No. of Recommendations: 15
For those of you who don't know there are several of us trying to get some new research projects going. We have already completed the first part which was joespeaks recommendation of the stock. He is long this stock as of last post and although he didn't say it he had implied we can make some serious cash with it. Ok maybe not but lets pretend.

So the next part we want to examine what the company actually does. Please enjoy

The Business

Cohesant Technologies COHT

I highly recommend going to their website and to the subsidiaries website for a visual on the products that they sell. It makes the 10-K's business description much easier to understand

Cohesant Technologies

Cohesant Technologies was formed in 1994 and operates via two wholly owned subsidiaries Glass-Craft Inc. and Raven Lining Systems. As of last fiscal year ending December 2004 they had $19.3 million in sales and a market cap of $27 million. They hade 74 full time and 4 part employees.
Their sales are 72 percent in the US and the rest abroad.

They are basically engaged in two activities. Their main source of revenue is manufacturing specialized equipment that dispenses hi-tech epoxies and grout products. Their secondary source of revenue is the sale of the epoxies and grout products themselves. Equipment and Replacement parts accounted for 70% plus of their business with the remainder in epoxy and grout products used in the equipment.

Glass-Craft Inc. (there is much more detail in the SEC docs but I don't want to regurgitate their obfusication)

Glass-Craft operates in Indiana. It sells its 2 component dispense equipment to be used typically with multiple component formulations such as fiberglass, reinforced plastic or polyurethane. Their customers are in the construction, transportation and marine industries.

There uses include equipment to apply insulation, protective coating, sealant and anti-corrosive products. Also their equipment is design to inject into closed and open molds to make things like fiberglass shower basins, boat hulls, and smaller custom items like hockey mask's.

My guess is that there are several types of customers. Many who are OEM's that are making products and need the equipment in the process like fiberglass boats or tubs. There are also I am sure individual contractors that are hired to spray new construction with a protective coating. The same goes for contractors in the transportation industry. A picture on their website shows a large recreational vehicle that has had a protective coating sprayed over it. Have you ever seen those spray on liners for truck beds. That sort of stuff.

One note is that Glass-Craft is selling material that contains volatile organic chemicals (VOC's) which is heavily regulated by the EPA and OSHA. Much of their new business is generated by companies updating equipment to meet newer code requirements such as low waste and VOC emissions. I think this works in Glass-Craft's favor.

Raven Lining Systems.

Raven Lining Systems operates in Oklahoma. They are also engaged in the manufacture of two part dispenser systems and application of epoxies and insulation. However their business focuses more on application on industrial facilities that face harsh environmental conditions. There products are "used in the construction, repair,rehabilitation and maintenance of food processing and water storage structures, wastewater treatment and collection systems of municipalities and industrial and recreational facilities ... [and] ... are ideally suited for the rapidly growing market in underground rehabilitation of infrastructure." (taken from their 10-K).

Raven AquataPoxy Products do not contain VOC's so regulation isn't as large a part of the business.

An interesting fact is that to operate Raven equipment you must be a certified applicator of which they had 44 domestic and 1 international as of last 10-K. (I find that a number worth tracking to measure growth by)

How do I buy Cohesant Technology Wares

Cohesant sells its products through independent distributors. Doing a search on the web I found a couple. They do sell direct to their larger customers and OEM clients.

And as a wrap-up I believe that this a very straightforward business to understand. I didn't come across anything tricky. I also like the add on sales that generate with the epoxies so that they have continual repeat business always keeping them around their customers. Consumables and equipment that wears and tears, gotta like it.


Equipment looks garage built. Definitely the impression of a small company.
10-K easy to read and disclosures looked decent on first read through.
Management has some related party transactions that warrant closer inspection
Stock Options are all over the place it seemed like
Management said current facilities were adequate


PS. If this didn't make sense or you have a question just ask. I think I have a decent understanding of their business but might not have explained it well.

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No. of Recommendations: 10
I would add a couple of points to Matt's excellent description of the business.

