SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1996
/__/ TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to __________
Commission File Number: 0-18711
ACTRADE INTERNATIONAL, LTD.
(Name Of Small Business Issuer In Its Charter)
Delaware 13-3437739
(State Or Other Jurisdiction Of Incorporation or Organization) (IRS Employer
Ident. No.)
7 Penn Plaza, Suite 422, New York, New York 10001
(Address Of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number:(212) 563-1036
Securities registered pursuant to Section 12 (b)of the Act:
Title of each class Name of Exchange on which registered
Securities registered pursuant to Section 12 (g) of the Act:
Common - 5,683,181 Shares Outstanding as of the date of this Report
(Title Of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or 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___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB /_X_/ State the issuer's revenues for its
most recent fiscal year. $23,837,985
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked price of such stock, as of a specified date within the past 60
days. As of August 15, 1996, the value of such stock was: $17,794,200.
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FORM 10-K
ACTRADE INTERNATIONAL LTD.
JUNE 30, 1996
PART I
ITEM 1. BUSINESS
General.
Actrade International, Ltd. (the "Company") was incorporated under the name
"Acquisition Capability, Inc." in the state of Delaware on April 3, 1987. In
1989, the Company acquired Actrade International Corp. ("Actrade") and Allstate
Travel Corp. ("Allstate"), both New York corporations, making both companies
wholly owned subsidiaries. See, "BUSINESS OPERA- TIONS - Actrade International
Corp. and Allstate Travel Corp." below. In 1991, the Company acquired an
inactive foreign corporation, Actrade S.A., as a wholly owned subsidiary, to
participate in foreign transactions which do not involve American products. See,
"BUSINESS OPERATIONS - Actrade S.A." below.
In fiscal 1993, the Company established two new subsidiary corporations,
Actrade Capital Inc., originally incorporated as Amworld Commerce, Inc.
("Capital") and Amworld Credit Inc. ("Credit"), for the purpose of offering to
domestic companies innovative financial services which together comprise the
Company's Financial Services Division. To date, however, Credit has remained
inactive. See, "BUSINESS OPERATIONS - Financial Services Division" below.
BUSINESS OPERATIONS
Actrade Capital Inc.:
During fiscal 1993, Capital was formed to engage in the development and
commercialization of new trade-financing services for the domestic US market. In
mid-1993, Capital completed development of a new system to manage and finance
the accounts receivable of American companies through the use of Trade
Acceptance Drafts (the "TAD Program"). The TAD Program is designed to improve
the management of accounts receivable, improve cash flow and increase sales. It
allows Sellers to offer credit terms to their commercial customers through the
use of pre-authorized debit drafts ("TAD's") that Capital purchases and, on
their due date, processes for payment.
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Definition.
Essentially, a "TAD" is a draft which is prepared by the seller of goods or
services ("Sellers") and accepted by the buyer of the goods or services
("Buyers") by the Buyer signing and delivery of draft back to the Seller. This
acceptance of the draft confirms that: (i) the goods or services have been
delivered by the Seller; (ii) the goods or services were checked and ac- cepted
by the Buyer; (iii) it establishes a specific payment date and (iv) the draft
itself constitutes the payment instrument for the transaction according to its
terms. In addition, the TAD is negotiable so that the Seller may endorse it and
transfer it to another party. At its most basic level, a TAD can be viewed as a
negotiable promissory note which at its due date is collected like an ordinary
check. Three major steps are involved in the TAD Program:
Generating the TAD: By agreement between the Seller and Buyer, a Buyer
"pays" the Seller by signing and delivering a TAD or series of TAD's, as they
may agree.
Purchasing the TAD: Periodically, a Seller will endorse and offer its TAD's
for sale to Capital who then evaluates the TAD's and decides which TAD's it will
purchase and upon what terms; these terms must then be accepted by the Seller.
Collecting the TADs: On the due date, either Capital or the bank to which
they have been sold collects the TADs directly from the Buyers bank account
without any further involvement of either the Seller or Buyer.
BENEFITS OF THE TAD PROGRAM.
There are three major benefits of the TAD Program. First, it serves as a
means for a Seller to finance his accounts receivable by substituting TAD's for
the open receivable. In most cases Sellers can obtain 75% of the face value of
the TAD's sold to Capital within 48 hours, thereby providing them critically
needed cash flow. Second, the use of TAD's allows the Seller to give credit
terms to his Buyers which in most cases gives him a clear advantage over his
competition and serves as a sales tool. Finally, the TAD's provide a collection
mechanism by allowing the TAD to be charged directly against the Buyer's
checking account on the due date.
SAFETY.
The TAD Program is designed with many safeguards to minimize the risk of
non-payment. In management's opinion, although no assurance can be given, the
following features of the TAD Program will reduce the risk of non-collection:
1. Diversification. By accepting TAD's issued by a large number of
customers, the risk of loss is reduced. Each Seller typically deals with TAD's
from many unrelated companies. Therefore, the extent of Capital's exposure from
nonpayment by any company is limited.
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2. Reserve Against Non-Payment. When Capital advances a portion of the
purchase price before the due date of the TAD, it will withhold a "reserve" from
the total aggregate amount of TAD's purchased from each Seller to protect
against the non-payment of any TAD. The collection of every TAD purchased is
cross-collateralized by the full proceeds of all TAD's collected for each
Seller.
3. Guarantees and Insurance. Most TAD's are unconditionally guaranteed by
the participant and, where appropriate by the participant's individual
principals. Further, in many cases, Capital is able to secure collection of
TAD's it will purchase through a business credit insurance policy it has secured
through American Credit Indemnity Company which became effective May 1, 1996.
This policy will cover losses up to $3 Million and allows a discretionary
coverage of $50,000 per customer.
Finally, when TAD's are tendered for sale by a Seller, Capital reviews the
total relationship with the Seller and its customers, including past payment
record for TAD's previously purchased, etc., before deciding whether or not to
purchase the TADs being presented. See, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" below for an analysis of
Capital's operations.
As of the date of this Report, management is not aware of any other
financial service program offered in the United States which utilizes trade
acceptance drafts. The Company has filed for patent protection on the processes
involved in the TAD Program, which application is currently pending under Number
08/506,539. Although no assurances can be given, based upon discussions had with
the Company's patent counsel, management believes that it may be able to secure
patent protection for this innovative program.
Actrade International Corp. - General:
Actrade is engaged in international trade and finance having, since July
1988, concentrated in the direct export of American products primarily to the
Middle East, South America, Europe (including Eastern Europe) and the Pacific
Rim.
Actrade represents a number of manufacturers of American made products on
both an exclusive and non-exclusive basis. From the manufacturers it represents,
Actrade will assemble compatible products into full product lines which it
offers to its overseas distributors. Where Actrade has secured exclusive rights,
it will pass on this exclusivity to its overseas distributor. All products
carried by Actrade are produced by a number of manufacturers and, consequently,
the loss of any existing manufacturer's agreement will not, in the opinion of
management, have a material adverse effect on the Company's operations.
In management's opinion, Actrade represents a business concept beyond
traditional commission export management companies, which simply solicit orders
for the suppliers they represent. Actrade provides US companies foreign markets
for their products through its own
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network of buyers, wholesalers and distributors, coupled with an ability to
arrange required export services (including air or sea shipping, inland freight
arrangements, preparation of shipping documents, export licenses, establishment
of letters of credit, etc.) which offers a less expensive alternative to
"in-house" export operations.
- Product Lines:
As of the end of fiscal 1996, Actrade's principal product groups included:
1- Industrial and Commercial Air Conditioning Equipment including package
systems, stand alone units and spare parts;
2- Computer systems, hardware and related peripheral equipment;
3- Commercial and Industrial Machinery, Ancillary Equipment and Spare
Parts, including restaurant, commercial bakery and hotel equipment, commercial
refrigerators and freezers, display cases, ice cream freezers, laundry and dry
cleaning pressing equipment and automotive spare parts; and
Actrade also offers a wide range of additional consumer and commercial products
and, on request, will search out special order products for foreign buyers.
Management's goal has always been to offer a diverse range of American products
in order to provide overseas distributors with a single source for all their
customers' needs. Based upon Actrade's experience to date, management does not
anticipate any material seasonal variations in the sales of any of its principal
product lines.
During the year ended June 30, 1996, out of Actrade's three principal product
groups, the Air Conditioning and Refrigeration Division accounted for gross
sales revenues of approximately $6,915,915, or approximately 29% of the
Company's total sales. During fiscal 1995, Air Conditioning and Refrigeration
sales totaled approximately $5,280,000, or 32.2% of total sales (as compared to
approximately $3,410,581, or 28% of total sales, during fiscal 1994). Although
this Division continues to represent a very significant component of the
Company's total revenues, the percentage of total revenues represented by it
dropped significantly during fiscal 1996 due to the increase in revenues by
Actrade S.A. (see discussion below) and the substantial expansion of commercial
operations by Capital.
During the past fiscal year, no other single product line or related group
accounted for more than 10% of the Company's total sales revenues.
- Operations:
Actrade maintains no inventory of products. Rather, it purchases products
for its own account
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only when it has confirmed orders from overseas buyers. In this fashion, Actrade
(I) acts as a principal in the sale; (ii) does not require warehouse or storage
space for inventories; (iii) does not tie up available capital in inventory; and
(iv) assures US manufacturers acceptable payment terms in the US thereby
eliminating the problems of collecting foreign receivables. Through Actrade,
American companies can effectively trade with overseas buyers without the risks
and delays associated with the international market.
All of Actrade's activities are transacted in US dollars to avoid the risk of
loss due to currency fluctuations and exchange rates. Further, as a re-seller of
products to foreign buyers, applicable foreign tariffs, taxes and local import
charges are the responsibility of the foreign buyer and not Actrade.
For numerous reasons, many American manufacturers are reluctant to offer credit
terms to foreign buyers. By acting as a direct re-seller of products, utilizing
its own credit facilities, Actrade is in a position to offer generally
unavailable credit terms to foreign buyers. Due to its current cash position,
Actrade continues to offer extended credit to its largest, most creditworthy
customers.
During fiscal 1996 no single customer represented 10% or more of the Company's
total sales. During fiscal 1995, two customer represented approximately 27% of
the Company's total sales. These customers were Efatar Engineering Co., Ltd., an
engineering company located in Hong Kong; and Karioka, Ltd., a distribution
company located in Israel. None of these customers are affiliated with the
Company nor any of its affiliates. Management does not believe that the loss of
any of these customers would have a materially adverse affect upon the
operations or revenues of Actrade. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
Actrade S.A.
Unlike Actrade, Actrade S.A. engages in all phases of international trade except
for the sale of American products. With gross revenues growing from $908,000 in
fiscal 1991 to $7,689,791 in fiscal 1996 (an average annual increase of over
124% over its six years of operations) Actrade S. A. accounted for over 32% of
the Company's total gross revenues for fiscal 1996 and represented the second
largest component of the Company's overall operations (second only to the
operations of Capital discussed above).
Since fiscal 1993, Actrade S.A. has been principally involved with the sale of
computer systems primarily for distribution to Eastern Europe. During fiscal
1994, Actrade S.A. continued to aggressively pursue the expansion of its
European markets with total world-wide sales of over $6,419,000, primarily
comprised of computer systems and related equipment. This trend continued
through fiscal 1995 with sales, again primarily in computer systems and
hardware, growing slightly to $6,747,479, an increase of approximately $328,000
or 5% over fiscal 1994. In fiscal 1996, Actrade S.A. accelerated its growth over
fiscal 1995 with an increase in gross revenues of $942,312 over those of fiscal
1995, an increase of almost 14%.
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However, since sales by Actrade S.A. are usually special situations of typically
higher dollar amounts, as has been the case with the sale of computer equipment,
management is unable to predict the impact of it's activities in the future,
although it is expected that Actrade S.A. will continue to operate at least at
current levels in the future. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" below.
