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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2000
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from .......... to ...........
Commission file number 000 30432
ARBOR ENTECH CORPORATION
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(Name of Small Business Issuer in its charter)
Delaware 22-2335094
---------------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
ROUTE 349, RD 1, BOX 1076, LITTLE MARSH, PENNSYLVANIA 16931
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (570) 376-2217
---------------------------------------------
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
registered
None NASD OTC Bulletin Board
---- ------------------------------------------
Securities registered under Section 12(g) of the Act:
Common
__________________________________________________________________________
(Title of class)
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 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. Yes /X/
No / /
Check if there is no disclosure of delinquent filers in response to item
405 of Regulation SB not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. / /
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State issuer's revenues for its most recent fiscal year $1,184,071
----------
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.) $365,001.25
-----------
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes ........ No ........
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date 7,050,540
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) Into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The list
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format (check one):
Yes ....... No ...X....
PART I
ITEM 1. DESCRIPTION OF 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.
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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.
In addition to its wood products business, Arbor traded securities for its
own account from August 1994 to September 1999. This activity has been totally
discontinued by Arbor, which has determined to concentrate on its wood business.
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 numerous small
suppliers, 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. Arbor has no information on its competitive
position within the industry because of the lack of public availability of
relevant information.
INTELLECTUAL PROPERTY
The trademark "Arborlogs(R)" has been registered with the U.S.
Trademark and Copyright Office. This trademark expires on March 13, 2004, but
Arbor expects to renew the trademark for an additional 10 year term. 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.
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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 full-time, 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.
HOW TO CONTACT ARBOR
Arbor's principal executive offices are located on Route 349, RD 1, P.O.
Box 1076, Little Marsh, Pennsylvania, and its telephone number is (570)
376-2217.
Arbor is required to file quarterly and annual reports with the
Securities and Exchange Commission and to send an annual report to its
shareholders. In the event Arbor's obligation to file these reports is
suspended under the Securities Exchange Act of 1934, it is Arbor's current
intention to continue to file such reports; however, this determination may
be modified. The public may read and copy this Form 10-KSB 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 contains reports,
proxy and information statements, and other information regarding issuers
that file electronically with the SEC at http://www.sec.gov.
ITEM 2. 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 square foot 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. The real property is mortgaged to Mark
Shefts, Secretary/Treasurer and a director of Arbor, to secure a credit line Mr.
Shefts extended to Arbor in the amount of $100,000.
ITEM 3. LEGAL PROCEEDINGS
Arbor is not currently involved in any outstanding legal proceedings nor
was it in the fiscal year ended April 30, 2000. 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.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Arbor's stock is traded on the NASD OTC Bulletin Board.
Arbor's Common Stock is currently considered to be "penny stock" and as
such is subject to a variety of requirements under the Securities Exchange Act
of 1934, as amended. Penny stocks are low-priced shares of small companies not
traded on an exchange or quoted on Nasdaq. Prices often are not available.
Investors in penny stocks often are unable to sell stock back to the
broker/dealer that sold them the stock. Thus, investment in a penny stock can be
very risky. Prior to effecting a transaction in penny stock, a brokerage firm
must deliver a standardized risk disclosure statement to the customer which
describes the risks involved, the duties of the broker/dealer to the customer
and the rights and remedies available, the nature of bid and ask prices in the
penny stock market and a toll-free telephone number to provide information on
disciplinary histories. Further, the broker/dealer must disclose the bid and ask
prices, the number of shares to which the prices apply, and the amount and
description of any compensation received by the broker/dealer. Prior to the
transaction the broker/dealer must approve the person's account for transactions
involving penny stocks by obtaining from the person information concerning the
person's financial situation, investment experience and investment objectives
and reasonably determine, based on such information, that transactions in penny
stocks are suitable for that person and that the person has sufficient knowledge
and experience in financial matters that the person reasonably may be expected
to be capable of evaluating the risks of transactions in penny stocks. Finally,
the broker/dealer must receive from the customer a signed and dated written
acknowledgment of receipt of the disclosure document disclosing the basis on
which the broker/dealer made the suitability determination, and on which the
person agrees in writing to the specific transaction. Each customer must also
receive a monthly statement indicating the market value of the penny stocks
owned by the customer. These requirements, while offering a great deal of
customer protection, negatively affect liquidity in the penny stock market by
making the process both more selective and more time consuming.
