U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 8-K/A
__________________________
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report
February 12, 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) (IRS Employer Identification No.)
7118 Beech Ridge Trail
Tallahassee, Florida 32312
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(904) 668-8500
Item 1. CHANGES IN CONTROL OF REGISTRANT
(a) On February 12, 1996, Proactive Technologies, Inc. (the "Company"), a
publicly-traded Delaware corporation (Nasdaq symbol "PTEK") completed its
acquisition 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 approximately eighty percent (80%) of the issued and
outstanding shares of common stock of the Company. In connection with such
acquisition, Mr. Conner was also elected Chairman of the Board and President
and Chief Executive Officer of the Company.
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 $30.5
million in revenues and approximately $3.3 million in net income before tax.
As of December 31, 1995, Capital owned approximately $26 million in Total
Assets.
The Company's other primary operating subsidiary, Keystone Laboratories, Inc.,
will continue to operate its forensic using drug screening and confirmatory
testing laboratory in Asheville, North Carolina.
Item 2. Acquisition or Disposition of Assets
In connection with the Company's acquisition of all of the
outstanding common stock of Capital First, the Company acquired all of the
real estate and other assets of Capital First. See discussion of this
acquisition in Item 1 above, and Financial Statements in Item 7, below.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The following are included in this Item 7 with respect to Capital
First Holdings, Inc. and Subsidiaries:
Report of Independent Accountants.
Consolidated Balance Sheet, December 31, 1995.
Consolidated Statement of Operations and Retained Earnings
for the year ended December 31, 1995.
Consolidated Statement of Cash Flows for the year ended
December 31, 1995.
Notes to the Consolidated Financial Statements.<PAGE>
Report of Independent Accountants
We have audited the accompanying consolidated balance sheet of Capital First
Holdings, Inc. and Subsidiaries as of December 31, 1995, and the related
consolidated statements of operations and retained earnings, and cash flows for
the year then ended. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Capital
First Holdings,Inc. and Subsidiaries as of December 31, 1995, and the
consolidated results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
April 19, 1996
Capital First Holdings, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 1995
ASSETS
Real estate inventories:
Houses and condominiums $1,749,448
Developed lots 8,912,142
Land under development 6,887,158
Land 2,306,893
-----------
19,855,641
Cash and cash equivalents, including restricted
cash of approximately $237,717 292,935
Notes receivable 265,211
Property and equipment, net 985,385
Deferred income taxes 723,312
Other assets 184,148
-----------
Total assets $22,306,632
============
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Notes payable $15,127,200
Accounts payable and accrued expenses 850,733
Customer deposits 156,222
Income taxes payable 1,611,928
Deferred revenue 1,578,064
Deferred compensation payable 923,382
-----------
Total liabilities 20,247,529
Shareholder's equity:
Commitments and contingent liabilities
Common stock, $.001 par value, 10,000,000 shares
authorized, 6,000,000 issued and outstanding 6,000
Additional paid-in capital 595,210
Retained earnings 1,457,893
-----------
Total shareholder's equity 2,059,103
-----------
Total liabilities and shareholder's equity $22,306,632
============
The accompanying notes are an integral part of these consolidated financial
statements.
