U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
ARBOR ENTECH CORPORATION
----------------------------------------------
(Name of Small Business Issuer in its charter)
Delaware 22-2335094
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
RD 1, Box 1076, Little Marsh, Pennsylvania 16931
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (570) 376-2217
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Common Stock NASD Bulletin Board
- - -------------------------------- ----------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common
- - --------------------------------------------------------------------------------
(Title of class)
<PAGE>
BUSINESS
Arbor EnTech Corporation ("Arbor") is a Delaware corporation which was
organized in 1980 under the name Arbor Energy Corporation. Our name change was
effected in 1984.
Arbor engages in the production and wholesale distribution of wood
products for home use, principally fireplace wood and garden stakes. The
fireplace wood, which is sold under the name "Arborlogs(R)", is shrink wrapped
in bundles of approximately 6 pieces each. Tomato stakes are delivered in bulk
to be sold individually.
Arbor's products are packaged in and distributed from Arbor's facility in
Little Marsh, Pennsylvania, and then delivered by various independent trucking
concerns to customer locations in the northeastern United States. Uncut logs and
cut firewood are purchased from various loggers and cut and split, if necessary,
and packaged and palletized. Garden stakes are purchased precut and are banded
with a UPC code for customer delivery.
Arbor also trades securities for its own account.
Customers
Substantially all of Arbor's products are sold to Home Depot Inc. for
resale at its retail outlets. Arbor has no written agreement with Home Depot
with respect to these sales. Arbor believes it has a good relationship with Home
Depot, but were sales to Home Depot to diminish or cease for any reason, Arbor's
business would not be viable unless it developed relationships with Home Depot's
competitors in this area, such as lawn and garden shops, hardware stores and
supermarkets.
Suppliers
Arbor obtains logs, cut firewood and garden stakes from many independent
loggers. Arbor believes that if it could no longer obtain its raw logs and
firewood from loggers it currently utilizes, there are many alternate sources of
supply, including commencing logging operations on its own forest land.
Competition
Arbor competes with many other wood product companies. Some of the major
competitors are Ultraflame and Ossipee. Arbor also competes with local tree
companies and others who sell wood by the cord. Arbor competes on the basis of
price, consistency of product quality and prompt delivery. Arbor also competes
with paper firelog companies and with suppliers of metal plant cages and stakes.
Intellectual Property
<PAGE>
The trademark "Arborlogs(R)" has been registered with the U.S.
Trademark and Copyright Office. While there can be no guarantee that some entity
will not attempt to utilize the same name, we believe we have taken adequate
steps to protect this trademark.
Governmental Regulation
There are no government regulations which materially impact our packaging
and distribution operations, except for regulations promulgated by OSHA (the
U.S. Occupational Safety and Health Agency), pursuant to which we are required
to maintain a safe warehouse environment for our workers, and by state
departments of weights and measures with respect to the labeling of our
products.
Personnel
Arbor is a seasonal employer. The number of employees ranges from a high
of approximately 17 from September to January to 4 in the remaining months. One
is an officer, who is fulltime, one is a full-time foreman and from 2 to 15
full-time employees are in the wood preparation and packaging area. Sales and
marketing is undertaken by Arbor's Executive Vice President; a foreman oversees
production at the Pennsylvania facility. Arbor's president and treasurer serve
in a part-time capacity and do not devote a substantial amount of time to the
affairs of Arbor. There are no employment contracts with any employee and no
employee is unionized.
Legal Proceedings
Arbor is not currently involved in any outstanding legal proceedings. In
the ordinary course of business Arbor may become involved in proceedings
involving workers' compensation, trucking issues and disputes involving orders,
none of which is expected to have a material adverse effect on its business.
How to Contact Arbor
Arbor's principal executive offices are located RD 1, Box 1076, Little
Marsh, Pennsylvania, and its telephone number is (570) 376-2217.
Arbor is not required to deliver an annual report to security holders, and
no such report will be sent. Arbor does not file reports with the Securities and
Exchange Commission. The public may read and copy this Form 10-SB and any other
materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site that contrains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 trades securities for its own account.