No dividends were declared on our stock in the last two fiscal years.
There were no sales of securities by Arbor during the past three years.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with our
financial statements, any notes related thereto, and the other financial data
included elsewhere in this Annual Report on Form 10-KSB. This discussion
contains forward looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these forward
looking statements.
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.
This activity has been totally discontinued by Arbor, which has determined to
concentrate on its wood business.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED APRIL 30, 2000 COMPARED TO THE FISCAL YEAR ENDED
APRIL 30, 1999.
Net sales for the fiscal year ended April 30, 2000 were
approximately $1,184,000, an increase of 13% as compared to net sales of
approximately $1,048,000 for the fiscal year ended April 30, 1999. Net sales
increased due to additional sales to Home Depot. Net losses from trading
securities were approximately $122,000 for the fiscal year ended April 30, 2000,
a decrease of 148% as compared to net gain from trading securities of
approximately $255,000 for the fiscal year ended April 30, 1999. Net gains
decreased due to less profitable results from its securities trading activities.
Arbor has discontinued its trading activities and does not intend to resume
them.
Cost of sales were approximately $581,000 for fiscal 2000, an
increase of approximately $63,000 or 12% over fiscal 1999 cost of sales of
approximately $518,000. This increase is primarily attributable to Arbor's
growth in sales.
Selling, general and administrative expenses were approximately
$586,000 for fiscal 2000, a decrease of approximately $169,000 or 22% under
fiscal 1999 selling, general and administrative expenses of approximately
$755,000. This decrease was due primarily to a decrease in traders' compensation
in the amount of $155,000, a decrease in compensation paid to two officers in
the amount of $50,000, and an overall increase in other general expenses of
$36,000. These changes were incurred in connection with Arbor's growth in sales
and reduction of income from trading securities.
Interest income for fiscal 2000 was approximately $7,200, an
increase of approximately $6,700, or 1340% over fiscal 1999 interest income of
approximately $500.
The income tax provision decreased from approximately $49,000 for
the fiscal year ended April 30, 1999 to approximately $30,000 for the fiscal
year ended April 30, 2000. This decrease of 39% was primarily attributable to a
reduction of taxable income during fiscal 2000.
Arbor's net loss increased from approximately $34,000 for the fiscal
year ended April 30, 1999 to approximately $133,000 for the fiscal year ended
April 30, 2000. This was an increase of approximately $99,000, or 291%.
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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 due to more profitable results from its securities trading activities.
Cost of sales were approximately $518,000 for fiscal 1999, an
increase of approximately $163,000, or 46% over fiscal 1998 cost of sales of
approximately $355,000. This increase is primarily attributable to Arbor's
growth in sales.
Selling, general and administrative expenses were approximately
$755,000 for fiscal 1999, an increase of approximately $317,000, or 72% over
fiscal 1998 selling general and administrative expenses of approximately
$438,000. This increase was due to an increase in compensation paid to two
officers in the amount of $200,000, an increase in traders' compensation in the
amount of $155,000 and other general expenses of $7,000, offset by a reduction
in Pennsylvania corporation tax of $45,000 pursuant to a prior year's audit
adjustment. These changes were incurred in connection with Arbor's growth in
sales and trading income.
Interest income for fiscal 1999 was approximately $500, a decrease
of approximately $1,300, or 72% over fiscal 1998 interest income of
approximately $1,800.
