<PAGE>


                        SECURITIES & EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                   Quarterly Report Under Section 13 or 15 (d)
                     Of the Securities Exchange Act of 1934

                           ---------------------------

                For the quarterly period ended December 31, 2001

                         Commission File Number 0-18711

                       ACTRADE FINANCIAL TECHNOLOGIES LTD.

              Incorporated under the laws of the State of Delaware
                I.R.S. Employer Identification Number 13-3437739

                  7 Penn Plaza, Suite 422, New York, N.Y. 10001
                         Telephone Number (212) 563-1036

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 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 22, 2002 there
were 10,147,345 shares of Common Stock, par value $0.0001

                                       1





<PAGE>




<TABLE>
<CAPTION>
                                      INDEX
<S>                                                                                                   <C>
Part I. Financial Information

Item 1.   Condensed consolidated financial statements (Unaudited)

          Condensed consolidated balance sheets as of December 31, 2001 and June 30, 2001             3

          Condensed consolidated statements of income for the six and three months ended
            December 31, 2001 and 2000                                                                4

          Condensed consolidated statements of cash flows for the six months ended
            December 31, 2001 and 2000                                                                 5

          Notes to condensed consolidated financial statements                                        6-7

Item 2. Management's discussion and analysis of the financial condition and results of operations     8-13

Item 3. Quantitative and qualitative disclosures about market risk                                    13

PART II. Other Information

Item 6. Exhibits and reports on Form 8-K                                                              13

Signatures                                                                                            14
</TABLE>

                                       2





<PAGE>




ACTRADE FINANCIAL TECHNOLOGIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------
                  Dollars in thousands except per share amounts

<TABLE>
<CAPTION>
                                                                                 December 31, 2001
                                                                                    (Unaudited)     June 30, 2001
<S>                                                                                  <C>             <C>
ASSETS
     CURRENT ASSETS:
          Cash and cash equivalents                                                  $  26,414       $  42,155
          Accounts receivable - trade                                                   34,469           5,786
          Trade acceptance drafts receivable (net of deferred income and
             allowance for doubtful accounts of $1,150 and $3,694 at
             December 31, 2001 and $1,209 and $2,012 at June 30, 2001                   38,345          40,680
          Investment in and due from qualifying special purpose entity                      94           2,217
          Income tax refund receivable                                                    --             2,823
          Deferred income taxes                                                          1,521             800
          Other current assets                                                             548             647
                                                                                     ---------       ---------
                    Total Current Assets                                               101,391          95,108

     NON-CURRENT RECEIVABLE                                                              8,500            --
     PROPERTY AND EQUIPMENT, net                                                         1,407           1,731
     OTHER ASSETS                                                                           42             341
                                                                                     ---------       ---------

TOTAL ASSETS                                                                         $ 111,340       $  97,180
                                                                                     =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES:
          Short-term borrowings                                                      $  24,869       $  30,615
          Other current liabilities                                                      3,022           1,316
                                                                                     ---------       ---------
                    Total Current Liabilities                                           27,891          31,931

     COMMITMENTS AND CONTINGENCIES

     STOCKHOLDERS' EQUITY:
          Common stock, $0.0001 par value, authorized
               100,000,000 shares, issued and outstanding
               11,123,277 shares and 10,147,345 shares at December 31, 2001 and
               10,565,514 shares and 9,880,151 shares at June 30, 2001                       1               1
          Additional paid-in capital                                                    46,420          38,881
          Retained earnings                                                             64,946          47,065
          Accumulated other comprehensive income (loss)                                     40             (13)
          Treasury stock at cost, 975,932 shares at December 31, 2001 and
               685,363 shares at June 30, 2001                                         (27,958)        (20,685)
                                                                                     ---------       ---------
                      Total Stockholders' Equity                                        83,449          65,249
                                                                                     ---------       ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                           $ 111,340       $  97,180
                                                                                     =========       =========
</TABLE>

See notes to condensed consolidated financial statements.

