-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fb2oh9Ne7clE4bakhwAq47LaGDwmevEC0/POhREI0oWDv2mipGM9+6xqxODxLAvA EtUwlF+bD+K3D7kNMIshsg== 0000950147-99-001428.txt : 19991215 0000950147-99-001428.hdr.sgml : 19991215 ACCESSION NUMBER: 0000950147-99-001428 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SC&T INTERNATIONAL INC CENTRAL INDEX KEY: 0001000079 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 860737579 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27382 FILM NUMBER: 99773858 BUSINESS ADDRESS: STREET 1: 7625 EAST REDFIELD ROAD, SUITE 200 CITY: SCOTTSDALE STATE: AZ ZIP: 85260 BUSINESS PHONE: 6023689490 MAIL ADDRESS: STREET 1: 7625 EAST REDFIELD ROAD, SUITE 200 CITY: SCOTTSDALE STATE: AZ ZIP: 85260 10QSB 1 QUARTERLY REPORT FOR PERIOD ENDING 10-31-99 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. ---------------------------------------------------------- (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 [ ] 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 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 SC&T INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended October 31, October 31, -------------------------- -------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- 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 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements 4 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 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 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 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 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 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 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 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 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 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 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 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 U.S. DOLLARS 6-MOS APR-30-2000 MAY-01-1999 OCT-31-1999 1 573 0 515,205 325,112 1,042,098 1,333,918 1,002,925 577,614 1,806,347 2,421,129 0 0 0 45,512 (663,209) 1,806,347 69,344 69,344 37,758 37,758 0 0 4,924 (152,642) 0 (152,642) 0 0 0 (152,642) (.03) (.03)
-----END PRIVACY-ENHANCED MESSAGE-----