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 loss increased from approximately $19,000 for the fiscal
year ended April 30, 1998 to approximately $34,000 for the fiscal year ended
April 30, 1999. This was an increase of approximately $15,000, or 79%.
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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 30, 2000 we had working capital of approximately
$520,000.
As at April 30, 2000, we had cash and cash equivalents of
approximately $496,000, which represented 78% 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 decreased by approximately
$528,000 from fiscal 1999 to fiscal 2000. This decrease was partially due to the
change in the purchase and sale of trading securities from fiscal 1999 to fiscal
2000. During fiscal 2000, Arbor had net purchases over sales proceeds of
approximately $120,000, compared to net sales proceeds over purchases in fiscal
1999 of approximately $250,000, a difference of approximately $370,000. During
fiscal 2000, Arbor had a net reduction of accounts payable and accrued expenses
of approximately $247,000, compared to a net increase in fiscal 1999 of
approximately $218,000, a difference of approximately $465,000. This net
reduction was primarily due to the increase of cash flow available.
Net cash provided by financing activities was approximately $570,000
in fiscal 1999, compared to net cash used by financing activities of
approximately $12,000 in fiscal 2000, or a net decrease of $582,000. This
decrease was primarily attributable to additional net loans to related parties
of approximately $348,000 and net repayments of loans from related parties of
approximately $201,000.
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ITEM 7. FINANCIAL STATEMENTS
ARBOR ENTECH CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Accountants
Balance Sheet, April 30, 2000
Statement of Operations, Years Ended April 30, 2000 and
April 30, 1999
Statement of Stockholders' Equity, Years Ended April 30, 2000
and April 30, 1999
Statement of Cash Flows, Years Ended April 30, 2000 and
April 30, 1999
Notes to Financial Statements
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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, 2000, and the related statements of operations, stockholders' equity,
and cash flows for each of the two years in the period ended April 30, 2000.
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 audits.
We conducted out audits 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 audits provide 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, 2000, and the results of its operations and its cash flows for each of
the two years in the period ended April 30, 2000 in conformity with generally
accepted accounting principles.
WOLINETZ, LAFAZAN & COMPANY, P.C.
Rockville Centre, New York
June 21, 2000
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ARBOR ENTECH CORPORATION
BALANCE SHEET
APRIL 30, 2000
ASSETS
Current Assets:
Cash and Cash Equivalents $ 496,074
Accounts Receivable 34,521
Inventories 63,358
-----------
Total Current Assets 593,953
Property, Plant and Equipment (Net of Accumulated
Depreciation of $56,987) 43,531
-----------
$ 637,484
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 74,074
-----------
Total Current Liabilities 74,074
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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 2,030,756
Retained Earnings (Deficit) (346,380)
Notes Receivable - Related Parties (1,128,016)
-----------
Total Stockholders' Equity 563,410
-----------
$ 637,484
===========
The accompanying notes are an integral part of the financial statements.
