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, 2004, 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. $7,298,640. at November 22,
2004 computed on the average of the bid and
1
asked prices for Holobeam, Inc. Common shares at November 22, 2004.
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest practicable
date. 270,320 Shares at December 10,2004.
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.
12. Financial Statements for the Years Ended September 30, 2004
and 2003.
2
Holobeam, Inc.
Form 10-K
Year Ended September 20, 2004
Table of Contents
Part I
Page
Item 1. Business 4
Item 2. Properties 8
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security
Holders 12
Part II
Item 5. Market for the Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 23
Item 8. Financial Statements and Supplementary Data 23
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 48
Item 9A. Controls and Procedures 48
Item 9B. Other Information 48
Part III
Item 10. Directors and Officers of the Registrant 49
Item 11. Executive Compensation 50
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 53
Item 13. Certain Relationships and Related Transactions 53
Item 14. Principal Accountant Fees and Services 53
Part IV
Item 15. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 55
3
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, 2004, 2003 and 2002.
(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 CompUSA, 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 materials used for the Registrant's research
activities were acquired through commercial businesses engaged in the
distribution of such supplies.
4
(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
21. Australian Pat. #704533 Improved Staples 08/05/99
5
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.
(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 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.
6
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 2004, 2003 and 2002, the Registrant expended $-0-,
$172,746. and $214,031., respectively, in connection with the
furtherance of this activity. Such costs were 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
7
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, 2004 the Registrant employed three persons as
compared to three persons at September 30, 2003 and three persons at
September 30, 2002.
(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 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.)
8
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.)
Building Building
Paramus, NJ Paramus, NJ
----------- -----------
Year Acquired 1971 1994
Gross Square Footage 62,000 31,000
Percent Leased at 09/30/04 100% 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 $4,059,353 $ -0-
(1) Includes $3,567,267. 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. 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
9
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 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
2004 100%
2003 100%
2002 100%
2001 100%
2000 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, 2003 or 2004.
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
11
the Registrant.
Item 4. Submission to Matters to a Vote of Security Holders.
- -------------------------------------------------------------
None.
PART II
Item 5. Market for the Registrant's Common Stock Related Stockholder
- ---------------------------------------------------------------------
Matters and Issuer Purchases of Equity Securities.
--------------------------------------------------
(a) The Registrant's common stock is traded on the
over-the-counter market. The bid price listed (Source: S&P
Comstock) on November 22, 2004 was $27. 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 November 22, 2004 was 399.
(c) No dividends have been paid or declared on the Common Stock
of the Registrant during the 2004, 2003 or 2002 fiscal years. In
making decisions regarding the possible payment of dividends, the
Board of Directors considers the Requirements 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]).
12
2004 2003
---- ----
high low high low
----- --- ---- ---
Quarter Ended Dec. 31 25.00 23.00 25.50 20.00
Quarter Ended Mar. 31 30.00 22.50 26.00 17.00
Quarter Ended June 30 40.00 33.00 24.00 17.00
Quarter Ended Sept. 30 27.00 26.50 23.00 17.00
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, 1999 and ending September 30, 2004 is presented below.
HOLOBEAM, INC.
SUMMARY OF SELECTED FINANCIAL DATA
FOR THE YEARS ENDED SEPTEMBER 30,
RESTATED
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Gross Income $2,058,348 $2,086,635 $2,071,508 $2,105,020 $2,109,860
Net Income (Loss) 184,936 204,370 166,399 168,830 220,147
Weighted Average
Number
of Common Shares
Outstanding 271,873 275,642 287,518 290,960 294,013
Earnings Per
Share (Loss) 0.68 0.74 0.58 0.58 0.75
Total Assets 6,983,806 7,298,664 7,637,822 7,931,825 8,143,623
Long-Term Debt 3,566,176 4,059,346 4,511,321 4,925,540 5,305,149
Shareholders'
Equity 2,012,511 1,902,922 1,952,727 1,905,433 1,767,071
Gross Rental
Income 2,053,703 2,053,703 2,053,703 2,053,703 2,053,703
Net Rental Income 1,793,610 1,798,151 1,795,141 1,794,699 1,790,823
It should be noted that the year ended 2000 was restated.
(Reference is made to Note 16 to the financial statements of
the Registrant for the year ending September 30, 2001.)
13
Item 7. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations.
- --------------------------
(1) Liquidity.
- ----------------
Cash flows generated from operating activities during 2004 were $535,386.
and were produced primarily from the Registrant's real estate
rental properties.
The Registrant anticipates that cash flows associated with the Registrant's
real estate rental activities will be sufficient to fund and
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, 2004
and 2003.
The minimum future rental income associated with the non-cancelable
operating leases approximates $15,187,400. and is expected to
generate sufficient cash flows to support the Registrant's
activities through 2012 when The Sports Authority, Inc.'s
operating lease expires. (Reference is made to Form 10K,
Item 7(1)for the year ended September 30, 2003.)
During 2004 the Registrant's Working Capital decreased to ($49,408.) which
represents a decrease of $87,976. when compared to the
Registrant's Working Capital at September 30, 2004. Such
decrease results principally from the increased current
portion of long term debt associated with the Registrant's
mortgage and from increases in Deferred Rent resulting from
tenants remitting rents prior to the period in which it is
earned.
It is the opinion of the Registrant that cash flows associated with its real
estate rental activities will be sufficient to maintain
liquidity during the terms of the operating leases.
14
2) Capital Resources.
