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FORM 10 K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For this fiscal year ended September 30, 2002, Commission file number 03385
HOLOBEAM, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-1840647
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
217 First Street, P.O. Box 287, Ho-Ho-Kus, NJ 07423-0287
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-445-2420
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on which
Title of each class registered
Common Stock, Par Value $0.10 per share Over the Counter
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x No
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant. The aggregated market value shall be
computed by references to the price at which the stock sold, or the average
bid and asked prices of such stock, as of a specified date within 60 days
prior to date of filing. $6,058,800.00 at December 04, 2002.
1
Indicate the number of shares outstanding of each of
the Registrant's classes of common stock, as of the latest
practicable date. 275,400 Common Shares at December 04,2002.
DOCUMENTS INCORPORATED BY REFERENCE.
1. Annual Report Form 10K for the year ended September
30, 1994.
2. Financial Statements for the year ended September 30,
1995.
3. Financial Statements for the years ended September
30, 1990 and 1989.
4. Annual Report Form 10K for the years ended September
30, 1996 and 1997.
5. Holobeam, Inc. Defined Benefit Plan.
6. Financial Statements for the years ended September
30, 1998 and 1999.
7. Financial Statements for the years ended September
30, 2000 and 1999.
8. Financial Statements for the years ended September
30, 2001 and 2002.
2
PART I
Item 1. Business
(a) In General. The Registrant was organized in October,
1967, and commenced doing business on January 1, 1968. The
Registrant is engaged in the rental and development of real
estate and in developing surgical staples and the technology used
to apply the staples.
b) Industry Segments. For financial information in
regard to Industry Segments, reference is made to Note 12 to the
Financial Statements for the years ended September 30, 2002, 2001
and 2000.
(c) Description of Business.
(i) Principal Activities and
(ii) Status of products and Real Estate Properties.
Medical Staples
The Registrant is continuing its efforts in the area of
medical staples for use in internal surgery. Several United
States Patents and foreign patents have been received covering a
novel staple. The staple has been produced and animal testing
took place during 2002, 2001 and 2000. The Registrant presently
intends to continue the project if the final tests indicate
commercial value.
A significant investment would be required if the
Registrant were to pursue this area of business independently.
The Registrant may seek a relationship of some sort with a firm
active in the medical equipment area. However, no decision as to
such a relationship has been made at this time.
Real Estate Development and Rental Activities
The Registrant has rented two buildings it owns located at
A&S Drive, Paramus, New Jersey: one to The Sports Authority, Inc.
and the other to Comp USA, both for retail purposes.
(iii) Raw Materials
The Registrant believes that the components and materials
necessary or useful to its operations will be available from
diverse sources of supply. The
3
materials used for the Registrant's research activities have
been acquired through commercial businesses engaged in the
distribution of such supplies. The materials that the Registrant
would require for development of commercial production of medical
staples are widely available.
(iv) Patents.
The Registrant has filed several patent applications and
has several patents issued in connection with medical staples for
use in internal surgery. These applications and patents are as
follows:
No. Serial No. Title of Invention Issue Date
1. PCT/US94/02227 Staples 03/01/94
2. 08/512,766 Staples 08/09/95
3. 08/228,058 Staples 08/29/95
4. Canadian Pat. No. 2,155,750 Improved Staples(PCT NAT) 08/18/98
5. European Pat. 94910801.3 Staples 03/01/94
6. Australian Pat. 63568/94 Improved Staples 09/15/94
7. Japanese Pat. 6-520120 Staples 03/01/94
8. Brazilian Pat. PCT/US94/02227 Staples 03/01/94
9. 08/502,988 Staple Overlap 08/18/95
10. 07/753,116 Surgical Stapling Method 01/19/93
11. 07/934,858 Surgical Stapling Method 11/23/93
12. 08/024,501 Staples 08/30/94
13. US Pat. #5,445,648 Staples 08/29/95
14. US Pat. #5,342,396 Staples 08/30/94
15. US Pat. #5,263,973 Surgical Stapling Method 11/23/93
16. US Pat. #5,667,527 Staples 09/16/97
17. US Pat. #5,749,896 Staple Overlap 05/12/98
18. Japanese Pat. #2672713 Improved Staples 07/11/97
19. Brazilian Pat. #9405840-7 Improved Staples 09/01/95
20. US Pat. #6,083,242 Improved Staples 07/04/00
4
21. Australian Pat. #704533 Improved Staples 08/05/99
(v) Non-seasonal Business.
The Registrant does not believe that its products are
subject to material seasonal changes.
(vi) Working Capital.
Not relevant.
(vii) Customers.
Not relevant.
(viii) Backlog.
Not relevant.
(ix) Governmental Contracts. Not relevant.
(x) Competition.
It is presently contemplated that Registrant's activities
with respect to medical staples, if actual commercial
activities are commenced, may be limited to forming some type
of business relationship with other firms. The technology is
in competition with alternative staples technology. Some
suppliers of surgical staplers are well-established and have
significant capital resources.
Competition in the real estate office rental segment of
the Registrant's business activities was significant in the
Bergen County, New Jersey market in which the Registrant
competes during the period when the Registrant was seeking
suitable tenants for its rental properties.
The obsolete style of the building owned by the
Registrant prior to and during 1991 made the attraction of
suitable tenants difficult.
In an effort to increase the marketability of the
Registrant's properties, the Registrant applied to the Borough
of Paramus for a zoning change to allow retail use for the
office building and for the adjacent site.
In December 1991, the necessary change in zoning was
approved. The then existing building was rented to The Sports
Authority, Inc., a retailer of
5
sporting goods. This building was substantially renovated by
The Sports Authority, Inc. and Holobeam reimbursed them for
their costs in connection with this renovation.
During 1994, a 30,000 sq. ft. building was constructed on
the Registrant's site located adjacent to the building leased
to The Sports Authority, Inc. for use as a Computer City retail
store. Tandy Corp., parent corporation of Computer City,
commenced paying rent in October 1994. Holobeam reimbursed
Tandy Corporation $1,189,675 as an allowance for costs of
constructing the building and paving of the site, after a
permanent Certificate of Occupancy was obtained. During 1998,
Computer City Retail Stores were acquired by Comp USA. On
January 23, 2000, Comp USA entered into a merger agreement with
Grupo Sanborns, S.A. de C.V. and TPC Acquisition Corp., a
subsidiary of Grupo Sanborns, S.A. de C.V. Tandy Corp. remains
on the lease as guarantor.
(xi) Research and Development.
The Registrant has investigated methods for applying
surgical staples and the technology presently used to fabricate
and apply such staples. During 2002, 2001 and 2000, the
Registrant expended $214,031.00, $183,089.00 and $192,085.00,
respectively, in connection with the furtherance of this
activity. Such costs have been currently expensed and consist
principally of materials, supplies and costs associated with
design and development.
(xii) Environmental Compliances.
The Registrant does not believe that compliance with
Federal, State or Local provisions of a governmental nature
which have been enacted or adopted regulating the discharge of
material into the environment will have a materially adverse
effect upon the capital expenditure requirements, earnings or
competitive position of the Registrant.
The Registrant's activities with regard to medical staple
technology, at present, are limited to engineering, development
and animal testing of medical staple design with fabrication
and manufacturing of prototypes and models sub-contracted to
other firms.
6
The Registrant is not aware of any potential liabilities
or costs associated with the disposal or handling of waste
materials and is not aware of any potential violations of
local, state or federal laws which regulate the technology.
(xiii) Employees.
At September 30, 2002 the Registrant employed three
persons as compared to three persons at September 30, 2001 and
three persons at September 30, 2000.
(d) Financial Information About Foreign and
Domestic Operations and Export Sales.
The Registrant is not engaged in foreign operations and
does not export to foreign countries.
Item 2. Properties
The Registrant's headquarters and principal facilities
are located at 217 First Street, Ho-Ho-Kus, New Jersey 07423-
0287. The Registrant leases approximately 1,000 square feet of
office and laboratory space. The Registrant owns two office
buildings, one of 62,000 square feet and another of 30,000
square feet located at 50 A&S Drive, Paramus, New Jersey. One
building was placed in service in October 1994, the other in
1982. (Reference is made to Notes 4, 8, 9 and 10 to the
Financial Statements for the fiscal years ended September 30,
1995, 1991, 1990 and 1989.)
Pertinent information concerning the Registrant's
properties is as follows. (Reference is made to Schedule XI of
the Registrant's Financial statements for the years ended
September 30, 1997 and 1996.)
7
Building Building
Paramus, NJ Paramus, NJ
Year Acquired 1971 1994
Gross Square Footage 62,000 30,000
Percent Leased at 09/30/02 100% 100%
Acquisition Cost $ 718,881 $2,592,513 (2)
Capital Improvements Since
Acquisition $3,649,850 (1) -0-
Total Investment $4,587,133 (3) $2,826,843 (4)
Mortgage Balance $4,925,542 $ -0-
(1) Includes $3,567,267.00 of improvements to the
building repaid to The Sports Authority, Inc. (the
Tenant) upon closing of the Mortgage, but does not
include additional amounts expended by The Sports
Authority, Inc. since said closing.
(2) Includes construction allowance of $1,189,675.00
for Tandy Corporation pursuant to the Operating
Lease Agreement. (Now Comp USA.)
(3) Includes land cost of $218,402 for the 62,000 sq.
ft. building.
(4) Includes land cost of $234,370 for the 30,000 sq.
ft. building.
In 1983, the Registrant purchased 2.799 acres of land
located in Paramus, New Jersey and adjacent to the building
owned by the Registrant at 50 A&S Drive. The purchase price
was $173,565 which was paid in cash. Since 1983, the
Registrant incurred costs in the amount of $60,805 for various
improvements and architectural work relating to development of
this property. During 1992, 1991 and 1990, the Registrant
spent $293,784, $78,051 and $50,667 respectively in connection
with an application for a use variance for the site and various
site improvements that would enable the construction of a
commercial or retail building on the site. The change in
zoning to retail use was approved by the Borough of Paramus in
December 1991. The change in zoning to allow retail use also
required new site plan approval because the change in use
required new traffic pattern studies, parking lot re-design and
significant additional changes in order to comply with
governmental requirements.
