UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
[X]
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
fiscal year ended June 30, 2008
[ ]
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
of incorporation or
organization)
(IRS
Employer Identification No.)
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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)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15 (d) of the Exchange Act 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
X
No
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No [X]
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or an
amendment to this Form 10-K. [ ]
State
issuer’s revenues for its most recent fiscal year: $4,510,200
As of
October 14, 2008 there were 12,091,399 common shares outstanding, and the
aggregate market value of the common shares (based upon the average of the bid
price ($.41) reported by brokers) held by non-affiliates was approximately
$1,348,081.
Transitional
Small Business Disclosure Format (check one): Yes [ ] No [X]
METWOOD,
INC. AND SUBSIDIARY
FORM
10-K
TABLE OF
CONTENTS
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Page
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PART
I
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Item
1
Description of
Business
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1
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Item
2
Description of
Property
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5
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Item
3
Legal
Proceedings
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5
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Item
4
Submission of Matters to a Vote of Security
Holders
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5
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PART
II
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Item
5
Market for Common Equity and Related Stockholder
Matters
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6
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Item
6
Management
’
s Discussion
and Analysis or Plan of Operation
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6
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Item
7
Financial Statements
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10
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Item
8
Changes in and Disagreements
with Accountants on Accou
nting and Financial
Disclosure
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23
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Item
8A
Controls
and Procedures
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23
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PART
III
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Item
9
Directors and Executive Officers of the
Registrant
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24
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Item
10
Executive
Compensation
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26
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Item
11
Security Ownership of Certain Beneficial Owners
and Management
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27
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Item
12
Certain Relationships and Related
Transactions
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28
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Item
13
Exhibits and Reports on Form
8-K
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29
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Item
14
Principal Accountant Fees and
Services
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29
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Signatures
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30
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Index to
Exhibits
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31
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Exhibits
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32
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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.
PART I
Business
Development
We were
incorporated under the laws of the State of Wyoming on June 19, 1969. Following
an involuntary dissolution for failure to file an annual report, we were
reinstated as a Wyoming corporation on October 14, 1999. On January 28, 2000,
we, 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. We also changed our par value to $.001
and the amount of authorized common stock to 100,000,000 shares.
Prior to
1990, we were engaged in the business of exploring for and producing oil and gas
in the Rocky Mountain and mid-continental areas of the United States. We
liquidated substantially all of its assets in 1990 and were 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, we
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, 2004 and April 15, 2004) for 275,000 shares. All of
the originally issued 290,000 shares of Metwood stock have thus been repurchased
as of June 30, 2004. 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. Our initial 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:
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Floor
joist reinforcers
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Roof
and floor trusses and rafters
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Square
structural columns
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Garage,
deck and porch concrete pour over systems
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Garage
and post-and-beam buildings
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Engineering,
design and custom building services
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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 lumber yards and home improvement stores
mainly in Virginia. We rely primarily on our own sales force to generate sales;
additionally, however, our distributors in Virginia, New York, Oklahoma, Arizona
and Colorado and also utilizes the salespeople of wholesale yards stocking our
products as an additional sales force. We are an authorized vendor for Lowe’s,
Home Depot, 84 Lumber, Stock Building Supply, The Contractor Yard, and many
more. We have several stocking dealers of our Square Columns and Reinforcing
Products. We will sell directly to contractors in areas that we do not have a
dealer, but with our national dealer relationships, we typically have a dealer
to use. We are in discussions with national engineered I-joist
manufacturers who are interested in marketing our products and expect to
announce affiliations with these companies in the near future. Metwood intends
to continue expanding the wholesale marketing of its unique products to
retailers, to increase dealer sales, and to license our technology and products
to increase its distribution outside of Virginia, North Carolina and the
South.
Status of Publicly Announced
New Products or Services
We have
acquired four new patents through assignment from Robert Callahan and Ronald
Shiflett, the original 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.
Seasonality of
Market
Our sales
are subject to seasonal impacts, as its 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 its fourth and first fiscal quarters. We build an inventory of
its products throughout the winter and spring to support its 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 around.
