UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K /A
Amendment No. 1
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended June 30, 2011
[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
	Commission fle number 000-05391
	METWOOD, INC.
	(Name of small business issuer in its charter)
	NEVADA		83-0210365
	(State or other jurisdiction		(IRS Employer
	of incorporation or organization)		Identification No.)
	819 Naff Road, Boones Mill, VA 24065
	(Address of principal executive offices)
	(540) 334-4294
	(Issuer's telephone number)
	Securities registered under Section 12(b) of the Exchange Act:
	None
	Securities registered under Section 12(g) of the Exchange Act:
	$0.001 Par Value Common Voting Stock
	(Title of Class)
	Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes £  No S
	Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the the Act. Yes £  No S
	Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for 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 Yes SNo £
	Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K
	Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):
	Large accelerated filer £       Accelerated filer         £
	Non-accelerated filer £ (Do not check if a smaller reporting company)       Smaller reporting company S

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes £ No S
As of December 31, 2010, the aggregate market value of the 12,231,797 common shares outstanding (based upon the average of the bid price ($.15) reported on the OTCQB Market) held by non-affiliates was $1,834,770
As of September 13, 2011, the number of shares outstanding of the registrant's common stock, $0.001 par value(the only class of voting stock), was 12,231,797 shares

 

 

 

METWOOD, INC. AND SUBSIDIARY
FORM 10-K
TABLE OF CONTENTS
								Page
	PART I
Item 1	Description of Business							1
Item 1A	Risk Factors							5
Item 2	Properties							6
Item 3	Legal Proceedings							6
Item 4	Submission of Matters to a Vote of Security Holders							6
	PART II
Item 5	Market for Registrant's Common Equity, Related Stockholder Matters							6
	and Issuer Purchases of Equity Securities
Item 7	Management's Discussion and Analysis or Plan of Operation							7
Item 8	Financial Statements and Supplementary Data							10
Item 9	Changes in and Disagreements with Accountants on Accounting and							24
	Financial Disclosure
Item 9A	Controls and Procedures							24
Item 9B	Other Information							24
	PART III
Item 10	Directors, Executive Officers and Corporate Governance							25
Item 11	Executive Compensation							27
Item 12	Security Ownership of Certain Beneficial Owners and Management							28
	and Related Stockholder Matters
Item 13	Certain Relationships and Related Transactions, and Director Independence							29
Item 14	Principal Accounting Fees and Services							29
	PART IV
Item 15	Exhibits and Financial Statement Schedules							30
Signatures								31

 

 

 

EXPLANATORY NOTE

 

This Annual Report on Form 10-K/A is being filed as Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2011.  The Form 10-K was originally filed with the Securities and Exchange Commission on September 14, 2011.

 

We are amending original Form 10-K to include the revised languages in the controls and procedures section of the report.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, and plans and objectives of management.  Statements that are not historical in nature and which include such words as "anticipate," "estimate," "should," "expect," believe," "intend," and similar expressions are intended to identify forward-looking statements for the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act

PART I

Item 1.  Description of Business

Business Development

The company was incorporated under the laws of the State of Wyoming on June 19, 1969.  Following an involuntary dissolution for failure to file an annual report, the company was reinstated as a Wyoming corporation on October 14, 1999.  On January 28, 2000, the company, through a majority shareholder vote, changed its domicile to Nevada through a merger with EMC Energies, Inc., a Nevada corporation.  The Plan of Merger provided for the dissenting shareholders to be paid the amount, if any, to which they would be entitled under the Wyoming Corporation Statutes with respect to the rights of dissenting shareholders.  The company also changed its par value to $.001 and the amount of authorized common stock to 100,000,000 shares

Prior to 1990, the company was engaged in the business of exploring for and producing oil and gas in the Rocky Mountain and mid-continental areas of the United States.  The company liquidated substantially all of its assets in 1990 and was dormant until June 30, 2000, when it acquired, in a stock-for-stock, tax-free exchange, all of the outstanding common stock of a privately held Virginia corporation, Metwood, Inc. ("Metwood"), which was incorporated in 1993.  See Form 8-K and attached exhibits filed August 11, 2000.  Metwood has been in the metal and metal/wood construction materials manufacturing business since 1992.  Following the acquisition, the company approved a name change from EMC Energies, Inc. to Metwood, Inc.

Effective January 1, 2002, Metwood acquired certain assets of Providence Engineering, PC ("Providence"), a professional engineering firm with customers in the same proximity as Metwood, paying $60,000 in cash and issuing 290,000 Metwood common shares to the two Providence shareholders (one of whom was also an officer and existing shareholder of Metwood prior to the acquisition).  These shares were valued at the closing quoted stock price of $1.00 per share at the effective date of the purchase.  On October 15, 2002, $15,000 additional cash was paid to one shareholder in exchange for the shareholder's surrender of 15,000 shares of Metwood stock, and $50,000 was paid to that shareholder in two installments of $25,000 each (on January 15 and April 15, 2004) for 275,000 shares.  All of the originally issued 290,000 shares of Metwood stock were thus repurchased.  The initial purchase transaction was accounted for under the purchase method of accounting

 

 

 

The consolidated company ("the Company," "We," "Us," "Our") provides construction-related products and engineering services to residential customers and contractors, commercial contractors, developers and retail enterprises, primarily in southwestern Virginia
Principal Products or Services and Markets
Metwood - Residential builders are aware of the superiority of steel framing vs. wood framing, insofar as steel framing is lighter; stronger; termite, pest, rot and fire resistant; and dimensionally more stable in withstanding induced loads.  Although use of steel framing in residential construction has generally increased each year since 1980, many residential builders have been hesitant to utilize steel due to the need to retrain framers and subcontractors who are accustomed to a "stick-built" construction method where components are laid out and assembled with nails and screws.  The Company's founders, Robert Callahan and Ronald Shiflett, saw the need to combine the strength and durability of steel with the convenience and familiarity of wood and wood fasteners
Our primary products and services are:
·  Girders and headers	·  Square structural columns
·  Floor joists	·  Garage, deck and porch concrete pourover systems
·  Floor joist reinforcers	·  Garage and post-and-beam buildings
·  Roof and floor trusses and rafters	·  Engineering, design and custom building services
·  Metal framing
Metwood manufactures light-gage steel construction materials, usually combined with wood or wood fasteners, for use in residential and commercial applications in place of more conventional wood products, which are inferior in terms of strength and durability.  The steel and steel/wood products allow structures to be built with increased load strength and structural integrity and fewer support beams or support configurations, thereby allowing for structural designs that are not possible with wood-only products
Providence - Extensively involved in ongoing product research and development for Metwood, Providence also offers its customers civil engineering capabilities which include rezoning and special use submissions; erosion and sediment control and storm-water management design; residential, commercial, and religious facility site development design; and utility design, including water, sewer and onsite treatment systems.  Providence's staff is familiar with construction practices and has been actively involved in construction administration and inspection on multiple projects.
Providence also performs a variety of structural design and analysis work, successfully providing solutions for many projects, including retaining walls, residential framing, commercial building framing, light-gage steel fabrication drawings, metal building retrofits and additions, mezzanines, and seismic anchors and restraints
Providence has designed numerous foundations for a variety of structures.  Its foundation design expertise includes metal building foundations, traditional building construction foundations, atypical foundations for residential structures, tower foundations, and sign foundations for a variety of uses and applications

