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, 1997, 1996 and 1995. (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 it is anticipated that animal tests will continue during the fiscal year ending September 30, 1998. A significant investment would be required if the Registrant were to pursue this area of business. The Registrant may seek a relationship of some sort with a firm active in the medical equipment area. However, no decision as to such a relationship has been made at this time. Semiconductor Technology The Registrant had obtained a United States patent covering technology for the deposition of thin films of semiconductor materials, e.g., III-V materials such as binary or ternary semiconductor materials, on suitable substrates. Contracts to investigate the technology involved were given by the Solar Energy
Research Institute (S.E.R.I.) of the United States Department of Energy (USDOE) to Brown University. This work, in order to support the length of research required to test the theories, was to test the quality of the materials and potential applications and the funds were supplied by the USDOE on the Solaris Solar Research program, Grant #DE-FG02-84C410203. Subsequently, Brown University performed additional investigations of the applications of the technology supported by the USDOE under the University Participation Program, Contract #XB5-05009-5. These investigations showed that the film deposition rates with the technology were faster than with conventional liquid phase epitaxy and were of high quality. However, variations in film thickness along the direction of flow were observed. If such variation cannot be solved, it would limit the possible commercial use of the technology. Further investigation of the technology by Brown University has ceased as governmental support for their research has terminated. The Registrant has no direct knowledge at this time of other research taking place using its technology. There is no assurance that the technology in question will find commercial application. During 1993 the Registrant expended $37,615.00 toward development of semiconductor technology and substantially reduced expenditures during 1994. During fiscal year 1994, the Registrant discontinued efforts relating to photovoltaic cells. Work in the field has moved in directions away from that of the Registrant's technology. There has been a substantial reduction of government support in this technical area and funding that had been received by laboratories exploring the Registrant's technology has terminated.
Real Estate Development and Rental Activities The Registrant has rented two buildings it owns located at A&S Drive, Paramus, New Jersey: one to The Sports Authority, Inc. and the other to Tandy Corporation for retail purposes. (iii) Raw Materials
The Registrant believes that the components and materials necessary or useful to its operations will be available from diverse sources of supply. The materials used for the Registrant's research activities have been acquired through commercial businesses engaged in the distribution of such supplies. The materials that the Registrant would require for development of commercial production of medical staples are widely available. (iv) Patents. The Registrant has filed several patent applications and has several patents issued in connection with medical staples for use in internal surgery. These applications and patents are as follows:
No. Serial No. Title of Invention Issue Date
1. PCT/US94/02227 Staples 03/01/94
2. 08/512,766 Staples 08/09/95
3. 08/228,058 Staples 08/29/95
4. Canadian Pat. No. Improved Staples (PCT NAT)03/01/94 2,155,750
5. European Pat. 94910801.3 Staples 03/01/94
6. Australian Pat. 63568/94 Improved Staples 03/01/94
7. Japanese Pat. 6-520120 Staples 03/01/94
8. Brazilian Pat. Staples 03/01/94 PCT/US94/02227
9. 08/502,988 Staple Overlap 07/18/95
10. 07/753,116 Surgical Stapling Method 01/19/93
11. 07/934,858 Surgical Stapling Method 11/23/93
12. 08/024,501 Staples 08/30/94
13. US Pat. #5,445,648 Staples 08/29/95
14. US Pat. #5,342,396 Staples 08/30/94
15. US Pat. #5,263,973 Surgical Stapling Method 11/23/93
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, some of the suppliers of which are well-established. Competition in the real estate office rental segment of the Registrant's business activities was significant in the Bergen County, New Jersey market in which the Registrant competes. The obsolete style of the office building owned by the Registrant prior to and during 1991 made the attraction of suitable office tenants most difficult. In an effort to increase the marketability of the Registrant's properties, the Registrant applied to the Borough of Paramus for a zoning change to allow retail use for the office building and for development of the adjacent site. In December 1991, the change in zoning was approved. The then existing building was rented to The Sports Authority, Inc. The market for retail space in Paramus, New Jersey area, although in recession, was not as adversely affected as was the market for office space. During 1994, a 30,000 sq. ft. building was constructed on the Registrant's site located adjacent to the building leased by The Sports Authority, for use as a Computer City retail store. Tandy Corp. commenced paying rent in October 1994. Holobeam reimbursed Tandy Corporation $1,189,675 for the costs of constructing the building and paving of the site, after a permanent Certificate of Occupancy was obtained. (xi) Research and Development. The Registrant discontinued engineering and development in connection with the development of technology associated with semiconductor devices during 1994 and no funds were expended in connection with these activities. During 1993 the Registrant recorded research and development costs of $37,615.00 on such technology. There have been no such costs expended during 1994, 1995 and 1996
