<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended August 31, 1998
-----------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------------- -----------------------
Commission File Number: 1-13484
-------------------------------------------------------
COHESANT TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 34-1775913
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
5845 West 82nd Street, Suite 102, Indianapolis, Indiana 46278
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 317-875-5592
------------------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) 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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
--- ---
As of October 5, 1998, the Company has 2,688,343 shares of Common
Stock, $.001 par value, outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
--- ---
<PAGE> 2
COHESANT TECHNOLOGIES INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information PAGE
------------------------------ ----
<S> <C>
Cohesant Technologies Inc. Condensed Consolidated
Balance Sheet as of August 31, 1998....................................... 1
Cohesant Technologies Inc. Condensed Consolidated
Statements of Operations for the Three Months Ended
August 31, 1998 and August 31, 1997....................................... 2
Cohesant Technologies Inc. Condensed Consolidated
Statements of Operations for the Nine Months Ended
August 31, 1998 and August 31, 1997....................................... 3
Cohesant Technologies Inc. Condensed Consolidated
Statements of Cash Flows for the Nine Months Ended
August 31, 1998 and August 31, 1997....................................... 4
Notes to Condensed Financial Statements............................................ 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 9
Part II. Other Information
-------- -----------------
Item 1. Legal Proceedings....................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders..................... 13
Item 5. Other Information....................................................... 14
Item 6. Exhibits and Reports on Form 8-K........................................ 14
Signatures....................................................................... 15
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
-----------------------------
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
August 31,1998
--------------
<S> <C>
ASSETS:
Cash and cash equivalents $ 170,804
Accounts receivable, net of allowance
for doubtful accounts of $93,344 2,121,218
Inventory 3,171,237
Prepaid expenses 182,066
Deferred tax asset 165,600
Current assets - discontinued operations 10,057
-----------
Total Current Assets 5,820,982
Restricted, temporary investment 213,178
Property, plant and equipment, net 629,235
Investment and advances in unconsolidated affiliate 97,975
Patents and other intangibles, net 131,306
Goodwill, net 548,899
Other noncurrent assets 6,220
Noncurrent assets - discontinued operations 339,673
-----------
Total Assets $ 7,787,468
===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Revolving line of credit $ 802,280
Current maturities of other noncurrent liabilities 56,308
Accounts payable 913,221
Accrued wages and benefits 110,699
Accrued liabilities related to discontinued operations 154,324
Other current liabilities 409,261
-----------
Total Current Liabilities 2,446,093
Other noncurrent liabilities 193,428
-----------
Total Liabilities 2,639,521
Commitments and contingencies (Note 7)
Shareholders' Equity:
Common stock ($.001 par value, 10,000,000
shares authorized, 2,688,343 issued and
outstanding) 2,688
Additional paid-in capital 6,450,360
Retained deficit (1,305,101)
-----------
Total Shareholders' Equity 5,147,947
-----------
Total Liabilities and Shareholders' Equity $ 7,787,468
===========
</TABLE>
See Notes to Condensed Financial Statements.
