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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, 2003, Commission file
------------------
number 03385
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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
1
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. $5,406,543.00 at
------------
November 20, 2003 computed on the average of the bid and asked
prices for Holobeam, Inc. common shares at November 20, 2003.
Indicate the number of shares outstanding of each of
the Registrant's classes of common stock, as of the latest
practicable date. 273,749 common Shares at December 12,2003.
-----------------------------------------
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.
9.Financial Statements for the years ended September 30, 2002
and 2003.
10.Annual Reports on Form 10K for the years ended September 30,
1998, 1999, 2000, 2001 and 2002.
11.Quarterly Reports on Form 10Q for the Quarter Ended June 30,
2003.
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 was formerly engaged 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, 2003,
2002 and 2001.
(c) Description of Business.
--- -----------------------
(I) Principal Activities and
(ii) Status of products and Real Estate
Properties.
Medical Staples
---------------
The Registrant has discontinued its efforts in the area of
medical staples for use in internal surgery. Several United
States Patents and foreign patents were received covering a
novel staple. The staple has been produced and animal testing
took place during 2003, 2002 and 2001. Final test results
indicated insufficient commercial value for the staple. As a
result, the Registrant discontinued funding for the project
during 2003.
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 were
acquired through commercial businesses engaged in the
distribution of such supplies.
(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. Improved Staples 08/18/98
2,155,750 (PCT NAT)
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. Staples 03/01/94
PCT/US94/02227
9. 08/502,988 Staple Overlap 08/18/95
10. 07/753,116 Surgical Stapling 01/19/93
Method
11. 07/934,858 Surgical Stapling 11/23/93
Method
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 11/23/93
Method
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
4
19. Brazilian Pat.#9405840-7 Improved Staples 09/01/95
20. US Pat. #6,083,242 Improved Staples 07/04/00
21. Australian Pat. #704533 Improved Staples 08/05/99
During 2003 the Registrant's research activities in
connection with the surgical staples was terminated. As a
result, the unamortized portion of the Patents and Patent
Applications costs associated with the surgical staple project
were written off and charged to operations. Such write-off
amounted to $60,052.00.
(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.
During 2003 the Registrant discontinued its activities
with respect to medical staples and their application.
Results of the final phase of tests did not indicate
sufficient commercial feasibility for the technology developed
by the Registrant and funding of engineering and research was
terminated.
Competition in the real estate office rental segment of
the Registrant's business activities was significant in the
Bergen County, New Jersey market in
5
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 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 31,000 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 2003 and 2002, the
Registrant expended $172,746.00 and $214,031.00, respectively,
in
6
connection with the furtherance of this activity. Such costs
have been currently expensed to operations and consist
principally of materials, supplies and costs associated with
design and development. During 2003 the Registrant terminated
funding for the surgical staples project. (Reference is made
to Form 10Q, Management's Discussion and Analysis of Financial
Conditions and Results of Operations for the Quarter Ended
June 30, 2003.)
(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 were limited to engineering, development and animal
testing of medical staple design with fabrication and
manufacturing of prototypes and models sub-contracted to other
firms.
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, 2003 the Registrant employed three
persons as compared to three persons at September 30, 2002
and three persons at September 30, 2001.
(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.
7
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 31,000
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 accompanying Form 10K
for the years ended September 30, 1997 and 1996.)
8
Building Building
Paramus, NJ Paramus,NJ
----------- ----------
Year Acquired 1971 1994
Gross Square Footage 62,000 31,000
Percent Leased at 09/30/03 100% 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 $4,511,328 $ -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 31,000 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
9
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 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:
10
2003 100%
2002 100%
2001 100%
2000 100%
1999 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
which such expenditures were made appears below. No such
expenditures were made in 1996, 1997, 1998, 1999, 2000, 2001,
2002 or 2003.
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
11
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.
12
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 12, 2003 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 12, 2003 was 449.
(c) No dividends have been paid or declared on the
Common Stock of the Registrant during the 2003, 2002 or 2001
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: Over the Counter Bulletin Board [OTCBB]).
13
2003 2002
---- ----
high low high low
---- --- ---- ---
Quarter Ended Dec. 31 25.50 20.00 15.00 14.50
Quarter Ended Mar. 31 26.00 17.00 25.00 18.00
Quarter Ended June 30 24.00 17.00 23.50 21.00
Quarter Ended Sept. 30 23.00 17.00 22.00 22.00
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, 1998 and ending September 30, 2003 is presented
below.
HOLOBEAM, INC.
