-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UT/CvYh6lju6YaVZMDUYdc30Z/8+CS1zetfTMO1ub/cUNDeJibPjWMcK8XVl82Un 3G8x1VuKN5aNIqHYgFs2KQ== 0001010549-03-000431.txt : 20030813 0001010549-03-000431.hdr.sgml : 20030813 20030813144759 ACCESSION NUMBER: 0001010549-03-000431 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20030813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MB SOFTWARE CORP CENTRAL INDEX KEY: 0000714256 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 592219994 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11808 FILM NUMBER: 03840675 BUSINESS ADDRESS: STREET 1: 2225 E RANDOL MILL RD STREET 2: STE 305 CITY: ARLINGTON STATE: TX ZIP: 76011 BUSINESS PHONE: 8177928872 MAIL ADDRESS: STREET 1: 2225 EAST RANDOL MILL RD STREET 2: SUITE 305 CITY: ARLINGTON STATE: TX ZIP: 76011 FORMER COMPANY: FORMER CONFORMED NAME: INAV TRAVEL CORPORATION DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: TWISTEE TREAT CORP DATE OF NAME CHANGE: 19910220 FORMER COMPANY: FORMER CONFORMED NAME: TWISTEE FREEZ CORP DATE OF NAME CHANGE: 19840917 10QSB 1 mb10qsb063002.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, 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 June 30, 2002 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheet (Unaudited)........................................ 1 Consolidated Statements of Operations for the three and six months ended June 30, 2002 and 2001 (Unaudited).................................... 2 Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001 (Unaudited).................................... 3 MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (unaudited) JUNE 30, 2002 ASSETS Total Assets $ -- =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Checks in excess of bank balance $ 9,787 Notes payable (Note 5) 2,004,062 Accounts payable (Note 5) 346,859 Accrued interest (Note 5) 95,324 ----------- Total current liabilities 2,456,032 ----------- 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 6,385,174 Accumulated deficit (8,829,990) ----------- (2,443,993) Less, treasury stock, at cost; 4,089 shares (12,039) ----------- Total stockholders' deficit (2,456,032) ----------- Total liabilities and stockholders' deficit $ -- =========== See condensed notes to consolidated financial statements. 1
MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 Three months Three months Six months Six months ended ended ended ended June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001 ---------------------------------------------------------------- Revenues $ -- $ -- $ -- $ -- Cost of revenues -- -- -- -- ---------------------------------------------------------------- Gross profit -- -- -- -- Operating Expenses Selling, general and administrative (326,534) (215,335) (630,019) (473,985) ---------------------------------------------------------------- Loss from operations (326,534) (215,335) (630,019) (473,985) Other Income (Expense) Write off net assets of Portalook (292,347) -- (292,347) -- Write off of receivables - related party (397,359) -- (397,359) -- Interest expense (22,984) (67,187) (187,124) (102,423) Interest income 6,586 7,090 14,497 14,101 ---------------------------------------------------------------- Total other income (expense) (706,104) (60,097) (862,333) (88,322) ---------------------------------------------------------------- Loss before benefit for income taxes (1,032,638) (275,432) (1,492,352) (562,307) Benefit for income taxes 70,625 34,655 78,676 120,248 ---------------------------------------------------------------- Loss from continuing operations (962,013) (240,777) (1,413,676) (442,059) Discontinued operations, net of tax effect 137,092 67,274 152,720 233,423 ---------------------------------------------------------------- Net loss $ (824,921) $ (173,503) $ (1,260,956) $ (208,636) ================================================================ Loss from continuing operations $ (962,013) $ (240,777) $ (1,413,676) $ (442,059) Plus cumulative preferred stock dividends (28,333) (85,000) (113,333) (170,000) ---------------------------------------------------------------- Loss available to common stockholders $ (990,346) $ (325,777) $ (1,527,009) $ (612,059) ================================================================ Basic and Diluted Loss Per Share: Continuing operations $ (1.26) $ (0.35) $ (1.89) $ (0.64) Discontinued operations 0.18 0.10 0.20 0.34 ---------------------------------------------------------------- $ (1.08) $ (0.25) $ (1.69) $ (0.30) ================================================================ Weighted average common shares outstanding 763,854 692,000 747,423 692,000 ================================================================
See condensed notes to consolidated financial statements. 2
MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) SIX MONTHS ENDED JUNE 30, 2002 AND 2001 2002 2001 -------------------------- Cash Flows From Operating Activities Loss from continuing operations $(1,413,676) $ (442,059) Adjustments to reconcile loss from continuing operations to net cash used in operating activities: Depreciation and amortization 71,480 1,299 Common stock issued for services and consulting costs 46,000 18,750 Deferred licensing costs -- 11,783 Accretion of debt 68,747 -- Disposal of fixed assets 5,038 -- Write off net assets of Portalook 292,347 -- 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) (4,390) Increase (decrease) in accounts payable 20,747 (36,085) Increase (decrease) in accrued liabilities 26,358 (1,534) -------------------------- Net cash used in continuing operations (498,519) (452,236) Net cash from discontinued operations (138,176) 91,159 -------------------------- Net cash used in operating activities (636,695) (361,077) -------------------------- Cash Flows From Investing Activities Capital expenditures -- (1,701) -------------------------- Net cash used in investing activities -- (1,701) Cash Flows From Financing Activities Bank overdraft (13,785) 38,270 Common stock issued for cash 1,000 -- Principal payments on capital leases -- (1,494) Principal payments on borrowings (68,226) -- Proceeds from new borrowings 717,706 288,550 -------------------------- Net cash provided by financing activities 636,695 325,326 -------------------------- Increase (decrease) in cash -- (37,452) Cash and cash equivalents, beginning of period -- 37,452 -------------------------- Cash and cash equivalents, end of period $ -- $ -- ========================== Cash paid during the period for interest $ 66,911 $ 54,655 ========================== Supplemental noncash investing and financing activities: Fair value of assets exchanged in connection with the Restructure and Settlement Agreement dated November 5, 2001 (settled May 8, 2002) (Note 3) $ 3,943,928 $ -- ========================== Notes receivable, impaired $ 397,359 $ -- ==========================
