**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-QSB**

 

**(MarkOne)**

 

**ý****                                ****QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT 0F1934**

 

**Forthe period ended: October 31, 2004**

 

**o****                                ****TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**Forthe transition period from**

 

**CommissionFile Number 0-30432**

 

**ARBOR ENTECH CORPORATION**

(Exact name ofsmall business issuer 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)                               |

 

Issuer’s TelephoneNumber, 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 all reports required to be filed by Section 13 or 15(d) of theExchange Act  during the past 12 months(or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90days.

 

ý   Yes     o   No

 

State the number ofshares outstanding of each of the issuer’s classes of common equity as of thelatest practicable date.

 

| **Class**                                | ** ** | **Outstanding at October 31, 2004** |
|------------------------------------------|------------|------------------------------------------|
| Common Stock,  par value $.001 per share |       | 7,050,540                                |

 

Transitional SmallBusiness Format (check one):  Yes   o     No   ý

 

 

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ARBOR ENTECH CORPORATION

CONDENSED BALANCE SHEET

OCTOBER 31, 2004

(Unaudited)

 
| ASSETS                                                                                                 |         |         |         |
|--------------------------------------------------------------------------------------------------------|--------------|--------------|--------------|
|                                                                                                   |         |         |         |
| Current Assets:                                                                                        |         |         |         |
| Cash and Cash  Equivalents                                                                             |         | $            | 292,895      |   |
| Prepaid Expenses                                                                                       |         | 511          |         |
|                                                                                                   |         |         |         |
| Total Current  Assets                                                                                  |         | 293,406      |         |
|                                                                                                   |         |         |         |
| Property and  Equipment (Net of Accumulated Depreciation of $54,828)                                   |         | 28,343       |         |
|                                                                                                   |         |         |         |
|                                                                                                   |         | $            | 321,749      |   |
|                                                                                                   |         |         |         |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                              | *** *** | *** *** | *** *** |
| *** ***                                                                                           | *** *** | *** *** | *** *** |
| Current  Liabilities:                                                                                  |         |         |         |
| Accounts Payable  and Accrued Liabilities                                                              |         | $            | 2,250        |   |
|                                                                                                   |         |         |         |
| Total Current  Liabilities                                                                             |         | 2,250        |         |
|                                                                                                   |         |         |         |
| 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                                                                            |         | 2,365,441    |         |
| Retained  Earnings (Deficit)                                                                           |         | (2,052,992   | )            |
|                                                                                                   |         |         |         |
| Total  Stockholders’ Equity                                                                       |         | 319,499      |         |
|                                                                                                   |         |         |         |
|                                                                                                   |         | $            | 321,749      |   |

 

The accompanying notes are an integral part of the financialstatements.

 

2

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## ***ARBORENTECH CORPORATION***

CONDENSED STATEMENT OFOPERATIONS

(Unaudited)

 
| ** **                                    | ** ** | **Three Months Ended  October 31,** | ** ** | **Six Months Ended  October 31,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------|------------|-----------------------------------|------------|
| ** **                                    | ** ** | **2004**                            | ** ** | **2003**                          | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Net Sales                                     |       | $                                   | —     |                              | $          | — |   | $ | — |   | $ | — |   |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Costs and  Expenses:                          |       |                                |       |                              |       |   |   |   |   |
| Selling, General  and Administrative Expenses |       | 7,804                               |       | 61,634                            |       | 19,752 |   | 127,893 |   |
|                                          |       | 7,804                               |       | 61,634                            |       | 19,752 |   | 127,893 |   |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Loss from  Operations                         |       | (7,804                              | )          | (61,634                           | )          | (19,752 | ) | (127,893 | ) |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Other Income:                                 |       |                                |       |                              |       |   |   |   |   |
| Interest                                      |       | 262                                 |       | 196                               |       | 542 |   | 390 |   |
| Other                                         |       | —                              |       | —                            |       | 22 |   | — |   |
|                                          |       | 262                                 |       | 196                               |       | 564 |   | 390 |   |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Loss from  Continuing Operations              |       | (7,542                              | )          | (61,438                           | )          | (19,188 | ) | (127,503 | ) |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Loss from  Discontinued Operations            |       | —                              |       | (102,456                          | )          | — |   | (76,573 | ) |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Net Loss                                      |       | $                                   | (7,542     | )                                 | $          | (163,894 | ) | $ | (19,188 | ) | $ | (204,076 | ) |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Loss Per Common  Share – Basic:          |       |                                |       |                              |       |   |   |   |   |
| Loss from  Continuing Operations              |       | $                                   | (.00       | )                                 | $          | (.01 | ) | $ | (.00 | ) | $ | (.02 | ) |
| Loss from  Discontinued Operations            |       | (.00                                | )          | (.00                              | )          | (.00 | ) | (.01 | ) |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Net Loss                                      |       | $                                   | (.00       | )                                 | $          | (.01 | ) | $ | (.00 | ) | $ | (.01 | ) |
|                                          |       |                                |       |                              |       |   |   |   |   |
| Weighted Average  Shares Outstanding          |       | 7,050,540                           |       | 7,050,540                         |       | 7,050,540 |   | 7,050,540 |   |

 

The accompanying notes are an integral part of the financialstatements.

