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WOUND MANAGEMENT TECHNOLOGIES, INC. - 10KSB/A - 20051220 - PART_III
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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 40 Chairman, Chief Executive
Officer, President and Director 1993
Gilbert A. Valdez 61 Director 1996
Araldo A. Cossutta 80 Director 1994
Steven W. Evans 54 Director 1994
Robert E. Gross 60 Director 1994
Thomas J. Kirchhofer 64 Director 1994
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8
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 2005
annual meeting.
Scott A. Haire is Chairman of the Board, Chief Executive Officer and President
of the Company. Prior to founding MedBanc Data 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.
Board of Directors Committees
The board of directors has not yet established an audit committee or a
compensation 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 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.
The board of directors has not yet established a compensation committee.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company, one
transaction conducted by each of Messrs. Haire, Cossutta and Evans that was
required to be reported by Section 16(a) of the Securities Exchange Act of 1934,
was reported late during the period ended December 31, 2004.
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.
9
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
----------------------
Except as set forth below, no compensation in excess of $100,000 was awarded to,
earned by, or paid to any executive officer of the Company during the years
2004, 2003, and 2002. The following table and the accompanying notes provide
summary information for each of the last three fiscal years concerning cash and
non-cash compensation paid or accrued by the Company's Chief Executive Officer
over the past three years.
SUMMARY COMPENSATION TABLE
----------------------- ------------------------------------- -------------------------------------------------------
Annual Compensation Long Term Compensation
----------------------- ------------------------------------- -------------------------------------------------------
Awards Payouts
------------------------------------------------------------- ---------------------------- --------------------------
Other Restricted Securities
Name and Annual Stock Underlying LTIP All Other
Principal Salary Bonus Compensation Award(s) Options payouts Compensation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
--------------- -------- ------------ ---------- ------------ ------------- -------------- ---------- ---------------
Scott A. Haire 2004 -0- - - - - - -
2003 -0- - - - - - -
2002 $ 60,000 - - - - - -
--------------- -------- ------------ ---------- ------------ ------------- -------------- ---------- ---------------
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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 March 31, 2005, 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, 2004, there were 14,921,432 shares of common stock issued and
outstanding.
Amount and Nature
Title Name of Beneficial of Beneficial Percent
Class Owner of Group(1) Ownership of Class
Common Scott A. Haire(2) 7,181,403 55.55%
Common Araldo A. Cossutta 4,280,000 34.30%
Common Steven W. Evans 1,015,000 8.13%
Common Thomas J. Kirchhofer - -
Common Robert E. Gross - -
Common Gilbert Valdez 3,000 .02%
Common All Directors and Executive Officers
As a Group (six in number) 12,479,403 83.63%
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(1) Unless otherwise noted, the address for each person or entity listed is 2225
E. Randol Mill Road, Suite 305, Arlington, Texas, 76011.
(2) 6,916,403 shares held by HEB, LLC. Mr. Haire is the managing member and
majority owner of HEB, LLC, and as such, is deemed to be the beneficial owner of
such shares.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective August 20, 2004, we acquired Wound Care Innovations, 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.
Effective November 10, 2003, the Company acquired MB Holding Corporation through
a merger transaction, for an aggregate of 5,000,000 shares of the Company's
common stock. Messrs. Haire and Cossutta, were the sole owners of MB Holding
Corporation. In connection with the acquisition, Mr. Steve Evans, on of the
Company's directors, received a portion of the 5,000,000 shares issued in the
acquisition.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No.
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
(b) Reports on Form 8-K. None. The Company filed one Current Report on Form 8-K
on , 2004 reporting the acquisition of Wound Care Innovations under Items 1.01.
2.01, 3.02 and 9.01, of such Report.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The firm of Clancy and Co., P.L.L.C. served as the Company's independent public
accountants for the years ended December 31, 2004 and 2003. The Board of
Directors of the Company, in its discretion, may dirct 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
accounts.
