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, 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 May 10, 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 March 31, 1999
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
-----------
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheet
March 31, 1999 (Unaudited) and December 31, 1998 (Audited) F-1-F-2
Consolidated Statements of Operations -
for the Three Months ended March 31, 1999 (Unaudited) and
December 31, 1998 (Audited) F-3-F4
Consolidated Statements of Cash Flows
for the Three Months ended March 31, 1999 (Unaudited)
and December 31, 1998 (Audited) F-5-F-6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 7-8-9
PART II - OTHER INFORMATION
Item 5 - Other Information 10
Item 6 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 10
SIGNATURES 10
</TABLE>
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1999 1998
---------- ----------
(Unaudited)
CURRENT ASSETS
Cash $ 72,597 $ 188,797
Accounts receivable -
Medical receivables, net of
allowance for doubtful accounts and
contractual adjustments of $1,595,052 and
$1,810,887 in 1999 and 1998, respectively 904,791 1,003,126
Notes receivable 83,233 51,288
Prepaid expenses 4,200 4,200
---------- ----------
TOTAL CURRENT ASSETS 1,064,821 1,247,411
---------- ----------
PROPERTY AND EQUIPMENT, NET 341,686 396,022
---------- ----------
OTHER ASSETS
Goodwill, net of accumulated amortization 296,908 316,806
Software development costs, net of accumulated
amortization 139,487 169,376
Deposits and other assets 69,444 73,036
---------- ----------
TOTAL OTHER ASSETS 505,839 559,218
---------- ----------
$1,912,346 $2,202,651
========== ==========
(Continued)
F-1
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<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes payable
Related parties $ -- $ --
Other 287,020 303,946
Current maturities of long-term debt
Related parties -- --
Other 36,275 54,965
Accounts payable 372,793 483,074
Accrued liabilities 367,465 315,004
Deferred revenues 53,309 57,423
----------- -----------
TOTAL CURRENT LIABILITIES 1,116,862 1,214,412
LONG-TERM DEBT, NET OF CURRENT
MATURITIES
Related parties 1,703,808 1,703,808
Other 38,057 56,392
PREFERRED STOCK DIVIDENDS PAYABLE 130,644 85,000
----------- -----------
TOTAL LIABILITIES 2,989,371 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 (5,635,191) (5,415,127)
Treasury stock, at cost; 408,029 shares (12,039) (12,039)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIT (1,077,025) (856,961)
----------- -----------
$ 1,912,346 $ 2,202,651
=========== ===========
</TABLE>
F-2
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31, 1999 March 31, 1998
-------------- ---------------
REVENUES
Medical income - net of contractual
adjustments of $371,993 and $344,590
in 1999 and 1998, respectively $ 565,605 $ 556,308
Service fees 81,239 164,916
Software & maintenance sales 60,671 162,308
--------- ---------
TOTAL REVENUES 707,515 883,532
--------- ---------
COST OF REVENUES
Cost of software and maintenance 4,078 33,094
Cost of medical services 534,774 512,542
--------- ---------
TOTAL COST OF REVENUES 538,852 545,636
--------- ---------
GROSS PROFIT 168,663 337,896
--------- ---------
OPERATING EXPENSES
Selling, general and administrative 298,355 520,056
Depreciation and amortization 76,188 85,105
--------- ---------
TOTAL OPERATING EXPENSES 374,543 605,161
--------- ---------
(LOSS) FROM OPERATIONS (205,880) (267,265)
OTHER INCOME (EXPENSES)
Gain on sale of asset -- 1,501
Interest expense (45,828) (68,457)
Interest income and other 116,644 21,286
--------- ---------
TOTAL OTHER INCOME (EXPENSE) 70,816 (45,670)
--------- ---------
(LOSS) FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST (135,064) (312,935)
MINORITY INTEREST IN LOSS -- 161,017
--------- ---------
(LOSS) BEFORE PREFERRED STOCK
DIVIDEND AND DISCONTINUED
OPERATIONS (135,064) (151,918)
--------- ---------
(Continued)
F-3
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MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(CONTINUED)
Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
PREFERRED STOCK DIVIDEND $ 85,000 $ --
------------ ------------
(LOSS) BEFORE DISCONTINUED
OPERATIONS (220,064) (151,918)
DISCONTINUED OPERATIONS
Income from operations of discontinued subsidiary -- 5,868
------------ ------------
NET LOSS $ (220,064) $ (146,050)
============ ============
INCOME PER WEIGHTED AVERAGE
COMMON SHARE
Continuing Operations $ -- $ --
Discontinued Operations -- --
------------ ------------
$ -- $ --
============ ============
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING 69,100,000 68,580,000
============ ============
</TABLE>
F-4
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<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) before discontinued operations $(220,064) $(151,918)
Adjustments to reconcile net (loss) to net
cash used by operating activities:
Depreciation and amortization 76,188 85,105
Gain on sale of assets -- (1,501)
Change in allowance for doubtful accounts (215,835) 110,440
Changes in assets and liabilities:
Trade accounts receivable 314,170 (222,447)
Notes receivable (31,945) 3,489
Prepaid expenses and other -- 2,931