 

3

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ARBOR ENTECH CORPORATION

CONDENSED STATEMENT OFCASH FLOWS

(Unaudited)

 
| ** **                                                                                               | ** ** | **Six Months Ended  October 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                               | ** ** | **2004**                          | ** ** | **2003** | ** ** |
|                                                                                                     |       |                              |       |   |   |
| Cash Flows from  Operating Activities:                                                                   |       |                              |       |   |   |
| (Loss) from  Continuing Operations                                                                       |       | $                                 | (19,188    | ) | $ | (127,503 | ) |
| Adjustments to  Reconcile (Loss) from Continuing Operations to Net Cash (Used) in Operating  Activities: |       |                              |       |   |   |
| Depreciation                                                                                             |       | 575                               |       | — |   |
| Changes in  Operating Assets and Liabilities:                                                            |       |                              |       |   |   |
| Decrease in  Prepaid Expenses                                                                            |       | —                            |       | 11,350 |   |
| (Decrease) in  Accounts Payable and Accrued Liabilities                                                  |       | (15,776                           | )          | (17,884 | ) |
|                                                                                                     |       |                              |       |   |   |
| Total  Adjustments                                                                                       |       | (15,201                           | )          | (6,534 | ) |
|                                                                                                     |       |                              |       |   |   |
| Net Cash (Used)  in Operating Activities                                                                 |       | (34,389                           | )          | (134,037 | ) |
|                                                                                                     |       |                              |       |   |   |
| Cash Flows from  Financing Activities:                                                                   |       |                              |       |   |   |
| Proceeds of  Loans to Related Parties                                                                    |       | 1,019,850                         |       | 27,000 |   |
| Dividends Paid                                                                                           |       | (1,057,694                        | )          | — |   |
|                                                                                                     |       |                              |       |   |   |
| Net Cash  Provided by (Used) in Financing Activities                                                     |       | (37,844                           | )          | 27,000 |   |
|                                                                                                     |       |                              |       |   |   |
| Net Cash  Provided by Discontinued Operations                                                            |       | —                            |       | 196,643 |   |
|                                                                                                     |       |                              |       |   |   |
| Increase  (Decrease) in Cash and Cash Equivalents                                                        |       | (72,233                           | )          | 89,606 |   |
|                                                                                                     |       |                              |       |   |   |
| Cash and Cash  Equivalents – Beginning of Period                                                    |       | 365,128                           |       | 302,287 |   |
|                                                                                                     |       |                              |       |   |   |
| Cash and Cash  Equivalents – End of Period                                                          |       | $                                 | 292,895    |   | $ | 391,893 |   |
|                                                                                                     |       |                              |       |   |   |
| Supplemental  Disclosures of Cash Flow Information:                                                      |       |                              |       |   |   |
| Cash Paid for  Interest                                                                                  |       | $                                 | —     |   | $ | — |   |
|                                                                                                     |       |                              |       |   |   |
| Cash Paid for  Income Taxes                                                                              |       | $                                 | —     |   | $ | — |   |
|                                                                                                     |       |                              |       |   |   |
| Supplemental  Disclosure of Non-Cash Financing Activities:                                               |       |                              |       |   |   |
| Accrued Interest  on Related Parties Loans Receivable Credited to Additional Paid-In Capital             |       | $                                 | —     |   | $ | 17,134 |   |

 

The accompanying notes are an integral part of the financial statements.

 

4

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ARBOR ENTECH CORPORATION

NOTES TO CONDENSEDFINANCIAL STATEMENTS

OCTOBER 31, 2004

(Unaudited)

 

NOTE 1 -         UnauditedInterim Financial Statement

 

In the opinion of the Company’s management, theaccompanying unaudited conÞnsed financial statements contain all adjustments(consisting of only normal recurring adjustments) necessary to present fairlythe information set forth therein.  Thesefinancial statements are condensed and therefore do not include all of theinformation and footnotes required by accounting principles generally acceptedin the United States of America for complete financial statements.

 

Results of operations for interim periods are notnecessarily indicative of the results of operations for a full year.

