-----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, WD5eF9yeVX/W04s5Fjc5qD8ZZ7FsNt9F1wl+T3pgunSP1YopMY92i+7Zc/aH9egk 1salUVfSmeJ/g+vzt/ZaBw== 0000722839-96-000026.txt : 19961030 0000722839-96-000026.hdr.sgml : 19961030 ACCESSION NUMBER: 0000722839-96-000026 CONFORMED SUBMISSION TYPE: 10QSB CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19961029 SROS: AMEX 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: 1934 Act SEC FILE NUMBER: 001-08662 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 7118 BEECH RIDGE TRAIL STREET 2: SUITE 402 CITY: TALLAHASSEE STATE: FL ZIP: 32312 BUSINESS PHONE: 9046685800 MAIL ADDRESS: STREET 1: 711 BEECH RIDGE TRAIL 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 CONFIRMING COPY 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: March 31, 1996 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) (904) 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 No X 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 May 30, 1996 was 11,562,712. 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 Sheets 3-4 March 31, 1996 and June 30, 1995 Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended March 31, 1996 and 1995 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 1996 and 1995 6-7 Condensed Consolidated Statement of Changes in Stockholders' Equity for the Nine Months Ended March 31, 1996 and the Year Ended June 30, 1995 8 Notes to Condensed Consolidated Financial Statements 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-14 PART II OTHER INFORMATION Item 1. Legal Proceedings 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURE 16-17 ROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS March 31 June 30 1996 1995 (Unaudited) (Audited) ASSETS: Current Assets: Cash and equivalents, including restricted cash of approximately $ 274,241 $ 348,428 $ 98,911 Marketable equity securities, net 175,171 559,005 Accounts receivable, net 119,021 110,081 Notes receivable 5,984 ------ Inventory 18,574,150 ------ Due from related parties 23,971 4,625 Prepaid expenses 46,123 7,454 Deferred income tax asset, net 1,004,786 266,460 --------- ------- Total Current Assets 20,297,634 1,046,536 Property and equipment, net 1,277,654 426,208 Notes receivable 240,517 ------ Deferred income tax asset, net 280,000 280,000 Other assets, net 268,948 10,763 Goodwill, net 143,550 ----- --------- ------- TOTAL ASSETS $ 22,508,303 $1,763,507 ---------- --------- ---------- --------- PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS March 31 June 30 1996 1995 (Unaudited) (Audited) LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Notes payable $ 9,310,352 $ 221,010 Current portion of obligations under capital leases 50,660 69,600 Accounts payable 341,392 219,103 Accrued expense 399,888 117,596 Customer deposits 92,451 ------- Income taxes payable 1,082,816 ------- Accrued salaries 13,522 179,461 Due to related parties 49,313 102,044 Deferred revenue 1,480,152 ------ Deferred compensation payable 737,382 ------ --------- -------- Total Current Liabilities 13,557,928 908,814 Notes Payable 4,452,648 105,407 Obligations under capital leases 15,430 47,801 Minority Interest 65,278 ------- ---------- -------- Total Liabilities 18,091,284 1,062,022 Stockholders' Equity: Common stock 446,971 88,217 Capital in excess of par value 1,543,282 27,989,381 Accumulated deficit ( 27,573,234) (27,376,113) ------------ ------------ Total Stockholders' Equity 4,417,019 701,485 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,508,303 $ 1,763,507 ------------ ------------ ------------ ------------ See Accompanying Notes to Condensed Consolidated Financial Statements PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Nine Months Ended Ended March 31, March 31, 1996 1995 1996 1995 Net sales $ 2,132,441 $ 244,050 $ 2,815,840 $1,229,066 Cost of sales 1,020,541 70,559 1,161,900 222,362 Selling, general and administrative expenses 650,467 315,493 1,308,896 939,184 ---------- -------- --------- ---------- Income (loss) from operations 461,433 (142,002) 345,044 67,520 Other Income (deductions) Interest expense ( 94,412) (4,856) ( 121,016) (17,277) Interest income 6,149 1,923 11,826 11,718 Gain (loss) on sale of marketable equity securities ( 1,884) (364,303) ( 48,806) (365,267) Unrealized gain(loss)on marketable equity securities (108,887) 93,279 ( 333,118) 233,712 Other income and expense 6,381 ----- 6,381 75,000 Minority