FORM 10 K/A NO. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For this fiscal year ended September 30, 2006, Commission file ------------------ number 03385 ----- HOLOBEAM, INC. ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 22-1840647 ----------------------------------------------------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 217 First Street, P.O. Box 287, Ho-Ho-Kus, NJ 07423-0287 ---------------------------------------------------------------- Registrants telephone number, including area code 201-445-2420 ------------- Securities registered pursuant to Section 12(b) of the Act: Name of exchange on which Title of each class registered ------------------- ----------- Common Stock, Par Value $0.10 per share Over the Counter Securities registered pursuant to Section 12(g) of the Act: --------------------------------------------------------------- (Title of Class) --------------------------------------------------------------- (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ----- State the aggregate market value of the voting stock held by non-affiliates of the Registrant. The aggregated market value shall be computed by references to the price at which the stock sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to date of filing. $11,608,158. at December 5, 2006 computed on the average of the bid and asked prices for Holobeam, Inc. Common shares at December 5, 2006. 1 Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. 269,784 Shares at December 5, 2006. DOCUMENTS INCORPORATED BY REFERENCE. ------------------------------------- 1. Holobeam, Inc. Defined Benefit Plan. 2. Financial Statements for the years ended September 30, 1999 and 2000. 3. Financial Statements for the years ended September 30, 2000 and 2001. 4. Financial Statements for the years ended September 30, 2001 and 2002. 5. Financial Statements for the years ended September 30, 2002 and 2003. 6. Annual Reports on Form 10K for the years ended September 30, 1998, 1999, 2000, 2001, 2002, 2003, 2004 and 2005. 7. Quarterly Reports on Form 10Q for the Quarter Ended June 30, 2003. 8. Financial Statements for the Years Ended September 30, 2003 and 2004. 9. Financial Statements for the Years Ended September 30, 2004 and 2005. 2 Holobeam, Inc. Form 10-K/A NO. 1 Year Ended September 30, 2006 Table of Contents Part I Page ------ ---- Item 1. Business 4 Item 2. Properties 8 Item 3. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Part II ------- Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 12 Item 6. Selected Financial Data 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 19 Item 8. Financial Statements and Supplementary Data 19 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 19 Item 9A. Controls and Procedures 19 Item 9B. Other Information 20 Part III -------- Item 10. Directors and Executive Officers of the Registrant 21 Item 11. Executive Compensation 22 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 25 Item 13. Certain Relationships and Related Transactions 25 Item 14. Principal Accountant Fees and Services 26 Part IV ------- Item 15. Exhibits, Financial Statements Schedules 27 Signatures ---------- Index to Financial Statements ----------------------------- Report of Independent Registered Public Accounting Firm ------------------------------------------------------- 3 EXPLANATORY NOTE This amendment No. 1 on Form 10-K/A to the Registrant's Annual Report on Form 10-K for the year ended September 30, 2006, initially filed with the Securities and Exchange Commission on December 28, 2006, is being filed to include an audit report that expresses an opinion on the restated 2005 and 2004 financial statements. This Amendment No. 1 amends and restates only the audit report for 2005 and 2004 of the Original Filing. Other than these items, no other information of the Original Filing is amended hereby. The foregoing items have been amended to reflect the effects of the updated audit report, unless otherwise indicated, have not been updated to reflect other events occurring after the filing of the Original Filing or to modify or update those disclosures affected by subsequent events. PART I ------- Item 1. Business ----------------- (a) In General. The Registrant was organized in October, --- ---------- 1967, and commenced doing business on January 1, 1968. The Registrant is engaged in the rental and development of real estate and was formerly engaged 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 10 to the Financial Statements for the year ended September 30, 2006, Note 11 to the Financial Statements for the year ended 2005, and Note 12 to the Financial Statements for the year ended September 30, 2004. (c) Description of Business. --- ----------------------- (I) Principal Activities and (ii) Status of products and Real Estate Properties. Medical Staples --------------- The Registrant has discontinued its efforts in the area of medical staples for use in internal surgery. Several United States Patents and foreign patents were received covering a novel staple. The staple has been produced and animal testing took place during 2003, 2002 and 2001. Final test results indicated insufficient commercial value for the staple. As a result, the Registrant discontinued funding for the project during 2003. 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 CompUSA, 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 were acquired through commercial businesses engaged in the distribution of such supplies. (iv) Patents. The Registrant has filed several patent applications and has several 4 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 During 2003 the Registrant's research activities in connection with the surgical staples was terminated. As a result, the unamortized portion of the Patents and Patent Applications costs associated with the surgical staple project were written off and charged to operations. Such write-off amounted to $60,052. 5 (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. During 2003 the Registrant discontinued its activities with respect to medical staples and their application. Results of the final phase of tests did not indicate sufficient commercial feasibility for the technology developed by the Registrant and funding of engineering and research was terminated. 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 31,000 sq. ft. building was constructed on the Registrant's site located adjacent to the building leased to The Sports Authority, Inc. for 6 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 2003, the Registrant expended $172,746. in connection with the furtherance of this activity. Such costs were expensed to operations and consist principally of materials, supplies and costs associated with design and development. During 2003 the Registrant terminated funding for the surgical staples project and no further funds were expended. (Reference is made to Form 10Q, Management's Discussion and Analysis of Financial Conditions and Results of Operations for the Quarter Ended June 30, 2003.) (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 were 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 7 technology. (xiii) Employees. At September 30, 2006 the Registrant employed three persons as compared to three persons at September 30, 2005 and three persons at September 30, 2004. (d) Financial Information About Foreign and Domestic --- ------------------------------------------------ Operations and Export Sales. --------------------------- The Registrant is not engaged in foreign operations and does not export to foreign countries. Item 2. Properties ------------------- The Registrant's headquarters and principal facilities are located at 217 First Street, Ho-Ho-Kus, New Jersey 07423-0287. The Registrant leases approximately 1,000 square feet of office and laboratory space. The Registrant owns two retail buildings, one of 62,000 square feet and another of 31,000 square feet located at 50 A&S Drive, Paramus, New Jersey. One building was placed in service in October 1994, the other in 1992. Pertinent information concerning the Registrant's properties is as follows: 8 Building Building Paramus, NJ Paramus, NJ Year Acquired 1971 1994 Gross Square Footage 62,000 31,000 Percent Leased at 09/30/06 100% 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 $3,027,971 $ -0- (1) Includes $3,567,267. 