In addition, the Registrant expended $964,505 through
September 30, 1994
8
for site plan approval and changes, and toward construction of
a building on the site. No depreciation or amortization was
recorded until the building and site were put into service.
During October 1994, construction was completed by Tandy
Corporation of a retail building on the Registrant's site. The
building is now being used for a CompUSA retail store.
(Reference is made to Note 13 to the Registrant's 1994
Financial Statements and to Item 1, Part X of the 1994 Annual
Report on Form 10K.)
The zoning change approval allowed for retail use of the
property and significantly enhanced the opportunities for
attracting a suitable tenants for the site.
When purchased, the site adjacent to the building owned
by the Registrant, required site engineering and costs to
acquire site plan approval for a building from the appropriate
governmental regulatory authorities.
In addition, the Registrant expended funds during its
efforts to change the zoning of the property from office use to
retail use. This change in zoning allowed the Registrant to
seek tenants engaged in retail operations and resulted in the
October 1994 tenancy of Computer City. (Reference is made to
Note 12 of the Financial Statements for the year ended
September 30, 1997.)
The Registrant was not able to lease the property since
the original site plan allowing office use was not approved for
retail use until the Computer City occupancy of October 1994.
The market for office space had seen significant decline during
1990, 1991, 1992, 1993 and 1994.
The occupancy rate for the building owned by the
Registrant and under lease to The Sports Authority Inc. for the
past five (5) years is as follows:
2002 100%
2001 100%
2000 100%
1999 100%
1998 100%
The building owned by the Registrant and under lease to
Tandy Corp. (now occupied by CompUSA) has been 100% occupied
since October 1994. A summary of the amounts expended for such
approvals for the three most recent fiscal years during
9
which such expenditures were made appears below. No such
expenditures were made in 1996, 1997, 1998, 1999, 2000, 2001 or
2002.
1994 1993 1992
Zoning Changes and Site Plan Approvals:
Legal Fees $ 2,859 $ 10,093 $ 15,840
Governmental Fees 11,827 55,811 19,990
Engineering 11,049 39,171 57,954
Paramus Park -0- -0- 200,000
------ ------ -------
Total Related Costs $25,735 $105,075 $293,784
======= ======= =======
The payment of $200,000 during 1992 to Paramus Park was a
one-time fee in connection with removal of an existing deed
restriction which prohibited adjacent retail activity. The
balance of the payments for site plan approvals were paid to
various engineering, legal and surveying firms in connection
with professional services rendered to obtain governmental
approvals.
No payments to affiliated parties were made in connection
with the zoning changes nor were any payments made to
affiliated or related parties for the acquisition of site plan
approval.
During 1998, Computer City, Inc. retail stores were
acquired by CompUSA, Inc., another retailer of computers,
computer accessories and software. The Registrant accepted
assignment of the Computer City lease by CompUSA and Tandy
Corporation remains on the lease as the guarantor.
Item 3. Legal Proceedings.
There are no legal proceedings of a material nature to
which the Registrant is a party other than ordinary, routine
litigation incidental to the business of the Registrant.
Item 4. Submission to Matters to a Vote of Security Holders.
None.
10
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder
Matters.
(a) The Registrant's common stock is traded on the
over-the-counter market. The bid price listed (Source: S&P
Comstock) on December 04, 2002 was $26.00 per share. On July
18, 1983, the Registrant's shares were deleted from the NASDAQ
system when no market maker for the Registrant's common stock
any longer maintained registration as such with the NASDAQ
System.
(b) The approximate number of holders of Common Stock
securities of the Registrant as of December 16, 2002 was 457.
(c) No dividends have been paid or declared on the
Common Stock of the Registrant during the 2002, 2001 or 2000
fiscal years. In making decisions regarding the possible
payment of dividends, the Board of Directors considers the Re-
quirements of the Registrant in such ongoing activities as real
estate development and the research, development and
engineering efforts of the Registrant as well as such
obligations as mortgages and debentures.
(d) Changes in Securities.
(Reference is made for Form 10Q for the six-month period
ended March 31, 1984, wherein the Registrant completed an
exchange of common stock for 5% Debentures payable March 1,
1989. Reference is made to Notes 9 and 10 to the Financial
Statements for the years ended September 30, 1989 and 1990.)
The high and low bid information of the Registrant's
common stock for the last two years was estimated to be as
follows: (Source: S&P Comstock).
11
2002 2001
high low high low
Quarter Ended Dec. 31 15.00 14.50 15.00 14.50
Quarter Ended Mar. 31 25.00 18.00 15.00 14.50
Quarter Ended June 30 23.50 21.00 15.00 14.00
Quarter Ended Sept. 30 22.00 22.00 14.00 13.50
Such quotation represents prices offered by purchases
without retail mark-up, mark-down or commission and may not
represent actual sales transactions.
Item 6. Selected Financial Data.
Financial information for the five-year period commencing
October 1, 1997 and ending September 30, 2002 is presented
below.
HOLOBEAM, INC.
SUMMARY OF SELECTED FINANCIAL DATA
FOR THE YEARS ENDED SEPTEMBER 30,
RESTATED
-----------------------------------------
2002 2001 2000 1999 1998
Gross Income $2,071,508 $2,105,020 $2,109,860 $2,053,703 $2,053,520
Net Income (Loss) 166,399 168,830 220,147 273,953 243,682
Weighted Average
Number
of Common Shares
Outstanding 287,518 290,960 294,013 298,101 304,237
Earnings Per
Share (Loss) 0.58 0.58 0.75 0.92 0.80
Total Assets 7,637,822 7,931,825 8,143,623 8,252,151 8,216,004
Long-Term Debt 4,511,321 4,925,540 5,305,149 5,653,044 5,984,002
Shareholders'
Equity 1,952,727 1,905,433 1,767,071 1,628,040 1,433,089
Gross Rental
Income 2,053,703 2,053,703 2,053,703 2,053,703 2,053,520
Net Rental
Income 1,795,141 1,794,699 1,790,823 1,795,908 1,795,014
It should be noted that years ended 2000, 1999 and 1998 have been restated
with reference to financial statement footnote #16.
12
Item 7. Management's Discussion and Analysis of Financial Condition
and
Results of Operations.
(1) Liquidity.
During the year ended September 30, 2002, the
Registrant's operations provided cash flows amounting to
$455,375.00, resulting principally from its real estate rental
activities.
The Registrant expects that revenues associated with its
real estate rental business will be sufficient to maintain
operations for the terms of the operating leases on the rental
properties. (Reference is made to Note 3 of the accompanying
financial statements for the years ended September 30, 2002 and
2001.) The operating leases expire in 2009 (Tandy Corporation
/ CompUSA) and 2012 (The Sports Authority) and both contain
options for renewal periods of five (5) years. Minimum future
rental revenues on the non-cancek\llable operating leases total
$21,036,152.00 and are expected to provide sufficient revenues
to sustain the Registrant's operations through 2012 provided
that there are no extraordinary events that would prematurely
cause the leases to expire.
The Registrant's working capital at September 30, 2002
was $189,403.00, which was $168,865 below that reported for the
same period one year ago. In the opinion of the Registrant,
current revenues are expected to provide sufficient cash flows
to fund the Registrant's current operating activities and will
provide revenues during the remaining terms of the operating
leases.
(2) Capital Resources.
The Registrant has continued to fund a series of
experiments in connection with the development of surgical
staples and their application during 2002. (Reference is made
to Annual Report Form 10K, Item 7 for the years ended September
30, 1998, 1999, 2000 and 2001.) The experiments are presently
in the final phase of evaluation for determining the commercial
13
value and definitive results will not be available for some
time.
If practical applications cannot be demonstrated, the
project will not be continued beyond the fiscal year begun
October 1, 2002. Therefore, the Registrant cannot state at
this time whether or not there will be funding beyond the
current commitment of $250,000.00 projected for the fiscal year
begun October 1, 2002.
The Registrant has contributed $398,584.00 to its defined
benefit pension plan for the year ended September 30, 2002.
The contribution was expensed to operations during each quarter
of the year. The Registrant's funding policy is to make annual
contributions in amounts sufficient to fully provide for all
eligible employees benefits by the time they retire. The
Registrant expects to continue funding the plan in 2003 and
expects no materially adverse effect on its financial
condition. (Reference is made to Note 14 to the accompanying
Financial Statements for September 30, 2002 and 2001.)
The Registrant's projected expenditures for capital
acquisitions and improvements is limited to those that are
normal, routine and incidental to its real estate rental
operations. The rental properties, located at 50 A&S Drive,
Paramus, New Jersey, do not require new construction or
refurbishment at this time and no renovations requiring capital
funding are planned at this time. The tenants are responsible
for real estate tax expenses and maintenance costs while
liability and hazard insurance is the Registrant's
responsibility. Cost increases are not expected to adversely
effect the Registrant's operations.
(3) Results of Operations.
(a) After-tax earnings for the year ended September 30,
2002 were $166,399.00, representing a decrease of $2,431.00
when compared to the results of operations for the previous
year. Earnings per share were $0.58 for 2002 and 2001.
14
Revenues decreased $33,512.00 to $2,071.508.00 when
compared to 2001. Such decrease resulted from lower interest
income received on the Registrant's money market fund
investments during 2002.
Total costs and expenses increased from $1,805,735.00 in
2001 to $1,819,911.00 in 2002, reflecting increases in costs
incidental and necessary for the Registrant's administrative
business activities.
During 2001 the Registrant adopted FASB 13, Accounting
for Leases. The effect of FASB 13 is to apportion escalation
rental income contained on the operating leases in equal annual
adjustments over the remaining terms of the operating leases.