Competition
Nationally,
there are over one hundred manufacturers of the types of products produced by
us. 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 that of us. However, Metwood has often found that its 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 used by us are readily available on the market from numerous
suppliers. The light-gage metal used by us is supplied primarily by Dietrich
Industries, Marino-Ware, Telling Industries, Wheeling Corrugating, and
Consolidated Systems, Inc. Our main sources of lumber are BlueLinx, Lowe’s, 84
Lumber Company and Smith Mountain Building Supply. Gerdau Amersteel, Descosteel
and Adelphia Metals provide the majority of our rebar. Because of the number of
suppliers available to us, its decisions in purchasing materials are dictated
primarily by price and secondarily by availability. We do not anticipate a lack
of supply to affect its production; however, a shortage might cause us to pass
on higher materials prices to its buyers.
Dependence on One or a Few
Major Customers
Presently
we do not have any one customer whose loss would have a substantial impact on
our operations.
Patents
We have
twelve U.S. Patents:
U.S.
Patent No. 5,519,977, “Joist Reinforcing Bracket,” a bracket that reinforces
wooden joists with a hole for the passage of a utility conduit. We refer 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 our founders,
Robert Callahan and Ronald B. Shiflett, who licensed these patents to
us.
Canadian
Patent Nos. 101892, 101893, 101894, and 101895 for our joist reinforcing bracket
designs.
Need for Government Approval
of Principal Products
Our
products must either be sold with an engineer’s seal or applicable building code
approval. Our 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 its products as it expands to new
markets. Currently, we are seeking International Code Council (“ICC”) code
approval on its joist reinforcers and beams. Once that approval is obtained, the
products can be used in all fifty states and will eliminate the need for an
engineer’s seal on individual products. To date, our 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 its 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. It is an environmentally
friendly business in that its products are fabricated from recycled
steel.
Number of Total Employees
and Number of Full-Time Employees
We had
thirty-seven employees at June 30, 2008, thirty-five of whom were full time.
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.
We are
not a party to any legal proceedings, nor, to the best of its knowledge, is any
such proceedings threatened or contemplated.
None.
PART II
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 average bid
price for our common stock at October 14, 2008 of $.41 per share (average asking
price of $.80), the market value of shares held by non-affiliates would be
$1,348,081. There are no preferred shares authorized.
We are
listed on the OTC Bulletin Board of the National Association of Securities
Dealers (“NASD”) under the symbol “MTWD.OB.”
Set forth
below are the high and low bid prices for our common stock for the last two
years:
Quarter
Ended
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High Bid
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Low Bid
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September
2006
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$
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0.55
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$
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0.90
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December
2006
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$
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0.35
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$
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0.85
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March
2007
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$
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0.57
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$
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0.70
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June
2007
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$
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0.51
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$
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0.70
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September
2007
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$
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0.51
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$
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0.70
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December
2007
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$
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0.35
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$
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0.65
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March
2008
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$
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0.30
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$
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0.65
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June
2008
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$
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0.33
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$
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0.60
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Holders
The
number of holders of record of our common stock as of October 14, 2008 was
1,119. 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 the line-of-credit agreements, we are restricted from
paying dividends until the debt is repaid. We have not paid any dividends on its
common stock and do not intend to pay dividends in the foreseeable future.
Plan of
Operation
We
anticipate that the next twelve months will be a period of continued growth as
it seeks to further expand its presence in new markets throughout the United
States through increased numbers of distributors, licensees and dealers. ICC
code approval is being sought for our 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.
Management’s Discussion and
Analysis of Financial Condition and Results of Operations
Below are
selected financial data for the years ended June 30, 2008 and 2007:
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2008
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2007
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Revenues
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$
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4,510,200
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$
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4,440,949
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Net
income (loss)
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$
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(30,825
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)
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$
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212,081
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Net
income (loss) per common share
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$
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**
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$
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0.02
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Weighted
average common
shares
outstanding
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12,071,725
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11,920,259
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At
June 30, 2008 and 2007:
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Total
assets
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$
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2,980,112
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$
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2,576,675
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Working
capital
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$
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1,692,795
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$
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1,539,453
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Shareholders’
equity
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$
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2,355,576
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$
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2,163,296
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**Less
than $.01
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No
dividends have been declared or paid during the periods presented.
Results
of Operations Fiscal 2008 Compared with Fiscal 2007
Revenues and Cost of Sales
—
Consolidated gross sales increased $69,291, or 2%, for the
year ended June 30, 2008 (“fiscal 2008”) compared to the year ended June 30,
2007 (“fiscal 2007”). Construction sales consisted of product sales,
engineering, delivery and installation fees. Engineering sales consisted of fees
for engineering services. Gross profit decreased $303,490 (16%) from fiscal 2007
to fiscal 2008.
