U.S. SECURITIES AND EXCHANGE COMMISSION
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: March 31, 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 [ ] No [X]
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [X] No [ ]
As of December 31, 1998, 68,580,000 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 March 31, 1998
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1 - Financial Statements
Consolidated Balance Sheet
March 31, 1998 (Unaudited) F-1-F-2
Consolidated Statements of Operations -
for the Three Months ended March 31, 1998
(Unaudited) F-3-F4
Consolidated Statements of Cash Flows
for the Three Months ended March 31, 1998
(Unaudited) F-5-F-6
Notes to Consolidated Financial Statements F-7
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 3
PART II - OTHER INFORMATION
Item 5 - Other Information 4
Item 6 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 4
SIGNATURES 4
2
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
CURRENT ASSETS
Cash $ 135,451 $ 714,927
Accounts Receivable -
Medical receivables, net of
allowance for doubtful accounts of
$530,286 and $390,562 in 1998
and 1997, respectively 1,458,864 1,403,694
Trade accounts receivable, net of
allowance for doubtful accounts of
$11,108 in 1998 and 1997, respectively 369,199 330,634
Notes receivable - Current Portion 208,178 108,178
Prepaid Expenses and Other 6,040 9,688
---------- ----------
TOTAL CURRENT ASSETS 2,177,732 2,567,121
---------- ----------
PROPERTY AND EQUIPMENT, NET 422,173 446,803
---------- ----------
OTHER ASSETS
Goodwill, net of accumulated amortization 621,859 819,080
Software Development Costs, net of accumulated
amortization 269,545 405,966
Note Receivable, net of current portion 374,683 203,569
Deposits and Other Assets 83,547 83,627
---------- ----------
TOTAL OTHER ASSETS 1,349,634 1,512,242
---------- ----------
NET ASSETS OF DISCONTINUED OPERATIONS 180,457 186,362
---------- ----------
$4,129,996 $4,712,528
========== ==========
(Continued)
F-1
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
March 31, December 31,
1998 1997
----------- -----------
(Unaudited)
CURRENT LIABILITIES
Notes Payable $ 605,312 $ 605,312
Current Maturities of Long-Term Debt 1,369,695 1,344,229
Accounts payable 279,205 472,286
Accrued liabilities 224,300 250,261
Other liabilities - related party 59,000 89,000
Deferred revenues 78,638 108,658
----------- -----------
TOTAL CURRENT LIABILITIES 2,616,150 2,869,746
LONG-TERM DEBT, NET OF CURRENT
MATURITIES 537,811 559,680
----------- -----------
TOTAL LIABILITIES 3,153,961 3,429,426
----------- -----------
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES 1,593,824 1,754,841
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' DEFICIT
Common stock; $.001 par value; 100,000,000 shares
authorized; 68,580,000 shares issued 68,580 68,580
Additional paid-in capital 1,035,625 1,035,625
Accumulated deficit (1,709,955) (1,563,905)
Treasury stock, at cost; 409,577 shares (12,039) (12,039)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIT (617,789) (471,739)
----------- -----------
$ 4,129,996 $ 4,712,528
=========== ===========
F-2
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
----------------------
March 31, March 31,
1998 1997
---------- ---------
REVENUES
Medical income $ 657,073 $ 532,647
Service fee and broker income 164,916 --
Software & maintenance sales 162,308 416,264
Other income -- 17,853
--------- ---------
TOTAL REVENUES 984,297 966,764
--------- ---------
COST OF REVENUES
Cost of software and maintenance 33,094 96,788
Cost of medical services 597,577 307,466
--------- ---------
TOTAL COST OF REVENUES 630,671 404,254
--------- ---------
GROSS PROFIT 353,626 562,510
--------- ---------
OPERATING EXPENSES
Selling, general and administrative 520,056 446,801
Depreciation and amortization 88,550 72,119
--------- ---------
TOTAL OPERATING EXPENSES 608,606 518,920
--------- ---------
INCOME (LOSS) FROM OPERATIONS (254,980) 43,590
OTHER INCOME (EXPENSES)
Gain on Sale of Asset 1,501 --
Interest expense (68,969) (51,508)
Interest income and other 21,286 --
--------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS (301,162) (7,918)
DISCONTINUED OPERATIONS
(Loss) from operations of discontinued subsidiary (5,905) --
--------- ---------
(LOSS) BEFORE MINORITY INTEREST (307,067) (7,918)
MINORITY INTEREST INCOME (LOSS) 161,017 --
--------- ---------
NET (LOSS) $(146,050) $ (7,918)
========= =========
(Continued)
F-3
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(CONTINUED)
Three Months Ended
-------------------------
March 31, March 31,
1998 1997
----------- -----------
INCOME PER WEIGHTED AVERAGE
COMMON SHARE
Continuing Operations $ -- $ --
Discontinued Operations -- --
----------- -----------
$ -- $ --
=========== ===========
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING 68,580,000 67,885,000
=========== ===========
F-4
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
-----------------------
March 31, March 31,
1998 1997
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(146,050) $ (7,918)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Minority Interest In Loss (161,017) --
Loss from Discontinued Operations 5,905 --
Depreciation and Amortization 88,550 72,119
Gain on Sale of Assets (1,501) --
Changes in assets and liabilities:
Trade Accounts Receivable (93,735) (59,300)
Notes Receivable 3,489 5,000
Prepaid expenses and other 3,648 (250)
Deposits (3,562) (154)
Accounts payable and accrued liabilities (219,042) (88,498)
Other liabilities (30,000) (30,000)
Deferred revenues (30,019) (36,045)
--------- ---------
NET CASH USED BY
OPERATING ACTIVITIES (583,334) (145,046)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (1,239) (125,955)
Software development costs capitalized -- (61,725)
Proceeds from Sale of Assets 1,501 --