 

 

Providence has also designed and drafted full building plans for several applications.  When subcontracting with local professional firms, Providence has the ability to provide basic architectural, mechanical, electrical, and detailed civil and structural design services for these facilities

Providence has reviewed designs by manufacturers for a variety of structures and structural components, including retaining walls, radio towers, tower foundations, sign foundations, timber trusses, light-gage steel trusses, and light-gage steel beams.  This service enables clients to take generic designs and have them certified and approved for construction in the desired locality

Distribution Methods of Products and Services

Our sales are primarily wholesale, directly to lumberyards, home improvement stores, hardware stores, and plumbing and electrical suppliers in Virginia and North Carolina.  Metwood relies primarily on its own sales force to generate sales; additionally, however, the Company has distributors in Virginia, New York, Oklahoma, Arizona and Colorado and also utilizes the salespeople of wholesale yards stocking the Company's products as an additional sales force.  We are an authorized vendor for Lowe's, Home Depot, 84 Lumber, Stock Building Supply, ProBuild, and many more.  We have several stocking dealers of our square columns and reinforcing products.  We will sell directly to contractors in areas where we do not have a dealer, but with our national dealer relationships,  we typically  have a dealer to use.   Metwood  intends to continue expanding  the wholesale marketing of its unique products to retailers, to increase dealer sales, and to license the Company's technology and products to increase its distribution outside of Virginia, North Carolina and the South

Status of Publicly Announced New Products or Services

The Company acquired four new patents through assignment from Robert Callahan and Ronald Shiflett, the patent holders.  All four patents reflect various modifications to our Joist Reinforcing Bracket which will make it even easier for tradesmen to insert utility conduits through wood joists.  In

October 2010, Metwood signed a letter of intent with Nuconsteel ("Nucon"), a Nucor company, to team with Nucon to increase our sales of the TUFFBEAM, TUFFJOIST, and RIMBEAM ("products").  We will provide, among other things, an unrestricted, exclusive license (except for defined Metwood territory) to Nucon to sell and manufacture all current and future products.  Nucon will pay us a royalty for all products manufactured by Nucon and their sub-licensees and will sell us Nucon's complete line of NUJOIST product at the most favorable pricing.  Nucon will also integrate Metwood into the Nucon Fabrication Network.  Nucon will provide us with certain equipment in exchange for the exclusive rights granted in the agreement.  The agreement will be in effect for two years with renewals for additional periods of one year

Seasonality of Market

Our sales are subject to seasonal impacts, as our products are used in residential and commercial construction projects which tend to be at peak levels in Virginia and North Carolina between the months of March and October.  Accordingly, our sales are greater in our fourth and first fiscal quarters.  We build an inventory of our products throughout the winter and spring to support our sales season.  Due to the seasonality of our local market, we are continuing our efforts to expand into markets that are not so seasonally impacted.  We have shipped projects to Florida, Georgia, South Carolina, Arizona, Washington, and more.  These markets have some seasonality, but increased exposure in these markets wil help maintain stronger sales year round

 

 

 

Competition

Nationally, there are over one hundred manufacturers of the types of products produced by the Company.  However, the majority of these manufacturers are using wood-only products or products without metal reinforcement.  Metwood has identified only one other manufacturer in the United States that manufactures a wood-metal floor truss similar to ours.  However, we have often found that our products are the only ones that will work within many customers' design specs.

Sources and Availability of Raw Materials and the Names of Principal Suppliers

All of the raw materials we use are readily available on the market from numerous suppliers.  The light-gage metal used by the Company is supplied primarily by Dietrich Industries, Nuconsteel, Clark Western, and Wheeling Corrugating.  Our main source of lumber is BlueLinx.  Nucor and Gerdau Amersteel provide the majority of our rebar.  Because of the number of suppliers available to us, our decisions in purchasing materials are dictated primarily by price and secondarily by availability.  We do not anticipate a lack of supply to affect our production; however, a shortage might cause us to pass on higher materials prices to our buyers

Dependence on One or a Few Major Customers

For the fiscal years ending June 30, 2011 and 2010, no customer accounted for 10% or more of total sales.

Patents

The Company has nine U.S. Patents:

U.S. Patent Nos. 5,519,977 and 7,347,031, "Joist Reinforcing Bracket," a bracket that reinforces wooden joists with a hole for the passage of a utility conduit.  The Company refers to this as its floor joist patch kit

U.S. Patent No. 5,625,997, "Composite Beam," a composite beam that includes an elongated metal shell and a pierceable insert for receiving nails, screws or other penetrating fasteners

U.S. Patent No. 5,832,691, a continuation in part of U.S. Patent No. 5,625,997, "Composite Beam," a composite beam that includes an elongated metal shell and a pierceable insert for receiving nails, screws or other penetrating fasteners

U.S. Patent No. 5,921,053, "Internally Reinforced Girder with Pierceable Nonmetal Components," a girder that includes a pair of "c"-shaped members secured together so as to form a hollow box which permits the girder to be secured within a building structure with conventional fasteners such as nails, screws and staples

U.S. Patent Nos. D472,791S; D472,792S; D472,793S; and D477,210S, all modifications of Metwood's Joist Reinforcing Bracket, which will be used for repairs of wood I-joists

 

 

 

Each of the above-mentioned patents was originally issued to the inventors and Company founders, Robert Callahan and Ronald B. Shiflett, who licensed these patents to us

Need for Government Approval of Principal Products

Our products must either be sold with an engineer's seal or applicable building code approval.  The Company's chief engineer has obtained professional licensure in several states, which permits products not building code approved to be sold and used with his seal.   We expect his licensure in a growing number of states to greatly assist in the uniform acceptability of our products as we expand to new markets. Currently, we are seeking International Code Council ("ICC") code approval on our joist reinforcers and beams.  Once that approval is obtained, our products can be used in all fifty states and will eliminate the need for an engineer's seal on individual products.  To date, the Company's 2x10 floor joist reinforcer has received both Bureau Officials Code Association approval (2001) and ICC approval (2004).

