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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, 1999, 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
1
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. $4,750,496.00 at December
1, 1999.
Indicate the number of shares outstanding of each of
the Registrant's classes of
common stock, as of the latest practicable date. 286,906 Common
Shares at December 1,1998.
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
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, 1999,
1998 and 1997.
(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
took place during 1998 and
1999.
The Registrant presently intends to continue the project.
A significant investment would be required if the Registrant
were to pursue this area of
business independently. The Registrant may seek a relationship
of some sort with a firm active
in
the medical equipment area. However, no decision as to such a
relationship has been made at
this
time.
Semiconductor Technology
The Registrant had obtained a United States patent covering
technology
3
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 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
commer-
cial 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.
4
Real Estate Development and Rental Activities
The Registrant has rented two buildings it owns located at
A&S Drive, Paramus, New Jersey:
one to The Sports Authority, Inc. and the other to Comp USA 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 have been acquired through commercial
businesses engaged in the distribution
of such supplies. The materials that the Registrant would
require for development of commercial
production of medical staples are widely available.
(iv) Patents.
The Registrant has filed several patent applications and has
several patents issued in
connection with medical staples for use in internal surgery.
These applications and patents are as
follows:
No.
Serial No. Title of Invention Issue Date
1. PCT/US94/02227 Staples 03/01/94
2. 08/512,766 Staples 08/09/95
3. 08/228,058 Staples 08/29/95
4. Canadian Pat. No. 2,155,750Improved 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
5
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
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.
6
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.
7
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 technology. Some suppliers
of surgical staples are
well-established and have significant capital resources.
Competition in the real estate office rental segment of the
Registrant's business activities
was significant in the Bergen County, New Jersey market in which
the Registrant competes
during the period when the Registrant was seeking suitable
tenants for its rental properties.
The obsolete style of the 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., 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. The market for retail space in
the 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, 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
8
of the site, after a permanent Certificate of Occupancy was
obtained. During 1998, Computer
City Retail Stores were acquired by Comp USA. Tandy Corp.
remains on the lease as guarantor.
9
(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, 1998 and 1999 in
connection with this technology.
The Registrant anticipates that no 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 1999,
1998 and 1997, the Registrant
expended $194,713.00, $224,693.00 and $147,562.00, respectively,
in connection with the
furtherance of this activity. Such costs have been currently
expensed and consist principally of
materials, supplies and costs associated with design and
development.
(xii) Environmental Compliances.
The Registrant does not believe that compliance with
Federal, State or Local provisions
of a governmental nature which have been enacted or adopted
regulating the discharge of
material into the environment will have a materially adverse
effect upon the capital expenditure
requirements, earnings or competitive position of the Registrant.
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
10
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.
(xiii) Employees.
At September 30, 1999 the Registrant employed three persons
as compared to the three
persons at September 30, 1998 and three persons at September 30,
1997.
(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, one of 62,000 square feet and another of
30,000 square feet located at 50
A&S Drive, Paramus, New Jersey. One building was placed in
service in October 1994, the
other in 1982. (Reference is made to Notes 4, 8, 9 and 10 to the
Financial Statements for the
fiscal year ended September 30, 1995, 1991, 1990 and 1989.)
Pertinent information concerning the Registrant's properties
is as follows.
11
(Reference is made to Schedule XI of the Registrant's Financial
statements for the years ended
September 30, 1997 and 1996.)
12
Building Building
Paramus, NJ Paramus,
NJ
Year Acquired 1971 1994
Gross Square Footage 62,000 30,000
Percent Leased at 9/30/99 100% 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 $5,971,876 $ -0-
(1) Includes $3,567,267.00 of improvements to the
building repaid to The Sports
Authority, Inc. (the Tenant) upon closing of the
Mortgage, but does not include
additional amounts expended by The Sports Authority,
Inc. since said closing.
(2) Includes construction allowance of
$1,189,675.00 for Tandy Corporation pursuant
to the Operating Lease Agreement. (Now Comp USA.)
(3) Includes land cost of $218,402 for the 62,000 sq. ft.
building.
(4) Includes land cost of $234,370 for the 30,000 sq. ft.
building.
In 1983, the Registrant purchased 2.799 acres of land
located in Paramus, New Jersey and
adjacent to the building owned by the Registrant at 50 A&S Drive.
The purchase price was
$173,565 which was paid in cash. Since 1983, the Registrant 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
13
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 Comp USA 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 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, 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 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 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 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
the years ended September 30,
1990, 1991, 1992, 1993 and 1994.
14
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:
1999 100%
1998 100%
1997 100%
1996 100%
1995 100%
The building owned by the Registrant and under lease to
Tandy Corp. (now Comp USA)
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, 1998 or 1999.
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 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.
Any payments to affiliated parties are unrelated to the cost of
such activities and are detailed and
disclosed in Item
15
11 (d) of this report.
During 1998, Computer City, Inc. retail stores were acquired
by Comp. USA, Inc.,
another retailer of computers, computer accessories and software.
The Registrant accepted
assignment of the Computer City lease by Comp. USA and Tandy
Corporation remains on the
lease as the guarantor.
16
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.
17
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder
Matters.
(a) The Registrant's common stock is traded on the
over-the-counter market. The bid
price listed (Source: S&P Comstock) on December 1, 1999 was
$16.50 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 1, 1999 was 601.
