UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-QSB

 

(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT 0F 1934
		For the period ended: October 31, 2003
or
o		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

 

 

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.

 

     ý   Yes   o    No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date.

 

 

 

Transitional Small Business Format (check one):           Yes  o     No  ý

 

 

ARBOR ENTECH CORPORATION

CONDENSED BALANCE SHEET

OCTOBER 31, 2003

(Unaudited)

 

ASSETS
Current Assets:
Cash and Cash Equivalents		$	391,893
Prepaid Expenses		15,166
Total Current Assets		407,059
Property, Plant and Equipment (Net of Accumulated Depreciation of $101,854)		38,204
		$	445,263
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities		$	6,383
Total Current Liabilities		6,383
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		2,331,173
Retained Earnings (Deficit)		(823,487		)
Notes Receivable — Related Parties		(1,075,856		)
Total Stockholders’ Equity		438,880
		$	445,263

 

The accompanying notes are an integral part of the financial statements.

 

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ARBOR ENTECH CORPORATION

CONDENSED STATEMENT OF OPERATIONS

(Unaudited)

 

		Three Months Ended October 31,						Six Months Ended October 31,
		2003			2002			2003			2002
Net Sales		$	—		$	—		$	—		$	—
Costs and Expenses:
Selling, General and Administrative Expenses		61,634			77,846			127,893			150,396
		61,634			77,846			127,893			150,396
Loss from Operations		(61,634		)	(77,846		)	(127,893		)	(150,396		)
Other Income:
Interest		196			405			390			852
Loss from Continuing Operations		(61,438		)	(77,441		)	(127,503		)	(149,544		)
Income (Loss) from Discontinued Operations		(102,456		)	(7,906		)	(76,573		)	56,353
Net Loss		$	(163,894	)	$	(85,347	)	$	(204,076	)	$	(93,191	)
Loss Per Common Share — Basic:
Loss from Continuing Operations		$	(.01	)	$	(.01	)	$	(.02	)	$	(.02	)
Income (Loss) from Discontinued Operations		(.01		)	(.00		)	(.01		)	.01
Net Loss		$	(.02	)	$	(.01	)	$	(.03	)	$	(.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.

 

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ARBOR ENTECH CORPORATION

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited)

 

		Six Months Ended October 31,
		2003			2002
Cash Flows from Operating Activities:
(Loss) from Continuing Operations		$	(127,503	)	$	(149,544	)
Adjustments to Reconcile (Loss) from Continuing Operations to Net Cash (Used) by Operating Activities:
Depreciation		—			—
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Prepaid Expenses		11,350			(33,067		)
(Decrease) in Accounts Payable		(17,884		)	(12,180		)
(Decrease) in Taxes Payable		—			(1,479		)
Total Adjustments		(6,534		)	(46,726		)
Net Cash (Used) by Operating Activities		(134,037		)	(196,270		)
Cash Flows from Investing Activities:		—			—
Cash Flows from Financing Activities:
Proceeds of Loans to Related Parties		27,000			27,000
Net Cash Provided by Financing Activities		27,000			27,000
Net Cash Provided by Discontinued Operations		196,643			216,689
Increase in Cash and Cash Equivalents		89,606			47,419
Cash and Cash Equivalents — Beginning of Period		302,287			252,026
Cash and Cash Equivalents — End of Period		$	391,893		$	299,445
Supplemental Cash Flow Information:
Cash Paid for Interest		$	—		$	—
Cash Paid for Income Taxes		$	—		$	50,500
Supplemental Disclosure of Non-Cash Financing Activities:
Accrued Interest on Related Parties Loans Receivable Credited to Additional Paid-In Capital		$	17,134		$	17,134

 

The accompanying notes are an integral part of the financial statements.

 

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ARBOR ENTECH CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

OCTOBER 31, 2003

(Unaudited)

 

 

NOTE 1 -                Unaudited Interim Financial Statements

 

In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein.  These financial statements are condensed and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements

 

Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

 

 

NOTE 2 -                Property, Plant and Equipment

 

Property, plant and equipment consists of the following:

 

Land		$	22,058
Building and Improvements		61,114
Machinery and Equipment		4,300
Computers		12,804
Automotive Equipment		39,782
		140,058
Less:  Accumulated Depreciation		101,854
		$	38,204

 

The land and building are collateralized by a mortgage held by the Company’s Secretary/Treasurer (see Note 5).

 

 

NOTE 3 -                Notes Receivable — Related Parties

 

Notes receivable from related parties consists of amounts due from two affiliated companies.  These loans are classified as a reduction of 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, which was reduced to 7% per annum in October 2001.  The notes are payable in equal annual installments of $108,789 and interest on the notes is payable semi-annually.

 

The notes consist of the following:

 

Receivable from:
Rushmore Financial Services, Inc. (a)		$	784,024
Attain Technology, Inc. (b)		195,072
		979,096
Accrued Interest		96,760
		$	1,075,856

 

(a)          A corporation wholly owned by Mr. Shefts and Mr. Houtkin.

(b)         A wholly owned subsidiary of Rushmore Financial Services, Inc.

 

5

 

The Company has not received the annual principal payments in the amount of $108,789 that were due November 18, 2002 and 2003.

 

 

NOTE 4 -                Related Party Transactions

 

The Company incurred $27,000 in administrative fees to a Company owned by two of its significant stockholders during the six months ended October 31, 2003 and 2002.

 

 

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, 2003 on this credit facility.

