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, 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 ____X______ No ________
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, 1999 was 20,688,245.
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, 1998 and June 30, 1998
Condensed Consolidated Statements of
Income for the Three Months and Six Months
Ended December 31, 1998 and 1997 4
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
December 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 2. Changes in Securities 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>
December 31, June 30,
1998 1998
<S> <C> <C>
ASSETS:
Real estate inventories $ 23,111 $ 32,960
Cash and equivalents 412 100
Property and equipment, net 358 410
Investment in Killearn Properties, Inc. 627 1,188
Other Investments 163 261
Other assets 454 175
Notes Receivable 863 3,366
_________ _________
TOTAL ASSETS $ 25,989 $ 38,460
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable $ 16,201 $ 21,849
Accounts payable and accrued expenses 976 1,608
Income taxes payable 1,244 1,237
Deferred income tax liability 298 298
Deferred revenue 109 109
Deferred compensation payable 0 0
Customer deposits 39 125
_________ _________
Total Liabilities $ 18,869 $ 25,226
Minority Interest 0
Stockholders' Equity:
Common stock - par value $.04 per
share; authorized 60,000,000 shares;
issued 15,611,778, and 16,523,000, respectively 684 684
Treasury Stock ( 2,415) ( 1,950)
Paid-in capital 12,180 12,180
Retained earnings ( 3,326) 2,320
_________ _________
Total Stockholders' Equity $ 7,123 $ 13,234
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,989 $ 38,460
========= =========
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 Six Months Ended
December 31, December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $ 11,666 $ 1,711 $ 12,993 $ 4,254
Cost of sales 14,974 1,250 16,363 2,794
Selling, general and
administrative expenses 724 354 1,178 655
________ ________ _________ ________
Income from operations (4,032) 107 ( 4,548) 805
Other Income (deductions):
Interest (expense) ( 188) (281) ( 326) (462)
Other (expense) income,
net ( 893) ( 16) ( 773) ( 42)
Minority Interest 0 ( 37) 0 ( 38)
________ ________ _________ _________
(Loss) income from
continuing operations
before income taxes (5,113) ( 227) (5,647) 263
Income tax (benefit)
expense 186 ( 83) 0 97
________ ________ __________ _________
Net (loss) income before
discontinued operations $ (5,299) ( 144) (5,647) 166
Discontinued operations:
Loss from operations
of Decocrete Worldwide,
less applicable tax
benefit of $0 and $0,
respective for 1998, and
$3,000 and $8,000,respectively
for 1997 0 ( 8) 0 (15)
________ _________ __________ _________
Net (loss) income $ (5,299) (152) (5,647) $ 151
======== ======== ========== =========
Earnings per share before
Discontinued operations$ ( .33) (.01) ( .35) .01
Discontinued operations $ .00 .00 .00 $ .00
________ ________ __________ _________
Earnings per share $ ( .33) (.01) ( .35) $ .01
======== ======== ========== =========
Adjusted shares
outstanding primary and
fully diluted 15,970,474 18,448,718 15,970,474 18,448,718
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>
Six Months Ended
December 31
1998 1997
<S> <C> <C>
Net Cash provided by operating activities $ 5,938 $ 118
--------- --------
Cash Flows from Investing Activities:
Distribution from real estate ventures 0 27
Investment in real estate ventures (12) 5
Purchase of investments in equity securities ( 8) (1,020)
Purchase of property and equipment ( 2) 0
--------- ---------
Net Cash used in investing activities ( 22) ( 988)
Cash Flows from Financing Activities:
Proceeds from exercise of stock warrants 0 0
Proceeds from issuance of notes payable 10,917 5,216
Repayments of amounts borrowed (16,564) (4,399)
--------- --------
Net Cash (used) provided by financing
activities ( 5,647) 817
--------- --------
Net (Decrease) Increase in Cash
and Cash Equivalents 312 ( 53)
--------- --------
Cash and Cash Equivalents, Beginning of Period 100 155
--------- ---------
Cash and Cash Equivalents, End of Period $ 412 $ 102
========= ========
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 Six Months Ended December 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-K/A for the
year ended December 31, 1995, the Company's Form 10-KSB for the year
ended June 30, 1998, and the Company's Form 10-QSB for the three months
ended September 30, 1998 (filed by EDGAR on November 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. In 1998, the Company and
a former director of the Company completed their reevaluation of the assets
acquired. The renegotiated purchase price was valued at $5,128,629 after
the purchase price adjustment. As a result, the former director returned
1,102,456 shares of Company stock originally issued for the acquisition.
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 was added to the land inventory of the
Company. Subsequent to the acquisition, the Company has sold several of
the assets to a former director of the Company in exchange for cash or stock,
including various acres of real estate in Albany , Georgia, during the
three months ended December 31, 1998 in exchange for a total of 1,000,000
shares of Company stock, all of which was 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
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 ended September 30, 1997, 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 December 31, 1998, the Company currently owns of record, 132,000
shares, or 14.87% of the total issued and outstanding shares of KPI.
Pursuant to the January 27, 1998 agreement,the Company incorporated
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 brought approximately
650 acres or the potential of 1,200 developed lots, in various stages of
development and brought land with an estimated basis of $9 million to the
Company.
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
was accounted for under the purchase method of accounting.
Identifiable assets acquired approximated the liabilities assumed;
accordingly, the entire purchase price was attributed to goodwill.
During fiscal 1997 the Company decided to cease operating Decocrete. Tne
Company wrote off all existing amounts still outstanding in their
June 30, 1998 Form 10-KSB (filed by EDGAR on October 14, 1998), thus no
financial information regarding Decocrete is included in the Company's
quarterly financial statements.
(3) Debt
The Company's last remaining debt to Killearn Properties, Inc., in
the approximate amount of $367,000, was paid off in October 1998 through
the sale of bulk assets. Earlier in the fiscal year, the Company paid the
bulk of its loan off to Killearn, of an amount equal to approximately
$2,000,000, through the refinance of loans with its primary lender at a
rate of 9.5% per annum, which notes are due in July 1999. Additionally, as
part of the same October 1998 transaction, the Company was able to relieve
itself as primary obligor of approximately $598,000 worth of debt.
The Company's loan on the golf course and surrounding acreage
in Freeport, Florida in the amount of $2,300,000 was called due to
non-payment of interest during the three months ended December 31, 1998,
but the Company has subsequently brought the note current and reinstated the
existing purchase money first mortgage, which note carries an interest rate
of 10%, with monthly interest payments in the amount of $17,000, and the
principal due on or before November 3, 2000.
The Company paid down approximately $1,258,000 of its debt related
to its Albany properties upon the sale of approximately 230 acres to a
then director of the Company and the sale of approximately 100 acres to
the same director for $610,000, which prices were the highest bona fide
offers received on the property.