Allstate's Operations
Allstate has operated as a travel agency since 1987, and is duly licensed as a
ticketing agent with IATA (International Airlines Travel Agents Network). To
date, the Company has concentrated its efforts in the international trade
markets of Actrade and Actrade S.A. and in development of its Financial Services
Division. Consequently, management has decided to defer any expansion of
Allstate's operations for the foreseeable future. During fiscal 1995, Allstate's
total revenues constituted less than 1/4 of 1% of the Company's total revenues;
this decreased to less than 1/10 of 1% during fiscal 1996. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for a
complete discussion of the Company's revenues and financial condition.
EXPANSION PLAN
Management has concentrated its efforts for the past eighteen months in the
expansion of Capital's TAD Program and for the foreseeable future plans to
devote the majority of its efforts and resources in the marketing of this
Program. There are several reasons for this decision. First, the TAD Program has
grown well beyond management's projections; with revenues growing over 300% in
fiscal 1995 and an additional 116% in fiscal 1996. Second, the acceptance of the
TAD Program has proven management's original assessment as to the potential
market for the TAD Program. Finally, Actrade's international trade operations
have developed to a point where the Company has experienced a steady average 20%
plus growth rate for the past seven fiscal years. Of course, the Company
continually evaluates the feasibility of new product lines and expanded markets
for its international trade operations and, also, evaluates the applicability of
new financial service products for development in conjunction with the TAD
Program.
Competition
Despite its consistent growth over the past six years, Actrade faces strong
competition from many other companies (many of which are larger and have greater
financial resources) in three primary areas. First, Actrade competes with export
management companies for representation of US manufacturers. In the present
favorable economic climate for export of US products overseas, management
expects that competition for US products will continue to increase for the
foreseeable future. Secondly, Actrade competes with local (overseas)
manufacturers of products similar to those offered by it. Virtually all products
offered by
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Actrade have competitive products manufactured by foreign companies overseas.
Consequently, Actrade must depend upon the quality of the US products it
represents and the competitive pricing it can offer in order to effectively
compete with local manufacturers. Finally, Actrade competes with US
manufacturers engaged in the direct export of their products. All of these
factors will impact upon Actrade's export operations, revenues, profits and its
ability to grow.
With respect to Capital's TAD Program, the Company faces strong competition from
many established financial institutions, including banks, insurance companies
and receivables financing (factoring) companies. Most of these companies are
larger and have greater financial resources. Further, Capital's TAD Program is
based upon the use of Trade Acceptance Drafts which, although a long-established
instrument in international trade, has been virtually unknown within the US
domestic market. Consequently, management faces the additional burden of
educating its target market as to the use of this financial instrument and
gaining adequate market acceptance of this concept to attract a sufficient
number of participating companies in order to make this Program commercially
viable. As of the date of this Report, management is not aware of any other
financial service program which utilizes trade acceptance drafts in a manner
similar to Capital.
ITEM 2. PROPERTIES.
The Company's principal corporate offices are located at 7 Penn Plaza, Suite
422, New York, NY 10001, where it occupies approximately 5,000 square feet of
office space. This lease expires February 28, 2000, and provides for monthly
rentals of $4,400, commencing June 1,
1991 with annual increases of 4.5%.
Although the Company took occupancy of these premises on April 1, 1990, the
Lease Agreement with the Landlord, 370 Joint Venture, an unaffiliated third
party, provided for the landlord to grant rent abatements until June 1, 1991 in
consideration of certain leasehold improvements made by the Company. This space
houses both executive and operating offices for the Company and its
subsidiaries.
As of December 1, 1991, the Company opened a regional sales office,
pursuant to a three-year lease with an unaffiliated third party, at 6700 North
Andrews Avenue, Suite 101, Ft. Lauderdale, Florida, where it occupies
approximately 979 square feet of office space. This office is managed by Mr.
Leon Schorr, Vice President.
Actrade S.A. maintains a separate sales office at 14 Benyamin Ave., Nathanya,
Israel, where it leases approximately 600 square feet of office space from
Mercaz Haneyar Atara Marketing and Distribution Ltd. ("Mercaz"), an unaffiliated
third party, who also serves as a commission sales agent for Actrade S.A.. Under
this agreement, Mercaz also provides Actrade S.A. with all necessary office
furniture and equipment, telephone service, basic secretarial and clerical
services and an office manager to coordinate Actrade's office operations.
Actrade S.A. pays an annual fee of $6,000, which is payable at the end of each
year and is subject to downward adjustment based upon the commissions paid to
Mercaz during such year.
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Actrade S.A. also maintains a sales office within the offices of Resource
International Marketing Ltd. at No. 7, 12/F, Elite Industrial Centre, 883 Cheung
Sha Wan Road, Kowloon, Hong Kong, which serves as a special consultant to the
Company with respect to Actrade's marketing activities in the Pacific Rim. This
office is provided without additional charge to Actrade S.A. as part of the
services provided by Resource International Marketing Ltd.
The Company believes that it's present facilities will be adequate for its
purposes for the foreseeable future and does not anticipate the need for
additional office or operating facilities.
ITEM 3. LEGAL PROCEEDINGS.
The Company has no legal proceedings which are unusual in nature or not in the
normal course of its business or material in amount. The Company knows of no
litigation pending, threatened or contemplated, or unsatisfied judgements
against it. The Company knows of no legal action pending or threatened or
judgements entered against any officers or directors of the Company in their
capacity as such.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the year ended June 30, 1996.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market on which the Company's securities are traded is the
over-the-counter market. Since December, 1990 the Company's securities have been
trading on the NASDAQ electronic quotation system under the symbol "ACRT." The
following table sets forth for the periods indicated the range of high and low
bid quotations for the Company's Common Stock which were listed for the
Company's Common Stock as reported by NASDAQ in the Monthly Statistical Reports.
PERIOD
HIGH LOW
---------------------------------------------------------------
Quarter ended September 30, 1993 $2.4375 $2.25
Quarter ended December 31, 1993 $2.50 $2.25
Quarter ended March 31, 1994 $2.50 $2.25
Quarter ended June 30, 1994 $1.6875 $1.6875
Quarter ended September 30, 1994 $2.00 $1.625
Quarter ended December 31, 1994 $2.25 $1.875
Quarter ended March 31, 1995 $2.00 $1.625
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Quarter ended June 30, 1995 $1.75 $1.25
Quarter ended September 30, 1995 $1.9375 $1.50
Quarter ended December 31, 1995 $2.00 $1.5625
Quarter ended March 31, 1996 $3.1875 $1.75
Quarter ended June 30, 1996 $5.75 $3.8175
On August 15,1996 the reported bid price for the Company's Common Stock was
$5.375 per share; there were 324 record holders of the Company's Shares; and
there were thirteen (13) market makers for the Company's securities.
The Company has not paid any dividends and there are presently no plans to pay
any such dividends in the foreseeable future. The declaration and payment of
dividends in the future will be determined by the Board of Directors in light of
conditions then existing, including earning, financial condition, capital
requirements and other factors. There are no contractual restrictions on the
Company's present or future ability to pay dividends. Further, there are no
restrictions on any of the Company's subsidiaries which would, in the future,
adversely affect the Company's ability to pay dividends to its shareholders.
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ITEM 6. SELECTED FINANCIAL DATA:
Summary Balance Sheet Data: _______________________________Year Ended June 30__
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total Assets $8,088,521 $5,987,746 $3,663,777 $2,608,566 $3,697,120
Total Current Assets 7,969,782 5,894,571 3,538,629 2,473,372 3,528,090
Total Current Liabilities 3,198,814 2,856,926 1,353,122 715,068 2,005,135
Stockholders Equity 4,889,707 3,066,918 2,091,667 1,510,911 1,311,735
Retained Earning 1,782,002 1,024,628 616,835 362,585 178,013
Summary Earnings Data:_______________Year Ended June 30___________________
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total Revenues $23,837,985 $16,415,804 $12,125,468 $9,413,623 $ 8,067,581
Cost of Sales 21,870,891 14,896,903 10,869,674 8,336,780 7,152,864
Selling, General & Administrative
Expenses 1,194,445 1,136,243 1,004,752 869,513 788,102
Interest Expense 150,113 56,991 25,520 39,638 55,912
Interest Income 97,858 78,738 33,981 39,559 45,680
Income Before Taxes and
Extraordinary Item 778,676 404,405 259,503 207,251 116,383
Loss on Sale of Fixed Assets - - - 2,662 -
Income Tax (Benefit) 21,302 (3,388) 5,253 (9,235) 18,086
Net Income Before
Extraordinary Item 757,374 407,793 254,250 213,824 98,297
Net Income 757,374 407,793 254,250 213,824 98,297
Earnings per Share 0.14 0.08 0.06 0.05 0.02
- -------------------------------------------------------
The Company's fiscal year ends June 30 of each year.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
I. Results of Operations
During fiscal 1996, ended June 30, 1996, the Company had combined gross revenues
from operations of $23,837,985, as compared to $16,415,804 for fiscal 1995;
$12,125,468 for fiscal 1994 and $9,413,623 for fiscal 1993. Total cost of
revenues during fiscal 1996 were $21,870,891, as compared to $14,896,903 for
fiscal 1995; $10,869,674 in fiscal 1994 and $8,336,780 in fiscal 1993. As a
result, the Company realized gross profit from operations of $1,967,094 during
fiscal 1996, as compared to $1,518,901 in fiscal 1995; $1,225,794 in fiscal 1994
and $1,076,843 in fiscal 1993.
The increase in gross revenues during fiscal 1996, approximately 45% above
fiscal 1995, was primarily due to the expansion of Actrade's operations through
(I) the increased sales by its subsidiary Actrade S.A. and (ii) significantly
increased revenues by Actrade Capital Inc. ("Capital") through its TAD Program,
discussed separately below (see "II. Revenues Segment Information - Actrade
Capital, Inc. And The Trade Acceptance Draft Program"). The increase in revenues
in fiscal 1996 resulted from increased product sales rather than from price
increases for the Company's products and substantially increased operating
revenues derived from Capital.
After selling, general and administrative expenses, depreciation, a loss on the
sale of fixed assets, interest income and expenses, and provision for taxes,
including an extraordinary benefit from utilization of net operating loss
carryforward, the Company realized a net operating profit of $757,374, or $0.14
per share, as compared to $407,793, or $0.08 per share, for fiscal 1995 and
$254,250, or $0.06 per share, in fiscal 1994. This represented an increase in
net operating profits for fiscal 1996 of approximately 86% above fiscal 1995.
During fiscal 1996, selling, general and administrative expenses showed a slight
increase to $1,194,445, as compared to $1,136,243 for fiscal 1995, an increase
of only 5%. When expressed as a percentage of overall revenues, selling, general
and administrative expenses represented only 3.2% of total revenues for fiscal
1996 (compared to 6.9% in fiscal 1995 and 8.3% in fiscal 1994). Additionally,
approximately $274,625 of this amount was due directly to Capital's operations
during fiscal 1996. Management projects that the costs directly related to
Capital's operations will continue to escalate for the foreseeable future,
particularly as it accelerates its marketing efforts for the TAD Program during
fiscal 1997 (see "II. Revenues Segment Information - Actrade Capital, Inc. And
The Trade Acceptance Draft Program"). However, in management's opinion, the
foregoing operating results clearly reflect the positive impact of the Company's
cost-cutting measures implemented over the past few fiscal years.