The
increase in construction revenues was due to several factors, including adding
inside sales support for outside sales reps, thereby freeing up the reps to make
more daily contacts; increased marketing efforts, such as regular seminars for
building inspectors and architects on our systems and services; and strengthened
dealer relationships. Also, product prices were raised in the third quarter to
compensate for the increasing cost of steel. In addition, we experienced
continued demand for our pour over systems for fiscal 2008 compared to fiscal
2007 which had the added benefit of increasing related installation fees. Growth
in engineering sales resulted from both higher demand and quicker turnaround
time on jobs.
Cost of
sales increased by $372,740 overall (14%) in fiscal 2008 compared to fiscal
2007. On the construction side, cost of sales increased $350,518 (14%), and cost
of engineering sales also increased $22,223 (17%). The rise in construction
costs was due primarily to the higher steel prices we faced in fiscal 2008.
However, efforts were made to secure as much steel as possible just prior to the
new higher prices taking effect, thereby alleviating some of the impact of those
increases. We anticipate that steel prices will continue to be high for the
foreseeable future.
Administrative expenses —
These costs increased $104,299, or 7%, to $1,646,010 in fiscal 2008 from
$1,541,711 in fiscal 2007. The increase was due primarily to a decrease in
payroll costs from $771,793 in fiscal 2007 to $889,644 in fiscal 2008 or an
increase of $117,851 (15%). We hired new personnel to capacitate the increase in
sales and new customers in fiscal 2008 but the personnel were compensated using
different methods and at higher rates. We also expensed common stock issued to
certain employees in fiscal 2008 which was higher compared to fiscal
2007.
Other Income (Expense) —
These
amounts are immaterial to the financial statements taken as a whole and include
miscellaneous and sundry items only.
Income Taxes —
In fiscal 2008
our income tax expense (credit) was $(24,977) compared to income tax expense of
$131,778 in fiscal 2007. We increased our deferred tax liability by $4,579 in
fiscal 2008. 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 operations in fiscal 2008 were $35,465 versus cash
flows provided by operations in fiscal 2007 of $53,872, a decrease of $18,407.
The decrease in cash flows from operations was primarily attributable to lesser
net income attributable to the increase in cost of sales in fiscal 2008, an
increase in inventory which required cash outlays, an increase in non-cash
depreciation expense, receipt of recoverable income taxes of $57,077 in 2007 and
an increase in accounts payable. We also used $168,760 for capital improvements
and purchases of fixed assets in fiscal 2008, while we spent $153,032 for
purchases of fixed assets in fiscal 2007. Financing activities in fiscal 2008
provided $162,888 compared to $37,567 provided in fiscal 2007. The main
provision of funds in 2008 and 2007 was due to a net increase in borrowings
under our line-of-credit agreement of $125,000 and $25,000,
respectively.
We have
historically funded its cash needs through operating income and credit line
draws as needed. It will continue to rely on sales revenue as its 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 it continues to expand its 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 its production facilities. If additional
cash becomes necessary to fund its 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 its plans.
Item 7. Financial Statements
|
Metwood,
Inc.
and
Wholly Owned Subsidiary
|
Audited
Financial Statements
As
of and for Years Ended
June
30, 2008 and 2007
|
Lake
& Associates,
Certified
Public Accountants
|
Table
of Contents
Report
Of Independent Registered Public Accounting
Firm
Balance
Sheet as of June 30, 2008 & 2007
Statement
of Cash Flow for the years ended June 30, 2008 & 2007
Statement
of Stockholders’ Equity For Years Ended June 30, 200
8
&
200
7
Notes to
Financial Statements
Report
Of Independent Registered Public Accounting Firm
To the
Board of Directors
Metwood,
Inc.
819 Naff
Road
Boones
Mill, Virginia 24065
We have
audited the accompanying consolidated balance sheet of Metwood, Inc. (the
“Company”) and its wholly-owned subsidiary as of June 30, 2008 and 2007 and
related consolidated statements of operations, stockholders’ equity, and cash
flows for the years ending June 30, 2008 and 2007. These financial statements
are the responsibility of the company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 consolidated financial position of Metwood, Inc.
(a Virginia corporation) and its wholly-owned subsidiary as of June 30, 2008 and
2007 and the results of its operations and its cash flows for years ended June
30, 2008 and 2007 in conformity with accounting principles generally accepted in
the United States of America.