Results of Operations
Fiscal year ended April 30, 1999 compared to the fiscal year ended April 30,
1998.
Net sales for the fiscal year ended April 30, 1999 were approximately
$1,048,000, an increase of 42% as compared to net sales of approximately
$737,000 for the fiscal year ended April 30, 1998. Net sales increased due to
additional sales to Home Depot. Net gains from trading securities were
approximately $255,000 for the fiscal year ended April 30, 1999, an increase of
190% as compared to net gains from trading securities of approximately $88,000
for the fiscal year ended April 30, 1998. Net gains increased from more
successful trading.
Cost of sales were approximately $518,000 for fiscal 1999, an increase of
approximately $253,000, or 95% over fiscal 1998 cost of sales of approximately
$265,000. This increase is primarily attributable to Arbor's growth in sales and
Arbor's reduction in gross profit margins in connection with higher sales.
Selling, general and administrative expenses were approximately $755,000
for fiscal 1999, an increase of approximately $227,000, or 43% over fiscal 1998
selling general and administrative expenses of approximately $528,000. This
increase was due to additional salary and other expenses incurred in connection
with Arbor's growth in sales and trading income.
Interest income for fiscal 1999 was approximately $123,000, an increase of
approximately $36,000, or 41% over fiscal 1998 interest income of approximately
$87,000. This increase was primarily attributable to greater loan balances due
from related parties.
The income tax provision increased from approximately $18,000 for the
fiscal year ended April 30, 1998 to approximately $49,000 for the fiscal year
ended April 30, 1999. This increase of 172% was primarily attributable to
greater taxable income and a lesser amount of net operating loss utilization
compared to fiscal 1998.
Arbor's net income increased from approximately $66,000 for the fiscal
year ended April 30, 1998 to approximately $88,000 for the fiscal year ended
April 30, 1999. This was an increase of approximately $22,000, or 33%.
<PAGE>
The results of operations for the fiscal year ended April 30, 1999 are not
necessarily indicative of the results for any future interim or fiscal year
period.
Fiscal year ended April 30, 1998 compared to fiscal year ended April 30, 1997.
Net sales for the fiscal year ended April 30, 1998 were approximately
$737,000, a decrease of 4% as compared to net sales of approximately $764,000
for the fiscal year ended April 30, 1997. Net gains from trading securities were
approximately $88,000 for the fiscal year ended April 30, 1998, an decrease of
74% as compared to net gains from trading securities of approximately $338,000
for the fiscal year ended April 30, 1997. Net gains decreased because of less
successful trading.
Cost of sales were approximately $265,000 for fiscal 1998, a decrease of
approximately $99,000, or 27% over fiscal 1997 cost of sales of approximately
$364,000. This decrease is primarily attributable to Arbor's ability to purchase
and produce its products at a lower cost.
Selling, general and administrative expenses were approximately $528,000
for fiscal 1998, an increase of approximately $180,000, or 52% over fiscal 1997
selling general and administrative expenses of approximately $348,000. This
increase was due to additional salary and other expenses incurred in connection
with Arbor's growth in sales and trading income.
Interest income for fiscal 1998 was approximately $87,000, an increase of
approximately $54,000, or 164% over fiscal 1997 interest income of approximately
$33,000. This increase was primarily attributable to greater loan balances due
from related parties.
The income tax provision decreased from approximately $36,000 for the
fiscal year ended April 30, 1997 to approximately $18,000 for the fiscal year
ended April 30, 1998. This decrease of 50% was primarily attributable to a
higher level of utilization of net operating loss carryforwards, offsetting
higher taxable income.
Arbor's net income decreased from approximately $387,000 for the fiscal
year ended April 30, 1997, to approximately $66,000 for the fiscal year ended
April 30, 1998. This was a decrease of approximately $321,000, or 83% due
primarily to a significant decrease in gains from Arbor's securities trading
activities.