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, 1998. The Registrant has investigated methods for applying surgical staples and the technology presently used to fabricate and apply such staples. During 1997, 1996 and 1995, the Registrant expended $147,562.00, $219,001.00 and $120,833.00, respectively, in connection with furtherance of this activity. Such costs have been currently expensed and consist principally of materials, supplies and costs associated with design and development. (xii) Environmental Compliances. The Registrant does not believe that compliance with Federal, State or Local provisions of a governmental nature which have been enacted or adopted regulating the discharge of material into the environment will have a materially adverse effect upon the capital expenditure requirements, earnings or competitive position of the Registrant. If the semiconductor technology developed had ever reached production, the Registrant would have engaged an accredited, outside manufacturing firm to perform the production process. One feature of the Registrant's technology was the absence of significant waste materials. Since the Registrant's semiconductor technology was developed, other technologies have advanced the state-of-the-art and new directions in this field have rendered the Registrant's technology less attractive. The Registrant's activities with regard to medical staple technology, at present, are limited to engineering, development and testing of medical staple design with fabrication and manufacturing of prototypes and models sub-contracted to other firms. The Registrant is not aware of any potential liabilities or costs associated with the disposal or handling of waste materials and is not aware of any potential violations of local, state or federal laws which regulate the
technology. (xiii) Employees. At September 30, 1997, the Registrant employed three persons as compared to the three persons at September 30, 1996 and three persons at September 30, 1995. (d) Financial Information About Foreign and Domestic Operations and Export Sales. 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 of 62,000 square feet and 30,000 square feet located at 50 A&S Drive, Paramus, New Jersey. One building was placed in service in October 1994, the other in 1982. (Reference is made to Notes 4, 8, 9 and 10 to the Financial Statements for the fiscal year ended September 30, 1991, 1990 and 1989.) Pertinent information concerning the Registrant's properties is as follows. (Reference is made to Schedule XI of the accompanying Financial statements for the years ended September 30, 1997 and 1996.) Building Building Paramus, NJ Paramus, NJ
Year Acquired 1971 1994
Gross Square Footage 62,000 30,000
Percent Leased at 9/30/95 100% 100%
Acquisition Cost $ 718,881 $2,592,513 (2)
Capital Improvements Since Acquisition $3,649,850 (1) -0-
Total Investment $4,587,133 (3) $2,826,843 (4)
Mortgage Balance $6,531,848 $ -0-
(1) Includes $3,567,267.00 of improvements to the building paid by The Sports Authority, Inc. (the Tenant) upon closing of the Mortgage, but does not include additional amounts expended by The Sports Authority, Inc. since closing.
(2) Includes construction allowance of $1,189,675.00 for Tandy Corporation pursuant to the Operating Lease Agreement.
(3) Includes land cost of $218,402 for the 62,000 sq. ft. building.
(4) Includes land cost of $234,370 for the 30,000 sq. ft. building.
In 1983, the Registrant purchased 2.799 acres of land located in Paramus, New Jersey and adjacent to the building owned by the Registrant at 50 A&S Drive. The purchase price was $173,565 which was paid in cash. Since 1983, the Registrant has incurred costs in the amount of $60,805 for various improvements and architectural work relating to development of this property. During 1992, 1991 and 1990, the Registrant spent $293,784, $78,051 and $50,667 respectively in connection with an application for a use variance for the site and various site improvements that would enable the construction of a commercial or retail building on the site. The change in zoning to retail use was approved by the Borough of Paramus in December 1991. The change in zoning to allow retail use also required new site plan approval because the change in use requires new traffic pattern studies, parking lot re-design and significant additional changes in order to comply with governmental requirements. In addition, the Registrant expended $964,505 through September 30, 1994 for site plan approval and changes, and toward construction of a building on the site. No depreciation or amortization was recorded until the building and site were put into service. During October 1994, construction was completed by Tandy Corporation of a retail building on the Registrant's site. The building is now being used for a Computer City retail store. (Reference is made to Note 13 to the Registrant's 1994 Financial Statements and to Item 1, Part X of the 1994 Form 10K.) The source of funds for any additional improvements will be the cash and cash equivalents reflected on the Balance Sheet, and if necessary, the Cash Flows associated with the Rental Income generated by the Operating Leases. (Reference
