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, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File No. 0-11808
MB SOFTWARE CORPORATION
Texas 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
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 [ ] No [X]
As of July 31, 2002, 822,810 of the Issuer's $.001 par value common stock were
outstanding.
Transitional Small Business Disclosure Format
Yes [ ] No [X]
MB SOFTWARE CORPORATION AND SUBSIDIARIES
Form 10-QSB
Quarter Ended September 30, 2002
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet (Unaudited)....................................... 3
Consolidated Statements of Operations for the three and nine months ended
September 30, 2002 and 2001 (Unaudited).............................. 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2002 and 2001 (Unaudited).............................. 5
2
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (unaudited)
SEPTEMBER 30, 2002
ASSETS
Current Assets
Cash $ 107
-----------
Total Assets $ 107
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities --
-----------
Stockholders' Deficit
Preferred stock, $10 par value, 5,000,000 shares authorized;
issued and outstanding - none --
Common stock: $0.001 par value; 20,000,000 shares authorized;
issued in and outstanding - 822,810 shares 823
Additional paid-in capital 8,632,456
Accumulated deficit (8,621,133)
-----------
12,146
Less, treasury stock, at cost; 4,089 shares (12,039)
-----------
Total stockholders' deficit 107
-----------
Total liabilities and stockholders' deficit $ 107
===========
See condensed notes to consolidated financial statements.
3
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Revenues (sale of screenphone) $ -- $ 44,358 $ -- $ 44,358
Cost of revenues -- -- -- --
------------- ------------- ------------- -------------
Gross profit -- 44,358 -- 44,358
Operating Expenses
Selling, general and administrative 12,869 (268,255) (617,150) (731,558)
------------- ------------- ------------- -------------
Loss from operations 12,869 (223,897) (617,150) (687,200)
Other Income (Expense)
Write off net assets of Portalook -- -- (292,347) --
Impairment loss -- (232,466) -- (232,466)
Write off of receivables - related party -- -- (397,359) --
Forgiveness of debt 195,986 -- 195,986 --
Franchise tax -- -- (50)
Interest expense -- (74,822) (187,124) (177,246)
Interest income -- -- 14,497 14,100
------------- ------------- ------------- -------------
Total other income (expense) 195,986 (307,288) (666,347) (395,660)
------------- ------------- ------------- -------------
Income (loss) before provision (benefit) for income taxes 208,855 (531,185) (1,283,497) (1,082,860)
Provision (benefit) for income taxes -- 18,638 (78,676) (101,610)
------------- ------------- ------------- -------------
Income (loss) from continuing operations 208,855 (512,547) (1,204,821) (981,250)
Discontinued operations, net of tax effect -- (73,457) 152,720 197,242
------------- ------------- ------------- -------------
Net income (loss) $ 208,855 $ (586,004) $ (1,052,101) $ (784,008)
============= ============= ============= =============
Loss from continuing operations $ 208,855 $ (512,547) $ (1,204,821) $ (981,250)
Plus cumulative preferred stock dividends -- (85,000) (113,333) (255,000)
------------- ------------- ------------- -------------
Loss available to common stockholders $ 208,855 $ (597,547) $ (1,318,154) $ (1,236,250)
============= ============= ============= =============
Basic and Diluted Income (Loss) Per Share:
Continuing operations $ 0.25 $ (0.73) $ (1.56) $ (1.39)
Discontinued operations -- (0.10) 0.20 0.28
------------- ------------- ------------- -------------
$ 0.25 $ (0.83) $ (1.36) $ (1.11)
============= ============= ============= =============
Weighted average common shares outstanding 822,810 707,261 773,162 704,000
============= ============= ============= =============
See condensed notes to consolidated financial statements.