As a result of the foregoing factors, historically, the Company's net operating
income expressed as a percentage of gross revenues increased from 1.21% during
fiscal 1992 to a previous high of 2.41% at the end of the third quarter of
fiscal 1993 (prior to the impact of
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the costs associated with Capital's operations). As had been expected, following
the introduction of Capital's TAD Program, this ratio fell to its all time low
of 2.1% at the end of fiscal 1994; but began to recover significantly in fiscal
1995 when it rose to 2.48% at the end of fiscal 1995. During fiscal 1996, due
principally to a combination of significantly increased revenues from Capital's
TAD Program and a continued decline in the growth of selling, general and
administrative expenses, this ratio continued its upward trend and, at the end
of fiscal 1996, reached an all time high of 3.1%. Management believes that this
ratio may level off during fiscal 1997, due to the anticipated balance between
the cost of its accelerated marketing program and the expected increased
revenues from Capital's operations.
During fiscal 1989, Management decided to defer expansion of Allstate's
operations due primarily to the concentration of its personnel and resources in
the import/export business of Actrade. In light of management's continued
emphasis on the expansion of Actrade's export operations and the operations of
its Financial Services Division, this policy has been extended indefinitely.
During fiscal 1996, Allstate's total sales aggregated only $19,053 which
represented a substantial decrease in gross revenues from fiscal 1995, and
accounted for less than 1/10 of 1% of the Company's total revenues.
The Company's growth in revenues over the past several years has provided
greater financial strength and improved credit facilities from its own banks,
thereby enabling it to offer foreign buyers longer payment terms on its
receivables. This ability has had the dual effect of increasing revenues, since
foreign buyers could receive more favorable terms from Actrade than from
competitors, but resulted in an increase in the accounts receivable turnover
rate, which reached a high of approximately 175 days in fiscal 1990. However,
principally as a result of Actrade's decision to limit extended credit terms
(over 90 days) to all but its most credit-worthy customers, during fiscal 1993
the accounts receivable turnover rate decreased significantly to approximately
62 days, where it leveled off during fiscal 1994 and has remained since. See
"IV. Discussion of Financial Condition." below. Even if the accounts receivable
turnover rate were to increase again in the future, management believes that
there will be no negative impact upon Actrade's operations because virtually all
of Actrade's receivables are fully secured either by letters of credit or
separate guarantees, including payment guarantees from Actrade's suppliers.
As of June 30, 1996, of the Company's total accounts receivable, in the amount
of $3,364,441, approximately 76% have been collected as of the date of this
Report and, of the balance, approximately $873,000 are secured by commercial
documentary drafts; and approximately $60,000 are open account. This does not
include $2,578,015 in Trade Acceptance Drafts receivable which, for the most
part, have been sold to an independent financial institution and which are
insured - see Financial Statements, Note 12.
II. Revenue Segment Information.
Until fiscal 1993, the Company's revenues were comprised solely of export sales
by Actrade and revenues earned by Allstate's travel agency business. During
fiscal 1993 the Company,
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through Capital, realized the first revenues from its newly introduced TAD
Program. Since its introduction, revenues have continued to increase. See
discussion immediately below.
Actrade Capital, Inc. and The Trade Acceptance Draft Program.
Following a complete revision of the operating plan for Capital in late fiscal
1993, management developed new trade financing programs intended to be marketed
to domestic companies in the United States. Although a departure from the
Company's core business of international trade, management believed that a
strong demand for new, innovative trade financing methods exists among small to
medium sized American companies. In late fiscal 1993, Capital offered its first
financial program to assist companies in the management and collection of small
open accounts receivable - The TAD Program.
During fiscal 1994, the first full year of operations for the TAD Program,
although still in its development stage, Capital generated gross revenues of
$927,757, as compared to $247,809 during fiscal 1993. During fiscal 1994 the
Company incurred general and administrative expenses directly attributable to
Capital's operations of $180,469 resulting in a loss from Capital's operations,
before interest income and expenses, of $76,649. After interest income of
$28,956, and interest expense of $1,918, and provision for taxes of $779, the
net loss from operations for Capital during fiscal 1994 was $50,390. Although
showing a modest loss, Capital's operating results for fiscal 1994 exceeded
management's expectations.
During fiscal 1995, management decided to implement an aggressive new marketing
plan for the TAD Program, principally in response to the perceived need to
educate potential participants in the Program about how trade acceptances work
and how they could benefit from the TAD Program. Additionally, management
decided to offer more conventional receivables management services, such as
factoring, to TAD Program participants to help them with the transition to the
use of trade acceptances.
As a result, during fiscal 1995, Capital generated total gross revenues of
$3,703,493, almost 300% higher than in fiscal 1994. Direct general and
administrative expenses for Capital totaled $120,175 during fiscal 1995 and, had
management not elected to make a year-end allocation of indirect general and
administrative over-head costs, net income before taxes would have been
approximately $215,153. However, due the year-end allocation to Capital of a
share of the Company's indirect general and administrative costs in the amount
of $208,000, Capital reflected net pre-tax income of only $7,153. Management had
elected to make a similar allocation of indirect general and administrative
expenses on a quarterly basis during fiscal 1996 in order to avoid any interim
distortion of earnings by Capital.
During fiscal 1996, Capital generated gross revenues of $7,993,932, almost 116%
higher than fiscal 1995, with direct general and administrative expenses of
$895,124, an increase of over 272% from fiscal 1995 (as adjusted to include the
1995 year-end allocation). For the fiscal year ended June 30, 1996, Capital
operations reflected a gross profit of $526,386, with net pre-tax income of
$106,377, an increase of more than 1,387% from fiscal 1995.
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Actrade International Corp. And Actrade S.A., Ltd.: The International Trade
Division.
Through fiscal 1993, Actrade's four principal overseas markets have been (I) the
Middle East, (ii) South America (iii) Europe (including Eastern Europe) and (iv)
the Pacific Rim, with sales in the Eastern European markets having begun during
the last quarter of fiscal 1991. During fiscal 1996, the Company showed
increased revenues in five out of its six principal markets. The most
significant increase occurred in the European area where sales increased
approximately 17% from fiscal 1995 due principally to a decrease in demand for
computers in Eastern Europe and the continued increased sales of Bard
air-conditioning units for the tele-communications industry in Europe. The
Company also posted a decline in revenues (approximately 27%) in sales in the
Far East. The most significant increase in any single market occurred in the
United States, due principally to revenues earned by Capital, where sales
increased by approximately 105% over fiscal 1995. Increases in other market
areas occurred in the Middle East and South America where sales increased by
approximately 19% and 17% respectively over fiscal 1995. The following table
illustrates the Company's gross revenues by market segment during the past four
fiscal years:
Market Segment Amount of Revenues for Fiscal Year
by Area 1996 1995 1994 1993
- -------------- --------- ----------- ----------- -----------
Middle East $4,350,000 $3,643,911 $3,683,269 $1,322,492
South America $3,424,000 $2,926,184 $1,529,580 $1,620,199
Europe $5,300,000 $2,652,436 $3,365,000 $3,157,360
Far East $1,750,000 $2,387,653 $1,490,000 $2,230,720
United States $8,112,000 $3,975,464 $1,232,485 $ 168,012
All Others $ 900,000 $ 830,156 $ 825,134 $ 914,840
See "FINANCIAL STATEMENTS - Note 5 Foreign and Domestic Operations and Export
Sales."
Management plans to utilize current cash on hand in connection with its
international trading operations principally for (i) general working capital
reserves to meet any extraordinary or unexpected expenses; (ii) and to
collateralize interim financing, if required, in connection with Actrade's
export operations. Management has, in many cases, utilized assignments of
letters of credit from its overseas buyers in payment for products from American
manufacturers. Although this procedure has been acceptable to most suppliers,
with respect to new suppliers or for small purchase orders, this assignment
procedure may not be acceptable and the Company may be required to utilize
available cash. To date, it has not been necessary to use available cash for
this purpose and management does not foresee the need for such financing in the
future. See "BUSINESS OPERATIONS."
During fiscal 1996, ended June 30, 1996, sales by Actrade S.A. totaled
$7,689,000, or 32.3% of the Company's total gross revenues, as compared to
$6,747,479, or 41.1% of the Company's total gross revenues for fiscal 1995 and
$6,419,491, or 52.9% for fiscal 1994. The
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increase in gross revenues for Actrade S.A. resulted primarily from the sale of
computer systems and related equipment, which represents the culmination of a
long-term effort to open the developing markets of Eastern Europe and the former
Soviet Union. By opening these markets over the past few years, Actrade S.A. has
also solidified it's efforts to develop reliable sources for computer systems
and hardware.
However, in light of the volatile economic and political changes in the world,
and particularly in Eastern Europe where Actrade S.A. made a significant portion
of its sales during fiscal 1996, it continues to be impossible to accurately
project revenues for Actrade S.A. during fiscal 1997. However, although no
assurances can be given, in management's opinion, revenues are expected to
continue at approximately the levels experienced during fiscal 1996 and the
operations of Actrade S.A. will continue to be an important aspect of the
Company's overall operations for the foreseeable future.
The most significant factor which continues to impact the growth of Actrade S.A.
is the continued economic and political instability among the many new,
developing nations of the world. Although no assurances can be given, management
believes that, as many of these new and developing countries stabilize their
internal political and economic conditions, provided that individual currencies
can also be stabilized to permit participation in the international markets, the
demand for commercial and consumer products will increase, a factor which is
expected to benefit Actrade, S.A. in the future.
Another factor which management believes will favor the continued growth of
Actrade S.A. has been the improved economic environment in the United States.
With the end of the economic recession, and as domestic sales of products
increase, management believes that many American manufacturers will de-emphasize
the export of their products and will no longer be willing to make the price
concessions necessary to be competitive in the international marketplace. This
situation will favor the growth of Actrade S.A. which deals only with foreign
made products which are typically less expensive than their American equivalent.
III. Discussion of Financial Condition
On a consolidated basis, as of June 30, 1996 the Company had total assets of
$8,088,521 (compared with $6,124,564 at June 30, 1995 and $3,663,777 at June 30,
1994) with total liabilities of $3,198,057,128 (compared with $3,057,128 and
$1,097,655 respectively for June 30, 1995 and 1994). Of the Company's assets at
June 30, 1996, cash and cash equivalent accounted for $1,924,805, and $3,361,821
represents trade accounts receivable. The increase in the Company's assets, as
well as the increase in liabilities, at June 30, 1996 was principally due to the
increase in cash on hand, an increase in trade acceptance drafts receivable-bank
and trade accounts receivable (with a corresponding increase in accounts payable
- - $1,872,880 at June 30, 1996 as compared with $1,764,986 at June 30, 1995).
The increase of approximately $801,000 in trade accounts receivable at June
30, 1996 was principally due to sales made by Actrade and Actrade S.A. during
the last quarter of fiscal
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1996 which were shipped prior to the end of the fiscal year with payment to be
made after year-end. As previously indicated (see "I. Result of Operations"
above), of the Company's receivables at June 30, 1996, approximately 76% have
been collected as of the date of this Report. Despite the substantial increase
in both trade accounts receivable and payable, management believes that this was
caused principally by the increased volume of business by both Actrade and
Actrade S.A. and the normal variations in Company's business and not due to any
trend which is expected to have a continuing effect upon operations in the
future.
The Company's accounts payable are current except for one former supplier where
a dispute exists between the Company and the supplier. This account represents
$105,000 of the total accounts payable and involves the shipment of lawn
equipment which did not comply with the Company's purchase orders. Although no
resolution to this dispute has been negotiated and all talks between the Company
and this supplier have been suspended for almost two years, management believes
that, should the supplier pursue recovery of the amount claimed, the Company
would have both a meritorious defense and a sustainable counterclaim for
damages. Further, as the Company no longer represents this manufacturers product
lines, management does not anticipate any adverse impact upon its ability to
secure trade credit in the future.
