U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1996.

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)


                 3837 E. LaSalle Street, Phoenix, Arizona 85040
                 ----------------------------------------------
                    (Address of principal executive offices)


                                 (602) 470-1334
                           ---------------------------
              (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 the latest practicable date:  5,186,093 shares of Common
Stock, par value $0.01 per share.

        Transitional Small Business Disclosure Format (Check one):  Yes   No X 
                                                                       ---  ---
                                       1
<PAGE>
                            SC&T INTERNATIONAL, INC.
                            ------------------------
                                 AND SUBSIDIARY
                                 --------------



                                                                           Page
Part I  Financial Information

Item 1  Financial Information

        Consolidated Balance Sheet as of September 30, 1996                  3

        Consolidated Statements of Operations for the Three Months
                Ended September 30, 1996  and September 30, 1995             5

        Consolidated Statement of Shareholders' Equity for the Three 
                Months Ended September 30, 1996                              6

        Consolidated Statements of Cash Flows for the Three Months 
                Ended September 30, 1996 and September 30, 1995              7

        Notes to Consolidated Financial Statements                           9

Item 2  Management's Discussion and Analysis                                15

Part II Other Information

Item 1  Litigation                                                          19

Item 2  Change in Securities                                                19

Item 3  Defaults Upon Senior Securities                                     19

Item 4  Submission of Matters to a Vote of Security-Holders                 19

Item 5  Other Information                                                   19

Item 6  Exhibits & Reports on Form 8-K                                      19
                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS



                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                               September 30, 1996


                                     ASSETS

Current assets:
        Cash, including $49,625 of restricted cash                   $ 7,634,391

        Receivables (Note 2)                                           1,262,503

        Inventory (Note 3)                                             2,151,420

        Other current assets                                             148,924
                                                                     -----------

                Total current assets                                  11,197,238

Product development costs, less accumulated amortization of $34,147      305,147

Property and equipment, less accumulated depreciation of $123,479        423,685

Other assets                                                              75,678
                                                                     -----------

                                                                     $12,001,748
                                                                     ===========

       The accompanying notes are an integral part of these consolidated
                              financial statements.
                                       3
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                               September 30, 1996


                      LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:
      Notes payable, bank (Note 4)                                 $     86,413

      Accounts payable                                                  846,840

      Accrued expenses                                                  145,179
                                                                   ------------

              Total current liabilities                               1,078,432
                                                                   ------------

Commitments and contingencies (Note 5)                                     --

Shareholders' equity:
      Common stock, $0.01 par; authorized 25,000,000 shares;
              5,386,093 shares issued and 5,186,093 shares
              outstanding (Note 7)                                       53,861

      Series  A preferred stock, $0.01 par; authorized 5,000,000
              shares; 1,018 shares issued and outstanding (Note 8)           10

      Additional paid-in capital                                     15,087,730

      Treasury stock - at cost, 200,000 shares (Note 6)                 (29,415)

      Currency translation                                              (35,701)

      Accumulated deficit                                            (4,153,169)
                                                                   ------------

                      Total shareholders' equity                     10,923,316
                                                                   ------------

                                                                   $ 12,001,748
                                                                   ============

              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 September 30, 1996 and 1995
        

                                                        1996           1995 
                                                     -----------    -----------

Net sales                                            $ 1,727,947    $ 1,037,707

Cost of goods sold                                     1,178,717        645,006
                                                     -----------    -----------

Gross profit                                             549,230        392,701

Selling, general and administrative expenses:
        Payroll and payroll taxes                        229,062        159,803
        Selling and promotion                            262,893        114,230
        Office and administrative                        149,432        113,845
        Research and development                          33,013          4,951
        Development cost amortization                     26,974         27,144
        Consulting fees                                   36,653         23,677
        Other                                             79,080         77,485
                                                     -----------    -----------
                                                         817,107        521,135
                                                     -----------    -----------