4
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001
----------- -----------
Cash Flows From Operating Activities
Loss from continuing operations $(1,204,821) $ (981,250)
Adjustments to reconcile loss from continuing operations to net cash used in
operating activities:
Depreciation and amortization 71,480 2,341
Common stock issued for services 46,000 18,750
Deferred licensing costs -- 232,466
Forgiveness of debt - unrelated notes payable and accrued interest (195,986) --
Write off net assets of Portalook 292,347
Other noncash items (12,732) --
Accretion of debt 68,747 --
Disposal of fixed assets 5,038 --
Write off related party notes receivable and accrued interest receivable 397,359 --
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses and other (12,919) (15,589)
Increase (decrease) in accounts payable 20,747 2,969
Increase (decrease) in accrued liabilities 26,358 (3,504)
----------- -----------
Net cash used in continuing operations (498,382) (743,817)
Net cash from discontinued operations (138,176) 144,027
----------- -----------
Net cash used in operating activities (636,558) (599,790)
----------- -----------
Cash Flows From Investing Activities
Capital expenditures -- (1,701)
----------- -----------
Net cash used in investing activities -- (1,701)
Cash Flows From Financing Activities
Bank overdraft (23,652) 29,883
Common stock issued for cash 1,000 --
Principal payments on capital leases -- (1,494)
Principal payments on borrowings (68,226) (40,000)
Proceeds from new borrowings -- 224,000
Proceeds from notes payable related parties 727,543 351,650
----------- -----------
Net cash provided by financing activities 636,665 564,039
----------- -----------
Increase (decrease) in cash 107 (37,452)
Cash and cash equivalents, beginning of period -- 37,452
----------- -----------
Cash and cash equivalents, end of period $ 107 $ --
=========== ===========
Cash paid during the period for interest $ 66,911 $ 54,655
=========== ===========
Supplemental noncash investing and financing activities:
Acquisiton of Portalook, Inc. assets and assumption of liabilities
Common stock issued for assets $ -- $ 390,000
=========== ===========
Liabilities assumed for purchase of assets $ -- $ 30,000
=========== ===========
Payment to seller included in accounts payable $ -- $ 224,000
=========== ===========
Notes receivable, impaired $ 397,359 $ --
=========== ===========
Fair value of assets exchanged in connection with the Restructure and Settlement
Agreeement dated November 5, 2001 $ 3,943,928 $ --
=========== ===========
Liabilities disposed of in connection with Capital Restructuring $ 2,247,363 $ --
=========== ===========
Forgiveness of debt - unrelated party notes payable and accrued interest $ 195,986 $ --
=========== ===========
See condensed notes to consolidated financial statements.
5
MB SOFTWARE CORPORATION AND SUBSIDIARIES
MB SOFTWARE CORPORATION
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles in the United States
of America for interim financial information and with the instructions to Form
10-QSB and Rule 10-01 of Regulations S-X. They do not include all information
and notes required by generally accepted accounting principles 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 (the Company) for the year ended December 31,
2001. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included in the operating results for the nine month period ended September 30,
2002, and are not necessarily indicative of the results that may be expected for
the year ending December 31, 2002.
NOTE 2: GOING CONCERN
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.
The Company does not currently have any business operations. The Company has
explored the possibility of selling or merging with another Company. Although
the Company has not entered into any binding agreement to effect such a
transaction, the board of directors of the Company does consider such offers and
would consider all of the terms of any such offer as part of its fiduciary duty
to determine whether any such transaction is in the best interest of the
Company's stockholders. If the board of directors does determine that a sale or
merger of the Company is in the best interests of the Company's stockholders,
the board of directors may determine to pursue such a transaction and the
consideration to be paid in connection with such transaction would be used to
expand our business and fund future operations. There is not assurance the
Company can raise funds through a sale or equity transaction, or if such funding
is available, that it will be on favorable terms.
The Company faces all the risks common to companies in their early stages of
development, including undercapitalization and uncertainty of funding sources,
high initial expenditure levels and uncertain revenue streams, an unproven
business model, and difficulties in managing growth. The Company expects to
incur losses as it expands its business and will require additional funding
during the next twelve months. The satisfaction of the Company's cash
requirements hereafter will depend in large part on its ability to successfully
raise capital from external sources to fund operations. As a result, the Company
expects to aggressively pursue additional sources of funds, including debt and
equity offerings. The Company plans to raise capital by obtaining financing
through private debt and or equity placements. Management believes that if the
Company is successful in those private placement efforts, then the Company will
have sufficient capital to continue its operations until the Company becomes
profitable. To date, the Company has not been profitable.
