PINX:MTWD Metwood Inc Annual Report 10-K Filing - 9/30/2012

Effective Date 9/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
     
FORM 10-K
     
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2012
     
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the transition period from ________ to ________
     
Commission file number 000-05391
     
METWOOD, INC.
(Exact name of registrant as specified 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
(Registrant's telephone number, including area code)
     
Securities registered pursuant to Section 12(b) of the Act:
None
     
Securities registered pursuant to Section 12(g) of the 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 Act. Yes   £ No  S
     
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days Yes S No £
     
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes S No £
 
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,  and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10K Yes S No £

 

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 a smaller reporting company”: in Rule 12b-2 of the Exchange Act.
  
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 Act).
Yes  £  No  S
 
As of October 1, 2012, the aggregate market value of the 12,231,797 common shares outstanding (based upon
the average of the bid price ($.09) reported on the OTCQB Market) held by non-affiliates was $1,100,867
       
As of October 1, 2012, 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.

 

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METWOOD, INC. AND SUBSIDIARY

FORM 10-K

TABLE OF CONTENTS

    Page #
     
  PART I  
     
Item 1 Description of Business 4-6
Item 1A Risk Factors 7
Item 2 Properties  7
Item 3 Legal Proceedings  7
     
  PART II  
     
Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 8
Item 7 Management's Discussion and Analysis or Plan of Operation  8
Item 8 Financial Statements and Supplementary Data 10-15
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 16
Item 9A Controls and Procedures  18
Item 9B Other Information  18
     
  PART III  
     
Item 10 Directors, Executive Officers and Corporate Governance  19
Item 11 Executive Compensation 20
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 20
Item 13 Certain Relationships and Related Transactions, and Director Independence 21
Item 14 Principal Accounting Fees and Services 21
     
  PART IV  
     
Item 15 Exhibits and Financial Statement Schedules  22
     
  Signatures 23

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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.

 

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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, for $350,000 and accounted for the transaction under the purchase method of accounting.  As of June 30, 2012, Providence is no longer an operating segment of the Company.  We have concluded that the majority of the engineering portion of the business can best be handled through a strategic partnership with an outside engineering firm.  We believe that continuing research and development efforts will soon enable us to meet code requirements for our products and will eliminate the need for individual engineering seals.

Metwood ("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
   
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 saw the need to combine the strength and durability of steel with the convenience and familiarity of wood and wood fasteners.
   
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.
   
Metwood's primary products and services are:
  · TUFFBEAM - internally reinforced cold-formed steel beam
  · TUFFJOIST - internally reinforced cold-formed steel joist
      ·  TNT FLOOR SYSTEM - combinations of TUFFBEAM, NUJOIST and TUFFJOIST 
               are utilized to make up a complete floor system
      ·  TUFFDECK - concrete deck systems
      ·  RIMBEAM - internally reinforced CFS load distribution member
      ·  NUJOIST - Metwood is a national distributor for NUJOIST floor joist system by Nuconsteel
      ·  NUFRAME 3.5 & 5.5 - a fully proprietary panelized load bearing and non-load bearing
               CFS wall framing solution
      ·  NUTRUSS 2.0 - a proprietary roof and floor truss system
      ·  NUTRUSS - CFS truss system
      ·  Aegis - Metwood is a distributor of Aegis Metal Framing's cold-formed steel trusses
      ·  Trimmable square columns
      ·  Joist reinforcers
      ·  Engineering, design and custom building services
   
   
Metwood is performing ongoing product research and development.  Through a strategic partnership with an outside engineering firm, Metwood is able to offer 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. 

We also perform 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.
 
The Company has designed numerous foundations for a variety of structures.  Our 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.

 

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We have also designed and drafted full building plans for several applications.  When subcontracting for local companies, we have the ability, in partnership with our outside engineering firm, to provide basic architectural, mechanical, electrical, and detailed civil and structural design services for these facilities.
 
We have 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
 
Metwood has become a fabricator of the Aegis steel truss system and is a supplier of their products to both residential and commercial customers.