See condensed notes to consolidated financial statements. 3 MB SOFTWARE CORPORATION AND SUBSIDIARIES MB SOFTWARE CORPORATION QUARTER ENDED JUNE 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 six month period ended June 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 significant accumulated 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. 4 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 six months ended June 30: 2002 2001 ---------- ---------- Revenue $ 740,619 $1,230,554 Operating Costs 509,223 876,883 ---------- ---------- Net Income 231,396 353,671 Income tax provision 78,676 120,248 ---------- ---------- Income from discontinued operations $ 152,720 $ 233,423 ========== ========== 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: SUBSEQUENT EVENTS - 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 5 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. (See Note 6) 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. 6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 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 second quarter of 2002, the Company shifted business strategies and focused on a restructuring strategy to maximize shareholder value. The new strategy is intended to maximize shareholder value by seeking attractive operating companies for acquisition. The Company intends to evaluate companies that would benefit from access to public markets. The Company did not have any business operations during the second 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). 7 Liquidity and Capital Resources - ------------------------------- As of June 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 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. 8 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. 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 9 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 2. CHANGES IN SECURITIES 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. The issuance of the Company's common stock described above was made in reliance upon the exemptions from registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), contained in Section 4(2) on the basis that such transaction did not involve a public offering. The certificates evidencing the shares bear legends stating that the securities are not to be offered, sold or transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from such registration requirements. On June 17, 2002, the Company issued 4,600,000 shares of its common stock to Mr. Mark Wilson for consulting services rendered in connection with the Restructure and Settlement Agreement. The shares of common stock were issued at fair market 10 value at the time of issuance. The issuance of these shares was made in reliance upon the exceptions from registration requirement of the Securities Act contained in Section 4 (2) on the basis that such issuance did not involve a public offering. Immediately after receiving the shares, Mr. Wilson gifted 1,000,000 of these shares to Della Wilson, Mr. Wilson's wife. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 21, 2002, the Company received the approval of the Company's shareholders for a one for one hundred reverse stock split. This approval was obtained by the written consent of shareholders holding 42,028,101 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. ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Articles of Incorporation* 3.2 Bylaws* 10.1 Restructure and Settlement Agreement dated as of November 5, 2001 by and among MB Software Corporation, Healthcare Innovations, LLC, Imagine Investments, Inc., and XHI(2), Inc. (incorporated by reference to the Company's Form 10-QSB for the fiscal quarter ended September 30, 2001) 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 June 30, 2002. 11 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: Aug. 12, 2003 /s/ Scott A. Haire --------------------------------------- Scott A. Haire, Chairman of the Board, Chief Executive Officer and President (Principal Financial Officer) 12 Index of Exhibits 3.1 Articles of Incorporation* 3.2 Bylaws* 10.1 Restructure and Settlement Agreement dated as of November 5, 2001 by and among MB Software Corporation, Healthcare Innovations, LLC, Imagine Investments, Inc., and XHI(2), Inc. (incorporated by reference to the Company's Form 10-QSB for the fiscal quarter ended September 30, 2001) 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 13 EX-3.1 3 mb10qsbex31063002.txt ARTICLES OF INCORPORATION EXHIBIT 3.1 ARTICLES OF INCORPORATION OF eAPPLIANCE INNOVATIONS, INC. The undersigned natural person, of the age of eighteen years or more, a resident of the State of Texas, acting as an incorporator of a corporation under the Texas Business Corporation Act, does hereby adopt the following Articles of Incorporation for such corporation: ARTICLE ONE The name of the Corporation is "eAppliance Innovations, Inc." ARTICLE TWO The Corporation will have perpetual existence. ARTICLE THREE The purpose for which the Corporation is organized is the transaction of any or all lawful business for which corporations may be incorporated under the Texas Business Corporation Act. ARTICLE FOUR The aggregate number of shares of capital stock that the Corporation will have authority to issue is one hundred and fifty-one million (151,000,000), one hundred and fifty million (150,000,000) of which will be shares of Common Stock, having a par value of $.001 per share, and one million (1,000,000) of which will be shares of preferred stock, having a par value of $10 per share. Preferred stock may be issued in one or more series as may be determined from time to time by the Board of Directors. All shares of any one series of preferred stock will be identical except as to the date of issue and the dates from which dividends on shares of the series issued on different dates will cumulate, if cumulative. Authority is hereby expressly granted to the Board of Directors to authorize the issuance of one or more series of preferred stock, and to fix by resolution or resolutions providing for the issue of each such series the voting powers, designations, preferences, and relative, participating, optional, redemption, conversion, exchange or other special rights, qualifications, limitations or restrictions of such series, and the number of shares in each series, to the full extent now or hereafter permitted by law. ARTICLE FIVE No shareholder of the Corporation will, solely by reason of holding shares of any class, have any preemptive or preferential right to purchase or subscribe for any shares of the Corporation, now or hereafter to be authorized, or any notes, debentures, bonds or other securities convertible into or carrying warrants, rights or options to purchase shares of any class, now or hereafter to be authorized, whether or not the issuance of any such