is made to Note 3 of the accompanying Financial Statements for the years ended September 30, 1997 and 1996.) The zoning change approval allowed for retail use of the property and significantly enhanced the opportunities for attracting a suitable tenant for the site. When purchased, the site adjacent to the building owned by the Registrant, was 12 (twelve) feet below the acceptable construction level and required significant amounts of fill together with site engineering costs to acquire site plan approval for a building from the appropriate governmental regulatory authorities. In addition, the Registrant expended funds to change the zoning of the property from office use to retail use. This change in zoning allowed the Registrant to seek tenants who were engaged in retail operations for the site and resulted in the October 1994 tenancy of Computer City. (Reference is made to Note 12 of the accompanying Financial Statements.) The Registrant was not able to lease the property since the original site plan allowing office use was approved until the Computer City occupancy of October 1994 for retail use. The market for office space has seen significant decline during the years ended September 30, 1990, 1991, 1992, 1993 and 1994. The vacancy rate for such space had reached 28% during the year ended September 30, 1994 and 1993, respectively for the area in which the Registrant competes, Bergen County, New Jersey. The occupancy rate for the building owned by the Registrant and under lease to The Sports Authority Inc. for the past five (5) years is as follows: 1997 100% 1996 100% 1995 100% 1994 100% 1993 100%
The building owned by the Registrant and under lease to Tandy Corp. has been 100% occupied since October 1994. A summary of the amounts expended for
such approvals for the three most recent fiscal years during which such expenditures were made appears below. No such expenditures were made in 1995. 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 for 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. 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 offered by Walsh Manning Securities Inc., New York, New York on December 10, 1997 was $11.00 per share. On July 18, 1983, the Registrant's shares were deleted from the NASDAQ system when no market maker for the Registrant's common stock any longer maintained registration as such with the NASDAQ System. (b) The approximate number of holders of Common Stock securities of the Registrant as of December 10, 1997 was 685. (c) No dividends have been paid or declared on the Common Stock of the Registrant during the 1997 or 1996 fiscal year. In making decisions regarding the possible payment of dividends, the Board of Directors considers the Requirements of the Registrant in such ongoing activities as real estate development and the research, development and engineering efforts of the Registrant as well as such obligations as mortgages and debentures. (d) Changes in Securities. (Reference is made for Form 10Q for the six-month period ended March 31, 1984, wherein the Registrant completed an exchange of common stock for 5% Debentures payable March 1, 1989.
Reference is made to Notes 9 and 10 to the Financial Statements for the years ended September 30, 1989 and 1990.) The high and low bid information of the Registrant's common stock for the last two years was estimated to be as follows: (Source: National Quotation Bureau). (On July 18, 1993, the Company shares were deleted from NASDAQ.)
1997 1996 ---- ---- high low high low ---- --- ---- ---
Quarter Ended Dec. 31 11.00 11.00 10.50 9.00
Quarter Ended Mar. 31 11.00 11.00 11.00 9.00
Quarter Ended June 30 11.00 11.00 11.00 11.00
Quarter Ended Sept. 30 11.00 11.00 11.00 11.00
Such quotation represents prices offered by purchases without retail mark-up, mark-down or commission and may not represent actual sales transactions. Item 6.
Item 6. Selected Financial Data. Financial information for the five-year period commencing October 1, 1992 and ending September 30, 1997 is presented below.
HOLOBEAM, INC. SUMMARY OF SELECTED FINANCIAL DATA FOR THE YEARS ENDED SEPTEMBER 30,
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. (1) Liquidity. The Registrant funded construction site preparation, engineering and site plan approvals for a 30,000 sq. ft. building presently occupied by Tandy Corporation as a Computer City retail store. Total costs related to
the building construction amounted to $2,592,513 and the building was placed in service during the fiscal year ended September 30, 1995. (Reference is made to the Registrant's Annual Report, Form 10K for the year ended September 30, 1994, Item 1(c), Item 2 and to Note 3 to the Registrant's financial statements for the year ended September 30, 1995.) These construction costs were funded in part by the proceeds of the First Mortgage on the 62,000 sq. ft. building owned by the Registrant (and occupied by The Sports Authority), in part by the Tenant allowance for construction pursuant to the lease agreement and by cash flows associated with the operating leases for both buildings. Gross Rents and net rental income associated with the operating leases on the properties of the Registrant are sufficient to provide the cash flows necessary to fund the Registrant's operations. The lease terms expire in 2009 (Tandy Corporation) and 2012(The Sports Authority) and include options for renewal. In the event that the lease options are exercised, revenue will continue beyond 2009 and 2012. Total minimum future rental income associated with these leases approximates $30,036,000.00 and should be adequate to fund the Registrant's real estate rental activities and to provide the cash flows necessary to fund the surgical staple development and engineering project.
(2) Capital Resources Since building construction has been completed, the Registrant does not anticipate future additional capital requirements for the rental properties other than those that are routine and incidental to its rental operations. Expenses are expected in connection with maintenance, insurance and taxes, but no major capital projects are planned at this time. The Registrant expects to continue to fund the development and
engineering associated with its activities with the medical staples technology. Animal testing is expected to continue during 1998 and results will be evaluated before additional testing occurs. The Registrant expects that the maximum funding requirement during 1998 in connection with the development, engineering and testing will approximate $250,000.00 and will be funded from cash flows provided by the real estate rental activities. No revenues are projected in connection with the medical staples technology during 1998.
