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
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.
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
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.
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.
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
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.
(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
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.
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.
(Reference is made to Schedule XI of the Registrant's 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 9/30/99 100% 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
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.
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
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.
Item 3.
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.
Item 4. Submission to Matters to a Vote of Security Holders. None.
PART II Item 5.
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.
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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. (1) Liquidity.
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,
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.
(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
$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
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
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.
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.
Item 9. Disagreements on Accounting and Financial Disclosure. None.
PART III Item 10.
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
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.
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
Registrant as a group for such fiscal year.
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
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:
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.
PART IV Item 12.
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.
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:
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
Financial Statements for the year ended September 30, 1997.
Item 14.
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.
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. (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.
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.
PAGE INDEPENDENT ACCOUNTANTS' REPORT
FINANCIAL STATEMENTS:
BALANCE SHEETS -3
STATEMENTS OF OPERATIONS
STATEMENTS OF SHAREHOLDERS' EQUITY
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS -19
SCHEDULES FOR THE YEARS ENDED SEPTEMBER 30, 1999 1998 AND 1997
V PROPERTY AND EQUIPMENT
VI ACCUMULATED DEPRECIATION AND AMORTIZATION PROPERTY AND EQUIPMENT
X SUPPLEMENTARY INCOME STATEMENT INFORMATION
XI REAL ESTATE AND ACCUMULATED DEPRECIATION
XIII MORTGAGE LOANS REAL ESTATE
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
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.
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
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.
The accompanying notes are an integral part of the financial statements.
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.
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.
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.
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 ========= ========== =========
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
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.
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.
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.
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
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 ======= ====== ======= =======
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.
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 ========= ======== ==========
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.
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) $ - ======== =======
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:
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.
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.
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.
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.
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.
HOLOBEAM, INC.
Schedule XII
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.