**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-QSB**

 

**(MarkOne)**

 

**ý****                                ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT 0F 1934**

 

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

 

**o****                                ****TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**Forthe transition period from**

 

**CommissionFile Number 0-30432**

 

**ARBORENTECH 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 the latestpracticable date.

 

| **Class**                                |   | **Outstanding  at July 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 ENTECHCORPORATION

CONDENSED BALANCESHEET

JULY 31, 2004

(Unaudited)

 
| ASSETS                                                                                                 |   |       |    |
|--------------------------------------------------------------------------------------------------------|--------|------------|---------|
|                                                                                                   |   |       |    |
| Current Assets:                                                                                        |   |       |    |
| Cash  and Cash Equivalents                                                                             |   | $          | 309,399 |   |
| Prepaid  Expenses                                                                                      |   | 511        |    |
|                                                                                                   |   |       |    |
| Total  Current Assets                                                                                  |   | 309,910    |    |
|                                                                                                   |   |       |    |
| Property  and Equipment (Net of Accumulated Depreciation of $54,541)                                   |   | 28,631     |    |
|                                                                                                   |   |       |    |
|                                                                                                   |   | $          | 338,541 |   |
|                                                                                                   |   |       |    |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                             |   |       |    |
|                                                                                                   |   |       |    |
| Current  Liabilities:                                                                                  |   |       |    |
| Accounts  Payable and Accrued Liabilities                                                              |   | $          | 11,500  |   |
|                                                                                                   |   |       |    |
| Total  Current Liabilities                                                                             |   | 11,500     |    |
|                                                                                                   |   |       |    |
| 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)                                                                           |   | (2,045,450 | )       |
|                                                                                                   |   |       |    |
| Total  Stockholders’ Equity                                                                       |   | 327,041    |    |
|                                                                                                   |   |       |    |
|                                                                                                   |   | $          | 338,541 |   |

 

The accompanying notesare an integral part of the financial statements.

 

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ARBOR ENTECH CORPORATION

CONDENSEDSTATEMENT OF OPERATIONS

(Unaudited)

 
|                                          |   | **Quarter  Ended  July 31,** |    |
|-----------------------------------------------|--------|-----------------------------------|---------|
|                                          |   | **2004**                          |    | **2003** | ** ** |
|                                          |   |                              |    |   |   |
| Net Sales                                     |   | $                                 | —  |   | $ | — |   |
|                                          |   |                              |    |   |   |
| Costs  and Expenses:                          |   |                              |    |   |   |
| Selling,  General and Administrative Expenses |   | 11,948                            |    | 67,658 |   |
|                                          |   | 11,948                            |    | 67,658 |   |
|                                          |   |                              |    |   |   |
| Loss  from Operations                         |   | (11,948                           | )       | (67,658 | ) |
|                                          |   |                              |    |   |   |
| Other  Income:                                |   |                              |    |   |   |
| Interest  Income                              |   | 280                               |    | 194 |   |
| Other                                         |   | 22                                |    | — |   |
|                                          |   | 302                               |    | 194 |   |
|                                          |   |                              |    |   |   |
| Loss  from Continuing Operations              |   | (11,646                           | )       | (67,464 | ) |
|                                          |   |                              |    |   |   |
| Discontinued  Operations:                     |   |                              |    |   |   |
| Income  from Discontinued Operations          |   | —                            |    | 27,282 |   |
|                                          |   |                              |    |   |   |
| Net  Income from Discontinued Operations      |   | —                            |    | 27,282 |   |
|                                          |   |                              |    |   |   |
| Net  Loss                                     |   | $                                 | (11,646 | ) | $ | (40,182 | ) |
|                                          |   |                              |    |   |   |
| Loss  Per Common Share – Basic:          |   |                              |    |   |   |
| Loss  from Continuing Operations              |   | $                                 | (.00    | ) | $ | (.00 | ) |
| Income  from Discontinued Operations          |   | .00                               |    | .00 |   |
|                                          |   |                              |    |   |   |
| Net  Loss                                     |   | $                                 | (.00    | ) | $ | (.00 | ) |
|                                          |   |                              |    |   |   |
| Weighted  Average Shares Outstanding          |   | 7,050,540                         |    | 7,050,540 |   |

 

The accompanying notesare an integral part of the financial statements.

