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, 2003
/ / 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
----------------------------------------------
(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 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
NONE NASD 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 / / No /X/
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 /X/
State issuer's revenues for its most recent fiscal year: $791,000.
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.) Average Bid/Ask 7/16/03: $8,249,131.80.
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 /X/
(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 of
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/
Page 1
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.
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.
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 any of its sales to Home Depot. Arbor believes it has a good
relationship with Home Depot, but sales to Home Depot have diminished during the
past year and the number of Home Depot stores to which Arbor sells its products
has also decreased. Were Home Depot sales to substantially further 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 other home
centers, 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.
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 31 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 29
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, 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. In the event Arbor's obligation to file these reports
is suspended under the Securities and Exchange Act of 1934, it is Arbor's
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 outdoor overhang for airing of inventory and another
outdoor overhang of more than 10,000 feet
to hold inventory so that Arbor can respond more quickly to orders.
Approximately 12 acres of the property is devoted to Arbor'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, 2003. 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.
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 Common 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 a 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 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 last three years.
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. We have not made any significant change in our accounting
practices and policies in the past fiscal year.
GENERAL
We are a wood products company that has been in business since 1980.
Our business has increased over the years. We are almost wholly dependent on
sales to Home Depot.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED APRIL 30, 2003 COMPARED TO THE FISCAL YEAR ENDED
APRIL 30, 2002
Net sales for the fiscal year ended April 30, 2003, were approximately
$791,000, a decrease of approximately $569,000 or 42% as compared to net sales
of approximately $1,360,000 for the fiscal year ended April 30, 2002. Net sales
decreased primarily due to decreased orders from Home Depot and a decrease in
the number of Home Depot stores served.
Cost of sales were approximately $494,000 for fiscal 2003, a decrease
of approximately $265,000, or 35% over fiscal 2002 cost of sales of
approximately $759,000. Cost of sales as a percentage of net sales was
approximately 62% for fiscal 2003 compared to approximately 56% for fiscal 2002.
This increase was primarily attributable to an increase in product costs during
fiscal 2003 that could not be passed on to Home Depot.
Selling, general and administrative expenses were approximately
$479,000 for fiscal 2003, a decrease of approximately $210,000, or 30% over
fiscal 2002 selling, general and administrative expenses of approximately
$689,000. This decrease was due primarily to decreases in warehouse costs, and
salaries and related costs of approximately $164,000, and other general expenses
of approximately $46,000.
Interest income for fiscal 2003 was approximately $1,600, a decrease
of approximately $4,200, or 33%, over fiscal 2002 interest income of
approximately $5,800. This decrease was primarily attributable to a decrease in
the rate of interest along with lower cash balances.
Other income for fiscal 2003 was approximately $1,000 compared to
approximately $6,000 for fiscal 2002.
Arbor incurred a net loss of approximately $180,000 for the fiscal
year ended April 30, 2003 compared to a net loss of approximately $78,000 for
the fiscal year ended April 30, 2002.
The results of operations for the fiscal year ended April 30, 2003 are
not necessarily indicative of the results for any future interim or fiscal year
period.
FISCAL YEAR ENDED APRIL 30, 2002 COMPARED TO THE FISCAL YEAR ENDED
APRIL 30, 2001
Net sales for the fiscal year ended April 30, 2002, were approximately
$1,360,000, an increase of approximately $163,000 or 14% as compared to net
sales of approximately $1,197,000 for the fiscal year ended April 30, 2001. Net
sales increased due to additional sales to Home Depot.
Cost of sales were approximately $759,000 for fiscal 2002, an increase
of approximately $166,000, or 28% over fiscal 2001 cost of sales of
approximately $593,000. Cost of sales as a percentage of net sales was
approximately 56% for fiscal 2002 compared to approximately 50% for fiscal 2001.
This increase was primarily attributable to an increase in product costs during
fiscal 2002 that was not passed on in increased sales prices to Home Depot.
Selling, general and administrative expenses were approximately
$689,000 for fiscal 2002, an increase of approximately $90,000, or 15% over
fiscal 2001 selling, general and administrative expenses of approximately
$599,000. This increase was due primarily to increases in warehouse costs,
salaries and related costs of approximately $31,000, and other general expenses
of approximately $59,000.