shares or such notes, 1 debentures, bonds or other securities would adversely affect the dividend, voting or any other rights of such shareholder. The Board of Directors may authorize the issuance of, and the Corporation may issue, shares of any class of the Corporation, or any notes, debentures, bonds or other securities convertible into or carrying warrants, rights or options to purchase any such shares, without offering any shares of any class to the existing holders of any class of stock of the Corporation. ARTICLE SIX Shareholders of the Corporation will not have the right of cumulative voting for the election of directors. ARTICLE SEVEN Any action that under the provisions of the Texas Business Corporation Act would, but for this Article Seven, be required to be authorized by the affirmative vote of the holders of any specified portion of the shares of the Corporation will require the approval of the holders of a majority of the shares of the Corporation entitled to vote on the action. ARTICLE EIGHT Pursuant to Article 13.04 of the Texas Business Corporation Act, the Corporation elects not to be governed by Article 13.03, the Business Combination Law, of the Texas Business Corporation Act. ARTICLE NINE Any action required or permitted by law, these Articles of Incorporation or the Bylaws of the Corporation to be taken at a meeting of the shareholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall have been signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted. Prompt notice of the taking of any action by shareholders without a meeting by less than unanimous written consent shall be given to those shareholders who did not consent in writing to the action. ARTICLE TEN The Board of Directors is expressly authorized to alter, amend or repeal the Bylaws of the Corporation or to adopt new Bylaws. ARTICLE ELEVEN (a) The Corporation will, to the fullest extent permitted by, and in accordance with the Texas Business Corporation Act, as the same exists or may hereafter be amended, indemnify any and all persons who are or were serving as director or officer of the Corporation, or who are or were serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee or employee of another corporation, partnership, limited liability company, joint venture, sole proprietorship, trust, employee benefit 2 plan or other enterprise, from and against any and all of the expenses, liabilities or other matters referred to in or covered by the Texas Business Corporation Act. Such indemnification may be provided pursuant to any Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in the capacity of director or officer and as to action in another capacity while holding such office, will continue as to a person who has ceased to be a director or officer and inure to the benefit of the heirs, executors and administrators of such a person. (b) If a claim under paragraph (a) of this Article is not paid in full by the Corporation within 30 days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant will be entitled to be paid also the expense of prosecuting such claim. It will be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct that make it permissible under the laws of the State of Texas for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense will be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the laws of the State of Texas nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, will be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. ARTICLE TWELVE To the fullest extent permitted by the laws of the State of Texas as the same exist or may hereafter be amended, a director of the Corporation will not be liable to the Corporation or its shareholders for monetary damages for an act or omission in the director's capacity as a director. Any repeal or modification of this Article will not increase the personal liability of any director of the Corporation for any act or occurrence taking place before such repeal or modification, or adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. The provisions of this Article shall not be deemed to limit or preclude indemnification of a director by the Corporation for any liability of a director that has not been eliminated by the provisions of this Article. ARTICLE THIRTEEN The Corporation will not commence business until it has received for the issuance of shares consideration of the value of at least $1,000. ARTICLE FOURTEEN The street address of the Corporation's initial registered office is 2225 E. Randol Mill Road, Suite 305, Arlington, Texas 76011, and the name of its initial registered agent at that address is Scott A. Haire, 2225 E. Randol Mill Road, Suite 305, Arlington, Texas 76011. 3 ARTICLE FIFTEEN The number of directors constituting the Board of Directors of the Corporation, which shall be composed of not less than one nor more than eight, shall initially be one (1) and the name and mailing addresses of such person, who is to serve as a director until the first annual meeting of the shareholders or until his successors are elected and qualified, is: Scott A. Haire 2225 E. Randol Mill Road, Suite 305 Arlington, Texas 76011 Hereafter, the number of directors will be determined in accordance with the Bylaws of the Corporation. ARTICLE SIXTEEN The name and address of the incorporator are: Robert J. Johnston 901 Main Street, Suite 6000 Dallas, Texas 75202 EXECUTED as of the 14th day of December, 2001. By:________________________ Robert J. Johnston Incorporator 4 EX-3.2 4 mb10qsbex32063002.txt BYLAWS OF EAPPLIANCE INNOVATIONS, INC. BYLAWS OF eAPPLICANE INNOVATIONS, INC. TABLE OF CONTENTS ARTICLE I......................................................................1 OFFICES.....................................................................1 Section 1.1 Registered Office............................................1 Section 1.2 Other Offices................................................1 ARTICLE II.....................................................................1 SHAREHOLDERS................................................................1 Section 2.1 Place of Meetings............................................1 Section 2.2 Annual Meeting...............................................1 Section 2.3 List of Shareholders.........................................1 Section 2.4 Special Meetings.............................................2 Section 2.5 Notice.......................................................2 Section 2.6 Quorum.......................................................2 Section 2.7 Voting.......................................................2 Section 2.8 Method of Voting.............................................2 Section 2.9 Record Date; Closing Transfer Books..........................3 Section 2.10 Action by Consent.........................................3 ARTICLE III....................................................................3 