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. 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 31,000 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 parking lot re-design and significant additional changes in order to comply with governmental requirements. 9 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 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: 2006 100% 2005 100% 2004 100% 2003 100% 2002 100% 10 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, 2002, 2003, 2004, 2005 or 2006. 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. Legal Proceedings. -------------------------- There are no legal proceedings of a material nature to which the Registrant is a party other than ordinary, routine litigation incidental to the business of the Registrant. Item 4. Submission of Matters to a Vote of Security Holders. ------------------------------------------------------------ No matters were submitted for vote of security holders during the fourth quarter of 2006. Reference is made to Annual Meeting held on May 9, 2006. 11 PART II ------------- Item 5. Market for the Registrant's Common Stock and Related ------------------------------------------------------------- Stockholder ----------- Matters and Issuer Purchases of Securities. ------------------------------------------ (a) The Registrant's common stock is traded on the over-the-counter market. The bid price listed (Source: S&P Comstock) on December 5, 2006 was $41.50. per share. On July 18, 1983, the Registrant's shares were deleted from the NASDAQ system when no market maker for the Registrant's common stock any longer maintained registration as such with the NASDAQ System. (b) The approximate number of holders of Common Stock securities of the Registrant as of December 5, 2006 was 336. (c) No dividends have been paid or declared on the Common Stock of the Registrant during the 2006, 2005 or 2004 fiscal years. In making decisions regarding the possible payment of dividends, the Board of Directors considers the Requirements of the Registrant in such ongoing activities as real estate development and acquisition 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: Over the Counter Bulletin Board [OTCBB]). 2006 2005 ----- ----- high low High low ---- ---- ----- --- Quarter Ended Dec. 31 39.00 39.00 30.00 26.85 Quarter Ended Mar. 31 40.05 39.00 36.25 30.00 Quarter Ended June 30 40.00 39.25 41.00 35.00 Quarter Ended Sept. 30 39.50 39.50 42.00 36.00 12 Such quotation represents prices offered by purchases without retail mark-up, mark-down or commission and may not represent actual sales transactions. Item 6. Selected Financial Data. -------------------------------- Financial information for the five-year period commencing October 1, 2001 and ending September 30, 2006 is presented below. HOLOBEAM, INC. SUMMARY OF SELECTED FINANCIAL DATA FOR THE YEARS ENDED SEPTEMBER 30, HOLOBEAM, INC. SUMMARY OF SELECTED FINANCIAL DATA FOR THE YEARS ENDED SEPTEMBER 30, RESTATED RESTATED -------- -------- 2006 2005 2004 2003 2002 ---- ---- ---- ---- ---- Gross Income $2,144,675 $2,079,097 $2,058,348 $2,086,635 $2,071,508 Net Income (Loss) 367,869 480,785 184,936 204,370 166,399 Weighted Average Number of Common Shares Outstanding 269,381 270,006 271,873 275,642 287,518 Earnings Per Share (Loss) 1.37 1.78 0.68 0.74 0.58 Total Assets 6,294,834 6,546,783 7,047,026 7,369,492 7,637,822 Long-Term Debt 2,725,945 3,632,129 4,294,560 4,901,755 4,511,321 Shareholders' Equity 2,776,237 2,231,598 1,917,680 1,796,679 1,952,727 Gross Rental Income 2,053,703 2,053,703 2,053,703 2,053,703 2,053,703 Net Rental Income 1,786,774 1,810,557 1,793,610 1,798,151 1,795,141 Item 7. Management's Discussion and Analysis of Financial ---------------------------------------------------------- Condition and ------------- Overview. -------- Critical Accounting Policies and Estimates ------------------------------------------ The preparation of the Registrant's financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying footnotes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates and such differences may be material to the financial statements. The process of determining significant estimates is fact specific and takes into account such factors 13 as historical experience and current and expected economic conditions. Historically, actual results have not differed significantly from those determined using estimates. Liquidity. --------- Cash flows generated from operating activities during 2006 were $353,630. and were produced primarily from the Registrant's real estate rental properties. The Registrant anticipates that cash flows associated with the Registrant's real estate rental activities will be sufficient to fund and sustain operations during the terms of the operating leases on the properties owned by the Registrant in Paramus, New Jersey. (Reference is made to Note 3 of the accompanying Financial Statements for the years ended September 30, 2006 and 2005. The minimum future rental income associated with the non- cancelable operating leases approximates $10,700,000. and is expected to generate sufficient cash flows to support the Registrant's activities through 2012 when The Sports Authority, Inc.'s operating lease expires. During 2006 the Registrant's Working Capital increased to $285,905. which represents an increase of $139,684. when compared to the Registrant's Working Capital at September 30, 2005. Such increase results principally from increases in Trading Assets and Prepaid Pension costs. It is the opinion of the Registrant that cash flows associated with its real estate rental activities will be sufficient to maintain liquidity during the terms of the operating leases. Capital Resources. ----------------- During 2006 the Registrant contributed $275,114. to its defined benefit pension plan. The contribution is charged to operations during each quarter of the Registrant's fiscal year in amounts sufficient to fully provide for all eligible employees' benefits by the time they retire. During 2005 an additional minimum liability has been recognized as unfunded accrued pension cost of $126,454., net of tax and is shown in 14 the statement of changes in stockholders' equity under other comprehensive loss for a total accumulated other comprehensive loss of $221,285. During 2006 there was no additional minimum liability requirement and thus other comprehensive income adjustment of $221,285. was reversed. The Registrant expects to continue funding the plan in 2007 and expects no materially adverse effect upon its financial condition. (Reference is made to Notes 13 and 14 of the accompanying financial statements for the years ended September 30, 2005 and Note 12 and 13 for the year ended September 30, 2006.) At the present time the Registrant's rental properties, located at 50 A&S Drive, Paramus, New Jersey do not require renovation or refurbishment and none are planned for 2007. The tenants are responsible for real estate taxes, maintenance expenses and insurance costs. The Registrant's projected costs and expenses associated