1
<PAGE> 4
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
August 31,1998 August 31,1997
-------------- --------------
<S> <C> <C>
NET SALES $ 3,053,923 $ 2,839,903
COST OF SALES 1,683,152 1,543,424
----------- -----------
Gross profit 1,370,771 1,296,479
RESEARCH, DEVELOPMENT AND
ENGINEERING EXPENSES 219,823 218,032
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 927,637 842,971
----------- -----------
Income from operations 223,311 235,476
OTHER INCOME (EXPENSE):
Interest expense (19,989) (23,993)
Interest income 2,495 2,549
Equity in income of
unconsolidated affiliate 11,315 129
Other income, net 33,509 1,819
----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 250,641 215,980
PROVISION FOR INCOME TAXES (Note 5) - -
----------- -----------
INCOME FROM CONTINUING OPERATIONS 250,641 215,980
DISCONTINUED OPERATIONS:
Loss from discontinued operations - (1,511,156)
----------- -----------
NET INCOME (LOSS) $ 250,641 $(1,295,176)
=========== ===========
NET INCOME (LOSS) PER SHARE
CONTINUING OPERATIONS
$ 0.09 $ 0.08
DISCONTINUED OPERATIONS - (0.56)
----------- -----------
BASIC AND DILUTED EARNINGS (LOSS) PER
COMMON SHARE (Note 3) $ 0.09 $ (0.48)
=========== ===========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 2,688,343 2,688,343
=========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
2
<PAGE> 5
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
August 31,1998 August 31,1997
-------------- --------------
<S> <C> <C>
NET SALES $ 8,838,730 $ 7,420,540
COST OF SALES 4,957,880 4,195,110
----------- -----------
Gross profit 3,880,850 3,225,430
RESEARCH, DEVELOPMENT AND
ENGINEERING EXPENSES 630,006 710,968
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,700,069 2,279,971
----------- -----------
Income from operations 550,775 234,491
OTHER INCOME (EXPENSE):
Interest expense (77,373) (53,623)
Interest income 7,387 9,209
Equity in income of
unconsolidated affiliate 31,684 34,672
Other income, net 85,405 5,411
----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 597,878 230,160
PROVISION FOR INCOME TAXES (Note 5) - -
----------- -----------
INCOME FROM CONTINUING OPERATIONS 597,878 230,160
DISCONTINUED OPERATIONS:
Loss from discontinued operations - (1,654,341)
----------- -----------
NET INCOME (LOSS) $ 597,878 $(1,424,181)
=========== ===========
NET INCOME (LOSS) PER SHARE
CONTINUING OPERATIONS $ 0.22 $ 0.09
DISCONTINUED OPERATIONS - (0.62)
----------- -----------
BASIC AND DILUTED EARNINGS (LOSS) PER
COMMON SHARE (Note 3) $ 0.22 $ (0.53)
=========== ===========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 2,688,343 2,688,343
=========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
3
<PAGE> 6
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
August 31, 1998 August 31, 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 597,878 $(1,424,181)
Adjustments to reconcile net income (loss) to net
cash used in continuing operations -
Loss from discontinued operations - 1,654,341
Depreciation and amortization 188,284 160,736
Provision for doubtful accounts 39,300 25,871
Equity in income of unconsolidated subsidiary (31,684) (34,672)
Net change in current assets and
current liabilities-
Accounts and notes receivable (627,391) (503,977)
Inventories (8,663) (593,013)
Prepaid expenses (77,382) (15,369)
Accounts payable (654,211) 158,243
Other current liabilities (413,778) 1,331,676
Other noncurrent assets 23 (27,134)
Other noncurrent liabilities 130,755 (9,014)
----------- -----------
Net cash used in continuing operations (856,869) 723,507
Net cash used in discontinued operations - (1,440,757)
Change in current assets of discontinued operations 1,764,713 -
----------- -----------
Net cash provided by (used in) operating activities 907,844 (717,250)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (136,114) (98,007)
Property and equipment additions of discontinued
operations - (296,079)
Change in noncurrent assets of discontinued
operations 50,000 -
Payments from unconsolidated affiliate 39,211 35,244
----------- -----------
Net cash provided by (used in) investing activities 46,903 (358,842)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) under revolving
line of credit (750,000) 802,280
----------- -----------
Net cash provided by (used in) financing activities (750,000) 802,280
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 110,941 (273,812)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 59,863 446,299
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 170,804 $ 172,487
=========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
4
<PAGE> 7
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BACKGROUND
Cohesant Technologies Inc. ("Company") designs, develops and
manufactures plural component dispensing systems, specialized spray
finishing and coating application equipment and specialty two component
epoxy coating and grout products through two wholly owned
subsidiaries--Glas-Craft, Inc. ("GCI") and Raven Lining Systems, Inc.
("Raven").
NOTE 2 - BASIS OF PRESENTATION
The interim condensed consolidated financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission for certain
small business issuers. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, in the opinion of
management of the Company, the interim condensed consolidated financial
statements include all adjustments, which consist only of normal
recurring accruals, necessary to present fairly the financial
information for such periods.
