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: January 31, 2002
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 January 31, 2002
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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
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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 JANUARY 31, 2002 COMPARED TO THE QUARTER ENDED
JANUARY 31, 2001.
Net sales for the quarter ended January 31, 2002 were approximately
$459,000, a decrease of 11% as compared to net sales of approximately $518,000
for the quarter ended January 31, 2001. Net sales decreased due to less sales to
Home Depot. We believe this resulted from the unusually warm weather in the
Northeast United States this winter.
Cost of sales were approximately $230,000 for the quarter ended January
31, 2002, a decrease of approximately $38,000 or 14% over the comparable 2001
period cost of sales of approximately $268,000. This decrease is primarily
attributable to Arbor's decrease in sales.
Selling, general and administrative expenses were approximately
$230,000 for the quarter ended January 31, 2002, an increase of approximately
$24,000 or 12% over selling, general and administrative expenses of
approximately $206,000 for the quarter ended January 31, 2001.
Interest income for the quarter ended January 31, 2002 was
approximately $300 compared to $1,400 for the quarter ended January 31, 2001.
The decrease in interest income is primarily attributable to lower average money
market account balances in the current quarter.
Other income for the quarter ended January 31, 2002 was $0, compared to
$21,000 for the quarter ended January 31, 2001. Other income for the quarter
ended January 31, 2001 consisted of $21,000 from a class action settlement of
claims regarding price fixing on NASDAQ.
Arbor's net income decreased from approximately $24,000 for the quarter
ended January 31, 2001 to a net loss of approximately $4,000 for the quarter
ended January 31, 2002.
NINE MONTHS ENDED JANUARY 31, 2002 COMPARED TO THE NINE MONTHS ENDED
JANUARY 31, 2001.
Net sales for the nine months ended January 31, 2002 were approximately
$1,053,000, an increase of 9% as compared to net sales of approximately $966,000
for the nine months ended January 31, 2001. Net sales increased due to more
sales to Home Depot.
Cost of sales were approximately $528,000 for the nine months ended
January 31, 2002, an increase of approximately $28,000 or 6% over the comparable
2001 period cost of sales of approximately $500,000. This increase is primarily
attributable to Arbor's increase in sales.
Selling, general and administrative expenses were approximately
$562,000 for the nine months ended January 31, 2002, an increase of
approximately $123,000 or 28% over selling, general and administrative expenses
of approximately $439,000 for the nine months ended January 31, 2001. This
increase was due primarily to increases in warehouse costs of approximately
$24,000, salaries and related costs of approximately $26,000, and other general
expenses of $73,000.
Interest income for the nine months ended January 31, 2002 was
approximately $5,000 compared to interest income of $6,000 for the nine months
ended January 31, 2001.
Other income for the nine months ended January 31, 2002 was
approximately $5,000, compared to $21,000 for the nine months ended January 31,
2001. Other income for the nine months ended January 31, 2001 consisted of
$21,000 from a class action settlement of claims regarding price fixing on
NASDAQ.
Arbor's net income decreased from net income of approximately $5,000
for the nine months ended January 31, 2001 to a net loss of approximately
$34,000 for the nine months ended January 31, 2002.
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 January 31, 2002 we had working
capital of approximately $712,000.
As at January 31, 2002, we had cash and cash equivalents of
approximately $239,000, which represented 30% 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 amounted to approximately
$407,000 for nine months ended January 31, 2002. Net loss of $34,000 was reduced
by increases in accounts receivable of $268,000 and inventories of $52,000. It
was further reduced by a decrease in accounts payable and accrued liabilities of
$89,000. Net cash used in operating activities was increased by decreases in
other current assets of $25,000 and non-cash depreciation charges of $10,000.
Net cash provided by financing activities was approximately $21,000 for
the nine months ended January 31, 2002. This was primarily attributable to the
proceeds received on loans previously made to related parties.
