<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 May 31, 1999
---------------------------------------
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 July 6, 1999, the Company has 2,370,133 shares of Common Stock, $.001 par
value, outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
--- ---
<PAGE> 2
COHESANT TECHNOLOGIES INC.
INDEX
Part I. Financial Information PAGE
Cohesant Technologies Inc. Condensed
Balance Sheet as of May 31, 1999........................... 1
Cohesant Technologies Inc. Condensed
Statements of Operations for the Three Months Ended
May 31, 1999 and May 31, 1998.............................. 2
Cohesant Technologies Inc. Condensed
Statements of Operations for the Six Months Ended
May 31, 1999 and May 31, 1998.............................. 3
Cohesant Technologies Inc. Condensed
Statements of Cash Flows for the Six Months Ended
May 31, 1999 and May 31, 1998.............................. 4
Notes to Condensed Financial Statements............................. 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 9
Part II.
Other Information................................................... 13
Signatures.......................................................... 15
<PAGE> 3
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
May 31, 1999
-------------------------
<S> <C>
ASSETS:
Cash and cash equivalents $ 43,271
Accounts receivable, net of allowance
for doubtful accounts of $158,033 2,920,670
Inventory 3,380,719
Prepaid expenses 122,820
Deferred tax asset 165,600
-----------
Total Current Assets 6,633,080
Restricted, temporary investment 204,559
Property, plant and equipment, net 669,783
Investment and advances in unconsolidated affiliate 94,082
Patents and other intangibles, net 119,593
Goodwill, net 633,198
Other noncurrent assets 5,566
Noncurrent assets - discontinued operations 155,861
-----------
Total Assets $ 8,515,722
===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Revolving line of credit $ 1,748,472
Current maturities of other noncurrent liabilities 162,953
Accounts payable 1,034,978
Accrued wages and benefits 54,288
Other current liabilities 478,440
-----------
Total Current Liabilities 3,479,131
Other noncurrent liabilities 82,018
-----------
Total Liabilities 3,561,149
Commitments and contingencies (Note 7)
Shareholders' Equity:
Common stock ($.001 par value, 10,000,000
shares authorized, 2,688,343 issued) 2,688
Additional paid-in capital 6,450,360
Retained deficit (869,781)
Treasury stock at cost, (351,610 shares) (628,694)
-----------
Total Shareholders' Equity 4,954,573
-----------
Total Liabilities and Shareholders' Equity $ 8,515,722
===========
</TABLE>
See Notes to Condensed Financial Statements.
1
<PAGE> 4
<TABLE>
<CAPTION>
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
May 31,1999 May 31,1998
----------------------- -------------------
<S> <C> <C>
NET SALES $ 3,876,331 $ 3,181,190
COST OF SALES 2,153,047 1,819,387
----------- -----------
Gross profit 1,723,284 1,361,803
RESEARCH, DEVELOPMENT AND
ENGINEERING EXPENSES 241,243 194,178
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,182,091 1,004,593
----------- -----------
TOTAL OPERATING EXPENSES 1,423,334 1,198,771
Income from operations 299,950 163,032
OTHER INCOME (EXPENSE):
Interest expense (36,555) (26,914)
Interest income 1,869 2,402
Equity in income of
unconsolidated affiliate 4,374 8,092
Other income, net 31,338 30,919
----------- -----------
INCOME BEFORE INCOME TAXES 300,976 177,531
PROVISION FOR INCOME TAXES (Note 5) (105,449) --
----------- -----------
NET INCOME 195,527 177,531
=========== ===========
BASIC AND DILUTED EARNINGS PER
COMMON SHARE (Note 3) $ 0.08 $ 0.07
=========== ===========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING:
BASIC 2,353,433 2,688,343
=========== ===========
DILUTED
2,378,261 2,747,157
=========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
2
<PAGE> 5
<TABLE>
<CAPTION>
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Six Months Ended
May 31,1999 May 31,1998
----------------------- ---------------------
<S> <C> <C>
NET SALES $ 6,971,738 $ 5,784,807
COST OF SALES 3,913,577 3,274,728
----------- -----------
Gross profit 3,058,161 2,510,079
RESEARCH, DEVELOPMENT AND
ENGINEERING EXPENSES 475,246 410,183
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,085,466 1,772,432
----------- -----------
TOTAL OPERATING EXPENSES 2,560,712 2,182,615
Income from operations 497,449 327,464
OTHER INCOME (EXPENSE):
Interest expense (60,948) (57,384)
Interest income 4,083 4,892
Equity in income of
unconsolidated affiliate 15,979 20,369
Other income, net 68,746 51,896
----------- -----------
INCOME BEFORE INCOME TAXES 525,309 347,237