Set forth below is a summary of the fees paid to the Company's principal
accountants for the past two years for the professional services performed for
the Company. Audit Fees
The aggregate fees billed by Clancy and Co., P.L.L.C. for professional services
rendered for the audit of the Company
The Audit fees billed by Clancy and Co., P.L.L.C. for professional services
rendered for the audit fot he Company's annual financial statements on Form
10-KSB and the reviews of the financial statements included in the Company's
From 10-QSB's for the fiscal years ended December 31, 2004 and 2003 was $27,150
and $20,650 respectively.
Audit-Related Fees- None
Tax Fees - None
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All Other Fees- None
Audit Committee Pre-Approval Policies and Procedures
The Company does not currently have and Audit Committee. The Company's current
policy is the Board of Directors pre-approve 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-approve all audit services and fees of
our independent auditor for the years ended December 31, 2004 and 2003. Our
independent auditors did not provide us with any non-audited services during the
period indicated above.
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 14th day of April 2004.
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 December 20, 2005
Scott A. Haire
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12
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
13
MB SOFTWARE CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements
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' Equity...................F-5
Consolidated Statements of Cash Flows........................................F-6
Notes to the Consolidated Financial Statements........................F-7 - F-15
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F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
MB Software Corporation
We have audited the accompanying consolidated balance sheet of MB Software
Corporation, a Texas Corporation, and Subsidiaries (the "Company") as of
December 31, 2004, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the preceding two years then
ended. 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 audits.
We conducted our audit in accordance with the standards established by 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 of the consolidated financial statements provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2004, and the results of their operations and their
cash flows for the preceding two years then ended, in conformity with generally
accepted accounting principles in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred recurring losses and has a
significant accumulated deficit. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The accompanying consolidated financial statements have been restated due to a
correction of an error, the details of which can be found in Note 3 to the
consolidated financial statements.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
March 31, 2005, except for Note 3 which is dated October 24, 2005
F-2
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2004
ASSETS (Restated)
-------
Current Assets
Cash $ 7,889
Accounts receivable 20,086
Inventory 95,300
Due from related parties 9,538
Prepaid expenses 69,200
------------
Total current assets 202,013
Fixed assets, net 54,919
Security deposits 15,694
------------
Total Assets $ 272,626
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current liabilities
Accounts payable $ 97,662
Accrued liabilities 54,234
Obligation under capital lease - current portion 4,092
------------
Total current liabilities 155,988
Long-term liabilities
Obligation under capital lease - noncurrent portion 6,240
------------
Total Liabilities 162,228
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: 14,921,432 14,921
Stock subscription 221,971
Additional paid-in capital 10,960,749
Accumulated deficit (11,075,204)
------------
122,437
Less: treasury stock, at cost; 4,089 shares (12,039)
------------
Total stockholders' deficiency 110,398
------------
Total Liabilities and Stockholders' Deficiency $ 272,626
============
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The accompanying notes are an integral part of these consolidated financial
statements.
F-3
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
(Restated) (Restated)
2004 2003
----------- -----------
Revenues $ 174,091 $ 21,642
Cost of revenues 170,506 14,914
----------- -----------
Gross margin 3,585 6,728
Selling, general and administrative (1,666,508) (194,524)
-----------
Loss from operations (1,662,923) (187,796)
Interest expense, net (54,685) (6,932)
----------- -----------
Loss before provision for income taxes (1,717,608) (194,728)
Provision for income taxes -- --
----------- -----------
Loss from continuing operations (1,717,608) (194,728)
Discontinued operations
Operating loss (158,710) (383,069)
----------- -----------
Net loss $(1,876,318) $ (577,797)
=========== ===========
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Basic and diluted loss per share:
Continuing operations $ (0.19) $ (0.13)
Discontinued operations (0.02) (0.25)
----------- -----------
$ (0.21) $ (0.38)
=========== ===========
Weighted average common shares outstanding 9,134,287 1,521,440
=========== ===========
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The accompanying notes are an integral part of these consolidated financial
statements.