- --------------------------
The Registrant discontinued its activities associated with the surgical
staples technology during 2003. As a result, the costs
associated with the project were classified as Discontinued
Operations on the Registrant's Statement of Operations for
2003. (Reference is made to Notes 4 and 12 to the
accompanying Financial Statements for the years ended
September 30, 2004 and 2003.) There were no expenditures
made in connection with the surgical staples technology
during 2004. The research and development activities
associated with the project were discontinued because the
final phase of testing did not indicate sufficient commercial
value for the Registrant to continue its financial support.
During 2004 the Registrant contributed $479,009. to its defined benefit
pension plan. The contribution is charged to operations
during each quarter of the Registrant's fiscal year 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 2005 and expects no
materially adverse effect upon its financial condition.
(Reference is made to Note 14 of the accompanying financial
statements for the years ended September 30, 2004 and 2003.)
At the present time the Registrant's rental properties, located at 50 A&S
Drive, Paramus, New Jersey do not require renovation or
refurbishment and none are planned for 2005. The tenants are
responsible for real estate taxes, maintenance expenses and
insurance costs. The Registrant's projected costs and
expenses associated with these properties is limited to
depreciation and costs that are routine, normal and
incidental to its real estate rental activities.
The Registrant has investigated potential sites in the Bergen
15
County, New Jersey area where it conducts its present real estate
rental activities. It is the intention of the Registrant to locate
and develop suitable properties in the area in and around Paramus,
New Jersey.
During meetings with local real estate brokers planning for the future
leasing situation, the lack of direct access to New Jersey
Route 17 could be a serious detriment to the Registrant's
ability to attract suitable replacement tenants when the
lease terms expire.
A Shell Oil Co. gasoline station presently blocks such direct access to the
highway and there was some possibility that the owner may
sell the property for a suggested price of $2,200,000. Since
an engineering study indicated that a 7,200 square foot
addition to the building presently occupied by CompUSA would
justify the price and increase the value of the properties,
the Board of Directors authorized the Registrant's management
to place a bid on the property at $2,200,000. and begin
negotiations to purchase the tract.
The Registrant intends to fund the acquisition with financing based upon the
equity appreciation presently contained in the Registrant's
rental properties. Any purchase of new properties is not
expected to have a materially adverse effect upon the
Registrant's capital resources or financial condition.
(3) Results of Operations.
- -----------------------------
(a)During the year ended September 30, 2004 the Registrant recorded after-tax
income in the amount of $184,936., which represents a
decrease of $19,434. when compared to the income recorded in
2003. Earnings per weighted average number of common shares
outstanding were $0.68 and $0.74, respectively.
16
Revenues for the year were $2,058,348., down $28,287. from 2003. The
decrease results principally from reduced interest income
during 2004 ($12,574.) and reduced gains on sales of short
term investments ($13,630.).
Total costs and expenses for the fiscal year ended September 30, 2004 were
$1,708,489. as compared to $1,673,465. for the year ended
2003. The increased costs resulted from increases in
expenses that are normal, routine and incidental to the
Registrant's administrative and real estate rental
activities.
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 year ended September 2000 has been
restated to reflect this change. (Reference is made to Note
16 to the Registrant's financial statements for the years
ended September 30, 2002 and 2001.)
The Registrant's rental properties had occupancy rates of 100% during 2004
and 2003 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 adversely effect the
Registrant's results of operations or financial condition.
(b)The Registrant recorded after-tax income of $275,642. for the fiscal year
ended September 30, 2003 which represents an increase of
$37,971. when compared to the results of operations for the
fiscal year
17
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., down $44,925. 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 in connection with the surgical
staples resulted in a charge to revenues in the amount of
$60,052.
Total costs and expenses for the fiscal year ended September 30, 2003 were
$1,673,405., down $146,506. from the $1,819,911. 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
18
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.
The Registrant has no off-balance sheet contractual obligations or
arrangements.
(c)After-tax earnings for the year ended September 30, 2002 were $166,399.,
representing a decrease of $2,431. 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. to $2,071.508. 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. in 2001 to $1,819,911.
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. for the
year ended September 30, 2002 as compared to $183,089. for
the
19
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 tests 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. 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. 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.
Off-Balance Sheet Arrangements
- ------------------------------
As of September 30, 2004 the Registrant had no off-balance sheet
arrangements.
Critical Accounting Policies and Estimates
- ------------------------------------------
The preparation of the Registrant's financial statements
20
in conformity with GAAP requires management to make estimates and
assumptions about future events that affect the amounts reported in
the financial statements and accompanying footnotes. Future events
and their effects cannot be determined with absolute certainty.
Therefore, the determination of estimates requires the exercise of
judgment. Actual results could differ from those estimates and such
differences may be material to the financial statements. The process
of determining significant estimates is fact specific and takes into
account such factors as historical experience and current and
expected economic conditions. Historically, actual results have not
differed significantly from those determined using estimates.
Contractual Commitments
- -----------------------
The following table represents the Registrant's contractual commitments
associated with long term debt and other obligations at
September 30, 2004.
21
Holobeam, Inc.
Contractual Obligations
September 30, 2004
Oct. Oct. Oct. Oct. Oct.
2004 2005 2006 2007 2008
to to to to to
Contractual Sept. Sept. Sept. Sept. Sept.
