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, 2001
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
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (570) 376-2217
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(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 JULY 31, 2001
----- ----------------------------
Common Stock, par value $.001 per share 7,050,540
Transitional Small Business Format (check one): Yes No X
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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, 2001 COMPARED TO THE QUARTER ENDED OCTOBER
31, 2000.
Net sales for the quarter ended October 31, 2001 were approximately
$462,000, an increase of 30% as compared to net sales of approximately $355,000
for the quarter ended October 31, 2000. Net sales increased primarily due to
more sales to Home Depot.
Cost of sales were approximately $231,000 for the quarter ended
October 31, 2001, an increase of approximately $46,000 or 25% over the
comparable 2000 period cost of sales of approximately $185,000. This increase is
primarily attributable to Arbor's increase in sales.
Selling, general and administrative expenses were approximately
$175,000 for the quarter ended October 31, 2001, an increase of approximately
$37,000 or 27% over selling, general and administrative expenses of
approximately $138,000 for the quarter ended October 31, 2000. This increase was
due primarily to an increase of $4,000 in shipping and packing costs, an
increase of approximately $9,000 in warehouse expenses as well as an increase of
$24,000 in general expenses.
Interest income for the quarter ended October 31, 2001 was
approximately $1,100 compared to $2,000 for the quarter ended October 31, 2000.
The decrease in interest income is primarily attributable to lower average money
market account balances in the current quarter.
Arbor's net income increased from approximately $27,000 for the
quarter ended October 31, 2000 to approximately $58,000 for the quarter ended
October 31, 2001. This was an increase of approximately $31,000, or 115%.
SIX MONTHS ENDED OCTOBER 31, 2001 COMPARED TO THE SIX MONTHS ENDED
OCTOBER 31, 2000.
Net sales for the six months ended October 31, 2001 were
approximately $594,000, an increase of 33% as compared to net sales of
approximately $448,000 for the six months ended October 31, 2000. Net sales
increased primarily due to more sales to Home Depot.
Cost of sales were approximately $298,000 for the six months ended
October 31, 2001, a increase of approximately $66,000 or 28% over the comparable
2000 period cost of sales of approximately $232,000. This increase is primarily
attributable to Arbor's increase in sales.
Selling, general and administrative expenses were approximately
$332,000 for the six months ended October 31, 2001, an increase of approximately
$99,000 or 42% over selling, general and administrative expenses of
approximately $233,000 for the six months ended October 31, 2000. This increase
was due primarily to an increase in packing and shipping costs of approximately
$18,000, an increase in warehouse costs of approximately $22,000 and an overall
increase in other general expenses of $59,000.
Interest income for the six months ended October 31, 2001 was
approximately $4,000 compared to interest income of $5,000 for the six months
ended October 31, 2000.
Arbor's net loss increased from approximately $19,000 for the six
months ended October 31, 2000 to approximately $31,000 for the six months ended
October 31, 2001. This was an increase of approximately $12,000, or 63%.
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, 2001 we
had working capital of approximately $713,000.
As at October 31, 2001, we had cash and cash equivalents of
approximately $340,000, which represented 42% 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 increased by approximately
$72,000 from the six months ended October 31, 2000 to the six months ended
October 31, 2001. This increase was partially offset by $21,000 net cash
provided by financing activities for the six months ended October 31, 2001.
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 and no cash was used by investing activities for the
six months ended October 31, 2001.