Interest income for fiscal 2002 was approximately $5,800. a decrease
of approximately $2,800, or 33% over fiscal 2001 interest income of
approximately $8,600. This decrease was primarily attributable to a decrease in
the rate of interest along with lower cash balances.
Other income for fiscal 2002 was approximately $6,000 compared to
approximately $21,000 for fiscal 2001. This decrease of approximately $15,000
was primarily attributable to the receipt of funds distributed as a result of a
class action settlement with certain market makers in fiscal 2001.
The income tax provision decreased from approximately $50,000 for the
fiscal year ended April 30, 2001, to approximately $1,000 for the fiscal year
ended April 30, 2002. This decrease was primarily attributable to the loss
incurred in fiscal 2002.
Arbor incurred a net loss of approximately $78,000 for the fiscal year
ended April 30, 2002 compared to a net loss of approximately $16,000 for the
fiscal year ended April 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
In the periods discussed above, Arbor's working capital requirements
have been met primarily from sales of its wood products. At April 30, 2003 we
had a working capital of approximately $575,000.
As at April 30, 2003, we had cash and cash equivalents of
approximately $302,000, which represented 45% of total assets. Arbor believes it
has adequate working capital and will generate net revenues adequate to fund its
operations for at least the next 12 months.
Net cash used by operations for the year ended April 30, 2003, was
approximately $4,000. Net loss of $180,000 was reduced by non-cash depreciation
charges of $15,000. Cash used by operations was further reduced by decreases in
accounts receivable, inventories and prepaid expenses of approximately $165,000.
Net cash used by operations was increased by decreases in accounts payable and
taxes payable of $4,000.
Net cash provided by financing activities for the year ended April 30,
2003 was $54,000 as a result of related party loan repayments.
ITEM 7. FINANCIAL STATEMENTS
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, 2003, and the related statements of operations, stockholders' equity,
and cash flows for each of the two years in the period ended April 30, 2003.
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 auditing standards generally accepted
in the United States of America. 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, 2003, and the results of its operations and its cash flows for each of
the two years in the period ended April 30, 2003 in conformity with accounting
principles generally accepted in the United States of America.
WOLINETZ, LAFAZAN & COMPANY, P.C.
Rockville Centre, New York
June 16, 2003
ARBOR ENTECH CORPORATION
BALANCE SHEET
APRIL 30, 2003
ASSETS
Current Assets:
Cash and Cash Equivalents $ 302,287
Accounts Receivable 227,005
Inventories 65,123
Prepaid Expenses 35,866
-----------
Total Current Assets 630,281
Property, Plant and Equipment (Net of Accumulated
Depreciation of $99,054) 41,004
-----------
$ 671,285
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 55,329
-----------
Total Current Liabilities 55,329
-----------
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 2,296,905
Retained Earnings (Deficit) (619,411)
Notes Receivable - Related Parties (1,068,588)
-----------
Total Stockholders' Equity 615,956
-----------
$ 671,285
===========
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF OPERATIONS
Years Ended
April 30,
----------------------------
2003 2002
---------- -----------
Sales - Net $ 791,332 $ 1,360,139
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Costs and Expenses:
Cost of Sales 493,826 759,053
Selling, General and Administrative Expenses 479,402 689,046
---------- -----------
973,228 1,448,099
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(Loss) from Operations (181,896) (87,960)
---------- -----------
Other Income:
Interest Income 1,577 5,771
Other 780 5,915
---------- -----------
2,357 11,686
---------- -----------
(Loss) Before Provision for Income Taxes (179,539) (76,274)
Provision for Income Taxes 200 1,479
---------- -----------
Net (Loss) $ (179,739) $ (77,753)
========== ===========
Loss Per Common Share - Basic $ (.03) $ (.01)
========== ===========
Weighted Average Shares Outstanding 7,050,540 7,050,540
========== ===========
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 30, 2002 AND 2003
Notes
Common Stock Additional Retained Receivable -
--------------------------- Paid-In Earnings Related
Shares Amount Capital (Deficit) Parties Total
------------ ------------ ------------ ------------ ------------ ------------
Balance - April 30, 2001 7,050,540 $ 7,050 $ 2,145,896 $ (361,919) $ (1,025,579) $ 765,448
Capital Contributed -- -- 82,473 -- -- 82,473
Accrued Interest on Loans to