These interim condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's November 30, 1997 Annual Report
to Shareholders on Form 10-KSB.
The accompanying condensed consolidated financial statements include
the accounts of the Company and its direct wholly owned subsidiaries.
The Company's noncontrolling investment in an affiliate is accounted
for under the equity method. All significant intercompany amounts have
been eliminated.
NOTE 3 - EARNINGS PER SHARE
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", was issued. The new standard simplifies the
computation of earnings per share, and requires the presentation of two
new amounts, basic and diluted earnings per share. The Company adopted
this standard as of December 1, 1997, and has restated its computation
of earnings per share for each period presented. Financial instruments
considered in the computation of diluted earnings per share included
only the Company's outstanding stock options as the outstanding
warrants are antidilutive.
5
<PAGE> 8
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - REVOLVING LINE OF CREDIT FACILITY
On May 15, 1998, the Company entered into a revolving line of credit
agreement with a bank. This $3,500,000 credit facility is subject to a
borrowing base and accrues interest at the bank's prime lending rate
(8.5% as of August 31, 1998). The credit facility is fully secured by a
lien on all the assets of the Company and its operating subsidiaries.
The credit facility expires on May 1, 1999.
This agreement requires that the Company meets certain covenants
including financial ratios. As of August 31, 1998, the Company is in
compliance with these financial covenants. As of August 31, 1998, the
outstanding balance under this agreement was $802,280.
NOTE 5- INCOME TAXES
The Company has not recorded a provision for income taxes for the
quarter in light of the Company's net operating loss carryforwards for
which a full valuation allowance had been established in prior years
due to uncertainty as to the future use of these amounts. At year end,
the Company will assess the realization of the deferred tax asset
attributable to its loss carryforwards and adjust its valuation
allowance accordingly. Prior thereto, the tax benefit of these
carryforward amounts will be recognized only to the extent income is
generated. During the first nine months of 1998, the Company reduced
the valuation allowance to reflect the expected use of approximately
$221,000 of net operating loss carryforwards to reduce current income
taxes.
NOTE 6- DISCONTINUED OPERATIONS
On November 30, 1997, the Company's Board of Directors signed an
agreement to sell certain assets of American Chemical Company's ("ACC")
adhesive, private label and toll manufacturing business and decided to
account for such business as a discontinued operation for all periods
presented in accordance with Accounting Principles Board No. 30,
"Reporting the Results of Operations - Reporting the Effects of a
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions."
6
<PAGE> 9
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Accounts receivable, inventory and other current assets of the
adhesives, private label, and toll manufacturing business have been
segregated in the accompanying Consolidated Balance Sheet as Current
Assets - Discontinued Operations. Net property, plant and equipment and
other noncurrent assets of the adhesives, private label, and toll
manufacturing segment have been segregated in the accompanying
Consolidated Balance Sheet as Noncurrent Assets - Discontinued
Operations. The operating activity performed during the first nine
months of 1998 includes sales through the closing and tolling
activities for the buyer thereafter. Such tolling activity expired in
the second quarter. The discontinued operation recorded sales totaling
$722,879 and $4,215,762 during the first nine months of 1998 and 1997,
respectively. Total operating losses from the discontinued operation
were $321,303 and $1,654,341 during the first nine months of 1998 and
1997, respectively. The 1998 losses have been reflected as a reduction
to the Accrued Liabilities Related to Discontinued Operations in the
accompanying Condensed Consolidated Balance Sheet. Operating results
for this business are consistent with the Company's prior estimate of
these amounts.
On January 14, 1998 the Company, ACC and a third party completed the
sale of certain assets (inventory and certain intangibles) of the
discontinued business and executed a three-year non-compete agreement.
The consideration received of approximately $1,350,000 includes a
$300,000 promissory note and $350,000, for a three-year non-compete
agreement with the buyer. The cash consideration received in connection
with the sale of inventory is reflected in the accompanying Condensed
Consolidated Statement of Cash Flows as a Change in Current Assets of
Discontinued Operations. The $350,000 non-compete agreement is
presented on the accompanying Condensed Consolidated Balance Sheet as
an Other Current and Non-current Liability. The non-compete agreement
is being amortized to income over the three-year contract period. The
Company anticipates selling or otherwise disposing of the remaining
assets of this business by November 30, 1998. Subsequent to the Balance
Sheet date the Company settled the promissory note for $250,000 cash,
which was the carrying value of the note.