(c) No dividends have been paid or declared on the Common
Stock of the Registrant
during the 1999, 1998 or 1997 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: S&P Comstock). (On
July 18, 1993, the Company
shares were deleted from NASDAQ.)18
1999 1998
high low high low
Quarter Ended Dec. 31 15.50 14.25 11.00 11.00
Quarter Ended Mar. 31 14.50 14.50 11.25 11.00
Quarter Ended June 30 16.50 15.50 11.50 11.25
Quarter Ended Sept. 30 16.50 15.50 14.75 12.75
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, 1994 and ending
September 30, 1999 is presented below.
HOLOBEAM, INC.
SUMMARY OF SELECTED FINANCIAL DATA
FOR THE YEARS ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995
Gross Income$1,960,262 $1,964,562 $1,873,382 $1,856,218$1,895,392
Net Income
(Loss) 197,161 166,891 303,882 306,434 334,594
Weighted Average Number
of Common Shares
Outstanding 298,101 304,237 310,426 316,992 323,596
Earnings Per
Share(Loss) 0.66 0.55 0.98 0.97 1.03
Total Assets 7,163,243 7,255,082 7,552,667 7,743,614 8,931,962
Long-Term
Debt 5,653,044 5,984,002 6,310,060 6,667,298 6,946,564
Shareholders'
Equity 971,695 856,536 748,020 558,463 371,422
Gross Rental
Income 1,925,717 1,925,534 1,845,509 1,838,216 1,834,829
Net Rental
Income 1,667,922 1,667,028 1,578,010 1,577,254 1,554,791
Item 7. Management's Discussion and Analysis of Financial
Condition and
Results of Operations.
(1) Liquidity.
19
During the fiscal year ended September 30, 1999,
the Registrant generated
approximately $540,000.00 in cash flows associated with its
real estate rental activities
and anticipates that such cash flows will continue during
the terms of the operating
leases. (Reference is made to Note 3, Rental income under
operating losses, to the
Financial Statements for the years ended September 30, 1999
and 1998).
The Registrant's cash and equivalents increased to
$891,119.00 during 1999 and
has been substantially responsible for an increase of
$42,949.00 in working capital.
It is anticipated that revenues and net rental
income associated with the operating
leases on the properties of the Registrant will be
sufficient to provide the cash flows
necessary to fund the Registrant's operations. The
operating leases expire in 2009 and
2012 and include renewal options, which, if exercised will
provide revenues beyond 2009
and 2012.
Minimum future rental income expected from the
operating leases approximates
$26,185,300.00 and is available during the operating lease
terms and should provide
sufficient cash flows to sustain profitable real estate
operations.
(2) Capital Resources
The properties owned by the Registrant do not
require renovation or additional
construction activities in order to maintain rental
operations. The Registrant does not
anticipate future capital requirements in connection with
its rental properties other than
those that are routine and incidental to the Registrants'
real estate rental business. The
Registrant anticipates expenditures for maintenance,
insurance and taxes,
20
but has no planned major capital expenditures that would require
significant allocation of
resources. In no event are any expenditures expected to have any
materially adverse effect upon
the Registrant's capital resources.
The Registrant presently intends to continue
funding the development of the
Medical Staples for use in internal surgery. Testing will
continue during 2000 and results
will determine the Registrant's furtherance of such
activities after the fiscal year ended
September 30, 2000. During the year ended September 30,
2000, the Registrant expects
to fund the engineering, testing and development of
approximately $300,000.00.
Revenues associated with the Registrant's real estate rental
activities are expected to
provide the necessary funding for the project to the
$300,000.00 level.
The Registrant anticipates that no revenues will
be realized from the medical
staple technology during the next fiscal year.
During the fiscal year ended September 30, 1999,
the Registrant funded
contributions to the defined benefit pension plan in the
amount of $311,388.00 and was
included in General and Administrative expense in the
Statement of Operations for the
years ended September 30, 1999 and 1998.
The Registrant's funding policy is to make annual
contributions to the plan in
amounts sufficient to fully provide for all eligible
employees' benefits by the time they
retire. Continual funding is not expected to have an
adverse effect upon the Registrant's
financial condition. (Reference is made to Note 15 to the
Registrant's Financial
Statement for the years ended September 30, 1999 and 1998.)
(3) Results of Operations.
21
(a) During 1999, the Registrant recorded
after-tax income of $197,161.00 as
compared to $166,891.00 for the year ended September 30,
1998. The results of
operations reflect improved performance as a result of
decreased interest expense
associated with the Registrant's mortgage on the rental
properties and in reduced
expenditures in connection with the Registrant's medical
staples project. When
compared to 1998 costs, interest expense decreased
$24,582.00 and Research and
Development decreased $30,677.00. Gains associated with
decreased expenses were
partially offset by increased income tax expense.
The Registrant has 100% tenant occupancy in its
rental properties resulting in
consistent earnings performance for the fiscal years ended
September 30, 1998 and 1999.
The Registrant anticipates that such performance will
continue during the next twelve
(12) months. As the Registrant's properties age, it is
anticipated that the buildings will
require more upkeep and maintenance costs. Such costs are
not expected to materially
effect the long term performance of the Registrant's real
estate rental activities.
