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FORM 10 K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For this fiscal year ended September 30, 1998, 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.
$4,155,429.00 at December 4, 1998.
1
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest practicable
date. 302,213 Common Shares at December 4,1998.
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.
2
PART I
Item 1. Business
(a) In General. The Registrant was organized in October,
1967, and commenced doing business on January 1, 1968. The
Registrant is engaged in the rental and development of real estate
and in developing surgical staples and the technology used to apply
the staples and was formerly engaged in developing technology for
semiconductor devices until 1994 when such activities were
terminated.
b) Industry Segments. For financial information in regard
to Industry Segments, reference is made to Note 13 to the Financial
Statements for the years ended September 30, 1998, 1997 and 1996.
(c) Description of Business.
(i) Principal Activities and
(ii) Status of products and Real Estate Properties.
Medical Staples
The Registrant is continuing its efforts in the area of
Medical Staples for use in internal surgery. Four United States
Patents have been received and foreign applications have been filed
on a novel staple. The staple has been produced and animal testing
has yielded favorable results during 1998. Additional testing has
been started at a medical center and preliminary results have been
successful enough to continue the project.
A significant investment would be required if the Registrant
were to pursue this area of business. The Registrant may seek a
relationship of some sort with a firm active in the medical
equipment area. However, no decision as to such a relationship has
been made at this time.
Semiconductor Technology
The Registrant had obtained a United States patent covering
technology for the deposition of thin films of semiconductor
materials, e.g., III-V materials such as binary or ternary
semiconductor materials, on suitable substrates. Contracts to
investigate the technology involved were given by the Solar Energy
3
Research Institute (S.E.R.I.) of the United States Department of
Energy (USDOE) to Brown University. This work, in order to support
the length of research required to test the theories, was to test
the quality of the materials and potential applications and the
funds were supplied by the USDOE on the Solaris Solar Research
program, Grant #DE-FG02-84C410203. Subsequently, Brown University
performed additional investigations of the applications of the
technology supported by the USDOE under the University
Participation Program, Contract #XB5-05009-5. These investigations
showed that the film deposition rates with the technology were
faster than with conventional liquid phase epitaxy and were of high
quality. However, variations in film thickness along the direction
of flow were observed. If such variation cannot be solved, it
would limit the possible commercial use of the technology. Further
investigation of the technology by Brown University has ceased as
governmental support for their research has terminated. The
Registrant has no direct knowledge at this time of other research
taking place using its technology. There is no assurance that the
technology in question will find commercial application. During
1993 the Registrant expended $37,615.00 toward development of
semiconductor technology and substantially reduced expenditures
during 1994.
During fiscal year 1994, the Registrant discontinued efforts
relating to photovoltaic cells. Work in the field has moved in
directions away from that of the Registrant's technology. There
has been a substantial reduction of government support in this
technical area and funding that had been received by laboratories
exploring the Registrant's technology has terminated.
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 Tandy Corporation 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
4
materials used for the Registrant's research activities have been
acquired through commercial businesses engaged in the distribution
of such supplies. The materials that the Registrant would require
for development of commercial production of medical staples are
widely available.
(iv) Patents.
The Registrant has filed several patent applications and has
several patents issued in connection with medical staples for use
in internal surgery. These applications and patents are as
follows:
No. Serial No. Title of Invention Issue Date
1. PCT/US94/02227 Staples 03/01/94
2. 08/512,766 Staples 08/09/95
3. 08/228,058 Staples 08/29/95
4. Canadian Pat. No. Improved Staples (PCT NAT)08/18/98
2,155,750
5. European Pat. 94910801.3 Staples 03/01/94
6. Australian Pat. 63568/94 Improved Staples 09/15/94
7. Japanese Pat. 6-520120 Staples 03/01/94
8. Brazilian Pat. Staples 03/01/94
PCT/US94/02227
9. 08/502,988 Staple Overlap 07/18/95
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
5
The Registrant has obtained patent protection on technology
developed in the areas of epitaxial growth, peeled films and
photovoltaic cells. However, there is no assurance that any
revenue will be received as a result of obtaining the patents. The
Patents issued to the Registrant dealing with the Semiconductor
research are as follows:
1. U.S. Patent No. 4,396,456 "Method of Peeling Epilayers",
Melvin S. Cook.
2. U.S. Patent No. 4,519,871 "Bubble-Mode Liquid Phase
Epitaxy," Melvin S. Cook.
3. U.S. Patent No. 4,548,658 "Growth of Lattice-Graded
Epilayers," Melvin S. Cook.
4. U.S. Patent No. 4,594,126 "Growth of This Epitaxial Films
on Moving Substrates from Flowing Solutions," Melvin S.
Cook.
5. U.S. Patent No. 4,594,128 "Liquid Phase Epitaxy," Melvin
S. Cook.
6. U.S. Patent No. 4,597,823 "Rapid LPE Crystal Growth,"
Melvin S. Cook.
7. U.S. Patent No. 4,633,030 "Photovoltaic Cells on
Larrice-Mismatched Crystal Substrates," Melvin S. Cook.
(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.
6
It is presently contemplated that Registrant's activities with
respect to medical staples, if actual commercial activities are
commenced, may be limited to licensing the technology to other
firms or to forming some type of business relationship with other
firms. The technology is in competition with alternative staples,
some of the suppliers of which are well-established.
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.
The obsolete style of the office building owned by the
Registrant prior to and during 1991 made the attraction of suitable
office tenants most 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
development of the adjacent site.
In December 1991, the change in zoning was approved. The then
existing building was rented to The Sports Authority, Inc. The
market for retail space in Paramus, New Jersey area, although in
recession, was not as adversely affected as was the market for
office space.
During 1994, a 30,000 sq. ft. building was constructed on the
Registrant's site located adjacent to the building leased by The
Sports Authority, for use as a Computer City retail store. Tandy
Corp. commenced paying rent in October 1994. Holobeam reimbursed
Tandy Corporation $1,189,675 for the costs of constructing the
building and paving of the site, after a permanent Certificate of
Occupancy was obtained.
(xi) Research and Development.
The Registrant discontinued engineering and development in
connection with the development of technology associated with
semiconductor devices during 1994 and no funds were expended in
connection with these activities. During 1993 the Registrant
recorded research and development costs of $37,615.00 on such
technology. There have been no such costs expended during 1994,
1995, 1996, 1997 and 1998 in connection with this technology. The
Registrant anticipates that no
7
Research and Development expenditures will be made with respect to
semiconductor technology during the year ended September 30, 1999.
The Registrant has investigated methods for applying surgical
staples and the technology presently used to fabricate and apply
such staples. During 1998, 1997 and 1996, the Registrant expended
$224,693.00, $147,562.00 and $219,001.00, respectively, in
connection with furtherance of this activity. Such costs have been
currently expensed and consist principally of materials, supplies
and costs associated with design and development.
(xii) Environmental Compliances.
The Registrant does not believe that compliance with Federal,
State or Local provisions of a governmental nature which have been
enacted or adopted regulating the discharge of material into the
environment will have a materially adverse effect upon the capital
expenditure requirements, earnings or competitive position of the
Registrant.
If the semiconductor technology developed had ever reached
production, the Registrant would have engaged an accredited,
outside manufacturing firm to perform the production process. One
feature of the Registrant's technology was the absence of
significant waste materials. Since the Registrant's semiconductor
technology was developed, other technologies have advanced the
state-of-the-art and new directions in this field have rendered the
Registrant's technology less attractive.
The Registrant's activities with regard to medical staple
technology, at present, are limited to engineering, development and
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.
8
(xiii) Employees.
At September 30, 1998, the Registrant employed three persons
as compared to the three persons at September 30, 1997 and three
persons at September 30, 1996.
(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 on a 12 month lease that is annually renewable.
The Registrant owns two office buildings of 62,000 square feet and
30,000 square feet located at 50 A&S Drive, Paramus, New Jersey.
One building was placed in service in October 1994, the other in
1982. (Reference is made to Notes 4, 8, 9 and 10 to the Financial
Statements for the fiscal year ended September 30, 1991, 1990 and
1989.)