with these properties is limited to depreciation and costs that are routine, normal and incidental to its real estate rental activities. The Registrant has investigated potential sites in the Bergen County, New Jersey area where it conducts its present real estate rental activities. It is the primary intention of the Registrant to locate and develop suitable properties in the area of Bergen County, New Jersey, although suitable properties in other locations would be considered. During meetings with local real estate brokers planning for the future leasing situation, the lack of direct access to New Jersey Route 17 could be a serious detriment to the Registrant's ability to attract suitable replacement tenants when the lease terms expire. A Shell Oil Co. gasoline station presently blocks such direct access to the highway and there was some possibility that the owner might sell the property. Discussions have terminated because the terms offered were unacceptable to Registrant. Any purchase of new properties is not expected to have a materially adverse effect upon the Registrant's capital resources or financial 15 condition. (3) Results of Operations. --- --------------------- (a) Fiscal 2006 compared to Fiscal 2005. During the year ended September 30, 2006, the Registrant recorded after-tax income in the amount of $367,869., which represents a decrease of $112,916. when compared to the income recorded in 2005. Earnings per weighted average number of common shares outstanding were $1.37 and $1.78, respectively. Revenues for the year were $2,144,675., up $65,578. from 2005 due to realized gains and interest on investments. (Reference is made to Note 1.j to financial statements.) The costs and expenses for the year ended September 30, 2006 were $1,512,446., up $145,411, as compared to $1,367,035. for the year ended September 30, 2005. The increase in expenses was primarily due to severance paid to the Estate of the former Treasurer and increase in executive compensation. (b) Fiscal 2005 compared to Fiscal 2004. During the year ended September 30, 2005, the Registrant recorded after-tax income in the amount of $480,785., which represents an increase of $295,849. when compared to the income recorded in 2004. Earnings per weighted average number of common shares outstanding were $1.78 and $0.68, respectively. Revenues for the year were $2,079,097., up $20,749. from 2004. The increase results principally from unrealized gains from trading assets stated at fair value. (Reference is made to Note 1k to the Registrant's financial statements.) Total costs and expenses for the fiscal year ended September 30, 2005 were $1,367,035. as compared to $1,708,489. for the year ended September 30, 2004. The decrease costs resulted primarily from a decrease in pension service costs. (Reference is made to Note 13 of the Registrant's financial statements.) The Registrant's rental properties had occupancy rates of 100% during 2006 and 2005 and such rates are expected to continue through 16 September 30, 2009 when the CompUSA lease expires. Rental expenses for which the Registrant is responsible are expected to increase at or below the inflation rate for the geographical area in which the Registrant conducts its real estate rental activities. These inflationary increases are not expected to adversely affect the Registrant's results of operations or financial condition. Off-Balance Sheet Arrangements ------------------------------ As of September 30, 2006 the Registrant had no off-balance sheet arrangements. Contractual Commitments ----------------------- The following table represents the Registrant's contractual commitments associated with long term debt and other obligations at September 30, 2006. 17 Holobeam Inc. Contractual Obligations September 30, 2006 Oct. Oct. Oct. Oct. Oct. 2006 2007 2008 2009 2010 to to to to to Contractual Sept. Sept. Sept. Sept. Sept. Obligations Total 2007 2008 2009 2010 2011 --------- ------- ------- ------- ------- --------- Mortgage Loans on Real Estate $3,027,971 $587,202 $640,727 $699,136 $762,870 $ 338,036 Capital Lease Obligations -0- -0- -0- -0- -0- -0- Operating Lease Obligations -0- -0- -0- -0- -0- -0- Purchase Obligations -0- -0- -0- -0- -0- -0- Other -0- -0- -0- -0- -0- -0- --------- ------- ------- ------- ------- --------- $3,027,971 $587,202 $640,727 $699,136 $762,870 $ 338,036 ========= ======= ======= ======= ======= ========= 18 Item 7A. Quantitative and Qualitative Disclosures About Market --------------------------------------------------------------- Risk. ---- The Registrant has operating leases with tenants for the two properties it owns. The leases expire in 2009 and 2012. The primary market risk is the possibility that one or both tenants will default on the lease prior to the end of the lease term. If tenants had defaulted on the leases at the beginning of 2006, the Registrant would have been impacted by approximately $2,000,000. 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 Simontacchi and Company, LLP for 2006 and R.A. Fredericks and Company, LLP for 2005.) The index to our Financial Statements is found on page 28. Item 9. Changes and Disagreements with Accountants on ------------------------------------------------------- Accounting and Financial Disclosure. ----------------------------------- None. Item 9A. Controls and Procedures. --------------------------------- Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective as of September 30, 2006. Management, including our Chief Executive Officer and Chief Financial Officer, is in the process of evaluating the effectiveness of its internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. 19 Based on preliminary results to date, management has not identified any material weaknesses in internal control over financial reporting as of October 1, 2006. No change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the fourth quarter of our fiscal year ended September 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Item 9B. Other Information --------------------------- On October 20, 2004, the Registrant filed an amendment to the Restated Certificate of Incorporation for the purpose of reducing the number of Authorized Common Shares to 272,000 from 2,000,000. The amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware and was approved by the affirmative vote of approximately 81% of the Registrant's shareholders. 20 PART III Item 10. Directors and Executive Officers of the Registrant. ------------------------------------------------------------ (a) The following Table identifies each Director of the Registrant and indicates his position with the Registrant, the duration of his term as Director and the date when he was first elected. Name and Age Title Term Date First Elected ------------------------------------------------------------------------- Melvin S. Cook Chairman of the Board 2008 Annual 1968 Age 75 President of Registrant Meeting Ralph A. Fredericks Treasurer of Registrant 2009 Annual 2006 Age 57 Meeting Beverly Cook Office Manager and 2007 Annual 1995 Age 70 Secretary of Registrant Meeting Cynthia R. Cook Board Member 2009 Annual 2006 Age 41 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 75 Ralph A. Fredericks Treasurer of Registrant Annual 2006 Age 57 Beverly Cook Secretary of Registrant Annual 1997 Age 70 (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. 