-----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, HyZG1+TRVE3mesUh/5kQajkQaHxAY5nQ2mRfRV/McnXKX6JK+NwxnOuHSdQFGY1G aZQGMC24db7sBle/J3DSnQ== 0001010549-07-000254.txt : 20070326 0001010549-07-000254.hdr.sgml : 20070326 20070326154248 ACCESSION NUMBER: 0001010549-07-000254 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070326 DATE AS OF CHANGE: 20070326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MB SOFTWARE CORP CENTRAL INDEX KEY: 0000714256 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 592219994 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-11808 FILM NUMBER: 07718050 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 10KSB/A 1 mbsc10ksba123106.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB-A [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006 ------------------------------------------------------ [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission File Number 0-11808 MB SOFTWARE CORPORATION (Exact name of Registrant as specified in its charter) Texas 59-2220004 ------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 777 Main Street, Suite 3100, Fort Worth Texas 76102 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 633-9400 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered ----------------------- ------------------------------------------- Common OTC BULLETIN BOARD Securities registered pursuant to Section 12(g) of the Act: Common Stock $ .001 par value (Title of Class) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such 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. [ X ] Yes [ ] No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X] Issuer's revenues for its most recent fiscal year: $189,755. The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the quoted market price ($.50) at which the common equity was sold as of December 31, 2006 was approximately $1,332,241. As of December 31, 2006, 16,145,432 shares of the Issuer's $.001 par value common stock were outstanding. Transitional Small Business Disclosure Format: Yes [ ] No [X] MB SOFTWARE CORPORATION Form 10-KSB For the Year Ended December 31, 2006 Page - ----------- ITEM 1. BUSINESS ...........................................................1 ITEM 2. PROPERTIES...........................................................7 ITEM 3. LEGAL PROCEEDINGS....................................................7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................7 ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS..................................................7 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............8 ITEM 7. FINANCIAL STATEMENTS ................................................9 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................................................9 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.................................................10 ITEM 10. EXECUTIVE COMPENSATION.............................................11 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........................................................12 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................13 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K....................................13 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................14 PART 1 Item 1. DESCRIPTION OF BUSINESS Background MB Software Corporation was incorporated in 1982 as a Colorado corporation and was reincorporated in the State of Texas in 2002. References in this report to "we" or "the Company" refer to MB Software Corporation. The Company's current focus is developing and marketing products for the advanced wound care market, as pursued through our wholly-owned subsidiary, Wound Care Innovations, LLC, a Nevada limited liability company. We acquired Wound Care effective August 20, 2004, through a merger of Wound Care with a newly formed Company subsidiary. The consideration paid by the Company for Wound Care consisted of an aggregate of 6,000,000 shares of our common stock. These shares were issued to H.E.B., LLC, a Nevada limited liability company, and to Mr. Araldo Cossutta, the sole owners of Wound Care. Mr. Scott A. Haire, our Chairman of the Board, Chief Executive Officer and President is the majority owner and managing member of HEB, and Mr. Cossutta is a member of our Board of Directors. In connection with the acquisition of Wound Care, HEB and Mr. Cossutta also agreed to convert an aggregate of $1,800,612 of Wound Care's debt and other obligations owed to HEB and Mr. Cossutta into an aggregate of 2,257,303 additional shares of our common stock. Wound Care has certain exclusive and nonexclusive distribution rights to CellerateRx(TM) products, a collagen-based wound care product line based upon a patented molecular form of collagen. Wound Care's distribution rights for these products are exclusive in the domestic medical, retail, government and first aid human use wound care markets, as well as in several international markets; however such rights are currently in default as described below. These products are FDA cleared for marketing for the following indications: pressure ulcers, diabetic ulcers, surgical wounds, ulcers due to arterial insufficiency, traumatic wounds, 1st and 2nd degree burns, and superficial wounds. We believe that these products are unique in composition, applicability, clinical performance, and demonstrate the ability to reduce costs associated with standard wound management. CellerateRx(TM) is a trademark of Applied Nutritionals, Inc. We have been pre-marketing CellerateRX products to select markets and have received positive user feedback from many healthcare markets, including long term care facilities, wound care centers, hospitals, homecare agencies, and durable medical equipment companies. Our pre-marketing work is beginning to bear results that we believe will generate additional revenues during 2007. We are still in the early stage of our development and we will have to raise additional capital, either through the sale of equity or through debt financing to meet our contractual obligations, and continue operations. Wound Care Industry The US wound care market is currently estimated at six billion dollars, and serves between three to five million patients annually with wounds resulting from diabetes, arterial insufficiency, pressure caused by immobility and other causes. This market is currently estimated to be growing at 10% per year. The wound care market in the US is made up of healthcare professionals and organizations that provide care for those with wounds, durable medical equipment companies that supply ambulatory patients with products, and product companies that market drugs, devices, and methodologies to healthcare organizations and patients. Presently, Wound Care focuses strictly on sales and marketing activities directed toward professionals and organizations that will either resell CellerateRx products or use them in the course of treating their patient's wounds. Within the wound care products market, there are two typical groups of products: drugs and devices. CellerateRx(TM) products currently classified by the FDA as Class I medical devices, and are further classified as dressings. Although collagen has been used for a number of years as a component of wound care dressings, we believe that the patented form of collagen in CellerateRx(TM) products allows these dressings to have a more active role in wound therapy than other currently available collagens based wound care dressings. The dressing market in the United States is currently estimated to be $2.5 billion per year. Competition The wound care market is served by a number of large, multi-product line companies offering a suite of products to the market. CellerateRx(TM) products compete with all primary dressings, some prescription therapies (drugs), and other medical devices. Manufacturers and distributors of competitive products include: Smith & Nephew, Johnson & Johnson, Healthpoint, and Biocore. Many of our competitors are significantly larger that we are and have more financial and personnel resources that we do. Consequently, we will be at a competitive disadvantage in marketing and selling our products into the marketplace. We believe, however, that the patented molecular form of collagen allows CellerateRx(TM) products to outperform currently available non-active dressings, reduce the cost of wound management, and replace a variety of other products with a single primary dressing. General Business Plan The Company's general business plan is to introduce CellerateRX products to select national and regional healthcare provider organizations, and focus on geographically-targeted marketing. CellerateRx(TM) products are currently being used by wound care providers of all types, and are getting to market through a variety of distribution channels. CellerateRx(TM) products are currently approved for reimbursement under Medicare Part B. As a consequence, the professional medical market is, and will remain the primary focus of our marketing and sales efforts for the immediate future. Products CellerateRX Gel and Powder are our two primary products for the professional healthcare market. Both products contain the patented form of collagen and can be used on a variety of wounds, wound states, and phases. We believe that the spectrum of use of CellerateRx(TM) products allows us to market to a wide range of customers, and enables us to pursue relationships with compatible product companies for potential joint marketing activities. Both gel and powered products are sold, physician ordered, and reimbursed (when applicable) by the gram. Marketing, Sales, and Distribution The Company anticipates building and supporting a limited sales and marketing force directed toward securing key high profile accounts, penetrating select geographic markets, and supporting the efforts of our resellers and distributors. The wound care products market has a variety of overlapping distribution channels, with many customers able to procure products in multiple ways. With an intended limited internal sales force, our goal is to market directly to large accounts and open distribution channels preferred by those clients, as well as marketing through traditional online, offline, trade show and local activities. Applied Nutritionals is our exclusive supplier of products. Packaging, inventory management, and shipping activities are currently outsourced to Diamond Contract Manufacturing, a non-affiliated entity who provides packaging, warehousing, and fulfillment services from their Rochester, NY facilities. R & D We conduct our research and development activities, in conjunction with Applied Nutritionals. Although our efforts are currently focused on marketing and selling our current product lines, we anticipate that we may develop derivative products, utilizing the patented form of collagen, for other markets and applications. 