Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File No. 0-11808
MB SOFTWARE CORPORATION
Colorado 59-2219994
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2225 E. Randol Mill Road - Suite 305
Arlington, Texas 76011-6306
(817) 633-9400
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for shorter period that the registrant was required to file
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 [ ]
As of September 30, 1996, 66,850,000 shares of the Issuer's $.001 par value
common stock were outstanding.
Transitional Small Business Disclosure Format
Yes [ ] No [ X ]
<PAGE>
MB SOFTWARE CORPORATION
Form 10-QSB
Quarter Ended September 30, 1996
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1 - Financial Statements
Consolidated Balance Sheet
September 30, 1996 (Unaudited) and December 31, 1995 (Audited) 3-4
Consolidated Statements of Cash Flow
for the Nine Months ended September 30, 1996 (Unaudited
and December 31,1995 (Audited) 5
Consolidated Statements of Operations
for the Nine Months and Three Months ended September 30, 1996)
and September 1995 (Unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion
and Analysis of Financial Condition or Plan of Operation
7-9
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to Vote by Security Holders 10
Item 6 - Exhibits, Financial Statement Schedules 10
and Reports on Form 8-K
SIGNATURES 10
2
<PAGE>
September 30, December 31,
1996 1996
----------------- -----------------
CURRENT ASSETS
Cash $ 151,529 $ 36,535
Trade accounts receivable 210,664 59,788
Notes receivable - -
Advance 44,652
Prepaid Expenses 16,064
------------------ ----------------
Total current assets 422,909 96,323
PROPERTY AND EQUIPMENT, NET 44,305 23,839
------------------ ----------------
OTHER ASSETS
Goodwill 942,882 956,045
Software Source Code
-
Software development costs 228,921 51,879
Deposits 18,488 17,788
Total other assets 1,234,596 1,025,712
------------------ ----------------
1,657,505 1,145,874
================= ================
<PAGE>
September 30, December 31,
1996 1995
------------------ -----------------
CURRENT LIABILITIES
Bank Overdraft $ - $ 29,616
Notes Payable, including $38,214 and
$130,172 respectively,due to related
parties
299,889 397,741
Accounts payable
169,086 177,266
Accrued liabilities 110,384 142,754
Other liabilities 119,269 527,350
Other -
------------------ ----------------
Total current liabilities 698,628 1,274,727
------------------ ----------------
LONG TERM LIABILITIES
Note Payable 1,321,715 710,900
Other liabilities 130,000 130,000
Deferred Revenue 132,775 160,878
------------------ ----------------
Total long term liabilities 1,584,490 1,001,778
SHAREHOLDERS' EQUITY
Common stock .001 par value;
100,000,000 shares
authorized; 66,850,000 shares issued 66,885 49,485
Additional paid-in capital 501,320 518,720
Retained Earnings (deficit) (1,551,796) (1,551,797)
Treasury stock, at cost; 57,518 shares (102,039) (147,039)
------------------ ----------------
Net Earnings 460,017
Total shareholders' equity (deficit) (625,613) (1,130,631)
------------------ ----------------
$ 1,657,505 1,145,874
=================== ================
<PAGE>
September December
1996 1995
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income(Loss) for the period $ 460,017 $ (690,487)
Adjustments to reconcile net
income(loss)to net cash used
by operating activities:
Depreciation 13,163 129,467
Loss on write down of software 77,885
Loss on disposition and write down of
assets held for sale and related notes
receivable 168,972
Gain on disposition of PC3 assets and
certain liabilities (17,944)
Changes in assets and liabilities
Trade accounts receivable (150,876) (3,420)
Advances (44,652) 18,732
Prepaid expenses and other (16,064) 22,479
Deposits (700) 1,500
Accounts payable 8,180 (58,059)
Accrued Liabilities 32,370 (113,384)
Other Liabilities 408,081 12,456
Deferred revenues 28,103 160,878
Other - -
---------------- -----------------
Net cash used by operating activities 737,622 (290,925)
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal (Purchase) of property and
equipment (20,466) (3,227)
Software development costs capitalized (177,042) (55,750)