Loss from operations                                    (267,877)      (128,434)

Other income (expense):
        Interest income                                   95,655           --
        Interest expense                                 (17,642)       (63,771)
                                                     -----------    -----------

Loss before income tax                                  (189,864)      (192,205)

Income tax expense                                          --             --
                                                     -----------    -----------

Net loss                                             $  (189,864)   $  (192,205)
                                                     ===========    ===========

Net loss from operations per common share            $     (0.05)   $     (0.03)
                                                     ===========    ===========

Net loss per common share                            $     (0.04)   $     (0.05)
                                                     ===========    ===========

Weighted average common shares outstanding             4,961,564      3,797,199
                                                     ===========    ===========


   The accompanying notes are an integral part of these financial statements.
                                       5
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                 For the Three Months Ended September 30, 1996


<TABLE>
<CAPTION>
                                                                      
                                    Common Stock    Preferred Stock  Additional        Treasury Stock                  
                                ------------------  ----------------   paid-in      --------------------    Currency    Accumulated
                                  Shares    Amount  Shares    Amount   capital        Shares     Amount    translation    deficit 
                                ---------  -------   -----    -----  -----------    --------    --------    --------    -----------
<S>                             <C>        <C>       <C>      <C>    <C>            <C>         <C>         <C>         <C>         
Balance at June 30, 1996        5,085,415  $50,854   1,051    $  11  $15,097,557    (200,000)   $(29,415)   $(23,271)   $(3,963,305)

Preferred stock issuance costs                                           (20,570)
Issuance of common stock            9,166       92                        13,657
Preferred stock conversion        291,512    2,915     (33)      (1)      (2,914)
Currency translation                                                                                         (12,430)
Net loss                                                                                                                   (189,864)
                                ---------  -------   -----    -----  -----------    --------    --------    --------    ----------- 

Balance at  September 30, 1996  5,386,093  $53,861   1,018    $  10  $15,087,730    (200,000)   $(29,415)   $(35,701)   $(4,153,169)
                                =========  =======   =====    =====  ===========    ========    ========    ========    =========== 
</TABLE>
       The accompanying notes are an integral part of these consolidated
                              financial statements.
                                       6
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the Three Months Ended September 30, 1996 and 1995


<TABLE>
<CAPTION>
                                                                                 1996           1995 
                                                                             -----------    -----------
<S>                                                                          <C>            <C>
Cash flows from operating activities:
        Net loss                                                             $  (189,864)   $  (192,205)
        Adjustments to reconcile net loss to net cash used in operating
                activities:
                Depreciation and amortization                                     50,534         72,600
                (Increase) decrease in accounts receivable                      (531,423)       215,083
                Decrease in allowance for doubtful accounts                         --          (36,000)
                Increase in inventories                                          (98,325)      (231,346)
                (Increase) decrease in advances on purchases of
                        inventory                                               (621,014)        45,521
                Increase in other current assets                                 (73,981)       (53,849)
                Increase in other assets                                         (38,902)       (43,437)
                Decrease in accounts payable                                    (246,971)      (318,533)
                (Decrease) increase in  accrued expenses                         (65,404)        37,407
                                                                             -----------    -----------
                        Net cash used in operating activities                 (1,815,350)      (504,759)
                                                                             -----------    -----------
Cash flows from investing activities:
        Purchase of property and equipment                                      (217,560)       (12,876)
        Development costs                                                       (122,113)       (43,157)
        Loans to related parties                                                   9,374           --
                                                                             -----------    -----------
                        Net cash used in investing activities                   (330,299)       (56,033)
                                                                             -----------    -----------
Cash flows from financing activities:
        Currency translation                                                     (12,430)          --
        Net borrowings under line of credit agreement                              7,885           --
        Principal payments on short-term debt                                     (5,556)          --
        Principal payments on long-term debt                                      (1,266)        (6,253)
        Proceeds from note payable, related party                                   --          875,000
        Net repayments on related party loans                                    (29,166)          --
        Net borrowings on notes payable, bank                                       --           95,227
        Preferred stock issuance costs                                           (20,570)          --
        Repayments to factor                                                    (121,368)      (197,174)
                                                                             -----------    -----------
                        Net cash (used in)provided by financing activities      (182,471)       766,800
                                                                             -----------    -----------
Net (decrease)increase in cash                                                (2,328,120)       206,008
Cash, beginning of period                                                      9,962,511        289,707
                                                                             -----------    -----------
Cash, end of period                                                          $ 7,634,391    $   495,715
                                                                             ===========    ===========
</TABLE>
       The accompanying notes are an integral part of these consolidated
                              financial statements.
                                       7
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                Supplemental Disclosure of Cash Flow Information