2 Clinical Studies Although no clinical studies are currently planned, we intend to conduct a number of clinical studies for the purposes of quantifying the benefits of CellerateRX. We anticipate planning study design and management in the near future. Risk Factors We have sought to identify what we believe to be the most significant risks to our business. However, we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our Common Stock. We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could affect us. Lack of Operating History We acquired Wound Care in August of 2004 and we have not been profitable to date. Although we have seen our sales increase in the two and a half years since the acquisition, we cannot predict if and when we may become profitable. Even if we become profitable in the future, we cannot accurately predict the level of, or our ability to sustain profitability. Because we have not yet been profitable and cannot predict any level of future profitability, you bear the risk of a complete loss of your investment in the event our business plan is unsuccessful. Inability to Obtain Funding We may not be able to obtain additional funding when needed, which could limit future expansion and marketing opportunities, as well as result in lower than anticipated revenues. We may require additional financing to pursue relationships with other business opportunities. If the market price of our common stock declines, some potential financiers may either refuse to offer us any financing or will offer financing at unacceptable rates or unfavorable terms. If we are unable to obtain financing on favorable terms, or at all, this unavailability could prevent us from expanding our business, which could materially impact our future potential revenues. Sole Source of Products Applied Nutritionals holds the patent to, and is currently the sole source of the products we offer for sale. In the event Applied Nutritionals is not able to fulfill our product orders, or our relationship with Applied Nutritionals is terminated we would be prevented from marketing and selling our products into the market and we would be unable to conduct business. We are currently in the process of renegotiating and extending our relationship with Applied Nutritionals. Although we believe that this process will be successful, there can be no assurances that we will successfully renegotiate or extend our agreement. If we fail to renegotiate or extend our relationship with Applied Nutritionals, we would be unable to conduct business. Continued Control by Existing Management You may lack an effective vote on corporate matters and management may be able to act contrary to your objectives. Our officers and board members own approximately 83.5% of the 16,145,432 shares of our outstanding common stock. If management votes together, it will influence the outcome of corporate actions requiring shareholder approval, including the election of directors, mergers and asset sales. As a result, new stockholders may lack an effective vote with respect to the election of directors and other corporate matters. Therefore, it is possible that management may take actions with respect to its ownership interest, which may not be consistent with your objectives or desires. 3 Unknown Product and Brand Although our products have performed exceptionally well in customer evaluations, and on a continual basis in the field, Wound Care is an unknown entity with a relatively unknown brand in a market significantly controlled by much larger products companies. We may not, even with strong customer accounts, be able to establish the credibility necessary to secure large national customers. Because of our dependence upon consumer perceptions, adverse publicity associated with illness or other adverse effects resulting from the use of our products or any similar products distributed by other companies could have a material adverse effect on our operations. Such adverse publicity could arise even if the adverse effects associated with such products resulted from consumers' failure to consume such products as directed. In addition, we may not be able to counter the effects of negative publicity concerning the efficacy of our products. Any such occurrence could have a negative effect on our operations. Product Liability Exposure We face an inherent risk of exposure to product liability claims in the event that the use of any products we sell results in injury. Such claims may include, among others, that these products contain contaminants or include inadequate instructions as to use or inadequate warnings concerning side effects and interactions with other substances. We do not anticipate obtaining contractual indemnification from parties supplying raw materials or marketing the products we sell. In any event, any such indemnification if obtained would be limited by our terms and, as a practical matter, to the creditworthiness of the indemnifying party. In the event that we do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a material adverse effect on our operations and financial conditions. Single Product Line Most companies providing wound care products are able to offer customers multiple products. By doing so, they effectively offset the cost of customer acquisition and support across several revenue sources. With only one product line, our costs are relatively much higher and may prevent us from achieving strong profitability. Changes in Reimbursement Policies Healthcare services are heavily reliant upon health insurance reimbursement. Although many current insurance plans place much of the financial risk on providers of care (allowing them to choose whatever products/therapies are most cost effective) under capitated or prospective payment structures, much of our business is related to Medicare-eligible populations. Adjustments to our reimbursement amounts under Medicare's reimbursement policies could have an adverse effect on our ability to pursue market opportunities. User resistance Because our products are classified by the FDA as medical devices and not drugs, we were not required to pursue stringent clinical trials. Many physicians and larger, sophisticated healthcare provider organizations often required clinical studies demonstrating specific performance capabilities of new products. We do not have results from controlled clinical studies. Regulations The FDA has cleared these devices for specific indications, and generally has wide experience in evaluating collagen-based products. If the FDA were to change its policy on collagen for any reason, we would likely be required to conduct and submit data to satisfy additional requirements. 4 Competition Competition in the wound care market is heavy among a vast array of medical devices, drugs, and therapies. Most of our competitors are very well capitalized and will continue to compete aggressively. Competitors may be able to keep us out of some distribution channels, close us out from some larger accounts with "Master Contracts" for full product lines, and create market awareness that hinders our abilities to secure key accounts in a cost effective way. Dividends We have not paid and do not currently intend to pay dividends, which may limit the current return you may receive on your investment in our common stock. Future dividends on our common stock, if any, will depend on our future earnings, capital requirements, financial condition and other factors. We currently intend to retain earnings, if any, to increase our net worth and reserves. Therefore, we do not anticipate that any holder of common stock will receive any cash, stock or other dividends on our shares of common stock at any time in the near future. You should not expect or rely on the potential payment of dividends as a source of current income. "Penny Stock" Limitations Our common stock currently trades on the OTC Bulletin Board. Since our common stock continues to trade below $5.00 per share, our common stock is considered a "penny stock" and is subject to SEC rules and regulations, which impose limitations upon the manner in which our shares can be publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser's written agreement to a transaction prior to sale. These regulations have the effect of limiting the trading activity of our common stock and reducing the liquidity of an investment in our common stock. Stockholders should be aware that, according to the Securities and Exchange Commission Release No. 34- 29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. These patterns include: - Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; - Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; - "Boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; - Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and - The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. Furthermore, the "penny stock" designation may adversely affect the development of any public market for the Company's shares of common stock or, if such a market develops, its continuation. Broker-dealers are required to personally determine whether an investment in "penny stock" is suitable for customers. Penny stocks are securities (i) with a price of less than five dollars per share; (ii) that are not traded on a "recognized" national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an issuer with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation 5 for less than three years), or with average annual revenues of less than $6,000,000 for the last three years. Section 15(g) of the Exchange Act and Rule 15g-2 of the Commission require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account. Potential investors in the Company's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock." Rule 15g-9 of the Commission requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for