Cash paid in connection with sale of PC3 - (2,580)
Proceeds from sale of Assets held for Sale
and related notes receivable
Collections on notes receivable - 75,000
Advances on notes receivable - -
---------------- ----------------
Net cash provided (used) by investing
activities (197,508) 308,955
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts on notes payable 790,949 (556,854)
Principle payments on notes payable (350,446) 561,538
Increase (decrease) in cash overdraft 29,616 7,593
Common Stock (17,400)
Paid in Capital 17,402
Purchase of treasury stock (45,000) -
--------------- ----------------
Net cash provided by financing activities 425,121 12,277
INCREASE / (DECREASE) IN CASH 114,993 30,307
--------------- ----------------
Cash at beginning of period 36,535 6,228
Cash at end of period $ 151,529 $ 36,535
=============== ================
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest $ $ 87,427
=============== ================
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED 9-30/96 ENDED -9/30/95 ENDED 9/30/96 ENDED 9/30/95
REVENUES
Service fee & broker income $ 119,190 $ 45,131 $ 404,026 $ 100,008
Smart card product sales 13,747 - -
Software & maintenance
sales 558,344 34,103 1,845,042 354,565
Other income - 41,241 1,008 79,380
----------------------- --------------------- --------------------- ---------------------
Total revenues 677,534 134,223 2,250,076 533,954
----------------------- --------------------- --------------------- ---------------------
COST OF REVENUES
Cost of service & broker
fees - 11,985 2,548 15,044
Cost of smart card
product sales - 7,238 - -
Cost of software &
maintenance 140,769 23,241 326,226 174,890
----------------------- --------------------- --------------------- ---------------------
Total cost of
revenues 140,769 42,465 328,774 189,934
----------------------- --------------------- --------------------- ---------------------
GROSS PROFIT 536,765 91,757 1,921,302 344,020
----------------------- --------------------- --------------------- ---------------------
OPERATING EXPENSES
Selling, general &
administrative 433,944 140,206 1,429,299 501,516
Depreciation and
amortization - 10,042 10,262 15,227
Gain on disposition of
assets held - - 261,552
for resale and
related note receivable -
----------------------- --------------------- --------------------- ---------------------
Total operating
expenses 433,944 150,248 1,439,561 778,295
----------------------- --------------------- --------------------- ---------------------
INCOME FROM OPERATIONS 102,821 (58,489) 481,741 (434,275)
----------------------- --------------------- --------------------- ---------------------
OTHER INCOME (EXPENSES)
Interest income, net (792) 4,905 (797) 15,792
Other, net (1,883) 2,424 22,521 656
----------------------- --------------------- --------------------- ---------------------
Total other
income, net (2,675) 7,329 21,724 16,448
----------------------- --------------------- --------------------- ---------------------
NET INCOME BEFORE TAXES 105,496 (65,819) 460,017 (450,723)
----------------------- --------------------- --------------------- ---------------------
PROVISION FOR INCOME TAXES -
NET INCOME 105,496 $ (65,819) $ 460,017 $ (450,723)
======================= ===================== ===================== =====================
Income per weighted-average
common shares $ (0.00) $ (0.00) $ 0.01 $ (0.01)
======================= ===================== ===================== =====================
Weighted-average common
shares outstanding 66,885,000 49,485,000 66,885,000 49,485,000
======================= ===================== ===================== ====================
</TABLE>
<PAGE>
MB SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
1. BASIS OF PRESENTATION
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although management believes the disclosures
herein are adequate to make the information presented not misleading. These
interim financial statements should be read in conjunction with the more recent
financial statements of MB Software Corporation included in the Company's report
on Form 10-KSB for the year ended December 31, 1995.