21 Other Name Business Experience/Occupation Directorship ------------------------------------------------------------------------ Melvin S. Cook Chairman of the Board of Directors and None President of the Registrant since its formation. Ralph A. Fredericks Treasurer of the Registrant from None February 2006. Mr. Fredericks is a CPA and the managing partner of a firm that bears his name. Beverly Cook Office Manager and Secretary of None Registrant from June 1,1981 until present. Married to Melvin S. Cook, President and Chairman of the Board of Directors. Cynthia R. Cook Board Member. Ms. Cook is the Associate None Director of Project Air Force of the Rand Corporation. (f) Not applicable. Item 11. Management Compensation. --------------------------------- (a) The following Table shows all direct remunerations paid by the Registrant during the fiscal year ended September 30, 2006 to each Director or Officer of the Registrant whose aggregate direct remuneration exceeds $100,000., and the direct remuneration paid all Directors and Officers of the Registrant as a group for such fiscal year. 22 HOLOBEAM, INC. Form 10K/A NO. 1 Summary Compensation Table September 30, 2006 Long Term Compensation ----------------------------------------------- Name and Annual Compensation Awards Payouts All Other ---------------------------- ---------------------------- ------------ Principal Position Year Salary Bonus Other Restricted Stock SUO/SARS LTIP Payouts Compensation ------------------ ---- ------ ----- ----- ---------------- -------- ------------ ------------ Melvin S. Cook 2006 $381,250 -0- -0- -0- -0- -0- -0- President and CEO 2005 325,000 -0- -0- -0- -0- -0- -0- and Director 2004 325,000 -0- -0- -0- -0- -0- -0- William M. Hackett 2006 $108,750 -0- -0- -0- -0- -0- -0- Treasurer and 2005 33,333 -0- -0- -0- -0- -0- -0- Director 2004 33,333 -0- -0- -0- -0- -0- -0- Ralph A. Fredericks 2006 $ 26,250 -0- -0- -0- -0- -0- -0- Treasurer and Director Beverly Cook 2006 $237,500 -0- -0- -0- -0- -0- -0- Secretary and 2005 150,000 -0- -0- -0- -0- -0- -0- Director 2004 150,000 -0- -0- -0- -0- -0- -0- All Officers and 2006 $753,750 -0- -0- -0- -0- -0- -0- Directors as a 2005 508,333 -0- -0- -0- -0- -0- -0- Group 2004 508,333 -0- -0- -0- -0- -0- -0- 23 Item 11 (cont'd.) ----------------- The Summary Compensation Table represents all aggregate forms of remuneration to the executive officers of the Registrant. There were no other payments or compensation awarded to the officers of the Registrant. (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 2006, 2005 and 2004. (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. as well as all officers and directors as a group since October 1, 2004. All Directors and Officers as a Group ------------------------------------- Options Granted 0 Options Exercised 0 Unexercised Options Held at 9/30/06 0 (d) The following Table sets forth information about the Company's defined benefit pension plan benefits: Pension Plan Table Years of Service ---------------- Remuneration 39 ------------- -------- $160,000. $160,000. 205,000. 170,000. 220,000. 220,000. 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 $220,000. and $179,000., respectively, as of September 30, 2006. Melvin Cook and Beverly Cook will be credited at normal retirement date with 39 years service each under the Pension Plan as of September 30, 2006. Pensions may be adjusted for a surviving spouse's pension or other options under the Pension Plan. Pensions are not subject to any other 24 deduction for Social Security or any other amounts. (Reference is made to Note 12 of the accompanying Financial Statements for the year ended September 30, 2006.) Item 12. Security Ownership of Certain Beneficial Owners and ------------------------------------------------------------- Management and Related Stockholder Matters. ------------------------------------------ (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 15, 2006 is as follows: Title of Class Name & Address Amount Owned % of Class ----------------------------------------------------------------- Common Stock, Par Melvin S. Cook 95,000 35.4% Value $0.10 Per Share 217 First Street Ho-Ho-Kus, NJ 07423 Common Stock, Par Beverly Cook 64,500 24.0% Value $0.10 Per Share 217 First Street Ho-Ho-Kus, NJ 07423 Common Stock, Par The Cook 2003 Insurance 60,000 22.3% Cynthia Cook, Trustee Trust Value $0.10 Per Share 8 Saddle Ridge Road Ho-Ho-Kus, NJ 07423 (b) The stockholding of Officers and Directors as a group as of December 15, 2006 are as follows: Title of Class Amount Beneficially Owned % of Class --------------------------------------------------------------- Common Stock, Par Value 219,500 81.7% $0.10 Per Share (c) There are no contractual arrangements that might result in a change of control of Registrant. Item 13. Certain Relationships and Related Transactions -------------------------------------------------------- During May 2006, the Chairman of the Board and Secretary of the Board transferred 30,000 shares each of the Registrant's stock to a family trust established for estate planning purposes for the benefit of the Grantors' descendents. 25 Item 14. Principal Accountant Fees and Services. ------------------------------------------------ The Board of Directors and Officers of the Registrant appointed Simontacchi and Co., LLP, independent registered public accounting firm, to audit the Registrant's books, records and accounts for the Fiscal Year ended September 30, 2006. The information called for by this item is incorporated by reference from the Proxy Statement for the 2006 Annual Meeting. The Board of Directors requires that the Treasurer and the President approve all audit services by Simontacchi & Co., LLP and other permissible non-audit services provided by R. A. Fredericks & Company, LLP. The Board of Directors will not approve non-audit engagements that would violate rules of the U.S. Securities and Exchange Commission or impair the independence of R.A. Fredericks and Co., LLP. For the fiscal years ended September 30, 2006 and 2005, the following fees were paid for services provided to the Registrant: Simontacchi & Company, LLP R.A. Fredericks & Company, LLP 2006 2006 2005 Audit Fees $25,331 $ 3,000 $26,500 Tax Fees -- 9,500 2,500 All Other Fees -- -- -- ------- -------- -------- $25,331 $12,500 $29,000 ======= ======= ======= 26 PART IV Item 15. Exhibits, Financial Statement, Schedules -------------------------------------------------- The following documents are filed as part of the report: 1. The Financial Statements for the fiscal years ended September 20, 2006 and 2005 filed as a part of this report are listed on page 28. 2. Financial Statement Schedules: XI. Real Estate and Accumulated Depreciation XII. Mortgage Loans on Real Estate 3. Index to Exhibits A. Officers' Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 B. Certification of Chief Executive Officer pursuant to U.S.C., Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 B. Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 C. Amended and restated Certificate of Incorporation of Holobeam, Inc. D. Code of Ethics 27 HOLOBEAM, INC. Form 10K/A NO. 1 September 30, 2006 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 Beverly Cook ----------------------- Date October 9, 2007 -------------------------- 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: October 9, 2007 ----------------------------- By: Ralph A. Fredericks ------------------------- Ralph A. Fredericks Director and Treasurer Date: October 9, 2007 ------------------------- By: Beverly Cook ---------------------- Beverly Cook Director and Secretary Date: October 9, 2007 ------------------------- HOLOBEAM, INC. FINANCIAL STATEMENTS WITH INDEPENDENT ACCOUNTANTS' REPORT YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 R.A. FREDERICKS & COMPANY, LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS HOLOBEAM, INC. YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 CONTENTS PAGE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 29 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 29.A FINANCIAL STATEMENTS: BALANCE SHEETS 30-31 STATEMENTS OF OPERATIONS 32 STATEMENTS OF SHAREHOLDERS' EQUITY 33 STATEMENTS OF CASH FLOWS 34 NOTES TO FINANCIAL STATEMENTS 35-47 SCHEDULES: MORTGAGE LOANS ON REAL ESTATE 48 REAL ESTATE AND ACCUMULATED DEPRECIATION 49 -28- SIMONTACCHI & COMPANY, LLP 170 E. Main Street CERTIFIED PUBLIC ACCOUNTANTS Rockaway, New Jersey 07866 Tel: (973) 664-1140 Fax: (973) 664-1145 Report of Independent Registered Public Accounting Firm ------------------------------------------------------- To the Board of Directors and Shareholders' Holobeam, Inc. Ho Ho Kus, NJ We have audited the accompanying balance sheet of Holobeam, Inc. as of September 30, 2006 and the related statement of operations, shareholders' equity, and cash flows for the year ended September 30, 2006. 