 

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ARBOR ENTECH CORPORATION

CONDENSEDSTATEMENT OF CASH FLOWS

(Unaudited)

 
|                                                                                                                 |   | **Quarter  Ended  July 31,** |    |
|----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                                                                 |   | **2004**                          |    | **2003** | ** ** |
|                                                                                                                 |   |                              |    |   |   |
| Cash  Flows from Operating Activities:                                                                               |   |                              |    |   |   |
| (Loss)  from Continuing Operations                                                                                   |   | $                                 | (11,646 | ) | $ | (67,464 | ) |
| Adjustments  to Reconcile (Loss) from Continuing Operations to Net Cash Provided by (Used)  in Operating Activities: |   |                              |    |   |   |
| Depreciation                                                                                                         |   | 287                               |    | 1,399 |   |
| Changes  in Operating Assets and Liabilities:                                                                        |   |                              |    |   |   |
| Decrease  in Accounts Receivable                                                                                     |   | —                            |    | 153,052 |   |
| (Increase)  in Inventories                                                                                           |   | —                            |    | (20,261 | ) |
| Decrease  in Prepaid Expenses                                                                                        |   | —                            |    | 2,736 |   |
| (Decrease)  in Accounts Payable and Accrued Liabilities                                                              |   | (6,526                            | )       | (28,509 | ) |
|                                                                                                                 |   |                              |    |   |   |
| Total  Adjustments                                                                                                   |   | (6,239                            | )       | 108,417 |   |
|                                                                                                                 |   |                              |    |   |   |
| Net  Cash Provided by (Used) in Operating Activities                                                                 |   | (17,885                           | )       | 40,953 |   |
|                                                                                                                 |   |                              |    |   |   |
| Cash  Flows from Financing Activities:                                                                               |   |                              |    |   |   |
| Proceeds  of Loans to Related Parties                                                                                |   | 1,019,850                         |    | 13,500 |   |
| Dividends  Paid                                                                                                      |   | (1,057,694                        | )       | — |   |
|                                                                                                                 |   |                              |    |   |   |
| Net  Cash Provided by (Used) in Financing Activities                                                                 |   | (37,844                           | )       | 13,500 |   |
|                                                                                                                 |   |                              |    |   |   |
| Net  Cash Provided by Discontinued Operations                                                                        |   | —                            |    | 27,282 |   |
|                                                                                                                 |   |                              |    |   |   |
| Increase  (Decrease) in Cash and Cash Equivalents                                                                    |   | (55,729                           | )       | 81,735 |   |
|                                                                                                                 |   |                              |    |   |   |
| Cash  and Cash Equivalents – Beginning of Period                                                                |   | 365,128                           |    | 302,287 |   |
|                                                                                                                 |   |                              |    |   |   |
| Cash  and Cash Equivalents – End of Period                                                                      |   | $                                 | 309,399 |   | $ | 384,022 |   |

 

The accompanying notesare an integral part of the financial statements.

 

4

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|                                                                                          |   | **Quarter  Ended  July 31,** |   |
|-----------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                                          |   | **2004**                          |   | **2003** |   |
|                                                                                          |   |                              |   |   |   |
| Supplemental  Cash Flow Information:                                                          |   |                              |   |   |   |
| Cash  Paid for Interest                                                                       |   | $                                 | — |   | $ | — |   |
|                                                                                          |   |                              |   |   |   |
| Cash  Paid for Income Taxes                                                                   |   | $                                 | — |   | $ | — |   |
|                                                                                          |   |                              |   |   |   |
| Supplemental  Disclosures of Non-Cash Investing and Financing Activities:                     |   |                              |   |   |   |
| Accrued  Interest on Related Parties Loans Receivable Credited to Additional Paid-In  Capital |   | $                                 | — |   | $ | 17,134 |   |

 

The accompanying notesare an integral part of the financial statements.

 

5

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ARBOR ENTECH CORPORATION

NOTES TO CONDENSEDFINANCIAL STATEMENTS

JULY 31, 2004

(Unaudited)

 

NOTE 1-                                          UnauditedInterim Financial Statement

 

In the opinion of the Company’s management, the accompanying unauditedcondensed financial statements contain all adjustments (consisting of onlynormal recurring adjustments) necessary to present fairly the information setforth therein.  These financialstatements are condensed and therefore do not include all of the informationand footnotes required by accounting principles generally accepted in theUnited States of America for complete financial statements.

 

Results of operations forinterim periods are not necessarily indicative of the results of operations fora full year.

 

NOTE 2-                                          Propertyand Equipment

 

Property and equipmentconsists of the following:

 
| Land                                 |   | $      | 22,058 |   |
|--------------------------------------|--------|--------|--------|--------|
| Building  and Improvements           |   | 61,114 |   |
|                                 |   | 83,172 |   |
| Less:  Accumulated Depreciation |   | 54,541 |   |
|                                 |   | $      | 28,631 |   |

 

Depreciation amounted to$287 and $1,399 for the quarters ended July 31, 2004 and 2003,respectively.

