10QSB 1 d10qsb.txt FORM 10-QSB 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 December 31, 2001 ----------------- [_] Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from ____________ to ______________ Commission file number 0-29024 ------- 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 1,383,102 (Class) (Outstanding stock at February 11, 2002) Transitional Small Business Disclosure Format (check one): Yes ________ No X ------- 2 BENTHOS, INC. AND SUBSIDIARIES FORM 10-QSB FOR THE QUARTER ENDED DECEMBER 31, 2001 INDEX
Page No. Face Sheet 1 Index 2 Part I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets (unaudited) 3 December 31, 2001 and September 30, 2001 Condensed Consolidated Statements of Operations (unaudited) 4 Quarter Ended December 31, 2001 and December 31, 2000 Condensed Consolidated Statements of Cash Flow (unaudited) 5 Quarter Ended December 31, 2001 and December 31, 2000 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis 10 of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 Signatures 13
3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Benthos, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except per share amounts) (unaudited)
Assets December 31, 2001 September 30, 2001 ----------------- ------------------ Current Assets: Cash and Cash Equivalents $ 14 $ 46 Accounts Receivable, Net 3,417 2,723 Inventories 4,246 5,101 Prepaid Expenses and Other Current Assets 738 713 Deferred Tax Asset 1,650 1,650 ---------- ----------- Total Current Assets 10,065 10,233 Property, Plant and Equipment, Net 1,708 1,810 Goodwill 2,657 2,657 Other Assets, Net 1,410 1,388 ---------- ----------- $15,840 $16,088 ========== =========== Liabilities and Stockholders' Investment Current Liabilities: Current Portion of Long-Term Debt $ 786 $ 786 Line of Credit 400 500 Accounts Payable 1,603 1,520 Accrued Expenses 2,142 2,329 Customer Deposits 341 161 ---------- ----------- Total Current Liabilities 5,272 5,296 ---------- ----------- Long-Term Debt, Net of Current Portion 2,881 3,077 Stockholders' Investment: Common stock, $.06 2/3 Par Value- Authorized - 7,500 Shares Issued - 1,653 Shares at December 31, 2001 and September 30, 2001 110 110 Capital in Excess of Par Value 1,569 1,569 Retained Earnings 6,638 6,667 Treasury Stock, at Cost (630) (631) ---------- ----------- Total Stockholders' Investment 7,687 7,715 ---------- ----------- $ 15,840 $ 16,088 ========== ===========
See accompanying notes to Condensed Consolidated Financial Statements 4 Benthos, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited)
Quarter Ended December 31, 2001 December 31, 2000 ----------------- ----------------- Net Sales $ 4,643 $ 4,238 Cost of Sales 3,053 3,111 --------- --------- Gross Profit 1,590 1,127 Selling, General and Administrative Expenses 1,278 1,280 Research and Development Expenses 228 508 Amortization of Goodwill -- 66 Amortization of Acquired Intangibles 60 60 --------- --------- Income (Loss) from Operations 24 (787) Interest Income -- 21 Interest Expense (65) (104) --------- --------- Loss Before Benefit for Income Taxes (41) (870) Benefit for Income Taxes (13) (261) --------- --------- Net Loss $ (28) $ (609) ========= ========= Basic and Diluted Loss Per Share $ (0.02) $ (0.44) ========= ========== Weighted Average Number of Shares Outstanding 1,383 1,379 ========= =========
See accompanying notes to Condensed Consolidated Financial Statements 5 Benthos, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flow (in thousands) (unaudited)
Quarter Ended December 31, 2001 December 31, 2000 ----------------- ----------------- Cash Flows from Operating Activities: Net Loss $ (28) $ (609) Adjustments to Reconcile Net Loss to Net Cash Provided by (Used In) Operating Activities: Depreciation and Amortization 206 287 Changes in Assets and Liabilities: Accounts Receivable (694) 117 Inventories 855 142 Prepaid Expenses and Other Current Assets (25) 38 Accounts Payable and Accrued Expenses (104) (454) Customer Deposits 180 (78) -------- -------- Net Cash Provided by (Used In) Operating Activities 390 (557) Cash Flows from Investing Activities: Purchases of Property, Plant and Equipment (39) (235) Increase in Other Assets (87) (82) -------- -------- Net Cash Used in Investing Activities (126) (317) Cash Flows from Financing Activities: Payments on Line of Credit (100) -- Payments on Long-Term Debt (196) (196) -------- -------- Net Cash Used in Financing Activities (296) (196) Net Decrease in Cash and Cash Equivalents (32) (1,070) Cash and Cash Equivalents, Beginning of Period 46 1,474 -------- -------- Cash and Cash Equivalents, End of Period $ 14 $ 404 ======== ======== Supplemental Disclosure of Cash Flow Information: Interest Paid $ 61 $ 104 ======== ======== Income Taxes Paid, Net of Refunds $ 6 $ 50 ======== ========
