<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q/A
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------------------------------
For Quarter Ended December 31, 1998
Commission File Number 0-18711
ACTRADE INTERNATIONAL, LTD.
(Exact name of Registrant as specified in its Charter)
Delaware 13-3437739
(State or other Jurisdiction (I.R.S. Employer Ident-
of incorporation or organization) ification Number)
7 Penn Plaza, Suite 422, New York, N.Y. 10001
(Address of principal executive offices) (Zip Code)
Same
(Former Address) (Zip Code)
(212) 563-1036
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes_X__ No____
Indicate the number of Shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date. As of January 30, 1999 there
were outstanding 8,559,551 shares of Common Stock, par value $.0001.
<PAGE>
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed consolidated financial statements (restated):
Consolidated balance sheets as of December 31, 1998
and June 30, 1998 3
Consolidated statements of income for the six months and three
months ended December 31, 1998 and 1997 4
Consolidated statements of cash flows for the six months and three
months ended December 31, 1998 and 1997 5
Notes to consolidated financial statements 6-9
Item 2. Management's discussion and analysis of financial condition and
results of operations 10-12
PART II. OTHER INFORMATION
Exhibits and reports on Form 8-K 12
Signatures 13
</TABLE>
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
----------------- --------------
(as restated, see
Note 4)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,827,387 $13,381,678
Accounts receivable - trade 11,746,782 3,307,873
Trade acceptance drafts receivable and other (net of deferred
income and allowance for doubtful accounts of $879,391 and $350,000
at December 31, 1998 and $14,190 and $61,700 at June 30, 1998
respectively) 22,752,184 8,957,506
Deferred income taxes and other assets 574,296 74,669
Total current assets 36,900,649 25,721,726
Property and equipment (net of accumulated depreciation
and amortization of $349,350 at December 31, 1998 and
$293,519 at June 30, 1998) 466,172 374,679
Other assets 30,288 26,807
----------- -----------
Total assets $37,397,109 $26,123,212
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 7,718,079 $ 0
Accounts payable and customer reserves payable 4,500,664 3,195,691
Accrued expenses 90,341 17,439
Income taxes payable 312,719 285,441
----------- -----------
Total current liabilities 12,621,803 3,498,571
Other liabilities 24,094 31,721
----------- -----------
Total liabilities 12,645,897 3,530,292
----------- -----------
Shareholders' equity:
Common stock, $0001 par value; authorized 100,000,000 shares,
issued, and outstanding 8,528,051 shares at December 31, 1998
and 8,541,051 shares at June 30, 1998 856 854
Additional paid-in capital 14,550,466 14,489,668
Accumulated other comprehensive income 2,686 0
Retained earnings 10,649,560 8,102,398
Treasury stock at cost, 31,500 shares at December 31, 1998 (452,356) 0
----------- -----------
Total shareholders' equity 24,751,212 22,592,920
----------- -----------
Total Liabilities & Shareholders' Equity $37,397,109 $26,123,212
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX AND THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31 December 31
----------- -----------
1998 1997 1998 1997
---- ---- ---- ----
(as restated, (as restated,
see Note 4) see Note 4)
<S> <C> <C> <C> <C>
Gross Sales - Trade Acceptance Drafts $50,462,255 $24,806,174 $28,156,212 $13,301,092
Gross Sales - International Merchandise Trade 33,752,179 18,311,270 17,907,286 9,814,767
----------- ----------- ----------- -----------
Total Gross Sales $84,214,434 $43,117,444 $46,063,498 $23,115,859
=========== =========== =========== ===========
Gross Sales - International Merchandise Trade 33,752,179 18,311,270 17,907,286 9,814,767
Cost of Sales - International Merchandise Trade 30,671,816 16,073,245 16,333,781 8,583,322
----------- ----------- ----------- ----------
Gross Profit - International Merchandise Trade 3,080,363 2,238,025 1,573,505 1,231,445
Gross Profit - Trade Acceptance Drafts 2,420,600 1,521,391 1,634,667 820,632
----------- ----------- ----------- -----------
Total gross profit 5,500,963 3,759,416 3,208,172 2,052,077
General and Administrative Expenses (2,847,106) (1,589,073) (1,595,462) (903,006)
----------- ----------- ----------- -----------
Income from Operations 2,653,857 2,170,343 1,612,710 1,149,071
Other Income (Expenses):
Interest income 51,844 62,220 6,179 11,852
