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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-SB
as amended by Form 10-SB/A-1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
BENTHOS, INC.
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(Name of Small Business Issuer in Its Charter)
Massachusetts 04-2381876
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
49 Edgerton Drive, Falmouth, Massachusetts 02556
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(Address of Principal Executive Offices) (Zip Code)
508-563-1000
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Each Class is to be
to be so Registered Registered
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0667 par value
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Benthos, Inc. hereby amends Items 1 and 9 of its Registration Statement on
Form 10-SB to read as follows:
ITEM 1. DESCRIPTION OF BUSINESS
Benthos, Inc. (the "Company") was founded in 1962 to act as a supplier of
oceanographic products. It was incorporated as a Massachusetts corporation in
1965. Over the last 34 years, the Company has developed and acquired new
technology and products. Currently, the Company consists of two distinct
divisions: the Undersea Systems Division and the Container Inspection Systems
Division.
During the last three years, the Company has been going through a period of
marketing and product transition. From 1962 to 1993 the Company's sales were
primarily in the Undersea Systems Division, predominantly to educational,
governmental and research institutions. During 1994 and 1995, the sales in these
markets declined as government funding for these institutions was reduced
primarily as a result of a decrease in governmental expenditures for military
and scientific purposes. During the same period, the sales of the Container
Inspection Systems Division increased by 67.6%, from $3,071,000 in fiscal 1994
to $5,146,000 in the first nine months of fiscal 1996. Recent growth in the
Container Inspection Systems Division has been spurred in large part by the sale
of equipment to the North American brewery industry. See Item 2, "Management's
Discussion and Analysis" herein.
The Company's wholly-owned subsidiary, Benthos International, Inc. acts as
a foreign sales corporation (FSC) for the Company's foreign sales. It has no
substantial assets, liabilities or income.
Undersea Systems Division
The Company's Undersea Systems Division designs, develops, manufactures and
sells products and services used in oceanographic and undersea environments.
The markets for these products include the oceanographic research community
(research institutions, universities, government agencies and similar
organizations). Certain products are also sold to the oil industry (for
offshore oil and gas exploration) and the nuclear power industry. The product
range includes acoustic transponders used for location marking and navigation,
acoustic release devices used for recovering instrumentation packages from the
depths of the ocean, imaging systems (including video, 35mm and digital still
cameras), hydrophones used for geophysical exploration and sound detection,
remotely operated vehicles for inspection and light work tasks and glass
flotation products used to house instruments and to provide buoyancy. The
Company's undersea products are generally marketed under the trade name
"Benthos."
Container Inspection Systems Division
The Company's Container Inspection Systems Division designs, develops,
manufactures and sells systems used to inspect the integrity of containers in
the food, pharmaceutical and beverage industries. The customers for these
systems include manufacturers of food, beverages and pharmaceuticals packaged in
bottles, cans, glass jars, plastic containers and assorted vacuum packages with
metal and plastic caps. These systems are marketed
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under the trade name "TapTone." TapTone systems integrate various sensor
technologies with digital signal processing techniques in order to inspect
containers for leakage, seal integrity, low or high pressure, and similar
packaging defects. TapTone systems may be used on-line as continuous inspection
systems that operate at production speeds or as off-line inspection systems to
periodically validate package integrity.
1. Principal Products
Undersea Systems
The Company's undersea products are divided into five distinct product
groups as follows:
a. Acoustics
The Acoustics product group includes transponders, acoustic releases and
companion deck control systems. Transponders are used to transmit and receive
acoustic signals underwater for the purposes of determining location,
navigation, or sending and receiving data. These products are used for
scientific research, salvage and ship positioning operations. Both expendable
and recoverable products are manufactured. The transponder line includes low
cost versions that transmit a limited signal selection in response to a command
received, as well as more sophisticated versions that can be programmed to
transmit a wide variety of functions in response to received commands.
Transponders are monitored by and communicate with companion deck units which
are typically located on board a ship.