Pertinent information concerning the Registrant's properties
is as follows. (Reference is made to Schedule XI of the
accompanying Financial statements for the years ended September 30,
1997 and 1996.)
Building Building
Paramus, NJ Paramus, NJ
Year Acquired 1971 1994
Gross Square Footage 62,000 30,000
Percent Leased at 9/30/95 100% 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 $6,264,064 $ -0-
9
(1) Includes $3,567,267.00 of improvements to the building
paid by The Sports Authority, Inc. (the Tenant) upon
closing of the Mortgage, but does not include additional
amounts expended by The Sports Authority, Inc. since
closing.
(2) Includes construction allowance of $1,189,675.00 for
Tandy Corporation pursuant to the Operating Lease
Agreement.
(3) Includes land cost of $218,402 for the 62,000 sq. ft. building.
(4) Includes land cost of $234,370 for the 30,000 sq. ft. building.
In 1983, the Registrant purchased 2.799 acres of land located
in Paramus, New Jersey and adjacent to the building owned by the
Registrant at 50 A&S Drive. The purchase price was $173,565 which
was paid in cash. Since 1983, the Registrant has incurred costs in
the amount of $60,805 for various improvements and architectural
work relating to development of this property. During 1992, 1991
and 1990, the Registrant spent $293,784, $78,051 and $50,667
respectively in connection with an application for a use variance
for the site and various site improvements that would enable the
construction of a commercial or retail building on the site. The
change in zoning to retail use was approved by the Borough of
Paramus in December 1991. The change in zoning to allow retail use
also required new site plan approval because the change in use
requires 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 Computer City retail store.
(Reference is made to Note 13 to the Registrant's 1994 Financial
Statements and to Item 1, Part X of the 1994 Form 10K.) The source
of funds for any additional improvements will be the cash and cash
equivalents reflected on the Balance Sheet, and if necessary, the
Cash Flows associated with the Rental Income generated by the
Operating Leases. (Reference is made to Note 3 of the accompanying
Financial Statements for the years
10
ended September 30, 1997 and 1996.)
The zoning change approval allowed for retail use of the
property and significantly enhanced the opportunities for
attracting a suitable tenant for the site.
When purchased, the site adjacent to the building owned by the
Registrant, was 12 (twelve) feet below the acceptable construction
level and required significant amounts of fill together with site
engineering costs to acquire site plan approval for a building from
the appropriate governmental regulatory authorities.
In addition, the Registrant expended funds to change the
zoning of the property from office use to retail use. This change
in zoning allowed the Registrant to seek tenants who were engaged
in retail operations for the site and resulted in the October 1994
tenancy of Computer City. (Reference is made to Note 12 of the
Financial Statement 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 approved until the
Computer City occupancy of October 1994 for retail use. The market
for office space has seen significant decline during the years
ended September 30, 1990, 1991, 1992, 1993 and 1994. The vacancy
rate for such space had reached 28% during the year ended September
30, 1994 and 1993, respectively for the area in which the
Registrant competes, Bergen County, New Jersey.
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:
1998 100%
1997 100%
1996 100%
1995 100%
1994 100%
The building owned by the Registrant and under lease to Tandy
Corp. 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 1995, 1996, 1997 or 1998.
11
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, a retail
shopping mall adjacent to the site currently being developed by the
Registrant, 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 con-
nection 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. Any
payments to affiliated parties are unrelated to the cost of such
activities and are detailed and disclosed in Item 11 (d) of this
report.
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 in
the lease as the guarantor.
Item 3. Legal Proceedings.
There are no legal proceedings of a material nature to which
the Registrant is a party other than ordinary, routine litigation
incidental to the business of the Registrant.
Item 4. Submission to Matters to a Vote of Security Holders.
None.
12
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder
Matters.
(a) The Registrant's common stock is traded on the
over-the-counter market. The bid price offered by Walsh Manning
Securities Inc., New York, New York on December 4, 1998 was $11.00
per share. On July 18, 1983, the Registrant's shares were deleted
from the NASDAQ system when no market maker for the Registrant's
common stock any longer maintained registration as such with the
NASDAQ System.
(b) The approximate number of holders of Common Stock
securities of the Registrant as of December 4, 1998 was 630.
(c) No dividends have been paid or declared on the Common
Stock of the Registrant during the 1998, 1997 or 1996 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: National Quotation Bureau). (On July 18, 1993, the
Company shares were deleted from NASDAQ.)
13
1998 1997
high low high low
Quarter Ended Dec. 31 11.00 11.00 11.00 11.00
Quarter Ended Mar. 31 11.25 11.00 11.00 11.00
Quarter Ended June 30 11.50 11.25 11.00 11.00
Quarter Ended Sept. 30 14.75 12.75 11.00 11.00
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, 1993 and ending September 30, 1998 is presented below.
HOLOBEAM, INC.
SUMMARY OF SELECTED FINANCIAL DATA
FOR THE YEARS ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994
Restated
Gross Income $1,964,562 $1,873,382 $1,856,218 $1,895,392 $1,239,344
Net Income (Loss) $ 166,891 $ 303,882 $ 306,434 $ 334,594 $ 556,787
Weighted Average
Number of
Common Shares
Outstanding 304,237 310,426 316,992 323,596 335,211
Earnings Per
Share (Loss) $ 0.55 $ 0.98 $ 0.97 $ 1.03 $ 1.66
Total Assets $7,255,082 $7,552,667 $7,743,614 $8,931,962 $7,456,189
Long-Term Debt $5,984,002 $6,310,060 $6,667,298 $6,946,564 $7,002,162
Shareholders'
Equity $ 856,536 $ 748,020 $ 558,463 $ 371,422 $ 68,070
Gross Rental
Income $1,925,534 $1,845,509 $1,838,216 $1,834,829 $1,208,217
Net Rental Income $1,667,028 $1,578,010 $1,577,254 $1,554,791 $1,039,686
Item 7. Management's Discussion and Analysis of Financial
Condition and
Results of Operations.
(1) Liquidity.
The Registrant funded construction site preparation,
engineering and site plan approvals for a 30,000 sq. ft.
building presently occupied by Tandy Corporation as a Computer
City retail store. Total costs related to
14
the building construction amounted to $2,592,513 and the building
was placed in service during the fiscal year ended September 30,
1995. (Reference is made to the Registrant's Annual Report, Form
10K for the year ended September 30, 1994, Item 1(c), Item 2 and to
Note 3 to the Registrant's financial statements for the year ended
September 30, 1995.)
These construction costs were funded in part by the
proceeds of the First Mortgage on the 62,000 sq. ft. building
owned by the Registrant (and occupied by The Sports
Authority), in part by the Tenant allowance for construction
pursuant to the lease agreement and by cash flows associated
with the operating leases for both buildings.
Gross Rents and net rental income associated with the
operating leases on the properties of the Registrant are
sufficient to provide the cash flows necessary to fund the
Registrant's operations. The lease terms expire in 2009
(Tandy Corporation) and 2012 (The Sports Authority) and
include options for renewal. In the event that the lease
options are exercised, revenue will continue beyond 2009 and
2012.
Total minimum future rental income associated with these
leases approximates $28,111,000.00 and should be adequate to
fund the Registrant's real estate rental activities and to
provide the cash flows necessary to fund the surgical staple
development and engineering project.
(2) Capital Resources
Since building construction has been completed, the
Registrant does not anticipate future additional capital
requirements for the rental properties other than those that
are routine and incidental to its rental operations. Expenses
are expected in connection with maintenance, insurance and
taxes, but no major capital projects are planned at this time.
The Registrant expects to continue to fund the
development and engineering associated with its activities
with the medical staples
15
technology. Testing has commenced at a medical center and is
expected to continue during 1999. Results during 1998 have been
encouraging and the Registrant expects to continue with the
project. The Registrant expects that the maximum funding
requirement during 1999 in connection with the development,
engineering and testing will approximate $300,000.00 and will be
funded from cash flows provided by the real estate rental
activities. No revenues are projected in connection with the
medical staples technology during 1999.