Interest expense (150,461) (11,759) (99,131) (7,275)
Other income, net 0 9,435 0 0
----------- ----------- ----------- -----------
Net Income before Income Taxes 2,555,240 2,230,239 1,519,758 1,153,648
Provision for Income Taxes 8,078 193,292 103,679 69,555
----------- ----------- ----------- -----------
Net Income $ 2,547,162 $ 2,036,947 $ 1,416,079 $ 1,084,093
=========== =========== =========== ===========
Net Income per Common Share:
Basic $0.30 $0.26 $0.17 $0.13
Diluted $0.29 $0.23 $0.16 $0.12
Weighted average Number of Shares Outstanding:
Basic 8,434,760 7,893,865 8,433,838 8,113,072
Diluted 8,776,109 8,983,722 8,762,426 9,076,002
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
(as restated, see
Note 4)
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 2,547,162 $ 2,036,947
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation and amortization 55,831 34,182
Deferred income 865,201 0
Changes in other operating assets and liabilities:
Accounts receivable - trade and trade acceptance
drafts receivable, and other (23,016,847) (7,025,714)
Deferred income taxes and other assets (499,627) (3,893)
Other assets (3,481) (8,800)
Accounts payable and customer reserves payable 1,304,973 (25,927)
Accrued expenses (6,353) 25,804
Income taxes payable 27,278 106,639
Other liabilities (7,627) (6,508)
------------ ----------
Net cash used in operating activities (18,733,490) (4,867,270)
Cash flows from investing activities:
Purchase of property and equipment (147,324) (104,948)
------------ ----------
Net cash used in investing activities (147,324) (104,948)
Cash flows from financing activities:
Proceeds from issuance of common stock 60,800 1,171,213
Purchase of treasury stock (452,356) 0
Change in short-term borrowings 7,718,079 (1,019,392)
------------ ----------
Net cash provided by financing activities 7,326,523 151,821
------------ ----------
Net decrease in cash (11,554,291) (4,820,397)
Cash, beginning of period 13,381,678 7,352,465
------------ ----------
Cash, end of period $ 1,827,387 $ 2,532,068
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the period
Interest $462,024 $62,540
======== =======
Income taxes $346,462 $101,446
======== ========
</TABLE>
See note to consolidated financial statements.
5
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included. The
results of operations for the six months ended is not necessarily indicative of
the results to be expected for the full year. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report for the year ended June 30, 1998, included in its Annual
Report filed on Form 10-K.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant inter-company balances and transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Certain prior period amounts have been reclassified to conform with the current
presentation.
6
<PAGE>
2. Net Income Per Share:
Net income per share has been computed as follows:
<TABLE>
<CAPTION>
Six months ended Three months ended
December 31 December 31
-------------------------------------- ------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $2,547,162 $2,036,947 $1,416,079 $1,084,093
---------- ---------- ---------- ----------
Weighted average of shares
outstanding 8,434,760 7,893,865 8,433,838 8,113,072
Weighted average of options
outstanding 341,349 1,089,857 328,588 962,930
---------- ---------- ---------- ----------
Total equivalent shares 8,776,109 8,983,722 8,762,426 9,076,002
---------- ---------- ---------- ----------
Basic $0.30 $0.26 $0.17 $0.13
===== ===== ===== =====
Diluted $0.29 $0.23 $0.16 $0.12
===== ===== ===== =====
</TABLE>
7
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. Common stock purchase warrants and options:
In the six months ending December 31, 1998, 18,500 warrants were exercised at
prices ranging from $3.00 to $6.40, resulting in net proceeds to the Company of
$60,800 and the issuance of 18,500 common shares.
8
<PAGE>
4. Restated Financial Statements
Subsequent to the issuance of the Company's financial statements for the six and
three months ended December 31, 1998, the Company's management determined that
the revenue earned on Trade Acceptance Drafts transactions were not recorded in
the proper period and net income per share was not properly calculated. As a
result, the consolidated statement of financial position, consolidated statement
of operations and cash flows have been restated from the amounts previously
reported to reflect the proper revenue earned on TAD transactions and the proper
calculation of net income per share.