                                              1996                   1995    
                                           -----------           -----------
Interest paid                              $    17,642           $    63,771


     Supplemental Information of Noncash Investing and Financing Activities

On  September  12,  1995,  the  Company  issued  87,500  shares of Common  Stock
associated with short-term  bridge financing raised with a private  placement of
8% Subordinated Debentures (Note 7).





       The accompanying notes are an integral part of these consolidated
                             financial statements.
                                       8
<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 September 30, 1996 is  not necessarily indicative of the operating results
that may be expected  for the entire  fiscal year  ending June 30,  1997.  These
financial  statements  should be read in  conjunction  with the  Company's  Form
10-KSB filed with the Securities Exchange Commission on September 27, 1996.

         Reclassification:

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

2.       Receivables:

         Receivables at September 30, 1996 consist of the following:

                Trade accounts receivable                            $1,233,374
                Related party (Note 6)                                   55,129
                Allowance for returns and doubtful accounts             (26,000)
                                                                     ----------
                                                                     $1,262,503
                                                                     ==========

3.      Inventory:

        Inventory at September 30, 1996 consists of the following:

                Finished goods                                       $1,398,377
                Advances on purchases of inventory                      808,407
                Reserve for obsolescence                                (55,364)
                                                                     ----------
                                                                     $2,151,420
                                                                     ==========
                                       9
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                  (Unaudited)

3.       Inventory, Continued:

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
determined by the first-in,  first-out  (FIFO) method.  Advances on purchases of
inventory are for inventory  currently  being  manufactured or anticipated to be
manufactured  in  the  near  future.  Reserve  for  obsolescence  exists  due to
continual changes in the consumer electronic products industry.

4.       Notes payable, bank:

         Notes payable, bank consist of the following:
        
         The  Company  has a line  of  credit  with a bank  in    $   24,056
         Arizona  secured  by a CD. The line of credit is used
         to back  international  letters  of credit  issued to
         factories that manufacture the Company's products.

         The Company has a line of credit due on demand with a        
         bank in  Belgium at a variable  rate of  interest  of
         approximately  11.5%.  Borrowings  under  the line of
         credit are collateralized by substantially all of the
         assets of the Belgian subsidiary.                            28,057

         The  Company  has a second line of credit with a bank
         in  Belgium  at a  variable  rate  of  interest  that
         fluctuates  based  on  the   transaction.   The  bank
         advances  approximately 93% of the specific invoices.
         Repayment  is due 10 days  after  the due date of the
         accounts  receivable  invoice.  Borrowings under this
         line of credit are  collateralized  by  substantially
         all of the assets of the Belgian subsidiary.                34,300
                                                                 ----------
                                                                 $   86,413
                                                                 ==========

5.       Commitments and contingencies:

         Operating leases:

         The Company  leases an office and  warehouse  from an  unrelated  third
party under an operating  lease which  expires in August 1997.  Under the lease,
the monthly rental is approximately  $4,900,  and the Company is responsible for
certain  expenses.  In October 1996, the Company  purchased  approximately  1.24
acres of land located at the  Scottsdale  Airpark in  Scottsdale,  Arizona.  The
Company is negotiating an agreement to build warehouse  facilities and executive
offices on this site.
                                       10
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                  (Unaudited)