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ARBOR ENTECH CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
April 30,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net Sales $ 1,184,071 $ 1,048,397
----------- -----------
Costs and Expenses:
Cost of Sales 580,836 518,425
Selling, General and Administrative Expenses 585,745 754,583
----------- -----------
1,166,581 1,273,008
----------- -----------
Operating Income (Loss) 17,490 (224,611)
----------- -----------
Other Income - Net:
Net Gain (Loss) on Trading Securities (121,880) 255,095
Interest Income 7,205 534
Other 1,915 3,153
Interest Expense (7,659) (18,981)
----------- -----------
(120,419) 239,801
----------- -----------
Income (Loss) Before Provision for Income Taxes (102,929) 15,190
Provision for Income Taxes 30,095 49,000
----------- -----------
Net Loss $ (133,024) $ (33,810)
=========== ===========
Earnings Per Common Share - Basic $ (.02) $ (.00)
=========== ===========
Weighted Average Shares Outstanding 7,050,540 7,050,540
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ARBOR ENTECH CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES
COMMON STOCK ADDITIONAL RETAINED RECEIVABLE -
--------------------------- PAID-IN EARNINGS RELATED
SHARES AMOUNT CAPITAL (DEFICIT) PARTIES TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance - April 30, 1998 7,050,540 $ 7,050 $ 1,792,199 $ (179,546) $(1,648,161) $ (28,458)
Capital Contributed -- -- 122,017 -- -- 122,017
Repayments of Loans to
Related Parties - Net -- -- -- -- 433,798 433,798
Net Loss -- -- -- (33,810) -- (33,810)
----------- ----------- ----------- ----------- ----------- -----------
Balance - April 30, 1999 7,050,540 7,050 1,914,216 (213,356) (1,214,363) 493,547
Capital Contributed -- -- 116,540 -- -- 116,540
Repayments of Loans to
Related Parties - Net -- -- -- -- 86,347 86,347
Net Loss -- -- -- (133,024) -- (133,024)
----------- ----------- ----------- ----------- ----------- -----------
Balance - April 30, 2000 7,050,540 $ 7,050 $ 2,030,756 $ (346,380) $(1,128,016) $ 563,410
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ARBOR ENTECH CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
APRIL 30,
--------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (133,024) $ (33,810)
------------- -------------
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used) in Operating Activities:
Depreciation 9,048 7,338
(Gain) Loss on Sale of Trading Securities 121,880 (255,095)
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (7,730) (4,873)
(Increase) Decrease in Inventories 6,820 (24,713)
Purchases of Trading Securities (204,859,253) (214,682,789)
Proceeds from Sale of Trading Securities 204,737,373 214,937,884
(Increase) Decrease in Other Current Assets 2,927 (2,927)
Increase (Decrease) in Accounts Payable and
Accrued Liabilities (246,726) 218,387
------------- -------------
Total Adjustments (235,661) 193,212
------------- -------------
Net Cash Provided by (Used) in Operating Activities (368,685) 159,402
------------- -------------
Cash Flows from Investing Activities:
Capital Expenditures (10,273) (4,300)
------------- -------------
Net Cash (Used) in Investing Activities (10,273) (4,300)
------------- -------------
Cash Flows from Financing Activities:
Loans to Related Parties (586,836) (286,978)
Proceeds of Loans to Related Parties 673,183 720,776
Capital Contributed 116,540 122,017
Loans from Related Party (222,321) (1,615)
Proceeds of Loans from Related Party 7,228 16,052
------------- -------------
Net Cash Provided by (Used) In Financing Activities (12,206) 570,252
------------- -------------
Increase (Decrease) in Cash and Cash Equivalents (391,164) 725,354
Cash and Cash Equivalents - Beginning of Period 887,238 161,884
------------- -------------
Cash and Cash Equivalents - End of Period $ 496,074 $ 887,238
============= =============
Supplemental Cash Flow Information:
Cash Paid for Interest $ -- $ 18,981
============= =============
Cash Paid for Income Taxes $ 27,855 $ 17,200
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
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.
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ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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, and accounts
payable and accrued liabilities approximate their carrying amounts reported
because of their short-term nature.
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.
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ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
NOTE 3 - INVENTORIES
Inventories consist of the following:
Raw Materials $ 20,144
Finished Goods 43,214
------------
$ 63,358
============
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated
Useful Life
-----------
<S> <C> <C>
Land $ 3,000 --
Building and Improvements 61,114 15-31 Years
Machinery and Equipment 4,300 5 Years
Computers 10,273 3 Years
Automotive Equipment 21,831 5 Years
-------------
100,518
Less: Accumulated Depreciation 56,987
-------------
$ 43,531
=============
</TABLE>
The land and building are collateralized by a mortgage held by the
Company's Secretary/Treasurer (see Note 7).