During 1999, the Registrant funded the research
and development activities
associated with the medical staple project in the amount of
$194,364.00 which represents
a reduction of $30,677.00 when compared to expenditures for
1998. The Registrant
expects to continue funding this project with the cash flows
associated with its real estate
rental activities during 2000. When definitive testing
results can be obtained, the
Registrant will determine if funding should continue into
fiscal year 2001. The
Registrant expects to fund the project during 2000 for
testing, development and patent
activities in the amount of approximately
22
$300,000.00.
Funding of the Registrant's defined benefit plan
during the year ended September
30, 1999 was $311,388.00 as compared to $307,773.00 for
1998. The Registrant expects
to continue funding the plan on an annual basis. The
expenses associated with annual
funding of the plan are not expected to have a materially
adverse effect upon the
Registrant's financial condition. (Reference is made to
Exhibit entitled "Defined Benefit
Plan" filed with Quarterly Report Form 10Q for the Quarter
ended June 30, 1998 and
filed on August 8, 1998.)
(b) 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.
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
23
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
but initial results do not
assure the commercial viability of the Registrant's
technology. If more definitive
favorable results are 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 conjunction
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
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.
(4) Other Matters
24
The Company is currently continuing work 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 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 R.A. Fredericks and
Company for 1998 and 1999.)
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
25
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 2002 Annual 1968
Age 68 President of Registrant Meeting
William M. Hackett Treasurer of Registrant 2000 Annual 1984
Age 56 Meeting
Beverly Cook Office Manager and 2001 Annual 1995
Age 63 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(1) Title Term
Elected
Melvin S. Cook Chairman of the Board Annual 1968
Age 68
William M. Hackett Treasurer of the Registrant Annual 1975
Age 56
Beverly Cook Secretary of the Registrant Annual 1997
Age 63
(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
26
shall quality.
(c) There are no significant employees other than
those identified in (a) and
(b) above.
(d) The following Table summarizes the business
experience and principal
occupation during the last five years of each person who serves
as a director of executive officer
of the Registrant, as well as any other directorship held by
persons serving as directors of the
Registrant.
Other
Name(1) 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, 1999 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
27
Registrant as a group for such fiscal year.
28
HOLOBEAM, INC.
Form 10K
Summary Compensation Table
September 30, 1999
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 1999 $250,000 -0- -0- -0- -0- -0- -0-
President and CEO 1998 250,000 -0- -0- -0- -0- -0- -0-
and Director 1997 200,000 -0- -0- -0- -0- -0- -0-
William M. Hackett 1999 17,550 -0- -0- -0- -0- -0- -0-
Treasurer and 1998 17,550 -0- -0- -0- -0- -0- -0-
Director 1997 17,550 -0- -0- -0- -0- -0- -0-
Martin R.Infante 1999 -0- -0- -0- -0- -0- -0- -0-
Secretary and 1998 -0- -0- -0- -0- -0- -0- 9,999
Director 1997 -0- -0- -0- -0- -0- -0- 29,984
Beverly Cook 1999 75,000 -0- -0- -0- -0- -0- -0-
1998 75,000 -0- -0- -0- -0- -0- -0-
1997 75,000 -0- -0- -0- -0- -0- -0-
All Officers and 1999 342,550 -0- -0- -0- -0- -0- -0-
Directors as a 1998 342,550 -0- -0- -0- -0- -0- 9,999
Group 1997 342,550 -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
29
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.)
(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 1999, 1998
and
1997.
(c) The following Table sets forth all the options to
purchase securities from the
Registrant which were granted to or exercised by any of its
directors and each officer whose
direct
remuneration exceeds $100,000.00 as well as all officers and
directors as a group since October
1,
1998.
All Directors and Officers as
a Group
Options Granted 0
Options Exercised 0
Unexercised Options Held at 9/30/99 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
30
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 year ended
September 30, 1997 is presented
below:
1997
Rent Expense $ 9,999
Insurance -0-
---------
Total Payments $ 9,999
=====
The following Table sets forth information about the
Company's defined benefit pension plan
benefits:
Pension Plan Table
Years of Service
Remuneration 36
60,000 60,000
160,000 107,112
200,000 107,112
Pensions are based upon average annual earnings (salary and
bonus) for the highest three
consecutive years of employment with the Company. For Melvin
Cook and Beverly Cook, the
amounts equaled $107,112 and $60,000, respectively, as of
September 30, 1999. Melvin Cook
and
Beverly Cook will be credited at normal retirement date with 36
years service each under the
Pension Plan as of September 30, 1999. 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.
31
PART IV
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) The stockholding of each person who is known by the
Registrant to own beneficially
more than 5% of any classes of securities as of December 1, 1999
is as follows:
Title of Class Name & Address Amount Owned % of Class
Common Stock, Par Melvin S. Cook 123,497 41.6%
Value $0.10 Per Share 217 First Street
Ho-Ho-Kus, NJ 07423
Common Stock, Par Beverly Cook 95,000 32.0%
Value $0.10 Per Share 217 First Street
Ho-Ho-Kus, NJ 07423
(b) The stockholding of Officers and Directors as a group
as of December 1, 1999 are
as follows:
Title of Class Amount Beneficially Owned % of Class
Common Stock, Par Value 218,497 73.6%
$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, the amount
paid to Mr. Infante in
connection with such services were as follows:
1997
Rent Expense $ 9,999
Insurance -0-
Total Payments $ 9,999
Reference is made to Item 11 (d) of Form 10K and to Notes 4
and 6 to the
32
Financial Statements for the year ended September 30, 1997.
