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, 2002
/ / 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 Identification No.)
incorporation or organization)
RD 1, BOX 1076, LITTLE MARSH, PENNSYLVANIA 16931
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (570) 376-2217
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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
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(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: $1,360,139.
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 9/6/02: $345,476.46.
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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.
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 any of its sales to Home Depot. 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 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 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, 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, 2002. 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.
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.
RESULTS OF OPERATIONS
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 was 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 is
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 to primarily to increases in warehouse costs and 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% from 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.
The results of operations for the fiscal year ended April 30, 2002 are not
necessarily indicative of the results for any future interim or fiscal year
period.
FISCAL YEAR ENDED APRIL 30, 2001 COMPARED TO THE FISCAL YEAR ENDED APRIL 30,
2000.
Net sales for the fiscal year ended April 30, 2001, were approximately
$1,197,000, an increase of approximately $13,000 or 1% as compared to net sales
of approximately $1,184,000 for the fiscal year ended April 30, 2000. 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.
Arbor has discontinued its trading activities and does not intend to resume
them.
Cost of sales was approximately $593,000 for fiscal 2001, an increase of
approximately $12,000, or 2% over fiscal 2000 cost of sales of approximately
$581,000. This increase is primarily attributable to Arbor's growth in sales.
Selling, general and administrative expenses were approximately $599,000
for fiscal 2001, an increase of approximately $13,000, or 2% over fiscal 2000
selling, general and administrative expenses of approximately $586,000. This
increase was due to primarily to an overall net increase in other general
expenses.
Interest income for fiscal 2001 was approximately $8,600, an increase of
approximately $1,400, or 19% over fiscal 2000 interest income of approximately
$7,200. This increase was primarily attributable to an increase in the rate of
interest which commenced November 1999.
Other income for fiscal 2001 was approximately $21,000 compared to
approximately $2,000 for fiscal 2000. This increase of approximately $19,000 was
primarily attributable to the receipt of funds distributed as a result of a
class action settlement with certain market makers.
The income tax provision increased from approximately $30,000 for the
fiscal year ended April 30, 2000, to approximately $50,000 for the fiscal year
ended April 30, 2001. This increase of 67% was primarily attributable to an
increase in taxable income during fiscal 2001.
Arbor's net loss decreased from approximately $133,000 for the fiscal year
ended April 30, 2000 to approximately $16,000 for the fiscal year ended April
30, 2001. This was a decrease of approximately $117,000, or 88%.
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, 2002 we had a
working capital of approximately $686,000.
As at April 30, 2002, we had cash and cash equivalents of approximately
$252,000, which represented 31% 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 in operating activities increased by approximately $350,000
from fiscal 2001 to fiscal 2002. This increase of net cash used in operating
activities was primarily attributable to an increase in accounts receivable of
approximately $231,000 and an increase in net loss of approximately $63,000.
Net cash used in investing activities decreased by approximately $11,000
from fiscal 2001 to fiscal 2002, all attributable to capital expenditures
incurred.
Net cash provided by financing activities was approximately $218,000 in
fiscal 2001, compared to net cash provided by financing activities of
approximately $54,000 in fiscal 2002, or a net decrease of $164,000. This
decrease was primarily attributable to a reduction in proceeds received on
repayment of loans to related parties of approximately $164,000.
ITEM 7. FINANCIAL STATEMENTS
ARBOR ENTECH CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Accountants
Balance Sheet, April 30, 2002
Statement of Operations, Years Ended April 30, 2002
and April 30, 2001
Statement of Stockholders' Equity, Years Ended April 30, 2002
and April 30, 2001
Statement of Cash Flows, Years Ended April 30, 2002 and
April 30, 2001
Notes to 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, 2002, and the related statements of operations, stockholders' equity,
and cash flows for each of the two years in the period ended April 30, 2002.
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 our 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, 2002, and the results of its operations and its cash flows for each of
the two years in the period ended April 30, 2002 in conformity with accounting
principles generally accepted in the United States of America.
WOLINETZ, LAFAZAN & COMPANY, P.C.