The Registrant's Statements of Operations for the years ended
September 30, 2000, 1999 and 1998 have been restated to reflect
this change. (Reference is made to Note 16 to the accompanying
financial statements for the years ended September 30, 2002 and
2001.)
Funding for the Registrant's surgical staple project was
$214,031.00 for the year ended September 30, 2002 as compared
to $183,089.00 for the twelve months ended September 30, 2001.
The expenses represent costs associated with the engineering,
research and development of the surgical staples and their
application.
This project has entered into a final phase of tests that
will ultimtely determine the project's commercial feasibility,
although it will be some time before definitive results will be
publishsed. There will be no decision regarding additional
funding beyond Fiscal 2003 until such results are published.
The continued funding of the project is not expected to have
any materially adverse effect upon the financial condition of
the Registrant.
Revenues associated with the Registrant's real estate
rental activities were $2,053,703.00 for the year ended
September 30, 2002 and 2001 and are expected to continue t the
same rate until the leases expire in 2009 and 2012.
The properties have had occupancy rates of 100% during
2002 and 2001
15
and are expected to continue until 2009 when the CompUSA lease
expires. Rental expenses were $258,572.00 for 2002 and are
expected to increase at or below the current inflation rate for
the geographical area in which the Registrant conducts its
activities. Any such increases are not expected to have any
materially adverse effect upon the Registrant's financial
condition.
(b) The Registrant's after-tax earnings for the year
ended September 30, 2001 were $168,830.00 as compared to
$220,147.00 for the year ended September 30, 2000. Earnings
per share were $0.58 and $0.75 respectively. Revenues
decreased $4,840.00 to $2,105,020.00 while general expenses
increased $129,235.00. Cost increases were partially offset by
a $29,276.00 decrease in interest expense associated with the
Mortgage on the rental property owned by the Registrant.
During 2001 the Registrant adopted FASB 13, accounting for
leases. The effect of FASB 13 is to apportion escalation
revenues contained in the operating leases in equal annual
adjustments over the terms of the leases. The Registrant's
Statements of Operations for the years ended September 30,
2000, 1999 and 1998 have been restated to reflect this change.
(Reference is made to Note 16 to the accompanying financial
statements for the years ended September 30, 2000 and 1999.)
The Registrant's properties at 50 A&S Drive, Paramus, New
Jersey have had occupancy rates of 100% during 2001 and the
rates are expected to continue at 100% until 2009 when the Comp
USA lease expires. Rental expenses were $259,004.00 for 2001
and are expected to increase at or below the current inflation
rate for the geographic area in which the Registrant has its
real estate rental activities. The Registrant anticipates no
material effect upon its financial condition as a result of
such increases.
The Registrant continued to fund the medical staple
project during
16
2001. Expenses associated with the engineering, research and
development of the project totaled $183,089.00 for the year as
compared to $92,085.00 for 2000.
During 2002, the Registrant expects to continue funding
of the medical staple project and to conduct a final series of
tests to determine the economic feasibility for the staple. If
results do not indicate favorable economic potential, funding
will be discontinued after 2002.
(c) During 2000, the Registrant recognized after-tax
earnings of $220,147.00 as compared to $273,953.00 for the
fiscal year ended September 30, 1999. The results of
operations reflect performance consistent with prior years and
results from increased revenues associated with the
Registrant's real estate rental activities and proportionate
reduction in related expenses. When compared to 1999, revenues
increased $21,612.00 while interest expense associated with the
Registrant's mortgage decreased $26,837.00 to $513,106.00. The
favorable effect of interest reduction and increased revenues
was partially offset by increased income tax and general
expenses.
Funding of the Registrant's surgical staple project
continued during 2000 with expenditures amounting to
$192,085.00 as compared to $194,364.00 in 1999. Efforts are
proceeding to continue initial testing during 2001 and the
Registrant intends to fund the project with resources generated
from its operating activities. Such funding is anticipated to
approximate $300,000.00 during 2001.
The Registrant's occupancy rates for the real estate
rental properties was 100@ during 2000 and it is anticipated to
remain at 100% during 2001 which should result in comparable
favorable performance to 2001. Rental expenses, which
approximated $262,900.00 in 2000 are expected to increase
approximately 5% and are not expected to have any materially
adverse effect upon the Registrant's financial condition.
17
The Registrant's defined benefit pension plan was funded
in the amount of $330,122.00 during the fiscal year ended
September 30, 2000 as compared to $311,388.00 for 1999. The
Registrant anticipates continued funding of plan requirements
with the cash flows presently generated by its operations.
Funding of the plan is not expected to have any material
adverse effect upon its financial condition.
(4) Other Matters
The Registrant was able to positively resolve the
potential impact of the Year 2000 on the processing of data-
sensitive information by the Registrant's computerized
information system. The Year 2000 problem is the result of
computer programs being written using two digits (rather than
four) to define the applicable year. Any of the Registrant's
programs that have time-sensitive software could recognize a
date using "00" as the year 1900 rather than the year 2000,
which may have caused miscalculations or systems failures. The
costs of addressing this issue did not have a material adverse
impact on the Registrant's financial position, results of
operations or cash flows. The Registrant devoted the necessary
resources and resolved all significant Year 2000 issues.
Item 8. Financial Statements and Supplemental Data.
Financial statements, supplementary financial information and
Accountant's Report are filed with this report. (See Financial
Statements and reports thereon of R.A. Fredericks and Company for
2002 and 2001.)
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
18
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) The following Table identifies each Director of the
Registrant and indicates his position with the Registrant, the
duration of his term as Director and the date when he was first
elected.
Name and Age Title Term Date First Elected
Melvin S. Cook Chairman of the Board 2005 Annual 1968
Age 71 President of Registrant Meeting
William M. Hackett Treasurer of Registrant 2003 Annual 1984
Age 59 Meeting
Beverly Cook Office Manager and 2004 Annual 1995
Age 66 Secretary of Registrant Meeting
(b) The following Table represents the name and age of each
officer of the Registrant, the positions and offices held by each,
the term of each office and the period which each has served in the
indicated office.
Name and Age Title Term Date First Elected
Melvin S. Cook Chairman of the Board Annual 1968
Age 71
William M. Hackett Treasurer of Registrant Annual 1975
Age 59
Beverly Cook Secretary of Registrant Annual 1997
Age 66
(1) Each officer has been selected to serve until the next
Annual Meeting of the Board of Directors or until his respective
successor shall be elected and shall quality.
(c) There are no significant employees other than those
identified in (a) and (b) above.
(d) The following Table summarizes the business
experience and principal occupation during the last five years of
each person who serves as a director of executive officer of the
Registrant, as well as any other directorship held by persons serving
as directors of the Registrant.
19
Other
Name Business Experience/Occupation
Directorship
Melvin S. Cook Chairman of the Board of Directors and
None
President of the Registrant since its
formation.
William M. Hackett Vice President of Registrant from
None
August 23, 1975 until June 1, 1981 and
Controller of Registrant and member of
accounting staff from October 1973 to
August 1975. Treasurer of Registrant
from June 1981 to present. Vice President
of CMA Co., Inc. from November 1986 to
present. Elected President of CMA Co., Inc.
in 1998.
Beverly Cook Office Manager of Registrant from June 1,
None
1981 until present. Married to Melvin S.
Cook, President and Chairman of the
Board of Directors.
(f) Not applicable.
Item 11. Management Compensation.
(a) The following Table shows all direct remunerations paid
by the Registrant during the fiscal year ended September 30, 2002 to
each Director or Officer of the Registrant whose aggregate direct
remuneration exceeds $100,000.00, and the direct remuneration paid
all Directors and Officers of the Registrant as a group for such
fiscal year.
20
HOLOBEAM, INC.
Form 10K
Summary Compensation Table
September 30, 2002
Long Term Compensation
Name and Annual Compensation Awards Payouts All Other
Principal Position Year Salary Bonus Other Restricted Stock SUO/SARS LTIP
Payouts Compensation
Melvin S. Cook 2002 $325,000 -0- -0- -0- -0- -0- -0-
President and CEO 2001 400,000 -0- -0- -0- -0- -0- -0-
and Director 2000 306,000 -0- -0- -0- -0- -0- -0-
William M. Hackett 2002 25,000 -0- -0- -0- -0- -0- -0-
Treasurer and 2001 25,000 -0- -0- -0- -0- -0- -0-
Director 2000 23,138 -0- -0- -0- -0- -0- -0-
Beverly Cook 2002 137,500 -0- -0- -0- -0- -0- -0-
Secretary and 2001 99,999 -0- -0- -0- -0- -0- -0-
Director 2000 93,750 -0- -0- -0- -0- -0- -0-
All Officers and 2002 $487,500 -0- -0- -0- -0- -0- -0-
Directors as a 2001 524,999 -0- -0- -0- -0- -0- -0-
Group 2000 423,138 -0- -0- -0- -0- -0- -0-
21
Item 11 (cont'd.)
The Summary Compensation Table represents all aggregate forms
of remuneration to the executive officers of the Registrant. There
were no other payments or compensation awarded to the officers of
the Registrant.
(b) The Directors who are not employees of the Registrant
receive standard attendance fees of $200 plus applicable expenses
for travel. No Directors' fees were paid during 2002, 2001 and
2000.
(c) The following Table sets forth all the options to
purchase securities from the Registrant which were granted to or
exercised by any of its directors and each officer whose direct
remuneration exceeds $100,000.00 as well as all officers and
directors as a group since October 1, 2001.