                                       3





<PAGE>



ACTRADE FINANCIAL TECHNOLOGIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               (Unaudited)

--------------------------------------------------------------------------------
                  Dollars in thousands except per share amounts

<TABLE>
<CAPTION>
                                                            Six months ended               Three months ended
                                                              December 31,                     December 31,
                                                              ------------                     ------------
                                                         2001             2000             2001             2000
<S>                                                 <C>              <C>              <C>              <C>
Revenue:
          Trade Acceptance Drafts                      $17,510          $10,183           $8,769           $5,212
          International Merchandise Trade              $17,009          $13,671           $8,819           $7,474
                                                       -------          -------          -------          -------
Total Revenue                                          $34,519          $23,854          $17,588          $12,686
                                                       -------          -------          -------          -------

Operating Expenses:
          General and administrative                    (6,610)          (5,329)          (2,958)          (2,757)
          Bad debt expense                              (1,800)          (1,261)          (1,200)            (690)
          Securitization loss, net                        (274)            (591)             (37)            (294)
          Interest, net                                 (4,226)          (4,679)          (1,983)          (2,652)
                                                       -------          -------          -------          -------
Total Operating Expenses                               (12,910)         (11,860)          (6,178)          (6,393)

Income before Provision for Income Taxes                21,609           11,994           11,410            6,293

Provision for Income Taxes                              (3,728)          (1,338)          (1,892)            (532)
                                                       -------          -------          -------          -------

Net Income                                             $17,881          $10,656           $9,518           $5,761
                                                       =======          =======          =======          =======

Net Income per Common Share:
Basic                                                    $1.78            $1.18            $0.94            $0.64
Diluted                                                  $1.58            $1.01            $0.80            $0.55

Weighted Average Number of Shares Outstanding:
Basic                                               10,062,016        9,015,474       10,142,255        9,038,132
Diluted                                             11,334,068       10,601,676       11,874,179       10,466,318
</TABLE>

See notes to condensed consolidated financial statements.

                                       4





<PAGE>





ACTRADE FINANCIAL TECHNOLOGIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

--------------------------------------------------------------------------------
                  Dollars in thousands except per share amounts

<TABLE>
<CAPTION>
                                                                    Six months ended
                                                                      December 31,
                                                                  2001           2000
<S>                                                            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                     $ 17,881       $ 10,656
Adjustments to reconcile net income to net cash (used in)
    provided by operating activities:
     Depreciation and amortization                                  729            453
     Bad debt expense                                             1,800          1,261
     Deferred income                                                (59)           201
     Securitization loss, net                                       274            591
     Deferred income taxes                                         (721)          (513)
Changes in operating assets and liabilities:
     Accounts receivable - trade and trade
        acceptance drafts receivable                            (36,589)           (51)
     Other assets                                                 4,870           (163)
     Other current liabilities                                    1,706            (53)
                                                               --------       --------
Net cash (used in) provided by operating activities             (10,109)        12,382
                                                               --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of property and equipment                            (152)          (520)
                                                               --------       --------
Net cash used in investing activities                              (152)          (520)
                                                               --------       --------

CASH FLOWS FROM FINANCING ACTIVITIES
      Proceeds from issuance of common stock                      7,539         (6,993)
      Purchase of treasury stock                                 (7,273)         1,020
      Change in short-term borrowings                            (5,746)          (868)
                                                               --------       --------
Net cash used in financing activities                            (5,480)        (6,841)
                                                               --------       --------

CHANGE IN CASH AND CASH EQUIVALENTS                             (15,741)         5,021

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                     42,155          9,424
                                                               --------       --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                       $ 26,414       $ 14,445
                                                               ========       ========

Supplemental disclosures of cash flow information:
     Interest paid during the period                           $  4,573       $  4,772
                                                               ========       ========
     Income taxes paid during the period                       $    632       $  2,550
                                                               ========       ========
</TABLE>

See notes to condensed consolidated financial statements

                                       5





<PAGE>




              ACTRADE FINANCIAL TECHNOLOGIES LTD. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       Summary of Significant Accounting Policies:

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 disclosures 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 interim periods are 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
Annual Report of Actrade Financial Technologies Ltd. (the "Company") and
subsidiaries on Form 10-K for the fiscal year ended June 30, 2001.