The following table represents the amounts as previously reported and as
restated:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31, 1998 December 31, 1998
------------------------------ --------------------------------
As Reported As Restated As Reported As Restated
<S> <C> <C> <C> <C>
Trade Acceptance Drafts Receivable, net
of deferred revenues and bad debt allowance $14,266,234 $22,752,184 $14,266,234 $22,752,184
Accounts receivable - trade 14,825,300 11,746,782 14,825,300 11,746,782
Trade Acceptance Drafts, on hand (*) 6,286,823 0 6,286,823 0
Deferred income taxes and other assets 202,498 574,296 202,498 574,296
Accounts payable and customer reserves 4,503,350 4,500,664 4,503,350 4,500,664
Accrued expenses 11,086 90,341 11,086 90,341
Accumulated other comprehensive income 0 2,686 0 2,686
Gross profit 6,678,149 5,500,963 3,748,060 3,208,172
Interest expense 471,084 150,461 281,578 99,131
Provision for income taxes 379,786 8,078 238,410 103,679
Net income $3,031,927 $2,547,162 $1,638,699 $1,416,079
Basic net income per share $0.35 $0.30 $0.19 $0.17
Diluted net income per share $0.35 $0.29 $0.19 $0.16
Basic weighted average shares 8,702,932 8,434,760 8,693,592 8,433,838
Diluted weighted average shares 8,702,932 8,776,109 8,693,592 8,762,426
</TABLE>
(*) Re-classed to Trade Acceptance Drafts Receivable
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
I. RESULTS OF OPERATIONS
During the first six months of fiscal 1999, ended December 31, 1998, the Company
had combined gross sales of $84,214,434, compared with $43,117,444 for the first
six months of fiscal 1998, an increase of more than 95%. Gross profit reached
$5,500,963 for the six months ended December 31, 1998, compared to $3,759,416
for the same period in fiscal 1998, and increase of just over 46%. Net profits
from operations for this period, after interest expense and provision for taxes,
climbed to $2,547,162, as compared to $2,036,947 for the same period last year,
an increase of approximately 25%. Based upon the Company's currently issued and
outstanding shares, earnings per share for the first half of fiscal 1999 reached
$.30 per share, as compared to $.26 per share for the first half of fiscal 1998,
an increase of just over 15%.
With respect to the three months ended December 31, 1998, gross sales increased
to $46,063,498 (up over 99% from the second quarter of fiscal 1998) while gross
profits climbed to $3,208,172 (an increase of over 56% from the second quarter
of fiscal 1998). During the second quarter, income from operations totaled
$1,612,710 (up over 34% from the same period in fiscal 1998) and net earnings,
after interest income and interest expense and provision for taxes, reached
$1,416,079 (an increase of over 30% from the 2nd quarter of fiscal 1998). Second
quarter earning per share totaled approximately $.17 as compared to $.13 per
share for the second quarter of fiscal 1998, an increase of just over 30%.
II. DISCUSSION OF FINANCIAL CONDITION
On a consolidated basis, at December 31, 1998 the Company had total assets of
$37,397,108, with total current assets of $36,900,649 (compared with $26,123,212
and $25,721,726, respectively, at June 30, 1998, the end of fiscal 1998). Of the
Company's assets at December 31, 1998, $1,827,387 was in the form of cash and
cash equivalent (compared to $13,381,678 at June 30, 1998). The substantial
decrease in cash and cash equivalent at December 31, 1998 reflects the
utilization of available cash on hand for the purchase of TADs in Capital's TAD
Program.
In addition to cash, the Company accounts receivable- trade, which represents
receivables generated from the international merchandise trade division, of
$11,746,782 at December 31, 1998. In addition, the Company has "trade
acceptances drafts receivable of $22,752,184 net of deferred revenues and
allowance for doubtful accounts. This represents TADs that have been pledged to
a bank to secure short-term borrowings and TADs that were held in inventory by
the Company at December 31, 1998. The increase in assets at December 31, 1998
over fiscal year-end, was principally due to a substantial increase in purchases
of TADs. This increased TAD activity also resulted in a corresponding increase
in "short-term borrowings", which represents the utilization of the Company's
current credit lines with the banks.
During December 1998 the Company concluded an interim financing facility with a
major financial institution which provided Capital with up to $10 Million of
additional funding ability for the purchase of TADs.
During the balance of the current fiscal year, ending June 30, 1999, the Company
projects no significant additional capital expenditures in connection with any
of the Company's operations except in connection with the continued expansion of
the TAD program.
10
<PAGE>
Based upon available cash on hand, current and anticipated credit facilities and
expected revenues from operations, management is of the opinion that it will
have adequate available funds to meet anticipated capital expenditures and cash
needs for the balance of fiscal 1999. Thereafter, future capital expenditures
will be decided based upon operating results and available revenues from
operations. Apart from expenses associated with the expansion of Capital's
operations, which cannot be estimated at this time, management projects no
significant additional capital expenditures in connection with its operations
during the next twelve months.
III. ACTRADE CAPITAL INC. AND THE TRADE ACCEPTANCE DRAFT PROGRAM.
During the first half of fiscal 1999, gross sales of TADS transacted reached
$50,462,255, as compared with $24,806,174 for the first half of fiscal 1998, an
increase of over 103%. Gross profits from TADS increased to $2,420,600 during
the first half of fiscal 1999 as compared to $1,521,391 for the same period in
fiscal 1998. This represented an increase in gross profits of more than 56% over
last year. After general and administrative expenses of $2,223,440, interest
expense of $70,929 and interest income of $13,059 and provision for an income
tax benefit of $219,195 Capital realized net income from its operations of
$358,485, as compared to net income of $372,263 in 1998. The main cause for this
decrease was the effect of a change in accounting recognition of deferred
revenues on TAD sales in fiscal 1999. For the first six months of fiscal 1999,
Capital recognized $879,391 in deferred TAD revenues as opposed to $102,083 that
would have been recognized under the method used in fiscal 1998.
