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. b) Industry Segments. For financial information in regard to Industry Segments, reference is made to Note 12 to the Financial Statements for the years ended September 30, 2002, 2001 and 2000. (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. Several United States Patents and foreign patents have been received covering a novel staple. The staple has been produced and animal testing took place during 2002, 2001 and 2000. The Registrant presently intends to continue the project if the final tests indicate commercial value. 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. 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, both for retail purposes. (iii) Raw Materials The Registrant believes that the components and materials necessary or useful to its operations will be available from diverse sources of supply. The
materials used for the Registrant's research activities 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. 2,155,750 Improved Staples(PCT NAT) 08/18/98
5. European Pat. 94910801.3 Staples 03/01/94
6. Australian Pat. 63568/94 Improved Staples 09/15/94
7. Japanese Pat. 6-520120 Staples 03/01/94
8. Brazilian Pat. PCT/US94/02227 Staples 03/01/94
9. 08/502,988 Staple Overlap 08/18/95
10. 07/753,116 Surgical Stapling Method 01/19/93
11. 07/934,858 Surgical Stapling Method 11/23/93
12. 08/024,501 Staples 08/30/94
13. US Pat. #5,445,648 Staples 08/29/95
14. US Pat. #5,342,396 Staples 08/30/94
15. US Pat. #5,263,973 Surgical Stapling Method 11/23/93
16. US Pat. #5,667,527 Staples 09/16/97
17. US Pat. #5,749,896 Staple Overlap 05/12/98
18. Japanese Pat. #2672713 Improved Staples 07/11/97
19. Brazilian Pat. #9405840-7 Improved Staples 09/01/95
20. US Pat. #6,083,242 Improved Staples 07/04/00
21. Australian Pat. #704533 Improved Staples 08/05/99
(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 forming some type of business relationship with other firms. The technology is in competition with alternative staples technology. Some suppliers of surgical staplers 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 building owned by the Registrant prior to and during 1991 made the attraction of suitable tenants difficult. In an effort to increase the marketability of the Registrant's properties, the Registrant applied to the Borough of Paramus for a zoning change to allow retail use for the office building and for the adjacent site. In December 1991, the necessary change in zoning was approved. The then existing building was rented to The Sports Authority, Inc., a retailer of
sporting goods. This building was substantially renovated by The Sports Authority, Inc. and Holobeam reimbursed them for their costs in connection with this renovation. During 1994, a 30,000 sq. ft. building was constructed on the Registrant's site located adjacent to the building leased to The Sports Authority, Inc. for use as a Computer City retail store. Tandy Corp., parent corporation of Computer City, commenced paying rent in October 1994. Holobeam reimbursed Tandy Corporation $1,189,675 as an allowance for costs of constructing the building and paving of the site, after a permanent Certificate of Occupancy was obtained. During 1998, Computer City Retail Stores were acquired by Comp USA. On January 23, 2000, Comp USA entered into a merger agreement with Grupo Sanborns, S.A. de C.V. and TPC Acquisition Corp., a subsidiary of Grupo Sanborns, S.A. de C.V. Tandy Corp. remains on the lease as guarantor. (xi) Research and Development. The Registrant has investigated methods for applying surgical staples and the technology presently used to fabricate and apply such staples. During 2002, 2001 and 2000, the Registrant expended $214,031.00, $183,089.00 and $192,085.00, 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. The Registrant's activities with regard to medical staple technology, at present, are limited to engineering, development and animal testing of medical staple design with fabrication and manufacturing of prototypes and models sub-contracted to other firms.
The Registrant is not aware of any potential liabilities or costs associated with the disposal or handling of waste materials and is not aware of any potential violations of local, state or federal laws which regulate the technology. (xiii) Employees. At September 30, 2002 the Registrant employed three persons as compared to three persons at September 30, 2001 and three persons at September 30, 2000. (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. 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 years 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 09/30/02 100% 	 100%
Acquisition Cost $ 718,881 $2,592,513 (2)
Capital Improvements Since Acquisition 	$3,649,850 (1) 	 -0-
Total Investment $4,587,133 (3) $2,826,843 (4)
Mortgage Balance $4,925,542 	 $ -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 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 CompUSA retail store. (Reference is made to Note 13 to the Registrant's 1994 Financial Statements and to Item 1, Part X of the 1994 Annual Report on Form 10K.) The zoning change approval allowed for retail use of the property and significantly enhanced the opportunities for attracting a suitable tenants for the site. When purchased, the site adjacent to the building owned by the Registrant, required site engineering and costs to acquire site plan approval for a building from the appropriate governmental regulatory authorities. In addition, the Registrant expended funds during its efforts to change the zoning of the property from office use to retail use. This change in zoning allowed the Registrant to seek tenants engaged in retail operations and resulted in the October 1994 tenancy of Computer City. (Reference is made to Note 12 of the Financial Statements for the year ended September 30, 1997.) The Registrant was not able to lease the property since the original site plan allowing office use was not approved for retail use until the Computer City occupancy of October 1994. The market for office space had seen significant decline during 1990, 1991, 1992, 1993 and 1994. The occupancy rate for the building owned by the Registrant and under lease to The Sports Authority Inc. for the past five (5) years is as follows: 2002 100% 2001 100% 2000 100% 1999 100% 1998 100% The building owned by the Registrant and under lease to Tandy Corp. (now occupied by CompUSA) has been 100% occupied since October 1994. A summary of the amounts expended for such approvals for the three most recent fiscal years during
which such expenditures were made appears below. No such expenditures were made in 1996, 1997, 1998, 1999, 2000, 2001 or 2002. 1994 1993 1992
Zoning Changes and Site Plan Approvals: Legal Fees 		 $ 2,859 $ 10,093 $ 15,840 Governmental Fees 		 11,827 55,811 19,990 Engineering 		 11,049 39,171 57,954 Paramus Park 		 -0- -0- 200,000 							 ------ 	 ------ -------
Total Related Costs 		 $25,735 $105,075 $293,784 							 ======= ======= ======= The payment of $200,000 during 1992 to Paramus Park was a one-time fee in connection with removal of an existing deed restriction which prohibited adjacent retail activity. The balance of the payments for site plan approvals were paid to various engineering, legal and surveying firms in connection with professional services rendered to obtain governmental approvals. No payments to affiliated parties were made in connection with the zoning changes nor were any payments made to affiliated or related parties for the acquisition of site plan approval. During 1998, Computer City, Inc. retail stores were acquired by CompUSA, Inc., another retailer of computers, computer accessories and software. The Registrant accepted assignment of the Computer City lease by CompUSA and Tandy Corporation remains on the lease as the guarantor. Item 3.