6
NOTE 3: SALE OF BUSINESS
On May 8, 2002, the Company agreed to the Restructure and Settlement Agreement
with Imagine Investments, Inc. (Imagine). In accordance with the agreement,
proceeds ($4,634,203) represented the conversion of 340,000 shares of Series A
Convertible Preferred Stock ($3,400,000), dividends in arrears ($45,644),
convertible debt ($800,000) and accrued interest on the debt ($388,559), all
held by Imagine, into 4,500,000 shares of common stock and the Company conveyed
to Imagine its ownership in NFPM. The fair market value of the consideration
given was $690,275 representing the net assets in NFPM ($629,999) and the fair
market value of the 4,500,000 shares of common stock ($60,276). No gain or loss
on the transaction with the preferred stockholder was recognized. The
transaction resulted in a net increase in stockholders' equity of approximately
$850,000. The calculation of the gain or loss did not include $1,178,977 of
cumulative preferred stock dividends, which were not required to be paid to
Imagine as part of the sale. These dividends were cumulative but have never been
declared as a result of past net losses. The exclusion of the dividends in the
calculation does not have any effect on total stockholders' equity.
The net assets of NFPM ($629,999) primarily consisted of accounts receivable,
property and equipment, accounts payable and accrued liabilities, notes payable
and accrued interest. Results of operations included in discontinued operations
are as follows for the nine months ended September 30:
2002 2001
---------- ----------
Revenue $ 740,619 $1,461,386
Operating Costs 509,223 1,162,534
---------- ----------
Net Income 231,396 298,852
Income tax provision 78,676 101,610
---------- ----------
Income from discontinued
operations $ 152,720 $ 197,242
========== ==========
NOTE 4: REINCORPORATION AND REVERSE STOCK SPLIT
Effective June 13, 2002, the Company reincorporated in the State of Texas
through a merger of the Company with a newly formed wholly-owned subsidiary. At
the effective date of the merger each share of the company's outstanding common
stock was converted into one share of the reincorporated company's common stock
and all options to purchase share of our common stock were converted into
options to purchase shares of the reincorporated common stock at the time of the
merger. All of the company's officers and directors became officers and
directors of the reincorporated company after the merger. The reincorporation
was approved at the Company's Annual Meeting of Shareholders held on February
11, 2002.
Effective June 24, 2002, the Company effected a one-for-one hundred reverse
stock split and amended the Company's Article of Incorporation to reduce the
number of authorized shares of our Common Stock from 150,000,000 shares to
20,000,000 shares, and increased the number of authorized shares of preferred
stock from 1, 000,000 shares to 5,000,000 shares (the "Amendment"). The reverse
stock split and Amendment were approved by the Board of Directors and by a
majority of the Company's shareholders on June 21, 2002.
NOTE 5: DIVESTURE OF ASSETS
Effective August 1, 2002, the Company sold its ninety-nine percent interest in
e-Appliance Innovations, LLC, a Nevada limited liability company, to e-Appliance
Payment Solutions, LLC, a Nevada limited liability company ("Payment
Solutions"), in exchange for the assumption by Payment Solutions of
substantially all the Company's liabilities. E-Appliance Innovations constituted
substantially all of the assets of the Company, and held all of the Company's
rights to the Company's proprietary technology designed to enable Internet
transaction devices (ITDs) to be used as transaction processing devices in the
field and the software programs implementing this technology that were developed
or acquired by the Company (the "Technology"). In connection with this sale,
Payment Solutions granted the Company a world-wide, royalty-free, perpetual,
non-exclusive license to use the Technology to develop, market, sell and operate
electronic client services to be made available to clients through the Company's
computer network. The transaction resulted in a decrease in liabilities and an
increase in total stockholders' equity of approximately $2,247,000.
7
NOTE 6: RELATED PARTIES
Effective August 1, 2002, the Company sold substantially all of its assets to
Payment Solutions, in exchange for the assumption by Payment Solutions of
substantially all of the Company's liabilities. Mr. Scott A. Haire, the
Company's President and Chief Executive Officer directly owns 0.5%, of the
membership interests in Payment Solutions, and beneficially may be deemed to own
an additional 57.8% through HEB LLC and SAH, LLC. Mr. Haire is also the Manager
of Payment Solutions.
