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, 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 JULY 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
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 2002 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.
QUARTER ENDED JULY 31, 2002 COMPARED TO THE QUARTER ENDED
JULY 31, 2001.
Net sales for the quarter ended July 31, 2002 were
approximately $247,000, an increase of 87% as compared to net sales of
approximately $132,000 for the quarter ended July 31, 2001. Net sales increased
due to more sales to Home Depot.
Cost of sales were approximately $148,000 for the quarter
ended July 31, 2002, an increase of approximately $81,000 or 121% over the
comparable 2001 period cost of sales of approximately $67,000. Cost of sales
as a percentage of net sales was approximately 60% for the quarter ended July
31, 2002 compared to approximately 51% for the quarter ended July 31, 2001.
This increase is primarily attributable to an increase in product costs
during the current quarter that was not passed on to Home Depot.
Selling, general and administrative expenses were
approximately $107,000 for the quarter ended July 31, 2002, a decrease of
approximately $50,000 or 32% over selling, general and administrative expenses
of approximately $157,000 for the quarter ended July 31, 2001. This decrease was
due primarily to a decrease in salaries and related costs and other general
expenses.
Interest income for the quarter ended July 31, 2002 was
approximately $500 compared to $3,000 for the quarter ended July 31, 2001.
Arbor's net loss decreased from approximately $89,000 for the
quarter ended July 31, 2001 to approximately $8,000 for the quarter ended July
31, 2002. This was a decrease of approximately $81,000, or 91%.
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 July
31, 2002 we had working capital of approximately $695,000.
As at July 31, 2002, we had cash and cash equivalents of
approximately $287,000, which represented 36% 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 provided by operating activities was approximately
$22,000 for the quarter ended July 31, 2002, as compared to net cash used in
operating activities of approximately $340,000 for the quarter ended July 31,
2001. This increase of approximately $362,000 is primarily attributable to a
reduction of net loss of approximately $81,000 and a net change in operating
assets and liabilities of approximately $281,000.
Net cash provided by financing activities increased by
approximately $14,000, primarily attributable to net capital contributed in
connection with related party loans.
ARBOR ENTECH CORPORATION
BALANCE SHEET
JULY 31, 2002
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 287,097
Accounts Receivable 198,553
Inventories 177,361
Prepaid Expenses 79,136
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Total Current Assets 742,147
Property, Plant and Equipment (Net of Accumulated
Depreciation of $87,862) 52,196
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$ 794,343
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 46,992
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Total Current Liabilities 46,992
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Commitments and Contingencies
Stockholders' Equity:
Common Stock, $.001 Par Value; Authorized
10,000,000 Shares; Issued and Outstanding
7,050,540 Shares 7,050
Additional Paid-In Capital 2,245,503
Retained Earnings (Deficit) (447,516)
Notes Receivable - Related Parties (1,057,686)
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Total Stockholders' Equity 747,351
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$ 794,343
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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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2002 2001
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Net Sales $ 247,477 $ 132,049
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Costs and Expenses:
Cost of Sales 148,486 66,880
Selling, General and Administrative Expenses 107,282 157,051
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255,768 223,931
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Loss from Operations (8,291) (91,882)
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Other Income:
Interest Income 447 3,323
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447 3,323
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Net Loss $ (7,844) $ (88,559)
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Earnings Per Common Share - Basic $ (.00) $ (.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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2002 2001
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Cash Flows from Operating Activities:
Net Loss $ (7,844) $ (88,559)
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Adjustments to Reconcile Net Loss to Net Cash Provided by
(Used) in Operating Activities:
Depreciation 3,731 3,393
Changes in Operating Assets and Liabilities:
Decrease in Accounts Receivable 109,254 14,022
(Increase) in Inventories (33,122) (185,490)
(Increase) in Prepaid Expenses (38,527) (317)
(Decrease) in Accounts Payable and Accrued Liabilities (10,442) (33,307)
(Decrease) in Taxes Payable (1,479) (49,619)
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Total Adjustments 29,415 (251,318)
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Net Cash Provided by (Used) in Operating Activities 21,571 (339,877)
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Cash Flows from Investing Activities: - -
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Cash Flows from Financing Activities:
Loans to Related Parties - Net (3,634) (24,447)
Capital Contributed 17,134 24,447
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Net Cash Provided by Financing Activities 13,500 -
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Increase (Decrease) in Cash and Cash Equivalents 35,071 (339,877)
Cash and Cash Equivalents - Beginning of Period 252,026 625,438
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Cash and Cash Equivalents - End of Period $ 287,097 $ 285,561
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Supplemental Cash Flow Information:
Cash Paid for Interest $ - $ -
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Cash Paid for Income Taxes $ 50,200 $ 42,305
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The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2002
(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 $ 150,757
Finished Goods 26,604
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$ 177,361
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NOTE 3 - 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
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140,058
Less: Accumulated Depreciation 87,862
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$ 52,196
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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 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 October 2001.
The notes consist of the following:
Receivable from:
Rushmore Financial Services, Inc. (a) $ 784,024
Attain Technology, Inc. (b) 195,072
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979,096
Accrued Interest 78,590
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$1,057,686
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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 - RELATED PARTY TRANSACTIONS
The Company paid $13,500 in administrative fees to a Company
owned by two of its significant stockholders during the quarters ended July 31,
2002 and 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 July 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
President
By: s/Mark Shefts
Mark Shefts
Chief Financial Officer
Dated: September 19, 2002