-----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, JYDlFGIZd5UjS27nwss5FYr5pwbhGk05iVmgb9q+1rMeofNm2AwFn+q5hVCOrrQW d2kdBqJqtXO8goyaaDuNmg== 0000722839-98-000008.txt : 19980521 0000722839-98-000008.hdr.sgml : 19980521 ACCESSION NUMBER: 0000722839-98-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980520 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: SEC FILE NUMBER: 001-08662 FILM NUMBER: 98628798 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: March 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 __________ 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 11, 1998 was 18,445,648. 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 March 31, 1998 and June 30, 1997 Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended March 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 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 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)
March 31, June 30, 1998 1997 ASSETS: Real estate inventories $ 39,008 $ 36,425 Cash and equivalents 153 292 Property and equipment, net 613 1,037 Investment in Killearn Properties, Inc. 1,321 2,253 Other Investments 220 242 Other assets 762 250 Notes Receivable 3,410 4,730 _________ _________ TOTAL ASSETS $ 45,487 $ 45,229 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Notes payable $ 25,136 $ 23,178 Accounts payable and accrued expenses 793 1,908 Income taxes payable 1,640 1,717 Deferred income tax liability 1,597 1,232 Deferred revenue 109 109 Deferred compensation payable 0 387 Customer deposits 265 572 _________ _________ Total Liabilities $ 29,540 $ 29,103 Minority Interest 6 313 Stockholders' Equity: Common stock - par value $.04 per share; authorized 60,000,000 shares; issued 18,445,648 738 726 Paid-in capital 11,402 11,886 Retained earnings 3,801 3,201 _________ _________ Total Stockholders' Equity $ 15,941 $ 15,813 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,487 $ 45,229 ========= ========= 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 Nine Months Ended March 31, March 31, 1998 1997 1998. 1997 Net sales $ 8,346 $ 3,601 $ 12,600 $11,729 Cost of sales 7,063 2,831 9,857 7,878 Selling, general and administrative expenses 490 488 1,145 1,348 ________ ________ _________ ________ Income from operations 793 282 1,598 2,503 Other Income (deductions): Interest (expense) (258 ) ( 62) ( 720) ( 779) Other income (expense), net 305 ( 48) 261 67 Minority Interest 0 1 ( 38) 0 ________ ________ _________ ________ (Loss) income from continuing operations before income taxes 840 173 1,103 1,791 Income tax (benefit) expense 176 65 273 539 ________ ________ __________ ________ Net (loss) income before discontinued operations $ 664 108 830 1,252 Discontinued operations: Loss from operations of Decocrete Worldwide, less applicable tax benefit of $3,000 and $8,000,respectively ( 8) 0 ( 23 ) ( 61) ( ) ________ _________ __________ ________ Net (loss) income $ 656 $ 108 $ 807 $ 1,191 ======== ======== ========== ======== Earnings per share before Discontinued operations$ .04 $ .01 $ .04375 $ .0745 Discontinued operations $ .00 $ .00 $ .00 $ .00 ________ ________ __________ _______ Earnings per share $ .04 $ .01 $ .04375 $ .0745 ======== ======== ========== ======= Adjusted shares outstanding primary and fully diluted 18,448,718 16,441,505 18,448,718 15,971,484 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)
Nine Months Ended March 31 1998 1997 Net Cash provided by operating activities $ 2,328 $ (1,676) _________ ________ Cash Flows from Investing Activities: Distribution from real estate ventures 27 32 Investment in real estate ventures 5 ( 5) Purchase of investments in equity securities( 1,020) ( 650) Purchase of property and equipment 0 ( 794) _________ _________ Net Cash used in investing activities ( 988) (1,417) Cash Flows from Financing Activities: Proceeds from exercise of stock warrants 0 1,119 Proceeds from issuance of notes payable 5,620 4,085 Repayments of amounts borrowed (6,989) (2,106) _________ ________ Net Cash provided by financing activities (1,369) 3,098 _________ ________ Net (Decrease) Increase in Cash and Cash Equivalents ( 29) 5 _________ ________ Cash and Cash Equivalents, Beginning of Period 182 154 _________ ________ Cash and Cash Equivalents, End of Period $ 153 $ 159 ========= ======== 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 Nine Months Ended March 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-KA for the year ended December 31, 1995, the Company's Form 10-KSB for the year ended June 30, 1997, the Company's Form 10-QSB for the three months ended September 30, 1997 (filed by EDGAR on November 14, 1997), and the Company's Form 10-QSB for the three months and six months ended December 31, 1997 (filed by EDGAR on February 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. 