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: June 30, 1999
[ ] 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common NASDAQ - OTC BULLENTIN BOARD
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 July 30, 1999, 68,691,971 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, 1999
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheet
June 30, 1999 (Unaudited) and December 31, 1998 (Audited) 3-4
Consolidated Statements of Operations -
for the Three Months ended June 30, 1999 (unaudited) and
December 31, 1998 (Audited) 5
Consolidated Statements of Cash Flows
for the Three Months ended June 30, 1999 (unaudited) and
December 31, 1998 (Audited)
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 8-9-10
PART II-OTHER INFORMATION
Item 5 - Other Information 10
Item 6 - Exhibits, Financial Statement Schedules
AND rEPORTS ON fORM 8-K 10
SIGNATURES 10
2
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1999 1998
---------- ------------
(Unaudited)
CURRENT ASSETS
Cash $ 257,022 $ 188,797
Accounts receivable -
Medical receivables, net of
allowance for doubtful accounts and
contractual adjustments of $631,861 and
$1,810,887 in 1999 and 1998, respectively 605,625 1,003,126
Notes receivable 229,325 51,288
Prepaid expenses 4,000 4,200
---------- ----------
TOTAL CURRENT ASSETS 1,095,972 1,247,411
---------- ----------
PROPERTY AND EQUIPMENT, NET 379,938 396,022
---------- ----------
OTHER ASSETS
Goodwill, net of accumulated amortization 207,702 316,806
Software development costs, net of accumulated
amortization -- 169,376
Deposits and other assets 74,596 73,036
---------- ----------
TOTAL OTHER ASSETS 282,298 559,218
---------- ----------
$1,758,208 $2,202,651
========== ==========
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(Continued)
3
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes payable
Related parties $ -- $ --
Other 163,716 303,946
Current maturities of long-term debt
Related parties -- --
Other 34,968 54,965
Accounts payable 311,088 483,074
Accrued liabilities 260,018 400,004
Deferred revenues 44,901 57,423
----------- -----------
TOTAL CURRENT LIABILITIES 814,619 1,299,412
LONG-TERM DEBT, NET OF CURRENT
MATURITIES
Related parties 933,808 933,808
Other 921,611 741,392
PREFERRED STOCK DIVIDENDS PAYABLE 215,644 85,000
----------- -----------
TOTAL LIABILITIES 2,885,754 3,059,612
----------- -----------
SHAREHOLDERS' DEFICIT
Series A senior cumulative convertible
participating preferred stock; $10 par value;
340,000 shares issued and outstanding in 1998 3,400,000 3,400,000
Common stock; $.001 par value; 100,000,000 shares
authorized; 69,100,000 shares issued 69,100 69,100
Additional paid-in capital 1,101,105 1,101,105
Accumulated deficit (5,415,127) (5,415,127)
Net Earnings (270,525)
Treasury stock, at cost; 408,029 shares (12,039) (12,039)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIT (1,127,546) (856,961)
----------- -----------
$ 1,758,208 $ 2,202,651
=========== ===========
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4
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Medical Activities:
Revenue $ 904,266 $ 996,131 $ 1,729,516 $ 1,653,204
Contractual Allowance 319,287 - 631,861 -
------------ ------------ ------------ ------------
Net Revenues 584,979 996,131 1,097,655 1,653,204
Cost of Revenue 310,317 694,187 642,383 1,310,431
------------ ------------ ------------ ------------
Gross Profit 274,662 301,944 455,272 342,773
Service Fees 5,056 177,751 91,796 342,667
------------ ------------ ------------ ------------
Software Activities:
Gross Revenue 71,488 97,896 132,158 260,204
Cost of Revenue 16,835 - 18,753 14,427
------------ ------------ ------------ ------------
Gross Profit 54,653 97,896 113,406 245,777
Gross Profit 334,371 577,591 660,473 931,217
------------ ------------ ------------ ------------
Operating Expenses:
Selling, General and Administrative 388,598 426,223 734,633 946,279
Bad Debt Expense, Other General
and Administrative
Depreciation and Amortization 40,265 93,707 108,727 182,257
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSE 428,863 519,930 843,360 1,128,536
Interest Expense and Other 22,135 10,254 58,261 56,436
Income and Expenses (2,223) - (5,987) -
------------ ------------ ------------ ------------
TOTAL OTHER EXPENSE 19,911 10,254 52,274 56,436
Income Tax Expense -
Net (Loss) on Operations (114,403) 47,407 (235,161) (253,755)
------------ ------------ ------------ ------------
PREFERRED STOCK DIVIDENDS 85,000 - 170,000 -
------------ ------------ ------------ ------------
DISCONTINUED OPERATIONS
Gain (Loss) Discontinued Operation (37,868) (53,581) (28,255) (59,486)
Gain on Discontinued Operation 134,636 - 134,636 -
------------ ------------ ------------ ------------
TOTAL GAIN ON DISCONTINUED 96,768 (53,581) 106,381 (59,486)
OPERATION
MINORITY INTEREST - 8,537 - 169,554
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (102,635) $ 2,363 $ (298,780) $ (143,687)
============ ============ ============ ============
INCOME PER WEIGHTED
AVERAGE COMMON SHARE $ .000 $ .000 $ .000 $ .(002)
============ ============ ============ ============
WEIGHTEDAVERAGE COMMON
SHARES OUTSTANDING 68,580,000 68,670,000 68,580,000 68,631,428
============ ============ ============ ============
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5
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
JUNE 30,
1999 1998
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss before discontinued operations $ (270,525) $(3,723,057)
Adjustments to reconcile net (loss) to net
