10QSB 1 a2032898z10qsb.txt 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 0F 1934 For the period ended: October 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ____________ Commission File Number 0-30432 ARBOR ENTECH CORPORATION ------------------------ (Exact name of registrant as specified in its charter) DELAWARE 22-2335094 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) Route 349, Rd 1, Box 1076, Little Marsh, PA 16931 ------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (570) 376-2217 -------------- -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No Indicate the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date.
Class Outstanding at October 31, 2000 ----- ------------------------------- Common Stock, par value $.001 per share 7,050,540
Transitional Small Business Format (check one): Yes No X --- ARBOR ENTECH CORPORATION BALANCE SHEET OCTOBER 31, 2000 (Unaudited)
ASSETS ------ Current Assets: Cash and Cash Equivalents $ 243,311 Accounts Receivable 261,040 Inventories 60,809 Other Current Assets 8,800 ----------- Total Current Assets 573,960 Property, Plant and Equipment (Net of Accumulated Depreciation of $63,697) 54,770 ----------- $ 628,730 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable and Accrued Liabilities $ 84,672 ----------- Total Current Liabilities 84,672 ----------- Commitments and Contingencies Stockholders' Equity: Common Stock, $.001 Par Value; Authorized 10,000,000 Shares; Issued and Outstanding 7,050,540 Shares 7,050 Additional Paid-In Capital 2,076,308 Retained Earnings (Deficit) (365,731) Notes Receivable - Related Parties (1,173,569) ----------- Total Stockholders' Equity 544,058 ----------- $ 628,730 ===========
The accompanying notes are an integral part of the financial statements. ARBOR ENTECH CORPORATION ------------------------ STATEMENT OF OPERATIONS ------------------------ (Unaudited)
Three Months Ended Six Months Ended ------------------------- -------------------------- October 31, October 31, ------------------------- -------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net Sales $ 355,297 $ 398,017 $ 447,951 $ 551,608 ----------- ----------- ----------- ----------- Costs and Expenses: Cost of Sales 185,472 206,061 232,288 281,320 Selling, General and Administrative Expenses 138,083 154,470 232,897 217,044 ----------- ----------- ----------- ----------- 323,555 360,531 465,185 498,364 ----------- ----------- ----------- ----------- Operating Income (Loss) 31,742 37,486 (17,234) 53,244 ----------- ----------- ----------- ----------- Other Income (Expense): Net Loss on Trading Securities -- (10,697) -- (121,880) Interest Income 2,019 228 4,908 3,588 Other -- 7,444 -- 7,444 Interest Expense -- (2,947) -- (7,659) ----------- ----------- ----------- ----------- Total Other Income (Expense) 2,019 (5,972) 4,908 (118,507) ----------- ----------- ----------- ----------- Income (Loss) before Provision for Income Taxes 33,761 31,514 (12,326) (65,263) Provision for Income Taxes 7,025 1,500 7,025 1,500 ----------- ----------- ----------- ----------- Net Income (Loss) $ 26,736 $ 30,014 $ (19,351) $ (66,763) =========== =========== =========== =========== Earnings Per Common Share - Basic $ .00 $ .00 $ (.00) $ (.01) =========== =========== =========== =========== Weighted Average Shares Outstanding 7,050,540 7,050,540 7,050,540 7,050,540 =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. ARBOR ENTECH CORPORATION ------------------------ STATEMENT OF CASH FLOWS ----------------------- (Unaudited)
Six Months Ended ------------------------------ OCTOBER 31, ------------------------------ 2000 1999 ------------- ------------- Cash Flows from Operating Activities: Net (Loss) $ (19,351) $ (66,763) ------------- ------------- Adjustments to Reconcile Net (Loss) to Net Cash (Used) by Operating Activities: Depreciation 6,710 3,800 Loss on Sale of Trading Securities -- 121,880 Changes in Operating Assets and Liabilities (Increase) in Accounts Receivable (226,519) (325,009) Decrease in Inventories 2,549 44,886 (Increase) Decrease in Other Current Assets (8,800) 528 Increase (Decrease) in Accounts Payable and Accrued Expenses 10,598 (9,022) Purchases of Trading Securities -- (204,859,253) Proceeds from Sale of Trading Securities -- 204,737,373 ------------- ------------- Total Adjustments (215,462) (284,817) ------------- ------------- Net Cash (Used) by Operating Activities (234,813) (351,580) ------------- ------------- Cash Flows from Investing Activities: Capital Expenditures (17,950) -- ------------- ------------- Net Cash (Used) in Investing Activities (17,950) -- ------------- ------------- Cash Flows from Financing Activities: Capital Contributed 45,552 70,983 Loans to Related Parties (45,552) (541,280) Proceeds of Loans to Related Parties -- 230,093 Payments of Loans from Related Party -- (222,321) Proceeds of Loans from Related Party -- 7,228 ------------- ------------- Net Cash Provided by (Used) In Financing Activities -- (455,297) ------------- ------------- (Decrease) in Cash and Cash Equivalents (252,763) (806,877) Cash and Cash Equivalents - Beginning of Period 496,074 887,238 ------------- ------------- Cash and Cash Equivalents - End of Period $ 243,311 $ 80,361 ============= ============= Supplemental Cash Flow Information: Cash Paid for Interest $ -- $ 7,659 ============= ============= Cash Paid for Income Taxes $ 29,985 $ 12,500 ============= =============
