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 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)


                 15695 North 83rd Way, Scottsdale, Arizona 85260
                 -----------------------------------------------
                    (Address of principal executive offices)


                                 (602) 368-9490
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


                 ----------------------------------------------
                 (Former name, former address and former fiscal
                      year, if changed since last report)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity as of latest practicable date:

As of March 9,1999 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        15

        Item 5.  Other Information                                          15

        Item 6.  Exhibits & Reports on Form 8-K                             15

Signatures                                                                  16

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                                January 31, 1999


                                     ASSETS

Current assets:
   Cash                                                               $   74,997

   Receivables                                                         1,962,069

   Inventory                                                           1,765,252

   Other current assets                                                  340,812
                                                                      ----------

   Total Current Assets                                                4,143,130

Property and equipment, less accumulated depreciation of $455,292        586,558

Other assets                                                             144,507
                                                                      ----------

 Total Assets                                                         $4,874,195
                                                                      ==========

                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       3
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                                 January 31,1999


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable                                                 $  2,143,519
  Common stock payable                                                  103,130
  Advances From Factor
  Accounts payable                                                      399,311
  Accrued expenses                                                      185,434
                                                                   ------------

Total Current Liabilities                                             2,831,394


Commitments and Contingencies

Deferred Income-Long Term                                               181,727
Shareholders' Equity:
  Common Stock, $0.01 par value; authorized 75,000,000 
   shares; 25,903,684 shares issued and outstanding                     259,038
  Series B preferred stock, $100,000 Stated Value,
  15 shares issued and outstanding                                    1,500,000

  Additional Paid-in Capital                                         13,252,528

Currency Translation                                                    (54,275)

Accumulated deficit                                                 (13,096,217)
                                                                   ------------

    Total Shareholders' Equity                                        1,861,074
                                                                   ------------

    Total Liabilities and Equity                                   $  4,874,195
                                                                   ============

                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       4
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               For the Three Months Ended January 31, 1999 and 1998

                                                        1999            1998
                                                        ----            ----

Net sales                                           $ 1,846,697     $ 2,375,262

Cost of goods sold                                    1,145,391       1,519,916
                                                    -----------     -----------

Gross profit                                            701,306         855,346

Selling, general and administrative expenses:
   Payroll and payroll taxes                            332,264         335,740
   Selling and promotion                                376,993         294,018
   Office and administrative                            241,664         364,779
   Research and development                              14,663          55,974
   Consulting fees                                        2,548          33,828
   Other                                                  4,201         105,485
                                                    -----------     -----------
                                                        972,333       1,189,824
                                                    -----------     -----------
Loss from operations                                   (271,027)       (334,478)
Other income (expense)
   Royalty income                                       112,201              --
   Interest income/(expense)                              (3667)         (3,826)
                                                    -----------     -----------

Income(Loss) before extraordinary items                (162,493)       (338,304)

Prior Period Adjustment                                 230,711              --
                                                    -----------     -----------
Net loss                                            $    68,218     $  (338,304)
                                                    ===========     ===========

Net loss from operations per common share           $        .0     $      (.01)
                                                    ===========     ===========

Net loss per common share                           $        .0     $      (.01)
                                                    ===========     ===========

 Weighted average common shares outstanding          24,729,695      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



                                 Common Stock     Preferred Stock    Additional
                            --------------------- ---------------      Paid-in
                              Shares      Amount  Shares    Amount     capital
                              ------      ------  ------    ------     -------
Balance at October 31,1998  23,153,684   $231,536   188  $1,500,002  $13,280,028

Preferred stock issuance
costs                               --         --    --          --           --
Issuance of common stock     2,750,000     27,500    --          --           --
Preferred stock conversion          --         --   155          (2)          --
Currency translation                --         --    --          --           --
Net loss                            --         --    --          --           --
                            ----------   --------  ----  ----------  -----------
Balance at January 31,1999  25,903,684   $259,037    33  $1,500,000  $13,280,028
                            ==========   ========  ====  ==========  ===========

                               Treasury Stock
                              -----------------  Currency     Accumulated
                              Shares   Amount   Translation     Deficit
                              ------   ------   -----------     -------
Balance at October 31,1998      --      $ --      $58,782    $(13,254,736)

Preferred stock issuance
costs                           --        --           --              --
Issuance of common stock        --        --           --              --
Preferred stock conversion      --        --           --              --
Currency translation            --        --        (4507)             --
Net loss                        --        --           --          68,218
                               ---      ----       -------    ------------
Balance at January 31,1999              $          $54,275    $(13,186,518)
                               ===      ====       =======    ============