5.       Commitments and contingencies, Continued:

         The Company  leased its office  location in Belgium  through  April 30,
1996 from a former director, who was a shareholder and owned 50% of the building
where the office was located, for a monthly rental of approximately  $3,700. The
Company  exercised its cancellation  rights described in the lease and relocated
to a temporary  facility,  effective May 1, 1996.  As of September 1, 1996,  the
Belgian office relocated to Gent, Belgium.  The new operating lease provides for
a  monthly  rental  rate  of  approximately  $1,600  per  month,  with  a 60 day
cancellation clause effective after December 31, 1996.

         The Company leases a corporate  apartment from an unrelated third party
under an operating lease which expires  December 31, 1996.  Under the lease, the
monthly rental is approximately $700, and the Company is responsible for certain
expenses.

         The  Company  leases  office  equipment  under three  operating  leases
requiring  monthly payments of approximately  $500. The leases expire in January
1997, November 1997, and November 1998.

         Future minimum rental  payments  required under  operating  leases that
have initial or remaining noncancellable lease terms in excess of one year as of
September 30, 1996 are as follows:


                  1997                       $       69,000
                  1998                                3,000
                  1999                                1,000
                                             --------------
                                             $       73,000
                                             ==============

         Total rental expenses for the three months ended September 30, 1996 and
September 30, 1995 were approximately $19,900 and $ 25,900, respectively.

         Promotional Programs:
        
         In October 1996, SC&T Racing Enterprises,  Ltd. entered into a $605,000
agreement to sponsor a Formula  Atlantic Team in the 1997 Player's Toyota Series
races.  The Company  intends to use the racing team to promote its  products and
increase brand awareness throughout the 1997 selling season.

         Pending or threatened litigation:

         The Company, from time to time, is a party to various legal proceedings
which are incidental to its business. In the opinion of management, the ultimate
resolution of these proceedings will not have a materially adverse affect on the
Company's financial position or results of operations.
                                       11
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                  (Unaudited)


5.       Commitments and contingencies, continued:

         The Company is currently  suing a competitor,  who competes in the same
industry.  Any  potential  benefit  of this  lawsuit is not  reflected  in these
financial statements.

         Inventory:

         At September 30, 1996, the Company has outstanding purchase commitments
for  inventory  acquisitions  of  approximately  $  4,284,000.  The  Company has
advanced funds against the purchase commitments totaling $808,000.

6.       Related party transactions:

         Related party receivables:

         The Company has a related party  receivable from its President,  who is
also a shareholder.  The note receivable  bears interest at 8.25% annually.  The
repayment  terms  provide for 36  principal  payments of $500 per month,  with a
balloon  payment  of  $33,814  plus  interest  due at the end of the  term.  The
receivable balance was $42,400 at September 30, 1996, of which $6,000 is current
and $36,400 is long-term.

         The Company also advances  funds to employees  for traveling  purposes.
These advances are due on demand and are  non-interest  bearing.  The balance at
September 30, 1996 was approximately $12,400.

         Treasury stock:

         In June 1996,  the Company  entered  into a separation  and  settlement
agreement with the former General  Director of the Belgian  subsidiary,  whereby
the former General Director  resigned as an officer,  director,  and employee of
the  Company.  Under the terms of the  agreement,  the former  General  Director
received  $29,415.  In addition,  the former General Director  forfeited 200,000
shares of common stock of the Company owned by him on the date of the agreement.
Upon compliance  with the terms of the agreement,  25,000 shares of common stock
may be issued to the former General Director.

