<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 February 29, 2000
-----------------------------------------------
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 March 15, 2000, the Company has 2,336,733 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 Consolidated
Balance Sheet as of February 29, 2000....................1
Cohesant Technologies Inc. Condensed Consolidated
Statements of Operations for the Three Months Ended
February 29, 2000 and February 28, 1999..................2
Cohesant Technologies Inc. Condensed Consolidated
Statements of Cash Flows for the Three Months Ended
February 29, 2000 and February 28, 1999..................3
Notes to Condensed Consolidated Financial Statements..............4
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................8
Part II. Other Information
--------------------------
Item 6. Exhibits and Reports on Form 8-K.........................10
Signatures.......................................................11
<PAGE> 3
PART I. FINANCIAL INFORMATION
-----------------------------
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
February 29, 2000
-----------------
ASSETS:
Cash $ 71,836
Accounts receivable, net of allowance
for doubtful accounts of $179,579 2,637,889
Inventory, net 4,208,630
Prepaid expenses and other 145,417
Deferred tax assets 274,200
-----------
Total Current Assets 7,337,972
Property, plant and equipment, net 610,178
Investment and advances in unconsolidated affiliate 64,543
Patents and other intangibles, net 109,661
Goodwill, net 713,024
Other noncurrent assets 6,034
-----------
Total Assets $ 8,841,412
===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Revolving line of credit $ 700,000
Current maturities of long-term liabilities 114,722
Accounts payable 1,606,587
Accrued salaries, benefits and commissions 226,880
Accrued income taxes 380,967
Other current liabilities 362,213
-----------
Total Current Liabilities 3,391,369
Other noncurrent liabilities 0
-----------
Total Liabilities 3,391,369
Commitments and contingencies
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 (374,549)
Treasury stock at cost, (351,610 shares) (628,456)
-----------
Total Shareholders' Equity 5,450,043
-----------
Total Liabilities and Shareholders' Equity $ 8,841,412
===========
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 4
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
February 29, 2000 February 28,1999
----------------- ----------------
NET SALES $ 3,488,733 $ 3,095,407
COST OF SALES 1,984,193 1,760,530
----------- -----------
Gross profit 1,504,540 1,334,877
RESEARCH, DEVELOPMENT AND
ENGINEERING EXPENSES 254,015 234,003
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,034,007 903,375
----------- -----------
TOTAL OPERATING EXPENSES 1,288,022 1,137,378
Income from operations 216,518 197,499
OTHER INCOME (EXPENSE):
Interest expense (12,877) (24,393)
Interest income 0 2,214
Equity in income of
unconsolidated affiliate 12,449 11,605
Other income, net 37,198 37,408
----------- -----------
INCOME BEFORE INCOME TAXES 253,288 224,333
INCOME TAX PROVISION (89,111) (83,003)
----------- -----------
NET INCOME 164,177 141,330
=========== ===========
BASIC AND DILUTED EARNINGS PER
COMMON SHARE (Note 3) $ 0.07 $ 0.06
=========== ===========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING:
BASIC 2,336,733 2,393,320
=========== ===========
DILUTED 2,440,435 2,395,304
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
February 29, 2000 February 28, 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 164,177 $ 141,330
Adjustments to reconcile net income to net cash
used in continuing operations -
Depreciation and amortization 72,331 65,626
Provision for doubtful accounts 11,500 505
Equity in income of unconsolidated subsidiary (12,449) (11,605)
Net change in current assets and
current liabilities-
Accounts and notes receivable (297,842) (551,521)
Inventories (863,430) (97,306)
Prepaid expenses (81) 11,134
Accounts payable 688,622 37,369
Other current liabilities 11,269 (64,496)
Other noncurrent assets 72 402
Other noncurrent liabilities (9,727) (35,450)
--------- ---------
Net cash used in operating activities (235,558) (504,012)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (62,159) (66,369)
Change in noncurrent assets of discontinued
operations
- (56,149)
Advances to unconsolidated affiliate 16,658 6,274
--------- ---------
Net cash used in investing activities (45,501) (116,244)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit - 630,000
Proceeds from sale of treasury stock - 101,351
Purchase of treasury stock - (166,778)
--------- ---------
Net cash provided by financing activities - 564,573
--------- ---------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (281,059) (55,683)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 352,895 119,967
--------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 71,836 $ 64,284
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for
Interest $ 7,580 $ 24,393
--------- ---------
Income Taxes $ 11,249 $ 10,000
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED 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 condensed consolidated 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 condensed
consolidated 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, 1999 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 expired on November 30, 1999 or were antidilutive.