The results of operations for the fiscal year ended April 30, 1998 are not
necessarily indicative of the results for any future interim or fiscal year
period.
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 gains from its trading
activities. At April
<PAGE>
30, 1999 we had a working capital of approximately $666,000.
As at April 30, 1999, we had cash and cash equivalents of approximately
$887,000, which represented approximately 40% 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.
Year 2000 Issues
We have devised a plan and have substantially completed a review and
assessment of all hardware and software and believe that our hardware and
software are substantially year 2000 compliant so that the computer programs do
not cease functioning because of an inability to process on a date occurring
from and after January 1, 2000. Our review has not revealed any Year 2000 issues
that cannot be remediated in a timely manner. We do not believe that any
remediation costs will be material.
DESCRIPTION OF PROPERTY
Arbor owns a lumber mill facility located on 102 acres of property in
Little Marsh, Pennsylvania. The mill consists of an enclosed structure of 17,000
square feet, with a 7,000 outdoor overhang for airing of inventory.
Approximately 12 acres of the property is devoted to the company's work area and
the remaining 90 acres are forest land.
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to Arbor, as of the date
of this registration statement, relating to the beneficial ownership of shares
of common stock of Arbor: by each person who is known by Arbor to be the
beneficial owner of more than five percent of the outstanding shares of common
stock; each director or person who has agreed to become a director; and all
executive officers and directors as a group.
Unless otherwise indicated, the address of each beneficial owner in the
table set forth below is 160 Summit Avenue, Montvale, New Jersey 07645.
A person is deemed to be the beneficial owner of securities that can be
acquired by him or her within 60 days from the date of this registration
statement upon the exercise of options, warrants or convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that options,
warrants or convertible securities that are held by him or her, but not those
held by any other person, and which are exercisable within 60 days of the date
of this registration statement have been exercised and converted.
<PAGE>
Name and Address of Number of Shares Percentage of Shares
Beneficial Owner Beneficially Owned Beneficially Owned
- - ------------------- ------------------ -------------------
Harvey Houtkin((1)(2) 3,554,000 50.4%
Wanda Shefts(1)(2) -0- -0-
Mark Shefts(1)(2) 3,554,000 50.4%
All directors and 6,949,900 98.6%
executive officers
as a group (3 persons)
(1) The address of such person is 160 Summit Avenue, Montvale, NJ 07645.
(2) Such person may be deemed to be the owner 159,100 of such shares by virtue
of his/her being a control person of Solar Products, Sun-Tank, Inc.
MANAGEMENT
Executive Officers and Directors Age Positions
- - -------------------------------- --- ---------
Harvey Houtkin 50 Chairman of the Board, Chief
Executive Officer, President
Wanda Shefts 40 Executive Vice President, Director
Mark Shefts 41 Secretary/Treasurer, Director
Harvey I. Houtkin founded Arbor EnTech Corporation in October 1980 and has
been our Chairman of the Board, Chief Executive Officer and President since
inception. From April 1993 through the present Mr. Houtkin has been Chairman of
the Board, Chief Executive Officer and Secretary of All-Tech Investment Group,
Inc. ("All-Tech"), an NASD registered securities broker/dealer specializing in
direct accesss electronic trading. From September 1996 to January 1997 he also
served as president of All-Tech but not as Secretary. Mr. Houtkin is an
associate member of the American Stock Exchange. He held a seat on the New York
Stock Exchange for several years and co-owns a broker/dealer which operated a
floor brokerage business on that Exchange. He graduated from Baruch College of
the City University of New York in 1970 with a Bachelor of Science Degree and in
1973 with a Masters Degree in Business Administration. He is the author of The
SOES Bandits' Guide-Day Trading in the 21st Century and Secrets of the SOES
Bandit.
Wanda Shefts was the Vice President and a director of Arbor 1982 through
April 1987 and from February 1993 through the present. She has an Associates
Degree from Kingsborough Community College.