Time Spent During the Last Two Fiscal Years on Research and Development Activities

Approximately fifteen percent of our time and resources have been spent during the last two fiscal years researching and developing our metal/wood products, new product lines, and new patents

Costs and Effects of Compliance with Environmental Laws

We do not incur any costs to comply with environmental laws.  We are an environmentally friendly business in that our products are fabricated from recycled steel

Number of Total Employees and Number of Full-Time Employees

We had eighteen employees at June 30, 2011, all of whom were full time

Item 1A.  Risk Factors

Our business is subject to various risks, including those described below.  You should carefully consider the following risk factors and all other information contained in this Form 10-K.  If any of the following events or outcomes actually occurs, our business, operating results, and financial conditions would likely suffer

Changing economic conditions could materially adversely affect us - Our operations and performance depend significantly on regional and national economic conditions and their impact on levels of spending by our customers and end users.  Currently, those economic conditions have deteriorated and may remain depressed for the foreseeable future.  These changing economic conditions could have a material adverse effect on demand for our products and on our financial condition and operating results

 

 

 

Current volatility and disruption in the capital and credit markets may continue to exert downward pressure on our stock price - The capital and credit markets have been experiencing extreme volatility and disruption over the past year.  Stock markets in general, and our stock price in particular, have experienced significant volatility over the past year.  Our stock recently traded at historic lows.  In the future, there can be no assurance that price volatility in the stock markets in general will abate or that our stock price in particular will rise.  Additionally, the volatility in the credit markets could impact our ability to access new financing

We have a history of operating losses and may incur future losses.  We incurred a net loss of $86,262 for the fiscal year ended June 30, 2011 and $196,085 for the year ended June 30, 2010.  Our ability to generate significant revenues and maintain profitability is dependent in large part on our ability to expand our customer base; increase sales of our products to existing customers; manage our expense growth; enter into additional supply, license and collaborative arrangements; and successfully manufacture and commercialize products incorporating our technologies in new applications and in new markets

Item 2.  Properties

During the year ended June 30, 2005, we sold our facilities to a related party for $600,000 and subsequently leased the facilities back under a long-term lease agreement.  We now lease our facilities in Boones Mill, Virginia, which consist of corporate offices, warehouses, a garage/vehicle maintenance building, and other multi-use buildings.  The condition of these buildings is very good

We do not invest in real estate or interests in real estate, real estate mortgages or securities of or interests in persons primarily engaged in real estate activities and therefore have no policies related to such investments

Item 3.  Legal Proceedings

We are currently the complainant in two legal proceedings seeking to recover unpaid amounts from customers.  We are not a party to any other legal proceedings, nor, to the best of our knowledge, are any such proceedings threatened or contemplated

Item 4.  Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote during the year

 

 

PART II

 

 

Item 5.  Market for Common Equity and Related Stockholder Matters

Because there is no active trading market for Metwood, Inc. common stock, it is difficult to determine the market value of the stock.  Based on the best bid price for our common stock at July 21, 2011 of $.22 per share (best ask price of $.43), the market value of shares held by non-affiliates would be $2,690,995.  There are no preferred shares authorized

 

Our common stock is currently listed on the OTCQB Market, the middle tier of the OTC marketplace, under the symbol "MTWD.OB."
The following table sets forth high and low bid information for each full quarterly period within the two most recent fiscal years.  These over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions

 

Year Ended June 30, 2011			High		Bid
First Quarter			$0.25		$0.13
Second Quarter			$0.55		$0.11
Third Quarter			$0.43		$0.18
Fourth Quarter			$0.43		$0.21
Year Ended June 30, 2010
First Quarter			$1.80		$0.05
Second Quarter			$0.10		$0.07
Third Quarter			$0.26		$0.10
Fourth Quarter			$0.25		$0.03

 

Holders 

The approximate number of holders of record of our common stock as of September 13, 2011 was 1,114.  This number does not include an indeterminate number of stockholders whose shares are held by brokers in street name.  The number of stockholders has been substantially the same during the past ten years
Dividends
Per the negative covenants in our line-of-credit agreement, we are restricted from paying dividends when any debt remains outstanding on the lines.  We have not paid any dividends on our common stock and do not intend to pay dividends in the foreseeable future
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operation
Financial Condition
We anticipate that the next twelve months will be a period of continued growth as we seek to further expand our presence in new markets throughout the United States through increased numbers of distributors, licensees and dealers.  ICC code approval is being sought for the Company's joist reinforcers and beams and is expected to be obtained within the coming fiscal year.  If this approval is obtained, product marketability would be greatly enhanced and would likely lead to higher demand.
Higher product demand would likely increase the need for more capital as inventory requirements grew, which could be met through borrowing or a stock offering.  No decision has been made at the present time, however, as to which means might be used to raise capital

 

 

Results of Operations
Below are selected financial data for the years ended June 30, 2011 and 2010:

 

		2011				2010
Revenues		$	2,212,757			$	2,209,942
Net loss		$	(86,262	)		$	(196,085	)
Net loss per common share		$	(0.01	)		$	(0.02	)
Weighted average common
shares outstanding			12,231,797				12,231,797

 

At June 30, 2011 and 2010:
Total assets		$	2,185,815			$	2,406,203
Working capital		$	1,250,111			$	1,589,855
Shareholders' equity		$	1,907,084			$	1,993,346

 

No dividends have been declared or paid during the periods presented
Revenues and Cost of Sales - Consolidated gross sales increased slightly ($2,815, or less than 1%) for the year ended June 30, 2011 ("fiscal 2011") compared to the year ended June 30, 2010 ("fiscal 2010").  Construction sales consisted of product sales, engineering, delivery and installation fees and increased $14,224 (1%) comparing fiscal 2011 to 2010.  Engineering sales consisted of fees for engineering services and declined $11,409 (6%) comparing fiscal 2011 to 2010.  Gross profit increased $41,531 (5%) from fiscal 2010 to fiscal 2011

 

The slight sales increase for fiscal 2011 versus 2010 continues to reflect an ongoing general downtown in the building industry. Although we have sold product in over twenty-five states, our local market is down more than 50%. Now the commercial market is not overcoming some of the residential downturn. The potential for increased sales volume as the Company goes forward is enhanced by the fact that we now have two NUFRAME and one NUTRUSS 2.0 machines and that we are an authorized fabricator for the NUTRUSS light-gage steel truss system, begun in March 2010.