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 typically 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 will 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 Telling Industries, Nuconsteel, New Millenium, Allied Tube & Conduit, and Vulcraft.  Our main source of lumber is BlueLinx.  Re-Steel, 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, 2012 and 2011, no customer accounted for 10% or more of total sales.  

 

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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.  Currently, we are seeking International Code Council ("ICC") code approval on our TUFFBEAMS.  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, 2012, all of whom were full time.

 

(6)

 
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 net losses of $354,919 for the fiscal year ended June 30, 2012 and $86,262 for the year ended June 30, 2011. 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.

 

(7)

 

 
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 recent close of our common stock at October 1, 2012 of $.09 per share (with a 52-week high of $.43), the market value of shares held by non-affiliates would be $1,100,867.  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, 2012     High   Bid    
  First Quarter     $0.43   $0.22    
  Second Quarter   $0.39   $0.20    
  Third Quarter     $0.37   $0.21    
  Fourth Quarter   $0.31   $0.04    
                 
  Year Ended June 30, 2011              
  First Quarter     $0.25   $0.13    
  Second Quarter   $0.55   $0.11    
  Third Quarter     $0.43   $0.18    
  Fourth Quarter   $0.43   $0.21    

 

                 
Holders                
                 
The approximate number of holders of record of our common stock as of August 17, 2012 was 1,112.  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                
                 
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 our TUFFBEAM 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, 2012 and 2011:  
               
        2012   2011  
      Revenues     $ 1,940,526    $ 2,212,757   
  Net loss     $  (354,919)   $    (86,262)  
  Net loss per common share $        (0.03)   $        (0.01)  
  Weighted average common        
     shares outstanding   12,231,797    12,231,797   
               
At June 30, 2012 and 2011:          
               
  Total assets   $ 1,828,928    $ 2,185,815   
  Working capital   $ 1,119,326    $ 1,250,111   
  Shareholders' equity   $ 1,552,165    $ 1,907,084   
               

 

               
No dividends have been declared or paid during the periods presented.  
               
Revenues and Cost of Sales - Consolidated gross sales decreased $272,231, or 12%, for the year ended June 30, 2012 ("fiscal 2012") compared to the year ended June 30, 2011 ("fiscal 2011"). Construction sales consisted of product sales, engineering, delivery and installation fees and decreased $122,846 (6%) comparing fiscal 2012 to 2011. Engineering sales consisted of fees for engineering services and declined $149,385 (91%) comparing fiscal 2012 to 2011. This decline results from the fact that Providence is no longer an operating segment of the Company. Gross profit decreased $198,622 (22%) from fiscal 2011 to fiscal 2012, again reflecting the fact that Providence is not an active segment for us.
               
The sales decrease for fiscal 2012 versus 2011 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 30%. Nonetheless, the commercial market has overcome some of the residential downturn. The potential for increased sales volume as the Company goes forward is enhanced by the fact that we are now an authorized fabricator for the Dynatruss light-gage steel truss system, begun in March 2008.
               
Cost of sales decreased $73,609 overall (6%) in fiscal 2012 compared to fiscal 2011.  On the construction side, cost of sales increased $72,375 (6%), while cost of engineering sales decreased $145,984 (88%).  The change in construction and engineering costs was proportional to the change in sales for the same period.  
               
Administrative expenses - These costs increased $95,164, or 9%, to $1,135,402 in fiscal 2012 from $1,040,238 in fiscal 2011. The increase resulted from impairment losses on intangible assets. Aside from that expense, administrative costs declined in all but two categories. We are invested in decreasing expenditures where possible in order to maximize our net earnings.

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Other Income - Other income in fiscal 2012 was $18,876, 28% higher than fiscal 2011. The increase resulted from higher customer finance charges and gains on asset disposals.
               
Income Taxes - In fiscal 2012 we recorded an income tax benefit of $75,098 compared to a tax benefit of $54,145 in fiscal 2011. 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.
               