Mark D. Shefts was the Secretary/Treasurer and a director of Arbor from
<PAGE>
1982 through April 1987 and from February 1993 through the present. He has been
a principal of All-Tech since early 1988 and has been its President, Chief
Operating Officer, Chief Financial Ofricer, Treasurer and a Director since such
time. From September 1996 to January 1997 he was the Secretary of All-Tech and
during such period he did not hold the office of President. He is a member of
the Chicago Stock Exchange and co-owns a broker/dealer which operated a floor
brokerage business on the New York Stock Exchange. Mr. Shefts is licensed as a
Commodity Pool Operator and a Commodity Trading Advisor by the National Futures
Association. He is also a Certified Financial Services Auditor, a Certified
Fraud Examiner and an arbitrator for the American Arbitration Association and
NASD Regulation, Inc. Mr. Shefts graduated in 1979 from Brooklyn College of the
City of New York with a Bachelor of Science Degree in Accounting.
Mark Shefts and Wanda Shefts are husband and wife. Harvey Houtkin and
Wanda Shefts are brother and sister.
Executive Compensation
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Principal Position Year Salary Bonus Other Annual Compensation
- - --------------------------- ---- ------ ----- -------------------------
<S> <C> <C> <C> <C>
Harvey Houtkin: CEO & Pres 1999 -- $100,000 --
1998 -- -- --
1997 -- -- --
Wanda Shefts 1999 $ 79,500 31,000 $ 24,000
1998 72,250 25,000 24,000
1997 73,550 -- 24,000
Mark Shefts 1999 -- 100,000 --
1998 -- -- --
1997 -- -- --
</TABLE>
Employment Agreements
Arbor has no employment agreements with any of its employees, including
Wanda Shefts, its Executive Vice President.
Stock Option Plans
Arbor has no stock option or bonus plans for its employees.
<PAGE>
Limitations on Liability and Indemnification Matters
As authorized by the Delaware General Corporation Law, Arbor's By-Laws
provide that Arbor will indemnify any person who was or is a party or is
threatened to be made a party to any action or proceeding by reason of such
person's being an officer, director, employee or agent of Arbor if that person
acted in good faith in in a manner that person reasonably believed to be in or
not opposed to the best interest of Arbor.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to Arbor's
directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
RELATED PARTY TRANSACTIONS
During the fiscal year ended April 30, 1999, Arbor made a series of
revolving loans bearing interest at 8% a year to various affiliated companies
and to Messrs. Houtkin and Shefts, officers, directors and shareholders of
Arbor. The loans have no specific repayment terms and have been classified as
long-term in nature. These loans were made by oral agreements upon request of
these related parties. As of April 30, 1999, loans outstanding to these related
parties were $1,214,363.
DESCRIPTION OF SECURITIES
Arbor has authority to issue 10,000,000 shares of stock, $.001 par value.
Each share has one vote. No dividends are required to be paid on this stock and
Arbor has never paid any dividends. The shares do not have preemptive rights.
There are no provisions in the charter or by-laws of Arbor which would
delay, defer or prevent a change in the control over Arbor.
PART II
MARKET PRICE; DIVIDENDS
Arbor's stock is traded on the OTC Bulletin Board. The range of high and
low bid prices for each quarter within the last two fiscal years and the quarter
ended June 30, 1999 is as follows:
Date High Bid Low Bid
---- -------- -------
4/1/97-6/30/97 $0.75 $0.75
<PAGE>
7/1/97-9/30/97 0.75 0.25
10/1/97-12/31/97 1.00 0.50
1/1/98-3/31/98 1.00 1.00
4/1/98-6/30/98 1.50 0.25
7/1/98-9/30/98 2.00 1.5625
10/1/98-12/30/98 2.00 2.00
1/1/99-3/31/99 2.00 2.00
4/1/99-6/30/99 2.00 2.00
The foregoing information has been provided by The Nasdaq Stock Market, Inc. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
LEGAL PROCEEDINGS
Arbor is not currently involved in any legal proceedings.
CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS
Arbor has neither changed nor disagreed with its accountants in the past
two fiscal years.