The accompanying notes are an integral part of the financial statements. ARBOR ENTECH CORPORATION ------------------------ NOTES TO FINANCIAL STATEMENTS ----------------------------- OCTOBER 31, 2000 ---------------- (Unaudited) NOTE 1 - UNAUDITED INTERIM FINANCIAL STATEMENTS In the opinion of the Company, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations and cash flows presented. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year. NOTE 2 - INVENTORIES Inventories consist of the following: Raw Materials $20,270 Finished Goods 40,539 ------- $60,809 =======
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: Land $ 3,000 Building and Improvements 61,114 Machinery and Equipment 4,300 Computers 10,273 Automobiles and Trucks 39,780 -------- 118,467 Less: Accumulated Depreciation 63,697 -------- $ 54,770 ========
The land and building are collateralized by a mortgage held by the Company's Secretary/Treasurer (see Note 5). ARBOR ENTECH CORPORATION ------------------------ NOTES TO FINANCIAL STATEMENTS ----------------------------- OCTOBER 31, 2000 ---------------- (Unaudited) NOTE 4 - NOTES RECEIVABLE - RELATED PARTIES Notes receivable from related parties consists of amounts due from affiliated companies. These loans originally had no specific repayment terms and are classified as a deduction from stockholders' equity. Although the loans bear interest such interest is not recorded as income for financial statement purposes but as additional contributed capital. In November 1999 the remaining two loans were memorialized into 10 year promissory notes bearing interest at 10% per annum. The notes consist of the following: Receivable from: Rushmore Financial Services, Inc. (a) $ 871,138 Double H Management Corp. (b) 216,747 ---------- 1,087,885 Accrued Interest 85,864 ---------- $1,173,569 ==========
(a) A corporation wholly owned by Mr. Shefts and Mr. Houtkin. (b) A wholly owned subsidiary of Rushmore Financial Services, Inc. NOTE 5 - COMMITMENTS AND CONTINGENCIES LINE OF CREDIT The Company has a revolving credit facility with its Secretary/Treasurer, secured by a mortgage of the Company's real property located in Tioga County, Pennsylvania. This revolving line of credit provides for the extension of credit in the aggregate principal amount of $100,000 with interest at 11% per annum. Principal and interest are payable on demand. There was no balance due at October 31, 2000 on this credit facility. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements contained in this report which are not historical fact are "forward-looking statements" that involve various important assumptions, risks, uncertainties and other factors which could cause the Company's actual results for 2000 and beyond to differ materially from those expressed in such forward-looking statements. These important factors include, without limitation, competitive factors and pricing pressures, changes in legal and regulatory requirements, technological change or difficulties, product development risks, commercialization and trade difficulties and general economic conditions, as well as other risks previously disclosed in the Company's securities filings and press releases. GENERAL We are a wood products company which has been in business since 1980. Our business has increased over the years. We are almost wholly dependent on sales to Home Depot. Arbor also has traded securities for its own account. RESULTS OF OPERATIONS QUARTER ENDED OCTOBER 31, 2000 COMPARED TO THE QUARTER ENDED OCTOBER 31, 1999. Net sales for the quarter ended October 31, 2000 were approximately $355,000, a decrease of 11% as compared to net sales of approximately $398,000 for the quarter ended October 31, 1999. Net sales decreased due to less sales to Home Depot. Net losses from trading securities were approximately $11,000 for the quarter ended October 31, 1999. Arbor had no trading activities during the quarter ended October 31, 2000 and has discontinued its trading activities and does not intend to resume them. Cost of sales were approximately $185,000 for the quarter ended October 31, 2000, a decrease of approximately $21,000 or 10% over the comparable 1999 period cost of sales of approximately $206,000. This decrease is primarily attributable to Arbor's decline in sales. Selling, general and administrative expenses were approximately $138,000 for the quarter ended October 31, 2000, a decrease of approximately $16,000 or 10% over selling, general and administrative expenses of approximately $154,000 for the quarter ended October 31, 1999. This decrease was due primarily to an increase in salaries and related payroll tax expenses of approximately $10,000, offset by an overall decrease in other general expenses of $26,000. Interest income for the quarter ended October 31, 2000 was approximately $2,000 compared to $0 for the quarter ended October 31, 1999. The increase in interest income is primarily attributable to higher average money market account balances in the current quarter. Interest expense was approximately $3,000 for the quarter ended October 31, 1999 compared with $0 for the quarter ended October 31, 2000. This decrease of $3,000 was due to the repayment by Arbor of its interest bearing loans. Arbor's net income decreased from approximately $30,000 for the quarter ended October 31, 1999 to approximately $27,000 for the quarter ended October 31, 2000. This was a decrease of approximately $3,000, or 10%. SIX MONTHS ENDED OCTOBER 31, 2000 COMPARED TO THE SIX MONTHS ENDED OCTOBER 31, 1999. Net sales for the six months ended October 31, 2000 were approximately $448,000, a decrease of 19% as compared to net sales of approximately $552,000 for the six months ended October 31, 1999. Net sales decreased due to less sales to Home Depot. Net losses from trading securities were approximately $122,000 for the six months ended October 31, 1999. Arbor had no trading activities during the six months ended October 31, 2000 and has discontinued its trading activities and does not intend to resume them. Cost of sales were approximately $233,000 for the six months ended October 31, 2000, a decrease of approximately $49,000 or 17% over the comparable 1999 period cost of sales of approximately $281,000. This decrease is primarily attributable to Arbor's decline in sales. Selling, general and administrative expenses were approximately $233,000 for the six months ended October 31, 2000, an increase of approximately $16,000 or 7% over selling, general and administrative expenses of approximately $217,000 for the six months ended October 31, 1999. This increase was due primarily to an increase in salaries and related payroll tax expenses of approximately $30,000, offset by an overall decrease in other general expenses of $14,000. Interest income for the six months ended October 31, 2000 was approximately $5,000 compared to interest income of $4,000 for the six months ended October 31, 1999. Interest expense was approximately $8,000 for the six months ended October 31, 1999 compared with $0 for the six months ended October 31, 2000. This decrease of $8,000 was due to the repayment by Arbor of its interest bearing loans. Arbor's net income decreased from approximately $67,000 for the six months ended October 31, 1999 to approximately $19,000 for the six months ended October 31, 2000. This was a decrease of approximately $48,000, or 72%. LIQUIDITY AND CAPITAL RESOURCES In the periods discussed above, Arbor's working capital requirements have been met primarily from sales of its wood products. At October 31, 2000 we had working capital of approximately $489,000. As at October 31, 2000, we had cash and cash equivalents of approximately $243,000, which represented 39% of total assets. Arbor believes it has adequate working capital and will generate net revenues adequate to fund its operations for at least the next 12 months. Net cash used in operating activities decreased by approximately $117,000 from the six months ended October 31, 1999 to the six months ended October 31, 2000. This decrease was partially due to the change in the purchase and sale of trading securities from the six months ended October 31, 1999 to the six months ended October 31, 2000. During 1999, Arbor had net purchases over sales proceeds of approximately $122,000, compared to $0 in 2000. Net cash used in investing activities was approximately $18,000 during the six months ended October 31, 2000, which represented capital expenditures made by Arbor. Net cash used in financing activities was approximately $455,000 in 1999, compared to $0 for the six months ended October 31, 2000. This change was primarily attributable to additional net loans to related parties of approximately $455,000 during the six months ended October 31, 1999. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) None (b) None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ARBOR ENTECH CORPORATION Registrant By: /s/ Harvey Houtkin President By: /s/ Mark Shefts Mark Shefts Chief Financial Officer Dated: December 12, 2000