During 1998 the Registrant established a defined benefit
plan covering all eligible employees who have completed one
year of service. Benefits are based upon years of service and
average compensation during the three years in which the
participant earned the highest compensation.
The Registrant's funding policy is to make annual
contributions to the plan in amounts sufficient to fully
provide for all employees' benefits by the time they retire.
During 1998 the Registrant's pension contribution was
$307,773.00 and was included in General and Administrative
expenses in the Statement of Operations in the accompanying
Financial Statements for the year ended September 30, 1998.
(Reference is made to Note 15 to the Financial Statements for
the year ended September 30, 1998 and to the Exhibit filed
August 8, 1998 with the Registrant's Quarterly Report on Form
10Q for the Quarter ended June 30, 1998.)
(3) Results of Operations.
(a) The Registrant recorded net income for the year
ended September 30, 1998 in the amount of $166,891.00 as
compared to $303,882.00 for the year ended September 30, 1997.
The results of operations reflect improved revenues and income
associated with the Registrant's real estate rental activities
as net rental income was $1,667,028.00 as compared to
$1,578,010.00 in 1997.
16
The Registrant continues to experience consistent
earnings performance due to 100% occupancy of the Registrant's
rental properties and the favorable long-term operating
leases. Costs associated with the Registrant's real estate
rental activities are expected to remain at present levels
during the short-term as are the revenues associated with such
operating leases.
Long term, costs are expected to rise with inflation and
some capital maintenance and repairs are expected as the
buildings mature and require more intensive upkeep. Since
there are rental income escalation provisions contained in the
operating leases, revenues are expected to be sufficient to
provide for such costs, which are not expected to have any
materially adverse effects upon the results of operations
during the term of the leases.
The Registrant continued to fund the engineering and
development activities related to the surgical staple
technology it has developed. Expenditures in connection with
this project for 1998 were $225,041.00, which represented an
increase of $77,479.00 when compared to the 1997 expenditures
for the staples project. The Registrant expects to continue
funding this project during 1999 and will utilize the cash
flows and revenues from its real estate rental activities to
fund the ongoing testing and development for the staples
project. Testing has commenced at a medical center and
initial results, although favorable, cannot assure the
commercial viability of the Registrant's technology. When
more definitive results can be obtained, the Registrant will
analyze its position and determine if funding should continue
beyond fiscal year 1999. The Registrant anticipates funding
testing, development and patent activities in connection with
the staples project during 1999 to approximate $300,000.00.
During 1998, the Registrant contributed $307,773.00 to
its defined benefit plan (pension plan) which covers all
eligible employees who have
17
completed one year of service. (Reference is made to Exhibit
entitled"Defined Benefit Plan" filed with Quarterly Report 10Q for
the Quarter ended June 30, 1998 and filed on August 8, 1998.) The
Registrant expects to continue to fund the pension plan on an
annual basis and does not expect the expense of such plan to have
a materially adverse effect upon its financial condition.
(b) The results of operations for the year ended
September 30, 1997 indicate after tax income of $303,882.00 as
compared to $306,434.00 for the fiscal year ended September
30, 1996. The Registrant has experienced consistent results
of operations since the real estate rental properties have
been 100% occupied and under favorable operating lease
agreements. Because the buildings are under lease to The
Sports Authority and to Tandy Corporation, such revenues are
expected to continue to be uniform through 2009 when the Tandy
lease expires. Costs are also expected to remain at present
levels during the short term.
Long term, the Registrant expects costs to increase,
particularly with liability insurance, during the life of the
leases. It is also expected that maintenance costs may
increase as the buildings mature and may require more
substantial and costly repairs. Funding of these costs is not
expected to have a materially adverse effect upon the results
of operations during the term of the leases.
As previously discussed, the Registrant also expects to
fund engineering and development activities associated with
its medical staple technology in the maximum amount of
$250,000.00 during 1998 which will be supported by the cash
flows associated with the real estate rental activities. The
Registrant funded the medical staples technology development
in the amount of $147,562.00 during the year ended September
30, 1997.
(c) The results of operations for the year ended
September 30, 1996 indicate after-tax income of $334,594.00
for 1995. Performance for
18
the two years remained relatively stable resulting from revenues
received under the operating leases of The Sports Authority, Inc.
and Tandy Corp. Since the buildings are 100% occupied and will
remain so until 2009, revenues are expected to continue to be
uniform through 2009. Costs associated with the operating leases
are expected to remain at present levels throughout the terms of
the leases with the exception of costs associated with business
liability insurance in connection with the leasing activities,
which are expected to rise with inflation and risk factors.
The Registrant expects to continue to fund research and
development costs associated with the surgical staple project
and such costs increased from $120,833.00 in 1995 to
$219,001.00 in 1996. This increase resulted from additional
expenditures for purchases of materials, supplies and design
and drafting services during 1996. The Registrant expects to
continue to fund the development during 1997 and anticipates
that such expenditures will approximate $250,000.00 during
1997.
At present, the fabrication and experiments being
performed by the Registrant in connection with the surgical
staples project are limited to engineering, design and
development of staple design and to design of equipment to
apply the staples. Such work may progress to animal testing
during 1997 and if started, may take substantial time before
conclusive results can be evaluated.
(4) Other Matters
The Company is currently working to resolve the potential
impact of the Year 2000 on the processing of date-sensitive
information by the Company's computerized information system.
The Year 2000 problem is the result of computer programs being
written using two digits (rather than four) to define the
applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year
19
1900 rather than the year 2000, which could cause miscalculations
or systems failures. The costs of addressing potential problems are
not expected to have a material adverse impact on the Company's
financial position, results of operations or cash flows in future
periods. However, if the Company or its vendors are unable to
resolve such issues in a timely manner, it could result in a
material financial risk. The Company does plan to devote the
necessary resources to resolve all significant Year 2000 issues in
a timely manner.
Item 8. Financial Statements and Supplemental Data.
Financial statements, supplementary financial information and
Accountant's Report are filed with this report. (See Financial
Statements and reports thereon of Fredericks and Company for 1997
and 1998.)
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
20
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.
Date First
Name and Age Title Term Elected
Melvin S. Cook Chairman of the Board 1999 Annual 1968
Age 67 President of Registrant Meeting
William M. Hackett Treasurer of Registrant 2000 Annual 1984
Age 55 Meeting
Beverly Cook Office Manager and 2001 Annual 1995
Age 62 Secretary of Registrant Meeting
(1) Martin R. Infante, Secretary of the Registrant and member of
the Board of Directors served the Registrant in such
capacities until his death while in office during the year
ended September 30, 1997.
(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.
Date First
Name and Age Title Term Elected
Melvin S. Cook Chairman of the Board Annual 1968
Age 67
William M. Hackett Secretary and Treasurer of Annual 1975
Age 55 the Registrant
Beverly Cook (1) Secretary of the Registrant Annual 1997
Age 62
(1) Martin R. Infante, Secretary of the Registrant and member of
the Board of Directors of the Registrant served in such
capacities until his death during the year ended September 30,
1997.
(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
21
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.
(1) Martin R. Infante, Secretary of the Registrant and member of
the Board of Directors of the Registrant served in such
capacities until his death during the year ended September 30,
1997.
(f) Not applicable.
Item 11. Management Compensation.
(a) The following Table shows all direct remunerations paid
by the Registrant during the fiscal year ended September 30, 1998
to each Director or Officer of the Registrant whose aggregate
direct remuneration exceeds $100,000.00, and the direct
remuneration paid all Directors and Officers of the Registrant as
a group for such fiscal year.
22
HOLOBEAM, INC.