See accompanying notes to Condensed Consolidated Financial Statements 6 Benthos, Inc. and Subsidiaries Notes to 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, 2001, 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. Certain reclassifications have been made to the 2001 financial statements to conform with the 2002 presentation. 3. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following: December 31, 2001 September 30, 2001 ------------------- -------------------- Raw Materials $ 374 $ 375 Work-in-Process 3,851 4,704 Finished Goods 21 22 ------- ------- $ 4,246 $ 5,101 ======= ======= 7 4. Earnings (Loss) Per Share A reconciliation of basic and diluted shares outstanding is as follows: Quarter Ended December 31, 2001 2000 ------- ------- Basic weighted average common shares outstanding 1,383 1,379 Weighted average common share equivalents -- -- ------- ------- Diluted weighted average shares outstanding 1,383 1,379 ======= ======= The following securities were not included in computing earnings per share because their effects would be anti-dilutive. Quarter Ended December 31, 2001 2000 ------- ------- Options to purchase common stock 337 197 ======= ======= 5. Segment Reporting The Company views its operations and manages its business as two segments, Undersea Systems and Package 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 December 31, 2001 2000 ------- ------- Sales to Unaffiliated Customers: Undersea Systems $ 3,016 $ 2,950 Package Inspection Systems 1,627 1,288 ------- ------- Total $ 4,643 $ 4,238 Income (Loss) from Operations: Undersea Systems $ (111) $ (585) Package Inspection Systems 135 (202) ------- ------- Total $ 24 $ (787) Identifiable Assets: Undersea Systems $ 9,990 $11,240 Package Inspection Systems 2,928 2,945 Corporate Assets 2,922 2,343 ------- ------- Total $15,840 $16,528 ======= ======= 8 Revenues by geographic area for the quarter ended December 31, 2001 and 2000 were as follows: Geographic Area 2001 2000 ------- ------- United States $ 3,832 $ 2,942 Other 811 1,296 ------- ------- Total $ 4,643 $ 4,238 ======= ======= 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 line of credit. The term note is payable in 84 consecutive equal monthly installments of principal with interest at prime (4.75% at December 31, 2001) plus 2%, or 7%, whichever is higher. The term note matures in August 2006. The line of credit expires on January 31, 2003. Borrowings under the line of credit are payable as follows: monthly payments of interest only and unpaid principal and accrued and unpaid interest at maturity. The interest rate under the line of credit is either prime (4.75% at December 31, 2001) plus 2%, or 7%, whichever is higher. Advances are limited to 35% of eligible accounts receivable. The availability under the line of credit was $716 as of December 31, 2001. There were $400 in advances outstanding under the line of credit as of December 31, 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. As of December 31, 2001, the Company was not in compliance with two of these covenants. In February of 2002, the Company obtained a waiver of this default. The amount available under the secured line of credit will become $600 after March 31, 2002. In January 2002, the line of credit was paid in full. 7. New Accounting Standards In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations. SFAS No. 141 addresses changes in the financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting for Pre-acquisition Contingencies of Purchased Enterprises. Effective July 1, 2001, all business combinations should be accounted for using only the purchase method of accounting. In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". This statement applies to goodwill and intangible assets acquired after June 30, 2001, as well as goodwill and intangible assets previously acquired. Under this statement goodwill as well as certain other intangible assets, determined to have an infinite life, will no longer be amortized, instead these assets will be reviewed for impairment on a periodic basis. Early adoption of this statement is permitted for fiscal year-end companies whereby the entity's fiscal year begins after March 15, 2001 and its first interim period financial statements have not been issued. Pursuant to this statement, the Company elected early adoption during the first fiscal quarter ended December 31, 2001. The goodwill associated with the Datasonics acquisition is no longer subject to amortization. Accordingly, the goodwill will be subject to an annual assessment for impairment. As a result, the Company's amortization expense for the first quarter of fiscal year 2002 is $66 lower than the first quarter of fiscal year 2001. The Company is currently evaluating the ultimate impact of this statement on its results of operations and financial position. In addition, the Company will be required to do a fair value impairment analysis of this goodwill. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of 9 tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company believes that this statement will not have a material impact on operations. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. Under this statement it is required that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and it broadens the presentation of discontinued operations to include more disposal transactions. The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the ultimate impact of this statement on its results of operations and financial position until such time as its provisions are applied. 8. Comprehensive Loss SFAS No. 130, Reporting Comprehensive Income, requires disclosure of all components of comprehensive loss. Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. The Company does not have any items of comprehensive loss other than net loss. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in Thousands) Results of Operations -- First quarter of fiscal year 2002 compared with first quarter of fiscal year 2001. The following table presents, for the periods indicated, the percentage relationship of Condensed Consolidated Statements of Earnings items to total sales:
Quarter Ended December 31, 2001 December 31, 2000 ----------------- ----------------- (unaudited) Net Sales 100.0% 100.0% Cost of Sales 65.7% 73.4% ------- ------- Gross Profit 34.3% 26.6% Selling, General & Administrative Expenses 27.6% 30.2% Research and Development Expenses 4.9% 12.0% Amortization of Goodwill --% 1.6% Amortization of Acquired Intangibles 1.3% 1.4% ------- ------- Income (Loss) from Operations .5% (18.6)% Interest Income --% .5% Interest Expense (1.4)% (2.5)% ------- ------- Loss Before Benefit for Income Taxes (.9)% (20.6)% Benefit for Income Taxes (.3)% (6.2)% ------- ------- Net Loss (.6)% (14.4)% ======= =======
Sales. Net sales increased by 9.6% in the first quarter of fiscal year 2002 to $4,643 as compared to $4,238 in the first quarter of fiscal year 2001. Sales of the Package Inspection Systems Division increased by 26.3% to $1,627 in the first quarter of fiscal year 2002 as compared to $1,288 in the first quarter of fiscal year 2001. The increase resulted largely from the timing of orders. Sales of the Undersea Systems Division increased by 2.2% to $3,016 in the first quarter of fiscal year 2002 as compared to $2,950 in the first quarter of fiscal year 2001. The increase in sales was concentrated in the geophysical, remotely operated vehicle (ROV), geophysical hydrophone, and glass flotation product areas, as compared to the first quarter of fiscal year 2001. Gross Profit. Gross Profit increased by 41.1% to $1,590 for the first quarter of fiscal year 2002 as compared to $1,127 for the first quarter of fiscal year 2001. As a percentage of sales, gross profit was 34.3% in the first quarter of fiscal year 2002 as compared to 26.6% in the first quarter of fiscal year 2001. The increase in gross profit dollars and percentage is attributed primarily to increased shipments, higher product mix of Package Inspection Systems Division products which provide higher gross profit, and less unabsorbed overhead resulting from increased sales volume. 11 Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased slightly to $1,278 for the first quarter of fiscal year 2002 as compared to $1,280 in the first quarter of fiscal year 2001. As a percentage of sales, selling, general and administrative expenses decreased to 27.6% in the first quarter of fiscal year 2002 as compared to 30.2% for the first quarter of fiscal year 2001. The decrease in selling, general, and administrative expenses as a percentage of sales is a result of increased sales volume as compared to the first quarter of fiscal year 2001. Research and Development Expenses. Research and development expenses decreased 55.1% to $228 for the first quarter of fiscal year 2002 as compared to $508 in the first quarter of fiscal year 2001. As a percentage of sales, research and development expenses decreased to 4.9% of sales in the first quarter of fiscal year 2002 from 12.0% in the first quarter of fiscal year 2001. The decrease in the overall level of expenditures is a result of the completion in fiscal 2001 of several development projects that were active in the first quarter of fiscal year 2001, the elimination of certain outside costs that existed in the first quarter of fiscal year 2001, and the temporary reassignment of engineering resources. Amortization of Goodwill. As a result of the Company's early adoption of SFAS No. 142, Goodwill and Other Intangible Assets, goodwill, as well as certain other intangible assets determined to have an indefinite life, will no longer be amortized. Such intangible assets will be subject to an annual assessment for impairment by applying a fair-value based