Obligations Total 2005 2006 2007 2008 2009 Thereafter
--------- ------- ------- ------- ------- ------- ---------
Mortgage Loans
on Real
Estate $4,059,363 $493,177 $538,140 $487,197 $640,727 $699,136 $1,600,976
Capital Lease
Obligations -0- -0- -0- -0- -0- -0- -0-
Operating Lease
Obligations 11,400 11,400 -0- -0- -0- -0- -0-
Purchase
Obligations -0- -0- -0- -0- -0- -0- -0-
Other -0- -0- -0- -0- -0- -0- -0-
--------- ------- ------- ------- ------- ------- ---------
$4,070,753 $504,577 $538,140 $587,197 $640,727 $699,136 $1,600,976
========= ======= ======= ======= ======= ======= =========
22
Item 7A. Quantitative and Qualitative Disclosures About Market
- ---------------------------------------------------------------
Risk.
- -----
The Registrant has operating leases with tenants for the
two properties it owns. The leases expire in 2009 and 2012.
The primary market risk is the remote possibility that one or
both tenants will default on the lease prior to the end of the
lease term. If tenants had defaulted on the leases at the
beginning of 2004, the Registrant would have been impacted by
approximately $2,000,000.
Item 8. Financial Statements and Supplemental Data.
- ----------------------------------------------------
Financial statements, supplementary financial information
and Accountant's Report are filed with this report.
23
HOLOBEAM, INC.
FINANCIAL STATEMENTS
WITH INDEPENDENT ACCOUNTANTS' REPORT
YEARS ENDED
SEPTEMBER 30, 2004, 2003 AND 2002
R.A. FREDERICKS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
MANAGEMENT CONSULTANTS
24
HOLOBEAM, INC.
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
CONTENTS
PAGE
INDEPENDENT ACCOUNTANTS' REPORT 26
FINANCIAL STATEMENTS:
BALANCE SHEETS 27-28
STATEMENTS OF OPERATIONS 29
STATEMENTS OF SHAREHOLDERS' EQUITY 30
STATEMENTS OF CASH FLOWS 31
NOTES TO FINANCIAL STATEMENTS 32-45
SCHEDULES FOR THE YEARS ENDED SEPTEMBER 30, 2004,
2003, AND 2002
XI REAL ESTATE AND ACCUMULATED DEPRECIATION 46
XII MORTGAGE LOANS ON REAL ESTATE 47
ALL OTHER SCHEDULES HAVE BEEN OMITTED BECAUSE THEY ARE
NOT APPLICABLE, OR THE INFORMATION IS SHOWN IN THE FINANCIAL
STATEMENTS OR NOTES THERETO.
25
R.A. FREDERICKS & COMPANY, LLP
Certified Public Accountants
Ralph A. Fredericks, CPA
Ellen T. O'Donnell, CPA
Mary V. Fox, CPA, CFE (retired)
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders'
Holobeam Inc.
Ho-Ho-Kus , New Jersey
We have audited the accompanying balance sheets of Holobeam,
Inc. as of September 30, 2004 and 2003 and the related
statements of operations, shareholders' equity, and cash flows
for each of the years in the period ended September 30, 2004.
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 the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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, 2004 and 2003, and the
results of its operations and its cash flows for each of the
three years in the period ended September 30, 2004, in
conformity with U. S. generally accepted accounting principles.
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 15, 2004
26
170 Changebridge Road Unit B-4, Montville, New Jersey 07045
Tel: (973) 575-6200 Fax: (973) 575-5444
Members of the Center for Public Company Audit Firms.
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 2004 AND 2003
ASSETS
2004 2003
CURRENT ASSETS
Cash (including cash equivalents of $613,404
in 2004 and $809,349 in 2003) $ 917,971 $ 913,436
Prepaid Expenses 7,697 6,391
Prepaid Income Taxes 7,698 7,688
Other Receivables 18 18
-------- --------
TOTAL CURRENT ASSETS 933,384 927,533
-------- --------
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 88,815
Furniture and Fixtures 33,468 29,939
-------- --------
TOTAL 7,536,299 7,532,770
Less: Accumulated Depreciation and Amortization 2,805,099 2,584,733
-------- --------
PROPERTY AND EQUIPMENT-NET 4,731,200 4,948,037
-------- --------
OTHER ASSETS
Deferred Charges 263,404 304,513
Unbilled Rents Receivable 1,055,818 1,118,581
-------- --------
TOTAL OTHER ASSETS 1,319,222 1,423,094
-------- --------
TOTAL ASSETS $ 6,983,806 $ 7,298,664
======== ========
The accompanying notes are an integral part of the financial statements.
27
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 2004 AND 2003
LIABILITIES AND SHAREHOLDERS' EQUITY
2004 2003
-------- --------
CURRENT LIABILITIES
Mortgage Payable-Current Portion $ 493,177 $ 451,982
Accounts Payable 6,934 6,376
Deferred Rent 185,430 60,375
Other Accrued Expenses 50,165 43,066
Accrued Pension 148,006 217,906
Income Taxes Payable 69,460 76,341
Accrued Interest Payable 29,620 32,918
-------- --------
TOTAL CURRENT LIABILITIES 982,792 888,964
-------- --------
LONG-TERM LIABILITIES
Mortgage Payable (Net of Current Portion) 3,566,176 4,059,346
Deferred Income Taxes 422,327 447,432
-------- --------
TOTAL LONG-TERM LIABILITIES 3,988,503 4,506,778
-------- --------
TOTAL LIABILITIES 4,971,295 5,395,742
-------- --------
SHAREHOLDERS' EQUITY
Common Stock, Par Value $.10 Per Share
Authorized 2,000,000 Shares, Issued
271,209 in 2004 and 275,015 in 2003 27,121 27,502
Additional Paid in Capital 9,137,868 9,226,979
Accumulated Deficit (7,152,478) (7,337,414)
-------- --------
2,012,511 1,917,067
Less: Cost of Shares in Treasury (0
in 2004 and 600 in 2003) - (14,145)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 2,012,511 1,902,922
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,983,806 $7,298,664
======== ========
The accompanying notes are an integral part of the financial statements.