Mr. Gilbert Valdez, and Mr. Araldo Cossutta, each a director of the Company,
directly own 0.5%, and 16.44%, respectively, of the membership interest in
Payment Solutions. Mr. Cossutta may be deemed to beneficially own an additional
8.38% of the membership interests of Payment Solutions thorough Patricia
Cossutta, his wife.
Mr. Richard F. Dahlson, a partner with the law firm of Jackson Walker L.L.P.,
the Company's chief legal counsel, owns 7.51% of the membership interest in
Payment Solutions.
8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
Caution Concerning Forward-Looking Statements/Risk Factors
- ----------------------------------------------------------
The following discussion should be read in conjunction with the Company's
financial statements and the notes thereto and the other financial information
appearing elsewhere in this document. In addition to historical information, the
following discussion and other parts of this document contain certain
forward-looking information. When used in this discussion, the words "believes,"
"anticipates," "expects," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected due to a number of factors beyond our control. The Company does not
undertake to publicly update or revise any of its forward-looking statements
even if experience or future changes show that the indicated results or events
will not be realized. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. You are also
urged to carefully review and consider our discussions regarding the various
factors, which affect our business, included in this section and elsewhere in
this report.
Factors that might cause actual results, performance or achievements to differ
materially from those projected or implied in such forward-looking statements
include, among other things: (i) the impact of competitive products; (ii)
changes in law and regulations; (iii) adequacy and availability of insurance
coverage; (iv) limitations on future financing; (v) increases in the cost of
borrowings and unavailability of debt or equity capital; (vi) the effect of
adverse publicity regarding our products; (vii) the inability of the Company to
gain and/or hold market share; (viii) exposure to and expense of resolving and
defending product liability claims and other litigation; (ix) consumer
acceptance of the Company's products; (x) managing and maintaining growth; (xi)
customer demands; (xii) market and industry conditions including pricing and
demand for products, (xiii) the success of product development and new product
introductions into the marketplace; (xiv) the departure of key members of
management; (xv) the ability of the Company to efficiently market its products;
as well as other risks and uncertainties that are described from time to time in
the Company's filings with the Securities and Exchange Commission.
General
- -------
In July of 2001, the Company acquired certain proprietary technology designed to
enable Internet transaction devices (ITDs) to be used as transaction processing
devices in the field. The Company acquired these technology assets with the
intent to provide transaction services to physicians' practices.
Effective May 8, 2002 in accordance with the terms of the previously announced
Restructure and Settlement Agreement dated as of November 5, 2001 (the
"Restructure and Settlement Agreement"), among the Company, Healthcare
Innovations, LLC, Imagine Investments, Inc. ("Imagine") and XHI(2), Inc.
("XHI(2)"), the Company completed the sale of its medical clinics business to
XHI(2). In exchange for the sale, Imagine and XHI(2) surrendered to the Company,
the Company's promissory notes in the aggregate principal amount of $800,000,
plus all interest due thereunder, and all shares of the Company's Series A
Preferred Stock (340,000 shares in the aggregate) held by Imagine and XHI(2). In
addition to receiving the Company's medical clinic business, Imagine and XHI(2)
also received an aggregate of 4,500,000 shares of the Company's common stock.
The Settlement and Restructure Agreement was approved at the Company's Annual
Meeting of Shareholders held on February 11, 2002. Therefore, the statement of
operations reflects the unaudited results of discontinued operations.
In the third quarter of 2002, the Company continued its emphasis on its
restructuring strategy to maximize shareholder value. Toward this goal, the
Company sold its ninety-nine percent interest in e-Appliance Innovations, LLC, a
Nevada limited liability company, to e-Appliance Payment Solutions, LLC, a
Nevada limited liability company ("Payment Solutions"), in exchange for the
assumption by Payment Solutions of substantially all the Company's liabilities.
E-Appliance Solutions constituted substantially all of the assets of the
Company, and held all of the Company's rights to the Company's proprietary
technology designed to enable Internet transaction devices (ITDs) to be used as
transaction processing devices in the field and the software programs
implementing this technology that were developed or acquired by the Company (the
"Technology"). In connection with this sale, Payment Solutions granted the
Company a world-wide, royalty-free, perpetual, non-exclusive license to use the
Technology to develop, market, sell and operate electronic client services to be
made available to clients through the Company's computer network.