--------- ---------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 262 (187,680)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable (296,404) (443,113)
Proceeds from notes payable 300,000 876,398
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 3,596 433,285
--------- ---------
(Continued)
F-5
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Three Months Ended
--------------------------
March 31, March 31,
1998 1997
------------ -----------
INCREASE (DECREASE) IN CASH (579,476) 100,559
CASH AT BEGINNING OF PERIOD 714,927 196,653
----------- -----------
CASH AT END OF PERIOD $ 135,451 $ 297,212
=========== ===========
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest $ 28,969 $ 25,181
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Issuance of treasury stock in settlement of
note payable $ -- $ 45,000
Note Payable -- (45,000)
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) --
----------- -----------
$ -- $ --
=========== ===========
F-6
<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, 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 three month period
ended March 31, 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.
In April 1998, the Company borrowed $1.4 million from Stone Capital pursuant to
the terms of a promissory note which gives Healthcare Innovations, LLC the
option to convert the note and its 49% ownership interest to preferred stock.
F-7
<PAGE>
SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(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 most recent
financial statements of MB Software Corporation included in the Company's report
on Form 10-KSB for the year ended December 31, 1997.
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 presentation of
financial position, results of operations and cash flows for the interim period.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company
MB Software Corporation as previously announced, continued its transition away
from a single-dimensional software company, toward a healthcare company that
maximizes its software heritage. The Company owns and manages nine healthcare
operations in sites concentrated in Florida, Texas, Nevada, Utah and California.
In April 1998, the Company acquired two major clinics with substantial revenue
base, while divesting itself of two less cost effective operations. Acquired was
the Victory Medical and Family Health Clinic based in Austin, Texas. Victory
Medical is a multi-specialty clinic with a strong physical medicine and family
practice orientation. The Company acquired a Fort Worth Rehab Clinic as it
continues its focus on Physical Medicine and the Rehab business. The Company
plans to expand its technology to offer more services that are not being offered
in the Clinics at the present time, thereby enhancing the revenue and growth
base for both facilities. The Company divested itself of Santiago SDS, Inc., a
Newport Beach, California based software business serving billing centers, sole
practitioner physicians and multi-specialty clinics. The Company retained
ownership to OneClaim Plus(TM), its proprietary practice management software
that it continues to use throughout its multi-state operations. Moreover, the
Company also sold Sandy Home Health in the quarter ended March 31, 1998 and
opted to focus on healthcare operations with greater profit potential and less
administrative overhead.
Results of Operations
Note: The Company will amend its Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 to reflect changes made to its financial statements in
connection with the annual audit. The results set forth below for the quarter
ended March 31, 1997 represent the results that will be included in the amended
Form 10-Q.
This section discusses the results of operations of the Company and its
subsidiaries for the quarterly period ended March 31, 1998. Revenues in the
quarter ended March 31, 1997, inched upward to $984,297, over $966,764 reported
in the same quarter, 1997. Revenues were generated primarily from medical
services and to less extent from service fees and software sales.
Operating Expenses increased to $608,606 in the quarter ended March 31, 1998
compared to 518,920 for the same quarter of 1997, a 17% increase in operating
expenses. Said increase was directly attributable to operational realignment of
companies.
The Company reported a net loss of ($146,050) in the quarter ended March 31,
1998 over the same period in 1997. Major contributors to the shortfall were
depreciation, write-downs and credit adjustments.
3
<PAGE>
Total current liabilities decreased to $2,616,150 for the quarter ended March
31, 1998 compared to $3,012,424 for the same period in 1997.
The Company maintains that a strategy of healthcare acquisitions coupled with
cost effective software systems and management are proven and methodology.
Liquidity and Capital Resources
As of March 31, 1998, the Company reported total assets of $4,129,996 as
compared to $4,103,141 for the same period in 1997, Net working capital was
($438,418) for the quarter ended March 31, 1998 for ($512,311) for the quarter
ended March 31, 1997.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
Exhibits - All exhibits are incorporated by reference from prior filings with
the Commission.
Financial Statements - See Item 1 for financial statements filed with this
report.
Reports on Form 8-K - Form 8-K filed March 23, 1998.
- --------------------------------------------------------------------------------
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 9, 1998 /s/ Scott A. Haire
----------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
4
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<PERIOD-START> Jan-01-1998
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