U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: June 30, 1998
[ ] 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 June 30, 1998, 68,700,000 shares of the Issuer's $.001 par value common
stock were outstanding.
Transitional Small Business Disclosure Format
Yes [ ] No [ X ]
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MB SOFTWARE CORPORATION
Form 10-QSB
Quarter Ended June 30, 1998
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
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Item 1 - Financial Statements
Consolidated Balance Sheet
June 30, 1998 (Unaudited) F-1,F-2
Consolidated Statements of Operations -
for the Six Months and Three Months ended June 30, 1998 and 1997
(Unaudited) F-3
Consolidated Statements of Cash Flows
for the Six Months ended June 30, 1998
(Unaudited) F-4,F-5
Notes to Consolidated Financial Statements F-6
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 3
PART II - OTHER INFORMATION
Item 5 - Other Information 3
Item 6 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 4
SIGNATURES 4
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1998 1997
---------- ------------
(Unaudited)
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CURRENT ASSETS
Cash $ 885,297 $ 776,079
Accounts receivable -
Medical receivables, net of
allowance for doubtful accounts of $621,804
and $390,572 in 1998 and 1997, respectively 1,633,430 1,632,742
Trade accounts receivable, net of
allowance for doubtful accounts of
$11,108 in 1998 and 1997, respectively 616,296 330,634
Notes receivable - current portion 306,161 108,178
Prepaid expenses and other 8,748 20,981
---------- ----------
TOTAL CURRENT ASSETS 3,449,932 2,868,614
---------- ----------
PROPERTY AND EQUIPMENT, NET 481,187 500,215
---------- ----------
OTHER ASSETS
Goodwill, net of accumulated amortization 679,699 1,244,022
Software development costs, net of accumulated
amortization 232,659 405,966
Notes receivable, net of current portion 255,700 203,569
Deposits and other assets 81,796 83,627
---------- ----------
TOTAL OTHER ASSETS 1,249,854 1,937,184
---------- ----------
NET ASSETS OF DISCONTINUED OPERATIONS 483,801 --
---------- ----------
$5,664,774 $5,306,013
========== ==========
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(Continued)
F-1
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
June 30, December 31,
1998 1997
---------- ------------
(Unaudited)
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CURRENT LIABILITIES
Notes payable $ 2,117,995 $ 791,410
Current maturities of long-term debt 1,076,762 1,383,711
Accounts payable 562,151 710,446
Accrued liabilities 205,957 359,090
Other liabilities - related party 59,000 89,000
Deferred revenues 68,343 108,658
----------- -----------
TOTAL CURRENT LIABILITIES 4,090,208 3,442,315
LONG-TERM LIABILITIES
Long-term debt, net of current maturities 598,705 580,596
----------- -----------
TOTAL LIABILITIES 4,688,913 4,022,911
----------- -----------
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES 1,585,287 1,754,841
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' DEFICIT
Common stock; $.001 par value; 100,000,000 shares
authorized; 68,700,000 and 68,580,000 shares
issued, respectively 68,700 68,580
Additional paid-in capital 1,041,505 1,035,625
Accumulated deficit (1,707,592) (1,563,905)
Treasury stock, at cost; 409,577 shares (12,039) (12,039)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIT (609,426) (471,739)
----------- -----------
$ 5,664,774 $ 5,306,013
=========== ===========
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The accompanying notes are an integral part
of these consolidated financial statements
F-2
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
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REVENUES
Medical income $ 996,131 $ 991,257 $ 1,653,204 $ 1,523,904
Service fee and broker income 177,751 -- 342,667 --
Software & maintenance sales 97,896 394,400 260,204 810,664
Other income -- 13,860 -- 31,713
------------ ------------ ------------ ------------
TOTAL REVENUES 1,271,778 1,399,517 2,256,075 2,366,281
------------ ------------ ------------ ------------
COST OF REVENUES
Cost of software and maintenance -- 115,485 14,427 212,273
Cost of medical services 694,187 766,981 1,310,431 1,074,447
------------ ------------ ------------ ------------
TOTAL COST OF REVENUES 694,187 882,466 1,324,858 1,286,720
------------ ------------ ------------ ------------
GROSS PROFIT 577,591 517,051 931,217 1,079,561
------------ ------------ ------------ ------------
OPERATING EXPENSES
Selling, general and administrative 426,223 465,515 946,279 912,316
Depreciation and amortization 93,707 102,853 182,257 174,972
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 519,930 568,368 1,128,536 1,087,288
------------ ------------ ------------ ------------
INCOME (LOSS) FROM
OPERATIONS 57,661 (51,317) (197,319) (7,727)
OTHER INCOME (EXPENSES)
Interest expense (69,726) (91,476) (138,695) (142,984)
Other 59,472 -- 82,259 --
------------ ------------ ------------ ------------
INCOME (LOSS) FROM
CONTINUING OPERATIONS 47,407 (142,793) (253,755) (150,711)
DISCONTINUED OPERATIONS
(Loss) from operations of discontinued
subsidiaries (53,581) -- (59,486) --
------------ ------------ ------------ ------------