 

Cost of sales decreased $38,716 overall (3%) in fiscal 2011 compared to fiscal 2010.  On the construction side, cost of sales decreased $46,448 (4%), while cost of engineering sales increased $7,732 (5%).  The change in construction and engineering costs was proportional to the change in sales for the same period

 

Administrative expenses - These costs decreased $117,297, or 10%, to $1,040,238 in fiscal 2011 from $1,157,535 in fiscal 2010.  The decrease resulted from lower costs in nearly every category reported, notably payroll, insurance and travel expenses.  We are invested in decreasing expenditures where possible in order to maximize our net earnings.

 

 

Other Income - Other income in fiscal 2011 was13,135 (47%) lower than fiscal 2010.  The decrease resulted primarily from lower customer finance charges
Income Taxes - In fiscal 2011 we recorded an income tax benefit of $54,145 compared to a tax benefit of $90,015 in fiscal 2010.  An income tax benefit was recognized in both fiscal years because, in addition to the book loss experienced, temporary ("timing") differences between book and tax income gave rise to a higher tax loss, which will be carried forward and offset future taxable income.  A deferred tax asset has been recorded to reflect the potential future benefit of such a carryforward.  Since the realization of such an asset is uncertain, we have also recorded a valuation allowance to reduce this asset to its net realizable value.  We decreased our deferred tax liability by $33,558 in 2011 due to a turnaround of deferred taxes previously recorded.  The primary components of the deferred tax liability relate to timing differences between book and tax depreciation and the treatment of goodwill amortization.
Liquidity and Capital Reserves - Cash flows provided by operating activies in fiscal 2011 were $47,395 versus net cash used for operating activities of $73,541 in fiscal 2010, a change of $120,936.  The increase in cash flows from operations was primarily attributable to decreases in inventory and an increase in depreciation and refundable income taxes.  We also used approximately $271,000 for capital improvements and purchases of fixed assets.  Financing activities in fiscal 2011 used $8,197 compared to $175,027 provided in fiscal 2010.  The main use of funds in 2011 was from amounts repaid to a related party, while funds provided in 2010 in financing activities were from amounts loaned to us from a related party
We have historically funded our cash needs through operating income and credit line draws as needed.  We will continue to rely on sales revenue as our main source of liquidity and will incur debt primarily to fund inventory purchases as sales growth produces increased product demand.  Liquidity needs that cannot be met by current sales revenue may also arise in certain unusual circumstances such as has previously occurred when rain and snow significantly slowed construction activity and resulted in a corresponding decline in demand for our products.  In those circumstances, debt may be added to meet our fixed costs and to maintain inventory in anticipation of a spurt in product demand that generally occurs once a weather-related slowdown has ended
On a long-term basis, we also anticipate that product demand will increase considerably as we continue to expand our marketing and advertising campaign, which may include the use of television, radio, print and internet advertising.  Efforts are well underway to increase the number of out-of-state sales representatives/brokers who will market our products throughout the country.  As sales increase, we can add a second shift to meet the additional product demand without having to use funds to expand our production facilities.  If additional cash becomes necessary to fund our growth, we may raise this capital through an additional follow-on stock offering rather than taking on more debt.  However, there can be no assurance that we will be able to obtain additional equity or debt financing in the future.  If we are unable to raise additional capital as needed, our growth potential will be adversely affected, and we would have to significantly modify our plans

 

 

Item 8.  Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

Metwood, Inc.

We have audited the accompanying consolidated balance sheets of Metwood, Inc. (a Nevada corporation) and subsidiary as of June 30, 2011 and 2010, and the related consolidated statements of income, stockholders' equity, and cash flows for the 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 audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Metwood, Inc. and subsidiary as of June 30, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America

/s/ Bongiovanni & Associates, CPAs

Bongiovanni & Associates, CPAs

Cornelius, North Carolina

September 13, 2011

 

 

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2011 AND 2010
		June 30,
		2011				2010
ASSETS
Current Assets
Cash and cash equivalents		$	180,448			$	403,512
Accounts receivable, net			240,581				297,828
Inventory			855,864				938,878
Recoverable income taxes			42,606				84,383
Other current assets			47,872				53,329
Total current assets			1,367,371				1,777,930
Property and Equipment
Leasehold improvements			259,490				168,338
Furniture, fixtures and equipment			98,458				97,766
Computer hardware, software and peripherals			159,261				155,924
Machinery and shop equipment			457,688				356,166
Vehicles			420,533				380,834
Land improvements			67,959				42,099
			1,463,389				1,201,127
Less accumulated depreciation			(935,093	)			(825,942	)
Net property and equipment			528,296				375,185
Other Assets
Deferred tax asset			157,792				—
Less valuation reserve			(120,732	)			—
			37,060				—
Goodwill			253,088				253,088
TOTAL ASSETS		$	2,185,815			$	2,406,203

 

See accompanying notes to consolidated financial statements

 

 

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2011 AND 2010
		June 30,
		2011				2010
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable		$	78,401			$	148,661
Note payable			5,359			$	—
Accrued expenses			33,500				39,414
Total current liabilities			117,260				188,075
Long-term Liabilities
Note payable			24,529				—
Due to related company			136,942				175,027
Total long-term liabilities			161,471				175,027
Total liabilities			278,731				363,102
Stockholders' Equity
Common stock ($.001 par, 100,000,000 shares authorized;
12,231,797 shares issued and outstanding at June 30, 2011)			12,232				12,232
Common stock not yet issued ($.001 par, 8,150 shares at
June 30, 2011)			8				8
Additional paid-in capital			1,544,268				1,544,268
Retained earnings			350,576				436,838
Total stockholders' equity			1,907,084				1,993,346
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY		$	2,185,815			$	2,356,448

 

See accompanying notes to consolidated financial statements

 

 