Acoustic releases are sound-operated devices that will anchor underwater
products in place and will release those products, allowing them to float to the
surface, in response to an acoustic command signal transmitted from the surface.
The acoustic release product line includes both deep water (up to 12,000
meters), heavy duty releases as well as recently introduced shallow water (up to
600 meters), light duty, low cost releases. Releases may be operated with
companion deck control units.
b. Hydrophones
Hydrophones are underwater sensors designed to produce an output signal in
response to an acoustic pressure signal. They can be thought of as underwater
microphones. The Company's hydrophone products are typically used in the
offshore oil and gas exploration industry, where they listen to acoustic sound
waves generated by the reflections of an acoustic signal as it bounces off of
the various geological layers beneath the ocean floor. These data are used to
generate information about the geological structure beneath the ocean as a means
of locating promising oil and gas exploration sites. The Company's hydrophone
product line is also used in military applications to listen for and detect
submarines and other vessels under and on
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the surface of the ocean. Hydrophones may also be sold to research institutions
for various applications such as listening to marine animals.
The Company's hydrophone product line includes sophisticated versions that
offer high sensitivity and can operate at great depth without significant
variation in response, as well as low cost hydrophones for the seismic research
industry that are produced in high production volumes. The Company's hydrophone
products may be used with companion amplifiers that convert the electrical
signals to usable formats and they may be integrated into arrays, which are
groupings of hydrophones assembled together in long tubes for the purpose of
added acoustic sensitivity and for listening to acoustic signals over a long
distance.
c. Imaging
The imaging product group consists of a line of cameras that are packaged
in enclosures that allow them to operate at varying depths underwater. The
Company's capabilities include still cameras (typically 35 mm), video cameras,
and recently introduced digital still cameras that can capture an image
comprised of digital data for transmission to the surface and subsequent
processing by software. The Company also sells companion underwater camera
flashes.
The Company's imaging products are used in research to photograph
underwater wildlife and geological formations. Imaging products are also used in
the commercial market to photograph underwater structures, such as oil rigs and
shipwrecks, for the purposes of inspection. Imaging products are also employed
in military applications to remotely inspect underwater objects such as mines.
d. Remotely Operated Vehicles (ROVs)
ROVs are unmanned underwater vehicles that are controlled from the surface
by a skilled operator. The Company's ROV product line includes a number of
specialized designs that are aimed at specific markets. These markets include
the research sector, where ROVs may be used as a camera delivery system for
visual documentation and inspection. ROVs are also sold to the nuclear power
industry, where they are used to perform inspections and light work tasks in
radioactive cooling water pools, and to the military sector, where they may be
used for remote inspection and to retrieve or deliver objects. The Company's
ROV products are also used for sewer and pipeline inspection. ROV systems are
occasionally used by the entertainment industry.
e. Glass Flotation
The Company manufactures a line of glass spheres that are used to provide
buoyancy to underwater products and systems and
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may be used to house underwater instruments and electronics, such as
transponders. Glass spheres are offered in three sizes depending on the
individual requirements of buoyancy and/or housing size. The Company also
customizes its glass spheres for individual customer requirements by providing
various penetrations, machined surfaces and electrical connectors. The Company
pressure tests all of its glass sphere products in order to insure successful
operation at desired depths. Glass spheres are normally provided with companion
plastic "hard hats" that allow for protection of the glass from breakage and for
safe transport.
Container Inspection Systems
The Company's container inspection systems are used to inspect bottles,
cans and similar packages for a variety of defects. The TapTone product line
includes the following:
a. TapTone II Pressure/Vacuum Discriminator
TapTone II uses acoustic technology to test for acceptable levels of
pressure or vacuum in containers that have metal closures and/or are metallic
themselves (such as beverage cans, glass bottles with metal crowns, and
conventional steel cans). These data are used to determine if the tested package
meets preset quality acceptance criteria. TapTone II is used for a variety of
food processing and beverage applications and its principal market is the
brewing and beverage industry. The TapTone II system is an on-line, high speed
inspection system designed to test 100% of produced products and to reject
containers that are determined to be defective. A typical TapTone II system
consists of a sensor assembly, an electronic control and display unit, and a
rejector for removing defective containers from the production line. TapTone II
is also available in a case configuration which incorporates multiple sensors
for testing products that have been packaged in sealed cases.
