-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G5RxSy5FLWEHSHYXueiubBjtdyyLIiQZz2kndPbn0S/geWABy+JUckn4Fx4cgrL4 E6g3B7nePBGwzzsekiikDA== 0000722839-99-000017.txt : 19990217 0000722839-99-000017.hdr.sgml : 19990217 ACCESSION NUMBER: 0000722839-99-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROACTIVE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000722839 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 232265039 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-08662 FILM NUMBER: 99543461 BUSINESS ADDRESS: STREET 1: 7118 BEECH RIDGE TRAIL STREET 2: STE 402 CITY: TALLAHASSEE STATE: FL ZIP: 32312 BUSINESS PHONE: 9046685800 MAIL ADDRESS: STREET 1: 7118 BEECH RIDGE TRAIL STREET 2: SUITE 402 CITY: TALLAHASSEE STATE: FL ZIP: 32312 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE MEDICAL CORPORATION DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE MEDICAL CORP INC DATE OF NAME CHANGE: 19910103 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended: December 31, 1998 Commission File Number: 1-8662 PROACTIVE TECHNOLOGIES, INC. (formerly KEYSTONE MEDICAL CORPORATION) (Exact name of registrant as specified in its charter) Delaware 23-2265039 (State of Incorporation) (I.R.S. Employer ID No.) 7118 Beech Ridge Trail, Tallahassee, Florida 32312 (Address of principal executive offices) (Zip Code) (850) 668-8500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that registrant was to require such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ____X______ No ________ Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ___X_____ No _________ The number of shares outstanding of registrant's common stock, par value $.04 per share, as of February 11, 1999 was 20,688,245. Transitional Small Business Disclosure Format (Check one):Yes______No ___X____ PROACTIVE TECHNOLOGIES, INC. Table of Contents Page No. PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheet 3 December 31, 1998 and June 30, 1998 Condensed Consolidated Statements of Income for the Three Months and Six Months Ended December 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURE 11 EXHIBIT INDEX 12 PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES (NOTE 1) CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (000's except for outstanding shares)
December 31, June 30, 1998 1998 ASSETS: Real estate inventories $ 23,111 $ 32,960 Cash and equivalents 412 100 Property and equipment, net 358 410 Investment in Killearn Properties, Inc. 627 1,188 Other Investments 163 261 Other assets 454 175 Notes Receivable 863 3,366 _________ _________ TOTAL ASSETS $ 25,989 $ 38,460 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Notes payable $ 16,201 $ 21,849 Accounts payable and accrued expenses 976 1,608 Income taxes payable 1,244 1,237 Deferred income tax liability 298 298 Deferred revenue 109 109 Deferred compensation payable 0 0 Customer deposits 39 125 _________ _________ Total Liabilities $ 18,869 $ 25,226 Minority Interest 0 Stockholders' Equity: Common stock - par value $.04 per share; authorized 60,000,000 shares; issued 15,611,778, and 16,523,000, respectively 684 684 Treasury Stock ( 2,415) ( 1,950) Paid-in capital 12,180 12,180 Retained earnings ( 3,326) 2,320 _________ _________ Total Stockholders' Equity $ 7,123 $ 13,234 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,989 $ 38,460 ========= ========= See Accompanying Notes to Condensed Consolidated Financial Statements
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES (NOTE 1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In 000's, except for earnings per share and outstanding shares)
Three Months Ended Six Months Ended December 31, December 31, 1998 1997 1998 1997 Net sales $ 11,666 $ 1,711 $ 12,993 $ 4,254 Cost of sales 14,974 1,250 16,363 2,794 Selling, general and administrative expenses 724 354 1,178 655 ________ ________ _________ ________ Income from operations (4,032) 107 ( 4,548) 805 Other Income (deductions): Interest (expense) ( 188) (281) ( 326) (462) Other (expense) income, net ( 893) ( 16) ( 773) ( 42) Minority Interest 0 ( 37) 0 ( 38) ________ ________ _________ _________ (Loss) income from continuing operations before income taxes (5,113) ( 227) (5,647) 263 Income tax (benefit) expense 186 ( 83) 0 97 ________ ________ __________ _________ Net (loss) income before discontinued operations $ (5,299) ( 144) (5,647) 166 Discontinued operations: Loss from operations of Decocrete Worldwide, less applicable tax benefit of $0 and $0, respective for 1998, and $3,000 and $8,000,respectively for 1997 0 ( 8) 0 (15) ________ _________ __________ _________ Net (loss) income $ (5,299) (152) (5,647) $ 151 ======== ======== ========== ========= Earnings per share before Discontinued operations$ ( .33) (.01) ( .35) .01 Discontinued operations $ .00 .00 .00 $ .00 ________ ________ __________ _________ Earnings per share $ ( .33) (.01) ( .35) $ .01 ======== ======== ========== ========= Adjusted shares outstanding primary and fully diluted 15,970,474 18,448,718 15,970,474 18,448,718 Dividends Paid NONE NONE NONE NONE See Accompanying Notes to Condensed Consolidated Financial Statements
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In 000's)
Six Months Ended December 31 1998 1997 Net Cash provided by operating activities $ 5,938 $ 118 --------- -------- Cash Flows from Investing Activities: Distribution from real estate ventures 0 27 Investment in real estate ventures (12) 5 Purchase of investments in equity securities ( 8) (1,020) Purchase of property and equipment ( 2) 0 --------- --------- Net Cash used in investing activities ( 22) ( 988) Cash Flows from Financing Activities: Proceeds from exercise of stock warrants 0 0 Proceeds from issuance of notes payable 10,917 5,216 Repayments of amounts borrowed (16,564) (4,399) --------- -------- Net Cash (used) provided by financing activities ( 5,647) 817 --------- -------- Net (Decrease) Increase in Cash and Cash Equivalents 312 ( 53) --------- -------- Cash and Cash Equivalents, Beginning of Period 100 155 --------- --------- Cash and Cash Equivalents, End of Period $ 412 $ 102 ========= ======== See Accompanying Notes to Condensed Consolidated Financial Statements
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Form 10-QSB for the Three Months and Six Months Ended December 31, 1998 (1) Basis of Financial Presentation On February 12, 1996, Proactive Technologies, Inc. ("PTE" or the "Company") acquired 100% of the outstanding common stock of Capital First Holdings, Inc. ("Capital First") in a reverse acquisition in which Capital First's sole shareholder acquired voting control of the Company. The acquisition was accomplished through the issuance of approximately 8,559,000 shares of PTE stock which represented approximately 80% of the voting stock of PTE immediately after the transaction. For accounting purposes, the acquisition has been treated as a recapitalization of Capital First with Capital First as the acquirer. The historical financial statements prior to February 12, 1996 are those of Capital First. As a result of the acquisition, Capital First effectively changed its accounting year end to June 30 from December 31. Capital First is a developer of residential subdivisions with its principal operations in Tallahassee, Florida. The accompanying unaudited consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The information furnished reflects, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of the interim period presented. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited financial statements of Capital First Holdings, Inc., and notes thereto, as found in Form 8-K/A for the year ended December 31, 1995, the Company's Form 10-KSB for the year ended June 30, 1998, and the Company's Form 10-QSB for the three months ended September 30, 1998 (filed by EDGAR on November 14, 1998). A copy of such consolidated financial statements and notes thereto may be obtained by writing to the Company. (2) Acquisitions and Dispositions Effective August 12, 1996, the Company acquired all of the voting common stock of Flowers Properties, Inc., Highland Properties Construction Company, Inc., and Barrier Dunes Development Corporation in exchange for approximately 2,565,000 shares of PTE common stock with a stated value of $3.50 per share. Under the agreement, the number of shares was to be adjusted in the event the quoted market price of the shares at December 31, 1996 was less than $3.50 per share. Subsequently, the Company has amended this Agreement with the final resolution as to the number of shares issued. On April 3, 1997 the Company and the Flowers group agreed upon the final number of shares to be issued for the three corporations, known as the Flowers entities. By mutual agreement between the parties, it was decided that the number of shares to be paid for the entities would be 4.5 million shares as follows: Highlands Properties Construction Company, Inc. - 3,200,000 shares; Flowers Properties, Inc. - 800,000 shares; and Barrier Dunes Development Corporation - 500,000 shares. In 1998, the Company and a former director of the Company completed their reevaluation of the assets acquired. The renegotiated purchase price was valued at $5,128,629 after the purchase price adjustment. As a result, the former director returned 1,102,456 shares of Company stock originally issued for the acquisition. The purchased corporations' operations principally consist of land development in Middle and South Georgia, and Cape San Blas, Florida. The land owned by these corporations was added to the land inventory of the Company. Subsequent to the acquisition, the Company has sold several of the assets to a former director of the Company in exchange for cash or stock, including various acres of real estate in Albany , Georgia, during the three months ended December 31, 1998 in exchange for a total of 1,000,000 shares of Company stock, all of which was accounted for under the purchase method of accounting. During April, 1996, the Company acquired for investment purposes approximately 8.1% of the issued and outstanding shares of Killearn Properties, Inc.