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 has been added to the land inventory of the Company. This acquisition will be 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 Killearn Properties, Inc. (AMEX: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, 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 February 11, 1998, the Company currently owns of record, 132,000 shares, or 14.87% of the total issued and outstanding shares of KPI. As part and parcel of the aforementioned January 27, 1998 agreement the Company created a new Georgia corporation called 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 will bring approximately 650 acres or 1,200 lots, in various stages of development and bring land with an estimated basis of $9 million to the Company. On January 30, 1998, the Company sold its one-third general partnership interest and its one-third limited partnership interest in Piney-Z, Ltd., a Florida limited partnership to a new 65 1/3 limited partner and a 1% general partner for $2,300,000. 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 has been accounted for under the purchase method of accounting. Identifiable assets acquired approximated the liabilities assumed; accordingly, the entire purchase price has been attributed to goodwill. During fiscal 1997 the Company decided to cease operating Decocrete. Assets have been written down to the amount expected to be realized upon sale. (3) Debt The Company had an outstanding loan from a company in which a director has an interest which was due November 29, 1997, which loan was extended to February 28, 1998. The Company's purchase of the acreage surrounding a developing golf course in Freeport, Florida resulted in the Company's owing a total of $2,300,000 in the form of a purchase money mortgage, which note carries an interest rate of 10%, with semi-annual interest payments and is due November 3, 2000. The Company, as a result of the aforementioned three Put and Call Agreements, have entered into three separate promissory notes with three individuals for a total amount of $1,254,000 at an interest rate of prime plus 1%, which notes are due and payable the earlier of June 22, 1998, or when money is tendered for Killearn Properties, Inc. shareholders in the event a cash out merger is proposed. The Company, as a result of an agreement reached with Killearn Properties, Inc. ("KPI") agreed to assume the following liabilities from KPI as a result of its acquisitions stemming from the agreement: (a.) Simpson Mill Development: The Company assumed a first money purchase mortgage in the amount of $1,258,087.00 at the annual rate of 5.25%, which note called for principal payment of $50,000 on or before January 15, 1998, $300,000 plus all acrued interest on or before June 30, 1998, and $300,000, plus all accrued interest on or before June 30, 1999, and the balance of unpaid principal and accrued interest on or before June 30, 2000. Additionally, the Company assumed a construction and development loan on the project in the amount of $1,923,411.72; (b.) The Summit at Eagle's Landing: The Company assumed a development loan in the amount of $1,839,670.00, which note accrues interest at the annual rate of 9.5% per year and is due and payable September 28, 1998; (c.) The Glen at Eagles' Landing: The Company assumed a development loan in the principal amount of $598,321.66, which note accrues interest at the annual rate of 9.5% per year and is due and payable October 24, 1998. Additionally, the Company assumed a fifty per cent joint venture interest in a Georgia general partnership, which owns three parcels in Stockbridge, Georgia, two commercial parcels and a residlential subdivision known as The Highlands. The result was that the Company assumed 50% of the following obligations: a $1,939,320.00 note to First Community Bank, which note accrues at the annual rate of 9.5% per year and is due September 28, 1998; a $1,000,000 note payable to Peachtree Bank, which note accrues at the annual rate of prime plus 2% per year and is due and payable on December 28,1998; and a $425,415.00 note payable to Wachoivia Bank, which note accrues at the rate of 10%% per year and is due and payable on or befoe December 31, 1998. On or about March 31, 1998, the Company sold its interest in Simpson Mill Development in exchange for the assumption by new purchaser of the existing first mortgage and development loan on the project, plus approximately $300,000 in cash and several developed lots worth approximately $150,000. (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 18,445,648 for the three month and the nine month period presented. This number was achieved after taking the 18,151,918 shares outstanding as of June 30, 1997 and adding to it the 293,730 shares issued on September 4, 1997 for 58,746 shares of Killearn Properties, Inc. common stock from a shareholder. There were no additional additions to the outstanding shares during the three months ended March 31, 1998. (5) Subsequent Events Subsequent to the end of the quarter, the Company sold its 50% interest in the Ward Lake project, resltuing in a gain to the Company of approximately $100,000. PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. and attempting to sell it to interested buyers in the Tampa, Florida area. The operating results of Decocrete are included in the accompanying consolidated financial statements from the date of acquisition as a discontinued operation. The effect that the treatment of Decocrete as a discontinued operation had on the Balance Sheet for March 31, 1998 was a reduction in total assets and equity of approximately $133,000. The effect that the treatment had on the Consolidated Statement of Profit