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 December 31, 1997

         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       No  X
   -----    -----

                      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: 23,135,263 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 December 31, 1997                    3

       Consolidated Statements of Operations for the Three Months
          Ended December 31, 1997  and December 31, 1996                     5

       Consolidated Statement of Shareholders' Equity for the Three
          Months Ended December 31, 1997                                     6

       Consolidated Statements of Cash Flows for the Three Months
          Ended December 31, 1997 and December 31, 1996                      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                                      15

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

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                      UNAUDITED CONSOLIDATED BALANCE SHEET
                                December 31, 1997


                                     ASSETS


Current assets:
         Cash                                                         $  286,295

         Receivables                                                   1,160,649


         Inventory                                                     2,175,075


         Other current assets                                            411,400
                                                                      ----------


                  Total current assets                                 4,033,419


Product development costs, less accumulated amortization of $70,804       77,276

Property and equipment, less accumulated depreciation of $477,206        377,832


Other assets                                                             147,198
                                                                      ----------

            Total Assets                                              $4,635,725
                                                                      ==========

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

                           CONSOLIDATED BALANCE SHEET
                                December 31, 1997


                 UNAUDITED LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:
    Accounts payable                                               $  1,185,904


    Common stock payable                                                103,130
    Accrued expenses                                                     39,048
                                                                    ------------
         Total current liabilities                                    1,328,082
                                                                    ------------


Commitments and contingencies                                                --

Shareholders' equity:
              Common stock, $0.01 par; authorized 25,000,000
shares; 23,135,263 shares issued and 22,940,823 shares outstanding      231,353

              Series  A preferred stock, $0.01 par; authorized
5,000,000 shares; 718 shares issued and outstanding                           7

              Additional paid-in capital                             14,959,621

              Treasury stock - at cost, 194,440 shares                  (29,166)

    Currency translation                                               (193,634)

              Accumulated deficit                                   (11,660,537)
                                                                   ------------ 


              Total shareholders' equity                              3,307,644
                                                                   ------------

                                                                   $  4,635,725
                                                                   ============

              The accompanying notes are an integral part of these
                       consolidated financial statements.
                                       4
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
             For the Three Months Ended December 31, 1997 and 1996


                                                         1997           1996 
                                                    ------------   ------------

Net sales                                            $ 2,375,262     3,125,865

Cost of goods sold                                     1,519,916      2,099,993
                                                    ------------   ------------

Gross profit                                             855,346      1,025,872

Selling, general and administrative expenses:
         Payroll and payroll taxes                       335,740        232,911
         Selling and promotion                           294,018        300,986
         Office and administrative                       364,779        262,051
         Research and development                         55,974         68,821
         Consulting fees                                  33,828         51,165
         Other                                           105,485        180,866
                                                    ------------   ------------
                                                       1,189,824      1,096,800


Loss from operations                                    (334,478)       (70,928)


Other income (expense):
         Interest income                                     864         86,555
         Interest expense                                 (4,690)        (3,967)
                                                    ------------   ------------

Loss before income tax                                  (338,304)        11,660

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

Net loss                                            $   (338,304)  $     11,660
                                                    ============   ============

Net loss from operations per common share           $      (0.01)  $       0.00
                                                    ============   ============

Net loss per common share                           $      (0.01)  $       0.00
                                                    ============   ============

Common shares outstanding                             23,135,263      9,022,062
                                                    ============   ============

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

                       UNAUDITED CONSOLIDATED STATEMENT OF
                              SHAREHOLDERS' EQUITY

                  For the Three Months Ended December 31, 1997
<TABLE>
<CAPTION>
                                                                                   
                                     Common Stock                      Additional       Treasury Stock     
                                  -----------------    Preferred 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 September 30, 1997  23,135,263 $ 231,353      718   $   7  $14,959,621  (194,440)  $ (29,166) $  (74,539)  (11,322,233)

Preferred stock costs
Currency translation                    -         -        -       -            -         -           -    (119,096)            -

Net loss                                                                                                               (  338,304)
                               ---------- ---------      ---   -----  -----------  --------   ---------  ----------   ----------- 