         Employment agreement:

         In September  1995,  the Company  entered into an employment  agreement
with its President,  who is also a shareholder,  for a period of five years. The
agreement  provides  for an  annual  salary of  $104,000  and  contains  certain
provisions  regarding the  repurchase of the  President's  stock and  guaranteed
salary payments.
                                       12
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                  (Unaudited)

6.       Related party transactions, Continued:

         Short-term bridge financing:

         In December  1995,  the Company used  approximately  $1,875,000  of the
proceeds  from its  initial  public  offering  to repay  two  short-term  bridge
financing  arrangements  with  shareholders and all accrued interest  associated
with the debt.

7.       Issuance of common stock:

         In August and  September  of 1996,  33 shares of  preferred  stock were
converted  into  291,512  shares of common  stock.  At the  conversion  price on
October 23, 1996, excluding the effect of 8% accretion, an additional 24,238,095
shares of common stock are  issuable  upon  conversion  of the  remaining  1,018
shares of Series A Preferred Stock subject to a vote of shareholders to increase
the Company's authorized share capital.

         In January  1996,  the Company  issued 67,500  Redeemable  Common Stock
Purchase Warrants for which the Company received cash of approximately $6,750.

         During the quarter  ended  December 31, 1995,  the Company  completed a
public  offering  of  Common  Stock.   The  Company  received  net  proceeds  of
approximately $3,615,000 and issued a total of 900,000 shares of Common Stock.

         The Company  also  issued  450,000  Redeemable  Common  Stock  Purchase
Warrants.  Each  Warrant  represented  the right to purchase  one-half  share of
Common Stock at a price of $7.00 per share,  subject to adjustment under certain
circumstances.  The Warrants expire three years from December 1995. Each warrant
is immediately exercisable. The Warrants are redeemable by the Company for $0.05
per  Warrant  upon 30 days  notice  mailed  within 20 days after the closing bid
price of the Common  Stock has equaled or exceeded  $8.00 per share for a period
of 20  consecutive  trading days.  The Company  received  cash of  approximately
$45,000 for the Purchase Warrants.

         In October 1995, the Company  increased its authorized share capital to
25,000,000  shares of common stock and authorized  5,000,000 shares of preferred
stock.

         During the quarter ended  September 30, 1995,  the Company  completed a
private placement for short-term bridge financing of 8% Subordinated Debentures,
due at the earlier of September  30, 1996,  or upon  completion of the offering.
The Company  issued  87,500  shares of Common Stock at $1.00 per share to obtain
the short-term bridge financing.

         In September  1995,  the  President  was issued 15,822 shares of Common
Stock at a value of $1.00 per share for past services provided to the Company.
                                       13
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                  (Unaudited)


8.       Issuance of preferred stock:

         In June 1996,  the Company  issued  1,051  shares of Series A Preferred
Stock,  $0.01 par value per share,  for $10,000 per share with an accretion rate
of 8% per annum up to the date of conversion.  The Company received net proceeds
of approximately $9,669,000 for the 1,051 shares. The shares may be converted to
Common Stock at a conversion  price which shall be the lesser of $7.75 per share
or 85% of the average  closing bid price of the  Company's  Common Stock for the
ten trading days preceding the conversion  date. The Series A Preferred Stock is
converted as follows:  one-third of the shares of Series A Preferred Stock on or
subsequent  to August 20,  1996;  one-third  of the shares on or  subsequent  to
September  19, 1996;  and the  remaining  shares on or subsequent to October 19,
1996. All conversions are subject to the Company's right of redemption.

         The Series A Preferred  Stock will bear no dividends and have no voting
rights except as otherwise required by Arizona statute.

         Upon dissolution of the Company the holders of Series A Preferred Stock
are entitled to  distributions  in the sum of the original  Series A issue price
for each  outstanding  share,  plus 8% of the original  Series A issue price per
annum since  purchase.  At any time  commencing  12 months and one day after the
last closing date,  the Company shall have the right to redeem any or all of the
Series  A  Preferred  Stock  subject  to  certain  conditions  set  forth in the
Certificate of Designation.