RECENT SALES OF UNREGISTERED SECURITIES
Arbor has not sold any unregistered securities in the past three years.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The By-Laws of Arbor provide that Arbor shall indemnify any person who is
a party or is threatened to be made a party to any threatened, pending or
completed action, lawsuit or proceeding because that person is or was a
director, officer, employee or agent of Arbor.
<PAGE>
FINANCIAL STATEMENTS
ARBOR ENTECH CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants F-2
Balance Sheet, April 30, 1999 F-3
Statement of Income, Years Ended April 30, 1999 and
April 30, 1998 (Unaudited) F-4
Statement of Stockholders' Equity, Years Ended April 30, 1999
and April 30, 1998 (Unaudited) F-5
Statement of Cash Flows, Years Ended April 30, 1999 and
April 30, 1998 (Unaudited) F-6
Notes to Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Arbor Entech Corporation
We have audited the accompanying balance sheet of Arbor Entech Corporation as of
April 30, 1999, and the related statements of income, stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted out audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Arbor Entech Corporation as of
April 30, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
Rockville Centre, New York
June 24, 1999
F-2
<PAGE>
ARBOR ENTECH CORPORATION
BALANCE SHEET
APRIL 30, 1999
ASSETS
Current Assets:
Cash and Cash Equivalents $ 887,238
Accounts Receivable 26,791
Inventories 70,178
Other Current Assets 2,927
----------
Total Current Assets 987,134
Property, Plant and Equipment (Net of Accumulated
Depreciation of $47,939) 42,306
Loans Receivable - Related Parties 1,214,363
----------
$2,243,803
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 320,800
----------
Total Current Liabilities 320,800
Loan Payable - Related Party 215,093
----------
Total Liabilities 535,893
----------
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 1,676,318
Retained Earnings 24,542
----------
Total Stockholders' Equity 1,707,910
----------
$2,243,803
==========
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
ARBOR ENTECH CORPORATION
STATEMENT OF INCOME
Years Ended
--------------------------
April 30,
--------------------------
1999 1998
----------- -----------
(Unaudited)
Net Sales $ 1,048,397 $ 737,204
----------- -----------
Costs and Expenses:
Cost of Sales 518,425 265,009
Selling, General and Administrative Expenses 754,583 527,896
----------- -----------
1,273,008 792,905
----------- -----------
Operating Income (Loss) (224,611) (55,701)
----------- -----------
Other Income - Net:
Net Gain on Trading Securities 255,095 87,658
Interest Income 122,551 86,661
Other 3,153 --
Interest Expense (18,981) (34,932)
----------- -----------
361,818 139,387
----------- -----------
Income before Provision for Income Taxes 137,207 83,686
Provision for Income Taxes 49,000 17,669
----------- -----------
Net Income $ 88,207 $ 66,017
=========== ===========
Earnings Per Common Share - Basic $ .01 $ .01
=========== ===========
Weighted Average Shares Outstanding 7,050,540 7,050,540
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
ARBOR ENTECH CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained
---------------------- Paid-In Earnings
Shares Amount Capital (Deficit) Total
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance - April 30, 1997
(Unaudited) 7,050,540 $ 7,050 $1,676,318 $ (129,682) $1,553,686
Net Income (Unaudited) -- -- -- 66,017 66,017
--------- ---------- ---------- ---------- ----------
Balance - April 30, 1998
(Unaudited) 7,050,540 7,050 1,676,318 (63,665) 1,619,703
Net Income -- -- -- 88,207 88,207
--------- ---------- ---------- ---------- ----------
Balance - April 30, 1999 7,050,540 $ 7,050 $1,676,318 $ 24,542 $1,707,910
========= ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
ARBOR ENTECH CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
April 30,
------------------------------
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 88,207 $ 66,017
------------- -------------
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating
Activities:
Depreciation 7,338 3,882
Gain on Sale of Trading Securities (255,095) (87,658)
Changes in Operating Assets and Liabilities
(Increase) in Accounts Receivable (4,873) (9,210)
(Increase) in Inventories (24,713) (6,000)
(Increase) Decrease in Other Current Assets (2,927) 32
Increase in Accounts Payable and Accrued Expenses 218,387 53,847
------------- -------------
Total Adjustments (61,883) (45,107)
------------- -------------
Net Cash Provided by Operating Activities 26,324 20,910