Form 10K
Summary Compensation Table
September 30, 1998
Long Term Compensation
Name and Annual Compensation Awards Payouts All Other
Principal Year Salary Bonus Other Restricted Stock SUO/SARS LTIP Payouts Compensation
Position
Melvin S. Cook 1998 $250,000 -0- -0- -0- -0- -0- -0-
President and CEO 1997 250,000 -0- -0- -0- -0- -0- -0-
and Director 1996 200,000 -0- -0- -0- -0- -0- -0-
William M. Hackett 1998 17,550 -0- -0- -0- -0- -0- -0-
Treasurer and 1997 17,550 -0- -0- -0- -0- -0- -0-
Director 1996 17,550 -0- -0- -0- -0- -0- -0-
Martin R.Infante(1) 1998 -0- -0- -0- -0- -0- -0- -0-
Secretary and 1997 -0- -0- -0- -0- -0- -0- 9,999
Director 1996 -0- -0- -0- -0- -0- -0- 29,984
Beverly Cook 1998 75,000 -0- -0- -0- -0- -0- -0-
1997 75,000 -0- -0- -0- -0- -0- -0-
1996 54,167 -0- -0- -0- -0- -0- -0-
All Officers and 1998 342,550 -0- -0- -0- -0- -0- -0-
Directors as a 1997 342,550 -0- -0- -0- -0- -0- 9,999
Group 1996 271,717 -0- -0- -0- -0- -0- 29,984
(1) Martin Infante performed services for the registrant as landlord and
insurance broker. See Item 11(D) of this report. Mr. Infante died
during the year ended September 30, 1997
23
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.
Mr. Infante received no compensation as an employee of the
Registrant. The amounts paid to Mr. Infante were in connection
with his services performed as insurance agent and landlord.
During 1997, Mr. Infante's payments were limited to rental payments
amounting to $9,999.00. (Reference is made to Notes 4 and 6 to the
Financial Statements for the year ended September 30, 1997 and to
Item 11 (d) of Report, Form 10K for the year ended September 30,
1997.)
(a) 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 1998, 1997 and
1996.
(b) The following Table sets forth all the options to
purchase securities from the Registrant which were granted to or
exercised by any of its directors and each officer whose direct
remuneration exceeds $100,000.00 as well as all officers and
directors as a group since October 1, 1997.
All Directors and Officers as a Group
Options Granted 0
Options Exercised 0
Unexercised Options Held at 9/30/98 0
(d) During the fiscal year of the Registrant ended on
September 30, 1997, the Registrant utilized the services of Mr.
Infante as a landlord. In the opinion of the Registrant, the
amounts paid to Mr. Infante in respect to the foregoing were in all
cases fair to the Registrant and were consistent with the amount
which would have been paid had the transaction occurred with
unaffiliated parties. (Reference is made to Notes 4 and 5 to the
Financial Statements of the Registrant for the years ended
September 30, 1997 and 1996.)
The amounts paid to Mr. Infante during the years ended
September 30 1997 and 1996 are presented below:
24
1997 1996
Rent Expense $ 9,999 $10,908
Insurance -0- 19,076
Total Payments $ 9,999 $29,984
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
160,000 107,112
200,000 107,112
Pensions are based upon average annual earnings (salary and bonus)
for the highest three consecutive years of employment with the
Company. For Melvin Cook and Beverly Cook the amounts equaled
$107,112 and $60,000, respectively, as of September 30, 1998.
Melvin Cook and Beverly Cook were credited with 36 years of service
each under the Pension Plan as of September 30, 1998. 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.
PART IV
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
25
(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 4, 1998 is as follows:
Title of Class Name & Address Amount Owned % of Class
Common Stock, Par Melvin S. Cook 123,497 40.9%
Value $0.10 Per Share 540 Ravine Court
Wyckoff, NJ 07481
Common Stock, Par Beverly Cook 95,000 31.4%
Value $0.10 Per Share 540 Ravine Court
Wyckoff, NJ 07481
(b) The stockholding of Officers and Directors as a group as
of December 10, 1998 are as follows:
Title of Class Amount Beneficially Owned % of Class
Common Stock, Par Value 218,497 72.3%
$0.10 Per Share
(c) There are no contractual arrangements that might result
in a change of control of Registrant.
Item 13. Certain Relationships and Related Transactions.
Martin R. Infante, Former Secretary and Director provided
services to the Registrant in his capacity as a principal in the
Martin Infante Insurance Agency and as a landlord.
During the fiscal years ended September 30, 1997 and 1996, the
amounts paid to Mr. Infante in connection with such services were
as follows:
26
1997 1996
Rent Expense $9,999 $10,908
Insurance -0- 19,076
Total Payments $9,999 $29,984
Reference is made to Item 11 (d) of Form 10K and to Notes 4
and 6 to the Financial Statements for the year ended September 30,
1997.
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8K
(a) Index to Financial Statement filed as part of the Annual
Report and attached.
(b) Reports on Form 8K.
(c) Lease with The Sports Authority, Inc. filed as part of
the 1993 Annual Report Form 10K-A.
(d) Financial Statement Schedules.
(e) Lease with Tandy Corp. filed as part of the 1995 Annual
Report Form 10K.
The following is a list of Financial Statement Schedules filed
as part of this Annual Report on Form 10K. All other schedules
omitted herein are so omitted because either (1) they are not
applicable, or (2) they required information is shown in the
Financial Statements.
Schedules
V Property and Equipment
VI Accumulated Depreciation and Amortization of
Property and Equipment
X Supplementary Income Statement Information
XI Real Estate and Accumulated Depreciation
XII Mortgage Loans on Real Estate
(e) Exhibits, including those incorporated by references.
27
The following is a list of Exhibits filed as part of this
Annual Report on Form 10K. Where so indicated by footnotes,
Exhibits that were previously filed are incorporated by references.
Legend for Documents
Incorporated
by Reference
Articles of Incorporation and By Laws
Articles of Incorporation (1)
By-Laws (1)
By Laws as Amended (2)
Instruments Defining Rights of Share-
holders Including Indentures
Specimen Certificate for Shares of
Common Stock (1)
Security Combination Agreement (1)
Additional Exhibits - Exchange Offer (3)
- Lease with Sports
Authority, Inc. (4)
- Lease with Tandy
Corporation (5)
Form 8K - Change in Certifying Accountants (6)
Form 8K-A - Change in Certifying Accountants (7)
Defined Benefit Plan (8)
Legend
(1) Filed September 21, 1968 as an Exhibit to Form 10K and
incorporated herein by reference.
(2) Filed December 15, 1986 as part of proxy statement and
incorporated herein by reference.
(3) Filed December 23, 1983 - Exchange Offer.
(4) Filed October 12, 1994 as an exhibit to Form 10K-A and
incorporated herein by reference.
(5) Filed December 21, 1995 as an exhibit to Form 10K.
(6) Filed November 15, 1996 and incorporated herein by
reference.
28
(7) Filed November 20, 1996 and incorporated herein by
reference.
(8) Filed August 8, 1998 with Quarterly Report 10Q and
incorporated herein by reference.
Supplemental Information
No annual report or proxy material has been sent to security
holders. Such annual report and proxy material are to be furnished
to security holders subsequent to the filing of the annual report
on this form. Copies of such material will be furnished to the
Commission when it is sent to security holders.
29
HOLOBEAM, INC.
Form 10K
September 30, 1998
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 28, 1998
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 28, 1998
By: William M. Hackett
William M. Hackett
Director and Treasurer
Date: December 28, 1998
By: Beverly Cook
Beverly Cook
Director
Date: December 28, 1998
HOLOBEAM, INC.
FINANCIAL STATEMENTS
WITH INDEPENDENT ACCOUNTANTS' REPORT
YEARS ENDED
SEPTEMBER 30, 1998, AND 1997 AND 1996
R.A. FREDERICKS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
HOLOBEAM, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT ACCOUNTANTS' REPORT F-1
FINANCIAL STATEMENTS:
BALANCE SHEETS F-2,3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF SHAREHOLDERS' EQUITY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F7-18
SCHEDULES FOR THE YEARS ENDED SEPTEMBER 30, 1998,
1997 AND 1996
V PROPERTY AND EQUIPMENT F-19
VI ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY AND EQUIPMENT F-20
X SUPPLEMENTARY INCOME STATEMENT INFORMATION F-21
XI REAL ESTATE AND ACCUMULATED DEPRECIATION F-22
XII MORTGAGE LOANS REAL ESTATE F-23
ALL OTHER SCHEDULES HAVE BEEN OMITTED BECAUSE THEY ARE NOT
APPLICABLE, OR THE INFORMATION IS SHOWN IN THE FINANCIAL STATEMENTS
OR NOTES THERETO.