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 04, 2002 was $26.00 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 16, 2002 was 457. (c) No dividends have been paid or declared on the Common Stock of the Registrant during the 2002, 2001 or 2000 fiscal years. In making decisions regarding the possible payment of dividends, the Board of Directors considers the Re-
quirements 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).
2002 2001 high low high low
Quarter Ended Dec. 31 15.00 14.50 15.00 14.50
Quarter Ended Mar. 31 25.00 18.00 15.00 14.50
Quarter Ended June 30 23.50 21.00 15.00 14.00
Quarter Ended Sept. 30 22.00 22.00 14.00 13.50
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, 1997 and ending September 30, 2002 is presented below.
It should be noted that years ended 2000, 1999 and 1998 have been restated with reference to financial statement footnote #16.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. (1) Liquidity. During the year ended September 30, 2002, the Registrant's operations provided cash flows amounting to $455,375.00, resulting principally from its real estate rental activities. The Registrant expects that revenues associated with its real estate rental business will be sufficient to maintain operations for the terms of the operating leases on the rental properties. (Reference is made to Note 3 of the accompanying financial statements for the years ended September 30, 2002 and 2001.) The operating leases expire in 2009 (Tandy Corporation / CompUSA) and 2012 (The Sports Authority) and both contain options for renewal periods of five (5) years. Minimum future rental revenues on the non-cancek\llable operating leases total $21,036,152.00 and are expected to provide sufficient revenues to sustain the Registrant's operations through 2012 provided that there are no extraordinary events that would prematurely cause the leases to expire. The Registrant's working capital at September 30, 2002 was $189,403.00, which was $168,865 below that reported for the same period one year ago. In the opinion of the Registrant, current revenues are expected to provide sufficient cash flows to fund the Registrant's current operating activities and will provide revenues during the remaining terms of the operating leases.
(2) Capital Resources. The Registrant has continued to fund a series of experiments in connection with the development of surgical staples and their application during 2002. (Reference is made to Annual Report Form 10K, Item 7 for the years ended September 30, 1998, 1999, 2000 and 2001.) The experiments are presently in the final phase of evaluation for determining the commercial
value and definitive results will not be available for some time. If practical applications cannot be demonstrated, the project will not be continued beyond the fiscal year begun October 1, 2002. Therefore, the Registrant cannot state at this time whether or not there will be funding beyond the current commitment of $250,000.00 projected for the fiscal year begun October 1, 2002. The Registrant has contributed $398,584.00 to its defined benefit pension plan for the year ended September 30, 2002. The contribution was expensed to operations during each quarter of the year. The Registrant's funding policy is to make annual contributions in amounts sufficient to fully provide for all eligible employees benefits by the time they retire. The Registrant expects to continue funding the plan in 2003 and expects no materially adverse effect on its financial condition. (Reference is made to Note 14 to the accompanying Financial Statements for September 30, 2002 and 2001.) The Registrant's projected expenditures for capital acquisitions and improvements is limited to those that are normal, routine and incidental to its real estate rental operations. The rental properties, located at 50 A&S Drive, Paramus, New Jersey, do not require new construction or refurbishment at this time and no renovations requiring capital funding are planned at this time. The tenants are responsible for real estate tax expenses and maintenance costs while liability and hazard insurance is the Registrant's responsibility. Cost increases are not expected to adversely effect the Registrant's operations.
(3) Results of Operations. (a) After-tax earnings for the year ended September 30, 2002 were $166,399.00, representing a decrease of $2,431.00 when compared to the results of operations for the previous year. Earnings per share were $0.58 for 2002 and 2001.
Revenues decreased $33,512.00 to $2,071.508.00 when compared to 2001. Such decrease resulted from lower interest income received on the Registrant's money market fund investments during 2002. Total costs and expenses increased from $1,805,735.00 in 2001 to $1,819,911.00 in 2002, reflecting increases in costs incidental and necessary for the Registrant's administrative business activities. During 2001 the Registrant adopted FASB 13, Accounting for Leases. The effect of FASB 13 is to apportion escalation rental income contained on the operating leases in equal annual adjustments over the remaining terms of the operating leases. The Registrant's Statements of Operations for the years ended September 30, 2000, 1999 and 1998 have been restated to reflect this change. (Reference is made to Note 16 to the accompanying financial statements for the years ended September 30, 2002 and 2001.) Funding for the Registrant's surgical staple project was $214,031.00 for the year ended September 30, 2002 as compared to $183,089.00 for the twelve months ended September 30, 2001. The expenses represent costs associated with the engineering, research and development of the surgical staples and their application. This project has entered into a final phase of tests that will ultimtely determine the project's commercial feasibility, although it will be some time before definitive results will be publishsed. There will be no decision regarding additional funding beyond Fiscal 2003 until such results are published. The continued funding of the project is not expected to have any materially adverse effect upon the financial condition of the Registrant. Revenues associated with the Registrant's real estate rental activities were $2,053,703.00 for the year ended September 30, 2002 and 2001 and are expected to continue t the same rate until the leases expire in 2009 and 2012. The properties have had occupancy rates of 100% during 2002 and 2001
and are expected to continue until 2009 when the CompUSA lease expires. Rental expenses were $258,572.00 for 2002 and are expected to increase at or below the current inflation rate for the geographical area in which the Registrant conducts its activities. Any such increases are not expected to have any materially adverse effect upon the Registrant's financial condition.