33
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.
34
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.
35
(4) Filed October 12, 1994 as an exhibit to Form 10K-A and
incorporated herein by
reference.
(5) Filed December 21, 1995 as an exhibit to Form 10K.
(6) Filed November 15, 1996 and incorporated herein by
reference.
(7) Filed November 20, 1996 and incorporated herein by
reference.
(8) Filed August 8, 1998 with Quarterly Report
10Q and incorporated herein by
reference.
Supplemental Information
No annual report or proxy material has been sent to security
holders. Such annual report and
proxy material are to be furnished to security holders subsequent
to the filing of the annual report
on this form. Copies of such material will be furnished to the
Commission when it is sent to
security
holders.
36
HOLOBEAM, INC.
Form 10K
September 30, 1999
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto
duly
authorized.
Registrant Holobeam, Inc.
By William M. Hackett
Date December 24, 1999
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed
below by the following persons on behalf of the Registrant and in
the capacities and on the dates
indicated.
HOLOBEAM, INC.
By: Melvin S. Cook
Melvin S. Cook
President and Chairman of the Board
Date: December 24, 1999
By: William M. Hackett
William M. Hackett
Director and Treasurer
Date: December 24, 1999
By: Beverly Cook
Beverly Cook
Director
Date: December 24, 1999
December 24,1999
US Securities and Exchange Commission
6432 General Green Way
Alexandria, VA 22312
Attn: File Support
Re: Holobeam, Inc., File No. 03385
Dear Sir or Madam:
Enclosed you will find one (1) paper format copy of
Holobeam, Inc. Annual Report, Form
10K for the year ended September 30, 1999 which has been
previously filed/transmitted via the
EDGAR system.
Kindly acknowledge receipt by signing the enclosed photocopy
of this letter and return it to
us in the accompanying stamped, self-addressed envelope.
Very truly yours,
William M. Hackett
Treasurer
mjb
Encs.
HOLOBEAM, INC.
FINANCIAL STATEMENTS
WITH INDEPENDENT ACCOUNTANTS' REPORT
YEARS ENDED
SEPTEMBER 30, 1999, AND 1998 AND 1997
R.A. FREDERICKS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
HOLOBEAM, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT ACCOUNTANTS' REPORT F-1
FINANCIAL STATEMENTS:
BALANCE SHEETS F2-3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF SHAREHOLDERS' EQUITY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7-19
SCHEDULES FOR THE YEARS ENDED SEPTEMBER 30, 1999
1998 AND 1997
V PROPERTY AND EQUIPMENT F-20
VI ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY AND EQUIPMENT F-21
X SUPPLEMENTARY INCOME STATEMENT INFORMATION F-22
XI REAL ESTATE AND ACCUMULATED DEPRECIATION F-23
XIII MORTGAGE LOANS REAL ESTATE F-24
ALL OTHER SCHEDULES HAVE BEEN OMITTED BECAUSE THEY ARE NOT
APPLICABLE, OR THE INFORMATION IS SHOWN IN THE FINANCIAL
STATEMENTS
OR
NOTES THERETO.
R.A. FREDERICKS & COMPANY, LLP
Certified Public Accountants
Ralph A. Fredericks, CPA
Ellen T. O'Donnell, CPA
Robert J. Rosenberg, CPA
Eric Frank Zach, CPA
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, 1999
and
1998 and the related statements of operations, shareholders'
equity and statements of cash flows
for
the years ended September 30, 1999, 1998, 1997. 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, 1999 and
1998, and the results of its
operations, shareholders' equity and its cash flows for the
years ended September 30, 1999,
1998,
1997, 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, 1999
F-1
170 Changebridge Road Unit B-4, Montville, New Jersey 07045
Tel: (973) 575-6200 Tel: (212) 544-2204 Fax: (973) 575-5444
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
ASSETS
1999 1998
CURRENT ASSETS
Cash (including cash equivalents of $774,084
in 1999 and $268,932 in 1998) $ 891,119 $ 301,623
Short-term Investments - 421,282
Accrued Interest 1,872 5,823
Accounts Receivable 28 -
Prepaid Expenses 10,710 8,092
----------- ----------
TOTAL CURRENT ASSETS 903,729 736,820
----------- ----------
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 20,633
------------- -------------
TOTAL 7,501,588 7,501,588
Less: Accumulated Depreciation
and Amortization 1,781,272 1,569,407
------------- ------------
PROPERTY AND EQUIPMENT-NET 5,720,316 5,932,181
------------- ------------
OTHER ASSETS
Patents and Patent
application cost, net of
accumulated amortization
of $217,850 in 1999
and $204,001 in 1998 70,250 76,024
Deferred Charges 468,948 510,057
------------ -----------
TOTAL OTHER ASSETS 539,198 586,081
------------ -------------
TOTAL ASSETS $ 7,163,243 $ 7,255,082
======= ========
The accompanying notes are an integral part of the financial
statements.