In October, and November 1998, the Company received a total of
approximately $252,400 of a note due and wrote off a remaining balance
of about $367,000 as uncollectible from a single vendor who owed the
Company $619,000.
During the three months ended December 31, 1998, the Company renewed
its consulting agreement with Millenium Holdings, Inc., for an additional
three month period. Further, the Company entered into an agreement
whereby the Company placed 866,467 shares of stock into escrow, which
escrow agreement called for the release of the shares as payment for the
finding of a suitable merger candidate.
In November 1998, the Company paid down approximately $287,000 in
debt through the bulk sale of 58 lots to one builder, and approximately
$587,000 in debt through the bulk sale of an entire subdivision to another.
During the three months ended December 31, 1998, the Company made
short term unsecured borrowings and repayments to aid cash flow, from a
private lending source, through one of its directors, and had a remaining
balance at the end of the three months ended December 31, 1998 totalling
approximately $268,000, which notes accrued interest at between 5.5% and
7% per annum. Subsequent to the end of the presented quarter, the Company
consolidated the remaining balance into one note which accrues interest at
7.5% and is secured by a first mortgage on undeveloped Company land.
During the three months ended December 31, 1998, the Company paid
off approximately $745,000 worth of debt through the sale and refinance
of its Tallahassee property, and $856,000 worth of debt through the
sale and refinance of its Albany property.
(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 15,970,474 for the three month period
presented. This number was achieved after taking the 17,389,467 shares
outstanding as of June 30, 1998 and subtracting from it the 866,467 shares
held in escrow to be disbursed upon the finding of a suitable merger
candidate for the Company, and adding to it the 88,778 shares issued on
September 3, 1998 for an interest payment on the Hawkins note. Further, on
November 2, 1998, 1,000,000 were subtracted following the sale of property
in Albany in return for said shares to the Company's treasury. There were
no further additions or subtractions to the outstanding shares during the
three months ended December 31, 1998.
(5) Subsequent Events
On January 2, 1999, the Company acquired 100% of the total
issued and outstanding shares of West Side Investors, Inc., a Georgia
corporation, which owns P & W Stonebridge, LLC, and P & W Headland, LLC,
which own, respectively, the Headland-DeLowe Shopping Center located
in Atlanta, Georgia and Stonebridge Village Shopping Center, located in
DeKalb County, Georgia.
The purchase price for West Side Investors, Inc. stock was the
issuance of 3,100,000 shares of Proactive restricted common stock as
follows: Arthur G. Weiss, 1,550,000 shares; Charles G. Weiss 775,000
shares; and Caroline Weiss Kyriopoulos, 775,000 shares. Appraisals of
the properties total $9,130,000. The shopping centers are subject to
a $7,886,000 non-recourse equal profit participating mortgage. The
consideration paid was determined as a result of arms-length negotiations
between unrelated parties.
On January 8, 1999, as filed in Form 8-K with EDGAR on
January 18, 1999, the Company acquired an interest in PDK Properties, Inc.,
a Georgia corporation, which wholly owns Stratos Inns, LLC, a Georgia
limited liability company, which the Company hopes to develop into a going
concern as a hotel developer and hospitality provider at DeKalb-Peachtree
Airport in Atlanta, Georgia.
Also, as stated in the above-noted Form 8-K, the Company named two new
persons to its Board of Directors, Arthur G. Weiss and James Verbrugge.
Also, subsequent to the end of the three months ended December 31,
1998, as filed in Form 8-K with EDGAR on Febuary 5, 1999, the Company
reacquired 5,000,000 shares of its stock from the former President and
Chairman of the Company, in exchange for $1,570,000 and an additional
$200,000 to be released from escrow upon the achievement of certain
contingencies by the former President.
Subsequent to the end of the three months ended December 31,
1998, as noted on Schedule 13-D/A filed on January 29, 1999, the Company
sold 2,500,000 shares of stock to Wendell M. Starke in exchange for
$1,000,000.
Additionally, as also stated in Form 8-K filed February 5, 1999, the
Board named William B. Astrop to its Board of Directors, and Mark A. Conner
resigned his position as President, Chief Executive Officer, and his
seat on the Board. Additionally, two of the Company's directors resigned
from the Board, leaving the Company with three directors, with the intention
to add further independent directors.
Further, On February 10, 1999, the Company added C. Beverly Lance and
Joel A. Goldberg to its Board of Directors, and as President and CEO.
PROACTIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company desires to take advantage of the "safe harbor" provisions
of the Private Securities Reform Act of 1995 (the "Act") and is making
the following statements pursuant to the Act in order to do so. Certain
statements under this Item 2 and elsewhere in this report constitute
forward-looking statements within the meaning of Section 21A of the
Securities Exchange Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended. Although the Company believes the
expectations reflected in the forward-looking statements and assumptions
upon which forward-looking statements are based are reasonable it can give
no assurance that such expectations and assumptions will prove to have been
correct. Such forward-looking statements are risks and uncertainties,
many of which are beyond the the Company's control, that could cause the
actual results, performance or achievements of the Company, or industry
trends, to differ materially from any future results, performance or
achievements expressed or implied by such forward looking statements.
Given these uncertainties, investors are cautioned not to place undue
reliance on such forward-looking statements and no assurance can be given
that the plans, estimates and expectations reflected in such statements
will be achieved. The Company wishes to caution readers that the following
important factors, among others, in some cases have affected, and in the
future may affect, the Company's actual results and could cause the
Company's actual consolidated results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company:
a.) Changes in national, international, or regional economic conditions
that can affect the real estate market, which is cyclical in nature, and
highly sensitive to such changes, including, among other factors,levels
of employment and discretionary disposable income,consumer confidence,
available financing, and interest rates.
b.) The imposition of additional costs of compliance on the Company as
a result of changes in environmental, zoning, or other laws and
regulations that govern the acquisition, subdivision, and sale of real
estate.
c.) Risks associated with a large investment in real estate inventory at
any given time time (including risks that real estate inventories will
decline in value due to changing market and economic conditions and that
the development and carrying costs of inventories may exceed those
anticipated).
d.) Risks associated with an inability to locate suitable inventory
for acquisition and development as a residential, or commercial development.
e.) Risks associated with delays in bringing the Company's inventories
to market due to, among other factors, changes in regulations, governing
the Company's operations, adverse weather conditions, or changes in the
availability of development financing on terms acceptable to the Company.
f.) Changes in applicable usury laws or the availability of interest
deductions, or tax loss carry-forwards which the Company, or its predecessors
may have possessed in the past, or other provisions of federal or state tax
law.
g.) Changes on the part of banks or other lending institutions to
extend direct customer lot financing for purchase or development, which
could result in the Company having lower sales and/or the Company receiving
less cash in connection with the sale of its inventory.
h.) The inability of the Company to find external sources of liquidity
on favorable terms to support its operations, acquire, develop and carry
land, and satisfy its debt and other obligations.
i.) The increase in prepayment rates, delinquency rates or default
rates.
j.) Changes in costs to develop inventory for sale and/or selling,
general and administrative expenses exceeding those anticipated.