(AMEX "KPI"). KPI is in the business of real estate development in the Stockbridge, Georgia area. The Company filed its Schedule 13D regarding this event on April 25, 1996. In May 1996, PTE proposed a transaction with KPI whereby KPI would exchange certain assets (consisting of the golf course and country club, a newly constructed inn and certain joint venture interests) to KPI's then Chairman of the Board and Chief Executive Officer, for his approximate 42% ownership interest in KPI, or 551,321 shares of KPI voting common stock. During August 1996, PTE acquired approximately 85,950 additional shares of KPI stock, increasing its ownership interest in KPI to approximately 22%. On July 29, 1996, PTE proposed to KPI's Board of Directors that PTE be retained to provide sales personnel and sales training techniques in order to improve the sales of residential lots. In addition, PTE proposed that KPI's board include two additional representatives of PTE. On July 31, 1996, KPI's Board of Directors approved the transaction and the PTE proposals, and an agreement was entered into on August 2, 1996 between KPI and KPI's Chairman. The split-off transaction was voted upon and approved at KPI's shareholders' meeting held on September 30, 1996. At the Board meeting following the shareholders' meeting, Mark A. Conner was named Chairman of the Board of KPI. Additionally, Langdon S. Flowers, Jr., and Robert Maloney, Jr. were named as Directors of KPI. On November 1, 1996, J.T. Williams, Jr., President, resigned his position and the Board of KPI named Mark A. Conner as Chief Executive Officer. The transaction was completed on November 16, 1996, at which time, PTE's holdings in KPI were increased to approximately 25.6%. The Company continued to make investments in Killearn Properties, Inc., including acquisitions during the three months ended September 30, 1997, of an additional 155,426 shares of KPI, in exchange for approximately $323,000 in cash, $198,000 in promissory notes, and 294,000 shares of Company voting stock, bringing its holdings in KPI to approximately 45.77%. Subsequent to the end of the quarter ended September 30, 1997, the Company learned that J.T. Williams, whom the Company had entered into a prior agreement (see Form 13D/A filed October 11, 1997) had refused to tender his shares in accordance with a stock exchange agreement between Mr. Williams and the Company. The result was that in the event the non- performance by Mr. Williams was valid the Company's position was reduced to 315,430 shares, or 35.5% of the 887,412 issued and outstanding shares of KPI. Additionally, as filed in Form 13-D/A with EDGAR on January 8, 1998, the Company exercised its call rights with three other major KPI shareholders under certain Put and Call Agreements for a total of 132,000 additional KPI shares at a total price of $1,254,000, or $9.50 per share, giving the Company a total of 447,430 shares, representing 50.4% of the total issued and outstanding shares of KPI. Further, on January 27, 1998, the Company entered into an Agreement to sell 315,430 shares of KPI stock to the Wimberly Investment Fund, L.P. for a total of $2,286,867.50, or $7.25 per share. Consequently, as of December 31, 1998, the Company currently owns of record, 132,000 shares, or 14.87% of the total issued and outstanding shares of KPI. Pursuant to the January 27, 1998 agreement,the Company incorporated Capital First Holdings, Inc of Georgia. which received at cost from Killearn Properties, Inc. title to three separate subdivisions -- The Summit, The Glen, and Simpson Mill Development, as well as Killearn's 50% interest in Henry County Land Partners, a Georgia general partnership, and other contract assignments, the result of which brought approximately 650 acres or the potential of 1,200 developed lots, in various stages of development and brought land with an estimated basis of $9 million to the Company. Effective February 10, 1996 Decocrete Worldwide, Inc. ("Decocrete"), a newly-formed subsidiary of PTE, operating under the direction of Capital First, acquired the net assets of Decocrete International, Inc., a manufacturer of decorative concrete with a plant located in Tampa, Florida, for an aggregate purchase price of $72,000 in cash and 20% of the outstanding shares of Decocrete. The acquisition was accounted for under the purchase method of accounting. Identifiable assets acquired approximated the liabilities assumed; accordingly, the entire purchase price was attributed to goodwill. During fiscal 1997 the Company decided to cease operating Decocrete. Tne Company wrote off all existing amounts still outstanding in their June 30, 1998 Form 10-KSB (filed by EDGAR on October 14, 1998), thus no financial information regarding Decocrete is included in the Company's quarterly financial statements. (3) Debt The Company's last remaining debt to Killearn Properties, Inc., in the approximate amount of $367,000, was paid off in October 1998 through the sale of bulk assets. Earlier in the fiscal year, the Company paid the bulk of its loan off to Killearn, of an amount equal to approximately $2,000,000, through the refinance of loans with its primary lender at a rate of 9.5% per annum, which notes are due in July 1999. Additionally, as part of the same October 1998 transaction, the Company was able to relieve itself as primary obligor of approximately $598,000 worth of debt. The Company's loan on the golf course and surrounding acreage in Freeport, Florida in the amount of $2,300,000 was called due to non-payment of interest during the three months ended December 31, 1998, but the Company has subsequently brought the note current and reinstated the existing purchase money first mortgage, which note carries an interest rate of 10%, with monthly interest payments in the amount of $17,000, and the principal due on or before November 3, 2000. The Company paid down approximately $1,258,000 of its debt related to its Albany properties upon the sale of approximately 230 acres to a then director of the Company and the sale of approximately 100 acres to the same director for $610,000, which prices were the highest bona fide offers received on the property. In October, and November 1998, the Company received a total of approximately $252,400 of a note due and wrote off a remaining balance of about $367,000 as uncollectible from a single vendor who owed the Company $619,000. During the three months ended December 31, 1998, the Company renewed its consulting agreement with Millenium Holdings, Inc., for an additional three month period. Further, the Company entered into an agreement whereby the Company placed 866,467 shares of stock into escrow, which escrow agreement called for the release of the shares as payment for the finding of a suitable merger candidate. In November 1998, the Company paid down approximately $287,000 in debt through the bulk sale of 58 lots to one builder, and approximately $587,000 in debt through the bulk sale of an entire subdivision to another. During the three months ended December 31, 1998, the Company made short term unsecured borrowings and repayments to aid cash flow, from a private lending source, through one of its directors, and had a remaining balance at the end of the three months ended December 31, 1998 totalling approximately $268,000, which notes accrued interest at between 5.5% and 7% per annum. Subsequent to the end of the presented quarter, the Company consolidated the remaining balance into one note which accrues interest at 7.5% and is secured by a first mortgage on undeveloped Company land. During the three months ended December 31, 1998, the Company paid off approximately $745,000 worth of debt through the sale and refinance of its Tallahassee property, and $856,000 worth of debt through the sale and refinance of its Albany property. (4) Earnings Per Share Primary and fully diluted earnings per share are calculated based on the following number of weighted average shares of stock outstanding including stock options as common stock equivalent: The weighted number of shares outstanding was 15,970,474 for the three month period presented. This number was achieved after taking the 17,389,467 shares outstanding as of June 30, 1998 and subtracting from it the 866,467 shares held in escrow to be disbursed upon the finding of a suitable merger candidate for the Company, and adding to it the 88,778 shares issued on September 3, 1998 for an interest payment on the Hawkins note. Further, on November 2, 1998, 1,000,000 were subtracted following the sale of property in Albany in return for said shares to the Company's treasury. There were no further additions or subtractions to the outstanding shares during the three months ended December 31, 1998. (5) Subsequent Events On January 2, 1999, the Company acquired 100% of the total issued and outstanding shares of West Side Investors, Inc., a Georgia corporation, which owns P & W Stonebridge, LLC, and P & W Headland, LLC, which own, respectively, the Headland-DeLowe Shopping Center located in