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, 1999
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File No. 0-11808
MB SOFTWARE CORPORATION
Colorado 59-2219994
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2225 E. Randol Mill Road - Suite 305
Arlington, Texas 76011-6306
(817) 633-9400
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common NASDAQ - OTC BULLENTIN BOARD
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ X ] No [ ]
As of September 30, 1999, 68,691,971 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 September 30, 1999
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1 - Financial Statements
Consolidated Balance Sheet
September 30, 1999 (Unaudited) and
December 31, 1998 (Audited) 3-4
Consolidated Statements of Operations -
for the Three and Nine Months ended September 30, 1999
(Unaudited) and December 31, 1998 (Audited) 5-6
Consolidated Statements of Cash Flows
for the Nine Months ended September 30, 1999 (Unaudited)
and December 31, 1998 (Audited) 7-8
Notes to Consolidated Financial Statements 9
Item 2 - Management's Discussion
and Analysis of Financial Condition and
Results of Operations 9-10-11
PART II - OTHER INFORMATION
Item 5 - Other Information 11
Item 6 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 11
SIGNATURES 11
2
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash $ 1,804 $ 188,797
Accounts receivable -
Medical receivables, net of
allowance for doubtful accounts and
contractual adjustments of $505,181 and
$1,810,887 in 1999 and 1998, respectively 798,909 1,003,126
Notes receivable 279,325 51,288
Prepaid expenses 4,200
------------- -------------
TOTAL CURRENT ASSETS 1,080,038 1,247,411
------------- -------------
PROPERTY AND EQUIPMENT, NET 253,695 396,022
------------- -------------
OTHER ASSETS
Goodwill, net of accumulated amortization 207,701 316,806
Software development costs, net of accumulated 104,386 169,376
amortization
Deposits and other assets 9,769 73,036
------------- -------------
TOTAL OTHER ASSETS 321,856 559,218
------------- -------------
TOTAL ASSETS $ 1,655,589 $ 2,202,651
============= =============
(Continued)
3
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
CURRENT LIABILITIES
Notes payable
Related parties $ -- $ --
Other 203,651 303,946
Current maturities of long-term debt
Related parties -- --
Other 4,523 54,965
Accounts payable 372,341 483,074
Accrued liabilities 244,281 400,004
Other liabilities 21,500 --
Deferred revenues 34,232 57,423
------------- -------------
TOTAL CURRENT LIABILITIES 880,528 1,299,412
LONG-TERM DEBT, NET OF CURRENT
MATURITIES
Related parties 889,808 933,808
Other 814,000 741,392
PREFERRED STOCK DIVIDENDS PAYABLE 300,644 85,000
------------- -------------
TOTAL LONG TERM LIABILITIES 2,004,452 1,760,200
------------- -------------
SHAREHOLDERS' EQUITY (DEFICIT)
Series A senior cumulative convertible
participating preferred stock; $10 par value;
340,000 shares issued and outstanding in 1998 3,400,000 3,400,000
Common stock; $.001 par value; 100,000,000 shares
authorized; 69,100,000 shares issued 69,100 69,100
Additional paid-in capital 1,101,105 1,101,105
Accumulated deficit (5,415,127) (5,415,127)
Current period earnings (372,430)
Treasury stock, at cost; 408,029 shares (12,039) (12,039)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY (1,229,391) (856,961)
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDER
EQUITY (DEFICIT) $ 1,655,589 $ 2,202,651
============= =============
4
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLITATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------- -----------------------------
1999 1998 1999 1998
----------------------------- -----------------------------
Medical Activities:
Revenue $ 863,585 $ 1,231,213 $ 2,577,503 $ 3,532,648
Contractual Allowance 122,783 443,114 745,369 1,091,345
----------- ----------- ----------- -----------
Net Revenues 740,802 788,099 1,832,134 2,441,303
Cost of Revenue 338,180 546,769 984,061 1,857,200
----------- ----------- ----------- -----------
Gross Profit 402,622 241,330 848,073 584,103
Service Fees 9,002 112,994 100,798 455,661
----------- ----------- ----------- -----------
Software Activities:
Gross Revenue 73,810 35,849 205,969 296,053
Cost of Revenue 17,933 7,440 36,591 21,867
----------- ----------- ----------- -----------
Gross Profit 55,878 28,409 169,377 274,186
Gross Profit 467,502 382,733 1,118,248 1,313,950
----------- ----------- ----------- -----------
Operating Expenses:
Selling, General and Administrative
Bad Debt Expense, Other General
and Administrative 487,776 1,363,271 1,212,091 2,309,550
Depreciation and Amortization 40,263 306,048 148,993 488,305