Interest 6,722 ----- 6,722 ----- ------- -------- ---------- ---------- Income(loss) from continuing operations before income taxes 275,502 (415,959) ( 132,967) 5,406 Income tax (expense) benefit ( 72,633) 108,610 5,760 54,875 -------- -------- ---------- ---------- Net income (loss) from continuing operations 202,869 (307,349) ( 127,207) 60,281 Loss from operations of discontinued Proactive Solutions, Inc. ----- ----- ( 69,914) ---- Net income (loss) $ 202,869 $ (307,349) $( 197,121) $ 60,281 Net income (loss) per common and common equivalent share - primary and fully diluted $ .025 $ ( .140) $ ( .048) $ .028 Adjusted shares outstanding primary and fully diluted 8,164,912 2,200,624 4,078,455 2,131,177 See Accompanying Notes to Condensed Consolidated Financial Statements PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in Cash (UNAUDITED) Nine months ended March 31, 1996 1996 1995 Cash Flows From Operating Activities: Net Income (Loss) $ ( 197,121) $ 60,281 Adjustment to reconcile net income (loss) to net cash (used in )provided by operating activities: Depreciation and amortization 79,511 82,983 Loss on sale of marketable equity securities 48,805 365,267 Unrealized loss (gain)on marketable equity securities 333,119 ( 233,712) Allocate net loss to minority interest ( 6,722) ----- Current expenses paid with common stock 51,386 ----- Deferred tax benefit ( 15,014) ( 54,875) Decrease in accounts receivable 20,267 9,674 Decrease in notes receivable 48,901 ----- (Increase) in inventories (242,674) ----- (Increase) in due from related parties ( 327) ----- (Increase) decrease in prepaid expenses (39,924) 6,758 (Increase) decrease in other assets (53,841) 662 Decrease in accounts payable (61,803) ( 53,568) Increase (decrease) in accrued expenses 4,648 ( 91,301) Decrease in customer deposits (151,751) ----- Decrease in income taxes payable (576,449) ----- Increase in accrued salaries 13,522 ----- Increase in due to related parties 98,954 ----- Decrease in deferred revenue ( 45,585) ----- Decrease in deferred compensation payable (124,000) ----- -------- ---------- Net Cash (used in)provided by Operating Activities ( 816,098) 92,169 Cash Flows from Investing Activities: Purchases of property and equipment ( 35,753) ( 101,813) Purchases of marketable equity securities ( 16,913) ( 325,173) Capitalized software expenditures ( 12,362) ( 878,337) Cash to discontinued operations ( 6,977) ----- Purchase of subsidiary ( 144,000) ----- Minority interest purchase of subsidiary 72,000 ----- Proceeds from sale of investments 18,823 119,731 Cash received on purchase of subsidiary 296,916 ----- ----------- ---------- Net Cash provided by (used in) investing activities 171,734 (1,185,592) Cash Flows from Financing Activities: Proceeds from exercise of stock warrants 1,151,154 ----- Proceeds from exercise of stock options 458 ----- Proceeds from issuance of common stock ----- 744,940 Repayment of obligations under capital leases ( 51,311) ( 46,208) Proceeds from notes payable 1,825,726 ----- Principal payments on notes payable (2,033,446) ----- Loans to employees 1,300 4,550 ---------- --------- Net Cash provided by financing activities 893,881 703,282 Net Increase (Decrease) in Cash and Cash Equivalents 249,517 ( 390,141) Cash and Cash Equivalents, Beginning of Period 98,911 611,038 ---------- --------- Cash and Cash Equivalents, End of Period $ 348,428 $ 220,897 Supplemental Disclosure of Cash Flow Information: Cash Payments of: Interest $ 256,189 $ 17,277 Income Taxes $ 585,000 ------ Non-cash investing and financing activities: Reacquire common stock in exchange for assets and liabilities of Proactive Solutions, Inc. 294,754 ----- Cancel common stock received ( 15,000) ----- Issue stock in payment of debt 317,822 ----- Issue stock to purchase CFHI 2,163,467 ----- See Accompanying Notes to Condensed Consolidated Financial Statements PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) Capital In Excess of TOTAL Common Stock Par Accumulated Stockholders' Shares Amount Value Deficit Equity Balance June 30, 1994 2,055,288 $82,211 $27,317,250 ($23,511,876) $3,887,585 Exercise of Common Stock options 150,139 6,006 672,131 678,137 Net Loss for Year (3,864,237) (3,864,237) Balance June 30, 1995 2,205,427 88,217 27,989,381 (27,376,113) 701,485 Common stock issued for debt extinguish- ment 201,500 8,060 309,762 317,822 Reacquired and canceled stock from dissolution of Proactive