28
HOLOBEAM, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
2004 2003 2002
---- ---- ----
REVENUES
Rental Income $ 2,053,703 $2,053,703 $2,053,703
Interest Income 4,645 17,219 13,805
Gain on sale of fixed assets - - 4,000
Gain on sale of investments - 13,630 -
Other income - 2,083 -
---------- --------- ----------
TOTAL 2,058,348 2,086,635 2,071,508
---------- --------- ----------
COSTS AND EXPENSES
Rental Expense 260,093 255,552 258,572
General Expense 1,069,407 828,081 895,350
Interest Expense 378,989 417,026 451,958
Research and Development - - 214,031
---------- --------- ----------
TOTAL 1,708,489 1,500,659 1,819,911
---------- --------- ----------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 349,859 585,976 251,597
INCOME TAX EXPENSE 164,923 241,927 85,198
---------- --------- ----------
EARNINGS FROM CONTINUING OPERATIONS 184,936 344,049 166,399
---------- --------- ----------
DISCONTINUED OPERATIONS:
Operating Loss - (172,746) -
Loss on Disposition - (60,052) -
Tax Benefit - 93,119 -
---------- --------- ----------
NET LOSS FROM DISCONTINUED OPERATIONS - (139,679) -
---------- --------- ----------
NET INCOME $ 184,936 $ 204,370 $ 166,399
========== ========= ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 271,873 275,642 287,518
========== ========= ==========
EARNINGS PER SHARE - CONTINUING $ .68 $ 1.25 $ .58
========== ========= ==========
LOSS PER SHARE - DISCONTINUED $ - $ (.51) $ -
========== ========= ==========
EARNINGS PER SHARE - NET INCOME $ .68 $ .74 $ .58
========== ========= ==========
The accompanying notes are an integral part of the financial statements.
29
HOLOBEAM, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
Additional
Common Stock Paid-In Accumulated Treasury Stock
Shares Amount Capital Deficit Shares Amount
BALANCE, SEPTEMBER 30, 2001 305,598 $30,559 $9,825,498 $(7,708,183) 15,086 $242,441
Net Income 168,399
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
Net Income 184,936
Purchase of Treasury Stock 3,206 75,347
Retirement of Treasury Stock (3,806) (381) (89,111) (3,806) (89,492)
-------- ------- ---------- ---------- ------- --------
BALANCE, SEPTEMBER 30, 2004 271,209 $ 27,121 $9,137,868 $(7,152,478) - $ -
======== ======= ========== ========== ======= ========
The accompanying notes are an integral part of the financial statements.
30
HOLOBEAM, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
2004 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $184,936 $204,370 $168,399
-------- ------- -------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 220,366 219,866 216,888
Amortization 41,109 41,108 55,535
Patent and Patent Application Costs - (3,524) (10,002)
Gain on Sale of Fixed Assets - - (4,000)
Gain on Sale of Investment - (13,630) -
Loss on Disposition of Discontinued Operations - 60,052 -
Increase (Decrease) in:
Accounts Payable and Accrued Expenses (65,541) 13,251 (28,126)
Deferred Income Taxes (25,105) (25,106) 10,186
Deferred Rent 125,055 60,375 -
Income Taxes Payable (6,881) 76,341 -
Decrease (Increase) in:
Unbilled Rents Receivable 62,763 62,764 (25,465)
Accounts and Other Receivables - 84 (56)
Prepaid Expenses (1,306) (678) 21,546
Prepaid Income Taxes (10) 41,094 (3,782)
-------- ------- -------
Total Adjustments 350,450 531,999 288,976
-------- ------- -------
Net Cash Provided by Operating Activities 535,386 736,367 455,375
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Short-term Investments - (290,779) -
Capital Expenditures (3,529) (4,214) (49,082)
Sale of Short-Term Investments - 304,409 -
Sale of Capital Assets - - 4,000
-------- ------- -------
Net Cash Provided by (Used in)
Investing Activities (3,529) 9,416 (45,082)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on First Mortgage (451,975) (414,214) (379,609)
Purchase of Treasury Stock (75,347) (254,175) (119,105)
-------- ------- -------
Net Cash Used in Financing Activities (527,322) (668,389) (498,714)
-------- ------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 4,535 77,394 (88,421)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 913,436 836,042 924,463
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 917,971 $ 913,436 $ 836,042
======== ======= =======
SUPPLEMENTAL CASH FLOWS DISCLOSURES
Interest Paid $ 382,287 $ 420,048 $ 454,728
Income Taxes Paid $ 196,909 $ 55,131 $ 78,799
The accompanying notes are an integral part of the financial statements.