Related Parties - Net -- -- -- -- (28,473) (28,473)
Net Loss -- -- -- (77,753) -- (77,753)
------------ ------------ ------------ ------------ ------------ ------------
Balance - April 30, 2002 7,050,540 7,050 2,228,369 (439,672) (1,054,052) 741,695
Capital Contribution -- -- 68,536 -- -- 68,536
Accrued Interest on Loans to
Related Parties - Net -- -- -- -- (14,536) (14,536)
Net Loss -- -- -- (179,739) -- (179,739)
------------ ------------ ------------ ------------ ------------ ------------
Balance - April 30, 2003 7,050,540 $ 7,050 $ 2,296,905 $ (619,411) $ (1,068,588) $ 615,956
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF CASH FLOWS
Years Ended
April 30,
----------------------------
2003 2002
---------- ---------
Cash Flows from Operating Activities:
Net (Loss) $ (179,739) $ (77,753)
---------- ---------
Adjustments to Reconcile Net (Loss) to Net Cash
(Used) in Operating Activities:
Depreciation 14,923 13,572
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 80,802 (251,956)
(Increase) Decrease in Inventories 79,116 (19,401)
(Increase) Decrease in Prepaid Expenses 4,743 (4,009)
(Decrease) in Accounts Payable (2,105) (28,363)
(Decrease) in Taxes Payable (1,479) (50,444)
---------- ---------
Total Adjustments (176,000) (340,601)
---------- ---------
Net Cash (Used) in Operating Activities (3,739) (418,354)
---------- ---------
Cash Flows from Investing Activities:
Capital Expenditures -- (9,058)
---------- ---------
Net Cash (Used) in Investing Activities -- (9,058)
---------- ---------
Cash Flows from Financing Activities:
Proceeds of Loans to Related Parties 54,000 54,000
---------- ---------
Net Cash Provided by Financing Activities 54,000 54,000
---------- ---------
Increase (Decrease) in Cash and Cash Equivalents 50,261 (373,412)
Cash and Cash Equivalents - Beginning of Year 252,026 625,438
---------- ---------
Cash and Cash Equivalents - End of Year $ 302,287 $ 252,026
========== =========
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF CASH FLOWS
(Continued)
Years Ended
April 30,
----------------------------
2003 2002
Supplemental Cash Flow Information:
Cash Paid for Interest $ -- $ --
========== =========
Cash Paid for Income Taxes $ 5,662 $ 50,033
========== =========
Supplemental Disclosure of Non-Cash Investing Activities:
Deposits Applied to Capital Expenditures $ -- $ 10,000
========== =========
Accrued Interest on Related Parties Loans Receivable
Credited to Additional Paid-In Capital $ 68,536 $ 82,473
========== =========
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2003
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. The Company's products
are produced, packaged in and distributed from its facility in Little Marsh,
Pennsylvania. The products are delivered by independent truckers to customer
locations in the Northeastern United States.
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 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
whereas major betterments and renewals are capitalized.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S.
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.
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.
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOSS PER COMMON SHARE
The computation of earnings (loss) per share of common stock is
computed by dividing income (loss) for the year by the weighted average number
of common shares outstanding during that period. Since the Company has no common
stock equivalents outstanding diluted earnings (loss) per share is the same as
basic earnings (loss) per share.
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
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 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 $ 57,805
Finished Goods 7,318
----------
$ 65,123
==========
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
Estimated
Useful Life
-------------
Land $ 22,058 -
Building and Improvements 61,114 15 & 31 Years
Machinery and Equipment 4,300 5 Years
Computers 12,804 3 Years
Automotive Equipment 39,782 5 Years
----------
140,058
Less: Accumulated Depreciation 99,054
----------
$ 41,004
==========
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2003
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT (Continued)
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 two
affiliated companies. These loans are classified as a reduction of stockholders'
equity. Although the loans bear interest such interest is not recorded as income
for financial statement purposes but as additional contributed capital. In
November 1999 the remaining two loans were memorialized into 10 year promissory
notes bearing interest at 10% per annum, which was reduced to 7% per annum in
October 2001. The notes are payable in equal annual installments of $108,789 and
interest on the notes is payable semi-annually.