The consolidated financial statements include the accounts of the Company and
its subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities. It also
requires 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 to the current
period presentation. Income or loss from securitization transactions has been
reclassified from Revenue - Trade Acceptance Drafts to Securitization Loss. The
reclassification was made to more clearly reflect the effects of securitization
transactions in the consolidated statements of income. The reclassification of
securitization loss resulted in revenue increases of $591,000 and $294,000 for
the six and three-month periods ended December 31, 2000, respectively. In
addition, certain expenses have been reclassified from Interest Expense to
Revenue - Trade Acceptance Drafts in the amounts of $3,651,000 and $1,969,000
for the six and three-month periods ended December 31, 2000, respectively. This
reclassification was made to reflect revenue for the six and three-month periods
ended December 31, 2000 in a similar manner as reflected in prior periods.
Neither of the above reclassifications had any impact on total assets,
stockholders' equity, net income or earnings per share of the Company.

Actrade Funding Corp. ("Funding") is a wholly owned subsidiary of Actrade
Capital, Inc. ("Capital") with the specific purpose of purchasing trade
acceptance draft receivables from Capital. Funding is considered as a qualifying
special purpose entity. As of December 31, 2001, the Company has ended this
securitization arrangement.

On October 3, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, that replaces SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of. This statement establishes one accounting model for long-lived
assets to be disposed of by sale and addresses significant implementation
issues. The provisions of SFAS No. 144 are effective for financial statements
issued for fiscal years beginning after December 15, 2001. Management does not
expect the adoption of this statement to have a significant impact on its
financial position or results of operations of the Company.

2.       Segment Information:

The Company's business operations are divided into two principal business
segments: Trade Acceptance Drafts program ("TADs" or "E-TADs") and International
Merchandise Trade ("IMT") activities. The Company's business segments are based
on business units or entities that offer different products and services. They
are managed separately because each business segment requires different
strategic initiatives and marketing. During the quarter ended September 30,
2001, Actrade Commerce Ltd. ("Commerce") began operations. Commerce purchases
Bills of Exchange outside of North America and its results are included in the
IMT segment. A Bill of Exchange is an unconditional order in writing signed by
the person originating it, requiring the person to whom it is addressed to

                                       6





<PAGE>



pay on demand, or at a fixed or determinable future time, a sum certain in
money, to or to the order of, a specified person, or to the bearer. A Bill of
Exchange involves the payment of money only.

Revenue, income before provision for income taxes and total assets for each
segment were as follows:

<TABLE>
<CAPTION>
                                                     Six Months Ended December 31         Three Months Ended December 31
                                                        2001               2000               2001               2000
<S>                                                   <C>                <C>                <C>                <C>
Revenue:
   Trade Acceptance Drafts                            $17,510            $10,183             $8,769             $5,212
   International Merchandise Trade                    $17,009            $13,671             $8,819             $7,474
                                                      -------            -------            -------            -------
                                                      $34,519            $23,854            $17,588            $12,686
                                                      =======            =======            =======            =======

Income before Provision for Income Taxes:
   Trade Acceptance Drafts                             $8,756             $2,695             $4,483             $1,080
   International Merchandise Trade                    $12,853             $9,299             $6,927             $5,213
                                                      -------            -------            -------             ------
                                                      $21,609            $11,994            $11,410             $6,293
                                                      =======            =======            =======             ======


<CAPTION>
                                                    December 31          June 30
                                                        2001              2001
<S>                                                  <C>                <C>
Total Assets:
   Trade Acceptance Drafts                            $51,147           $50,425
   International Merchandise Trade                    $60,193           $46,755
                                                     --------           -------
                                                     $111,340           $97,180
                                                     ========           =======
</TABLE>


3.       Non-current Receivable:

In January 2002, Capital tentatively agreed to modify the terms of certain TADs
it held from one customer for the amount of $8,845,000. $8,500,000 of these TADs
are supported by surety bonds. Although final documents have not been executed,
the expected terms are as outlined below.