b. Tracker
The Tracker system uses a proximity sensor to measure the deflection of the
metal lid on a container. These data are used to determine if the container
meets preset quality acceptance criteria based upon lid deflection and its
correlation with the pressure or vacuum inside the container. Tracker systems
are normally used on beverage cans and conventional steel cans. Tracker systems
are on-line, high speed inspection systems designed to test 100% of produced
product, rejecting containers that are determined to be defective. A typical
Tracker system consists of a sensor assembly, an electronic control and display
unit, and a rejector for removing defective containers from the production line.
Tracker systems are also available in a case configuration that incorporates
multiple proximity sensors for testing products that have been packaged in
sealed cases.
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c. Turbo Tracker
The Turbo Tracker uses digital signal processing to enhance the accuracy
and performance of the Tracker system, allowing the system to test a wider
variety of containers. The Turbo Tracker system is also available in a case
configuration.
d. Laser Tracker
The Laser Tracker system is similar to the Tracker system except that it
uses a laser beam to measure closure deflection on a container with a non-
metallic lid or closure. These data are correlated with pressure inside the
container and are used to determine container quality based upon preset
criteria.
e. Squeezer System
The Squeezer system mechanically deforms a resilient container with a
preset force. These data are used to determine if the container is leaking
based upon preset criteria. Squeezer systems are typically used on squeezable
packages, such as plastic bottles, jugs, and pouches.
2. Distribution and Marketing Methods
The Undersea Systems Division and the Container Inspection Systems Division
market their products through an international network of independent sales
representatives and distributors. Sales representatives and distributors are
located in North America, South America, Europe, the Far East, Africa and
Australia. Domestic and international customers may also order the Company's
products directly from its headquarters in Massachusetts. Both divisions of the
Company participate in a number of trade shows and exhibitions around the world.
The Company also maintains an internal staff of trained sales and marketing
personnel with experience and expertise in the markets served by the Company.
3. New Products
The Company continually invests in new product development. Since October
1993, the Undersea Systems Division has introduced a digital still camera, a
shallow water acoustic release, and a low cost Reduced Diameter Array ("RDA")
seismic hydrophone. During that period, the Container Inspection Systems
Division introduced the Turbo Tracker and the Laser Tracker.
4. Competition
Undersea Systems Division
The Company competes with a variety of larger and smaller companies in each
of its product sectors. The Company's policy is to compete based upon technical
superiority and quality. In some product categories, such as glass flotation,
the Company believes
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that it has a majority share of the market. In the hydrophone and ROV product
groups, the Company has a minority market share and competes with larger
companies, such as Teledyne, that have significantly more resources than the
Company. In the acoustics and imaging product groups, the Company competes with
a variety of domestic and foreign competitors that are generally of the same
approximate size as the Company.
Container Inspection Systems Division
The majority of the competition for the Container Inspection Systems
Division is European-based. In general, these competitors are larger and offer a
broader product range than the Company. There are also three significant
domestic competitors, two of which are larger companies similar in size and
product breadth to the European competitors. The Company believes that it does
not have any significant competition in the market for leak detection in glass
bottles with metal caps. The Company's policy is to compete by offering
technically advanced, innovative products that feature better performance than
those offered by competitors.
5. Sources and Availability of Raw Materials
The products of both divisions generally utilize mechanical and electrical
components that are readily available from a wide variety of domestic and
foreign vendors. In certain cases, the Company produces components internally,
utilizing its labor force and machine shop capability. Some components are
specially designed for specific products and are purchased from a single vendor.
A ceramic component that is used in the seismic hydrophone product is purchased
from a single vendor, Motorola Corp., although the Company believes that there
are other vendors that possess the capability to provide a replacement
component. The Company's glass flotation products are also purchased from a
single vendor, Holophane Corp., although similar products could be obtained from
other vendors. The Company has not experienced any problems with the supply of
its raw materials and it believes that its sources of supply are adequate for
its present and future requirements.