(3) Results of Operations. (a) The results of operations for the year ended September 30, 1997 indicate after tax income of $303,882.00 as compared to $306,434.00 for the fiscal year ended September 30, 1996. The Registrant has experienced consistent results of operations since the real estate rental properties have been 100% occupied and under favorable operating lease agreements. Because the buildings are under lease to The Sports Authority and to Tandy Corporation, such revenues are expected to continue to be uniform through 2009 when the Tandy lease expires. Costs are also expected to remain at present levels during the short term. Long Term, the Registrant expects costs to increase, particularly with liability insurance, during the life of the leases. It is also expected that maintenance costs may increase as the buildings mature and may require more substantial and costly repairs. Funding of these costs is not expected to have a materially adverse effect upon the results of operations during the term of the leases. As previously discussed, the Registrant also expects to fund engineering and development activities associated with its medical staple technology in the maximum amount of $250,000.00 during 1998 which will be supported by the cash flows associated with the real estate rental
activities. The Registrant funded the medical staples technology development in the amount of $147,562.00 during the year ended September 30, 1997 (b) The results of operations for the year ended September 30, 1996 indicate after-tax income of $334,594.00 for 1995. Performance for the two years remained relatively stable resulting from revenues received under the operating leases of The Sports Authority, Inc. and Tandy Corp. Since the buildings are 100% occupied and will remain so until 2009, revenues are expected to continue to be uniform through 2009. Costs associated with the operating leases are expected to remain at present levels throughout the terms of the leases with the exception of costs associated with business liability insurance in connection with the leasing activities, which are expected to rise with inflation and risk factors. The Registrant expects to continue to fund research and development costs associated with the surgical staple project and such costs increased from $120,833.00 in 1995 to $219,001.00 in 1996. This increase resulted from additional expenditures for purchases of materials, supplies and design and drafting services during 1996. The Registrant expects to continue to fund the development during 1997 and anticipates that such expenditures will approximate $250,000.00 during 1997. At present, the fabrication and experiments being performed by the Registrant in connection with the surgical staples project are limited to engineering, design and development of staple design and to design of equipment to apply the staples. Such work may progress to animal testing during 1997 and if started, may take substantial time before conclusive results can be evaluated. The Registrant expects to fund the 1997 portion of the project's requirements from cash flows associated with the real estate rental
activities of the Registrant's business. (c) The results of operations for the year ended September 30, 1995 indicate a profit of $334,594.00 as compared to income of $32,201.00 (before cumulative effect of change in Accounting Principle) for 1994. (Reference is made to Note 2 of the accompanying Financial Statements for the year ended September 30, 1995.) Income before provision for income taxes increased $531,339.00 when compared to $32,251.00 for 1994. The improved performance resulted from rental income associated with the operating lease on the 30,000 sq. ft. building occupied by Tandy Corporation. The operating lease generated an increase in gross rentals of approximately $626,600.00 during 1995 as compared to 1994 and is expected to continue and increase for the term of the lease. Expenses associated with Registrant's rental activities increased from $168,531.00 in 1994 to $280,038.00 in 1995. These increased costs resulted primarily from increased depreciation expense associated with the building that was put into service during 1995 in the amount of $60,935.00 and increased legal fees associated with the administration of the real estate rental activities and lease preparation activities. Such increase approximates $31,695.00. The remainder of the annual increase results from increases in expenses incident and necessary to the Registrant's business and activities associated with real estate development. Research and development costs in connection with the Registrant's medical staple development project approximated $120,800.00 for 1995 which represents an increase of $56,900.00 when compared to the 1994 expenditures. The increase is associated with an increase in supplies and materials, including sample raw materials and supplies, used to perform the development activity. Such increase approximated $49,900.00 during 1995. No revenues were earned in connection with the medical staples activities during 1995 or 1994.
The Registrant anticipates that revenues associated with the real estate rental phase of its operations will be sufficient to fund the planned research and development efforts in connection with the medical staples.
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 Fredericks and Company for 1996 and 1997.) 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 1999 Annual 1968 Age 66 President of Registrant Meeting
Martin R. Infante Secretary of Registrant 1997 Annual 1976 Age 65 (1) Meeting
William M. Hackett Treasurer of Registrant 2000 Annual 1984 Age 54 Meeting
Beverly Cook Office Manager of Registrant 1998 Annual 1995 Age 61 Meeting
(1) Martin R. Infante, Secretary of the Registrant and member of the Board of Directors served the Registrant in such capacities until his death while in office during the year ended September 30, 1997.
(b) The following Table represents the name and age of each officer of the Registrant, the positions and offices held by each, the term of each office and the period which each has served in the indicated office.
Date First Name and Age Title Term Elected - ----------------------------------------------------------------- Melvin S. Cook Chairman of the Board Annual 1968 Age 66
William M. Hackett Secretary and Treasurer of Annual 1975 Age 54 the Registrant
Martin R. Infante (1)Secretary of the Registrant Annual 1980 Age 65
(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 Business Experience/Occupation Directorship
Melvin S. Cook Chairman of the Board of Directors and None President of the Registrant since its formation.