BOARD OF DIRECTORS..........................................................3 Section 3.1 Management...................................................3 Section 3.2 Qualification; Election; Term................................3 Section 3.3 Number.......................................................3 Section 3.4 Removal......................................................4 Section 3.5 Vacancies....................................................4 Section 3.6 Place of Meetings............................................4 Section 3.7 Annual Meeting...............................................4 Section 3.8 Regular Meetings.............................................4 Section 3.9 Special Meetings.............................................4 Section 3.10 Quorum....................................................4 Section 3.11 Interested Directors......................................4 Section 3.12 Committees................................................5 Section 3.13 Action by Consent.........................................5 Section 3.14 Compensation of Directors.................................5 Section 3.15 Organization..............................................5 ARTICLE IV.....................................................................5 NOTICE......................................................................5 Section 4.1 Form of Notice...............................................5 Section 4.2 Waiver.......................................................6 ARTICLE V......................................................................6 OFFICERS AND AGENTS.........................................................6 Section 5.1 In General...................................................6 Section 5.2 Election.....................................................6 Section 5.3 Other Officers and Agents....................................6 Section 5.4 Compensation.................................................6 Section 5.5 Term of Office and Removal...................................6 Section 5.6 Employment and Other Contracts...............................7 i Section 5.7 Chairman of the Board of Directors...........................7 Section 5.8 President....................................................7 Section 5.9 Vice Presidents..............................................7 Section 5.10 Secretary.................................................7 Section 5.11 Assistant Secretaries.....................................7 Section 5.12 Treasurer.................................................8 Section 5.13 Assistant Treasurers......................................8 Section 5.14 Bonding...................................................8 ARTICLE VI.....................................................................8 CERTIFICATES REPRESENTING SHARES............................................8 Section 6.1 Form of Certificates.........................................8 Section 6.2 Lost Certificates............................................8 Section 6.3 Transfer of Shares...........................................9 Section 6.4 Transfer Agent...............................................9 Section 6.5 Registered Shareholders......................................9 ARTICLE VII...................................................................10 GENERAL PROVISIONS.........................................................10 Section 7.1 Dividends...................................................10 Section 7.2 Reserves....................................................10 Section 7.3 Telephone and Similar Meetings..............................10 Section 7.4 Books and Records...........................................10 Section 7.5 Fiscal Year.................................................10 Section 7.6 Seal. 10 Section 7.7 Indemnification.............................................11 Section 7.8 Insurance...................................................11 Section 7.9 Resignation.................................................11 Section 7.10 Amendment of Bylaws......................................11 Section 7.11 Invalid Provisions.......................................11 Section 7.12 Relation to Articles of Incorporation....................11 ii BYLAWS OF eAPPLIANCE INNOVATIONS, INC. ARTICLE I OFFICES Section 1.1 Registered Office. The registered office and registered agent of 2225 E. Randol Mill Road, Suite 305, Arlington, Texas 76011 (the "Corporation") will be as from time to time set forth in the Corporation's Articles of Incorporation or in any certificate filed with the Secretary of State of the State of Texas to amend such information. Section 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Texas, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II SHAREHOLDERS Section 2.1 Place of Meetings. All meetings of the shareholders for the election of Directors will be held at the principal office of the Corporation or at such place, within or without the State of Texas, as may be fixed from time to time by the Board of Directors. Meetings of shareholders for any other purpose may be held at such time and place, within or without the State of Texas, as may be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2.2 Annual Meeting. An annual meeting of the shareholders will be held at such time as may be determined by the Board of Directors, at which meeting the shareholders will elect a Board of Directors and transact such other business as may properly be brought before the meeting. Section 2.3 List of Shareholders. At least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of voting shares registered in the name of each, will be prepared by the officer or agent having charge of the stock transfer books. Only shareholders of record on the books of the Corporation shall be entitled to be treated by the Corporation as holders in fact of the shares standing in their respective names, and the Corporation shall not be bound to recognize any equitable or other claim to, or interest in, any shares on the part of any other person, firm or Corporation, whether o not it shall have express or other notice thereof, except as expressly provided by the laws of the state of the Corporation's incorporation. Such list will be kept on file at the registered office of the Corporation for a period of ten (10) days prior to such meeting and will be subject to inspection by any shareholder at any time during usual business hours. Such list will be produced and kept open at the time and place of the meeting during the whole time thereof, and will be subject to the inspection of any shareholder who may be present. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine the record or transfer books or to vote at any meeting of shareholders. 