Actrade plans to exchange these TADs for: (1) a long-term note receivable of
$8,000,000 bearing an interest rate at Prime plus 1% with the entire principal
payable in 2006, (2) an installment note receivable of $500,000 bearing an
interest rate of 4.75% with the final payment due in December 2002, and (3) an
installment note receivable of $345,000, with the final payment due in 2005. The
notes receivable of $8,000,000 and $500,000 would continue to be secured by the
financial guaranties from the surety companies.

Based on the creditworthiness of the surety companies, management believes that
the $8,500,000 currently supported by surety bonds is fully collectible. At
December 31, 2001, the Company provided a specific reserve of $345,000 for the
receivable, which was not covered by the surety bonds. Consistent with the
expected payment terms outlined above, the Company has reclassified $8,500,000
of the receivable (net of the $345,000 reserve) as non-current receivable in the
condensed consolidated balance sheet at December 31, 2001.

                                       7





<PAGE>





ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

General Statement - Factors That May Affect Future Results.

With the exception of historical information, the matters discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward looking statements under the 1995 Private Securities
Litigation Reform Act (the "Reform Act") that involve various risks and
uncertainties. Typically, these statements are indicated by words such as
"anticipates," "expects," "believes," "plans," "could," and similar words and
phrases. Factors that could cause the Company's actual results to differ
materially from management's projections, forecasts, estimates and expectations
include but are not limited to, the following:

o        Changes in the Company's currently available credit facilities;

o        The inability of the Company to extend or secure additional credit
         facilities to fund the anticipated expansion of sales under its E-TAD
         Program as defined below;

o        Unexpected economic changes both in the United States and overseas;

o        The imposition of new restrictions or regulations affecting either the
         Company's international merchandise trade activities or its E-TAD
         Program, either in the United States or in Canada.

o        Unanticipated economic impacts of the September 11, 2001 terrorist
         attack on the United States

Segment Reporting Disclosures.

The Company's revenue is generated from two major business segments: the E-TAD
Program and IMT.

An E-TAD is a post-dated payment draft prepared by the buyer of goods or
services ("Buyer") and accepted by the seller of the goods or services
("Supplier") by the Buyer signing and delivering the draft back to the Supplier.
The E-TAD Program denotes the Company's ongoing plan for all aspects of E-TADs
to be processed, marketed, and fulfilled electronically, including prospective
E-commerce applications. The E-TAD Program is operated by Actrade Capital, Inc.
("Capital") in the United States, and Actrade Capital Canada, Inc. ("Actrade
Canada") in Canada. Pre-tax income of the E-TAD Program also includes the
results of its investment in and transactions with its unconsolidated
subsidiary, Actrade Funding Corp.

IMT operations are conducted through Actrade International Corp.
("International"), which resells American-made products to foreign buyers;
Actrade S.A., including its wholly-owned subsidiary Actrade Resources, Inc.
("Resources"), which resells non-US products to foreign buyers; and Actrade
Commerce Ltd., which purchases Bills of Exchange outside of North America.

Results of Operations - Six months ended December 31, 2001 Compared to Six
months ended December 31, 2000.

All figures included in the following discussion have been rounded to the
nearest $1,000 for presentation purposes.