cash used by operating activities:
Depreciation and amortization 108,727 1,502,083
(Gain) loss on sale of assets (134,636) 43,994
Common stock issued for services 60,000
Minority interest in loss (548,623)
Change in allowance for doubtful accounts (905,748) 1,950,626
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 1,072,927 (866,118)
Decrease in notes receivable 51,288 8,040
Decrease in prepaid expenses and other 200 4,348
Increase in deposits (21,454) (4,132)
Increase (decrease) in accounts payable/accrued liabilities (6,340) 109,783
Decrease in deferred revenues (12,520) (51,233)
----------- ----------
NET CASH USED BY CONTINUING OPERATIONS (118,081) (1,514,289)
----------- ----------
NET CASH PROVIDED (USED) BY
DISCONTINUED OPERATIONS (8,824) 67,755
----------- ----------
NET CASH USED BY OPERATING ACTIVITIES (126,906) (1,446,534)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (9,850) (111,945)
Organizational costs (1,224) -
Proceeds from sale of business segment 300,000 -
Proceeds from sale of equipment - 750
----------- ----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 288,926 (111,195)
----------- ----------
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CONTINUED
6
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MB SOFTWARE CORPORATION AND SUBSIDILARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
JUNE 30,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable
Related parties $ - $ (895,000)
Other (137,441) (220,035)
Proceeds from notes payable
Related parties 10,000 1,900,000
Other 33,646 238,826
Proceeds from common stock issuance - 6,000
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (93,795) 1,029,791
----------- -----------
INCREASE (DECREASE) IN CASH 68,225 (527,938)
Cash balance at beginning of period 188,797 716,735
----------- -----------
CASH BALANCE AT END OF PERIOD $ 257,022 $ 188,797
=========== ===========
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest $ 81,363 $ 260,516
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Preferred stock issued for minority interest $ - $ 2,000,000
Minority interest acquired - (1,083,079)
Preferred stock issued to satisfy note payable - 1,400,000
Conversion of note payable to prefrred stockrelated party - (1,400,000)
Goodwill on acquisition of minority interest - (916,921)
Sale of software for note receivable - 230,982
Note receivable from software sale - (230,982)
----------- -----------
$ - $ -
----------- -----------
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7
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NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X. They do not include all information and notes required by
generally accepted accounting principles 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, 1998. 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 June 30, 1999, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
During the second quarter of 1999, MB Software Corporation (the "Company")
continued operations of its Florida healthcare clinics, promoted sales of its
medical practice management software and pursued development of Internet- based
health care services.
The health care division of the Company continued to focus on Company-owned
physician practices in Florida. Florida law, as opposed to the law of many other
states, permits the corporate practice of medicine of the type engaged in by the
Company. As a result, the Company opened a fourth clinic in Lauderhill, Florida
in July 1999. Similarly, the Company sold its chiropractic clinic in Nevada. All
clinics are now Company-owed and located in Florida.
The software division of the Company focused on new product development,
including online services for the health care industry. MB Software Solutions,
Inc., (MBSSI), a subsidiary of the Company, has developed an Internet-based
product that can operate independently or in conjunction with MBSSI's practice
management software patient verification and patient validation services. MBSSI
has entered into an agreement with NetVitality, Inc., a Stone Capital Company,
that will accommodate the communication portion of the Internet verification and
validation services. The new services are described on the corporate web page at
MBSSI.com.
The following summarizes the results of operations for the three-month and the
six-month period ended June 30, 1999 and 1998.
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
- -----------------------------------------------------------------------------
Revenue from medical activities decreased 9.4% to $904,266 for the three-months
ended June 30, 1999, compared to $996,131 for the three-months ended June 30,
1998. This modest decrease is attributable to the termination of the Utah and
Nevada clinics.
A contractual allowance adjustment was made in the amount of $319,287 for the
second quarter of 1999. In the first six months of 1999, the Company identified
numerous slow-paying receivables that, due to changing conditions, required
reductions in their realizable amounts. The majority of these receivables
pre-dated 1999.
The amounts have been recorded in the contractual adjustment of $319,287.
The cost of medical revenues decreased 55.29% to $310,317 for the three months
ended June 30, 1999, compared to $694,187 for the three months ended June 30,
1998. This significant decrease is applicable to increased efficiencies in the
operation of the clinics, the sale of Utah and Nevada clinics and the
termination of practice management arrangements.