 

The land and building arecollateralized by a mortgage held by the Company’s Secretary/Treasurer (seeNote 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 atJuly 31, 2004 on this credit facility.

 

NOTE 4-                                          NotesReceivable – Related Party

 

Notes receivable in theamount of $1,019,850 were paid in full in May 2004.

 

6

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NOTE 5-                                          Dividends

 

On May 1, 2004, the boardof directors declared and paid a dividend of $.15 per share for a total of$1,057,694 to each shareholder of record as of March 22, 2004.

 

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 Home Depot territoriesthe Company was allowed to sell products to, and Home Depot’s demands regardingreturns of ordered products that the Company was unwilling to accede to foreconomic reasons.

 

The Financial AccountingStandards Board’s SFAS No. 144, “Accounting for the Impairment or disposal ofLong-Lived Assets”, addresses financial accounting and reporting for theimpairment of long-lived assets and for long-lived assets to be disposedof.  SFAS No. 144 supersedes SFAS No.121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assetsto be Disposed of,” retains the fundamental provisions of Statements 121 for(a) recognition and measurement of the impairment of long-lived assets to beheld 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 andResults of Operations – Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransaction,” for segments of a business to be disposed of, but retains therequirement of Opinion 30 to report discontinued operations separately fromcontinuing operations and extends that reporting to a component of an entitythat either has been disposed of (by sale, by abandonment, or in a distributionto 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 below are theresults of discontinued operations:

 
|                                 |   | **Quarter  Ended  July 31,** |   |
|--------------------------------------|--------|-----------------------------------|--------|
|                                 |   | **2004**                          |   | **2003** |   |
| Net  Sales                           |   | $                                 | — |   | $ | 247,477 |   |
|                                 |   |                              |   |   |   |
| Income  from Discontinued Operations |   | $                                 | — |   | $ | 27,282 |   |

 

The Company is seekingother business opportunities, but there can be no assurance that suchopportunities will be identified, 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 HarborStatement under the Private Securities Litigation Reform Act of 1995

 

The statements contained in this report which are not historical fact are“forward-looking statements” that involve various important assumptions, risks,uncertainties and other factors which could cause the Company’s actual resultsfor 2004 and beyond to differ materially from those expressed in suchforward-looking statements.  Theseimportant factors include, without limitation, 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 productscompany which has been in business since 1980. We were almost wholly dependent on sales to The Home Depot, Inc. (“HomeDepot”).

 

On September 2, 2003, we informed Home Depot that we would nolonger do business with Home Deport due to increased difficulties intransacting business with Home Depot on a profitable basis.  We 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 we were unwilling toaccede to for economic reasons.

 

We have discontinued ourwood products business.  We are seekingother business opportunities, but there can be no assurance that suchopportunities will be identified, engaged in, or result in any profits.

 

Results ofoperations

 

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

 

Selling, general and administrative expenses were approximately $12,000for the quarter ended July 31, 2004, a decrease of approximately $56,000or 82% over selling, general and administrative expenses of approximately$68,000 for the quarter ended July 31, 2003.  This decrease was attributable primarily to decreases in salariesand related costs.

 

8

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Interest income for thequarter ended July 31, 2004 was approximately $300 compared to $200 forthe quarter ended July 31, 2003.

 

Our net loss decreasedfrom approximately $40,000 for the quarter ended July 31, 2003 to a netloss of approximately $12,000 for the quarter ended July 31, 2004.

 

Liquidity andcapital resources

 

In the periods discussedabove, our working capital requirements were met primarily from sales of ourdiscontinued wood products.  AtJuly 31, 2004, we had working capital of approximately $298,000.

 

At July 31, 2004, wehad cash and cash equivalents of approximately $309,000, which represented 91%of total assets.  We believe we haveadequate working capital to fund our operations for at least the next 12months.

 

Net cash used inoperating activities amounted to approximately $18,000 for quarter endedJuly 31, 2004.  Net loss fromcontinuing operations was $12,000.  Netcash used in operating activities was increased by decreases in accounts payableand accrued liabilities of $6,000.

 

Net cash used infinancing activities was approximately $38,000 for the quarter endedJuly 31, 2004 as a result of related party loan repayments of $1,020,000and payment of dividends of $1,058,000.

 

9

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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:  September 14, 2004 |                      |
|                                 |                           |                         |  |  |  |  |

 

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