(b) The Registrant's after-tax earnings for the year ended September 30, 2001 were $168,830.00 as compared to $220,147.00 for the year ended September 30, 2000. Earnings per share were $0.58 and $0.75 respectively. Revenues decreased $4,840.00 to $2,105,020.00 while general expenses increased $129,235.00. Cost increases were partially offset by a $29,276.00 decrease in interest expense associated with the Mortgage on the rental property owned by the Registrant. During 2001 the Registrant adopted FASB 13, accounting for leases. The effect of FASB 13 is to apportion escalation revenues contained in the operating leases in equal annual adjustments over the terms of the leases. The Registrant's Statements of Operations for the years ended September 30, 2000, 1999 and 1998 have been restated to reflect this change. (Reference is made to Note 16 to the accompanying financial statements for the years ended September 30, 2000 and 1999.) The Registrant's properties at 50 A&S Drive, Paramus, New Jersey have had occupancy rates of 100% during 2001 and the rates are expected to continue at 100% until 2009 when the Comp USA lease expires. Rental expenses were $259,004.00 for 2001 and are expected to increase at or below the current inflation rate for the geographic area in which the Registrant has its real estate rental activities. The Registrant anticipates no material effect upon its financial condition as a result of such increases. The Registrant continued to fund the medical staple project during
2001. Expenses associated with the engineering, research and development of the project totaled $183,089.00 for the year as compared to $92,085.00 for 2000. During 2002, the Registrant expects to continue funding of the medical staple project and to conduct a final series of tests to determine the economic feasibility for the staple. If results do not indicate favorable economic potential, funding will be discontinued after 2002.
(c) During 2000, the Registrant recognized after-tax earnings of $220,147.00 as compared to $273,953.00 for the fiscal year ended September 30, 1999. The results of operations reflect performance consistent with prior years and results from increased revenues associated with the Registrant's real estate rental activities and proportionate reduction in related expenses. When compared to 1999, revenues increased $21,612.00 while interest expense associated with the Registrant's mortgage decreased $26,837.00 to $513,106.00. The favorable effect of interest reduction and increased revenues was partially offset by increased income tax and general expenses. Funding of the Registrant's surgical staple project continued during 2000 with expenditures amounting to $192,085.00 as compared to $194,364.00 in 1999. Efforts are proceeding to continue initial testing during 2001 and the Registrant intends to fund the project with resources generated from its operating activities. Such funding is anticipated to approximate $300,000.00 during 2001. The Registrant's occupancy rates for the real estate rental properties was 100@ during 2000 and it is anticipated to remain at 100% during 2001 which should result in comparable favorable performance to 2001. Rental expenses, which approximated $262,900.00 in 2000 are expected to increase approximately 5% and are not expected to have any materially adverse effect upon the Registrant's financial condition.
The Registrant's defined benefit pension plan was funded in the amount of $330,122.00 during the fiscal year ended September 30, 2000 as compared to $311,388.00 for 1999. The Registrant anticipates continued funding of plan requirements with the cash flows presently generated by its operations. Funding of the plan is not expected to have any material adverse effect upon its financial condition. (4) Other Matters The Registrant was able to positively resolve the potential impact of the Year 2000 on the processing of data- sensitive information by the Registrant'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 Registrant's programs that have time-sensitive software could recognize a date using "00" as the year 1900 rather than the year 2000, which may have caused miscalculations or systems failures. The costs of addressing this issue did not have a material adverse impact on the Registrant's financial position, results of operations or cash flows. The Registrant devoted the necessary resources and resolved all significant Year 2000 issues.
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 2002 and 2001.)
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. Name and Age Title Term Date First Elected
Melvin S. Cook Chairman of the Board 2005 Annual 1968 Age 71 President of Registrant Meeting
William M. Hackett Treasurer of Registrant 2003 Annual 1984 Age 59 Meeting
Beverly Cook Office Manager and 2004 Annual 1995 Age 66 Secretary of Registrant Meeting
(b) The following Table represents the name and age of each officer of the Registrant, the positions and offices held by each, the term of each office and the period which each has served in the indicated office.
Name and Age Title Term Date First Elected
Melvin S. Cook Chairman of the Board Annual 1968 Age 71
William M. Hackett Treasurer of Registrant Annual 1975 Age 59
Beverly Cook Secretary of Registrant Annual 1997 Age 66
(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.
William M. Hackett Vice President of Registrant from None August 23, 1975 until June 1, 1981 and Controller of Registrant and member of accounting staff from October 1973 to August 1975. Treasurer of Registrant from June 1981 to present. Vice President of CMA Co., Inc. from November 1986 to present. Elected President of CMA Co., Inc. in 1998.
Beverly Cook Office Manager of Registrant from June 1, None 1981 until present. Married to Melvin S. Cook, President and Chairman of the Board of Directors.