9
The Company did not have any business operations during the third quarter of
2002, other than those associated with the execution of this new strategy and
with a short term agreement to act as an administration agent for the clinics
business sold to Imagine and XHI(2).
Liquidity and Capital Resources
- -------------------------------
As of September 30, 2002, we did not have any significant assets.
Our future funding requirements will depend on numerous factors, some of which
are beyond the Company's control. These factors include our ability to operate
profitably, recruit and train management and personnel, and to compete with
other, better-capitalized and more established competitors.
We believe that the Company can satisfy its cash requirements over the next
twelve months by advances from shareholders and/or through debt or equity
offerings and private placements in order to expand the range and scope of our
business operations. There is no assurance that such additional funds will be
available for the Company to finance its operations on acceptable terms, if at
all. Furthermore, there is no assurance the net proceeds from any successful
financing arrangement will be sufficient to cover cash requirements during the
initial stages of the Company's operations, once a suitable business opportunity
has been identified. Due to the "start up" nature of the Company's business, the
Company expects to incur losses as it expands.
Our ability to meet future cash requirements is dependent upon the our ability
to successfully obtain external financing and to generate revenues. We operate
in an intensely competitive industry and many of our competitors have much
greater resources. There can be no assurance that any of the Company's business
activities will result in any operating revenues or profits. Investors should be
aware that they might lose all or substantially all of their investment.
The continued existence of the Company is dependent upon our ability to meet
future financing requirements and the success of future operations. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. We believe that actions presently taken to revise the Company's
operating and financial requirements provide the opportunity for the Company to
continue as a going concern. Our ability to achieve these objectives cannot be
determined at this time.
The Company does not anticipate incurring significant research and development
costs, the purchase of any major equipment, or any significant changes in the
number of its employees over the next twelve months.
Recent Accounting Pronouncements
- --------------------------------
The Financial Accounting Standards Board ("FASB") has issued the following
pronouncements, none of which are expected to have a significant affect on the
financial statements:
April 2002 - SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections." Under SFAS No.
4, all gains and losses from extinguishment of debt were required to be
aggregated and, if material, classified as an extraordinary item, net of related
income tax effect. This Statement eliminates SFAS No. 4 and, thus, the exception
to applying APB No. 30 to all gains and losses related to extinguishments of
debt. As a result, gains and losses from extinguishment of debt should be
10
classified as extraordinary items only if they meet the criteria in APB No. 30.
Applying the provisions of APB No. 30 will distinguish transactions that are
part of an entity's recurring operations from those that are unusual or
infrequent or that meet the criteria for classification as an extraordinary
item. Under SFAS No. 13, the required accounting treatment of certain lease
modifications that have economic effects similar to sale-leaseback transactions
was inconsistent with the required accounting treatment for sale-leaseback
transactions. This Statement amends SFAS No. 13 to require that those lease
modifications be accounted for in the same manner as sale-leaseback
transactions. This statement also makes technical corrections to existing
pronouncements. While those corrections are not substantive in nature, in some
instances, they may change accounting practice.
June 2002 - SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." This Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The principal difference between this
Statement and EITF 94-3 relates to its requirements for recognition of a
liability for a cost associated with an exit or disposal activity. This
Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. Under EITF 94-3,
a liability was recognized at the date of an entity's commitment to an exit
plan. This Statement is effective for exit or disposal activities that are
initiated after December 31, 2002.
October 2002 - SFAS No. 147, "Acquisitions of Certain Financial Institutions, an
amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9,"
which applies to the acquisition of all or part of a financial institution,
except for a transaction between two or more mutual enterprises. SFAS No. 147
removes the requirement in SFAS No. 72 and Interpretation 9 thereto, to
recognize and amortize any excess of the fair value of liabilities assumed over
the fair value of tangible and identifiable intangible assets acquired as an
un-identifiable intangible asset. This statement requires that those
transactions be accounted for in accordance with SFAS No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." In
addition, this statement amends SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," to include certain financial institution-related
intangible assets. This statement is effective for acquisitions for which the
date of acquisition is on or after October 1, 2002, and is not applicable to the
Company.