/S/
Lake & Associates CPA’s LLC
Lake
& Associates CPA’s LLC
Boca
Raton FL
October
8, 2008
Balance
Sheet as of June 30, 2008 & 2007
Assets
|
|
|
As
of June 30,:
|
|
|
|
|
|
Current
assets
|
|
|
2008
|
2007
|
Cash
and Cash Equivalents
|
|
$
|
67,880
|
$ 38,287
|
Accounts
Receivable-Net
|
|
|
535,799
|
398,042
|
Inventory
|
|
|
1,492,924
|
1,210,438
|
Recoverable
Income Taxes
|
|
|
45,955
|
57,077
|
Prepaid
Expenses and Other Current Assets
|
|
|
53,184
|
119,412
|
Total
current assets
|
|
|
2,195,743
|
1,823,256
|
|
|
|
|
|
Fixed
Assets
|
|
|
|
|
Leasehold
Improvements
|
|
|
174,385
|
139,585
|
Furniture,
Fixtures and Equipment
|
|
|
86,341
|
75,851
|
Computer
Hardware, Software & Peripherals
|
|
|
197,817
|
173,148
|
Machinery
and Shop Equipment
|
|
|
407,103
|
325,602
|
Vehicles
|
|
|
369,451
|
365,501
|
Total
Fixed Assets
|
|
|
1,235,097
|
1,079,687
|
Accumulated
Depreciation
|
|
|
(703,815)
|
(579,356)
|
Net
Fixed Assets
|
|
|
531,282
|
500,331
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
Goodwill
|
|
|
253,088
|
253,088
|
Total
assets
|
|
$
|
2,980,112
|
$ 2,576,675
|
Liabilities and stockholders'
equity
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts
Payable
|
|
$
|
290,316
|
$ 233,814
|
Accrued
Expenses
|
|
|
26,633
|
19,989
|
Bank
Line of Credit Payable
|
|
|
150,000
|
25,000
|
Customer
Deposits
|
|
|
36,000
|
5,000
|
Total
Current Liabilities
|
|
|
502,948
|
283,803
|
|
|
|
|
|
Long
Term Liabilities
|
|
|
|
|
Deferred
Income Taxes, Net
|
|
|
121,588
|
117,009
|
Related
Party Payable
|
|
|
-
|
12,567
|
Total
Long-Term Liabilities
|
|
|
121,588
|
129,576
|
|
|
|
|
|
Commitment
- Note D and G
|
|
|
-
|
-
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Common
Stock ($.001 par value, 100,000,000 shares authorized:
|
|
12,091,399
shares issued and outstanding at June 30, 2008)
|
|
12,091
|
11,924
|
Common
Stock Not Yet Issued ($.001 par value, 199,600 shares)
|
200
|
2
|
Additional
Paid-in-Capital
|
|
|
1,542,057
|
1,319,317
|
Retained
Earnings
|
|
|
801,228
|
832,053
|
Total
stockholders' equity
|
|
|
2,355,576
|
2,163,296
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
2,980,112
|
$ 2,576,675
|
|
|
|
|
|
See
notes to consolidated audited financial statements and auditors'
report.
|
|
Statement
of Operations for the years ended June 30, 2008 & 2007
METWOOD,
INC. AND WHOLLY OWNED SUBSIDIARY
|
|
Consolidated
Income Statements
|
|
|
|
|
|
|
|
|
|
|
As
of June 30,:
|
|
|
|
|
|
|
|
|
Revenues and Cost of Sales:
|
|
2008
|
|
|
2007
|
|
Construction
Sales
|
|
$
|
4,279,487
|
|
|
$
|
4,262,071
|
|
Engineering
Sales
|
|
|
230,713
|
|
|
|
178,878
|
|
Gross
Sales
|
|
|
4,510,200
|
|
|
|
4,440,949
|
|
|
|
|
|
|
|
|
|
|
Cost
of Construction Sales
|
|
|
2,785,633
|
|
|
|
2,435,115
|
|
Cost
of Engineering Sales
|
|
|
153,372
|
|
|
|
131,149
|
|
Gross
Cost of Sales
|
|
|
2,939,004
|
|
|
|
2,566,264
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
1,571,195
|
|
|
|
1,874,685
|
|
|
|
|
|
|
|
|
|
|
Administrative Expenses:
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
106,965
|
|
|
|
123,115
|
|
Construction/Bidding
Data
|
|
|
21,557
|
|
|
|
19,287
|
|
Depreciation
|
|
|
64,443
|
|
|
|
57,096
|
|
Insurance
|
|
|
74,503
|
|
|
|
90,396
|
|
Office
Expense
|
|
|