The interim financial information included herein is unaudited; however it
reflects all adjustments (consisting solely of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair representation,
results of operations and cash flows for the interim period. The results of
operations for the nine months and three months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
This Quarterly Report on Form 10-QSB contains forward looking statements about
the business, operations and financial condition of the Company, including
various statements contained in "Management's Discussions and Analysis of
Financial Condition and Results of Operations." The actual results of the
Company could differ materially from those forward looking statements,
contingent upon market factors and economic volatility. Causal factors that
could impact actual results of the Company to differ materially from those
contained in the forward looking statements are discussed in connection with
those statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company
MB Software Corporation remains one of the leading providers of practice
management software and cash management resources to physicians, dentists,
chiropractors and medical billing centers. As of September 30, 1996, the Company
maintained market share with business management services to approximately 3,500
physicians, dentists and chiropractors, with over 2,350 physical locations
supporting these services.
The Company's long term business plan focuses on increasing the number of
physician customers using its practice management software products and, through
the use of a common software convention, become a pivotal link in the electronic
exchange of information between physician practices and connecting service
providers. Currently over 250 clients enjoy fully-electronic, on-line
capabilities and process financial information through the Company's OneClaim
Plus(TM) practice management system.
Prospectively, the Company also plans to establish Internet and World-Wide Web
connectivity with customers via an Internet/WWW hub set up to be integral with
the Company's practice management software. The Company's strategy for achieving
this objective is to transition the Company's 3,500 existing practice management
customers to the SDS Health Network Information System, acquire new practice
management systems under the SDS Health Network Platform, and offer new and
enhanced services along with related service products.
The Company's near term outlook focuses on enhancement of its core business
products developed by Santiago SDS, Inc. and corresponding announcement of its
Windows 95 version of OneClaim Plus(TM). Additionally, the Company intends to
seek and obtain certification as a Windows 95 approved vendor, a competitive
strategy aligned with healthcare's market and technological direction.
Accordingly, roll-out of the Windows 95 version of OneClaim Plus(TM) commenced
late in September with initial market reception showing strong support for its
expanded and enhanced value-added features.
The Company remains positioned to maximize the opportunities that appear likely
from pending federal healthcare legislation. Specifically, healthcare's
transition toward electronic processing of billing and collections, and the
potential that electronic submission of claims may be mandated in certain health
care sectors, places the Company in good stead within the industry. Given the
stability of annual inflation rates for 1996, near term inflation trends as a
non-issue.
Results of Operations
This section discusses the results of operations of the Company and its
subsidiaries for the quarterly period ended September 30, 1996. Since January 1,
1996, the Company has been able to exceed projections following the acquisition
of Santiago SDS, Inc. In the quarter ending September 30, 1996, revenues
improved to $677,534, a 404% increase from the $134,223 revenues for the same
period in 1995. For the nine months ending September 30, 1996, revenues improved
to $2,250,076, an increase of 321.4% compared with $533,954, in revenues for the
same period in 1995. Net income trended upward for the third consecutive quarter
ended September 30, 1996, a 260% increase from the same period in 1995. For the
nine month period ending September 30, 1996, net income of $460,017 improved by
202% from ($450,723) for the same period in 1995. Operating expenses for the
quarter ending September 30, 1996 increased at a decreasing rate given the
Company's comprehensive efforts to maximize profit margins through effective
cost containment programs. Actual operating expenses for the third quarter grew
188% from the third quarter of 1995 to $433,944. Operating expenses included the
non-recurring costs associated with development of the Windows 95 product. The
Company's ability to fund said development from operating revenues evidences
management's commitment to a policy of fiscal prudence and incremental revenue
growth financed primarily by operating expense outlays. For the nine month
period ending September 30, 1996, operating expenses increased 84% from $788,295
to $1,439,561%, during the same period in 1995.
Total current liabilities as of September 30, 1996 evidenced strong improvement
by a decrease of 45% to $698,628 from $1,274,727 in December 31, 1995.