------------- -------------
Cash Flows from Investing Activities:
Purchases of Trading Securities (214,682,789) (466,199,840)
Proceeds from Sale of Trading Securities 214,937,884 469,156,416
Capital Expenditures (4,300) (21,831)
------------- -------------
Net Cash Provided by Investing Activities 250,795 2,934,745
------------- -------------
Cash Flows from Financing Activities:
Loans to Related Parties (286,978) (1,980,384)
Proceeds of Loans to Related Parties 720,776 1,139,771
Loans from Related Party (1,615) (509,259)
Proceeds of Loans from Related Party 16,052 319,159
Payments of Brokerage Loans Payable -- (1,880,974)
------------- -------------
Net Cash Provided by (Used) In Financing Activities 448,235 (2,911,687)
------------- -------------
Increase in Cash and Cash Equivalents 725,354 43,968
Cash and Cash Equivalents - Beginning of Period 161,884 117,916
------------- -------------
Cash and Cash Equivalents - End of Period $ 887,238 $ 161,884
============= =============
Supplemental Cash Flow Information:
Cash Paid for Interest $ 18,981 $ 21,620
============= =============
Cash Paid for Income Taxes $ 17,200 $ 102,480
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
NOTE 1 - Nature of Business
Arbor Entech Corporation (the "Company") is a Delaware corporation
that engages in the production and wholesale distribution of wood products for
home use, principally fireplace wood and garden stakes.
NOTE 2 - Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid short-term investments with
a maturity of three months or less at time of purchase to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed
principally by the straight-line method over the estimated useful lives of the
related assets. Expenditures for maintenance and repairs are charged to expense
as incurred where are major betterments and renewals are capitalized.
Marketable Securities
The Company accounts for its investments in marketable securities in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
Management determines the appropriate classification of all
securities at the time of purchase and re-evaluates such designation as of each
balance sheet date. The Company classifies all of its debt and marketable equity
securities as trading securities. The Company's trading securities are
classified as current assets and are recorded at fair value. Unrealized holding
gains and losses, net of the related tax effect, are included in earnings.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
NOTE 2 - Summary of Significant Accounting Policies (Continued)
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation". SFAS No. 123 encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has elected to continue to account
for its employee stock-based compensation plans using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"),
Accounting for Stock Issued to Employees" and to disclose the pro forma effect
on net earnings per share had the fair value of options been expensed. Under the
provisions of APB No. 25, compensation cost for stock options is measured as the
excess, if any, of the estimated market value of the Company's common stock at
the date of the grant over the amount an employee must pay to acquire the stock.
Revenue Recognition
Sales are recorded as products are shipped.
Income Taxes
The Company utilizes the liability method of accounting for income
taxes. Under such method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect at the balance sheet date. The resulting asset or
liability is adjusted to reflect enacted changes in tax law. Future tax benefits
attributable to temporary differences are recognized to the extent that
realization of such benefits is more likely than not.
Earnings Per Common Share
In 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"),
which replaced APB No. 15 to conform earning per share with international
standards as well as to simplify the complexity of the computation under APB No.
15. The previous primary earnings per share ("EPS") calculation is replaced with
a basic EPS calculation. The basic EPS differs from the primary EPS calculation
in that the basic EPS does not include any potentially dilutive securities.
Fully dilutive EPS is replaced with diluted EPS and should be disclosed
regardless of dilutive impact to basic EPS.
Fair Value of Financial Instruments
The fair value of the Company's financial instruments, which consist
primarily of cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses, and long-term receivables and debt, approximate their carrying
amounts reported.