Martin R. Infante(1)Principal, Martin Infante Associates, a None construction contractor for more than 30 (thirty) years, Principal, Martin Infante Agency, an insurance agency whose cli- entele has a large representation in the construction industry, for more than 30 (thirty) years. Secretary of Registrant since 1980. Director of Registrant since 1976.
(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.
Other Name Business Experience/Occupation Directorship - ----------------------------------------------------------------- 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.
Beverly Cook Office Manager of Registrant from June 1, None 1981 until present. Married to Melvin S. Cook, President and Chairman of the Board of Directors.
(f) Not applicable. Item 11.
Item 11. Management Compensation. (a) The following Table shows all direct remunerations paid by the Registrant during the fiscal year ended September 30, 1997 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.
HOLOBEAM, INC. Form 10K Summary Compensation Table September 30, 1997
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. The "other" compensation paid to Mr. Cook in 1995 represents interest on unpaid salary accrued from 1989 through 1993. 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 accompanying Financial Statements and to Item 11 (d) of this report.) (a) The Directors who are not employees of the Registrant receive standard attendance fees of $200 plus applicable expenses for travel. No Directors' fees were paid during 1997, 1996 and 1995. (b) The following Table sets forth all the options to purchase securities from the Registrant which were granted to or exercised by any of its directors and each officer whose direct remuneration exceeds $100,000.00 as well as all officers and directors as a group since October 1, 1996. All Directors and Officers as a Group Options Granted 0 Options Exercised 0 Unexercised Options Held at 9/30/97 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, 1996 and 1995.)
The amounts paid to Mr. Infante during the three most recent fiscal years ended September 30 are presented below: 1997 1996 1995 Rent Expense $ 9,999 $10,908 $10,908 Insurance -0- 19,076 17,227 ------ ------ ------ Total Payments $ 9,999 $29,984 $28,135 ====== ====== ======
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 10, 1997 is as follows: Title of Class Name & Address Amount Owned % of Class - ----------------------------------------------------------------- Common Stock, Par Melvin S. Cook 123,497 40.4% Value $0.10 Per Share 540 Ravine Court Wyckoff, NJ 07481
Common Stock, Par Beverly Cook 95,000 31.0% Value $0.10 Per Share 540 Ravine Court Wyckoff, NJ 07481
(b) The stockholding of Officers and Directors as a group as of December 10, 1997 are as follows: Title of Class Amount Beneficially Owned % of Class - ----------------------------------------------------------------- Common Stock, Par Value 218,497 71.4% $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, Secretary and Director provides services to the Registrant in his capacity as a principal in the Martin Infante Insurance Agency and as a landlord. During the three most recent fiscal years, the amounts paid to Mr. Infante
in connection with such services were as follows:
1997 1996 1995 Rent Expense $ 9,999 $10,908 $10,908 Insurance -0- 19,076 17,227 ------ ------ ------- Total Payments $ 9,999 $29,984 $28,135 ====== ====== ======
Reference is made to Item 11 (d) of this report and to Notes 4 and 6 to the accompanying 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
VIII Allowances and Reserves
X Supplementary Income Statement Information
XI Real Estate and Accumulated Depreciation
XII Mortgage Loans on Real Estate
(e) Exhibits, including those incorporated by references.
The following is a list of Exhibits filed as part of this Annual Report on
Form 10K. Where so indicated by footnotes, Exhibits that were previously filed are incorporated by references. Legend for Documents Incorporated by Reference -------------------- Articles of Incorporation and By Laws
Articles of Incorporation (1)
By-Laws (1)
By Laws as Amended (2)
Instruments Defining Rights of Share- holders Including Indentures
Specimen Certificate for Shares of Common Stock (1)
Security Combination Agreement (1)
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)
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.
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, 1997
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 19, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
HOLOBEAM, INC.
By: Melvin S. Cook Melvin S. Cook President and Chairman of the Board
Date: December 12, 1997
By: William M. Hackett William M. Hackett Director and Treasurer
Date: December 19, 1997
By: Beverly Cook Beverly Cook Director
Date: December 12, 1997
HOLOBEAM, INC.
FINANCIAL STATEMENTS WITH INDEPENDENT ACCOUNTANTS' REPORT
YEARS ENDED SEPTEMBER 30, 1997, AND 1996 AND 1995
HOLOBEAM, INC.
