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: September 30, 2000
------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File No. 0-11808
MB SOFTWARE CORPORATION
Colorado 59-2220004
(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 October 31, 2000, 69,200,000 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 September 30, 2000
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1 - Financial Statements
Consolidated Balance Sheet
September 30, 2000 (Unaudited) and December 31, 1999 (Audited) F1-F2
Consolidated Statements of Operations -
for the Three and Nine Months ended September 30, 2000
(Unaudited) F-3
Consolidated Statements of Cash Flows
for the Nine Months ended September 30, 2000 (Unaudited) F-4
Notes to Consolidated Statements F-5
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 3-4
PART II - OTHER INFORMATION
Item 5 - Other Information 4-5-6
Item 6 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 6
SIGNATURES 6
2
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<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
September 30, December 31,
2000 1999
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Cash $ -- $ 26,078
Medical receivables, net allowance
for doubtful accounts and contactual
allowances of $972,689 and $822,692 in 2000 and
1999, respectively 589,359 713,625
Notes receivable 275,245 177,721
Prepaid expenses 19,067 4,131
---------- ----------
Total current assets 883,671 921,555
---------- ----------
PROPERTY AND EQUIPMENT, NET 132,515 178,525
---------- ----------
Note receivable - shareholder 350,000 350,000
---------- ----------
Total assets $1,366,186 $1,450,080
========== ==========
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F1
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<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
September 30, December 31,
2000 1999
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT LIABILITIES
Cash Overdraft $ 35,356 $ --
Current maturities of notes payable 1,519,714 1,057,925
Current maturities of capital leases 1,434 17,434
Accounts payable 303,547 402,410
Accrued liabilities 359,387 346,639
Other liabilities 20,811 --
----------- -----------
Total current liabilities 2,240,249 1,824,408
LONG TERM DEBT
Capital leases 1,662 3,050
----------- -----------
Total long term liabilities 1,662 3,050
----------- -----------
TOTAL LIABILITIES 2,241,911 1,827,458
SHAREHOLDERS' DEFICIT
Series A senior cumulative convertible particpating preferred
stock; $10 par value; 340,000 shares issued and outstanding
in 2000 and 1999; dividends in arrears 2000 $640,644, and 3,400,000 3,400,000
1999, $385,644
Undesignated preferred stock; $10 par value; 660,000 shares
authorized; none issued -- --
Common stock .001 par value;150,000,000 shares
authorized; 69,200,000 shares issued in 2000 and 1999 69,200 69,200
Additional paid-in capital 1,182,382 1,103,005
Accumulated deficit (5,515,268) (4,937,544)
Treasury stock, at cost; 408,029 shares (12,039) (12,039)
----------- -----------
Total shareholders' deficit (875,725) (377,378)
----------- -----------
$ 1,366,186 $ 1,450,080
=========== ===========
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F2
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<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Ended Nine Months Ended
-------------------------------------- -------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30,1999
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
REVENUES
Medical income - net of contractual
Adjustments of $356,090 and $17,474 and $1,083,712
and $745,369 in 2000 and 1999, respectively $ 523,502 $ 528,906 $ 1,628,573 1,626,561
Service fees 2,484 -- 2,743 --
----------- ----------- ----------- -----------
Total revenues 525,986 528,906 1,631,316 1,626,561
COST OF REVENUES
Cost of medical services 398,244 304,993 1,193,118 947,376
----------- ----------- ----------- -----------
Total cost of revenues 398,244 304,993 1,193,118 947,376
----------- ----------- ----------- -----------
GROSS PROFIT 127,742 223,913 438,198 679,185
OPERATING EXPENSES
Selling, general & administrative 302,680 426,210 902,331 1,250,687
Depreciation and amortization 13,553 19,576 42,178 57,179
----------- ----------- ----------- -----------
Total operating expenses 316,233 445,786 944,509 1,307,866
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (188,491) (221,873) (506,311) (628,681)
OTHER INCOME (EXPENSE)
Interest income and other 9,676 (5,987) 28,964 --
Interest Expense (39,227) 58,261 (99,476) --
Franchise Tax (900) -- (900)
----------- ----------- ----------- -----------
Total other income (expense) (30,451) 52,274 (71,412) --
----------- ----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS (218,942) (169,599) (577,723) (628,681)
DISCONTINUTED OPERATIONS
Income (loss) from operations of discontinued subsidiary -- 108,249 -- 115,600
----------- ----------- ----------- -----------
NET LOSS $ (218,942) $ (61,350) $ (577,723) $ (513,081)
=========== =========== =========== ===========
Loss from continuing operations $ (218,942) $ (169,599) $ (577,723) $ (628,681)
Plus: Cumulative preferred stock dividends (85,000) (85,000) (255,000) (255,000)