or Loss for the three months and nine months ended March 31, 1998 was a loss of approximately $8,000 and $15,000, repectively, due to depreciation and amortization expense with no sales. Additionally, certain amounts in the December 31, 1996 financial statements and notes to consolidated financial statements have been reclassified to conform to the March 31, 1998 presentation. The effect that the treatment had on the Consolidated Statement of Profit or Loss for the three months and nine months ended March 31, 1997 was a reduction in sales of approximately $30,000, and $149,000, respectively; a reduction on cost of sales of approximately $15,000, and $92,000, respectively, a reduction in selling, general and administrative expenses of $35,000, and $141,000, respectively, and an increase to net income before discontinued operations of $20,000, and $61,000, respectively. QuinStone Industries, Inc., ("QuinStone") a manufacturer of synthetic building products, became an 82% owned subsidiary of the Company on September 9, 1996. This transaction was rescinded, however, on November 16, 1996. Consequently, the June 30, 1997 and December 31, 1997 balance sheets of QuinStone and results of operations are not included in this report. 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. 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. 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 nine month periods ended March 31, 1997 and 1998. Results of Operations Net sales increased approximately $4,745,000 (131%)during the current three month period ended March 31, 1998, and $ 871,000 (7.43%) during the nine month period ended March 31, 1998, respectively, compared to those same periods a year ago. Real estate market conditions that have been down in the southeastern United States, and specifically in the northern Florida, recovered slightly. The sales of the Company's interest in the Piney-Z, Ltd. partnership as well as the sale of the Company's remaining land in Vero Beach, Florida and the newly acquired Simpson Mill Development in Stockbridge, Georgia were the primary reasons for the increase. Cost of sales, as a percentage of sales, was 84.6% for the current three month period and 78.23% for the current nine month period, compared to 78.62% and 67.2%, respectively, a year ago. The gross profit margin for the current three month period decreased 6.37% as compared to the same period a year ago. This decrease in profit margin on net sales was primarily due to the increased basis in the property sold during the current three months due to the increased capitalization of costs put to the land over time. and the sale of a bulk asset of Piney-Z, Ltd. partnership at a lower profit margin than had the project been sold out over time as developed lots. Profit margins on ordinary lot sales of between 18% and 21% are expected assuming no great fluctuations in the current interest rates. Selling, general, and administrative ("SG&A") expenses remained fairly constant, increasing only $2,000 during the three months ended March 31, 1998 as compared to the three months ended March 31, 1997. For the current nine month period, SG&A decreased $203,000, or 15%, over the nine month period a year ago, as the Company continues to implement cost improvement policies. The retirement of the Company's Chief Executive Officer on March 6, 1998 also eliminated his salary of $180,000 per year, a significant decrease in the Company's overhead, which should be reflected in future quarters. 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 increased $196,000 or 316% for the three months ended March 31, 1998 as compared to the three months ended March 31, 1997, but decreased $59,000 or 7.57% for the nine months ended March 31, 1998 from the nine months ended March 31, 1997. This increase during the three month period is primarily due to the acquisition of new debt totalling about $4.5 million from the Killearn Properties, Inc. transaction. The overall nine month decrease was due to the refinance of existing debt at lower interest rates, as well as the increase of in notes payable for the three months ended March 31, 1997. Other income was $305,000 for the three months ended March 31, 1998 compared to an expense of $48,000 for that same period in 1997. This increase was primarily due to the following: a gain of approximately $134,000 through relief from debt as a result of the termination agreement with the Company's former CEO; a gain of approximately $60,000 through relief from debt on the Company's sale of an asset of Barrier Dunes Development Corporation involved with the Killearn Properties, Inc. agreement; and a gain of about $105,000 through relief of debt in the form of a forfeited deposit. Liquidity Management believes that the Company, through the generation of cash flow from operations and the utilization of unused borrowing capacity, has sufficient financial resources available to maintain its current operations and provide for its current capital expenditure requirements. The Company intends to concentrate its future efforts on expanding the volume of it's real estate business in Tallahassee and implementing its sales and marketing techniques with the Flowers properties. The Company's investment in Killearn Properties, Inc. did not result in the returns originally anticipated by the Company's management. However, the agreement reached with Killearn Properties, Inc. in January of 1998 resulted in the acquisition of substantial land holdings and a presence in the Stockbridge, Georgia area. Additionally, the Company has petitioned Walton County, Florida for the creation of the Magnolia Bluff Community Development District which will allow bonds to fund the development of a project with over 600 homesites in Freeport, Florida. Such a development bond, which is anticipated to close around September of 1998, will allow the Company to obtain the necessary funding while allowing interest to accrue and defer payment of all interest and principal until the lots are sold to third party pruchasers. 