Balance at December 31, 1997   23,135,263 $ 231,353   $  718   $   7  $14,959,621  (194,440)  $ (29,166) $ (193,635)  (11,660,537)
                               ========== =========   ======   =====  ===========  ========   =========  ==========   =========== 
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.
                                       6
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Three Months Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
                                                                 1997           1996
                                                             ------------   ------------ 
<S>                                                          <C>            <C>         
Cash flows from operating activities:
     Net loss                                                $  (338,304)   $  (189,864)
     Adjustments to reconcile net loss to net cash used in
operating activities:
          Depreciation and amortization                           55,655         50,534
          Increase in accounts receivable                       (281,117)      (531,423)
          Increase in allowance for doubtful accounts           (111,996)          --
          Decrease in inventories                                320,269        (98,325)
          Increase in advances on purchases of                  (160,536)      (621,014)
              inventory
          Decrease in other current assets                                      (73,981)
          Loan amortization                                         --
          Increase in prepaid expenses                          (177,811)          --
          Decrease in other assets                                11,069        (38,902)
          Increase in accounts payable                           910,195       (246,971)
          Decrease in accrued expenses                          (157,531)       (65,404)
                                                             -----------    ----------- 
                   Net cash used in operating activities          69,893     (1,815,350)
                                                             -----------    ----------- 

Cash flows from investing activities:
          Purchase of property and equipment                    (110,522)      (217,560)
          Development costs                                       (6,345)      (122,113)
          Loans to related parties                               (10,509)         9,374
                                                             -----------    ----------- 
                   Net cash used in investing activities        (127,376)      (330,299)
                                                             -----------    ----------- 

Cash flows from financing activities:
      Currency translation                                      (119,096)       (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)
      Proceeds from note payable, related party                     --             --
      Net repayments on related party loans                         --          (29,166)
      Net borrowings on notes payable, bank                         --             --
      Preferred stock issuance costs                                --          (20,570)
      Repayments to factor                                          --         (121,368)
Net cash (used in)provided by financing activities              (119,096)      (182,471)
                                                             -----------    ----------- 
Net decrease in cash                                            (176,579)    (2,328,120)
Cash, beginning of period                                        462,874      9,962,511
                                                             -----------    ----------- 
Cash, end of period                                          $   286,295    $ 7,634,391
                                                             ===========    ===========
</TABLE>
              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.  Under a 10-Q filing,  it is not necessary to
include all of the information and footnotes  required in a 10-K filing.  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  December  31,  1997 is not
necessarily  indicative  of the  operating  results that may be expected for the
entire fiscal year ending June 30, 1998.

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. This action by Toback & Company, as
noted by the Nasdaq,  caused the delisting of the Company,  and the Company will
pursue all legal  options  regarding  Toback &  Company's  actions.  The Company
followed the appropriate policy of Nasdaq by filing its form 8-K, began a search
for a new accounting firm,  retaining Evers & Company. The Company has completed
and filed its 10-K.

The Company has entered into  agreements with the holders of 94% 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 Fixed  Conversion,  the holders of Series A Preferred  Stock will
also receive  warrants to purchase one third (1/3) of the number of shares which
they receive  pursuant to Section I of the Fixed Conversion at a price of $1.25,
subject to ordinary anti-dilution provisions (the "Warrant Shares"). The Warrant
Shares will be subject to ordinary  registration  rights and a warrant agreement
and registration  rights agreement will be forwarded as promptly as is possible.
All such  documents  shall contain  ordinary and reasonable  terms,  conditions,
presentations and warranties.
                                        8
<PAGE>
                            SC&T INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                  (Unaudited)

3. Commitments and contingencies:

         Operating leases:

         In October 1996, the Company purchased approximately 1.24 acres of land
located at the Scottsdale Airpark in Scottsdale,  Arizona. The Company completed
construction  of  approximately  12,000  square  feet  of  warehouse  space  and
approximately  6,000  square feet of executive  office space in April 1997.  The
Company has  subsequently  sold the facility on June 30, 1997 and effective July
1, 1997 leased the  facility  back from the buyer.  The facility was sold by the
Company for a profit exceeding 20% of cost.
                                       9
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

            The  statements  contained in this Report on Form 10QSB that are not
purely historical are  forward-looking  statements within the meaning of 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 fiscal 1998 and  thereafter;  future  products or
product development;  future research and development spending and the Company's
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.  The  Company's  products  include  sub-woofer,  speaker  and  sound
enhancement  systems (for PC's and PC gaming systems),  a PC volume  controller,
and a line of PC and Video Game arcade  racing wheels for SEGA,  Nintendo,  Sony
Playstation  and IBM-PC's.  The  Company's  multimedia  keyboards  line has been
discontinued,  in favor of a second generation product targeted at the corporate
market. This second generation,  features an enhanced Voice Recognition product,
has been completed but at this time has not been introduced into the market.

         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,  has  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 remains open at this time, solely as a sales office
for  mainline  Europe.  All  current  marketing  and  distribution   operations,
including a United Kingdom domestic sales force, is now being handled out of the
United Kingdom operations.