SUMMARY OF SELECTED FINANCIAL DATA
FOR THE YEARS ENDED SEPTEMBER 30,
RESTATED
--------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Gross Income $2,086,635 $2,071,508 $2,105,020 $2,109,860 $2,053,703
Net Income (Loss) 204,370 166,399 168,830 220,147 273,953
Weighted Average
Number
of Common Shares
Outstanding 275,642 287,518 290,960 294,013 298,101
Earnings Per
Share (Loss) 0.74 0.58 0.58 0.75 0.92
Total Assets 7,298,664 7,637,822 7,931,825 8,143,623 8,252,151
Long-Term Debt 4,059,346 4,511,321 4,925,540 5,305,149 5,653,044
Shareholders' Equity 1,902,922 1,952,727 1,905,433 1,767,071 1,628,040
Gross Rental Income 2,053,703 2,053,703 2,053,703 2,053,703 2,053,703
Net Rental Income 1,798,151 1,795,141 1,794,699 1,790,823 1,795,908
It should be noted that years ended 2000 and 1999 have
been restated. (Reference is made to Note 16 to the
financial statements of the Registrant for the year
ending September 30, 2001.)
14
Item 7. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and
- -------------
Results of Operations.
----------------------
(1) Liquidity.
--- ----------
Cash flows generated from operating activities
during 2003 were $736,367.00 and were generated
principally from the Registrant's real estate rental
activities.
The Registrant anticipates that cash flows
associated with the real estate rental segment of its
business will be sufficient to sustain operations during
the terms of the operating leases on the properties owned
by the Registrant in Paramus, New Jersey. (Reference is
made to Note 3 of the accompanying financial statements
for the years ended September 30, 2003 and 2002.)
Minimum future rental income on the non-cancellable
operating leases totals $17,303,862.00 and are expected
to produce sufficient cash flows to fund the Registrant's
activities through 2012, provided that there are no
extraordinary events that would cause early termination
of the operating leases.
The operating leases are with Tandy
Corporation/CompUSA and The Sports Authority, Inc. and
expire in 2009 and 2012, respectively. Both leases
contain options for renewal periods of five (5) years.
During 2003, the Registrant's working capital
decreased to $38,569.00, which represents a decrease of
$150,834.00 when compared to the working capital at
September 30, 2002. It is the opinion of the Registrant
that sufficient cash flows will be provided by current
revenues to sustain the Registrant's operating activities
over the remaining terms of the operating leases.
15
(2) Capital Resources.
--- ------------------
During 2003 the Registrant discontinued its funding
of the experiments and engineering in connection with the
surgical staples and their application. (Reference is
made to Annual Report, Form 10K, Item 7., for the years
ended September 20, 2000, 2001, 2002 and 2003.) The
final phase of tests did not indicate sufficient
commercial value for the Registrant to continue its
financial support of the project and as a result, the
testing, engineering and experiments were terminated
during the third quarter of fiscal 2003.
The Registrant's expenditures for the surgical
staple development totalled $172,746.00 during 2003, down
$41,285.00 when compared to 2002 expenses. Such decrease
represents the reduction in expenses associated with the
abandonment of the project. No expenditures for the
project are expected during 2004.
During 2003, the Registrant contributed $347,040.00
to its defined benefit pension plan for the year ended
September 30, 2003. The contribution was charged 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
2004 and anticipates no materially adverse effect upon
its financial condition. (Reference is made to Note 14
to the accompanying financial statements for the years
ended September 30, 2003 and 2002.)
The Registrant's rental properties, located at 50
A&S Drive, Paramus, New Jersey do not require
refurbishment or renovation at this time and none are
planned for 2004. The tenants are responsible for real
16
estate taxes, maintenance expenses and insurance costs. The
Registrant's costs and projected expenditures in connection
with these properties is limited to depreciation and those
costs that are normal, routine and incidental to its rental
activities.
The Registrant intends to investigate the potential
for additional investments in rental properties in the
Bergen County, New Jersey area where it conducts its
present activities. Although there are no definitive
plans at present to purchase additional properties, the
Registrant will investigate available properties during
2004. If the Registrant should find viable rental
properties and decides to purchase, sufficient equity
exists in the existing properties owned by the Registrant
to provide financing arrangements, if necessary. Any
purchase of new properties is not expected to have a
materially adverse effect upon the Registrant's financial
condition.
(3) Results of Operations.
--- ----------------------
(a) The Registrant recorded after-tax income of
$275,642.00 for the fiscal year ended September 30, 2003
which represents an increase of $37,971.00 when compared
to the results of operations for the fiscal year ended
September 30, 2002. Earnings per weighted average number
of common shares outstanding were $0.74 and $0.58,
respectively.
Revenues for the period were $2,026,583.00, down
$44,925.00 when compared to the total revenues recorded
in 2002. The net decrease resulted principally from the
write-off of the unamortized costs of patents as a result
of the Registrant discontinuing activities associated
with the surgical staples project. The abandonment of
patents
17
in connection with the surgical staples resulted in a charge
to revenues in the amount of $60,052.00.
