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, 2001
[ ] 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 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, 2001, 70,400,000 shares of the Issuer's $.001 par value common
stock were outstanding.
Transitional Small Business Disclosure Format
Yes [ ] No [ X ]
MB SOFTWARE CORPORATION
Form 10-QSB
Quarter Ended June 30, 2001
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1 - Financial Statements
Consolidated Balance Sheets
June 30, 2001 (Unaudited) and December 31, 2000 F1-F2
Consolidated Statements of Operations -
for the Three Months and Six Months ended June 30,
2001 (Unaudited) and June 30, 2000 (Unaudited) F3
Consolidated Statements of Cash Flows
for the Three Months ended June 30, 2001 (Unaudited)
and June 30, 2000 (Unaudited) F4
Notes to Consolidated Financial Statements 3
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 3-5
PART II - OTHER INFORMATION
Item 5 - Other Information 5
Item 6 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 6
SIGNATURES 6
2
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
June 30, December 31,
2001 2000
------------ ------------
(Unaudited) (Audited)
Cash $ -- $ 29,910
Medical receivables, net allowance
for doubtful accounts and contactual
allowances of $1,118,630 and $1,118,630 in 2001 and
2000, respectively 700,882 525,265
Prepaid expenses 7,788 25,049
------------ ------------
Total current assets 708,670 580,224
------------ ------------
PROPERTY AND EQUIPMENT, NET 92,779 116,127
------------ ------------
Note receivable - shareholder 350,000 350,000
Employee advances 112,812 90,000
------------ ------------
Total assets $ 1,264,261 $ 1,136,351
============ ============
F-1
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
June 30, December 31,
2001 2000
------------ ------------
(Unaudited) (Audited)
Liabilities
Cash Overdraft $ 54,095 $ --
Notes payable 1,947,420 1,658,870
Current maturities of capital leases -- 1,494
Accounts payable 300,489 354,803
Accrued liabilities 519,296 500,120
----------- -----------
Total liabilities 2,821,300 2,515,287
SHAREHOLDERS' DEFICIT
Series A senior cumulative convertible participating preferred
stock; $10 par value; 340,000 shares issued and outstanding
in 2001 and 2000; dividends in arrears 2001 $895,644, and 3,400,000 3,400,000
2000, $725,644
Undesignated preferred stock; $10 par value; 660,000 shares
authorized; none issued -- --
Common stock .001 par value;150,000,000 shares
authorized; 70,400,000 and 70,300,000 shares 70,400 70,300
shares issued in 2001 and 2000, respectively
Additional paid-in capital 1,453,082 1,434,431
Accumulated deficit (6,247,798) (6,039,162)
Deferred license and consulting costs, net (220,684) (232,466)
----------- -----------
(1,545,000) (1,366,897)
Treasury stock, at cost; 408,029 shares (12,039) (12,039)
----------- -----------
Total shareholders' deficit (1,557,039) (1,378,936)
----------- -----------
$ 1,264,261 $ 1,136,351
=========== ===========
F-2
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLODATED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
------------- ------------- ------------- -------------
REVENUES
Medical income - net of contractual
Adjustments of $348,222. and $365,800 and $727,622
and $631,861 in 2001 and 2000, respectively $ 548,609 $ 416,146 $ 1,230,556 1,105,071
Service fees 123 259
------------- ------------- ------------- -------------
Total revenues 548,609 416,269 1,230,556 1,105,330
COST OF REVENUES
Cost of medical services 419,220 402,182 805,406 970,910
------------- ------------- ------------- -------------
Total cost of revenues 419,220 402,182 805,406 970,910
------------- ------------- ------------- -------------
GROSS PROFIT 129,389 14,087 425,150 134,420
OPERATING EXPENSES
Selling, general & administrative 228,145 311,350 516,163 423,615
Depreciation and amortization 14,650 14,921 29,300 28,625
------------- ------------- ------------- -------------
Total operating expenses 242,795 326,271 545,463 452,240
------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (113,406) (312,184) (120,313) (317,820)
OTHER INCOME (EXPENSE)
Interest income and other 7,089 8,744 14,101 19,288
Interest Expense (67,186) (29,328) (102,424) (60,249)
------------- ------------- ------------- -------------
Total other income (expense) (60,097) (20,584) (88,323) (40,961)
------------- ------------- ------------- -------------
LOSS FROM CONTINUING OPERATIONS (173,503) (332,768) (208,636) (358,781)
NET LOSS $ (173,503) $ (332,768) $ (208,636) $ (358,781)
============= ============= ============= =============
Loss from continuing operations $ (173,503) $ (332,768) $ (208,636) $ (358,781)
Plus: Cumulative preferred stock dividends (85,000) (85,000) (170,000) (170,000)
------------- ------------- ------------- -------------
Loss available to common shareholders $ (258,503) $ (417,768) $ (378,636) $ (528,781)
============= ============= ============= =============
BASIC AND DILUTED EARNINGS (L0SS) PER SHARE
Continuing Operations $ -- $ -- $ -- --
Discontinued Operations -- -- -- --
------------- ------------- ------------- -------------
Weighted-average common shares outstanding 69,200,000 69,200,000 69,200,000 69,200,000
============= ============= ============= =============
F-3
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS SIX MONTHS
ENDED ENDED
June 30, 2001 June 30, 2000
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations $ (208,636) $ (358,781)
Adjustments to reconcile net loss from continuing
operations to cash used by operating activities:
Depreciation 29,300 28,625
Change in allowance for doubtfull accounts -- (1,248,968)
Consulting cost recognized 30,533
Changes in assets and liabilities:
Accounts receivable (175,617) 1,713,392
Prepaid expenses 17,261 (1,500)
Outstanding checks in excess of deposits 54,095
Employee Advances (22,812)
Accrued other liabilities 19,176
Accounts payable (54,314) (141,423)
------------- --------------
Net cash used in continuing operations (311,014) (8,655)
Net cash used in discontinued operations -- (111,960)
------------- --------------
Net cash used in operating activities (311,014) (120,615)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (5,952) (47,177)
Issuance of preferred stock dividends -- 215,644
Proceeds from sale of business segment -- 302,745
Payments on notes receivable -- --
Issuance of notes receivable -- (172,174)
------------- --------------
Net cash provided by (used in) investing activities (5,952) 299,038
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital leases (1,494) (35,709)
Payments on notes payable -- (206,610)
Proceeds from new borrowings 288,550 119,388
Proceeds from notes payable related parties -- 10,000
------------- --------------
Net cash provided by (used in) financing activities 287,056 (112,931)
------------- --------------
NET INCREASE (DECREASE) IN CASH (29,910) 65,492
Cash at beginning of period 29,910 203,977
------------- --------------
Cash at end of period $ 0 $ 269,469
============= ==============
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest to related$party 54,655 $ 24,225
Cash paid during the period for interest to others -- 49,427
------------- --------------
$ 54,655 $ 73,652
============= ==============
F-4
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America 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 accounting principles generally accepted in the United States
of America 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, 2000. 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, 2001, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001.