F-2
HOLOBEAM, INC.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
CURRENT LIABILITIES
Mortgage Payable-Current Portion $ 318,832 $ 292,195
Accounts Payable 6,510 6,832
Deferred Rent 107,976 -
Franchise Taxes Payable 1,980 8,976
Income Taxes Payable 24,340 5,580
Other Accrued Expenses 23,158 21,392
Accrued Interest Payable 43,575 45,707
Accrued Commissions Payable 12,133 33,862
-------------- ---------
TOTAL CURRENT LIABILITIES 538,504 414,544
-------------- ---------
LONG-TERM DEBT
Mortgage Payable (Net
of Current Portion) 5,653,044 5,971,869
Real Estate Commissions
Payable - 12,133
-------------- ----------
TOTAL LONG-TERM LIABILITIES 5,653,044 5,984,002
----------- ----------
TOTAL LIABILITIES 6,191,548 6,398,546
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock, Par Value
$.10 Per Share
Authorized 2,000,000
Shares, Issued 305,598 30,559 30,559
Additional Paid in Capital 9,825,498 9,825,498
Accumulated Deficit (8,750,505) (8,947,666)
---------- ---------
TOTAL 1,105,552 908,391
Less: Cost of Shares in
Treasury (8,692
in 1999 and 3,395 in 1998) (133,857) (51,855)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 971,695 856,536
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 7,163,243 $7,255,082
======== ==========
The accompanying notes are an integral part of the financial
statements
F-3
HOLOBEAM, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
1999 1998 1997
REVENUES
Rental Income $ 1,925,717 $1,925,534 $1,845,509
Interest Income 34,545 38,977 27,873
Other - 51 -
----------- ---------- ----------
TOTAL 1,960,262 1,964,562 1,873,382
----------- ---------- ----------
COSTS AND EXPENSES
Rental Expense 257,795 258,506 267,499
General Expense 637,167 633,625 347,556
Interest Expense 539,943 564,525 587,061
Research and
Development 194,364 225,041 147,562
Other - - 10,022
--------- --------- --------
TOTAL 1,629,269 1,681,697 1,359,700
--------- --------- ---------
INCOME BEFORE
INCOME TAXES 330,993 282,865 513,682
INCOME TAX EXPENSE 133,832 115,974 209,800
-------- -------- --------
NET INCOME $ 197,161 $ 166,891 $ 303,882
======= ======= =======
WEIGHTED AVERAGE NUMBER
OF SHARES
OUTSTANDING 298,101 304,237 310,426
-------- -------- --------
EARNINGS PER SHARE $ .66 $ .55 $ .98
======= ======= ======
The accompanying notes are an integral part of the financial
statements.
F-4
HOLOBEAM, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Additional
Common Stock Paid-In Accumulated Treasury Stock
Shares Amount Capital Deficit Shares Amount
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 $30,559 $9,825,498 $(8,947,666) 3,395 $51,855
Net Income 197,161
Purchase of Treasury Stock 5,297 82,002
BALANCE, SEPTEMBER 30, 1999 305,598 $30,559 $9,825,498 $(8,750,505) 8,692 $ 133,857
The accompanying notes are an integral part of the
financial statements.
F-5
HOLOBEAM, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $197,161 $166,891 $ 303,882
--------- -------- ---------
Adjustments to Reconcile
Net Income to Net Cash
Provided by Operating
Activities:
Loss on disposition
of assets - - 10,022
Depreciation 211,865 214,427 212,487
Amortization 54,958 54,442 54,895
Patent and Patent
Application Costs (8,075) (5,495) (9,477)
Increase (Decrease) in:
Accounts Payable and
Accrued Expenses 119,052 (104,454) (45,637)
Real Estate Brokers
Commissions (33,862) (33,863) (89,455)
Decrease (Increase) in:
Accounts and other
receivables (28) - 49,230
Deferred Tax Asset - - 91,800
Interest Receivable 3,951 (1,772) (4,051)
Prepaid Expenses (2,618) 1,556 (3,336)
--------- ------ -------
Total Adjustments 345,243 124,841 266,478
--------- -------- --------
Net Cash Provided by
Operating Activities 542,404 291,732 570,360
----------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Short-term
Investments - (21,282) (400,000)
Capital Expenditures - (7,976) (51,587)
Sale of Short-Term
Investments 421,282 - -
Proceeds from Sale
of Assets - - 7,500
--------- -------- --------
Net Cash Provided (used)
by Investing Activities 421,282 (29,258) (444,087)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on
First Mortgage (292,188) (267,784) (245,412)
Purchase of Treasury
Stock (82,002) (58,375) (114,325)
------- ------- ---------
Net Cash Provided (Used)
by Financing Activities(374,190) (326,159) (359,737)
--------- -------- --------
NET INCREASE (DECREASE)
IN CASH AND
CASH EQUIVALENTS 589,496 (63,685) (233,464)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 301,623 365,308 598,772
--------- ------- --------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 891,119 $ 301,623 $ 365,308
====== ====== =======
SUPPLEMENTAL CASH FLOWS DISCLOSURES
Interest Paid $ 542,075 $ 566,479 $ 588,852
Income Taxes Paid $ 115,072 $ 107,198 $ 124,925
The accompanying notes are an integral part of the financial
statements.
F-6
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
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 stock were reserved at September 30, 1999,
1998 or 1997. 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, 1999, 1998 AND 1997
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.