Total costs and expenses for the fiscal year ended
September 30, 2003 were $1,673,405.00, down $146,506.00
from the $1,819,911.00 recorded in 2002. The reduced
costs and expenses result from lower costs associated
with the Registrant's surgical staple projects as
activities were concluding during the third and fourth
quarter of the year; reduced interest expense in
connection with the Registrant's mortgage as the loan
matures; and lower costs associated with the General and
Administrative expenses.
During 2001 the Registrant adopted FASB 13,
accounting for leases. The effect of FASB 13 is to
apportion escalation rental income contained in the
operating leases in equal annual adjustments over the
remaining terms of the leases. The Registrant's
Statement of Operations for the years ended September 30,
2000 and 1999 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.)
The Registrant's rental properties had occupancy
rates of 100% during 2003 and 2002 and such rates are
expected to continue through 2009 when the CompUSA lease
expires. Rental expenses for which the Registrant is
responsible are expected to increase at or below the
inflation rate for the geographical area in which the
Registrant conducts its real estate rental activities.
These inflationary increases are not expected to
have a materially adverse effect upon the Registrant's
results of operations or its financial condition.
18
The Registrant has no off-balance sheet contractual
obligations or arrangements.
(b) 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.
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.
During 2002 the project entered into a final phase
of tests that ultimately determined the project's
commercial feasibility and definitive
19
test results were published during 2003. There was no decision
regarding additional funding beyond 2003 until such results
were published. The continued funding of the project did not
have any materially adverse effect.
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 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.
(C) 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
20
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 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 continued to fund the
medical staple project and conducted a final series of
tests to determine the economic feasibility for the
staple. The results did not indicate favorable economic
potential and funding was discontinued in March 2003.
(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
21
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 2003 and 2002.)
Item 9. Disagreements on Accounting and Financial Disclosure.
- --------------------------------------------------------------
None.
22
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 72 President of Registrant Meeting
William M. Hackett Treasurer of Registrant 2006 Annual 1984
Age 60 Meeting
Beverly Cook Office Manager and 2004 Annual 1995
Age 67 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 72
William M. Hackett Treasurer of Registrant Annual 1975
Age 60
Beverly Cook Secretary of Registrant Annual 1997
Age 67
(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.
23
(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.
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, 2003 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.
24
HOLOBEAM, INC.
Form 10K
Summary Compensation Table
September 30, 2003
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 2003 $325,000 -0- -0- -0- -0- -0- -0-
President and CEO 2002 325,000 -0- -0- -0- -0- -0- -0-
and Director 2001 400,000 -0- -0- -0- -0- -0- -0-
William M. Hackett 2003 25,000 -0- -0- -0- -0- -0- -0-
Treasurer and 2002 25,000 -0- -0- -0- -0- -0- -0-
Director 2001 25,000 -0- -0- -0- -0- -0- -0-
Beverly Cook 2003 150,000 -0- -0- -0- -0- -0- -0-
Secretary and 2002 137,500 -0- -0- -0- -0- -0- -0-
Director 2001 99,999 -0- -0- -0- -0- -0- -0-
All Officers and 2003 $500,000 -0- -0- -0- -0- -0- -0-
Directors as a 2002 487,500 -0- -0- -0- -0- -0- -0-
Group 2001 524,999 -0- -0- -0- -0- -0- -0-
25
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 2003,
2002 and 2001.
(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, 2002.
All Directors and Officers as a Group
-------------------------------------
Options Granted 0
Options Exercised 0
Unexercised Options Held at 9/30/03 0
(d) The following Table sets forth information about the
Company's defined benefit pension plan benefits:
Pension Plan Table
Years of Service
----------------
Remuneration 37
------------ -------------
$ 60,000.00 $ 60,000.00
160,000.00 160,000.00
200,000.00 160,000.00
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 $200,000.00 and $137,500.00,
26
respectively, as of September 30, 2003. Melvin Cook and Beverly
Cook will be credited at normal retirement date with 37 years
service each under the Pension Plan as of September 30, 2003.
Pensions may be adjusted for a surviving spouse's pension 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, 2003.)
27
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 10, 2003 is as follows:
Title of Class Name & Address Amount Owned % of Class
- -----------------------------------------------------------------
Common Stock, Par Melvin S. Cook 124,500 45.2%
Value $0.10 Per Share 217 First Street
Ho-Ho-Kus, NJ 07423
Common Stock, Par Beverly Cook 95,000 34.6%
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 79.8%
$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.
28
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 information 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)
29
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)
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 holders.
