**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-QSB**

 
| **(Mark One)** |   |                                                                                                                                                                                                                         |
|----------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                                                                                                                         |
| **ý**     |   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT 0F 1934**                                                                                                                                 |
|           |   | **For the period ended: October 31, 2003**                                                                                                                                                                                   |
| **or**         |   |                                                                                                                                                                                                                         |
| **o**          |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                |
|           |   | **For the transition period from                                  to** |

 

**Commission File Number 0-30432**

 

| **ARBOR ENTECH CORPORATION**                                                        |
|-------------------------------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)                              |
|                                                                                |   |   |
| **Delaware**                                                                        |   | **22-2335094** |
| (State or other jurisdiction of  incorporation or organization)                     |   | (I.R.S. Employer Identification Number) |
|                                                                                |   |   |
| **Route 349, RD 1, Box 1076, Little Marsh, PA**                                     |   | **16931** |
| (Address of Principal Executive Offices)                                            |   | (Zip Code) |
|                                                                                |   |   |
| Registrant’s Telephone Number, including Area Code:                            |   | **(570) 376-2217** |
|                                                                                |   |   |
|                                                                                |   |   |
| (Former name, former address and former fiscal year, if changed since  last report) |

 

Check whether the issuer (1) filed allreports required to be filed by Section 13 or 15(d) of the Exchange Act  during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.

 

     ý   Yes  o    No

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common equity as of the latest practicabledate.

 

| **Class**                               |   | **Outstanding at October 31, 2003** |
|-----------------------------------------|--------|-------------------------------------|
| Common Stock, par value $.001 per share |   | 7,050,540                           |

 

 

Transitional Small Business Format (checkone):           Yes  o     No ý

 

 

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ARBOR ENTECH CORPORATION

CONDENSED BALANCE SHEET

OCTOBER 31, 2003

(Unaudited)

 
| ASSETS                                                                                                  |   |       |    |
|---------------------------------------------------------------------------------------------------------|--------|------------|---------|
|                                                                                                    |   |       |    |
| Current Assets:                                                                                         |   |       |    |
| Cash and Cash Equivalents                                                                               |   | $          | 391,893 |   |
| Prepaid Expenses                                                                                        |   | 15,166     |    |
|                                                                                                    |   |       |    |
| Total Current Assets                                                                                    |   | 407,059    |    |
|                                                                                                    |   |       |    |
| Property, Plant and Equipment (Net of  Accumulated Depreciation of $101,854)                            |   | 38,204     |    |
|                                                                                                    |   |       |    |
|                                                                                                    |   | $          | 445,263 |   |
|                                                                                                    |   |       |    |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                              |   |       |    |
|                                                                                                    |   |       |    |
| Current Liabilities:                                                                                    |   |       |    |
| Accounts Payable and Accrued Liabilities                                                                |   | $          | 6,383   |   |
|                                                                                                    |   |       |    |
| Total Current Liabilities                                                                               |   | 6,383      |    |
|                                                                                                    |   |       |    |
| 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                                                                              |   | 2,331,173  |    |
| Retained Earnings (Deficit)                                                                             |   | (823,487   | )       |
| Notes Receivable — Related Parties                                                                 |   | (1,075,856 | )       |
|                                                                                                    |   |       |    |
| Total Stockholders’ Equity                                                                         |   | 438,880    |    |
|                                                                                                    |   |       |    |
|                                                                                                    |   | $          | 445,263 |   |

 

The accompanying notes are an integral partof the financial statements.

 

2

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ARBOR ENTECH CORPORATION

CONDENSED STATEMENT OF OPERATIONS

(Unaudited)