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSE 528,039 1,669,319 1,361,084 2,797,855
INCOME (LOSS) FROM
OPERATIONS (60,537) (1,286,586) (242,836) (1,483,905)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Other income - 2,231 - 77,870
Forgiveness of indebtedness 92,611 - 92,612 -
Interest Expense, Net Income (20,613) (93,740) (72,887) (225,815)
Other expense (728) (728)
----------- ----------- ----------- -----------
OTHER INCOME ( EXPENSE) 71,270 (91,509) 18,996 (147,945)
INCOME TAX EXPENSE - - - -
----------- ----------- ----------- -----------
NET GAIN (LOSS) FROM
CONTINUNING OPERATIONS
BEFORE MINORITY INTEREST 10,733 (1,378,095) (223,840) (1,631,850)
MINORITY INTEREST IN LOSS - 139,665 - 309,219
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
PREFERRED STOCK DIVIDENDS
AND DISCONTINUED OPERATIONS $ 10,733 $(1,238,430) $ (223,840) $(1,322,631)
5
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLITATED STATEMENTS OF OPERATIONS
(UNAUDITED)
CONTINUED
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------- -----------------------------
1999 1998 1999 1998
----------------------------- -----------------------------
INCOME (LOSS) BEFORE
PREFERRED STOCK DIVIDENDS
AND DISCONTINUED OPERATIONS $ 10,733 $(1,238,430) $ (223,840) $(1,322,631)
PREFERRED STOCK DIVIDENDS (85,000) - (255,000) -
----------- ----------- ----------- -----------
LOSS BEFORE DISCONTINUED
OPERATIONS (74,267) (1,238,430) (478,840) (1,322,631)
DISCONTINUED OPERATIONS
Loss from discontinued operations -- (233,541) (28,226) (283,027)
Gain from sale of subsidiary -- -- 134,636 --
----------- ----------- ----------- -----------
NET LOSS $ (74,267) $(1,471,971) $ (372,430) $(1,605,658)
=========== =========== =========== ===========
LOSS PER WEIGHTED AVERAGE
COMMON SHARE
Continuing operations $ 0.00 $ (0.02) $ (0.02) $ (0.02)
Loss from discontinued operations $ 0.00 $ 0.00 $ 0.00 $ 0.00
Gain from sale of subsidiary $ 0.00 $ 0.00 $ 0.00 $ 0.00
TOTAL $ .000 $ .000 $ .000 $ .(002)
=========== =========== =========== ===========
WEIGHTED-AVERAGE COMMON
SHARES OUTSTANDING 68,580,000 68,670,000 68,580,000 68,631,428
=========== =========== =========== ===========
6
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended Year Ended
September 30, December 31,
----------------- ------------
1999 1998
----------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss before discontinued operations $ (478,840) $(3,723,057)
Adjustments to reconcile net (loss) to net
cash used by operating activities:
Depreciation and amortization 148,993 1,502,083
(Gain) loss on sale of assets 18,073 43,994
Decrease in deferred revenues (23,189) (51,233)
Common stock issued for services -- 60,000
Minority interest in loss -- (548,623)
Forgiveness of indebtedness (92,611) 1,950,626
Provision for allowance for doubtful accounts
(1,305,707) 1,950,626
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 1,230,598 (866,118)
Decrease in notes receivable 51,288 8,040
Decrease in prepaid expenses and other 4,200 4,348
Increase in deposits (9,766) (4,132)
Increase in accounts payable/accrued liabilities 60,150 109,783
----------- -----------
Net Cash Used by Continuing Operations (396,811) (1,514,289)
----------- -----------
Net Cash Provided (Used) by Discontinued Operations (28,226) 67,755
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (425,037) (1,446,534)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIE
Purchases of property and equipment (4,691) (111,945)
Organizational costs (1,224) --
Proceeds from sale of business segment 300,000
Proceeds from sale of equipment -- 750
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 294,085 (111,195)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on related party notes payable $ -- $ (895,000
Principal payments on other notes payable (99,687) (220,035)
Proceeds from related party notes payable 10,000 1,900,000
Proceeds from other notes payable 33,646 238,826
Proceeds from common stock issuance -- 6,000
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (56,041) 1,029,791
----------- -----------
INCREASE (DECREASE) IN CASH (186,992) (527,938)
Cash balance at beginning of period 188,797 716,735
----------- -----------
CASH BALANCE AT END OF PERIOD $ 1,805 $ 188,797
=========== ===========
7
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Nine Months Year Ended
September 30, December 31,
------------- ------------
1999 1998
------------- ------------
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest $ 79,873 $ 260,516
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Preferred stock issued for minority interest $ -- $ 2,000,000
Minority interest acquired -- (1,083,079)