26,053
|
|
|
|
35,321
|
|
Payroll
Expense
|
|
|
889,644
|
|
|
|
771,793
|
|
Professional
Fees
|
|
|
45,385
|
|
|
|
38,970
|
|
Rent
|
|
|
78,850
|
|
|
|
78,600
|
|
Research
and Development
|
|
|
68,267
|
|
|
|
13,000
|
|
Telephone
|
|
|
33,362
|
|
|
|
38,734
|
|
Travel
|
|
|
27,140
|
|
|
|
33,148
|
|
Vehicle
Expense
|
|
|
57,716
|
|
|
|
62,392
|
|
Other
|
|
|
152,126
|
|
|
|
179,859
|
|
Total
Expenses
|
|
|
1,646,010
|
|
|
|
1,541,711
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
(74,814
|
)
|
|
|
332,974
|
|
|
|
|
|
|
|
|
|
|
Other Income/Expenses
|
|
|
|
|
|
|
|
|
Loss
on Sale of Fixed Assets
|
|
|
5,864
|
|
|
|
-
|
|
Other
Income (Expense)
|
|
|
13,148
|
|
|
|
10,885
|
|
Income
(Loss) Before Income Taxes
|
|
|
(55,802
|
)
|
|
|
343,859
|
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
|
24,977
|
|
|
|
(131,778
|
)
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(30,825
|
)
|
|
$
|
212,081
|
|
|
|
|
|
|
|
|
|
|
Net
Income Per Common Share
|
|
|
|
|
|
|
|
|
Basic
& Fully Diluted
|
|
|
**
|
|
|
$
|
0.02
|
|
**
Less than $.01
|
|
|
|
|
|
|
|
|
Weighted
Average Common
|
|
|
|
|
|
|
|
|
Shares
Outstanding
|
|
$
|
12,071,725
|
|
|
$
|
11,920,259
|
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated audited financial statements and auditors'
report.
|
|
Statement
of Cash Flow for the years ended June 30, 2008 & 2007
METWOOD,
INC. AND WHOLLY OWNED SUBSIDIARY
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
For
the years ended June 30,
|
|
|
|
2008
|
2007
|
Cash
Flows From Operating Activities:
|
|
|
|
|
Net
income (loss)
|
|
$
|
(30,825)
|
$ 212,081
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
Depreciation
|
|
|
141,650
|
114,992
|
Provision
for deferred income taxes
|
|
|
4,579
|
9,855
|
Loss
on sale of fixed assets
|
|
|
5,864
|
-
|
Common
stock issued to employees
|
|
|
172,655
|
-
|
(Increase)
decrease in operating assets:
|
|
|
|
|
Accounts
receivable
|
|
|
(137,757)
|
95,598
|
Inventory
|
|
|
(282,487)
|
(227,467)
|
Prepaid
expenses and other current assets
|
|
|
66,228
|
(35,351)
|
Recoverable
income taxes
|
|
|
11,122
|
(57,077)
|
Increase
(decrease) in operating liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
53,436
|
2,829
|
Customer
Deposits
|
|
|
31,000
|
-
|
Current
income taxes payable
|
|
|
-
|
(61,588)
|
|
|
|
|
|
Net
Cash Profided By Operating Activities
|
|
|
35,465
|
53,872
|
|
|
|
|
|
Cash
Flows From Investing Activities:
|
|
|
|
|
Expenditures
for fixed assets
|
|
|
(168,760)
|
(153,032)
|
|
|
|
|
|
Net
Cash (Used In) Investing Activities
|
|
|
(168,760)
|
(153,032)
|
|
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
|
|
Incurrence
of related party payable
|
|
|
(12,567)
|
12,567
|
Proceeds
from employee stock plan
|
|
|
50,455
|
|
Borrowings
from bank line of credit
|
|
|
125,000
|
75,000
|
Repayment
of bank line of credit
|
|
|
-
|
(50,000)
|
|
|
|
|
|
Net
Cash Provided By Financing Activities
|
|
|
162,888
|
37,567
|
|
|
|
|
|
Net
(Decrease) In Cash and Cash Equivilents
|
|
|
29,593
|
(61,593)
|
|
|
|
|
|
Cash
and Cash Equivalents:
|
|
|
|
|
Beginning
of year
|
|
|
38,287
|
99,880
|
|
|
|
|
|
End
of year
|
|
$
|
67,880
|
$ 38,287
|
|
|
|
|
|
See
notes to consolidated audited financial statements and auditors'
report.