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 $350,000 and $224,000 for
2001 and 2000, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
- -------
In the second quarter of 2001, MB Software Corporation (the "Company") focused
on the operations of its three 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, 2000.
3
The following summarizes the results of operations for the three-month and the
six-month period ended June 30, 2001 and 2000.
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
- -----------------------------------------------------------------------------
Net revenues from medical activities increased 31.8% to $548,609 for the
three-months ended June 30, 2001, compared to $416,146 for the three-months
ended June 30, 2000. This increase is attributable to a fee schedule increase
commensurate with overall cost of living increases.
A contractual allowance adjustment of $348,222 was made for the three-months
ended June 30, 2001, compared to $365,800 for the three-months ended June 30,
2000. 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. This
relative consistency reflects stability in connection with present contractual
arrangements with insurance carriers.
The cost of medical revenues increased 04.2% to $419,220 for the three months
ended June 30, 2001, compared to $402,182 for the three months ended June 30,
2000. This increase is applicable to increases in certain pharmaceutical
supplies used in the clinics.
The gross profits from medical activities increased 818% to $129,389 for the
three months ended June 30, 2001, as compared to $14,087 for the three months
ended June 30, 2000. This increase correlates with the current quarter increase
in the net medical revenues.
The Company's selling, general and administrative expenses decreased by 26.7% to
$228,145 for the three months ended June 30, 2001 as compared to $311,350 for
the three months ending June 30, 2000. This decrease reflects savings resulting
from reductions of certain costs at the corporate level.
The net loss on operations was $113,406 for the three month period ended June
30, 2001 representing a 63.7% difference compared to $312,184 for the three
months ended June 30, 2000. This differential reflects the increase in net
medical revenues and corresponding decrease in the Company's selling, general
and administrative expenses.
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
- -------------------------------------------------------------------------
The net medical revenues increased 11.4% to $1,230,556 for the six-month period
ended June 30, 2001, compared to $1,105,071 for the six-month period ended June
30, 2000. The increase is attributable to net medical revenue increase during
the first quarter of 2001.
The cost of medical revenue decreased 17% to $805,406 for the six-month period
ended June 30, 2001, as compared to $970,910 for the six-month period ended June
30, 2000. The overall decease is applicable to decrease in certain vendor costs.
Gross profit increased to $425,150 for the six months ended June 30, 2001,
compared to $134,420 for the six months ended June 30, 2000. The increase in
gross profit correlates with the current quarter increase in net medical
revenues.
The Company's selling, general and administrative expenses increased by 21.8% to
$516,163 for the six-months ending June 30, 2001 as compared to $423,615 for the
six months ending June 30, 2000. This increase cost is due to general expense .
Net operating loss decreased 62.1% to $120,313 for the six-month period ended
June 30, 2001, as compared to $317,820 for the six-month period ended June 30,
2000. This significant decrease results primarily from the closing of South
Florida Medical Center and the attendant costs associated therewith.
4
Liquidity and Capital Resources
- -------------------------------
The Company's operations used $311,014 of cash during the six months ended June
30, 2001 compared to a use of cash of $8,655 for the six months ended June 30,
2000.
As of June 30, 2001, the Company had a working capital deficit of $2,112,630,
which is a 9.2% increase over the June 30, 2000 working capital deficit of
$1,935,063. The increase in the deficit results from a corresponding increase in
liabilities.
As of June 30, 2001, the Company had a negative cash position of $54,095. To
increase its cash position, the Company is seeking to convert existing matured
debt to manageable long term financing.
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. The Company
continues to work toward the implementation of each aspect of the four-point
approach.
Medical information technology via PatientMed 2000(TM) 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(TM) 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(TM). In furtherance of the agreement, the
Company has generated some revenue in connection with the licensing of the
Internet appliance.
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 includes a complementary nutritional products line.
With this four-point strategy, the Company will continue building a nationwide
organization providing superior healthcare services for its customers as well as
economic value for its shareholders.
5
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
Exhibits -
- --------
Financial Statements
- --------------------
Reports on Form 8-K
- -------------------
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 7, 2001 /s/ Scott A. Haire
--------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
6