(f) Not applicable. Item 11.
Item 11. Management Compensation. (a) The following Table shows all direct remunerations paid by the Registrant during the fiscal year ended September 30, 2002 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. (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 2002, 2001 and 2000. (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, 2001. All Directors and Officers as a Group Options Granted 0 Options Exercised 0 Unexercised Options Held at 9/30/02 0
(d) 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 Registrant. For Melvin Cook and Beverly Cook, the amounts equaled $107,112 and $60,000, respectively, as of September 30, 2002. 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, 2002. Pensions may be adjusted for a surviving spouse's pension
or other options under the Pension Plan. Pensions are not subject to any other deduction for Social Security or any other amounts. (Reference is made to Note 14 of the accompanying Financial Statements for the year ended September 30, 2002.)
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 04, 2002 is as follows: Title of Class Name & Address Amount Owned % of Class
Common Stock, Par Melvin S. Cook 124,500 43.3% Value $0.10 Per Share 217 First Street Ho-Ho-Kus, NJ 07423
Common Stock, Par Beverly Cook 95,000 33.0% 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 04, 2002 are as follows: Title of Class Amount Beneficially Owned % of Class
Common Stock, Par Value 219,500 76.3% $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 - Not Applicable 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 infor
mation 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)
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 hold-
ers.
HOLOBEAM, INC. Form 10K September 30, 2002
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, 2002
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, 2002 -----------------
By: William M. Hackett ------------------ William M. Hackett Director and Treasurer
Date: December 24, 2002 -----------------
By: Beverly Cook ------------ Beverly Cook Director and Secretary
Date: December 24, 2002 -----------------
CERTIFICATIONS
(a) The Registrant maintains disclosure controls and procedures that provide reasonable assurance that the Registrant is able to record, process and summarize and report the information required to comply with the Registrant's
Exchange Act disclosure obligations and for the Registrant's own internal purposes. The Registrant has evaluated these controls and procedures at September 30, 2002 and has determined the controls and procedures to be effective in recording, processing, summarizing and reporting the information required by the Registrant's quarterly and annual Exchange Act reports.
(b) There have been no significant changes in the Registrant's procedures or internal controls or in other factors that could significantly affect these controls subsequent to September 30, 2002, including corrective actions with regard to significant deficiencies and material weaknesses. As of September 30, 2002, the examination of controls and procedures did not disclose any significant deficiencies or material weaknesses.
I, William M. Hackett, Treasurer, certify that:
1. I have reviewed this annual report on Form 10-K of Holobeam, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
(a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: 12/24/02 -------- William M. Hackett,Treasurer 					 ---------------------------- William M. Hackett Treasurer
I, Melvin S. Cook, President, certify that:
1. I have reviewed this annual report on Form 10-K of Holobeam, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
(a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: 12/24/02 --------
Melvin S. Cook, President 					 ------------------------- Melvin S. Cook President
HOLOBEAM, INC. 217 First Street P.O. Box 287 Ho-Ho-Kus, New Jersey 07423-0287
December 24,2002
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, 2002 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. 217 First Street P.O. Box 287 Ho-Ho-Kus, New Jersey 07423-0287
December 31, 2002
U.S. Securities and Exchange Commission Mellon Bank - Account 910-8739 Box 360055M Pittsburgh, PA 15251
Dear Sir or Madam:
Enclosed you will find our Check No. 1136 which has been issued for payment of the Annual Report Form 10K filing fee. Our file number is 0-3385.
Kindly acknowledge receipt by signing a copy of the enclosed letter and return it to us in the accompanying stamped, self-addressed envelope.
Very truly yours,
W.M. Hackett Treasurer
mjb Enc.
HOLOBEAM, INC.
FINANCIAL STATEMENTS WITH INDEPENDENT ACCOUNTANTS' REPORT
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
R.A. FREDERICKS & COMPANY, LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS
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 -22
SCHEDULES FOR THE YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
V PROPERTY AND EQUIPMENT
VI ACCUMULATED DEPRECIATION AND AMORTIZATION PROPERTY AND EQUIPMENT
X SUPPLEMENTARY INCOME STATEMENT INFORMATION
XI REAL ESTATE AND ACCUMULATED DEPRECIATION
XII MORTGAGE LOANS ON 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 John Plesniarski, CPA Mary V. Fox, CPA, CFE
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, 2002 and 2001 and the related statements of operations, shareholders' equity and statements of cash flows for the years ended September 30, 2002, 2001, and 2000. 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 auditing standards generally accepted in the United States of America. 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, 2002 and 2001, and the results of its operations and its cash flows for the years ended September 30, 2002, 2001, and 2000, in conformity with accounting principles generally accepted in the United States of America. 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 5, 2002
170 Changebridge Road Unit B-4, Montville, New Jersey 07045 Tel: (973) 575-6200 Tel: (212) 544-2204 Fax: (973) 575-5444
Members of the SEC Practice Section of the AICPA Division for CPA Firms.
HOLOBEAM, INC.