NOTE 7- COMMITMENTS AND CONTINGENCIES
King Adhesives Corporation, a predecessor company to ACC, has been
named by the United States Environmental Protection Agency ("EPA") as a
potentially responsible party ("PRP") for clean-up costs associated
with hazardous substances transshipped from
7
<PAGE> 10
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
the Enviro-Chem Site to the Great Lakes Asphalt Site. In January, 1995,
the Company received notice from a PRP group negotiating with the EPA
that liabilities regarding the received notice from a PRP group
negotiating with the EPA that liabilities regarding the Great Lakes
Asphalt Site had been settled with the EPA and that no further
assessments are expected. In addition, the Company had previously
received from such group notice of its potential liability with regard
to hazardous substances shipped to the Third Site/Enviro-Chem Site.
Management cannot currently predict the ultimate outcome of these
matters; however, management believes the outcome will not materially
affect the Company's financial position and its results of operations.
In the past King Adhesives Corporation had settled its alleged
liability with regard to hazardous substances shipped to the Wastex
Research, Inc. facility and the original Enviro-Chem Site. Management
believes that it is unlikely that any further liability will result
with regard to these two sites; however, no assurance can be given that
the EPA or any other party will not pursue any additional or ancillary
claims in the future.
In another environmental matter, with the sale of ACC's product lines
and inventories, the Company is proceeding to investigate and remediate
the environmental condition of its St. Louis property in order that the
property can be marketed and sold. The work includes soil remediation
required by the Missouri Department of Natural Resources in connection
with the closure of underground storage tanks. The Missouri Department
of Natural Resources has also requested a groundwater contamination
investigation plan be submitted for the site to fully define the extent
of groundwater contamination. Based on current information, the Company
does not expect the cost of the investigation and any remediation of
the St. Louis property to have a material adverse effect on the
Company's financial position or results of operations. An estimate of
costs expected to be incurred for environmental matters, based on
current information, has been accrued.
8
<PAGE> 11
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER ENDED AUGUST 31, 1998
RESULTS OF OPERATIONS
---------------------
For the three months ended August 31, 1998, net sales increased
$214,020, or 7.5%. Of this amount, $253,999 represented increased
equipment and parts sales offset by a $39,979 decrease of specialty
grout and epoxy products. The increase of equipment and parts sales
were attributable to a 20.6% increase in domestic sales, and a slight
increase in foreign sales over the 1997 period. Increased sales to
Europe offset slight decreases in sales to South America and the Asian
market.
The Company's gross margin increased to $1,370,771, or 44.9% of net
sales, in the current quarter from $1,296,479, or 45.7% of net sales,
in the 1997 period. The slight decline in gross profit percentage was
attributable to changes in product mix.
Operating expenses were up $86,457, or 8%, in the third quarter of 1998
over the 1997 period. This increase was principally due to additional
marketing expenses at both GCI and Raven. The increased marketing
expenses were attributable to the increased sales volume, additional
staffing and increased advertising.
During the third quarter of 1998, other income, net of other expenses,
increased from the prior period by approximately $46,800, due
principally to income derived from amortization of the noncompetition
agreement arising from the sale of ACC' s adhesive, private label and
toll manufacturing business ("the discontinued operation"), an increase
in income derived from the unconsolidated affiliate and decreased
interest expense.
NINE MONTHS ENDED AUGUST 31, 1998
COMPARED TO THE NINE MONTHS ENDED AUGUST 31, 1997
RESULTS OF OPERATIONS
---------------------
For the nine months ended August 31, 1998, net sales increased
$1,418,190, or 19.1%. Of this amount, $834,677 represented increased
specialty grout and epoxy products. This increase was primarily
attributable to increasing acceptance and specification of AquataPoxy
and Raven products. Equipment and parts sales increased $583,513
compared to the 1997 period. The increase was attributable to a 19%
increase in domestic sales offset by a slight 1% decrease in foreign
sales. The decrease in foreign sales was primarily due to a 21% drop in
sales to the Asian/Pacific region offset entirely by increased sales in
Europe and South America.