PAGE INDEPENDENT ACCOUNTANTS' REPORT
FINANCIAL STATEMENTS:
BALANCE SHEETS ,3 SEPTEMBER 30, 1997 AND 1996
STATEMENTS OF OPERATIONS SEPTEMBER 30, 1997, 1996 AND 1995
STATEMENTS OF SHAREHOLDERS' EQUITY SEPTEMBER 30, 1997, 1996 AND 1995
STATEMENTS OF CASH FLOWS SEPTEMBER 30, 1997, 1996 AND 1995
NOTES TO FINANCIAL STATEMENTS -17
SCHEDULES FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
V PROPERTY AND EQUIPMENT
VI ACCUMULATED DEPRECIATION AND AMORTIZATION PROPERTY AND EQUIPMENT
X SUPPLEMENTERY INCOME STATEMENT INFORMATION
XI REAL ESTATE AND ACCUMULATED DEPRECIATION
XII 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.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders Holobeam Inc. Wyckoff, New Jersey
We have audited the accompanying balance sheets of Holobeam, Inc. as of September 30, 1997 and 1996 and the related statements of operations, shareholders' equity and statements of cash flows for the years then ended . 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. The financial statements of Holobeam, Inc. as of September 30, 1995, were audited by other auditors whose report dated December 25, 1995, expressed an unqualified opinion on those statements.
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, 1997 and 1996, and the results of its operations, shareholders' equity and its cash flows for the years then ended 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 12, 1997
HOLOBEAM, INC.
BALANCE SHEETS SEPTEMBER 30, 1997 AND 1996
The accompanying notes are an integral part of the financial statements.
HOLOBEAM, INC.
BALANCE SHEETS SEPTEMBER 30, 1997 AND 1996
The accompanying notes are an integral part of the financial statements
HOLOBEAM, INC.
STATEMENTS OF OPERATIONS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
The accompanying notes are an integral part of the financial statements.
HOLOBEAM, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
The accompanying notes are an integral part of the financial statements.
HOLOBEAM, INC.
STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
The accompanying notes are an integral part of the financial statements.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
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.
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.
d. Capitalized Real Estate Taxes
The Company capitalized real estate taxes related to the property upon which the Company intended to construct a commercial building. Such taxes were capitalized until the property was put into service on October 1, 1994.
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, 1997, 1996 AND 1995
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 liability's. Generally, deferred tax assets are recognized in the current period for the future benefit of net operating loss carryforwards and items for which expenses have been recognized for financial statement purposes, but will be deductible in future periods. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
g. Deferred Charges
It is the policy of the Company to charge costs associated with the acquisition of long term debt (mortgages) to expense over the term of the mortgage.
In addition, the Company charges costs associated with the procurement of operating leases, specifically real estate brokers commissions, to expense during the term of the operating lease.
h. Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from these estimates.
I. Short-Term Investments
Short-term investments have an original maturity of more than three months and a remaining maturity of less than 1 year. These investments are stated at cost as it is the intent of the company to hold these securities until maturity. NOTE 2. INCOME TAXES
The deferred tax assets recorded on the balance sheet as of September 30, are as follows:
1997 1996 1995 Deferred tax asset $ - $ 91,800 $ 295,590 Valuation allowance - - - --------- ------- -------- Net deferred tax asset $ - $ 91,800 $ 295,590 ========= ======= ========
Net operating loss carryovers of the Company, aggregated approximately $0 at September 30, 1997, and $270,000 at September 30, 1996 and $326,716 at September 30, 1995.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
NOTE 2. INCOME TAXES (Continued)
The sources of deferred income taxes for the years ended September 30, are as follows:
1997 1996 1995
Depreciation $ -$ - $ 413,371 Net operating loss carryover - 270,000 326,716 ---------- --------- -------- $ - $ 270,000 $ 740,087 ========== ========= ========
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: 1997 1996 1995
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:
1997 1996 1995 Current Federal $ 69,000 $ 2,916 $ - State 49,000 2,125 -
Deferred Federal 91,800 184,508 194,938 State - 19,407 34,058 -------- ---------- --------- $209,800 $ 208,956 $ 228,996 ======== ========== =========
Capital losses of the Company which approximates $0 in 1997, $0 in 1996, and $17,575 in 1995 were available to offset future capital gains. Capital losses of $17,575 expired in 1995.
In 1997, 1996 and 1995, the net operating loss carryovers do not agree with the accumulated deficit on the balance sheets for the same periods because some net operating losses have expired and because capital losses are not included in the net operating loss carryovers.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES
The Company has leased two buildings at its A & S Drive, Paramus, N.J. site for retail use. The Sports Authority, Inc. has leased the 62,000 sq. ft. building for a lease term of twenty (20) years and the Tandy Corporation has leased the 30,000 sq. ft. building for use as a Computer City retail store for a lease term of fifteen (15) years. The tenants are also responsible for real estate taxes and other assessments as defined in the operating lease agreements.