----------- ----------- ----------- -----------
Loss available to common shareholders $ (303,942) $ (254,599) $ (832,723) $ (883,681)
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS (L0SS) PER SHARE
Continuing Operations $ (0.00) $ (0.01) $ (0.01) $ (0.01)
Discontinued Operations -- 0.00 -- 0.00
Weighted-average common shares outstanding 69,200,000 69,100,000 69,200,000 69,100,000
</TABLE>
F3
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<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $ (577,723) $ (628,681)
Adjustments to reconcile loss from continuing
operations to cash used in operating activities:
Depreciation 42,178 57,179
Change in allowance for doubtfull accounts -- (1,248,968)
Changes in assets and liabilities:
Accounts receivable (124,266) 1,346,507
Prepaid expenses 14,936 (5,257)
Accounts payable (98,862) (9,463)
Accrued liabilities 112,937 (67,245)
----------- -----------
Net cash used in continuing operations (630,800) (555,928)
Net cash provided by (used in) discontinued operations 79,859 (115,600)
----------- -----------
Net cash used in operating activities (550,941) (671,528)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment -- (13,514)
Issuance of preferred stock dividends -- 300,644
Proceeds from sale of business segment -- 550,052
Payments on notes receivable (44,894) --
Issuance of notes receivable 90,000 (228,037)
----------- -----------
Net cash provided by investing activities 45,106 609,145
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital leases (17,388) (70,677)
Payments on notes payable (2,010) (183,926)
Proceeds from new borrowings 364,799 180,439
Proceeds from notes payable related parties 99,000 10,000
Bank overdraft 35,356 --
----------- -----------
Net cash provided by (used in) financing activities 479,757 (64,164)
----------- -----------
NET DECREASE IN CASH (26,078) (126,547)
Cash at beginning of period 26,078 203,977
----------- -----------
Cash at end of period $ -- $ 77,430
=========== ===========
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest to rela$ed party -- $ 24,225
Cash paid during the period for interest to others 41,673 49,427
----------- -----------
$ 41,673 $ 73,652
=========== ===========
</TABLE>
F4
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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, 1999. 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 nine-month period
ended September 30, 2000, are not necessarily indicative of the results that may
be expected for the year ending December 31, 2000.
NOTE 2: ORGANIZATION AND NATURE OF OPERATIONS
The financial statements have been prepared on a going concern basis, which
contemplates realization of assets and liquidation of liabilities in the
ordinary course of business. The Company has continuously incurred losses from
operations and has a working capital deficit. The appropriateness of using the
going concern basis is dependent upon the Company's ability to obtain additional
financing or equity capital and, ultimately, to achieve profitable operations.
These conditions raise substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Management plans to raise capital by obtaining financing through debt, private
placement or conversion of Series A preferred stock. The Company believes that
these actions will enable the Company to continue until its operations become
profitable.
NOTE 3: RELATED PARTIES
Included in notes payable is related party payables of $220,000 and $889,000 for
2000 and 1999, respectively.
NOTE 4: SALE OF CLINIC
Effective September 1, 2000, the Company sold its South Florida Medical Center
Clinic to a company wholly owned by two shareholders of the Company. The sale
was accomplished by an assumption of net liabilities by the related company of
approximately $79,000. The net affect of the transaction was recorded as a
contribution to capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
-------
During the third quarter of 2000, MB Software Corporation (the "Company")
continued operations of its Florida health care clinics and pursued development
of online financial services for health care providers.
The health care division of the Company continued to focus on Company-owned
physician practices in Florida. Florida law permits the corporate management
practice of medicine of the type engaged in by the Company. The Company owns
three clinics, each located in Florida.
The following summarizes the results of operations for the three-month and the
nine-month period ended September 30, 2000 and 1999.
Three Months Ended September 30, 2000 Compared to Three Months Ended September
--------------------------------------------------------------------------------
30, 1999
--------
Revenue less contractual adjustments resulting from medical activities decreased
0.01% from $528,906 for the three-month period ended September 30, 1999 to
$525,986 for the three-months ended September 30, 2000.
The cost of medical revenues increased 30.57% to $ 398,244 for the three months
ended September 30, 2000, compared to $304,993 for the three months ended
September 30, 1999. The Company is currently reviewing operational guidelines as
part of an overall strategy to reduce costs.