Solutions, Inc. (375,000) ( 15,000) 294,754 279,754 Exercise of common stock options 11,444 458 458 Exercise of common stock warrants 571,827 22,873 1,128,281 1,151,154 Common stock issued Purchase of Capital First Holdings, Inc. 8,559,077 342,363 1,821,104 2,163,467 Net Loss for the Nine Months ended March 31, 1996 ( 197,121) ( 197,121) - ------------------------------------------------------------------- Total as of March 31, 1996 11,174,275 $446,971 $31,543,282 $(27,573,234) $4,417,019 See Accompanying Notes to Condensed Consolidated Financial Statements PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Financial Presentation 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 accompanying consolidated financial statements and related notes should be read in conjunction with the audited financial statements of Proactive Technologies, Inc. (the Company) , and notes thereto, as found in Form 10-KSB for the fiscal year ended June 30, 1995. A copy of such consolidated financial statements and notes thereto may be obtained by writing to the Company. 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 periods presented. The results of operations for the interim periods are not indicative of the results to be expected for the full year. (2) Chapter 11 Bankruptcy As was reported on Form 8-K which was filed on September 13, 1995, the Company, along with two operating subsidiaries, Keystone Laboratories, Inc. (KLI) and Proactive Solutions, Inc. (PSI), was voluntarily placed under the protection of the United States Bankruptcy Court for the Northern District of Oklahoma (the Court) on September 1, 1995, the Court confirmed the Equity Security Holders' Plan of Reorganization (the Plan), one result of which is PSI is no longer a subsidiary of the Company. The Company transferred all assets and liabilities of PSI to the former shareholders of PSI in exchange for the return of the original shares of the Company issued upon the acquisition of PSI. The Company canceled these returned shares in December of 1995. In connection with the confirmation of the Plan, the Court dissolved the order administratively consolidating the Company's Chapter 11 proceeding with the Chapter 11 proceeding of PSI. KLI's Chapter 11 bankruptcy petition was dismissed without prejudice by the Court on September 25, 1995. Under the Plan, primarily all the Company's creditors were to be paid in full within six months of the effective date of the Plan. Most of these creditors were paid in December of 1995 with the issuance of the Company's common stock, and all but one remaining creditor was paid in January of 1996. As of the date of this filing, all claims have been paid and the Company has requested a hearing of the Bankruptcy Court dismissing the Company from bankruptcy. Under the Plan, the Company is authorized to issue a total of sixty million (60,000,000) shares of common stock. In addition, certain classes of current stockholders of the Company received warrants entitling them to purchase shares of the Company's common stock at a price of $.50 per share ($2.00 per share after the reverse stock split) for a period of six months in exchange for the release of their respective shareholder claims against the Company. As of March 31, 1996, 571,827 warrants have been exercised. (3) Reverse Stock Split A one for four reverse stock split of the Company's common stock was approved through written consent by the holders of 51.28% of the outstand- ing shares of the Company and became effective January 31, 1996. This decreases the number of issued and outstanding shares of common stock by 75%, and increases the par value of each such share from $0.01 to $0.04. All references in the accompanying consolidated financial statements to the number of common shares, par value per share and other per share information have been restated to give retroactive effect to the one for four reverse stock split for all periods presented. (4) Acquisitions On February 10, 1996, the Company entered into an agreement to incorporate a wholly-owned subsidiary called Decocrete Worldwide, Inc. (Worldwide) for the purpose of purchasing the net assets of Decocrete International, Inc. (International) for the purchase price of $144,000 a total of $72,000 was distributed to International and $72,000 was given to Worldwide in payment of twenty per cent of the Worldwide stock to be issued to the International shareholders. Subsequent