1 Section 2.4 Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by law, the Articles of Incorporation or these Bylaws, may be called by the Chairman of the Board, the President or the Board of Directors, or will be called by the holders of not less than ten percent (10%) of all the shares issued, outstanding and entitled to vote. Such request will state the purpose or purposes of the proposed meeting. Business transacted at all special meetings will be confined to the purposes stated in the notice of the meeting unless all shareholders entitled to vote are present and consent. Section 2.5 Notice. Written or printed notice stating the place, day and hour of any meeting of the shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, will be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at the meeting. If mailed, such notice will be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. Section 2.6 Quorum. With respect to any matter, the presence in person or by proxy of the holders of a majority of the shares entitled to vote on that matter will be necessary and sufficient to constitute a quorum for the transaction of business except as otherwise provided by law, or these Articles of Incorporation. If, however, such quorum is not present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, will have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each shareholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. Section 2.7 Voting. When a quorum is present at any meeting of the Corporation's shareholders, the vote of the holders of a majority of the shares entitled to vote that are actually voted on any question brought before the meeting will be sufficient to decide such question; provided that if the question is one upon which, by express provision of law, the Articles of Incorporation or these Bylaws, a different vote is required, such express provision shall govern and control the decision of such question. Section 2.8 Method of Voting. Each outstanding share of the Corporation's capital stock, regardless of class or series, will be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or series are limited or denied by the Articles of Incorporation, as amended from time to time. At any meeting of the shareholders, every shareholder having the right to vote will be entitled to vote in person or by proxy executed in writing by such shareholder and bearing a date not more than eleven (11) months prior to such meeting, unless such instrument provides for a longer period. A telegram, telex, 2 cablegram or similar transmission by the shareholder, or a photographic, photostatic, facsimile or similar reproduction of a writing executed by the shareholder, shall be treated as an execution in writing for purposes of the preceding sentence. Each proxy will be revocable unless expressly provided therein to be irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. Such proxy will be filed with the Secretary of the Corporation prior to or at the time of the meeting. Voting for Directors will be in accordance with Article III of these Bylaws. Voting on any question or in any election may be by voice vote or show of hands unless the presiding officer orders or any shareholder demands that voting be by written ballot. Section 2.9 Record Date; Closing Transfer Books. The Board of Directors may fix in advance a record date for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, such record date to be not less than ten (10) nor more than [fifty (50)] days prior to such meeting, or the Board of Directors may close the stock transfer books for such purpose for a period of not less than ten (10) nor more than [fifty (50)] days prior to such meeting. In the absence of any action by the Board of Directors, the date upon which the notice of the meeting is mailed will be the record date. Section 2.10 Action by Consent. Except as prohibited by law, any action required or permitted by law, the Articles of Incorporation or these Bylaws to be taken at a meeting of the shareholders of the Corporation may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and will be delivered to the Corporation by delivery to its registered office in Texas, its principal place of business or an officer or agent of the Corporation having custody of the minute book. ARTICLE III BOARD OF DIRECTORS Section 3.1 Management. The business and affairs of the Corporation will be managed by or under the direction of the Board of Directors, who may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Articles of Incorporation or these Bylaws directed or required to be exercised or done by the shareholders. Section 3.2 Qualification; Election; Term. None of the Directors need be a shareholder of the Corporation or a resident of the State of Texas. The Directors will be elected by plurality vote at the annual meeting of the shareholders, except as hereinafter provided, and each Director elected will hold office until whichever of the following occurs first: the next succeeding annual meeting and his successor is elected and qualified, his resignation, his removal from office by the shareholders or his death. Section 3.3 Number. The number of Directors of the Corporation will be at least one (1) and not more than eight (8). The number of Directors authorized will be fixed as the Board of Directors may from time to time designate, or if no such designation has been made, the number of Directors will be the same as the number of members of the initial Board of Directors as set forth in the Articles of Incorporation. [No decrease in the number of Directors will have the effect of shortening the term of any incumbent Director]. 3 Section 3.4 Removal. Any Director may be removed either for or without cause at any special meeting of shareholders by the affirmative vote of at least a majority in number of shares of the shareholders present in person or represented by proxy at such meeting and entitled to vote for the election of such Director. Section 3.5 Vacancies. Any vacancy occurring in the Board of Directors by death, resignation, removal or otherwise may be filled by an affirmative vote of at least a majority of the remaining Directors though less than a quorum of the Board of Directors. A Director elected to fill a vacancy will be elected for the unexpired term of his predecessor in office. A directorship to be filled by reason of an increase in the number of Directors may be filled by the Board of Directors for a term of office only until the next election of one or more Directors by the shareholders. Section 3.6 Place of Meetings. Meetings of the Board of Directors, regular or special, may be held at such place within or without the State of Texas as may be fixed from time to time by the Board of Directors. Section 3.7 Annual Meeting. The first meeting of each newly elected Board of Directors will be held without further notice immediately following the annual meeting of shareholders and at the same place, unless