9
<PAGE> 12
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's 1998 year to date gross margin increased to $3,880,850,
or 43.9% of net sales, from $3,225,430, or 43.5% of net sales, in the
1997 period, reflective of the increased sales volume.
Operating expenses were up $339,136, or 11%, over the 1997 comparable
period. This increase was principally due to additional marketing
expenses at both GCI and Raven. The increased marketing expenses were
attributable to the increased sales volume, additional staffing and
increased advertising, offset by an adjustment of $45,000 as a result
of a final negotiated payment for previously accrued professional
services.
During the first nine months of 1998, other income, net of other
expenses, increased from the same period in the prior year by
approximately $51,400, due principally to income derived from
amortization of the noncompetition agreement arising from the sale of
the discontinued operation, offset by increased interest expense and a
decrease in income derived from the unconsolidated affiliate.
DISCONTINUED OPERATIONS
-----------------------
On November 30, 1997, the Company's Board of Directors signed an
agreement to sell certain assets of ACC's adhesive, private label and
toll manufacturing business (the "discontinued operation") and
management decided to discontinue this business. The operating activity
performed during the first nine months of 1998 includes sales through
the closing and tolling activities for the buyer thereafter. Such
tolling activity expired in the second quarter. The discontinued
operation recorded sales totaling $722,879 and $4,215,762 during the
first nine months of 1998 and 1997, respectively. Total operating
losses from the discontinued operation were $321,303 and $1,654,341
during the first nine months of 1998 and 1997, respectively. The 1998
losses have been reflected as a reduction to the Accrued Liabilities
Related to Discontinued Operations in the accompanying Condensed
Consolidated Balance Sheet.
On January 14, 1998, the Company completed the sale of certain of the
assets of the discontinued operation and signed a three-year agreement
not to compete in this business. The purchase price was approximately
$1,350,000, including $350,000 for the non- compete agreement. The
purchase price was paid in cash except for a $300,000 promissory note
bearing 8% interest and due in three years. The $350,000 non-compete
10
<PAGE> 13
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
agreement is being amortized to income over the three-year contract
period. The Company anticipates selling or otherwise disposing of the
remaining assets of this business by November 30, 1998. Subsequent to
the Balance Sheet date the Company settled the promissory note for
$250,000 cash, which was the carrying value of the note.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
On May 15, 1998, the Company entered into a revolving line of credit
agreement with a bank. This $3,500,000 credit facility is subject to a
borrowing base and accrues interest at the bank's prime lending rate
(8.5% as of August 31, 1998). The credit facility is fully secured by a
lien on all the assets of the Company and its operating subsidiaries.
The credit facility expires on May 1, 1999.
This agreement requires that the Company meets certain covenants
including financial ratios. As of August 31, 1998, the Company is in
compliance with these financial covenants. As of August 31, 1998, the
outstanding balance under this agreement was $802,280.
For the nine months ended August 31, 1998, the Company's working
capital increased $874,738, from $2,500,151 at November 30, 1997 to
$3,374,889 at August 31, 1998. This increase was due primarily to a
$188,323 increase in cash and prepaid expenses. $588,091 increase in
accounts receivable, $750,000 of repayments under the Company's line of
credit, a $654,211 decrease in accounts payable, $406,447 decrease in
accrued wages and benefits and accrued liabilities related to the
discontinued operation, offset by a $1,708,990 decrease in current
assets held from the discontinued operation.
YEAR 2000
---------
The "Year 2000 Issue" refers to the inability of computers and
applications to correctly interpret and process Year 2000 dated
transactions. The software problem results from a memory-saving
practice of using two digits instead of four to denote years in a
program. Computer systems that are not Year 2000 compliant may not be
able to be relied upon to process data accurately for transactions
dated after the year 1999.
