U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1997
[ ] 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, 1997, 67,885,000 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/A
Quarter Ended June 30, 1997
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements
Consolidated Balance Sheet
June 30, 1997 (Unaudited) F-1,F-2
Consolidated Statements of Operations -
for the Six Months and Three Months ended
June 30, 1997 and 1996 (Unaudited) F-3
Consolidated Statements of Cash Flows
for the Six Months ended June 30, 1997
(Unaudited) F-4
Notes to Consolidated Financial Statements F-6
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 3-4
PART II - OTHER INFORMATION
Item 5 - Other Information 5
Item 6 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 5-6
SIGNATURES 6
2
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
CURRENT ASSETS
Cash $1,119,052 $ 196,653
Accounts receivable -
Medical receivables, net of
allowance for doubtful accounts of
$103,725 in 1997 538,080 --
Trade accounts receivable, net of
allowance for doubtful accounts of
$33,487 and $33,487, respectively 1,798,926 311,965
Notes receivable - current portion 5,000 10,000
Prepaid expenses and other 22,457 19,883
---------- ----------
TOTAL CURRENT ASSETS 3,483,515 538,501
---------- ----------
PROPERTY AND EQUIPMENT, NET 300,222 63,349
---------- ----------
OTHER ASSETS
Goodwill, net of accumulated amortization 827,964 850,109
Software development costs, net of accumulated
amortization 431,846 394,240
Deposits and other assets 18,645 18,488
---------- ----------
TOTAL OTHER ASSETS 1,278,455 1,262,837
---------- ----------
$5,062,192 $1,864,687
========== ==========
(Continued)
F-1
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Notes payable $ 3,324,138 $ 209,123
Current maturities of long-term debt 40,941 32,906
Accounts payable 339,357 149,741
Accrued liabilities 222,221 101,382
Other liabilities - related party 109,000 179,000
Deferred revenues 93,472 159,026
----------- -----------
TOTAL CURRENT LIABILITIES 4,129,129 831,178
LONG-TERM LIABILITIES
Long-term debt, net of current maturities 1,334,073 1,283,808
Other liabilities 40,000 40,000
----------- -----------
TOTAL LIABILITIES 5,503,202 2,154,986
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' DEFICIT
Common stock; $.001 par value; 100,000,000 shares
authorized; 67,885,000 shares issued 67,885 67,885
Additional paid-in capital 810,322 810,322
Accumulated deficit (1,307,178) (1,156,467)
Treasury stock, at cost; 409,577 shares (12,039) (12,039)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIT (441,010) (290,299)
----------- -----------
$ 5,062,192 $ 1,864,687
=========== ===========
The accompanying notes are an integral part
of these condolidated financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C>
REVENUES
Medical income $ 991,257 $ -- $ 1,523,904 $ --
Service fee and broker income -- 34,027 -- 35,843
Software & maintenance sales 394,400 683,599 810,664 1,286,698
Other income 13,860 219,992 31,713 250,000
------------ ------------ ------------ ------------
TOTAL REVENUES 1,399,517 937,618 2,366,281 1,572,541
------------ ------------ ------------ ------------
COST OF REVENUES
Cost of services and broker fees -- 2,548 -- 2,548
Cost of software and maintenance 115,485 82,617 212,273 185,456
Cost of medical services 766,981 -- 1,074,447 --
------------ ------------ ------------ ------------
TOTAL COST OF REVENUES 882,466 85,165 1,286,720 188,004
------------ ------------ ------------ ------------
GROSS PROFIT 517,051 852,453 1,079,561 1,384,537
------------ ------------ ------------ ------------
OPERATING EXPENSES
Selling, general and administrative 465,515 565,515 912,316 995,354
Depreciation and amortization 102,853 4,646 174,972 10,262
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 568,368 570,161 1,087,288 1,005,616
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS (51,317) 282,292 (7,727) 378,921
OTHER INCOME (EXPENSES)
Interest expense (91,476) (7,407) (142,984) (8,445)
Other -- (13,743) -- (15,954)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (142,793) $ 261,142 $ (150,711) $ 354,522
============ ============ ============ ============
INCOME PER WEIGHTED AVERAGE
COMMON SHARE $ (.002) $ .005 $ (.002) $ .007
============ ============ ============ ============
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING 67,885,000 49,485,000 67,885,000 49,485,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
F-3
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
--------------------------
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (150,711) $ 354,522
Adjustments to reconcile net (loss) income to net
cash used by operating activities:
Depreciation and amortization 174,972 13,163
Change in allowance for doubtful accounts 103,725 --
Changes in assets and liabilities:
Trade accounts receivable (322,263) (144,283)
Advances -- (1,125)
Notes receivable 5,000 --
Prepaid expenses and other (2,574) (4,500)
Deposits (157) (700)
Accounts payable and accrued liabilities 87,437 17,715
Other liabilities (70,000) 364,266
Deferred revenues (65,554) 79,283
Other -- (6,812)
----------- -----------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (240,125) 671,529
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (138,361) (8,565)
Software development costs capitalized (127,820) (71,032)
Change in notes receivable -- (21,052)