         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  revenues,  resulting in a net loss of  approximately  $
338,000 for the three months ended  December 31,  1997.  The  Company's  primary
costs for are for research and development, tooling for new products, inventory,
trade shows, selling and promotion activities. The Company expects certain 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.
                                       10
<PAGE>
Results of Operations of the Company for the Three-Month  Periods Ended December
31, 1997 and 1996

Net Sales

         Net sales for the three  months ended  December  31, 1997  decreased to
approximately  $2,375,000 or approximately  $751,000 less than net sales for the
three months ended  December 31, 1996.  Net sales for the quarter ended December
31, 1997 were  negatively  impacted by a delay in the manufacture and release of
new products the Company is bringing to the market.  The Company  expects  sales
revenues to be negatively  impacted  through  March 1998 due to lagging  product
deliveries. New manufacturing alliances under negotiations, will improve quality
on-time  deliveries and increase  production volumes to accommodate higher sales
volume.

Gross Profit

         The  Company's  gross profit for the three month period ended  December
31,  1997  increased  to 36%  compared  to 32.8% for three  month  period  ended
December 31, 1996.  Gross margins are affected by the sales  product mix.  Gross
profit margins range from 20% to 40%. The Company  anticipates new products will
initially sell at higher margins.  However,  there can be no assurance that such
margins can be maintained over the life of the product.

Payroll and Payroll Taxes

         The  Company's   payroll  and  payroll  tax  expense   increased   from
approximately   $233,000  in  the  three  months  ended  December  31,  1996  to
approximately  $336,000  in  the  three  months  ended  December  31,  1997,  or
approximately  42.2%.  Payroll  and  payroll tax  expense  also  increased  as a
percentage of sales, from 8% for the three months ended December 31, 1996 to 14%
for the three months ended  December  31,1997.  This  represents  an increase in
sales and  operations  personnel.  In  addition,  a  significant  portion of the
increase in payroll and payroll taxes is a result of additional employees due to
operations  of SC&T  Europe.  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   decreased   from
approximately   $301,000  in  the  three  months  ended  December  31,  1996  to
approximately  $294,000  in the three  months  ended  December  31,  1997.  This
represents  an increase in selling and  promotion  expenses,  as a percentage of
sales from 10% for the three months ended December  31,1996 to 12% for the three
months ended  December 31, 1997. 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. Approximately $125,000
of the increase  was  associated  with the  Company's  sponsorship  of a Formula
Atlantic  Racing  Team in the 1998  Kool  Toyota  Atlantic  Racing  Championship
Series.  The Company has reduced its 1998 sponsorship to a co-sponsor  associate
level.
                                       11
<PAGE>
Office and Administration

         The  Company's  office  and  administrative   expenses  increased  from
approximately   $262,000  in  the  three  months  ended  December  31,  1996  to
approximately   $365,000  in  the  three  months  ended  December  31,1997,   or
approximately  39%.  As a  percentage  of net sales,  office and  administrative
expenses  increased  from 8% for the three months ended December 31, 1996 to 15%
for the three months ended December 31, 1997.  Increased legal and audit fees of
approximately  $  100,00  were  the  major  reasons  for the  increased  expense
necessary to deal with the Company's ongoing legal, preferred shareholder issues
and  accounting  costs.  The Company  hopes these costs will be reduced over the
next 3-6 months.

Development Cost Amortization

         Development cost amortization  decreased from approximately $69,000 for
the three months ended December 31, 1996 to  approximately  $56,000 December 31,
1997. 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 decreased from  approximately  $51,000
for the three  months  ended  December  31, 1996 to $34,000 for the three months
ended December 30, 1997, or approximately 33%.

Net Loss

         Primarily as a result of reduced sales, the Companies operating results
changed from a profit of approximately  $12,000 for the three month period ended
December 31, 1996 to an  operating  loss of $ 338,000 for the three month period
ended December 31, 1997. Late  introduction of the Company's new products during
the Christmas selling season attributed to the decrease in sales.

Liquidity and Capital Resources

         The Companies  working capital of $ 2,705,337  decreased  $565,412 from
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.

         Currently  the US  Company  has  reverted  to  factoring  its  accounts
receivables in an effort to assist its cash flow.
                                       12
<PAGE>
Business Outlook and Risk Factors

Management  believes that there is growing  acceptance in the global marketplace
for the Company's  expanding product line. The Company's future success rests in
securing  new   manufacturing   relationships   that  take  advantage  of  lower
manufacturing  costs  and  improved  reliability  for  product  deliveries.  The
Company's  total  revenue  and  product mix could be  materially  and  adversely
affected by many  factors,  some of which are beyond the control of the Company.
Those factors  include,  but are not limited to, turnover in the Company's sales
force,  competition  from  existing  or new  products,  production  delays,  the
Company's ability to penetrate new markets and attract new customers, unexpected
postponement or cancellation of significant orders, lack of market acceptance of
the  Company's  products,  manufacturing  defects and  seasonality  of sales and
general economic conditions.