Atlanta, Georgia and Stonebridge Village Shopping Center, located in DeKalb County, Georgia. The purchase price for West Side Investors, Inc. stock was the issuance of 3,100,000 shares of Proactive restricted common stock as follows: Arthur G. Weiss, 1,550,000 shares; Charles G. Weiss 775,000 shares; and Caroline Weiss Kyriopoulos, 775,000 shares. Appraisals of the properties total $9,130,000. The shopping centers are subject to a $7,886,000 non-recourse equal profit participating mortgage. The consideration paid was determined as a result of arms-length negotiations between unrelated parties. On January 8, 1999, as filed in Form 8-K with EDGAR on January 18, 1999, the Company acquired an interest in PDK Properties, Inc., a Georgia corporation, which wholly owns Stratos Inns, LLC, a Georgia limited liability company, which the Company hopes to develop into a going concern as a hotel developer and hospitality provider at DeKalb-Peachtree Airport in Atlanta, Georgia. Also, as stated in the above-noted Form 8-K, the Company named two new persons to its Board of Directors, Arthur G. Weiss and James Verbrugge. Also, subsequent to the end of the three months ended December 31, 1998, as filed in Form 8-K with EDGAR on Febuary 5, 1999, the Company reacquired 5,000,000 shares of its stock from the former President and Chairman of the Company, in exchange for $1,570,000 and an additional $200,000 to be released from escrow upon the achievement of certain contingencies by the former President. Subsequent to the end of the three months ended December 31, 1998, as noted on Schedule 13-D/A filed on January 29, 1999, the Company sold 2,500,000 shares of stock to Wendell M. Starke in exchange for $1,000,000. Additionally, as also stated in Form 8-K filed February 5, 1999, the Board named William B. Astrop to its Board of Directors, and Mark A. Conner resigned his position as President, Chief Executive Officer, and his seat on the Board. Additionally, two of the Company's directors resigned from the Board, leaving the Company with three directors, with the intention to add further independent directors. Further, On February 10, 1999, the Company added C. Beverly Lance and Joel A. Goldberg to its Board of Directors, and as President and CEO. PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Reform Act of 1995 (the "Act") and is making the following statements pursuant to the Act in order to do so. Certain statements under this Item 2 and elsewhere in this report constitute forward-looking statements within the meaning of Section 21A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Although the Company believes the expectations reflected in the forward-looking statements and assumptions upon which forward-looking statements are based are reasonable it can give no assurance that such expectations and assumptions will prove to have been correct. Such forward-looking statements are risks and uncertainties, many of which are beyond the the Company's control, that could cause the actual results, performance or achievements of the Company, or industry trends, to differ materially from any future results, performance or achievements expressed or implied by such forward looking statements. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements and no assurance can be given that the plans, estimates and expectations reflected in such statements will be achieved. The Company wishes to caution readers that the following important factors, among others, in some cases have affected, and in the future may affect, the Company's actual results and could cause the Company's actual consolidated results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company: a.) Changes in national, international, or regional economic conditions that can affect the real estate market, which is cyclical in nature, and highly sensitive to such changes, including, among other factors,levels of employment and discretionary disposable income,consumer confidence, available financing, and interest rates. b.) The imposition of additional costs of compliance on the Company as a result of changes in environmental, zoning, or other laws and regulations that govern the acquisition, subdivision, and sale of real estate. c.) Risks associated with a large investment in real estate inventory at any given time time (including risks that real estate inventories will decline in value due to changing market and economic conditions and that the development and carrying costs of inventories may exceed those anticipated). d.) Risks associated with an inability to locate suitable inventory for acquisition and development as a residential, or commercial development. e.) Risks associated with delays in bringing the Company's inventories to market due to, among other factors, changes in regulations, governing the Company's operations, adverse weather conditions, or changes in the availability of development financing on terms acceptable to the Company. f.) Changes in applicable usury laws or the availability of interest deductions, or tax loss carry-forwards which the Company, or its predecessors may have possessed in the past, or other provisions of federal or state tax law. g.) Changes on the part of banks or other lending institutions to extend direct customer lot financing for purchase or development, which could result in the Company having lower sales and/or the Company receiving less cash in connection with the sale of its inventory. h.) The inability of the Company to find external sources of liquidity on favorable terms to support its operations, acquire, develop and carry land, and satisfy its debt and other obligations. i.) The increase in prepayment rates, delinquency rates or default rates. j.) Changes in costs to develop inventory for sale and/or selling, general and administrative expenses exceeding those anticipated. See the Company's Annual Report on Form 10-KSB for additional statements concerning important factors, such as demand for products, manufacturing costs and competition, that could cause actual results to differ materially from the Company's expectations. Year 2000 Impact Year 2000 ("Y2K") issues are expected because many existing computer programs use two digits instead of four to refer to the calendar year. It is unknown whether these programs will be able to properly interpret a year that begins with digits other than "19" (like the year 2000), and thus cause disruption of business activities. The Company is currently switching its software, from older programs,which could be affected by the Y2K problem, to ones that are advertised as "Y2K ready". The Company currently only utilizes software packages for its accounting and sales and inventory maintenance. It is anticipated that the costs of implementing ths new software to the Company will not exceed $2,000. In the unlikely event all software cannot be converted prior to January 1, 2000, the Company plans on several back-up measures, including back-up tapes and disks; hard copies of all essential notes, mortgages, and other financial and sales information, and cross-checking inventory sheets with sales occurring during the year to provide secondary back-up of lots and sales in the event of a Y2K catastrophe. The Stratos Inns division, currently in the conceptual stage, plans to have Y2K ready software when it begins design and construction during the next fiscal quarter. The Company has begun communications with material suppliers and its primary lenders to determine if the Company or the suppliers and or lenders are vulnerable due to failure of being Y2K compliant. Background of the Company On February 12, 1996, Proactive Technologies, Inc. ("PTE")acquired 100% of the outstanding common stock of Capital First Holdings, Inc. ("Capital First") in a reverse acquisition in which Capital First's sole shareholder acquired voting control of the Company. For financial reporting purposes the transaction is treated as the acquisition of PTE by Capital First. Accordingly, the historical results of operations and financial position are those of Capital First and include the accounts of PTE from February 12, 1996. As a result of the acquisition, Capital First effectively changed its accounting year end to June 30 from December 31. Worldwide, a manufacturer of decorative concrete, became an 80% owned subsidiary of the Company on February 10, 1996. On September 30, 1996, the Company purchased 15% of the remaining Worldwide stock from Garat Oates, bringing its ownership percentage to 95%. On January 1, 1997, the Company discontinued the working operations of Decocrete Worldwide, Inc. In the financial statements for the year ended June 30, 1998,the Company wrote off all existing amounts outstanding from Worldwide, and thus no financial information regarding Worldwide is presented in these financial statements. On December 31, 1995, Mark A. Conner contributed to Capital First his 33 1/3% limited partnership interest in Piney-Z Ltd. and Apalachee Partners, Ltd. (the "Piney-Z Partnerships"). The Piney-Z Partnerships were formed in October 1995, by Conner, J. T. Williams and Grace Dansby to develop the "Piney-Z" development, an approximately 400 acre mixed- use development north of Tallahassee. On May 17, 1996, the Company purchased Williams' 33 1/3% general partnership interest. In the acquisition, the Company issued to Williams 200,000 shares of its common stock (valued at $675,000) and repaid Williams a $25,000 advance he had made to the Piney-Z Partnerships. As a result of these acquisitions, as of December 31, 1997, the Company