Capital First Holdings, Inc. and Subsidiaries
Consolidated Statement of Operations and Retained Earnings
for the year ended December 31, 1995
Sales $29,970,961
Cost of sales 23,701,542
-----------
Gross profit 6,269,419
Selling, general and administrative expenses 1,577,420
Interest expense 2,435,605
Other, net (480,132)
-----------
Income before income taxes and discontinued
operations 2,736,526
Income tax expense 980,501
-----------
Net income before discontinued operations 1,756,025
Discontinued operations:
Loss from operations of Golden Eagle (less
applicable income tax benefit of $186,996) 309,936
Loss on disposal of Golden Eagle (less
applicable income tax benefit of $67,862) 112,477
-----------
Net income 1,333,612
Retained earnings, beginning of the year 124,281
------------
Retained earnings, end of the year $1,457,893
============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Capital First Holdings, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
for the year ended December 31, 1995
Cash flows from operating activities:
Net income $1,333,612
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 301,385
Loss on completed venture 200,534
Loss on disposal of Golden Eagle 180,339
Loss on impairment of real estate 535,683
Decrease in real estate inventories 8,932,661
Decrease in deferred income taxes 325,980
Decrease in accounts receivable 301,011
Increase in notes receivable (137,524)
Decrease in other assets 166,868
Decrease in accounts payable and accrued expenses (731,531)
Decrease in customer deposits (513,857)
Decrease in deferred compensation payable (301,618)
Increase in deferred revenue 1,143,422
Increase in accrued income taxes 176,524
------------
Net cash provided by operating activities 11,913,489
-----------
Cash flows from investing activities:
Proceeds from disposal of Golden Eagle 3,116,003
Distribution from completed venture 497,752
Investment in real estate ventures (162,562)
Purchase of property and equipment (245,482)
Proceeds from disposal of property, plant and equipment 56,482
Decrease in due to affiliates (2,526,889)
------------
Net cash provided by investing activities 735,304
------------
Cash flows from financing activities:
Repayment of amounts borrowed (17,672,939)
Proceeds from issuance of notes payable 4,927,451
------------
Net cash used in financing activities (12,745,488)
------------
Net decrease in cash and cash equivalents (96,695)
Cash and cash equivalents at beginning of period 389,630
------------
Cash and cash equivalents at end of period $292,935
============
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest $2,302,657
Taxes $549,119
The accompanying notes are an integral part of these consolidated financial
statements.
Capital First Holdings, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies:
Description of the Business
Capital First Holdings, Inc. and Subsidiaries (the "Company") is a
developer of land for sale to residential home-builders and individuals
with its principal operations located in Northern Florida. As of
December 31, 1995,the Company owns property in approximately 35
subdivisions.
The Company was formed on January 27, 1994 primarily to acquire Capital
First, Inc., Marketprice Properties, Inc., Jamesmark, Inc., North Beach
Holdings, Inc., and Golden Eagle of Tallahassee, Inc. (the
"Subsidiaries"). The acquisition of the Subsidiaries was effective
January 31, 1994 and occurred through the issuance of 6,000,000 shares
of the Company's common stock for all of the outstanding stock of the
acquired companies.
On December 28, 1995, the Company was party to a stock purchase agreement
between the sole shareholder and Proactive Technologies, Inc. ("PTEK"), a
Delaware Corporation. Under the terms of the agreement, which closed on
February 15, 1996, PTEK purchased all of the outstanding stock of the
Company from the sole shareholder in return for a specified number of
shares of previously unissued PTEK common stock. Subsequent to this
transaction, the sole shareholder of the Company owned approximately
80% of PTEK, and the Company became a wholly owned subsidiary of PTEK.
Principles of Consolidation
The financial statements include the Company and its wholly-owned
subsidiaries. Investments in which the Company does not own a majority
interest but exerts significant but not controlling influence are reported
under the equity method. All significant intercompany balances and
transactions have been eliminated.
Cash and Cash Equivalents
The Company classifies as cash equivalents any investments which can be
readily converted to cash and have an original maturity of less than three
months. At times cash and cash equivalent balances at a limited number of
banks and financial institutions may exceed insurable amounts. The Company
believes it mitigates its risks by depositing cash or investing in cash
equivalents in major financial institutions.
The Company is required under certain mortgages to maintain deposits as
collateral. Such balances are reflected as restricted cash on the
accompanying balance sheet.
Real Estate Inventories
Real estate inventories are recorded at the lower of cost or estimated net
realizable value. Expenditures for land development are capitalized and
allocated to development projects by the specific identification method.
Costs are allocated to specific lots based on a ratio of the lot sales
price to the estimated total project sales price times the total
project costs incurred. Interest costs and real estate taxes are
capitalized while development is in progress. Total interest
capitalized in 1995 was approximately $760,000.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed on the straight-line basis over the
assets' estimated useful lives. Expenditures for maintenance and repairs
are expensed as incurred and expenditures for improvements which extend the
useful life or add value to the asset are capitalized.
Sales and disposals of assets are recorded by removing the related cost and
accumulated depreciation amounts with any resulting gain or loss reflected
in income.