PROVISION FOR INCOME TAXES (Note 5) (188,452) --
----------- -----------
NET INCOME 336,857 347,237
=========== ===========
BASIC AND DILUTED EARNINGS PER
COMMON SHARE (Note 3) $ 0.14 $ 0.13
=========== ===========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING:
BASIC
2,373,157 2,688,343
=========== ===========
DILUTED
2,408,677 2,719,050
=========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
3
<PAGE> 6
<TABLE>
<CAPTION>
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended
May 31, 1999 May 31, 1998
----------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 336,857 $ 347,237
Adjustments to reconcile net income to net cash
used in continuing operations -
Depreciation and amortization 133,901 126,723
Provision for doubtful accounts 78,093 27,000
Equity in income of unconsolidated subsidiary (15,979) (20,369)
Net change in current assets and
current liabilities-
Accounts and notes receivable (1,051,137) (678,079)
Inventories 26,644 186,702
Prepaid expenses 29,551 (79,015)
Accounts payable (22,775) (772,710)
Other current liabilities (57,184) (305,338)
Other noncurrent assets 11,013 1,840
Other noncurrent liabilities (69,717) 163,345
----------- -----------
Net cash used in continuing operations (600,733) (1,002,664)
Change in current assets of discontinued
operations -- 1,542,960
----------- -----------
Net cash provided by (used in) operating (600,733) 540,296
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (153,416) (83,216)
Change in noncurrent assets of discontinued
operations (84,624) 50,000
Payments from unconsolidated affiliate 5,017 37,192
----------- -----------
Net cash provided by (used in) investing activities (233,023) 3,976
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) under revolving
line of credit 880,000 (550,000)
Proceeds from sale of treasury stock 101,351 --
Purchase of treasury stock (224,291) --
----------- -----------
Net cash provided by (used in) financing activities 757,060 (550,000)
----------- -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (76,696) (5,728)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 119,967 59,863
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 43,271 $ 54,135
=========== ===========
</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 subsidiaries--Glas-Craft,
Inc. ("GCI") and Raven Lining Systems, Inc. ("Raven").
NOTE 2 - BASIS OF PRESENTATION
The interim 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 financial statements include all adjustments,
which consist only of normal recurring accruals, necessary to present
fairly the financial information for such periods.
These interim financial statements should be read in conjunction with
the financial statements and the notes thereto included in the
Company's November 30, 1998 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
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". This
standard requires the presentation of two amounts, basic and diluted
earnings per share. 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 for each
period presented.
5
<PAGE> 8
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - REVOLVING LINE OF CREDIT FACILITY
On May 1, 1999, the Company's revolving line of credit agreement with a
bank was renewed. This $3,500,000 credit facility is subject to a
borrowing base and accrues interest at the bank's prime lending rate
(7.75% as of May 31, 1999). 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, 2000.
This agreement requires that the Company meet certain covenants
including financial ratios. As of May 31, 1999, the Company was in
compliance with the financial covenants. As of May 31, 1999, the
outstanding balance under this agreement was $1,748,472.
NOTE 5- INCOME TAXES
The Company has provided for income taxes at its estimated effective
tax rate of 37% during the first six months of fiscal 1999. The Company
did not record a provision for income taxes for the 1998 six month
period due to the utilization of the Company's net operating loss
carryforwards for which a full valuation allowance had been established
in prior years due to the risk that the net operating loss
carryforwards may expire unused.
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."
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
for an aggregate contract amount of $1,350,000. The $350,000 payment
received in exchange for the non-compete agreement is being amortized
to income over the three-year contract period. The unamortized portion
of the non-compete agreement of $116,667 and $68,059 are included in
the accompanying
6
<PAGE> 9
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidated Balance Sheet as an Other Current and Noncurrent
Liability, respectively.