and Capital First had a collective ownership interest of 66 2/3% of the Piney-Z Partnerships, which interest was sold on January 28, 1998. Thus, there are no financial statements regarding the Piney-Z Partnerships presented in the three months and six months ended December 31, 1998. Because of the ownership percentage in the partnership (and the fact that the Company became the sole general partner), the results of the Piney-Z Partnerships have been consolidated in the Company's financial statements for the three month and six month periods ended December 31, 1997. Results of Operations Net sales increased approximately $9,955,000 (582%)during the current three month period ended December 31, 1998, and approximately $8,739,000 (205%) during the six month period ended December 31, 1998, respectively, compared to those same periods a year ago. The dramatic increase in sales was due to three particular bulk sales during the current three month period. In October and December, the Company transferred back to Killearn Properties, Inc., two projects it had procured for the outstanding mortgage balances in January of 1998. Due to cash flow constraints, the Company found it impossible to continue these projects without placing severe strain on the Company, and management decided to sell the assets back to Killearn Properties, Inc. for a total price of about $4,000,000. Further, in November, the Company sold 58 lots to one builder of one of its major subdivisions in Tallahassee, Florida. The sales of the Company's remaining 58 lots in the previously developed phases of the Summerbrooke subdivision were the source of approximately $1,560,000 in additional sales. Further, the Company sold a total of 280 acres of land to an entity controlled by a former director for a total of $1,732,000, which management determined to be fair market value for said property. Lastly, sales of retail lots significantly increased due to a concerted push to sell remaining inventory in older subdivisions. Real estate market conditions continued downward in the southeastern United States, and specifically in the northern Florida, despite the increase in overall general sales. With the Company's new management comes a new focus on maintaining prices for their product. The Company added greatly to its cash flow with its acquisition of West Side Investors, Inc. and its interest in two Atlanta-area shopping centers. Currently, those shopping centers provide the Company with $not less than $7,500 in monthly revenues, and it is anticipated to continue that revenue stream in the foreseeable future. Management anticipates that the Stratos Inn subsidiary will begin contributing revenues to the Company in October, 1999. Cost of sales, as a percentage of sales, was 133% for the current three month period and 130% for the current six month period, compared to 73.05% and 65.67%, respectively, a year ago. The gross margin for the current three month period decreased to a loss of 40.15% as compared to a gross profit margin of 6.25% for the same period a year ago. This decrease in profit margin on net sales was primarily due to the significantly high basis in the property sold during the current three months. Of greatest significance was the sale of 58 lots in the Summerbrooke subdivision. These lots, due to the length of time the Company held these lots, and the capitalization of lots during construction created a total basis of $1,603,000 in the lots sold. Gross profit margins ("GPM") between 17% and 21% are the goals set by the Company, but these goals are difficult to maintain in the current marketplace, and assume no great fluctuations in the current trends, such as interest rates. It is anticipated that the impact of the West Side Investors subsidiary will greatly enhance net income as the rental income should exceed substantially any costs of maintaining the shopping center property. Further, it is anticipated that initial costs for the Stratos Inns subsidiary will be capitalized as start-up costs until revenues can be generated. Selling, general, and administrative ("SG&A") expenses increased $370,000, (105%) during the three months ended December 31, 1998 as compared to the three months ended December 31, 1997. For the current six month period, SG&A increased $523,000, or 79.85%, over the six month period a year ago. Commissions have been reclassified as an SG&A expense. In prior financial reports, the Company had classified commissions as a cost of sales. Commissions in the total amount of about $443,000, for the six month period ending December 31, 1998, due to increased sales, added to the significant change from the periods ended December 31, 1997. Management believes that SG&A expense to be fairly constant over the next few quarters with necessary additional professional and other administrative fees associated with being a public corporation. Interest expense decreased $ 93,000 or 33% for the three months ended December 31, 1998 as compared to the three months ended December 31, 1997, and $136,000 or 29.44% for the six months ended December 31, 1998 from the three months ended December 31, 1997. This decrease is primarily due to the elimination through payment of existing debt from the bulk transactions which occurred during the current three month period and six months period. Further, the Company expensed all of its interest costs for the current three month period and chose not to capitalize any of it. Other expenses increased $ 877,000 for the three months ended December 30, 1998 to $893,000 compared to an expense of $16,000 for that same period in 1997. A significant amount of the increase is due to the unrealized loss of approximately $561,000 on the Killearn Properties, Inc. (AMEX:KPI) common stock, which was trading at $4.75 per share at December 31, 1998, and which the Company acquired for $9.50 per share from the Hawkins group. Further, the Company wrote off approximately $367,000 from a note receivable it had from a vendor who it had sold a subdivision to two years ago. Financial Condition Total assets decreased a net total of $12,471,000 from June 30, 1998 to December 31, 1998; Real estate inventories decreased $9,849,000 primarily due to the disposition of The Glen at Eagle's Landing and The Summit at Eagle's Landing, back to Killearn Properties, Inc. for a total of approximately $4,100,000, as well as approximately 260 acres of land in Albany to a former director, which removed approximately $1,850,000 from the real estate inventory of the Company. Further, the increase in general lot sales removed an additional $6,000,000 from the real estate inventories. Notes receivable decreased approximately $2,503,000 due primarily to the reduction of $619,000 of the remaining receivable from the sale of a large tract of undeveloped property near Summerbrooke subdivision in Tallahassee, Florida. The Company received a total of approximately $252,400 and from the vendor who was going out of business and cancelled the remaining receivable. Additionally, in the first fiscal quarter, the Company eliminated several wrap positions of about $2,300,000, the Company held on some properties. This elimination caused both a reduction in receivables and in the corresponding notes payable. Total liabilities decreased $6,357,000 from June 30, 1998 to December 31, 1998, primarily due to the payment of Company debt to its primary lender upon the bulk sale of property in Albany, Georgia, Summerbrooke subdivision, and over $4,000,000 from the disposal of The Glen at Eagle's Landing and The Summit at Eagle's Landing. The deferred income tax liability of $298,000 as of June 30, 1998, was eliminated at December 31, 1998 due to the Company's loss for the six months ended December 31, 1998. Total Shareholders' equity decreased $6,111,500 during the current six month period, which is a reflection of the six month loss. Liquidity Management believes that the Company, through the generation of cash flow from operations, especially, through its West Side Investors, Inc. subsidiary and the sale of stock it reacquired from the former President and Chairman has sufficient financial resources available to maintain its current operations and provide for its current capital expenditure requirements. Management plans to focus the Company in new directions. With the acquisition of the Stratos Inns subsidiary, the Company intends to achieve a niche for itself in the aviation hospitality industry the executive airport hotel and service industry. Regarding its real estate division, the Company anticipates that its acquisition of its income-producing shopping centers will provide additional cash flow. It further plans on continuing its residential development business in Florida and in Albany, Georgia, and intends to focus on the marketing and sale of its existing inventory, while at the same time seek out aditional land for new development, and will continue to look explore other possible acquisitions to complement its existing businesses lots. The Company is continuing to explore other possible acquisitions which will complement its existing businesses, as well as to search out other areas for residential and commercial development in other geographic areas. Management anticipates that most of its available cash flow will be utilized to develop its Stratos Inns subsidiary. The Company hopes to begin construction of its first building in Atlanta during the next fiscal period, and it is anticipated to be generating revenues by October, 1999. The Company expects to fund the start-up costs from bond financing. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings The Company and its subsidiaries are involved from time to time in various claims and legal actions in the ordinary course of business. In the opinion of management, the Company and its subsidiaries are not party to any other legal proceedings, the adverse outcome of which, would have any material adverse effect on its business, its assets, or results of operations. ITEM 2. Changes in Securities (c.) On January 12, 1999, the Company issued 3,100,000 shares of Proactive restricted common stock to Arthur G. Weiss and his family, in exchange for 100% of West Side Investors, Inc., a Georgia corporation, which owns P & W Stonebridge, LLC, and P & W Headland, LLC, which own, respectively, the Stonebridge Village Shopping Center,located in DeKalb County, Georgia, and Headland-DeLowe Shopping Center, located in Atlanta, Georgia. Appraisals of the properties total $9,130,000. The shopping centers are subject to a $7,886,000 non-recourse equal profit participating mortgage. The Company believes this transaction is exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. ITEM 4. Submission of Matters to a Vote of Security Holders During the three months ended December 31, 1998, there were no matters submitted to a vote of the security holders of the Company. ITEM 5. Other Information NONE ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits and Index of Exhibits: (2) Plan of acquisition, reorganization, arrangement, liquidations, or succession : (i.) Agreement and Plan of Reorganization by and among Proactive Technologies, Inc., Arthur Weiss and Kay Weiss and West Side Investors, Inc. (filed on Form 8-K by EDGAR on January 19, 1999 and incorporated herein by reference). (3)(i.) Articles of Incorporation Certificate of Incorporation (As amended and restated as of February 12, 1999) (ii.) Bylaws of the Corporation (As amended and restated as of February 12, 1999): (b) Reports on Form 8-K: The following reports on Form 8-K or Form 8-K/A were prepared and filed during the three months ended December 31, 1997: NONE Subsequent to the three months ended December 31, 1998, but prior to the filing of this Form 10-QSB, the following reports on Form 8-K were prepared and filed: (1) January 13, 1999, refiled January 19, 1999, the Company filed Form 8-K regarding its acquisition of 100% of the issued and outstanding shares of West Side Investors, Inc., a Georgia corporation, which owns P & W Stonebridge, LLC, and P & W Headland, LLC, which own, respectively, the Stonebridge Village Shopping Center, located in DeKalb County, Georgia, and the Headland-DeLowe Shopping Center, located in Atlanta, Georgia, in exchange for the issuance of a total of 3,100,00 shares of Company restricted common stock to Mr. Arthur G. Weiss and his family. Additionally, Mr. Arthur G. Weiss and Mr. James Verbrugge were named to the Board of Directors. (2) January 25, 1999, the Company filed Form 8-K regarding its acquisition of 100% of the issued and outstanding shares of PDK Properties, Inc., a Georgia corporation, which owns 100% of Stratos Inns, LLC, a Georgia limited liability company, located in Atlanta, Georgia, in exchange for the issuance of a total of 3,600,00 shares of Company restricted common stock to the Lance Children's Trust. (3) February 5, 1999, the Company filed Form 8-K regarding its repurchase of 5,000,000 shares of common stock in exchange for a total of $1,570,000, plus an additional $200,000, in the event certain contingencies are fulfilled by Mr. Conner. As part and parcel of a stock exchange agreement with Mr. Conner, he resigned as President, Chief Executive Officer, and as a director of the Company. Additionally. the Board named Mr. William B. Astrop to its Board of Directors. Also, two directors, Mr. Branch and Mr. Maloney resigned their positions as directors. (c) Financial Data Schedule - EX 27 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. PROACTIVE TECHNOLOGIES, INC. (Registrant) Date: February 15, 1999 By: /s/ Robert E. Maloney, Jr. Robert E. Maloney, Jr., Vice-President EXHIBIT INDEX Exhibit No. Description Page No. (3)(i) Articles of Incorporation (As amended and restated as of February 12, 1999): (3)(ii.) Bylaws of the Corporation (As amended and restated as of February 12, 1999): 27 Financial Data Schedule 15 EX-3 2 CERTIFICATE OF INCORPORATION Articles of Incorporation Certificate of Incorporation (As amended and restated as of February 12, 1999) The undersigned, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows: I. The corporate name is PROACTIVE TECHNOLOGIES, INC. II. The address of the registered office of the corporation in the State of Delaware is 11th Floor, Rodney Square North, 11th and Market Streets, Wilmington, New Castle County, Delaware, 19801. The registered agent in charge thereof is CORPORATION GUARANTEE AND TRUST COMPANY. III. The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. IV. The total number of shares of stock which the corporation shall have authority to issue is Sixty Million (60,000,000) shares, with each of the shares having a par value of $0.01, thereby resulting in the corporation having total authorized capital stock in the amount of sixty million (60,000,000) shares, all of which shall be common stock. All such Common Stock shall be non-assessable, and each holder of Common Stock shall be entitled to one (1) vote per share of Common Stock held by such shareholder. As provided in the Plan and as required by 11 U.S.C. Section 1123 (a)(6), the Corporation is prohibited from issuing any nonvoting equity securiites. V. The Board of Directors is authorized and empowered to adopt, amend and repeal the By-Laws of the Corporation. VI. The name and address of each Incorporator is as follows: Name: Address: Joseph J. Collopy 2225 Land Title Building Philadelphia, PA 19110 VII. No Director shall be personally liable to the corproation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the Delaware General Corporation Law) or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, he (i) shall have breached his duty of loyalty to the corporation or its stockholders, (ii) shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article VII, nor the adoption of any provision of the certificate of incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article VII would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 17th day of December, 1982. /s/ Joseph J. Collopy --------------------------- by: Joseph J. Collopy EX-3 3 BYLAWS (ii.) Bylaws of the Corporation (As amended and restated as of February 12, 1999): BYLAWS OF PROACTIVE TECHNOLOGIES, INC. ARTICLE I. SHAREHOLDERS Section A. Annual Meetings Annual Meetings shall be held at the time (date and hour) and place designated by the Board Of Directors, but shall be held no later than thirteen months after the last preceding annual meeting. Business transacted at each annual meeting shall include the election of directors. Section B. Special Meetings Special meetings shall be held when directed by the president or the Board Of Directors, or when requested in writing by the shareholders of not less than ten per cent of all the shares entitled to vote. A special meeting requested by the shareholders, unless they designate a later date, shall be called for a date not less than ten nor more than sixty days after the request is made. The call shall be issued by the secretary, unless the president, Board Of Directors, or shareholders designate another person to do so. Section C. Meeting Place Meetings may be held within or without Delaware. Section D. Meeting Notice Written notice, stating the time (date and hour) and place of a meeting, and in the case of a special meeting, its purpose, shall be delivered not less than ten nor more than sixty days before the meeting, either personally or by first class mail, by or at the direction of the secretary, to each shareholder entitled to vote. If mailed, the notice, addressed to each shareholder at his or her address as it appears on the stock transfer books, shall be deemed to be delivered when deposited in the United States mail. Section E. Adjourned Meeting Notice When a meeting is adjourned to another designated time (date and hour) or place, it shall not be necessary to give notice of the adjourned meeting. If, however, after the adjournment, the Board Of Directors fixes a new record date for the adjourned meeting, it shall be necessary to give notice. Section F. Shareholder Determination One of the following methods shall be used for the purpose of determining the shareholders (1) entitled to notice of, or to vote at, a meeting or an adjournment thereof, (2) entitled to receive dividends, or (3) for any other purpose. The Board Of Directors may provide that the stock transfer books shall be closed for a stated period. The period shall not be more than sixty days, and in the case of a meeting, it shall not be less than ten days immediately preceding the meeting. In lieu of closing the stock transfer books, the Board Of Directors may designate a date as the record date. The date shall not be more than sixty days, and in the case of a meeting, it shall not be less than ten days, prior to the date on which the particular action is to be taken. If the stock transfer books are not closed and a record date is not designated, the date on which the notice of the meeting is mailed, or the date on which the Board Of Directors adopted the resolution declaring the dividend, shall be the record date. When a determination has been made of the shareholders entitled