                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       6
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF CASH FLOWS For
                 the Three Months Ended January 31, 1999 and 1998

                                                           1999          1998
                                                           ----          ----
Cash flows from operating activities:
  Net Profit (loss)                                     $  68,218     $(338,304)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
  Depreciation and amortization                            51,915        55,655
  (Increase) decrease in accounts receivable             (712,688)     (281,117)
  (Increase) Decrease in allowance for
    doubtful accounts                                          --      (111,996)
  (Increase )decrease in inventories                      (24,037)      320,269
  (Increase) decrease in advances on purchases
    of inventory                                               --      (160,536)
  (Increase)decrease in other current assets                   --       (24,063)
  Loan amortization                                            --          2438
  (Increase) in prepaid expenses                         (164,377)     (177,811)
  (Increase) Decrease in other assets                          --        11,069
  Increase (Decrease) in accounts payable                 896,213       910,195
  Increase (Decrease)n accrued expenses                  (115,027)     (157,531)
                                                        ---------     ---------
  Net cash used in operating activities                       217        69,893
                                                        ---------     ---------
Cash flows from investing activities:
  Purchase of property and equipment                       63,478      (110,522)
  Development costs                                          8071        (6,345)
  Loans to related parties                                     --       (10,509)
                                                        ---------     ---------
  Net cash used in investing activities                    71,549      (127,376)
                                                        ---------     ---------
Cash flows from financing activities:
  Currency translation                                         --      (119,096)
  Repayments to factor                                    (10,297)           --
  Net cash (used in)provided by financing
   activities                                             (10,297)     (119,096)
Net (decrease)increase in cash                             61,469      (176,579)
Cash, beginning of period                                  13,528       462,874
                                                        ---------     ---------
Cash, end of period                                     $  74,997     $ 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 October  31,1998 is not  necessarily  indicative of the operating  results
that may be expected for the entire fiscal year ending April 30,1999.

RECLASSIFICATION:

Certain prior period  amounts have been  reclassified  to conform to the current
period presentation.

2. COMMON STOCK:

On October 22, 1997,  the  Company's  shares of common  stock,  which was traded
under the symbol SCTI,  were  delisted  from the Nasdaq  Small cap market.  This
action was taken as a direct result of the Company's  failure to meet the filing
requirement as stated in marketplace Rule  4310(c)(14).  The failure to meet the
filing  requirement was the result of the untimely  resignation of the Company's
accounting firm,  Toback & Company.  The Company has complied with all reporting
requirements  in a timely  manner  since  retaining  Evers & Company in October,
1997.  The  company  has  completed  and filed its 10K report for the year ended
April 30 ,1998.

The company has entered into  agreements with the holders of 99% of the Series A
Preferred  Stock  hereby  all of their  shares of Series A  Preferred  Stock are
tendered for  conversion  at a fixed  conversion  price of $1.00 per share ( the
"Fixed  Conversion").  The holders of Series A  Preferred  Stock waive all other
conversion rights which they may have 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

                                       8
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

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.

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 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.

5. 3RD QUARTER -- EXTRAORDINARY EXPENSES

The Company  experienced  unforeseen and increased expenses not original planned
for the quarter. These expenses should not be considered reoccurring costs. As a
result,  management was very upset with the Company's 3rd quarter results, which
were caused primarily by these contributing factors:

     1.   The Company was forced to utilize Air freight (versus sea shipping) to
          ship its customers Christmas  products.  These costs exceeded $200,000
          USD.  Despite  this  action,  some  products  simply  did not make the
          customers shelves in a timely manner.

     2.   Product  returns  primarily  in  January  1999,  due to our late  fall
          shipping to  customers  resulted in product  returns of nearly  $350K.
          This was  predicated  by SC&T's  inability  to  get product out of the
          Orient via sea containers in time to meet customer commitments.  These
          returns and lost sales had an adverse  impact on the company's  profit
          objectives.

     3.   Late  deliveries  caused the Company price  concessions/reductions  to
          maintain shelf space that amounted to $160K during this period.

     4.   The  Company's  factoring  charges  increased  to over $75,000 for the
          quarter  primarily due to late  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
          this quarter and amounted to $153K.

