Combine all the meatball ingredients in a bowl and mix gently using your (clean) hands so that everything is evenly distributed. Shape mixture into 1-inch meatballs. Set aside.
In a saucepan over medium heat, saute mushrooms in olive oil for 5 minutes. Add onion and garlic and cook until softened, 2-3 minutes longer. Add pureed tomatoes, broth or water, herbs and seasoning and bring to boil. Drop in meatballs and cook for 30 minutes, or until meatballs are cooked through and sauce has thickened (do not stir meatballs in sauce for first 5 minutes so that they can firm up). Remove bay leaf.
Serve over brown rice or egg noodles or pasta, with extra parmesan cheese.
Note: This can also be placed in a casserole dish, rice on bottom, meatballs and sauce on top, and reheated later on.