**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: January 31, 2004**                                                                                                                                                                                                                                     |
|           |   |       |   |                                                                                                                                                                                                                                                                            |
| **or**         |   |       |   |                                                                                                                                                                                                                                                                            |
|           |   |       |   |                                                                                                                                                                                                                                                                            |
|           |   | **o**      |   | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                   |
|           |   |       |   |                                                                                                                                                                                                                                                                            |
|           |   |       |   | **For  the transition period from                       to                     ** |

 

**CommissionFile Number 0-30432**

 

**ARBOR ENTECH CORPORATION**

(Exact name of registrantas 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 all reports required to be filed bySection 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 of each of the issuer’sclasses of common equity as of the latest practicable date.

 

| **Class**                                |   | **Outstanding at March 15, 2004** |
|------------------------------------------|--------|-----------------------------------|
| Common Stock, par value  $.001 per share |   | 7,050,540                         |

 

Transitional Small Business Format (check one):                                 Yes    o    No    ý

 

 

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ARBOR ENTECH CORPORATION

CONDENSED BALANCE SHEET

JANUARY 31, 2004

(Unaudited)

 
| ASSETS                                                                                                  |   |       |    |
|---------------------------------------------------------------------------------------------------------|--------|------------|---------|
|                                                                                                    |   |       |    |
| Current Assets:                                                                                         |   |       |    |
| Cash and Cash  Equivalents                                                                              |   | $          | 365,370 |   |
| Prepaid Expenses                                                                                        |   | 701        |    |
|                                                                                                    |   |       |    |
| Total Current  Assets                                                                                   |   | 366,071    |    |
|                                                                                                    |   |       |    |
| Property, Plant  and Equipment (Net of Accumulated  Depreciation of $53,968)                            |   | 29,204     |    |
|                                                                                                    |   |       |    |
|                                                                                                    |   | $          | 395,275 |   |
|                                                                                                    |   |       |    |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                               |   |       |    |
|                                                                                                    |   |       |    |
| Current  Liabilities:                                                                                   |   |       |    |
| Accounts Payable  and Accrued Liabilities                                                               |   | $          | 8,000   |   |
|                                                                                                    |   |       |    |
| Total Current  Liabilities                                                                              |   | 8,000      |    |
|                                                                                                    |   |       |    |
| 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                                                                             |   | 2,348,307  |    |
| Retained  Earnings (Deficit)                                                                            |   | (888,592   | )       |
| Notes Receivable  – Related Parties                                                                |   | (1,079,490 | )       |
|                                                                                                    |   |       |    |
| Total  Stockholders’ Equity                                                                        |   | 387,275    |    |
|                                                                                                    |   |       |    |
|                                                                                                    |   | $          | 395,275 |   |

 

The accompanying notes are an integral part of the financialstatements.

 

2

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ARBOR ENTECH CORPORATION

CONDENSED STATEMENT OFOPERATIONS

(Unaudited)

