U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended July 1, 2001
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ______________
Commission file number 0-29024
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BENTHOS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-2381876
(State or Other Jurisdiction of (I. R. S. Employer
Corporation or Organization) Identification No.)
49 Edgerton Drive, North Falmouth, Massachusetts 02556
(Address of Principal Executive Offices)
(508) 563-1000
Issuer's Telephone Number Including Area Code
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer 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 number of shares outstanding of each of the issuer's classes of Common
equity as of the latest practicable date:
Common Stock par value $.06 2/3 1,387,149
(Class) (Outstanding stock at August 14, 2001)
Transitional Small Business Disclosure Format (check one):
Yes ___ No X
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2
BENTHOS, INC. AND SUBSIDIARY
FORM 10-QSB
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JUNE 30, 2001
INDEX
Page No.
Face Sheet 1
Index 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) 3
June 30, 2001 and
September 30, 2000
Condensed Consolidated Statements of Operations (unaudited) 4
Quarter and Nine Months Ended
June 30, 2001 and
June 30, 2000
Condensed Consolidated Statements of Cash Flow (unaudited) 5
Nine Months Ended
June 30, 2001 and
June 30, 2000
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 10
of Financial Condition and Results of Operations
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Benthos, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
Assets June 30, 2001 September 30, 2000
------------- ------------------
Current Assets:
Cash and Cash Equivalents $ 40 $ 1,474
Accounts Receivable, Net 3,598 3,448
Inventories 5,924 4,974
Prepaid Expenses and Other Current Assets 65 159
Deferred Tax Asset 1,354 1,354
------- -------
Total Current Assets 10,981 11,409
Property, Plant and Equipment, Net 1,896 1,960
Other Assets, Net 4,179 4,496
------- -------
$17,056 $17,865
======= =======
Liabilities and Stockholders' Investment
Current Liabilities:
Note Payable $ 500 $ --
Current Portion of Long-Term Debt 4,060 786
Accounts Payable 2,252 1,160
Accrued Expenses 1,030 1,729
Customer Deposits 223 350
------- -------
Total Current Liabilities 8,065 4,025
------- -------
Long-Term Debt, Net of Current Portion -- 3,863
Stockholders' Investment:
Common stock, $.06 2/3 Par Value-
Authorized - 7,500 Shares
Issued - 1,653 Shares at June 30, 2001
and September 30, 2000 110 110
Capital in Excess of Par Value 1,569 1,569
Retained Earnings 7,943 8,959
Treasury Stock, at Cost (631) (661)
------- -------
Total Stockholders' Investment 8,991 9,977
------- -------
$17,056 $17,865
======= =======
See accompanying notes to Condensed Consolidated Financial Statements
4
Benthos, Inc. and Subsidiary
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Quarter Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
------ ------ ------- -------
Net Sales $5,115 $5,004 $14,005 $15,652
Cost of Sales 3,110 3,042 9,212 8,966
Gross Profit 2,005 1,962 4,793 6,686
Selling, General &
Administrative Expenses 1,528 1,188 4,208 4,133
Research and Development
Expenses 300 348 1,398 1,270
Amortization of Goodwill
and Other Acquired
Intangibles 127 126 379 380
------ ------ ------- -------
Income (Loss) from Operations 50 300 (1,192) 903
Interest Income -- 20 27 61
Interest Expense (90) (97) (287) (302)
------ ------ ------- -------
Income (Loss) before (Benefit) Provision
for Income Taxes (40) 223 (1,452) 662
(Benefit) Provision for Income Taxes (13) 67 (436) 199
------ ------ ------- -------
Net Income (Loss) $ (27) $ 156 $(1,016) $ 463
====== ====== ======= =======
Basic Earnings (Loss) Per Share $(0.02) $ 0.11 $ (0.74) $ 0.34
====== ====== ======= =======
Diluted Earnings (Loss) Per Share $(0.02) $ 0.11 $ (0.74) $ 0.33
====== ====== ======= =======
Weighted Average
Common Shares Outstanding 1,383 1,379 1,381 1,375
====== ====== ======= =======
Weighted Average
Common Shares Outstanding,
Assuming Dilution 1,383 1,415 1,381 1,416
====== ====== ======= =======
