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Strategies & Market Trends : ACRT going to Zero -- Ignore unavailable to you. Want to Upgrade?

To: Pink Minion who wrote (7)	2/4/1998 11:48:00 AM
From: Mr. Pink	Read Replies (1) \| Respond to of 320

Yes, they are grossly overstated and not in compliance with standard accounting practices in the industry. The revenues that are real are from the air conditioner business which is legitimate but not worth 50X EPS. Mr. pink

To: Pink Minion who wrote (7)	2/4/1998 12:29:00 PM
From: Michael Patrick	Read Replies (3) \| Respond to of 320

Dude, uh these revenues are, like misunderstood by some who, uh, are butt-munchers, yeah that's it, ass-wipes, yeah, yeah, fart-knockers. Uh, sorry. I got carried away. The revenues are what they are. TAD's are the companies product. When you sell product, then you list it as revenue. Furthermore, the number that results from these revenues is the earnings per share, which has never been disputed. These earnings are based upon both the TAD business, which has a margin of about 7%, and is growing rapidly due to its innovative nature, and the other divisions which are also doing well. Party on Beavis.

To: Pink Minion who wrote (7)	2/4/1998 7:27:00 PM
From: John Chew	Read Replies (1) \| Respond to of 320

Actrade Capital, Inc. ("Actrade" or "Capital") is a subsidiary of Actrade International, Ltd. This division was formed in 1993 to develop and commercialize through the Trade Acceptance ProgramT the discount purchase of Commercial Paper (TADs) for the U.S. market based on the Company's expertise in international trade and finance. The TAD Program is designed to improve the management of accounts receivable, cash flow and increase sales. It allows sellers of goods and services to offer credit terms to their commercial customers through the use of pre-authorized debit drafts ("TADs") that Capital purchases and, on their due date, processes for payment. Understand Trade Acceptance Drafts ("TADs") Key Concepts are in Bold Essentially, a "TAD" is a draft which is prepared by the seller of goods or services ("Seller") and accepted by the buyer of the goods or services ("Buyers"), which the Buyer signs and delivers the draft back to the Seller. This acceptance of the draft establishes that: i. the goods or services have been delivered by the Seller ii. the goods or services were checked and accepted by the Buyer iii. a specific payment date has been agreed to 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 (Capital). Also, since Capital is purchasing the TAD from the Seller (not giving a loan) it is a holder in due course (HDC). A HDC is entitled to payment on a negotiable instrument despite most defenses that maker or drawer of instrument may have. (Capital would sue and win in court if the Buyer did not pay the TAD). A Review of Commercial Paper This section provides a partial summary of the law behind the TAD. A TAD is one type of commercial paper. There are four types of commercial paper under Article 3 of UCC: a) A draft: has three parties in which one person or entity (drawer) orders another (drawee) to pay a third party (payee) a sum of money. Example: b) A check is a special type of draft that is payable on demand and drawee must be a bank. The person writing the check is drawer and (customer of drawee bank). A draft is a three party instrument. c) A note (also called a promissory) note) is a two-party instrument. One party is called the maker-this party promises to pay a specified sum of money to another called the payee. The note may be payable on demand or at a definite time. d) Certificate of deposit (CD) is an acknowledgement by a financial institution of receipt of money and promise to repay it. A CD is actually a special type of note in which the financial institution is the maker. To be negotiable, an instrument (TAD) must: a) Be written b) Be signed by maker or drawer c) Contain an unconditional promise or order to pay. (All rights to commercial dispute are eliminated) d) State a fixed amount in money e) Be payable on demand or at a definite time f) Be payable to order or to bearer, unless it is a check. There are two methods of transferring commercial paper: By assignment. (1) Assignment occurs when transfer does not meet all requirements of negotiation (2) Assignee can obtain only same rights that assignor had. By negotiation (1) One receiving negotiable instrument by negotiation is called a holder (2) If holder further qualifies as a holder in due course (discussed later), then holder can obtain more rights than what transferor had. (3) There are two methods of negotiation (a) Negotiating order paper requires both endorsement by transferor and delivery of instrument. This is applicable for TADs. (b) Negotiating bearer paper is accomplished delivery alone (endorsement not necessary) Example: a check is made payable to the order of cash Holder in Due Course To be a holder in due course (Capital is a holder in due course on all TADs purchased from the Seller), a taker of instrument (TAD) must a) Be a holder of a properly negotiated negotiable instrument b) Give value* for instrument. *Note that value does not have to be for full amount of instrument. (Capital purchases TADs at a discount). Purchase at a discount is value for full face amount of instrument provided HDC took in good faith, i.e., as long as not too large a discount. Example: Capital purchases a negotiable note that has a face value of $1,000. Capital gives $600 in cash now and agrees to pay in two weeks. Capital has given value only to the extent of $600 and thus can qualify as a HDC for $600. Once Capital pays the remaining $350, Capital qualifies as a HDC for the full $1,000. Note that even though Capital paid only $950, Capital has HDC status for the entire $1,000 because it was a reasonable discount. c) Take in good faith. Good faith defined as honesty in fact and observance of reasonable commercial standards of fair dealing. (Capital checks the Seller to see if it is a legitimate commercial entity). d) Take without notice that it is overdue, has been dishonored, or that any person has a defense or claim to it. (Capital has reason to know that the TAD is forged). Rights of a Holder in Due Course (HDC) The general rule is that a transfer of a negotiable instrument to a HDC cuts off all personal defenses against a HDC. Personal defenses are assertable against ordinary holders and assignees of contract rights to avoid payment. Example: Bill negotiates a note to George in payment of a TV. George negotiates this note to John who qualifies as a HDC. When John seeks payment, Bill points out that George breached the contract by never delivering the TV. John, as a HDC, still has the right to collect. Bill then has to seek recourse directly against George. Types of real defenses: Breach of contract, lack or failure of consideration, prior payment, unauthorized completion, fraud in the inducement, nondelivery, ordinary duress or undue influence, mental incapacity, and illegality. 2. Some defenses are assertible against any party including a HDC-these defenses are called real (or universal) defenses. a. Forgery of maker's or drawer's signature does not act as his/her signature. (Capital verifies the authorization and signature on all TADs). b. Bankruptcy. TADs are NOT backed by any asset, so Capital would not be paid from the Buyer until all secured lenders are paid in the event of a bankruptcy. However, if a Seller of a TAD to Capital goes bankrupt, it would not effect Capital's ability to collect from the Buyer. A bankruptcy court would not be able to reverse the transaction between the Buyer and Seller, i.e., a court could not ask the Buyer to return merchandise to the Seller and become its creditor. This will be discussed later. c. Fraud in the execution. This occurs when a party is tricked into signing a negotiable instrument believing it to be something else. This defense will not apply if signer, should have know what was happening. d. Minority (or infancy) A minor signs a TAD. e. Mental incapacity, illegality, or extreme duress. Real defenses if transaction is void under state law. f. Material alteration of instrument. This is actually only partially a real defense. If dollar amount was altered, then HDC can collect according to original terms. If an instrument was incomplete originally and then completed without authorization, HDC can enforce it as completed. A Summary of Trade Acceptance Drafts ("TADs") TADs are negotiable notes signed by a buyer to the order of a given seller specifying the amount to be paid, the due date for payment and the buyer's bank account information.