Management maintains a core strategy to reduce debt and current liabilities in
order to grow the company with minimal debt obligations. The Company
demonstrated strong results and exceeded profit targets in the first, second and
third quarters 1996. While the Company moves to minimize debt, management
recognizes that limited outside capitalization may be necessary to properly
underwrite the roll-out of its two new products. Initial market response to both
products has been positive, yet management prioritized the flagship product,
OneClaim Plus(TM) as the Company's focus in order to create a financing platform
from which to launch its second product, KI.D. While the window of opportunity
for launch of its second product remains open today, management believes that
the new KI.D. product must be introduced through a national campaign within the
next 120 to 150 days. The current status of the Windows 95 healthcare package is
positive and market response strong. Moreover, an expanded sales force and
increased promotional advertising form the basis for an improved sales revenue
outlook. New promotional brochures and marketing strategies were developed to
take aim at the optimization of the current install base revenue potential,
contribute in large part to an improved outlook for sales. Additionally, the
Company continues to consider offers from industry vendors that produce
complimentary products who seek strategic alliances in order to capture greater
market share. Although no major alliance has yet been formed, negotiations
remain active and promising. Reaching accord with current vendor(s) represents
minimal development costs and presents no major distraction, yet could
significantly expand the Company's market presence and build positive critical
mass.
Liquidity and Capital Resources
As of September 30, 1996, the Company recorded total assets of $1,657,505, with
current assets of $422,909 and property, equipment and other assets of
$1,234,596. Total current liabilities as of September 30, 1996 were $696,628.
Net working capital at the end of the period was ($275,719), an improvement from
($1,265,095) or 358% from December 31, 1995.
The KI.D., Kid Identity Defense Program remains positioned for national roll-out
with an advertising and public relations firm that will orchestrate the elements
for KI.D.'s success. To date, the unveiling of KI.D. has turned on a strategy
that:
Creates an infrastructure of local distributors;
Incorporates a recognized-name sponsor company positively and closely
identified with infants and children;
Includes direct or tacit endorsement by law enforcement agencies; and
Demonstrates public assurance of KI.D.'s integrity and ethics as a program
is supported by the systems capabilities that safeguard customer privacy.
Release of KI.D. currently has been limited to California and Texas as beta test
markets. Initial response to promotional and live field test through local
venues has been strong and positive. Over 70 distributorships have been
contracted nationwide who will work with the national sponsor(s) in the actual
enrollment of children. The Company believes that KI.D. represents a positive
image and service for corporate America, while providing a proactive solution
for a compelling special issue - child safety. Given the populace's sensitivity
to child abduction, KI.D. allows parents, grandparents, educators, the medical
community, and law enforcement at large to effectively utilize the information
super highway as a child abduction deterrent. The Company's management is
determined to foster KI.D. as a social positive akin to usage of 911 for
emergency calls. Clearly, the initialization and roll-out of KI.D. forms the
nucleus for incremental growth. The advent of KI.D., coupled with the solidarity
of the core Windows 95 business, together represent the single focus for a
strong outlook. Notwithstanding the positive potential evidenced by its new
products and the subsequent revenue generation, there can be no guarantee that
such revenues will be generated or that the revenues will be significant, given
the competitive nature found in the health care practice management arena.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Exhibits - All other exhibits are incorporated by reference from prior filings
with the Commission on Form 8-K during the period.
Financial Statements - See Item 1 for financial statements filed with this
report.
Reports of Form 8-K - No reports were filed on Form 8-K during this period.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
MB SOFTWARE CORPORATION
Dated: October 23, 1996 /s/ Scott A. Haire
---------------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 151,529
<SECURITIES> 0
<RECEIVABLES> 255,316
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 422,908
<PP&E> 44,305
<DEPRECIATION> 13,163
<TOTAL-ASSETS> 1,657,505
<CURRENT-LIABILITIES> 698,629
<BONDS> 0
0
0
<COMMON> 66,885
<OTHER-SE> 692,498
<TOTAL-LIABILITY-AND-EQUITY> 1,675,505
<SALES> 1,921,302
<TOTAL-REVENUES> 2,250,076
<CGS> 328,773
<TOTAL-COSTS> 1,429,298
<OTHER-EXPENSES> 31,986
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 460,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 460,017
<EPS-PRIMARY> .001
<EPS-DILUTED> .001
</TABLE>