See accompanying notes to Condensed Consolidated Financial Statements
5
Benthos, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flow
(in thousands)
(unaudited)
Nine Months Ended
June 30, 2001 June 30, 2000
------------------ --------------
Cash Flows from Operating Activities:
Net Income (Loss) $ (1,016) $ 463
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation and Amortization 866 859
Changes in Assets and Liabilities:
Accounts Receivable (150) (1,210)
Inventories (950) 252
Prepaid Expenses and Other Current Assets 94 618
Accounts Payable and Accrued Expenses 393 (833)
Customer Deposits (127) (161)
---------- ---------
Net Cash Used in Operating Activities (890) (12)
Cash Flows from Investing Activities:
Purchases of Property, Plant and Equipment (373) (686)
Increase in Other Assets (82) (272)
---------- ---------
Net Cash Used in Investing Activities (455) (958)
Cash Flows from Financing Activities:
Borrowings on Revolving Note 500 --
Exercise of Stock Options -- 23
Payments on Long-Term Debt (589) (589)
---------- ---------
Net Cash Used in Financing Activities (89) (566)
---------- ---------
Net Decrease in Cash and Cash Equivalents (1,434) (1,536)
Cash and Cash Equivalents, Beginning of Period 1,474 2,930
---------- ---------
Cash and Cash Equivalents, End of Period $ 40 $ 1,394
========== =========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 291 $ 302
========== =========
Income Taxes Paid, Net of Refunds $ 81 $ 248
========== =========
Supplemental Disclosure of Noncash Activities:
Issuance of Treasury Stock to the Company's ESOP $ 30 $ 74
========== =========
See accompanying notes to Condensed Consolidated Financial Statements
6
Benthos, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
1. Fiscal Periods
The fiscal year of Benthos, Inc. (the Company) ends on September 30 each year.
Interim quarters are comprised of 13 weeks unless otherwise noted and end on the
Sunday closest to December 31, March 31, and June 30. All references in the
unaudited condensed consolidated financial statements to fiscal periods ended on
December 31, March 31, or June 30 mean the interim quarters referred to above.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission regarding interim financial reporting. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements and should be
read in conjunction with the consolidated financial statements and notes thereto
for the fiscal year ended September 30, 2000, included in the Company's
previously filed Form 10-KSB. The accompanying condensed consolidated financial
statements reflect all adjustments (consisting solely of normal, recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim periods presented. The results of
operations for the interim period are not necessarily indicative of the results
to be expected for the full fiscal year.
3. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of the following:
June 30, 2001 September 30, 2000
------------- ------------------
Raw Materials $ 441 $ 423
Work-in-Process 5,461 4,538
Finished Goods 22 13
------ ------
$5,924 $4,974
====== ======
7
4. Earnings (Loss) Per Share
A reconciliation of basic and diluted shares outstanding is as follows:
Quarter Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
----- ----- ----- -----
Basic weighted average common shares outstanding 1,383 1,379 1,381 1,375
Weighted average common share equivalents -- 36 -- 41
----- ----- ----- -----
Diluted weighted average shares outstanding 1,383 1,415 1,381 1,416
===== ===== ===== =====
The following securities were not included in computing earnings per share
because their effects would be anti-dilutive.
Quarter Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
----- ----- ----- -----
Options to purchase common stock 238 197 222 155
===== ===== ===== =====
5. Segment Reporting
The Company views its operations and manages its business as two segments,
Undersea Systems and Container Inspection Systems, as being strategic business
units that offer different products. The Company evaluates performance of its
operating segments based on revenues from external customers, income from
operations and identifiable assets.