All Directors and Officers
as a Group
Options Granted 0
Options Exercised 0
Unexercised Options Held at 9/30/02 0
(d) The following Table sets forth information about the Company's
defined benefit pension plan benefits:
Pension Plan Table
Years of Service
Remuneration 36
60,000 60,000
160,000 107,112
200,000 107,112
Pensions are based upon average annual earnings (salary and bonus) for the
highest three consecutive years of employment with the Registrant. For Melvin
Cook and Beverly Cook, the amounts equaled $107,112 and $60,000, respectively,
as of September 30, 2002. Melvin Cook and Beverly Cook will be credited at
normal retirement date with 36 years service each under the Pension Plan as of
September 30, 2002. Pensions may be adjusted for a surviving spouse's pension
22
or other options under the Pension Plan. Pensions are not subject to any other
deduction for Social Security or any other amounts. (Reference is made to Note
14 of the accompanying Financial Statements for the year ended September 30,
2002.)
23
PART IV
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) The stockholding of each person who is known by the Registrant to
own beneficially more than 5% of any classes of securities as of December 04,
2002 is as follows:
Title of Class Name & Address Amount Owned % of Class
Common Stock, Par Melvin S. Cook 124,500 43.3%
Value $0.10 Per Share 217 First Street
Ho-Ho-Kus, NJ 07423
Common Stock, Par Beverly Cook 95,000 33.0%
Value $0.10 Per Share 217 First Street
Ho-Ho-Kus, NJ 07423
(b) The stockholding of Officers and Directors as a group as of December
04, 2002 are as follows:
Title of Class Amount Beneficially Owned % of Class
Common Stock, Par Value 219,500 76.3%
$0.10 Per Share
(c) There are no contractual arrangements that might result in a change
of control of Registrant.
Item 13. Certain Relationships and Related Transactions - Not Applicable
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8K
(a) Index to Financial Statement filed as part of the Annual Report and
attached.
(b) Reports on Form 8K.
(c) Lease with The Sports Authority, Inc. filed as part of the 1993
Annual Report Form 10K-A.
(d) Financial Statement Schedules.
(e) Lease with Tandy Corp. filed as part of the 1995 Annual Report Form
10K.
The following is a list of Financial Statement Schedules filed as part of
this Annual Report on Form 10K. All other schedules omitted herein are so
omitted because either (1) they are not applicable, or (2) they required infor
24
mation is shown in the Financial Statements.
Schedules
V Property and Equipment
VI Accumulated Depreciation and Amortization of
Property and Equipment
VIII Allowances and Reserves
X Supplementary Income Statement Information
XI Real Estate and Accumulated Depreciation
XII Mortgage Loans on Real Estate
(e) Exhibits, including those incorporated by references.
The following is a list of Exhibits filed as part of this Annual Report
on Form 10K. Where so indicated by footnotes, Exhibits that were previously
filed are incorporated by references.
Legend for Documents
Incorporated
by Reference
Articles of Incorporation and By Laws
Articles of Incorporation (1)
By-Laws (1)
By Laws as Amended (2)
Instruments Defining Rights of Share-
holders Including Indentures
Specimen Certificate for Shares of
Common Stock (1)
Security Combination Agreement (1)
Additional Exhibits - Exchange Offer (3)
- Lease with Sports
Authority, Inc. (4)
- Lease with Tandy
Corporation (5)
Form 8K - Change in Certifying Accountants (6)
Form 8K-A - Change in Certifying Accountants (7)
Defined Benefit Plan (8)
25
Legend
(1) Filed September 21, 1968 as an Exhibit to Form 10K and incorporated
herein by reference.
(2) Filed December 15, 1986 as part of proxy statement and incorporated
herein by reference.
(3) Filed December 23, 1983 - Exchange Offer.
(4) Filed October 12, 1994 as an exhibit to Form 10K-A and incorporated
herein by reference.
(5) Filed December 21, 1995 as an exhibit to Form 10K.
(6) Filed November 15, 1996 and incorporated herein by reference.
(7) Filed November 20, 1996 and incorporated herein by reference.
(8) Filed August 8, 1998 with Quarterly Report 10Q and incorporated
herein by reference.
Supplemental Information
No annual report or proxy material has been sent to security holders.
Such annual report and proxy material are to be furnished to security holders
subsequent to the filing of the annual report on this form. Copies of such
material will be furnished to the Commission when it is sent to security hold-
ers.
26
HOLOBEAM, INC.
Form 10K
September 30, 2002
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Registrant Holobeam, Inc.
By William M. Hackett
Date December 24, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
HOLOBEAM, INC.
By: Melvin S. Cook
--------------
Melvin S. Cook
President and Chairman of the Board
Date: December 24, 2002
-----------------
By: William M. Hackett
------------------
William M. Hackett
Director and Treasurer
Date: December 24, 2002
-----------------
By: Beverly Cook
------------
Beverly Cook
Director and Secretary
Date: December 24, 2002
-----------------
CERTIFICATIONS
(a) The Registrant maintains disclosure controls and
procedures that provide reasonable assurance that the Registrant is
able to record, process and summarize and report the information
required to comply with the Registrant's
27
Exchange Act disclosure obligations and for the Registrant's own
internal purposes. The Registrant has evaluated these controls and
procedures at September 30, 2002 and has determined the controls
and procedures to be effective in recording, processing,
summarizing and reporting the information required by the
Registrant's quarterly and annual Exchange Act reports.
(b) There have been no significant changes in the
Registrant's procedures or internal controls or in other factors
that could significantly affect these controls subsequent to
September 30, 2002, including corrective actions with regard to
significant deficiencies and material weaknesses. As of September
30, 2002, the examination of controls and procedures did not
disclose any significant deficiencies or material weaknesses.
I, William M. Hackett, Treasurer, certify that:
1. I have reviewed this annual report on Form 10-K of
Holobeam, Inc.;
2. Based on my knowledge, this annual report does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The Registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the Registrant and have:
(a) designed such disclosure controls and procedures to
ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
(b) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the "Evaluation
Date"); and
(c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the Registrant's
auditors and the audit committee of Registrant's board of directors
(or persons performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data and
have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls; and
28
6. The Registrant's other certifying officers and I have
indicated in this annual report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 12/24/02
--------
William M. Hackett,Treasurer
----------------------------
William M. Hackett
Treasurer
I, Melvin S. Cook, President, certify that:
1. I have reviewed this annual report on Form 10-K of
Holobeam, Inc.;
2. Based on my knowledge, this annual report does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The Registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the Registrant and have:
(a) designed such disclosure controls and procedures to
ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
(b) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the "Evaluation
Date"); and
(c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the Registrant's
auditors and the audit committee of Registrant's board of directors
(or persons performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data and
have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls; and
29
6. The Registrant's other certifying officers and I have
indicated in this annual report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 12/24/02
--------
Melvin S. Cook, President
-------------------------
Melvin S. Cook
President
30
HOLOBEAM, INC.
217 First Street
P.O. Box 287
Ho-Ho-Kus, New Jersey 07423-0287
December 24,2002
US Securities and Exchange Commission
6432 General Green Way
Alexandria, VA 22312
Attn: File Support
Re: Holobeam, Inc., File No. 03385
Dear Sir or Madam:
Enclosed you will find one (1) paper format copy of
Holobeam, Inc. Annual Report, Form 10K for the year
ended September 30, 2002 which has been previously
filed/transmitted via the EDGAR system.
Kindly acknowledge receipt by signing the enclosed
photocopy of this letter and return it to us in the
accompanying stamped, self-addressed envelope.
Very truly yours,
William M. Hackett
Treasurer
mjb
Encs.
HOLOBEAM, INC.
217 First Street
P.O. Box 287
Ho-Ho-Kus, New Jersey 07423-0287
December 31, 2002
U.S. Securities and Exchange Commission
Mellon Bank - Account 910-8739
Box 360055M
Pittsburgh, PA 15251
Dear Sir or Madam:
Enclosed you will find our Check No. 1136 which has
been issued for payment of the Annual Report Form 10K
filing fee. Our file number is 0-3385.
Kindly acknowledge receipt by signing a copy of the
enclosed letter and return it to us in the accompanying
stamped, self-addressed envelope.
Very truly yours,
W.M. Hackett
Treasurer
mjb
Enc.
HOLOBEAM, INC.
FINANCIAL STATEMENTS
WITH INDEPENDENT ACCOUNTANTS' REPORT
YEARS ENDED
SEPTEMBER 30, 2002, 2001 AND 2000
R.A. FREDERICKS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
MANAGEMENT CONSULTANTS
HOLOBEAM, INC.
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
INDEPENDENT ACCOUNTANTS' REPORT F-1
FINANCIAL STATEMENTS:
BALANCE SHEETS F-2-3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF SHAREHOLDERS' EQUITY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7-22
SCHEDULES FOR THE YEARS ENDED SEPTEMBER 30, 2002,
2001 AND 2000
V PROPERTY AND EQUIPMENT F-23
VI ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY AND EQUIPMENT F-24
X SUPPLEMENTARY INCOME STATEMENT INFORMATION F-25
XI REAL ESTATE AND ACCUMULATED DEPRECIATION F-26
XII MORTGAGE LOANS ON REAL ESTATE F-27
ALL OTHER SCHEDULES HAVE BEEN OMITTED BECAUSE THEY ARE NOT APPLICABLE, OR
THE INFORMATION IS SHOWN IN THE FINANCIAL STATEMENTS OR NOTES THERETO.
R.A. FREDERICKS & COMPANY, LLP
Certified Public Accountants
Ralph A. Fredericks, CPA
Ellen T. O'Donnell, CPA
Robert J. Rosenberg, CPA
Eric Frank Zach, CPA
John Plesniarski, CPA
Mary V. Fox, CPA, CFE
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
Holobeam Inc.
Ho-Ho-Kus , New Jersey
We have audited the accompanying balance sheets of Holobeam, Inc.
as of September 30, 2002 and 2001 and the related statements of operations,
shareholders' equity and statements of cash flows for the years ended
September 30, 2002, 2001, and 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements.An audit includes,
examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects the financial position of Holobeam, Inc. as of
September 30, 2002 and 2001, and the results of its operations and its
cash flows for the years ended September 30, 2002, 2001, and 2000, in
conformity with accounting principles generally accepted in the United
States of America. Further,it is our opinion that the schedules referred
to in the accompanying index present fairly the information set forth
therein.