to the acquisition, International was dissolved with the $72,000, the only remaining asset being distributed to its shareholders. The net after-tax profits of Worldwide will be allocated sixty percent (60%) to the Company and forty percent (40%) to Worldwide's minority shareholders. The results of operations of Worldwide are included with the results of the Company beginning February 10, 1996. Next, as reported on Form 8-K which was filed on February 22, 1996, on February 12, 1996, the Company acquired all of the issued and outstanding shares of common stock of Capital First Holdings, Inc. and its subsidiaries (Capital) from Mark A. Conner in exchange for a total of 8,559,077 (approximately eighty percent (80%)) of the issued and outstanding shares of common stock of the Company. The acquisition of Capital was accounted for in a manner similar to a reverse acquisition. Finally in connection with this acquisition, Mr. Conner was also elected Chairmain of the Board and President and Chief Executive Officer of the Company, pursuant to a five year employment agreement. Capital is a real estate developer in Florida which designs and develops single-family subdivisions for residential lots and condominiums principally in the Tallahassee, Leon County and Vero Beach areas. For the twelve (12) month period ended December 31, 1995, Capital generated approximately $30,000,000 in revenues and approximately $2,700,000 in net income before tax and loss from discontinued operations. As of December 31, 1995, Capital owned approximately $22,000,000 in total assets. The results of operations of Capital are included with the results of the Company beginning February 12, 1996. On February 12, 1996, the Company acquired from Capital $20,856,707 in total assets, $18,693,240 in total liabilities and $2,163,467 in total equity. No purchase price allocation adjustments have been made at this time but the balances are subject to adjustments which may be determined later. The consolidated pro forma condensed income statement which follows assumes that the acquisition of Worldwide and Capital had occurred at the beginning of each period presented. The calculations include adjustments for depreciation, amortization and interest. The weighted number of shares assumes that the reverse stock split has occurred and the 8,559,077 shares have been issued to Mark A. Conner. Nine Months Year Ended Ended March, June 30 1996 1995 (Unaudited) (Unaudited) Revenues $ 21,713,666 $31,727,791 Net Income (Loss) 910,162 ($ 3,055,009) Net Income (Loss) per share $ .084 ($ 0.29) PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (continued) Weighted Average Number of shares 10,829,039 10,704,544 The pro forma statements presented above are not necessarily indicative of what actually would have occurred if the acquisitions had been in effect for the entire periods presented. In addition they are not intended to be a projection of future results. (5) Subsequent Events On or about 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. Subsequently, in May 1996, the Company has entered into an agreement to purchase a controlling interest in KPI, the details of which are in the process of being finalized. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company had four subsidiaries for the periods included in this report; Capital First Holdings, Inc. (Capital), Decocrete Worldwide, Inc., (Worldwide), Keystone Laboratories, Inc. (KLI) and Proactive Solutions, Inc. (PSI). Capital, a real estate development company, became a wholly owned subsidiary of the Company on February 12, 1996. The March 31, 1996 Balance Sheet of Capital and results of Operations of Capital from February 12, 1996 to March 31, 1996 are included in this report. Worldwide, a manufacturer of decorative concrete, became an 80% owned subsidiary of the Company on February 10, 1996. Included in this report is the March 31, 1996 Balance Sheet of Worldwide and the results of operations from February 10, 1996 to March 31, 1996. Sixty percent of the net income (loss) is included in the Company's results of operations with the remaining forty percent allocated to the minority shareholders. KLI is a wholly-owned subsidiary of the Company and operates a urine drug screening laboratory in Asheville, North Carolina. Approximately 90% of the Company's drug testing customers are located in the mid-South region and many of them are in the