See the Company's Annual Report on Form 10-KSB for additional
statements concerning important factors, such as demand for products,
manufacturing costs and competition, that could cause actual results to
differ materially from the Company's expectations.
Year 2000 Impact
Year 2000 ("Y2K") issues are expected because many existing computer
programs use two digits instead of four to refer to the calendar year.
It is unknown whether these programs will be able to properly interpret
a year that begins with digits other than "19" (like the year 2000), and
thus cause disruption of business activities. The Company is currently
switching its software, from older programs,which could be affected by
the Y2K problem, to ones that are advertised as "Y2K ready". The Company
currently only utilizes software packages for its accounting and sales
and inventory maintenance. It is anticipated that the costs of implementing
ths new software to the Company will not exceed $2,000. In the unlikely
event all software cannot be converted prior to January 1, 2000, the Company
plans on several back-up measures, including back-up tapes and disks;
hard copies of all essential notes, mortgages, and other financial and sales
information, and cross-checking inventory sheets with sales occurring
during the year to provide secondary back-up of lots and sales in the event
of a Y2K catastrophe. The Stratos Inns division, currently in the
conceptual stage, plans to have Y2K ready software when it begins design
and construction during the next fiscal quarter. The Company has begun
communications with material suppliers and its primary lenders to determine
if the Company or the suppliers and or lenders are vulnerable due to
failure of being Y2K compliant.
Background of the Company
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. In the financial statements for the year ended June
30, 1998,the Company wrote off all existing amounts outstanding from
Worldwide, and thus no financial information regarding Worldwide is
presented in these financial statements.
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 interest. 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. Thus, there are no financial statements
regarding the Piney-Z Partnerships presented in the three months and
six months ended December 31, 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 six month
periods ended December 31, 1997.
Results of Operations
Net sales increased approximately $9,955,000 (582%)during
the current three month period ended December 31, 1998, and approximately
$8,739,000 (205%) during the six month period ended December 31, 1998,
respectively, compared to those same periods a year ago. The dramatic
increase in sales was due to three particular bulk sales during the current
three month period. In October and December, the Company transferred back
to Killearn Properties, Inc., two projects it had procured for the
outstanding mortgage balances in January of 1998. Due to cash flow
constraints, the Company found it impossible to continue these projects
without placing severe strain on the Company, and management decided to
sell the assets back to Killearn Properties, Inc. for a total price of
about $4,000,000. Further, in November, the Company sold 58 lots to one
builder of one of its major subdivisions in Tallahassee, Florida. The sales
of the Company's remaining 58 lots in the previously developed phases of the
Summerbrooke subdivision were the source of approximately $1,560,000
in additional sales. Further, the Company sold a total of 280 acres of land
to an entity controlled by a former director for a total of $1,732,000,
which management determined to be fair market value for said property.
Lastly, sales of retail lots significantly increased due to a concerted
push to sell remaining inventory in older subdivisions. Real estate
market conditions continued downward in the southeastern United States,
and specifically in the northern Florida, despite the increase in overall
general sales. With the Company's new management comes a new focus on
maintaining prices for their product. The Company added greatly to its
cash flow with its acquisition of West Side Investors, Inc. and its
interest in two Atlanta-area shopping centers. Currently, those
shopping centers provide the Company with $not less than $7,500 in monthly
revenues, and it is anticipated to continue that revenue stream in the
foreseeable future. Management anticipates that the Stratos Inn subsidiary
will begin contributing revenues to the Company in October, 1999.
Cost of sales, as a percentage of sales, was 133% for the current
three month period and 130% for the current six month period, compared
to 73.05% and 65.67%, respectively, a year ago. The gross margin
for the current three month period decreased to a loss of 40.15% as compared
to a gross profit margin of 6.25% for the same period a year ago. This
decrease in profit margin on net sales was primarily due to the significantly
high basis in the property sold during the current three months. Of greatest
significance was the sale of 58 lots in the Summerbrooke subdivision.
These lots, due to the length of time the Company held these lots, and the
capitalization of lots during construction created a total basis of
$1,603,000 in the lots sold. Gross profit margins ("GPM") between 17% and
21% are the goals set by the Company, but these goals are difficult to
maintain in the current marketplace, and assume no great fluctuations in
the current trends, such as interest rates. It is anticipated that the
impact of the West Side Investors subsidiary will greatly enhance net income
as the rental income should exceed substantially any costs of maintaining
the shopping center property. Further, it is anticipated that initial
costs for the Stratos Inns subsidiary will be capitalized as start-up costs
until revenues can be generated.
Selling, general, and administrative ("SG&A") expenses increased
$370,000, (105%) during the three months ended December 31, 1998 as
compared to the three months ended December 31, 1997. For the current six
month period, SG&A increased $523,000, or 79.85%, over the six month
period a year ago. Commissions have been reclassified as an SG&A expense.
In prior financial reports, the Company had classified commissions as a
cost of sales. Commissions in the total amount of about $443,000, for the
six month period ending December 31, 1998, due to increased sales,
added to the significant change from the periods ended December 31, 1997.
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 decreased $ 93,000 or 33% for the three months
ended December 31, 1998 as compared to the three months ended December 31,
1997, and $136,000 or 29.44% for the six months ended December 31, 1998 from
the three months ended December 31, 1997. This decrease is primarily due
to the elimination through payment of existing debt from the bulk
transactions which occurred during the current three month period and six
months period. Further, the Company expensed all of its interest costs
for the current three month period and chose not to capitalize any of it.
Other expenses increased $ 877,000 for the three months ended December
30, 1998 to $893,000 compared to an expense of $16,000 for that same period
in 1997. A significant amount of the increase is due to the
unrealized loss of approximately $561,000 on the Killearn Properties, Inc.
(AMEX:KPI) common stock, which was trading at $4.75 per share at December
31, 1998, and which the Company acquired for $9.50 per share from the Hawkins
group. Further, the Company wrote off approximately $367,000 from a note
receivable it had from a vendor who it had sold a subdivision to two years
ago.
