<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended: December 31, 1997
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 February 11, 1997 was 18,445,648.
Transitional Small Business Disclosure Format (Check
one):Yes______No ___X____
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PROACTIVE TECHNOLOGIES, INC.
Table of Contents
Page No.
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet 3
December 31, 1997 and June 30, 1997
Condensed Consolidated Statements of
Income for the Three Months and Six Months
Ended December 31, 1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
December 31, 1997 and 1996 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
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PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES (NOTE 1)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's except for outstanding shares)
<CAPTION>
December 30, June 30,
1997 1997
<S> <C> <C>
ASSETS:
Real estate inventories $ 38,322 $ 36,425
Cash and equivalents 102 292
Property and equipment, net 995 1,037
Investment in Killearn Properties, Inc. 2,982 2,253
Other Investments 134 242
Other assets 233 250
Notes Receivable 2,589 4,730
_________ _________
TOTAL ASSETS $ 45,357 $ 45,229
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable $ 23,527 $ 23,178
Accounts payable and accrued expenses 1,551 1,908
Income taxes payable 1,542 1,717
Deferred income tax liability 1,232 1,232
Deferred revenue 109 109
Deferred compensation payable 304 387
Customer deposits 404 572
_________ _________
Total Liabilities $ 28,669 $ 29,103
Minority Interest 313 313
Stockholders' Equity:
Common stock - par value $.04 per
share; authorized 60,000,000 shares;
issued 18,445,648 738 726
Paid-in capital 12,285 11,886
Retained earnings 3,352 3,201
_________ _________
Total Stockholders' Equity $ 16,383 $ 15,813
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,357 $ 45,229
========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements
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PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES (NOTE 1)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In 000's, except for earnings per share and outstanding shares)
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 1,711 $ 2,098 $ 4,254 $ 7,979
Cost of sales 1,250 1,263 2,794 4,955
Selling, general and
administrative expenses 354 310 655 719
________ ________ _________ ________
Income from operations 107 525 805 2,305
Other Income (deductions):
Interest (expense) (281) (352) (462) ( 717)
Other income (expense),
net ( 16) 8 ( 42) 115
Minority Interest ( 37) 20 ( 38) ( 1)
________ ________ _________ _________
(Loss) income from
continuing operations
before income taxes ( 227) 201 263 1,702
Income tax (benefit)
expense ( 83) 70 97 497
________ ________ __________ _________
Net (loss) income before
discontinued operations $ ( 144) 131 166 1,205
Discontinued operations:
Loss from operations
of Decocrete Worldwide,
less applicable tax
benefit of $3,000 and
$8,000,respectively ( 8) (13) (15) (61)
________ _________ __________ _________
Net (loss) income $ (152) $ 118 $ 151 $ 1,144
======== ======== ========== =========
Earnings per share before
Discontinued operations$ (.01) .01 .01 $ .0724
Discontinued operations $ .00 $ .00 $ .00 $ .00
________ ________ __________ _________
Earnings per share $ (.01) $ .01 $ .01 $ .0724
======== ======== ========== =========
Adjusted shares
outstanding primary and
fully diluted 18,448,718 15,794,342 18,448,718 15,794,342
Dividends Paid NONE NONE NONE NONE
See Accompanying Notes to Condensed Consolidated Financial Statements
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PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (In 000's)
<CAPTION>
Six Months Ended
December 31
1997 1996
<S> <C> <C>
Net Cash provided by operating activities $ 118 $ ( 938)
_________ ________
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) (76)
Purchase of property and equipment 0 ( 5)
_________ _________
Net Cash used in investing activities ( 988) (54)
Cash Flows from Financing Activities:
Proceeds from exercise of stock warrants 0 1,119
Proceeds from issuance of notes payable 5,216 3,183
Repayments of amounts borrowed (4,399) (3,257)
_________ ________
Net Cash provided by financing activities 817 1,045
_________ ________
Net (Decrease) Increase in Cash
and Cash Equivalents ( 53) 53
_________ ________
Cash and Cash Equivalents, Beginning of Period 155 154
_________ ________
Cash and Cash Equivalents, End of Period $ 102 $ 207
========= ========
See Accompanying Notes to Condensed Consolidated Financial Statements
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PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Form 10-QSB for the Three Months and Six Months Ended December 31, 1997
(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, and the Company's Form 10-QSB for the three months
ended September 30, 1997 (filed by EDGAR on November 14, 1997). 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
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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, PTing receivable
from the sale of a large commercial tract of property near Piney-Z
Plantation. 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
increased approximately $788,000 as a result of the acquisition
of additional shares of Killearn Properties, Inc. (AMEX:KPI),
bringing its total investment to 45.78% of the total issued and
outstanding shares of KPI.
Total liabilities decreased $351,000 from June 30, 1997 to
December 31, 1997, primarily due to the payment of income taxes payable
in the total amount of $175,000, and the return of about $168,000 in
customer deposits.
Total Shareholders' equity increased $570,000 during the current
six month period, due primarily to the six month earnings of $151,000
and additional paid-in capital of approximately $400,000 from
the acquisition of additional KPI shares.
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.
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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 December 31, 1997, the Company
held its Annual Meeting at which time the slate of directors for the
next terms were made, and the following persons were elected to the
Board of Directors: Ben S. Branch, Marshall R. Cassedy, Jr., Mark A.
Conner, Langdon S. Flowers, Jr., Robert Maloney, and James A. Preiss.
Other than the above, there were no other matters submitted to a vote
of the security holders of the Company.
ITEM 5. Other Information
NONE
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
The following reports on Form 8-K or Form 8-K/A were prepared and
filed during the three months ended December 31, 1997:
(1) December 2, 1997, the Company filed Form 8-K/A regarding its
change in certifying accountants from Coopers & Lybrand, L.L.P. to Jones
and Kolb. The report of Coopers and Lybrand did not contain an adverse
opinion or disclaimer of opinion and was not modified, and its letter
attesting to this fact was attached.
SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PROACTIVE TECHNOLOGIES, INC.
(Registrant)
Date: February 13, 1997 By: /s/ Mark A. Conner
Mark A. Conner, President
</PAGE>
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EXHIBIT INDEX
Exhibit No. Description Page No.
27 Financial Data Schedule 15
12
</PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 102,000
<SECURITIES> 3,215,000
<RECEIVABLES> 2,589,000
<ALLOWANCES> 0
<INVENTORY> 38,322,000
<CURRENT-ASSETS> 45,223,000
<PP&E> 1,022,000
<DEPRECIATION> 28,000
<TOTAL-ASSETS> 45,357,000
<CURRENT-LIABILITIES> 29,065,000
<BONDS> 0
0
0
<COMMON> 738,000
<OTHER-SE> 15,637,000
<TOTAL LIABILTIES-AND-EQUITY> 45,357,000
<SALES> 4,254,000
<TOTAL-REVENUES> 4,254,000
<CGS> 2,794,000
<TOTAL-COSTS> 2,794,000
<OTHER-EXPENSES> 575,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 462,000
<INCOME-PRETAX> 805,000
<INCOME-TAX> 97,000
<INCOME-CONTINUING> 263,000
<DISCONTINUED> 15,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 151,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