Since fiscal 1991, the Company has experienced a disproportionate growth rate in
its accounts receivable and accounts payable as a percentage of gross revenues
due to the nature of the sales made by its Air Conditioning and Refrigeration
Division and by Actrade S.A. Revenues from the Air Conditioning and
Refrigeration Division are primarily derived from the sale of large commercial
and industrial scale units, as opposed to individual home air conditioning
units. Consequently, the average invoice amount, as well as the average per item
cost, is considerably higher than many of the other products sold by the Company
resulting in higher cost of goods sold as well as higher accounts receivable and
payable. Similarly, the sales revenues generated by Actrade S.A. are from the
sale of less expensive foreign made products where the typical gross margins are
much lower than for similar American made products. However, management does not
anticipate any additional difficulty in securing required trade financing, if
required, as a result of these transaction since virtually all of these sales
are based upon the buyers confirmed, irrevocable letters of credit.
At June 30, 1996, the Company's total stockholders' equity increased to
$4,889,679, as compared to $3,067,034 at June 30, 1995 and $2,091,667 at June
30, 1994. The principal source of funds for the Company's operations are
revenues earned by its operating subsidiaries. On June 4, 1996, the Company
commenced a private placement offering of up to 1 Million shares of its common
stock at $3.35 per share, pursuant to Regulation D promulgated under the
Securities Act of 1933. As of June 30, 1996, the end of the fiscal year, the
Company had received net proceeds from this private placement of $1,065,300,
virtually all of which has been designated by the Company for the continued
expansion of Capital's TAD Program. These proceeds were received by the Company
on June 28, 1996. If the Company sells the balance of the shares being offered,
of which there is no assurance, an additional $2,185,875 will be received.
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During the fiscal year ending June 30, 1997, the Company projects no
significant additional capital expenditures in connection with any of the
Company's operations.
At June 30, 1996 the Company also had property, less accumulated depreciation,
of $103,- 705, (compared to $93,174 at June 30, 1995 and $99,168 at June 30,
1994) and security deposits, deferred taxes and prepaid expenses of $15,034,
$13,439 and $28,994 respectively. In connection with the Company's relocation
during fiscal 1990, it received an 18 month rent abatement from its landlord. To
conform with applicable accounting procedures, the value of this abatement is
being amortized over the life of the lease. At June 30, 1995 the Company
continued to show $55,960 in deferred rent liability.
Based upon available cash on hand and expected revenues from operations,
management is of the opinion that it will have adequate available funds to meet
its anticipated capital expenditures and cash needs for fiscal 1997. Thereafter,
future capital expenditures will be decided based upon operating results and
available revenues from operations. Apart from expenses associated with the
implementation of Capital's operations which cannot yet be estimated, management
projects no significant additional capital expenditures in connection with its
operations during the next twelve months.
On a consolidated basis, management believes that operations from its
subsidiaries will continue to reflect a profit in fiscal 1997 and management
expects that revenues will be adequate to meet the Company's operating cash
needs. The Company plans to draw working capital from cash on hand and operating
revenues. The Company's outstanding notes, due during the present fiscal year,
are all secured by the Company's related accounts receivable and are paid as
such receivables are collected. Consequently, the payment of these outstanding
notes is not expected to have an impact upon the Company's liquidity.
IV. Trends Affecting Liquidity, Capital Resources and Operations
Over the years, management has observed a substantial increase in demand for
American made products. In management's opinion, this is due to a renewed
confidence in the quality of American products and the relative weakness in
recent years of the US dollar as compared to other major foreign currencies.
This formed the basis of the Company's operating philosophy since 1989 and, in
management's opinion, continue's to favor growth over the foreseeable future.
Combined with recent changes in world political structures, management believes
the demand for American products will continue to increase at least in the
foreseeable future.
Over the past decade, economic conditions in the United States have caused many
American manufacturers to seek new markets for their products and, in
particular, to turn to foreign markets to boost domestic sales. Management
believes this trend, coupled with renewed demand for American products and
improved buying power of foreign currencies, has been beneficial to the Company
and has been a major factor in its growth over the past four years. This trend,
although expected to continue for the foreseeable future, is now being affected
by a number of other factors which could adversely affect future growth rates
for the Company's
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present operations.
However, recently management has observed that, with the collapse of traditional
political and ideological barriers, the demand for products from all parts of
the world has increased perceptibly with many developing and third world nations
now looking for products from many different countries. This has been
particularly true of countries with "soft" currencies (i.e. currencies not
readily exchangeable into established currencies such as British pounds, US
dollars, etc.), which at present are unable to pay for their purchases in US
dollars. Management believes that the greatest demand for all kinds of foreign
products (including those from the US and other industrial nations) will come
from these new developing third world countries over the next few years. To meet
this changing market demand, the Company initiated an expansion of Actrade's
operations through the establishment of Actrade S.A., which is intended to
compliment current operations by providing foreign sources for products.
As the US economy continues to improve and the dollar strengthens with respect
to other currencies, foreign buying power for American products may decrease
with foreign buyers looking for comparable, but less expensive, products from
other sources. Although it is impossible to predict the extent to which this
trend may affect the competitiveness of American products overseas, it is likely
that any significant decline in buying power of foreign currencies will have an
adverse impact upon Actrade's present operations. Although no assurances can be
given, management believes that by utilizing its foreign network both to promote
new sales of American products and as a source of comparable, less expensive
foreign made products, the Company will gain the flexibility needed to meet
changing product demands over the coming years.
A review of the Company's Statement of Operations shows that the cost of goods
sold, as a percentage of total sales, has increased from approximately 83% in
fiscal 1990 to approximately 91.7% for fiscal 1996. This increase is the result
of three principal factors. First, as recessionary factors influenced economic
conditions both in the United States and other major industrial nations
worldwide, there has been a significant increase in competition for a shrinking
market. This resulted in the need to reduce profit margins in order to remain
competitive in the world markets. Second, as discussed above, as the Company's
operations have expanded the nature and mix of the products sold by the Company
it has also changed from smaller, less expensive products to larger or more
expensive products, such as the commercial and industrial air conditioning and
refrigeration equipment which made up a significant proportion of the Company's
total sales since fiscal 1992. With such higher priced products, the profit
margins are typically less. Finally, the sales by Actrade S.A. have typically
consisted of larger orders primarily for computer systems and related equipment
from foreign sources, which typically are based upon lower profit margins. In
combination, these factors resulted in a higher percentage cost of sales for the
Company.
Management knows of no other trends reasonably expected to have a material
impact upon the Company's operations or liquidity in the foreseeable future.
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VI Inflation.
During the past few years inflation in the United States has been relatively
stable which, coupled with the relative strength of foreign currencies discussed
above, has had a beneficial effect upon the Company's operations in that the
products it offers have been competitively priced in relation to comparable
foreign made products. In management's opinion, this is expected to continue for
the foreseeable future. However, should the American economy again experience
double digit inflation rates, as was the case in the past, the impact upon
prices for American goods could adversely affect the Company's ability to
effectively compete in its overseas markets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements: Reference:
Financial Statements Table of Contents F-1
Independent Auditor's Report F-2
Balance Sheets F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statements of Cash Flow F-6
Notes to Financial Statements F-7 - F-16
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) and (b) Identification of directors and executive officers.
The following identification of officers and directors, including
biographies, set forth the present officers and directors:
NAME AGE POSITIONS HELD
Henry N. Seror 60 President and Director of the
Company and each of its
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subsidiaries, except Actrade Capital, Inc.
John Woerner 59 Vice President and Director of the
Company and its subsidiaries
Leon Schorr 59 Vice President and Director of the
Company and its subsidiaries
Amos Aharoni 51 President of Actrade Capital, Inc. Secretary/-
Treasurer and Chief Executive Officer of the
Company and each of its subsidiaries.
Jacques W. Munro 30 Vice President of Operations of Actrade Capital,
Inc.
Directors hold office until the next annual shareholders meeting or until their
death, resignation, retirement, removal, disqualification, or until a successor
has been elected and qualified. Vacancies in the Board are filled by majority
vote of the remaining Directors. Officers of the Company serve at the will of
the Board of Directors.
(c) Identification of significant employees. None
(d) Family relationships.
There are no family relationships among the Officers, and there are no
arrangements or understandings pursuant to which they were elected officers. All
officers hold office for one year or until their successors are elected and
qualified, unless otherwise specified by the Board of Directors; provided,
however, that any officer is subject to removal with or without cause, at any
time, by a vote of the Board of Directors.
(e) 1. Business Experience.
Principal occupations of directors and officers are as follows:
HENRY N. SEROR has been President and a Director of the Company since September
1988, having served as President and a Director of All State and Actrade since
July 1988. Mr. Seror has been actively engaged in the export business for more
than twenty years having served from 1986 until July 1988 as Managing Director
of the New York office of Indamerica International, Inc., a privately held, New
York based export company. From 1972 until 1986 Mr. Seror was Vice President of
Drake America Corporation, also a privately held export company, where he served
as Automotive and Industrial Group President with principal responsibility for
export sales of automotive and industrial products to the Middle East and Far
East, including the establishment of initial operations in Korea and the
People's Republic of China. From 1968 until 1972, Mr. Seror served as Vice
President of American Steel Export
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Company, a privately held export company specializing in foreign sales of US
products. Mr. Seror graduated from New York University receiving his Bachelor of
Science degree in 1967.
JOHN WOERNER has been a Vice President of Actrade, a wholly owned subsidiary of
the Company, since September 1991. Effective January 15, 1992, Mr. Woerner was
appointed Vice President and a Director of the Company. From March 1987 until
joining Actrade, Mr. Woerner was employed as Marketing Manager with Ad Auriema,
Inc., a privately held import/export company headquartered in the New York
metropolitan area. From December 1984 until March 1987, Mr. Woerner served as a
General Manager of the Air Conditioning and Refrigeration Division for Connell
Export Company, also a privately held export company located in New Jersey. From
July 1978 until March 1987, he was a principal of Global Systems, Inc. a
privately held import/export company which he founded with Mr. Schorr, also an
officer of Actrade. From April 1965 through July 1978, Mr. Woerner served as
Vice President of Sillcox Air Conditioning & Refrigeration Corp., a privately
held corporation located in New York City. Mr. Woerner is a licensed
Professional Engineer in New York and New Jersey and is a member of the American
Society of Heating, Refrigeration & Air Conditioning Engineers. Mr. Woerner is a
graduate of Lehigh University having received his Bachelors of Science Degree in
Mechanical Engineering in 1959.
LEON SCHORR has been a Vice President of Actrade, a wholly owned subsidiary of
the Company, since September 1991. Effective January 15, 1992, Mr Schorr was
appointed Vice President and a Director of the Company. From October, 1988 until
joining Actrade, Mr. Schorr was employed as Manager of the Florida based Latin
American and Caribbean Sales Office of Ad Auriema, Inc., a privately held
import/export company headquartered in the New York metropolitan area. From
January 1987 until October 1988 Mr. Schorr served as Export Manager for TRACO
Overseas Corporation, a privately held, Florida based export company. From
December 1984 until March 1987, Mr. Schorr served as a General Manager of the
Air Conditioning and Refrigeration Division for Connell Export Company, also a
privately held export company located in New Jersey. From July 1978 until March
1987, he was a principal of Global Systems, Inc. a privately held import/export
company which he founded with Mr. Woerner, also an officer of Actrade. From June
1971 through September 1978 Mr. Schorr served as Manager of the Air Conditioning
and Food Service Equipment Division of Drake America Corporation. Mr. Schorr is
also a member of the American Society of Heating, Refrigeration & Air
Conditioning Engineers. Mr. Schorr is a graduate of Rutgers University having
received his Bachelors of Arts Degree in 1959.