First, each customer of Cohesant's equipment becomes a continuing source of on-going sales into the future. "A significant portion of the Company's business is the sale of replacement and spare parts for its current and discontinued dispense equipment.... Net sales of replacement and spare parts and supplies amounted to $6,517,165 and $5,831,810, representing 33.7% and 33.8% of net sales for the fiscal years ended November 30, 2004 and 2003, respectively." (Source: 10K at p.3.)

It is not clear from the 10K whether customers are locked into using Cohesant's formulations of spray materials (epoxy, urea, etc.) with Cohesant's equipment. Although Cohesant's spray material formulations are largely proprietary, I assume that the equipment could be used with competitors' spray materials. I think that customers are unlikely, however, to use Cohesant's equipment with competing spray materials because, in my view, it is the customers' desire to use Cohesant's spray materials that drives their decision to purchase Cohesant equipment. Many of Cohesant's spray applicators are covered by US patents, and therefore potential customers who want to use Cohesant's spray materials are probably tied to buying its equipment. Therefore, I believe that whenever we see sales of new equipment by Cohesant, we can be confident that we will see sales in future years of both (a) epoxies and other spray compounds (30% of the business in 2004) and (b) replacement and spare parts (34% of the business in 2004). I think it would be interesting to learn the typical usable life span of the spray equipment, as this would have a direct impact on these follow-up sales.

Second, it appears to me from the 10K that the Raven subsidiary -- that is the one that operates through the Certified Applicators -- has a number of advantages over its competitors. To me, it is Raven, and not GlasCraft, where Cohesant has a real competitive edge and the ability to grow. Raven has two main product lines: Raven and AquataPoxy. Both are solvent-free and contain no VOCs (volatile organic compounds).

Raven epoxies can be sprayed on in thick coats to protect structural surfaces from corrosion. Some of the formulas are so physically strong that they can be used to restore the structural integrity of damaged structures. In other words, if your infrastructure is beginning to decay and crumble because it is subjected to a harsh and corrosive environment, you can either (a) dig it up or tear it down and replacement it, at great expense, or (b) hire a Cohesant Certified Applicator, and have them repair and spray, at a much lesser expense. By using Cohesant's Raven epoxy, you also avoid the expense of having to dispose of potentially hazardous chemically-laden construction debris.

AquataPoxy epoxies are unique in that, if properly applied, they are completely inert once cured. AquataPoxy epoxies are certified as safe to use in agricultural, food processing, and potable water facilities. Competitors' products using solvents or VOC emit potentially carcinogenic compounds are not certified as safe. AquataPoxy epoxies also have what are described as unique high moisture tolerant qualities, making them ideal to use in underwater and water-filled structures.

Thus, in my view, Raven and AquataPoxy products have a lot of potential commercial appeal. The main drawback, which may also be a barrier to entry by competitors, is that Cohesant cannot sell these products directly to end-users. Applying these materials requires special training, thus resulting in Cohesant's Certified Applicator program.

This raises the questions: Is Cohesant too dependent upon any particular Certified Applicator? Although Raven has a total of 45 Certified Applicators as of November 30, 2004, for the fiscal years ended November 30, 2004 and 2003, Raven's ten largest Certified Applicators accounted for 71% and 67%, respectively, of its coating and grout product sales. It seems to me that there is a potential for Cohesant to be at risk if a major Certified Applicator got out of the business.

--- Joe

For those who want to read Cohesant's description of these two product lines, the 10K describes the Raven and AquataPoxy product lines as follows:

"Raven Products. Raven's sprayable epoxies were formulated for ultra high-build (20-250 mils per coat) application on concrete, masonry and steel surfaces providing protection from atmospheric and chemical corrosion. The high physical strengths of some Raven formulations permit the epoxy to enhance the structural integrity of damaged structures. Raven products can be quickly applied under harsh environmental conditions providing quick return to service and substantial savings for industrial facilities by lessening downtime. The life span of the infrastructure exposed to these conditions can increase dramatically with the use of Raven's high performance protective coatings and linings. Raven's unique high performance line of products and network of Certified Applicators provide access to specialty coating contractors and key end-users in the wastewater, pulp and paper, petrochemical, power and other industries.

