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: July 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
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(Exact name of registrant as specified in its charter)
DELAWARE 22-2335094
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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
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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 2001 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 JULY 31, 2001 COMPARED TO THE QUARTER ENDED
JULY 31, 2000.
Net sales for the quarter ended July 31, 2001 were
approximately $132,000, an increase of 42% as compared to net sales of
approximately $93,000 for the quarter ended July 31, 2000. Net sales increased
due to more sales to Home Depot.
Cost of sales were approximately $67,000 for the quarter ended
July 31, 2001, an increase of approximately $20,000 or 43% over the comparable
2000 period cost of sales of approximately $47,000. This increase is primarily
attributable to Arbor's increase in sales.
Selling, general and administrative expenses were
approximately $157,000 for the quarter ended July 31, 2001, an increase of
approximately $62,000 or 65% over selling, general and administrative expenses
of approximately $95,000 for the quarter ended July 31, 2000. This increase was
due primarily to an increase in shipping and packing expenses of approximately
$30,000, and an overall increase in other general expenses of $32,000.
Interest income for the quarter ended July 31, 2001 was
approximately $3,000 compared to $3,000 for the quarter ended July 31, 2000.
Arbor's net loss increased from approximately $46,000 for the
quarter ended July 31, 2000 to approximately $89,000 for the quarter ended July
31, 2001. This was an increase of approximately $43,000, or 93%.
LIQUIDITY AND CAPITAL RESOURCES
In the periods discussed above, Arbor's working capital
requirements have been met primarily from sales of its wood products and partial
payment of its notes receivable from related parties. At July 31, 2001 we had
working capital of approximately $630,000.
As at July 31, 2001, we had cash and cash equivalents of
approximately $286,000, 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 increased by
approximately $250,000 for the three months ended July 31, 2001 as compared to
the three months ended July 31, 2000. This increase was primarily attributable
to the following factors: (i) an increase in net loss of $43,000, (ii) an
increase in inventories of $151,000 and (iii) a decrease in payables of $75,000,
offset by an increase in receivables of $11,000.
The Company had no capital expenditures during the quarter
ended July 31, 2001, compared with approximately $18,000 for the quarter ended
July 31, 2000.
ARBOR ENTECH CORPORATION
BALANCE SHEET
JULY 31, 2001
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 285,561
Accounts Receivable 41,829
Inventories 310,328
Prepaid Expenses 36,917
Deposits 10,000
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Total Current Assets 684,635
Property, Plant and Equipment (Net of Accumulated
Depreciation of $73,952) 47,048
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$ 731,683
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 52,490
Taxes Payable 2,304
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Total Current Liabilities 54,794
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Commitments and Contingencies
Stockholders' Equity:
Common Stock, $.001 Par Value; Authorized
10,000,000 Shares; Issued and Outstanding
7,050,540 Shares 7,050
Additional Paid-In Capital 2,170,343
Retained Earnings (Deficit) ( 450,478)
Notes Receivable - Related Parties (1,050,026)
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Total Stockholders' Equity 676,889
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$ 731,683
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The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended
July 31,
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2001 2000
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Net Sales $ 132,049 $ 92,654
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Costs and Expenses:
Cost of Sales 66,880 46,816
Selling, General and Administrative Expenses 157,051 94,814
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223,931 141,630
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Loss from Operations ( 91,882) ( 48,976)
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Other Income:
Interest Income 3,323 2,889
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3,323 2,889
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Net Loss $( 88,559) $( 46,087)
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Earnings Per Common Share - Basic $( .01) $( .01)
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Weighted Average Shares Outstanding 7,050,540 7,050,540
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The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended
July 31,
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2001 2000
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Cash Flows from Operating Activities:
Net Loss $( 88,559) $( 46,087)
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Adjustments to Reconcile Net Loss to Net Cash
(Used) in Operating Activities:
Depreciation 3,393 2,855
Changes in Operating Assets and Liabilities:
Decrease in Accounts Receivable 14,022 3,234
(Increase) in Inventories (185,490) ( 33,794)
(Increase) in Prepaid Expenses ( 317) ( 8,800)
Increase (Decrease) in Accounts Payable and Accrued Liabilities ( 33,307) 13,377
(Decrease) in Taxes Payable ( 49,619) ( 20,693)
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Total Adjustments (251,318) ( 43,821)
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Net Cash (Used) in Operating Activities (339,877) ( 89,908)
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Cash Flows from Investing Activities:
Capital Expenditures - ( 17,950)
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Net Cash (Used) in Investing Activities - ( 17,950)
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Cash Flows from Financing Activities:
Loans to Related Parties ( 24,447) ( 22,560)
Capital Contributed 24,447 22,560
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Net Cash (Used) In Financing Activities - -
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(Decrease) in Cash and Cash Equivalents (339,877) (107,858)
Cash and Cash Equivalents - Beginning of Period 625,438 496,074
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Cash and Cash Equivalents - End of Period $ 285,561 $ 388,216
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Supplemental Cash Flow Information:
Cash Paid for Interest $ - $ -
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Cash Paid for Income Taxes $ 42,305 $ 29,985
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The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2001
(Unaudited)
NOTE 1 - UNAUDITED INTERIM FINANCIAL STATEMENT
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 $ 207,920
Finished Goods 102,408
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$ 310,328
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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
Automotive Equipment 39,782
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121,000
Less: Accumulated Depreciation 73,952
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$ 47,048
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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.
The notes consist of the following:
Receivable from:
Rushmore Financial Services, Inc. (a) $ 784,024
Double H Management Corp. (b) 195,072
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979,096
Accrued Interest 70,930
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$1,050,026
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(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 July 31, 2001 on this credit facility.
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: September 14, 2001