Preferred stock issued to satisfy note payable -- 1,400,000
Conversion of note payable to preferred stock - related party -- (1,400,000
Goodwill on acquisition of minority interest -- (916,921)
Sale of software for note receivable -- 230,982
Note receivable from software sale -- (230,982)
Note payable forgiven by related party 92,611
Income recognized from discharge of indebtedness (92,611
----------- -----------
$ -- $ --
=========== ===========
7
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, 1998. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1999, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
- -------
During the third quarter of 1999, MB Software Corporation (the "Company")
continued operations of its Florida health care clinics, promoted sales of its
medical practice management software 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. In July 1999, the
Company opened a new clinic in Lauderhill, Florida. The Company now owns four
clinics, each located in Florida.
The following summarizes the results of operations for the three-month and the
nine-month period ended September 30, 1999 and 1998.
Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998
- ---------------------------------------------------------------------
Revenue from medical activities decreased 42.5% to $863,585 for the three-months
ended September 30, 1999, compared to $1,231,213 for the three-months ended
September 30, 1998. This decrease is substantially attributable to the
termination of the Nevada and Utah clinics and a focus upon generating revenue
that does not require substantial contractual adjustments.
As evidence of management's intent to produce collectible revenue, the
contractual allowance amount decreased significantly based on the verification
system inaugurated at the clinic's front desk. A contractual allowance
adjustment was made in the amount of $122,783 for the third quarter of 1999, as
compared to $443,114 for the third quarter of 1998.
The cost of medical revenues decreased 38.14% to $338,180 for the three months
ended September 30, 1999, compared to $546,769 for the three months ended
September 30, 1998. The decrease in the cost of medical revenues is evidence of
reduced costs resulting from the sale of the Utah and Nevada clinics and the
termination of many practice management arrangements. The decrease is further
attributable to increased efficiencies in the operation of the clinics. In the
third quarter ending September 30, 1998, the cost of revenue was 44.40% of the
gross medical revenue whereas in the third quarter ending September 30, 1999,
the cost of revenue was 39.15% of the gross medical revenue.
The gross profits from medical activities increased 66.8% to $402,623 for the
three months ended September 30, 1999, as compared to $241,330 for the three
months ended September 30, 1998. This 66.8% increase in gross profits is in
accordance with the reduced amount of contractual allowances and the decreased
cost of revenue.
9
The service fees for the third quarter of 1999, decreased to $9,002 from
$112,994 for the third quarter ending September 1998. Service fees are earned in
connection with practice management agreements. The reduction in the service fee
amount reflects the Company's decision to eliminate future practice management
arrangements in favor of Company-owned practices. The modest service fees earned
in the third quarter ending September 1999 represent earnings of a Company
subsidiary, MB Practice Solutions, Inc., in connection with its practice
management agreement with Advanced Healthcare Integration, a former Austin based
clinic.
In the quarter ending September 30, 1999, gross profit from software activities
increased 96.3% to $55,878 from $28,409 for the third quarter ending September
1998. The revenue increase is applicable to the revised technical support fees
and increased software sales.
The Company's gross profit for the third quarter increased 22.14% to $467,502
for the third quarter ended September 30, 1999 from $382,733 for the third
quarter ending September 1998. The gross profit increase is substantially
related to the Company's efforts to streamline operations, the reduced
percentage of contractual allowances, reduced costs of revenue and the increase
in gross profits on software activities.
The Company's selling, general and administrative expenses decreased to $487,776
for the three months ended September 30, 1999 as compared to $1,363,271 for the
third quarter ending September 30, 1998. This decrease reflects savings
resulting primarily from the termination of many health care operations as well
as reductions in administrative expenses associated with software activities.