F-8
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 2. INCOME TAXES
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:
1999 1998 1997
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:
1999 1998 1997
Current
Federal $ 104,229 $ 89,716 $ 69,000
State 29,603 26,258 49,000
Deferred
Federal - - 91,800
State - - -
--------- ------- ---------
$ 133,832 $ 115,974 $ 209,800
======= ======= =======
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES
The Company has leased two buildings at it's
a & S Drive, Paramus, N.J. site for
retail
use. The Sports Authority, Inc. has leased the 62,000
sq. ft. building for a lease term
of twenty (20) years and the Tandy Corporation has
leased the 30,000 sq. ft. building
for use as a 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.
1999 1998 1997
Buildings and building improvements:
Cost $ 6,961,244 $6,961,244 $6,961,244
Accumulated
depreciation 1,726,564 1,526,605 1,326,646
------------- ------------ ------------
Net buildings and
building
improvements $ 5,234,680 $5,434,639 $5,634,598
========= ========== =========
F-9
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE3. RENTAL INCOME UNDER OPERATING LEASES
(Continued)
The minimum future rentals on noncancellable
operating leases for the years ending
September 30, are as follows:
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 ----------
2004 2,116,467 2009 2,331,017
Total $26,185,033
=========
Net rental income consists of the following:
1999 1998 1997
Rental income $1,925,717 $1,925,534 $1,845,509
Depreciation
expense (199,959) (199,959) (199,959)
Other expenses (57,836) (58,547) (67,540)
----------- -------- --------
Rental income,net $ 1,667,922 $1,667,028 $1,578,010
======== ========= =========
In 1999, 1998, and 1997, depreciation expense
included all depreciation of the rental
buildings and building improvements.
a) The Company entered into a triple net
lease agreement with The Sports
Authority, Inc., Fort Lauderdale, Florida. The
term of the lease is twenty (20)
years with four (4) options to extend the term for
an additional period of five
(5) years in each option.
The Company was responsible for
funding certain improvements to the
building pursuant to the lease agreement and
incurred costs amounting to
$3,567,276 at September 30, 1993. The Company
reimbursed The Sports
Authority, Inc. for such improvements and on
February 5, 1993 the original
lease was amended and the base rent was increased
to reflect the improved
condition of the building.
The Company obtained additional
mortgage financing totaling $7,500,000 in
order to fund reimbursement to The Sports
Authority, Inc., whose former
parent company, K-Mart Corporation (K-mart
Corporation is a public company
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
F-10
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES
(Continued)
a) 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.
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.
F-11
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
The following is a condensed summary of
financial information on the above
publicly
held companies:
Tandy The Sports
Corporation Authority K-Mart CompUSA
12/31/98 1/24/99 1/27/99 6/26/99
(In Millions) (In Thousands)(In Millions)(In Thousands)
Current
assets $ 1,299 $ 439,335 $ 7,830 $ 1,108,537
Total
assets 1,994 901,599 14,166 1,481,715
Current
liabilities 880 408,790 3,691 966,426
Total
liabilities 1,142 632,842 7,203 1,131,239
Minority
interest - (4,155) - -
Common stock
put option 4 - - -
Total
stockholders'
equity 848 272,912 6,963 350,476
Net sales 4,788 1,600,501 33,674 6,248,518
Cost of
sales 2,784 1,208,701 26,319 5,459,471
Gross
profit 2,004 391,800 7,355 789,047
Income
(loss)
before
income
taxes
(continuing) 100 (100,885) 1,091 (84,824)
Income taxes 39 (35,028) 230 31,810
Minority
Interest - (2,066) - -
Net income
(loss) $ 61 $ (63,791) $ 518 $ (53,014)
NOTE 4. RELATED PARTY TRANSACTIONS
An officer and member of the Board of
Directors, was the Company's landlord until
his death during the year ended September 30, 1997.
1997
Landlord-Office rental
and related services $9,999
--------
$9,999
=====
NOTE 5. RESEARCH AND DEVELOPMENT
Research and development expenses in the
amount of $194,364 in 1999, $225,041 in
1998, and $147,562 in 1997, were charged to operations
and included in costs and
expenses.
F-12
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
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
1999, $11,400 in 1998 and
$11,447 in 1997.
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 2000 at a
medical center. Research and
development costs in the amounts of $194,364, $225,041
and $147,562 have been
expended in connection with the surgical staple during
1999, 1998 and 1997,
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:
2000 $5,126
2001 5,126
2002 5,126
2003 5,126
2004 5,126
F-13
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 8. LONG-TERM DEBT (Continued)
The balance outstanding for each debt issued
at the end of 1999, 1998, and 1997 is
as
follows:
1999 1998 1997
First Mortgage on
62,000 sq. ft. Building $5,971,876 $6,264,064 $6,531,848
Real Estate Brokers
Commissions Payable - 12,133 45,995
------------ ------------ ----------
Total 5,971,876 6,276,197 6,577,843
Less Current Portion 318,832 292,195 267,783
-------------- ---------- ----------
Long-Term Portion $5,653,044 $5,984,002 $6,310,060
======== ========= =========
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:
2000 $318,832 2005 $493,181 2010 $762,870
2001 347,897 2006 538,140 2011 338,090
2002 379,611 2007 587,197
2003 414,217 2008 640,727
2004 451,978 2009 699,136
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 243,212 34,174 99,019 110,019
-------- ------ ------- --------
Balance 9/30/99 $468,948 $ 68,346 $180,565 $220,037
======= ====== ======= =======
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
======= ====== ======= =======
F-14
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
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", 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. During 1999, the Financial Accounting Standards
Board issued SFAS No. 132 "Employers' Disclosures about Pensions
and Other Post Retirement Benefits. SFAS No. 132 is not
applicable for post employment benefits but is applicable to the
Company's pension plan (See Note 15).