R.A. FREDERICKS & COMPANY, LLP
Montville, New Jersey
December 5, 2002
F-1
170 Changebridge Road Unit B-4, Montville, New Jersey 07045
Tel: (973) 575-6200 Tel: (212) 544-2204 Fax: (973) 575-5444
Members of the SEC Practice Section of the AICPA Division for CPA Firms.
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 2002 AND 2001
ASSETS
2002 2001
CURRENT ASSETS
Cash (including cash equivalents of $782,731
in 2002 and $896,486 in 2001) $ 836,042 $ 924,463
Accounts Receivable 102 46
Prepaid Income Taxes 48,782 45,000
Prepaid Expenses 5,713 27,259
------- -------
TOTAL CURRENT ASSETS 890,639 996,768
------- -------
PROPERTY AND EQUIPMENT-COST
Real Estate:
Land 452,772 452,772
Buildings and Building Improvements 6,961,244 6,961,244
--------- ---------
TOTAL 7,414,016 7,414,016
Machinery and Equipment 86,992 63,052
Furniture and Fixtures 27,548 24,910
--------- ---------
TOTAL 7,528,556 7,501,978
Less: Accumulated Depreciation and Amortization 2,364,867 2,170,484
--------- ---------
PROPERTY AND EQUIPMENT-NET 5,163,689 5,331,494
--------- ---------
OTHER ASSETS
Patents and Patent Application Cost, net of
accumulated amortization of $259,469 in 2002
and $245,042 in 2001 56,528 60,953
Deferred Charges 345,621 386,730
Unbilled Rents Receivable 1,181,345 1,155,880
--------- ---------
TOTAL OTHER ASSETS 1,583,494 1,603,563
--------- ---------
TOTAL ASSETS $ 7,637,822 $ 7,931,825
========= =========
The accompanying notes are an integral part of the financial statements.
F-2
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 2002 AND 2001
LIABILITIES AND SHAREHOLDERS' EQUITY
2002 2001
CURRENT LIABILITIES
Mortgage Payable-Current Portion $ 414,221 $ 379,611
Accounts Payable 7,669 24,894
Other Accrued Expenses 37,776 37,014
Accrued Pension 205,630 158,271
Accrued Interest Payable 35,940 38,710
-------- -------
TOTAL CURRENT LIABILITIES 701,236 638,500
-------- -------
LONG-TERM DEBT
Mortgage Payable (Net of Current Portion) 4,511,321 4,925,540
--------- ---------
TOTAL LONG-TERM DEBT 4,511,321 4,925,540
OTHER LONG-TERM LIABILITIES
Deferred Income Taxes 472,538 462,352
--------- ---------
TOTAL LONG-TERM LIABILITIES 4,983,859 5,387,892
--------- ---------
TOTAL LIABILITIES 5,685,095 6,026,392
--------- ---------
SHAREHOLDERS' EQUITY
Common Stock, Par Value $.10 Per Share
Authorized 2,000,000 Shares, Issued
287,697 in 2002 and 305,598 in 2001 28,769 30,559
Additional Paid in Capital 9,540,472 9,825,498
Accumulated Deficit (7,541,784) (7,708,183)
--------- ---------
2,027,457 2,147,874
Less: Cost of Shares in Treasury (3,300
in 2002 and 15,086 in 2001) (74,730) (242,441)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 1,952,727 1,905,433
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,637,822 $7,931,825
========= =========
The accompanying notes are an integral part of the financial statements
F-3
HOLOBEAM, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
(Restated)
2002 2001 2000
REVENUES
Rental Income $ 2,053,703 $2,053,703 $2,053,703
Interest Income 13,805 47,354 44,024
Gain on sale of fixed assets 4,000 3,963 12,133
--------- --------- ---------
TOTAL 2,071,508 2,105,020 2,109,860
---------- --------- ---------
COSTS AND EXPENSES
Rental Expense 258,572 259,004 262,880
General Expense 895,350 879,812 750,577
Interest Expense 451,958 483,830 513,106
Research and Development 214,031 183,089 192,085
--------- -------- --------
TOTAL 1,819,911 1,805,735 1,718,648
--------- --------- ---------
INCOME BEFORE INCOME TAXES 251,597 299,285 391,212
INCOME TAX EXPENSE 85,198 130,455 171,065
--------- --------- --------
NET INCOME $ 166,399 $ 168,830 $ 220,147
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 287,518 290,960 294,013
-------- ------- -------
EARNINGS PER SHARE $ .58 $ .58 $ .75
======== ======= ======
The accompanying notes are an integral part of the financial statements.
F-4
HOLOBEAM, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
Additional
Common Stock Paid-In Accumulated Treasury Stock
Shares Amount Capital Deficit Shares Amount
BALANCE, SEPTEMBER 30, 1999
AS ADJUSTED 305,598 $30,559 $9,825,498 $(8,097,160) 8,692 $133,857
Net Income (Restated) 220,147
Purchase of Treasury Stock 4,559 78,116
-------- ------- --------- ---------- ------ --------
BALANCE, SEPTEMBER 30, 2000 305,598 30,559 9,825,498 (7,877,013) 13,251 211,973
Net Income 168,830
Purchase of Treasury Stock 1,835 30,468
-------- ------- --------- ---------- ------ --------
BALANCE, SEPTEMBER 30, 2001 305,598 30,559 9,825,498 (7,708,183) 15,086 242,441
Net Income 166,399
Purchase of Treasury Stock 6,115 119,105
Retirement of Treasury Stock (17,901) (1,790) (285,026) (17,901) (286,816)
-------- ------- --------- ---------- ------ --------
BALANCE, SEPTEMBER 30, 2002 287,697 $28,769 $9,540,472 $(7,541,784) 3,300 $ 74,730
======== ======= ========= ========== ====== ========
The accompanying notes are an integral part of the financial statements.
F-5
HOLOBEAM, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
(Restated)
2002 2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $166,399 $168,830 $ 220,147
------- ------- --------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 216,888 209,890 211,115
Amortization 55,535 54,638 54,772
Patent and Patent Application Costs (10,002) (7,933) (9,962)
Gain on sale of fixed assets (4,000) (3,963) -
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 28,126 (15,659) 54,876
Deferred Income Taxes 10,186 13,394 13,395
Decrease (Increase) in:
Unbilled rents receivable (25,465) (33,486) (33,486)
Accounts and Other Receivables (56) (15) (3)
Interest Receivable - 713 1,159
Prepaid Expenses 21,546 720 (17,269)
Prepaid Income Taxes (3,782) (45,000) -
------- ------- --------
Total Adjustments 288,976 173,299 274,597
------- ------- --------
Net Cash Provided by Operating Activities 455,375 342,129 494,744
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Short-term Investments - - (738,517)
Capital Expenditures (49,082) (39,320) -
Sale of Short-Term Investments - 738,517 -
Sale of Capital Assets 4,000 11,100 -
------- ------- --------
Net Cash Provided (Used) by Investing Activities (45,082) 710,297 (738,517)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on First Mortgage (379,609) (347,895) (318,830)
Purchase of Treasury Stock (119,105) (30,468) (78,116)
------- ------- --------
Net Cash Used by Financing Activities (498,714) (378,363) (396,946)
------- ------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (88,421) 674,063 (640,719)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 924,463 250,400 891,119
------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 836,042 $ 924,463 $ 250,400
======= ======= ========
SUPPLEMENTAL CASH FLOWS DISCLOSURES
Interest Paid $ 454,728 $ 486,368 $ 515,433
Income Taxes Paid $ 78,799 $ 217,660 $ 118,890
The accompanying notes are an integral part of the financial statements.
F-6
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Operations
The Company is engaged in the rental of
real property located in New Jersey for
retail use and in development of surgical
staples and the technology used to apply
the staples for use in internal surgery,
nationwide.
b. Depreciation and Amortization
It is the policy of the Company to
provide for depreciation and amortization
of the building and equipment on a
straight-line and accelerated basis in
amounts sufficient to write-off the cost
of the assets over their estimated useful
lives, which are as follows:
Building and Building Improvements 31.5 to 40 years
Machinery and Equipment 5 to 7 years
Furniture and Fixtures 7 to 10 years
Maintenance and repairs are charged to
operations in the year in which incurred,
while replacements and betterments are
capitalized by charges to the appropriate
asset accounts. The cost and accumulated
depreciation and amortization with
respect to assets retired or otherwise
disposed, are eliminated from the assets
and related accumulated depreciation and
amortization accounts and any profit or
loss resulting therefrom is reflected in
operations.
Patent and patent application costs are
amortized on a straight-line basis over
a ten year period.
c. Earnings Per Share
Earnings per share of common stock has
been computed by dividing net income by
the weighted average number of common
shares outstanding during the year.
Diluted earnings per share of common
stock is the same as earnings per share
prior to dilution.
d. Common Stock
Each share of common stock is entitled to
one vote. No such shares of common stock
were reserved at September 30, 2002,
2001, or 2000. On May 6, 2002, the
Company retired 17,901 shares of Treasury
Stock purchased between 1998 and April of
2002 at a cost of $286,816.
e. Statement of Cash Flows
For purposes of reporting cash flows, all
liquid investments with original
maturities of three months or less are
considered cash equivalents.
F-7
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
f. Income Taxes
Deferred income taxes are provided on
temporary differences between financial
statement and income tax bases of assets
and liabilities. Generally, deferred
tax assets are recognized in the current
period for the future benefit of net
operating loss carry forwards and items
for which income has been recognized for
financial statement purposes, but will be
included in future periods for tax
purposes. Valuation allowances are
established when necessary to reduce
deferred tax assets to the amount
expected to be realized.
g. Deferred Charges
It is the policy of the Company to charge
costs associated with the acquisition of
long term debt (mortgages) to expense
over the term of the mortgage.