The net gain on operations was $10,733 for the three month period ended
September 30, 1999 as compared to a loss of $1,378,095 for the three months
ended September 30, 1998. The elimination of the loss is attributable to the
following reduced amounts for the three months ended September 30, 1999:
Contractual allowances; selling, general and administrative expenses; and
depreciation and amortization.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
- ------------------------------------------------------------------
The gross medical revenues decreased 27.71% to $2,577,503 for the nine-month
period ended September 30, 1999, compared to $3,532,648 for the nine-month
period ended September 30, 1998. The decrease is substantially attributable to
the divestment of the Nevada and Utah clinics.
The cost of medical revenue decreased 47.01% to $984,061 for the nine-month
period ended September 30, 1999, as compared to $1,857,200 for the nine-month
period ended September 30, 1998. The decrease is applicable to the divestment of
the Nevada and Utah clinics as well as the termination of many practice
management arrangements.
It is interesting to note that for the nine-month period ended September 30,
1999, while the cost of medical revenue decreased 47.01% the resulting revenue
reduction was only 27.71%. This evidence of management's intent to maximize
profits is repeated in the comparison of the same period for gross profits.
Gross profit for medical activities increased 45.19% to $848,072 for the third
quarter ended September 30, 1999, compared to $584,103 for the third quarter
ended September 30, 1998. The increase in gross profit is attributable to the
47.01% cost of medical revenue reduction.
Gross profit decreased 61.87% for the software division from $274,186 for the
quarter ended September 30, 1998 as compared to $169,377 for the nine months
period ending September 30, 1999. The decrease is due to the Company's continued
dedication of available resources to research and development for new products
as opposed to sales and marketing of existing software.
The Company's selling, general and administrative expenses decreased to
$1,212,091 for the third quarter ending September 30, 1999 as compared to
$2,309,550 for the third quarter ending September 30, 1998. This decrease
reflects savings resulting primarily from the termination of many health care
operations as well as reductions in administrative expenses associated with
software activities.
Net operating loss decreased to $242,836 for the nine-month period ended
September 30, 1999, as compared to $1,483,905 for the nine month period ended
September 30, 1998. This reduction in loss reflects other reduced amounts for
the nine-month period ending September 30, 1999. These amounts include the
reduced cost of medical revenue; reduced amount of selling, general and
administrative expenses; and the reduction in depreciation and amortization.
The gain on sale of subsidiary was $134,636 from the sale of the chiropractic
clinic in Nevada.
10
Liquidity and Capital Resources
- -------------------------------
The Company's operations used $425,037 of cash during the three months ended
September 30, 1999 compared to a use of cash of $1,514,289 for the quarter ended
September 30, 1998.
As of September 30, 1999, the Company had working capital of $199,510, compared
to the September 30, 1998 working capital of ($1,437,970). At September 30,
1999, the Company had cash of $1,804.
PART II - OTHER INFORMATION
MB Software Corporation sold its subsidiary, MB Software Solutions, Inc.,
("MBSSI"), its medical software and internet company, through a newly formed
subsidiary, MedEWay.com, Inc. to Consolidated National Corp. and Scott A. Haire,
both of whom are shareholders. Mr. Haire is also an officer and director of the
Company. The Company had tried to raise capital to fund its software and
internet businesses and had attempted to sell the software company to third
parties to generate cash for its continued growth in Florida, but had been
unsuccessful in each case. The Company had received one offer to sell MBSSI for
a lesser amount than received from Consolidated National Corp. and Mr. Haire.
Consolidated National Corporation and Scott A. Haire paid $1,500,000, $250,00 of
which is cash and $1,250.000 of which is contribution of debt owed by the
Company to Consolidated National Corporation and Scott A. Haire. MBSC also
received a warrant for 5% of the new company.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
Exhibits
- --------
10.1 Exchange Agreement between the Company, Consolidated National Corp.
and Scott A. Haire.
10.2 Warrant issued by MedEWay.com, Inc. in favor of MB Software
Corporation.
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: Novwember 12, 1999 /s/ Scott A. Haire
----------------------
Scott A. Haire, Chairman of the Board,
Chief Executive Officer and President
(Principal Financial Officer)
11