9.       Significant customers:
        
         There were two significant  customers which accounted for approximately
17% and 23% of the Company's total revenues for the three months ended September
30,  1996.  The  Company  had  one  significant  customer  which  accounted  for
approximately  25% of the  company's  total  revenues for the three months ended
September 30, 1995. The accounts  receivable balance for these customers totaled
approximately $384,660 and $112,125 at September 30, 1996 and 1995 respectively.
                                       14
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Overview

         SC&T  International,  Inc. (the "Company") was formed in June 1993. The
Company  develops  and  markets  accessory  and  peripheral   products  for  the
multimedia,  interactive,  and  communication  segments of the PC industry.  The
Company's products include fully-integrated  multimedia stereo keyboards, CD-ROM
storage systems,  various after market  equalizer/amplifiers,  sound enhancement
products, sub-woofer sound systems, PC volume controllers,  CD-ROM audio cables,
and a line of PC and  video  arcade  racing  wheels  for  SEGA,  Nintendo,  Sony
Playstation and IBM-PC's.

         Since  July  1993,  the  Company's   monthly  revenue  has  grown  from
approximately $8,000 to approximately  $718,000 in September,  1996. On December
31, 1994,  the Company  purchased  SC&T  Europe,  a marketing  and  distribution
company located in Antwerp, Belgium. Revenue from SC&T Europe represented 29% of
the  Company's  consolidated  revenue for the three months ended  September  30,
1996.  SC&T  Europe's  revenue from products  other than the Company's  products
represented  approximately  11% of the  Company's  consolidated  revenue for the
three months ended September 30, 1996.

         Despite the expansion in the number of customers and the  corresponding
increase in revenue since commencing  operations,  the Company's total operating
expenses  have  exceeded  revenue,  resulting  in a net  loss  of  approximately
$189,800 for the three months ended  September 30, 1996.  The Company's  primary
costs are for research and  development,  tooling for new  products,  inventory,
trade shows,  and selling and promotion  activities.  The Company  expects these
costs to increase in  connection  with the  anticipated  expansion of 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.
                                       15
<PAGE>
Results of Operations of the Company for the Three-Month Periods Ended September
30, 1996 and 1995

Net Sales

         Net sales for the three months ended  September  30, 1996  increased to
approximately  $1,728,000 or approximately  $690,000 more than net sales for the
three months ended September 30, 1995. In addition, the Company has a backlog of
orders   totaling   approximately   $1,347,000  at  September   30,  1996,   and
approximately $1,633,000 as of November 6, 1996. In comparison,  the Company had
no backlog of orders as of September  30, 1995.  This  increase  resulted from a
variety of factors,  including growing  acceptance of the Company's  products in
the  marketplace,  a broadening of the Company's  distribution  channels and the
expansion of the Company's overall product lines.  Approximately $184,000 of the
Company's net sales during the three months ended  September 30, 1996 represents
sales by SC&T Europe of products other than the Company's products.

Gross Profit

         The Company's gross profit percentage  decreased from 38% for the three
months ended  September 30, 1995 to 32% for the three months ended September 30,
1996. Gross profit margins are affected by several factors, including the mix of
sales  between the  Company's  products,  which  typically  sell at gross profit
margins ranging from 25% to 40%. The Company  anticipates that new products will
initially sell at higher profit margins. However, there can be no assurance that
such margins will be maintained over the life of the product.

Payroll and Payroll Taxes

         The  Company's   payroll  and  payroll  tax  expense   increased   from
approximately  $160,000  in  the  three  months  ended  September  30,  1995  to
approximately  $229,000  in the  three  months  ended  September  30,  1996,  or
approximately  43%.  Although the total  dollar  amount  increased,  payroll and
payroll tax expense  decreased as a percentage of sales,  from 15% for the three
months ended  September 30, 1995 to 13% for the three months ended September 30,
1996.  The Company is required to employ a base staff of qualified  personnel to
maintain its operations.