Revenue:

For the six months ended December 31, 2001, the Company had consolidated revenue
of $34,519,000 as compared to $23,854,000 for the same period in fiscal 2001, an
increase of 45%. This increase resulted from substantial revenue increases in
each of the Company's business segments as outlined below.

         E-TAD Program Revenue

Revenue for the first half of fiscal 2002 from the E-TAD Program totaled
$17,510,000, as compared to $10,183,000 in the first half of fiscal 2001, an
increase of 72%. This increase represents a higher volume of E-TAD transactions
that management believes were a direct result of the accelerated marketing and
expansion program begun during the prior fiscal year and which continues today.
(See also Expenses: General and Administrative and Liquidity and Capital
Resources below). For the first half of fiscal 2002, total E-TAD originations
(representing the face amount of all E-TAD transactions) totaled $277,548,000,
as compared to $165,539,000 during the first half of fiscal 2001, an increase of
68%.

                                       8





<PAGE>




         International Merchandise Trade Revenue

Revenue from International Merchandise Trade during this period climbed to
$17,009,000 as compared to $13,671,000 in the first half of fiscal 2001, an
increase of 25%. This increase was the result of increased unit sales by
Resources, rather than from price increases for the products sold. Management
attributes the continued growth in this business sector to the ability to
provide immediate payment to foreign suppliers as well as facilitating access to
flexible payment terms for the buyers. During the first half of fiscal 2002, the
Company's principal overseas markets continued to be (i) South America (ii)
Eastern Europe, (iii) Western Europe, (iv) Far East, (v) Middle East and (vi)
Central America and the Caribbean.

See "Condensed Consolidated Financial Statements - Note 2, Segment Information"
for additional information.

Expenses:

         General and Administrative

General and administrative expenses for the six months ended December 31, 2001
were $6,610,000, as compared to $5,329,000 for the same period last year, an
increase of 24%. The major component of this increase was compensation for the
E-TAD segment (including commissions and other related costs), which increased
to $3,057,000 in the six months ended December 31, 2001 from $2,159,000 in the
same period last year. This reflected the expansion of sales and support
personnel to support the E-TAD Program.

Depreciation and amortization increased $276,000 during the six months ended
December 31, 2001 as compared to the same period last year. Other components of
general and administrative expenses increased $107,000 in the six months ended
December 31, 2001 as compared to the same period in fiscal 2001.

With respect to the balance of fiscal 2002, management projects that costs
related to E-TAD operations will continue to escalate, particularly as marketing
efforts for the E-TAD Program increase and Capital continues to implement its
E-Commerce program. However, management believes that the impact of these
continued increased costs will be outweighed by increased revenue as the
benefits of the fiscal 2002 business and system development mature.

         Bad Debt

Bad debt expense arises almost exclusively from the E-TAD business segment.
International Merchandise Trade transactions have had no history of losses. In
the first half of fiscal 2002, the Company provided for bad debt expense in the
amount of $1,800,000 as compared to $1,261,000 in the first half of fiscal 2001.
In evaluating bad debt, management looks at the adequacy of its allowance for
doubtful accounts based on a percentage (%) of originations, as well as the
status of individual past due accounts.

         Interest

In the first half of fiscal 2002, the Company incurred net interest expense of
$4,226,000 as compared to $4,679,000 in the same period last year. This decrease
is due to volume growth in both business segments, offset by lower interest
rates during the first half of fiscal 2002 as well as reduced debt needs due to
the utilization of internally generated cash flow from the Company's operations.

         Securitization Loss

In the first half of fiscal 2002, the Company incurred $274,000 in
securitization loss as compared to a loss of $591,000 in the same period last
year. As of December 31, 2001 the Company has ended this securitization
arrangement.

                                       9





<PAGE>




Pre-tax Income:

         E-TAD Program

Pre-tax income attributable to the E-TAD business segment was $8,756,000 for the
six months ended December 31, 2001, as compared to $2,695,000 for the December
2000 period, an increase of 225%. Management believes that this significant
improvement reflects the investment made in the recent expansion of the E-TAD
program and that such expansion will continue during fiscal 2002.