|
|
|
|
|
|
Statement
of Stockholders’ Equity For Years Ended June 30, 2006 - 2008
METWOOD,
INC. AND WHOLLY OWNED SUBSIDIARY
|
|
Consolidated
Statement of Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
Common
|
|
|
|
|
|
Additional Paid-In Capital
|
|
|
Retained Earnings
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Shares
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not
Yet Issued
|
|
|
|
|
|
|
|
|
|
(000's)
|
|
|
($.001 Par)
|
|
|
(000's)
|
|
|
($.001 Par)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
June 30, 2006
|
|
|
11,905
|
|
|
$
|
11,905
|
|
|
|
16
|
|
|
$
|
16
|
|
|
$
|
1,319,317
|
|
|
$
|
619,972
|
|
Net
income (loss) for year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
212,081
|
|
Issuance
of common stock for services rendered
|
|
|
19
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance
of common stock subscribed
|
|
|
-
|
|
|
|
-
|
|
|
|
(14
|
)
|
|
|
(14
|
)
|
|
|
-
|
|
|
|
-
|
|
Balances,
June 30, 2007
|
|
|
11,924
|
|
|
$
|
11,924
|
|
|
|
2
|
|
|
$
|
2
|
|
|
$
|
1,319,317
|
|
|
$
|
832,053
|
|
Net
income (loss) for year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30,825
|
)
|
Common
stock subscribed but not yet issued
|
|
|
-
|
|
|
|
-
|
|
|
|
198
|
|
|
|
198
|
|
|
|
103,152
|
|
|
|
-
|
|
Shares
Cancelled
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance
of common stock subscribed
|
|
|
172
|
|
|
|
172
|
|
|
|
-
|
|
|
|
-
|
|
|
|
119,588
|
|
|
|
-
|
|
Balances,
June 30, 2008
|
|
|
12,091
|
|
|
$
|
12,091
|
|
|
|
200
|
|
|
$
|
200
|
|
|
$
|
1,542,057
|
|
|
$
|
801,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated audited financial statements and auditors'
report.
|
Notes
to Financial Statements
Note
A - Summary Of Significant Accounting Policies
Business Activity
-
Metwood, Inc. (the Company) was organized under the laws of the State of
Virginia on April 7, 1993.
Effective
June 30, 2000, the Company entered an Agreement and Plan of Reorganization to
acquire the majority of the outstanding common stock of a publicly held shell
corporation. The acquisition resulted in a tax-free exchange for federal and
state income tax purposes. Upon acquisition, the name of the shell corporation
was changed to Metwood, Inc. (a Nevada corporation). Metwood, Inc. (a Virginia
corporation) became a wholly owned subsidiary of Metwood, Inc. (a Nevada
corporation). The transaction was accounted for as a reverse merger in
accordance with Accounting Principles Board (APB) Opinion No. 16 wherein the
stockholders of Metwood, Inc. (a Virginia corporation) retained the majority of
the outstanding common stock of the Company after the merger. The publicly
traded shell corporation did not have a material operating history for several
years prior to the merger.
Effective
January 1, 2002, the Company acquired certain assets of Providence Engineering,
PC (Providence), a professional engineering firm with customers in the same
proximity as the Company. 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
per share. One of the shareholders of Providence was also an officer and
existing shareholder of the Company prior to the acquisition. The transaction
was accounted for under the purchase method of accounting, and the purchase
price was allocated as follows:
In prior
years, liabilities assumed at the date of acquisition were identified and paid.
The amount of the liabilities paid was $23,088 and has been 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.
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.
Fair Value of Financial
Instruments
– The carrying amounts reported in the consolidated balance
sheet for cash, accounts receivable, inventory, prepaid expenses and other
current assets, accounts payable, accrued expenses, customer deposits and bank
credit line approximate fair values based on the short-term maturity of these
instruments.
Accounts Receivable
—
The Company grants credit in the form of unsecured accounts receivable to its
customers based on an evaluation of their financial condition. The Company
performs ongoing credit evaluations of its 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, 2008 allowance for
doubtful accounts was approximately $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, 2008and 2007, the
bad debt expense was $9,576 and $30,887, respectively.