R.A. Fredericks & Company, LLP
Certified Public Accountants
240 Main Road US Hwy. Route 202
Montville, New Jersey 07045
Tel: (973) 263-2900 Fax: (973) 316-6940
P.O. Box 206 Wood - Ridge, New Jersey 07075
Tel: (201) 507-0041
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
Holobeam Inc.
Ho-Ho-Kus , New Jersey
We have audited the accompanying balance sheets of Holobeam, Inc.
as of September 30, 1998 and 1997 and the related statements of
operations, shareholders' equity and statements of cash flows for
the years ended September 30, 1998, 1997, 1996. 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 generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit
includes, examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects the financial position of
Holobeam, Inc. as of September 30, 1998 and 1997, and the results
of its operations, shareholders' equity and its cash flows for the
years ended September 30, 1998, 1997, 1996, in conformity with
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 16, 1998
F-1
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
ASSETS
1998 1997
CURRENT ASSETS
Cash (including cash equivalents of $268,932
in 1998 and $227,732 in 1997) $ 301,623 $ 365,308
Short-term Investments 421,282 400,000
Accrued Interest 5,823 4,051
Prepaid Income Taxes - 3,196
Prepaid Expenses 8,092 6,452
---------- ----------
TOTAL CURRENT ASSETS 736,820 779,007
---------- ----------
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 66,939 66,939
Furniture and Fixtures 20,633 12,657
---------- ----------
TOTAL 7,501,588 7,493,612
Less: Accumulated Depreciation and Amortization 1,569,407 1,354,980
---------- ----------
PROPERTY AND EQUIPMENT-NET 5,932,181 6,138,632
---------- ----------
OTHER ASSETS
Patents and Patent application cost, net of
accumulated amortization of $204,001 in 1998
and $190,668 in 1997 76,024 83,862
Deferred Charges 510,057 551,166
---------- ----------
TOTAL OTHER ASSETS 586,081 635,028
---------- ----------
TOTAL ASSETS $ 7,255,082 $ 7,552,667
=========== ===========
The accompanying notes are an integral part of the financial
statements.
F-2
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
1998 1997
CURRENT LIABILITIES
Mortgage Payable-Current Portion $ 292,195 $ 267,783
Accounts Payable 6,832 116,172
Franchise Taxes Payable 8,976 8,593
Income Taxes Payable 5,580 -
Other Accrued Expenses 21,392 20,515
Accrued Interest Payable 45,707 47,661
Accrued Commissions Payable 33,862 33,863
--------- ---------
TOTAL CURRENT LIABILITIES 414,544 494,587
--------- ---------
LONG-TERM DEBT
Mortgage Payable (Net of Current Portion) 5,971,869 6,264,065
Real Estate Commissions Payable 12,133 45,995
---------- ----------
TOTAL LONG-TERM LIABILITIES 5,984,002 6,310,060
---------- ----------
TOTAL LIABILITIES 6,398,546 6,804,647
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock, Par Value $.10 Per Share
Authorized 2,000,000 Shares, Issued
305,598 in 1998 and 1,052,598 1997 30,559 105,260
Additional Paid in Capital 9,825,498 12,399,699
Accumulated Deficit (8,947,666) (9,114,557)
----------- -----------
TOTAL 908,391 3,390,402
Less: Cost of Shares in Treasury (3,395
in 1998 and 746,573 in 1997) (51,855) (2,642,382)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 856,536 748,020
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,255,082 $7,552,667
=========== ==========
The accompanying notes are an integral part of the financial
statements
F-3
HOLOBEAM, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
1998 1997 1996
REVENUES
Rental Income $ 1,925,534 $1,845,509 $1,838,216
Interest Income 38,977 27,873 18,002
Other 51 - -
---------- ---------- ----------
TOTAL 1,964,562 1,873,382 1,856,218
---------- ---------- ----------
COSTS AND EXPENSES
Rental Expense 258,506 267,499 260,962
General Expense 633,625 347,556 253,146
Interest Expense 564,525 587,061 607,719
Research and Development 225,041 147,562 219,001
Other - 10,022 -
---------- ---------- ----------
TOTAL 1,681,697 1,359,700 1,340,828
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 282,865 513,682 515,390
INCOME TAX EXPENSE 115,974 209,800 208,956
---------- ---------- ----------
NET INCOME $ 166,891 $ 303,882 $ 306,434
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 304,237 310,426 316,992
---------- ---------- ----------
EARNINGS PER SHARE $ .55 $ .98 $ .97
========== ========== ==========
The accompanying notes are an integral part of the financial
statements.
F-4
HOLOBEAM, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
Additional
Common Stock Paid-In Accumulated Treasury Stock
Shares Amount Capital Deficit Shares Amount
BALANCE, SEPTEMBER 30, 1995 1,052,598 $105,260 $12,399,699 $(9,724,873) 730,455 $2,408,664
Net Income 306,434
Purchase of Treasury Stock 8,624 119,393
---------- ------- ----------- ---------- ------- ---------
BALANCE, SEPTEMBER 30, 1996 1,052,598 $105,260 $12,399,699 $(9,418,439) 739,079 $2,528,057
Net Income 303,882
Purchase of Treasury Stock 7,494 114,325
--------- -------- ----------- ----------- ------- ---------
BALANCE, SEPTEMBER 30, 1997 1,052,598 $105,260 $12,399,699 $(9,114,557) 746,573 2,642,382
Net Income 166,891
Purchase of Treasury Stock 3,822 58,375
Retirement of Treasury Stock (747,000) (74,701) (2,574,201) (747,000) (2,648,902)
--------- -------- ----------- ----------- -------- ---------
BALANCE, SEPTEMBER 30, 1998 305,598 $ 30,059 $ 9,825,498 $(8,947,666) 3,395 $ 51,855
========= ======== =========== =========== ======== =========
The accompanying notes are an integral part of the financial statements.
F-5
HOLOBEAM, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $166,891 $303,882 $ 306,434
-------- -------- ---------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Loss on disposition of assets - 10,022 -
Depreciation 214,427 212,487 206,651
Amortization 54,442 54,895 56,037
Patent and Patent Application Costs (5,495) (9,477) (30,048)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses (104,454) (45,637) 20,551
Real Estate Brokers Commissions (33,863) (89,455) (33,863)
Decrease (Increase) in:
Other Receivables - 49,230 -
Deferred Tax Asset - 91,800 203,790
Interest Receivable (1,772) (4,051) 3,758
Prepaid Expenses 1,556 (3,336) ( 608)
-------- -------- --------
Total Adjustments 124,841 266,478 426,268
-------- -------- --------
Net Cash Provided by Operating Activities 291,732 570,360 732,702
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Short-term Investments (21,282) (400,000) -
Capital Expenditures (7,976) (51,587) -
Proceeds from Sale of Assets - 7,500 -
-------- --------- --------
Net Cash Used in Investing Activities (29,258) (444,087) -
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on First Mortgage (267,784) (245,412) (224,902)
Purchase of Treasury Stock (58,375) (114,325) (119,393)
Principal Payments on Loan Payable-Tandy - - 1,137,175
--------- -------- ---------
Net Cash Provided (Used) by
Financing Activities (326,159) (359,737)(1,481,470)
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (63,685) (233,464) (748,768)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 365,308 598,772 1,347,540
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 301,623 $ 365,308 $ 598,772
========= ======== ========
SUPPLEMENTAL CASH FLOWS DISCLOSURES
Interest Paid $ 566,479 $ 588,852 $609,359
Income Taxes Paid $ 107,198 $ 124,925 $ 3,041
The accompanying notes are an integral part of the financial statements.