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 2011 and 2010
		2011				2010
REVENUES
Construction sales		$	2,048,516			$	2,034,292
Engineering sales			164,241				175,650
Gross sales			2,212,757				2,209,942
Cost of construction sales			1,161,821				1,208,269
Cost of engineering sales			165,805				158,073
Gross cost of sales			1,327,626				1,366,342
Gross profit			885,131				843,600
ADMINISTRATIVE EXPENSES
Advertising			79,004				63,106
Bad debt provision			13,332				20,282
Depreciation			43,016				52,849
Insurance			18,720				36,999
Office expense			13,942				10,318
Payroll expenses			559,136				600,592
Professional fees			55,876				47,876
Rent			79,200				79,200
Research and development			10,555				6,940
Telephone			19,820				21,986
Travel			9,948				22,248
Vehicle			48,683				43,811
Other			89,006				151,328
Total administrative expenses			1,040,238				1,157,535
Operating loss			(155,107	)			(313,935	)
Other income			14,700				27,835
Loss before income taxes			(140,407	)			(286,100	)
Income tax benefit			(54,145	)			(90,015	)
Net loss		$	(86,262	)		$	(196,085	)
Basic and diluted deficit per share		$	(0.01	)		$	(0.02	)
Weighted average number of shares			12,231,797				12,231,797

 

See accompanying notes to consolidated financial statements

 

 

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2011 AND 2010
										Common				Common
		Common				Common				Shares Not				Shares Not				Additional
		Shares				Shares				Yet Issued				Yet Issued				Paid-in				Retained
		(000s)				($.001 Par)				(000s)				($.001 Par)				Capital				Earnings
Balances July 1, 2009			12,232			$	12,232				8			$	8			$	1,544,268			$	632,923
Net loss for year			—				—				—				—				—				(196,085	)
Balances June 30, 2010			12,232			$	12,232				8			$	8			$	1,544,268			$	436,838
Net loss for year			—				—				—				—				—			$	(86,262	)
Balances June 30, 2011			12,232			$	12,232				8			$	8			$	1,544,268			$	350,576

 

See accompanying notes to consolidated financial statements

 

 

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2011 AND 2010
		2011				2010
OPERATING ACTIVITIES
Net loss		$	(86,262	)		$	(196,085	)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation, net of property disposals			109,151				(8,869	)
Provision for deferred income taxes			(86,815	)			(32,589	)
(Increase) decrease in operating assets:
Accounts receivable			47,208				79,645
Inventory			83,013				(26,709	)
Prepaid expenses			15,496				2,110
Refundable income taxes			41,777				6,150
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses			(76,173	)			102,806
Net cash provided by (used for) operating activities			47,395				(73,541	)
INVESTING ACTIVITIES
Property, plant and equipment:
Purchases			(271,362	)			(25,058	)
Property disposals			9,100				127,216
Net cash (used for) provided by investing activities			(262,262	)			102,158
FINANCING ACTIVITIES
Net repayment to related party			(38,085	)			175,027
Net borrowings from vehicle financing			29,888				—
Net cash (used for) provided by financing activities			(8,197	)			175,027
Net (decrease) increase in cash			(223,064	)			203,644
Cash, beginning of the year			403,512				199,868
Cash, end of the year		$	180,448			$	403,512

 

See accompanying notes to consolidated financial statements

 

METWOOD, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011 AND 2010
NOTE 1 - ORGANIZATION AND OPERATIONS
Metwood, Inc. ("Metwood") was organized under the laws of the Commonwealth of Virginia on April 7, 1993.  On June 30, 2000, Metwood entered into an Agreement and Plan of Reorganization in which the majority of its outstanding common stock was acquired by a publicly held Nevada shell corporation.  The acquisition was a tax-free exchange for federal and state income tax purposes and was accounted for as a reverse merger in accordance with Accounting Principles Board ("APB") Opinion No. 16.  Upon acquisition, the name of the shell corporation was changed to Metwood, Inc., and Metwood, Inc., the Virginia corporation, became a wholly owned subsidiary of Metwood, Inc., the Nevada corporation.  The publicly traded shell corporation had not had a material operating history for several years prior to the merger
Effective January 1, 2002, Metwood acquired certain assets of Providence Engineering, PC ("Providence"), a professional engineering firm with customers in the same proximity as Metwood.  The total purchase price of $350,000 was paid with $60,000 in cash and with 290,000 shares of the Company's common stock to the two Providence shareholders.  These shares were valued at the closing active quoted market price of the stock at the effective date of the purchase, which was $1.00 per share.  One of the shareholders of Providence was also an officer and existing shareholder of Metwood prior to the acquisition.  The transaction was accounted for under the purchase method of accounting.  Liabilities assumed at the date of acquisition were identified, paid and added to goodwill
The consolidated company provides construction-related products and engineering services to residential customers and contractors, commercial contractors, developers and retail enterprises, primarily in southwestern Virginia.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

 

Basis of Presentation - The financial statements include the accounts of Metwood, Inc. (a Nevada corporation) and its wholly owned subsidiary, Metwood Inc. (a Virginia corporation) prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission. All significant intercompany balances and transactions have been eliminated.

 

Management’s Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. At June 30, 2010, the significant estimates used by management include the valuation of its goodwill. Actual results could differ from those estimates.

 

 

Fair Value of Financial Instruments - For certain of our financial instruments, none of which are held for trading, including cash, accounts receivable, accounts payable and accrued expenses, and the bank lines of credit, the carrying amounts approximate fair value due to their short maturities.
Cash and Cash Equivalents - For purposes of the Consolidated Statements of Cash Flows, we consider liquid investments with an original maturity of three months or less to be cash equivalents. We maintain our cash in bank deposit accounts, which, at times, may exceed the federally insured limit of $250,000. We have not experienced any losses in such accounts and believe we are not exposed to any significant credit risk on cash and cash equivalents.
Accounts Receivable - We grant credit in the form of unsecured accounts receivable to our customers based on an evaluation of their financial condition. We perform ongoing credit evaluations of our customers. The estimate of the allowance for doubtful accounts, which is charged off to bad debt expense, is based on management’s assessment of current economic conditions and historical collection experience with each customer. At June 30, 2011 and 2010, the allowance for doubtful accounts was $5,000 and $30,000, respectively. Specific customer receivables are considered past due when they are outstanding beyond their contractual terms and are charged off to the allowance for doubtful accounts when determined uncollectible. For the years ended June 30, 2011 and 2010, the bad debt expense was $13,332 and $36,638, respectively.
Inventory - Inventory, consisting primarily of metal and wood raw materials, is located on our premises and is stated at the lower of cost or market using the first-in, first-out method.
Property and Equipment - Property and equipment are stated at cost less accumulated depreciation and are depreciated over their estimated useful lives using the straight-line method. Recovery periods range from three to thirty-nine years. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet, and the resulting gain or loss is reflected in other income and expense. Maintenance and repairs are charged to operations as incurred.
Impairment of Long-lived Assets - We evaluate our long-lived assets for indications of possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amounts to the future net undiscounted cash flows which the assets are expected to generate. Should an impairment exist, the impairment would be measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash flows arising from the asset. There have been no such impairments of long-lived assets through June 30, 2011 and 2010.
Patents - We have been assigned several key product patents developed by certain Company officers. No value has been recorded in our financial statements because the fair value of the patents was not determinable within reasonable limits at the date of assignment.
Goodwill - We account for goodwill and intangibles under SFAS No. 142, “Goodwill and Other Intangible Assets.” As such, goodwill is not amortized, but is subject to annual impairment reviews, or more frequent reviews if events or circumstances indicate there may be an impairment. We performed our required annual goodwill impairment test as of June 30, 2011 using discounted cash flow estimates and found that there was no impairment of goodwill. The estimated fair value of the reporting unit for which goodwill was recorded, Providence Engineering, substantially exceeds carrying values.