November 2002 - FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." FIN 45 requires that a liability be
recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN 45 requires disclosures about the guarantees that an entity has
issued, including a roll-forward of the entity's product warranty liabilities.
Initial recognition and measurement provisions of the Interpretation are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002.
December 2002 - SFAS No. 148, "Accounting for Stock Based
Compensation-Transition and Disclosure." This statement was issued to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
Statement amends the disclosure requirements of Statement 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. This statement is effective for financial
statements for fiscal years ending after December 15, 2002. This statement does
not have any impact on the Company because the Company does not plan to
implement the fair value method.
January 2003 - FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51." FIN 46 requires
certain variable interest entities to be consolidated by the primary beneficiary
of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after June 15, 2003.
11
April 2003 - SFAS No. 149, "Accounting for Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," which amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. This Statement is generally effective for contracts entered into or
modified after June 30, 2003, and all provisions should be applied
prospectively. This statement does not affect the Company.
May 2003 - SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," which establishes standards for
how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). This Statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. It is to be implemented by reporting the cumulative effect of a change in
an accounting principle for financial instruments created before the issuance
date of the Statement and still existing at the beginning of the interim period
of adoption. Restatement is not permitted. This statement does not affect the
Company.
Pending accounting pronouncements - It is anticipated current pending accounting
pronouncements will not have an adverse impact on the financial statements of
the Company.
ITEM 3. CONTROLS AND PROCEDURES
The President, who is also the chief executive officer and the chief financial
officer of the Company, has concluded based on his evaluation as of a date
within 90 days prior to the date of the filing of this Report, that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in the reports filed or
submitted by it under the Securities Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and include controls and
procedures designed to ensure that information required to be disclosed by the
Company in such reports is accumulated and communicated to the Registrant's
management, including the president, as appropriate to allow timely decisions
regarding required disclosure.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
such evaluation.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August, 2002, the Company received the approval of the Company's shareholders
for the sale of e-Appliance Innovations to Payment Solutions. This approval was
obtained by the written consent of shareholders holding 420,281 shares of the
Company's common stock, which number represented a majority of the issued and
outstanding shares of the Company's common stock at that time. No shareholders
of the Company were requested to provide the Company with a proxy or vote with
respect to this matter and, therefore, no shareholders voted against or
abstained from voting for this matter.
12
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation (incorporated by reference to the
Company's Form 10-QSB for the fiscal quarter ended September
30, 2002)
3.2 Bylaws (incorporated by reference to the Company's Form 10-QSB
for the fiscal quarter ended September 30, 2002)
10.1 Securities Purchase Agreement dated as of August 1, 2002, by
and between MB Software, Inc., and e-Appliance Payment
Solutions, LLC*
10.2 Assignment and Assumption Agreement dated as of August 1,
2002, by and between MB Software, Inc., and e-Appliance
Payment Solutions, LLC and each of the creditors listed
therein*
31.1 Certification of Principal Executive Officer and Principal
Financial Officer in accordance with 18 U.S.C. Section 1350,
as adopted by Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Certification of Principal Executive Officer and Principal
Financial Officer in accordance with 18 U.S.C. Section 1350,
as adopted by Section 906 of the Sarbanes-Oxley Act of 2002*
- ---------
* Filed herewith
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
September 30, 2002.
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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, 2003 /s/ Scott A. Haire
--------------------------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
14
Index of Exhibits
3.1 Articles of Incorporation (incorporated by reference to the Company's
Form 10-QSB for the fiscal quarter ended September 30, 2002)
3.2 Bylaws (incorporated by reference to the Company's Form 10-QSB for the
fiscal quarter ended September 30, 2002)
10.1 Securities Purchase Agreement dated as of August 1, 2002, by and
between MB Software, Inc., and e-Appliance Payment Solutions, LLC*
10.2 Assignment and Assumption Agreement dated as of August 1, 2002, by and
between MB Software, Inc., and e-Appliance Payment Solutions, LLC and
each of the creditors listed therein*
31.1 Certification of Principal Executive Officer and Principal Financial
Officer in accordance with 18 U.S.C. Section 1350, as adopted by
Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Certification of Principal Executive Officer and Principal Financial
Officer in accordance with 18 U.S.C. Section 1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002*
- ---------
* Filed herewith
15