 

NOTE 2 -         Propertyand Equipment

 

Property and equipment consists of the following:

 
| Land                            |   | $      | 22,058 |   |
|---------------------------------|--------|--------|--------|--------|
| Building and  Improvements      |   | 61,114 |   |
|                            |   | 83,172 |   |
| Less:  Accumulated Depreciation |   | 54,829 |   |
|                            |   | $      | 28,343 |   |

 

Depreciation amounted to $575 and $2,800 for the sixmonths ended October 31, 2004 and 2003, respectively.

 

The land and building are collateralized by a mortgageheld by the Company’s Secretary/Treasurer (see Note 3).

 

NOTE 3 -         Commitmentsand Contingencies

 

Line of Credit

 

The Company has a revolving credit facility with itsSecretary/Treasurer, secured by a mortgage of the Company’s real propertylocated in Tioga County, Pennsylvania. This revolving line of credit provides for the extension of credit inthe aggregate principal amount of $100,000 with interest at 11% per annum.  Principal and interest are payable ondemand.  There was no balance due atOctober 31, 2004 on this credit facility.

 

NOTE 4 -         NotesReceivable – Related Party

 

Notes receivable in the amount of $1,019,850 were paidin full in May 2004.

 

5

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NOTE 5 -                Dividends

 

On May 1, 2004, the board of directors paid a dividendof $.15 per share for a total of $1,057,694 to each shareholder of record as ofMarch 22, 2004.

 

NOTE 6 -                DiscontinuedOperations

 

On September 2, 2003, the Company informed The HomeDepot, Inc., 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 Home Depot territories the Company was allowed tosell products to, and Home Depot’s demands regarding returns of orderedproducts that the Company was unwilling to accede to for economic reasons.

 

The Financial Accounting Standards Board’s SFAS No. 144, “Accountingfor the Impairment or disposal of Long-Lived Assets”, addresses financialaccounting and reporting for the impairment of long-lived assets and forlong-lived assets to be disposed of. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment ofLong-Lived Assets and Long-Lived Assets to be Disposed of,” retains thefundamental provisions of Statements 121 for (a) recognition and measurement ofthe impairment of long-lived assets to be held and used and (b) measurement oflong-lived assets to be disposed of by sale. SFAS 144 also supersedes the accounting and reporting provisions of APBOpinion No. 30, “Reporting and Results of Operations – Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transaction,” for segments of a business tobe disposed of, but retains the requirement of Opinion 30 to reportdiscontinued operations separately from continuing operations and extends thatreporting to a component of an entity that either has been disposed of (bysale, by abandonment, or in a distribution to owners) or is classified as heldfor sale.

 

The Company has discontinued its wood productsbusiness.  Consequently, the accompanyingfinancial statements reflect the wood products business as discontinuedoperations in accordance with SFAS No. 144.

 

Summarized below are the results of discontinuedoperations:

 
| ** **                         | ** ** | **Three Months Ended  October 31,** | ** ** | **Six Months Ended  October 31,** | ** ** |
|------------------------------------|------------|-------------------------------------|------------|-----------------------------------|------------|
| ** **                         | ** ** | **2004**                            | ** ** | **2003**                          | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net Sales                          |       | $                                   | —     |                              | $          | 20,638 |   | $ | — |   | $ | 161,391 |   |
|                               |       |                                |       |                              |       |   |   |   |   |
| Loss from  Discontinued Operations |       | $                                   | —     |                              | $          | (102,456 | ) | $ | — |   | $ | (76,573 | ) |

 

The Company is seeking other business opportunities,but there can be no assurance that such opportunities will be identified,engaged in, or result in any profits.

 

6

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Item 2 -                   Management’sDiscussion and Analysis of Financial Condition and Results of Operations

 

Safe Harbor Statementunder the Private Securities Litigation Reform Act of 1995

 

The statements contained in this report which are nothistorical fact are “forward-looking statements” that involve various importantassumptions, risks, uncertainties and other factors which could cause theCompany’s actual results for 2004 and beyond to differ materially from thoseexpressed in such forward-looking statements. These important factors include, without limitation, competitive factorsand pricing pressures, changes in legal and regulatory requirements,technological change or difficulties, product development risks,commercialization and trade difficulties and general economic conditions, aswell as other risks previously disclosed in the Company’s securities filingsand press releases.

 

General

 

We were a wood products Company which has been inbusiness since 1980.  Our business hasfluctuated over the years.  We werealmost wholly dependent on sales to Home Depot.

 

On September 2, 2003, the Company informed The HomeDepot, Inc., 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 ordered productsthat the Company was unwilling to accede to for economic reasons.

 

The Company has discontinued its wood productsbusiness.  The Company intends to seekother 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, 2004 compared to the quarter ended October 31, 2003.**

 

Since the Company discontinued its wood productsbusiness there were no sales from continuing operations during the quartersended October 31, 2004 and 2003.