F-8
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
NOTE 2 - Summary of Significant Accounting Policies (Continued)
Concentration of Credit Risk
The Company's financial instruments that are exposed to
concentration of credit risk consist of cash and cash equivalents. At times,
such amounts are in excess of the FDIC and SIPC insurance limits.
The Company's customer base is comprised primarily of one major
national retailer. The Company routinely assesses the financial strength of its
customers and records an allowance for doubtful accounts when it determines that
collection of a particular amount is unlikely.
NOTE 3 - Inventories
Inventories consist of the following:
Raw Materials $28,480
Finished Goods 41,698
-------
$70,178
=======
NOTE 4 - Property, Plant and Equipment
Property, plant and equipment consists of the following:
Estimated
Useful Life
-----------
Land $ 3,000 --
Building and Improvements 61,114 15-31 Years
Machinery and Equipment 4,300 5 Years
Delivery Equipment 21,831 5 Years
-------
90,245
Less: Accumulated Depreciation 47,939
-------
$42,306
=======
NOTE 5 - Loans Receivable - Related Parties
Loans receivable from related parties consists of amounts due from
officers and affiliated companies. These loans have no specific repayment terms
and bear interest at 8% per annum.
NOTE 6 - Loan Payable - Related Party
Loan payable to a related party consists of amounts due to an
affiliated company. The loan has no specific repayment terms and bears interest
at 8% per annum.
F-9
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
NOTE 7 - Income Taxes
Income tax provision consisted of the following:
Years Ended
April 30,
-----------------------
1999 1998
------- --------
(Unaudited)
Current
Federal $29,000 $ --
State 20,000 17,669
------- -------
49,000 17,669
------- -------
Deferred
Federal -- --
State -- --
------- -------
-- --
------- -------
$49,000 $17,669
======= =======
The following is a reconciliation of the US statutory income tax
rate and the effective tax rate on pretax income:
Years Ended
April 30,
--------------------
1999 1998
------- --------
(Unaudited)
US federal statutory rate 34% 34%
State taxes, net of federal tax
Benefit 9.6 13.9
Benefit of net operating loss
carryforward (17.1) (34%)
Other, net 9.2 7.2
------- -------
Effective tax rate $ 35.7 $ 21.1%
======= =======
NOTE 8 - Commitments and Contingencies
Legal
The Company may be subject to legal proceedings and claims which may
arise in the ordinary course of its business. Currently, the Company is not a
party to any known legal proceedings.
F-10
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
NOTE 9 - Major Customers
Net sales to a major national retailer in 1999 and 1998 accounted
for approximately 98% and 97% of net sales, respectively.
As of April 30, 1999, 100% of accounts receivable are amounts due
from a major national retailer.
NOTE 10 - Year 2000 Considerations
The "Year 2000" problem relates to computer systems that have time
and date-sensitive programs that were designed to read years beginning with
"19", but may not properly recognize the year 2000. If a computer system or
software application used by the Company or a third party dealing with the
Company fails because of the inability of the system of application to properly
read the year 2000 the results could have a material adverse effect on the
Company.
The Company's review of its own operating systems has not revealed
any Year 2000 issues that cannot be remediated in a timely manner. However, the
Company is dependent on third party vendors. Failures and interruptions, if any,
resulting from the inability of certain computing systems of third party vendors
to recognize the Year 2000 could have a material adverse effect on the Company's
results of operations. There can be no assurance that the Year 2000 issue can be
resolved by any of such third parties prior to the upcoming change in the
century. Although the Company may incur substantial costs, as a result of such
third party service providers correcting Year 2000 issues, such costs are not
sufficiently certain to estimate at this time.
F-11
<PAGE>
INDEX TO EXHIBITS
Exhibit 2 Charter and By-laws (By-laws to be filed by Amendment) Page 22
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARBOR ENTECH CORPORATION
Date: July 29, 1999
By; s/Harvey Houtkin
Harvey Houtkin, Chairman of the Board,
Chief Executive Officer, President
Exhibit 2
CERTIFICATE OF INCORPORATION
OF
ARBOR ENTECH CORPORATION
FIRST - The name of this Corporation is Arbor EnTech Corporation.