"Raven coatings and grouts are solvent-free, nontoxic, 100% solids epoxy products, emitting no VOC's. These products offer safe working environments while complying with the existing United States Environmental Protection Agency ("EPA") and Clean Air Act regulations."

"AquataPoxy Products. The AquataPoxy line of solvent-free epoxy coating and grout products is designed to extend the life of a structure by protecting it from corrosion. These products are formulated to have high performance characteristics such as excellent resistance to moisture, corrosion and chemical attack. AquataPoxy products are used in the construction, repair, rehabilitation and maintenance of food processing and water storage structures, wastewater treatment and collection systems of municipalities and industrial and recreational facilities. AquataPoxy products are unique with their high moisture tolerant characteristics that allow them to be applied to underwater and moisture filled concrete surfaces. AquataPoxy products are ideally suited for the rapidly growing market in underground rehabilitation of infrastructure. AquataPoxy products are specified for use by many engineers and governmental agencies in connection with the rehabilitation of potable and/or wastewater facilities by trained applicators. The Company is aggressively demonstrating and testing AquataPoxy products to expand awareness of its unique attributes and the application and marketing benefits of its Certified Applicator program.

"AquataPoxy products contain no solvents or VOC's. Properly applied, AquataPoxy products are inert once cured and do not release harmful by-products into air, water or the environment. Conversely, competitive solvent-borne coatings have the potential to release carcinogens and other hazardous substances into the environment and generally are not desirable for applications that involve contact with food, drinking water, animals or people. The Company maintains certification under the National Sanitation Foundation Standard 61 and meets qualifications of the United States Department of Agriculture for agricultural applications, food processing and potable water facilities and marine environments."
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No. of Recommendations: 3

great additions. your writing is better than mine for sure.

It seems to me that there is a potential for Cohesant to be at risk if a major Certified Applicator [went] out of the business.

I think this is a double edged sword like you said and as I commented an important number to focus on. In other words is Raven Lining able to increase its number or applicators. If sales are growing but the number of applicators aren't I wonder if the model isn't working well. And like you said if one of the applicators quits using Raven's system the sales could take a huge hit.

Another point I ponder is the ability to grow sales through an independent sales force. In the bicycle business there are factory reps and independent reps. I always find the outside sales force that are direct employees of the company better equiped to sell and service their accounts. I wonder if Cohesant would better grow their business this way by emphasizing a direct sales force. So short term they take a hit by increasing fixed costs of a direct sales force but long term they are able to grow faster but without losing quality control thus utilizing more fixed cost leverage.

Lastly, their sales are growing overseas which is benefiting from the current dollar depreciation since everything is I believe manufactured in the US. Don't know how long it will last but this is an example of positive export trade with a weaker dollar. Also just as a check see if in the future that the 1 international applicator grows to 2 etc.

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No. of Recommendations: 2
I have a few questions:

What was the auditors opinion?
Do they have any material lawsuits?
Have they had any earnings restatements?


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No. of Recommendations: 2
I've got one more in the annual report I can't seem to find the five year summary, did they have any unusual losses in the last five years?

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No. of Recommendations: 2

Glad to see your watching. First, your questions should officially be answered in the subsequent portions of the research. But since you want to read ahead I will try and answer them.

Ernst & Young gave them a clean audit although it looks a little wordy/indirect. I guess a simple yes would have worked better for me.

We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-106155) pertaining to the Cohesant Technologies Inc. 1994
Employee Stock Option Plan, and (Form S-8 No. 333-67127) pertaining to the
Cohesant Technologies Inc. Employee 401(k) Profit Sharing Plan of our report
dated December 16, 2004, with respect to the consolidated financial statements
of Cohesant Technologies Inc. included in the Annual Report (Form 10-KSB) for
the year ended November 30, 2004

There was mention of one lawsuit but no numbers were given as possible liability.