 
|                                          |   | **Three  Months Ended  October 31,** |     | **Six Months  Ended  October 31,** |   |
|-----------------------------------------------|--------|--------------------------------------|----------|------------------------------------|--------|
|                                          |   | **2003**                             |     | **2002**                           |   | **2003** |   | **2002** |   |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Net Sales                                     |   | $                                    | —   |                               | $      | — |   | $ | — |   | $ | — |   |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Costs and Expenses:                           |   |                                 |     |                               |   |   |   |   |   |
| Selling, General and Administrative  Expenses |   | 61,634                               |     | 77,846                             |   | 127,893 |   | 150,396 |   |
|                                          |   | 61,634                               |     | 77,846                             |   | 127,893 |   | 150,396 |   |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Loss from Operations                          |   | (61,634                              | )        | (77,846                            | )      | (127,893 | ) | (150,396 | ) |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Other Income:                                 |   |                                 |     |                               |   |   |   |   |   |
| Interest                                      |   | 196                                  |     | 405                                |   | 390 |   | 852 |   |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Loss from Continuing Operations               |   | (61,438                              | )        | (77,441                            | )      | (127,503 | ) | (149,544 | ) |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Income (Loss) from Discontinued Operations    |   | (102,456                             | )        | (7,906                             | )      | (76,573 | ) | 56,353 |   |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Net Loss                                      |   | $                                    | (163,894 | )                                  | $      | (85,347 | ) | $ | (204,076 | ) | $ | (93,191 | ) |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Loss Per Common Share — Basic:           |   |                                 |     |                               |   |   |   |   |   |
| Loss from Continuing Operations               |   | $                                    | (.01     | )                                  | $      | (.01 | ) | $ | (.02 | ) | $ | (.02 | ) |
| Income (Loss) from Discontinued Operations    |   | (.01                                 | )        | (.00                               | )      | (.01 | ) | .01 |   |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Net Loss                                      |   | $                                    | (.02     | )                                  | $      | (.01 | ) | $ | (.03 | ) | $ | (.01 | ) |
|                                          |   |                                 |     |                               |   |   |   |   |   |
| Weighted Average Shares Outstanding           |   | 7,050,540                            |     | 7,050,540                          |   | 7,050,540 |   | 7,050,540 |   |

 

The accompanying notes are an integral partof the financial statements.

 

3

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ARBOR ENTECH CORPORATION

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited)

 
|                                                                                                      |   | **Six Months  Ended  October 31,** |     |
|-----------------------------------------------------------------------------------------------------------|--------|------------------------------------|----------|
|                                                                                                      |   | **2003**                           |     | **2002** |   |
|                                                                                                      |   |                               |     |   |   |
| Cash Flows from Operating Activities:                                                                     |   |                               |     |   |   |
| (Loss) from Continuing Operations                                                                         |   | $                                  | (127,503 | ) | $ | (149,544 | ) |
| Adjustments to Reconcile (Loss) from  Continuing Operations   to Net Cash (Used) by Operating Activities: |   |                               |     |   |   |
| Depreciation                                                                                              |   | —                             |     | — |   |
| Changes in Operating Assets and  Liabilities:                                                             |   |                               |     |   |   |
| (Increase) Decrease in Prepaid Expenses                                                                   |   | 11,350                             |     | (33,067 | ) |
| (Decrease) in Accounts Payable                                                                            |   | (17,884                            | )        | (12,180 | ) |
| (Decrease) in Taxes Payable                                                                               |   | —                             |     | (1,479 | ) |
|                                                                                                      |   |                               |     |   |   |
| Total Adjustments                                                                                         |   | (6,534                             | )        | (46,726 | ) |
|                                                                                                      |   |                               |     |   |   |
| Net Cash (Used) by Operating Activities                                                                   |   | (134,037                           | )        | (196,270 | ) |
|                                                                                                      |   |                               |     |   |   |
| Cash Flows from Investing Activities:                                                                     |   | —                             |     | — |   |
|                                                                                                      |   |                               |     |   |   |
| Cash Flows from Financing Activities:                                                                     |   |                               |     |   |   |
| Proceeds of Loans to Related Parties                                                                      |   | 27,000                             |     | 27,000 |   |
|                                                                                                      |   |                               |     |   |   |
| Net Cash Provided by Financing Activities                                                                 |   | 27,000                             |     | 27,000 |   |
|                                                                                                      |   |                               |     |   |   |
| Net Cash Provided by Discontinued Operations                                                              |   | 196,643                            |     | 216,689 |   |
|                                                                                                      |   |                               |     |   |   |
| Increase in Cash and Cash Equivalents                                                                     |   | 89,606                             |     | 47,419 |   |
|                                                                                                      |   |                               |     |   |   |
| Cash and Cash Equivalents — Beginning of  Period                                                     |   | 302,287                            |     | 252,026 |   |
|                                                                                                      |   |                               |     |   |   |
| Cash and Cash Equivalents — End of Period                                                            |   | $                                  | 391,893  |   | $ | 299,445 |   |
|                                                                                                      |   |                               |     |   |   |
| Supplemental Cash Flow Information:                                                                       |   |                               |     |   |   |
| Cash Paid for Interest                                                                                    |   | $                                  | —   |   | $ | — |   |
|                                                                                                      |   |                               |     |   |   |
| Cash Paid for Income Taxes                                                                                |   | $                                  | —   |   | $ | 50,500 |   |
|                                                                                                      |   |                               |     |   |   |
| Supplemental Disclosure of Non-Cash  Financing Activities:                                                |   |                               |     |   |   |
| Accrued Interest on Related Parties Loans  Receivable  Credited to Additional Paid-In Capital             |   | $                                  | 17,134   |   | $ | 17,134 |   |