by unanimous consent, the Directors then elected and serving shall change such time or place. Section 3.8 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place as is from time to time determined by resolution of the Board of Directors. Section 3.9 Special Meetings. Special meetings of the Board of Directors may be called by the President on oral or written notice to each Director, given either personally, by telephone, by telegram or by mail; special meetings will be called on the written request of at least two (2) Directors. Except as may be otherwise expressly provided by law, the Articles of Incorporation or these Bylaws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in a notice or waiver of notice. Section 3.10 Quorum. At all meetings of the Board of Directors the presence of a majority of the number of Directors then in office will be necessary and sufficient to constitute a quorum for the transaction of business, and the affirmative vote of at least a majority of the Directors present at any meeting at which there is a quorum will be the act of the Board of Directors, except as may be otherwise specifically provided by law, the Articles of Incorporation or these Bylaws. If a quorum is not present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum is present. Section 3.11 Interested Directors. No contract or transaction between the Corporation and one or more of its Directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of the Corporation's Directors or officers are Directors or officers or have a financial interest, will be void or voidable solely for this reason, solely because the Director or officer is present at or 4 participates in the meeting of the Board of Directors or committee thereof that authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (i) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum, (ii) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the shareholders. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction. Section 3.12 Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate committees, each committee to consist of two (2) or more Directors of the Corporation, which committees will have such power and authority and will perform such functions as may be provided in such resolution. Such committee or committees will have such name or names as may be designated by the Board of Directors and will keep regular minutes of their proceedings and report the same to the Board of Directors when required. Section 3.13 Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee of the Board of Directors may be taken without such a meeting if a consent or consents in writing, setting forth the action so taken, is signed by all the members of the Board of Directors or such committee, as the case may be. Section 3.14 Compensation of Directors. Directors will receive such compensation for their services and reimbursement for their expenses as the Board of Directors, by resolution, may establish; provided that nothing herein contained will be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 3.15 Organization. The Board of Directors shall elect a Chairman to preside at each meeting of the Board of Directors. The Board of Directors shall elect a Secretary to record the discussions and resolutions of each meeting. ARTICLE IV NOTICE Section 4.1 Form of Notice. Whenever by law, the Articles of Incorporation or these Bylaws, notice is to be given to any Director or shareholder, and no provision is made as to how such notice is to be given, such notice may be given: (i) in writing, by mail, postage prepaid, addressed to such Director or shareholder at such address as appears on the books of the Corporation at least three (3) days prior to the meeting or (ii) in any other method permitted by law. Any notice required or permitted to be given by mail will be deemed to be given at the time the same is deposited in the United States mail. 5 Section 4.2 Waiver. Whenever any notice is required to be given to any shareholder or Director of the Corporation as required by law, the Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated in such notice, will be equivalent to the giving of such notice. Attendance of a shareholder or Director at a meeting will constitute a waiver of notice of such meeting, except where such shareholder or Director attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Members of the Board of Directors or any committee designed by such Board may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting. ARTICLE V OFFICERS AND AGENTS Section 5.1 In General. The officers of the Corporation will be elected by the Board of Directors and will be a President, Secretary and a Treasurer, each of whom shall be eighteen years old or older and who shall be elected by the Board of Directors at its annual meeting. The Board of Directors may also elect a Chairman of the Board, Vice Chairman of the Board, Vice Presidents, Assistant Vice Presidents, a Treasurer, and Assistant Secretaries and Assistant Treasurers. Any two (2) or more offices may be held by the same person. Section 5.2 Election. The Board of Directors, at its first meeting after each annual meeting of shareholders, will elect the officers, none of whom need be a member of the Board of Directors. Section 5.3 Other Officers and Agents. The Board of Directors may also elect and appoint such other officers and agents as it deems necessary, who will be elected and appointed for such terms and will exercise such powers and perform such duties as may be determined from time to time by the Board of Directors. Section 5.4 Compensation. The compensation of all officers and agents of the Corporation will be fixed by the Board of Directors or any committee of the Board of Directors, if so authorized by the Board of Directors. Section 5.5 Term of Office and Removal. Each officer of the Corporation will hold office until the next succeeding annual meeting of the Board and until their respective successors are elected and shall qualify, his death, his resignation or removal from office, or the election and qualification of his successor, whichever occurs first. Any officer or agent elected or appointed by the Board of Directors may be removed at any time, for or without cause, by the affirmative vote of a majority of the entire Board of Directors, but such removal will not prejudice the contract rights, if any, of the person so removed. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. 