31
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 1. SUMMARY OF MAJOR ACCOUNTING POLICIES
a. Description of Business
The Company is engaged primarily in the rental of real
property located in New Jersey for retail use. During
2003, the Company terminated its activities in the
development of surgical staples and the technology used
to apply the staples for use in internal surgery.
b Basis of Presentation
The financial statements are prepared in accordance
with accounting principles generally accepted in the
United States of America and include amounts based on
management's prudent judgements and estimates. While
actual results may differ from these estimates,
management does not expect the differences, if any, to
have a material effect on the financial statements.
c. Cash and Cash Equivalents
For purposes of reporting cash flows, all liquid
investments with original maturities of three months or
less are considered cash equivalents.
d. Property and Equipment
Depreciation is provided 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.
e. 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.
32
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Capital Stock
Each share of common stock is entitled to one vote. No
such shares of common stock were reserved at September
30, 2004, 2003, or 2002. On October 20, 2004, the
Company amended its Certificate of Incorporation in
order to reduce its authorized shares from 2,000,000 to
272,000. Between May 10, 2004 and July 13, 2004, the
Company retired 3,806 shares of Treasury Stock
purchased during the years ended September 30, 2004 and
2003 at a cost of $89,492. On May 1, 2003, the Company
retired 12,682 shares of Treasury Stock purchased
between May 2002 and March 2003, at a cost of $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.
g. Income Taxes
The Company provides for federal and state income taxes
on items included in the Statements of Operations
regardless of the period when such taxes are payable.
Deferred taxes are recognized for temporary differences
between financial and income tax reporting based on
enacted tax laws and rates.
h. 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.
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.
33
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
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.
k. Reclassifications
Earnings from discontinued operations were previously
classified under earnings from continuing operations and
have been reclassified within the Statement of
Operations for the year ended September 30, 2003.
NOTE 2. INCOME TAXES
2004 2003 2002
Current taxes:
Federal $ 149,230 $131,321 $70,952
State 40,799 42,593 4,060
------- ------- ------
Total 190,029 173,914 75,012
------- ------- ------
Deferred taxes:
Federal (21,339) (21,340) 8,660
State (3,767) (3,766) 1,526
------- ------- ------
Total (25,106) (25,106) 10,186
------- ------- ------
Provision for
income taxes $164,923 $148,808 $85,198
======= ======= ======
The deferred tax assets and liabilities recorded on the
balance sheet as of September 30, are as follows:
2004 2003 2002
Deferred tax liabilities:
Federal $358,978 $380,317 $401,657
State 63,349 67,115 70,881
------- ------- -------
Total $422,327 $447,432 $472,538
======= ======= =======
The sources of deferred income taxes for the years ended
September 30, are as follows:
2004 2003 2002
Unbilled Rents
Receivable $1,055,817 $1,118,581 $1,181,345
34
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 2. INCOME TAXES (continued)
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:
2004 2003 2002
Federal statutory
income tax rate 34% 34% 34%
State tax provisions,
net of federal benefits 6 6 6
Other 7 2 (6)
-- -- --
Effective income tax rate 47% 42% 34%
== == ==
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES
The Company leases two buildings at it's A & S Drive, Paramus,
N.J. site for retail use. The Sports Authority, Inc. has
leased a 62,000 sq. ft. building for a lease term of twenty
(20) years and the Tandy Corporation has leased a 30,000 sq.
ft. building for use as a Comp USA retail store for a lease
term of fifteen (15) years. The tenants are responsible for
real estate taxes and other assessments as defined in the
operating lease agreements.
2004 2003 2002
Buildings and building improvements:
Cost $ 6,961,244 $6,961,244 $6,961,244
Accumulated depreciation 2,726,359 2,526,400 2,326,441
----------- --------- ---------
Net buildings and building
improvements $ 4,234,885 $4,434,844 $4,634,803
=========== ========== ==========
The minimum future rentals on noncancellable operating leases
for the years ending September 30, are as follows:
2005 $2,225,142 2009 $2,331,017
2006 2,225,142 2010 1,497,842
2007 2,233,965 2011 1,275,697
2008 2,331,017 2012 1,067,573
---------
Total $15,187,395
==========
35
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
Net rental income consists of the following:
2004 2003 2002
Rental income $2,053,703 $2,053,703 $2,053,703
Depreciation expense (199,959) (199,959) (199,959)
Other expenses (60,134) (55,593) (58,613)
-------- -------- --------
Rental income, net $1,793,610 $1,798,151 $1,795,131
========= ========= =========
In 2004, 2003, and 2002, depreciation expense included all
depreciation of the rental buildings and building
improvements.
a) In September 1992, 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 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
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.
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.
36
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
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
12/31/03 1/31/04
(In Millions) (In Thousands)
Current assets $ 1,667 $ 880,623
------ ---------
Total assets 2,244 1,339,556
------ ---------
Current liabilities 858 501,714
------ ---------
Total liabilities 1,475 900,290
------ ---------
Total stockholders'
equity 769 439,266
------ ---------
Net sales 4,649 1,760,450
------ ---------
Cost of sales 2,333 1,274,721
------ ---------
Gross profit 2,315 485,729
------ ---------
Income before
income taxes 473 24,086
------ ---------
Income tax expense 174 7,719
------ ---------
Net income $ 299 $ 16,367
------ ---------
NOTE 4. DISCONTINUED OPERATIONS
During the year ended September 30, 2003, the Company
abandoned its activities in the development of surgical
staples and the technology used to apply the staples for use
in internal surgery. Assets totaling $60,052, associated with
this segment, were written off to operations during 2003;
therefore, there are no remaining assets included on the
balance sheet as of September 30, 2003. There were no sales
associated with this segment. The operating loss from this
segment for 2003 was $172,746, with a tax benefit of $93,119
for a net loss from discontinued operations of $139,679.