 

The accompanying notes are an integral partof the financial statements.

 

4

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ARBORENTECH CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

OCTOBER 31, 2003

(Unaudited)

 

 

NOTE 1 -                Unaudited Interim FinancialStatements

 

In the opinion ofthe Company’s management, the accompanying unaudited condensed financialstatements contain all adjustments (consisting of only normal recurring adjustments)necessary to present fairly the information set forth therein.  These financial statements are condensed andtherefore do not include all of the information and footnotes required byaccounting principles generally accepted in the United States for completefinancial statements

 

Results ofoperations for interim periods are not necessarily indicative of the results ofoperations for a full year.

 

 

NOTE 2 -                Property,Plant and Equipment

 

Property, plantand equipment consists of the following:

 
| Land                                  |   | $       | 22,058 |   |
|---------------------------------------|--------|---------|--------|--------|
| Building and Improvements             |   | 61,114  |   |
| Machinery and Equipment               |   | 4,300   |   |
| Computers                             |   | 12,804  |   |
| Automotive Equipment                  |   | 39,782  |   |
|                                  |   | 140,058 |   |
| Less:   Accumulated Depreciation |   | 101,854 |   |
|                                  |   |    |   |
|                                  |   | $       | 38,204 |   |

 

The land andbuilding are collateralized by a mortgage held by the Company’sSecretary/Treasurer (see Note 5).

 

 

NOTE 3 -                NotesReceivable — Related Parties

 

Notes receivablefrom related parties consists of amounts due from two affiliatedcompanies.  These loans are classifiedas a reduction of stockholders’ equity. Although the loans bear interest such interest is not recorded as incomefor financial statement purposes but as additional contributed capital.  In November 1999 the remaining two loanswere memorialized into 10 year promissory notes bearing interest at 10% perannum, which was reduced to 7% per annum in October 2001.  The notes are payable in equal annualinstallments of $108,789 and interest on the notes is payable semi-annually.

 

The notes consistof the following:

 
| Receivable from:                      |   |    |      |
|---------------------------------------|--------|---------|-----------|
| Rushmore Financial Services, Inc. (a) |   | $       | 784,024   |   |
| Attain Technology, Inc. (b)           |   | 195,072 |      |
|                                  |   | 979,096 |      |
| Accrued Interest                      |   | 96,760  |      |
|                                  |   | $       | 1,075,856 |   |

 

(a)          A corporation wholly owned by Mr. Shefts and Mr.Houtkin.

(b)         A wholly owned subsidiary of Rushmore FinancialServices, Inc.

 

5

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The Company hasnot received the annual principal payments in the amount of $108,789 that weredue November 18, 2002 and 2003.

 

 

NOTE 4 -                RelatedParty Transactions

 

The Companyincurred $27,000 in administrative fees to a Company owned by two of itssignificant stockholders during the six months ended October 31, 2003 and 2002.