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
In 1999, the Company adopted Financial
Accounting Standards Board Statement
(SFAS)
No. 131 "Disclosures About Segments of an Enterprise
and Related Information". The
information for 1998 and 1997 has been restated to
conform to the 1999 presentation. The
Company's reportable segments are strategic business
units that involve different products
and services. They are managed by a single management
team.
The Company has three business segments as
follows:
Surgical Staples-Engaged in engineering and
design of surgical staples for use in
internal
surgery, and in the technology used to fabricate the
equipment issued to apply the staples.
This segment of the company's business is still in the
research and development stage.
Electro-Optical-Engaged in engineering and
development of equipment for the semi-
conductor industry. The company has discontinued
efforts relating to the electro-optical
segment of its business.
F-15
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 13. FINANCIAL REPORTING BY BUSINESS SEGMENTS
(Continued)
Rental-Engaged in leasing to tenants, 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 12).
The accounting policies of the segments are
the same as those described in the
summary
of significant accounting policies. The Company
evaluates the performance of its
operating segments based on income before income taxes.
There are no intercompany
sales. The Company derives all revenue in the United
States.
Summarized financial information concerning
the Company's reportable segments is
shown in the following table. The "Other" column
includes corporate income and
expense items not allocated to reportable segments.
Revenues
1999 1998 1997
Business Segments:
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 1,925,717 1,925,534 1,845,509
Other 34,545 39,028 27,873
----------- --------- ---------
Total $ 1,960,262 $1,964,562 $1,873,382
========= ======== ==========
Business Segments:
Income (Loss)
1999 1998 1997
Surgical Staples $(194,364) $ (225,041) $ (147,562)
Electro-Optical - - -
Real Estate
Rental 1,667,922 1,667,028 1,578,010
----------- --------- ---------
Total $ 1,473,558 $1,441,987 $1,430,448
========= ======== ==========
General and
Administrative
Expenses (639,824) (633,625) (347,556)
Interest Expense (539,943) (564,525) (587,061)
Other Income 34,545 39,028 17,851
Income Tax Expense (133,832) (115,974) (209,800)
----------- --------- ---------
Total (1,279,054) (1,275,096) (1,126,566)
----------- --------- ---------
Net Income $ 194,504 $ 166,891 $ 303,882
========= ======== ==========
Business Segments:
Identifiable Assets
1999 1998 1997
Surgical Staples $ 59,778 $ 60,738 $ 63,599
Electro-Optical 10,471 15,286 20,263
Real Estate Rental 6,156,401 6,397,468 6,638,536
Other 933,936 781,590 830,269
----------- --------- ---------
TOTAL ASSETS $ 7,160,586 $7,255,082 $7,552,667
========= ======== ==========
F-16
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 13. FINANCIAL REPORTING BY BUSINESS SEGMENTS
(Continued)
Business Segments:
Capital Expenditures
1999 1998 1997
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental - - -
Other - 7,976 51,587
----------- --------- ---------
$ - $ 7,976 $ 51,587
========= ======== ==========
Property and Equipment
Business Segments Depreciation
1999 1998 1997
Surgical Staples $ - $ - $ -
Electro-Optical - - -
Real Estate Rental 199,959 199,959 199,959
Other 11,906 14,468 12,528
----------- --------- ---------
$211,865 $214,427 $212,487
========= ======== ==========
Intangible Assets
Amortization
1999 1998 1997
Surgical Staples $ 9,034 $ 8,356 $ 7,607
Electro-Optical 4,815 4,977 6,179
Real Estate Rental 41,109 41,109 41,109
Other - - -
----------- --------- ---------
$ 54,958 $ 54,442 $ 54,895
========= ======== ==========
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, 1999, does not differ materially from the
aggregate carrying values of its
financial instruments recorded in the accompanying
balance sheet. The estimated fair
value amounts have been determined by the Company using
available market information
and appropriate valuation methodologies. Considerable
judgement is necessarily required
in interpreting market data to develop the estimates of
fair value, and accordingly, the
estimates are not necessarily indicative of the amounts
that the Company could realize in
a current market exchange.
F-17
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 15. PENSION PLAN (Continued)
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.
In 1999, the Company 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.