 

Selling, general and administrative expenses wereapproximately $8,000 for the quarter ended October 31, 2004, a decrease ofapproximately $54,000 or 87% over selling, general and administrative expensesof approximately $62,000 for the quarter ended October 31, 2003.  This decrease is a direct result of theCompany’s discontinued operations and curtailment of virtually all operatingexpenses.

 

Arbor’s net loss decreased from approximately $164,000for the quarter ended October 31, 2003 to a net loss of approximately $8,000for the quarter ended October 31, 2004. This was a decrease of approximately $156,000 or 95%.

 

7

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**Sixmonths ended October 31, 2004 compared to the six months ended October 31, 2003**

 

Since the Company discontinued its wood productsbusiness there were no sales from continuing operations during the six monthsended October 31, 2004 and 2003.

 

Selling, general and administrative expenses wereapproximately $20,000 for the six months ended October 31, 2004, a decrease ofapproximately $108,000 or 84% over selling, general and administrative expensesof approximately $128,000 for the six months ended October 31, 2003.  This decrease is a direct result of theCompany’s discontinued operations and curtailment of virtually all operatingexpenses.

 

Arbor’s net loss decreased from approximately $204,000for the six months ended October 31, 2003 to approximately $19,000 for the sixmonths ended October 31, 2004.  This wasa decrease of approximately $185,000 or 91%.

 

**DiscontinuedOperations**

 

On September 2, 2003, the Company informed The HomeDepot, Inc., 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 $0 and $21,000 for the quarters ended October 31, 2004 and 2003,respectively.  The net loss fromdiscontinued operations was $0 and $102,000 for the quarters ended October 31,2004 and 2003, respectively.

 

Liquidity and capitalresources

 

In the prior years, Arbor’s working capitalrequirements have been met primarily from sales generated by its discontinuedwood products business.  At October 31,2004 we had working capital of approximately $291,000.

 

As at October 31, 2004, we had cash and cashequivalents of approximately $293,000, which represented 91% of totalassets.  Arbor believes it has adequateworking capital to fund its operations for at least the next 12 months.

 

Net cash used in operating activities amounted toapproximately $34,000 for the six months ended October 31, 2004.  Loss from continuing operations of $19,000for the six months ended October 31, 2004 was increased by decreases inaccounts payable of $16,000.

 

Net cash used in financing activities wasapproximately $38,000 for the six months ended October 31, 2004 as a result ofrelated party loan repayments of $1,020,000 offset by dividend payments of$1,058,000.

 

8

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Item 3Controlsand Procedures

 

Our management,with the participation of our Chief Executive Officer and Chief FinancialOfficer, evaluated the effectiveness of our disclosure controls and procedures(as defined in Rule 13a-15(e) or Rule 15a-15(e) of the Exchange Act) as of theend of the period covered by this report. Based on that evaluation, our Chief Executive Officer and ChiefFinancial Officer concluded that our disclosure controls and procedures as ofthe end of the period covered by this report were effective in ensuring thatinformation required to be disclosed by us in reports that we file or submitunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in the Securities and Exchange Commission’s rulesand forms.

 

There was nochange in our internal control over financial reporting (as defined in Rule13a-15(f) of the Exchange Act) that occurred during the fiscal quarter to whichthis report relates that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.

 

PART II - OTHERINFORMATION

 

Item 6.  Exhibits and Reports on Form 8-K

 

(a) The followingexhibits are filed with this report:

 
| **Exhibit  Number** | ** ** | **Description of Exhibit**                                                                          |
|---------------------|------------|-----------------------------------------------------------------------------------------------------|
|                |       |                                                                                                |
| Exhibit 31.1        |       | Certification of Chief  Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|                |       |                                                                                                |
| Exhibit 31.2        |       | Certification of Chief  Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|                |       |                                                                                                |
| Exhibit 32.1        |       | Certification of Chief  Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|                |       |                                                                                                |
| Exhibit 32.2        |       | Certification of Chief  Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

(b) None

 

SIGNATURES

 

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 
|                           | ARBOR ENTECH  CORPORATION |                    |
|--------------------------------|---------------------------|-------------------------|
|                           | Registrant                |                    |
|                           |                      |
|                           | By:                       | /s/ Harvey Houtkin      |   |
|                           |                      | Harvey Houtkin          |
|                           |                      | President               |
|                           |                      |
|                           |                      |
|                           | By:                       | /s/ Mark Shefts         |   |
|                           |                      | Mark Shefts             |
|                           |                      | Chief Financial Officer |
|                           |                      |
| Dated:  December 14, 2004 |                      |
|                                |                           |                         |  |  |  |  |

 

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