F-6
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Operations
The Company is engaged in the rental of real
property for retail use and in development of
surgical staples and the technology used to apply
the staples for use in internal surgery.
b. Depreciation and Amortization
It is the policy of the Company to provide for
depreciation and amortization of the building and
equipment on a straight-line and accelerated basis
in amounts sufficient to write-off the cost of the
assets over their estimated useful lives, which are
as follows:
Building and Building Improvements 31. 5 to 40 years
Machinery and Equipment 5 to 7 years
Furniture and Fixtures 7 to 10 years
Maintenance and repairs are charged to operations in
the year in which incurred, while replacements and
betterments are capitalized by charges to the
appropriate asset accounts. The cost and
accumulated depreciation and amortization with
respect to assets retired or otherwise disposed, are
eliminated from the assets and related accumulated
depreciation and amortization accounts and any
profit or loss resulting therefrom is reflected in
operations.
Patent and patent application costs are amortized on
a straight-line basis over a ten year period.
c. Earnings Per Share
Earnings per share of common stock has been computed
by dividing net income by the weighted average
number of common shares outstanding during the year.
Diluted earnings per share of common stock is the
same as earnings per share prior to dilution.
d. Common Stock
Each share of common stock is entitled to one vote.
No such shares of common were reserved at September
30, 1998, 1997, 1996. On February 19, 1998, the
Company retired 747,000 shares of Treasury Stock
purchased between 1970 and January of 1998 at a cost
of $2,648,902.
e. Statement of Cash Flows
For purposes of reporting cash flows, all liquid
investments with original maturities of three months
or less are considered cash equivalents.
F-7
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Income Taxes
Deferred income taxes are provided on temporary
differences between financial statement and income
tax bases of assets and liabilities. Generally,
deferred tax assets are recognized in the current
period for the future benefit of net operating loss
carry forwards and items for which expenses have
been recognized for financial statement purposes,
but will be deductible in future periods. Valuation
allowances are established when necessary to reduce
deferred tax assets to the amount expected to be
realized.
g. Deferred Charges
It is the policy of the Company to charge costs
associated with the acquisition of long term debt
(mortgages) to expense over the term of the
mortgage.
In addition, the Company charges costs associated
with the procurement of operating leases,
specifically real estate brokers commissions, to
expense during the term of the operating lease.
h. Use of Estimates
The preparation of financial statements requires
management to make estimates and assumptions that
affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these
estimates.
I. Short-Term Investments
Short-term investments have an original maturity of
more than three months and a remaining maturity of
less than 1 year. These investments are stated at
cost as it is the intent of the company to hold
these securities until maturity.
NOTE 2. INCOME TAXES
The deferred tax assets recorded on the balance sheet as
of September 30, are as follows:
1998 1997 1996
Deferred tax asset $ - $ - $ 91,800
Valuation allowance - - -
----------- -------- ---------
Net deferred tax asset $ - $ - $ 91,800
=========== ======== =========
Net operating loss carryovers of the Company, aggregated
approximately $0 at September 30, 1998 and 1997, and
$270,000 at September 30, 1996.
F-8
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 2. INCOME TAXES (Continued)
The sources of deferred income taxes for the years ended
September 30, are as follows:
1998 1997 1996
Depreciation $ - $ - $ -
Net operating loss
carryover - - 270,000
------------ ----------- ---------
$ - $ - $ 270,000
============ =========== =========
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:
1998 1997 1996
Federal statutory income tax rate 34% 34% 34%
State tax provisions, net of
federal benefits 6 6 6
Other 1 1 1
-- -- --
Effective income tax expense rate 41% 41% 41%
== == ==
Income tax expense (benefit) consisted of the following:
1998 1997 1996
Current
Federal $ 89,716 $ 69,000 $ 2,916
State 26,258 49,000 2,125
Deferred
Federal - 91,800 184,508
State - - 19,407
--------- --------- ---------
$ 115,974 $ 209,800 $ 208,956
========= ========= =========
In 1998, 1997 and 1996, the net operating loss carryovers
do not agree with the accumulated deficit on the balance
sheets for the same periods because some net operating
losses have expired and because capital losses are not
included in the net operating loss carryovers.
F-9
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES
The Company has leased two buildings at its A & S Drive,
Paramus, N.J. site for retail use. The Sports Authority,
Inc. has leased the 62,000 sq. ft. building for a lease
term of twenty (20) years and the Tandy Corporation has
leased the 30,000 sq. ft. building for use as a Computer
City retail store for a lease term of fifteen (15) years.
The tenants are also responsible for real estate taxes
and other assessments as defined in the operating lease
agreements.
1998 1997 1996
Buildings and building improvements:
Cost $ 6,961,244 $6,961,244 $6,961,244
Accumulated depreciation 1,526,605 1,326,646 1,126,687
----------- ---------- ---------
Net buildings and building
improvements $ 5,434,639 $5,634,598 $5,834,557
=========== ========== ==========
The minimum future rentals on noncancellable operating
leases for the years ending September 30, are as follows:
1999 1,925,717 2004 $2,116,467 2009 $2,331,017
2000 2,020,217 2005 2,225,142 2010 1,497,842
2001 2,020,217 2006 2,225,142 2011 1,497,842
2002 2,108,447 2007 2,322,194 2012 1,373,022
2003 2,116,467 2008 2,331,017 ------------
Total $28,110,750
============
Net rental income consists of the following:
1998 1997 1996
Rental income $1,925,534 $1,845,509 $1,838,216
Depreciation expense (199,959) (199,959) (199,987)
Other expenses (58,547) (67,540) (60,975)
---------- ---------- ----------
Rental income, net $ 1,667,028 $1,578,010 $1,577,254
========== ========== ==========
In 1998, 1997, and 1996, depreciation expense included
all depreciation of the rental buildings and building
improvements.
a) The Company entered into a triple net lease
agreement with The Sports Authority, Inc., Fort
Lauderdale, Florida. The term of the lease is
twenty (20) years with four (4) options to extend
the term for an additional period of five (5) years
in each option.
The Company was responsible for funding certain
improvements to the building pursuant to the lease
agreement and incurred costs amounting to $3,567,276
at September 30, 1993. The Company reimbursed The
Sports Authority, Inc. for such improvements and on
February 5, 1993 the original lease was amended and
the base rent was increased to reflect the improved
condition of the building.
F-10
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
a) The Company obtained additional mortgage financing
totaling $7,500,000 in order to fund reimbursement
to The Sports Authority, Inc., whose former parent
company, K-Mart Corporation (K-mart Corporation is
a public company and financial information regarding
K-mart is publicly available) has guaranteed the
incremental monthly rental payments over the
remaining life of the lease. (See Note 8).
The base rents under the amended lease were
increased as follows:
2nd through 5th years $1,208,217
6th through 10th years 1,295,716
11th through 15th years 1,391,967
16th through 20th years 1,497,842
In addition to the rent, the tenant is responsible
for real estate taxes and other assessments as
defined in the operating lease.
b) Tandy Corporation has constructed a 30,000 sq.ft.
building on the Company's site located in Paramus,
N.J. for use as a Computer City retail store. Tandy
Corporation commenced paying rent to the Company
pursuant to the terms of the operating lease on
October 1, 1994. The lease term is for fifteen (15)
years at an annual rental of $630,000 for the first
five years, $724,500 for the second five years and
$833,175 for the last five years. Tandy Corporation
has three (3) options to extend the term of the
lease for an additional period of five (5) years for
each such option.
Pursuant to the terms and conditions of the lease,
the Company agreed to reimburse Tandy Corporation up
to $1,200,000 plus the costs of paving the driveway
and parking area and one-half (1/2) the cost of
exterior lighting not attached to the building.
This construction allowance was amended to
$1,189,675 and paid in cash to Tandy Corporation on
November 9, 1995.
Costs associated with the 30,000 sq. ft. building
are as follows:*
Construction allowance paid to Tandy Corporation $1,189,675
Costs incurred by the Company for use variance
and site improvement (deferred until put in
service at October 1, 1994) 434,821
Construction costs incurred through September 30,
1994 (deferred until put in service at October
1, 1994) 964,505
Construction costs incurred during 1995 3,512
----------
Total Costs of 30,000 sq. ft. building occupied
by Tandy Corporation. $2,592,513
==========
(*) Does not include costs of improvements incurred
by the tenant.