BALANCE SHEETS SEPTEMBER 30, 2002 AND 2001
ASSETS
2002 2001
CURRENT ASSETS Cash (including cash equivalents of $782,731 in 2002 and $896,486 in 2001) $ 836,042 $ 924,463 Accounts Receivable 102 46 Prepaid Income Taxes 48,782 45,000 Prepaid Expenses 5,713 27,259 									 -------	 ------- TOTAL CURRENT ASSETS 890,639 996,768 									 -------	 ------- 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 86,992 63,052 Furniture and Fixtures 27,548 24,910 								 --------- ---------
TOTAL 7,528,556 7,501,978
Less: Accumulated Depreciation and Amortization 2,364,867 2,170,484 								 --------- ---------
PROPERTY AND EQUIPMENT-NET 5,163,689 5,331,494 								 --------- ---------
OTHER ASSETS Patents and Patent Application Cost, net of accumulated amortization of $259,469 in 2002 and $245,042 in 2001 56,528 60,953 Deferred Charges 345,621 386,730 Unbilled Rents Receivable 1,181,345 1,155,880 								 --------- ---------
TOTAL OTHER ASSETS 1,583,494 1,603,563 								 --------- ---------
TOTAL ASSETS $ 7,637,822 $ 7,931,825 								 ========= =========
The accompanying notes are an integral part of the financial statements.
HOLOBEAM, INC.
BALANCE SHEETS SEPTEMBER 30, 2002 AND 2001
LIABILITIES AND SHAREHOLDERS' EQUITY
2002 2001 CURRENT LIABILITIES Mortgage Payable-Current Portion $ 414,221 $ 379,611 Accounts Payable 7,669 24,894 Other Accrued Expenses 37,776 37,014 Accrued Pension 205,630 158,271 Accrued Interest Payable 35,940 38,710 									--------	 -------
TOTAL CURRENT LIABILITIES 701,236 638,500 									--------	 -------
LONG-TERM DEBT Mortgage Payable (Net of Current Portion) 4,511,321 4,925,540 								 --------- ---------
TOTAL LONG-TERM DEBT 4,511,321 4,925,540
OTHER LONG-TERM LIABILITIES Deferred Income Taxes 472,538 462,352 								 --------- ---------
TOTAL LONG-TERM LIABILITIES 4,983,859 5,387,892 								 --------- ---------
TOTAL LIABILITIES 5,685,095 6,026,392 								 --------- ---------
SHAREHOLDERS' EQUITY Common Stock, Par Value $.10 Per Share Authorized 2,000,000 Shares, Issued 287,697 in 2002 and 305,598 in 2001 28,769 30,559 Additional Paid in Capital 9,540,472 9,825,498 Accumulated Deficit (7,541,784) (7,708,183) 								 --------- ---------
2,027,457 2,147,874
Less: Cost of Shares in Treasury (3,300 in 2002 and 15,086 in 2001) (74,730) (242,441) 								 --------- ---------
TOTAL SHAREHOLDERS' EQUITY 1,952,727 1,905,433 								 --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,637,822 $7,931,825 								 ========= =========
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, 2002, 2001 AND 2000
(Restated) 2002 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $166,399 $168,830 $ 220,147 ------- ------- --------
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 216,888 209,890 211,115 Amortization 55,535 54,638 54,772 Patent and Patent Application Costs (10,002) (7,933) (9,962) Gain on sale of fixed assets (4,000) (3,963) -
Increase (Decrease) in: Accounts Payable and Accrued Expenses 28,126 (15,659) 54,876 Deferred Income Taxes 10,186 13,394 13,395
Decrease (Increase) in: Unbilled rents receivable (25,465) (33,486) (33,486) Accounts and Other Receivables (56) (15) (3) Interest Receivable - 713 1,159 Prepaid Expenses 21,546 720 (17,269) Prepaid Income Taxes (3,782) (45,000) - ------- ------- --------
Total Adjustments 288,976 173,299 274,597 ------- ------- --------
Net Cash Provided by Operating Activities 455,375 342,129 494,744 ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Short-term Investments - - (738,517) Capital Expenditures (49,082) (39,320) - Sale of Short-Term Investments - 738,517 - Sale of Capital Assets 4,000 11,100 - ------- ------- --------
Net Cash Provided (Used) by Investing Activities (45,082) 710,297 (738,517) ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on First Mortgage (379,609) (347,895) (318,830) Purchase of Treasury Stock (119,105) (30,468) (78,116) ------- ------- --------
Net Cash Used by Financing Activities (498,714) (378,363) (396,946) ------- ------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (88,421) 674,063 (640,719)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 924,463 250,400 891,119 ------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 836,042 $ 924,463 $ 250,400 ======= ======= ========
SUPPLEMENTAL CASH FLOWS DISCLOSURES Interest Paid $ 454,728 $ 486,368 $ 515,433
Income Taxes Paid $ 78,799 $ 217,660 $ 118,890
The accompanying notes are an integral part of the financial statements.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Operations
The Company is engaged in the rental of real property located in New Jersey for retail use and in development of surgical staples and the technology used to apply the staples for use in internal surgery, nationwide.
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, 2002, 2001, or 2000. On May 6, 2002, the Company retired 17,901 shares of Treasury Stock purchased between 1998 and April of 2002 at a cost of $286,816.
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, 2002, 2001 AND 2000
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 income has been recognized for financial statement purposes, but will be included in future periods for tax purposes. 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
The Company accounts for marketable securities in accordance with the provisions of SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities".
