FORM 10-QSB/A
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
PRROACTIVE TECHNOLOGIES, INC.
Table of Contents
Page No.
PART I FINANCIAL INFORMATION
Item 1(a). Introduction 3
Item 1(b). Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets 4
March 31, 1996 and December 31, 1995
Condensed Consolidated Statements of
Income for the Three Months
Ended March 31, 1996 and 1995 5
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial
Statements 7-8
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 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
Item 1(a) Introduction
As reported on Form 8-K filed on February 12, 1996 (confirming copy
filed on EDGAR on October 9, 1996), and Form 8-K/A filed (electronically) on
October 10, 1996, on February 12, 1996, Proactive Technologies, Inc. (PTEK)
acquired 100% of the outstanding common stock of Capital First Holdings, Inc.
(Capital First). In connection with the preparation and audit of PTEK's
financial statements for the fiscal year ending June 30, 1996, it was
determined that such transaction was a reverse acquisition, and, for financial
reporting purposes, as the acquisition of PTEK by Capital First. Under this
treatment as a reverse acquisition, the historical information is that of
Capital First. To be consistent with this reporting, this Form 10-QSB/A is
being filed to restate PTEK's results for the three months ending March 31,
1996 (i.e., the third quarter) to reflect the accounting treatment as a
reverse acquisition. This amended information is also consistent with the
reporting in PTEK's Form 10-KSB, filed October
Item 1(b). Condensed Consolidated Financial Statements (Unaudited)
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES (NOTE 1)
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
(Unaudited)
(000's)
ASSETS:
Real estate inventories $17,497 $19,856
Cash and equivalents 223 155
Property and equipment, net 1,081 985
Deferred income taxes 614 723
Other assets 2,512 588
------- -------
TOTAL ASSETS $21,927 $22,307
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable $13,623 $15,128
Accounts payable and accrued expenses 688 851
Income taxes payable 985 1,612
Deferred revenue 1,217 1,578
Deferred compensation payable 737 923
Customer deposits 92 156
------- -------
Total Liabilities $17,343 $20,248
Minority Interest $ 65 --0--
Stockholders' Equity:
Common stock $ 452 429
Paid-in capital 2,723 172
Retained earnings 1,344 1,458
Total Stockholders' Equity 4,520 2,059
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $21,927 $22,307
------- -------
------- -------
See Accompanying Notes to Condensed Consolidated Financial Statements
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES (NOTE 1)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months
Ended
March 31,
1996 1995
(000's)
Net sales $ 4,163 $ 6,347
Cost of sales 3,361 4,862
Selling, general and administrative
expenses 500 195
------- --------
Income from operations 302 1,290
Other Income (deductions)
Interest expense (402) (478)
Interest income 6 4
Unrealized (loss) gain on
marketable equity securities (79) --0--
Other income, net 72 12
Minority Interest 7 --0--
-------- ---------
(Loss) income from operations
before income taxes (94) 828
Income tax expense (20) (310)
-------- ---------
Net (loss) income $ (114) $ 518
-------- ---------
-------- ---------
Net (loss) gain per common and
common equivalent share -
primary and fully diluted $ (.020) $ .048
-------- ---------
-------- ---------
Adjusted shares outstanding
primary and fully diluted 8,164,912 10,739,405
See Accompanying Notes to Condensed Consolidated Financial Statements
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended
March 31, 1996
----------------------
1996 1995
(000)
Net Cash provided by
operating activities $546 $715
Cash Flows from Investing Activities
Distribution from real estate
ventures 58 --0--
Investment in real estate ventures (204) --0--
Purchase of investments in equity
securities 60 (325)
Purchase of property and equipment (35) --0--
Proceeds from maturity of
certificates of deposit 14 --0--
Proceeds from minority shareholders 72 --0--
Acquisitions of businesses net of
cash (140) --0--
Proceeds from sale of investments 120
-------- -----
Net Cash provided by investing activities (176) (205)
Cash Flows from Financing Activities:
Proceeds from exercise of stock
warrants 1,136 --0--
Proceeds from issuance of notes
payable 790 1,150
Repayments of amounts borrowed (2,353) (1,900)
-------- ------
Net Cash provided (used) by financing
activities (427) 750
Net Increase (Decrease) in Cash
and Cash Equivalents (55) (240)
Cash and Cash Equivalents, Beginning
of Period 155 390
-------- ------
Cash and Cash Equivalents, End of
Period $ 100 $ 150
-------- -------
-------- -------
See Accompanying Notes to Condensed Consolidated Financial Statements
Notes to Condensed Consolidated Financial Statements
(1) Basis of Financial Presentation
On February 12, 1996, Proactive Technologies, Inc. (PTEK 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 PTEK
stock which represented approximately 80% of the voting stock of PTEK
immediately after the transaction. For accounting purposes, the acquisition
has been treated as a recapitalization of Capital First with Capital First as
the acquiror. 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. Pro forma financial information is not
provided since the continuing operations Capital First acquired from PTEK
(i.e., Keystone Laboratories, Inc.) are insignificant.
