10QSB 1 mb10qsb033101.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: March 31, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 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 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (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 OTC BULLETIN BOARD Securities registered pursuant to Section 12 (g) of the Act: Common Stock $.001 par value ---------------------------- (Title of Class) 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 [ ] As of May 20, 2002, 1,784,833 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 March 31, 2002 INDEX PART I - FINANCIAL INFORMATION PAGE NUMBER Item 1 - Financial Statements Consolidated Balance Sheets March 31, 2002(Unaudited) and December 31, 2001 (Audited) F-1 - F-2 Consolidated Statements of Operations - for the Three Months ended March 31, 2002(Unaudited) and March 31, 2001 (Unaudited) F-3 Consolidated Statements of Cash Flows for the Three Months ended March 31, 2002(Unaudited) and March 31, 2001 (Unaudited) F-4 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 3 PART II - OTHER INFORMATION Submission of Matters to Vote of Security Holders 5 Item 6 - Exhibits and Reports on Form 8-K 6 SIGNATURES 6 2 MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ASSETS ------ March 31, December 31, 2002 2001 ------------ ------------ (Unaudited) (Audited) CURRENT ASSETS Cash $ -- $ -- Accounts receivables, net of allowance for doubtful accounts of $0 for both years 7,250 7,250 Inventory 131,740 131,740 Notes receivable 8,439 2,000 Prepaid expenses 41,388 33,941 ------------ ------------ Total Current Assets 188,817 174,931 ------------ ------------ PROPERTY AND EQUIPMENT, NET 78,646 83,654 ------------ ------------ OTHER ASSETS Software license, net 338,048 368,780 Notes receivable - related parties 350,000 361,789 ------------ ------------ 688,048 730,569 ASSETS OF DISCONTINUED OPERATIONS 541,229 474,574 ------------ ------------ TOTAL ASSETS $ 1,496,740 $ 1,463,728 ============ ============ F1

MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET LIABILITIES AND SHAREHOLDERS' DEFICIT ------------------------------------- March 31, December 31, 2002 2001 ------------ ------------ CURRENT LIABILITIES Notes payable $ 2,562,282 $ 2,099,035 Checks in excess of bank balance 6,741 23,572 Accounts payable 344,219 326,112 Accrued liabilities 735,866 ------------ ------------ Total current liabilities 3,649,108 3,174,537 LIABILITIES OF DISCONTINUED OPERATIONS 378,948 385,472 ------------ ------------ Total liabilities 4,028,056 3,560,009 SHAREHOLDERS' DEFICIT Series A sesnior cumulative convertible participating preferred stock; $10 par value 340,000 shares issued and outstanding in 2002 and 2001; dividends in arrears 2002$1,150,644, 2001 $1,065,644 3,400,000 3,400,000 Undesignated preferred stock; $10 par value 660,000 shares authorized; none issued -- -- Common stock .001 par value;150,000,000 shares authorized; 73,500,000 and 73,400,000 shares 73,500 73,400 issued in 2002 and 2001, respectively Additional paid-in capital 2,012,291 2,011,391 Accumulated deficit (8,005,068) (7,569,033) ------------ ------------ (2,519,277) (2,084,242) Treasury stock, at cost; 407,446 shares (12,039) (12,039) ------------ ------------ Total shareholders' deficit (2,531,316) (2,096,281) ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 1,496,740 $ 1,463,728 ============ ============

F2

MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, 2002 March 31, 2001 -------------- -------------- REVENUES $ -- $ -- COST OF REVENUES -- -- -------------- -------------- GROSS PROFIT -- -- OPERATING EXPENSES Selling, general & administrative 267,745 248,615 Depreciation and amortization 35,740 6,559 -------------- -------------- Total operating expenses 303,485 255,174 Loss from operations (303,485) (255,174) OTHER INCOME (EXPENSE) -- Interest expense (164,140) (35,237) Interest income 7,911 7,011 -------------- -------------- Total other income (expense) (156,229) (28,226) -------------- -------------- Loss before benefit for income taxes (459,714) (283,400) ============== ============== BENEFIT FOR INCOME TAXES 8,051 -- -------------- -------------- Loss from continuing operations (451,663) (283,400) DISCONTINUED OPERATIONS Income (loss) from operations, net of tax effect in 2002 of $8,051 and in 2000 of $0 15,628 254,157 -------------- -------------- Net loss $ (436,035) $ (29,243) ============== ============== Loss from continuing operations $ (451,663) $ (283,400) Plus: Cumulative preferred stock dividends (85,000) (85,000) -------------- -------------- Income (loss) available to common shareholders $ (536,663) $ (368,400) ============== ============== BASIC AND DILUTED L0SS PER SHARE Continuing operataions $ (0.01) $ (0.01) Discontinuing operations $ -- $ -- -------------- -------------- $ (0.01) $ (0.01) ============== ============== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 73,427,778 70,400,000 ============== ==============