Financial Condition
Total assets decreased a net total of $12,471,000 from June 30,
1998 to December 31, 1998; Real estate inventories decreased $9,849,000
primarily due to the disposition of The Glen at Eagle's Landing and
The Summit at Eagle's Landing, back to Killearn Properties, Inc. for a
total of approximately $4,100,000, as well as approximately 260 acres of
land in Albany to a former director, which removed approximately $1,850,000
from the real estate inventory of the Company. Further, the increase in
general lot sales removed an additional $6,000,000 from the real estate
inventories. Notes receivable decreased approximately $2,503,000 due
primarily to the reduction of $619,000 of the remaining receivable from
the sale of a large tract of undeveloped property near Summerbrooke
subdivision in Tallahassee, Florida. The Company received a total of
approximately $252,400 and from the vendor who was going out of business
and cancelled the remaining receivable. Additionally, in the first fiscal
quarter, the Company eliminated several wrap positions of about $2,300,000,
the Company held on some properties. This elimination caused both a
reduction in receivables and in the corresponding notes payable.
Total liabilities decreased $6,357,000 from June 30, 1998 to December
31, 1998, primarily due to the payment of Company debt to its primary lender
upon the bulk sale of property in Albany, Georgia, Summerbrooke subdivision,
and over $4,000,000 from the disposal of The Glen at Eagle's Landing and
The Summit at Eagle's Landing. The deferred income tax liability of
$298,000 as of June 30, 1998, was eliminated at December 31, 1998 due to the
Company's loss for the six months ended December 31, 1998.
Total Shareholders' equity decreased $6,111,500 during the current
six month period, which is a reflection of the six month loss.
Liquidity
Management believes that the Company, through the generation of
cash flow from operations, especially, through its West Side Investors,
Inc. subsidiary and the sale of stock it reacquired from the former
President and Chairman has sufficient financial resources available to
maintain its current operations and provide for its current capital
expenditure requirements.
Management plans to focus the Company in new directions. With the
acquisition of the Stratos Inns subsidiary, the Company intends to
achieve a niche for itself in the aviation hospitality industry
the executive airport hotel and service industry. Regarding its real
estate division, the Company anticipates that its acquisition of its
income-producing shopping centers will provide additional cash flow. It
further plans on continuing its residential development business in Florida
and in Albany, Georgia, and intends to focus on the marketing and sale of
its existing inventory, while at the same time seek out aditional land for
new development, and will continue to look explore other possible
acquisitions to complement its existing businesses lots.
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.
Management anticipates that most of its available cash flow will
be utilized to develop its Stratos Inns subsidiary. The Company hopes to
begin construction of its first building in Atlanta during the next fiscal
period, and it is anticipated to be generating revenues by October, 1999.
The Company expects to fund the start-up costs from bond financing.
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 2. Changes in Securities
(c.) On January 12, 1999, the Company issued 3,100,000 shares of Proactive
restricted common stock to Arthur G. Weiss and his family, in exchange for
100% of West Side Investors, Inc., a Georgia corporation, which owns P & W
Stonebridge, LLC, and P & W Headland, LLC, which own, respectively, the
Stonebridge Village Shopping Center,located in DeKalb County, Georgia, and
Headland-DeLowe Shopping Center, located in Atlanta, Georgia. Appraisals of
the properties total $9,130,000. The shopping centers are subject to
a $7,886,000 non-recourse equal profit participating mortgage. The
Company believes this transaction is exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933.
ITEM 4. Submission of Matters to a Vote of Security Holders
During the three months ended December 31, 1998, there were no
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 and Index of Exhibits:
(2) Plan of acquisition, reorganization, arrangement, liquidations,
or succession :
(i.) Agreement and Plan of Reorganization by and among Proactive
Technologies, Inc., Arthur Weiss and Kay Weiss and West
Side Investors, Inc. (filed on Form 8-K by EDGAR on January
19, 1999 and incorporated herein by reference).
(3)(i.) Articles of Incorporation
Certificate of Incorporation (As amended and restated as of
February 12, 1999)
(ii.) Bylaws of the Corporation (As amended and restated as of
February 12, 1999):
(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: NONE
Subsequent to the three months ended December 31, 1998, but prior
to the filing of this Form 10-QSB, the following reports on Form 8-K
were prepared and filed:
(1) January 13, 1999, refiled January 19, 1999, the Company filed Form 8-K
regarding its acquisition of 100% of the issued and outstanding shares
of West Side Investors, Inc., a Georgia corporation, which owns P & W
Stonebridge, LLC, and P & W Headland, LLC, which own, respectively, the
Stonebridge Village Shopping Center, located in DeKalb County, Georgia,
and the Headland-DeLowe Shopping Center, located in Atlanta, Georgia, in
exchange for the issuance of a total of 3,100,00 shares of Company
restricted common stock to Mr. Arthur G. Weiss and his family.
Additionally, Mr. Arthur G. Weiss and Mr. James Verbrugge were named to
the Board of Directors.
(2) January 25, 1999, the Company filed Form 8-K regarding its acquisition
of 100% of the issued and outstanding shares of PDK Properties, Inc.,
a Georgia corporation, which owns 100% of Stratos Inns, LLC, a Georgia
limited liability company, located in Atlanta, Georgia, in exchange for
the issuance of a total of 3,600,00 shares of Company restricted common
stock to the Lance Children's Trust.
(3) February 5, 1999, the Company filed Form 8-K regarding its repurchase
of 5,000,000 shares of common stock in exchange for a total of $1,570,000,
plus an additional $200,000, in the event certain contingencies are
fulfilled by Mr. Conner. As part and parcel of a stock exchange agreement
with Mr. Conner, he resigned as President, Chief Executive Officer, and as
a director of the Company. Additionally. the Board named Mr. William B.
Astrop to its Board of Directors. Also, two directors, Mr. Branch and Mr.
Maloney resigned their positions as directors.
(c) Financial Data Schedule - EX 27
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 15, 1999 By: /s/ Robert E. Maloney, Jr.
Robert E. Maloney, Jr., Vice-President
EXHIBIT INDEX
Exhibit No. Description Page No.
(3)(i) Articles of Incorporation (As amended
and restated as of February 12, 1999):
(3)(ii.) Bylaws of the Corporation (As amended
and restated as of February 12, 1999):
27 Financial Data Schedule 15
Articles of Incorporation
Certificate of Incorporation (As amended and restated as of
February 12, 1999)
The undersigned, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
I. The corporate name is PROACTIVE TECHNOLOGIES, INC.
II. The address of the registered office of the corporation in the
State of Delaware is 11th Floor, Rodney Square North, 11th and Market Streets,
Wilmington, New Castle County, Delaware, 19801.
The registered agent in charge thereof is CORPORATION GUARANTEE AND
TRUST COMPANY.