In addition, the Company charges costs
associated with the procurement of
operating leases, specifically real
estate brokers commissions, to expense
during the term of the operating lease.
h. Use of Estimates
The preparation of financial statements
requires management to make estimates and
assumptions that affect certain reported
amounts and disclosures. Accordingly,
actual results could differ from these
estimates.
I. Short-Term Investments
The Company accounts for marketable
securities in accordance with the
provisions of SFAS No. 115 "Accounting
for Certain Investments in Debt and
Equity Securities".
Short-term investments have an original
maturity of more than three months and a
remaining maturity of less than 1 year.
These investments consist of marketable
debt securities which are stated at
amortized cost as the Company has
classified these securities as held-to-
maturity.
j. Revenue Recognition
Base rental revenue is recognized on a
straight-line basis over the terms of the
respective leases. Unbilled rents
receivable represents the amount by which
straight-line rental revenue exceeds
rents currently billed in accordance with
the lease agreements.
F-8
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 2. INCOME TAXES
2002 2001 2000
Current taxes:
Federal $ 70,952 $89,950 $122,221
State 4,060 27,110 35,449
-------- ------- --------
Total $75,012 $117,060 $157,670
-------- ------- --------
Deferred taxes:
Federal 8,660 11,385 11,385
State 1,526 2,010 2,010
-------- ------- --------
Total 10,186 13,395 13,395
-------- ------- --------
Provision for income
taxes $85,198 $130,455 $171,065
======== ======= ========
The deferred tax assets and liabilities recorded on the
balance sheet as of September 30, are as follows:
2002 2001 2000
Deferred tax liabilities:
Federal $401,657 $392,994 $381,610
State 70,881 69,358 67,348
-------- ------- --------
Total $472,538 $462,352 $448,958
======== ======= ========
The sources of deferred income taxes for the years ended
September 30, are as follows:
2002 2001 2000
Unbilled Rents
Receivable $1,181,345 $1,155,880 $1,122,394
The difference between the statutory federal income tax
rate on income before income taxes and the Company's
effective income tax rate is as follows:
2002 2001 2000
Federal statutory
income tax rate 34% 34% 34%
State tax provisions,
net of
federal benefits 6 6 6
Other (6) 4 4
--- --- ---
Effective income
tax expense rate 34% 44% 44%
=== === ==
F-9
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES
The Company has leased two buildings at it's
a & S Drive, Paramus, N.J. site for retail
use. The Sports Authority, Inc. has leased
the 62,000 sq. ft. building for a lease term
of twenty (20) years and the Tandy
Corporation has leased the 30,000 sq. ft.
building for use as a Comp USA retail store
for a lease term of fifteen (15) years. The
tenants are also responsible for real estate
taxes and other assessments as defined in
the operating lease agreements.
2002 2001 2000
Buildings and building improvements:
Cost $ 6,961,244 $6,961,244 $6,961,244
Accumulated
depreciation 2,326,441 2,126,482 1,926,523
--------- --------- ---------
Net buildings
and building
improvements $ 4,634,803 $4,834,762 $5,034,721
========= ========= =========
The minimum future rentals on noncancellable operating
leases for the years ending September 30, are as follows:
2003 $2,116,467 2008 $2,331,017 2012 $1,373,022
2004 2,116,467 2009 2,331,017 ---------
2005 2,225,142 2010 1,497,842
2006 2,225,142 2011 1,497,842
2007 2,322,194
Total $21,036,152
===========
Net rental income consists of the following:
(Restated)
2002 2001 2000
Rental income $2,053,713 $2,053,703 $2,053,703
Depreciation expense (199,959) (199,959) (199,959)
Other expenses (58,613) (59,045) (62,921)
---------- --------- ---------
Rental income, net $ 1,795,141 $1,794,699 $1,790,823
========== ========= =========
F-10
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
In 2002, 2001, and 2000, depreciation
expense included all depreciation of the
rental buildings and building improvements.
a) The Company entered into a triple net
lease agreement with The Sports
Authority, Inc., Fort Lauderdale,
Florida. The term of the lease is
twenty (20) years with four (4) options
to extend the term for an additional
period of five (5) years in each
option.
The Company was responsible for funding
certain improvements to the building
pursuant to the lease agreement and
incurred costs amounting to $3,567,276
at September 30, 1993. The Company
reimbursed The Sports Authority, Inc.
for such improvements and on February
5, 1993 the original lease was amended
and the base rent was increased to
reflect the improved condition of the
building.
The Company obtained additional
mortgage financing totaling $7,500,000
in order to fund reimbursement to The
Sports Authority, Inc., whose former
parent company, K-Mart Corporation (K-
mart Corporation is a public company
who recently filed for bankruptcy
protection and announced that it will
restate prior results) has guaranteed
the incremental monthly rental payments
over the remaining life of the lease.
(See Note 7).
The base annual rents under the amended
lease were increased as follows:
2nd through 5th years $1,208,217
6th through 10th years 1,295,716
11th through 15th years 1,391,967
16th through 20th years 1,497,842
In addition to the rent, the tenant is
responsible for real estate taxes and
other assessments as defined in the
operating lease.
b) Tandy Corporation has constructed a
30,000 sq. ft. building on the
Company's site located in Paramus, N.J.
for use as a Computer City retail
store. Tandy Corporation commenced
paying rent to the Company pursuant to
the terms of the operating lease on
October 1, 1994. The lease term is for
fifteen (15) years at an annual rental
of $630,000 for the first five years,
$724,500 for the second five years and
$833,175 for the last five years.
Tandy Corporation has three (3) options
to extend the term of the lease for an
additional period of five (5) years for
each such option.
Pursuant to the terms and conditions of
the lease, the Company agreed to
reimburse Tandy Corporation up to
$1,200,000 plus the costs of paving the
driveway and parking area and one-half
(1/2) the cost of exterior lighting not
attached to the building. This
construction allowance was amended to
$1,189,675 and paid in cash to Tandy
Corporation on November 9, 1995.
F-11
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES
(Continued)
Costs associated with the 30,000 sq.
ft. building are as follows:*
Construction allowance paid to Tandy
Corporation $1,189,675
Costs incurred by the Company for use
variance
and site improvement (deferred until
put in
service at October 1, 1994) 434,821
Construction costs incurred through
September 30,
1994 (deferred until put in service at
October 1, 1994) 964,505
Construction costs incurred during 1995 3,512
-------
Total costs of 30,000 sq. ft. building
occupied
by Tandy Corporation. $2,592,513
=========
(*) Does not include costs of
improvements incurred by the tenant.
Tandy Corporation sold Computer City,
Inc. to CompUSA, Inc. on September 1,
1998, the lease was assigned to
CompUSA, Inc. and continues to be
guaranteed by Tandy Corporation. On
May 18, 2000 Tandy Corporation changed
its name to Radioshack Corporation.
On January 23, 2000, CompUSA, Inc.
entered into a merger agreement with
Grupo Sanborns, S.A. de C.V. and TPC
Aquisition Corp., a subsidiary of Grupo
Sanborns, S.A. de C.V. The financial
information for Grupo Sanborns, S.A. de
C.V. is unavailable. The lease
continues to be guaranteed by Tandy
Corporation.
F-12
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES
(Continued)
The following is a condensed summary of
financial information on the above publicly
held companies:
Radioshack
The Sports
Corporation
Authority K-Mart
12/31/01
2/02/02 1/30/02
(In Millions) (In Thousands) (In Millions)
Current assets $ 1,714 $411,669 $ 7,884
------ -------- -------
Total assets 2,245 601,157 14,298
------ -------- -------
Current liabilities 826 222,931 624
------ -------- -------
Total liabilities 1,467 446,034 9,950
------ -------- -------
Total stockholders'
equity 778 155,123 4,348
------ -------- -------
Net sales 4,776 1,418,998 36,151
------ -------- -------
Cost of sales 2,479 1,028,753 29,936
------ -------- -------
Gross profit 2,297 390,245 6,215
------ -------- -------
Income (loss) before
income taxes
(continuing) 292 12,305 (2,816)
------ -------- -------
Income tax expense (benefit) 125 - (115)
------ -------- -------
Net income (loss) $ 167 $ 12,350 $ (2,418)
------ -------- -------
NOTE 4. RESEARCH AND DEVELOPMENT
Research and development expenses in the
amount of $214,031 in 2002, $183,089 in
2001, and $192,085 in 2000, were charged to
operations and included in costs and
expenses.
F-13
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 5. RENT EXPENSE
The Company leases approximately 1,000
square feet of office and laboratory space
on an annual basis. Lease payments are $950
per month. Rent expense was $11,400 in
2002, $11,400 in 2001 and $11,400 in 2000.
NOTE 6. PATENTS
The Company has discontinued efforts
relating to solar cells and semi-conductor
technology. Work in the field has moved in
other directions than that of the Company's
technology and there has been a substantial
reduction of government support in this
technical area. The funding that had been
received by laboratories exploring the
Company's technology has also terminated.
The Company is continuing its efforts in the
area of surgical staple design for use in
internal surgery. Several United States
Patents have been issued and foreign
applications have been filed on a novel
staple. The staple has been produced and it
is anticipated that tests will continue
during 2002 at a medical center. Research
and development costs in the amounts of
$214,031, $183,089 and $192,085 have been
expended in connection with the surgical
staple during 2002, 2001 and 2000,
respectively.
NOTE 7. LONG-TERM DEBT
Long-term debt consists of two loans, one in
the amount of $6,000,000 payable in monthly
installments of $55,328 including interest
at 8.77% until 2011. The second loan in the
amount of $1,500,000 is payable in monthly
installments of $13,767 including interest
at 8.7% until 2011.