the Company's stockholders to resell their shares to third parties or to otherwise dispose of them. Future sales of large amounts of common stock could adversely affect the market price of our common stock and our ability to raise capital. Future sales of large amounts of common stock could adversely affect the market price of our common stock and our ability to raise capital. Future sales of our common stock by existing stockholders pursuant to Rule 144 under the Securities Act, or following the exercise of outstanding options, could adversely affect the market price of our common stock. Substantially all of the outstanding shares of our common stock are freely tradable, without restriction or registration under the Securities Act, other than the sales volume restrictions of Rule 144 applicable to shares held beneficially by persons who may be deemed to be affiliates. Our directors and executive officers and their family members are not under lockup letters or other forms of restriction on the sale of their common stock. The issuance of any or all of these additional shares upon exercise of options will dilute the voting power of our current stockholders on corporate matters and, as a result, may cause the market price of our common stock to decrease. Further, sales of a large number of shares of common stock in the public market could adversely affect the market price of the common stock and could materially impair our future ability to generate funds through sales of common stock or other equity securities. Dependence on Executive Officers and Technical Personnel The success of our business plan depends on attracting qualified personnel, and failure to retain the necessary personnel could adversely affect our business. Competition for qualified personnel is intense, and we may need to pay premium wages to attract and retain personnel. Attracting and retaining qualified personnel is critical to our business. Inability to attract and retain the qualified personnel necessary would limit our ability to implement our business plan successfully. Potential Fluctuations in Quarterly Results Significant variations in our quarterly operating results may adversely affect the market price of our common stock. Our operating results have varied on a quarterly basis during our operating history, and we expect to experience significant fluctuations in future quarterly operating results. These fluctuations have been and may in the future be caused by numerous factors, many of which are outside of our control. We believe that period-to-period comparisons of our results of operations will not necessarily be meaningful and that you should not rely upon them as an indication of future performance. Also, it is likely that our operating results could be below the expectations of public market analysts and investors. This could adversely affect the market price of our common stock. 6 Employees We currently have three employees in Florida. In addition, we use administrative services provided by two employees of an entity controlled by Mr. Scott Haire, our Chairman, President and Chief Executive Officer. Reports to Security Holders The Company is required to deliver period and other reports to the Securities and Exchange Commission ("Commission"). The public may read and copy any materials that are filed by the Company with the Commission at the Commission's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The statements and forms filed by the Company with the Commission have been filed electronically and are available for viewing or copy on the Commission maintained Internet site that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the Commission. The Internet address for this site can be found at: http://www.sec.gov. ITEM 2. DESCRIPTION OF PROERTY The Company's principal executive office is located at 777 Main Street, Fort Worth. TX 761021. These offices contain approximately 2,390 square feet and are leased for a 3 year term expiring March 31, 2010. Rental on our executive offices is $3,784.00 per month. Wound Care's principal office is located at 790 E Broward Blvd, Suite 300, Fort Lauderdale, FL 33301. These offices contain approximately 2,000 square feet and are leased for a 5 year term expiring September 2009. Rental on Wound Care's office is $4,130.77 per month. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the security holders, through the solicitation of proxies or otherwise, during the fourth quarter ended December 31, 2006. 7 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is quoted on the Over the Counter Bulletin Board, a service maintained by the National Association of Securities Dealer, Inc. under the symbol "MBSB". Trading in the common stock in the over-the-counter market has been limited and sporadic and the quotations set forth below are not necessarily indicative of actual market conditions. Further, these prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions. The high and low sales prices are as follows for the periods indicated: ------ ----------------------- ------------- ------------- YEAR QUARTER ENDING HIGH LOW ------ ----------------------- ------------- ------------- 2005 March 31, 2005 $0.80 $0.80 ------ ----------------------- ------------- ------------- June 30, 2005 $0.80 $0.80 ------ ----------------------- ------------- ------------- September 30, 2005 $0.45 $0.45 ------ ----------------------- ------------- ------------- December 31, 2005 $0.22 $0.15 ------ ----------------------- ------------- ------------- 2006 March 31, 2006 $0.45 $0.45 ------ ----------------------- ------------- ------------- June 30, 2006 $0.20 $0.20 ------ ----------------------- ------------- ------------- September 30, 2006 $0.10 $0.10 ------ ----------------------- ------------- ------------- December 31, 2006 $0.05 $0.05 ------ ----------------------- ------------- ------------- Record Holders As of December 31, 2006, there were approximately 2000 shareholders of record holding a total of 16,145,432 shares of common stock. The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock. Dividends The Company has not declared any cash dividends since inception and does not anticipate paying any dividends in the foreseeable future. The payment of dividends is within the discretion of the board of directors and will depend on the Company's earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit the Company's ability to pay dividends on its common stock other than those generally imposed by applicable state law. The Company has determined that it will utilize any earnings in the expansion of its business. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Introduction Management's discussion and analysis of results of operations and financial condition ("MD&A") is provided as a supplement to the accompanying consolidated financial statements and footnotes to help provide an understanding of our financial condition, changes in financial condition and results of operations. 8 Caution Concerning Forward-Looking Statements/Risk Factors The following discussion should be read in conjunction with the 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. We do not undertake to publicly update or revise any of our 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 that affect our business, included in this section and elsewhere in this report. Overview and Plan of Operation The Company currently has limited business operations, maintaining leased offices in Fort Worth, TX, and Fort Lauderdale, FL. All major business functions are performed by our subsidiary, Wound Care. Although Wound Care is a product distributor, it is also responsible for product packaging development, packaging materials, and coordination of all processes except the actual manufacturing of the product. Wound Care also conducts other activities that are typical of a product distributor and including sales, marketing, customer service, and customer support. All of these activities are run and managed out of Wound Care's Fort Lauderdale offices. Manufacturing of our products is conducted by Applied Nutritionals. Warehousing, shipping, and physical inventory management is outsourced to Diamond Contract Manufacturing of Rochester, NY. Our sales and marketing activities to date have been limited and have resulted in a nominal revenue stream. Through these activities, we have, however, secured product evaluations with a number of key accounts. These accounts are regional and national healthcare provider organizations that represent strong recurring revenue opportunities for the Company. We currently intend to secure capital resources for expansion of staff, inventories, marketing efforts, and research and development; however we may be unsuccessful in our efforts to secure such capital. If we are successful in raising capital, we anticipate hiring a number of management, marketing, and clinical staffs to secure additional accounts, market to the broader US wound care market, support customers in specific geographies, broaden our clinical/educational programs, and evaluate retail and international market opportunities. Results of Operations Year ended December 31, 2006 Compared to Year ended December 31, 2005 Revenues. The Company generated revenues for the year ended December 31, 2006 of $189,755 compared to revenues of $211,167 for the year ended December 31, 2005, or an 8% decrease in revenues. Cost of revenues and gross margin. Costs of revenues for the year ended December 31, 2006 were $193,057 resulting in a gross loss margin of $3,302, compared to cost of revenues for the year ended December 31, 2005 of $271,339 and gross loss margin of $60,172. Lower cost of revenues in 2006 were primarily a result of lower sales and a change in personnel during 2006 when compared to 2005. Our margins continue to be small, but our client base is growing and we believe that the product is gaining traction in the wound care field. Selling, general and administrative expenses ("SGA"). SGA consists primarily of wages, facility-related expenses such as rent and utilities, and outside professional services such as legal and professional fees incurred in connection with our SEC reporting requirements. SGA for 2006 were $484,583 compared to 9 $680,651 for fiscal 2005, or a decrease of approximately 28%. This decrease resulted primarily from a change in top management during fiscal 2006. We expect