6. Dependence on Major Customers.
Although the Company has a number of major customers, during the first nine
months of fiscal 1996, no one customer represented more than 10% of the
Company's total revenue. During the first nine months of fiscal 1996, sales to
the Miller Brewing Company represented approximately 9% of the Company's sales
and approximately 15% of the sales of the Container Inspection Systems Division.
The Company does not have a written purchase agreement with Miller Brewing
Company, other than a purchase order.
7. Patents, Trademarks and Other Agreements
The Company possesses several patents pertaining to the design and
manufacture of its products. Several names utilized by the Company are also
trademarked. It is the Company's policy to
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seek patent protection on products and designs that it considers important to
its future. However, the Company believes that quality and technical
superiority, rather than patent protection, are the most important criteria for
its future success.
The Company does not license any of its patents or designs to others at
this time. The Company is currently a licensee under a non-exclusive license
pertaining to the design of its seismic hydrophone product from The Penn State
Research Foundation.
8. Government Approvals and Contracts
There are no government approvals required for any of the products
currently manufactured by the Company. Certain products of the Undersea Systems
Division cannot be sold to certain countries under U.S. export controls. The
Company does not anticipate that these export restrictions will be removed in
the near future.
During the first nine months of fiscal 1996, approximately 10% of the sales
of the Undersea Systems Division were derived from military procurement
contracts, particularly contracts with the U.S. Navy. Accordingly, these
revenues will continue to be subject to the risks of changes in government
appropriations and changes in national defense policies and priorities. There
can be no assurance that the U.S. Navy will continue to purchase the Company's
products.
9. Effect of Government Regulations
The Company is not aware of any government regulations or pending
legislation that would affect the future sale of its products.
10. Research and Development
The Company maintains an internal staff of engineers and external
consultants with experience and expertise in the technologies it utilizes. The
majority of research and development programs are internally funded. Research
and development expenditures were $914,000 and $598,000, for the fiscal years
ended September 30, 1994 and 1995, respectively; and $431,000 and $441,000, for
the nine months ended July 2, 1995 and June 30, 1996, respectively. In addition,
the Company has an ongoing technical consulting agreement with William D.
McElroy, an expert in undersea acoutics.
11. Environmental Protection Regulations
The Company believes that its compliance with current federal, state, and
local environmental regulations will not have a material adverse effect on its
capital expenditures, earnings, or competitive position.
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12. Employees
As of June 30, 1996, the Company employed 63 full-time individuals, 13 of
whom were engaged in research and development, 26 in manufacturing and 24 in
sales, marketing and administrative positions. None of the Company's employees
is covered by a collective bargaining agreement. The Company believes that it
maintains good relations with its employees.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded over-the-counter and is listed on the
OTC Bulletin Board under the symbol BTHS. The Company has applied for listing of
its Common Stock on the Nasdaq SmallCap market and expects said listing to be
effective following the effectiveness of this registration statement.
The following table sets forth the high and low bid information for the
Company's Common Stock for the periods shown. Said quotations reflect inter-
dealer prices, without retail mark-up, mark-down, or commission, and may not
represent actual transactions.
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Quarter Ended High Low
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December 31, 1993 $ 3.50 $2.75
March 31, 1994 3.50 2.00
June 30, 1994 2.75 1.50
September 30, 1994 2.25 1.50
December 31, 1994 2.50 1.75
March 31, 1995 3.75 1.50
June 30, 1995 5.25 1.88
September 30, 1995 7.25 5.25
December 31, 1995 7.25 3.50
March 31, 1996 7.50 4.25
June 30, 1996 16.00 6.00
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As of September 30, 1996, there were approximately 310 holders of record of
the Company's Common Sock.
The Company has never declared dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
BENTHOS, INC.
By /s/ JOHN L. COUGHLIN
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John L. Coughlin,
President
Date: December 26, 1996
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