 

 

NOTE 5 -                Commitmentsand Contingencies

 

Line of Credit

 

The Company has arevolving credit facility with its Secretary/Treasurer, secured by a mortgageof the Company’s real property located in Tioga County, Pennsylvania.  This revolving line of credit provides forthe extension of credit in the aggregate principal amount of $100,000 withinterest at 11% per annum.  Principaland interest are payable on demand. There was no balance due at October 31, 2003 on this credit facility.

 

 

NOTE 6 -                DiscontinuedOperations

 

On September 2,2003, the Company informed The Home Depot, Inc., the customer that purchasedmore than 99 percent of the Company’s wood products, that the Company would nolonger do business with Home Depot due to increased difficulties in transactingbusiness with Home Depot on a profitable basis.  The Company stated to Home Depot that these difficulties includedHome Depot’s prohibition against price increases despite increases in theCompany’s increased costs of production, a diminution in the Home Depotterritories the Company was allowed to sell product to, and Home Depot’s demandsregarding returns of ordered products that the Company was unwilling to accedeto for economic reasons.

 

6

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The FinancialAccounting Standards Board’s SFAS No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets”, addresses financial accounting and reportingfor the impairment of long-lived assets and for long-lived assets to bedisposed of.  SFAS No. 144 supersedesSFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-LivedAssets to be Disposed Of,” retains the fundamental provisions of Statement 121for (a) recognition and measurement of the impairment of long-lived assets tobe held and used and (b) measurement of long-lived assets to be disposed of bysale.  SFAS 144 also supersedes theaccounting and reporting provisions of APB Opinion No. 30, “Reporting theResults of Operations — Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,”for segments of a business to be disposed of, but retains the requirement ofOpinion 30 to report discontinued operations separately from continuingoperations and extends that reporting to a component of an entity that eitherhas been disposed of (by sale, by abandonment, or in a distribution to owners)or is classified as held for sale.

 

The Company hasdiscontinued its wood products business. Consequently, the accompanying financial statements reflect the woodproducts business as discontinued operations in accordance with SFAS No. 144.

 

Summarized beloware the results of discontinued operations:

 
|                                        |   | **Three  Months Ended  October 31,** |     | **Six Months  Ended  October 31,** |   |
|---------------------------------------------|--------|--------------------------------------|----------|------------------------------------|--------|
|                                        |   | **2003**                             |     | **2002**                           |   | **2003** |   | **2002** |   |
|                                        |   |                                 |     |                               |   |   |   |   |   |
| Net Sales                                   |   | $                                    | 20,638   |                               | $      | 121,980 |   | $ | 161,391 |   | $ | 369,457 |   |
|                                        |   |                                 |     |                               |   |   |   |   |   |
| Income (Loss) from  Discontinued Operations |   | $                                    | (102,456 | )                                  | $      | (7,906 | ) | $ | (76,573 | ) | $ | 56,353 |   |

 

The Companyintends to seek other business opportunities, but there can be no assurancethat such opportunities will be identified, engaged in, or result in anyprofits.

 

7

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Item 2 -  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

 

Safe Harbor Statement under the PrivateSecurities Litigation Reform Act of 1995

 

The statementscontained in this report which are not historical fact are “forward-lookingstatements” that involve various important assumptions, risks, uncertaintiesand other factors which could cause the Company’s actual results for 2003 andbeyond to differ materially from those expressed in such forward-lookingstatements.  These important factorsinclude, without limitation,   changesin the nature of the Company’s business, competitive factors and pricingpressures, changes in legal and regulatory requirements, technological changeor difficulties, product development risks, commercialization and tradedifficulties and general economic conditions, as well as other risks previouslydisclosed in the Company’s securities filings and press releases.

 

General

 

We were a wood products company which hasbeen in business since 1980.  Ourbusiness fluctuated over the years.  Wewere almost wholly dependent on sales to The Home Depot, Inc.

 

On September 2, 2003, the Company informedHome Depot, the customer that purchased more than 99 percent of the Company’swood products, that the Company would no longer do business with Home Deportdue to increased difficulties in transacting business with Home Depot on aprofitable basis.  The Company stated toHome Depot that these difficulties included Home Depot’s prohibition againstprice increases despite increases in the Company’s increased costs ofproduction, a diminution in the Home Depot territories the Company was allowedto sell product to, and Home Depot’s demands regarding returns of orderedproducts that the Company was unwilling to accede to for economic reasons.