III. The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
IV. The total number of shares of stock which the corporation shall
have authority to issue is Sixty Million (60,000,000) shares, with each of
the shares having a par value of $0.01, thereby resulting in the corporation
having total authorized capital stock in the amount of sixty million
(60,000,000) shares, all of which shall be common stock. All such Common
Stock shall be non-assessable, and each holder of Common Stock shall be
entitled to one (1) vote per share of Common Stock held by such
shareholder. As provided in the Plan and as required by 11 U.S.C. Section
1123 (a)(6), the Corporation is prohibited from issuing any nonvoting
equity securiites.
V. The Board of Directors is authorized and empowered to adopt,
amend and repeal the By-Laws of the Corporation.
VI. The name and address of each Incorporator is as follows:
Name: Address:
Joseph J. Collopy 2225 Land Title Building
Philadelphia, PA 19110
VII. No Director shall be personally liable to the corproation or any
stockholder for monetary damages for breach of fiduciary duty as a
director, except for any matter in respect of which such director shall be
liable under Section 174 of Title 8 of the Delaware Code (relating to the
Delaware General Corporation Law) or any amendment thereto or successor
provision thereto or shall be liable by reason that, in addition to any and
all other requirements for such liability, he (i) shall have breached his
duty of loyalty to the corporation or its stockholders, (ii) shall not have
acted in good faith, (iii) shall have acted in a manner involving
intentional misconduct or a knowing violation of law or (iv) shall have
derived an improper personal benefit. Neither the amendment nor repeal of
this Article VII, nor the adoption of any provision of the certificate of
incorporation inconsistent with this Article VII, shall eliminate or
reduce the effect of this Article VII in respect of any matter occurring,
or any cause of action, suit or claim that, but for this Article VII would
accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 17th
day of December, 1982.
/s/ Joseph J. Collopy
---------------------------
by: Joseph J. Collopy
(ii.) Bylaws of the Corporation (As amended and restated as of
February 12, 1999):
BYLAWS
OF
PROACTIVE TECHNOLOGIES, INC.
ARTICLE I. SHAREHOLDERS
Section A. Annual Meetings
Annual Meetings shall be held at the time (date and hour) and place
designated by the Board Of Directors, but shall be held no later than
thirteen months after the last preceding annual meeting. Business
transacted at each annual meeting shall include the election of directors.
Section B. Special Meetings
Special meetings shall be held when directed by the president or the
Board Of Directors, or when requested in writing by the shareholders of not
less than ten per cent of all the shares entitled to vote. A special meeting
requested by the shareholders, unless they designate a later date, shall be
called for a date not less than ten nor more than sixty days after the request
is made. The call shall be issued by the secretary, unless the president,
Board Of Directors, or shareholders designate another person to do so.
Section C. Meeting Place
Meetings may be held within or without Delaware.
Section D. Meeting Notice
Written notice, stating the time (date and hour) and place of a meeting,
and in the case of a special meeting, its purpose, shall be delivered not less
than ten nor more than sixty days before the meeting, either personally or by
first class mail, by or at the direction of the secretary, to each shareholder
entitled to vote. If mailed, the notice, addressed to each shareholder at his
or her address as it appears on the stock transfer books, shall be deemed to
be delivered when deposited in the United States mail.
Section E. Adjourned Meeting Notice
When a meeting is adjourned to another designated time (date and hour) or
place, it shall not be necessary to give notice of the adjourned meeting. If,
however, after the adjournment, the Board Of Directors fixes a new record date
for the adjourned meeting, it shall be necessary to give notice.
Section F. Shareholder Determination
One of the following methods shall be used for the purpose of determining
the shareholders (1) entitled to notice of, or to vote at, a meeting or an
adjournment thereof, (2) entitled to receive dividends, or (3) for any other
purpose.
The Board Of Directors may provide that the stock transfer books shall be
closed for a stated period. The period shall not be more than sixty days, and
in the case of a meeting, it shall not be less than ten days immediately
preceding the meeting.
In lieu of closing the stock transfer books, the Board Of Directors may
designate a date as the record date. The date shall not be more than sixty
days, and in the case of a meeting, it shall not be less than ten days, prior
to the date on which the particular action is to be taken.
If the stock transfer books are not closed and a record date is not
designated, the date on which the notice of the meeting is mailed, or the date
on which the Board Of Directors adopted the resolution declaring the dividend,
shall be the record date.
When a determination has been made of the shareholders entitled to vote
at a meeting, the determination shall apply to any adjournment thereof, unless
the Board Of Directors designates a new record date for the adjourned meeting.
Section G. Voting Record
If this corporation has six or more shareholders, the officer having
charge of the stock transfer books shall make, at least ten days before each
meeting, a complete list of the names and addresses of the shareholders
entitled to vote, including the number, class, and series, if any, of shares
held by each. The list, for a period of ten days prior to the meeting, shall
be kept on file at this corporation's registered office, principal place of
business, or transfer agent's or registrar's office. Any shareholder shall be
entitled to inspect the list at any time during usual business hours. The
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder at any time during
the meeting.
If these requirements have not been substantially complied with, the
meeting, on the demand of any shareholder, shall be adjourned until they are
complied with. If no demand is made, failure to comply with these
requirements shall not affect the validity of any action taken at the meeting.
Section H. Quorum & Voting
A majority of the shares entitled to vote on a matter and represented at
a meeting shall constitute a quorum.
If a quorum is present, an affirmative vote of a majority of the shares
entitled to vote on the matter and represented at the meeting shall be the act
of the shareholders, except as provided otherwise by law.
After a quorum has been established, the subsequent withdrawal of
shareholders, so as to reduce the number of shares entitled to vote on the
matter, below the number required for a quorum, shall not affect the validity
of any action taken at the meeting or any adjournment thereof.
Section I. Voting Shares
Each common share shall be entitled to one vote on each matter submitted
to a vote at the meeting.
Treasury shares, shares of this corporation owned by another corporation,
of which a majority of that corporation's voting shares are owned or
controlled by this corporation, and shares of this corporation held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
At each election for directors, each shareholder entitled to vote at the
election shall have the right to vote the number of shares owned by him or her
for as many persons as there are directors to be elected at that time.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by the officer, agent, or proxy designated by the corporation's
bylaws or, in the absence of any applicable bylaws, by the person designated
by the corporation's Board Of Directors. Proof of the designation may be made
by the presentation of a certified copy of the corporation's bylaws, or the
Board Of Directors' designation. In the absence of any designation, or in
case of conflicting designations, the corporation's chairman of the Board Of
Directors, president, vice president, secretary, and treasurer shall be
presumed to possess, in that order, authority to vote the shares.
Shares held by an administrator, executor, guardian, or conservator may
be voted by him or her, in person or by proxy, without a transfer of the
shares into his or her name.