SGA to increase in the future as we continue to expand our marketing efforts and the number of products we offer and as our business continues to grow and the costs associated with being a public company continue to increase as a result of increased reporting requirements, including but not limited to the Sarbanes-Oxley Act of 2002. Liquidity and Capital Resources The Company currently has limited resources to maintain its current operations, secure more inventories, and meet its contractual obligations. Additional capital must be raised through equity or debt offerings. If we are unable to obtain additional capital, we will be unable to operate our business. During 2006, certain related parties advanced us approximately $153,000 for working capital purposes. We also secured a short-term loan of $500,000, due March 31, 2007. We generated a loss from operations of $623,559 and our cash position at December 31, 2006 was $236,301. Without realization of additional capital or significant revenues from operations, it would be unlikely for the Company to continue as a going concern. The Company anticipates that its majority shareholders will contribute sufficient funds to satisfy the cash needs of the Company for the next twelve months. However, there can be no assurances to that effect, as the Company has minimal revenues and the Company's need for capital may change dramatically if it is successful in expanding its current business or acquiring a new business. If the Company cannot obtain needed funds, it may be forced to curtail or cease its activities. 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. 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. Going Concern 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. It is the Company's belief that it will continue to incur nominal losses for at least the next twelve months, and as a result will require additional funds from debt or equity investments to meet such needs. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The Company anticipates that its officers and shareholders will contribute sufficient funds to satisfy the cash needs of the Company for the next twelve months. However, there can be no assurances to that effect, as the Company has no revenues and the Company's need for capital may change dramatically if it is successful in acquiring a new business. If the Company cannot obtain needed funds, it may be forced to curtail or cease its activities. To meet these objectives, management's plans are to (i) raise capital by obtaining financing through private placement efforts; (ii) issue common stock for services rendered in lieu of cash payments and (iii) obtain loans from officers and shareholders as necessary. The Company's future ability to achieve these objectives cannot be determined at this time. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty and should not be regarded as typical for normal operating periods. 10 ITEM 7. FINANCIAL STATEMENTS MB SOFTWARE CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements ------------------------------------------------------------------------------ Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . 1 Report of Independent Registered Public Accounting Firm. . . . . . . . . . F-2 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . F-3 Consolidated Statements of Operations . . . . . . . . . . . . . . .. . . F-4 Consolidated Statements of Changes in Stockholders' Deficiency ... . . F-5 Consolidated Statements of Cash Flows . . . . . . . . . . . . .. . . . .. F-6 Notes to the Consolidated Financial Statements . . . . . . . . . . .. F7 - 16 11 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders MB SOFTWARE CORPORATION AND SUBSIDIARY We have audited the accompanying consolidated balance sheet of MB Software Corporation and Subsidiary as of December 31, 2006 and the related consolidated statements of operations, changes in stockholders' deficiency and cash flows for the year ended December 31, 2006. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MB Software Corporation and Subsidiary as of December 31, 2006 and the consolidated results of their operations and their cash flows for the year ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that MB Software Corporation and Subsidiary will continue as a going concern. As discussed in Note 2 to the financial statements, MB Software Corporation and Subsidiary have incurred recurring losses and has a stockholders' deficiency. Further, the Company has current liabilities in excess of current assets. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Management's plans in regards to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. /s/ Pritchett, Siler & Hardy, P.C. PRITCHETT, SILER & HARDY, P.C. Salt Lake City, Utah March 8, 2007 MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 2006 - -------------------------------------------------------------------------------- ASSETS Current Assets Cash $ 236,301 Accounts receivable 59,724 Inventory 96,571 Prepaid inventory 46,537 ---------------- Total current assets 439,133 Fixed assets, net 43,415 Security deposits 13,739 ---------------- Total Assets $ 496,287 ================ LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities Accounts payable 45,396 Accrued liabilities 302,833 Obligation under capital lease- current portion 3,169 Notes and amounts due to related parties 1,277,877 Accrued interest due to related parties 138,036 ---------------- Total current liabilities 1,767,311 Long-term liabilities - ---------------- Total Liabilities 1,767,311 Commitments and contingencies Stockholders' Deficiency 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 and outstanding: 16,145,432 16,145 Additional paid-in capital 11,181,496 Accumulated deficit (12,456,626) ---------------- Less: treasury stock, at cost; 4,089 shares (12,039) ---------------- Total stockholders' deficiency (1,271,024) ---------------- ---------------- Total Liabilities and Stockholders' Deficiency $ 496,287 ================ The accompanying notes are an integral part of these consolidated financial statements. MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 - -------------------------------------------------------------------------------- 2006 2005 ------------- ------------- Revenues $ 189,755 $ 211,167 Cost of revenues 193,057 271,339 -------------------------------- Gross margin (3,302) (60,172) Selling, general and administrative (484,583) (680,651) ------------- ------------- Loss from operations (487,885) (740,823) Other income (expense) Write-off of liabilities - 34,045 Interest expense, net (135,674) (51,085) -------------------------------- Total other income (expense) (135,674) (17,040) -------------------------------- Loss before provision for income taxes (623,559) (757,863) Provision for income taxes - - ------------- ------------- Loss from continuing operations (623,559) (757,863) ------------- ------------- Net loss $ (623,559) $ (757,863) ============= ============= Basic and diluted loss per share: Continuing operations $ (0.04) $ (0.05) ------------- ------------- $ (0.04) $ (0.05) ============= ============= Weighted average common shares outstanding 16,145,432 15,665,869 ============= ============= The accompanying notes are an integral part of these consolidated financial statements.
MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY YEARS DECEMBER 31, 2006 AND 2005 - ------------------------------------------------------------------------------------------------------------------------------------ Common Common Additional Stock Stock Stock Paid-In Accumulated Treasury Shares Amount Subscription Capital Deficit Stock -------------- -------------- ------------ ------------- -------------- --------- -------------- -------------- ------------ ------------- -------------- --------- Balance, December 31, 2004 14,921,432 $ 14,921$ 221,971 $ 10,960,749 $(11,075,204) $(12,039) Common stock issued under stock subscripton 1,224,000 1,224 (221,971) 220,747 - - Net loss (757,863) ---------------------------------------------------------------------------------------- Balance, December 31, 2005 16,145,432 16,145 - 11,181,496 (11,833,067) (12,039) Net Loss (623,559) ---------------------------------------------------------------------------------------- Balance, December 31, 2006 16,145,432 $ 16,145 $ - $11,181,496 $(12,456,626) $(12,039) ========================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2006 AND 2005 - ------------------------------------------------------------------------------------------------------------------------------------ 2006 2005 ---------------- ---------------- Cash flows from operating activities Loss from continuing operations $ (623,559) $ (757,863) Adjustments to reconcile net loss from to net cash used in operating activities Depreciation 21,786 16,219 Loss on disposal of fixed assets 1,922 Changes in assets and liabilities: (Increase) decrease in accounts receivable (29,526) (10,112) (Increase) decrease in inventory (65,927) 64,656 (Increase) decrease in prepaid expenses and other assets 85,090 (60,472) Increase (decrease) in accounts payable and accrued liabilities 213,166 121,203 ---------------- ---------------- Net cash flows used in operating activities (398,970) (624,447) Cash flows from investing activities Purchase of fixed assets (16,430) (11,992) ---------------- ---------------- Net cash flows used in investing activities (16,430) (11,992) Cash flows from financing activities Principal payments under capital lease obligation (3,992) (3,171) Proceeds from notes payable - related parties 652,865 634,549 ---------------- ---------------- Net cash flows provided by financing activities 648,873 631,378 ---------------- ---------------- Increase (decrease) in cash 233,473 (5,061) Cash and cash equivalents, beginning of year 2,828 7,889 ---------------- ---------------- Cash and cash equivalents, end of year 236,301 2,828 ---------------- ---------------- Cash paid during the year for: Interest - - ================ ================ Income taxes - - ================ ================