 

The Company has discontinued its woodproducts business.  The Company intendsto seek other business opportunities, but there can be no assurance that suchopportunities will be identified, engaged in, or result in any profits.

 

Results of operations

 

**Quarterended October 31, 2003 compared to the quarter ended October 31, 2002.**

 

Since the Company discontinued its woodproducts business there were no sales from continuing operations during thequarter ended October 31, 2003 and 2002.

 

Selling, general and administrative expenseswere approximately $62,000 for the quarter ended October 31, 2003, a decreaseof approximately $16,000 or 21% over selling, general and administrativeexpenses of approximately $78,000 for the quarter ended October 31, 2002.

 

Arbor’s net loss increased from approximately$85,000 for the quarter ended October 31, 2002 to a net loss of approximately$164,000 for the quarter ended October 31, 2003.  This was an increase of approximately $79,000 or 93%.

 

8

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**Sixmonths ended October 31, 2003 compared to the six months ended October 31, 2002**

Since the Company discontinued its woodproducts business, there were no sales from continuing operations during thesix months ended October 31, 2003 and 2002.

 

Selling, general and administrative expenseswere approximately $128,000 for the six months ended October 31, 2003, adecrease of approximately $22,000 or 15% over selling, general andadministrative expenses of approximately $150,000 for the six months endedOctober 31, 2002.

 

Arbor’s net loss increased from approximately$93,000 for the six months ended October 31, 2002 to approximately $204,000 forthe six months ended October 31, 2003. This was an increase of approximately $111,000 or 119%.

 

**DiscontinuedOperations**

 

On September 2, 2003, the Company informedHome Depot, the customer that purchased more than 99 percent of the Company’swood products, that the Company would no longer do business with Home Depot dueto increased difficulties in transacting business with Home Depot on aprofitable basis.  The Company stated toHome Depot that these difficulties included Home Depot’s prohibition againstprice increases despite increases in the Company’s increased costs ofproduction, a diminution in the Home Depot territories the Company was allowedto sell product to, and Home Depot’s demands regarding returns of orderedproducts that the Company was unwilling to accede to for economic reasons.

 

Net sales of the wood products business wereapproximately $21,000 and $122,000 for the quarters ended October 31, 2003 and2002, respectively.  The net loss fromdiscontinued operations was $102,000 and $10,000 for the quarters ended October31, 2003 and 2002, respectively.

 

Liquidity and capital resources

 

In the periods discussed above, Arbor’sworking capital requirements were met primarily from sales generated by itsdiscontinued wood products business.  AtOctober 31, 2003 we had working capital of approximately $401,000.

 

As at October 31, 2003, we had cash and cashequivalents of approximately $392,000, which represented 88% of totalassets.  Arbor believes it has adequateworking capital to fund its operations for at least the next 12 months.

 

Net cash used by operating activitiesamounted to approximately $134,000 for the six months ended October 31,2003.  Loss from continuing operationsof $128,000 for the six months ended October 31, 2003 was increased bydecreases in accounts payable of $18,000 offset by decreases in prepaidexpenses of $11,000.

 

Net cash provided by financing activities wasapproximately $27,000 for the six months ended October 31, 2003 as a result ofrelated party loan repayments.

 

9

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PART II - OTHER INFORMATION

 

Item 6. Exhibits and Reports on Form 8-K

 

(a) None

(b) None

 

SIGNATURES

 

In accordance with the requirements of theExchange Act, the registrant caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 
| Dated  December 12, 2003 |   |   | ARBOR ENTECH  CORPORATION |                     |
|--------------------------|--------|--------|---------------------------|--------------------------|
|                     |   |   | Registrant                |                     |
|                     |   |   |                      |                     |   |
|                     |   |   | By:                       | s/Harvey  Houtkin        |   |
|                     |   |   |                      | President                |   |
|                     |   |   |                      |                     |   |
|                     |   |   | By:                       | s/Mark  Shefts           |   |
|                     |   |   |                      | Mark Shefts              |   |
|                     |   |   |                      | Chief  Financial Officer |   |

 

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