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 audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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, 2006 and the results of its operations and its cash flows for the year ended September 30, 2006, 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. SIMONTACCHI & COMPANY Rockaway, New Jersey December 20, 2006 -29- SIMONTACCHI & COMPANY, LLP 170 E. Main Street CERTIFIED PUBLIC ACCOUNTANTS Rockaway, New Jersey 07866 Tel: (973) 664-1140 Fax: (973) 664-1145 Report of Independent Registered Public Accounting Firm ------------------------------------------------------- To the Board of Directors and Shareholders' Holobeam, Inc. Ho Ho Kus, NJ We have audited the accompanying balance sheet of Holobeam, Inc. as of September 30, 2005 and 2004 and the related statement of operations, shareholders' equity, and 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. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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, 2005 and 2004 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. SIMONTACCHI & COMPANY, LLP Rockaway, New Jersey August 15, 2007 -29.A- HOLOBEAM, INC. BALANCE SHEETS SEPTEMBER 30, 2006 AND 2005 ASSETS 2006 2005 ---- ----- CURRENT ASSETS Cash (including cash equivalents of $15,539 in 2006 and $497,275 in 2005) $ 262,138 $ 519,847 Trading Assets 428,969 302,520 Prepaid Pension 351,529 - Prepaid Expenses 12,321 6,910 Prepaid Income Taxes 23,600 - --------- --------- TOTAL CURRENT ASSETS 1,078,557 829,277 --------- --------- 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 82,393 88,815 Furniture and Fixtures 33,468 33,468 --------- --------- TOTAL 7,529,877 7,536,299 Less: Accumulated Depreciation and Amortization 3,207,651 3,025,604 --------- --------- PROPERTY AND EQUIPMENT-NET 4,322,226 4,510,695 --------- --------- OTHER ASSETS Deferred Charges 181,111 222,294 Deferred Income Taxes - 100,139 Unbilled Rents Receivable 712,940 884,378 --------- --------- TOTAL OTHER ASSETS 894,051 1,206,811 --------- --------- TOTAL ASSETS $ 6,294,834 $ 6,456,783 ========== ========== The accompanying notes are an integral part of the financial statements. -30- HOLOBEAM, INC. BALANCE SHEETS SEPTEMBER 30, 2006 AND 2005 LIABILITIES AND SHAREHOLDERS' EQUITY 2006 2005 ---- ---- CURRENT LIABILITIES Mortgage Payable-Current Portion $ 587,202 $ 538,144 Accounts Payable 1,907 2,045 Other Accrued Expenses 40,837 45,093 Income Taxes Payable - 71,753 Accrued Interest Payable 22,094 26,021 Deferred Income Taxes 140,612 - --------- --------- TOTAL CURRENT LIABILITIES 792,652 683,056 --------- --------- LONG-TERM LIABILITIES Mortgage Payable (Net of Current Portion) 2,440,769 3,028,031 Accrued Pension - 250,347 Deferred Income Taxes 285,176 353,751 --------- --------- TOTAL LONG-TERM LIABILITIES 2,725,945 3,632,129 --------- --------- TOTAL LIABILITIES 3,518,597 4,315,185 --------- --------- SHAREHOLDERS' EQUITY Common Stock, Par Value $.10 Per Share Authorized Shares 272,000 in 2006 and 2005, issued 268,659 in 2006 and 269,784 in 2005 26,866 27,021 Additional Paid in Capital 9,053,195 9,110,968 Accumulated Deficit (6,303,824) (6,671,693) Other Comprehensive income (Loss) - (221,285) --------- --------- 2,776,237 2,245,011 Less: Cost of Shares in Treasury (none in 2006 and 425 in 2005) - (13,413) --------- --------- TOTAL SHAREHOLDERS' EQUITY 2,776,237 2,231,598 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,294,834 $6,546,783 ========= ========= The accompanying notes are an integral part of the financial statements. -31- HOLOBEAM, INC. STATEMENTS OF OPERATIONS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 2006 2005 2004 ------ ------ ------- REVENUES Rental Income $ 2,053,703 $2,053,703 $2,053,703 Interest Income 30,950 9,694 4,645 Net Holding Gains 60,022 15,700 - ----------- ----------- ------------ TOTAL 2,144,675 2,079,097 2,058,348 ----------- ----------- ------------ COSTS AND EXPENSES Rental Expense 266,929 243,146 260,093 General Expense 953,312 785,206 1,069,407 Interest Expense 292,205 338,683 378,989 ----------- ----------- ------------ TOTAL 1,512,446 1,367,035 1,708,489 ----------- ----------- ------------ EARNINGS BEFORE INCOME TAXES 632,229 712,062 349,859 INCOME TAX EXPENSE 264,360 231,277 164,923 ----------- ----------- ------------ NET INCOME $ 367,869 $ 480,785 $ 184,936 =========== ========== =========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 269,381 270,006 271,873 ----------- ----------- ------------ EARNINGS PER SHARE $ 1.37 $ 1.78 $ .68 =========== ========== =========== EARNINGS PER SHARE - NET INCOME $ 1.37 $ 1.78 $ .68 =========== ========== =========== The accompanying notes are an integral part of the financial statements. -32- HOLOBEAM, INC. STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 Accumulated Additional Compre- Other Common Stock Paid-In hensive Accumulated Comprehensive Treasury Stock Shares Amount Capital Income Deficit Loss Shares Amount ----------- --------- -------- ------ ------------ ------------- ------- ------ BALANCE, SEPTEMBER 30, 2003 275,015 $ 27,502 $9,226,979 $(7,337,414) $ (106,243) 600 $ 14,145 Net Income $184,936 184,936 Other Comprehensive Income: Minimum pension liability adjustment 11,412 11,412 ------- Other Comprehensive Income $196,348 ======= Purchase of Treasury Stock 3,206 75,347 Retirement of Treasury Stock (3,806) (381) (89,111) (3,806) (89,492) ------ ------- --------- --------- ---------- ------- ------- BALANCE, SEPTEMBER 30, 2004 271,209 27,121 9,137,868 (7,152,478) (94,831) - - Net Income $480,785 480,785 Other Comprehensive Income: Minimum pension liability adjustment (126,454) (126,454) ------- Other Comprehensive Income $354,331 ======= Purchase of Treasury Stock 1,425 40,413 Retirement of Treasury Stock (1,000) (100) (26,900) (1,000) (27,000) ------ ------- --------- --------- ---------- ------- ------- BALANCE, SEPTEMBER 30, 2005 270,209 27,021 9,110,968 (6,671,693) (221,285) 425 13,413 Net Income $367,869 367,869 Other Comprehensive Income: Minimum pension liability adjustment 221,285 221,285 ------- Other Comprehensive Income $589,154 ======= Purchase of Treasury Stock 1,125 44,515 Retirement of Treasury Stock (1,550) (155) (57,773) (1,550) (57,928) ------ ------- --------- --------- ---------- ------- ------- BALANCE, SEPTEMBER 30, 2006 268,659 $26,866 $9,053,195 $(6,303,824) $ - - $ - ======= ======= ========= ========= ========== ====== ======= The accompanying notes are an integral part of the financial statements. -33- HOLOBEAM, INC. STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2006 2005 2004 2003 ----------- ---------- ------- Restated 2006 2005 2004 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 367,869 $ 480,785 $ 184,936 -------- -------- -------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 217,089 220,505 220,366 Amortization 41,183 41,110 41,109 Pension Adjustment 