F-4
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS DECEMBER 31, 2004 AND 2003
(Restated)
Common Common Additional (Restated)
Stock Stock Stock Paid-In Accumulated Treasury
Shares Amount Subscription Capital Deficit Stock
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2002 822,810 $ 823 $ -- $ 8,632,456 $ (8,621,089) $ (12,039)
Common stock issued for acquisition of
MB Holding Corporation 5,000,000 5,000 -- 96,221 -- --
Gain on sale of assets between entities
under common control -- -- -- 303,708 -- --
Capital contributions -- -- -- -- -- --
Net loss -- -- -- -- (577,797) --
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2003 5,822,810 5,823 -- 9,032,385 (9,198,886) (12,039)
Common stock issued for the acquisition
of Wound Care Innovations, LLC 8,572,303 8,572 -- 1,792,040 -- --
Conversion of debt to equity 526,319 526 -- 358,295 -- --
Stock subscription to settle debt in
exchange for the net book value of
related entities disposed -- -- 221,971 (221,971) -- --
Net loss -- -- -- -- (1,876,318) --
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2004 14,921,432 $ 14,921 $ 221,971 $ 10,960,749 $(11,075,204) $ (12,039)
============ ============ ============ ============ ============ ============
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The accompanying notes are an integral part of these consolidated financial
statements.
F-5
MB SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004 AND 2003
(Restated) (Restated)
2004 2003
----------- -----------
Cash flows from operating activities
------------------------------------
Loss from continuing operations $(1,717,608) $ (194,728)
Adjustments to reconcile net loss from to net cash used in operating activities
Gain on sale of assets between entities under common control -- --
Depreciation 4,264 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (9,546) (10,541)
(Increase) decrease in inventory 261,453 (356,752)
(Increase) decrease in prepaid expenses and other assets (84,894) --
Increase (decrease) in accounts payable and accrued liabilities 443,372 58,524
Net cash from discontinued operations 141,076 (13,336)
----------- -----------
Net cash flows used in operating activities (961,883) (516,833)
Cash flows from investing activities
------------------------------------
Purchase of fixed assets (45,244) (1,664)
----------- -----------
Net cash flows used in investing activities (45,244) (1,664)
Cash flows from financing activities
------------------------------------
Advances / repayments - related parties 932,558 46,746
Principal payments under capital lease (1,944) --
Proceeds from notes payable 70,000 457,500
----------- -----------
Net cash flows provided by financing activities 1,000,614 504,246
----------- -----------
Increase (decrease) in cash (6,513) 14,251
Cash and cash equivalents, beginning of year 14,402 151
----------- -----------
Cash and cash equivalents, end of year $ 7,889 $ 14,402
=========== ===========
Cash paid during the year for:
------------------------------
Interest $ 23,823 --
=========== ===========
Income taxes -- --
=========== ===========
Supplemental noncash investing and financing activities:
--------------------------------------------------------
Common stock issued for conversion of debt in connection with WCI acquisition $ 1,800,612 --
=========== ===========
Common stock issued for conversion of debt to equity $ 358,821 --
=========== ===========
Stock subsription to settle debt $ 221,971
=========== ===========
Exchange of assets between entities under common control $ -- $ 101,221
=========== ===========
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The accompanying notes are an integral part of these consolidated financial
statements.
F-6
MB SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
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.
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. The Company's financial statements include
the combined statements of financial position, results of operations and cash
flows as a result of a merger agreement completed during 2004. (See Note 3 for
details) The Company remains as the reporting entity and its balance sheet and
other financial information have been updated as of the beginning of the period
as though the assets and liabilities had been transferred at that date.
Financial statements and financial information presented for the prior year have
been restated to furnish comparative information for all periods during which
the companies were under common control. All restated financial statements
reflect the combined results of operations and cash flows of the previously
separate entities. 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
generally accepted accounting principles 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, due from
related parties, accounts payable and other accrued liabilities, the carrying
amounts approximate fair value due to their short maturities.
Business and credit risk concentrations - 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.
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, 2004.
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 five 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 amounted to
$4,264 for 2004.