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. Financial Condition Total assets increased a net total of $258,000 from June 30, 1997 to March 31, 1998; Real estate inventories increased $2,583,000 primarily due to the acquisition of the Georgia properties which the Company acquired from Killearn Properties, Inc. as part of the agreement executed in January 1998. Notes receivable decreased approximately $1,320,000 due primarily to the payment of large debts and the reclassification of some intercompany debt. Additionally, the Company acquired a receivable in the amount of $126,000 as a result of a joint venture agreement to develop land in Thomasville, Georgia. Investments in Killearn Properties decreased approximately $932,000 as a result of the Company agreeing to sell the majority of its holdings to Wimberly investment Fund for $7.25 per share, and the acquisiiton of 132,000 at 9.50 per share in January, 1998. As a result of the above dispositions and acquisition of shares of Killearn Properties, Inc. (AMEX:KPI), the Company's total investment in Killearn Properties, Inc. at March 31, 1998 stands at 14.87%. Total liabilities increased $437,000 from June 30, 1997 to March 31, 1998, primarily due to the acquisition of additional debt as a result of the properties acquired from the Killearn Properties transaction. Account payables dropped approximately $1,115,000 as a result of payment of existing payables, as well as the sale of the Piney-Z, Ltd, interest, which resulted in payables of over $500,000 being removed from the Company's financial statements. Additionally, as stated above the Company eliminated its deferred compensation payable of $387,000 by virtue of its termination agreement with its former CEO, James A. Preiss. Lastly, customer deposits decreased by about $307,000 due to the return of about $163,000 in customer deposits involved with the Piney-Z, Ltd. interest and the closing of lots on which deposits were held of about $140,000. Total Shareholders' equity increased $128,000 during the current nine month period. Management plans to continue its residential development business in Florida and Georgia, and intends to focus on the marketing and sale of its existing inventory, and will continue to look explore other possible acquisitions to complement its existing businesses. 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 4. Submission of Matters to a Vote of Security Holders During the three months ended March 31, 1998, there were no matters submitted to a vote of security matters of the Company. ITEM 5. Other Information 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 February 11, 1998, the Company currently owns of record, 132,000 shares, or 14.87% of the total issued and outstanding shares of KPI, and the outstanding debt of the Company to KPI has been reduced by approximately $892,000 to $2.9 million. As part and parcel of the aforementioned January 27, 1998 agreement the Company created a new Georgia corporation called 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 will bring approximately 650 acres or 1,200 lots, in various stages of development and bring land with an estimated basis of $9 million to the Company. On or about February 11, 1998, Marshall R. Cassedy, Jr. resigned as director for the Company citing business reasons for his departure. Furtehr, On March 6, 1998. James A. Preiss retired as Chief Operating Officer for the Company, deciding to devote more attenton to his retirement and other business interests. Mr. Preiss remains as a member of the Board of Directors. On or about May 18,1998, the Company hired David W. Wahl as its new Controller and Vice-President of Operations in order to better position itself to financially manage the operations of both current and future development projects. Mr. Wahl is a recent graduate of the master's program at the Goizueta Business School of Emory University. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K: None 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: May 19, 1998 By: /s/ Mark A. Conner Mark A. Conner, President EXHIBIT INDEX Exhibit No. Description Page No. 27 Financial Data Schedule 15 12 EX-27 2
5 9-MOS JUN-30-1998 MAR-31-1998 153,000 1,541,000 3,410,000 0 39,008,000 44,267,000 641,000 28,000 45,487,000 29,540,000 0 0 0 738,000 15,209,000 45,487,000 12,600,000 12,863,000 9,857,000 9,857,000 1,145,000 0 720,000 1,103,000 273,000 830,000 23,000 0 0 807,000 .04 .04
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