Costs incurred in connection with this
mortgage amounted to $102,520 and are
charged to expense over the life of the
mortgage. This amount is included in the
balance of deferred charges as detailed in
Note 8. The expense for the next five (5)
years is presented below:
2003 $5,126
2004 5,126
2005 5,126
2006 5,126
2007 5,126
F-14
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 7. LONG-TERM DEBT (Continued)
The combined balance outstanding for each debt
issued at the end of 2002, 2001, and 2000 is
as follows:
2002 2001 2000
First Mortgage on
62,000 sq. ft. Building $4,925,542 $5,305,151 $5,653,046
Less Current Portion 414,221 379,611 347,897
------- -------- ---------
Long-Term Portion $4,511,321 $4,925,540 $5,305,149
========= ========= =========
The mortgage is secured by the land, building
and operating lease agreement with The Sports
Authority, Inc. (See Note 3).
The principle payments of long-term debt for
the term of the mortgage is as follows:
2003 $414,221 2008 $640,727
2004 451,978 2009 699,136
2005 493,181 2010 762,870
2006 538,140 2011 338,092
2007 587,197
NOTE 8. DEFERRED CHARGES
The composition of deferred charges and
related amortization is as follows:
Real Estate
Mortgage Brokers Commissions
Total Costs Sports Authority Tandy Corp.
Original Cost $712,160 $102,520 $279,584 $330,056
Accumulated Amortization 366,539 49,551 140,959 176,029
--------- ------- ------- --------
Balance 9/30/02 $345,621 $ 52,969 $138,625 $154,027
========= ======= ======= ========
Original Cost $712,160 $102,520 $279,584 $330,056
Accumulated Amortization 325,430 44,425 126,979 154,026
--------- ------- ------- --------
Balance 9/30/01 $386,730 $58,095 $152,605 $176,030
========= ======= ======= ========
F-15
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 9. DEFERRED SITE COST
The Company incurred costs in connection with
an application for a use variance and site
improvements for the property owned by the
Company at 50 A&S Drive, Paramus, New Jersey,
adjacent to the building owned by the Company
and leased to the Sports Authority, Inc. Such
costs amounting to $806,656 have been
considered to be part of the site cost and are
included in fixed assets.
NOTE 10. OTHER EMPLOYEE BENEFITS
The Financial Accounting Standards Board
issued SFAS No. 106 " Employers Accounting for
Post Retirement Benefits", and SFAS No. 112
"Employers Accounting for Post Employment
Benefits", which changed employers' accounting
for these benefits. Since the Company has no
post-retirement benefit plans, and does not
offer post employment benefits, SFAS No. 106
and SFAS No. 112 are not applicable. During
1999 the Financial Accounting Standards Board
issued SFAS No. 132 "Employers' Disclosures
about Pensions and Other Post Retirement
Benefits." SFAS No. 132 is not applicable for
post employment benefits, but is applicable to
the company's pension plan (See Note 14).
NOTE 11. CONCENTRATION OF CREDIT RISK
Substantially all of the Company's income is
rental income received from two tenants.
These tenants are subject to long-term lease
agreements. (See Note 3)
NOTE 12. FINANCIAL REPORTING BY BUSINESS SEGMENTS
The Company has adopted Financial Accounting
Standards Board Statement (SFAS) No. 131
"Disclosures About Segments of an Enterprise
and Related Information". The Company's
reportable segments are strategic business
units that involve different products and
services. They are managed by a single
management team.
The Company has three business segments as
follows:
Surgical Staples-Engaged in engineering and
design of surgical staples for use in internal
surgery, and in the technology used to
fabricate the equipment issued to apply the
staples. This segment of the Company's
business is still in the research and
development stage.
Electro-Optical-Engaged in engineering and
development of equipment for the semi-
conductor industry. The company has
discontinued efforts relating to the electro-
optical segment of its business.
F-16
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 12. FINANCIAL REPORTING BY BUSINESS SEGMENTS(Continued)
Rental-Engaged in the leasing of real estate
the two retail buildings owned by the Company
at 50 A&S Drive, Paramus, New Jersey.
Approximately 98% of the Company revenues are
earned by this segment, all of which is
received from two tenants (see Note 11).
The accounting policies of the segments are
the same as those described in the summary of
significant accounting policies. The Company
evaluates the performance of its operating
segments based on income before income taxes.
There are no intercompany sales. The Company
derives all of its revenue in the United
States.
Summarized financial information concerning
the Company's reportable segments is shown in
the following table. The "Other" column
includes corporate income and expense items
not allocated to reportable segments.
Revenues
(Restated)
2002 2001 2000
Business Segments:
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 2,053,703 2,053,703 2,053,703
Other 17,805 51,317 56,157
--------- --------- ---------
Total $ 2,071,508 $2,105,020 $2,109,860
========= ========= =========
Business Segments: Income (Loss)
(Restated)
2002 2001 2000
Surgical Staples $ (214,031) $ (183,089) $ (192,085)
Electro-Optical - - -
Real Estate Rental 1,795,131 1,794,699 1,790,823
--------- --------- ---------
Total 1,581,100 1,611,610 $1,598,738
--------- --------- ---------
General and
Administrative
Expenses (895,350) (879,812) (750,577)
Interest Expense (451,958) (483,830) (513,106)
Other Income 17,805 51,317 56,157
Income Tax Expense (85,198) (130,455) (171,065)
--------- --------- ---------
Total (1,414,701) (1,442,780) (1,378,591)
--------- --------- ---------
Net Income $ 166,399 $ 168,830 $ 220,147
========= ========= =========
Business Segments: Identifiable Assets
(Restated)
2002 2001 2000
Surgical Staples $ 55,179 $ 56,906 $ 59,804
Electro-Optical 1,349 4,047 6,745
Real Estate Rental 6,614,542 6,830,145 7,037,727
Other 966,752 1,040,727 1,039,347
--------- --------- ---------
TOTAL ASSETS $ 7,637,822 $7,931,825 $8,143,623
========= ========= =========
F-17
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 12. FINANCIAL REPORTING BY BUSINESS SEGMENTS(Continued)
Business Segments:
Capital Expenditures
2002 2001 2000
Surgical Staples $ - $ - $ -
Electro-Opitical - - -
Real Estate Rental - - -
Other 49,083 39,320 -
--------- --------- ---------
$ 49,083 $ 39,320 $ -
========= ========= =========
Property and Equipment
Business Segments Depreciation
2002 2001 2000
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 199,959 199,959 199,959
Other 16,929 9,931 11,156
--------- --------- ---------
$216,888 $209,890 $ 211,115
========= ========= =========
Intangible Assets
Amortization
2002 2001 2000
Surgical Staples $ 11,728 $ 10,831 $ 9,937
Electro-Optical 2,698 2,698 3,726
Real Estate Rental 41,109 41,109 41,109
Other - - -
--------- --------- ---------
$ 55,535 $ 54,638 $ 54,772
========= ========= =========
NOTE 13. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial
instruments, none of which are held for
trading purposes. The Company estimates that
the fair value of all financial instruments at
September 30, 2002, does not differ materially
from the aggregate carrying values of its
financial instruments recorded in the
accompanying balance sheet. The estimated
fair value amounts have been determined by the
Company using available market information and
appropriate valuation methodologies.
Considerable judgement is necessarily required
in interpreting market data to develop the
estimates of fair value, and accordingly, the
estimates are not necessarily indicative of
the amounts that the Company could realize in
a current market exchange.
F-18
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 14. PENSION PLAN
The Company established a defined benefit plan
covering all eligible employees, who have
completed one year of service. Benefits are
based on years of service and the average
compensation during the best three years of
participation.
The Company's funding policy is to make annual
contributions to the plan in amounts such that
all employees' benefits will be fully provided
for by the time they retire. Contributions
are intended to provide not only for benefits
attributed to service to date but also for
those expected to be earned in the future.
Although it has not expressed any intention to
do so, the Company has the right under the
plan to discontinue its contributions at any
time and to terminate the Plan subject to the
provisions set forth in ERISA.
The Company has adopted SFAS No. 132
"Employers' Disclosures about Pensions and
Other Post Retirement Benefits". The
provisions of SFAS No. 132 revise employers'
disclosures about pension and other post
retirement benefit plans. It does not change
the measurement or recognition of this plan.
It standardizes the disclosure requirements
for pensions and other post retirement
benefits to the extent practicable.
The Company provides defined benefit pension
plan to the employees. The following provides
a reconciliation of benefit obligations, plan
assets, and funded status of the plan.
2002 2001 2000
Changes in benefit obligation:
Benefit obligation at October 1 $1,782,702 $1,126,448 $ 719,594
Service cost 370,905 328,535 328,003
Interest cost 162,099 185,032 78,851
--------- --------- ---------
Benefit obligation at September 30 $2,315,706 $1,640,015 $1,126,448
========= ========= =========
2002 2001 2000
Change in plan assets:
Fair value of plan assets
at October 1 $1,407,957 $1,014,185 $ 640,223
Company contributions 398,584 341,103 330,122
Actual return on plan assets 4,103 52,669 43,840
--------- --------- ---------
Fair value of plan assets
at September 30, $1,810,644 $1,407,957 $1,014,185
========= ========= =========
Funded status of Plan $ (505,062) $(232,058) $(112,263)
Unrecognized Net (Gain) Loss 396,204 159,063 80,346
--------- --------- ---------
(Accrued) or Prepaid Pension $ (108,858) $ (72,995)$ (31,917)
========= ========= =========
F-19
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 14. PENSION PLAN (Continued)
The net periodic pension cost for the year
ended September 30, includes the following
components:
2002 2001 2000
1. Service cost - benefits earned
during the period $ 370,905 $328,535 $328,003
--------- --------- --------
2. Interest cost on projected benefit
obligation 162,099 114,801 78,851
--------- --------- --------
3. Actual return on plan assets (4,103) (52,629) (43,840)
--------- --------- --------
4. Net amortization and deferral:
a. Amortization of unrecognized net
obligation (asset) at transition - - -
b. Amortization of unrecognized
prior service cost - - -
c. Amortization of unrecognized net
(gain) or loss (94,454) (18,364) (975)
d. Asset gain or (loss) deferred - - -
e. Total (94,454) 18,364) $ (975)
--------- --------- --------
5. Net periodic pension cost (credit)=
(Item 1 + item 2 + item 3 + item 4(e)$434,447 $372,343 $362,039
========= ========= ========
The net periodic pension cost for 2002, 2001
and 2000 was determined based on a 7% discount
rate and a long - term rate of return of 7% on
plan assets.