 

 

 

Revenue Recognition - Revenue is recognized when goods are shipped and earned or when services are performed, provided collection of the resulting receivable is probable.  If any material contingencies are present, revenue recognition is delayed until all material contingencies are eliminated.  Further, no revenue is recognized unless collection of the applicable consideration is probable
Income Taxes - Income taxes are accounted for in accordance with FASB ASC 740, Income Taxes.  A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and for net operating loss carryforwards, where applicable.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or the entire deferred tax asset will not be realized.  Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment
Research and Development - We perform research and development on our metal/wood products, new product lines, and new patents.  Costs, if any, are expensed as they are incurred.  For the years ended June 30, 2011 and 2010, the expenses relating to research and development were $10,555 and $6,940, respectively
Advertising -  We expense advertising costs as incurred.  However, certain expenditures are treated as prepaid (such as trade show fees) if they are for goods or services which will not be received until after the end of the accounting period and are subsequently recognized as expenses in those periods in which the goods or services are received
Earnings Per Common Share - Basic earnings per share amounts are based on the weighted average shares of common stock outstanding.  If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. This presentation has been adopted for the years presented.  There were no adjustments required to net income for the years presented in the computation of diluted earnings per share
Recent Accounting Pronouncements - In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-06, Improving Disclosures about Fair Value Measurements. This guidance requires new disclosures and clarifies certain existing disclosure requirements about fair value measurements. It requires a reporting entity to disclose significant transfers in and out of Level 1 and Level 2 fair value measurements, to describe the reasons for the transfers and to present separately information about purchases, sales, issuances and settlements for fair value measurements using significant unobservable inputs. This Update is effective for interim and annual reporting periods beginning after December 15, 2009, with limited exceptions. The adoption did not have a material effect on our consolidated financial statements
In April 2010, the FASB issued authoritative guidance which clarifies the “Stock Compensation” guidance (ASC 718). This guidance clarifies the accounting for certain employee share-based payment awards. Awards with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades would not be considered to contain a condition that is not a market, performance or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. This accounting guidance is effective for accounting periods beginning on or after December 15, 2010, with earlier application permitted. The Company does not believe the impact of this guidance on the Company’s consolidated financial statements will be material

 

 

 

In July 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-20 which amends “Receivables” (Topic 310). ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entity’s risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The adoption of ASU 2010-20 did not have a material impact on our consolidated financial statements
In December 2010, the FASB released ASU 2010-28 entitled “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” The guidance released in this update amends Accounting Standards Codification (“ASC”) 350-20, entitled “Intangibles – Goodwill and Other – Goodwill,” by addressing questions about entities that have reporting units with zero or negative carrying amounts. More specifically, the guidance addresses the inconsistencies when a reporting unit concludes that Step 1 of the test is passed (meaning no goodwill impairment is necessary) because the fair value of the goodwill is greater than zero, when in fact, factors indicating impairment of the goodwill may still exist. The amendments included in this ASU affect all entities that have recognized goodwill  and  have  one or more  reporting  units whose carrying amount, for purposes of performing Step 1 of the goodwill impairment test, is zero or negative.  The amendments  in  the  ASU   are  effective  for  public  entities whose fiscal years  (and interim periods within those years) begin after
December 15, 2010.  Early adoption is not permitted for public entities. For non-public entities, the ASU are effective for fiscal years (and interim periods within those years) beginning after December 15, 2011. Non-public entities may early adopt the amendments using the effective dates for public entities.  We are evaluating the impact of this standard on our consolidated financial statements
In May 2011, the FASB, together with the International Accounting Standards Board ("IASB"), jointly issued ASU 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS." This new guidance is the result of a highly contested proposal issued by the FASB and IASB in August 2009. The adoption of ASU 2011-04 gives fair value the same meaning between U.S. generally accepted accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS), and improves consistency of disclosures relating to fair value.  The provisions of ASU 2011-04 will be effective for years beginning after December 15, 2011 for both public and nonpublic entities. Public entities will begin adoption in the first interim period beginning after December 15, 2011. Early adoption is not permitted, except for nonpublic entities that may want to adopt for the first interim period after December 15, 2011. Changes as a result of this new standard are to be applied prospectively. However, changes in valuation techniques shall be treated as changes in accounting estimates.  We are in the process of evaluating the impact the amended guidance will have on our consolidated financial statements.

 

 

 

 

In June 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05 "Comprehensive Income (Topic 220): Presentation of Comprehensive Income." The Update is intended to increase the prominence of other comprehensive income in financial statements.  In U.S. GAAP, the ASU will supersede some of the guidance in Topic 220 of the accounting Codification.  The main provisions of this Update provide that an entity that reports items of other comprehensive income has the option to present comprehensive income in either one or two consecutive financial statements.  A single statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income.  In a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income.   The option  in  current GAAP  that permits the presentation of other comprehensive income in the statement of changes in equity has been eliminated.  The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted, because compliance with the amendments is already permitted.  We are evaluating the impact this Update will have on our consolidated financial statements.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements

 

NOTE 3 - RELATED-PARTY TRANSACTIONS

For the years ended June 30, 2011 and 2010, we had sales of $112,062 and $77,614,  respectively, to our shareholder and CEO,  Robert Callahan.   As of June 30, 2011 and 2010,  the related receivable was $-0-

Also, from time to time, we contract with a construction company 50% owned by the our CEO which provides capital improvements and maintenance work on our buildings and grounds.  Billings for such services during the years ended June 30, 2011 and 2010 were $-0- and $17,000, respectively

 