As of May 31, 1999, the remaining assets of the discontinued segment
are reflected as assets held for sale at net realizable value less
costs to sell, which includes an estimate for environmental remediation
costs, in the accompanying Consolidated Balance Sheet as Noncurrent
Assets - Discontinued Operations. Disposal of these assets has been
delayed pending the outcome of certain environmental remediation
efforts at the site (Note 7). Management will reevaluate the net
realizable value of these assets as additional information regarding
the environmental remediation alternatives and the ultimate disposition
of the assets becomes available. The operating activity of the
discontinued segment ceased during the second quarter of 1998. Net
sales of the discontinued segment were $0 and $722,879 during the first
six months of fiscal 1999 and 1998, respectively. Total operating
losses from the discontinued segment were $0 and $184,550 during the
first six months of fiscal 1999 and 1998, respectively. Operating
results for this business are consistent with the Company's prior
estimate of these amounts.
NOTE 7- COMMITMENTS AND CONTINGENCIES
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
related to the closure of underground storage tanks and soil and
groundwater contamination investigation to fully define the extent of
groundwater and possible other contamination at the site. The Company
accrues costs for an estimated environmental liability when management
becomes aware that a liability is probable and is able to reasonably
estimate the Company's cost. Generally, that occurs no later than when
feasibility studies and related cost assessments of remedial techniques
are completed, and the extent to which other potentially responsible
parties (if any), can be expected to contribute is determined. Outside
consultants are being used to perform site investigation work and to
advise management on the findings and remediation alternatives. In
management's opinion, the liabilities for the environmental matter
mentioned above which are probable and reasonably estimable are
accrued. As of May 31, 1999, the environmental reserve was
approximately $167,000. The reserve is reflected as an adjustment to
the carrying value of the property held for sale. The actual costs to
be incurred by the Company will be dependent on final delineation of
contamination, final determination of remedial action required,
negotiations with federal and state agencies with respect to cleanup
levels, changes in regulatory requirements,
7
<PAGE> 10
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
innovations in investigatory and remedial technologies and
effectiveness of remedial technologies employed.
The Company is a party to other legal and environmental matters which
have arisen in the ordinary course of business. Management believes the
ultimate disposition of these matters will not have a material adverse
effect on the Company's financial position or results of operations.
NOTE 8- COMMON STOCK
In October 1998, the Company announced a 400,000 share repurchase
program. The Company completed purchases under the program in April
1999. The Company repurchased 413,500 shares for approximately
$730,000. In December 1998 the Company sold 61,890 shares out of
treasury to the Company sponsored 401(k) plan for approximately
$102,000.
8
<PAGE> 11
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1999
COMPARED TO THE THREE MONTHS ENDED MAY 31, 1998
RESULTS OF OPERATIONS
---------------------
For the three months ended May 31, 1999, net sales increased $695,141,
or 21.9%. Of this amount, $562,140 represented increased net sales of
equipment and parts. This increase was primarily attributable to sales
of polyurethane equipment and sales to OEM accounts. Domestic equipment
and parts net sales increased 51%, where as foreign equipment and parts
net sales decreased 6% when compared to the 1998 period. The decline in
foreign sales was the result of a considerable decrease in sales to
South America and a slight decrease in sales to Europe which was offset
by a small increase in sales to the Asia/Pacific Region. Specialty
grout and epoxy products net sales increased $133,001, or 22.1%.
This increase was a result of sales to new Certified Applicators.
The Company's gross margin increased to $1,723,284, or 44.5% of net
sales, in the current quarter from $1,361,803, or 42.8% of net sales,
in the 1998 period. The increase in gross profit percentage was
attributable to changes in product mix consisting of an increase in
sales of certain higher margin equipment and parts and increased sales
of the generally higher margin specialty grout and epoxy products.
Operating expenses are up $224,563, or 18.7% in the second quarter of
1999 over 1998 period. This increase was principally due to additional
marketing and administrative expenses attributable to the increased
sales volume. Also, higher personnel costs included in research,
development and engineering expenses contributed to this increase.
During the second quarter of 1999, other income, net of other expenses,
decreased from the same period in the prior year by $13,473, due
principally to increased interest expense and a decrease in income from
the unconsolidated affiliate.