30
HOLOBEAM, INC.
Form 10K
September 30, 2003
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 12, 2003
-----------------
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 12, 2003
-------------------------------
By: William M. Hackett
------------------------------------
William M. Hackett
Director and Treasurer
Date: December 12, 2003
-------------------------------
By: Beverly Cook
------------------------------------
Beverly Cook
Director and Secretary
Date: December 12, 2003
-------------------------------
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 Exchange Act disclosure obligations and for
the Registrant's own internal purposes. The Registrant has
evaluated these controls and procedures at September 30,
2003 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, 2003, including corrective
actions with regard to significant deficiencies and
material weaknesses. As of September 30, 2003, 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,
32
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
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: 12/12/03
--------
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
33
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
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: 12/12/03
--------
Melvin S. Cook, President
-------------------------
Melvin S. Cook
President
34
HOLOBEAM, INC.
FINANCIAL STATEMENTS
WITH INDEPENDENT ACCOUNTANTS' REPORT
YEARS ENDED
SEPTEMBER 30, 2003, 2002 AND 2001
R.A. FREDERICKS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
MANAGEMENT CONSULTANTS
HOLOBEAM, INC.
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
CONTENTS
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-7-21
SCHEDULES FOR THE YEARS ENDED SEPTEMBER 30, 2003,
2002, AND 2001
V PROPERTY AND EQUIPMENT F-22
VI ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY AND EQUIPMENT F-23
X SUPPLEMENTARY INCOME STATEMENT INFORMATION F-24
XI REAL ESTATE AND ACCUMULATED DEPRECIATION F-25
XII MORTGAGE LOANS ON REAL ESTATE F-26
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
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, 2003 and 2002 and the related statements of operations,
shareholders' equity and statements of cash flows for the years ended
September 30, 2003, 2002, and 2001. 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, 2003 and 2002, and the results of its
operations and its cash flows for the years ended September 30, 2003,
2002, and 2001, 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 2, 2003
F-1
170 Changebridge Road Unit B-4, Montville, New Jersey 07045
Tel: (973) 575-6200 Fax: (973) 575-5444
Members of the SEC Practice Section of the AICPA Division for CPA
Firms.
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 2003 AND 2002
ASSETS
2003 2002
CURRENT ASSETS
Cash (including cash equivalents of $809,349
in 2003 and $782,731 in 2002) $ 913,436 $ 836,042
Accounts Receivable 18 102
Prepaid Income Taxes 7,688 48,782
Prepaid Expenses 6,391 5,713
-------- --------
TOTAL CURRENT ASSETS 927,533 890,639
-------- --------
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 88,815 86,992
Furniture and Fixtures 29,939 27,548
-------- --------
TOTAL 7,532,770 7,528,556
Less: Accumulated Depreciation and Amortization 2,584,733 2,364,867
-------- --------
PROPERTY AND EQUIPMENT-NET 4,948,037 5,163,689
-------- --------
OTHER ASSETS
Patents and Patent Application Cost, net of
accumulated amortization of $0 in 2003
and $259,469 in 2002 - 56,528
Deferred Charges 304,513 345,621
Unbilled Rents Receivable 1,118,581 1,181,345
-------- --------
TOTAL OTHER ASSETS 1,423,094 1,583,494
-------- --------
TOTAL ASSETS $ 7,298,664 $ 7,637,822
======== ========
The accompanying notes are an integral part of the financial
statements.
F-2
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 2003 AND 2002
LIABILITIES AND SHAREHOLDERS' EQUITY
2003 2002
CURRENT LIABILITIES
Mortgage Payable-Current Portion $ 451,982 $ 414,221
Accounts Payable 6,376 7,669
Deferred Rent 60,375 -
Other Accrued Expenses 43,066 37,776
Accrued Pension 217,906 205,630
Income Taxes Payable 76,341 -
Accrued Interest Payable 32,918 35,940
-------- --------
TOTAL CURRENT LIABILITIES 888,964 701,236
-------- --------
LONG-TERM LIABILITIES
Mortgage Payable (Net of Current Portion) 4,059,346 4,511,321
Deferred Income Taxes 447,432 472,538
-------- --------
TOTAL LONG-TERM LIABILITIES 4,506,778 4,983,859
-------- --------
TOTAL LIABILITIES 5,395,742 5,685,095
-------- --------
SHAREHOLDERS' EQUITY
Common Stock, Par Value $.10 Per Share
Authorized 2,000,000 Shares, Issued
275,015 in 2003 and 287,697 in 2002 27,502 28,769
Additional Paid in Capital 9,226,979 9,540,472
Accumulated Deficit (7,337,414) (7,541,784)
-------- --------
1,917,067 2,027,457
Less: Cost of Shares in Treasury (600
in 2003 and 3,300 in 2002) (14,145) (74,730)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 1,902,922 1,952,727
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,298,664 $7,637,822
======== ========
The accompanying notes are an integral part of the financial
statements.