In November 1999, following the sale of certain assets of the Company's American
Chemical Company ("ACC") subsidiary, ACC contributed its land and building to
Marine Learning Institute ("MLI"), a not-for-profit environmental educational
organization. MLI agreed to indemnify the Company to assume any costs arising
from or out of the past, present or future environmental condition of the site.
Subsequent to the donation of the St. Louis property, the Missouri Attorney
General's office raised questions regarding the status of the contributed land
and advised the affected parties that additional clean-up efforts were
necessary. MLI advised both the Company and the Missouri Attorney General that,
in its opinion, no further clean-up efforts were necessary. Management intends
to seek indemnification from MLI for any further clean-up and legal costs. No
activity with respect to this matter occurred in Fiscal 2004.

Earnings Restatement -> I didn't see anything mentioned about restatements but I only looked at the 2004 10-K. This stuff should rear its head with the financial statement analysis which comes later.

Hope that helps

Regarding the 5 year summary I am not sure what you mean. Could you be more specific.

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No. of Recommendations: 2
Thanks that helps.

Usually companies post five or ten year summaries of their income statement in the annual report somewhere, I couldn't find Cohesant's.

Right now I'm doing the five-minute test written about in It's Earnings That Count one of the criteria is no unusual losses in the last three years -- like bad debt, useless investory and to much severance pay.


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No. of Recommendations: 2
The five-year data for 1999 through 2003 is found on page 3 of the 2003 Annual Report, available at:

I am sorry that I don't know how to format the text for display.

--- Joe
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No. of Recommendations: 1
Hi Matthew

Great start. Until going to the site I didn't appreciate the complexity and the diversity of their product lines. Maybe you could give a price range? Just how much are we talking about to set yourself up with these units.? Are individual contractors the biggest buyers or are they selling to bigger corporations who manufacture things like boats and hockey masks. Is their equipment a major capital investment or something anyone can buy? Do you have to be some kind of certified specialist to buy the equipment and do the applications? Having few registered or whatever users could be a real bottleneck. Equipment is pretty impressive. Looks complex to manufacture. Do they have their own manufacturing facilities to machine the parts and assemble? Do they buy pieces of the machines elsewhere? And then assemble? Do they own plants or rent?

Good start
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No. of Recommendations: 3
a large portion of their business is the reclaimation of manholes. I'd be wanting to find somebody in "city services" in the town where I live and see if he's heard of them.

Anybody in VA Beach?? Cohesant has a booth at a trade show that starts tomorrow.

How about articles in industry mags... for instance Coatings Solutions Magazine....

from the 10-K

The markets for all of the Company's products are highly
competitive. The Company competes with numerous well-established
companies, most of which possess substantially greater financial,
marketing, personnel and other resources than those of the

There are a number of competitive equipment manufacturers,
which include Graco Inc., Gusmer, Inc. and Magnum-Venus Products.
Competitors of Raven include Carboline Company, Tnemec Company,
Inc. and International Protective Coatings. The Company competes
by increasing customer awareness of its quality products, by
offering its products at a competitive price, and through product
line extensions.
The markets for the Company's products are characterized by
changing technology and industry standards. Accordingly, the
ability of the Company to compete is dependent upon the Company's
ability to complete development and effectively market its stateof-
the-art equipment and coating products.

is there a sustainable competitive advantage somewhere? the product? service? it's not economy of scale.

somebody, prob most of us, have a person in our universe of aquaintances who has direct experience with this company. That's the guy I'd be looking to have a conversation with.

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No. of Recommendations: 3

KitKat as always great suggestions

That sounds like a real scuttlebut! You just jacked my time 50x fold. Oh well I better get cracking!

Pricing? Gotta Call My guess for machines from 5-20 thousand (we will see)

Individual Contractors? Gotta be. Someone owns the equipment and gets called to a job site to spray it down and bills the construction company. I had a seamless steel roof installed and the contractor called a third party to come out and cut the roof lengths exact to my roof (cool - I want to say that the machine was either 25 or 35 grand. And they used skateboard wheels to roll out the metal. That's what I mean by garage build.)

I think the customer base ranges. There 10-K said that the larger customers and OEM's for Glas-Craft Products are serviced in house. Otherwise everyone else goes through a distributor.

