<PAGE>
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, 2000
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
------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2335094
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
ROUTE 349, LITTLE MARSH, PA 16931
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (570) 376-2217
RD 1, Box 1076, Little Marsh, PA
- --------------------------------------------------------------------------------
(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, 2000
----- -------------------------------
Common Stock, par value $.001 per share 7,050,540
Transitional Small Business Format (check one): Yes |_| No |X|
<PAGE>
ARBOR ENTECH CORPORATION
BALANCE SHEET
JANUARY 31, 2000
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 512,508
Accounts Receivable 108,160
Inventories 282,673
Other Current Assets 2,399
----------
Total Current Assets 905,740
Property, Plant and Equipment (Net of Accumulated
Depreciation of $54,494) 46,023
----------
$ 951,763
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $ 308,389
----------
Total Current Liabilities 308,389
----------
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 2,008,998
Retained Earnings (Deficit) (266,415)
Loans Receivable - Related Parties (1,106,259)
----------
Total Stockholders' Equity 643,374
----------
$ 951,763
==========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ARBOR ENTECH CORPORATION
STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
JANUARY 31, JANUARY 31,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 292,704 $ 366,549 $ 844,312 $ 744,729
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of Sales 149,282 148,877 430,602 336,207
Selling, General
and Administrative Expenses 116,516 132,442 333,560 283,045
----------- ----------- ----------- -----------
265,798 281,319 764,162 619,252
----------- ----------- ----------- -----------
Operating Income 26,906 85,230 80,150 125,477
----------- ----------- ----------- -----------
Other Income (Expense):
Net Loss on Trading Securities -- -- (121,880) --
Interest Income 262 -- 3,850 10,710
Other 1,036 -- 8,480 --
Interest Expense -- 9,312 (7,659) (12,026)
----------- ----------- ----------- -----------
Total Other Income (Expense) 1,298 9,312 (117,209) (1,316)
----------- ----------- ----------- -----------
Income (Loss) before Provision
for Income Taxes 28,204 94,542 (37,059) 124,161
Provision for Income Taxes 14,500 63,500 16,000 89,700
----------- ----------- ----------- -----------
Net Income (Loss) $ 13,704 $ 31,042 $ (53,059) $ 34,461
=========== =========== =========== ===========
Earnings Per Common Share - Basic $ .00 $ .00 $ (.01) $ .00
=========== =========== =========== ===========
Weighted Average Shares
Outstanding 7,050,540 7,050,540 7,050,540 7,050,540
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ARBOR ENTECH CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------
JANUARY 31,
-------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (53,059) $ 34,461
------------- -------------
Adjustments to Reconcile Net Income (Loss)
To Net Cash (Used) by Operating
Activities:
Depreciation 6,555 3,975
Loss on Sale of Trading Securities 121,880 --
Changes in Operating Assets and Liabilities
(Increase) in Accounts Receivable (81,369) (133,029)
(Increase) Decrease in Inventories (212,495) (83,145)
(Increase) Decrease in Other Current Assets 528 (2,683)
(Decrease) in Accounts Payable
and Accrued Expenses (12,411) 29,107
Purchases of Trading Securities (204,859,253) --
Proceeds from Sale of Trading Securities 204,737,373 --
------------- -------------
Total Adjustments (299,192) (185,775)
------------- -------------
Net Cash (Used) by Operating Activities (352,251) (151,314)
------------- -------------
Cash Flows from Investing Activities:
Capital Expenditures (10,272) --
------------- -------------
Net Cash (Used) in Investing Activities (10,272) --
------------- -------------
Cash Flows from Financing Activities:
Capital Contributed 94,782 109,605
Loans to Related Parties (541,280) (112,816)
Proceeds of Loans to Related Parties 673,183 36,000
Payments of Loans from Related Party (246,120) --
Proceeds of Loans from Related Party 7,228 11,026
------------- -------------
Net Cash Provided by (Used) In Financing Activities (12,207) 43,815
------------- -------------
(Decrease) in Cash and Cash Equivalents (374,730) (107,499)
Cash and Cash Equivalents - Beginning of Period 887,238 161,884
------------- -------------
Cash and Cash Equivalents - End of Period $ 512,508 $ 54,385
============= =============
Supplemental Cash Flow Information:
Cash Paid for Interest $ 7,659 $ 12,026
============= =============
Cash Paid for Income Taxes $ 22,855 $ 17,200
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000
(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
<TABLE>
<S> <C>
Inventories consist of the following:
Raw Materials $188,449
Finished Goods 94,224
--------
$282,673
========
</TABLE>
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<S> <C>
Land $ 3,000
Building and Improvements 61,114
Machinery and Equipment 4,300
Office Equipment 10,272
Delivery Equipment 21,831
--------
100,517
Less: Accumulated Depreciation 54,494
--------
$ 46,023
========
</TABLE>
The land and building are collateralized by a mortgage held by the
Company's Secretary/Treasurer (see Note 5).
5
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000
(Unaudited)
NOTE 4 - LOANS RECEIVABLE - RELATED PARTIES
Loans receivable from related parties consists of amounts due from
officers and affiliated companies. These loans originally had no specific
repayment terms and are classified as a deduction from stockholders' equity.
Although the loans bear interest at 8% per annum 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.
<TABLE>
<CAPTION>
These notes consist of the following:
Receivable from:
<S> <C>
Rushmore Financial Services, Inc. (a) $ 871,138
Double H Management Corp. (b) 216,747
----------
1,087,885
Accrued Interest 18,374
----------
$1,106,259
==========
</TABLE>
(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 January 31, 2000 on this credit facility.