3
<PAGE>
The Company's gross profit for the third quarter decreased 75.28% to $127,742
for the third quarter ended September 30, 2000 from $ 223,913 for the third
quarter ending September 1999. The Company is of the belief that the operational
costs of the healthcare clinic in South Florida were prohibitive in relations to
the profits generated thereby resulting in decreased gross profits. It is
anticipated that the closure of the South Florida clinic will result in an
increase in gross profits
The Company's selling, general and administrative expenses decreased 40.81% to
$302,680 for the three months ended September 30, 2000 as compared to $426,210
for the third quarter ending September 30, 1999. These reductions contributed to
the decreased expenses.
The net loss on operations decreased 17.71% to $188,491 for the three-month
period ended September 30, 2000 as compared to a loss of $221,873 for the three
months ended September 30, 1999. The reduction in the net loss is partially
attributable to increased operational efficiency.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
--------------------------------------------------------------------------------
1999
----
The gross medical revenues increased 14.35% to $2,712,285 for the nine-month
period ended September 30, 2000, compared to $2,371,930 for the nine-month
period ended September 30, 1999. This minimal increase is partially attributable
to an increase in patient volume.
The cost of medical revenue increased 25.93% to $1,193,118 for the nine-month
period ended September 30, 2000, as compared to $947,376 for the nine-month
period ended September 30, 1999. The increased is due to costs attendant to the
operations of South Florida Medical Center. This healthcare clinic was closed
effective August 31, 2000.
.
Gross profit decreased 54.96% to $679,185 for the nine-month period ending
September 30, 1999 as compared to $438,198 for the nine- months period ending
September 30, 2000. This reduction in gross profits reflects the significant
cost associated with South Florida Medical Center. This clinic was closed August
31 2000.
The Company's selling, general and administrative expenses decreased 38.60% to
$902,331 for the third quarter ending September 30, 2000 as compared to
$1,250,687 for the third quarter ending September 30, 1999. The savings of
$348,356 represents the reductions in administrative expenses and the closing of
the South Florida Medical Center. As such, this expense category is anticipated
to remain at a reduced level.
Net operating loss decreased 24.17% to $506,311 for the nine-month period ended
September 30, 2000, as compared to $628,681 for the nine-month period ended
September 30, 1999. This reduction in loss reflects other reduced amounts for
the nine-month period ending September 30, 2000. These amounts include the
reduced cost of medical revenue; reduced amount of selling, general and
administrative expenses; and the reduction in depreciation and amortization.
Liquidity and Capital Resources
-------------------------------
The Company's operations used $26,078 of cash during the nine-months ended
September 30, 2000 compared to a use of cash of $126,547 for the nine-months
ended September 30, 1999.
As of September 30, 2000, the Company had a working capital deficit of
$1,356,578, compared to the September 30, 1999 working capital of $287,827. At
September 30, 2000, the Company had a cash overdraft of $35,356.
PART II - OTHER INFORMATION
Item 5. Other Information.
The strategy of the Company continues to be to create a national physical
medicine network by utilizing a four-point approach consisting of:
o Development and implementation of a comprehensive pain management and
prevention program including nutritional supplements;
o increasing the number of clinics in which the Company has an interest,
either through the means of acquisition, ground-floor development, or
innovative partnering arrangements;
o contracting with insurers for "total episode responsibility," and
o the incorporation of leading-edge information technology within the
healthcare sector.
4
<PAGE>
INFORMATION TECHNOLOGY
Medical information technology is the cornerstone of the Company's strategy to
increase revenue. The Company's information technology incorporates three
independent yet complementary facets: An Internet-based comprehensive healthcare
system operated on the Healthcare Innovations, LLC ISP; PatientMed 2000, a
leading-edge Internet appliance that will feature physician websites and on-line
marketing of various vitamin and mineral supplements, and a Microsoft Windows(R)
based Practice Management Software System.
PatientMed 2000
Effective July 20, 2000, the Company entered into an agreement with
Screen.Phone.net Inc. whereby the Company acquired an exclusive license in
connection with PatientMed 2000_. PatientMed 2000_ is a ScreenPhone - an
appliance incorporating a telephone, alphanumeric keyboard, modem and touch
screen, to provide users with telephone-based Internet access.