 
|                                                                     |   | **Three  Months Ended  January 31,** |    | **Nine  Months Ended  January 31,** |   |
|--------------------------------------------------------------------------|--------|--------------------------------------|---------|-------------------------------------|--------|
|                                                                     |   | **2004**                             |    | **2003**                            |   | **2004** |   | **2003** |   |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Net Sales                                                                |   | $                                    | —  |                                | $      | — |   | $ | — |   | $ | — |   |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Costs and  Expenses:                                                     |   |                                 |    |                                |   |   |   |   |   |
| Selling, General  and Administrative Expenses                            |   | 19,478                               |    | 109,207                             |   | 147,371 |   | 259,603 |   |
|                                                                     |   | 19,478                               |    | 109,207                             |   | 147,371 |   | 259,603 |   |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Loss from  Operations                                                    |   | (19,478                              | )       | (109,207                            | )      | (147,371 | ) | (259,603 | ) |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Other Income:                                                            |   |                                 |    |                                |   |   |   |   |   |
| Interest                                                                 |   | 241                                  |    | 363                                 |   | 631 |   | 1,215 |   |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Loss from  Continuing Operations                                         |   | (19,237                              | )       | (108,844                            | )      | (146,740 | ) | (258,388 | ) |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Discontinued  Operations:                                                |   |                                 |    |                                |   |   |   |   |   |
| Gain on Disposal  of Property and Equipment from Discontinued Operations |   | 10,401                               |    | —                              |   | 10,401 |   | — |   |
| Income (Loss)  from Discontinued Operations                              |   | (56,268                              | )       | 55,949                              |   | (132,841 | ) | 112,302 |   |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
|                                                                     |   | (45,867                              | )       | 55,949                              |   | (122,440 | ) | 112,302 |   |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Net Loss                                                                 |   | $                                    | (65,104 | )                                   | $      | (52,895 | ) | $ | (269,180 | ) | $ | (146,086 | ) |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Loss Per Common  Share – Basic:                                     |   |                                 |    |                                |   |   |   |   |   |
| Loss from  Continuing Operations                                         |   | $                                    | .00     |                                | $      | (.02 | ) | $ | (.02 | ) | $ | (.04 | ) |
| Income (Loss)  from Discontinued Operations                              |   | (.01                                 | )       | .01                                 |   | (.02 | ) | .02 |   |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| Net Loss                                                                 |   | $                                    | (.01    | )                                   | $      | (.01 | ) | $ | (.04 | ) | $ | (.02 | ) |
|                                                                     |   |                                 |    |                                |   |   |   |   |   |
| 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)

 
|                                                                                                     |   | **Nine  Months Ended  January 31,** |     |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------|----------|
|                                                                                                     |   | **2004**                            |     | **2003** |   |
|                                                                                                     |   |                                |     |   |   |
| Cash Flows from  Operating Activities:                                                                   |   |                                |     |   |   |
| (Loss) from  Continuing Operations                                                                       |   | $                                   | (146,740 | ) | $ | (258,388 | ) |
| Adjustments to  Reconcile (Loss) from Continuing Operations to Net Cash (Used) by Operating  Activities: |   |                                |     |   |   |
| Gain on Sale of  Property and Equipment                                                                  |   | (10,402                             | )        | — |   |
| Changes in  Operating Assets and Liabilities:                                                            |   |                                |     |   |   |
| Decrease in  Prepaid Expenses                                                                            |   | 18,582                              |     | 14,871 |   |
| (Decrease) in  Accounts Payable                                                                          |   | (28,679                             | )        | (11,233 | ) |
| (Decrease) in  Taxes Payable                                                                             |   | —                              |     | (1,479 | ) |
|                                                                                                     |   |                                |     |   |   |
| Total  Adjustments                                                                                       |   | (10,097                             | )        | (2,159 | ) |
|                                                                                                     |   |                                |     |   |   |
| Net Cash (Used)  by Operating Activities                                                                 |   | (156,837                            | )        | (256,229 | ) |
|                                                                                                     |   |                                |     |   |   |
| Cash Flows from  Investing Activities:                                                                   |   |                                |     |   |   |
| Proceeds from  Sale of Property and Equipment                                                            |   | 18,000                              |     | — |   |
|                                                                                                     |   |                                |     |   |   |
| Net Cash  Provided by Investing Activities                                                               |   | 18,000                              |     | — |   |
|                                                                                                     |   |                                |     |   |   |
| Cash Flows from  Financing Activities:                                                                   |   |                                |     |   |   |
| Proceeds of  Loans to Related Parties                                                                    |   | 40,500                              |     | 40,500 |   |
|                                                                                                     |   |                                |     |   |   |
| Net Cash  Provided by Financing Activities                                                               |   | 40,500                              |     | 40,500 |   |
|                                                                                                     |   |                                |     |   |   |
| Net Cash  Provided by Discontinued Operations                                                            |   | 171,822                             |     | 308,775 |   |
|                                                                                                     |   |                                |     |   |   |
| Increase in Cash  and Cash Equivalents                                                                   |   | 63,083                              |     | 93,046 |   |
| Cash and Cash  Equivalents – Beginning of Period                                                    |   | 302,287                             |     | 252,026 |   |
|                                                                                                     |   |                                |     |   |   |
| Cash and Cash  Equivalents – End of Period                                                          |   | $                                   | 365,370  |   | $ | 345,072 |   |
|                                                                                                     |   |                                |     |   |   |
| Supplemental  Cash Flow Information:                                                                     |   |                                |     |   |   |
| Cash Paid for  Interest                                                                                  |   | $                                   | —   |   | $ | — |   |
|                                                                                                     |   |                                |     |   |   |
| Cash Paid for  Income Taxes                                                                              |   | $                                   | —   |   | $ | 5,662 |   |
|                                                                                                     |   |                                |     |   |   |
| Supplemental  Disclosure of Non-Cash Financing Activities:                                               |   |                                |     |   |   |
| Accrued Interest  on Related Parties Loans Receivable Credited to Additional Paid-In Capital             |   | $                                   | 51,402   |   | $ | 51,402 |   |