4
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COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - REVOLVING LINE OF CREDIT FACILITY
On May 1, 1999, 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 (8.75% as of February 29,
2000). 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 February 29, 2000, the Company was in compliance with
the covenants and financial ratios. As of February 29, 2000, the outstanding
balance under this agreement was $700,000.
NOTE 5- COMMON STOCK
In October 1998 the Company announced a share repurchase program. The Company
completed purchases under the program in April 1999. The Company repurchased
413,500 shares for $729,807. In December 1998 the Company sold 61,890 shares out
of treasury to the Company sponsored 401(k) plan for $101,351.
NOTE 6- SEGMENT INFORMATION
The Company monitors its operations in two business segments: Equipment and
Parts and Coatings and Grouts. Certain corporate costs and income taxes are not
allocated to the business segments. Financial information for the Company's
business segments as of the first quarter of fiscal 2000 and 1999, respectively
is as follows:
<TABLE>
<CAPTION>
Three Months Ended Equipment Coatings Discontinued
February 29, 2000 & Parts & Grouts Operations Corporate Consolidated
- ----------------- ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales $2,797,188 $ 691,545 $ - $ - $3,488,733
Depreciation and amortization: 49,545 22,770 - 16 72,331
Interest expense: 452 - - 12,425 12,877
Income from continuing operations before
taxes: 369,582 24,619 - (140,913) 253,288
Identifiable assets: 6,751,233 1,780,572 - 309,607 8,841,412
Capital expenditures: 47,854 14,305 - - 62,159
</TABLE>
5
<PAGE> 8
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Equipment Coatings Discontinued
February 28, 1999 & Parts & Grouts Operations Corporate Consolidated
- ----------------- ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 2,668,857 $ 426,550 $ - $ - $ 3,095,407
Depreciation and amortization: 44,520 21,090 - 16 65,626
Interest expense: 428 - - 23,965 24,393
Income from continuing operations before
taxes: 354,017 (17,160) - (112,524) 224,333
Identifiable assets: 6,068,624 1,592,986 127,386 425,811 8,214,807
Capital expenditures: 58,330 8,039 - - 66,369
</TABLE>
The following table presents percentage of total revenues by region.
Three Months Ended Three Months Ended
Region February 29, 2000 February 28, 1999
- ------- ----------------- -----------------
United States 65% 69%
Europe/Middle East 18 19
Asia/Pacific Rim 9 10
Other 8 2
------------------ ------------------
Total 100% 100%
NOTE 7- 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. The consideration received of
approximately $1,350,000 includes a $300,000 promissory note bearing 8% interest
and due in three years and $350,000, for a three-year non-compete agreement with
the buyer. The Company negotiated an early payment of the promissory note
6
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COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
during 1998. Cash received of $250,000 approximated the carrying value of the
note. The non-compete agreement is being amortized to income over the
three-year contract period. In November 1999, the Company contributed the ACC
land and building to Marine Learning Institute ("MLI"), a not-for-profit
environmental educational organization operating under section 501(c)(3) of the
United States Internal Revenue Code. In connection with the contribution
agreement, MLI has indemnified the Company and has agreed to assume any
environmental costs arising from or out of the past, present or future
condition of the site. Terms of the contribution agreement require MLI to
purchase a $1,000,000 environmental insurance policy and name the Company in
the policy as insured. As a measure of additional protection, the Company
obtained an additional environmental insurance policy. Management believes the
Company is adequately insured in the unlikely event of being assessed a future
liability.