Revenue Recognition
The Company records revenue on the sale of real estate properties once the
Company has fulfilled its obligation under the sales contract and is not
obligated to perform significant activities after the sale to earn its
profit. Revenue is only recognized when the collectibility of the sales
price is reasonably assured. When land is sold prior to the completion of
development by the Company, the related revenue and profit is recognized
under the percentage- of-completion method as the development is
completed. Generally, the Company does not provide financing on its
sales of property.
Utility rebates due from the City of Tallahassee for water and sewer lines
built by the Company are recognized in income in the year the rebates are
fixed and determinable. During 1995, rebate income of approximately
$506,000 is recorded as a reduction of cost of sales.
Income Taxes
The Company's income taxes are accounted for in accordance with the
liability method as provided under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Accordingly, deferred
income taxes are recognized for the tax consequences of differences between
the financial statement carrying amounts and the tax bases of existing
assets and liabilities. The measurement of deferred tax assets is reduced,
if necessary, by the amount of any benefits that, based on available
evidence, are not expected to be realized.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period.
Actual results could differ from those estimates.
2. Property and Equipment:
Property and equipment consists of the following:
Land and land improvements $253,267
Buildings and building improvements 403,426
Vehicles 277,089
Furniture, fixtures and equipment 205,538
---------
1,139,320
Accumulated depreciation (153,935)
---------
$985,385
=========
3. Investments In Real Estate Ventures:
The Company has certain investments in real estate partnerships formed to
manage specific development projects. The investment balances at December
31, 1995 are included in other assets and consist of the following:
Piney-Z, Ltd., 33 1/3% interest $103,000
Countryside Partnership, 50% interest 69,563
---------
$172,563
=========
The Company is a general partner in these partnerships and has a
significant but not controlling interest. Day-to-day operations are
managed by the other partner with major transactions, such as the
acquisition, disposition or financing of property requiring joint
approval. As general partner, the Company is liable for the debt and
obligations of the partnerships.
Piney-Z, Ltd. was formed on October 26, 1995 and was substantially inactive
during 1995.
Summarized financial information for Countryside Partnership as of and for
the year ended December 31, 1995 is as follows:
(Unaudited)
Real estate $1,549,740
Other assets 4,339
---------
Total assets $1,554,079
Mortgage debt 1,186,351
Other liabilities 204,318
---------
1,390,669
Partnership equity 163,410
---------
$1,554,079
===========
Revenues and net income $27,007
===========
During 1995 Northampton Partners, a partnership in which the Company held
a 50% interest, completed the development and sale of its land, settled
all remaining liabilities and distributed its equity to the Partners.
The Company received net proceeds of approximately $498,000 and recorded
a loss of approximately $201,000. The loss is included in other,
net on the statement of operations and retained earnings.
4. Mortgage loans payable:
At December 31, 1995 mortgage debt consisted of the following:
Notes payable to Killearn Properties, Inc.
("KPI") with interest rates ranging from
7% to 10% and varying maturity dates through 1998.
Interest is paid either quarterly or semi-annually.
The notes were in default as certain scheduled
principal payments had not been made; accordingly,
on December 29, 1995, the agreement was modified
to waive any existing default and modify the payment
terms such that principal and interest payments are
due when lots of the related collateral are released
for sale. These notes are collateralized by portions
of the developed lots, land under development and land. $7,172,473
Notes payable to financial institutions with interest
rates ranging from 9.75% to 10.5% with several of
the notes having variable interest rates at prime
plus 1% or 1 1/2%. Interest is due monthly and
principal is due in balloon payments at varying dates
through 1997. The notes are collateralized by portions
of the developed lots, land under development and land. 6,270,318
Notes payable to financial institutions with interest
rates ranging from 7.25% to 8%. Payment terms differ
with some paying interest monthly with balloon payments
in 1996 and others paying principal and interest
monthly with maturity dates from 2013 to 2025. The
notes are collateralized by portions of the houses
and condominiums. 1,151,513
Other notes payable 532,896
-----------
$15,127,200
All indebtedness which is collateralized by real property include
contingent principal and interest payments due when lots of the
related collateral are released for sale. Substantially all of
the notes are guaranteed by the sole stockholder. Additionally,
approximately $1,733,000 of the notes payable to financial
institutions are guaranteed by KPI.
The Company has approximately $1.5 million available under existing
loan arrangements for use in completing development of certain of its
properties.