F-3
HOLOBEAM, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
2003 2002 2001
REVENUES
Rental Income $ 2,053,703 $2,053,703 $2,053,703
Interest Income 17,219 13,805 47,354
Gain on sale of fixed assets - 4,000 3,963
Gain on sale of investments 13,630 - -
Loss on abandonment of patent
application costs (60,052) - -
Other income 2,083 - -
--------- --------- ---------
TOTAL 2,026,583 2,071,508 2,105,020
--------- --------- ---------
COSTS AND EXPENSES
Rental Expense 255,552 258,572 259,004
General Expense 828,081 895,350 879,812
Interest Expense 417,026 451,958 483,830
Research and Development 172,746 214,031 183,089
--------- --------- ---------
TOTAL 1,673,405 1,819,911 1,805,735
--------- --------- ---------
INCOME BEFORE INCOME TAXES 353,178 251,597 299,285
INCOME TAX EXPENSE 148,808 85,198 130,455
--------- --------- ---------
NET INCOME $ 204,370 $ 166,399 $ 168,830
========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 275,642 287,518 290,960
--------- --------- ---------
EARNINGS PER SHARE $ .74 $ .58 $ .58
========= ========= =========
The accompanying notes are an integral part of the financial
statements.
F-4
HOLOBEAM, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
Additional
Common Stock Paid-In Accumulated Treasury Stock
Shares Amount Capital Deficit Shares Amount
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
Net Income 204,370
Purchase of Treasury Stock 9,982 254,175
Retirement of
Treasury Stock (12,682) (1,267) (313,493) (12,682) (314,760)
-------- ------- ---------- ---------- ------- --------
BALANCE, SEPTEMBER 30, 2003 275,015 $ 27,502 $ 9,226,979 $(7,337,414) 600 $ 14,145
======== ======= ========== ========== ======= ========
The accompanying notes are an integral part of the financial
statements.
F-5
HOLOBEAM, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
2003 2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $204,370 $168,399 $ 168,830
------- ------- --------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 219,866 216,888 209,890
Amortization 41,108 55,535 54,638
Patent and Patent Application Costs (3,524) (10,002) (7,933)
Gain on Sale of Fixed Assets - (4,000) (3,963)
Gain on Sale of Investment (13,630) - -
Loss on Abandonment of Patent
Application Costs 60,052 - -
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 13,251 (28,126) (15,659)
Deferred Income Taxes (25,106) 10,186 13,394
Deferred Rent 60,375 - -
Income Taxes Payable 76,341 - -
Decrease (Increase) in:
Unbilled rents receivable 62,764 (25,465) (33,486)
Accounts and Other Receivables 84 (56) (15)
Interest Receivable - - 713
Prepaid Expenses (678) 21,546 720
Prepaid Income Taxes 41,094 (3,782) (45,000)
------- ------- --------
Total Adjustments 531,999 288,976 173,299
------- ------- --------
Net Cash Provided by Operating Activities 736,367 455,375 342,129
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Short-term Investments (290,779) - -
Capital Expenditures (4,214) (49,082) (39,320)
Sale of Short-Term Investments 304,409 - 738,517
Sale of Capital Assets - 4,000 11,100
------- ------- --------
Net Cash Provided (Used) by Investing Activities 9,416 (45,082) 710,297
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on First Mortgage (414,214) (379,609) (347,895)
Purchase of Treasury Stock (254,175) (119,105) (30,468)
------- ------- --------
Net Cash Used by Financing Activities (668,389) (498,714) (378,363)
------- ------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 77,394 (88,421) 674,063
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 836,042 924,463 250,400
------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 913,436 $ 836,042 $ 924,463
======= ======= ========
SUPPLEMENTAL CASH FLOWS DISCLOSURES
Interest Paid $ 420,048 $ 454,728 $ 486,368
Income Taxes Paid $ 55,131 $ 78,799 $ 217,660
The accompanying notes are an integral part of the financial statements.
F-6
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
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. During 2003, the company terminated its
activities in the development of surgical staples.
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, 2003, 2002, or 2001. On May 1, 2003,
the Company retired 12,682 shares of Treasury Stock
purchased between May 2002 and March 2003 at a cost
$314,760. 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.
F-7
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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. 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.