6
<PAGE>
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 1999 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.
QUARTER ENDED JANUARY 31, 2000 COMPARED TO QUARTER ENDED JANUARY 31, 1999
Net sales for the quarter ended January 31, 2000 were approximately
$293,000, a decrease of 20% as compared to net sales of approximately
$367,000 for the quarter ended January 31, 1999. Net sales decreased during
the quarter due to the unseasonably mild winter weather.
Cost of sales were approximately $149,000 for the quarters ended
January 31, 2000 and January 31, 1999. The Company was able to obtain better
prices for its cost of wood in 1999.
Selling, general and administrative expenses were approximately
$117,000 for quarter ended January 31, 2000, a decrease of approximately
$15,000, or 11% over the quarter ended January 31, 1999 of approximately
$132,000. This decrease was due to a reduction in salaries and office
expenses.
The provision for income taxes decreased for the quarter ended
January 31, 2000, from approximately $64,000 for the quarter ended January
31, 1999 to $15,000, a decrease of approximately 77%.
Arbor's net income decreased from approximately $31,000 for the
quarter ended
7
<PAGE>
January 31, 1999 to approximately $14,000 for the quarter ended January 31,
2000. This was a net decrease of approximately $17,000, or 55%. The decrease
was due to the decrease in net sales discussed above.
The results of operations for the quarter ended January 31, 2000 are
not necessarily indicative of the results for any future interim or fiscal
year period.
NINE MONTHS ENDED JANUARY 31, 2000 COMPARED TO NINE MONTHS ENDED JANUARY 31,
1999
Net sales for the nine months ended January 31, 2000 were
approximately $844,000, an increase of 13% as compared to net sales of
approximately $745,000 for the nine months ended January 31, 1999. This
increase was a result of Arbor's selling its products to more Home Depot
stores. Net losses from trading securities were approximately $122,000 for
the nine months ended January 31, 2000. There was no trading activity in the
comparable nine months of 1999. Arbor has discontinued its trading activities
and does not intend to resume them.
Cost of sales was approximately $431,000 for the nine months ended
January 31, 2000, an increase of approximately $95,000, or 28% from the nine
months ended January 31, 1999. This increase is consistent with Arbor's
increase in sales, as discussed above.
Selling, general and administrative expenses were approximately
$334,000 for the nine months ended January 31, 2000, an increase of
approximately $51,000, or 18% over expenses for the nine months ended January
31, 1999, of approximately $283,000. This increase was due to additional
salaries, office expenses and other expenses.
Interest income for the nine months ended January 31, 2000, was
approximately $4,000, a decrease of approximately $7,000 over interest income
of approximately $11,000 for the nine months ended January 31, 1999.
The income tax provision for the nine months ended January 31, 2000,
was $16,000, compared to approximately $90,000 for the nine months ended
January 31, 1999. The decrease was due to the fact that the earnings before
taxes was greater in the 1999 period than in the comparable 2000 period.
Arbor's net income decreased from approximately $34,000 for the nine
months ended January 31, 1999 to a net loss of approximately $53,000 for the
nine months ended January 31, 2000. This was a net decrease of approximately
$87,000, or 256%. The decrease was primarily due to stock trading losses.
The results of operations for the nine months ended January 31,
2000, are not necessarily indicative of the results for any future interim or
fiscal year period.
8
<PAGE>
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 January 31, 2000 we had working capital of approximately
$597,000.
As at January 31, 2000, we had cash and cash equivalents of
approximately $513,000, which represented approximately 54% of total assets.
Arbor believes it has adequate working capital and that its operations will
generate cash adequate to fund its operations for at least the next 12 months.
Net cash used by operating activities increased by approximately
$201,000 from fiscal 1999 to fiscal 2000. This increase was primarily
attributable to a reduction in net income accompanied by a decrease in
accounts receivable, offset by an increase in inventory.
During the nine months ended January 31, 2000 Arbor incurred capital
expenditures of approximately $10,000.
Net cash provided by financing activities was approximately $44,000
in fiscal 1999 compared to net cash used by financing activities of
approximately $12,000 in fiscal 2000, or a net decrease of $56,000. This
decrease was primarily attributable to loans made by Arbor to related parties.
Arbor could borrow money and use the proceeds to make payments to its
management or promoters or their affiliates and associates but has no present
intention of doing so.
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 have not been remediated. Remediation costs were not material.
PART 11 - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) None
9
<PAGE>
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: March 20, 2000
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 512,508
<SECURITIES> 0
<RECEIVABLES> 108,160
<ALLOWANCES> 0
<INVENTORY> 282,673
<CURRENT-ASSETS> 905,740
<PP&E> 100,517
<DEPRECIATION> 54,494
<TOTAL-ASSETS> 951,763
<CURRENT-LIABILITIES> 308,389
<BONDS> 0
0
0
<COMMON> 7,050
<OTHER-SE> 636,324
<TOTAL-LIABILITY-AND-EQUITY> 951,763
<SALES> 844,312
<TOTAL-REVENUES> 856,642
<CGS> 430,602
<TOTAL-COSTS> 764,162
<OTHER-EXPENSES> 121,880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,659
<INCOME-PRETAX> (37,059)
<INCOME-TAX> 16,000
<INCOME-CONTINUING> (53,059)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (53,059)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