I also think the Glas-Craft distributors are selling their own product and re-sell the Glas-Craft applicators for their product. I have seen two truck bed liner websites selling the Glas-Craft products.

As both Joe and I have mentioned I believe its only the Raven Lining Systems subsidiary that the certified applicator comes to play. And like Joe also said this is probably the subsidiary that has some legs under it due to its proprietary nature.

could be a real bottleneck

Supply and Demand I guess. Its good that there is a demand. The guy who came to roll out my roof came over an hour away from VT. If its profitable to be an applicator and the demand is there I would think more applicators will appear. Like I said that 44 domestic and 1 international applicator number(s) should be a number we watch or track from the last 5 10-k's.

The Equipment to me looks pretty typical US industrial grade garage built. The housing construction looks to be rudimentary. The parts are fitted neatly and I obviously don't have an impression on the actually quality of the machines. For instance if you go to Graco's website you will see that the castings look much more technical and clean -> not sheet metal welded together and then powdercoated. But Graco is a 2.74B market cap and Cohesant .027B so it doesn't suprise me or worry me.

To keep blabbing -> I bet if Raven Lining systems is really profitable someone like Graco will buy them. Why wouldn't they - they could pay cash today for COHT.

Manufacturing is done in Indiana and Oklahoma. I believe they buy all of the parts either off the shelf or custom made by a vendor and then assemble in house at the respective facility. I bet there is machining done but no casting. I bet they don't have a CNC machine but I could be wrong.

The Company leases its office, manufacturing and warehouse facilities, a portion
of its office equipment and Company cars under noncancellable operating leases
expiring at various dates through November 2009.

They lease there industrial facilities hey and they are so small they even mention the cars which means the CEO is driving a phat 700 series BMW for free :)


The majority shareholder and director of the Company is the owner of Clarion
Management Ltd. ("Clarion"), which provides management assistance for the
Company under a Financial Advisory Agreement. Clarion receives a quarterly fee
of $13,000. Under the agreement, Clarion also performs additional specific
projects as requested. Clarion was paid $52,000 and $51,100, during the fiscal
years ended November 30, 2004 and 2003, respectively.

The Company paid a fee of $50,000 in each of the fiscal years 2004 and 2003 to
an entity controlled by its chief executive officer, Morris Wheeler, for the
provision of office space for Mr. Wheeler and other management support.

This one seems a little chummy

Hope this answers some of those Q's. Pricing once again I don't know but can find out tomorrow.

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No. of Recommendations: 1

Those are some great ideas. I wish I was in Virginia right now. Anyway I was thinking of doing some calling tomorrow of a distributor or two for some scuttlebut.

Here's an interesting link about a Glas-Craft product

If anything it gives an idea about how much the equipment costs and who uses or in this case tried to use it. Not necessarily a great link to find but interesting.

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No. of Recommendations: 1
Hi Matthew

Thanks for the reply. If the equipment doesn't look as professionally made as Graco, perhaps they get through on pricing and quite a bit cheaper.The reason I wondered about price is because if it is a huge capital investment it might be somewhat cyclical in nature. But it sounds like the applications for the product are braod enough that is not likely the case. An interesting couple of things to look for is the backlog of orders. In some businesses its nice to see one although in highly competitive areas like generic drugs a backlog only means the business isn't keeping up with orders and the client can easily go to the next generic maker on the list to get the order filled. But in the case of COHT, unfilled orders might be a good indication of future business.
The other interesting thing to look for is a company comment on the cyclical nature of the business. That's usually somewhere in the discussion. A lot of times they will discuss which quarters are better or worse yearly.

Too bad they don't talk about the finacial management relationship with the director. He gets $100,000+ per year for salary and expenses for office rent, but they are annoyingly vague on the detaios og his job. I find this a lot in 10Ks--something you really want to know but no detail. I think they do this on purpose. Nothing seems to be out of line except in the case he does no work for the money. They don't say.
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Pricing once again I don't know but can find out tomorrow.

Here's an online store with pricing. So many products...

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Looking at the photos on the online store website, I thought the COHT products looked every bit as finished as the competitors.

--- Joe
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