Liquidity and Capital Reserves - Cash flows used for operating activies in fiscal 2012 were $96,612 versus net cash provided by operating activities of $47,395 in fiscal 2011. The decrease in cash flows from operations for fiscal 2012 was primarily attributable to increases in the net loss and in inventory. We also used $39,361 for capital improvements and purchases of fixed assets in fiscal 2012 compared to $271,362 in fiscal 2011. Property disposals increased cash provided by investing activites by $6,290 and fiscal 2012 compared to $9,100 in 2011. Financing activities in fiscal 2012 used $54,119 compared to $8,197 used in fiscal 2011. The use of funds in 2012 was from amounts repaid to a related party and full repayment of a vehicle loan, while funds used in 2011 in financing activities were from amounts repaid to 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.

 

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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, 2012 and 2011, 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, 2012 and 2011, 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
 
October 1, 2012

 

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METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2012 AND 2011
     

    June 30,
   2012 2011
ASSETS      
      
Current Assets         
Cash and cash equivalents  $58,646  $180,448 
Accounts receivable, net   231,081   240,581 
Inventory   961,780   855,864 
Recoverable income taxes   —     42,606 
Other current assets   31,871   47,872 
          
Total current assets   1,283,378   1,367,371 
          
Property and Equipment         
Leasehold improvements   264,820   259,490 
Furniture, fixtures and equipment   93,458   98,458 
Computer hardware, software and peripherals   167,763   159,261 
Machinery and shop equipment   459,087   457,688 
Vehicles   381,373   420,533 
Land improvements   67,959   67,959 
    1,434,460   1,463,389 
Less accumulated depreciation   (1,001,068)  (935,093)
          
Net property and equipment   433,392   528,296 
          
Other Assets         
Deferred tax asset   224,317   157,792 
Less valuation reserve   (112,159)  (120,732)
    112,158   37,060 
          
Goodwill   —     253,088 
          
TOTAL ASSETS  $1,828,928  $2,185,815 
          
LIABILITIES AND STOCKHOLDERS' EQUITY         
          
Current Liabilities         
Accounts payable  $79,177  $78,401 
Note payable   —     5,359 
Customer deposits   74,688   —   
Accrued expenses   10,187   33,500 
          
Total current liabilities   164,052   117,260 
          
Long-term Liabilities         
Note payable   —     24,529 
Due to related company   112,711   136,942 
          
Total long-term liabilities   112,711   161,471 
          
Total liabilities   276,763   278,731 
          
Stockholders' Equity         
Common stock ($.001 par, 100,000,000 shares authorized;         
  12,231,797 shares issued and outstanding at June 30, 2012 and 2011)   12,232   12,232 
Common stock not yet issued ($.001 par, 8,150 shares at         
   June 30, 2012 and 2011)   8   8 
Additional paid-in capital   1,544,268   1,544,268 
Retained earnings (deficit)   (4,343)  350,576 
          
Total stockholders' equity   1,552,165   1,907,084 
          
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $1,828,928  $2,185,815 

See accompanying notes to consolidate financial statements

(11)

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 2012 and 2011
       
   2012  2011
       
REVENUES          
Sales  $1,925,670   $2,048,516 
Cost of sales   1,218,251    1,161,821 
           
Gross profit   707,419    886,695 
           
ADMINISTRATIVE EXPENSES          
Advertising   40,115    77,253 
Bad debt provision   1,973    11,548 
Depreciation   32,997    30,541 
Impairment losses on intangible assets   253,088    —   
Insurance   23,269    18,235 
Payroll expenses   489,196    559,136 
Professional fees   49,757    55,876 
Rent   80,600    79,200 
Research and development   15,142    10,555 
Telephone   17,694    18,240 
Vehicle   47,498    44,117 
Other   78,837    103,691 
           
Total administrative expenses   1,130,166    1,008,392 
           
Loss from operations   (422,747)   (121,697)
           
Other income   9,896    14,718 
           
Income tax benefit   (65,654)   (41,142)
           
Loss from continuing operations   (347,197)   (65,837)
           
Discontinued operations   (7,722)   (20,425)
           
Net loss  $(354,919)  $(86,262)
           
Basic and diluted deficit per share  $(0.03)  $(0.01)
           
Loss per share from discontinued operations   **    ** 
           
Weighted average number of shares   12,231,797    12,231,797 
           
**Less than $.01          
           
See accompanying notes to consolidated financial statements.  