Quarter Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
----- ----- ----- -----
Sales to Unaffiliated Customers:
Undersea Systems $3,724 $3,896 $10,107 $11,370
Container Inspection Systems 1,391 1,108 3,898 4,282
------ ------ ------- -------
Total $5,115 $5,004 $14,005 $15,652
Income (Loss) from Operations:
Undersea Systems $ 33 $ 377 $ (908) $ 686
Container Inspection Systems 17 (77) (284) 217
------ ------ ------- -------
Total $ 50 $ 300 $(1,192) $ 903
Identifiable Assets:
Undersea Systems $11,864 $12,226
Container Inspection Systems 3,285 2,336
Corporate Assets 1,907 3,202
------- -------
Total $17,056 $17,764
======= =======
8
Revenues by geographic area were as follows:
Quarter Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
Geographic Area ---- ---- ---- ----
United States $3,052 $3,671 $ 9,200 $ 9,792
Other 2,063 1,333 4,805 5,860
------ ------ ------- -------
Total $5,115 $5,004 $14,005 $15,652
====== ====== ======= =======
6. Credit Facility
The Company has a credit facility with a bank. This facility provides for loans
under two notes: a $5,500 variable rate term note and a $800 variable rate
revolving note. The term note is payable in 84 consecutive equal monthly
installments of principal with interest at prime (6.75% at June 30, 2001) plus
0.50%. The term note matures in August 2006. The revolving note expires on
January 31, 2002. Advances under the revolving note are payable as follows:
monthly payments of interest only and unpaid principal and accrued and unpaid
interest at maturity. The interest rate under the revolving note is prime (6.75%
at June 30, 2001) plus 1.50%. There were $500 in advances outstanding under the
revolving note as of June 30, 2001. The credit facility is secured by
substantially all of the assets of the Company and requires the Company to meet
certain covenants, including debt service coverage. During the second quarter,
the bank reset the financial covenants under the credit facility for the
remainder of the fiscal year based on updated projections received from the
Company and reduced the amount of the variable rate note from $2,000 to $700. In
June 2001, the bank increased the amount of the variable note from $700 to $800.
As of June 30, 2001, the Company was not in compliance with two of these revised
covenants and has requested a waiver of this default from the bank. As the
Company has not yet received a waiver from the bank, the Company has classified
the amounts under the term note as current.
7. Recently Issued Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, Business Combinations. SFAS No. 141 requires all business combinations
initiated after June 30, 2001 to be accounted for using the purchase method. The
adoption of SFAS No. 141 is not expected to have a material impact on the
Company's consolidated financial statements.
In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other Acquired
Intangible Assets. Under SFAS No. 142, goodwill is no longer subject to
amortization over its estimated useful life. Instead, goodwill is subject to, at
least, an annual assessment for impairment by applying a fair-value-based test.
Also, under SFAS No. 142, intangible assets acquired in conjunction with a
business combination should be separately recognized if the benefit of the
intangible asset is obtained through contractual or other legal rights, or if
the intangible asset can be sold, transferred, transferred, licensed, rented, or
exchanged, regardless of the acquirer's intent to do so. Intangible assets will
continue to be amortized over their respective lives under SFAS No. 142.
The Company must adopt SFAS No. 141 and SFAS No. 142 on October 1, 2001. Upon
adoption, goodwill will no longer be amortized. Amortization expense during the
nine months ended June 30, 2001 related to goodwill was approximately $200.
Instead, the Company must reassess impairment of goodwill and record any
impairment during the three months ended December 31, 2001. The Company is
currently assessing the impact of SFAS No. 142 related to any potential
impairment of goodwill.
9
8. Contingencies
From time to time the Company has disputes with parties to whom it sells
products. The Company is currently involved in a dispute with a former
distributor with respect to the payment to the Company of the sum of
approximately $452 for products sold by the Company to the distributor. The
Company has exercised its contractual right to arbitration, which is in process.
Management does not believe the resolution of this dispute will have a
materially adverse effect on its financial position.
10
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Dollars in Thousands)
Results of Operations -- Third quarter of fiscal year 2001 compared with third
quarter of fiscal year 2000.
The following table presents, for the periods indicated, the percentage
relationship of Condensed Consolidated Statements of Operations items to total
sales:
Quarter Ended
June 30, 2001 June 30, 2000
------------- -------------
(unaudited)
Net Sales 100.0% 100.0%
Cost of Sales 60.8% 60.8%
----- -----
Gross Profit 39.2% 39.2%
Selling, General & Administrative Expenses 29.9% 23.7%
Research and Development Expenses 5.9% 7.0%
Amortization of Goodwill and Other
Acquired Intangibles 2.4% 2.5%
----- -----
Income from Operations 1.0% 6.0%
Interest Income -- .4%
Interest Expense (1.8)% (1.9)%
----- -----
Income (Loss) Before (Benefit) Provision
For Income Taxes (.8)% 4.5%
(Benefit) Provision for Income Taxes (.3)% 1.4%
----- -----
Net Income (Loss) (.5)% 3.1%
===== =====
Sales. Net sales increased by 2.2% in the third quarter of fiscal year 2001 to
$5,115 as compared to $5,004 in the third quarter of fiscal year 2000. Sales of
the Container Inspection Systems Division increased by 25.5% to $1,391 in the
third quarter of fiscal year 2001 as compared to $1,108 in the third quarter of
fiscal year 2000. The increase resulted largely from an increase in orders
received in the third quarter of fiscal year 2001 which as compared to the third
quarter of fiscal year 2000. Sales of the Undersea Systems Division decreased
by 4.4% to $3,724 in the third quarter of fiscal year 2001 as compared to $3,896
in the third quarter of fiscal year 2000. This decrease was experienced in
several of the product lines of the Undersea Systems Division which is still
experiencing the continued softness in several of the markets it serves, and was
partially offset by improvements in sales in the Company's acoustic,
geophysical, flotation and imaging product lines.