----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (266,181) (100,649)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable (458,819) 764,600
Proceeds from notes payable 1,887,524 (350,411)
Change in cash overdraft -- 29,616
Proceeds from common stock issuance -- 45,000
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,428,705 (488,805)
----------- -----------
The accompanying notes are an integral part
of these financial statements
(Continued)
F-4
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Three Months Ended June 30
----------------------------
1997 1996
----------- -----------
INCREASE (DECREASE) IN CASH $ 922,399 $ 82,075
CASH AT BEGINNING OF PERIOD 196,653 36,535
----------- -----------
CASH AT END OF PERIOD $ 1,119,052 $ 118,610
=========== ===========
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest $ 25,181 $ 8,451
=========== ===========
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 --
----------- -----------
$ -- $ --
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements
F-5
<PAGE>
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, 1996. 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, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
NOTE 2: ACQUISITION
In February 1997, the Company acquired two medical clinics, one in Utah and one
in Florida. The Utah clinic, Color Country Health Express, Inc., has three (3)
locations; and the Florida clinic, North Florida Physical Medicine Associates,
has two (2) locations.
F-6
<PAGE>
MB SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company
MB Software Corporation took a major step forward and unfolded the next phase of
its 1997 Strategic Plan by consolidating areas within its three operating
companies, thereby positioning them for long term benefits to derive greater
economies of scale and improved productivity.
The Company's primary focus continued to be the acquisition of companies that
provide reciprocal benefit and distribution channels for its software products
while currently increasing corporate asset value and developing greater market
share and critical mass for specific products and services.
Each operating company installed common practice management systems,
consolidated workflow processes and reporting mechanisms to facilitate
operational control and pinpoint areas where performance correction may be
indicated.
The Company continued to perform in accordance with its targets for the year;
however, for the quarter ended June 30, 1997, a steeper than anticipated expense
curve occurred from consolidation of Company functions which softened profit
margins, although the quarter still remained profitable. In each operating arm,
the Company realigned management, streamlined or downsized staff, reduced fixed
cost and explored expansion plans.
Santiago SDS, Inc. continued to sharpen its focus within the physician practice
management market through restructuring of marketing campaigns to offer a
more-defined, yet cost-competitive, state-of-the-art product. Santiago SDS,
Inc., in response to evolving market trends, continued to enhance product
capability and customer appeal, yet minimize product cost increases. In the
quarter ended June 30, 1997, Santiago SDS, Inc. maintained market share within
this highly competitive market segment through corporate extension of new
markets for its products and services. Strategies for 1997 remained on target
with financial and scheduling projections.
Color Country Health Express, Inc. continued to exceed expectations and
continued to explore expansion of its satellite locations within its market by
maximization of existing, yet untapped, capacity without major demands for
capital or staff. Anticipated seasonal downturns in revenue were measured and
staffing levels adjusted to reduce controllable costs and protect profit
margins.
3
<PAGE>
Intercoastal Rehabilitation, Inc. achieved positive results after substantial
realignment of staff and systems to position it for needed efficiencies and
improved productivity. The streamlined entity, with clearer operational focus,
continued to ramp up results, albeit after a longer period than planned.
Results of Operations
This section discusses the results of operations of the Company and its
subsidiaries for the quarterly period ended June 30, 1997.
In the quarter ended June 30, 1997, revenues from the consolidated entities rose
to $1,399,517 an increase of 49% over the $937,618 reported for the same period
in 1996. The year to date revenue for 1997 of $2,366,281 represents an increase
of 50% over the revenue in the same period in 1996 of $1,572,541. This trend
continues to show strong revenue growth and it represents the sixth continued
quarter of increased revenues for the Company.
Cost of revenues and operating expenses for the quarter ended June 30, 1997 were
$882,466 and $568,368 respectively. This is an increase of 936% over the cost of
revenues of $85,165 and a slight decrease in operating expenses of $570,161 for
the same period in 1996. Year to date 1997 cost of revenues plus operating
expenses exceeded total revenue by $7,727. This decrease over the prior year is
primarily due to increased expenses incurred with the restructuring of Santiago
SDS, Inc.'s marketing plan, reduced sales while refocusing that marketing
campaign, and miscellaneous unanticipated additional expenses related to the
Florida acquisition and operational improvements.