(LOSS) BEFORE MINORITY
INTEREST (6,174) (142,793) (313,241) (150,711)
MINORITY INTEREST 8,537 -- 169,554 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 2,363 $ (142,793) $ (143,687) $ (150,711)
============ ============ ============ ============
INCOME PER WEIGHTED AVERAGE
COMMON SHARE $ .000 $ (.002) $ (.002) $ (.002)
============ ============ ============ ============
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING 68,670,000 67,885,000 68,631,428 67,885,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
F-3
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
--------------------------
1998 1997
----------- -----------
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (143,687) $ (150,711)
Adjustments to reconcile net (loss) to net
cash used by operating activities:
Depreciation and amortization 182,257 174,972
Minority interest (169,554) --
Change in allowance for doubtful accounts 231,232 103,725
Changes in assets and liabilities:
Trade accounts receivable (517,582) (322,263)
Notes receivable 24,489 5,000
Prepaid expenses and other 6,778 (2,574)
Deposits -- (157)
Accounts payable and accrued liabilities (301,428) 87,437
Other liabilities (30,000) (70,000)
Deferred revenues (40,315) (65,554)
Other (83,965) --
----------- -----------
NET CASH (USED) BY
OPERATING ACTIVITIES (841,775) (240,125)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (92,752) (138,361)
Software development costs capitalized -- (127,820)
----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (92,752) (266,181)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable (1,274,858) (458,819)
Proceeds from notes payable 2,312,603 1,887,524
Proceeds from common stock issuance 6,000 --
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,043,745 1,428,705
----------- -----------
</TABLE>
The accompanying notes are an integral part
of these financial statements
(Continued)
F-4
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Six Months Ended June 30
---------------------------
1998 1997
------------- -----------
INCREASE IN CASH $ 109,218 $ 922,399
CASH AT BEGINNING OF PERIOD 776,079 196,653
----------- -----------
CASH AT END OF PERIOD $ 885,297 $ 1,119,052
=========== ===========
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest $ 35,395 $ 25,181
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Purchase of medical clinics $ -- $(1,933,381)
Goodwill -- (34,247)
Accounts payable assumed -- 223,018
Notes payable -- 1,744,610
Sale of software assets 274,603 --
Increase in notes receivable (274,603) --
----------- -----------
$ -- $ --
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements
F-5
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-QSB and Rule 10-01 of
Regulations S-X. They do not include all information and notes required by
generally accepted accounting principals for complete financial statements.
However, except as disclosed, there has been no material change in the
information disclosed in the notes to consolidated financial statements included
in the Annual Report on Form 10-KSB of MB Software Corporation for the year
ended December 31, 1997. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30, 1998, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
NOTE 2: DISCONTINUED OPERATIONS
On April 30, 1998, the Company entered into an agreement to sell its ownership
in Sandy Home Health, Inc. (a Utah Corporation). The total sales price was
$200,000 payable pursuant to the terms of a promissory note dated May 1, 1998.
The promissory note is due May 1, 2001 with monthly interest payments starting
June 1, 1998. The interest rate is the prime rate as published in the Wall
Street Journal, plus 2% per annum.
NOTE 3: ACQUISITIONS
On April 1, 1998, the Company purchased the assets and assumed certain liability
of Med-Sport Therapy & Rehabilitation Center, Inc. and compensated the previous
owners as follows:
Amount Due
Date Previous Owners
------------- ---------------
April 1, 1998 $ 38,000
May 1, 1998 33,000
July 1, 1998 167,000
---------
$ 238,000
=========
On April 1, 1998, the Company entered into a physician coverage and service
agreement with Toth Enterprises II, P.A., a Texas professional association doing
business as Victory Medical and Family Care and Dr. William G. Franklin. The
Company through a subsidiary will provide administrative and management services
for the clinic. The assets of Victory Medical and Family Care were purchased by
the Company with issuance of 400,000 shares of the Company's common stock. As of
July 1998, this purchase is being rescinded.
F-6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the second quarter of 1998, MB Software Corporation (the "Company")
continued its focus on acquiring and operating healthcare businesses that
utilize the Company's medical practice management software. Much of the
Company's efforts were directed toward integrating the previously acquired
practices and streamlining their operations. Specific activities included
installation of common practice management systems and reporting mechanisms,
realignment of management and staff, and reduction of costs. In addition, the
Company continued to explore opportunities for acquiring new businesses and
expanding existing operations.