AMOS AHARONI effective February 1, 1993, Mr. Aharoni was appointed President of
Actrade Capital, Inc., a wholly owned subsidiary of the Company and, effective
April 1993 was appointed as Secretary/Treasurer of the Company. Mr. Aharoni, age
48, has served as a special financial consultant to Registrant and its
subsidiaries since February 1991. In addition, he has been president of Mentor
Communication and Production Corp., a privately held New York corporation, since
1985. This company provides consulting services in the area of international
trade and finance. Since 1987, Mr. Aharoni has been president of NTS
Corporation, a foreign holding corporation. NTS Corporation is also the
principal shareholder
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of the Registrant. Mr. Aharoni received his Bachelor of Arts Degree in
Economics and Political Science from Hebrew University of Jerusalem in 1974. He
moved permanently to the United States in 1985 and has been actively involved in
all aspects of international trade since that time.
JACQUES MUNRO joined the Company in August 1994. Prior thereto, since June 1992,
he was employed as a credit manager for Copy Cat Industries, Inc., a privately
held manufacturing company, where he was charged with examination and analysis
of potential customers credit worthiness; preparation of financial statements
for the factor; was responsible for all corporate credit and collection
decisions and generally interacted with all internal department heads. From 1990
to 1992, Mr. Munro was employed as a Senior Account Representative by CIT
Group/Factoring, a major institutional banking firm. /in this position Mr. Munro
dealt directly with major chain store accounts, prepared and provided reports
and updates to various credit providers, handled collection responsibilities and
resolved disputes between clients and customers. From 1988 to 1990, Mr. Munro
was employed as a junior credit analyst for World Wide Capital Group, also an
institutional banking firm where he was primarily responsible for investigation
and credit analysis of new customers. In addition, since 1990, Mr. Munro has
served as a director of the Greenbriar Condominium, a 250 unit residential
complex in Briarwood New York. Mr. Munro received his Bachelors Degree in
Finance from LaSalle University in 1994 and his Associates Degree in Credit from
the New York Institute of Credit in 1993.
2. Directorships.
None, other than listed above.
(f) Other Involvement in Certain Legal Proceedings.
There have been no events under any bankruptcy act, no criminal proceedings and
no judgements or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information relating to remuneration received by
officers and directors as of June 30, 1996, the end of the Company's most recent
fiscal year, as well as indicating the compensation agreements for fiscal 1997:
Name and Principal Annual Compensation(1) Long Term Compensatio All Other
Position Year Salary Bonus Restricted Stock Awards Compensation
Amos Aharoni, CEO(2) 1996 $52,000 $ 18,413(3)
1995 $52,000 $ 30,714(3)
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Henry N. Seror,President 1996 $46157 $ 1,076(4)
1995 $42507 $3412 $ 1,165(4)
John Woerner,VP 1996 $76,125 $22,953 $ 13,153
1995 $67,442 $13,151(5) 6,553(5)
Leon Schorr,VP 1996 $72,875 $22,953 $ 9,299
1995 $64,885 $13,151(5) $ 3,600(6)
Andrew Schamisso 1996 $-0- $ -0-
1995 $ 21,000 $ -0-
Jacques Munro 1996 $ 41,953 $ 1,625
1995 $ 28,616 $ 3,057
- --------------------------------------------------------
(1) The Company has varying compensation arrangements with each of its executive
officers as more particularly described below. It should be noted that the
figures listed as "salary" include both base salary and earned commissions,
but do not included annual bonus amounts, if any, which are listed
separately under the "bonus" column.
(2) In addition to serving as Chief Executive Officer of the Company, Mr.
Aharoni also serves as Secretary/Treasurer of the Company and as President of
Actrade Capital, Inc., one of its wholly owned subsidiaries.
(3) The amount set forth herein includes amounts paid by the Company for
both the lease of an automobile for the exclusive use of Mr. Aharoni, and for
health insurance premiums for Mr. Aharoni.
(4) This amount includes payments made by the Company for health insurance
premiums on behalf of Mr. Seror.
(5) Pursuant to the terms of the employment contracts between the Company and
each of Messrs. Woerner and Schorr, who jointly head the Company's Air
Conditioning and Refrigeration Division, the annual bonus earned by them,
based upon the operating results of their Division, is divided equally
between them.
(6) This amount represent an annual automobile and expense reimbursement paid by
the Company to each of Messrs. Woerner and Schorr at an agreed rate of $400
per month.
During the year ended June 30 1996, Mr. Seror was employed pursuant to a
restructured employment agreement with Actrade. Under this agreement Mr. Seror's
salary has been restated and he now receives a base salary of $42,500. In
addition Mr. Seror receives a commission based upon the Company's net sales
profits generated directly by him equal to 15% of the first $150,000; 20% of the
next $50,000 and 25% of all net sales profits above $200,000.
Mr. Woerner became an officer and employee of the Company as of September
6, 1991. He was employed pursuant to an oral employment agreement until January
1, 1992, at which time Mr. Woerner and the Company entered into a formal written
employment agreement. This Agreement was modified and renewed effective as of
January 1, 1995. Under this new
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Agreement Mr. Woerner is employed at a base salary of $76,125 per year. In
addition Mr. Woerner receives an automobile lease and expense reimbursement of
$4,800 per year and a commission based upon the Company's net profits derived by
sales generated directly by the Air Conditioning Division equal to 15% of all
such net profits up to $110,000; 20% of the next $110,000 and 25% of all amounts
over $220,000. In determining net profits attributable to the Division, the
Company deducts from gross sales profits (gross sales less cost of sales) all
direct expenses as specified in the Agreement and an agreed to percentage
apportionment of the Company's overhead expenses up to a maximum of $149,000 per
year.
Mr. Schorr became an officer and employee of the Company as of September 6,
1991. He was employed pursuant to an oral employment agreement until January 1,
1992, at which time Mr. Schorr and the Company entered into a formal written
employment agreement. This Agreement was modified and renewed effective as of
January 1, 1995. Under this new Agreement Mr. Schorr is employed at a base
salary of $72,875 per year. In addition Mr. Schorr receives an automobile lease
and expense reimbursement of $4,800 per year and a commission based upon the
Company's net profits derived by sales generated directly by the Air
Conditioning Division equal to 15% of all such net profits up to $110,000; 20%
of the next $110,000 and 25% of all amounts over $220,000. In determining net
profits attributable to the Division, the Company deducts from gross sales
profits (gross sales less cost of sales) all direct expenses as specified in the
Agreement and an agreed to percentage apportionment of the Company's overhead
expenses up to a maximum of $149,000 per year.
In addition to the foregoing employment contracts with management, as of
February 20, 1991, the Company engaged the services of Mr. Amos Aharoni as chief
executive officer. For fiscal 1997, Mr. Aharoni's annual salary will be $78,000,
plus reimbursement of any expenses incurred by him on behalf of the Company. In
addition, the Company is obligated to provide Mr. Aharoni with a car for his
use, which car lease payments total approximately $9,960 per annum. Under that
agreement, Mr. Aharoni, who is also the president of NTS Corporation, the
Company's principal shareholder, was responsible, among other matters, with the
implementation and supervision of the Company's internal financial matters;
negotiation for new credit facilities with banking institutions on behalf of the
Company; preparation of financial budgets and projections for the Company's
various subsidiaries and product divisions; review of potential acquisition
candidates for the Company; the review of internal operating procedures and
preparation of recommendations concerning changes to such procedures; and such
additional special projects as may be designated by the Board of Directors. In
addition to his other duties, effective March 1, 1993 he was appointed President
of Capital and has been charged with the implementation of Capital's TAD
Program. Further, in April 1993, Mr. Aharoni was also appointed as Chief
Executive Officer of the Company and as Secretary/Treasurer of the Company and
its subsidiaries.
Except as herein above described, the Company has no other employment contracts.
Further, it has no retirement, pension, profit sharing, insurance or medical
reimbursement plan covering its officers or directors.
Page 25
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security ownership of certain beneficial owners.
None other than stated in (b) below.
(b) Security ownership of management.
Name Relationship Number of Shares Percent-
age(5)
NTS Corp. (1) Shareholder 2,345,549 41.2%
Henry N. Seror(2) Officer, Director &
Shareholder 27,083 0.5%
Amos Aharoni Officer 2,345,549 41.2%
Officers & Directors as
a group (3 persons) 2,372,632 41.7%
- ---------------------------------------
(1) Mr. Amos Aharoni controls the business of and is the sole officer and
director of NTS Corporation which is the Company's principal shareholder. By
reason of his position with NTS Corp., Mr. Aharoni may be deemed to have a
beneficial interest in the Shares owned by NTS Corporation. Mr. Aharoni owns no
Shares apart from those owned by NTS Corporation. (2) Mr. Seror is the only
officer or director of the Company or any of its subsidiaries which is also a
Shareholder of the Company, except for Mr. Aharoni who has beneficial ownership
through NTS Corp. (5) Percentage figures are based upon 5,683,181 Shares issued
and outstanding as of June 30, 1995.
(c) Changes in Control.
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Compliance With Section 16(a) of the Exchange Act.
The Company has been registered pursuant to Section 12 of the Securities
Exchange Act of 1934 since September 23, 1990 and, by reason thereof, all
officers, directors and 10% or more shareholders of the Company became obligated
to file Forms 3, 4 and 5, describing the ownership of securities in the Company
and any changes thereto, as they may apply, since that date.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Exhibits: None
Page 26
<PAGE>
Independent Auditor's Report on Financial Statement Schedules:
Financial Statement Schedules:
Schedule V: Property and Equipment;
Schedule VI: Accumulated Depreciation of Property and Equipment;
Schedule IX: Short Term Borrowings;
Schedule X: Supplemental Income Statement Information.
Reports on Form 8-K:
Report on Form 8K dated February 15, 1996 announcing the execution of three
consulting agreements.
Page 27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, there unto duly authorized.
ACTRADE INTERNATIONAL, LTD.
/s/Henry N. Seror
Date: August 15, 1996 By:______________________
Henry N. Seror, President
Pursuant to the requirements of 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 dates indicated.
/s/Henry N. Seror
Dated: August 15, 1996 By:_________________________
Henry N. Seror, President,
Chief Operating Officer & Director
/s/Amos Aharoni
Dated: August 15, 1996 By:__________________________
Chief Executive Officer,
Secretary/Treasurer, Principal
Financial Officer and Director
/s/John Woerner
Dated: August 15, 1996 By:__________________________
John Woerner, Vice President
and Director
/s/ Leon Schorr
Dated: August 15, 1996 By:__________________________
Leon Schorr, Vice President
and Director
Page 28
<PAGE>
Page 29
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Actrade International, Ltd. and Subsidiaries
New York, New York
We have audited the accompanying consolidated balance sheet of Actrade
International,Ltd. and Subsidiaries as of June 30, 1996 and June 30, 1995, and
the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for the years ended June 30, 1996, 1995, and 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Actrade International, Ltd.
and Subsidiaries as of June 30, 1996 and 1995 and the results of its operations
and its cash flows for the years ended June 30, 1996, 1995 and 1994, in
conformity with generally accepted accounting principles.