Gross Profit. Gross Profit increased by 2.2% to $2,005 for the third quarter of
fiscal year 2001 as compared to $1,962 for the third quarter of fiscal year
2000. As a percentage of sales, gross profit was 39.2% in the third quarters of
fiscal years 2001 and 2000.
11
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 28.6% to $1,528 for the third quarter of
fiscal year 2001 as compared to $1,188 in the third quarter of fiscal year 2000.
As a percentage of sales, selling, general and administrative expenses increased
to 29.9% in the third quarter of fiscal year 2001 as compared to 23.7% for the
third quarter of fiscal year 2000. The increase in selling, general, and
administrative dollars and percent to sales is a result of increased commissions
and selling expenses, expenses related to the transition of executive
management, and provisions related to accounts receivable.
Research and Development Expenses. Research and development expenses decreased
13.8% to $300 for the third quarter of fiscal year 2001 as compared to $348 in
the third quarter of fiscal year 2000. As a percentage of sales, research and
development expenses decreased to 5.9% of sales in the third quarter of fiscal
year 2001 from 7.0% in the third quarter of fiscal year 2000. The overall level
of expenditures is due to investments in new product development and is
consistent with the Company's current operational plans.
Amortization of Goodwill and Other Acquired Intangibles. Amortization of
goodwill and other acquired intangibles was $127 in the third quarter of fiscal
year 2001 as compared to $126 in the third quarter of fiscal 2000. The
amortization of goodwill and other acquired intangibles relates to the
Datasonics acquisition in fiscal year 1999.
Interest Income. Interest income decreased to $0 in the third quarter of fiscal
year 2001 as compared to $20 in the third quarter of fiscal year 2000. The
decrease in interest income was a result of lower invested cash balances.
Interest Expense. Interest Expense decreased to $90 in the third quarter of
fiscal year 2001 as compared to $97 in the third quarter of fiscal year 2000.
The decrease in interest expense dollars was a result of reduced principal on
the variable rate term loan used to finance the Datasonics acquisition.
(Benefit) Provision for Income Taxes. The (benefit) provision for income taxes
decreased to $(13) in the third quarter of fiscal year 2001 as compared to $67
in the third quarter of fiscal year 2000. The effective tax rate used in the
third quarter of fiscal years 2001 and 2000 was 30.0%. The rate used is lower
than the statutory rate due primarily to the benefit from the Company's Foreign
Sales Corporation.
12
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Dollars in thousands)
Results of Operations - Nine months of fiscal year 2001 compared with nine
months of fiscal year 2000.
The following table presents, for the periods indicated, the percentage
relationship of Condensed Consolidated Statements of Operations items to total
sales:
Nine Months Ended
June 30, 2001 June 30, 2000
------------------ --------------
Net Sales 100.0% 100.0%
Cost of Sales 65.8% 57.3%
------ -----
Gross Profit 34.2% 42.7%
Selling, General & Administrative Expenses 30.0% 26.4%
Research and Development Expenses 10.0% 8.1%
Amortization of Goodwill and
Other Acquired Intangibles 2.7% 2.4%
------ -----
Income (Loss) from Operations (8.5)% 5.8%
Interest Income .2% .4%
Interest Expense (2.1)% (1.9)%
------ -----
Income (Loss) Before (Benefit) Provision
for Income Taxes (10.4)% 4.3%
(Benefit) Provision for Income Taxes (3.1)% 1.3%
------ -----
Net Income (Loss) (7.3)% 3.0%
====== =====
Sales. Net sales decreased by 10.5% in the first nine months of fiscal year 2001
to $14,005 as compared to $15,652 in the first nine months of fiscal year 2000.