  

(12)

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
                         
                         
                     
    Common Shares Not   Common Shares Not   Additional      
  Common Shares   Common Shares   Yet Issued   Yet Issued   Paid-in   Retained  
  (000s)   ($.001Par)   (000s)   ($.001Par)   Capital   Earnings  
                         
Balances July 1, 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  
                         
Net loss for year -   -   -   -   -   $ (354,919)  
                         
Balances June 30, 2012 12,232   $12,232   8      $       8   $1,544,268   ($4,343)  

 

(13)

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
    
   2012  2011
OPERATING ACTIVITIES          
Net loss  $(354,919)  $(86,262)
Adjustments to reconcile net loss to net cash provided by          
(used for) operating activities:          
Depreciation, net of property disposals   65,975    109,151 
Impairment loss on intangible assets   253,088    —   
Provision for deferred income taxes   (75,098)   (86,815)
(Increase) decrease in operating assets:          
Accounts receivable   9,500    47,208 
Inventory   (105,915)   83,013 
Other current assets  16,001    15,496 
Refundable income taxes   42,606    41,777 
Increase (decrease) in operating liabilities:          
Accounts payable and accrued expenses   52,150    (76,173)
Net cash provided by (used for) operating activities   (96,612)   47,395 
           
INVESTING ACTIVITIES          
Property, plant and equipment:          
Purchases   (39,361)   (271,362)
Property disposals   68,290    9,100 
Net cash provided by (used for) investing activities   28,929    (262,262)
           
FINANCING ACTIVITIES          
Net repayment to related party   (24,231)   (38,085)
Net borrowings (repayments) from vehicle financing   (29,888)   29,888 
Net cash used for financing activities   (54,119)   (8,197)
           
Net (decrease) in cash   (121,802)   (223,064)
           
Cash, beginning of the year   180,448    403,512 
           
Cash, end of the year  $58,646   $180,448 
           
See accompanying notes to consolidated financial statements.  

 

(14)

METWOOD, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012 AND 2011
                   

 

 
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 (The"Providence"), a professional engineering firm with customers in the same proximity as Metwood, for $350,000 and accounted for the transaction under the purchase method of accounting.  As of June 30, 2012, Providence is no longer an operating segment of the Company. The Company has concluded that the majority of the engineering portion of the business can best be handled through a strategic partnership with an outside engineering firm. The Company believes that continuing research and development efforts will soon enable us to meet code requirements for our products and will eliminate the need for individual engineering seals.
                   
The 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 affect the reported amounts of assets and liabilities and disclosures 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, 2012 and 2011, 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, inventory, other current assets, 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 both June 30, 2012 and 2011, the allowance for doubtful accounts was $5,000.  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, 2012 and 2011, the bad debt expense was $15,058 and $13,332, 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, 2012 and 2011.

(15)

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 FASB ASC 350, “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.  Goodwill was recorded at the time of Metwood's acquisition of Providence Engineering.  Since Providence is no longer an active company (it has no employees and carries on no business activities), all goodwill carried on the books is 100% impaired and accordingly has been written off.

 

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 year ended June 30, 2012, expenses were $15,142 and for the year ended June 30, 2011, expenses were $10,555.
                   
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.  These costs are subsequently recognized as expenses in those periods in which the goods or services are received.
                   
Earnings (loss) Per Common Share - Basic earnings (loss) per share amounts are based on the weighted average shares of common stock outstanding.  If applicable, diluted earnings (loss) 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 (loss) for the years presented in the computation of diluted earnings (loss) per share.
                   