11
<PAGE> 14
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company has developed a plan to address possible exposures related
to the impact of the Year 2000 Issue. Possible exposures include the
Company's ability to procure and manage inventory, ship product and
bill and collect from customers. The Company has tested and confirmed
the readiness of its mainframe computer system and has identified other
software and systems with potential Year 2000 problems. The Company
estimates that costs associated with making internal information
systems Year 2000 compliant will not be material, and thus will not
have a material impact on the Company's financial position.
In addition, the Company has identified and is assessing the readiness
of third parties, primary suppliers and customers. There is no
guarantee that the systems of these third parties will be timely
converted, however, the Company plans to devote the necessary resources
to resolve any potentially significant Year 2000 issues facing it,
whether from within its operations or as a result of its interaction
with these third parties, in a timely manner.
FORWARD LOOKING STATEMENTS
--------------------------
Certain statements contained in this report that are not historical
facts are forward looking statements that are subject to certain risks
and uncertainties that could cause actual results to differ materially
from those set forth in the forward looking statement. These risks and
uncertainties include, but are not limited to, a slow-down in domestic
and foreign markets for plural component dispensing systems and a
reduction in growth of markets for the Company's epoxy coating systems.
12
<PAGE> 15
COHESANT TECHNOLOGIES INC.
PART II. OTHER INFORMATION
----------------------------
ITEM 1. LEGAL PROCEEDINGS
With the sale of the product lines and inventories of the
Company's American Chemical Corp. subsidiary ("ACC"), the Company is
proceeding to investigate and remediate the environmental condition of
the ACC property in St. Louis in order that the property can be
marketed and sold. The work includes soil remediation required by the
Missouri Department of Natural Resources ("DNR") in connection with the
closure of underground storage tanks. The DNR has also requested a
groundwater contamination investigation plan to be submitted for the
site to fully define the extent of groundwater contamination. Based on
current information, the Company does not expect the cost of the
investigation and remediation to have a material adverse effect on the
Company's financial position or results of operations. The Company has
established a reserve, based on current information, of an estimate of
the costs expected to be incurred for the environmental matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Company's annual meeting of stockholders was held on
June 24, 1998.
b) At the annual meeting, the Company's stockholders elected
Morton A. Cohen, Dwight D. Goodman, Michael L. Boeckman,
Richard L. Immerman and Morris H. Wheeler as Directors for a
term that expires at the annual meeting of stockholders in
1999.
c) At the annual meeting, the Company's stockholders ratified
the appointment of Arthur Andersen, LLP as auditors of the
Company for fiscal 1998. The holders of 2,270,118 shares of
Common Stock voted to ratify the appointment, the holders of
13,700 shares voted against the ratification, and the
holders of 1,450 shares abstained.
The following tabulation represents voting for the
Directors:
<TABLE>
<CAPTION>
For Withheld Authority
--------------------------- --------------------------
<S> <C> <C>
Morten A. Cohen 2,267,218 18,050
Dwight D. Goodman 2,267,218 18,050
Michael L. Boeckman 2,267,218 18,050
Richard L. Immerman 2,267,218 18,050
Morris H. Wheeler 2,267,218 18,050
</TABLE>
13
<PAGE> 16
COHESANT TECHNOLOGIES INC.
PART II. OTHER INFORMATION
----------------------------
ITEM 5. OTHER INFORMATION
The Company's Glas-Craft subsidiary has recently signed an $1.8
million agreement with Burtin Urethane Corp. of Santa Ana, California.
Under the agreement, Glas-Craft will sell Burtin at least 200
two-component spray finishing and coating applications systems.
Delivery of the systems has commenced and are expected to continue thru
1999 year-end. Disclosure of the foregoing shall not imply that the
agreement is a "material contract" within the definition of Item
601(b)(10), Regulation S-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedule
14
<PAGE> 17
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: October 9, 1998
COHESANT TECHNOLOGIES INC.
BY: /s/ Robert W. Pawlak
-------------------------------
Robert W. Pawlak
Chief Financial Officer
15
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