SECOND - Its registered office in the State of Delaware is to be
located at Suite 212, Bank of Delaware Building, State and Loockerman Streets,
in the City of Dover, County of Kent. The Registered Agent in charge thereof is
Agents for Delaware Corporations, Inc. at Suite 212, Bank of Delaware Building,
State and Loockerman Streets, Dover, Delaware 19901.
THIRD - The nature of the business and, the objects and purposes
proposed to be transacted, promoted and carried on, are to do any or all the
things herein mentioned as fully and to the same extent as natural persons might
or could do, and in any part of the world, viz:
"The purpose of the Corporation is to
engage In any lawful act of activity for
which corporations may be organized under
the General Corporation Law of Delaware."
FOURTH - The Corporation shall have the authority to issue ten
million (10,000,000) shares, par value $.001.
FIFTH - The name and mailing address of the incorporator is as
follows:
Name Address
---- -------
Bruce D. Ralston P.O. Box 841, Dover, DE 19901
SIXTH - The powers of the incorporator shall terminate upon the
filing of this Certificate of Incorporation.
SEVENTH - The Directors shall have power to make and to alter or
amend the By-Laws; to fix the amount to be reserved as working capital, and to
authorize and cause to be executed, mortgages and liens without limit as to the
amount, upon the prooperty and franchise of this corporation.
With the consent in writing, and pursuant to a vote of the holders
of a majority of the capital stock issued and outstanding, the Directors shall
<PAGE>
have authority to dispose, in any manner, of the whole property of this
corporation.
The By-Laws shall determmine whether and to what extent the accounts
and books of this corporation, or any of them, shall be open to the inspection
of the stockholders and no stockholder shall have any right of inspecting any
account, or book, or documents of this corporation, except as conferred by the
law or the By-Laws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their
meetings and keep the books, documents, and papers of the corporation outside
the State of Delaware, at such places as may be from time to time designated by
the By-Laws or by resolution of the stockholders or directors, except as
otherwise required by the laws of Delaware.
It is the intention that the objects, purposes and powers specified
in the third paragraph hereof shall, except where otherwise specified in said
paragraph, be nowise limited or restricted by reference to or inference from the
terms of any other clause or paragraph in this Certificate of Incorporation, but
that the objects, purposes and powers specified in the third paragraph and in
each of the clauses or paragraphs of this Charter shall be regarded as
independent objects, purposes and powers.
WE, THE UNDERSIGNED, for the purpose of forming a Corporaiton under
the laws of the State of Delaware, do make, file and record this Certificate,
and do certify that the facts herein stated are true; and we have accordingly
hereunto set our respective hands.
DATED as Sept. 29, 1980.
S/ Bruce D. Ralston
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> APR-30-1999 APR-30-1998
<PERIOD-END> APR-30-1999 APR-30-1998
<CASH> 887,238 0
<SECURITIES> 0 0
<RECEIVABLES> 26,791 0
<ALLOWANCES> 0 0
<INVENTORY> 70,178 0
<CURRENT-ASSETS> 987,134 0
<PP&E> 90,245 0
<DEPRECIATION> 47,939 0
<TOTAL-ASSETS> 2,243,803 0
<CURRENT-LIABILITIES> 320,800 0
<BONDS> 215,093 0
0 0
0 0
<COMMON> 7,050 0
<OTHER-SE> 1,700,860 0
<TOTAL-LIABILITY-AND-EQUITY> 2,243,803 0
<SALES> 1,048,397 737,204
<TOTAL-REVENUES> 1,429,196 911,523
<CGS> 518,425 265,009
<TOTAL-COSTS> 1,273,008 792,905
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 18,981 34,932
<INCOME-PRETAX> 137,207 83,686
<INCOME-TAX> 49,000 17,669
<INCOME-CONTINUING> 88,207 66,017
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 88,207 66,017
<EPS-BASIC> .01 .01
<EPS-DILUTED> .01 .01
</TABLE>