SIX MONTHS ENDED MAY 31, 1999
COMPARED TO THE SIX MONTHS ENDED MAY 31, 1998
RESULTS OF OPERATIONS
---------------------
For the six months ended May 31, 1999, net sales increased $1,186,931,
or 20.5%, reflective of $1,340,487 increase in net sales of equipment
and parts and a $153,556 decrease in net sales of specialty grout and
epoxy products. The equipment increase was primarily attributable to
sales of polyurethane equipment and to a lesser extent sales to
9
<PAGE> 12
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OEM accounts. Domestic and foreign equipment and parts net sales
increased 51% and 7% respectively, over the 1998 period. The increase
in foreign sales was a result of increased sales in Europe and the
Asian/Pacific region, which was offset by sharp decrease in sales to
South America. The decrease in specialty grout and epoxy products net
sales was a result of completion of certain large projects in 1998
which was partially offset by sales from the addition of new Certified
Applicators.
The Company's gross margin increased to $3,058,161, or 43.9% of net
sales, in the current six month period from $2,510,079, or 43.4% of net
sales, in the 1998 period. The increase in gross profit was
attributable to the increased sales volume and product mix.
Operating expenses are up $378,097, or 17.3%, over the 1998 comparable
period. This increase was principally due to additional marketing and
administrative expenses attributable to the increased sales volume.
Also, higher personnel costs included in research, development and
engineering expenses contributed to this increase.
During the first six months of 1999, other income, net of other
expenses, increased from the same period in the prior year by $8,087,
due principally to increased income derived from amortization of the
agreement not to compete in the adhesive, private label and toll
manufacturing business, income from finance charges attributable to
outstanding trade receivables. The increase was offset in part by
increased interest expense and a decrease in income from the
unconsolidated affiliate.
DISCONTINUED OPERATIONS
-----------------------
In January 1998, the Company and its American Chemical Company
subsidiary ("ACC") completed the sale of certain assets (inventory and
certain intangibles) of ACC's adhesive, private label and toll
manufacturing business (the "discontinued operation") for $1,350,000.
The purchase price includes $350,000 allocated to a three-year
non-compete agreement, which is being allocated to income over a
three-year term. The unamortized portion of the non-compete agreement
of $116,667 and $68,059 is included in the accompanying Condensed
Consolidated Balance Sheet as an Other Current and Noncurrent
Liability, respectively. The Company accounted for ACC's business as a
discontinued operation, in accordance with APB No. 30, as of November
30, 1997 when the definitive sale agreement was executed.
As of May 31, 1999, the remaining assets of the discontinued segment
are reflected as assets held for sale at net realizable value less
costs to sell, which includes an estimate for
10
<PAGE> 13
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
environmental remediation costs, in the accompanying Consolidated
Balance Sheet as Noncurrent Assets Discontinued Operations. Disposal of
these assets has beendelayed pending the outcome of certain
environmental remediation efforts at the site (Note 7). Management will
reevaluate the net realizable value of these assets as additional
information regarding the environmental remediation alternatives and
the ultimate disposition of the assets becomes available. The operating
activity of the discontinued segment ceased during the second quarter
of 1998. Net sales of the discontinued segment were $0 and $722,879
during the first six months of 1999 and 1998, respectively. Total
operating losses from the discontinued segment were $0 and $184,550
during the first six months of 1999 and 1998, respectively. Operating
results for this business are consistent with the Company's prior
estimate of these amounts.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
On May 1, 1999, the Company's revolving line of credit agreement with a
bank was renewed. This $3,500,000 credit facility is subject to a
borrowing base and accrues interest at the bank's prime lending rate
(7.75% as of May 31, 1999). 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, 2000. As of May 31, 1999, the
outstanding balance under this agreement was $1,748,472 an increase of
$880,000 over November 30, 1998. This increase was due to higher trade
receivable balances and the purchase of treasury shares.
In October 1998, the Company announced a 400,000 share repurchase
program. The Company completed purchases under the program in April
1999. The Company repurchased 413,500 shares for approximately
$730,000. In December 1998 the Company sold 61,890 shares out of
treasury to the Company sponsored 401(k) plan for approximately
$102,000.
During the first six months of fiscal 1999, the Company's working
capital remained substantially unchanged.
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. Also, the Company has
identified other software and systems with potential Year 2000
problems. These costs incurred to date and estimated future costs will
not in the aggregate be material. The Company anticipates completing
its review and testing of its Year 2000 compliance program by the end
of the third quarter.
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. The Company has begun the
process of developing contingency plans that will address critical
activities as determined by management in the event that its Year 2000
compliant program is not completed in a timely manner or events prove
it to be deficient.