textiles and furniture manufacturing industries. PSI was a company in the product development stage which never actually commenced operations. As mentioned above, as a result of the confirmation by the Court of the Equity Holders' Plan of Reorganization on November 21, 1995, PSI is no longer a subsidiary of the Company. For the periods included in this report, PSI was developing computer software for business management and project management and the resulting losses from these endeavors were recorded as losses from discontinued operations for the nine months ended March 31, 1996. Results of Operations Nine months and three months ended March 31, 1995 compared to nine months and three months ended March 31, 1996. Net sales increased $ 1,586,774, or 129% from the first nine months of fiscal year 1995 to the first nine months of fiscal year 1996. Net sales increased $ 1,888,391, or 774% from the third quarter of fiscal year 1995 to the same period in fiscal year 1996. The increase in net sales for the nine months and three months ended March 31, 1996 reflected net sales of $ 1,864,615 attributable to the acquisitions made during the third quarter of fiscal 1996 with the remaining changes due to fluctuations of volume at KLI. Cost of sales increased $ 939,538, or 423% and $ 949,982, or 1,346%, for the first nine months and three months, respectively, of fiscal year 1995 compared to the first nine months and three months, respectively, of fiscal year 1996. This was due primarily to the increase in net sales volume generated by the acquisitions made during the third quarter of fiscal 1996. Selling, general, and administrative expenses increased $ 369,712, or 39% from the first nine months of fiscal year 1995 to the first nine months of fiscal year 1996. Selling, general and administrative expenses increased $ 334,974, or 106% from the third quarter of fiscal year 1995 to the third quarter of fiscal year 1996. Selling, general and administrative expenses of the operations acquired during the third quarter of fiscal year 1996 accounted for $ 314,577 of the respective increases for the the three and nine months ended March 31, 1996. Interest expense increased $ 103,739 or 600% and $ 89,556, or 1,840% from the nine month and three month period ended March 31, 1995, respectively, compared to the nine and three month period ended March 31, 1996, primarily due to the interest on the notes payable of the companies acquired during the third quarter of fiscal year 1996. The realized loss on sale of marketable securities decreased $ 316,461 and $ 362,419 from the nine month period and three month period ended March 31, 1995, respectively, compared to the nine month and three month period ended March 31, 1996. These losses are due to the sale of investments for a price less than their respective purchase prices. The Company recorded an unrealized gain on marketable equity securities of $ 233,712 and $ 93,279 for the nine month and three month periods ended March 31, 1995, respectively, compared to an unrealized loss on marketable securities of $ 333,118 and $ 108,887 for the same periods in fiscal year 1996. These unrealized gains and losses are attributable to adjustments of the book value of the marketable equity securities to the market value for each reporting period. In the nine months ended March 31, 1995, $75,000 in other income was of a non-recurring nature. The minority interest of $6,722 for the nine and three months ended March 31, 1996, reflects the Worldwide net loss that was allocated to the minority shareholders. Financial Condition For the nine months ended March 31, 1996, the Company experienced a net increase in cash of $ 249,517 which is primarily attributable to cash received from the exercise of warrants of $1,151,154 and cash received from acquisitions of $296,916 offset by cash used to purchase Worldwide, service debt and outlays for operations. Total assets increased $ 20,744,796 from June 30, 1995 to March 31, 1996 primarily due to the following factors: an increase of $ 20,943,227 due to the acquisitions made in the third quarter of fiscal year 1996: a decrease of $ 383,834 in the value of marketable equity securities which consisted of a $ 333,118 reduction in market value and a $ 50,716 reduction due to sales of securities offset by purchases; an increase in inventories of $254,656; goodwill of $143,550 recorded for the Worldwide purchase and the