The gross profits from medical activities decreased 9.0% to $274,662 for the
three months ended June 30, 1999, as compared to $301,944 for the three months
ended June 30, 1998. This 9.0% decrease in gross profits is in accordance with
the 9.4% decrease in medical revenue with each decrease reflecting reduced
patient charges resulting from the sale of the Utah and Nevada clinics.
8
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The service fees for the second quarter of 1999, decreased 97.15% to $5,056 from
$177,751 for the second quarter ending June 1998. Service fees are earned in
connection with practice management agreements. The reduction in the service fee
amount reflects the Company's decision to eliminate practice management
arrangements in favor of Company-owned practices.
In the quarter ending June 30, 1999, gross profit from software activities
decreased 44.17% to $54,653 for $97,896 for the second quarter ending June 1998.
The revenue reduction is applicable to reduced technical support fees and
reduced software sales. The Company has continued to dedicate available
resources to research and development for new products as opposed to sales and
marketing of existing software.
The Company's gross profit for the second quarter decreased 42.10% to $334,371
for the second quarter ended June 30, 1999 from $577,591 for the second quarter
ending June 1998. The gross profit decrease is substantially related to the
reduction for reduced service fees as well as the revenue reductions for
software activities.
The Company's selling, general and administrative expenses decreased by 8.82% to
$388,598 for the three months ended June 30, 1999 as compared to $426,223 for
the second quarter ending June 30, 1998. This decrease reflects savings
resulting from the termination of certain operations.
The net loss on operations was $114,403 for the three month period ended June
30, 1999 representing a 141.32% difference compared to a profit of $47,407 for
the three months ended June 30, 1998. The loss is primarily attributable to
reduction in service fees, software sales and reductions for contractual
allowance.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
- -------------------------------------------------------------------------
The net medical revenues decreased 33.60% to $1,097,655 for the six-month period
ended June 30, 1999, compared to $1,653,204 for the six-month period ended June
30, 1998. The decrease is applicable to the divestment of the Nevada and Utah
clinics.
The cost of medical revenue decreased 50.97% to $642,383 for the six-month
period ended June 30, 1999, as compared to $1,310,431 for the six-month period
ended June 30, 1998. The decrease is applicable to the divestment of the Nevada
and Utah clinics as well as the termination of practice-management arrangements.
Gross profit decreased to $660,473 for the second quarter ended June 30, 1999,
compared to $931,217 for the second quarter ended June 30, 1998. The decrease in
gross profit is mainly attributable to the reductions in software revenue and
reduces service fees.
The Company's selling, general and administrative expenses decreased by 22.57%
to $734,633 for the second quarter ending June 30, 1999 as compared to $946,279
for the second quarter ending June 30, 1998. This decrease reflects savings
resulting from the termination of certain operations together with increased
operational efficiency.
Net operating loss decreased 7.32% to $235,161 for the six-month period ended
June 30, 1999, as compared to $253,755 for the six-month period ended June 30,
1998. The loss is primarily attributable to the reduction in software revenue
and service fees.
Gain on discontinued operations was $134,636 from the sale of the chiropractic
clinic in Nevada.
Liquidity and Capital Resources
- -------------------------------
The Company's operations used $118,081 of cash during the three months ended
June 30, 1999 compared to a use of cash of $841,775 for the quarter ended June
30, 1998.
As of June 30, 1999, the Company had working capital of $281,353, which is
143.9%, increase over the June 30, 1998 working capital of ($640,276). At June
30, 1999, the Company had cash of $257,022. To increase its cash position, the
Company plans on out-sourcing the collection efforts for a portion of
significantly delinquent Florida receivables in a multi-party
financing/collections arrangement.
9
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In the three months ended June 30, 1999, the Company expended $9,850 for the
purchase of equipment. The Company does not anticipate any major purchase of
equipment for the remaining six (6) months of 1999.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None
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 - None
- --------------------------------------------------------------------------------
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 12, 1999 /s/ Scott A. Haire
----------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000714256
<NAME> MB Software Corporation
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 257,022
<SECURITIES> 0
<RECEIVABLES> 834,950
<ALLOWANCES> 631,861
<INVENTORY> 0
<CURRENT-ASSETS> 1,095,972
<PP&E> 379,938
<DEPRECIATION> 108,727
<TOTAL-ASSETS> 1,758,208
<CURRENT-LIABILITIES> 814,619
<BONDS> 0
0
3,400,000
<COMMON> 69,100,000
<OTHER-SE> (1,127,546)
<TOTAL-LIABILITY-AND-EQUITY> 1,758,208
<SALES> 132,158
<TOTAL-REVENUES> 1,821,312
<CGS> 18,753
<TOTAL-COSTS> 734,633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 631,861
<INTEREST-EXPENSE> 58,261
<INCOME-PRETAX> (235,161)
<INCOME-TAX> 0
<INCOME-CONTINUING> (235,161)
<DISCONTINUED> 106,381
<EXTRAORDINARY> 170,000
<CHANGES> 0
<NET-INCOME> 270,525
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