Sales of the Container Inspection Systems Division decreased by 9.0% to $3,898
in the first nine months of fiscal year 2001 as compared to $4,282 in the first
nine months of fiscal year 2000. The decrease resulted largely from large
project orders in fiscal year 2000, which were not repeated in fiscal year 2001.
Sales of the Undersea Systems Division decreased by 11.1% to $10,107 in the
first nine months of fiscal year 2001 as compared to $11,370 in the first nine
months of fiscal year 2000. This decrease is a result of continued softness in
the markets served by the Undersea Systems Division. The decrease in sales
extended to almost all of the product areas, with the exception of acoustic,
flotation, and geophysical hydrophone product lines, as compared to the first
nine months of fiscal year 2000.
Gross Profit. Gross Profit decreased by 28.3% to $4,793 for the first nine
months of fiscal year 2001 as compared to $6,686 for the first nine months of
fiscal year 2000. As a percentage of sales, gross profit was 34.2% in the first
nine months of fiscal year 2001 as compared to 42.7% in the first nine months of
fiscal year 2000. The decrease in gross profit percentage is attributed
primarily to the higher sales mix of Undersea Systems Division products, which
carry a lower gross profit than the products of the Container Inspection Systems
Division, unabsorbed overhead resulting from decreased sales volume, and
inventory related provisions.
13
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 1.8% to $4,208 for the first nine months of
fiscal year 2001 as compared to $4,133 in the first nine months of fiscal year
2000. As a percentage of sales, selling, general and administrative expenses
increased to 30.0% in the first nine months of fiscal year 2001 as compared to
26.4% for the first nine months of fiscal year 2000. The increase in selling,
general, and administrative expenses in dollars is a result of increased
commissions expense and expenses related to the resignation of the former CEO,
such as search fees for a successor and severance costs, and provisions related
to accounts receivable, offset by the removal of duplicate expenses relating to
the integration of the operations of Datasonics, Inc. in the first nine months
of fiscal year 2000. The increase in selling, general and administrative
expenses as a percentage of sales is related to the decrease in sales volume.
Research and Development Expenses. Research and development expenses increased
10.1% to $1,398 for the first nine months of fiscal year 2001 as compared to
$1,270 in the first nine months of fiscal year 2000. As a percentage of sales,
research and development expenses increased to 10.0% of sales in the first nine
months of fiscal year 2001 from 8.1% in the first nine months of fiscal year
2000. The increase in the overall level of expenditures is due to investments in
new product development. The level of expenditures is consistent with the
Company's current operational plans.
Amortization of Goodwill and Other Acquired Intangibles. Amortization of
goodwill and other acquired intangibles was $379 in the first nine months of
fiscal year 2001 as compared to $380 in the first nine months of fiscal 2000.
The amortization of goodwill and other acquired intangibles relates to the
Datasonics acquisition in fiscal year 1999.
Interest Income. Interest income decreased to $27 in the first nine months of
fiscal year 2001 as compared to $61 in the first nine months of fiscal year
2000. The decrease in interest income was a result of lower invested cash
balances.
Interest Expense. Interest expense was $287 in the first nine months of fiscal
year 2001 as compared to $302 in the first nine months of fiscal year 2000. The
decrease in interest expense dollars was a result of reduced principal on the
variable rate term loan used to finance the Datasonics acquisition.
(Benefit) Provision for Income Taxes. The (benefit) provision for income taxes
was $(436) in the first nine months of fiscal year 2001 as compared to $199 in
the first nine months of fiscal year 2000. The effective tax rate used in the
first nine months of fiscal years 2001 and 2000 was 30.0%. The rate used is
lower than the statutory rate due primarily to the benefit from the Company's
Foreign Sales Corporation
Liquidity and Capital Resources. The Company's cash and cash equivalents
decreased $1,434 from September 30, 2000 to June 30, 2001. Cash of $890 was used
in operating activities, primarily the result of the net loss incurred during
the first nine months of fiscal year 2001 offset by depreciation and
amortization and changes in operational assets and liabilities. The Company also
used $455 and $89 of cash in its investing and financing activities,
respectively. Investing activities represents primarily the purchase of capital
equipment and financing activities represents the payment of the installment
payments on the term note and borrowing under the revolving note.