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
There are no pending legal proceedings to which the Company is subject,
nor to the knowledge of the Company are any legal proceedings
threatened, other than for ordinary, routine proceedings incidental to
its business, except as follows:
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
related to the closure of underground storage tanks and soil and
groundwater contamination investigation to fully define the extent of
groundwater and possible other contamination at the site. The Company
accrues costs for an estimated environmental liability when management
becomes aware that a liability is probable and is able to reasonably
estimate the Company's cost. Generally, that occurs no later than when
feasibility studies and related cost assessments of remedial techniques
are completed, and the extent to which other potentially responsible
parties (if any), can be expected to contribute is determined. Outside
consultants are being used to perform site investigation work and to
advise management on the findings and remediation alternatives. In
management's opinion, the liabilities for the environmental matter
mentioned above which are probable and reasonably estimable are
accrued. As of May 31, 1999, the environmental reserve was
approximately $167,000. The reserve is reflected as an adjustment to
the carrying value of the property held for sale. The actual costs to
be incurred by the Company will be dependent on final delineation of
contamination, final determination of remedial action required,
negotiations with federal and state agencies with respect to cleanup
levels, changes in regulatory requirements, innovations in
investigatory and remedial technologies and effectiveness of remedial
technologies employed.
13
<PAGE> 16
COHESANT TECHNOLOGIES INC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Company's annual meeting of stockholders was held on
May 10, 1999.
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
2000.
c) At the annual meeting, the Company's stockholders ratified
the appointment of Arthur Andersen LLP as auditors of the
Company for fiscal 1999. The holders of 2,238,615 shares of
Common Stock voted to ratify the appointment, the holders of
15,400 shares voted against the ratification, and the
holders of 66 shares abstained.
The following tabulation represents voting for the
Directors:
<TABLE>
<CAPTION>
For Withheld Authority
--------------------------- --------------------------
<S> <C> <C>
Morten A. Cohen 2,230,206 23,875
Dwight D. Goodman 2,230,206 23,875
Michael L. Boeckman 2,113,731 140,350
Richard L. Immerman 2,230,206 23,875
Morris H. Wheeler 2,113,731 140,350
</TABLE>
ITEM 6. Exhibits and reports on Form 8-K
(a) Exhibits
4.1 Amendment to Credit and Security Agreement, Date May 1,
1999 by and between Cohesant Technologies Inc. and Union
Planters Bank, N.A.
27 Financial Data Schedule
(b) Reports on Form 8-K - none
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: July 6, 1999
COHESANT TECHNOLOGIES INC.
BY: /s/ Robert W. Pawlak
--------------------------------
Robert W. Pawlak
Chief Financial Officer
15
<PAGE> 1
Exhibit 4.1
AMENDMENT NO. 1 TO CREDIT AND SECURITY AGREEMENT
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This Amendment No. 1 to Credit and Security Agreement ("Amendment No.
1") dated as of this day of April, 1999, by and between COHESANT TECHNOLOGIES
INC., a Delaware corporation (hereinafter referred to as "Borrower"), and UNION
PLANTERS BANK, N.A. a national banking association (hereinafter referred to as
"Bank") as successor in interest by way of assignment to NBD BANK, N.A.
W I T N E S S E T H :
WHEREAS, the Borrower and the Bank are parties to that certain Credit
and Security Agreement dated as of the 15th day of May, 1998 (hereinafter
referred to as "Agreement"); and
WHEREAS, the Borrower desires to renew the financial accommodations
previously extended by the Bank; and
WHEREAS, the Bank is willing to provide such financial accommodations
to the Borrower on the terms and subject to the conditions in the Agreement as
amended by the terms and conditions of this Amendment No. 1.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter contained, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. EFFECT OF THIS AMENDMENT NO. 1. This Amendment No. 1 shall
not change, modify, amend or revise the terms, conditions and provisions of the
Agreement, the terms and provisions of which are incorporated herein by
reference, except as expressly provided herein and agreed upon by the parties
hereto. This Amendment No. 1 is not intended to be nor shall it constitute a
novation or accord and satisfaction of the outstanding instruments by and
between the parties hereto. Borrower and Bank agree that, except as expressly
provided herein, all terms and conditions of the Agreement shall remain and
continue in full force and effect. The Borrower acknowledges and agrees that the
indebtedness under the Agreement remains outstanding and is not extinguished,
paid, or retired by this Amendment No. 1, or any other agreements between the
parties hereto prior to the date hereof, and that Borrower is and continues to
be fully liable for all obligations to the Bank contemplated by or arising out
of the Agreement. Except as expressly provided otherwise by this Amendment No.