NOTE 4 - COMMITMENT

 

In prior years, we implemented a stock-based incentive compensation plan for our employees.  Participating employees have an after-tax deduction withheld by the Company throughout the calendar year.  As of December 31 of each year, the employee is considered vested in the plan, and we will match the participating employee's withheld amounts.  We may also make a discretionary contribution based upon pay incentives or attendance.  Periodically, we will purchase restricted stock on behalf of the employee in the amount of his withholdings, our match, and any discretionary contributions

 

 

NOTE 5 - SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS
We have available a $600,000 revolving line of credit with a local bank.  Interest is payable monthly on the outstanding balance at the prime lending rate.  The note is secured by accounts receivable, equipment, general intangibles, inventory, and fixtures and furniture and is personally guaranteed by the Company's CEO.  The balance outstanding as of June 30, 2011 and 2010 was $-0-
NOTE 6 - EQUITY
During the years ended June 30, 2011 and 2010, we did not issue any common shares for the benefit of employees included in our stock-based incentive compensation program.
NOTE 7 - SALE OF FIXED ASSETS AND RELATED OPERATING LEASE
During the year ended June 30, 2006, we entered into a sales and leaseback transaction with a related party.  We sold the various buildings at our corporate headquarters which house our manufacturing plants, executive offices and other buildings for $600,000 in cash.  We simultaneously entered into a commercial lease agreement with the related party whereby we are committed to lease back these same properties for $6,600 per month over a ten-year term expiring December 31, 2014.  Rent expense charged to operations for the years ended June 30, 2010 and 2009 was $79,200, respectively
Future minimum lease payments under non-cancelable operating leases as of June 30, 2011 are as follows:

 

Year Ending June 30,
2012		$	79,200
2012			79,200
2014			79,200
2015 and beyond			39,600
		$	277,200

 

 

NOTE 8 - INCOME TAXES
The components of income tax benefit consist of:

 

		2011				2010
Current:
Federal		$	(113,429	)		$	(74,486	)
State			(7,303	)			—
			(120,732	)			(74,486	)
Deferred:
Federal			67,636				(3,401	)
State			(1,049	)			(12,128	)
			66,587				(15,529	)
Total income tax benefit		$	(54,145	)		$	(90,015	)

 

The reconciliation of the provision for income taxes at the U. S. federal statutory income tax rate of 39% to the Company's income taxes is as follows:

 

Loss before income taxes		$	(140,407	)		$	(286,100	)
Income tax benefit computed at the statutory rate			(54,758	)			(111,579	)
State income tax benefit, net of federal tax effect			(5,095	)			(9,448	)
Non-deductible expenses			475				10,901
Effect of graduated income tax rates			5,233				16,750
Prior year adjustment			—				3,361
Total income tax benefit		$	(54,145	)		$	(90,015	)

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.  We have recorded a deferred tax asset at June 30, 2011, net of a valuation reserve, of $37,060.   Deferred tax liabilities at June 30, 2010 were $49,755.  The components of these amounts are as follows:

 

			2011				2010
Tax loss carryforward		$	(66,587	)		$	—
Depreciation and miscellaneous			(17,528	)			7,677
Amortization of goodwill			47,055				42,078
Net deferred tax (asset) liabilities		$	(37,060	)		$	49,755

 

 

 

NOTE 9 - SEGMENT INFORMATION
We operate in two principal business segments: (1) construction-related products and (2) engineering services.  Performance of each segment is evaluated based on profit or loss from operations before income taxes.  These reportable segments are strategic business units that offer different products and services.  Summarized revenue and expense information by segment for the years ended June 30, 2011 and 2010 is as follows:

 

		2011				2010
Construction:
Sales		$	2,048,516			$	2,034,292
Cost of sales			(1,161,821	)			(1,208,269	)
Intersegment expenses			(18,693	)			(45,563	)
Intersegment revenues			24,000				24,000
Corporate and other expenses			(952,532	)			(1,010,839	)
Segment loss		$	(60,530	)		$	(206,379	)
Total assets		$	2,200,858			$	2,035,654
Capital expenditures		$	235,017			$	24,208
Depreciation		$	103,308			$	104,320
Interest expense		$	—			$	1,582
Engineering:
Sales		$	164,241			$	175,650
Cost of sales			(165,805	)			(158,073	)
Intersegment revenues			18,693				45,563
Intersegment expenses			(24,000	)			(24,000	)
Corporate and other expenses			(18,861	)			(28,846	)
Segment income		$	(25,732	)		$	10,294
Total assets		$	534,620			$	370,549
Capital expenditures		$	36,345			$	850
Depreciation		$	13,575			$	12,275
Interest expense		$	—			$	—

 

  

ITEM 9A(T).  CONTROLS AND PROCEDURES.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions as appropriate to allow timely decisions regarding required disclosure.  We concluded that our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act were effective as of June 30, 2011 to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in SEC rules and forms.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i)  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii)  provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii)  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2011. In making this assessment, management used the criteria set forth in Internal Control Over Financial Reporting — Guidance for Smaller Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Subject to the inherent limitations described in the following paragraph, our management has concluded that our internal controls over financial reporting was effective as December 31, 2010 at the reasonable assurance level.

Inherent Limitations Over Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.  Accordingly, our internal controls and procedures are designed to provide reasonable assurance of achieving their objectives.

Changes in Internal Control over Financial Reporting

We have made no change in our internal control over financial reporting during the fourth quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report on Form 10-K.

Item 9B.  Other Information
None

 

 

PART III
Item 10.  Directors, Executive Officers and Corporate Governance
Identification of Directors and Executive Officers
The following table sets forth the names and the nature of all positions and offices held by all directors and executive officers of the Company for the year ending June 30, 2011 and to the date of the filing of this report and the periods during which each such director or executive officer has served in his respective positions:
Name			Position and Background
Robert M. Callahan			President and CEO
Mr. Callahan has been involved in the building industry for over thirty years.  He is well recognized in southwestern Virginia as an innovator in the uses of passive solar design and wood/metal products in custom home building.  Along with Mr. Ronald Shiflett, he formed Metwood, Inc. in 1993 to bring light-gage construction, used in commercial building for years, into common use in residential construction
Shawn A. Callahan			Secretary/Treasurer/CFO, VP/General Manager
Education:		MBA Accounting, University of Phoenix
		B.S. Computer Science and Mathematics, Virginia Military Institute
Since starting with Metwood, Inc. in May 1996, Mr. Callahan has played a major role in the restructuring of the Company, increasing production, improving efficiency, and developing computer aids for the Company
Term of Office
The term of office of the current directors shall continue until new directors are elected or appointed
Family Relationships
Robert Callahan is the father of Shawn Callahan
Involvement in Certain Legal Proceedings
Except as indicated below and to the knowledge of management, during the past five years, no present or former director, person nominated to become a director, executive officer, promoter or control person of the Company:
(1) was a general partner or executive officer of any business by or against which any bankruptcy petition was filed, whether at the time of such filing or two years prior thereto;
(2) was convicted in a criminal proceeding or named the subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