         International Merchandise Trade

IMT pre-tax income for the six months ended December 31, 2001 totaled
$12,853,000 as compared to $9,299,000 for the same period last year, an increase
of 38%, consistent with the revenue growth noted above. Management believes that
these operations will continue to grow during the foreseeable future although no
assurance can be given that the rate of growth will continue to be sustained.

Net Income:

After provision for income taxes, the Company reported net income for the first
half of fiscal 2002 to be $17,881,000, or $1.58 per share (diluted), as compared
to $10,656,000 or $1.01 per share (diluted) for the comparable period in fiscal
2001. This represented an increase in net income of 68% over last year and an
increase in earnings per share of 56% over last year. The income tax provision
increased from $1,338,000 in the first six months of fiscal 2001 to $3,728,000
in the first six months of the current fiscal year, primarily due to increased
pre-tax income from the E-TAD segment. Income tax has not been provided on
unrepatriated earnings of foreign subsidiaries, as currently it is the intention
of the Company to reinvest such earnings in its foreign operations.
Substantially all of the pre-tax income for the IMT segment is comprised of such
unrepatriated earnings.

Results of Operations - Second Quarter, Fiscal 2002 Compared to Second Quarter,
Fiscal 2001.

All figures included in the following discussion have been rounded to the
nearest $1,000 for presentation purposes.

Revenue:

For the quarter ended December 31, 2001, the Company had consolidated revenue of
$17,588,000 as compared to $12,686,000 for the same period in fiscal 2001, an
increase of 39%. This increase resulted from substantial revenue increases in
each of the Company's business segments as outlined below.

         E-TAD Program Revenue

Revenue for the second quarter of fiscal 2002 from the E-TAD Program totaled
$8,769,000, as compared to $5,212,000 in the second quarter of fiscal 2001, an
increase of 68%. This increase represents a higher volume of E-TAD transactions
that management believes were a direct result of the accelerated marketing and
expansion program begun during the prior fiscal year and which continues today.
(See also Expenses: General and Administrative and Liquidity and Capital
Resources below). For the second quarter of fiscal 2002, total E-TAD
originations (representing the face amount of all E-TAD transactions) totaled
$145,098,000, as compared to $81,802,000 during the second quarter of fiscal
2001, an increase of 78%.

         International Merchandise Trade Revenue

Revenue from International Merchandise Trade during this period climbed to
$8,819,000 as compared to $7,474,000 in the second quarter of fiscal 2001, an
increase of 18%. This increase was the result of increased unit sales by
Resources, rather than from price increases for the products sold. Management
attributes the continued growth in this business sector to the ability to
provide immediate payment to foreign suppliers as well as facilitating access to
flexible payment terms for the buyers. During the second quarter of fiscal 2002,
the Company's principal overseas markets continued to be (i) South America (ii)
Eastern Europe, (iii) Western Europe, (iv) Far East, (v) Middle East and (vi)
Central America and the Caribbean.

                                       10





<PAGE>




See "Condensed Consolidated Financial Statements - Note 2, Segment Information"
for additional information.

Expenses:

         General and Administrative

General and administrative expenses for the quarter ended December 31, 2001 were
$2,958,000, as compared to $2,757,000 for the same period last year, an increase
of 7%. The major component of this increase was compensation for the E-TAD
segment (including commissions and other related costs), which increased to
$1,506,000 in the three months ended December 31, 2001 from $1,138,000 in the
same period last year. This reflected the expansion of sales and support
personnel to support the E-TAD Program.