Short-term investments have an original maturity of more than three months and a remaining maturity of less than 1 year. These investments consist of marketable debt securities which are stated at amortized cost as the Company has classified these securities as held-to- maturity.
j. Revenue Recognition
Base rental revenue is recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 2. INCOME TAXES 2002 2001 2000 Current taxes:
Federal $ 70,952 $89,950 $122,221 State 4,060 27,110 35,449 -------- ------- -------- Total $75,012 $117,060 $157,670 -------- ------- --------
Deferred taxes:
Federal 8,660 11,385 11,385 State 1,526 2,010 2,010 -------- ------- -------- Total 10,186 13,395 13,395 -------- ------- -------- Provision for income taxes $85,198 $130,455 $171,065 ======== ======= ========
The deferred tax assets and liabilities recorded on the balance sheet as of September 30, are as follows:
2002 2001 2000
Deferred tax liabilities:
Federal $401,657 $392,994 $381,610 State 70,881 69,358 67,348 -------- ------- -------- Total $472,538 $462,352 $448,958 ======== ======= ========
The sources of deferred income taxes for the years ended September 30, are as follows:
2002 2001 2000
Unbilled Rents Receivable $1,181,345 $1,155,880 $1,122,394
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:
2002 2001 2000
Federal statutory income tax rate 34% 34% 34% State tax provisions, net of federal benefits 6 6 6 Other (6) 4 4 				---		 ---			---
Effective income tax expense rate 34% 44% 44% 				===		 ===			==
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
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 Comp USA 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.
2002 2001 2000
Buildings and building improvements:
Cost $ 6,961,244 $6,961,244 $6,961,244
Accumulated 		 depreciation 2,326,441 2,126,482 1,926,523 --------- --------- ---------
Net buildings and building improvements $ 4,634,803 $4,834,762 $5,034,721 ========= ========= ========= The minimum future rentals on noncancellable operating leases for the years ending September 30, are as follows:
2003 $2,116,467 2008 $2,331,017 2012 $1,373,022 2004 2,116,467 2009 2,331,017 --------- 2005 2,225,142 2010 1,497,842 2006 2,225,142 2011 1,497,842 2007 2,322,194 Total $21,036,152 											===========
Net rental income consists of the following: (Restated) 2002 2001 2000
Rental income $2,053,713 $2,053,703 $2,053,703 Depreciation expense (199,959) (199,959) (199,959) Other expenses (58,613) (59,045) (62,921) 					 ---------- --------- --------- Rental income, net $ 1,795,141 $1,794,699 $1,790,823 					 ========== ========= =========
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
In 2002, 2001, and 2000, 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 who recently filed for bankruptcy protection and announced that it will restate prior results) has guaranteed the incremental monthly rental payments over the remaining life of the lease. (See Note 7).
The base annual rents under the amended lease were increased as follows:
2nd through 5th years $1,208,217 6th through 10th years 1,295,716 11th through 15th years 1,391,967 16th through 20th years 1,497,842
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.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
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.
Tandy Corporation sold Computer City, Inc. to CompUSA, Inc. on September 1, 1998, the lease was assigned to CompUSA, Inc. and continues to be guaranteed by Tandy Corporation. On May 18, 2000 Tandy Corporation changed its name to Radioshack Corporation.
On January 23, 2000, CompUSA, Inc. entered into a merger agreement with Grupo Sanborns, S.A. de C.V. and TPC Aquisition Corp., a subsidiary of Grupo Sanborns, S.A. de C.V. The financial information for Grupo Sanborns, S.A. de C.V. is unavailable. The lease continues to be guaranteed by Tandy Corporation.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued)
The following is a condensed summary of financial information on the above publicly held companies: Radioshack The Sports Corporation Authority K-Mart 12/31/01 2/02/02 1/30/02 (In Millions) (In Thousands) (In Millions) Current assets $ 1,714 $411,669 $ 7,884 ------ -------- ------- Total assets 2,245 601,157 14,298 ------ -------- -------
Current liabilities 826 222,931 624 ------ -------- -------
Total liabilities 1,467 446,034 9,950 ------ -------- -------
Total stockholders' equity 778 155,123 4,348 ------ -------- -------
Net sales 4,776 1,418,998 36,151 ------ -------- -------
Cost of sales 2,479 1,028,753 29,936 ------ -------- -------
Gross profit 2,297 390,245 6,215 ------ -------- -------
Income (loss) before income taxes (continuing) 292 12,305 (2,816) ------ -------- -------
Income tax expense (benefit) 125 - (115) ------ -------- -------
Net income (loss) $ 167 $ 12,350 $ (2,418) ------ -------- -------
NOTE 4. RESEARCH AND DEVELOPMENT
Research and development expenses in the amount of $214,031 in 2002, $183,089 in 2001, and $192,085 in 2000, were charged to operations and included in costs and expenses.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 5. RENT EXPENSE
The Company leases approximately 1,000 square feet of office and laboratory space on an annual basis. Lease payments are $950 per month. Rent expense was $11,400 in 2002, $11,400 in 2001 and $11,400 in 2000.
NOTE 6. 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 2002 at a medical center. Research and development costs in the amounts of $214,031, $183,089 and $192,085 have been expended in connection with the surgical staple during 2002, 2001 and 2000, respectively.
NOTE 7. LONG-TERM DEBT
Long-term debt consists of two loans, one in the amount of $6,000,000 payable in monthly installments of $55,328 including interest at 8.77% until 2011. The second loan in the amount of $1,500,000 is payable in monthly installments of $13,767 including interest at 8.7% until 2011.
Costs incurred in connection with this mortgage amounted to $102,520 and are charged to expense over the life of the mortgage. This amount is included in the balance of deferred charges as detailed in Note 8. The expense for the next five (5) years is presented below:
2003 $5,126 2004 5,126 2005 5,126 2006 5,126 2007 5,126
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 7. LONG-TERM DEBT (Continued)
The combined balance outstanding for each debt issued at the end of 2002, 2001, and 2000 is as follows: 2002 2001 2000 First Mortgage on 62,000 sq. ft. Building $4,925,542 $5,305,151 $5,653,046
Less Current Portion 414,221 379,611 347,897 ------- -------- ---------
Long-Term Portion $4,511,321 $4,925,540 $5,305,149 ========= ========= =========
The mortgage is secured by the land, building and operating lease agreement with The Sports Authority, Inc. (See Note 3).