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.
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
F-7
customers change, estimates of the recoverability of receivables would be
further adjusted. There is no allowance for doubtful accounts at December 31,
2004.
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 and gels.
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.
Intangible assets - Intangible assets represent amounts paid pursuant to two
license agreements. One of the licenses was subject to amortization and
amortization for both periods presented amounted to $20,000 per year. The other
license was not subject to amortization as its life was indeterminable. The
gross carrying amount of the intangible assets was $200,000 and accumulated
amortization totaled $51,667. The intangible assets were held by one of the
Company's wholly-owned subsidiaries, which was disposed of on December 31, 2004.
(See Note 10) Accordingly, there is no further amortization.
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 accounts for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Compensation
cost for stock options, if any, is measured as the excess of the quoted market
price of the Company's stock at the date of grant over the amount an employee
must pay to acquire the stock. SFAS No.123, "Accounting for Stock-Based
Compensation," established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee compensation
plans. The Company has elected to remain on its current method of accounting as
described above, and has adopted the pro forma disclosure requirements of SFAS
No. 123 only. See Note 8 for a description of the stock-based compensation plan.
There have been no options granted since 2001 and therefore, no pro forma
disclosures are required.
Earnings per share - Basic earnings or loss per share is based on the weighted
average number of common shares outstanding. Diluted earnings or loss per share
is based on the weighted average number of common shares outstanding and
dilutive common stock equivalents. Basic and diluted earnings or loss per share
is computed by dividing net earnings (loss) (numerator) by the weighted average
number of common shares outstanding (denominator) for the period. All earnings
or loss per share amounts in the financial statements are basic earnings or loss
per share. Convertible securities that could potentially dilute basic earnings
or loss per share in the future are not included in the computation of diluted
earnings or loss per share because to do so would be antidilutive. 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.
Reclassification - Certain prior period amounts have been reclassified to
conform to the current year presentation. These changes had no effect on
previously reported results of operations or total stockholders' equity.
Recent accounting pronouncements - The Financial Accounting Standards Board
("FASB") has issued the following pronouncements:
In March 2004, the Emerging Issues Task Force ("EITF") reached consensus on EITF
Issue No. 03-6, "Participating Securities and the Two Class Method under FASB
Statement No. 128" ("EITF 03-6"). EITF 03-6 addresses a number of questions
regarding the computation of earnings per share by companies that have issued
securities other than common stock that contractually entitle the holder to
participate in the dividends and earnings of the company when, and if, it
declares dividends on its common stock. EITF 03-6 also provides further guidance
in applying the two-class method of calculating earnings per share, clarifying
F-8
what constitutes a participating security and how to apply the two-class method
of computing earnings per share once it is determined that a security is
participating, including how to allocate undistributed earnings to such a
security. EITF 03-6 is effective for fiscal periods beginning after March 31,
2004 and requires retroactive restatement of prior earning per share amounts.
This statement does not affect the Company.
In June 2004, the FASB issued EITF Issue No. 02-14, "Whether an Investor Should
Apply the Equity Method of Accounting to Investments Other Than Common Stock."
EITF Issue No. 02-14 addresses whether the equity method of accounting applies
when an investor does not have an investment in voting common stock of an
investee but exercises significant influence through other means. EITF Issue No.
02-14 states that an investor should only apply the equity method of accounting
when it has investments in either common stock or in-substance common stock of a
corporation, provided that the investor has the ability to exercise significant
influence over the operating and financial policies of the investee. The
accounting provisions of EITF Issue No. 02-14 are effective for the reporting
period beginning after September 15, 2004. This statement does not affect the
Company.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of ARB No. 43, Chapter 4." The amendments made by SFAS No. 151 clarify that
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period charges and require
the allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities. The guidance is effective for inventory
costs incurred during fiscal years beginning after November 23, 2004. This
statement does not significantly affect the Company.