Professional fees decreased $294,000; primarily reflecting decreased litigation
costs to recover monies from defaulted E-TADs. Most such costs had been incurred
in connection with the litigation described in Note 12 to the consolidated
financial statements and in Item 3 - Legal Proceedings in the Company's Form
10-K for the year ended June 30, 2001. At this stage of the litigation, given
legal and liquidity uncertainties concerning the surety involved, counsel has
recommended a more limited legal effort. Other components of general and
administrative expenses increased $127,000 in the December 31, 2001 quarter as
compared to the same period in fiscal 2001.

With respect to the balance of fiscal 2002, management projects that costs
related to E-TAD operations will continue to escalate, particularly as marketing
efforts for the E-TAD Program increase and Capital continues to implement its
E-Commerce program. However, management believes that the impact of these
continued increased costs will be outweighed by increased revenue as the
benefits of the fiscal 2002 business and system development mature.

         Bad Debt

Bad debt expense arises almost exclusively from the E-TAD business segment.
International Merchandise Trade transactions have had no history of losses. In
the second quarter of fiscal 2002, the Company provided for bad debt expense in
the amount of $1,200,000 as compared to $690,000 in the second quarter of fiscal
2001. In evaluating bad debt, management looks at the adequacy of its allowance
for doubtful accounts based on a percentage (%) of originations, as well as the
status of individual past due accounts.

         Interest

In the second quarter of fiscal 2002, the Company incurred net interest expense
of $1,983,000 as compared to $2,652,000 in the same period last year. This
decrease is due to lower interest rates during the second quarter of fiscal 2002
as well as reduced debt needs due to the utilization of internally generated
cash flow from the Company's operations.

         Securitization Loss

In the second quarter of fiscal 2002, the Company incurred $37,000 in
securitization loss as compared to a loss of $294,000 in the same quarter last
year. As of December 31, 2001 the Company has ended this securitization
arrangement

Pre-tax Income:

         E-TAD Program

Pre-tax income attributable to the E-TAD business segment was $4,483,000 for the
three months ended December 31, 2001, as compared to $1,080,000 for the
December, 2000 period, an increase of 315%. Management believes that this
significant improvement reflects the investment made in the recent expansion of
the E-TAD program and that such improvement will continue during fiscal 2002
although no assurance can be given that the rate of growth will continue to be
sustained.

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         International Merchandise Trade

IMT pre-tax income for the quarter ended December 31, 2001 totaled $6,927,000 as
compared to $5,213,000 for the same period last year, an increase of 33%,
consistent with the revenue growth noted above. Management believes that these
operations will continue to grow during the foreseeable future although no
assurance can be given that the rate of growth will continue to be sustained.

Net Income:

After provision for income taxes, the Company reported net income for the second
quarter of fiscal 2002 to be $9,518,000, or $0.80 per share (diluted), as
compared to $5,761,000 or $0.55 per share (diluted) for the comparable period in
fiscal 2001. This represented an increase in net income of 65% over last year
and an increase in earnings per share of 45% over last year. The income tax
provision increased from $532,000 in the first three months of fiscal 2001 to
$1,892,000 in the first three months of the current fiscal year, primarily due
to increased pre-tax income from the E-TAD segment. Income tax has not been
provided on unrepatriated earnings of foreign subsidiaries, as currently it is
the intention of the Company to reinvest such earnings in their foreign
operations. Substantially all of the pre-tax income for the IMT segment is
comprised of such unrepatriated earnings.

Discussion of Financial Condition - Liquidity and Capital Resources

At December 31, 2001, the Company had working capital of $74,000,000 as compared
to working capital of $63,177,000 at June 30, 2001. As of December 31, 2001 the
Company had cash and cash equivalents of $26,414,000 as compared to $42,155,000
at June 30, 2001. Short-term borrowings decreased $5,746,000 from June 30 to
December 31, 2001. Such changes in working capital, short-term borrowings, and
cash and cash equivalents resulted from normal variations in the utilization of
these items by Capital in its operations, and not due to any trend that is
expected to have a continuing effect upon operations in the future. However,
consistent with prudent business practice, management attempts to minimize cash
at Capital so as to reduce short-term borrowings and related interest expense.