221,285 (126,454) 11,412 Purchases of Trading Assets (66,427) (286,820) - Holding (Gain) Loss on Trading Assets 13,620 (15,700) - (Gain) on Sale of Investment (73,642) - - Increase (Decrease) in: Accounts Payable and Accrued Expenses (8,321) (69,270) (84,561) Accrued Pension (250,347) - - Deferred Income Taxes Payable 72,037 (105,495) (17,497) Deferred Rent - (185,430) 125,055 Income Taxes Payable Receivable (71,753) 2,293 (6,881) Decrease (Increase) in: Unbilled Rents Receivable 171,438 171,440 62,763 Accounts and Other Receivables - 18 - Prepaid Expenses (356,940) 787 (1,306) Prepaid Income Taxes (23,600) 7,698 (10) Deferred Income Taxes Receivable 100,139 - - -------- -------- -------- Total Adjustments (14,239) (345,318) 350,450 -------- -------- -------- Net Cash Provided by Operating Activities 353,630 135,467 535,386 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Short-term Investments - - - Capital Expenditures (28,620) - (3,529) Sale of Short-Term Investments - - - -------- -------- -------- Net Cash Provided by (Used in) Investing Activities (28,620) - (3,529) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Principal Payments on First Mortgage (538,204) (493,178) (451,975) Purchase of Treasury Stock (44,515) ( 40,413) (75,347) -------- -------- -------- Net Cash Used in Financing Activities (582,719) (533,591) (527,322) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (257,709) (398,124) 4,535 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 519,847 917,971 913,436 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 262,138 $ 519,847 $ 917,971 ======== ======== ========= SUPPLEMENTAL CASH FLOWS DISCLOSURES Interest Paid $ 296,132 $342,282 $382,287 Income Taxes Paid $ 370,200 $ 250,175 $ 196,909 The accompanying notes are an integral part of the financial statements. -34- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 1. SUMMARY OF MAJOR ACCOUNTING POLICIES a. Description of Business The Company is engaged primarily in the rental of real property located in New Jersey for retail use. b Basis of Presentation The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include amounts based on management's prudent judgements and estimates. While actual results may differ from these estimates, management does not expect the differences, if any, to have a material effect on the financial statements. c. Cash and Cash Equivalents For purposes of reporting cash flows, all liquid investments with original maturities of three months or less are considered cash equivalents. d. Property and Equipment Depreciation is provided 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. e. 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. -35- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) f. Capital Stock Each share of common stock is entitled to one vote. No such shares of common stock were reserved at September 30, 2006, 2005, or 2004. On October 20, 2004, the Company amended its Certificate of Incorporation in order to reduce its authorized shares from 2,000,000 to 272,000. The Company purchased 1,125 shares during the year ended September 30, 2006 and retired 1,550 shares during the same period. For the year ended September 30, 2005, the Company retired 1,000 shares of Treasury Stock purchased on October 1, 2004. For the year ended September 30, 2004, the Company retired 3,806 shares of Treasury Stock purchased at a cost of $89,492. g. Income Taxes The Company provides for federal and state income taxes on items included in the Statements of Operations regardless of the period when such taxes are payable. Deferred taxes are recognized for temporary differences between financial and income tax reporting based on enacted tax laws and rates. h. 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. i. 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. -36- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) j. 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". Trading assets are stated at fair value, with gains or losses resulting from changes in fair value recognized currently in earnings. The Company elects to classify its marketable equity securities as trading assets. Net gains (losses) on equity security trading assets were $60,022 in 2006 and $15,700 in 2005 and $0 in 2004. NOTE 2. INCOME TAXES 2006 2005 2004 ------- ------ ------ Current taxes: Federal $ 184,286 $197,046 $ 149,230 State 55,422 55,422 40,799 -------- -------- -------- Total 239,708 252,468 190,029 -------- -------- -------- Deferred taxes: Federal 20,922 (18,012) (21,339) State 3,730 (3,179) (3,767) -------- -------- -------- Total 24,652 (21,191) (25,106) -------- -------- -------- Provision for income taxes $264,360 $231,277 $164,923 ======== ======== ======== The deferred tax assets and liabilities recorded on the balance sheet as of September 30, are as follows: 2006 2005 2004 ------- ------ ------ Deferred tax assets: Federal $ - $ 85,118 $ 53,737 State - 15,021 9,483 -------- -------- -------- Total Assets $ - $ 100,139 $ 63,220 -------- -------- -------- Deferred tax liabilities: Federal $361,888 $300,688 $358,978 State 63,900 53,063 63,349 -------- -------- -------- Total Liabilities$425,788 $353,751 $422,327 -------- -------- -------- Net $425,788 $253,612 $359,107 ======== ======== ======== -37- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 2. INCOME TAXES (continued) The sources of deferred income taxes for the years ended September 30, are as follows: 2006 2005 2004 ------ ------ ------ Prepaid (Accrued) Pension Costs $ 351,529 $(250,347) $ (306,057) Unbilled Rents Receivable 712,940 884,378 1,055,817 ------- -------- --------- Total $1,064,469 $ 634,031 $ 749,760 ========== ========= ========== 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: 2006 2005 2004 ---- ---- ---- Federal statutory income tax rate 34% 34% 34% State tax provisions, net of federal benefits 6 6 6 Deferred tax adjustment on prior accrued pension - (8) - Other 2 - 7 ---- ---- ---- Effective income tax rate 42% 32% 47% ==== ==== ==== Management believes it is more likely than not that the long-term deferred tax asset will reduce future income tax payments. Significant factors considered by management in its determination of the probability of the realization of the deferred tax benefits include: (a) historical operating results; (b) expectations of future earnings and (c) the period of time over which the pension liabilities will be paid. NOTE 3. RENTAL INCOME UNDER OPERATING LEASES The Company leases two buildings at it's A & S Drive, Paramus, N.J. site for retail use. The Sports Authority, Inc. has leased a 62,000 sq. ft. building for a lease term of twenty (20) years and the Tandy Corporation has leased a 30,000 sq. ft. building for use as a Comp USA retail store for a lease term of fifteen (15) years. The tenants are responsible for real estate taxes and other assessments as defined in the operating lease agreements. 2006 2005 2004 ---- ---- ---- Buildings and building improvements: Cost $ 6,961,244 $6,961,244 $6,961,244 Accumulated depreciation 3,126,277 2,926,315 2,726,359 ---------- --------- --------- Net buildings and building improvements $ 3,834,967 $4,034,929 $4,234,885 ========== ========= ========= -38- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued) The minimum future rentals on noncancellable operating leases for the years ending September 30, are as follows: 2007 $ 2,233,965 2011 $ 1,275,697 2008 2,331,017 2012 1,067,573 ---------- 2009 2,331,017 2010 1,497,842 Total $10,737,111 ========== Net rental income consists of the following: 2006 2005 2004 ---- ------ ------ Rental income $2,053,703 $2,053,703 $2,053,703 Depreciation expense (199,959) (199,959) (199,959) Other expenses (66,970) (43,187) (60,134) --------- --------- --------- Rental income, net $1,786,744 $1,810,557 $1,793,610 ========= ========= ========= In 2006, 2005, and 2004, depreciation expense included all depreciation of the rental buildings and building improvements. a) In September 1992, the Company entered into a triple net lease agreement with The Sports Authority, Inc. 