<PAGE> Shares standing in the name of a trustee may be voted by him or her,
in person or by proxy, but a trustee shall not be entitled to vote shares
held by him or her without a transfer of the shares into his or her name.
Shares held by a receiver may be voted by him or her, in person or by
proxy, without a transfer of the shares into his or her name, if the authority
to do so is contained in an appropriate order of the court by which the
receiver was appointed.
A shareholder, whose shares are pledged, shall be entitled to vote the
shares until the shares have been transferred into the name of the pledgee.
Thereafter, the pledgee shall be entitled to vote the shares.
On or after the date on which written notice of redemption of redeemable
shares has been mailed to the shareholders thereof, and a sum sufficient to
redeem the shares has been deposited with a bank or trust company along with
irrevocable instructions and authority to pay the redemption price to the
shareholders thereof upon the surrender of the certificates therefor, the
shares shall not be entitled to vote and shall not be deemed to be outstanding
shares.
Section J. Proxies
Any shareholder entitled to vote or to express consent or dissent, or his
or her duly authorized attorney-in-fact, may authorize another person or
persons to act for him or her by proxy.
A proxy must be in writing and must be signed by the shareholder or his
or her attorney-in-fact. A proxy shall not be valid after the expiration of
eleven months from the date thereof, unless it provides otherwise. A proxy
shall be revocable at the pleasure of the shareholder executing it, except as
provided otherwise by law.
A proxy holder's authority to act shall not be revoked by the death or
the incompetence of the shareholder who executed the proxy, unless, before the
authority is exercised, written notice and proof of the death or the
adjudication of incompetency is received by the officer responsible for
maintaining the shareholders list.
If a proxy for the same shares confers authority upon two or more
persons, and does not provide otherwise, a majority of them present, or if
only one is present, then that one, may exercise the powers conferred by the
proxy. However, if the proxy holders present are equally divided as to the
right and manner of voting, the voting of the shares shall be prorated.
If a proxy expressly so provides, the proxy holder may appoint, in
writing, a substitute to act in his or her place.
Section K. Voting Trusts
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, as provided by law. When the counterpart of a voting trust
agreement and a copy of the record of the holders of voting trust certificates
have been deposited with this corporation, as provided by law, those documents
shall be subject to an examination by any shareholder or record holder of
voting trust certificates, in person, or by his or her agent or attorney.
Section L. Voting Agreements
Two or more shareholders may enter into an agreement providing for the
manner of their exercising voting rights or relating to any phase of this
corporation's affairs, as provided by law. Nothing therein shall impair this
corporation's rights to treat the shareholders as entitled to vote their
shares.
Section M. Written Action
Any action required to be taken or which may be taken, at any annual or
special meeting, may be taken without a meeting, without prior notice, and
without a vote, if a written consent, setting forth the action taken, is
signed by the shareholders of not less than a majority of the shares entitled
to vote.
Within ten days after obtaining an authorization by written consent,
notice shall be given to the shareholders entitled to vote who did not consent
in writing. The notice shall fairly summarize the material features of the
action taken. If the action be a merger, consolidation, or sale or exchange
of assets, for which dissenting shareholders' rights are provided by law, the
notice shall contain a clear statement of those rights.
ARTICLE II. DIRECTORS
Section A. Function
All corporate powers shall be exercised by or under the authority of, and
this corporation's business and affairs shall be managed under the direction
of, the Board Of Directors.
Section B. Qualifications
Directors do not need to be either shareholders of this corporation or
residents of Delaware.
Section C. Compensation
The Board Of Directors shall have the authority to designate the
compensation of the directors.
Section D. Duties
A director shall perform his or her duties as a director and as a member
of any committee of the Board Of Directors upon which he or she may serve, in
good faith, in a manner he or she reasonably believes to be in the best
interests of this corporation, and with the care which an ordinarily prudent
person in the same position would use under similar circumstances.
In performing his or her duties, a director shall be entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, in each case prepared or presented by:
1.corporate officers or employees whom the director reasonably
believes to be reliable and competent in the matters presented,
2.counsel, public accountants, or other persons, as to matters which
the director reasonably believes to be within their professional or expert
competence, or
3.committees of the Board Of Directors upon which he or she does not
serve, duly designated in accordance with provisions of the Articles Of
Incorporation or Bylaws, as to matters within their designated authority,
which committees the director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he or
she has knowledge concerning the matter in question that would cause his or
her reliance to be unwarranted.
A director who performs his or her duties in compliance with this section
shall have no liability by reason of being or having been a director.
Section E. Assent Presumption
A director who is present at a Board Of Directors meeting, at which
action on any corporate matter is taken, shall be presumed to have assented to
the action taken, unless he or she votes against the action or abstains from
voting in respect thereto because of an asserted conflict of interest.
Section F. Number
The number of directors on this corporation's Initial Board Of Directors
shall be three (3). The number of directors may be increased or decreased by
amending these Bylaws, but no decrease shall have the effect of shortening the
term of any incumbent director.
Section G. Election & Term
Each member of the initial Board Of Directors shall hold office until the
shareholders' first annual meeting and until his or her successor shall have
been elected and qualified, or until his or her earlier resignation, removal
from office, or death.
At the shareholders' first annual meeting and at each annual meeting
thereafter, the shareholders shall elect directors to hold office until the
next succeeding annual meeting. Each director shall hold office for the term
for which he or she is elected and until his or her successor shall have been
elected and qualified, or until his or her earlier resignation, removal from
office, or death.
Section H. Vacancies
Any vacancy occurring in the Board Of Directors, including any vacancy
created by reason of an increase in the number of directors, may be filled by
the affirmative vote of a majority of the remaining directors, even though
they constitute less than a quorum of the Board Of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
Section I. Removal
At a shareholders' meeting called expressly for that purpose, any
director, or the entire Board Of Directors, may be removed, with or without
cause, by a vote of the shareholders of a majority of the shares entitled to
vote at an election of directors.
Section J. Quorum & Voting
A majority of the number of directors designated by these Bylaws shall
constitute a quorum for the transaction of business. An act of a majority of
the directors, at a meeting at which a quorum is present, shall be an act of
the Board Of Directors.