Recent Accounting Pronouncements -  In May 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2011-04 amending Topic 820 that substantially converged the requirements for fair value measurement and disclosure between the FASB and the International Accounting Standards Board (“IASB”).  This ASU is largely consistent with existing fair value measurement principles under U.S. GAAP. This ASU was effective for the Company in its quarter beginning January 1, 2012 and has not had a material impact on the Company’s financial statements.
                   
In June 2011, the FASB issued ASU 2011-05 amending Topic 220 that addressed the presentation of comprehensive income in the financial statements. This accounting update allows an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In addition, this ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity and does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This ASU is effective for the Company in its quarter beginning January 1, 2012 and is not expected to have a material impact on the Company’s financial statements other than modifying the presentation of comprehensive income.

(16)

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.

In September 2011, the FASB issued ASU 2011-08 amending Topic 350 that allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.  Under this new ASU, if a Company chooses the qualitative method, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This ASU is effective for annual and interim impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted.  The Company does not expect this ASU to have a material impact on its 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, 2012 and 2011, the Company had sales of $24,231 and $112,062,  respectively, to our shareholder and CEO,  Robert Callahan.   As of June 30, 2012 and 2011,  the related receivable was $-0-.
 
Also, from time to time, the Company contract with a construction company 50% owned by its CEO which provides capital improvements and maintenance work on our buildings and grounds.  Billings for such services during the years ended June 30, 2012 and 2011 were $-0-.

 

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 - EQUITY              
                   
During the years ended June 30, 2012 and 2011, we did not issue any common shares for the benefit of employees included in our stock-based incentive compensation program. 
                   
NOTE 6 - 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 $6,800 per month over a ten-year term expiring December 31, 2014.  Rent expense charged to operations for the years ended June 30, 2012 and 2011 was $80,600 and $79,200, respectively.
                   
Future minimum lease payments under non-cancelable operating leases as of June 30, 2012 are as follows:

 

                   
  Year Ending June 30,
                2013 81,600    
                2014 81,600    
                2015 and beyond            40,800        
                   
              $ 204,000    

 

(17)

 

                   
NOTE 7 - DISCONTINUED OPERATIONS
                   
In June 2012, the Company's subsidiary, Providence Engineering, PC, ceased operations because management concluded that most of the engineering portion of our business can best be handled through a strategic partnership with an outside engineering firm.  The discontinued operations are reported in these consolidated financial statements for the two reporting years ended June 30, 2012 and 2011.  See Note 9 for information on the revenues and expenses of this segment of our business.

 

NOTE 8 - INCOME TAXES        
           
The components of income tax benefit consist of:      
    2012   2011  
  Current:        
       Federal  $              -    $ (113,429)  
       State                  -   (7,303)  
                     -   (120,732)  
  Deferred:        
       Federal (64,362)   67,636   
       State (10,736)   (1,049)  
    (75,098)   66,587   
           
     Total income tax benefit $   (75,098)   $  (54,145)  
           
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 $ (430,017)    $(140,407)  
     Income tax benefit computed at the statutory rate (167,706)   (54,758)  
     State income tax benefit, net of federal tax effect (15,459)   (5,095)  
     Non-deductible expenses 2,977    475   
     Valuation reserve adjustment 89,209                    -  
     Effect of graduated income tax rates 15,881    5,233   
           
     Total income tax benefit $   (75,098)   $  (54,145)  

 

           
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 deferred tax assets at June 30, 2012 and 2012, net of a valuation reserve, of $112,159 and $37,060, respectively.  The components of these amounts are as follows:
           
    2012   2011  
           
  Tax loss carryforward $     99,047    $    66,587   
  Depreciation and miscellaneous 13,112    17,528   
  Amortization of goodwill                  -   (47,055)  
           
  Net deferred tax asset $   112,159    $    37,060   

 

NOTE 9 - SEGMENT INFORMATION
           
Until June 30, 2012, we operated 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, 2012 and 2011 is as follows:
           
