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, 2000
[ ] 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 BULLETIN 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 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 June 30, 2000
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1 - Financial Statements
Consolidated Balance Sheet
June 30, 2000 (Unaudited) and December 31, 1999 F1-F2
Consolidated Statements of Operations -
for the Three Months and Six Months ended June 30, 2000
(Unaudited) and June 30, 1999 (Unaudited) F3
Consolidated Statements of Cash Flows
for the Three Months ended June 30, 2000 (Unaudited)
and June 30, 1999 (Unaudited) F4
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 4,5,6
PART II - OTHER INFORMATION
Item 5 - Other Information 6,7
Item 6 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 7,8
SIGNATURES 8
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<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
June 30, December 31,
2000 1999
---------- ----------
(Unaudited) (Audited)
<S> <C> <C>
Cash $ 36,085 $ 26,078
Medical receivables, net allowance
for doubtful accounts and contactual
allowances of $972,689 and $822,692 in 2000 and
1999, respectively 679,331 713,625
Notes receivable 222,827 177,721
Prepaid expenses 9,420 4,131
---------- ----------
Total current assets 947,663 921,555
---------- ----------
PROPERTY AND EQUIPMENT, NET 149,900 178,525
---------- ----------
Note receivable - shareholder 350,000 350,000
---------- ----------
Total assets $1,447,563 $1,450,080
========== ==========
</TABLE>
F1
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<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
June 30, December 31,
2000 1999
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of notes payable $ 1,453,070 $ 1,057,925
Current maturities of capital leases 5,046 17,434
Accounts payable 319,434 402,410
Accrued liabilities 403,122 346,639
----------- -----------
Total current liabilities 2,180,672 1,824,408
LONG TERM DEBT
Capital leases 3,050 3,050
----------- -----------
Total long term liabilities 3,050 3,050
----------- -----------
TOTAL LIABILITIES 2,183,722 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 $555,644, 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 1,103,005 1,103,005
Accumulated deficit (5,296,325) (4,937,544)
Treasury stock, at cost; 408,029 shares (12,039) (12,039)
----------- -----------
Total shareholders' deficit (736,159) (377,378)
----------- -----------
$ 1,447,563 $ 1,450,080
=========== ===========
</TABLE>
F2
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<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months End Six Months End
----------------------------- ----------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30,1999
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Medical income - net of contractual
Adjustments of $365,800 and $319,287 and $727,622
and $631,861 in 2000 and 1999, respectively $ 416,146 $ 590,193 $ 1,105,071 $ 1,097,655
Service fees 123 10,557 259 91,796
------------ ------------ ------------ ------------
Total revenues 416,269 600,750 1,105,330 1,189,451
COST OF REVENUES
Cost of medical services 402,182 361,926 794,874 642,383
------------ ------------ ------------ ------------
Total cost of revenues 402,182 361,926 794,874 642,383
------------ ------------ ------------ ------------
GROSS PROFIT 14,087 238,824 310,456 547,068
OPERATING EXPENSES
Selling, general & administrative 311,350 332,126 599,651 824,477
Depreciation and amortization 14,921 20,590 28,625 37,603
------------ ------------ ------------ ------------
Total operating expenses 326,271 352,716 628,276 862,080
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (312,184) (113,892) (317,820) (315,012)
OTHER INCOME (EXPENSE)
Interest income and other 8,744 2,223 19,288 5,987
Interest Expense (29,328) (14,318) (60,249) (58,261)
------------ ------------ ------------ ------------
Total other income (expense) (20,584) (12,095) (40,961) (52,274)
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (332,768) (125,987) (358,781) (367,286)
DISCONTINUTED OPERATIONS
Income (loss) from operations of discontinued subsidiary -- (2,364) -- 7,351
------------ ------------ ------------ ------------
NET LOSS $ (332,768) $ (128,351) $ (358,781) $ (359,935)
============ ============ ============ ============
Loss from continuing operations $ (332,768) $ (125,987) $ (358,781) $ (367,286)
Plus: Cumulative preferred stock dividends (85,000) (85,000) (170,000) (170,000)
------------ ------------ ------------ ------------
Loss available to common shareholders $ (417,768) $ (210,987) $ (528,781) $ (537,286)
============ ============ ============ ============
BASIC AND DILUTED EARNINGS (L0SS) PER SHARE
Continuing Operations $ -- $ -- $ -- --
Discontinued Operations -- -- -- --
------------ ------------ ------------ ------------
Weighted-average common shares outstanding 69,200,000 69,100,000 69,200,000 69,100,000
============ ============ ============ ============
</TABLE>
F3
<PAGE>
<TABLE>
<CAPTION>
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS SIX MONTHS
ENDED ENDED
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations $ (358,781) $ (359,935)
Adjustments to reconcile net loss from continuing
operations to cash used by operating activities:
Depreciation 28,625 37,603