 

The accompanying notes are an integral part of the financialstatements.

 

4

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ARBOR ENTECH CORPORATION

NOTES TO CONDENSEDFINANCIAL STATEMENTS

JANUARY 31, 2004

(Unaudited)

 

NOTE 1 -                                               Unaudited Interim Financial Statements

 

In the opinion ofthe Company’s management, the accompanying unaudited condensed financialstatements contain all adjustments (consisting of only normal recurringadjustments) necessary to present fairly the information set forththerein.  These financial statements arecondensed and therefore do not include all of the information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial 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 |   |
|                                 |   | 83,172 |   |
| Less:  Accumulated Depreciation |   | 53,968 |   |
|                                 |   |   |   |
|                                 |   | $      | 29,204 |   |

 

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                       |   | 100,394 |      |
|                                   |   | $       | 1,079,490 |   |

 

5

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(a)          A corporation controlledby Mr. Shefts and Mr. Houtkin.

(b)         A wholly owned subsidiaryof Rushmore Financial Services, Inc.

 

The Company has not received the annualprincipal payments in the amount of $108,789 that were due November 18, 2003.

 

NOTE 4 -                                               RelatedParty Transactions

 

The Company incurred $40,500 in administrative fees toan affiliated Company during the nine months ended January 31, 2004 and 2003.

 

NOTE 5 -                                               Commitmentsand Contingencies

 

Line of Credit

 

The Company has a revolving credit facility with itsSecretary/Treasurer, secured by a mortgage on 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 atJanuary 31, 2004 on this credit facility.

 

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 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.

 

6

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The Financial Accounting Standards Board’s SFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, addressesfinancial accounting and reporting for the impairment of long-lived assets andfor long-lived assets to be disposed of. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to be Disposed Of,” retains thefundamental provisions of Statement 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 the Results of Operations – Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions,” 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, theaccompanying financial statements reflect the wood products business asdiscontinued operations in accordance with SFAS No. 144.

 

Summarized below are the results of discontinuedoperations:

 
|                                         |   | **Three  Months Ended  January 31,** |    | **Nine  Months Ended  January 31,** |   |
|----------------------------------------------|--------|--------------------------------------|---------|-------------------------------------|--------|
|                                         |   | **2004**                             |    | **2003**                            |   | **2004** |   | **2003** |   |
|                                         |   |                                 |    |                                |   |   |   |   |   |
| Net Sales                                    |   | $                                    | —  |                                | $      | 459,497 |   | $ | 571,337 |   | $ | 1,053,475 |   |
|                                         |   |                                 |    |                                |   |   |   |   |   |
| Income (Loss)  from  Discontinued Operations |   | $                                    | (56,268 | )                                   | $      | 55,949 |   | $ | (132,841 | ) | $ | 112,302 |   |

 

The Company intends to seek other businessopportunities, but there can be no assurance that such opportunities will beidentified, engaged in, or result in any profits.