Supplemental non-cash investing and financing activities: For the year ended December 31, 2006: None For the year ended December 31, 2005: None The accompanying notes are an integral part of these consolidated financial statements. MB SOFTWARE CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006 - -------------------------------------------------------------------------------- NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Operations MB Software Corporation and subsidiaries (collectively referred to as the "Company") distributes collagen-based wound care products to healthcare providers such as physicians, clinics and hospitals throughout the United States. Significant Accounting Policies Principles of consolidation and presentation - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. Business combinations - Transfers and exchanges of assets between companies under common control are accounted for at historical cost in a manner similar to that in a pooling of interests accounting. The excess of the cost of the asset acquired over the net assets sold at their book values are charged to additional paid-in capital. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates. Fair value of financial instruments - For certain of the Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities, and amounts due to related parties, the carrying amounts approximate fair value due to their short maturities. Cash and cash equivalents - The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents at December 31, 2006. The Company maintains its cash in bank deposit accounts at high quality financial institutions. The balances at times may exceed Federally insured limits of $100,000. Fixed assets - Fixed assets are stated at cost. Depreciation for financial statement purposes is computed principally on the straight-line method over the estimated useful lives of the related assets ranging from three to seven years. When fixed assets are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized. Depreciation expense for 2006 amounted to $21,786 (2005: $16,219). Revenue recognition - Revenue is recognized when the product is shipped and the risks and rewards of ownership have transferred to the customer. The Company recognizes shipping and handling fees as revenue, and the related expenses as a component of cost of sales. 16 Allowance for doubtful accounts - The Company establishes an allowance for doubtful accounts to ensure accounts receivables are not overstated due to uncollectibility. Bad debt reserves are maintained based on a variety of factors, including the length of time receivables are past due and a detailed review of certain individual customer accounts. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. There is no allowance for doubtful accounts at December 31, 2006. Inventories - Inventories are stated at the lower of cost or net realizable value, with cost computed on a first-in, first-out basis. Inventories consist of powders, gels and the related packaging supplies. The company has recorded an allowance for obsolete and slow moving inventory of $75,000 at December 31, 2006. Long-lived assets - Long-lived assets and certain identifiable intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. Income taxes - The Company recognizes deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts using enacted tax rates in effect for the year the differences are expected to reverse. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. Stock-based compensation - The Company adopted SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)"), on January 1, 2006, which requires the measurement and recognition of compensation expense for all share-based awards made to employees and directors, including employee stock options and shares issued through its employee stock purchase plan, based on estimated fair values. Prior to the adoption of SFAS 123(R), the Company accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value method that was used to account for stock-based awards prior to January 1, 2006, which had been allowed under the original provisions of SFAS 123, compensation expense is recorded on the date of grant if the current market price of the underlying stock exceeded the exercise price. Any compensation expense is recorded on a straight-line basis over the vesting period of the grant. The adoption of this standard had no impact to the Company's financial position, results of operations or cash flows as the Company's previous stock-based compensation awards expired prior to January 1, 2006, and there have been no grants during the current year. See Note 8 for a description of the Company's stock option plan. 17 Earnings per share - Basic and diluted earnings or loss per share ("EPS") amounts in the financial statements are computed in accordance with SFAS No. 128, "Earnings per Share." Basic EPS is based on the weighted average number of common shares outstanding. Diluted EPS is based on the weighted average number of common shares outstanding plus dilutive common stock equivalents. Basic EPS is computed by dividing net earnings available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS is calculated by dividing net earnings by the weighted average number of common shares outstanding and other dilutive securities, for which there were none for both periods presented. Accordingly, basic and diluted EPS are the same for both periods presented. All per share and per share information are adjusted retroactively to reflect stock splits and changes in par value. Related party transactions - A related party is generally defined as (i) any person that holds 10% or more of the Company's securities and their immediate families, (ii) the Company's management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Recent accounting pronouncements - The Financial Accounting Standards Board ("FASB") has issued the following pronouncements: In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 123-R, Share-Based Payment ("SFAS 123(R)"). SFAS 123(R) replaces SFAS 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion 25, Accounting for Stock Issued to Employees. SFAS 123(R) requires, among other things, that all share-based payments to employees, including grants of stock options, be measured based on their grant-date fair value and recognized as expense. Effective January 1, 2006, The Company adopted the fair value recognition provisions of SFAS 123(R) using the modified prospective application method effective January 1, 2006. Under this transition method, compensation expense recognized will include the applicable amounts of: (a) compensation expense of all stock-based payments granted prior to, but not yet vested as of January 1, 2006 (based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123 and previously presented in pro forma footnote disclosures), and (b) compensation expense for all stock-based payments granted subsequent to January 1, 2006 (based on the grant-date fair value estimated in accordance with the new provisions of SFAS 123(R)). Results for periods prior to January 1, 2006, have not been restated. Based on the Company's evaluation of the adoption of the new standard, the Company believes that it could have a significant impact to the Company's financial position and overall results of operations depending on the number of stock options granted in a given year. On June 7, 2005, the FASB issued Statement 154, Accounting Changes and Error Corrections, a replacement of APB Opinion 20 and FASB Statement 3, ("SFAS 154"). SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. Previously, most voluntary changes in accounting principles were required recognition via a cumulative effect adjustment within net income of the period of the change. SFAS 154 requires retrospective application to prior periods' financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. The Company adopted SFAS 154 on January 1, 2006. The adoption is not expected to have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows. In February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements 133 and 140, ("SFAS 155"). SFAS will be effective for the Company beginning January 1, 2007. The statement permits interests in hybrid financial instruments that contain an 18 embedded derivative that would otherwise require bifurcation, to be accounted for as a single financial instrument at fair value, with changes in fair value recognized in earnings. This election is permitted on an instrument-by-instrument basis for all hybrid financial instruments held, obtained, or issued as of the adoption date. The adoption had no impact to the Company's consolidated financial position, results of operations or cash flows. In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty of Income Taxes-an interpretation of FASB Statement No. 109 ("FIN 48"), Which clarifies the accounting for uncertainty in income tax positions. This Interpretation requires that the Company recognize in the consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The provisions of FIN 48 will be effective for the Company as of the beginning of the Company's 2008 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The provisions of FASB Interpretation 48 are not expected to any impact on the Company's financial statements. In September 2006, the FASB issued FASB No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Benefits ("FAS 158"). FAS 158 addresses the accounting for defined benefit pension plans and other postretirement benefit plans ("plans"). Specifically, FAS 158 requires companies to recognize an asset for a plan's overfunded status or a liability for a plan's underfunded status and to measure a plan's assets and its obligations that determine its funded status as of the end of the company's fiscal year, the offset of which is recorded, net of tax, as a component of other comprehensive income in shareholders' equity. FAS 158 will be effective for the Company as of September 30, 2007 and applied prospectively. The provisions of FAS 158 are not expected to have any impact on the Company's financial statements. In September 2006, the FASB issued FASB statement No.. 157, Fair Value Measurements ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. FAS 157 is effective for the Company on October 1, 2008 and will be applied prospectively. The provisions of FAS 157 are not expected to have a material impact on the Company's financial statements. Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force ("EITF")), the American Institute of Certified Public Accountants ("AICPA"), and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements. 