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 14, 2001
ARBOR ENTECH CORPORATION
BALANCE SHEET
OCTOBER 31, 2001
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 339,653
Accounts Receivable 207,199
Inventories 189,079
Prepaid Expenses 35,717
-----------
Total Current Assets 771,648
Property, Plant and Equipment (Net of Accumulated
Depreciation of $77,345) 43,655
-----------
$ 815,303
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 54,786
Taxes Payable 4,600
-----------
Total Current Liabilities 59,386
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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 2,194,101
Retained Earnings (Deficit) (392,450)
Notes Receivable - Related Parties (1,052,784)
-----------
Total Stockholders' Equity 755,917
-----------
$ 815,303
===========
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF INCOME
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ----------------------------
OCTOBER 31, OCTOBER 31,
--------------------------- ----------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net Sales $ 461,929 $ 355,297 $ 593,978 $ 447,951
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of Sales 230,733 185,472 297,613 232,288
Selling, General and Administrative Expenses 174,574 138,083 331,625 232,897
----------- ----------- ----------- -----------
405,307 323,555 629,238 465,185
----------- ----------- ----------- -----------
Operating Income (Loss) 56,622 31,742 (35,260) (17,234)
----------- ----------- ----------- -----------
Other Income (Expense):
Interest Income 1,124 2,019 4,447 4,908
Other 4,882 -- 4,882 --
----------- ----------- ----------- -----------
Total Other Income 6,006 2,019 9,329 4,908
----------- ----------- ----------- -----------
Income (Loss) before Provision for Income Taxes 62,628 33,761 (25,931) (12,326)
Provision for Income Taxes 4,600 7,025 4,600 7,025
----------- ----------- ----------- -----------
Net Income (Loss) $ 58,028 $ 26,736 $ (30,531) $ (19,351)
=========== =========== =========== ===========
Earnings Per Common Share - Basic $ .01 $ .00 $ (.00) $ (.00)
=========== =========== =========== ===========
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,
------------------------
2001 2000
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Cash Flows from Operating Activities:
Net (Loss) $ (30,531) $ (19,351)
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Adjustments to Reconcile Net (Loss) to
Net Cash (Used) by Operating
Activities:
Depreciation 6,786 6,710
Loss on Sale of Trading Securities -- --
Changes in Operating Assets and Liabilities
(Increase) in Accounts Receivable (151,348) (226,519)
(Increase) Decrease in Inventories (64,241) 2,549
(Increase) Decrease in Prepaid Expenses 10,883 (8,800)
Increase (Decrease) in Accounts Payable (31,011) 10,598
(Decrease) in Taxes Payable (47,323) --
--------- ---------
Total Adjustments (276,254) (215,462)
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Net Cash (Used) by Operating Activities (306,785) (234,813)
--------- ---------
Cash Flows from Investing Activities:
Capital Expenditures -- (17,950)
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Net Cash (Used) in Investing Activities -- (17,950)
--------- ---------
Cash Flows from Financing Activities:
Capital Contributed 48,205 45,552
Loans to Related Parties (48,205) (45,552)
Repayment of Loans to Related Parties 21,000 --
--------- ---------
Net Cash Provided by in Financing Activities 21,000 --
--------- ---------
(Decrease) in Cash and Cash Equivalents (285,785) (252,763)
Cash and Cash Equivalents - Beginning of Period 625,438 496,074
--------- ---------
Cash and Cash Equivalents - End of Period $ 339,653 $ 243,311
========= =========
Supplemental Cash Flow Information:
Cash Paid for Interest $ -- $ --
========= =========
Cash Paid for Income Taxes $ 42,305 $ 29,985
========= =========
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2001
(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 $ 63,026
Finished Goods 126,053
------------
$ 189,079
============
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 12,804
Automobiles and Trucks 39,782
------------
121,000
Less: Accumulated Depreciation 77,345
------------
$ 43,655
============
The land and building are collateralized by a mortgage held by the
Company's Secretary/Treasurer (see Note 5).
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. In October 2001 the interest rate was reduced to 7% per annum
(see Note 6).
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2001
(Unaudited)
NOTE 4 - NOTES RECEIVABLE - RELATED PARTIES (Continued)
The notes consist of the following:
Receivable from:
Rushmore Financial Services, Inc. (a) $ 784,024
ATTAIN Technology, Inc.
(F/K/A Double H Management Corp.) (b) 195,072
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979,096
Accrued Interest 73,688
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$ 1,052,784
===========
(a) A corporation wholly owned by Mr. Shefts and Mr. Houtkin.
(b) A wholly owned subsidiary of Rushmore Financial Services, Inc.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company incurred $21,000 in administrative fees to a Company
owned by two of its significant stockholders for the six months ended October
31, 2001.
NOTE 6 - 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, 2001 on this credit facility.
NOTE 7 - SUBSEQUENT EVENTS
The Company has not received the principal payments in the amount of
$108,789 that were due November 18, 2001 on its notes receivable from related
parties. In addition, the Company has been repaid $21,000 of a total of
approximately $98,000 accrued interest receivable on the notes that were due on
November 18, 2001.