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 Capital First Holdings, Inc. (the Company),
and notes thereto, as found in Form 8-KA for the year ended December 31, 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) Acquisitions
Effective February 10, 1996, the Company (operating under the direction
of Capital First) formed a wholly-owned subsidiary called Decocrete Worldwide,
Inc. (Worldwide) for the purpose of purchasing the net assets of Decocrete
International, Inc. (International), a manufacturer of decorative concrete
with a plant located in St. Petersburg, Florida. The purchase price was
$72,000 plus 20% of the outstanding shares of Worldwide. The acquisition has
been accounted for using the purchase method of accounting. Identifiable
assets acquired approximated the liabilities assumed. Accordingly, the entire
purchase price has been attributed to goodwill. The results of operations of
Worldwide are included with the results of the Company beginning February 10,
1996.
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(continued)
(3) Subsequent Events
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On February 12, 1996, Proactive Technologies, Inc. (PTEK)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 PTEK by Capital First.
Accordingly, the historical results of operations and financial position are
those of Capital First and include the accounts of PTEK 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. 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 Worldwide's minority shareholders.
Results of Operations
Three months ended March 31, 1995 compared to three months ended March
31, 1996:
Net sales decreased $2,184,000, or 34% from the first three months of
1995 to the first three months of 1996. This decrease is due to the decrease
in the number of lots available for sale, which is primarily attributable to a
staggered delivery date for some of the Company's builder's, which are
currently set to close in the latter half of calendar year 1996.
Cost of Sales decreased approximately $1,500,000, or 31%, during the
three month period ended March 31, 1996, over the same period in 1995, which
was due primarily to the decrease in net sales volume. The Company believes
that net sales volume will increase in the next quarter and the latter half of
1996, when delivery of larger subdivisions to some of the larger customers
comes to fruition. Further, the gross profit margin of 19% should be
maintainable by the Company as long as current sales patterns continue.
Selling, general, and administrative (SG&A) expenses increased $305,000
during the three months ended March 31, 1996 as compared to the three months
ended March 31, 1995. Management attributes this cost primarily to
professional fees incurred in connection with the reverse acquisition.
Management believes that while SG&A expenses will be necessarily higher than
in previous years due to professional and other administrative expenses
associated with being a public corporation, future quarters should not
experience expenses quite so high.
Interest expense increased $76,000 or 16%, primarily due to reduction in
overall debt.
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.
As a result of the acquisitions by Capital First and of Worldwide along
with the contemplated sale of Keystone Labs, 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 First in Tallahassee and Vero
Beach, Florida areas and of developing the business of Worldwide. The
Company's investment in 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.
Financial Condition
Total assets decreased $380,000 from December 31, 1995 to March 31, 1996.
Major factors in the net decrease were as follows: real estate inventories
experienced a decrease of $2,359,000 due to lot sales; and other assets
increased by almost $2,000,000 because of the inclusion of Keystone Labs
$1,400,000 in assets pursuant to the reverse acquisition and the inclusion of
$353,000 of goodwill as a result of the acquisition of Decocrete Worldwide.
Total liabilities decreased $2,905,000 from December 31, 1995 to March
31, 1996, primarily due to the following factors: a net decrease of
approximately $1,5 million in notes payable as a result of payment on overall
debt; and a net decrease in income taxes payable of $627,000 to $985,000 at
March 31, 1996 from $1,612,000 at December 31, 1995.
Total Shareholders' equity increased $2,461,000 to $4,520,000 at March
31, 1996 from $2,059,000 at December 31, 1995. The increase was due primarily
to the increase in paid in capital as a result of the issuance of stock in
connection with the exercise of the warrants.
Management hopes to continue to grow the real estate development business
as well as its manufacturing division through Decocrete and will continue to
explore other possible acquisitions to complement its existing businesses.
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
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: Mark A.
Conner, Chairman of the Board, Joel C. Holt, and Robert Maloney. The
directors then elected Mark A. Conner as 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: October 16, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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