Section K. Interest Conflicts
No contract or other transaction, between this corporation and one or
more of its directors, or any other corporation, firm, association, or entity,
in which one or more of this corporation's directors are directors or officers
or are financially interested, shall be either void or voidable because of the
relationship or interest, or because the director or directors are present at
the meeting of the Board Of Directors or a committee thereof, at which the
contract or transaction was authorized, approved, or ratified, or because his,
her, or their votes are counted for such purpose, if:
1.the fact of the relationship or interest is disclosed or known to
the Board Of directors or the committee thereof, and the authorization,
approval, or ratification of the contract or transaction was by a sufficient
vote or written consent for the purpose, without counting the votes or written
consents of the interested directors,
2.the fact of the relationship or interest is disclosed or known to
the shareholders entitled to vote, and they authorize, approve, or ratify the
contract or transaction by vote or written consent, or
3.the contract or transaction is fair and reasonable as to this
corporation at the time it is authorized by the Board Of Directors or the
committee thereof or the shareholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board Of Directors or a committee thereof at
which the contract or transaction is authorized, approved, or ratified.
Section L. Committees
The Board Of Directors, by resolution adopted by a majority of the full
Board Of Directors, may designate from its members an executive committee and
one or more other committees, each of which, to the extent provided in the
resolution, shall have and may exercise all the authority of the Board Of
Directors, except that no committee shall have the authority to:
1.approve or recommend to the shareholders any actions or proposals
required by law to be approved by the shareholders,
2.designate candidates for the office of director, for purposes of
proxy solicitation or otherwise,
3.fill vacancies on the Board Of Directors or any committee thereof,
4.amend these Bylaws,
5.authorize or approve the reacquisition of shares, unless pursuant
to a general formula or method specified by the Board Of Directors, or
6.authorize or approve the issuance or sale of shares or any
contract therefor, or designate the terms of a series of a class of shares,
except that the Board Of Directors, having acted under its general
authorization for the issuance or sale of shares or any contract therefor, and
in the case of a series, the designation thereof, and having specified a
general formula or method by resolution or by the adoption of a stock option
or other plan, may authorize a committee to designate the terms of any
contract for the sale of shares and the terms upon which the shares may be
issued or sold, including, without limitation, the price, the rate or manner
of payment of dividends, and provisions for redemption, sinking funds,
conversion, voting and preferential rights, and other features of a class of
shares or a series of a class of shares, with full power in the committee to
adopt any final resolution setting forth all the terms thereof and to
authorize a statement of the terms of a series for filing with the Department
Of State.
The Board Of Directors, by resolution adopted in accordance with this
section, may designate one or more directors as alternate committee members to
serve in the place and stead of absent committee members at a committee
meeting.
Specifically, the Board of Directors shall have an Audit Committee,
consisting of a least one (1), but not more than five (5), independent
members of the Board of Directors, whose responsibility, shall consist of,
among other matters, working together with the Corporation's independent
auditors regarding its annual audit and reporting back to the Board the
finding of the auditors. The Board of Directors, may, but is not required
to, provide additional compensation or directors fees for member of the
audit committee.
Section M. Meeting Place
Regular and special meetings may be held within or without Georgia.
Section N. Meeting Time, Notice, & Call
A regular meeting shall be held without notice immediately following each
shareholders' annual meeting. Written notice of the time (date and hour) and
place of a special meeting shall be given to each director by personal
delivery, telegram, or cablegram, at least two days before the meeting, or by
notice mailed to each director at least five days before the meeting.
Notice of a meeting need not be given to any director who signs a waiver
of notice before or after the meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of the meeting and of any
objections to its time (date and hour) and place and to the manner in which it
has been called or convened, unless the director states, at the beginning of
the meeting, any objection to the transaction of business because the meeting
is not lawfully called or convened.
The business to be transacted at, and the purpose of, a regular or
special meeting need not be specified in the notice or waiver of notice of the
meeting.
A majority of the directors present, whether or not a quorum exists, may
adjourn a meeting to another designated time (date and hour) and place.
Notice of the adjourned meeting shall be given to each director who was not
present at the time of the adjournment and to all directors if the time (date
and hour) and place of the adjourned meeting were not designated at the time
of the adjournment.
Meetings may be called by the president or any director.
Section O. Conference Telephone Meetings
The Board Of Directors or a committee thereof may participate in a
meeting by using conference telephones or similar communication equipment
which permits all persons participating in the meeting to hear each other at
the same time. Participation in this manner shall constitute presence in
person at the meeting.
Section P. Written Action
Any action required to be taken or which may be taken by the Board Of
Directors or a committee thereof may be taken without a meeting if a written
consent setting forth the action so taken, signed by all the directors or
committee members, as the case may be, is filed in the minutes of the
proceedings of the Board Of Directors or committee. The consent shall have
the same effect as a unanimous vote.
ARTICLE III. OFFICERS
Section A. Designation
The officers shall consist of a president, secretary, and treasurer, each
of whom shall be elected by the Board Of Directors at its regular meeting
immediately following the shareholders' annual meeting. These officers shall
serve until their successors are chosen and qualified. Other officers and
assistant officers and agents, as may be deemed necessary, may be elected or
appointed by the Board Of Directors from time to time. Any two or more
offices may be held by the same person. The failure to elect a president,
secretary, or treasurer shall not affect the existence of this corporation.
Section B. Duties
The chief executive officer shall be responsible for all sales management
and personnel of the corporation, subject to the direction of the Board of
Directors.
The president shall be the chief executive officer, shall be responsible
for the general and active management of this corporation's business and
affairs, subject to the directions of the Board Of Directors, and shall
preside at all shareholders' and Board Of Directors' meetings.
The secretary shall be responsible for the custody and maintenance of all
corporate records, except financial records, shall record the minutes of all
shareholders' and Board Of Directors' meetings, shall send out all notices of
meetings, and shall perform any other duties prescribed by the president or
the Board Of Directors.
The treasurer shall be responsible for the custody and maintenance of all
corporate funds and financial records, shall keep full and accurate accounts
of all receipts and disbursements, shall render accounts thereof at the
shareholders' annual meetings and whenever else required by the president or
the Board Of Directors, and shall perform any duties prescribed by the
president or the Board Of Directors.
Section C. Compensation
Except as the Board of Directors may otherwise determine, the Board of
Directors shall fix the compensation of all officers and assistant officers.
Section D Removal
Any officer or agent elected or appointed by the Board Of Directors may
be removed by the Board Of Directors whenever, in its judgment, the best
interests of this corporation will be served thereby.
Any officer or agent elected by the shareholders may be removed only by
the shareholders, unless the shareholders shall have authorized the Board Of
Directors to remove the officer or agent.
Any vacancy in any office may be filled by the Board Of Directors, unless
these Bylaws shall have expressly reserved that power to the shareholders.
The removal of any officer or agent shall be without prejudice to the
contract rights, if any, of the person so removed. However, the election or
appointment of the officer or agent shall not of itself create contract
rights.
ARTICLE IV. CAPITAL STOCK CERTIFICATES
Section A. Issuance
Every shareholder shall be entitled to have a certificate representing
the shares to which he or she is entitled. The certificate shall not be
issued for the shares until they are fully paid for.