In summary, if the Company had not incurred the above costs, it would have had a
better than average chance to have broken even, if not posted a minor profit for
this period. Based on the results, management is looking into other options that
will ensure  that the Company  will not  encounter  a similar  situation  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  10SB  that are not  purely
historical are forward-looking  statements within the meaning of the Section 27A
of the  Securities  Act of 1933 and Section 21E of the  Securities  Act of 1934,
including  statements  regarding the 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 many more customers and increasing the number of products  currently sold
by these customers.  The Company's  Chairman is also planning a more active role
in the  Company's  global sales  operations,  which SC&T hopes will increase the
number of customers for the Company.

On December  31,  1994,  the Company  purchased  SC&T  Europe,  a marketing  and
distribution  company located in Antwerp,  Belgium. The Company, in an effort to
reduce its European  operating  costs,  consolidated  its European  distribution
operations into one central facility located in the United Kingdom, in May 1997.
The Company  formed SC&T Europe  Limited,  located in  Portsmouth  England.  The
Belgium  office  was  closed  in  August,   1998.  All  current   marketing  and
distribution operations, including a United Kingdom domestic sales force, is now
being handled out of the United Kingdom operations.

                                       10
<PAGE>
The  expansion  in the number of  customers  and the  corresponding  increase in
revenue  since  commencing  operations,   the  Company's  total  revenue  exceed
operating expenses revenue,  resulting in a net profitof  approximately  $68,000
for the three months ended October 31,1998.  The Company's primary costs are for
research and development,  tooling for new products, inventory, trade shows, and
selling and promotion activities. Although these expenses were kept to a minimum
during the  quarter,  the Company  expects  these costs to increase at a reduced
rate when  compared to the  expected  rate of increase  in sales.  In  addition,
operating  results  may be  influenced  by  factors  such as the  demand for the
Company's products,  the timing of new product introductions by both the Company
and its competitors, pricing by both the Company and its competitors,  inventory
levels, the Company's ability to develop and market new products,  the Company's
ability to manufacture  its products at high quality levels and at  commercially
reasonable costs, the timing and levels of sales and marketing expenditures, and
general economic conditions.

OPERATING RESULTS OF THE COMPANY FOR THE THREE MONTH PERIOD ENDED
OCTOBER 31, 1998 AND 1997.

NET SALES

Net sales for the three months ended October 31,1998  increased  $516,000 or 39%
compared  to the three  months  ended  October  31,1997.  The sales  increase is
attributed to the Company's new product Air Racer introduced in September.

GROSS PROFIT

The Company's gross profit percentage for the three months ended October 31,1998
was $701,000 or 38% in contrast to a gross  profit of 20% for the quarter  ended
July 31,1997.  Gross profit margins are affected by several  factors,  including
the product mix between the  Company's  products.  Typically,  products  sell at
gross profit margins ranging from 20% to 40%. The Company  anticipates  that new
products will initially sell at higher gross profit margins.  However, there can
be no  assurance  that higher  margins will be  maintained  over the life of the
product.

PAYROLL AND PAYROLL TAXES

The  Company's  payroll and payroll tax  expense  decreased  from  approximately
$409,000 for the three months ended October  31,1997 to  approximately  $332,000
for the three months ended October 31, 1998, or approximately  19%.  Substantial
cost decreases were made in health insurance, executive salaries, and relocation
costs.

SELLING AND PROMOTION

The  Company's  selling and  promotion  expenses  decreased  from  approximately
$463,000 for the three months ended October  31,1997 to  approximately  $377,000
for the three months ended October 31,1998,  or a decrease of approximately 18%.
This represents an decrease in selling and promotion  expenses,  as a percentage
of sales  from 35% for the three  months  ended  October  31,1997 to 20% for the
three months ended  October  31,1998.  Approximately  60% of the decrease was in
travel  expense  and the balance was due to the  discontinuance  of  sponsorship
expenses of Kool Toyota Racing Series. The Company maintains a personal services
agreement  with its driver  which  allows the  Company to utilize his figure and
involvement in motor sports racing on its line of Per4mer racing products.

                                       11
<PAGE>
OFFICE AND ADMINISTRATION

The Company's office and  administrative  expenses  decreased from approximately
$432,000 for the three months ended October  31,1997 to  approximately  $242,000
for  the  three  months  ended  October  31,1998,  or  approximately  44%.  As a
percentage of net sales,  office and administrative  expenses decreased from 32%
to 13%. Major cost  reductions  were made in legal expense  $140,000 and general
office overhead expenses $50,000.