In December 2004, the FASB issued a revision of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123R). SFAS 123R supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related implementation guidance. SFAS 123R establishes
standards for the accounting for transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. SFAS 123R does not change the accounting guidance for
share-based payment transactions with parties other than employees provided in
SFAS 123 as originally issued and EITF Issue No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services." SFAS 123R is effective for interim
reporting period that begins after June 15, 2005. The Company is evaluating the
requirements of SFAS 123R and expects that the adoption of SFAS 123R will have a
material impact on the Company's consolidated results of operations and earnings
per share for future stock-based compensation arrangements. In December 2004,
the FASB issued SFAS No. 152, "Accounting for Real Estate Time-Sharing
Transactions - an amendment of FASB Statements No. 66 and 67," which discusses
the accounting and reporting of real estate time-sharing transactions. This
Statement is effective for financial statements for fiscal years beginning after
June 15, 2005, and restatement of previously issued financial statements is not
permitted. This statement does not affect the Company.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- an amendment of APB Opinion No. 29." The guidance in APB Opinion No. 29,
"Accounting for Nonmonetary Transactions," is based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged and provided an exception to the basic measurement
principle (fair value) for exchanges of similar productive assets. That
exception required that some nonmonetary exchanges, although commercially
substantive, be recorded on a carryover basis. This Statement eliminates the
exception to fair value for exchanges of similar productive assets and replaces
it with a general exception for exchange transactions that do not have
commercial substance--that is, transactions that are not expected to result in
significant changes in the cash flows of the reporting entity. The provisions of
this Statement are effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005, applied prospectively. This statement
does not affect the Company.
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
F-9
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
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 - BUSINESS ACQUISITION AND CORRECTION OF AN ERROR (RESTATEMENT)
Wound Care Innovations, LLC
On August 20, 2004, the Company consummated the acquisition of Wound Care
Innovations, LLC, ("WCI"), a Nevada limited liability company, through a merger
of WCI with the Company's wholly-owned subsidiary, Wcare Acquisition, LLC, a
Nevada limited liability company. WCI owns certain exclusive and nonexclusive
distribution rights to CellerateRxTM products, advanced collagen-based wound
care products based upon a patented molecular form of collagen. WCI'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.
The details of the agreement are as follows:
WCI had entered into a Distribution 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. To maintain the exclusive rights,
WCI agreed to pay AN the following royalties: contract year 1-$90,000; contract
year 2-$291,000, and contract year 3-$522,000. Additionally, WCI agreed to
purchase from AN a minimum dollar amount of products as follows: contract year
1-$350,000; contract year 2-$727,500; and contract year 3-$1,305,000. Within 45
days prior to expiration of the first 3 years following the effective date of
the agreement, and prior to the expiration of each year during the term
thereafter, WCI and AN agreed to negotiate in good faith a minimum annual
royalty and minimum annual purchases for the ensuing year, which shall be 115%
of the prior year's royalty and purchases, respectively. If WCI fails to pay the
royalties or make the purchases, AN may terminate the agreement by written
notice to WCI and the WCI's rights convert to a non-exclusive basis.
All 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. The first royalty report is due on or before January 30,
2005 for the period beginning on the effective date of the agreement and ending
on December 31, 2004. Accrued royalties at December 31, 2004 were $2,476. AN
also granted WCI an option to acquire all of AN's rights, title and interest in
and to the patent, and all processes and other know-how related to the products
and their manufacture, solely with respect to the patent, exercisable at any
time during the first five years of the term of the agreement.
The consideration paid by the Company for WCI consisted of an aggregate of
6,000,000 restricted shares of the Company's common stock. The shares were
issued to H.E.B., L.L.C. ("HEB") and Mr. Araldo Cossutta ("Cossutta"), the sole
owners of WCI. The Company's Chairman of the Board, Chief Executive Officer and
President, Scott Haire ("Haire") is the majority owner and managing member of
HEB. Cossutta is also a member of the Company's Board of Directors. In
connection with the acquisition, HEB and Cossutta agreed to convert an aggregate
of $1,800,612 of WCI debt and other WCI obligations owed to HEB and Cossutta
into an aggregate of 2,572,303 additional restricted shares of the Company's
common stock. The Company's financial statements include the combined statements
of financial position, results of operations and cash flows for the entities
merged. The historical financial statements of the Company have been restated
retroactively for all periods presented as the entities were under common
control during those periods. All restated financial statements reflect the
combined results of operations and cash flows of the previously separate
entities. The transaction was originally recorded in error as a purchase
business combination and valued at the fair value of the securities issued.