37
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 5. RESEARCH AND DEVELOPMENT
Research and development expenses in the amount of $214,031
in 2002 was charged to operations and included in costs and
expenses.
NOTE 6. 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 2004, $11,400 in
2003 and $11,400 in 2002.
NOTE 7. 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 and $214,031 have been
expended in connection with the surgical staple during 2003
and 2002, respectively.
NOTE 8. 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:
2005 $5,126
2006 5,126
2007 5,126
2008 5,126
2009 5,126
38
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 8. LONG-TERM DEBT (Continued)
The combined balance outstanding for each debt issued at the
end of 2004, 2003, and 2002 is as follows:
2004 2003 2002
First Mortgage on
62,000 sq. ft. Building $4,059,353 4,511,328 $4,925,542
Less Current Portion 493,177 451,982 414,221
--------- --------- ---------
Long-Term Portion $3,566,176 $4,059,346 $4,511,321
========= ========= =========
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:
2005 $493,177 2009 $699,136
2006 538,140 2010 762,870
2007 587,197 2011 338,106
2008 640,727
NOTE 9. DEFERRED CHARGES
The composition of deferred charges and related amortization
is as follows:
Real Estate
Mortgage Brokers Commissions
Total Costs Sports Tandy
Authority Corp.
Original Cost $712,160 $102,520 $279,584 $330,056
Accumulated Amortization 448,756 59,804 168,915 220,037
------- ------- ------- -------
Balance 9/30/04 $263,404 $ 42,716 $110,669 $110,019
======= ======= ======= =======
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
======= ======= ======= =======
39
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
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).
The Company is also subject to concentrations of credit risk
with respect to cash and cash equivalents which the Company
attempts to minimize by entering into arrangements with major
banks and financial institutions and investing in high-quality
instruments. The Company does not expect any counterparties to
fail to meet their obligations.
NOTE 12. BUSINESS SEGMENTS
The Company 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's business segments are 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 during 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 10).
The accounting policies of the segments are the same as those
described in the summary of major 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.
40
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 12. BUSINESS SEGMENTS (Continued)
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
2004 2003 2002
Business Segments:
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 2,053,703 2,053,703 2,053,703
Other 4,645 32,932 17,805
--------- --------- ---------
Total $ 2,058,348 $2,086,635 $2,071,508
========= ========= =========
Income (Loss)
2004 2003 2002
Business Segments:
Surgical Staples $ - $ (139,679)* $ (214,031)
Electro-Optical - - -
Real Estate Rental 1,793,610 1,798,151 1,795,131
--------- --------- ---------
Total 1,793,610 1,658,472 $1,581,100
--------- --------- ---------
General and Administrative
Expenses (1,069,407) (828,081) (895,350)
Interest Expense (378,989) (417,026) (451,958)
Other Income 4,645 32,932 17,805
Income Tax Expense (164,923) (241,927) (148,808)
--------- --------- ---------
Total (1,608,674) (1,454,102) (1,414,701)
--------- --------- ---------
Net Income $ 184,936 $ 204,370 $ 166,399
========= ========= =========
Identifiable Assets
2004 2003 2002
Business Segments:
Surgical Staples $ - $ - $ 55,179
Electro-Optical - - 1,349
Real Estate Rental 6,006,879 6,310,711 6,614,542
Other 976,927 987,953 966,752
--------- --------- ---------
TOTAL ASSETS $ 6,983,806 $7,298,664 $7,637,822
========= ========= =========
* Discontinued operations
41
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 12. BUSINESS SEGMENTS (Continued)
Business Segments: Capital Expenditures
2004 2003 2002
Surgical Staples $ - $ - $ -
Electro-Opitical - - -
Real Estate Rental - - -
Other 3,529 4,214 49,083
--------- --------- ---------
$ 3,529 $ 4,214 $ 49,083
========= ========= =========
Property and Equipment
Business Segments Depreciation
2004 2003 2002
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 199,959 199,959 199,959
Other 20,407 19,908 16,929
--------- --------- ---------
$220,366 $219,867 $216,888
========= ========= =========
Intangible Assets
Amortization
2004 2003 2002
Surgical Staples $ - $ - $ 11,728
Electro-Optical - - 2,698
Real Estate Rental 41,109 41,108 41,109
Other - - -
--------- --------- ---------
$ 41,109 $ 41,108 $ 55,535
========= ========= =========
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, 2004,
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.
42
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
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.