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 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 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 Comp USA 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. -39- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 3. RENTAL INCOME UNDER OPERATING LEASES (Continued) 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. The following is a condensed summary of financial information on the above publicly held companies: Radioshack The Sports Corporation Authority, Inc. 12/31/05 1/29/06 (In Millions) (In Thousands) Current assets $ 1,627 $ 824,914 ------ ---------- Total assets 2,205 1,403,782 ------ ---------- Current liabilities 986 476,204 ------ ---------- Total liabilities 1,616 848,985 ------ ---------- Total stockholders' equity 589 554,797 ------ ---------- Net sales 5,081 2,509,330 ------ ---------- Cost of sales 2,706 1,802,123 ------ ---------- Gross profit 2,375 702,207 ------ ---------- Income before income taxes 322 91,528 ------ ---------- Income tax expense (and other charges) 55 36,111 ------ ---------- Net income $ 267 $ 55,417 ------ ---------- NOTE 4. RESTATEMENT MINIMUM PENSION LIABILITY ------------------------- The Company restated Other Comprehensive Income for 2004 as a result of recording an additional minimum pension liability. The net adjustment for 2004 was $11,412 (see note 13). 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 2006, $11,400 in 2005 and $11,400 in 2004. -40- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 6. 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. Both loans are payable to the same lending institution. Costs incurred in connection with this mortgage amounted to $102,520 and are charged to expense over the life of the mortgage in the amount of $5,126. This amount is included in the balance of deferred charges as detailed in Note 7. The combined balance outstanding for each debt issued at the end of 2006, 2005, and 2004 is as follows: 2006 2005 2004 ------ ------ ------ First Mortgage on 62,000 sq. ft. Building $3,027,971 3,566,175 $4,059,353 Less Current Portion 587,202 538,144 493,177 ---------- --------- ---------- Long-Term Portion $2,440,769 $3,028,031 $3,566,176 ========= ========= ========= 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: 2007 $587,202 2010 $762,870 2008 640,727 2011 338,036 2009 699,136 -41- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 7. DEFERRED CHARGES The composition of deferred charges and related amortization is as follows: Real Estate Brokers Commissions Mortgage Sports Tandy Total Costs Authority Corp. ------ ----- --------- ------- Original Cost $712,160 $102,520 $279,584 $330,056 Accumulated Amortization 531,049 70,130 196,874 264,045 -------- ------- ------- ------- Balance 9/30/06 $181,111 $ 32,390 $ 82,710 $ 66,011 ======= ====== ======= ======= Original Cost $712,160 $102,520 $279,584 $330,056 Accumulated Amortization 489,866 64,929 182,895 242,042 -------- ------- ------- ------- Balance 9/30/05 $222,294 $ 37,591 $ 96,689 $ 88,014 ======= ====== ======= ======= Original Cost $712,160 $102,520 $279,584 $330,056 Accumulated Amortization 448,756 59,804 168,915 220,037 -------- ------- ------- ------- Balance 9/30/04 $263,404 $ 42,716 $110,669 $110,019 ======= ====== ======= ======= NOTE 8. 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. 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 13). NOTE 9. 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). The Company is also subject to concentrations of credit risk with respect to cash and cash equivalents which the Company attempts to minimize by entering into arrangements with major banks and financial institutions and investing in high-quality instruments. The Company does not expect any counterparties to fail to meet their obligations. -42- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 10. BUSINESS SEGMENTS The Company 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's business segments are as follows: 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 9). The accounting policies of the segments are the same as those described in the summary of major 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 2006 2005 2004 --------- ---------- -------- Business Segments: Real Estate Rental $2,053,703 $2,053,703 $2,053,703 Other 90,972 25,394 4,645 --------- ---------- -------- Total $2,144,675 $2,079,097 $2,058,348 ======== ========= ========= Income (Loss) 2006 2005 2004 --------- ---------- -------- Business Segments: Real Estate Rental $1,786,774 $1,810,557 $1,793,610 --------- ---------- -------- Total 1,786,774 1,810,557 $1,793,610 --------- ---------- -------- General and Administrative Expenses (953,312) (785,206) (1,069,407) Interest Expense (292,205) (338,683) (378,989) Other Income 90,972 25,394 4,645 Income Tax Expense (264,360) (231,277) (164,923) --------- ---------- -------- Total (1,418,905)(1,329,772) (1,608,674) --------- ---------- -------- Net Income $ 367,869 $ 480,785 $ 184,936 ======== ========= ========= -43- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 10. BUSINESS SEGMENTS (Continued) Identifiable Assets 2006 2005 2004 --------- ---------- -------- Business Segments: Real Estate Rental $5,181,791 $5,594,371 $6,006,879 Other 1,113,043 952,412 1,040,147 --------- ---------- -------- TOTAL ASSETS $6,294,834 $6,546,783 $7,047,026 ========= ========= ========= Capital Expenditures Business Segments: 2006 2005 2004 --------- ---------- -------- Real Estate Rental $ - $ - $ - Other 28,621 - 3,529 --------- ---------- -------- $ 28,621 $ - $ 3,529 ======== ========= ======= Property and Equipment Depreciation Business Segments: 2006 2005 2004 --------- ---------- -------- Real Estate Rental $ 199,959 $199,959 $199,959 Other 17,130 20,546 20,407 --------- ---------- -------- $217,089 $220,505 $220,366 ========= ========== ======== Intangible Assets Amortization Business Segments: 2006 2005 2004 --------- ---------- -------- Real Estate Rental $ 41,183 $ 41,110 $ 41,109 Other - - - --------- ---------- -------- $ 41,183 $ 41,110 $ 41,109 ======== ======== ======== -44- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 11. 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, 2006, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgement is necessarily required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. NOTE 12. 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. 