 

7

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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 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 2004 andbeyond to differ materially from those expressed in such forward-lookingstatements.  These important factorsinclude, without limitation, competitive factors and pricing pressures, changesin legal and regulatory requirements, technological change or difficulties,product development risks, commercialization and trade difficulties and generaleconomic conditions, as well as other risks previously disclosed in theCompany’s securities filings and press releases.

 

General

 

We were a wood products company that 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 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 Deport due to increased difficulties intransacting business with Home Depot on a profitable basis.  The Company stated to Home Depot that thesedifficulties included Home Depot’s prohibition against price increases despiteincreases in the Company’s increased costs of production, a diminution in theHome Depot territories the Company was allowed to sell product to, and HomeDepot’s demands regarding returns of ordered products that the Company wasunwilling 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

 

**Quarter ended January 31, 2004 compared to the quarter endedJanuary 31, 2003.**

 

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

 

Selling, general and administrative expenses wereapproximately $19,000 for the quarter ended January 31, 2004, a decrease ofapproximately $90,000 or 83% over selling, general and administrative expensesof approximately $109,000 for the quarter ended January 31, 2003.  The decrease in selling, general andadministrative expenses is a result of the Company’s discontinued operations ofits wood products business.

 

Arbor’s net loss increased from approximately $53,000for the quarter ended January 31, 2003 to a net loss of approximately $65,000for the quarter ended January 31, 2004. This was an increase of approximately $12,000 or 23%.

 

8

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**Ninemonths ended January 31, 2004 compared to the nine months ended January 31,2003**

 

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

 

Selling, general and administrative expenses wereapproximately $147,000 for the nine months ended January 31, 2004, a decreaseof approximately $113,000 or 43% over selling, general and administrativeexpenses of approximately $260,000 for the nine months ended January 31,2003.  The decrease in selling, generaland administrative expenses is a result of the Company’s discontinuedoperations of its wood products business.

 

Arbor’s net loss increased from approximately $146,000for the nine months ended January 31, 2003 to approximately $269,000 for thenine months ended January 31, 2004. This was an increase of approximately $123,000 or 84%.

 

**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 $459,000 for the quarters ended January 31, 2004 and 2003,respectively.  The net income (loss)from discontinued operations was $(56,000) and $56,000 for the quarters endedJanuary 31, 2004 and 2003, respectively.

 

**Liquidityand capital resources**

 

In the prior periods discussed above, Arbor’s workingcapital requirements have been met primarily from sales generated by itsdiscontinued wood products business.  AtJanuary 31, 2004 we had working capital of approximately $358,000.

 

As at January 31, 2004, we had cash and cashequivalents of approximately $365,000, which represented 92% of totalassets.  Arbor believes it has adequateworking capital to fund its operations for at least the next 12 months.  Although Arbor is seeking new businessopportunities, it has not yet identified any particular such opportunity.  Thus, for the foreseeable future workingcapital is needed only for general and administrative costs and expenses.

 

9

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Net cash used by operating activities amounted toapproximately $157,000 for the nine months ended January 31, 2004.  Loss from continuing operations of $147,000for the nine months ended January 31, 2004 was increased by decreases inaccounts payable of $29,000 offset by decreases in prepaid expenses of $19,000.

 

Net cash provided by financing activities wasapproximately $40,500 for the nine months ended January 31, 2004 as a result ofrelated party loan repayments.

 

PART II - OTHER INFORMATION

 

Item 6.  Exhibits and Reports onForm 8-K

 

(a) None

(b) None

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
| Dated March 15, 2004 | ARBOR ENTECH CORPORATION |             |
|----------------------|--------------------------|------------------|
|                 | Registrant               |             |
|                 |                     |             |
|                 | By:                      | s/Harvey Houtkin |   |
|                 |                     | President        |   |

 
|   | By:    | s/Mark Shefts           |   |
|--------|--------|-------------------------|--------|
|   |   | Mark Shefts             |   |
|   |   | Chief Financial Officer |   |

 

10

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