F-11
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
b) The construction allowance was payable to Tandy
Corporation two (2) months after a permanent
certificate of occupancy was issued by local
governmental authorities. According to the terms
and conditions of the lease agreement, Tandy
Corporation could accrue interest at the annual rate
of 7% on the unpaid balance and could also cease
paying rent until such amounts payable by the
Company were paid. Accordingly, the Company elected
to pay the amounts in full on November 9, 1995.
On September 1, 1998, Tandy Corporation sold
Computer City, Inc. to CompUSA, Inc. The lease was
therefore assigned to CompUSA, Inc. and is still
guaranteed by Tandy Corporation.
The following is a condensed summary of financial
information on the above publicly held companies:
Tandy The Sports
Corporation Authority K-Mart CompUSA
12/31/97 1/28/98 1/28/98 6/27/98
(In Millions)(In Thousands) (In Millions) (In Thousands)
Current assets $ 1,715 $ 392,426 $ 7,476 $ 922,867
Total assets 2,318 812,288 13,558 1,160,510
Current liabilities 976 292,716 3,274 634,000
Total liabilities 1,259 480,826 7,143 745,872
Minority interest - (2,089) - -
Total stockholders'
equity 1,059 333,551 6,415 414,638
Net sales 5,372 1,467,910 32,183 5,286,041
Cost of sales 3,358 1,045,028 25,152 4,540,717
Gross profit 2,014 422,882 7,031 745,324
Income before
income taxes 304 34,732 369 51,288
Income taxes 117 14,730 120 19,745
Minority Interest - (2,191) - -
Net income $ 187$ 22,193 $ 249 $ 31,543
NOTE 4. RELATED PARTY TRANSACTIONS
An officer and member of the Board of Directors, acted in
the capacity as insurance broker and was the Company's
landlord until his death during the year ended September
30, 1997.
1997 1996
Landlord-Office rental
and related services $9,999 $10,908
Insurance - 19,076
------ -------
$9,999 $29,984
====== =======
NOTE 5. RESEARCH AND DEVELOPMENT
Research and development expenses in the amount of
$225,041 in 1998, $147,562 in 1997, and $219,001 in 1996,
were charged to operations and included in costs and
expenses.
F-12
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 6. RENT EXPENSE
The Company had leased approximately 1,000 square feet of
office space on a month to month basis at a monthly
rental of $909 from a member of the Board of Directors
(See Note 4) until August 31, 1997. The Company moved its
headquarters to Ho-Ho-Kus, New Jersey and occupies
approximately 1,000 square feet of office and laboratory
space on an annual lease. Lease payments are $950 per
month and are paid to an unaffiliated landlord. Rent
expense was $11,400 in 1998, $11,449 in 1997 and $10,908
in 1996.
NOTE 7. PATENTS
The Company has discontinued efforts relating to solar
cells and semi-conductor technology. Work in the field
has moved in other directions than that of the Company's
technology and there has been a substantial reduction of
government support in this technical area. The funding
that had been received by laboratories exploring the
Company's technology has also terminated.
The Company is continuing its efforts in the area of
surgical staple design for use in internal surgery.
Several United States Patents have been issued and
foreign applications have been filed on a novel staple.
The staple has been produced and it is anticipated that
tests will continue during 1998 at a medical center.
Research and development costs in the amounts of
$225,041, $147,562 and $219,000 have been expended in
connection with the surgical staple during 1998, 1997 and
1996, respectively.
NOTE 8. LONG-TERM DEBT
The mortgage 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 is in
the amount of $1,500,000 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 9. The expense for
the next five (5) years is presented below:
1999 $5,126
2000 5,126
2001 5,126
2002 5,126
2003 5,126
F-13
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 8. LONG-TERM DEBT (Continued)
The balance outstanding for each debt issued at the end
of 1998, 1997, and 1996 is as follows:
1998 1997 1996
First Mortgage on
62,000 sq. ft. Building $6,264,064 $6,531,848 $6,777,260
Real Estate Brokers Commissions
Payable 12,133 45,995 135,450
---------- --------- ----------
Total 6,276,197 6,577,843 6,912,710
Less Current Portion 292,195 267,783 245,412
----------- ---------- ----------
Long-Term Portion $ 5,984,002 $6,310,060 $6,667,298
=========== ========== ==========
There was no outstanding long-term debt at September 30,
1996 other than the first mortgage and real estate
brokers commissions payable after September 30, 1996.
The mortgage is secured by the land and 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:
1999 $292,195 2004 $451,978 2009 $699,136
2000 318,832 2005 493,181 2010 762,870
2001 347,897 2006 538,140 2011 338,083
2002 379,611 2007 587,197
2003 414,217 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 Authority Tandy Corp.
Original Cost $712,160 $102,520 $279,584 $330,056
Accumulated
Amortization 202,103 29,047 85,040 88,016
-------- -------- -------- --------
Balance 9/30/98 $510,057 $ 73,473 $194,544 $242,040
======== ======== ======== ========
Original Cost $712,160 $102,520 $279,584 $330,056
Accumulated
Amortization 160,994 23,921 71,061 66,012
-------- -------- -------- --------
Balance 9/30/97 $551,166 $78,599 $208,523 $264,044
======== ======== ======== ========
F-14
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 10. DEFERRED SITE COST
The Company incurred costs in connection with an
application for a use variance and site improvements for
the property owned by the Company at 50 A&S Drive,
Paramus, New Jersey, adjacent to the building owned by
the Company and leased to the Sports Authority, Inc.
Such costs amounting to $806,656 have been considered to
be part of the site cost and are included in fixed
assets.
NOTE 11. 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
benefits plan, and does not offer post
employment benefits, SFAS No. 106 and SFAS No. 112 are
not applicable.
NOTE 12. CONCENTRATION OF CREDIT RISK
The Company maintains its cash balances and short term
investments in several financial institutions in excess
of the $100,000 guarantee by the Federal Deposit
Insurance Corporation (FDIC). At September 30, 1998,
this excess amounted to $357,954.
Substantially all of the Company's income is rental
income received from two tenants. These tenants are
subject to long-term lease agreements. (See Note 3)
NOTE 13. FINANCIAL REPORTING BY BUSINESS SEGMENTS
A summary description of the Company's business segments
is 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.
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 leasing to tenants, the two retail
buildings owned by the Company at 50 A&S Drive, Paramus,
New Jersey.
The Company has deferred its adoption of Financial
Accounting Standards Board Statement (SFAS) No. 131
"Disclosures About Segments of an Enterprise and Related
Information" until year ending September 30,1999.
However, the Company believes the Segments reported above
will remain the same under SFAS 131.
F-15
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 13. FINANCIAL REPORTING BY BUSINESS SEGMENTS (Continued)
Revenues
1998 1997 1996
Business Segments:
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 1,925,534 1,845,509 1,838,216
Corporate 39,028 27,873 18,002
------------ ---------- ----------
Total $ 1,964,562 $1,873,382 $1,856,218
============ ========== ==========
Business Segments: Income (Loss)
1998 1997 1996
Surgical Staples $ (225,041) $ (147,562) $ (219,001)
Electro-Optical - - -
Real Estate Rental 1,667,028 1,578,010 1,577,254
--------- --------- ---------
Total 1,441,987 1,430,448 1,358,253
--------- --------- ---------
General and Administrative
Expenses (633,625) (347,556) (253,146)
Interest Expense (564,525) (587,061) (607,719)
Other Income 39,028 17,851 18,002
Income Tax Expense (115,974) (209,800) (208,956)
----------- ----------- -----------
Total (1,275,096) (1,126,566) (1,051,819)
---------- ----------- ---------
Net Income $ 166,891 $ 303,882 $ 306,434
========== =========== =========
Business Segments: Identifiable Assets
1998 1997 1996
Surgical Staples $ 60,738 $ 63,599 $ 61,729
Electro-Optical 15,286 20,263 26,442
Real Estate Rental 6,397,468 6,638,536 6,885,752
Corporate and Other
Non-segment Items 781,590 830,269 769,691
------------ ---------- -----------
TOTAL ASSETS $ 7,255,082 $7,552,667 $7,743,614
============ ========== ==========
F-16
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 14. 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, 1998, 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.