2004 2003 2002
Changes in benefit obligation:
Benefit obligation at October 1 $2,371,343 $1,925,510 $1,782,702
Service cost 440,931 306,184 370,905
Interest cost 211,676 167,601 162,099
--------- --------- ---------
Benefit obligation at September 30 $3,023,950 $2,394,295 $2,315,706
========= ========= =========
2004 2003 2002
Change in plan assets:
Fair value of plan assets at October 1 $2,096,090 $1,810,644 $1,407,957
Company contributions 479,009 334,764 398,584
Benefit payments (100,000) - -
Actual return on plan assets 242,794 (49,318) 4,103
--------- --------- ---------
Fair value of plan assets at
September 30, $2,717,893 $2,096,090 $1,810,644
========= ========= =========
Funded status of Plan $(306,057) $(298,205) $(505,062)
Unrecognized Net (Gain) Loss 158,051 177,071 396,204
--------- --------- ---------
Accrued Pension $(148,006) $(121,134) $(108,858)
========= ========= =========
43
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 14. PENSION PLAN (Continued)
The net periodic pension cost for the year ended September 30,
includes the following components:
2004 2003 2002
1. Service cost - benefits earned
during the period $ 440,931 $ 306,184 $370,905
--------- --------- ---------
2. Interest cost on projected benefit
obligation 211,676 167,601 162,099
--------- --------- ---------
3. Actual return on plan assets (142,794) 49,318 (4,103)
--------- --------- ---------
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 (3,932) (176,063) (94,454)
d. Asset gain or (loss) deferred - - -
--------- --------- ---------
e. Total ( 3,932) (176,063) $(94,454)
--------- --------- ---------
5. Net periodic pension cost (credit) =
(Item 1+item 2+item 3+item 4(e) $505,881 $ 347,040 $434,447
--------- --------- ---------
The net periodic pension cost for 2004, 2003 and 2002 was
determined based on a 7% discount rate and a long - term rate of
return of 7% on plan assets.
44
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
NOTE 15. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
For the Fiscal Year Ended September 30, 2004
First Second Third Fourth
Quarter Quarter Quarter Quarter
Total Revenues $505,955 $505,371 $505,498 $541,524
Gross Profit N/A N/A N/A N/A
Income Before Extraordinary
Items 75,707 33,653 37,346 38,230
Weighted Average
Number of Shares 273,420 271,505 271,346 271,211
Earnings Per Share .28 .12 .14 .14
Net Income $75,707 $33,653 $37,346 $38,230
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
45
HOLOBEAM, INC.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 2004
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 2,067,152 1958 1971 3 to 40
years
Building II
Paramus, NJ 0 0 2,592,513 0 0 0 2,592,513 2,592,513 659,207 1995 1995 30 Years
--------- ------- --------- --------- -- ------- --------- --------- ---------
$6,777,260 $391,967 $3,311,394 $3,710,655 $0 $452,772 $6,961,244 $7,414,016 $2,726,359
========= ======= ========= ========= == ======= ========= ========= =========
(1)Activity for the three years (2)Activity for the three years
ended September 30, 2004 is ended September 30, 2004 is
as follows: 2004 2003 2002 as follows: 2004 2003 2002
Balance at Beginning Balance at Beginning
of Year $7,414,016 $7,414,016 $7,414,016 of Year $2,526,400 $2,326,441 $2,126,482
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 $2,726,359 $2,526,400 $2,326,441
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, 2004 is $7,414,016.
The accompanying notes are an integral part of these financial statements.
46
HOLOBEAM, INC.
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 2004
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 $ 810,123 None
Mortgage Payable
Building and Improvements 8.77% February 5, 2011 $56,328 None $6,000,000 $3,249,230 None
---------
$4,059,353
=========
Activity for the three
years ended September 30,
2004 is as follows:
2004 2003 2002
Balance at Beginning of Year $4,511,328 $4,925,542 $5,305,152
Additions During Year:
Commercial Loans 0 0 0
New Mortgages 0 0 0
--------- --------- ---------
4,511,328 4,925,542 5,305,152
Deductions During Year:
Principal Payments 451,975 414,214 379,610
Mortgage Payments 0 0 0
--------- --------- ---------
Balance at End of Year $4,059,353 $4,511,328 $4,925,542
========= ========= =========
(1) The cost for Federal income tax purposes at 9/30/04 is $4,059,353
The accompanying notes are an integral part of these financial statements.
47
Item 9. Changes and Disagreements with Accountants on
- ------------------------------------------------------
Accounting and Financial Disclosure.
- ------------------------------------
None.
Item 9A. Controls and Procedures.
- ---------------------------------
Under the supervision and with the participation of the
Officers, including the President and the Treasurer, the Board
of Directors has evaluated the effectiveness of the design and
operation of the Registrant's disclosure controls and procedures
as of the end of the period covered by this report, and based
upon their evaluation, the President and Treasurer have
concluded that these controls and procedures are effective.
There were no significant changes in internal controls or in
other factors that could materially affect these controls
subsequent to the date of their evaluation.
Item 9B. Other Information
- --------------------------
Subsequent Events
-----------------
On October 20, 2004, the Registrant filed an amendment to is Restated
Certificate of Incorporation for the purpose of reducing
the number of Authorized Common Shares to 272,000 from
2,000,000.
The amendment was duly adopted in accordance with the applicable
provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware and was approved by the affirmative
vote of approximately 81% of the Registrant's shareholders.
48
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 73 President of Registrant Meeting
William M. Hackett Treasurer of Registrant 2006 Annual 1984
Age 61 Meeting
Beverly Cook Office Manager and 2007 Annual 1995
Age 68 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 73
William M. Hackett Treasurer of Registrant Annual 1975
Age 61
Beverly Cook Secretary of Registrant Annual 1997
Age 68
(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
49
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. Executive Compensation.
- ---------------------------------
(a) The following Table shows all direct
remunerations paid by the Registrant during the fiscal year
ended September 30, 2004 to each Director or Officer of the
Registrant whose aggregate direct remuneration exceeds
$100,000., and the direct remuneration paid all Directors and
Officers of the Registrant as a group for such fiscal year.
50
HOLOBEAM, INC.