Rockville Centre, New York
July 19, 2002
ARBOR ENTECH CORPORATION
BALANCE SHEET
APRIL 30, 2002
ASSETS
Current Assets:
Cash and Cash Equivalents $ 252,026
Accounts Receivable 307,807
Inventories 144,239
Prepaid Expenses 40,609
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Total Current Assets 744,681
Property, Plant and Equipment (Net of Accumulated
Depreciation of $84,131) 55,927
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$ 800,608
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 57,434
Taxes Payable 1,479
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Total Current Liabilities 58,913
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Commitments and Contingencies
Stockholders' Equity:
Common Stock, $.001 Par Value; Authorized
10,000,000 Shares; Issued and Outstanding
7,050,540 Shares 7,050
Additional Paid-In Capital 2,228,369
Retained Earnings (Deficit) ( 439,672)
Notes Receivable - Related Parties (1,054,052)
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Total Stockholders' Equity 741,695
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$ 800,608
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----------
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF OPERATIONS
Years Ended April 30,
-------------------------------------
2002 2001
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Sales - Net $ 1,360,139 $ 1,197,354
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Costs and Expenses:
Cost of Sales 759,053 593,469
Selling, General and Administrative Expenses 689,046 599,052
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1,448,099 1,192,521
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Operating Income (Loss) ( 87,960) 4,833
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Other Income:
Interest Income 5,771 8,643
Other 5,915 20,906
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11,686 29,549
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Income (Loss) Before Provision for Income Taxes ( 76,274) 34,382
Provision for Income Taxes 1,479 49,921
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Net (Loss) $( 77,753) $( 15,539)
----------- -----------
----------- -----------
Loss Per Common Share - Basic $( .01) $( .00)
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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
Notes
Common Stock Additional Retained Receivable-
------------------ Paid-In Earnings Related
Shares Amount Capital (Deficit) Parties Total
--------- ------ ---------- --------- ----------- ---------
Balance - April 30, 2000 7,050,540 $7,050 $2,030,756 $(346,380) $(1,128,016) $ 563,410
Capital Contributed - - 115,140 - - 115,140
Repayments of Loans to
Related Parties - Net - - - - 102,437 102,437
Net Loss - - - ( 15,539) - ( 15,539)
--------- ------ ---------- --------- ----------- ---------
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
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
--------- ------ ---------- --------- ----------- ---------
--------- ------ ---------- --------- ----------- ---------
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
STATEMENT OF CASH FLOWS
Years Ended April 30,
---------------------------------------
2002 2001
--------- ---------
Cash Flows from Operating Activities:
Net (Loss) $( 77,753) $( 15,539)
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Adjustments to Reconcile Net (Loss) to Net Cash
(Used) in Operating Activities:
Depreciation 13,572 13,572
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (251,956) ( 21,330)
(Increase) in Inventories ( 19,401) ( 61,480)
(Increase) in Prepaid Expenses ( 4,009) ( 36,600)
(Increase) in Deposits - ( 10,000)
Increase (Decrease) in Accounts Payable ( 28,363) 42,425
(Decrease) in Taxes Payable ( 50,444) ( 21,221)
--------- ---------
Total Adjustments (340,601) ( 52,192)
--------- ---------
Net Cash (Used) in Operating Activities (418,354) ( 67,731)
--------- ---------
Cash Flows from Investing Activities:
Capital Expenditures ( 9,058) ( 20,482)
--------- ---------
Net Cash (Used) in Investing Activities ( 9,058) ( 20,482)
--------- ---------
Cash Flows from Financing Activities:
Loans to Related Parties ( 82,473) (115,140)
Proceeds of Loans to Related Parties 54,000 217,577
Capital Contributed 82,473 115,140
--------- ---------
Net Cash Provided by (Used) In Financing Activities 54,000 (217,577)
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (373,412) 129,364
Cash and Cash Equivalents - Beginning of Year 625,438 496,074
--------- ---------
Cash and Cash Equivalents - End of Year $ 252,026 $ 625,438
--------- ---------
--------- ---------
Supplemental Cash Flow Information:
Cash Paid for Interest $ - $ -
--------- ---------
--------- ---------
Cash Paid for Income Taxes $ 50,033 $ 30,579
--------- ---------
--------- ---------
Supplemental Disclosure of Non-Cash Investing Activities:
Deposits Applied to Capital Expenditures $ 10,000 $ -
--------- ---------
--------- ---------
The accompanying notes are an integral part of the financial statements.
ARBOR ENTECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2002
NOTE 1 - NATURE OF BUSINESS
Arbor EnTech Corporation ("Arbor") is a Delaware corporation that engages
in the production and wholesale distribution of wood products for home use,
principally fireplace wood and garden stakes. Arbor's products are produced,
packaged in and distributed from its facility in Little March, 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
Arbor 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 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
Arbor utilizes the liability method of accounting for income taxes. Under
that 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.
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 Arbor 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 Arbor's financial instruments, which consist primarily of
cash and cash equivalents, accounts receivable, accounts payable and taxes
payable approximate their carrying amounts reported because of their short-term
nature.