    2012   2011  
         Construction:        
  Sales $ 1,925,670    $ 2,048,516   
  Cost of sales (1,234,196)   (1,161,821)  
  Intersegment expenses (200)   (18,693)  
  Intersegment revenues 6,000    24,000   
  Corporate and other expenses (1,032,671)   (952,532)  
  Segment loss $  (335,397)   $    (60,530)  
           
  Total assets $ 1,828,928    $ 2,200,858   
  Capital expenditures $      39,361    $    235,017   
  Depreciation $      97,821    $    103,308   
  Interest expense  $               -    $               -  
           
  Engineering:        
  Sales $      14,856    $    164,241   
  Cost of sales (19,821)   (165,805)  
  Intersegment revenues 200    18,693   
  Intersegment expenses (6,000)   (24,000)  
  Corporate and other expenses (8,757)   (18,861)  
  Segment income $    (19,522)   $    (25,732)  
           
  Total assets  $               -   $    534,620   
  Capital expenditures  $               -   $      36,345   
  Depreciation $        4,120    $      13,575   
  Interest expense $           111     $               -  

 

(18)

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
                   
None.                
                   
Item 9A.  Controls and Procedures          
                   
   (a) Evaluation of disclosure controls and procedures      
                   
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Annual Report on Form 10-K. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. 
                   
Based on our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of June 30, 2012, were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information was accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. 
                   
  (b) Changes in internal control over financial reporting
                   
We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. As we grow geographically and with new product offerings, we continue to create new processes and controls as well as improve our existing environment to increase efficiencies. Improvements may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes. 
 
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 
                   
Item 9B.  Other Information            
                   
None.                

(19)

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, 2012, 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.

(20)

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   Compensation Stock  LTIP Stock  
  Year Salary Bonuses Awards Options Bonuses  
      (1) (2) (3) (4) (4)  
  2012 $71,667 $   7,800  -0- -0- -0- -0-  
  2011 $95,119 $   7,200  -0- -0- -0- -0-  
  2010 $98,126 $   2,400  -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 October 1, 2012, based upon 12,231,797 shares outstanding:

 

 

Grater Than 5% Owners

 

Title of Class Name and Address of Benefial Owner No. of Shares Precent of Class
       
 Common Robert Callahan
  819 Naff Road    
  Boones Mill, VA 24065  6,521,782 (1)  53.3%
       
Common Ronald Shiflett    
  638 Patti Road    
  Rocky Mount, VA 24151 2,101,282 17.2%

 

(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 October 1, 2012:

 

Management Ownership

 

Title of Class Name and Address of Benefial Owner No. of Shares Precent of Class
       
 Common Robert Callahan
  819 Naff Road    
  Boones Mill, VA 24065  6,521,782 (1)  53.3%
       

 

(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.

 

(21)

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 $6,800 per month over a ten-year term expiring December 31, 2014.  Rent expense charged to operations for the years ended June 30, 2012 and 2011 was $80,600 and $79,200, 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, 2012 and 2011:

 

  2012 2012
     
Audit Fees $ 15,500 $15,500
Audit-related fees - -
Tax fees - -
All other fees 4,224 5,550
     
Total fees $ 19,724 $21,050

 

 
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.

 

(22)

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)

 

*Incorporate by reference on Form 8-K, filed February 16, 2000

 

(23)

SIGNATURES
                 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
                 
Date:  October 1, 2012                               By:        /s/  Robert M. Callahan
                                                                                Robert M. Callahan
                                                                                President, CEO and Director
                 
Date:  October 1, 2012                                 By:      /s/  Shawn A. Callahan
                                                                                Shawn A. Callahan
                                                                                Secretary/Treasurer/CFO and Director

(24)

PINX:MTWD Metwood Inc Annual Report 10-K Filling

Metwood Inc PINX:MTWD Stock - Get Annual Report SEC Filing of Metwood Inc PINX:MTWD stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

PINX:MTWD Metwood Inc Annual Report 10-K Filing - 9/30/2012
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