The notes payable to KPI and approximately $1,733,000 of the notes
payable to financial institutions are collateralized by the stock
of the Company with KPI's collateral position being subordinate.
Maturities of the notes payable, some of which are dependent on
the sale of lots, are as follows at December 31, 1995:
Year Amount
1996 $9,999,034
1997 4,393,572
1998 13,854
1999 14,928
2000 16,087
2001 and thereafter 689,725
-----------
Total $15,127,200
============
5. Income Taxes:
The components of income tax expense attributable to continuing operations
at December 31, 1995 are as follows:
Federal State Total
Current $558,856 $95,665 $654,521
Deferred 394,665 (68,685) 325,980
--------- -------- ---------
$953,521 $26,980 $980,501
========= ========= =========
Total income tax expense attributable to continuing operations differs from
the amount computed by applying the U.S. federal statutory tax rate to
pretax income from continuing operations primarily due to the effect of
state taxes.
Income taxes payable at December 31, 1995 includes taxes payable from 1994
of approximately $1,212,000 which were paid in February 1996.
The components of the net deferred tax asset at December 31, 1995 are as
follows:
Real estate inventories $(217,232)
Deferred compensation 347,192
Deferred revenue 593,352
----------
$723,312
==========
The valuation allowance at December 31, 1994 of approximately $138,000 was
recognized into income during 1995 due to the profitable operations of the
Company.
6. Commitments and Contingencies:
The Company is obligated under a purchase agreement with KPI to purchase
certain lots for a set price per lot. As the Company locates a third party
buyer for each lot, the Company purchases the lot from KPI and subsequently
sells it to the third party. During 1995, the Company purchased 18 lots
from KPI for approximately $566,000 and earning revenues of approximately
$628,000. As of December 31, 1995, 21 lots with an approximate purchase
price of $641,000 remained under this commitment.
7. Related Party Transactions:
During the year, the Company made aggregate advances and repayments ofloans
of approximately $2.1 million to the sole stockholder, approximately
$605,000 to affiliated companies, and approximately $1.6 million to a former
stockholder. All related party advances were repaid during 1995 either
through cash payments or increases in compensation expense to the sole
stockholder.
In March 1995, the sole stockholder of the Company acquired from the
Company's then other stockholder, the remaining 50% of the outstanding stock
of the Company.
The Company has a compensation agreement with the former stockholder which
resulted in the Company agreeing to pay compensation to the former
stockholder of $1.4 million for services rendered. The $1.4 million is
payable in five equal, monthly payments of $10,000 made throughout 1995 and
in $4,000 payments for each lot sale made in specified developments.
During 1995 a total of $412,000 was paid under this compensation
agreement. Based on an imputed interest rate of 10%, total interest
incurred in 1995 amounted to approximately $133,000 and the remaining
principal balance at December 31, 1995 equals approximately $882,000 and
is included in deferred compensation payable.
Additionally, as part of the compensation agreement, a payable of $65,000
was established for utility rebates to be passed through to the former
stockholder. Approximately $24,000 of these rebates were paid during 1995.
The remaining payable of approximately $41,000 is included in deferred
compensation payable.
8. Concentration of Credit Risks:
The Company currently utilizes only one vendor in the development of its
land inventories. Although there are a limited number of development
companies in the area, management believes that other suppliers could
provide similar services on comparable terms. A change in vendors,
however, could cause a delay in development and a possible loss of sales,
which would adversely affect operating results.
9. Discontinued Operations:
In a prior year, the Company acquired a golf and country club in connection
with its purchase of contiguous land which it planned to develop. The
Company operated the country club in order to ensure the retention of value
and maintenance of certain standards to support the value in the surroundin
property. On September 27, 1995, the Company sold the country club to an
unrelated party for aggregate proceeds of approximately $3.1 million. The
Company had previously provided a reserve against the valuation of the
property of $1.5 million and the net loss realized during 1995, after
giving effect to the provision previously recorded, was approximately
$180,000. The operating results of Golden Eagle have been presented as
a discontinued operation for the period in 1995 up to the date sold and
the resulting loss on disposal has been presented as the loss on
disposal of discontinued operation in the accompanying financial
statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROACTIVE TECHNOLOGIES, INC.
Date: 10/9/96 By: /s/ Mark A. Conner
Mark A. Conner
President