Selling and Promotion

         The  Company's   selling  and   promotion   expenses   increased   from
approximately  $114,000  in  the  three  months  ended  September  30,  1995  to
approximately  $263,000 in the three  months  ended  September  30,  1996,  or a
increase  of  approximately  131%.  This  represents  an increase in selling and
promotion expenses, as a percentage of sales from 11% for the three months ended
September  30, 1995 to 15% for the three  months  ended  September  30,  1996. A
portion of these  expenses  were  utilized to continue  promoting  and  creating
packaging for new products in addition to exhibiting  the Company's  products at
several  trade  shows,  in an effort to expand  their brand name  awareness  and
market penetration.
                                       16
<PAGE>
Office and Administration

         The  Company's  office  and  administrative   expenses  increased  from
approximately  $114,000  in  the  three  months  ended  September  30,  1995  to
approximately  $149,000  in the  three  months  ended  September  30,  1996,  or
approximately  31%.  However,   as  a  percentage  of  net  sales,   office  and
administrative  expenses decreased from 11% for the three months ended September
30, 1995 to 9% for the three months ended  September 30, 1996. A portion of this
reduction  is  due  to the  Company's  continued  efforts  to  reduce  operating
overhead.

Research and Development

         Expenditures for research and development  increased from approximately
$5,000 in the three months ended September 30, 1995 to approximately $33,000 for
the three months  ended  September  30, 1996.  The  Company's  expenditures  for
research and development vary from period to period depending upon the number of
products  under  development  and the  stage  of the  development  and vary as a
percentage of sales depending upon sales achieved in that period.

Development Cost Amortization

         Development  cost  amortization   remained  constant  at  approximately
$27,000 for the three months ended  September  30, 1995 and  September 30, 1996.
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.

Consulting Fees

         Expenditure  for consulting fees increased from  approximately  $24,000
for the three  months ended  September  30, 1995 to $37,000 for the three months
ended September 30, 1996, or approximately 54%.

Net Loss

         As a result of the factors  described  above,  the Company's  loss from
operations  increased  from  approximately  $128,000 in the three  months  ended
September 30, 1995 to approximately $268,000 in the three months ended September
30, 1996. However, the Company's net loss decreased from approximately  $192,000
in the three months ended  September 30, 1995 to  approximately  $190,000 in the
three months ended September 30, 1996.

Net Loss Per Share

         Net loss per share from  operations  increased from $0.03 for the three
months ended  September  30, 1995 to $0.05 for the three months ended  September
30, 1996.

         Net loss per share  decreased  from  $0.05 for the three  months  ended
September 30, 1995 to $.04 for the three months ended  September  30, 1996.  The
improvement  in net loss per share is due  primarily  to an increase in interest
income, a decrease in interest expense, and the effect of additional shares of
                                       17
<PAGE>
Net Loss Per Share, continued

common stock issued in connection  with the  Company's  private  placements  and
initial public offering in December 1995 and June 1996, respectively.

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 $10,119,000 at September 30, 1996. 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.  The
Company is currently  negotiating  to  establish a revolving  line of credit for
it's U.S. operations.
                                       18
<PAGE>
                           PART II - OTHER INFORMATION


ITEM I.  LITIGATION

        None


ITEM 2.  CHANGES IN SECURITIES

        None 


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

        None


ITEM 4.  SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY-HOLDERS

        None


ITEM 5.  OTHER INFORMATION

        None


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        None
                                       19
<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.

       Signature                   Capacity                         Date      
       ---------                   --------                         ----      


SC&T INTERNATIONAL, INC. 



 /s/ James L. Copland      President, Treasurer,              November 12, 1996
-------------------------       Chairman of the Board    
James L. Copland                and Chief Executive Officer
                           


 /s/ Timothy J. Stocker    Vice President of Finance          November 12, 1996
-------------------------
Timothy J. Stocker