F-8
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
NOTE 2. INCOME TAXES
2003 2002 2001
Current taxes:
Federal $ 131,321 $70,952 $89,950
State 42,593 4,060 27,110
--------- ------- -------
Total 173,914 75,012 117,060
--------- ------- -------
Deferred taxes:
Federal (21,340) 8,660 11,385
State (3,766) 1,526 2,010
--------- ------- -------
Total (25,106) 10,186 13,395
--------- ------- -------
Provision for income taxes $148,808 $85,198 $130,455
========= ======= =======
The deferred tax assets and liabilities recorded on the
balance sheet as of September 30, are as follows:
2003 2002 2001
Deferred tax liabilities:
Federal $380,317 $401,657 $392,994
State 67,115 70,881 69,358
-------- ------- -------
Total $447,432 $472,538 $462,352
======== ======= =======
The sources of deferred income taxes for the years ended
September 30, are as follows:
2003 2002 2001
Unbilled Rents Receivable $1,118,581 $1,181,345 $1,155,880
========= ========= =========
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:
2003 2002 2001
Federal statutory income tax rate 34% 34% 34%
State tax provisions, net of
federal benefits 6 6 6
Other 2 (6) 4
--- --- ---
Effective income tax rate 42% 34% 44%
=== === ===
F-9
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
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.
2003 2002 2001
Buildings and building improvements:
Cost $ 6,961,244 $6,961,244 $6,961,244
Accumulated
depreciation 2,526,400 2,326,441 2,126,482
--------- --------- ---------
Net buildings and building
improvements $ 4,434,844 $4,634,803 $4,834,762
========= ========= =========
The minimum future rentals on noncancellable operating
leases for the years ending September 30, are as follows:
2004 $2,116,467 2009 $2,331,017
2005 2,225,142 2010 1,497,842
2006 2,225,142 2011 1,275,697
2007 2,233,965 2012 1,067,573
2008 2,331,017 ----------
Total $17,303,862
==========
Net rental income consists of the following:
2003 2002 2001
Rental income $2,053,703 $2,053,713 $2,053,703
Depreciation expense (199,960) (199,959) (199,959)
Other expenses (55,592) (58,613) (59,045)
---------- --------- ---------
Rental income, net $ 1,798,151 $1,795,141 $1,794,699
========= ========= =========
F-10
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
In 2003, 2002, and 2001, 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. 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 Comp USA 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.
F-11
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
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, 2003, 2002 AND 2001
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
12/31/02 2/02/03 1/30/03
(In Millions)(In Thousands)(In Millions)
Current assets $ 1,707 $ 409,392 $ 6,102
------ ------- -------
Total assets 2,228 609,008 11,238
------ ------- -------
Current liabilities 828 227,566 2,120
------ ------- -------
Total liabilities 1,500 392,131 2,924
------ ------- -------
Total stockholders'
equity 728 216,877 8,314
------ ------- -------
Net sales 4,577 1,431,678 30,762
------ ------- -------
Cost of sales 2,339 1,030,275 26,258
------ ------- -------
Gross profit 2,238 401,403 4,504
------ ------- -------
Income (loss) before
income taxes
(continuing) 425 19,070 (2,745)
------ ------- -------
Income tax expense
(benefit) 162 40,599 (24)
------ ------- -------
Net income (loss)$ 263$ 59,669 $ (3,219)
------ ------- -------
NOTE 4. RESEARCH AND DEVELOPMENT
Research and development expenses in the amount of $172,746
in 2003, $214,031 in 2002, and $183,089 in 2001, were
charged to operations and included in costs and expenses.
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
2003, $11,400 in 2002 and $11,400 in 2001.
NOTE 6. PATENTS AND PATENT APPLICATION COSTS
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 terminated its efforts in the area of surgical
staple development for use in internal surgery. Several
United States Patents had been issued and foreign
applications had been filed on a novel staple. Research
and development costs in the amounts of $172,746, $214,031
and $183,089 have been expended in connection with the
surgical staple during 2003, 2002 and 2001, respectively.
F-13
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
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:
2004 $5,126
2005 5,126
2006 5,126
2007 5,126
2008 5,126
The combined balance outstanding for each debt issued at
the end of 2003, 2002, and 2001 is as follows:
2003 2002 2001
First Mortgage on
62,000 sq. ft. Building $4,511,328 4,925,542 $5,305,151
Less Current Portion 451,982 414,221 379,611
--------- --------- ---------
Long-Term Portion $4,059,346 $4,511,321 $4,925,540
========= ========= =========
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:
2004 $451,982 2009 $699,136
2005 493,181 2010 762,870
2006 538,140 2011 338,095
2007 587,197
2008 640,727
F-14
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
NOTE 8. DEFERRED CHARGES
The composition of deferred charges and related amortization
is as follows:
Real Estate
Brokers Commissions
Mortgage Sports Tandy
Total Costs Authority Corp.