test. The Company is currently assessing these assets for impairment and has not determined whether, or the extent to which, there will be any effect on the Company's financial position. The goodwill relates to the Datasonics acquisition in fiscal year 1999. Amortization of Other Acquired Intangibles. Amortization of other acquired intangibles was $60 in the first quarters of fiscal years 2002 and 2001. The amortization of other acquired intangibles relates to the Datasonics acquisition in fiscal year 1999. Interest Income. Interest income decreased to $0 in the first quarter of fiscal year 2002 as compared to $21 in the first quarter of fiscal year 2001. The decrease in interest income was a result of lower invested cash balances. Interest Expense. Interest Expense decreased to $65 in the first quarter of fiscal year 2002 as compared to $104 in the first quarter of fiscal year 2001. The decrease in interest expense dollars was a result of reduced interest rates and reduced principal on the variable rate term loan used to finance the Datasonics acquisition. Benefit for Income Taxes. The benefit for income taxes decreased to $13 in the first quarter of fiscal year 2002 as compared to a benefit of $261 in the first quarter of fiscal year 2001. The effective tax rate used in the first quarter of fiscal years 2002 and 2001 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 $32 from September 30, 2001 to December 31, 2001. Cash of $390 was generated in operating activities, primarily the result of the net loss incurred during the quarter offset by depreciation and amortization and changes in operational assets and liabilities. The Company also used $126 and $296 of cash in its investing and financing activities, respectively. Investing activities represents primarily the payments on a split-dollar life insurance policy and financing activities represents the payment of the installment payments on the term note and partial repayment on the line of credit. 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 line of credit. The term note is payable in 84 consecutive equal monthly installments of principal with interest at prime (4.75% at December 31, 2001) plus 2%, or 7%, whichever is higher. The term note matures in August 2006. The line of credit expires on January 31, 2003. Borrowings under the line of credit are payable as follows: monthly payments of interest only and unpaid principal and accrued and unpaid interest at maturity. The interest rate under the line of credit is either prime (4.75% at December 31, 2001) plus 2%, or 7%, whichever is higher. Advances are limited to 35% of 12 eligible accounts receivable. The availability under the line of credit was $716 as of December 31, 2001. There were $400 in advances outstanding under the line of credit as of December 31, 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. As of December 31, 2001, the Company was not in compliance with two of these covenants. In February of 2002, the Company obtained a waiver of this default. The amount available under the secured line of credit will become $600 after March 31, 2002. In January 2002, the Company received a $662 refund as a result of a carryback of tax losses. The Company paid the outstanding balance of the line of credit with the proceeds. The Company believes it is well-positioned to finance future working capital requirements and capital expenditures during the next twelve months through cash on hand and available credit facilities. "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 are 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. 13 Part II -- Other information 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 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: February 11, 2002 BENTHOS, INC. EXHIBIT INDEX Exhibit ------- 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 (15) 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 Second Amendment to Credit Agreement dated December 12, 2001. 10.36 License Agreement between the Company and Optikos Corporation dated July 29, 1997 (3) 10.37 Hydrophone License Agreement between the Company and Syntron, Inc. dated December 5, 1996 (6) 10.38 Amendment Number 1 to Hydrophone License Agreement between the Company and Syntron, Inc. dated September 11, 1998 (6) 10.39 Asset Purchase Agreement among Benthos, Inc., Datasonics, Inc., and William L. Dalton and David A. Porta (7) 10.40 Settlement Agreement and Mutual Release dated October 18, 2001 between the Company and RJE International, Inc.(16) 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. (15) Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2001 (File No. 0-29024) and incorporated herein by this reference. (16) Previously filed as an exhibit to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2001 (File No. 0-29024) and incorporated herein by this reference.