Section B. Form
Certificates representing shares shall be signed by the president or vice
president and the secretary or assistant secretary, and may be sealed with the
corporate seal or a facsimile thereof. The signatures of the president or
vice president and the secretary or assistant secretary may be facsimiles if
the certificate is manually signed by a transfer agent or registrar (other
than this corporation itself) or a corporate employee. In case any officer,
who signed or whose facsimile signature has been placed upon a certificate,
shall have ceased to be an officer before the certificate is issued, it may be
issued by this corporation with the same effect as if he or she were the
officer at the date of its issuance.
Every certificate shall set forth or fairly summarize, or shall state
that this corporation will furnish to any shareholder upon request and without
charge, a full statement of the preferences, limitations, relative rights, and
series designation provisions pertaining to the shares of each class or series
authorized to be issued, the variations in the relative rights and preferences
between the shares of each series so far as these have been designated and
determined, and the authority of the Board Of Directors to designate and
determine the relative rights and preferences of subsequent series.
Every certificate, representing shares which are restricted as to their
sale, disposition, or other transfer, shall state that the shares are
restricted as to transfer and shall set forth or fairly summarize, or shall
state that this corporation will furnish to any shareholder upon request and
without charge, a full statement of the restrictions.
Every certificate shall state upon its face the name of this corporation,
that this corporation is organized under the laws of Delaware, the name of the
person to whom it is issued, the number and class of shares and any series
designation, and the par value of the shares or a statement that the shares
are without par (no par) value.
Section C. Transfer
This corporation shall register a certificate presented to it for
transfer if the certificate is properly endorsed by the shareholder or his or
her duly authorized attorney.
Section D. Loss, Destruction, Or Theft
This corporation shall issue a new certificate in place of any
certificate previously issued if the shareholder:
1.makes proof in affidavit form that it has been lost, destroyed, or
stolen,
2.requests the issuance of a new certificate before this corporation
has notice that the certificate has been acquired by a purchaser for value in
good faith and without notice of any adverse claim,
3.gives bond in such form as this corporation may direct to
indemnify this corporation and its transfer agent and registrar against any
claim that may be made on account of the alleged loss, destruction, or theft
of the certificate, and
4.satisfies any other reasonable requirements imposed by this
corporation.
ARTICLE V. BOOKS, RECORDS, & MINUTES
Section A. Requirements
This corporation shall keep correct and complete books and records of
accounts and shall keep minutes of all meetings of its shareholders and Board
Of Directors and committees thereof.
This corporation shall keep records of its shareholders at its registered
office or principal place of business or at its transfer agent's or
registrar's office. The records shall contain the names and addresses of all
shareholders and the number, class, and series, if any, of the shares held by
each.
All books, records, and minutes shall be in written form, or in any other
form capable of being converted into written form within a reasonable time.
Section B. Inspection Rights
Any person who has been a shareholder or a record holder of voting trust
certificates for at least six months immediately preceding his or her request,
or who is a shareholder or record holder of voting trust certificates
representing at least five per cent of the outstanding shares of any class or
series, upon written request stating the purpose thereof, shall have the right
to examine, in person or by agent or attorney, at any reasonable time or
times, for any proper purpose, this corporation's relevant books and records
of accounts, minutes, and records of shareholders, and to make extracts
therefrom.
Section C. Financial Information
Not later than four months after the close of each fiscal year, this
corporation shall prepare a balance sheet, showing in reasonable detail its
financial condition as of the close of that fiscal year, and a profit and loss
statement, showing the financial result of its operation during that fiscal
year.
Upon the written request of any shareholder or record holder of voting
trust certificates, this corporation shall mail to the shareholder or record
holder of voting trust certificates, a copy of the most recent balance sheet
and profit and loss statement.
Balance sheets and profit and loss statements shall be filed in this
corporation's registered office in Florida, shall be kept for at least five
years, and shall be subject to inspection during business hours by any
shareholder or record holder of voting trust certificates, in person or by
agent or attorney.
Section D. Fiscal Year
The Company's fiscal year shall end June 30.
ARTICLE VI. DIVIDENDS
The Board Of Directors may from time to time declare, and this
corporation may pay, dividends on shares in cash, property, or its own shares,
except when this corporation is insolvent, when the payment thereof would
render this corporation insolvent, or when the declaration or payment thereof
would be contrary to any restrictions contained in the Articles Of
Incorporation, subject to the following provisions:
1.dividends in cash or property may be declared and paid, except as
otherwise provided in this article, only out of the unreserved and
unrestricted earned surplus or capital surplus, howsoever arising, but all
dividends paid out of the capital surplus shall be identified as a
distribution of the capital surplus, and the amount per share paid from the
capital surplus shall be disclosed to the shareholders receiving the dividends
concurrently with the distribution of the dividends,
2.dividends may be declared and paid in this corporation's own
treasury shares,
3.dividends may be declared and paid in this corporation's own
authorized but unissued shares out of any unreserved and unrestricted surplus,
subject to the following conditions:
a.if the dividends are payable in shares having a par value,
the shares shall be issued at not less than the par value thereof, and there
shall be transferred to the stated capital, at the time the dividends are
paid, an amount of surplus equal to the aggregate par value of the shares to
be issued as the dividends, and
b.if the dividends are payable in shares without par (no par)
value, the shares shall be issued at the stated value as shall be designated
by the Board Of Directors by resolution adopted at the time the dividends are
declared, there shall be transferred to the stated capital, at the time the
dividends are paid, an amount of surplus equal to the aggregate stated value
so designated in respect to the shares, and the amount per share so
transferred to the stated capital shall be disclosed to the shareholders
receiving the dividends concurrently with the distribution of the dividends,
c.dividends payable in shares of any class shall not be paid to
the shareholders of shares of any other class, unless the Articles Of
Incorporation so provide or the payment is authorized by the affirmative vote
or written consent of the shareholders of a majority of the shares of the
class in which the payments are to be made, and
d.a split-up or division of the issued shares of any class into
a greater number of shares of the same class, without increasing the stated
capital, shall not be construed to be dividends within the meaning of this
article.
ARTICLE VII. CORPORATE SEAL
The Board Of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the year of incorporation
and the following:
PROACTIVE TECHNOLOGIES, INC.
DELAWARE
ARTICLE VIII. BYLAWS
Bylaws may be adopted, altered, amended, or repealed by the shareholders
or the Board Of Directors, but the Board Of Directors may not alter, amend, or
repeal any bylaw adopted by the shareholders if the shareholders specifically
provide that bylaw is not subject to alteration, amendment, or repeal by the
Board Of Directors.
</PAGE>
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