<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: 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____
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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
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
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<TABLE>
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES (NOTE 1)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's except for outstanding shares)
<CAPTION>
March 31, June 30,
1998 1997
<S> <C> <C>
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
</TABLE>
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<TABLE>
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 Nine Months Ended
March 31, March 31,
1998 1997 1998. 1997
<S> <C> <C> <C> <C>
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
</TABLE>
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<TABLE>
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (In 000's)
<CAPTION>
Nine Months Ended
March 31
1998 1997
<S> <C> <C>
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
</TABLE>
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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
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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, 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.
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(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.
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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,
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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
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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.
</PAGE>
<PAGE>
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
</PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
27 Financial Data Schedule 15
12
</PAGE>
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