The notes consist of the following:
Receivable from:
Rushmore Financial Services, Inc. (a) $ 784,024
Attain Technology, Inc. (b) 195,072
------------
979,096
Accrued Interest 89,492
------------
$ 1,068,588
============
(a) A corporation wholly owned by Mr. Shefts
and Mr. Houtkin.
(b) A wholly owned subsidiary of Rushmore
Financial Services, Inc.
The Company has not received the annual principal payments in the
amount of $108,789 that were due November 18, 2001 and 2002.
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2003
NOTE 6 - INCOME TAXES
Income tax provision consisted of the following:
Years Ended
April 30,
----------------------
2003 2002
--------- --------
Current
Federal $ - $ 833
State 200 646
--------- --------
200 1,479
--------- --------
Deferred
Federal - -
State - -
--------- --------
- -
--------- --------
$ 200 $ 1,479
========= ========
The following is a reconciliation of the US statutory income tax rate
and the effective tax rate on pretax income:
Years Ended
April 30,
-------------------
2003 2002
------ ------
US federal statutory rate 34% 34%
State taxes, net of federal
tax benefit (0) (.60)
Permanent differences (14.46) (41.60)
Other, net (19.54) 6.26
------ ------
Effective tax rate (.00%) (1.94%)
====== ======
The Company had deferred tax assets of approximately $38,000 at April
30, 2003, resulting primarily from capital 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
carryforwards.
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2003
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 on 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, 2003 on this credit facility.
NOTE 8 - MAJOR CUSTOMERS
Net sales to a major national retailer in 2003 and 2002 accounted for
approximately 100% of net sales each year.
As of April 30, 2003, 100% of accounts receivable are amounts due from
one major national retailer.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company paid $54,000 in administrative fees to a Company owned by
two of its significant stockholders during the years ended April 30, 2003 and
2002, respectively.
ITEM 8. MAJOR CUSTOMERS.
Net sales to a major national retailer in 2003 and 2002 accounted for more
than 99% of net sales each year.
As of April 30, 2003, 100% of accounts receivable are amounts due from one
major national retailer.
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 54 Chairman of the Board, Chief
Executive Officer, President
Wanda Shefts 45 Executive Vice President, Director
Mark Shefts 45 Secretary/Treasurer, Director
Sherry Houtkin 52 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. Mr. Houtkin held a seat on the New York Stock Exchange from 1984 to
1988 and is Chairman of the Board, Chief
Executive Officer, Secretary and co-owner of Domestic Securities, Inc., an NASD
registered broker/dealer which operated a floor brokerage business on that
Exchange during the time the seat was owned. Domestic now operates the ATTAIN(R)
electronic communications network and engages in proprietary trading. From April
1993 through the present Mr. Houtkin has been Chairman of the Board, Chief
Executive Officer and Secretary of All-Tech Direct, Inc. ("All-Tech"), which
formerly operated as a securities broker/dealer and is now inactive. From
September 1996 to January 1997 he also served as president of All-Tech but not
as Secretary. 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.
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
1982 through April 1987 and from February 1993 through the present. He is a
member of the Chicago Stock Exchange and is President, Treasurer and a co-owner
of Domestic Securities, Inc., an NASD registered broker/dealer which operated a
floor brokerage business on the New York Stock Exchange from 1984 to 1988 and
which now owns the ATTAIN(R) ECN and engages in proprietary trading. He has been
a principal of All-Tech Direct, Inc., which formerly operated as a securities
broker/dealer, 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. 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 Dispute Resolution, 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, have not been required to file any Form 4's during the
most recent fiscal year because they neither bought nor sold shares of Arbor.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
Name and Principal Position Year Salary Bonus Other Annual Compensation
-----------------------------------------------------------------------------------------------------
Harvey Houtkin: CEO & Pres. 2003 -- -- --
2002 -- -- --
2001 -- 100,000 --
Wanda Shefts, VP, Dir. 2003 $ 125,000 $ 15,000 --
2002 127,404 20,000 --
2001 97,785 37,000 --
Mark Shefts, SEC/Treas 2003 -- -- --
Director
2002 -- -- --
2001 -- 100,000 --
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 believed 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 Annual Report, 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 annual report 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
annual report, 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) 3,554,000 50.4%
Wanda Shefts(1)(2) 159,100 2.6%
Mark Shefts(1)(2) 3,554,000 50.4%
Sherry Houtkin(1)(2) 159,000 2.2%
All directors and executive officers
as a group (4 persons) 6,949,900 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 of 159,100 of such shares by
virtue of his/her being a control person of Solar Products, Sun-Tank, Inc. In
the case of these 159,000 shares, the
beneficial owner has shared voting and investment power. With respect to all
other shares, the record owner has sole investment and voting power over the
shares.