F3

MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) THREE MONTHS THREE MONTHS ENDED 03/31/02 ENDED 03/31/01 2002 2001 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Loss from continuing operations $ (451,663) $ (283,400) Adjustments to reconcile loss from continuing operations to net cash used in operating activities: Accretion of debt 68,747 -- Depreciation and amortization 35,740 6,559 Deferred license and consulting cost recognized -- 24,610 Changes in assets and liabilities: Accounts receivable -- (1,088) Prepaid expenses and other (7,447) (20,917) Checks in excess of bank balance (16,831) (1,648) Accounts payable and accrued liabilities 28,155 315,537 -------------- -------------- Net cash provided by (used in) continuing operation (343,299) 39,653 Net cash used in discontinued operations (102,591) (155,360) -------------- -------------- Net cash ussed in operating activities (445,890) 115,707 CASH FLOWS FROM INVESTING ACTIVITIES Payments received on notes receivable 23,289 -- Loans made on notes receivable (17,939) (15,722) Capital expenditures (160) (4,938) -------------- -------------- Net cash provided by (used in) investing activities 5,190 (20,660) CASH FLOWS FROM FINANCING ACTIVITIES Payments on capital leases -- (1,493) Principal payments on borrowings (33,100) -- Issuance of common stock 1,000 -- Proceeds from loans and warrants 472,800 107,950 -------------- -------------- Net cash provided by financing activities 440,700 106,457 -------------- -------------- Net increase (decrease) in cash -- (29,910) CASH AND CASH EQUIVALENTS, beginning of year -- 29,910 -------------- -------------- CASH AND CASH EQUIVALENTS, at end of year $ -- $ -- ============== ============== SUPPLEMENTAL DISCLOUSURES OF CASH FLOWS INFORMATION Cash paid during the period for interest $ 39,180 $ 44,955 ============== ==============

F4 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 Regulations 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 (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 three month period ended March 31, 2002 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 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. The Company plans to raise capital by obtaining financing through private debt placement. 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. NOTE 3: RELATED PARTIES Included in notes payable is related party payables of $2,400,282 and $1,766,820 for 2002 and 2001, respectively. NOTE 4: SUBSEQUENT EVENT On May 8, 2002, the Company agreed to the Restructure and Settlement Agreement with Imagine Investments, Inc. (Imagine). In accordance with the agreement, the Company will convert 340,000 shares of Series A Convertible Preferred Stock, dividends in arrears, convertible debt and accrued interest on the debt, all held by Imagine, into 4,500,000 shares of common stock and the Company will convey to Imagine its ownership in NFPM. No gain or loss on the transaction with the preferred stockholder will be recognized. The transaction will result in a net increase in stockholders equity of approximately $600,000. 3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Financial Statements and Notes contained herein. Forward-looking statements in this Form 10-Q are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. 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 XHI2(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. 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. In the first quarter of 2002, the Company continued to focus on the development of the ITD technology, which the Company believes will serve as the key for processing transactions for healthcare customers, with the intent of leveraging this platform to connect a variety of healthcare-related businesses via the Internet. Currently anticipated transactions that can be conducted via the Company's ITD platform include: insurance verification, pharmacy order, email, and potentially credit card transactions. The Company will focus all of its activity on the transaction processing business that the Company believes to be the market for future growth. Three Months Ended March 31,2002 Compared to Three Months Ended March 31, 2001. The Company through the Restructure and Settlement Agreement (previously mentioned above) has divested its self of its medical clinics business. Therefore, the results of operation summarized below will reflect the unaudited discontinued operations results. The following summarizes the results of operations for the three months ended March 31, 2002 and March 31, 2001 of the discontinued operations of the clinic as outlined in the Restructure and Settlement Agreement. 4 Medical Activities: 2002 2001 -------- -------- Income (Loss) Discontinued Operations $ 15,628 $254,157 The following compares the results of operations for the three months ended March 31, 2002 and March 31, 2001 without the discontinued clinic operations. The selling, general and administrative expenses increased to $267,745 for the three months ended March 31, 2002 as compared to $248,615 for the three months ended March 31, 2001. The increase is attributed to cost for the annual shareholders meeting and development cost associated with ITDs. The net loss from continuing operations increased to ($451,663) for the three months ended March 31, 2002, as compared to a loss from continuing operations of ($283,400) for the three months ended March 31, 2001. Liquidity and Capital Resources ------------------------------- The Company's continuing operations used $343,299 of cash during the three months ended March 31, 2002 as compared to providing cash of $39,653 for the quarter ended March 31,2001. As of March 31, 2002, the Company had working capital deficits of $3,383,904. The working capital as of March 31, 2001 was $2,999,606. At March 31, 2002, the Company had outstanding checks in excess of bank balances of $6,741. To increase working capital, the Company is concentrating its efforts to distribute volume units of its ITDs. During the three months ended March 31, 2002, the Company had capital expenditures for the purchase of equipment totaling $160. The Company does not anticipate any major purchase of equipment for the remaining nine (9) months of 2002. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS On February 11, 2002, the Annual Meeting of Shareholders was held. In addition to the election of directors, the following matters were presented and approved by the shareholders: The Restructure and Settlement Agreement was ratified and approved, with the shareholders represented at the meeting voting as follows: For Against Abstain 40,564,833 None None 5 In addition, the shareholders approved a merger agreement pursuant to which the Company would be reincorporated as a Texas corporation and the name of the Company would be changed to eAppliance Innovations, Inc., with the shareholders at the meeting voting as follows: For Against Abstain 40,564,833 None None ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits - All exhibits are incorporated by reference from prior filings with the Commission. SIGNATURES In accordance with the requirements of the Securities Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MB SOFTWARE CORPORATION Date: June 3, 2002 /s/ Scott A. Haire ---------------------------------------- Scott A. Haire, Chairman of the Board, Chief Executive Officer and President (Principal Financial Officer)