Deposits -- (3,213)
Accounts payable (110,281) (173,003)
Accrued liabilities 13,105 (61,371)
Deferred revenues (4,114) (30,019)
--------- ---------
NET CASH USED BY
CONTINUING OPERATIONS (178,776) (441,507)
--------- ---------
NET CASH USED BY
DISCONTINUED OPERATIONS -- (161,017)
--------- ---------
NET CASH USED BY OPERATING
ACTIVITIES (178,776) (602,524)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (22,448) (1,239)
Proceeds from sale of assets -- 1,501
--------- ---------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (22,448) 262
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable
Related parties -- --
Other (42,424) (295,212)
Proceeds from notes payable
Related parties -- --
Other 42,448 300,000
Preferred stock dividends payable 85,000 --
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 85,024 4,788
--------- ---------
</TABLE>
F-5
<PAGE>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(DECREASE) IN CASH $(116,200) $(597,474)
CASH AT BEGINNING OF PERIOD 188,797 716,735
--------- ---------
CASH AT END OF PERIOD $ 72,597 $ 119,261
========= =========
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest
Related parties $ 24,225 $ 19,090
Other 49,427 42,593
--------- ---------
$ 73,652 $ 61,683
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Disposition of assets $ 53,975 $ --
Leases assumed by third party (53,975) --
Sale of Software Assets -- 274,603
Increase in Notes Receivable -- (274,603)
--------- ---------
$ -- $ --
========= =========
F-6
<PAGE>
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial informaiton and with the instructions to Form 10-QSB and Rule 10-01 of
of Regulations 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 March 31, 1999, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
- -------
In the first quarter of 1999, MB Software Corporation (the "Company") continued
to focus on the operations of its existing health care businesses and
development of its medical practice management software business.
In the year ending December 31, 1998, the Company sold numerous health care
entities that had proven to be cost-prohibitive to operate. In the first quarter
of 1999, the Company continued the process of restructuring the remaining
entities in an effort to maximize profits and reduce administrative expenses.
The health care division of the Company continued to focus on Company-owned
physician practices in Florida. The Company's remaining health care businesses
consist of three clinics in Florida and a chiropractic clinic in Las Vegas,
Nevada. 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. The
Florida clinics account for approximately 82% of gross medical revenues.
In the first quarter of 1999, the software division of the Company focused on
its continued restructuring and new product development pertaining to the health
care industry. The Company did not have any material changes in its Year 2000
compliance status from that disclosed in the Form 10Q for the quarter ended June
30, 1998, except that the Company's OneClaim(R) Plus software has met the
compliance standards for Medicare and as a result, will meet compliance
standards for the industry as a whole.
The following summarizes the results of operations for the three month period
ended March 31, 1999 and March 31, 1998:
7
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Three Months Ended
March 31
----------------------------------------------------------------------------
1999 % 1998 %
------------------ ------------------
<S> <C> <C> <C> <C>
Medical Activities:
Gross Revenue $ 938,598 100* $ 900,898 100*
Contractual Allowance 371,993 0.40* 344,590 0.38*
-------------- -------- -------------- --------
Net Revenue 565,605 60* 556,308 62*
-------- --------
Cost of Revenue (534,774) - 0.95** (512,542) -0.92**
-------------- -------- -------------- --------
Gross Profit 30,831 0.5** 43,766 0.8**
-------------- -------- -------------- --------
Service Fees 81,239 164,916
-------------- --------------
Software Activities:
Gross Revenue 60,671 162,308
Cost of Revenue (4,078) (33,094)
-------------- --------------
Gross Profit 55,593 129,214
-------------- --------------
GROSS PROFIT 168,663 337,896
Operating Expenses:
Selling, General and
Administrative:
Bad Debt Expense
Other General and
Administrative 298,355 520,056
-------------- --------------
298,355 520,056
Depreciation and Amortization 76,188 85,105
Interest Expense (45,828) (68,457
Interest Income and Other 116,644 21,286
Gain on sale of assets -- 1,501
--------------
Loss from Continuing Operations
before Minority Interest in 1998 (135,064) (312,935)
-------------- --------------
</TABLE>
Notes
- -----
* Computed as percentage of Gross
Medical Revenue
** Computed as percentage of Net
Medical Revenue
8
<PAGE>
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
- -------------------------------------------------------------------------------
Gross medical revenues increased 4% to $937,598 for the three months ended March
31, 1999 as compared to $900,898 for the three months ended March 31, 1998. This
increase is partially attributable to patient increases in the Company's Florida
clinics and the addition of a third Florida clinic.