2006 2005 2004 --------- ---------- -------- Changes in benefit obligation: Benefit obligation at October 1 $3,489,128 $3,244,889 $2,371,343 Service cost - - 440,931 Interest cost 241,508 244,239 211,676 Actuarial (Gain) Losses (185,167) - - Distributions (100,000) - - --------- ---------- -------- Benefit obligation at September 30 $3,445,469 $3,489,128 $3,023,950 ========== ========= ========= -45- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 12. PENSION PLAN (continued) 2006 2005 2004 --------- ---------- -------- Change in plan assets: Fair value of plan assets at October 1 $3,238,781 $2,717,893 $2,096,090 Company contributions 275,114 340,817 479,009 Benefit payments (100,000) (100,000) (100,000) Actual return on plan assets 75,617 280,071 242,794 --------- ---------- -------- Fair value of plan assets at September 30, $3,489,512 $3,238,781 $2,717,893 ========= ========= ========= Funded status of Plan $ 44,043 $(250,347) $(306,057) Unrecognized Net (Gain) Loss 307,486 368,808 158,051 --------- ---------- -------- Prepaid (Accrued) Pension $ 351,529 $ 118,461 $(148,006) ======== ======== ======== The net periodic pension cost for the year ended September 30, includes the following components: 2006 2005 2004 --------- ---------- -------- 1. Service cost - benefits earned during the period $ - $ - $440,931 --------- ---------- -------- 2. Interest cost on projected benefit obligation 241,508 244,239 211,676 --------- ---------- -------- 3. Actual return on plan assets (75,617) (180,071) (142,794) --------- ---------- -------- 4. Net amortization and deferral: a. Amortization of unrecognized net obligation (asset) at transition - - - b. Amortization of unrecognized prior service cost - - - c. Net amortization and defferal (123,845) 10,182 (3,932) d. Asset gain or (loss) deferred - - - --------- ---------- -------- e. Total (123,845) 10,182 $ (3,932) --------- ---------- -------- 5. Net periodic pension cost (credit) = (Item 1 + item 2 + item 3 + item 4(e)$42,046 $ 74,350 $505,881 ======== ======= ======= The net periodic pension cost was determined based on a 5.5% discount rate for 2006 and 7% discount rate for 2005 and 2004 and a long - term rate of return of 7% on plan assets for 2006, 2005 and 2004. -46- HOLOBEAM, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 NOTE 13. ACCUMULATED OTHER COMPREHENSIVE INCOME BALANCES Before-Tax Tax Expense Net-of-Tax Amount (Benefit) Amount Minimum Pension Liability Adjustment: 2004 $(19,020) $ 7,608 $ (11,412) ======== ======== ======= 2005 $210,757 $(84,303) $126,454 ======== ======== ======= 2006 $(368,808) $147,523 $(221,285) ======== ======== ======= NOTE 14. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) For the Fiscal Year Ended September 30, 2006 -------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- Total Revenues $553,051 $509,536 $525,570 $556,518 Gross Profit N/A N/A N/A N/A Net (loss) Income Before Extraordinary Items $ 94,662 $ (2,270)$ 67,185 $208,292 Weighted Average Number of Shares 269,784 269,784 269,304 269,381 Earnings Per Share .35 (.01) .25 .77 Net Income (Loss) $94,662 $(2,270) $67,185 $208,293 For the Fiscal Year Ended September 30, 2005 -------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- Total Revenues $505,920 $506,682 $507,226 $559,269 Gross Profit N/A N/A N/A N/A Income Before Extraordinary Items 38,703 71,035 75,718 295,329 Weighted Average Number of Shares 270,513 269,940 269,940 269,784 Earnings Per Share .14 .26 .28 1.10 Net Income $38,703 $71,035 $75,718 $295,329 -47- HOLOBEAM, INC. SCHEDULE XII MORTGAGE LOANS ON REAL ESTATE SEPTEMBER 30, 2006 Principal Amount of Loans Face Carrying Subject to Periodic Amount Amount Delinquent Interest Final Maturity Payment Prior of of Principal Rate Date Terms Items Mortgage Mortgage(1) or Interest Mortgage Payable Building and Improvements 8.7% February 5, 2011 $13,367 None $1,500,000 $ 604,010 None Mortgage Payable Building and Improvements 8.77% February 5, 2011 $56,328 None $6,000,000 $2,423,961 None --------- $3,027,971 ========= Activity for the three years ended September 30, 2006 is as follows: 2006 2005 2004 Balance at Beginning of Year $3,566,175 $4,059,353 $4,511,328 Additions During Year: Commercial Loans 0 0 0 New Mortgages 0 0 0 --------- --------- --------- 3,566,175 4,059,353 4,511,328 Deductions During Year: Principal Payments 538,204 493,178 451,975 Mortgage Payments 0 0 0 --------- --------- --------- Balance at End of Year $3,027,971 $3,566,175 $4,059,353 ========= ========= ========= (1) The cost for Federal income tax Purposes at 9/30/06 $3,027,971 The accompanying notes are an integral part of these financial statements. 48 HOLOBEAM, INC. SCHEDULE XI REAL ESTATE AND ACCUMULATED DEPRECIATION SEPTEMBER 30, 2006 Life in Which Deprec- Cost Capitalized Gross Amount at (2) iaton Initial Subsequent Which Carried at Accum- in Latest Cost to Company To Acquisition Close of Period (1) ulated Date Date Income Incum - Bldg & Carrying Bldg & Deprec- of Acqu- Stmt is brances Land Improv Improv Costs Land Improv Total iation Constr. ired Computed Improved Land Paramus, NJ $ 0 $218,402 $ 0 $ 0 $ 0 $218,402 $ 0 $ 218,402 $ 0 1971 - Improved Land Paramus, NJ 0 173,565 0 60,805 0 234,370 0 234,370 0 1983 - Building I Paramus, NJ Improvements 3,027,971 0 718,881 3,649,850 0 0 4,368,731 4,368,731 2,334,120 1958 1971 3 to 40 years Building II Paramus, NJ 0 0 2,592,513 0 0 0 2,592,513 2,592,513 792,157 1995 1995 30 Years --------- ------- --------- --------- -- ------- --------- --------- --------- $3,027,971 $391,967 $3,311,394 $3,710,655 $ 0 $452,772 $6,961,244 $7,414,016 $3,126,277 ========= ======= ========= ========= == ======= ========= ========= ========= of Year $7,414,016 $7,414,016 $7,414,016 of Year $2,926,318 $2,726,359 $2,526,400 Additions: Additions: Improvements 0 0 0 Depreciation 199,959 199,959 199,959 Acquisitions 0 0 0 Less Retirements 0 0 0 --------- --------- --------- --------- --------- --------- 7,414,016 7,414,016 7,414,016 Deductions Balance at During Year: End of Year: $3,126,277 $2,926,318 $2,726,359 Retirements 0 0 0 ========= ========= ========= Cost of Real Estate Sales 0 0 0 --------- --------- --------- Balance at End of Year $7,414,016 $7,414,016 $7,414,016 ========= ========= ========= The aggregate cost for Federal income tax purposes at September 30, 2006 is $7,414,016. The accompanying notes are an integral part of these financial statements. 49 EXHIBIT A --------- 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, 2006 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, 2006, including corrective actions with regard to significant deficiencies and material weaknesses. As of September 30, 2006, the examination of controls and procedures did not disclose any significant deficiencies or material weaknesses. I, Ralph A. Fredericks, certify that: 1. I have reviewed this annual report on Form 10-K/A NO. 1 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) 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. Date: October 9, 2007 -------------------- Ralph A. Fredericks ------------------- Ralph A. Fredericks Treasurer I, Melvin S. Cook, certify that: 1. I have reviewed this annual report on Form 10-K/A NO. 1 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) 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. Date: October 9, 2007 -------------------- Melvin S. Cook, President ------------------------- Melvin S. Cook President EXHIBIT C CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF HOLOBEAM, INC. ***** Holobeam, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation in a meeting duly held, unanimously adopted a resolution proposing and declaring advisable the following amendment to the Restated Certificate of Incorporation of said corporation: RESOLVED, That the Restated Certificate of Incorporation of the corporation be amended by changing the FOURTH Article thereof so that, as amended said Article shall be and read as follows: FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is Two Hundred Seventy Two Thousand (272,000) shares of Common Stock having a par value of Ten Cents ($0.10) per share amounting in the aggregate to Twenty- Seven Thousand Two Hundred Dollars ($27,200). SECOND: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware. THIRD: That this Certificate of Amendment of the Restated Certificate of Incorporation shall be effective on October 20, 2004. IN WITNESS WHEREOF, said Board of Directors of said Holobeam, Inc. has caused this certificate to be signed by the Chairman this 4th day of October 2004. Melvin S. Cook ------------------------- by Melvin S. Cook Chairman