CONCENTRATION OF CREDIT RISK
Arbor'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.
Arbor's customer base is comprised primarily of one major national
retailer. Arbor 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 $ 126,799
Finished Goods 17,440
---------
$ 144,239
---------
---------
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 84,131
--------
$ 55,927
--------
--------
The land and building are collateralized by a mortgage held by Arbor'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 consist of the following:
Receivable from:
Rushmore Financial Services, Inc. (a) $ 784,024
Attain Technology, Inc. (b)
(F/K/A Double H Management Corp.) 195,072
----------
979,096
Accrued Interest 74,956
----------
$1,054,052
----------
----------
a) A corporation wholly owned by Mr. Shefts and Mr. Houtkin.
b) A wholly owned subsidiary of Rushmore Financial Services, Inc.
Arbor has not received the principal payments in the amount of $108,789
that were due November 18, 2001 on its notes receivable from related parties.
NOTE 6 - INCOME TAXES
Income tax provision consisted of the following:
Years Ended April 30,
--------------------------------------
2002 2001
--------- ---------
Current
Federal $ 833 $ 42,305
State 646 7,616
--------- ---------
1,479 49,921
--------- ---------
Deferred
Federal - -
State - -
--------- ---------
- -
--------- ---------
$ 1,479 $ 49,921
--------- ---------
--------- ---------
The following is a reconciliation of the US statutory income tax rate
and the effective tax rate on pretax income:
Years Ended April 30,
--------------------------------------
2002 2001
--------- ---------
US federal statutory rate 34% 34%
State taxes, net of federal tax
benefit ( .60) 14.6
Permanent differences (41.60) 123.3
Other, net 6.26 ( 26.7)
--------- ---------
Effective tax rate ( 1.94%) 145.2%
--------- ---------
--------- ---------
Arbor had deferred tax assets of approximately $41,000 at April 30, 2002,
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.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
LEGAL
Arbor may be subject to legal proceedings and claims which may arise in the
ordinary course of its business. Currently, Arbor is not a party to any known
legal proceedings.
LINE OF CREDIT
Arbor has a revolving credit facility with its Secretary/Treasurer, secured
by a mortgage of Arbor'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, 2002
on this credit facility.
NOTE 8 - MAJOR CUSTOMERS
Net sales to a major national retailer in 2002 and 2001 accounted for more
than 99% of net sales each year.
As of April 30, 2002, 100% of accounts receivable are amounts due from one
major national retailer.
NOTE 9 - RELATED PARTY TRANSACTIONS
Arbor paid $54,000 in administrative fees to a company owned by two of its
significant stockholders during the years ended April 30, 2002 and 2001,
respectively.
NOTE 10 - SUBSEQUENT EVENTS
Arbor did not receive the interest payment of approximately $34,000 due on
May 18, 2002 on the notes receivable from related parties.
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 53 Chairman of the Board, Chief
Executive Officer, President
Wanda Shefts 44 Executive Vice President, Director
Mark Shefts 44 Secretary/Treasurer, Director
Sherry Houtkin 51 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
market making and 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 market making and
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. 2002 -- -- --
2001 -- 75,000 --
2000 -- 100,000 --
Wanda Shefts, VP, Dir. 2002 $127,404 20,000 --
2001 97,785 37,000 --
2000 79,500 31,000 24,000
Mark Shefts, SEC/Treas 2002 -- - --
Director 2001 -- 75,000 --
2000 -- 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.
PERCENTAGE OF
NAME AND ADDRESS OF NUMBER OF SHARES 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 6,949,900 98.6%
officers as a group
(4 persons)
(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.
RELATED PARTY TRANSACTIONS
During the fiscal year ended April 30, 2002, Arbor acted as lender under
two ten year loans which bore interest at 10% a year to two affiliated
companies. In October 2001, the rate of interest was reduced to 7% a year. The
borrowers are Attain
Technology, Inc. f/k/a Double H Management Corp. 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 or the interest
payments aggregating approximately $34,000 and $44,000, respectively, due on
May 18, 2002, on those notes.
As of April 30, 2002, the amounts owed to Arbor were as follows:
Rushmore Financial Services, Inc. $ 784,024
Attain Technology, Inc. 195,072
----------
979,096
Accrued Interest 74,956
----------
TOTAL $1,054,052
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----------
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: Sept. 9, 2002 By: /s/ HARVEY HOUTKIN
----------------------------
Harvey Houtkin
Chairman of the Board,
Chief Executive Officer,
President