NOTE 15. PENSION PLAN
The Company established a defined benefit plan in 1998
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.
Net pension cost for the Company's defined benefit plan,
determined under the provisions of the Statement of
Financial Accounting Statements No. 87, includes the
following components:
1998
a. Accumulated benefit obligation
-vested $ 307,773
-non-vested -
---------
-Total 307,773
b. Additional benefits based on
Estimated future salary levels -
----------
Projected benefit obligation September 30 307,773
---------
Plan assets at fair value 307,773
Plan assets in excess of projected benefit
obligation -
Unrecognized net obligation at transition -
Unrecognized net (gain) loss -
---------
Prepaid pension cost $ -
=========
F-17
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 15. PENSION PLAN (CONTINUED)
Assumed discount rate: 7%
Expected long-term rate of return
on plan assets: 7%
The net periodic pension cost for the year ended
September 30, includes the following components:
1. Service cost - benefits earned
during the period $ 287,638
2. Interest cost on projected benefit
obligation 20,135
-------
3. Actual return on plan assets -
--------
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 -
d. Asset gain or (loss) deferred -
-------
e. Total -
-------
5. Net periodic pension cost (credit) =
(Item 1 + item 2 + item 3 + item 4 (e) $ 307,773
=========
The net periodic pension cost for 1998 was
determined based on a 7% discount rate, a long -
term rate of return of 7% on plan assets.
The Company's pension plan was valued on October 1,
1997.
NOTE 16. CONTINGENCIES
The Company is engaged in a comprehensive project to
assure all its systems are year 2000 compliant.
Based on current estimates, the Company does not
anticipate related material adverse effects on its
financial condition, liquidity or results of
operations.
F-18
Schedule V
HOLOBEAM, INC.
PROPERTY AND EQUIPMENT
SEPTEMBER 30, 1998, 1997 AND 1996
Balance at Balance at
Beginning End of
CLASSIFICATIONS of Year Additions Retirements Year
YEAR ENDED SEPTEMBER 30, 1996:
Machinery and Equipment $ 67,227 $ - $ - $ 67,227
Furniture and Fixtures 2,258 - - 2,258
-------- -------- -------- --------
TOTAL $ 69,485 $ - $ - $ 69,485
======== ======== ======== ========
YEAR ENDED SEPTEMBER 30, 1997:
Machinery and Equipment $67,227 $38,930 $39,218 $66,939
Furniture and Fixtures 2,258 12,657 2,258 12,657
------- ------- ------- -------
TOTAL $69,485 $51,587 $41,476 $79,596
======= ======= ======= =======
YEAR ENDED SEPTEMBER 30, 1998:
Machinery and Equipment $66,939 $ - $ - $66,939
Furniture and Fixtures 12,657 7,976 - 20,633
------- --------- ------- -------
$79,596 $7,976 $ - $87,572
======= ========= ======= =======
The accompanying notes are an integral part of the financial
statements.
F-19
Schedule VI
HOLOBEAM, INC.
ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY AND EQUIPMENT
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
Balance at Balance at
Beginning End of
CLASSIFICATIONS of Year Additions Retirements Year
YEAR ENDED SEPTEMBER 30, 1996:
Machinery and Equipment $ 30,892 $ 8,300 $ - $ 39,192
Furniture and Fixtures 2,204 52 - 2,256
-------- ------- --------- --------
TOTAL $ 33,096 $ 8,352 $ - $ 41,448
======== ======= ========= ========
YEAR ENDED SEPTEMBER 30, 1997:
Machinery and Equipment $39,192 $10,581 $ 21,696 $28,077
Furniture and Fixtures 2,256 256 2,256 256
------- ------- -------- -------
TOTAL $41,448 $10,837 $ 23,952 $28,333
======= ======= ======== =======
YEAR ENDED SEPTEMBER 30, 1998:
Machinery and Equipment $28,077 $12,604 $ - $40,681
Furniture and Fixtures 256 1,864 - 2,120
------- ------- --------- -------
$28,333 $14,468 $ - $42,801
======= ====== ========= =======
The accompanying notes are an integral part of the financial
statements.
F-20
Schedule X
HOLOBEAM, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
1998 1997 1996
Maintenance and Repairs $ - $10,610 $ 945
========== ======= =========
Depreciation and Amortization of
Intangible Assets $54,442 $54,895 $ 56,037
======= ====== ========
Taxes, Other than Payroll and Income Tax
Franchise $ 3,600 $ 3,060 $ 4,740
Real Estate - - -
Other - 6,004 300
------ ------ -------
$ 3,600 $ 9,064 $ 5,040
======= ======== ======
Royalties $ - $ - $ -
======= ======= ========
Advertising $ - $ - $ -
======== ======== ==========
The accompanying notes are an integral part of the financial
statements.
F-21
Schedule XI
HOLOBEAM, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1998
Life in
Which
Cost Capitalized Gross Amount at Deprec.
Initial Subsequent Which Carried at in Latest
Cost to Company To Acquisition Close of Period (1) (2) Date Income
Incumb Bldg & Carrying Bldg & Accum. of Date Stmt is
Brances Land Improv Improv Costs Land Improv Total Deprec. Cons. Acquired Computed
Improved Land
Paramus, NJ $ 0 $218,402 $ 0 $ 0 $ 0 $218,402 $ 0 $218,402 $0 1971 -
Improved Land
Paramus, NJ 0 173,565 0 60,805 0 234,370 0 234,370 0 1983 -
Building I
Paramus, NJ
Improvements 6,777,260 0 718,881 3,649,850 0 0 4,368,731 4,368,731 1,266,246 1958 1971 3 to 40 years
Building II
Paramus, NJ 0 0 2,592,513 0 0 0 2,592,513 2,592,513 260,359 1995 1995 30 Years
---------- -------- ---------- ---------- ---- -------- ---------- ---------- ----------
$6,777,260 $391,967 $3,311,394 $3,710,655 $ 0 $452,772 $6,961,244 $7,414,016 $1,526,605
========== ======== ========== ========== ==== ======== ========== ========== ==========
(1)Activity for the three years (2)Activity for the three years
ended September 30, 1998 is ended September 30, 1998 is
as follows: 1998 1997 1996 as follows: 1998 1997 1996
Balance at Beginning Balance at Beginning
of Year $7,414,016 $7,414,016 $8,424,724 of Year $1,326,646 $1,126,687 $1,937,408
Additions: Additions:
Improvements 0 0 0 Depreciation 199,959 199,959 199,987
Acquisitions 0 0 0 Less Retirements 0 0 1,010,708
--------- --------- --------- --------- --------- ---------
7,414,016 7,414,016 8,424,724 Balance at End
Deductions During of Year $1,526,605 $1,326,646 $1,126,687
========= ========= =========
Year:
Retirements 0 0 1,010,708
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, 1998 is $7,414,016.
The accompanying notes are an integral part of these financial statements.
F-22
Schedule XII
HOLOBEAM, INC.
MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 1998
Principal Amount
Periodic Face Amount Carrying Amount of Loans Subject to
Interest Final Maturity Payment Prior of of Delinquent 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 $1,251,672 None
Mortgage Payable
Building and Improvements 8.77% February 5, 2011 $56,328 None $6,000,000 $5,012,392 None
----------
$6,264,064
==========
Activity for the three
years ended September 30,
1997 is as follows:
1998 1997 1996
Balance at Beginning of Year: $6,531,848 $6,777,260 $8,139,337
Addition During Year
Commercial Loans 0 0 0 (2)
New Mortgages 0 0 0
---------- ---------- ----------
6,531,848 6,777,260 8,139,337
Deductions During Year:
Principal Payments 267,784 245,412 224,902
Mortgage Payments 0 0 1,137,175 (2)
---------- ---------- ----------
Balance at End of Year $6,264,064 $6,531,848 $6,777,260
========== ========== ==========
(1) The cost for Federal income taxes
Purpose at 9/30/97 $6,264,064
(2) The Loan was paid in full
on November 9, 1995
The accompanying notes are an integral part of these financial statements.
F-23