6 Section 5.6 Employment and Other Contracts. The Board of Directors may authorize any officer or officers or agent or agents to enter into any contract or execute and deliver any instrument in the name or on behalf of the Corporation, and such authority may be general or confined to specific instances. The Board of Directors may, when it believes the interest of the Corporation will best be served thereby, authorize executive employment contracts that will have terms no longer than ten (10) years and contain such other terms and conditions as the Board of Directors deems appropriate. Nothing herein will limit the authority of the Board of Directors to authorize employment contracts for shorter terms. Section 5.7 Chairman of the Board of Directors. If the Board of Directors has elected a Chairman of the Board, he will preside at all meetings of the shareholders and the Board of Directors. Except where by law the signature of the President is required, the Chairman will have the same power as the President to sign all certificates, contracts and other instruments of the Corporation. During the absence or disability of the President, the Chairman will exercise the powers and perform the duties of the President. Section 5.8 President. The President will be the Chief Executive Officer of the Corporation and, subject to the control of the Board of Directors, will supervise and control all of the business and affairs of the Corporation. He will, in the absence of the Chairman of the Board, preside at all meetings of the shareholders and the Board of Directors. The President will have all powers and perform all duties incident to the office of President and will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe. Section 5.9 Vice Presidents. Each Vice President will have the usual and customary powers and perform the usual and customary duties incident to the office of Vice President, and will have such other powers and perform such other duties as the Board of Directors or any committee thereof may from time to time prescribe or as the President may from time to time delegate to him. In the absence or disability of the President and the Chairman of the Board, a Vice President designated by the Board of Directors, or in the absence of such designation the Vice Presidents in the order of their seniority in office, will exercise the powers and perform the duties of the President. Section 5.10 Secretary. The Secretary will attend all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. The Secretary will perform like duties for the Board of Directors and committees thereof when required. The Secretary will give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors. The Secretary will keep in safe custody the seal of the Corporation. The Secretary will be under the supervision of the President. The Secretary will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate to him. Section 5.11 Assistant Secretaries. The Assistant Secretaries in the order of their seniority in office, unless otherwise determined by the Board of Directors, will, in the absence or disability of the Secretary, exercise the powers and perform the duties of the Secretary. They will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate to them. 7 Section 5.12 Treasurer. The Treasurer will have responsibility for the receipt and disbursement of all corporate funds and securities, will keep full and accurate accounts of such receipts and disbursements, and will deposit or cause to be deposited all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer will render to the Directors whenever they may require it an account of the operating results and financial condition of the Corporation, and will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate to him. Section 5.13 Assistant Treasurers. The Assistant Treasurers in the order of their seniority in office, unless otherwise determined by the Board of Directors, will, in the absence or disability of the Treasurer, exercise the powers and perform the duties of the Treasurer. They will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate to them. Section 5.14 Bonding. The Corporation may secure a bond to protect the Corporation from loss in the event of defalcation by any of the officers, which bond may be in such form and amount and with such surety as the Board of Directors may deem appropriate. ARTICLE VI CERTIFICATES REPRESENTING SHARES Section 6.1 Form of Certificates. Certificates, in such form as may be determined by the Board of Directors, representing shares to which shareholders are entitled, will be delivered to each shareholder. Such certificates will be consecutively numbered and entered in the stock book of the Corporation as they are issued. Each certificate will state on the face thereof the holder's name, the number, class of shares, and the par value of such shares or a statement that such shares are without par value. They will be signed by the Chairman or Vice Chairman of the Board of Directors or by the President or a Vice President and by the Treasurer or an Assistant Treasurer or by the Secretary or an Assistant Secretary, and may be sealed with the seal of the Corporation or a facsimile thereof. If any certificate is countersigned by a transfer agent, or an assistant transfer agent or registered by a registrar, either of which is other than the Corporation or an employee of the Corporation, the signatures of the Corporation's officers may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on such certificate or certificates, ceases to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the Corporation or its agents, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. Section 6.2 Lost Certificates. The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed and lodge the same with the Secretary of the Corporation, accompanied by a signed application for a new certificate. Thereupon, and upon the giving of a satisfactory bond of indemnity to the Corporation not exceeding an amount 8 double the value of the shares as represented by such certificate (the necessity for such bond and the amount required to be determined by the President and Treasurer of the Corporation), a new certificate may be issued of the same tenor and representing the same number, class and series as were represented by the certificate alleged to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it may require and/or to give the Corporation a bond, in such form, in such sum, and with such surety or sureties as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. When a certificate has been lost, apparently destroyed or wrongfully taken, and the holder of record fails to notify the Corporation within a reasonable time after such holder has notice of it, and the Corporation registers a transfer of the shares represented by the certificate before receiving such notification, the holder of record is precluded from making any claim against the Corporation for the transfer of a new certificate. Section 6.3 Transfer of Shares. Subject to the terms of any shareholder agreement relating to the transfer of shares or other transfer restrictions contained in the Certificate of Incorporation or authorized therein, shares of stock will be transferable only on the books of the Corporation by the holder thereof in person or by such holder's duly authorized attorney. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer [and payment of all taxes therefore], it will be the duty of the Corporation or the transfer agent of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6.4 Transfer Agent. Unless otherwise specified by the Board of Directors by resolution, the Secretary of the Corporation shall act as transfer agent of the certificates representing the shares of stock of the Corporation. He shall maintain a stock transfer book, the stubs in which shall set forth among other things, the names and addresses of the holders of all issued shares of the Corporation, the number of shares held by each, the certificate numbers representing such shares, the date of issue of the certificates representing such shares, and whether or not such shares originate from original issue or from transfer. Subject to Section 2.3, the names and addresses of the shareholders as they appear on the stubs of the stock transfer book shall be conclusive evidence as to who are the shareholders of record and as such entitled to receive notice of the meetings of shareholders; to vote at such meetings; to examine the list of the shareholders entitled to vote at meetings; to receive dividends; and to own, enjoy and exercise any other property or rights deriving from such shares against the Corporation. Each shareholder shall be responsible for notifying the Secretary in writing of any change in his name or address and failure so to do will relieve the Corporation, its directors, officers and agents, from liability for failure to direct notices or other documents, or pay over or transfer dividends or other property or rights, to a name or address other than the name and address appearing on the stub of the stock transfer book. Section 6.5 Registered Shareholders. The Corporation will be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it has express or other notice thereof, except as otherwise provided by law. 9 ARTICLE VII GENERAL PROVISIONS Section 7.1 Dividends. Dividends upon the outstanding shares of the Corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting. Dividends may be declared and paid in cash, in property, or in shares of the Corporation, subject to the provisions of the Texas Business Corporation Act and the Articles of Incorporation. The Board of Directors may fix in advance a record date for the purpose of determining shareholders entitled to receive payment of any dividend, such record date to be not more than [fifty (50)] days prior to the payment date of such dividend, or the Board of Directors may close the stock transfer books for such purpose for a period of not more than [fifty (50)] days prior to the payment date of such dividend. In the absence of any action by the Board of Directors, the date upon which the Board of Directors adopts the resolution declaring such dividend will be the record date. Section 7.2 Reserves. There may be created by resolution of the Board of Directors out of the surplus of the Corporation such reserve or reserves as the Directors from time to time, in their discretion, deem proper to provide for contingencies, or to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the Directors may deem beneficial to the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. Surplus of the Corporation to the extent so reserved will not be available for the payment of dividends or other distributions by the Corporation. Section 7.3 Telephone and Similar Meetings. Shareholders, Directors and committee members may participate in and hold meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Participation in such a meeting will constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting had not been lawfully called or convened. Section 7.4 Books and Records. The Corporation will keep correct and complete books and records of account and minutes of the proceedings of its shareholders and Board of Directors, and will keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each. Section 7.5 Fiscal Year. The fiscal year of the Corporation will be fixed by resolution of the Board of Directors. Section 7.6 Seal. The Corporation may have a seal, and such seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Any officer of the Corporation will have authority to affix the seal to any document requiring it. 10 Section 7.7 Indemnification. The Corporation will indemnify its Directors to the fullest extent permitted by the Texas Business Corporation Act and may, if and to the extent authorized by the Board of Directors, so indemnify its officers and any other person whom it has the power to indemnify against liability, reasonable expense or other matter whatsoever. Section 7.8 Insurance. The Corporation may at the discretion of the Board of Directors purchase and maintain insurance on behalf of the Corporation and any person whom it has the power to indemnify pursuant to law, the Articles of Incorporation, these Bylaws or otherwise. Section 7.9 Resignation. Any Director, officer or agent may resign by giving written notice to the President or the Secretary. Such resignation will take effect at the time specified therein or immediately if no time is specified therein. Unless otherwise specified therein, the acceptance of such resignation will not be necessary to make it effective. Section 7.10 Amendment of Bylaws. These Bylaws may be altered, amended or repealed at any meeting of the Board of Directors at which a quorum is present, by the affirmative vote of a majority of the Directors present at such meeting. Section 7.11 Invalid Provisions. If any part of these Bylaws is held invalid or inoperative for any reason, the remaining parts, so far as possible and reasonable, will be valid and operative. Section 7.12 Relation to Articles of Incorporation. These Bylaws are subject to, and governed by, the Articles of Incorporation. 11 EX-31.1 5 mb10qsbex311063002.txt SECTION 302 CERTIFICATION OF CEO & CFO EXHIBIT 31.1 CERTIFICATION I, Scott A. Haire, certify that: 1. I have reviewed this quarterly report on Form 10-Q of MB Software, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function); a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: Aug. 12 , 2003 /S/ Scott A. Haire Scott A. Haire, Chairman of the Board, (Chief Executive Officer and Principal Financial Officer) EX-32.1 6 mb10qsbex321063002.txt SECTION 906 CERTIFICATION OF CEO & CFO EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of (the Company) on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Scott A. Haire, Chief Executive Officer and principal financial officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ Scott A. Haire Scott A. Haire, Chairman of the Board, (Chief Executive Officer and Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----