to vote at a meeting, the determination shall apply to any adjournment thereof, unless the Board Of Directors designates a new record date for the adjourned meeting. Section G. Voting Record If this corporation has six or more shareholders, the officer having charge of the stock transfer books shall make, at least ten days before each meeting, a complete list of the names and addresses of the shareholders entitled to vote, including the number, class, and series, if any, of shares held by each. The list, for a period of ten days prior to the meeting, shall be kept on file at this corporation's registered office, principal place of business, or transfer agent's or registrar's office. Any shareholder shall be entitled to inspect the list at any time during usual business hours. The list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder at any time during the meeting. If these requirements have not been substantially complied with, the meeting, on the demand of any shareholder, shall be adjourned until they are complied with. If no demand is made, failure to comply with these requirements shall not affect the validity of any action taken at the meeting. Section H. Quorum & Voting A majority of the shares entitled to vote on a matter and represented at a meeting shall constitute a quorum. If a quorum is present, an affirmative vote of a majority of the shares entitled to vote on the matter and represented at the meeting shall be the act of the shareholders, except as provided otherwise by law. After a quorum has been established, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to vote on the matter, below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof. Section I. Voting Shares Each common share shall be entitled to one vote on each matter submitted to a vote at the meeting. Treasury shares, shares of this corporation owned by another corporation, of which a majority of that corporation's voting shares are owned or controlled by this corporation, and shares of this corporation held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. At each election for directors, each shareholder entitled to vote at the election shall have the right to vote the number of shares owned by him or her for as many persons as there are directors to be elected at that time. Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent, or proxy designated by the corporation's bylaws or, in the absence of any applicable bylaws, by the person designated by the corporation's Board Of Directors. Proof of the designation may be made by the presentation of a certified copy of the corporation's bylaws, or the Board Of Directors' designation. In the absence of any designation, or in case of conflicting designations, the corporation's chairman of the Board Of Directors, president, vice president, secretary, and treasurer shall be presumed to possess, in that order, authority to vote the shares. Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, in person or by proxy, without a transfer of the shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, in person or by proxy, but a trustee shall not be entitled to vote shares held by him or her without a transfer of the shares into his or her name. Shares held by a receiver may be voted by him or her, in person or by proxy, without a transfer of the shares into his or her name, if the authority to do so is contained in an appropriate order of the court by which the receiver was appointed. A shareholder, whose shares are pledged, shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee. Thereafter, the pledgee shall be entitled to vote the shares. On or after the date on which written notice of redemption of redeemable shares has been mailed to the shareholders thereof, and a sum sufficient to redeem the shares has been deposited with a bank or trust company along with irrevocable instructions and authority to pay the redemption price to the shareholders thereof upon the surrender of the certificates therefor, the shares shall not be entitled to vote and shall not be deemed to be outstanding shares. Section J. Proxies Any shareholder entitled to vote or to express consent or dissent, or his or her duly authorized attorney-in-fact, may authorize another person or persons to act for him or her by proxy. A proxy must be in writing and must be signed by the shareholder or his or her attorney-in-fact. A proxy shall not be valid after the expiration of eleven months from the date thereof, unless it provides otherwise. A proxy shall be revocable at the pleasure of the shareholder executing it, except as provided otherwise by law. A proxy holder's authority to act shall not be revoked by the death or the incompetence of the shareholder who executed the proxy, unless, before the authority is exercised, written notice and proof of the death or the adjudication of incompetency is received by the officer responsible for maintaining the shareholders list. If a proxy for the same shares confers authority upon two or more persons, and does not provide otherwise, a majority of them present, or if only one is present, then that one, may exercise the powers conferred by the proxy. However, if the proxy holders present are equally divided as to the right and manner of voting, the voting of the shares shall be prorated. If a proxy expressly so provides, the proxy holder may appoint, in writing, a substitute to act in his or her place. Section K. Voting Trusts Any number of shareholders may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, as provided by law. When the counterpart of a voting trust agreement and a copy of the record of the holders of voting trust certificates have been deposited with this corporation, as provided by law, those documents shall be subject to an examination by any shareholder or record holder of voting trust certificates, in person, or by his or her agent or attorney. Section L. Voting Agreements Two or more shareholders may enter into an agreement providing for the manner of their exercising voting rights or relating to any phase of this corporation's affairs, as provided by law. Nothing therein shall impair this corporation's rights to treat the shareholders as entitled to vote their shares. Section M. Written Action Any action required to be taken or which may be taken, at any annual or special meeting, may be taken without a meeting, without prior notice, and without a vote, if a written consent, setting forth the action taken, is signed by the shareholders of not less than a majority of the shares entitled to vote. Within ten days after obtaining an authorization by written consent, notice shall be given to the shareholders entitled to vote who did not consent in writing. The notice shall fairly summarize the material features of the action taken. If the action be a merger, consolidation, or sale or exchange of assets, for which dissenting shareholders' rights are provided by law, the notice shall contain a clear statement of those rights. ARTICLE II. DIRECTORS Section A. Function All corporate powers shall be exercised by or under the authority of, and this corporation's business and affairs shall be managed under the direction of, the Board Of Directors. Section B. Qualifications Directors do not need to be either shareholders of this corporation or residents of Delaware. Section C. Compensation The Board Of Directors shall have the authority to designate the compensation of the directors. Section D. Duties A director shall perform his or her duties as a director and as a member of any committee of the Board Of Directors upon which he or she may serve, in good faith, in a manner he or she reasonably believes to be in the best interests of this corporation, and with the care which an ordinarily prudent person in the same position would use under similar circumstances. In performing his or her duties, a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by: 1.corporate officers or employees whom the director reasonably believes to be reliable and competent in the matters presented, 2.counsel, public accountants, or other persons, as to matters which the director reasonably believes to be within their professional or expert competence, or 3.committees of the Board Of Directors upon which he or she does not serve, duly designated in accordance with provisions of the Articles Of Incorporation or Bylaws, as to matters within their designated authority, which committees the director reasonably believes to merit confidence. A director shall not be considered to be acting in good faith if he or she has knowledge concerning the matter in question that would cause his or her reliance to be unwarranted. A director who performs his or her duties in compliance with this section shall have no liability by reason of being or having been a director. Section E. Assent Presumption A director who is present at a Board Of Directors meeting, at which action on any corporate matter is taken, shall be presumed to have assented to the action taken, unless he or she votes against the action or abstains from voting in respect thereto because of an asserted conflict of interest. Section F. Number The number of directors on this corporation's Initial Board Of Directors shall be three (3). The number of directors may be increased or decreased by amending these Bylaws, but no decrease shall have the effect of shortening the term of any incumbent director. Section G. Election & Term Each member of the initial Board Of Directors shall hold office until the shareholders' first annual meeting and until his or her