IV. TRENDS AFFECTING LIQUIDITY, CAPITAL RESOURCES AND OPERATIONS
A. ACTRADE CAPITAL, INC.
With respect to the TAD Program, management has not identified any trends which
have had, or which can reasonably be expected in the future to have, any adverse
impact upon the operations of Capital or the TAD Program in general. As of the
date of this report, management is not aware of any other company operating a
program similar to the TAD Program and, as demonstrated by Capital's growth rate
since the introduction of the TAD Program (see discussion above), Capital's
revenues and profits continue to reach new record levels each quarter.
B. ACTRADE INTERNATIONAL CORP. - EXPORT DIVISION.
Over the years, 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. This trend is
now being affected by a number of other factors that could adversely affect
future growth rates for the Company's export operations. Most importantly among
these has been the renewed strength of the American Dollar compared to other
currencies which has had the effect of making American products too expensive to
compete with foreign-made products. Principally this is due to the impact that
reduced foreign labor costs have upon the price of competitive merchandise.
11
<PAGE>
C. ACTRADE S.A. - INTERNATIONAL TRADE DIVISION.
To meet the changing conditions in the international marketplace, the Company
expanded the operations of Actrade S.A. Management believes that by utilizing
the foreign network available to Actrade S.A. 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 and adequately offset any
decline in its export operations. These changing trends have been the principal
reason for the dramatic increase in sales revenues by Actrade S.A.
Gross sales from the international trade division for the first six months of
fiscal 1999 are $33,752,179 as compared to $18,311,270 over the similar period
in fiscal 1998. This represents an 84% increase. However, management cannot
predict whether the extraordinary rise in sales revenues experienced by the
international division will continue. At present, while product demand is high
and the availability of trade financing is low, international enjoys a favorable
position in the market. As these factors stabilize and as trade financing
becomes more readily available, it is likely that this advantage will decrease.
Management knows of no other trends reasonably expected to have a material
impact upon the Company's operations or liquidity in the foreseeable future.
VI. "YEAR 2000" COMPLIANCE.
The Year 2000 issue is the result of computer programs being written using two
digits, rather than four to define the applicable year. Any of the Company's
computer programs that have data-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based upon an assessment made during fiscal 1998, the Company is currently
updating all versions of operations and financial software so that all of its
systems will utilize dates beyond December 31, 1999 properly. In addition, the
Company has evaluated all of its auxiliary computer application systems for Year
2000 compliance and believes that the planned modifications and conversions will
allow it to mitigate the Year 2000 issue.
The Company also plans to initiate formal communications with all of its
significant suppliers, financial institutions and major customers to determine
the extent to which the Company may be vulnerable to any third parties' failure
to remediate their own Year 2000 issues. The financial impact to the Company of
bringing its equipment and systems into Year 2000 compliance is not anticipated
to be material to its financial position or results of operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
None during this period.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 28, 1999
ACTRADE INTERNATIONAL, LTD.
BY:_/s/Alexander C. Stonkus___________________
Alexander C. Stonkus,
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1999
<PERIOD-START> SEP-01-1998 AUG-01-1998
<PERIOD-END> DEC-31-1998 DEC-31-1998
<CASH> 1,827,387 1,827,387
<SECURITIES> 0 0
<RECEIVABLES> 35,728,357 35,728,357
<ALLOWANCES> (1,229,391) (1,229,391)
<INVENTORY> 0 0
<CURRENT-ASSETS> 36,900,649 36,900,649
<PP&E> 815,522 815,522
<DEPRECIATION> (349,350) (349,350)
<TOTAL-ASSETS> 37,397,109 37,397,109
<CURRENT-LIABILITIES> 12,621,803 12,621,803
<BONDS> 0 0
<COMMON> 856 856
0 0
0 0
<OTHER-SE> 24,750,356 24,750,356
<TOTAL-LIABILITY-AND-EQUITY> 37,397,109 37,397,109
<SALES> 46,063,498 84,214,434
<TOTAL-REVENUES> 0 0
<CGS> 42,855,326 78,713,471
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,595,462 2,847,106
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 92,952 98,617
<INCOME-PRETAX> 1,519,758 2,555,240
<INCOME-TAX> 103,679 8,078
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,416,079 2,547,162
<EPS-BASIC> .17 .30
<EPS-DILUTED> .16 .29
</TABLE>