DEVELOPMENT COST AMORTIZATION

Development cost amortization decreased from approximately $72,000 for the three
months  ended  October  31, 1997 to $15,000  for the three  month  period  ended
October 31, 1998. Development cost amortization represents amortization of costs
associated with development of new products.  Such costs are amortized over a 12
month period commencing with the first sale of the product.

NET PROFIT

The Company  experienced its first profitable quarter since the inception of the
business.  in  1995.  Operating  profit  were  $68,000  or 3.7%.  This  compares
favorably  to  operating  losses of  $1,184,000  for the quarter  ended  October
31,1997 and $917,000  operating  loss for the quarter ended July 31,1998.  Major
reasons for the operating  improvement are attributable to the increase in gross
margins, ten percent reduction in overhead expenses,  royalty income of $112,000
and a prior  year  adjustment  for an over  accrual of vendor  royalty  costs of
$231,000.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the Company's initial public offering,  and its private placement
of Series A Preferred Stock in June 1996, the Company's working capital improved
to  approximately  $3,635,084 at September 30, 1997.  The Company is required to
pay the costs of  stocking  inventory  before the  Company  receives  orders and
payment from its customers.  Typically,  the Company's  customers do not pay the
Company for its products  until  approximately  60 days  following  delivery and
billing.  As a result,  the  receipt  of cash  from  operations  typically  lags
substantially  behind the payment of the costs for  purchase and delivery of the
Company's products.

Through July 1996,  the Company  financed  operations  by  factoring  its United
States  receivables.  Historically,  the Company's European  subsidiary financed
operations  through a line of credit of  approximately  $182,000  denominated in
Belgian francs.  In addition,  to raise funds to meet its expenses,  the Company
obtained  inventory  financing  in  April  and  May  1995  for an  aggregate  of
$1,000,000,  completed  a private  placement  in April  1995 of  $1,500,000  for
2,000,000  shares of Common  Stock,  completed a Private  Placement in September
1995 of $875,000 of 8%  Subordinated  Debentures.  In December 1995, the Company
used  approximately  $1,875,000 of the $4,500,000  gross proceeds of its initial
public  offering  to  repay  the  inventory  financing  and the 8%  Subordinated
Debentures.  In June 1996 the Company received gross proceeds of $10,510,000 for
an  issuance  of  1,051  shares  of  Series A  Preferred  Stock.  The  preferred
shareholders earn 8% accretion per annum up to the date of conversion.

                                       12
<PAGE>
BUSINESS OUTLOOK AND RISK FACTORS

SC&T Has  implemented  a major cost  reduction  program which will be maintained
into 1999. These initial efforts have already improved the Company's operations.
Management  believes there is a growing acceptance in the global marketplace for
the Company's  expanding  product line. SC&T Products are currently sold in over
25 countries worldwide.  The Company plans four to six new product introductions
by the end of 1999,  which will expand its current line up of Per4mer  products.
Management  is working on new  programs.  They are  designed to increase  profit
opportunities for its customers,  and SC&T is hopeful that it will enhance sales
revenues,  while reducing future operating  expenses.  The Company has developed
new manufacturing alliances which has reduced costs due to increased volumes and
economies of scale. The Company expects further cost reductions  throughout this
year. Total revenue and product mix could be materially and adversly affected by
many factors some of which are beyond the control of the Company.  Those factors
include,  but are  not  limited  to,  turnover  in the  Company's  sales  force,
competition  from existing or new  products,  production  delays,  the Company's
ability  to  penetrate  new  markets  and  attract  new  customers,   unexpected
postponement or cancellation of significant orders, lack of market acceptance of
the  Company's  products,  manufacturing  defects and  seasonality  of sales and
general economic conditions.

The Company  believes the  accessory  and  peripheral  products  markets for the
personal computer and video gaming indutries has a strong outlook. These markets
are  characterized  by  sales  growth,  rapid  technological  change,   frequent
introduction of new products,  product upgrades and evolving industry standards.
The  Company  strives to  provide  market-leading  solutions  that  address  the
personal computer user interested in upgrading  existing  equipment.  Due to the
risk factors discused and to other factors that generally affect high technology
companies,  there  can  be no  assurance  that  the  Company  will  be  able  to
successfully penetrate these markets in the future.

The  Company's 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.

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<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

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<PAGE>
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.  Such
failures  could result in  interruptions  of the Company's  business which could
have a material adverse impact on the Company.

In response  to the Y2K issue,  The Company  will  upgrade its current  Platinum
System  4.1A to 4.5A.  The  upgraded  system  is  fully  Y2K  ready  and will be
installed by June 30, 1999.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

None

                                       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
---------------------------


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