At December 31, 2001, Capital had approximately $36.7 million in Surety bonds
guaranteeing payment of E-TADs it had purchased (including $8.5 million against
the non-current receivable described in Note 3 to the financial statements), in
addition to approximately $30 million in credit insurance.

At December 31, 2001, the Company's total stockholders' equity increased to
$83,449,000 as compared to $65,249,000 at June 30, 2001. The principal source of
funds for the Company's operations continues to be revenues earned by its
operating subsidiaries.

During the balance of fiscal 2002, the Company projects no significant
additional capital expenditures in connection with any of the Company's IMT
operations. Management plans to utilize current cash on hand in connection with
its IMT operations principally for (i) general working capital reserves to meet
any extraordinary or unexpected expenses; (ii) and to finance, if required, the
Company's trading operations. However, in connection with the E-TAD Program,
management expects that it will have significant additional capital expenditures
relating to the ongoing expansion of sales and marketing operations, including
continued implementation of its E-Commerce initiative. However, spending levels
may be below those of recent years.

At December 31, 2001, there existed credit facilities with three different banks
through which the purchase of E-TADs were financed: $15 and $40 million credit
facilities with two financial institutions in the United States; and a CN$5
million (Canadian) credit facility with a financial institution in Canada. The
$15 million facility commenced during the September 30, 2001 fiscal quarter. As
noted above, as of December 31, 2001 the Company has ended the securitization
facility.

In order to sustain a growth rate comparable to that experienced in the past few
years, management may need to further expand its credit facilities and other
means for financing its purchase of E-TADs. Based upon its experience with
present lenders (including the new facility executed during the September 30,
2001 fiscal quarter), as well as discussions with other financial institutions,
management believes that it will be able to secure adequate financing to sustain
the growth of the E-TAD Program in the foreseeable future, although no assurance
can be given that such discussions will result in the completion of future
financing facilities.

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In January 2002, Capital tentatively agreed to modify the terms of $8.845
million of TADs on which it had previously extended terms into a non-current
receivable, $500,000 payable in December 2002 and the $8 million in 2006. Surety
bonds support both obligations.

III. Recent Accounting Pronouncements

On October 3, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, that replaces SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of. This statement establishes one accounting model for long-lived
assets to be disposed of by sale and addresses significant implementation
issues. The provisions of SFAS No. 144 are effective for financial statements
issued for fiscal years beginning after December 15, 2001. Management does not
expect the adoption of this statement to have a significant impact on its
financial position or results of operations of the Company.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss from adverse changes in market conditions and
interest rates. Operating margins are dependent upon the ability of the Company
to maintain the spread or interest differential between the discount it charges
the customer for E-TAD transactions and the interest the Company is charged for
the financing of those transactions.

Management knows of no other trends reasonably expected to have a material
impact upon the Company's operations or liquidity in the foreseeable future
except for the effects of the September 11, 2001 terrorist actions against the
United States. In the short run, management believes that the aftermath of these
events delayed completion of certain transactions that would otherwise have
taken place prior to September 30, 2001. The long run effects on the Company's
businesses are less clear. Possible decreases (or slower rates of increases) in
economic activity might be reflected in lower revenues (and profits) from the
Company's business segments. However, this impact might be offset or exceeded
either by the effects of proposed economic stimuli, the cost savings from lower
interest rates, or increased E-TAD originations due to decreased availability of
more conventional credit sources to the Company's customers.

In summary, the Company would be negatively impacted by rapidly rising
short-term interest rates. Rising interest rates would adversely affect the
levels of gains achieved upon the sale of those E-TAD transactions.

Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K

         None during this period.

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                                   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 23, 2002

ACTRADE FINANCIAL TECHNOLOGIES LTD.

BY: /s/ Joseph P. D'Alessandris
    -------------------------------
    Chief Financial Officer

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