ITEM 12. RELATED PARTY TRANSACTIONS
During the fiscal year ended April 30, 2003, Arbor acted as lender under
two ten year loans which bore interest at 7% a year to two affiliated
companies. The borrowers are Attain Technology, Inc. and Rushmore Financial
Services, Inc. Attain Technology is wholly owned by Rushmore. Rushmore is
owned 50% by Harvey Houtkin and 50% by Mark Shefts, officers, directors and
principal shareholders of Arbor. Arbor has not received the principal
payments in the amount of $108,789 due November 18, 2001 and November 18,
2002, or the interest payments aggregating approximately $92,000 due on May
18, 2003, on those notes.
As of April 30, 2003, the amounts owed to Arbor were as follows:
Rushmore Financial Services, Inc. $ 784,024
Attain Technology, Inc. 195,072
---------
979,096
Accrued Interest 89,492
---------
TOTAL $1,068,588
=========
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 3(i)Articles of Incorporation Incorporated by reference to
Exhibit 2 of Arbor's Form 10-SB
(b) Exhibit 3(ii) By-Laws Incorporated by reference to
Exhibit 2 of Arbor's Form 10-SB.
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, 2003 By: /s/ Harvey Houtkin
------------------
Harvey Houtkin
Chairman of the Board,
Chief Executive Officer,
President
Certification of Chief Executive Officer Pursuant to
18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-KSB of Arbor EnTech Corporation
(the "Company") for the fiscal year ended April 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Harvey
Houtkin, Chairman and Chief Executive Officer of the Company, hereby certify
that:
(1) I, Harvey Houtkin, have reviewed this annual report on Form 10-KSB of
Arbor EnTech Corporation;
(2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
(3) Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
July 29, 2003 s/Harvey Houtkin
----------------
Harvey Houtkin
Chief Executive Officer
Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-KSB of Arbor EnTech Corporation
(the "Company") for the fiscal year ended April 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Mark
Shefts, Chief Financial Officer of the Company, hereby certify that:
(1) I, Mark Shefts, have reviewed this quarterly report on Form 10-KSB of
Arbor EnTech Corporation;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
(3) Based on my knowledge, the financial statements and other financial
information included in this annual report fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
July 29, 2003 s/Mark Shefts
-------------
Mark Shefts
Chief Financial Officer
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-KSB of Arbor EnTech Corporation
(the "Company") for the fiscal year ended April 30, 2003, as filed with the
Securities and Exchange Commission (the "Commission") on the date hereof (the
"Report"), Harvey Houtkin, as Chairman and Chief Executive Officer of the
Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report for the fiscal year ended April 30, 2003, fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and
(1) The information in the Report, and the information in the Report,
fairly presents, in all material respects, the financial condition and
results of operations of the Company.
July 29, 2003 s/Harvey Houtkin
----------------
Harvey Houtkin
Chief Executive Officer
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-KSB of Arbor EnTech Corporation
(the "Company") for the fiscal year ended April 30, 2003, as filed with the
Securities and Exchange Commission (the "Commission") on the date hereof (the
"Report"), Mark Shefts, as Chief Financial Officer of the Company, hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report for the fiscal year ended April 30, 2003, fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and
(1) The information in the Report, and the information in the Report,
fairly presents, in all material respects, the financial condition and
results of operations of the Company.
July 29, 2003 s/Mark Shefts
-------------
Mark Shefts
Chief Financial Officer