In connection with the contribution of the ACC land and building to MLI, the
carrying value of the real estate and the direct costs associated therewith were
appropriately charged to discontinued operations in the fourth quarter of fiscal
1999. No related income tax benefit was provided.
7
<PAGE> 10
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER ENDED FEBRUARY 29, 2000
RESULTS OF OPERATIONS
---------------------
Net sales for the three months ended February 29, 2000 were $3,488,733
compared to $3,095,407 for the same period of the prior year, an
increase of $393,326 or 12.7%. Of this amount, $264,995, represented
increased net sales of specialty grout and epoxy products. This
increase was a result of orders from recently signed Certified
Applicators. Equipment and parts net sales increased $128,331. This
increase was a result of increased sales of fiberglass equipment and to
a lesser extent increased sales of polyurethane equipment, which was
somewhat offset by decreased sales to OEM accounts. Foreign equipment
and parts net sales increased 27%, whereas domestic equipment and parts
net sales decreased 10%. The increase in foreign sales was led by an
increase in sales to South America and Europe/Middle East and to a
lesser extent the Asian/Pacific Rim.
The Company's gross margin increased to $1,504,540, or 43.1% of net
sales, in the current quarter from $1,334,877, or 43.1% of net sales,
in the 1999 period. This increase was due to the increased sales
volume.
Operating expenses for the three months ended February 29, 2000 were
$1,288,022 compared to $1,137,378 for the same period of the prior
year, an increase of $150,644, or 13.2%. This increase was principally
due to additional marketing and administrative expenses at GCI. The
increased marketing expenses are attributable to the increased
attendance at tradeshows. The increased administrative expenses are
reflective of higher personnel costs.
During the first quarter of 2000, other income, net of other expenses,
increased from the same period in the prior year by $9,936, due
principally to decreased interest expense.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's primary source of liquidity are cash provided by
operations and availability under the revolving line of credit. At
February 29, 2000 the Company has cash of $71,836, net working capital
of $3,946,603 and approximately $2,800,000 available under the
revolving line of credit.
On May 1, 1999, 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
8
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COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
at the bank's prime lending rate (8.75% as of February 29, 2000). 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 February 29, 2000, the
Company was in compliance with the covenants and financial ratios. As
of February 29, 2000, the outstanding balance under this agreement was
$700,000.
As of February 29, 2000, the Company's working capital increased to
$3,946,603 from $3,799,660 at November 30, 1999.
YEAR 2000
---------
Cohesant did not experience significant problems related to systems
properly recognizing date sensitive information as a result of the year
2000. The costs associated with making its information systems year
2000 compliant were not material.
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.
9
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COHESANT TECHNOLOGIES INC.
PART II. OTHER INFORMATION
--------------------------
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits 27 - Financial Data Schedule
(b) Reports on Form 8-K - none
10
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned there unto duly authorized.
Dated: March 20, 2000
COHESANT TECHNOLOGIES INC.
BY: /s/ Robert W. Pawlak
---------------------------
Robert W. Pawlak
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000928420
<NAME> COHESANT TECHNOLOGIES
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-2000
<PERIOD-START> DEC-01-1999
<PERIOD-END> FEB-29-2000
<EXCHANGE-RATE> 1
<CASH> 71,836
<SECURITIES> 0
<RECEIVABLES> 2,817,468
<ALLOWANCES> 179,579
<INVENTORY> 4,208,630
<CURRENT-ASSETS> 7,337,972
<PP&E> 1,456,881
<DEPRECIATION> 846,703
<TOTAL-ASSETS> 8,841,412
<CURRENT-LIABILITIES> 3,391,369
<BONDS> 0
0
0
<COMMON> 2,688
<OTHER-SE> 5,447,355
<TOTAL-LIABILITY-AND-EQUITY> 8,841,412
<SALES> 3,488,733
<TOTAL-REVENUES> 3,488,733
<CGS> 1,984,193
<TOTAL-COSTS> 1,984,193
<OTHER-EXPENSES> 254,015
<LOSS-PROVISION> 11,500
<INTEREST-EXPENSE> 12,877
<INCOME-PRETAX> 253,288
<INCOME-TAX> 89,111
<INCOME-CONTINUING> 164,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 164,177
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.07
</TABLE>