ZELLER WEISS & KAHN
August 14, 1996
Mountainside, New Jersey
F-1
Page 30
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996 AND 1995
ASSETS
1996 1995
---- ----
Current assets:
Cash, including time deposits of
$750,000 and $1,750,000 at
June 30, 1996 and June 30, 1995,
respectively $1,924,805 $1,769,049
Accounts receivable, less allowance for
doubtful accounts of $25,000 at June 30, 1996
and $62,500 at June 30, 1995 (Notes 2 and 4) 3,361,821 2,560,827
Trade acceptance draft receivable,
bank (Note 12) 2,578,015 1,508,000
Due from affiliates (Note 15) 77,164 108,484
Prepaid expenses 24,815 28,994
Interest receivable 3,162 27,563
---------- ----------
Total current assets 7,969,782 6,002,917
---------- ----------
Property and equipment:
Furniture and fixtures 161,829 129,682
Leasehold improvements 113,902 110,902
---------- ----------
275,731 240,584
Less accumulated depreciation 172,026 147,410
---------- ----------
103,705 93,174
---------- ----------
Other asset:
Deferred taxes 13,439
Security deposits 15,034 15,034
---------- ----------
15,034 28,473
------ ------
$8,088,521 $6,124,564
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 4) $ 149,881
Cash advance from bank (Note 12) $1,178,551 1,054,898
Accounts payable 1,872,880 1,764,986
Customer deposits 55,954
Accrued expenses 11,041 10,288
Payroll taxes payable 9,213
Due to affiliates (Note 15) 3,126 3,662
Income taxes payable (Note 9) 21,302 700
---------- ----------
Total current liabilities 3,142,854 2,993,628
---------- ----------
Commitments (Note 9)
Deferred rent liability (Note 9) 55,960 63,902
---------- ----------
Shareholders' equity:
Common stock, $.0001 par value; authorized 100,000,000 shares, issued and
outstanding 5,683,181 at June 30, 1996 and 5,330,681
at June 30, 1995 568 533
Common stock purchase warrants (Note 13)
Additional paid in capital 3,107,137 2,041,873
Retained earnings 1,782,002 1,024,628
---------- ----------
4,889,707 3,067,034
--------- ---------
$8,088,521 $6,124,564
========== ==========
See notes to consolidated financial statements
F-2
Page 31
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996, 1995, AND 1994
1996 1995 1994
---- ---- ----
Net sales $23,837,985 $16,415,804 $12,125,468
Cost of sales 21,870,891 14,896,903 10,869,674
----------- ----------- -----------
Gross profit 1,967,094 1,518,901 1,255,794
Selling, general, and
administrative expenses 1,194,445 1,136,243 1,004,752
----------- ----------- -----------
Income from operations 772,649 382,658 251,042
----------- ----------- -----------
Other income (charges):
Interest income 97,858 78,738 33,981
Interest expense ( 150,113) ( 56,991) ( 25,520)
Miscellaneous income 58,282
----------- ----------- ------------
6,027 21,747 8,461
----------- ----------- -----------
Income before income taxes 778,676 404,405 259,503
Income tax expense (benefit) 21,302 ( 3,388) 5,253
(Note 9) ----------- ----------- -----------
Net income $ 757,374 $ 407,793 $ 254,250
=========== =========== ===========
Earnings per common share:
Primary $ 0.14 $ 0.08 $ 0.06
=========== =========== ===========
Fully diluted $ 0.14 $ 0.08 $ 0.06
=========== =========== ===========
Weighted average common shares
outstanding (Note 10)
Primary 5,378,427 5,304,735 4,530,756
=========== =========== ===========
Fully diluted 5,378,427 5,304,735 4,530,756
=========== =========== ===========
See notes to consolidated financial statements
F-3
Page 32
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
1. Organization of the company:
The Company, formerly Acquisition Capability, Inc., was incorporated in the
State of Delaware on April 3, 1987. On September 2, 1988, the Company acquired
100% of the issued and outstanding shares of Allstate Travel Corp., a New York
corporation incorporated on August 13, 1985 and Actrade International, Corp., a
New York corporation incorporated on July 18, 1985. Allstate operates as a
travel agency. Actrade represents various U. S. manufacturers and distributors
by buying and exporting their products overseas. Actrade Capital, Inc., formerly
Amworld Commerce, Inc., a wholly owned subsidiary of Actrade International,
Ltd., was incorporated in Delaware in May of 1991. Actrade Capital, Inc. offers
alternatives to existing accounts receivable management to domestic companies.
Actrade South America, Ltd., formerly Standard Corporation, a wholly owned
foreign corporation and subsidiary of Actrade International, Corp. was
incorporated in Antigua and Barbados on February 12, 1988 and was acquired in
January 1990. American Cooling, Inc., a wholly owned subsidiary of Actrade
International, Ltd. was incorporated in Delaware in 1992 and was inactive.
American Care Industries, was incorporated in 1993 and was inactive. American
Care Industries, Inc. is a wholly owned subsidiary of Actrade International,
Ltd. Amworld Credit, Inc. was incorporated in 1994 and was never activated.
The Company sells in the foreign markets. There is no guarantee that the
foreign market will continue to develop since the incorporation of foreign and
domestic governmen intervention, economic conditions world wide and any other
unforeseen situations may occur.
With respect to Actrade Capital, Inc. and its TAD Program, the Company
faces strong competition from many established financial institutions,including
banks, insurance companies and receivables financing (factoring) companies.
Actrade Capital,Inc.'s TAD program (see Note 12) is based upon the introduction
of a Trade Acceptance Draft (TAD).There is no assurance that management will be
successful in either gaining the necessary market acceptance for the TAD program
or in securing adequate additional capital to expand to its full commercial
potential.
2. Summary of significant accounting policies: Principles of consolidation:
The consolidated financial statements of Actrade International, Ltd. and
Subsidiaries include the accounts of all significant wholly owned subsidiaries,
after elimination of all significant intercompany transactions and accounts.The
accounts of Allstate Travel Corp.,Actrade South America, a foreign corporation,
Amworld Commerce, Inc., American Cooling, Inc. and American Care Industries,
Inc., are included in the consolidated financial statements of Actrade
International, Ltd.
F-6
Page 33
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
2. Summary of significant accounting policies (continued):
Revenue Recognition:
The Company recognizes revenues when realizable and earned. The Company
generally recognizes revenues at the date of shipment of merchandise.
Actrade Capital, Inc. recognizes revenue on the accrual basis. Discounts
on Trade Acceptance Drafts (TAD) are amortized over the term of the TAD.
All other related fees are recorded as income when incurred. Discounts
earned are recognized as income using the interest method or methods
which produce similar results.Income accrual is suspended after 30 days
on delinquent TAD's.
Actrade Capital, Inc. recognizes gross revenues from sale of TAD's at the
gross value of the TAD's face amount and cost of sales at the gross
value less the deferred discount. The usual discount is 5% to 10% and
the Company funds 75% of the purchase price of the TAD. The balance is
accounted for as a customer reserve payable. The deferred discount is
amortized over the TAD's term unless the Company sells the TAD. Then the
full discount is recognized in income as the TADs are sold. The balance
due to customers is treated as a liability at the balance sheet date.
Reverse stock split:
On January 2, 1991 the Company effected a 1 for 8 reverse split of its
outstanding shares of common stock and outstanding warrants. All
references to number of shares and warrants and to per share
information in the consolidated financial statements have been adjusted
to reflect this stock split on a retroactive basis, unless otherwise
specified.
Cash and cash equivalents:
Cash and cash equivalents include time and certificates of deposits with
maturities of less than three months.
Accounts receivable and allowance for doubtful accounts:
Accounts receivable are fully secured by either irrevocable letters of
credit, commercial documentary drafts, promissory notes with personal
guarantees or by liens on assets in the United States. Accordingly, the
Company's provision for doubtful accounts is minimal.
F-7
Page 34
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
2. Summary of significant accounting policies (continued):
Property and equipment:
Property and equipment are stated at cost. Depreciation of property and
equipment is provided using the straight-line method over the following
useful lives:
Years
Automotive equipment 5
Furniture and fixtures 5
Leasehold improvements 12.75
Expenditures for major renewals and betterment that extend the useful
lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to expense as incurred.
Per share amounts:
Net earnings per share are computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during
the period. Fully diluted and primary earnings per common share are the
same amounts for the period presented.
Income taxes:
Deferred income taxes:
Deferred income taxes arise from timing differences resulting from
income and expense items reported for financial/accounting and tax
purposes in different periods. Deferred taxes are classified as current
or non-concurrent, depending on the classification of the assets and
liabilities to which they relate. Deferred taxes arising from timing
differences that are not related to an asset or liability are
classified as current or non current depending on the periods in which
the timing differences are expected to reverse.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results differ from
these estimates.
F-8
Page 35
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
2. Summary of significant accounting policies (continued):
Effect of recently issued accounting standards:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impaired of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. "SFAS"
No. 121 requires that Long-Lived Assets and certain identifiable
intangibles to be held and used by the Company be reviewed for
impairment whenever events indicated that the carrying amount of an
asset may not be recoverable.
Additionally, The Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock
Based Compensation". The effective date of SFAS No. 123 is for fiscal
years beginning after December 15, 1995, and established a method of
accounting for stock compensation plans based on fair value. The
Company does not believe the SFAS No. 121 and No. 123 will have an
impact on its financial statements.
3. Public offering and common stock purchase warrants:
Actrade International, Ltd., (formerly Acquisition Capabilities, Inc.) was
incorporated in Delaware on April 3, 1987. On May 9, 1988, in a public
offering, the Company sold 2,434,000 units at $.05 per unit, which
consisted of one share of stock and four warrants. The total offering
amounted to $121,700 less expenses of offering of $36,638 for a net
proceeds to the Company of $85,062. The Company issued 2,434,000 shares
and 9,736,000 warrants exercisable at $.075 per share.
On September 2, 1988, the Company acquired 100% of the issued and
outstanding capital stock of Actrade International, Corp. and Allstate
Travel Corp. in exchange for 6,000,000 shares of the Company's common
stock, .001 par value and changed its name to Actrade International,Ltd.
Effective January 2, 1991, the Company declared a one for eight reverse
split of its common stock.
On October 31, 1991, the Company declared and distributed a dividend of
514,844 Class B redeemable stock purchase warrants to shareholders of
record at the close of business on October 31, 1991 on the basis of one
Class B warrant at a price of $1.75. As of October 31, 1991, 3,179,185
shares were outstanding, of which 2,149,562 shares were owned by two
principal shareholders, who declined receipt of warrants and only
1,029,623 were issued dividend warrants. These warrants expired July 29,
1994. A total of 324,327 common shares were issued as the result of the
exercise of the Class B Warrants and the Company received a total of
$567,572 as a result thereof. The proceeds from the exercises of the
Class B Warrants were received during July of 1994.
F-9
Page 36
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
3. Public offering and common stock purchase warrants (continued):
On May 8, 1988, at the closing of the public offering, underwriter
warrants in the amount of 30,425 at $.0001 or $24, were sold. The
warrants are exercisable at $.48 per common share at anytime during the
four year period commencing February 22, 1989. These warrants were
exercised in February of 1993.
4. Notes payable, bank:
Rate 1995
Note payable, Banca
Nazionale Del Lavoro (a) LIBOR + 1% $149,881
--------
149,881
Less current portion 149,881
-------
$ - 0 -
=========
(a) On August 30, 1993, a final loan restructuring agreement was signed
with the bank by the Company's subsidiary, Actrade International, Corp. Under
the terms of the agreement, a $50,000 principal payment was made at the signing
with another $50,000 payment due on both August 31, 1993 and September 30, 1993.
On October 31, 1993, and on the last day of each month thereafter, the Company
will make payments of $15,000 plus interest until the loan and interest is
repaid in full. The note matured and was paid in full in April of 1996.
The note was collateralized by accounts receivable of the
subsidiary of the Company, Actrade International, Corp..
5. Foreign and domestic operations and export sales:
The Company's revenues are generated through the sale and export to
countries outside the United States and through the domestic sale of
commercial trade acceptances. Actrade South America, Actrade's wholly
owned foreign subsidiary, sales accounted for a material amount of the
Company's sales. The following table indicated the relative amounts of
net sales, income from operations and identifiable assets of Actrade
International Ltd. by geographic area during the three year period ended
June 30, 1996.