         Although the Company has focused on controlling  administrative  costs,
it  recognizes  the added costs  associated  with  attracting  and retaining key
personnel.   The  Company   intends  to   continue   to  moderate   general  and
administrative  costs so that  revenue  growth  will  begin to exceed  operating
expenses.  There can be no assurance,  however, that the Company will be able to
predict or respond to a shortfall in sales during any given  quarter in order to
reduce its fixed general and administrative expenses on a timely basis.

         The Company  believes that it has major untapped market  opportunities.
The industry also has a strong outlook;  with expanding markets characterized by
rapid technological  change,  coupled with the frequent  introduction of product
upgrades  and  evolving  industry  standards.  The  Company  strives  to provide
market-leading  solutions  that  address  the PC user  interested  in  upgrading
existing equipment.  Due to the risk factors discussed and to other factors that
generally affect high technology  companies,  there can be no assurance that the
Company will be able to successfully  penetrate these markets in the future. The
Company plans new product  introductions during 1998 that it feels strongly that
coupled with existing products, will enhance future sales revenues.

         The  Company  has been  advised by it's  independent  certified  public
accountants  that the audit report for the year ended June 30, 1997 will include
a going concern qualification.  The Company does not dispute this qualification.
Due to the large number of preferred shares outstanding,  the Company was unable
to raise additional  equity funds in the past year. It is currently  anticipated
that the Company will require additional working capital to continue to fund its
operations.  Management  intends  to  actively  explore  both  debt  and  equity
financing as well as holding  discussions  with  potential  merging  partners in
order to obtain  such  debt or  equity  financing.  There is no  assurance  that
management will be able to obtain any such financing.
                                       13
<PAGE>
      PART II - OTHER INFORMATION


ITEM I.  LITIGATION

The Company has favorably resolved many of its past litigation  issues.  Current
Pending or Threatened litigation involves:
      a.  The Company v. Maxi Switch

         On May 13,  1997 a Pima County jury  awarded  SC&T $ 3,000,000  against
Maxi-Switch,  Inc.  Silitek  Corporation,  and  Lite-On  Peripherals,  Inc.  For
defendants' breach of contract and  misappropriation of trade secrets related to
SC&T's  Multimedia  keyboards.  On June 30, 1997 a formal Judgment was signed by
the Judge for $ 3,160,885,  which included  attorney's fees and court costs. The
defendants  posted a  $3,200,000  bond pending  post trial  motions.  Post trial
motions were denied.  On January 5, 1998 the Court  ordered  defendants to add a
further $500,000.  to the bond for additional appeal costs. It also ordered that
the 5.15%  accruing  interest.  Resolution  of the appeal  should take about one
year.

      b.  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 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.

      c.  Lake Management v. the Company
         In June of 1997,  Lake  Management  filed suit  against  the Company in
Phoenix,  Arizona,  seeking specific performance  requiring the Company to issue
common stock to Lake pursuant to a preferred  shareholder  conversion agreement.
The Company has  resolved a similar  problem  with 94% of the entities in Lake's
class. The Company believes it will reach a suitable  agreement with Lake. It is
anticipated that an agreement should be reached within a year.

      d.  Jack Of All Games v. the Company

         In June of 1997, Jack Of All Games Entertainment, Inc. sued the Company
in Cincinnati,  Ohio, for breach of contract regarding a purchase order of 5,000
racing  wheels.  Jack Of All Games is seeking  $55,000,  interest and  attorneys
fees.  The Company had  previously  agreed to a full product  replacement,  then
offered a full  product  exchange,  then  offered to  repurchase  the product at
current  company  selling  value.  Jack Of All Games  has  refused  all  offers.
Management  has honored all  obligations  under the terms of this  agreement and
firmly defends this action by Jack Of All Games as frivolous and without merit.

Unasserted Claims and Assessments

         The   Company  has  a  new  racing   wheel   product   which   includes
"force-feedback"  technology. 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 its  force-feedback  technology from another
company,  Immersion  Corporation.  Immersion  Corporation  has  indemnified  the
Company for patent infringement liability.

ITEM 2.  CHANGES IN SECURITIES

      None
                                       14
<PAGE>
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

      The  Company  plans to change the  fiscal  year from June 30, to March 31,
effective March 31, 1998.
                                       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.

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


SC&T INTERNATIONAL, INC.



 /s/  James L. Copland            Chairman of the Board          March 11, 1998
------------------------          Chief Executive Officer



 /s/ Richard W. Elwood            Director of Finance            March 11, 1998
------------------------          and Operations

                                       16