The principle payments of long-term debt for the term of the mortgage is as follows:
2003 $414,221 2008 $640,727 2004 451,978 2009 699,136 2005 493,181 2010 762,870 2006 538,140 2011 338,092 2007 587,197
NOTE 8. 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 366,539 49,551 140,959 176,029 					--------- -------	-------	 -------- Balance 9/30/02 $345,621 $ 52,969 $138,625 $154,027 					========= =======	=======	 ========
Original Cost $712,160 $102,520 $279,584 $330,056 Accumulated Amortization 325,430 44,425 126,979 154,026 					--------- -------	-------	 --------
Balance 9/30/01 $386,730 $58,095 $152,605 $176,030 					========= =======	=======	 ========
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 9. 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 10. OTHER EMPLOYEE BENEFITS
The Financial Accounting Standards Board issued SFAS No. 106 " Employers Accounting for Post Retirement Benefits", and SFAS No. 112 "Employers Accounting for Post Employment Benefits", which changed employers' accounting for these benefits. Since the Company has no post-retirement benefit plans, and does not offer post employment benefits, SFAS No. 106 and SFAS No. 112 are not applicable. 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 14).
NOTE 11. CONCENTRATION OF CREDIT RISK
Substantially all of the Company's income is rental income received from two tenants. These tenants are subject to long-term lease agreements. (See Note 3)
NOTE 12. FINANCIAL REPORTING BY BUSINESS SEGMENTS
The Company has adopted Financial Accounting Standards Board Statement (SFAS) No. 131 "Disclosures About Segments of an Enterprise and Related Information". The Company's reportable segments are strategic business units that involve different products and services. They are managed by a single management team.
The Company 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, 2002, 2001 AND 2000
NOTE 12. FINANCIAL REPORTING BY BUSINESS SEGMENTS(Continued)
Rental-Engaged in the leasing of real estate the two retail buildings owned by the Company at 50 A&S Drive, Paramus, New Jersey. Approximately 98% of the Company revenues are earned by this segment, all of which is received from two tenants (see Note 11).
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 of its 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 (Restated) 2002 2001 2000 Business Segments: Surgical Staples $ - $ - $ - Electro-Optical - - - Real Estate Rental 2,053,703 2,053,703 2,053,703 Other 17,805 51,317 56,157 --------- --------- --------- Total $ 2,071,508 $2,105,020 $2,109,860 ========= ========= =========
Business Segments: Income (Loss) (Restated) 2002 2001 2000 Surgical Staples $ (214,031) $ (183,089) $ (192,085) Electro-Optical - - - Real Estate Rental 1,795,131 1,794,699 1,790,823 --------- --------- ---------
Total 1,581,100 1,611,610 $1,598,738 --------- --------- --------- General and Administrative Expenses (895,350) (879,812) (750,577) Interest Expense (451,958) (483,830) (513,106) Other Income 17,805 51,317 56,157 Income Tax Expense (85,198) (130,455) (171,065) --------- --------- --------- Total (1,414,701) (1,442,780) (1,378,591) --------- --------- ---------
Net Income $ 166,399 $ 168,830 $ 220,147 ========= ========= =========
Business Segments: Identifiable Assets
(Restated) 2002 2001 2000 Surgical Staples $ 55,179 $ 56,906 $ 59,804 Electro-Optical 1,349 4,047 6,745 Real Estate Rental 6,614,542 6,830,145 7,037,727 Other 966,752 1,040,727 1,039,347 --------- --------- ---------
TOTAL ASSETS $ 7,637,822 $7,931,825 $8,143,623 ========= ========= =========
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 12. FINANCIAL REPORTING BY BUSINESS SEGMENTS(Continued)
Business Segments: Capital Expenditures 2002 2001 2000 Surgical Staples $ - $ - $ - Electro-Opitical - - - Real Estate Rental - - - Other 49,083 39,320 - --------- --------- --------- $ 49,083 $ 39,320 $ - ========= ========= =========
Property and Equipment Business Segments Depreciation
2002 2001 2000 Surgical Staples $ - $ - $ - Electro-Optical - - - Real Estate Rental 199,959 199,959 199,959 Other 16,929 9,931 11,156 --------- --------- --------- $216,888 $209,890 $ 211,115 ========= ========= =========
Intangible Assets
Amortization
2002 2001 2000 Surgical Staples $ 11,728 $ 10,831 $ 9,937 Electro-Optical 2,698 2,698 3,726 Real Estate Rental 41,109 41,109 41,109 Other - - - --------- --------- --------- $ 55,535 $ 54,638 $ 54,772 ========= ========= =========
NOTE 13. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at September 30, 2002, 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, 2002, 2001 AND 2000
NOTE 14. PENSION PLAN
The Company established a defined benefit plan covering all eligible employees, who have completed one year of service. Benefits are based on years of service and the average compensation during the best three years of participation.
The Company's funding policy is to make annual contributions to the plan in amounts such that all employees' benefits will be fully provided for by the time they retire. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.
Although it has not expressed any intention to do so, the Company has the right under the plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions set forth in ERISA.
The Company has adopted SFAS No. 132 "Employers' Disclosures about Pensions and Other Post Retirement Benefits". The provisions of SFAS No. 132 revise employers' disclosures about pension and other post retirement benefit plans. It does not change the measurement or recognition of this plan. It standardizes the disclosure requirements for pensions and other post retirement benefits to the extent practicable.
The Company provides defined benefit pension plan to the employees. The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plan.