F-10
Page 37
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
5. Foreign and domestic operations and export sales (continued):
Sales to unaffiliated customers: 1996 1995 1994
---- ---- ----
United States $ 8,093,000 3,975,464 $ 1,232,485
Middle East 4,350,000 3,643,911 3,683,269
South America 3,424,000 2,926,184 1,529,580
Europe 5,300,000 2,652,436 3,365,000
Far East 1,750,000 2,387,653 1,490,000
Other 920,985 830,156 825,134
----------- ----------- -----------
Total consolidated revenues $23,837,985 $16,415,804 $12,125,468
=========== =========== ===========
Operating profit (loss):
United States $ 666,844 $ 305,499 $ 96,078
Middle East 359,978 278,989 287,130
South America 283,262 224,706 119,239
Europe 436,695 204,507 262,320
Far East 143,598 184,310 116,153
Other 76,717 64,384 64,325
----------- ----------- -----------
Total operating profit $ 1,967,094 $ 1,262,395 $ 945,245
=========== =========== ===========
General corporate expenses, net $ 1,136,163 $ 836,243 $ 677,281
Interest expense (income), net 52,255 21,747 8,461
----------- ----------- -----------
1,188,418 857,990 685,742
----------- ----------- -----------
Income from continuing operations
before income taxes $ 778,676 $ 404,405 $ 259,503
=========== =========== ===========
Identifiable assets at June 30:
United States $ 2,715,850 $1,455,891 $ 367,828
Middle East 1,446,078 1,329,554 1,099,253
South America 1,153,635 1,070,862 456,495
Europe 1,778,521 974,605 1,004,267
Far East 584,829 878,348 444,688
Other 332,444 306,820 246,255
----------- ----------- -----------
8,011,357 6,016,080 3,618,786
Corporate assets 77,164 108,484 44,991
----------- ----------- -----------
Total assets at June 30 $ 8,088,521 $ 6,124,564 $ 3,663,777
=========== =========== ===========
Net sales to one country over ten percent of total:
Brazil $ 2,132,000
Hong Kong 1,752,000 $ 1,490,000
Finland 2,752,000
----------- ----------- -----------
$ 3,884,000 $ 4,242,000
=========== =========== ===========
Exports sales:
Middle East $ 4,350,000 $ 3,643,911 $ 3,683,269
South America 3,424,000 2,926,184 1,529,580
Europe 5,300,000 2,652,436 3,365,000
Far East 1,750,000 2,387,653 1,490,000
Other 920,985 1,059,596 825,134
----------- ----------- -----------
$15,744,985 $12,669,780 $10,892,983
=========== =========== ===========
Two customers accounted for approximately 27% of consolidated revenues in
1995, or $4,448,284. Four customers accounted for approximately 47% of
consolidated revenues in 1994,or $5,698,970. In 1996 the Company had no
one customer or country which accounted for 10% or more of the Company's
consolidated revenues.
F-11
Page 38
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
6. Employment contracts:
The Company and its president entered into a revised employment agreement.
The president receives a base salary of $42,500 per year. In addition,
the president receives a commission based upon the Company's net sales
profits generated by him, subject to recoupment of the guaranteed draw,
equal to 15% of the first $150,000, 20% of the next $50,000 and 25% of
all net sales profits above $200,000. Net sales profits are defined as
invoiced sales less direct cost of goods sold, discounts, bank charges
and other expenses.
On September 6, 1991, two officers of the company were employed pursuant
to oral agreements until January 1, 1992, at which time the officer and
the Company entered into formal written employment agreements. These
agreements were modified as of January 1, 1995 and provide for base
salaries of $76,125 and $72,875 per year. In addition, both officers
receive expense reimbursements of $4,800 per year and commissions based
on Company's net profit and derived by sales generated directly by Air
Conditioning Division equal to 15% of all such profits up to $110,000,
20% of the next $110,000 and 25% of all amounts over $220,000.
In addition to foregoing employment contracts with management, as of
February 20, 1991, the Company has employed the services of a chief
executive officer at a annual compensation of $78,000, plus
reimbursement of any expenses incurred on behalf of the Company
including auto expenses. Said individual is the president of the
Company's majority shareholders, NTS Corporation. In addition to his
other duties, effective March 1, 1993, he was appointed President of
Actrade Capital, Inc. and has been charged with the implementation of
Actrade Capital, Inc.'s business plan.
7. Related party transactions:
During each of the three years ended June 30, 1996, the Company and its
subsidiaries have advanced and received funds to and from related
parties. Such receivable and payables are non-interest bearing and are
due on demand.
The Company has entered into several employment agreements with its
officers and shareholders. See Note 6 for further information.
F-12
Page 39
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
8. Leases:
From March 1, 1989 to February 28, 1990, the Company and its subsidiaries
used office facilities under a non-cancelable operating sublease of
which commenced March 1, 1989 and was to expire February 28, 1992. The
related sublease agreement provided for monthly rentals of $4,000 and
gave a subsidiary of the Company the option to renew, for an additional
three years (to February 28, 1995), at the same monthly rental.
In February 1990, the Company agreed with the lessor and sublessor of its
facilities to discontinue its sublease. In the year ended June 30, 1991
the Company received $12,750 in settlement of the lease. The amount was
recorded as a reduction in selling, general and administrative expenses.
In February 1990, the Company executed a lease agreement with a related
corporation who was the lessor of the facility from an unrelated third
party. The lease in August 1991 was assigned to the Company from the
related party. The Company simultaneously assigned said lease to Actrade
in accordance with the terms of the lease. The agreement provides for
monthly rentals of $4,200 (commencing June 1, 1991) and annual increases
of 4.5% and expires February 28, 2000.
In lieu of rent for the first fifteen (15) months, the Company incurred
costs totaling approximately $87,000 for leasehold improvements. The
leasehold improvements and the total rent concessions are being
amortized using the straight line method over the entire term of the
lease. The resulting unpaid rent over the abatement period is included
in deferred rent liability.
In December 1991, Actrade entered into a non-cancelable 36 month operating
lease to house its Florida office. The lease provides for monthly
payments of $734 plus cost of living increases annually, capped @ 5% per
annum. The lease was renewed on December 24, 1994 for a three year term
under the above terms and expires on December 24, 1997.
Future minimum lease payments required under non-cancelable operating
leases by fiscal year are as follows:
June 30, 1997 $ 75,182
June 30, 1998 $ 73,763
June 30, 1999 $ 72,480
June 30, 2000 $ 49,933
Rent expense amounted to $73,337, $71,675 and $66,581 for 1996, 1995 and
1994 respectively.
Actrade South America, maintains a separate sales office in Israel, held
by a commissioned sales agent of the Company. The terms of the
agreement are reviewable yearly and the $6,000 annual fee is subject to
downward adjustment based upon the commissions paid to the agent during
such year.
F-13
Page 40
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
9. Income taxes:
The components of income tax expenses are:
1996 1995 1994
---- ---- ----
Income taxes currently payable:
Federal tax $ 38,181
Federal tax resulting from
tax examination (net) $6,264
State and local 7,336 700 700
-------- ------ ------
45,517 700 6,964
-------- ------ ------
Deferred tax expense arising from:
Excess of financial accounting
depreciation over tax 4,795 ( 434) ( 382)
Charges to allowance for doubtful
accounts over tax write-offs
for bad debts 16,720 ( 5,421) ( 2,210)
Rent expense for financial accounting
(over) under tax deductible rent 2,700 1,767 881
-------- ------ ------
24,215 ( 4,088) ( 1,711)
-------- ------ ------
Total income tax expense $ 21,302 ($3,388) $5,253
======== ====== ======
Deferred income tax provisions resulting from differences between
accounting for financial statement purposes and accounting for tax
purposes are reflected above.
A reconciliation of income tax expense at the statutory rate to income
tax expenses at the Company's effective rate is as follows:
1996 1995 1994
---- ---- ----
Computed tax at the expected
statutory rate $265,075 $137,498 $ 88,497
Surtax exemption ( 11,750) ( 11,750) ( 11,750)
State income taxes, net of
federal tax benefit 7,336 700 700
Foreign income ( 215,144) ( 125,748) ( 76,747)
Federal income tax adjustment for
tax examination net of refunds 6,264
Other ( 24,215) ( 4,088)( 1,711)
-------- -------- --------
Income tax expense (benefit) $ 21,302 ($ 3,388) ($ 5,253)
======== ======== ========
Foreign income before income taxes $632,777 $434,589 $413,851
Domestic income (loss) before
income taxes 145,899 ( 30,184) ( 154,348)
-------- -------- --------
Net income before income taxes $778,676 $404,405 $259,503
======== ======== ========
The expected statutory rate for 1996, 1995 and 1994 was 34% for federal
tax purposes
The Company has made adjustments to eliminate the tax provisions for
foreign earnings since said earnings are undistributed and will be
permanently invested. The cumulative amounts of foreign undistributed
earnings is $1,958,340 at June 30, 1996.
F-14
Page 41
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
9. Income taxes (continued):
The Company has adopted SFAS 109 for the fiscal year beginning July 1,
1993. SFAS 109 changes accounting for income taxes from the deferred
method, required by APB-11 to the asset/liability method, commonly
referred to as the liability method. The deferred method places primary
emphasis on the matching of revenues and expenses. The liability method
places primary emphasis on the valuation of current and deferred tax
assets and liabilities. The significance of the impact that SFAS 109
will have on the financial statements is expected to be immaterial and
will have no impact on any other significant matters of the Company.
The effect of initially adopting SFAS 109 will be reported as the
cumulative effect of a change in accounting principle in accordance
with APB-20.
10. Financial instruments with off-balance-sheet risk:
The Corporation's wholly owned subsidiary, Actrade Capital, Inc., is a
party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit and purchase
trade acceptance drafts. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount
recognized in the statement of financial position. The Corporation does
not require collateral or other security to support financial
instruments with credit risk.
The Corporation has only one office in New York City, New York. The
Corporation, Actrade Capital, Inc. has its highest percentage of Trade
Acceptance Drafts in the east coast area, with New York and New Jersey
representing a majority of all sales.
The Corporation has on deposit, amounts in Banco Portuguese De
Atlantico, in Grand Cayman, where there is no insurance. At June 30,
1996, the Company's uninsured balances are $1,916,787 as reflected in
the balance sheet.
The Company has available a credit line of $2,000,000 for letters of
credit to suppliers. At June 30, 1996, the Company has outstanding
letters of credit of $1,046,000.
The Company has back orders of $1,482,699 backed by letters of credit at
June 30, 1996.
11. Industry Segments:
The Company's three business segments are the exporting of machinery and
equipment from U.S. and foreign manufactures, travel agency services
and the purchase and sale of commercial Trade Acceptance Draft
documents. The following is a summary of selected consolidated
information for the related segments during 1996, 1995 and 1994.
Sales (1): 1996 1995 1994
---- ---- ----
Machinery and equipment $15,825,000 $12,669,780 $11,173,983
Travel agency service 19,053 42,531 23,728
Trade Acceptance Drafts 7,993,932 3,703,493 927,757
----------- ----------- -----------
Consolidated net sales $23,837,985 $16,415,804 $12,125,468
=========== =========== ===========
F-15
Page 42
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
11. Industry Segments (continued):
1996 1995 1994
---- ---- ----
Income (loss) from operations:
Machinery and equipment $ 678,586 $ 392,295 $ 308,711
Travel agency service ( 3,059) 1,122 ( 4,783)
Trade Acceptance Drafts 100,616 7,153 ( 50,390)
---------- ---------- -----------
776,143 400,570 253,538
Corporate and other (2) ( 18,769) 7,223 712
---------- ---------- -----------
Consolidated income (loss) $ 757,374 $ 407,793 $ 254,250
========== ========== ===========
Identifiable assets (3):
Machinery and equipment $4,532,213 $4,643,233 $ 3,334,820
Travel agency service 5,011 15,586 7,078
Trade Acceptance Drafts 3,474,133 1,357,261 276,888
---------- ---------- -----------
8,011,357 6,016,080 3,618,786
Corporate and other
consolidated assets 77,164 108,484 44,991
---------- ---------- -----------
$8,088,521 $6,124,564 $ 3,663,777
========== ========== ===========
(1) Sales between industry segments are not material.