Change in allowance for doubtfull accounts . -- (1,248,968)
Changes in assets and liabilities:
Accounts receivable 34,294 1,713,392
Prepaid expenses (5,290) (1,500)
Accounts payable (82,975) (72,675)
Accrued liabilities 56,484 (68,748)
----------- -----------
Net cash used in continuing operations (327,643) (831)
Net cash used in discontinued operations -- (111,960)
----------- -----------
Net cash used in operating activities (327,643) (112,791)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment -- (47,177)
Issuance of preferred stock dividends -- 215,644
Proceeds from sale of business segment -- 302,745
Payments on notes receivable 44,893 --
Issuance of notes receivable (90,000) (172,174)
----------- -----------
Net cash provided by (used in) investing activities (45,107) 299,038
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital leases (16,243) (35,709)
Payments on notes payable -- (206,610)
Proceeds from new borrowings 300,000 119,388
Proceeds from notes payable related parties 99,000 10,000
----------- -----------
Net cash provided by (used in) financing activities 382,757 (112,931)
----------- -----------
NET INCREASE IN CASH 10,007 73,316
Cash at beginning of period 26,078 203,977
----------- -----------
Cash at end of period $ 36,085 $ 277,293
=========== ===========
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest to relate$ party -- $ 24,225
Cash paid during the period for interest to others 30,920 49,427
----------- -----------
$ 30,920 $ 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 six-month period
ended June 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 $224,000 and $889,000 for
2000 and 1999, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
-------
In the second quarter of 2000, MB Software Corporation (the "Company") focused
on the operations of its four healthcare clinics consistent with its overall
strategy to increase revenue.
The strategy of the Company consists of a four point approach involving: A
comprehensive pain management program, a controlled increase in the number of
clinics in which the Company has a vested interest, contracting with insurance
companies for "total-episode responsibility" and the incorporation of
leading-edge healthcare information technology. (See discussion at Item 5
pertaining to Company strategy and developments).
There were no changes in the legal proceedings from the status set forth in the
Form 10 - KSB for the year ending December 31, 1999.
The following summarizes the results of operations for the three-month and the
six-month period ended June 30, 2000 and 1999.
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
-----------------------------------------------------------------------------
Net revenues from medical activities decreased 41.8% to $416,146 for the
three-months ended June 30, 2000, compared to $590,193 for the three-months
ended June 30, 1999.
A contractual allowance adjustment of $365,800 was made for the three-months
ended June 30, 2000, compared to $319,287 for the three-months ended June 30,
1999. The Company follows the generally accepted practice in medical clinics of
having in place contracts with numerous insurance companies to better serve
patients. These contracts establish reimbursement guidelines that result in
payment to the provider of only a portion of the account charge. The balance of
the account charge is reduced from the revenue as a contractual allowance. The
increased contractual allowance is attributable, in part to an increased number
of carriers forming alliances with managed care organizations resulting in
reduced reimbursement to providers. To address this reduction, the Company is
pursuing more lucrative carrier arrangements. The Company additionally intends
to provide services to an increased number of patients on a self-pay basis.
3
<PAGE>
The cost of medical revenues increased 11.1% to $402,182 for the three months
ended June 30, 2000, compared to $361,926 for the three months ended June 30,
1999. This minimal increase is applicable to increases in certain pharmaceutical
supplies used in the clinics.
The gross profits from medical activities decreased 1,595% to $14,087 for the
three months ended June 30, 2000, as compared to $238,824 for the three months
ended June 30, 1999. This decrease correlates with the current quarter increase
in the contractual allowances together with the increased cost of medical
revenues.
The Company's selling, general and administrative expenses decreased by 6.7% to
$311,350 for the three months ended June 30, 2000 as compared to $332,126 for
the three months ending June 30, 1999. This decrease reflects savings resulting
from reductions of certain costs at the corporate level.
The net loss on operations was $312,184 for the three month period ended June
30, 2000 representing a 174.1% difference compared to $113,892 for the three
months ended June 30, 1999. This percentage reflects the decrease in gross
profits.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
-------------------------------------------------------------------------
The net medical revenues increased 0.07% to $1,105,071 for the six-month period
ended June 30, 2000, compared to $1,097,655 for the six-month period ended June
30, 1999. The minimal increase is attributable to net medical revenue increases
during the first quarter of 2000.
