximately $37,000 and $76,000 for the three months
and six months ended October 31, 1999 from approximately $339,000 and $342,000
for the same periods ended October 31, 1998. This decrease represents a $302,000
and a $342,000 decrease.
NET LOSS
The Company experienced a net loss of approximately $153,000 and $741,000 for
the three months and six months ended October 31, 1999 compared to a net profit
of approximately $68,000 and a net loss of approximately $849,000 for the three
months and six months ended October 31, 1998. The net loss for the six months
ended October 31, 1999 is primarily due to a loss by the Company's UK subsidiary
of approximately $281,000. Total operating expenses decreased from approximately
$972,000 and $2,022,000 for the three months and six months ended October 31,
1998 to only approximately $222,000 and $822,000 for the same periods ended
October 31, 1999. This represents a decrease of 77% and 59% for the three months
and six months ended October 31, 1999 from the same periods ended October 31,
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased from $1,122,000 for the six months ended
October 31, 1998 to a deficit of $1,087,212 for the six months ended October 31,
1999. This decrease is due directly to the Company's net loss from operations
and decreased sales. 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. The Company has been
unable to attract additional sources of capital due to it's de-listing and must
rely on factoring of it's accounts receivable which dramatically increase costs
and reduces working capital.
12
<PAGE>
BUSINESS OUTLOOK AND RISK FACTORS
The Company will continue to cut costs to improve future operations. In an
effort to reduce operating costs the Company is in the process of closing its UK
subsidiary. The Company will continue to market and sell its products in Europe
through a UK distributor. Efforts over the past year have already significantly
reduced the Company's operating costs. The Company has developed new products
and is targeting new marketing channels (see Overview Section) it strongly
believes will result in profitability over the next twelve months. There is no
assurance the Company will achieve profitability, but it is confident it is on
the right track. The Company has already held discussions with potential new
customers, where its new product concepts were presented and based on feedback
for these new products, the Company is very optimistic. The Company plans to
introduce these new products over a ninety day period, commencing in December,
1999. The Company requires additional working captial, and is looking to a
private placement of company stock to raise the required cash.
The Company's 10K report for the year ended April 30,1999 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.
PART II - OTHER INFORMATION
ITEM 1. LITIGATION
Pending or Threatened Litigation
a. Home Arcade v. the Company
In September of 1997, Home Arcade filed suit in San Jose, California, against
the Company re a license dispute. The Company has denied breaching the contract
and instructed counsel to vigorously defend the case. Due to the recent filing
of the case, counsel has not yet been able to develop an opinion with regard to
the timing or likely results of this litigation. However, management believes it
has committed no wrongdoing. The company is preparing for litigation at this
time.
b. The Company v. Toback & Company
In June 1999 SC&T filed suit against Toback & Company seeking substantial
damages for the firms untimely resignation in September of 1997. These actions
caused the de-listing of SC &T's shares from the NASDAQ Stock Exchange. The
Company alleges Toback's actions were premeditated and unnecessary, causing
severe damage to the Company. The Company is seeking damages against Toback &
Company in this regard. The Company believes it will prevail in it's action
against Toback & Company.
c. The Company v. Santiago Villa
SC&T has filed suit against its former landlord seeking to collect approximately
$20,000 in escrow funds not disbursed to the Company when it vacated it's former
offices. The Company believes it will prevail in this action. The Company plans
an arbitration hearing within the next 60 days.
13
<PAGE>
UNASSERTED CLAIMS and ASSESSMENTS
The Company has a wheel product which includes "force-feedback" technology as a
new version to its racing wheel. The Company has been contacted by Atari. Atari
expressed a desire to evaluate the Company's force-feedback technology to
determine whether it violates a patent possessed by Atari. The Company is
presumptively protected under the circumstances because the Company obtained a
license for the force-feedback technology from another company, Immersion
Corporation. Immersion Corporation has indemnified the Company for patent
infringement liability. However, should Atari successfully enjoin Immersion,
sales of the Company's force-feedback racing wheel would be impacted, or the
Company might have to seek a license from Atari.
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.
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. As a direct
result of this concern the Company has upgraded all hardware and software to be
Y2K compliant. Management has taken these measures to insure all computer
hardware and software will be able to function as the year 2000 approaches.
However, there is no assurance all the suppliers and vendors of the Company are
Y2K compliant, and therefore it is possible some business interruption may occur
as a result.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
27 Financial Data Schedule
Reports on Form 8-K.
On June 17, 1998, the Registrant filed with the Securities and
Exchange Commission a Report on Form 8-K dated June 17, 1998, to
change the Company's fiscal year from March 31 to April 30.
On April 30, 1999, the registrant filed with the Securities and
Exchange Commission a Report on Form 8-K dated April 30, 1999 which
reported the engagement of King, Weber & Associates, P.C. as its new
audit firm.
On April 23, 1999, the registrant filed with the Securities and
Exchange Commission a report on Form 8-K, dated April 23, 1999, which
reported a reverse stock split in a ratio of one (1) new share for
eighteen (18) of its shares of common stock.
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 Copland Chairman of the Board December 13, 1999
- ----------------------------- and Chief Executive Officer
James Copland
16
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> OCT-31-1999
<EXCHANGE-RATE> 1
<CASH> 573
<SECURITIES> 0
<RECEIVABLES> 515,205
<ALLOWANCES> 325,112
<INVENTORY> 1,042,098
<CURRENT-ASSETS> 1,333,918
<PP&E> 1,002,925
<DEPRECIATION> 577,614
<TOTAL-ASSETS> 1,806,347
<CURRENT-LIABILITIES> 2,421,129
<BONDS> 0
0
0
<COMMON> 45,512
<OTHER-SE> (663,209)
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<SALES> 69,344
<TOTAL-REVENUES> 69,344
<CGS> 37,758
<TOTAL-COSTS> 37,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,924
<INCOME-PRETAX> (152,642)
<INCOME-TAX> 0
<INCOME-CONTINUING> (152,642)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152,642)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