(2) Corporate and other includes corporate general and administrative
expenses, net interest expense, other non-operating income and
expenses and income taxes.
(3) Identifiable assets by industry segment exclude inter-company
loans, advances and investments. Inter-company trade receivables
between segments have also been excluded from identifiable
assets. Corporate assets are principally cash, marketable
securities, deferred charges and assets held for disposition.
12. Trade Acceptance Drafts receivable, bank:
As of June 30, 1996, Actrade Capital, Inc., formerly Amworld Commerce,
Inc., a wholly owned subsidiary of Actrade International, Ltd, has sold
and assigned all outstanding Trade Acceptance Drafts (TAD's) to Banco
Portuguese De Atlantico (Bank). The total TAD amounts due from the bank
were $2,578,015 at June 30, 1996. The bank purchases the TAD's at the
face value and advances these amounts to Actrade Capital, Inc. The bank
purchases the TAD's without recourse and Actrade Capital, Inc., has
granted a security interest in all TAD's purchased by the bank and all
accounts represented by the TAD's together with all guarantees and
collateral, and all proceeds of the above. The bank will purchase each
F-16
Page 43
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
12. Trade Acceptance Drafts receivable, bank (continued):
TAD by advancing to Actrade Capital, Inc. 75% of the face amount of
each TAD assigned and delivered by overdraft on the Actrade Capital,
Inc. account. At June 30, 1996, the advances on the overdraft account
amounted to $1,178,551. As each TAD is collateralized, the face amount
will be credited to the Actrade account to reduce the advanced
overdraft. Interest is payable at 1% over prime per annum on the
outstanding advances, which shall be charged on the 1st day of each
month.
On June 30, 1996 the Company was issued a business credit insurance
policy from American Credit Indemnity Company, with an effective date
of May 1, 1996, covering specifically any TAD transactions. The policy
will cover losses to $3,000,000 and allow a discretionary coverage of
$50,000 per customer. The policy has a deductible of $40,000 per year.
13. Outstanding warrants to purchase common stock:
At June 30, 1996, the Company had outstanding warrants to purchase
435,000 shares of the Company's common stock at prices ranging from
$1.75 to $2.25 per share. The warrants became exercisable in 1996 and
expire in 2001. At June 30, 1996, 435,000 shares of common stock were
reserved for that purpose.
14. Reconciliation of shares used in computation of earnings per share:
1996 1995 1994
---- ---- ----
Weighted average of shares
actually outstanding 5,334,974 5,304,735 4,530,756
Common stock purchase warrants 43,453
------
Primary and fully diluted weighted
average common shares outstanding 5,378,427 5,304,735 4,530,756
========= ========= =========
F-17
Page 44
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
15. Related party transactions:
During the period ended June 30, 1996, the Company and its subsidiaries
have advanced and received funds to and from related partied. Such
receivable and payables are non-interest bearing and are due on demand.
These balances consist of the following:
1996 1995
---- ----
Due from affiliates:
NTS Corp. $ 2,500
Henessey Corp. $27,677 27,677
Executive 900 Corp. 49,487 78,307
------- --------
$77,164 $108,484
======= ========
Due from affiliates:
NTS Corp. $ 3,126 $ 3,662
------- --------
$ 3,126 $ 3,662
======= ========
16. Proceeds from additional stock offering:
Effective June 4, 1996 the Company offered a total of 134 units, each
consisting of 7,500 shares of common stock, at a gross unit price of
$25,125. This price does not include certain commissions or fees. In
June of 1996 the Company sold 47 units for a net proceed of $1,065,299
resulting in an issuance of 352,500 shares of common stock.
The offering will continue for ninety days unless extended for up to an
additional thirty days.
F-18
Page 45
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES
Board of Directors
Actrade International, Ltd. and Subsidiary
New York, New York
Our report on our audit of the basic financial statements of Actrade
International, Ltd. and Subsidiary for June 30, 1996, 1995 and 1994 appears on
Page F-1.That audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole.
Schedule IX is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
August 14, 1996
Mountainside, New Jersey
F-19
Page 46
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
SCHEDULE V
PROPERTY AND EQUIPMENT
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
YEAR ENDED JUNE 30, 1996
Balance at Balance at
Beginning Other End of
Classification of year Additions Retirements Changes Year
Furniture and fixtures $129,682 $32,147 $161,829
Leasehold improvements 110,902 3,000 113,902
-------- ------- ------- ----- --------
$240,584 $35,47 275,731
======== ======= ======= ===== ========
YEAR ENDED JUNE 30, 1995
Balance Balance at
Beginning Other End of
Classification of year Additions Retirements Changes year
Furniture & fixtures $113,301 $16,381 $129,682
Leasehold improvements 110,902 110,902
------- ----- ----- ----- -------
$224,203 $ 16,381 $240,584
======== ======== ========
YEAR ENDED JUNE 30, 1994
Balance at Balance at
Beginning Other End of
Classification of year Additions Retirements Change Year
Furniture and fixtures $102,337 10,964 $113,301
Leasehold improvements 110,902 110,902
-------- ------- ------- ------- --------
$213,239 $10,964 $224,203
======== ======= ======= ======= ========
F-20
Page 47
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
SCHEDULE VI
ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
YEAR ENDED JUNE 30, 1996
Balance at Balance at
Beginning Other End of
Classification of year Additions Retirements Changes Year
Furniture and fixtures $ 93,129 $15,818 $108,947
Leasehold improvements 54,281 8,799 63,080
-------- ------- ------- -------- --------
$147,410 $24,617 $172,027
======== ======= ======= ======== ========
YEAR ENDED JUNE 30, 1995
Balance at Balance at
Beginning Other End of
Classification of year Additions Retirements Changes year
Furniture & fixtures $ 79,478 $13,651 $ 93,129
Leasehold improvements 45,557 8,724 54,281
-------- ------- ------- ------- --------
$125,035 $22,375 $147,410
======== ======= ======= ======= ========
YEAR ENDED JUNE 30, 1994
Balance at Balance at
Beginning Other End of
Classification of year Additions(A) Retirements Changes Year
- -------------- ------- --------- ----------- ------- ----
Furniture and fixtures $ 65,901 $13,577 $ 79,478
Leasehold improvements 36,833 8,724 45,557
-------- ------- ------- ------- --------
$102,734 $22,301 $125,035
======== ======= ======= ======= ========
(A) Depreciation is calculated using the straight-line method.
F-21
Page 48
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIE
SHORT-TERM BORROWING
SCHEDULE IX
JUNE 30, 1996
As of June 30, 1996, the Company had been advanced $1,178,551 as part of
its agreement with BNA regarding Trade Acceptance Drafts. (see Note 12).
JUNE 30, 1995
As of June 30, 1995, the Company had been advanced $1,054,898 as part of its
agreement with BNA regarding Trade Acceptance Drafts (see Note 12)
JUNE 30, 1994
As of June 30, 1994, the Company had been advanced $167,111 as part of its
agreement with BNA regarding Trade Acceptance Drafts. (See Note 12)
F-22
Page 49
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATIO
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
Charged to cost and expenses
1996 1995 1994
---- ---- ----
Maintenance and repairs $ 8,461 $ 2,450 $ 1,037
======= ======= =======
Depreciation $24,167 $22,375 $22,301
======= ======= =======
F-23
Page 50
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT - CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
Common Stock Additional
$.0001 par value Paid In Retained
Shares Amount Capital Earnings Total
Balance at June 30, 1993 4,462,175 $447 $1,147,879 $362,585 $1,510,911
Exercise of warrants (Note 3) 544,179 54 326,452 326,506
Net income for the year ended
June 30, 1994 254,250 254,250
--------- ---- ---------- ---------- ----------
Balance at June 30, 1994 5,006,354 501 1,474,331 661,835 2,091,667
Exercise of warrants (Note 3) 324,327 32 567,542 567,574
Net income for the year ended
June 30, 1995 407,793 407,793
--------- ---- ---------- ---------- ----------
Balance at June 30, 1995 5,330,681 533 2,041,873 1,024,628 3,067,034
Issuance of common stock 352,500 35 1,065,264 1,065,299
(Note 16)
Net income for the year ended
June 30, 1996 757,374 757,374
--------- ---- ---------- ---------- ----------
Balance at June 30, 1996 5,683,181 $568 $3,107,137 $1,782,002 $4,889,707
========= ==== ========== ========== ==========
See notes to consolidated financial statements.
F-4
Page 51
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996, 1995, AND 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 757,374 $ 407,793 $ 254,250
Adjustments to reconcile net income
to cash provided from operating
activities:
Depreciation 24,617 22,375 22,301
Changes in operating assets and liabilities:
Increase in accounts receivable ( 1,871,009) ( 1,918,445) ( 560,926)
Increase (decrease) in prepaid expenses 4,179 4,993 ( 33,273)
Increase (decrease) in interest receivable 24,401 ( 14,809) ( 6,463)
Increase in accounts payable 163,848 762,064 598,817
Decrease (increase) in income tax benefits receivable 4,823 ( 7,316)
Increase (decrease) in accrued expenses 753 8,739 ( 10,080)
Increase (decrease) in payroll taxes payable( 9,213) 9,213 ( 13,634)
Increase in income taxes payable 20,602
Decrease in deferred rent ( 7,942) ( 5,205) ( 2,590)
Decrease in deferred taxes 13,439 ( 1,656)
---------- ---------- ----------
Net cash used in operating activities ( 878,951) ( 718,459) 239,430
---------- ---------- ----------
Investing activities:
Use of cash
Purchase of property and equipment ( 35,147) ( 16,381) ( 10,964)
Increase in loans receivable, affiliates ( 85,843)
---------- ----------
Net cash used in investing activiti ( 35,147) ( 102,224 ( 10,964)
---------- ---------- ----------
Financing activities:
Source of cash:
Proceeds from issuance of common stock 1,065,299 567,574 326,506
Increase in cash advances from bank 123,653 887,787 167,111
Decrease in due to/from affiliates 30,784 2,822 6,603
Use of cash
Decrease in long-term debt ( 149,882) ( 180,000)( 266,009)
---------- ---------- ----------
Net cash provided from financing activities 1,069,854 1,278,183 234,211
---------- ---------- ----------
Net increase in cash 155,756 457,500 462,677
Cash, beginning of year 1,769,049 1,311,549 848,872
---------- ---------- ----------
Cash, end of year $1,924,805 $1,769,049 $1,311,549
========== ========== ==========
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 141,227 $ 57,552 $ 28,200
========== ========== ==========
Income taxes $ 2,983 $ 700 $ 5,253
========== ========== ==========
See notes to consolidated financial statements. F-5
Page 52
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AT JUNE 30,1996 AND THE STATEMENT OF OPERATIONS,STATEMENT OF
STOCKHOLDERS' EQUITY AND THE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
JUNE 30,1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,924,805
<SECURITIES> 0
<RECEIVABLES> 5,939,836
<ALLOWANCES> 25,000
<INVENTORY> 0
<CURRENT-ASSETS> 7,969,782
<PP&E> 275,731
<DEPRECIATION> 172,026
<TOTAL-ASSETS> 8,088,521
<CURRENT-LIABILITIES> 3,142,854
<BONDS> 0
0
0
<COMMON> 568
<OTHER-SE> 3,107,137
<TOTAL-LIABILITY-AND-EQUITY> 8,088,521
<SALES> 23,837,985
<TOTAL-REVENUES> 23,837,985
<CGS> 21,870,891
<TOTAL-COSTS> 1,194,445
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,113
<INCOME-PRETAX> 778,676
<INCOME-TAX> 21,302
<INCOME-CONTINUING> 757,374
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 757,374
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