ARBOR ENTECH CORPORATION
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BALANCE SHEET
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JANUARY 31, 2002
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(Unaudited)
ASSETS
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Current Assets:
Cash and Cash Equivalents $ 238,966
Accounts Receivable 323,701
Inventories 176,799
Prepaid Expenses 21,392
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Total Current Assets 760,858
Property, Plant and Equipment (Net of Accumulated
Depreciation of $80,738) 40,262
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$ 801,120
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Accounts Payable $ 41,054
Taxes Payable 8,000
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Total Current Liabilities 49,054
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Commitments and Contingencies
Stockholders' Equity:
Common Stock, $.001 Par Value; Authorized
10,000,000 Shares; Issued and Outstanding
7,050,540 Shares 7,050
Additional Paid-In Capital 2,211,235
Retained Earnings (Deficit) (396,301)
Notes Receivable - Related Parties (1,069,918)
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Total Stockholders' Equity 752,066
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$ 801,120
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The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
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STATEMENT OF OPERATIONS
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(Unaudited)
Three Months Ended Nine Months Ended
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January 31, January 31,
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2002 2001 2002 2001
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Net Sales $ 459,497 $ 518,414 $ 1,053,475 $ 966,365
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of Sales 230,231 267,660 527,844 499,948
Selling, General and Administrative Expenses 230,014 205,910 561,639 438,807
----------- ----------- ----------- -----------
460,245 473,570 1,089,483 938,755
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Operating Income (Loss) (748) 44,844 (36,008) 27,610
----------- ----------- ----------- -----------
Other Income:
Interest Income 297 1,405 4,744 6,313
Other -- 20,906 4,882 20,906
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Total Other Income 297 22,311 9,626 27,219
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Income (Loss) before Provision for Income Taxes (451) 67,155 (26,382) 54,829
Provision for Income Taxes 3,400 42,975 8,000 50,000
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Net Income (Loss) $ (3,851) $ 24,180 $ (34,382) $ 4,829
=========== =========== =========== ===========
Earnings Per Common Share - Basic $ (.00) $ .00 $ (.00) $ .00
=========== =========== =========== ===========
Weighted Average Shares Outstanding 7,050,450 7,050,540 7,050,450 7,050,540
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The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
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STATEMENT OF CASH FLOWS
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(Unaudited)
Nine Months Ended
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January 31,
----------------------
2002 2001
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Cash Flows from Operating Activities:
Net Income (Loss) $ (34,382) $ 4,829
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Adjustments to Reconcile Net Income (Loss) to
Net Cash (Used) by Operating Activities:
Depreciation 10,179 10,565
Changes in Operating Assets and Liabilities
(Increase) in Accounts Receivable (267,850) (162,657)
(Increase) Decrease in Inventories (51,961) 45,918
(Increase) Decrease in Other Current Assets 25,208 (8,800)
Increase (Decrease) in Accounts Payable and Accrued Liabilities (88,666) 35,018
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Total Adjustments (373,090) (79,956)
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Net Cash (Used) by Operating Activities (407,472) (75,127)
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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:
Capital Contributed 65,339 90,864
Loans to Related Parties (65,339) (90,864)
Proceeds of Loans to Related Parties -- 217,578
Payment of Accrued Interest on Loans to Related Party 21,000 --
Loans to Related Parties -- --
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Net Cash Provided by Financing Activities 21,000 217,578
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Increase (Decrease) in Cash and Cash Equivalents (386,472) 124,501
Cash and Cash Equivalents - Beginning of Period 625,438 496,074
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Cash and Cash Equivalents - End of Period $ 238,966 $ 620,575
========= =========
Supplemental Cash Flow Information:
Cash Paid for Interest $ -- $ --
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Cash Paid for Income Taxes $ 9,304 $ 29,985
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The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
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NOTES TO FINANCIAL STATEMENTS
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JANUARY 31, 2002
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(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 $ 117,866
Finished Goods 58,933
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$ 176,799
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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
Automobiles and Trucks 39,782
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121,000
Less: Accumulated Depreciation 80,738
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$ 40,262
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The land and building are collateralized by a mortgage held by the
Company's Secretary/Treasurer (see Note 6).
NOTE 4 - NOTES RECEIVABLE - RELATED PARTIES
Notes receivable from related parties consists of amounts due from
affiliated companies. These notes and accrued interest thereon are classified as
a deduction from stockholders' equity. Although the notes bear interest such
interest is not recorded as income for financial statement purposes but as
additional contributed capital. The notes are 10 year notes effective November
1999. Interest was originally 10% per annum and in October 2001 was reduced to
7% per annum.
ARBOR ENTECH CORPORATION
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NOTES TO FINANCIAL STATEMENTS
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JANUARY 31, 2002
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(Unaudited)
NOTE 4 - NOTES RECEIVABLE - RELATED PARTIES (Continued)
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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 90,822
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$ 1,069,918
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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.
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.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company incurred $27,000 in administrative fees to a Company owned
by two of its significant stockholders during the nine months ended January 31,
2002.
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 January 31, 2002 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
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President
By: s/Mark Shefts
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Chief Financial Officer
Dated: March 15, 2002