successor shall have been elected and qualified, or until his or her earlier resignation, removal from office, or death. At the shareholders' first annual meeting and at each annual meeting thereafter, the shareholders shall elect directors to hold office until the next succeeding annual meeting. Each director shall hold office for the term for which he or she is elected and until his or her successor shall have been elected and qualified, or until his or her earlier resignation, removal from office, or death. Section H. Vacancies Any vacancy occurring in the Board Of Directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though they constitute less than a quorum of the Board Of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders. Section I. Removal At a shareholders' meeting called expressly for that purpose, any director, or the entire Board Of Directors, may be removed, with or without cause, by a vote of the shareholders of a majority of the shares entitled to vote at an election of directors. Section J. Quorum & Voting A majority of the number of directors designated by these Bylaws shall constitute a quorum for the transaction of business. An act of a majority of the directors, at a meeting at which a quorum is present, shall be an act of the Board Of Directors. Section K. Interest Conflicts No contract or other transaction, between this corporation and one or more of its directors, or any other corporation, firm, association, or entity, in which one or more of this corporation's directors are directors or officers or are financially interested, shall be either void or voidable because of the relationship or interest, or because the director or directors are present at the meeting of the Board Of Directors or a committee thereof, at which the contract or transaction was authorized, approved, or ratified, or because his, her, or their votes are counted for such purpose, if: 1.the fact of the relationship or interest is disclosed or known to the Board Of directors or the committee thereof, and the authorization, approval, or ratification of the contract or transaction was by a sufficient vote or written consent for the purpose, without counting the votes or written consents of the interested directors, 2.the fact of the relationship or interest is disclosed or known to the shareholders entitled to vote, and they authorize, approve, or ratify the contract or transaction by vote or written consent, or 3.the contract or transaction is fair and reasonable as to this corporation at the time it is authorized by the Board Of Directors or the committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board Of Directors or a committee thereof at which the contract or transaction is authorized, approved, or ratified. Section L. Committees The Board Of Directors, by resolution adopted by a majority of the full Board Of Directors, may designate from its members an executive committee and one or more other committees, each of which, to the extent provided in the resolution, shall have and may exercise all the authority of the Board Of Directors, except that no committee shall have the authority to: 1.approve or recommend to the shareholders any actions or proposals required by law to be approved by the shareholders, 2.designate candidates for the office of director, for purposes of proxy solicitation or otherwise, 3.fill vacancies on the Board Of Directors or any committee thereof, 4.amend these Bylaws, 5.authorize or approve the reacquisition of shares, unless pursuant to a general formula or method specified by the Board Of Directors, or 6.authorize or approve the issuance or sale of shares or any contract therefor, or designate the terms of a series of a class of shares, except that the Board Of Directors, having acted under its general authorization for the issuance or sale of shares or any contract therefor, and in the case of a series, the designation thereof, and having specified a general formula or method by resolution or by the adoption of a stock option or other plan, may authorize a committee to designate the terms of any contract for the sale of shares and the terms upon which the shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, and provisions for redemption, sinking funds, conversion, voting and preferential rights, and other features of a class of shares or a series of a class of shares, with full power in the committee to adopt any final resolution setting forth all the terms thereof and to authorize a statement of the terms of a series for filing with the Department Of State. The Board Of Directors, by resolution adopted in accordance with this section, may designate one or more directors as alternate committee members to serve in the place and stead of absent committee members at a committee meeting. Specifically, the Board of Directors shall have an Audit Committee, consisting of a least one (1), but not more than five (5), independent members of the Board of Directors, whose responsibility, shall consist of, among other matters, working together with the Corporation's independent auditors regarding its annual audit and reporting back to the Board the finding of the auditors. The Board of Directors, may, but is not required to, provide additional compensation or directors fees for member of the audit committee. Section M. Meeting Place Regular and special meetings may be held within or without Georgia. Section N. Meeting Time, Notice, & Call A regular meeting shall be held without notice immediately following each shareholders' annual meeting. Written notice of the time (date and hour) and place of a special meeting shall be given to each director by personal delivery, telegram, or cablegram, at least two days before the meeting, or by notice mailed to each director at least five days before the meeting. Notice of a meeting need not be given to any director who signs a waiver of notice before or after the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of the meeting and of any objections to its time (date and hour) and place and to the manner in which it has been called or convened, unless the director states, at the beginning of the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. The business to be transacted at, and the purpose of, a regular or special meeting need not be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn a meeting to another designated time (date and hour) and place. Notice of the adjourned meeting shall be given to each director who was not present at the time of the adjournment and to all directors if the time (date and hour) and place of the adjourned meeting were not designated at the time of the adjournment. Meetings may be called by the president or any director. Section O. Conference Telephone Meetings The Board Of Directors or a committee thereof may participate in a meeting by using conference telephones or similar communication equipment which permits all persons participating in the meeting to hear each other at the same time. Participation in this manner shall constitute presence in person at the meeting. Section P. Written Action Any action required to be taken or which may be taken by the Board Of Directors or a committee thereof may be taken without a meeting if a written consent setting forth the action so taken, signed by all the directors or committee members, as the case may be, is filed in the minutes of the proceedings of the Board Of Directors or committee. The consent shall have the same effect as a unanimous vote. ARTICLE III. OFFICERS Section A. Designation The officers shall consist of a president, secretary, and treasurer, each of whom shall be elected by the Board Of Directors at its regular meeting immediately following the shareholders' annual meeting. These officers shall serve until their successors are chosen and qualified. Other officers and assistant officers and agents, as may be deemed necessary, may be elected or appointed by the Board Of Directors from time to time. Any two or more offices may be held by the same person. The failure to elect a president, secretary, or treasurer shall not affect the existence of this corporation. Section B. Duties The chief executive officer shall be responsible for all sales management and personnel of the corporation, subject to the direction of the Board of Directors. The president shall be the chief executive officer, shall be responsible for the general and active management of this corporation's business and affairs, subject to the directions of the Board Of Directors, and shall preside at all shareholders' and Board Of Directors' meetings. The secretary shall be responsible for the custody and maintenance of all corporate records, except financial records, shall record the minutes of all shareholders' and Board Of Directors' meetings, shall send out all notices of meetings, and shall perform any other duties prescribed by the president or the Board Of Directors. The treasurer shall be responsible for the custody and maintenance of all corporate funds and financial records, shall keep full and accurate accounts of all receipts and disbursements, shall render accounts thereof at the shareholders' annual meetings and whenever else required by the president or the Board Of Directors, and shall perform any duties prescribed by the president or the Board Of Directors. Section C. Compensation Except as the Board of Directors may otherwise determine, the Board of Directors shall fix the compensation of all officers and assistant officers. Section D Removal Any officer or agent elected or appointed by the