These financial statements have been restated to reflect the correction of an
error and the net effect was an increase in total assets and total stockholders'
equity of $69,200, a decrease in net loss of $4,419,017, and a decrease in loss
per share of $0.48.
F-10
NOTE 4 - RELATED PARTY TRANSACTIONS
Amounts due from related parties
Amounts due from related parties represent funds advanced from various entities
controlled by the president of this Company, as necessary, to meet working
capital requirements. The advances bear interest at 10% per annum, are unsecured
and repayable on demand.
Management fees
Included in selling, general and administrative expenses for 2004 are management
fees totaling $350,000 representing fees incurred by Haire ($160,125) and
Cossutta ($189,875) for services rendered for WCI and the related acquisition.
(See Note 3 for details) The management fees were part of a conversion of WCI
debt and other WCI obligations owed to HEB and Cossutta that were converted into
an aggregate of 2,572,303 additional restricted shares of the Company's common
stock.
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 $ 12,639
Phone system 12,276
Computer equipment 14,268
Artwork 20,000
----------
59,183
Less accumulated depreciation 4,264
----------
Net book value $ 54,919
==========
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NOTE 6 - OPERATING AND CAPITAL LEASES
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
2004 was approximately $24,000. Minimum future rental payments under
non-cancelable operating leases having remaining terms in excess of 1 year as of
December 31, 2004, for each of the next five years and in the aggregate are as
follows:
2005 $ 82,000
2006 80,200
2007 80,200
2008 52,300
2009 35,000
------------
Total $ 329,700
============
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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 of $1,188 was charged to operations during 2004.
F-11
The following is a summary of property held under capital lease:
Phone system $ 12,276
Less accumulated depreciation (1,188)
----------
Net book value $ 11,088
==========
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Minimum future lease payments under capital lease as of December 31, 2004, for
each of the next five years and in the aggregate are: 2005$4,092; 2006-$4,092;
2007-$2,148.
NOTE 7 - STOCKHOLDERS' EQUITY TRANSACTIONS
Common stock issued for the acquisition of Wound Care Innovations, LLC. ("WCI")
During 2004, the Company issued an aggregate 8,572,303 shares of restricted
common stock pursuant to a merger agreement dated August 20, 2004, in exchange
for 100% of the issued and outstanding shares of WCI and the conversion of
outstanding liabilities of $1,800,612 of WCI debt and other WCI obligations. The
shares were issued to related parties. (See details in Note 3)
Conversion of debt to equity
During 2004, the Company's Board of Directors authorized the conversion of
certain notes payable and accrued interest to equity at agreed upon conversion
rates of $0.50 per share to $1.00 per share pursuant to signed conversion
agreements and issued 526,319 restricted shares of the Company's common stock.
Accrued interest waived in connection with the conversion totaled approximately
$37,440, which has been charged to additional paid-in capital.
Common stock issued for the acquisition of MB Holding Corporation ("MBH")
The Company acquired MBH through a merger transaction dated November 10, 2003,
for an aggregate of 5,000,000 shares of the Company's restricted common stock.
The shares were issued to related parties and were valued at the historical cost
basis of the transferred entity because the assets were transferred between
entities under common control. (See details in Note 10)
Gain on sale of assets between related parties
On July 24, 2003, Envoii Healthcare, L.L.C. and Envoii Technologies, L.L.C.