Total assets increased to $5,062,192. This increase from December 31, 1996 is
largely attributable to the increase in receivables via increased revenue in
1997. The nature of revenues generated from the subsidiaries acquired during
1997 lends themselves to larger receivables balances. Additionally, an influx of
$1,000,000 of cash occurred near the end of the quarter. This represents a
short-term note payable.
Total liabilities increased to $5,503,202 from the December 31, 1996 balance of
$2,154,986. The escalation of liabilities was largely due to the $1,000,000
short-term note mentioned above, debt assumed with acquisitions, and debt
incurred through normal operations.
Liquidity and Capital Resources
As of June 30, 1997, the Company had total assets of $5,062,192 with current
assets of $3,483,515, property and equipment $300,222 and other assets totaling
$1,278,455. Total current liabilities at June 30, 1997 were $4,129,129 with
total long-term liabilities equaling $1,374,073. Loans to the Company by certain
of its officers, directors and shareholders totaled to $2,744,430. Net working
capital at the end of the period was ($645,614), an decrease from the quarter
ended March 31, 1997 which net working capital equaled ($512,311).
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 1997 as necessary to continue the development
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.
4
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Company and Imagine, Inc. ("Imagine") announced on August 5, 1997, that they
had formed Healthcare Innovations, a limited liability company ("HI") for the
purposes of acquiring and operating healthcare businesses. Imagine is a
subsidiary of Stone Investments, which in turn is a subsidiary of Stone Capital,
a company with over $3 billion in assets. The Company will own a 51% common
equity interest in HI and Imagine will own a 49% common equity interest. In
addition, each of the Company and Imagine will own preferred interests in HI
designed to return their respective investments, plus a 10% return, over a three
year period.
For its interest, the Company contributed to HI its existing healthcare
businesses, consisting of two rehabilitation clinics in Jacksonville, Florida
and a Utah-based nurse practitioner business. The Company will also serve as
operator of HI, for which it will receive a management fee. For its interest,
Imagine contributed to HI the sum of $2,000,000, $900,000 of which was used to
repay debt assumed in connection with the purchase of the Jacksonville
facilities, and the remainder of which will be used to fund capital requirements
of the businesses and future acquisitions. The $900,000 loan repayment was
accomplished by a $1,000,000 loan from Imagine, through the Company, to Oak Tree
Receivables, Inc., which then repaid the loan with the cash and certain of its
receivables. The remaining $100,000 was used to repay obligations of the
Jacksonville facilities incurred in the ordinary course of business. Oak Tree
Receivables was contributed to HI by the Company, and the $1,000,000 note was
contributed to HI by Imagine as part of its $2,000,000 contribution.
Also in connection with the formation of HI, Imagine loaned the Company $500,000
for use in its Santiago operations. The loan bears interest at a rate of 10% and
is due on August 1, 2000. As security for the loan, the Company pledged all of
its stock of Santiago to Imagine and Robert T. Shaw, a shareholder of the
Company who had previously acquired a security interest in the Santiago stock,
consented to the pledge. In addition, a key part of the relationship between
Imagine and the Company is a funding arrangement whereby Imagine and its
affiliates will provide capital to HI through loan and equity arrangements in
order for HI to purchase healthcare businesses. The terms of such arrangements
are to be negotiated.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SHCEDULES AND REPORTS ON FORM 8-K
Exhibits
10.1 Operating Agreement dated as of August 1, 1997 for Healthcare Innovations,
LLC *
10.2 LLC Preorganizational Agreement dated as of August 1, 1997 among the
Company, HI and Imagine *
10.3 Services Agreement dated as of August 1, 1997 between HI and the Company *
10.4 Promissory Note dated as of August 1, 1997 in the principal amount of
$500,000 executed by the Company as maker in favor of Imagine *
10.5 Amended and Restated Pledge Agreement dated as of August 1, 1997 among the
Company, Imagine and Robert T. Shaw *
5
<PAGE>
* To be filed by amendment.
Financial Statements - See Item 1 for financial statements filed with this
report.
Reports on Form 8-K - Original 8-K was filed on February 6, 1997 and an
Amendment No. 1 was filed April 4, 1997.
- --------------------------------------------------------------------------------
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: June 30, 1998 /s/ Scott A. Haire
----------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