Board Of Directors may be removed by the Board Of Directors whenever, in its judgment, the best interests of this corporation will be served thereby. Any officer or agent elected by the shareholders may be removed only by the shareholders, unless the shareholders shall have authorized the Board Of Directors to remove the officer or agent. Any vacancy in any office may be filled by the Board Of Directors, unless these Bylaws shall have expressly reserved that power to the shareholders. The removal of any officer or agent shall be without prejudice to the contract rights, if any, of the person so removed. However, the election or appointment of the officer or agent shall not of itself create contract rights. ARTICLE IV. CAPITAL STOCK CERTIFICATES Section A. Issuance Every shareholder shall be entitled to have a certificate representing the shares to which he or she is entitled. The certificate shall not be issued for the shares until they are fully paid for. Section B. Form Certificates representing shares shall be signed by the president or vice president and the secretary or assistant secretary, and may be sealed with the corporate seal or a facsimile thereof. The signatures of the president or vice president and the secretary or assistant secretary may be facsimiles if the certificate is manually signed by a transfer agent or registrar (other than this corporation itself) or a corporate employee. In case any officer, who signed or whose facsimile signature has been placed upon a certificate, shall have ceased to be an officer before the certificate is issued, it may be issued by this corporation with the same effect as if he or she were the officer at the date of its issuance. Every certificate shall set forth or fairly summarize, or shall state that this corporation will furnish to any shareholder upon request and without charge, a full statement of the preferences, limitations, relative rights, and series designation provisions pertaining to the shares of each class or series authorized to be issued, the variations in the relative rights and preferences between the shares of each series so far as these have been designated and determined, and the authority of the Board Of Directors to designate and determine the relative rights and preferences of subsequent series. Every certificate, representing shares which are restricted as to their sale, disposition, or other transfer, shall state that the shares are restricted as to transfer and shall set forth or fairly summarize, or shall state that this corporation will furnish to any shareholder upon request and without charge, a full statement of the restrictions. Every certificate shall state upon its face the name of this corporation, that this corporation is organized under the laws of Delaware, the name of the person to whom it is issued, the number and class of shares and any series designation, and the par value of the shares or a statement that the shares are without par (no par) value. Section C. Transfer This corporation shall register a certificate presented to it for transfer if the certificate is properly endorsed by the shareholder or his or her duly authorized attorney. Section D. Loss, Destruction, Or Theft This corporation shall issue a new certificate in place of any certificate previously issued if the shareholder: 1.makes proof in affidavit form that it has been lost, destroyed, or stolen, 2.requests the issuance of a new certificate before this corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim, 3.gives bond in such form as this corporation may direct to indemnify this corporation and its transfer agent and registrar against any claim that may be made on account of the alleged loss, destruction, or theft of the certificate, and 4.satisfies any other reasonable requirements imposed by this corporation. ARTICLE V. BOOKS, RECORDS, & MINUTES Section A. Requirements This corporation shall keep correct and complete books and records of accounts and shall keep minutes of all meetings of its shareholders and Board Of Directors and committees thereof. This corporation shall keep records of its shareholders at its registered office or principal place of business or at its transfer agent's or registrar's office. The records shall contain the names and addresses of all shareholders and the number, class, and series, if any, of the shares held by each. All books, records, and minutes shall be in written form, or in any other form capable of being converted into written form within a reasonable time. Section B. Inspection Rights Any person who has been a shareholder or a record holder of voting trust certificates for at least six months immediately preceding his or her request, or who is a shareholder or record holder of voting trust certificates representing at least five per cent of the outstanding shares of any class or series, upon written request stating the purpose thereof, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any proper purpose, this corporation's relevant books and records of accounts, minutes, and records of shareholders, and to make extracts therefrom. Section C. Financial Information Not later than four months after the close of each fiscal year, this corporation shall prepare a balance sheet, showing in reasonable detail its financial condition as of the close of that fiscal year, and a profit and loss statement, showing the financial result of its operation during that fiscal year. Upon the written request of any shareholder or record holder of voting trust certificates, this corporation shall mail to the shareholder or record holder of voting trust certificates, a copy of the most recent balance sheet and profit and loss statement. Balance sheets and profit and loss statements shall be filed in this corporation's registered office in Florida, shall be kept for at least five years, and shall be subject to inspection during business hours by any shareholder or record holder of voting trust certificates, in person or by agent or attorney. Section D. Fiscal Year The Company's fiscal year shall end June 30. ARTICLE VI. DIVIDENDS The Board Of Directors may from time to time declare, and this corporation may pay, dividends on shares in cash, property, or its own shares, except when this corporation is insolvent, when the payment thereof would render this corporation insolvent, or when the declaration or payment thereof would be contrary to any restrictions contained in the Articles Of Incorporation, subject to the following provisions: 1.dividends in cash or property may be declared and paid, except as otherwise provided in this article, only out of the unreserved and unrestricted earned surplus or capital surplus, howsoever arising, but all dividends paid out of the capital surplus shall be identified as a distribution of the capital surplus, and the amount per share paid from the capital surplus shall be disclosed to the shareholders receiving the dividends concurrently with the distribution of the dividends, 2.dividends may be declared and paid in this corporation's own treasury shares, 3.dividends may be declared and paid in this corporation's own authorized but unissued shares out of any unreserved and unrestricted surplus, subject to the following conditions: a.if the dividends are payable in shares having a par value, the shares shall be issued at not less than the par value thereof, and there shall be transferred to the stated capital, at the time the dividends are paid, an amount of surplus equal to the aggregate par value of the shares to be issued as the dividends, and b.if the dividends are payable in shares without par (no par) value, the shares shall be issued at the stated value as shall be designated by the Board Of Directors by resolution adopted at the time the dividends are declared, there shall be transferred to the stated capital, at the time the dividends are paid, an amount of surplus equal to the aggregate stated value so designated in respect to the shares, and the amount per share so transferred to the stated capital shall be disclosed to the shareholders receiving the dividends concurrently with the distribution of the dividends, c.dividends payable in shares of any class shall not be paid to the shareholders of shares of any other class, unless the Articles Of Incorporation so provide or the payment is authorized by the affirmative vote or written consent of the shareholders of a majority of the shares of the class in which the payments are to be made, and d.a split-up or division of the issued shares of any class into a greater number of shares of the same class, without increasing the stated capital, shall not be construed to be dividends within the meaning of this article. ARTICLE VII. CORPORATE SEAL The Board Of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the year of incorporation and the following: PROACTIVE TECHNOLOGIES, INC. DELAWARE ARTICLE VIII. BYLAWS Bylaws may be adopted, altered, amended, or repealed by the shareholders or the Board Of Directors, but the Board Of Directors may not alter, amend, or repeal any bylaw adopted by the shareholders if the shareholders specifically provide that bylaw is not subject to alteration, amendment, or repeal by the Board Of Directors. EX-27 4
5 6-MOS JUN-30-1998 DEC-31-1998 411,844 1,194,919 863,402 0 20,381,076 24,440,635 643,416 (285,302) 25,691,564 18,569,109 0 0 0 683,706 6,438,748 25,691,564 12,284,580 12,527,760 16,363,483 17,866,698 772,588 0 325,708 (6,111,525) 0 (6,111,525) 0 0 0 (6,111,525) (.33) (.33)
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