1, the credit facilities contemplated by this Amendment No. 1 shall be made
according to and pursuant to all conditions, covenants, representations and
warranties contained in the Agreement.
SECTION 2. DEFINITIONS. Terms defined in the Agreement which are used
herein shall have the same meaning as set forth in the Agreement unless
otherwise specified herein.
SECTION 3. AMENDMENT OF AGREEMENT. Subject to the satisfaction of the
conditions
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precedent set forth in Section 5 herein:
(a) All references to "Bank" appearing in the Agreement and the Loan
Documents shall hereinafter refer to Union Planters Bank, N.A.
(b) The first sentence of Subsection 2.1.1 of the Agreement is hereby
amended and replaced with the following:
2.1.1 The obligation of the Borrower to repay the Line of Credit Loans
shall be evidenced by the Line of Credit Note which shall be repayable
on or before May 1, 2000 ("Maturity").
(c) Section 2.2 of the Agreement is hereby amended and restated in its
entirety with the following:
2.2 STANDBY LETTERS OF CREDIT. The Borrower may apply to the Bank for
the issuance by the Bank of one or more Letters of Credit
(individually a "Letter of Credit" and collectively the "Letters of
Credit"), the aggregate maximum principal amount of such Letters of
Credit not to exceed One Hundred Thousand and No/100 Dollars
($100,000.00). Upon receipt by the Bank of a duly executed application
by the Borrower for a Letter of Credit on the Bank's standard form
therefor, the Bank will accept such applications and issue one or more
of its Letters of Credit, subject to availability under the Line of
Credit. The Borrower agrees to pay the Bank a fee of One Percent
(1.0%) per annum for the aggregate undrawn full amount of the Letters
of Credit, which fee shall be paid on or prior to the issuance of a
Letter of Credit and thereafter on or before the renewal thereof. This
fee shall be additional consideration for the issuance of the Letter
of Credit. The Borrower shall not be entitled to, and agrees not to
seek, any refund, credit or offset for such fee whether or not any
amounts are drawn under any of such Letters of Credit. The terms and
conditions of the Letters of Credit shall be governed by International
Standby Practices - ISP98 (1998 version) International Chamber of
Commerce Publication No. 590 and otherwise in accordance with their
terms. The terms and conditions of any obligations of the Borrower
pursuant to any such Letter of Credit shall be determined by the
application made by the Borrower as accepted by the Bank. The Borrower
acknowledges that the amount available under the Borrowing Base shall
be reduced by the sum of (i) aggregate undrawn face amount of any
Letters of Credit plus (ii) the aggregate of any amounts paid by the
Bank pursuant to any Letter of Credit.
(d) The address for purposes of notices to the Bank as set forth in
Section 13.11 of the Agreement is hereby amended as follows:
If to Bank: Union Planters Bank, N.A.
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One Indiana Square
Mail Station 728
Indianapolis, Indiana 46266
Attn: Janet K. Carter
Telecopy: (317) 221-6921
SECTION 4. COMMITMENT FEE AND LEGAL FEES. There will be a Three
Thousand Five Hundred and No/100 Dollar ($3,500.00) commitment fee for the
renewal of the credit facilities contemplated by this Amendment No. 1 to the
Borrower. All out-of-pocket expenses of the Bank, including without limitation,
filing fees, recording fees, and legal fees and disbursements, are to be paid by
Borrower promptly upon demand therefor.
SECTION 5. CONDITIONS PRECEDENT. This Amendment No. 1 shall become and
be deemed effective in accordance with its terms immediately upon the Bank
receiving:
(a) Two (2) copies of this Amendment No. 1 duly executed by
the authorized officers of the Borrower and the Bank.
(b) One (1) copy of the Line of Credit Note reflecting the
revised Maturity duly executed by an authorized officer of the
Borrower.
(c) Two (2) copies of the Application for Advance and
Borrower Base Certificate dated as of the date hereof, in such amount
as requested to be advanced under the Line of Credit, or, in the
alternative, a Certificate of No Default, each executed by an
authorized officer of the Borrower.
(d) Two (2) copies of a Consent and Confirmation of Guaranty
executed by each of the Guarantors.
