10QSB 1 mb10qsb63001.txt 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