1997 1996 1995 Buildings and building improvements: Cost $6,961,244 $6,961,244 $8,424,724 Accumulated depreciation 1,326,646 1,126,687 1,937,408 --------- --------- ---------- Net buildings and building improvements $5,634,598 $5,834,557 $6,487,316 ========= ========= =========
The minimum future rentals on noncancellable operating leases for the years ending September 30, are as follows:
1998 $1,925,717 2003 $2,116,467 2008 $2,331,017 1999 1,925,717 2004 2,116,467 2009 2,331,017 2000 2,020,217 2005 2,225,142 2010 1,497,842 2001 2,020,217 2006 2,225,142 2011 1,497,842 2002 2,108,447 2007 2,322,194 2012 1,373,022 ----------- Total $30,036,467 =========== Net rental income consists of the following: 1997 1996 1995 Rental income $1,845,509 $1,838,216 $1,834,829 Depreciation expense (199,959) (199,987) (194,419) Other expenses (67,540) (60,975) (85,619) ---------- --------- --------- Rental income, net $1,578,010 $1,577,254 $1,554,791 ========== ========= ========= In 1997, 1996, and 1995, depreciation expense included all depreciation of the rental buildings and building improvements.
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.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
The Company obtained additional mortgage financing totaling $7,500,000 in order to fund reimbursement to The Sports Authority, Inc., whose former parent company, K- Mart Corporation (K-mart Corporation is a public company and financial information regarding K-mart is publicly available) has guaranteed the incremental monthly rental payments over the remaining life of the lease. (See Note 8).
The base rents under the amended lease were increased as follows:
2nd through 5th years $1,208,217 6th through 10th years 1,295,716 11th through 15th years 1,391,967 16th through 20th years 1,497,842
In addition to the rent, the tenant is responsible for real estate taxes and other assessments as defined in the operating lease.
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.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
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.
The following is a condensed summary of financial information on the above publicly held companies:
Tandy Corporation The Sports Authority K-Mart 12/31/96 1/28/97 1/31/97 (In Millions) (In Thousands) (In Millions) Current assets $ 1,940 $ 445,111 $7,733 ------- ---------- ------ Total assets 2,583 754,270 14,286 ------- ---------- ------ Current liabilities 1,194 269,114 3,602 ------- ---------- ------ Total liabilities 1,318 443,850 8,214 ------- ---------- ------ Total stockholders' equity 1,265 310,317 6,072 ------- ---------- ------ Net sales 6,285 1,274,461 31,437 ------- ---------- ------ Cost of sales 4,263 905,923 24,390 ------- ---------- ------ Gross profit 2,022 368,538 7,047 ------- ---------- ------ Income (loss) before income taxes (146) 48,032 330 ------- ---------- ------ Income taxes (benefit) (54) 19,597 68 ------- ---------- ------ Minority Interest - (1,570) - ------- ---------- ------ Net income (loss) continuing (92) 30,005 231 ------- ---------- ------ Discontinued Operations - - (451) ------- ---------- ------ Net income (loss) $ (92) $ 30,005 $ (220) ------- ---------- ------
NOTE 4. RELATED PARTY TRANSACTIONS
An officer and member of the Board of Directors, acted in the capacity as insurance broker and was the Company's landlord until his death during the year ended September 30, 1997. 1997 1996 1995 Landlord-Office rental and related services $9,999 $10,908 $10,908 Insurance - 19,076 17,227 ----- ------- ------ $9,999 $29,984 $28,135 ===== ======= =======
NOTE 5. RESEARCH AND DEVELOPMENT
Research and development expenses in the amount of $147,562 in 1997, $219,001 in 1996, and $120,833 in 1995 were charged to operations and included in costs and expenses.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
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 Hohokus, 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 $11,449 in 1997, $10, 908 in 1996 and 1995.
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 medical 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 animal tests will continue during 1998. Research and development costs in the amounts of $147,562, $219,000 and $120,833 have been expended in connection with the surgical staple during 1997, 1996 and 1995, 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:
1998 $5,126 1999 5,126 2000 5,126 2001 5,126 2002 5,126
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
NOTE 8. LONG-TERM DEBT (Continued)
The balance outstanding for each debt issued at the end of 1997, 1996, and 1995 is as follows: 1997 1996 1995 First Mortgage on 62,000 sq. ft. Building $6,531,848 $6,777,260 $7,002,162 Loan Payable-Tandy Corp. - - 1,137,175 ---------- ---------- --------- 6,531,848 6,777,260 8,139,337
Real Estate Brokers Commissions Payable 45,995 135,450 169,313 ---------- ---------- --------- Total 6,577,843 6,912,710 8,308,650
Less Current Portion 267,783 245,412 1,362,086 ---------- ---------- --------- Long-Term Portion $6,310,060 $6,667,298 $6,946,564 ========== ========== ========== There was no outstanding long-term debt at September 30, 1996 other than the first mortgage and real estate brokers commissions payable after September 30, 1996. The mortgage is secured by the land and building and operating lease agreement with The Sports Authority, Inc. (See Note 3).