 

 

(3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
(4) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than sixty days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity; or
(5) was found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, nor has a judgment been reversed, suspended, or vacated
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors, officers and persons who own more than 10% of the Company's common stock or other registered class of equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission.  Officers, directors and greater than 10% shareholders are required to furnish us with copies of all Section 16(a) forms they file
Based solely on a review of the forms received covering purchase and sale transactions in the Company's common stock during the fiscal year ended June 30, 2011, the Company believes that each person who, at any time during that period, was a director, executive officer, or beneficial owner of more than 10% of the Company's common stock complied with all Section 16(a) filing requirements

 

 

Item 11.  Executive Compensation
The following table sets forth in summary form the compensation received during each of the Company's last three fiscal years by our President and Chief Executive Officer, Robert M. Callahan:
	Summary Compensation Table
				Other	Restricted		Restricted
	Fiscal	Annual		Compen-	Stock	LTIP	Stock
	Year	Salary	Bonuses	sation	Awards	Options	Bonuses
			(1)	(2)	(3)	(4)	(4)
	2011	$90,217	$   7,200	-0-	-0-	-0-	-0-
	2010	$98,126	$   2,400	-0-	-0-	-0-	-0-
	2009	$81,832	$  -0-	-0-	-0-	-0-	-0-
(1)	The dollar value of bonuses (cash and non-cash) received
(2)	During the periods covered by the table, the Company did not pay any other annual compensation not properly categorized as salary or bonus, including perquisites and other personal benefits, securities or property
(3)	During the periods covered by the table, the Company did not make any award of restricted stock
(4)	The Company currently has no stock option or restricted stock bonus plans
No member of our management has been granted any option or stock appreciation right; accordingly, no tables relating to such items have been included within this item
Compensation of Directors
There are no standard arrangements pursuant to which our directors are compensated for any services provided as director.  No additional amounts are payable to our directors for committee participation or special assignments
There are no arrangements pursuant to which any of our directors was compensated during our last completed fiscal year or the previous two fiscal years for any services provided as director
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person named in the Summary Compensation Table set out above which would in any way result in payments to any such person because of his resignation, retirement or other termination of such person's employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person's responsibilities following a change in control of the Company

 

 

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners
The following table sets forth the shares held by those persons who owned more than five percent of Metwood's common stock as of September 13, 2011, based upon 12,231,797 shares outstanding:
	Greater Than 5% Owners
	Title of	Name and Address			No. of	Percent
	Class	of Beneficial Owner			Shares	of Class
	Common	Robert Callahan
		819 Naff Road			6,521,782 (1)	53.3%
		Boones Mill, VA 24065
	Common	Ronald Shiflett
		638 Patti Road			2,101,282	17.2%
		Rocky Mount, VA 24151
	(1) Includes direct and indirect interests.  There are 6,148,750 common shares included in this amount that are owned in the names of family members of Mr. Callahan
Security Ownership of Management
The following table sets forth the shares held by Metwood directors and officers as of September 13, 2011:
	Management Ownership
	Title of	Name and Address			No. of	Percent
	Class	of Beneficial Owner			Shares	of Class
	Common	Robert Callahan
		819 Naff Road			6,521,782 (1)	53.3%
		Boones Mill, VA 24065
	(1) Includes direct and indirect interests.  There are 6,148,750 common shares included in this amount that are owned in the names of family members of Mr. Callahan
	Ownership of shares by directors and officers of Metwood as a group:  53.3%
Changes in Control
We know of no contractual arrangements which may at a subsequent date result in a change of control in the Company

 

 

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence
Following are the transactions between Metwood and members of management, directors, officers, 5% shareholders, and promoters of Metwood:
We contract with a construction company 50% owned by our CEO which provides capital improvements and maintenance work on ourbuildings and grounds.
During the year ended June 30, 2006, we entered into a sales and leaseback transaction with a related party.  We sold the various buildings at our corporate headquarters which house our manufacturing plants, executive offices and other buildings for $600,000 in cash.  We simultaneously entered into a commercial lease agreement with the related party whereby we are committed to lease back these same properties for $6,600 per month over a ten-year term expiring December 31, 2014.  Rent expense charged to operations for the years ended June 30, 2011 and 2010 was $79,200, respectively
Continued education loans were advanced to our CFO during the year ended June 30, 2010 in the amount of $13,626.  The outstanding balances at June 30, 2011 and 2010 were $-0- and $8,575, respectively.
Item 14.  Principal Accounting Fees and Services
The following table sets forth the aggregate fees billed or to be billed by Bongiovanni & Associates, CPAs for audit services rendered in connection with the consolidated financial statements and reports for the years ended June 30, 2011 and 2010:

 

		2011				2010
Audit fees		$	15,500			$	15,000
Audit-related fees			—				—
Tax fees			—				—
All other fees			5,550				5,550
Total fees		$	21,050			$	20,550

 

Audit fees:  Consist of fees billed for professional services rendered for the audits of our consolidated financial statements and reviews of the interim consolidated financial statements included in quarterly reports and services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements and attest services, except those not required by statute or regulation
Audit-related fees:  Consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under "Audit fees."  These services include accounting consultations in connection with the Sarbanes-Oxley Act of 2002
Tax fees:  Consist of fees billed for tax compliance, tax advice and tax planning services
All other fees:  Consist of fees billed for all other services other than those reported above

 

 

 

PART IV
ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
NUMBER		DESCRIPTION
3(i)*		Articles of Incorporation
3(ii)*		By-Laws
31.1		Certification of Chief Executive Officer Pursuant to  Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer Pursuant to  Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
*Incorporated by reference on Form 8-K, filed February 16, 2000

 

 

SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized
Date:  February 21, 2012                                        /s/  Robert M. Callahan
Robert M. Callahan
President, CEO and Director
Date:  February 21, 2012                                        /s/  Shawn A. Callahan
Shawn A. Callahan
Secretary/Treasurer/CFO and Director