 

 

NOTE 6 -                Discontinued Operations

 

On September 2, 2003, the Company informed The Home Depot, Inc., the customer that purchased more than 99 percent of the Company’s wood products, that the Company would no longer do business with Home Depot due to increased difficulties in transacting business with Home Depot on a profitable basis.  The Company stated to Home Depot that these difficulties included Home Depot’s prohibition against price increases despite increases in the Company’s increased costs of production, a diminution in the Home Depot territories the Company was allowed to sell product to, and Home Depot’s demands regarding returns of ordered products that the Company was unwilling to accede to for economic reasons.

 

6

 

The Financial Accounting Standards Board’s SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of.  SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” retains the fundamental provisions of Statement 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale.  SFAS 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for segments of a business to be disposed of, but retains the requirement of Opinion 30 to report discontinued operations separately from continuing operations and extends that reporting to a component of an entity that either has been disposed of (by sale, by abandonment, or in a distribution to owners) or is classified as held for sale.

 

The Company has discontinued its wood products business.  Consequently, the accompanying financial statements reflect the wood products business as discontinued operations in accordance with SFAS No. 144.

 

Summarized below are the results of discontinued operations:

 

		Three Months Ended October 31,						Six Months Ended October 31,
		2003			2002			2003			2002
Net Sales		$	20,638		$	121,980		$	161,391		$	369,457
Income (Loss) from Discontinued Operations		$	(102,456	)	$	(7,906	)	$	(76,573	)	$	56,353

 

The Company intends to seek other business opportunities, but there can be no assurance that such opportunities will be identified, engaged in, or result in any profits.

 

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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 2003 and beyond to differ materially from those expressed in such forward-looking statements.  These important factors include, without limitation,   changes in the nature of the Company’s business, 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 were a wood products company which has been in business since 1980.  Our business fluctuated over the years.  We were almost wholly dependent on sales to The Home Depot, Inc.

 

On September 2, 2003, the Company informed Home Depot, the customer that purchased more than 99 percent of the Company’s wood products, that the Company would no longer do business with Home Deport due to increased difficulties in transacting business with Home Depot on a profitable basis.  The Company stated to Home Depot that these difficulties included Home Depot’s prohibition against price increases despite increases in the Company’s increased costs of production, a diminution in the Home Depot territories the Company was allowed to sell product to, and Home Depot’s demands regarding returns of ordered products that the Company was unwilling to accede to for economic reasons.

 

The Company has discontinued its wood products business.  The Company intends to seek other business opportunities, but there can be no assurance that such opportunities will be identified, engaged in, or result in any profits.

 

Results of operations

 

Quarter ended October 31, 2003 compared to the quarter ended October 31, 2002.

 

Since the Company discontinued its wood products business there were no sales from continuing operations during the quarter ended October 31, 2003 and 2002.

 

Selling, general and administrative expenses were approximately $62,000 for the quarter ended October 31, 2003, a decrease of approximately $16,000 or 21% over selling, general and administrative expenses of approximately $78,000 for the quarter ended October 31, 2002.

 

Arbor’s net loss increased from approximately $85,000 for the quarter ended October 31, 2002 to a net loss of approximately $164,000 for the quarter ended October 31, 2003.  This was an increase of approximately $79,000 or 93%.

 

8

 

Six months ended October 31, 2003 compared to the six months ended October 31, 2002

Since the Company discontinued its wood products business, there were no sales from continuing operations during the six months ended October 31, 2003 and 2002.

 

Selling, general and administrative expenses were approximately $128,000 for the six months ended October 31, 2003, a decrease of approximately $22,000 or 15% over selling, general and administrative expenses of approximately $150,000 for the six months ended October 31, 2002.

 

Arbor’s net loss increased from approximately $93,000 for the six months ended October 31, 2002 to approximately $204,000 for the six months ended October 31, 2003.  This was an increase of approximately $111,000 or 119%.

 

Discontinued Operations

 

On September 2, 2003, the Company informed Home Depot, the customer that purchased more than 99 percent of the Company’s wood products, that the Company would no longer do business with Home Depot due to increased difficulties in transacting business with Home Depot on a profitable basis.  The Company stated to Home Depot that these difficulties included Home Depot’s prohibition against price increases despite increases in the Company’s increased costs of production, a diminution in the Home Depot territories the Company was allowed to sell product to, and Home Depot’s demands regarding returns of ordered products that the Company was unwilling to accede to for economic reasons.

 

Net sales of the wood products business were approximately $21,000 and $122,000 for the quarters ended October 31, 2003 and 2002, respectively.  The net loss from discontinued operations was $102,000 and $10,000 for the quarters ended October 31, 2003 and 2002, respectively.

 

Liquidity and capital resources

 

In the periods discussed above, Arbor’s working capital requirements were met primarily from sales generated by its discontinued wood products business.  At October 31, 2003 we had working capital of approximately $401,000.

 

As at October 31, 2003, we had cash and cash equivalents of approximately $392,000, which represented 88% of total assets.  Arbor believes it has adequate working capital to fund its operations for at least the next 12 months.

 

Net cash used by operating activities amounted to approximately $134,000 for the six months ended October 31, 2003.  Loss from continuing operations of $128,000 for the six months ended October 31, 2003 was increased by decreases in accounts payable of $18,000 offset by decreases in prepaid expenses of $11,000.

 

Net cash provided by financing activities was approximately $27,000 for the six months ended October 31, 2003 as a result of related party loan repayments.

 

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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.

 

Dated December 12, 2003			ARBOR ENTECH CORPORATION
			Registrant
			By:	s/Harvey Houtkin
				President
			By:	s/Mark Shefts
				Mark Shefts
				Chief Financial Officer

 

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