(e) Such other documents and items as the Bank may reasonably
request.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
hereby represents and warrants, in addition to any other representations and
warranties contained herein, in the Agreement, the Loan Documents (as defined in
the Agreement) or any other document, writing or statement delivered or mailed
to the Bank or its agent by the Borrower, as follows:
(a) This Amendment No. 1 constitutes a legal, valid and
binding obligation of the Borrower enforceable in accordance with its
terms. The Borrower has taken all necessary and appropriate corporate
action for the approval of this Amendment No. 1 and the authorization
of the execution, delivery and performance thereof.
(b) As of the date hereof, there is no Event of Default or
Default under the Agreement, the Amendment No. 1 or the Loan Documents.
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<PAGE> 4
(c) The Borrower hereby specifically confirms and ratifies
its obligations, waivers and consents under each of the Loan
Documents.
(d) Except as specifically amended herein, all
representations, warranties and other assertions of fact contained in
the Agreement and the Loan Documents continue to be true, accurate and
complete.
(e) There have been no changes to the Articles of
Incorporation, By-Laws, the identities of the officers, or the
composition of the Board of Directors of the Borrower since execution
of the Agreement.
(f) Borrower acknowledges that the definition "Loan Documents"
shall include this Amendment No. 1 and all the documents executed
contemporaneously herewith.
SECTION 7. AFFIRMATIVE COVENANTS. By entering into this Amendment No.
1, Borrower further specifically undertakes to comply with the obligations,
terms and covenants as contained in the Agreement and agrees to comply
therewith as such relate to the credit facilities and accommodations as
provided to the Borrower pursuant to the terms of this Amendment No. 1.
SECTION 8. GOVERNING LAW. This Amendment No. 1 has been executed and
delivered and is intended to be performed in the State of Indiana and shall be
governed, construed and enforced in all respects in accordance with the
substantive laws of the State of Indiana.
SECTION 9. HEADINGS. The section headings used in this Amendment No. 1
are for convenience only and shall not be read or construed as limiting the
substance or generality of this Amendment No. 1.
SECTION 10. SURVIVAL. All representations, warranties, and covenants of
the Borrower herein or any certificate, agreement or other instrument delivered
by or on its behalf under this Amendment No. 1 shall be considered to have been
relied upon by the Bank and shall survive the making of the Loans and delivery
to the Bank of the Line of Credit Note. All statements and any such certificate
or other instrument shall constitute warranties and representations hereunder by
the Borrower, as the case may be.
SECTION 11. COUNTERPARTS. This Amendment No. 1 may be signed in one or
more counterparts, each of which shall be considered an original, with the same
effect as if the signatures were upon the same instrument.
SECTION 12. MODIFICATION. This Amendment No. 1 may be amended,
modified, renewed or extended only by written instrument executed in the manner
of its original execution.
SECTION 13. WAIVER OF CERTAIN RIGHTS. The Borrower waives acceptance or
notice of acceptance hereof and agrees that the Agreement, this Amendment No. 1,
the Line of Credit
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<PAGE> 5
Note, and all of the other Loan Documents shall be fully valid, binding,
effective and enforceable as of the date hereof, even though this Amendment No.
1 and any one or more of the other Loan Documents which require the signature
of the Bank, may be executed by and on behalf of the Bank on other than the
date hereof.
SECTION 14. WAIVER OF DEFENSES AND CLAIMS. In consideration of the
financial accommodations provided to the Borrower by the Bank as contemplated by
this Amendment No. 1, Borrower hereby waives, releases and forever discharges
the Bank from and against any and all rights, claims or causes of action against
the Bank arising under the Bank's actions or inactions with respect to the Loan
Documents or any security interest, lien or collateral in connection therewith
as well as any and all rights of set off, defenses, claims, causes of action and
any other bar to the enforcement of the Loan Documents which exist as of the
date hereof.
IN WITNESS WHEREOF, COHESANT TECHNOLOGIES INC. and UNION PLANTERS
BANK, N.A. have caused this Amendment No. 1 to Credit and Security Agreement to
be executed by their respective duly authorized officers as of this day of
April, 1999.
COHESANT TECHNOLOGIES INC.
("Borrower")
By:_________________________________________
Printed:____________________________________
Title:______________________________________
UNION PLANTERS BANK, N.A.
("Bank")
By:_________________________________________
Janet K. Carter, Vice President
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