1999 1998
Changes in benefit obligation:
Benefit obligation at October 1 $307,773 $ -
Service cost 309,163 287,638
Interest cost 21,544 20,135
------------- ------------
Benefit obligation at
September 30 $638,480 $307,773
======== =======
1999 1998
Change in plan assets:
Fair value of plan assets at
October 1 $313,645 $ -
Company contributions 307,754 307,773
Actual return on plan assets 18,824 5,872
------------- ------------
Fair value of plan assets at
September 30, $640,223 $313,645
======== =======
Funded status of Plan $1,743 $5,872
Unrecognized Net (Gain) Loss (5,377) (5,872)
------------- ------------
(Accrued) or Prepaid Pension $ (3,634) $ -
======== =======
F-18
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 15. PENSION PLAN (Continued)
The net periodic pension cost for the year
ended September 30, includes the
following
components:
1999
1998
1. Service cost -
benefits earned
during the period $ 309,163 $ 307,773
------------- ------------
2. Interest cost on
projected benefit
obligation 32,708 -
------------- ------------
3. Actual return on
plan assets (18,824) 5,872
------------- ------------
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 (11,659) (5,872)
d. Asset gain or
(loss) deferred - -
------------- ------------
e. Total (11,659) 5,872
------------- ------------
5. Net periodic pension
cost (credit) =
(Item 1 + item 2 +
item 3 + item 4 (e) $ 311,388 $ 307,773
======== =======
The net periodic pension cost for 1999 and 1998 was determined
based on a 7% discount rate and, a long - term rate of return of
7% on plan assets.
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-19
HOLOBEAM, INC.
Schedule V
PROPERTY AND EQUIPMENT
SEPTEMBER 30, 1999, 1998 AND 1997
Balance at Balance
at
Beginning End
of
CLASSIFICATIONS of Year
Additions Retirements Year
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
-------- ------- ------- --------
TOTAL $79,596 $ 7,976 $ - $ 87,572
====== ====== ====== ======
YEAR ENDED SEPTEMBER 30, 1999:
Machinery and Equipment $ 66,939 $ - $ - $ 66,939
Furniture and Fixtures 20,633 - - 20,633
-------- ------- ------- --------
TOTAL $87,572 $ - $ - $ 87,572
====== ====== ====== ======
The accompanying notes are an integral part of the financial
statements.
F-20
HOLOBEAM, INC.
Schedule VI
ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY AND EQUIPMENT
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Balance at Balance at
Beginning End of
CLASSIFICATIONS of Year Additions Retirements Year
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
-------- ------- ------- -------
TOTAL $ 28,333 $ 14,468 $ - $ 42,801
====== ====== ====== ======
YEAR ENDED SEPTEMBER 30, 1999:
Machinery and Equipment $40,681 $ 9,287 $ - $ 49,968
Furniture and Fixtures 2,120 2,620 - 4,740
-------- ------- ------- -------
TOTAL $ 42,801 $ 11,907 $ - $ 54,708
====== ====== ====== ======
The accompanying notes are an integral part of the financial
statements.
F-21
HOLOBEAM,INC.
Schedule X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
1999 1998 1997
Maintenance
and Repairs $ - $ - $ 10,610
====== ====== ======
Depreciation and
Amortization of
Intangible Assets $54,958 $ 54,442 $ 54,895
====== ====== ======
Taxes, Other than
Payroll and Income Tax
Franchise $ 9,500 $ 3,600 $ 3,060
Real Estate - - -
Other 518 - 6,004
----------- ---------- --------
$10,018 $ 3,600 $ 9,064
====== ====== ======
Royalties $ - $ - $ -
====== ====== ======
Advertising $ - $ - $ -
====== ====== ======
The accompanying notes are an integral part of the financial
statements.
F-22
HOLOBEAM, INC.
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1999
Cost Capitalized Gross Amount at
Initial Subsequent Which Carried at Life
in Which
Cost to Company To Acquisition Close of Period (1) (2) Date Deprec.
Incumb Bldg & Carrying Bldg & Accumulated of Date in Latest
Income
Brances Land Improv Improv Costs Land Improv Total Depreciation Constr. Acqd Stmt is
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 1,399,730 1958 1971 3 to 40 years
Building II
Paramus, NJ 0 0 2,592,513 0 0 0 2,592,513 2,592,513 326,834 1995 1995 30 Years
$6,777,260 $391,967 $3,311,394 $3,710,655 $ 0 $452,772 $6,961,244 $7,414,016 $1,726,564
(1)Activity for the three years (2)Activity for the three years
ended September 30, 1999 is ended September 30, 1999 is
as follows: 1999 1998 1997 as follows: 1999 1998 1997
Balance at Beginning of Year $7,414,016 $7,414,016 $7,414,016 Balance at Beginning of Year $1,526,605 $1,326,646 $1,126,687
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 During Year: Balance at End of Year $1,726,564 $1,526,605 $1,326,646
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, 1999 is $7,414,016.
The accompanying notes are an integral part of
these financial statements.
F-23
HOLOBEAM, INC.
Schedule XII
MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 1999
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 $1,193,084 None
Mortgage Payable
Building and Improvements 8.77% February 5, 2011 $56,328 None $6,000,000 $4,778,792 None
$5,971,876
Activity for the three
years ended September 30,
1999 is as follows:
1999 1998 1997
Balance at Beginning of Year $6,264,064 $6,531,848 $6,777,260
Addition During Year
Commercial Loans 0 0 0
New Mortgages 0 0 0
6,264,064 6,531,848 6,777,260
Deductions During Year:
Principal Payments 292,188 267,784 245,412
Mortgage Payments 0 0 0
Balance at End of Year $5,971,876 $6,264,064 $6,531,848
(1) The cost for Federal income taxe
Purposes at 9/30/99 $5,971,876
The accompanying notes are an integral part of these
financial statements.
F-24