2002 2001 2000 Changes in benefit obligation: Benefit obligation at October 1 $1,782,702 $1,126,448 $ 719,594 Service cost 370,905 328,535 328,003 Interest cost 162,099 185,032 78,851 --------- --------- --------- Benefit obligation at September 30 $2,315,706 $1,640,015 $1,126,448 ========= ========= =========
2002 2001 2000 Change in plan assets: Fair value of plan assets at October 1 $1,407,957 $1,014,185 $ 640,223 Company contributions 398,584 341,103 330,122 Actual return on plan assets 4,103 52,669 43,840 --------- --------- --------- Fair value of plan assets at September 30, $1,810,644 $1,407,957 $1,014,185 ========= ========= ========= Funded status of Plan $ (505,062) $(232,058) $(112,263) Unrecognized Net (Gain) Loss 396,204 159,063 80,346 --------- --------- --------- (Accrued) or Prepaid Pension $ (108,858) $ (72,995)$ (31,917) ========= ========= =========
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 14. PENSION PLAN (Continued)
The net periodic pension cost for the year ended September 30, includes the following components: 2002 2001 2000 1. Service cost - benefits earned during the period $ 370,905 $328,535 $328,003 --------- --------- -------- 2. Interest cost on projected benefit obligation 162,099 114,801 78,851 --------- --------- -------- 3. Actual return on plan assets (4,103) (52,629) (43,840) --------- --------- -------- 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 (94,454) (18,364) (975) d. Asset gain or (loss) deferred - - - e. Total (94,454) 18,364) $ (975) --------- --------- -------- 5. Net periodic pension cost (credit)= (Item 1 + item 2 + item 3 + item 4(e)$434,447 $372,343 $362,039 ========= ========= ======== The net periodic pension cost for 2002, 2001 and 2000 was determined based on a 7% discount rate and a long - term rate of return of 7% on plan assets.
NOTE 15. MARKETABLE SECURITIES
At September 30, 2002, 2001 and 2000, all short-term marketable debt securities were classified as held-to-maturity and carried at amortized cost. Investments consisted of the following:
2002 2001 2000 U.S. Government Securities $ - $ - $738,517 ------ ----- ------- $ - $ - $738,517 ====== ===== ======= At September 30, 2000 the fair value of investments approximated its amortized cost and therefore there were no significant unrealized gains or losses.
All investments at September 30 mature in one year or less.
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 16. PRIOR PERIOD ADJUSTMENT
The financial statements for the year ended September 30, 2000 were restated to correct an understatement of rental income due to an error in the computation of annual rental income. The effect of prior period accounting errors relating to rental income resulted in the following changes as of September 30, 2000;
As previously As Reported Restated
Balance Sheet: Rents Receivable $ - $1,122,394 Deferred Taxes Payable - 448,958 Deficit (8,550,449) (7,877,013)
Statement of Operations: Rental Income 2,020,217 2,053,703 Income Before Income Taxes 357,726 391,212 Income Taxes 157,670 171,065 Net Income 200,056 209,909 Earnings Per Share $ .68 $ .75
NOTE 17. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
For the Fiscal Year Ended September 30, 2002
First Second Third Fourth Quarter Quarter Quarter Quarter Total Revenues $501,718 $498,281 $499,095 $572,414
Gross Profit N/A N/A N/A N/A
Income Before Extraordinary Items 63,009 16,539 42,892 43,959
Weighted Average Number of Shares 290,317 288,075 286,738 287,518
Earnings Per Share .22 .06 .15 .15
Net Income $63,009 $16,539 $42,892 $43,959
HOLOBEAM, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
NOTE 17. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)(Continued)
For the Fiscal Year Ended September 30, 2001 Restated Restated Restated First Second Third Fourth Quarter Quarter Quarter Quarter
Total Revenues 525,023 513,832 513,820 552,345
Gross Profit N/A N/A N/A N/A
Income Before Extraordinary Items 75,662 53,810 65,717 (26,359)
Weighted Average Number of Shares 291,567 291,213 290,547 290,960
Earnings Per Share .26 .18 .23 (.09)
Net Income 75,662 53,810 65,717 (26,359)
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
HOLOBEAM, INC. SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
2002 2001 2000
Maintenance and Repairs $ - $ - $ - ======= ========== ======= Depreciation and Amortization of Intangible Assets $55,535 $ 54,638 $ 54,772 ======= ========== =======
Taxes, Other than Payroll and Income Tax Franchise $ 10,060 $ 10,620 $ 10,572 Real Estate - - - Other 213 58 35 ------- ---------- ------- $10,273 $ 10,678 $10,607 ======= ========== ======= Royalties $ - $ - $ - ======= ========== ======= Advertising $ - $ 189 $ - ======= ========== =======
The accompanying notes are an integral part of the financial statements.
The aggregate cost for Federal income tax purposes at September 30, 2002 is $7,414,016.
The accompanying notes are an integral part of these financial statements.
Activity for the three years ended September 30, 2002 is as follows: 2002 2001 2000 Balance at Beginning of Year $5,305,152 $5,653,046 $5,971,876
Additions During Year: Commercial Loans 0 0 0 New Mortgages 0 0 0 --------- --------- ---------
5,305,152 5,653,046 5,971,876
Deductions During Year: Principal Payments 379,610 347,894 318,830 Mortgage Payments 0 0 0 --------- --------- --------- Balance at End of Year $4,925,542 $5,305,152 $5,653,046 ========= ========= =========
(1) The cost for Federal income tax
Purposes at 9/30/02 $4,925,542
The accompanying notes are an integral part of these financial statements.