PatientMed 2000 provides users with an expanded array of Internet and telephone
services as well as extensive applications and service packages specifically
tailored to each segment of the healthcare market. PatientMed 2000_ facilitates
and features an improved two-way mode of communication and an information
delivery system between the physician and patient. By touching one icon on the
screen, the patient is immediately connected to the Internet. Once connected,
the patient may "chat" on-line with the physician or access information via a
secure e-mail address provided to each patient. In a real-time communication
dynamic, clinical data may be transmitted and assessments and interventions made
without the necessity of a patient office visit. Similarly, the patient may
access the clinic e-mail address to schedule appointments, obtain certain lab
results, order clinic nutritional products and obtain medical information and
services directly related to the Company clinics.
Significantly, PatientMed 2000 affords the clinic direct access to insurance
companies. The clinic may use PatientMed 2000 to access and provide insurance
information in two-way real-time communications with participating on-line
insurance companies.
There is a three-fold market for the PatientMed 2000. Prototypes for the
PatientMed 2000 will be utilized in all operational venues in the Company's
clinics. This will afford the Company the substantial benefit of evaluating and
further enhancing PatientMed 2000 in its intended environment. The second market
for the PatientMed 2000 includes medical clinics and ancillary healthcare
facilities throughout North America. The third market arena is comprised of
patient and other individual and entity users. There are a substantial number of
individuals in the U.S. that are informed consumers concerning injury prevention
and nutritional benefits. Many are baby-boomers, a unique group of individuals
with the resources and needs tailored to the Company's specific venues. There is
also a robust consumer market in the United States for fitness-related services
including those attendant to injury prevention and nutritional supplements.
The growth potential in the second and third markets appears to be substantial.
According to IDC, a division of International Data Group, in their report The
Worldwide Information Appliance Market 1999-2004, the author projects that
worldwide Internet appliance shipments will grow from 11 million units in 1999
to over 89 million units in 2004. IDC predicts that U.S. unit shipments of
lower-cost, transportable consumer information appliances will outnumber those
of consumer PC's by 2002. The IDC anticipates that while the costs for Internet
appliances are expected to begin to drop significantly as the market matures,
the worldwide value of Internet appliance shipments will grow from $2.4 billion
in 1999 to more than $17 billion in 2004.
The Healthcare Innovations, LLC ISP
Clinics acquiring the PatientMed 2000 may also acquire a personalized, custom
web site to be housed on the ISP to be provided by Healthcare Innovations, LLC.
The ISP will host a unique, new and exclusive medical domain. From the domain
the clinic will be able to refer patients to the personalized physician web
site. Each such web site will contain a comprehensive marketing unit to
facilitate the purchase of vitamins and selected herbs promulgated by the
Company.
Windows-based(R) Practice Management Software System
The Company will have a software system available to work in conjunction with
PatientMed 2000. Once complete, the software will have the following
capabilities: Complete practice management, including billing and collections;
flexible appointment scheduling; extensive claims tracking capability; selective
patient demographic reporting; simple to use interface; seamless integrated
electronic claims/statements; fully customized superbills; state of the art
Internet connectivity; and unlimited fee schedule maintenance.
5
<PAGE>
PAIN MANAGEMENT
The Company's four-point approach incorporates development and implementation of
a comprehensive pain management and prevention program. The Company's premise
for this goal is providing superior pain management care to its patients through
utilization of standardized "best practice outcomes" or clinical pathways
established throughout the Company and consistent with accepted standards of
medical practice. This will include a complementary nutritional products line.
CLINIC GROWTH
The nexus of the four points focuses on increasing the number of clinics in
which the Company has a qualitative as well as financial interest. To expand the
Company's clinic base, the Company intends to utilize innovative partnering
arrangements. The Company will only partner with professionals that share the
Company's vision of providing superior service and experience to patients. This
will include medical doctors, osteopaths and chiropractors. The Company may also
consider acquisition of existing clinics and the controlled development of new
practices in selected cities.
TOTAL EPISODIC CARE
The Company has developed strategic partnerships with insurers in which the
Company-managed clinicians will have clinical and financial responsibility for
total episodic care. The Company currently has structured an alliance with
United Healthcare and Humana, major healthcare forces in markets wherein the
Company clinics transact business. As a product of the alliance, the Company
acquired one of the few Pre-Approved Pain Management care contracts in the
United States. For episodes such as low-risk, spinal -related injury, the
Company clinicians will receive global payments covering not only professional
services, but also facility and ancillary care. This arrangement will enable
clinicians to share in the healthcare and economic value created by improving
care across the entire spectrum of services.
With this four-point strategy, the Company will continue to build a nationwide
organization to provide superior healthcare services for patients as well as
economic value for its shareholders.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
Exhibits - 10.1
--------
10.2 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: 16th November, 2000 /s/ Scott A. Haire
----------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
6