The Company has a credit facility with a bank. This facility provides for loans
under two notes: a $5,500 variable rate term note and a $800 variable rate
revolving note. The term note is payable in 84 consecutive equal monthly
installments of principal with interest at prime (6.75% at June 30, 2001) plus
0.50%. The term note matures in August 2006. The revolving note expires on
January 31, 2002. Advances under the revolving note are payable as follows:
monthly payments of interest only and unpaid principal and accrued and unpaid
interest at maturity. The interest rate under the revolving note is prime (6.75%
at June 30, 2001) plus 1.5%. There were $500 in advances outstanding under the
revolving note as of June 30, 2001. The credit facility is secured by
substantially all of the assets of the Company and requires the Company to meet
certain covenants, including debt service coverage. During the second quarter,
the bank reset the financial covenants under the credit facility for the
remainder of the fiscal year based on updated projections received from the
Company and reduced the amount of the variable rate note from $2,000 to $700. In
June 2001, the bank increased the amount of the variable note from $700 to $800.
As of June 30, 2001, the Company was not in compliance with two of these revised
covenants and has requested a
14
waiver of this default from the bank. As the Company has not yet received a
waiver from the bank, the Company has classified the amounts under the term note
as current.
The Company believes it will be able to finance future working capital
requirements and capital expenditures during the next twelve months through cash
on hand and available credit facilities or, if the Company is not able to amend
its current credit facility on terms it deems acceptable, through alternative
credit facilities. There is no guarantee that the Company will be able to obtain
financing on commercially acceptable terms.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995.
The statements in this Quarterly Report on Form 10-QSB and in oral statements
which may be made by representatives of the Company relating to plans,
strategies, economic performance and trends and other statements that are not
descriptions of historical facts may be forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking information is inherently subject to risks and
uncertainties, and actual results could differ materially from those currently
anticipated due to a number of factors which include: the timing of large
project orders, competitive factors, shifts in customer demand, government
spending, economic cycles, availability of financing as well as the factors
described in this report. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described herein as anticipated,
believed, estimated, expected or intended.
15
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) A Special Meeting in lieu of the Annual Meeting of Shareholders of the
Registrant (the "Meeting") was held on May 4, 2001.
(b) The Registrant solicited proxies for the Meeting pursuant to Regulation
14A; there was no solicitation in opposition to management's nominees for
directors as listed in the Proxy Statement, and all such nominees were
elected.
(c) The following describes the matters voted upon at the Meeting and sets
forth the number of votes cast for, against or withheld and the number of
abstentions as to each such matter:
(i) Election of Directors:
Nominee For Withheld
A. Theodore Mollegen, Jr. 1,214,062 15,458
Stephen D. Fantone 1,213,296 16,224
The directors whose term of office as a director continued after the
Meeting are Arthur L. Fatum, Thurman F. Naylor, Samuel O. Raymond and Gary
K. Willis.
(ii) Authorization of appointment of Arthur Andersen LLP as independent
auditors for 2001:
For Against Abstain
1,226,188 3,582 2,050
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits set forth in the
Exhibit Index on the following
page are filed herewith as a
part of this report.
(b) Reports on Form 8-K
None
16
SIGNATURES
Pursuant to the requirements 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.
BENTHOS, INC
By /s/ Francis E. Dunne, Jr.
Francis E. Dunne, Jr.
Vice President, Chief Financial Officer,
and Treasurer
(Principal Financial and Accounting Officer)
DATE: August 14, 2001
BENTHOS, INC.
EXHIBIT INDEX
Exhibit
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3.1 Restated Articles of Organization (1)