The contractual allowance adjustment increased .08% to $371,993 for the first
quarter of 1999 compared with $344,590 for the three months ended March 31,
1998. In the first quarter of 1999, the Company identified numerous slow paying
receivables or receivables that due to changing conditions required reductions
in their realizable amounts. These amounts have been recorded in the contractual
adjustment of $371,993.
The cost of medical revenues increased .04% to $534,774 for the three months
ended March 31, 1999 compared to $512,542 for the three months ended March 31,
1998. This modest increase is partially attributable to a short-term increase in
labor costs in that additional employees were retained to assist in receivable
collection efforts.
The gross profit from medical activities decreased 42% to $30,831 for the three
months ended March 31, 1999 as compared to $43,766 for the three months ended
March 31, 1999. The decrease reflects, in part, the increased contractual
allowance percentages increased expenses attendant to the opening of the new
clinics and the increased short-term labor costs.
The service fees for the first quarter ending March 1999 decreased 51% to
$81,239 from $164,916 for the first quarter of March 1998. Service fees are
earned in connection with practice management agreements. The reduction in the
service fee amounts reflects the Company's determination to reduce practice
management arrangements in favor of Company-owned practices.
In the quarter ending March 31, 1999, gross revenue from software activities
decreased 62% to $60,671 from $162,308 for the first quarter ending March 1998.
The revenue reduction reflects reduced technical support fees and reduced
software sales, each partially resulting from a period of time allocated to
research and development for new products.
The Company's gross profit for the first quarter ending March 1999 decreased 50%
to $168,663 from $337,896 for the first quarter ending March 1998. As delineated
herein, this reduction in gross profit is substantially related to the reduction
in service fees as well as the revenue reductions pertaining to the software
activities.
The other selling, general and administrative expenses decreased by 42% to
$298,355 for the three-month period ended March 31, 1999 as compared to $520,056
for the three-month period ended March 31, 1998. This decrease reflects savings
resulting from the termination of certain operations and reduction in the due
diligence costs associated with acquiring practice management affiliations.
The net loss from continuing operations decreased 56.8% to $135,064 for the
three month period ended March 31, 1999, as compared to a loss of $312,935 loss
for the three months ended March 31, 1998. The reduction evidences the Company's
continuing efforts to eliminate those operations that have not been profitable.
Liquidity and Capital Resources
- -------------------------------
The Company's operations used $178,776 of cash during the three months ended
March 31, 1999 compared to a use of cash of $602,524 for the quarter ended March
31, 1998. While there a multitude of factors to which the reduction may be
attributed, it is noteworthy that for the quarter ending March 31, 1998, there
was a cash usage of $161,017 by discontinued operations without a similar
expenditure for the same quarter of 1999.
9
<PAGE>
As of March 31, 1999, the Company had working capital deficits of $52,041. The
working capital as of March 31, 1998 was $32,999. At March 31, 1999, the Company
had cash of $72,597. 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.
In the three months ended March 31, 1999, the Company expended $22,448 for the
purchase of equipment. The Company does not anticipate any major purchase of
equipment for the remaining nine (9) 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: May 14, 1999 /s/ Scott A. Haire
----------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000714256
<NAME> MB SOFTWARE CORPORATION
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 72,597
<SECURITIES> 0
<RECEIVABLES> 2,499,753
<ALLOWANCES> 1,595,052
<INVENTORY> 0
<CURRENT-ASSETS> 1,064,821
<PP&E> 341,686
<DEPRECIATION> 436,395
<TOTAL-ASSETS> 1,912,346
<CURRENT-LIABILITIES> 1,116,862
<BONDS> 0
0
3,400,000
<COMMON> 69,100
<OTHER-SE> (1,077,025)
<TOTAL-LIABILITY-AND-EQUITY> 1,912,346
<SALES> 168,663
<TOTAL-REVENUES> 707,515
<CGS> 538,852
<TOTAL-COSTS> 298,355
<OTHER-EXPENSES> 116,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122,016
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (135,064)
<DISCONTINUED> 0
<EXTRAORDINARY> 85,000
<CHANGES> 0
<NET-INCOME> (220,064)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