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. It is the Company's belief that it will continue to incur losses for at least the next twelve months, and as a result will require additional funds from debt or equity investments to meet such needs. To meet these objectives, management's plans are to (i) raise capital by obtaining funds from debt financing and / or equity financing through private placement efforts, (ii) issue common stock for services rendered in lieu of cash payments (iii) convert outstanding debt to equity and (iii) obtain loans from shareholders. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The Company anticipates that its shareholders will contribute sufficient funds to satisfy the cash needs of the Company for the next twelve months. However, there can be no assurances to that effect, as the Company's need for capital may change dramatically if it is successful in expanding its current business or acquiring a new business. If the Company cannot obtain needed funds, it may be forced to curtail or cease its activities. Management believes 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. The Company's future ability to achieve these 19 objectives cannot be determined at this time. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 3 - DISTRIBUTION AGREEMENT Wound Care had entered into a Distribution Agreement (the "agreement") dated July 28, 2004 ("effective date of agreement"), with Applied Nutritionals, LLC, ("AN") for the exclusive rights to market, sell and distribute wound products that contain a certain tissue adhesive that AN had obtained the rights to via U.S. Patent No. 6,136,341. The patent is for a tissue adhesive hydrolysate which promotes wound healing containing hydrolyzed Type I collagen. Pursuant to the agreement, WCI was obligated to pay certain royalties and maintain minimum purchases with AN to maintain the exclusive rights. Since WCI was unable to pay the royalties or make the purchases, WCI's rights converted to a non-exclusive basis. Royalties are due and payable on a calendar quarterly basis on or before the 30th day of the month immediately following the calendar quarter in which gross receipts are received. Accrued royalties at December 31, 2006 were $14,349. Pursuant to a Purchase Option Agreement ("Option Agreement") with Applied Nutritionals, LLC, ("AN") dated July 28, 2004, the Company has an exclusive option for a period of five years to purchase certain patents related to the hydrolyzed Type I form of collagen used within gel, powder, paste and film collagen wound dressing compositions. The total cash exercise price of the patent and related intellectual property is $5,100,000 and the Company is entitled to pay $75,000 per year as an option fee to maintain its rights to purchase the said property. The Company had the option to pay another $75,000 on or before August 31, 2005 to retain its exclusive option pursuant to the Option Agreement as well as other terms and conditions contained therein. The Company was unable to pay the royalties or make the purchases and lost its exclusive option to distribute the product under the original Distribution Agreement. The Company is currently in negotiations to re-structure the deal as it has determined it cannot meet the original terms of the agreement. Although Applied Nutritionals has indicated that it is amenable to restructuring the agreement, there is no assurance reasonable terms can be reached. We have been advised that any restructured agreement will not include an option to purchase the above described patent. NOTE 4 - RELATED PARTY TRANSACTIONS Funds are advanced from various related parties including the Company's President and CEO/CFO and entities controlled by him. Other shareholders fund the company as necessary to meet working capital requirements and expenses. The advances are made pursuant to a note agreement that bears interest at 10% per annum, payable quarterly, and with maturity dates through June 30, 2007 per the table below. All notes are current liabilities and some of the notes are currently in default. Accrued interest due to related parties included in accrued liabilities as of December 31, 2006 was approximately $131,049. The following is a summary of amounts due to / from related parties as of December 31, 2006:
Related party Nature of relationship Terms of the agreement Amounts due to related parties - ------------------------- ----------------------------- -------------------------------------- ----------------- Scott Haire, an Chairman of the Board, CEO Unsecured note dated July 11, 2005 for $ 10,000 individual and CFO of this Company $10,000 at 10% per annum, due on June 30, 2007 HEB, LLC, a Nevada Scott Haire, Chairman Series of funds advanced under two separate, 398,467 Limited Liability President, CEO and CFO of unsecured $1 million lines of credit dated Company this company, controls both November 26, 2003 and November 4, 2004, both entities financing and at 10% per annum; no maturity date, interest operating decisions payable quarterly; unused lines available at December 31, 2006 total $1,601,532. 20 Araldo Cossutta, an Director and stockholder of Six separate, unsecured notes as follows: (i) 367,000 individual the Company $75,000 note dated September 30, 2004, at 10% per annum, due June 30, 2006; (ii) $80,000 note dated September 14, 2005, at 10% per annum, due June 30, 2006; (iii) $70,000 note dated June 15, 2006 at 10% per annum, due June 30, 2006 and (iv) $42,000 noted date April 5, 2005, at 10% per annum, due March 31, 2006and (v) $50,000 note dated January 4, 2006, at 10% per annum, due June 30, 2006 and (vi) $50,000 note dated January 31, 2006 due June 30, 2006 eAppliance Payment Controlling owners in Note dated January 1, 2004 for $2,410 at 10% Solutions, LLC a Nevada eAppliance Payment per annum; $10,000 line of credit. 2,410 Limited Liability Solutions, LLC are Company Keystone Cossutta and Haire Equity Partners Investors Note dated December 14, 2006 for $500,000 at 10% per annum; due March 31, 2007 500,000 ----------------- $ 1,277,877 =================
Administrative services The Company provides limited administrative services to other companies affiliated through common ownership of the Company's shareholders. NOTE 5 - FIXED ASSETS Fixed assets consists of the following: Furniture and fixtures $13,607 Phone system 13,302 Computer equipment 11,796 Artwork 30,000 Web-Site 16,430 ------- 85,135 Less accumulated depreciation 41,720 ------- Net book value 43,415 ======= NOTE 6 - COMMITMENTS AND CONTINGENCIES Consulting Agreement The Company's subsdiary entered into a Consulting Agreement dated November 7, 2005, for consulting and advisory services to the Company for period of 6 months at the rate of $12,500 per month. For the year ended December 31, 2006, consulting expenses totaled $38,500 (2005: $18,750) for this consultant. The agreement was mutually terminated in March 2006. Operating leases The Company leases office space and office equipment under operating leases expiring in various years through 2009. Rental expense charged to operations for 2006 was approximately $109,500 (2005: $105,000). Minimum future rental payments under non-cancelable operating leases having remaining terms in excess of 1 year 21 as of December 31, 2006, for each of the next five years and in the aggregate are as follows: 2007 $ 90,789 2008 56,636 2009 39,441 2010 -- -------- $186,866 ======== Capital leases The Company leases a phone system under a capital lease for a period of thirty-six months through September 2007. The asset and liability under capital lease is recorded at the present value of the minimum lease payments and the asset is depreciated over the related lease term. Depreciation of assets under capital lease for 2006 totaled $4,434 (2005: $5,117). The following is a summary of property held under capital lease: Phone system $ 13,302 Less accumulated depreciation 10,575 ---------------- Net book value 2,727 ================ Minimum future lease payments under capital lease as of December 31, 2006, for each of the next five years and in the aggregate are: (2007: $3,169). Federal Payroll Taxes The Company is delinquent in the payment of its payroll tax liabilities with the Internal Revenue Service. As of December 31, 2006, unpaid payroll taxes total approximately $203,484 and related penalties and interest approximated $85,000 computed through December 31, 2006. These liabilities have been recorded as accrued liabilities and general and administrative expenses at December 31, 2006. The Company expects to pay these delinquent payroll tax liabilities as soon as possible. The final amount due will be subject to the statutes of limitations related to such liabilities and to negotiations with the Internal Revenue Service. NOTE 7 - STOCKHOLDERS' EQUITY TRANSACTIONS Common stock issued At December 31, 2006 and 2005 the Company had 16,145,432 shares of common stock issued and outstanding. Of these shares, 4,089 shares are held by the Company as treasury stock. Conversion of debt to equity Pursuant to a "Settlement and Compromise Agreement" dated December 31, 2004, (and approved by the Company's Board of Directors on that same date), the Company agreed to issue 1,224,000 restricted shares of its common stock to H.E.B., LLC ("HEB") for the forgiveness of debt outstanding on the Company's books totaling $221,971 in exchange for all of the issued and outstanding shares of MBH, one of the Company's wholly-owned subsidiaries. No gain or loss was recognized on the transaction as it occurred between entities under common control. NOTE 8 - STOCK OPTIONS Effective May 5, 1994, the Board of Directors approved an Incentive Stock Option Plan (the "Plan") for key executives and employees. A summary of changes in the Company's stock options follows: 22 Weighted Average Options Exercise Price ------------- ---------------- Outstanding at 12/31/03 52,000 5.00 Granted, exercised - - Forfeited during 2004 (52,000) (5.00) ------------- ---------------- Outstanding at 12/31/05 and 06 - - ============= ================ NOTE 9 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS Major Customers and Trade Receivables The Company has 4 customers (2005: 3 customers) that each account for more than 10% of its revenues. Trade receivables from these customers totaled approximately $49,570 or 83% of total accounts receivable balance at December 31, 2006, and were unsecured. NOTE 10 - CONCENTRATION OF SUPPLIER RISK The Company purchases substantially all of its powders and gels from one vendor. If this vendor became unable to provide materials in a timely manner and the Company was unable to find alternative vendors, the Company's business, operating results and financial condition would be materially adversely affected. NOTE 11 - INCOME TAXES The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company's ability to generate taxable income within the net operating loss carry forward period. Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes. At December 31, 2006, deferred tax asset results from the deferred tax benefit of net operating losses. The net current and non-current deferred tax assets have a 100% valuation allowance, as the ability of the Company to generate sufficient taxable income in the future is uncertain. The net change in the valuation allowance for 2006 was approximately $200,000 (2005: $300,000). The Company generated net operating losses for financial reporting and Federal income tax reporting prior to its reorganization in 1993. As of December 31, 2005, subject to limitations under Internal Revenue Code Section 382, approximately $437,000 of these losses is available for use after the reorganization, which expire in 2008 if not previously utilized. The net operating loss carry forward at December 31, 2006 is approximately $12,400,000 and will begin to expire in 2008, if not previously utilized. A reconciliation of expected federal income tax expense (benefit) based on the U.S. Corporate income tax rate of 34% to actual expense (benefit) for 2006 and 2005 is as follows (rounded): 2006 2005 ---------------- ----------------- Expected federal income tax benefit $ 212,000 $ 248,000 Valuation allowance and other (212,000) (248,000) ---------------- ----------------- Income tax expense (benefit) - - ================ ================= 23 Deferred tax asset at December 31, 2006, is as follows: Net operating loss carry forwards $ 4,200,000 Valuation allowance (4,200,000) ---------------- Net current deferred tax asset - ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None ITEM 8A. CONTROLS AND PROCEDURES As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer, who is also the principal financial officer, of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation, the principal executive officer/principal financial officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company's internal control over financial reporting during the Company's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 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. ITEM 8B. OTHER INFORMATION None PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The following table sets forth certain information regarding the directors and executive officers of the Company: Year First Name Age Position Elected - ---- ----- -------- ------- Scott A. Haire 42 Chairman, Chief Executive Officer, President and Director 1993 Gilbert A. Valdez 63 Director 1996 Araldo A. Cossutta 82 Director 1994 Steven W. Evans 56 Director 1994 Robert E. Gross 62 Director 1994 Thomas J. Kirchhofer 66 Director 1994 Executive Officers of the Company are elected on an annual basis and serve at the discretion of the Board of Directors. Directors of the Company are elected on an annual basis. All of our directors have agreed to remain until the 2006 annual meeting. 24 Scott A. Haire is Chairman of the Board, Chief Executive Officer and President of the Company. Prior to founding MB Software Corporation, he was an employee of the Company from November 1993 to June 1994. Previously, Mr. Haire was president of Preferred Payment Systems, a company specializing in electronic claims and insurance system related projects. Gilbert A. Valdez is Chief Operating Officer of the Company and past President and CEO of four major financial and healthcare corporations. Most recently, he served as CEO of Hospital Billing and Collection Services, Inc., a $550 million healthcare receivables financing entity located in Wilmington, Delaware; Datix Corporation, an Atlanta-based corporate divestiture from Harris-Lanier; Medaphis Corporation, an interstate, multi-dimensional healthcare service agency based in Atlanta; and NEIC, a national consortium of 40 major insurance companies formed for development of electronic claim billing standards. Mr. Valdez has 30 years of senior healthcare receivables financing experience. Araldo A. Cossutta is President of Cossutta and Associates, an architectural firm based in New York City, with major projects throughout the world. Previously, he was a partner with I.M. Pei & Partners and is a graduate of the Harvard Graduate School of Design and the Ecole des Beaux Arts in Paris. Mr. Cossutta was a significant shareholder in Personal Computer Card Corporation ("PC3") and was chairman of PC3 at the time of its acquisition by the Company in November 1993. He is also was a large shareholder and director of Computer Integration Corporation of Boca Raton, Florida from 1993 to 2000. Steven W. Evans is a Certified Public Accountant and President of Evans Phillips & Co., PSC, an accounting firm which he established in 1976 in Barbourville and Middlesboro, Kentucky. He is also a founder and active in PTRL, which operates contract research laboratories located in Kentucky, North Carolina, California and Germany. He is also a founder and active in the management of environmental, financial and hotel corporations in Kentucky and Tennessee. Robert E. Gross is President of R. E. Gross & Associates, providing consulting and systems projects for clients in the multi-location service, banking and healthcare industries. From 1987 to 1990, he was vice president-technical operations for Medaphis Physicians Service Corp., Atlanta, Georgia. Prior to that, he held executive positions with Chi-Chi's, Inc., Royal Crown and TigerAir. He also spent 13 years as an engineer with IBM. Thomas J. Kirchhofer is president of Synergy Wellness Centers of Georgia, Inc. He is past president of the Georgia Chiropractic Association. Compensation of Directors The Company's directors are not currently compensated for their services as a director of the Company and are not currently reimbursed for out-of-pocket costs incurred in attending meetings. Meetings and Committees of the Board of Directors Our business is managed under the direction of the Board of Directors. The Board of Directors meets on a regularly scheduled basis to review significant developments affecting us and to act on matters requiring approval of the Board of Directors. It also holds special meetings when an important matter requires attention or action by the Board of Directors between scheduled meetings. During fiscal 2006, the Board of Directors did not meet. The Board of Directors does not have a standing audit, compensation, nominating or governance committee. Audit Committee The Company does not maintain a standing Audit Committee. An audit committee typically reviews, acts on and reports to the board of directors with respect to various auditing and accounting matters, including the recommendations and performance of independent auditors, the scope of the annual audits, fees to be paid to the independent auditors, and internal accounting and financial control 25 policies and procedures. Certain stock exchanges currently require companies to adopt a formal written charter that establishes an audit committee that specifies the scope of an audit committee's responsibilities and the means by which it carries out those responsibilities. In order to be listed on any of these exchanges, the Company will be required to establish an audit committee. Compensation Committee The Company does not maintain a standing Compensation Committee.. Due to the Company's small size at this point in time, the Board of Directors has not established a separate compensation committee. All members of the Board of Directors (with the exception of any member about whom a particular compensation decision is being made) participate in the compensation award process. During fiscal 2006, no executive officer received any compensation from the Company. Nominating Committee The Company does not maintain a standing Nominating Committee and does not have a Nominating Committee charter. Due to the Company's small size at this point in time, the Board of Directors has not established a separate nominating committee and feels that all directors should have input into nomination decisions. As such, all members of the Board of Directors generally participate in the director nomination process. Under the rules promulgated by the SEC, the Board of Directors is, therefore, treated as a "nominating committee". The Board of Directors will consider qualified nominees recommended by shareholders. Shareholders desiring to make such recommendations should submit such recommendations to the Corporate Secretary, c/o MB Software Corporation 777 Main Street, Suite 3100, Fort Worth, Texas 76102. The Board of Directors will evaluate candidates properly proposed by shareholders in the same manner as all other candidates. With respect to the nominations process, the Board of Directors does not operate under a written charter, but under resolutions adopted by the Board of Directors. The Board of Directors is responsible for reviewing and interviewing qualified candidates to serve on the Board of Directors, for making recommendations for nominations to fill vacancies on the Board of Directors, and for selecting the nominees for selection by the Company's shareholders at each annual meeting. The Board of Directors has not established specific minimum age, education, experience or skill requirements for potential directors. The Board of Directors takes into account all factors they consider appropriate in fulfilling their responsibilities to identify and recommend individuals as director nominees. Those factors may include, without limitation, the following: An individual's business or professional experience, accomplishments, education, judgment, understanding of the business and the industry in which the Company operates, specific skills and talents, independence, time commitments, reputation, general business acumen and personal and professional integrity or character; The size and composition of the Board of Directors and the interaction of its members, in each case with respect to the needs of the Company and its shareholders; and Regarding any individual who has served as a director of the Company, his or her past preparation for, attendance at, and participation in meetings and other activities of the Board of Directors or its committees and his or her overall contributions to the Board of Directors and the Company. The Board of Directors may use multiple sources for identifying and evaluating nominees for directors, including referrals from the Company's current directors and management as well as input from third parties, including executive search firms retained by the Board of Directors. The Board of Directors will obtain background information about candidates, which may include information from directors' and officers' questionnaires and background and reference checks, and will then interview 26