Original Cost $712,160 $102,520 $279,584 $330,056
Accumulated
Amortization 407,647 54,677 154,936 198,034
------- ------ ------- -------
Balance 9/30/03 $304,513 $ 47,843 $124,648 $132,022
======= ====== ======= =======
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
======= ====== ======= =======
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. 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).
F-15
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
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. The Company has discontinued its research
efforts relating to the surgical staple segment of its
business in 2003.
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.
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.
F-16
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
NOTE 12. FINANCIAL REPORTING BY BUSINESS SEGMENTS (Continued)
Revenues
2003 2002 2001
Business Segments:
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 2,017,720 2,053,703 2,053,703
Other 32,932 17,805 51,317
--------- --------- ---------
Total $2,050,652 $2,071,508 $2,105,020
========= ========= =========
Income (Loss)
Business Segments: 2003 2002 2001
Surgical Staples $ (172,746) $ (214,031)$ (183,089)
Electro-Optical - - -
Real Estate Rental 1,798,151 1,795,131 1,794,699
--------- --------- ---------
Total 1,625,405 1,581,100 $1,611,610
--------- --------- ---------
General and Administrative
Expenses (828,081) (895,350) (879,812)
Interest Expense (417,026) (451,958) (483,830)
Other Income (27,120) 17,805 51,317
Income Tax Expense (148,808) (85,198) (130,455)
--------- --------- ---------
Total (1,421,035) (1,414,701)(1,442,780)
--------- --------- ---------
Net Income $ 204,370 $ 166,399 $ 168,830
========= ========= =========
Business Segments: Identifiable Assets
2003 2002 2001
Surgical Staples $ - $ 55,179 $ 56,906
Electro-Optical - 1,349 4,047
Real Estate Rental 6,310,711 6,614,542 6,830,145
Other 987,953 966,752 1,040,727
--------- --------- ---------
TOTAL ASSETS $ 7,298,664 $7,637,822 $7,931,825
========= ========= =========
F-17
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
NOTE 12. FINANCIAL REPORTING BY BUSINESS SEGMENTS (Continued)
Business Segments: Capital Expenditures
2003 2002 2001
Surgical Staples $ - $ - $ -
Electro-Opitical - - -
Real Estate Rental - - -
Other 4,214 49,083 39,320
------ ------- -------
$ 4,214 $ 49,083 $ 39,320
====== ======= =======
Property and Equipment
Business Segments Depreciation
2003 2002 2001
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 199,959 199,959 199,959
Other 19,908 16,929 9,931
------- ------- -------
$219,867 $216,888 $209,890
======= ======= =======
Intangible Assets
Amortization
2003 2002 2001
Surgical Staples $ - $ 11,728 $ 10,831
Electro-Optical - 2,698 2,698
Real Estate Rental 41,108 41,109 41,109
Other - - -
------ ------- -------
$ 41,108 $ 55,535 $ 54,638
====== ======= =======
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, 2003, 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, 2003, 2002 AND 2001
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.
2003 2002 2001
Changes in benefit obligation:
Benefit obligation at October 1 $1,925,510 $1,782,702 $1,126,448
Service cost 306,184 370,905 328,535
Interest cost 167,601 162,099 185,032
--------- --------- ---------
Benefit obligation at September 30 $2,394,295 $2,315,706 $1,640,015
========= ========= =========
2003 2002 2001
Change in plan assets:
Fair value of plan assets at
October 1 $1,810,644 $1,407,957 $1,014,185
Company contributions 334,764 398,584 341,103
Actual return on plan assets (49,318) 4,103 52,669
--------- --------- ---------
Fair value of plan assets at
September 30, $2,096,090 $1,810,644 $1,407,957
========= ========= =========
Funded status of Plan $ (298,205) $(505,062) $(232,058)
Unrecognized Net (Gain) Loss 177,071 396,204 159,063
--------- --------- ---------
(Accrued) or Prepaid Pension $ (121,134) $(108,858) $ (72,995)
========= ========= =========
F-19
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
NOTE 14. PENSION PLAN (Continued)
The net periodic pension cost for the year ended September
30, includes the following components:
2003 2002 2001
1. Service cost - benefits earned
during the period $306,184 $370,905 $328,535
--------- --------- ---------
2. Interest cost on projected benefit
obligation 167,601 162,099 114,801
--------- --------- ---------
3. Actual return on plan assets 49,318 (4,103) (52,629)
--------- --------- ---------
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 (176,063) (94,454) (18,364)
d. Asset gain or (loss) deferred - - -
--------- --------- ---------
e. Total (176,063) (94,454) $(18,364)
--------- --------- ---------
5. Net periodic pension cost (credit) =
(Item 1 + item 2 +
item 3 + item 4 (e) $347,040 $434,447 $372,343
========= ========= =========
The net periodic pension cost for 2003, 2002 and 2001 was
determined based on a 7% discount rate and a long - term rate
of return of 7% on plan assets.