NOTE 5 - 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) $ 871,138
Double H Management Corp. (b) 216,747
----------
1,087,885
Accrued Interest 40,131
----------
$1,128,016
==========
(a) A corporation wholly owned by Mr. Shefts
and Mr. Houtkin.
(b) A wholly owned subsidiary of Rushmore
Financial Services, Inc.
17
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
NOTE 6 - INCOME TAXES
Income tax provision consisted of the following:
Years Ended
April 30,
--------------------------------
2000 1999
----------- -----------
Current
Federal $24,584 $29,000
State 5,511 20,000
------- -------
30,095 49,000
------- -------
Deferred
Federal -- --
State -- --
------- -------
-- --
------- -------
$30,095 $49,000
======= =======
The following is a reconciliation of the US statutory income tax
rate and the effective tax rate on pretax income:
Years Ended
April 30,
--------------------------
2000 1999
------------ -----------
US federal statutory rate 34% 34%
State taxes, net of federal tax
benefit 3.3 9.6
Benefit of net operating loss
carryforward -- (17.1)
Other, net (10.3) 9.2
---- ----
Effective tax rate 27.0% 35.7%
==== ====
The Company had deferred tax assets of approximately $41,000 at
April 30, 2000, resulting primarily from capital loss loss carryforwards. The
deferred tax assets have been fully offset by a valuation allowance resulting
from the uncertainty surrounding the future realization of the capital loss loss
carryforwards.
18
<PAGE>
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
NOTE 7 - 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.
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 April 30, 2000 on this credit facility.
NOTE 8 - MAJOR CUSTOMERS
Net sales to a major national retailer in 2000 and 1999 accounted
for approximately 100% and 98% of net sales, respectively.
As of April 30, 2000, 100% of accounts receivable are amounts due
from a major national retailer.
19
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Arbor has neither changed nor disagreed with its accountants in the past
two fiscal years.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Executive Officers and Directors Age Positions
-------------------------------- --- ---------
Harvey Houtkin 51 Chairman of the Board, Chief
Executive Officer, President
Wanda Shefts 42 Executive Vice President, Director
Mark Shefts 42 Secretary/Treasurer, Director
Sherry Houtkin 49 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 access electronic trading. From September 1996 to
January 1997 he also served as president of All-Tech but not as Secretary.
Mr. Houtkin held a seat on the New York Stock Exchange from 1984 to 1988 and
co-owns a Domestic Securities, Inc., broker/dealer which operated a floor
brokerage business on that Exchange during the time the seat was owned. Mr.
Houtkin 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 from 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
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 Officer, 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 Domestic Securities, Inc., a
broker/dealer which operated a floor brokerage business on the New York Stock
Exchange from 1984 to 1988. 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 of the National Association of Financial
Services Auditors, a Certified Fraud Examiner of the Association of Certified
Fraud Examiners, 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.
Sherry Houtkin has been a director of Arbor since February 1994. She has
studied at Rockland Community College and Ramapo College.
Mark Shefts and Wanda Shefts are husband and wife. Harvey Houtkin and
Wanda Shefts are brother and sister. Harvey Houtkin and Sherry Houtkin are
husband and wife.
Mark Shefts and Harvey Houtkin, officers, directors and principal
shareholders of Arbor, did not timely file a Form 3 setting forth their
ownership of shares of Arbor. They neither bought nor sold shares of Arbor
during the most recent fiscal year.
ITEM 10. 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., 2000 -- $ 75,000 --
Dir.
1999 -- 100,000 --
1998 -- 100,000 --
Wanda Shefts; Vice Pres., Dir 2000 $97,785 $ 37,000 --
1999 79,500 31,000 24,000
1998 72,250 25,000 24,000
Mark Shefts; Secy/Treas, Dir 2000 -- $ 75,000 --
1999 -- 100,000 --
1998 -- -- --
</TABLE>
20
<PAGE>
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.