qualified candidates. The Board of Directors will then determine, based on the background information and the information obtained in the interviews, whether to recommend that a candidate be nominated to the Board of Directors. We strongly encourage and, from time to time actively survey, our shareholders to recommend potential director candidates. Shareholder Communications with the Company's Board of Directors Any shareholder wishing to send written communications to the Company's Board of Directors may do so by sending them in care of Lucy Singleton, Corporate Secretary, at the Company's principal executive offices. All such communications will be forwarded to the intended recipient(s). Compliance with Section 16(a) of the Exchange Act No Forms 3, 4 or 5 have been furnish, or to our knowledge, filed by any of our directors, officers or ten percent stockholders during the one year period ended December 31, 2006. Code of Ethics Due to the current formative stage of the Company's development, it has not yet developed a written code of ethics for its directors or executive officers. ITEM 10. EXECUTIVE COMPENSATION Executive Compensation No compensation in excess of $100,000 was awarded to, earned by, or paid to any executive officer of the Company during the last three years. The following table and the accompanying notes provide summary information for each of the last three fiscal years concerning cash and non-cash compensation paid or accrued by the Company's Chief Executive Officer over the past three years. SUMMARY COMPENSATION TABLE - ------------------------------------------------------------------------------------------------------------------------------ Annual Compensation Long Term Compensation - ------------------------------------------------------------------------------------------------------------------------------ Awards Payouts - ------------------------------------------------------------------------------- ---------------------------------------------- Other Restricted Securities Name and Annual Stock Underlying LTIP All Other Principal Year Salary Bonus Compensation Award(s) Options payouts Compensation Position ($) ($) ($) ($) SARs(#) ($) ($) - ------------------------------------------------------------------------------------------------------------------------------ Scott A. Haire 2006 -0- -- -- -- -- -- -- 2005 -0- -- -- -- -- -- -- 2004 -0- -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information concerning the ownership of the Company's common stock as of December 31, 2006, with respect to: (i) each person known to the Company to be the beneficial owner of more than five percent of the Company's common stock; (ii) all directors; and (iii) directors and executive officers of the Company as a group. The notes accompanying the information in the table below are necessary for a complete understanding of the figures provided below. As of December 31, 2006, there were 16,145,432 shares of common stock issued and outstanding. 27 Amount and Nature Title Name of Beneficial of Beneficial Percent Class Owner of Group(1) Ownership of Class Common Scott A. Haire(2) 7,747,284 54% Common Araldo A. Cossutta 4,717,000 33% Common Steven W. Evans 1,015,000 7% Common Thomas J. Kirchhofer - Common Robert E. Gross - Common Applied Nutritionals 900,000 6% Common Gilbert Valdez 1,666 Common All Directors and Executive Officers As a Group (six in number) 13,480,950 83.50% * less than 1% (1) Unless otherwise noted, the address for each person or entity listed is 777 Main Street, Suite 3100, Fort Worth Texas, 76102. (2) 6,980,070 of these sharesare held by H.E.B., LLC. Mr. Haire is the managing member and majority owner of H.E.B., LLC, and as such, is deemed to be the beneficial owner of such shares. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Effective August 20, 2004, we acquired Wound Care Innovations, LLC through a merger of Wound Care with a newly formed Company subsidiary. The consideration paid by the Company for Wound Care consisted of an aggregate of 6,000,000 shares of our common stock. These shares were issued to H.E.B., LLC, a Nevada limited liability company, and to Mr. Araldo Cossutta, the sole owners of Wound Care. Mr. Scott A. Haire, our Chairman of the Board, Chief Executive Officer and President is the majority owner and managing member of HEB, and Mr. Cossutta is a member of our Board of Directors. In connection with the acquisition of Wound Care, HEB and Mr. Cossutta also agreed to convert an aggregate of $1,800,612 of Wound Care's debt and other obligations owed to HEB and Mr. Cossutta into an aggregate of 2,257,303 additional shares of our common stock. All of our directors are independent, as defined by Rule 4200(a)(15) of the Nasdaq's listing standards, except for Mr. Haire, who is not independent because he is currently employed by the Company as its Chief Executive Officer and Mr. Cossutta, who is not independent due to the above described acquisition of Wound Care. ITEM 13. EXHIBITS Exhibit No. 3.1 Articles of Incorporation (incorporated by reference to the Company's Form 10-QSB for the fiscal quarter ended June 30, 2002). 3.2 Bylaws (incorporated by reference to the Company's Form 10-QSB for the fiscal quarter ended June 30, 2002). 28 10.1 Agreement and Plan of Merger, dated as of November 10, 2003 by and among MBH Acquisition, Inc., MB Software Corporation, MB Holding Corporation, and all of the stockholders of MB Holding Corporation (incorporated by reference to the Company's Current Report on Form 8-K, filed with the commission on November 21, 2003). 10.3 Agreement and Plan of Merger, dated as of August 20, 2004 by and among Wound Care Innovations, LLC, MB Software Corporation, WCare Acquisitions, LLC, H.E.B., LLC and Araldo A. Cossutta (incorporated by reference to the Company's Form 10-QSB for the fiscal quarter ended September 30, 2004). 10.4 Settlement and Compromise Agreement, dated December 31, 2004 by and among MB Holding Corporation, MB Software Corporation and Wound Care Innovations, LLC (incorporated by reference to the Company's Form 10-KSB for the fiscal year ended December 31, 2004). 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 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The firm of Pritchett, Siler & Hardy, P.C. served as the Company's independent public accountants for the year ended December 31, 2006. The firm of Clancy and Co., P.L.L.C served as the Company's independent public accounts for the year ended December 31, 2005. The Board of Directors of the Company, in its discretion, may direct the appointment of different public accountants at any time during the year if the Board believes that a change would be in the best interests of our stockholders. The Board of Directors has considered the audit fees, audit-related fees, tax fees and other fees paid the Company's accountants, as disclosed below, and determined that the payment of such fees is compatible with maintaining the independence of the accountants. Audit Fees The Audit fees billed by Clancy and Co., P.L.L.C. for professional services rendered for the audit of the Company's annual financial statements on Form 10-KSB and the reviews of the financial statements included in the Company's Form 10-QSB's for the fiscal years ended December 31, 2006 and 2005 was $14,000 and $27,500, respectively. Audit-Related Fees None Tax Fees None All Other Fees None 29 Audit Committee Pre-Approval Policies and Procedures The Company does not currently have and Audit Committee. Currently, the Board of Directors pre-approves all audit and non-audit services that are to be performed and fees to be charged by our independent auditor or assure that the provision of these services does not impair the independence of such auditor. The Board of Directors pre-approved all audit services and fees of our independent auditor for the years ended December 31, 2006 and 2005. Our independent auditors did not provide us with any non-audited services during the period indicated above. 30 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this ___day of March 2007. In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. - ----------------------------------------------------- ----------------- Signature Title Date - ----------------------------------------------------- ----------------- /s/ Scott A.Haire CEO, President, Chairman and - ------------------ Principal Financial Officer March __, 2007 Scott A. Haire - ----------------------------------------------------- ----------------- 31 INDEX TO EXHIBITS (a) Exhibits 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 32 EX-31 2 mbs10ksbex32123106.txt Exhibit 31 CERTIFICATIONS I, Scott A. Haire, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of MB Software Corporation; 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or causes such disclosure controls and procedures to be designed under out supervision, 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 report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 26, 2007 /S/ Scott A. Haire Scott A. Haire, Chairman of the Board, (Chief Executive Officer and Principal Financial Officer) EX-32 3 mbs10ksbaex31123106.txt EXHIBIT 32 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 MB Software Corporation on Form 10-QSB for the period ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof, 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: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. March 26, 2007 /S/ Scott A. Haire Scott A. Haire, Chairman of the Board, (Chief Executive Officer and Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----