F-20
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
NOTE 15. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
For the Fiscal Year Ended September 30, 2003
First Second Third Fourth
Quarter Quarter Quarter Quarter
Total Revenues $505,843 $531,467 $507,841 $481,432
Gross Profit N/A N/A N/A N/A
Income Before
Extraordinary
Items 50,021 67,758 64,226 22,365
Weighted Average
Number of Shares 278,277 274,985 271,242 274,492
Earnings Per Share .18 .25 .24 .08
Net Income $50,021 $67,758 $64,226 $22,365
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. SCHEDULE V
PROPERTY AND EQUIPMENT
SEPTEMBER 30, 2003, 2002 AND 2001
Balance at Balance at
Beginning End of
CLASSIFICATIONS of Year Additions Retirements Year
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
======== =========== =========== ========
YEAR ENDED SEPTEMBER 30, 2003:
Machinery and Equipment $ 86,992 $ 1,823 $ - $ 88,815
Furniture and Fixtures 27,548 2,391 - 29,939
-------- ----------- ----------- --------
TOTAL $114,540 $ 4,214 $ - $118,754
======== =========== =========== ========
The accompanying notes are an integral part of the financial statements.
F-22
HOLOBEAM, INC. SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY AND EQUIPMENT
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
Balance at Balance at
Beginning End of
CLASSIFICATIONS of Year Additions Retirements Year
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
======== =========== =========== ========
YEAR ENDED SEPTEMBER 30, 2003:
Machinery and Equipment $ 24,546 $ 16,328 $ - $ 40,874
Furniture and Fixtures 13,880 3,580 - 17,460
-------- ----------- ----------- --------
TOTAL $ 38,426 $19,908 $ - $ 58,334
======== =========== =========== ========
The accompanying notes are an integral part of the financial statements.
F-23
HOLOBEAM, INC. SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
2003 2002 2001
Maintenance and Repairs $ - $ - $ -
======= ========== =======
Depreciation and Amortization of
Intangible Assets $41,108 $ 55,535 $ 54,638
======= ========== =======
Taxes, Other than Payroll and
Income Tax
Franchise $ 10,060 $ 10,060 $ 10,620
Real Estate - - -
Other 213 213 58
------- ---------- -------
$10,273 $ 10,273 $10,678
======= ========== =======
Royalties $ - $ - $ -
======= ========== =======
Advertising $ - $ - $ 189
======= ========== =======
The accompanying notes are an integral part of the financial statements.
F-24
HOLOBEAM, INC. SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 2003
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 4,511,328 0 718,881 3,649,850 0 0 4,368,731 4,368,731 1,933,667 1958 1971 3 to 40
years
Building II
Paramus, NJ 0 0 2,592,513 0 0 0 2,592,513 2,592,513 592,733 1995 1995 30 Years
--------- ------- --------- --------- -- ------- --------- --------- ---------
$4,511,328 $391,967 $3,311,394 $3,710,655 $ 0 $452,772 $6,961,244 $7,414,016 $2,526,400
========= ======= ========= ========= == ======= ========= ========= =========
(1)Activity for the three years (2)Activity for the three years
ended September 30, 2003 is ended September 30, 2003 is
as follows: 2003 2002 2001 as follows: 2003 2002 2001
Balance at Balance at
Beginning Beginning
of Year $7,414,016 $7,414,016 $7,414,016 of Year $2,326,441 $2,216,482 $1,926,523
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: $2,526,400 $2,326,441 $2,126,482
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, 2003 is $7,414,016.
The accompanying notes are an integral part of these financial statements.
F-25
HOLOBEAM, INC. SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 2003
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 $ 900,567 None
Mortgage Payable
Building and Improvements 8.77% February 5, 2011 $56,328 None $6,000,000 $3,610,761 None
---------
$4,511,328
=========
Activity for the three
years ended September 30,
2003 is as follows:
2003 2002 2001
Balance at Beginning of Year $4,925,542 $5,305,152 $5,653,046
Additions During Year:
Commercial Loans 0 0 0
New Mortgages 0 0 0
--------- --------- ---------
4,925,542 5,305,152 5,653,046
Deductions During Year:
Principal Payments 414,214 379,610 347,895
Mortgage Payments 0 0 0
--------- --------- ---------
Balance at End of Year $4,511,328 $4,925,542 $5,305,151
========= ========= =========
(1) The cost for Federal income tax
Purposes at 9/30/03 $4,511,328
The accompanying notes are an integral part of these financial statements.
F-26