(identical parties control each entity) completed an Asset Purchase Agreement
for the purchase of certain assets for consideration of $375,000 with a cost
basis of $71,292 for a net gain on the transaction of $303,708. Envoii
Healthcare and Envoii Technologies are controlled by identical parties, Haire,
which is the Company's President, Chairman and CEO, and Cossutta, one of the
Company's directors. Both Haire and Cossutta converted notes payable totaling
$240,800 to capital and then applied the capital to the purchase price of the
transaction. Since the transaction occurred between entities under common
control, no gain on the transaction was recognized, but credited to additional
paid-in capital.
Stock subscription
Stock subscription represents the Company's obligation to issue shares in
settlement of debt. (See Note 10)
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:
F-12
Weighted Average
Options Exercise Price
-------------- --------------------
Outstanding at 12/31/02 52,000 $ 5.00
Granted, Exercised, Forfeited - -
-------------- --------------------
Outstanding at 12/31/03 52,000 5.00
Granted - -
Exercised - -
Forfeited (52,000) (5.00)
-------------- --------------------
Outstanding at 12/31/04 - -
============== ====================
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NOTE 9 - 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 carryforward period. Management has
considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes.
At December 31, 2004, 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 2004 was approximately $2,100,000 (2003: $15,000).
The Company generated net operating losses for financial reporting and Federal
income tax reporting prior to its reorganization in 1993. As of December 31,
2004, subject to limitations under Internal Revenue Code Section 382,
approximately $469,000 of these losses are available for use after the
reorganization, which expire in 2008 if not previously utilized. The net
operating loss carryforward at December 31, 2004 is approximately $16,700,000
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 2003 and
2002 is as follows:
2004 2003
----------- -----------
Expected federal income tax benefit $ 2,086,000 $ (15,000)
Valuation allowance and other (2,086,000) 15,000
----------- -----------
Income tax expense (benefit) -- --
=========== ===========
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Deferred tax asset at December 31, 2004, is as follows:
Net operating loss carryforwards $ 5,671,000
Valuation allowance (5,671,000)
-----------
Net current deferred tax asset --
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NOTE 10 - DISCONTINUED OPERATIONS
MB Holding Corporation ("MBH")
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. The shares are presented as stock subscriptions because the Company is
obligated to issue the shares in settlement of debt, however the shares have not
yet been issued as of the date of issuance of these financial statements.
Condensed results of operations included in discontinued operations are as
follows:
F-13
Revenues $ 39,226
Expenses (197,936)
---------
Operating loss $ 158,710
=========
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MBH was originally acquired in 2003 for an aggregate of 5,000,000 restricted
shares of the Company's common stock, which were issued to Scott Haire ("Haire")
and Araldo Cossutta ("Cossutta"), the sole stockholders of MBH, in proportionate
share to their respective holdings in MBH. Both Haire and Cossutta are directors
of the Company, and Haire is also the Company's Chairman of the Board, Chief
Executive Officer and President. MBH, through its wholly-owned subsidiary Envoii
Healthcare L.L.C. ("Envoii"), a Nevada limited liability company, developed a
system for transmitting electronic documents in a secure environment. MBH other
wholly-owned subsidiary, VPS Holding, LLC ("VPSH"), was acquired in January
2004, for the purpose of obtaining the rights to certain intellectual property
and know-how related to prescription drug monitoring databases.
Exhibit 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott A. Haire, certify that:
1. I have reviewed this annual report on Form 10-KSB, as amended, of MB
Software, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over fiscal
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our 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 principals;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusion about the effectiveness
of disclosure controls and procedures, as of the end of the period covered by
this report based upon 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 (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
(a) All significant deficiencies in the design or operation of internal controls
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 controls over
financial reporting;
Date: December 20, 2005
/s/ Scott A. Haire
-------------------
Scott A. Haire,
Chairman of the Board,
(Chief Executive Officer and Principal Financial Officer)
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of MB Software Corporation on Form 10-KSB,
as amended, for the period ending December 31, 2004 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 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.
/s/ Scott A. Haire
-------------------
Scott A. Haire,
Chairman of the Board,
(Chief Executive Officer and Principal Financial Officer)
December 20, 2005
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