The principle payments of long-term debt for the term of the mortgage is as follows:
1998 $267,783 2003 $414,217 2008 $640,727 1999 292,195 2004 451,978 2009 699,136 2000 318,832 2005 493,181 2010 762,870 2001 347,897 2006 538,140 2011 338,084 2002 379,611 2007 587,197
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 160,994 23,921 71,061 66,012 -------- -------- -------- -------- Balance 9/30/97 $551,166 $ 78,599 $208,523 $264,044 ======== ======== ======== ========
Original Cost $712,160 $102,520 $279,584 $330,056 Accumulated Amoritzation 119,885 18,795 57,082 44,008 -------- -------- -------- -------- Balance 9/30/96 $592,275 $83,725 $222,502 $286,048 ======== ======== ======== ========
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
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. No depreciation or amortization was recorded until the year ended September 30, 1995. Depreciation expense recorded during 1995 on the deferred site costs transferred to the 30,000 sq. ft. building amounted to $60,935.
NOTE 11. OTHER EMPLOYEE BENEFITS
The Financial Accounting Standards Board issued SFAS No. 106 " Employers Accounting for Post retirement Benefits" and SFAS No. 112 "Employers Accounting for Post employment Benefits", which changed employers' accounting for these benefits. Since the Company has no post- retirement benefits plan, and does not offer post employment benefits, SFAS No. 106 and SFAS No. 112 are not applicable.
NOTE 12. CONCENTRATION OF CREDIT RISK
The Company maintains its cash balances in several financial institutions in excess of the $100,000 guarantee by the Federal Deposit Insurance Corporation (FDIC). At September 30, 1997, this excess amounted to $169,827. The Company also maintains its short-term investments in a certificate of deposit in which the entire balance of $400,000 is in excess of the FDIC insured balance.
Substantially all of the Company's income is rental income received from two tenants. These tenants are subject to long-term lease agreements. (See Note 3)
NOTE 13. FINANCIAL REPORTING BY BUSINESS SEGMENTS
A summary description of the Company's business segments is as follows:
Medical Staples-Engaged in engineering and design of staples for use in internal surgery, and in the technology used to fabricate the equipment issued to apply the staples.
Electro-Optical-Engaged in engineering and development of equipment for the semi-conductor industry. The company has discontinued efforts relating to the electro-optical segment of its business.
Rental-Engaged in leasing to tenants, the two retail buildings owned by the Company at 50 A&S Drive, Paramus, New Jersey.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
NOTE 13. FINANCIAL REPORTING BY BUSINESS SEGMENTS (Continued)
Revenues 1997 1996 1995 Business Segments:
Surgical Staples $ - $ - $ - Electro-Optical - - - Real Estate Rental 1,845,509 1,838,216 1,834,829 Corporate 27,873 18,002 60,563 ---------- ---------- ---------- Total $1,873,382 $1,856,218 $1,895,392 ========== ========== ========== Business Segments: Income (Loss)
1997 1996 1995 Surgical Staples $ (147,562)$ (219,001) $(120,833) Electro-Optical - - - Real Estate Rental 1,578,010 1,577,254 1,554,791 ---------- ---------- --------- Total 1,430,448 1,358,253 1,433,958 ---------- ---------- --------- General and Administrative Expenses (347,556) (253,146) (304,192) Interest Expense (587,061) (607,719) (626,638) Other Income 17,851 18,002 60,462 Income Tax Expense (209,800) (208,956) (228,996) --------- --------- -------- Total (1,126,566) (1,051,819)(1,099,364) --------- --------- --------- Net Income $ 303,882 $ 306,434 $ 334,594 ========= ========= ========= Business Segments: Identifiable Assets 1997 1996 1995 Surgical Staples $ 63,599 $ 61,729 $ 37,312 Electro-Optical 20,263 26,442 35,739 Real Estate Rental 6,638,536 6,885,752 7,126,240 Corporate and Other Non-segment Items 830,269 769,691 1,732,671 --------- --------- --------- TOTAL ASSETS $7,552,667 $7,743,614 $8,931,962 ========= ========= =========
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
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, 1997, 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 estmates of fair value, and accordingly, the estimates are not neccessarily indicative of the amounts that the Company could realize in a current market exchange.
Schedule VI HOLOBEAM, INC.
ACCUMULATED DEPRECIATION AND AMORTIZATION PROPERTY AND EQUIPMENT YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
The accompanying notes are an integral part of the financial statements.
Schedule X HOLOBEAM, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
The accompanying notes are an integral part of the financial statements.
Schedule XII HOLOBEAM, INC.
MORTGAGE LOANS ON REAL ESTATE SEPTEMBER 30, 1997
The accompanying notes are an integral part of these financial statements.
Schedule XI HOLOBEAM, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION SEPTEMBER 30, 1997
The aggregate cost for Federal income tax purposes at September 30, 1997 is $7,414,016. The accompanying notes are an integral part of these financial statements.