Form 10K
Summary Compensation Table
September 30, 2004
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 2004 $325,000 -0- -0- -0- -0- -0- -0-
President and CEO 2003 325,000 -0- -0- -0- -0- -0- -0-
and Director 2002 325,000 -0- -0- -0- -0- -0- -0-
William M. Hackett 2004 33,333 -0- -0- -0- -0- -0- -0-
Treasurer and 2003 25,000 -0- -0- -0- -0- -0- -0-
Director 2002 25,000 -0- -0- -0- -0- -0- -0-
Beverly Cook 2004 150,000 -0- -0- -0- -0- -0- -0-
Secretary and 2003 150,000 -0- -0- -0- -0- -0- -0-
Director 2002 137,500 -0- -0- -0- -0- -0- -0-
All Officers and 2004 $508,333 -0- -0- -0- -0- -0- -0-
Directors as a 2003 500,000 -0- -0- -0- -0- -0- -0-
Group 2002 487,500 -0- -0- -0- -0- -0- -0-
51
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 2004, 2003 and 2002.
(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. as well as all
officers and directors as a group since October 1, 2003.
All Directors and Officers as a Group
-------------------------------------
Options Granted
0
Options Exercised
0
Unexercised Options Held at 9/30/04 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. $ 60,000.
160,000. 160,000.
200,000. 160,000.
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. and $137,500., respectively, as of
September 30, 2004. Melvin Cook and Beverly Cook will be
credited at
52
normal retirement date with 37 years service each under the
Pension Plan as of September 30, 2004. 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, 2004.)
Item 12. Security Ownership of Certain Beneficial Owners and
- -------------------------------------------------------------
Management and Related Stockholder Matters.
- -------------------------------------------
(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, 2004 is as follows:
Title of Class Name & Address Amount Owned % of Class
- -----------------------------------------------------------------
Common Stock, Par Melvin S. Cook 124,500 46.1%
Value $0.10 Per Share 217 First Street
Ho-Ho-Kus, NJ 07423
Common Stock, Par Beverly Cook 95,000 35.1%
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 10, 2004 are as follows:
Title of Class Amount Beneficially Owned % of Class
- ---------------------------------------------------------------
Common Stock, Par Value 219,500 81.2%
$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. Principal Accountant Fees and Services.
- -------------------------------------------------
The Board of Directors and Officers of the Registrant
appointed R.A.
53
Fredericks and Co., LLP, independent registered public
accounting firm, to audit the Registrant's books, records and
accounts for the Fiscal Year ended September 30, 2004.
The Board of Directors approves all services rendered by
R.A. Fredericks and Co., LLP and approves all fees paid to the
audit firm.
The Board of Directors requires that the Treasurer and
the President approve all audit and other permissible non-audit
services provided by R.A. Fredericks and Co., LLP. The Board of
Directors will not approve non-audit engagements that would
violate rules of the U.S. Securities and Exchange Commission or
impair the independence of R.A. Fredericks and Co., LLP.
For the fiscal years ended September 30, 2004 and 2003,
R.A. Fredericks and Co., LLP was paid the following fees for
services provided to the Registrant:
2004 2003
Audit Fees $20,000 $16,000
Tax Fees 2,500 2,500
All Other Fees -0- -0-
------ ------
Total $22,500 $18,500
====== ======
54
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports
- -------------------------------------------------------------
on Form 8K
- ----------
The following documents are filed as part of the Annual
Form 10-K:
1. Index to Exhibits
A. Officers' Certifications pursuant to
Section 302 of the Sarbanes-Oxley Act
of 2002
B. Certification of Chief Executive
Officer pursuant to U.S.C., Section
1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
C. Certification of Chief Financial
Officer pursuant to 18 U.S.C.,
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002
D.Amended and restated Certificate of
Incorporation of Holobeam, Inc.
E.Code of Ethics
55
HOLOBEAM, INC.
Form 10K
September 30, 2004
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 10, 2004
-----------------
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 10, 2004
-----------------
By: William M. Hackett
------------------
William M. Hackett
Director and Treasurer
Date: December 10, 2004
-----------------
By: Beverly Cook
------------
Beverly Cook
Director and Secretary
Date: December 10, 2004
EXHIBIT A
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, 2004, including corrective actions with
regard to significant deficiencies and material
weaknesses. As of September 30, 2004, 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
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: 12/05/04
--------
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
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: 12/10/04
--------
Melvin S. Cook, President
-------------------------
Melvin S. Cook
President
EXHIBIT D
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
HOLOBEAM, INC.
*****
Holobeam, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation in a
meeting duly held, unanimously adopted a resolution proposing and
declaring advisable the following amendment to the Restated Certificate
of Incorporation of said corporation:
RESOLVED, That the Restated Certificate of
Incorporation of the corporation be amended by
changing the FOURTH Article thereof so that, as
amended said Article shall be and read as
follows:
"FOURTH: The total number of shares of stock
which the Corporation shall have authority to
issue is Two Hundred Seventy Two Thousand
(272,000) shares of Common Stock having a par
value of Ten Cents ($0.10) per share amounting in
the aggregate to Twenty-Seven Thousand Two
Hundred Dollars ($27,200)."
SECOND: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections 242 and 228 of
the General Corporation Law of the State of Delaware.
THIRD: That this Certificate of Amendment of the Restated Certificate
of Incorporation shall be effective on October 20, 2004.
IN WITNESS WHEREOF, said Board of Directors of said Holobeam, Inc.
has caused this certificate to be signed by the Chairman this 4th day
of October 2004.
Melvin S. Cook
by Melvin S. Cook
Chairman