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 a manner that person reasonably believed to be in or not
opposed to the best interest of Arbor. Section 145 of the Delaware General
Corporation Law permits indemnification of any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person was an officer, director, employee or agent
of the corporation if the person acted in good faith and in a manner the person
reasonably believe to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the person's conduct was not unlawful.
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.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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
21
<PAGE>
within 60 days of the date of this registration statement have been exercised
and converted.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------- ------------------ -------------------
Harvey Houtkin((1)(2)(3) 3,554,850 50.4%
Wanda Shefts(1)(2) 159,100 2.3%
Mark Shefts(1)(2)(3) 3,554,850 50.4%
All directors and executive
officers as a group (3 persons) 6,949,850 98.6%
(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.
("Solar"). In the case of these 159,100 shares, the beneficial owner has
shared voting and investment power. With respect to all other shares other
than the shares discussed in footnote 3 below, owned by The Manchester
Group, Inc., the record owner has sole investment and voting power over
the shares.
(3) Such person may be deemed to be the owner of 750 of such shares by virtue
of his being a control person of The Manchester Group, Inc. In the case of
these 750 shares, the beneficial owner has shared voting and investment
power. With respect to all other shares other than the shares discussed in
footnote 2 above owned by Solar, the record owner has sole investment and
voting power over the shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended April 30, 2000, Arbor acted as lender under a
series of revolving loans bearing interest at 8% a year to two affiliated
companies and to Messrs. Houtkin and Shefts, officers, directors and
shareholders of Arbor. The loans had no specific repayment terms and have been
classified as long-term in nature. The loans were made by oral agreements upon
request of these related parties. The loans to Messrs. Houtkin and Shefts were
paid off on November 18, 1999; $130,000 of the loans to one of the affiliated
companies, Double H Management Corp. ("Double H"), and $26,000 of the loans to
the other affiliated company, Rushmore Financial Services, Inc. ("Rushmore"),
was paid on such date. Double H is wholly owned by Rushmore. The principal
amount of the loan to Double H after the payment on November 18, 1999, was
$216,747, and the principal amount of the loan to Rushmore was $871,138.
Rushmore is owned 50% by Harvey Houtkin and 50% by Mark Shefts, officers,
directors and principal shareholders of Arbor.
At the end of the fiscal year ended April 30, 1999, Arbor owed Solar
Products, Sun-Tank Inc. ("Solar") $215,083, pursuant to an oral revolving loan
bearing interest at 8% per annum. On September 28, 1999, Arbor repaid Solar
$215,083.
22
<PAGE>
On September 30, 1999, Arbor loaned Solar $125, 597 pursuant to an oral
loan bearing interest at 8% per annum. This loan was repaid in full on November
18, 1999, by Solar. Harvey Houtkin and Mark Shefts are officers, directors and
principal shareholders of Solar as well as Arbor.
As of April 30, 2000, the amounts owed to Arbor were as follows:
Rushmore Financial Services, Inc. (1) $871,138
Double H Management Corp. (2) 216,747
----------
Total $1,087,885
==========
Accrued Interest 40,131
----------
Total 1,128,016
==========
(1) Such corporation is owned 50% by Mr. Houtkin and 50% by Mr. Shefts
(2) Such corporation is wholly owned by Rushmore Financial Services, Inc.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C> <C>
(a) Exhibit 3(i) Articles of Incorporation Incorporated by reference to
Exhibit 1 of Arbor's Form 10SB
3(ii) By-Laws Incorporated by reference to
Exhibit 1 of Arbor's Form 10SB
Exhibit 27 Financial Data Schedule
</TABLE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARBOR ENTECH CORPORATION
Date: July 31, 2000
By: /s/ Harvey Houtkin
Harvey Houtkin, Chairman of the Board, Chief Executive Officer,
President
Supplemental information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Exchange Act by Non-reporting Issuers
No annual report or proxy material has or will be sent to security holders of
Arbor.
23