transfer of all the assets of PSI in the amount of $168,091 back to the orginial PSI shareholders. Total liabilities increased $ 16,963,984 from June 30, 1995 to March 31, 1996, primarily due to the following factors: an increase of $ 18,779,759 due to the acquisitions made in the third quarter of fiscal year 1996; a decrease of $585,000 from payment of income taxes; a decrease due to all of the liabilities of PSI in the amount of $447,846 being transferred back to the original PSI shareholders and $263,250 from debt being paid off by the issuance of common stock. Liquidity The Company believes that, for the foreseeable future, funds from the Company's operations will be sufficient to support its current operations. The proceeds from the exercise of warrants issued in the bankruptcy plan produced sufficient cash flow to pay the Company's remaining creditors under the bankruptcy plan. The Company is in negotiations with several interested purchasers for KLI and the Company has a target date of the end of calendar 1996 to complete the transaction. As a result of the acquisitions of Capital and Worldwide along with the contemplated sale of KLI, it is anticipated that the overall sales and net income of the Company will increase significantly in the near future. The Company intends to concentrate its future efforts on expanding the volume of business of Capital in Tallahassee and Vero Beach, Florida areas and of developing the business of Worldwide. The Company's pending acquisition of Killearn Properties, Inc. will allow the Company to expand into the Atlanta area. The Company is continuing to explore other possible acquisitions in construction-related industries which will complement its existing businesses. Finally, it is anticipated in the near future that the Company will acquire approximately $10,000,000 in real estate holdings in the Albany and Thomasville, Georgia area and in Cape San Blas, Florida. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings As was discussed above in ITEM 2 of the Notes to the financial statements, on September 1, 1995, the Company along with its two subsidiaries at the time, KLI and PSI, voluntarily filed for protection under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Northern District of Oklahoma. On November 21, 1995 the Court confirmed the Equity Security Holders' Plan of Reorganization. The information contained in that discussion therein is incorporated herein by reference. All of the creditors in the Plan as well as claimants of the Court have been paid; the Company has petitioned the Bankruptcy Court for a hearing to allow its discharge from bankruptcy. ITEM 4. Submission of Matters to a Vote of Security Holders The Bankruptcy Court ordered that a summary of the Disclosure Statement and Plan of Reorganization, along with a ballot for voting be mailed to all shareholders; holders of 8,221,285 shares voted to accept the Plan, and holders of 1,080 shares voted to reject the Plan. On December 22, 1995 in a Consent to Action in lieu of a special meeting of shareholders of Proactive Technologies, Inc., the holders of a majority of shares of voting stock issued and outstanding agreed to enter into the stock purchase agreement with Capital First Holdings, Inc. and agreed to effect a one for four reverse stock split of the outstanding shares of common stock of the corporation. On February 12, 1996 in a Consent to Action in lieu of a special meeting of shareholders of Proactive Technologies, Inc., the holders of a majority of shares of voting stock agreed to elect the following directors of the corporation: Mark A. Conner, Chairman of the Board, Joel C. Holt, and Robert Maloney. The directors then elected Mark A. Conner President and Chief Executive Officer of the Company. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K: The following reports on Form 8-K were prepared and filed during the quarter ended March 31, 1996: (1) February 22, 1996: The Company announced it had completed its acquisition of all the issued and outstanding shares of the common stock of Capital First Holdings, Inc. and its subsidiaries from Mark A. Conner in exchange for approximately eighty percent of the issued and outstanding shares of the Company. 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) By: /s/ Mark A. Conner Mark A. Conner, President, and Chief Executive Officer Date: June , 1996 -----END PRIVACY-ENHANCED MESSAGE-----