3.2 Articles of Amendment dated April 28, 1997 (2)
3.3 Articles of Amendment dated April 20, 1998 (5)
3.4 By-Laws (1)
3.5 By-Law Amendments adopted January 23, 1998 (4)
4.1 Common Stock Certificate (1)
10.1 Employment Contract with Samuel O. Raymond (1)
10.2 Amendment to Employment Contract with Samuel O. Raymond (2)
10.3 Employment Contract with John L. Coughlin (1)
10.4 Amended and Restated Employment Agreement with John L. Coughlin (10)
10.5 Severance Agreement with John L. Coughlin (13)
10.6 Employment Agreement with Ronald L. Marsiglio dated May 21, 2001.
10.7 Employment Agreement with Francis E. Dunne, Jr. (11)
10.8 Employee Stock Ownership Plan (1)
10.9 First Amendment to Employee Stock Ownership Plan (2)
10.10 Second Amendment to Employee Stock Ownership Plan (8)
10.11 Third Amendment to Employee Stock Ownership Plan (8)
10.12 Fourth Amendment to Employee Stock Ownership Plan (11)
10.13 Fifth Amendment to Employee Stock Ownership Plan (11)
10.14 401(k) Retirement Plan (1993)(1)
10.15 First Amendment to 401(k) Retirement Plan (2)
10.16 Second Amendment to 401(k) Retirement Plan (2)
10.17 Third Amendment to 401(k) Retirement Plan (3)
10.18 401(k) Retirement Plan (1999)(8)
10.19 First Amendment to 1999 401(k) Retirement Plan (11)
10.20 Second Amendment to 1999 401(k) Retirement Plan (11)
10.21 Third Amendment to 1999 401(k) Retirement Plan (14)
10.22 Supplemental Executive Retirement Plan (1)
10.23 1990 Stock Option Plan (1)
10.24 Stock Option Plan for Non-Employee Directors(1)
10.25 1998 Non-Employee Directors' Stock Option Plan (4)
10.26 Benthos, Inc. 2000 Stock Incentive Plan (9)
10.27 License Agreement between the Company and The Penn State Research
Foundation dated December 13, 1993 (1)
10.28 Technical Consultancy Agreement between the Company and William D.
McElroy dated July 12, 1994 (1)
10.29 Technical Consultancy Agreement between the Company and William D.
McElroy dated October 1, 1996 (3)
10.30 General Release and Settlement Agreement between the Company and
Lawrence W. Gray dated February 8, 1996 (1)
10.31 Line of Credit Loan Agreement between the Company and Cape Cod Bank
and Trust Company dated September 24, 1990, as amended (1)
10.32 Commercial Mortgage Loan Extension and Modification Agreement between
the Company and Cape Cod Bank and Trust Company, dated July 6, 1994
(1)
10.33 Credit Agreement between the Company and Cape Cod Bank and Trust
Company dated August 18, 1999 (8)
10.34 First Amendment to Credit Agreement dated March 23, 2001 (14)
10.35 License Agreement between the Company and Optikos Corporation dated
July 29, 1997 (3)
10.36 Hydrophone License Agreement between the Company and Syntron, Inc.
dated December 5, 1996 (6)
10.37 Amendment Number 1 to Hydrophone License Agreement between the Company
and Syntron, Inc. dated September 11, 1998 (6)
10.38 Asset Purchase Agreement among Benthos, Inc., Datasonics, Inc., and
William L. Dalton and David A. Porta (7)
21 Subsidiaries of the Registrant (1)
(1) Previously filed as an exhibit to Registrant's Registration
Statement on Form 10-SB filed with the Commission on December 17, 1996
(File No. O-29024) and incorporated herein by this reference.
(2) Previously filed as an exhibit to Registrant's Quarterly Report on
Form 10-QSB for the quarterly period ended March 30, 1997 (File No. O-
29024) and incorporated herein by this reference.
(3) Previously filed as an exhibit to Registrant's Quarterly Report on
Form 10-QSB for the quarterly period ended June 29, 1997 (File No. O-29024)
and incorporated herein by this reference.
(4) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended December 31, 1997
(File No. O-29024) and incorporated herein by this reference.
(5) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended March 31, 1998 (File
No. 0-29024) and incorporated herein by this reference.
(6) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended December 31, 1998
(File No. 0-29024) and incorporated herein by this reference.
(7) Previously filed as an exhibit to Registrant's Current Report on
Form 8-K filed on or about August 27, 1999 (File No. 0-29024) and
incorporated herein by this reference.
(8) Previously filed as an exhibit to Registrant's Annual Report on
Form 10-KSB for the fiscal year ended September 30, 1999 (File No. 0-29024)
and incorporated herein by this reference.
(9) Previously filed as an exhibit to the Registrant's definitive
proxy statement filed on Schedule 14A on or about January 18, 2000 and
incorporated herein by this reference.
(10) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended December 31, 1999
(File No. 0-29024) and incorporated herein by this reference.
(11) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended June 30, 2000 (File
No. 0-29024) and incorporated herein by this reference.
(12) Previously filed as an exhibit to the Registrant's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 2000 (File No. 0-
29024) and incorporated herein by this reference.
(13) Previously filed as an exhibit to Amendment No. 1 to the
Registrant's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 2000 (File No. 0-29024) and incorporated herein by this
reference.
(14) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended March 31, 2001 (File
No. 0-29024) and incorporated herein by this reference.