The Company is in the process of evaluating its Year 2000 ("Y2K") compliance
status. A special committee of the Company's Board of Directors has been
appointed to oversee the Company's Y2K compliance efforts. The Company believes
that its proprietary medical practice management software, One ClaimPlus(TM), is
Y2K compliant. The Company is currently evaluating the effects that the Y2K
problem may have on its healthcare operations. Because the Company has not
completed this review, it is impossible to predict the effect that the Y2K
problem may have on the Company's healthcare operations. A Y2K related problem,
whether through a failure of the Company's medical equipment, through a failure
of a third party dealing with the Company (such as a utility provider, or a
third party payor of a medical claim), or otherwise, could have a material
adverse effect on the Company and its results of operation. The Company is
attempting to survey its major third party vendors, especially medical equipment
manufacturers, regarding their Y2K compliance status. The Company expects to
develop a contingency plan for Y2K failures with respect to its medical
equipment.
Results of Operations
This section discusses the results of operations of the Company and its
subsidiaries for the quarterly period ended June 30, 1998.
In the quarter ended June 30, 1998, revenues from the consolidated entities were
$1,271,778 compared to $1,399,517 reported for the same period in 1997. The year
to date revenue for 1998 of $2,256,075 compared to $2,366,281 for the year to
date of 1997.
Cost of revenues and operating expenses for the quarter ended June 30, 1998 were
$694,187and $519,930 respectively. Year to date 1998 cost of revenues plus
operating expenses exceeded total revenue by ($197,319) as compared to ($7,727)
for the same period in 1997.
Total current assets increased to $3,449,932. This increase from December 31,
1997 is largely attributable to the increase in receivables. The nature of
revenues generated from the subsidiaries acquired during 1998 lends themselves
to larger receivables balances.
Total liabilities increased to $4,688,913 from the December 31, 1997 balance of
$4,022,911.
Liquidity and Capital Resources
As of June 30, 1998, the Company had total assets of $5,664,774 with current
assets of $3,449,932, property and equipment $481,187 and other assets
tota1$1,249,854. Total current liabilities at June 30, 1998 were $4,090,208 with
total long-term liabilities equaling $598,705. Loans to the Company by certain
of its officers, directors and shareholders totaled $3,198,808. Net working
capital at the end of the period was ($640,276).
The Company is actively engaging in acquisitions of complementary companies,
development of software products, and developing greater market share for
specific products and services. It is impossible to predict what impact, if any,
the above will have on the operating results of the Company. The Company will
attempt to enhance cash flows from operations through sales efforts and
operating efficiencies and in addition, may attempt to seek financing
opportunities to obtain funds in 1998 as necessary to continue the development
3
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of the Company, its programs and strategic acquisitions. However, there can be
no assurance that the Company will produce additional revenue or profits from
these efforts. The Company intends to continue its growth by new acquisitions,
adding customers and catering to existing customers as well as aggressively
marketing new products and services.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On April 1, 1998, the Company, through a subsidiary, acquired the assets of
Victory Medical and Family Care in Austin, Texas for 400,000 shares of the
Company's common stock. The subsidiary entered into a services agreement with
the physician group in Austin whereby the subsidiary would provide assets and
administrative and management services to the practice. Soon after entering into
the agreements, disputes arose amoung the parties regarding the representations
made in the agreements and the future operations of the practice. The Company
filed a lawsuit in Tarrant County, Texas and a counter claim was filed in Travis
County, Texas. The parties are currently negotiating a recission of the
transaction. On August 11, 1998, the Company entered into a services agreement
to provide administrative and management services to a facility providing
physical therapy and chiropractic services in Austin, Texas. That facility
employs one physician and one chiropractor each of whom were previously
affiliated with Victory Medical and Family Care.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Exhibits
- - --------
Financial Statements - See Item 1 for financial statements filed with this
- - ---------------------
report.
Reports on Form 8-K -
- - -------------------
Form 8-K /A filed May 20, 1998; Form 8K filed June 30, 1998.
<PAGE>
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
Date: August 19, 1998 /s/ Scott A. Haire
----------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
4
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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<CIK> 0000714256
<NAME> MB Software Corporation
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 885,297
<SECURITIES> 0
<RECEIVABLES> 2,249,726
<ALLOWANCES> 632,912
<INVENTORY> 0
<CURRENT-ASSETS> 3,449,932
<PP&E> 481,187
<DEPRECIATION> 52,950
<TOTAL-ASSETS> 5,664,774
<CURRENT-LIABILITIES> 4,090,208
<BONDS> 0
0
0
<COMMON> 68,700
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,664,774
<SALES> 2,256,075
<TOTAL-REVENUES> 2,256,075
<CGS> 1,324,858
<TOTAL-COSTS> 2,453,394
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138,695
<INCOME-PRETAX> (253,755)
<INCOME-TAX> 0
<INCOME-CONTINUING> (253,755)
<DISCONTINUED> (59,486)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (143,687)
<EPS-PRIMARY> (0.0
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