NOTE 15. MARKETABLE SECURITIES
At September 30, 2002, 2001 and 2000, all
short-term marketable debt securities were
classified as held-to-maturity and carried at
amortized cost. Investments consisted of the
following:
2002 2001 2000
U.S. Government Securities $ - $ - $738,517
------ ----- -------
$ - $ - $738,517
====== ===== =======
At September 30, 2000 the fair value of
investments approximated its amortized cost
and therefore there were no significant
unrealized gains or losses.
All investments at September 30 mature in one
year or less.
F-20
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 16. PRIOR PERIOD ADJUSTMENT
The financial statements for the year ended
September 30, 2000 were restated to correct an
understatement of rental income due to an
error in the computation of annual rental
income. The effect of prior period accounting
errors relating to rental income resulted in
the following changes as of September 30,
2000;
2000
As previously As
Reported Restated
Balance Sheet:
Rents Receivable $ - $1,122,394
Deferred Taxes Payable - 448,958
Deficit (8,550,449) (7,877,013)
Statement of Operations:
Rental Income 2,020,217 2,053,703
Income Before Income
Taxes 357,726 391,212
Income Taxes 157,670 171,065
Net Income 200,056 209,909
Earnings Per Share $ .68 $ .75
NOTE 17. SUPPLEMENTAL QUARTERLY FINANCIAL DATA
(UNAUDITED)
For the Fiscal Year Ended September 30, 2002
First Second Third Fourth
Quarter Quarter Quarter Quarter
Total Revenues $501,718 $498,281 $499,095 $572,414
Gross Profit N/A N/A N/A N/A
Income Before
Extraordinary
Items 63,009 16,539 42,892 43,959
Weighted Average
Number of Shares 290,317 288,075 286,738 287,518
Earnings Per Share .22 .06 .15 .15
Net Income $63,009 $16,539 $42,892 $43,959
F-21
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 17. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)(Continued)
For the Fiscal Year Ended September 30, 2001
Restated Restated Restated
First Second Third Fourth
Quarter Quarter Quarter Quarter
Total Revenues 525,023 513,832 513,820 552,345
Gross Profit N/A N/A N/A N/A
Income Before
Extraordinary
Items 75,662 53,810 65,717 (26,359)
Weighted Average
Number of Shares 291,567 291,213 290,547 290,960
Earnings Per Share .26 .18 .23 (.09)
Net Income 75,662 53,810 65,717 (26,359)
F-22
HOLOBEAM, INC. SCHEDULE V
PROPERTY AND EQUIPMENT
SEPTEMBER 30, 2002, 2001 AND 2000
Balance at Balance at
Beginning End of
CLASSIFICATIONS of Year Additions Retirements Year
YEAR ENDED SEPTEMBER 30, 2000:
Machinery and Equipment $ 66,939 $ - $ - $ 66,939
Furniture and Fixtures 20,633 - - 20,633
-------- ----------- ----------- --------
TOTAL $ 87,572 $ - $ - $ 87,572
======== =========== =========== ========
YEAR ENDED SEPTEMBER 30, 2001:
Machinery and Equipment $ 66,939 $ 35,043 $ 38,930 $ 63,052
Furniture and Fixtures 20,633 4,277 - 24,910
-------- ----------- ----------- --------
TOTAL $87,572 $ 39,320 $ 38,930 $ 87,962
======== =========== =========== ========
YEAR ENDED SEPTEMBER 30, 2002:
Machinery and Equipment $ 63,052 $ 46,444 $ 22,504 $ 86,992
Furniture and Fixtures 24,910 2,638 - 27,548
-------- ----------- ----------- --------
TOTAL $ 87,962 $ 49,082 $ 22,504 $114,540
======== =========== =========== ========
The accompanying notes are an integral part of the financial statements.
F-23
HOLOBEAM, INC. SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY AND EQUIPMENT
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
Balance at Balance at
Beginning End of
CLASSIFICATIONS of Year Additions Retirements Year
YEAR ENDED SEPTEMBER 30, 2000:
Machinery and Equipment $ 49,968 $ 8,536 $ - $ 58,504
Furniture and Fixtures 4,740 2,620 - 7,360
-------- ----------- ----------- --------
TOTAL $ 54,708 $ 11,156 $ - $ 65,864
======== =========== =========== ========
YEAR ENDED SEPTEMBER 30, 2001:
Machinery and Equipment $ 58,504 $ 7,138 $ 31,793 $ 33,849
Furniture and Fixtures 7,360 2,793 - 10,153
-------- ----------- ----------- --------
TOTAL $ 65,864 $ 9,931 $ 31,793 $ 44,002
======== =========== =========== ========
YEAR ENDED SEPTEMBER 30, 2002:
Machinery and Equipment $ 33,849 $ 13,201 $ 22,504 $ 24,546
Furniture and Fixtures 10,153 3,727 - 13,880
-------- ----------- ----------- --------
TOTAL $ 44,002 $16,928 $ 22,504 $ 38,426
======== =========== =========== ========
The accompanying notes are an integral part of the financial statements.
F-24
HOLOBEAM, INC. SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
2002 2001 2000
Maintenance and Repairs $ - $ - $ -
======= ========== =======
Depreciation and Amortization of
Intangible Assets $55,535 $ 54,638 $ 54,772
======= ========== =======
Taxes, Other than Payroll and
Income Tax
Franchise $ 10,060 $ 10,620 $ 10,572
Real Estate - - -
Other 213 58 35
------- ---------- -------
$10,273 $ 10,678 $10,607
======= ========== =======
Royalties $ - $ - $ -
======= ========== =======
Advertising $ - $ 189 $ -
======= ========== =======
The accompanying notes are an integral part of the financial statements.
F-25
HOLOBEAM, INC. SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 2002
Life in
Which
Deprec-
Cost Capitalized Gross Amount at (2) iaton
Initial Subsequent Which Carried at Accum- in Latest
Cost to Company To Acquisition Close of Period (1) ulated Date Date Income
Incum - Bldg & Carrying Bldg & Deprec- of Acqu- Stmt is
brances Land Improv Improv Costs Land Improv Total iation Constr. ired Computed
Improved Land
Paramus, NJ $ 0 $218,402 $ 0 $ 0 $ 0 $218,402 $ 0 $ 218,402 $ 0 1971 -
Improved Land
Paramus, NJ 0 173,565 0 60,805 0 234,370 0 234,370 0 1983 -
Building I
Paramus, NJ
Improvements 6,777,260 0 718,881 3,649,850 0 0 4,368,731 4,368,731 1,800,183 1958 1971 3 to 40
years
Building II
Paramus, NJ 0 0 2,592,513 0 0 0 2,592,513 2,592,513 526,258 1995 1995 30 Years
--------- ------- --------- --------- -- ------- --------- --------- ---------
$6,777,260 $391,967 $3,311,394 $3,710,655 $ 0 $452,772 $6,961,244 $7,414,016 $2,326,441
========= ======= ========= ========= == ======= ========= ========= =========
(1)Activity for the three years (2)Activity for the three years
ended September 30, 2002 is ended September 30, 2002 is
as follows: 2002 2001 2000 as follows: 2002 2001 2000
Balance at Balance at
Beginning Beginning
of Year $7,414,016 $7,414,016 $7,414,016 of Year $2,162,482 $1,926,523 $1,726,564
Additions: Additions:
Improvements 0 0 0 Depreciation 199,959 199,959 199,959
Acquisitions 0 0 0 Less Retirements 0 0 0
--------- --------- --------- --------- --------- ---------
7,414,016 7,414,016 7,414,016
Deductions Balance at
During Year: End of Year: $2,362,441 $2,126,482 $1,926,523
Retirements 0 0 0 ========= ========= =========
Cost of Real
Estate Sales 0 0 0
--------- --------- ---------
Balance at
End of Year $7,414,016 $7,414,016 $7,414,016
========= ========= =========
The aggregate cost for Federal income tax purposes
at September 30, 2002 is $7,414,016.
The accompanying notes are an integral part of these financial statements.
F-26
HOLOBEAM, INC. SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 2002
Principal Amount
of Loans
Face Carrying Subject to
Periodic Amount Amount Delinquent
Interest Final Maturity Payment Prior of of Principal
Rate Date Terms Items Mortgage Mortgage(1) or Interest
Mortgage Payable
Building and Improvements 8.7% February 5, 2011 $13,367 None $1,500,000 $ 983,461 None
Mortgage Payable
Building and Improvements 8.77% February 5, 2011 $56,328 None $6,000,000 $3,942,081 None
---------
$4,925,542
=========
Activity for the three
years ended September 30,
2002 is as follows:
2002 2001 2000
Balance at Beginning of Year $5,305,152 $5,653,046 $5,971,876
Additions During Year:
Commercial Loans 0 0 0
New Mortgages 0 0 0
--------- --------- ---------
5,305,152 5,653,046 5,971,876
Deductions During Year:
Principal Payments 379,610 347,894 318,830
Mortgage Payments 0 0 0
--------- --------- ---------
Balance at End of Year $4,925,542 $5,305,152 $5,653,046
========= ========= =========
(1) The cost for Federal income tax
Purposes at 9/30/02 $4,925,542
The accompanying notes are an integral part of these financial statements.
F-27