The cost of medical revenue increased 23.7% to $794,874 for the six-month period
ended June 30, 2000, as compared to $642,383 for the six-month period ended June
30, 1999. The overall increase is applicable to increased costs of
pharmaceutical supplies during the second quarter of 2000 together with minimal
costs of supplies during the second quarter of June, 1999.
Gross profit decreased to $310,456 for the six months ended June 30, 2000,
compared to $547,068 for the six months ended June 30, 1999. The decrease in
gross profit is attributable, in part to a $91,537 reduction in service fees,
the increase in contractual allowances during the second quarter of 2000 and the
increased cost of revenues.
The Company's selling, general and administrative expenses decreased by 37.5% to
$599,651 for the six-months ending June 30, 2000 as compared to $824,477 for the
six months ending June 30, 1999. This decrease reflects savings resulting from
operational efficiency.
Net operating loss increased 0.08% to $317,820 for the six-month period ended
June 30, 2000, as compared to $315,012 for the six-month period ended June 30,
1999. The minimal variation may be accounted for by noting that while gross
profits for the current second quarter decreased, the decrease was offset by a
substantial reduction in operating expenses.
Liquidity and Capital Resources
-------------------------------
The Company's operations used $10,007 of cash during the six months ended June
30, 2000 compared to a use of cash of $73,316 for the six months ended June 30,
1999.
As of June 30, 2000, the Company had a working capital deficit of $1,233,009,
which is a 36.5% increase over the June 30, 1999 working capital deficit of
$902,853. The increase in the deficit results from the December 31, 1999
maturity of long term debt.
As of June 30, 2000, the Company had cash of $36,085. To increase its cash
position, the Company is seeking to convert existing matured debt to manageable
long term financing.
4
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The strategy of the Company continues to be the creation of a national physical
medicine network by utilizing a four point approach consisting of: Development
and implementation of a comprehensive pain management and prevention program
including nutritional supplements; 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; contracting with insurers
for "total-episode responsibility;" and, most significantly, the incorporation
of leading-edge information technology within the healthcare sector.
PatientMed 2000
Medical information technology is the cornerstone of the Company's strategy to
increase revenue. The technology incorporates two independent yet complementary
facets: An Internet-based comprehensive healthcare system operated on the
Company's ISP and, PatientMed 2000, a leading edge Internet appliance.
Effective July 20, 2000, the Company entered into an agreement with
ScreenPhone.net Inc. whereby the Company acquired an exclusive license in
connection with PatientMed 2000. Terms of the License Agreement include, the
issuance to ScreenPhone of 1,000,000 shares of MB Software Corporation common
stock and the payment of royalties by MB Software Corporation to ScreenPhone
based on the revenues generated by MB Software Corporation.
PatientMed 2000 is a screenphone - an appliance incorporating a telephone,
alphanumeric keyboard, modem and touch screen, to provide users with
telephone-based Internet access. The standard features of this Internet
appliance include one-button-access to email and all Internet functions,
dual-line capacity, a built-in Web browser, a user friendly color touch-screen
navigation system, speaker phone, caller ID, memory and speed dial, credit card
reader, long distance service, tasking capability, calendar options, address
features and a printer port. 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 a two-way mode of communication and an information
delivery system between the physician and the 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 email 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 email 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 heretofore-unavailable 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 online insurance companies. This insurance function, together with
other administrative features, should facilitate workflow automation, increase
productivity and improve cash flow.
There is a three-fold market for the PatientMed 2000. The 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. Patient and other individual and entity
users comprise the third market.
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. According to an analyst for IDC's Consumer
Devices research program:
Current online users want access to services in more locations and
situations, while many other consumers desire Internet access without
the inherent complexities of PC's. It is clear the PC will not be the
only enabling device as both groups find information appliances a
solution that can improve their lifestyle and work style.
IDC predicts that US unit shipments of lower-cost, transportable consumer
information appliances will outnumber those of consumer PC's by 2002.
5
<PAGE>
Concerning the costs for Internet appliances, 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 $17.8 billion in 2004.
Company Focus
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.
Currently, a significant number of individuals in the United States are
concerned with injury prevention. A substantial number of patients include baby
boomers, a unique group of individuals with the resources and need for a
comprehensive pain management and prevention program of the type envisioned by
the Company. 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 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.
The final strategy point forms the Company's economic cornerstone. The Company
will develop strategic partnerships with insurers in which the Company-managed
clinicians will be granted clinical and financial responsibility for total
episodic care. The Company currently has structured an alliance with United
Healthcare, a major healthcare force 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 contract 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 providing superior healthcare services for its customers as well as
economic value for its shareholders.
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 - Filed 8-K on August 2, 2000
-------------------
--------------------------------------------------------------------------------
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 14, 1999 /s/ Scott A. Haire
----------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
6