Fixed Assets
– Fixed
assets are recorded at cost and include expenditures that substantially increase
the productive lives of the existing assets. Maintenance and repair costs are
expensed as incurred. Depreciation is provided using the straight-line method.
Depreciation of fixed assets is calculated over management prescribed recovery
periods that range from three to thirty years.
When a
fixed asset is disposed of, its cost and related accumulated depreciation are
removed from the accounts. The difference between un-depreciated cost and the
proceeds from disposition is recorded as a gain or loss.
Impairment of Long-Lived
Assets:
In
accordance with SFAS No.144, “Accounting for the Impairment or Disposal of
Long-lived Assets”, the Company reviews long-lived assets, such as rental
equipment and fixed assets, for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset group may not be
fully recoverable. Recoverability of asset groups to be held and used is
measured by a comparison of the carrying amount of an asset group to estimated
undiscounted future cash flows expected to be generated by the asset
group. If the carrying amount exceeds its estimated future cash flows, an
impairment charge is recognized as the amount by which the carrying amount of an
asset group exceeds the fair value of the asset group. The Company evaluated its
long-lived assets and no impairment charges were recorded for any of the periods
presented.
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, 2008, the significant estimates used by management include the valuation of
its goodwill. Actual results could differ from those
estimates.
Cash and Cash Equivalents
— For purposes of the Consolidated Statements of Cash Flows, the Company
considers liquid investments with an original maturity of three months or less
to be cash equivalents. The Company maintains its cash in bank deposit accounts,
which, at times, may exceed the federally insured limit of $100,000. The Company
has not experienced any losses in such accounts. The Company believes it is not
exposed to any significant credit risk on cash and cash
equivalents.
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 SFAS No. 109, “Accounting for Income
Taxes.” A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and for net operating loss carry
forwards, 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.
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.
Advertising
– The
Company expenses 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 they are subsequently recognized as expenses in those periods in
which the goods or services are received.
Inventory
–
Inventory, consisting of metal and wood raw materials located in the Company’s
leased premises and is stated at the lower of cost or market using the first-in,
first-out (FIFO) method.
Patents
– The Company
has been assigned several key product patents developed by certain Company
officers. No value has been recorded in the Company’s financial statements
because the fair value of the patents was not determinable within reasonable
limits at the date of assignment.
Research and Development
– The Company performs research and development on its metal/wood
products, new product lines, and new patents. Costs, if any, are expensed as
they are incurred. For the years ended June 30, 2008 and 2007, the expenses
relating to research and development were $68,267and $13,000,
respectively.
Goodwill
– In June
2001 the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible
Assets.” This statement requires that goodwill and intangible assets deemed to
have an indefinite life not be amortized. Instead, such assets are to be tested
for impairment annually or immediately if conditions indicate that such an
impairment could exist. Transition to the new rules of SFAS 142 requires the
completion of a transitional impairment test of goodwill within the first year
of adoption. The Company adopted the provisions of SFAS 142 beginning July 1,
2002 and completed the transitional impairment test of goodwill as of July 1,
2002 and again as of June 30, 2008 using discounted cash flow estimates and
found no goodwill impairment.
Recent Accounting
Pronouncements
-
In July 2006, the Financial Accounting
Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"),
"Accounting for Uncertainty in
Income Taxes,"
an interpretation of FASB Statement No. 109 ("SFAS 109").
The interpretation clarifies the accounting for uncertainty in income taxes
recognized in an entity's financial statements in accordance with SFAS 109,
"Accounting for Income Taxes." It prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken on a tax return. FIN 48 is effective
for fiscal years beginning In September 2006, the FASB issued SFAS No. 157 and
No. 158. Statement No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. This Statement applies under
other accounting pronouncements that require or permit fair value measurements,
the Board having previously concluded in those accounting pronouncements that
fair value is the relevant measurement attribute. Accordingly, this Statement
does not require any new fair value measurements. However, for some entities,
the application of this Statement will change current practice.
Statement
No. 158 is an amendment of FASB Statements No. 87, 88, 106, and 132(R). It
improves financial reporting by requiring an employer to recognize the over
funded or underfunded status of a defined benefit postretirement plan (other
than a multi-employer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit organization. This
Statement also improves financial reporting by requiring an employer to measure
the funded status of a plan as of the date of its year-end statement of
financial position, with limited exceptions.
The
Company does not expect application of SFAS No. 156, 157 and 158 to have a
material effect on its financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS No. 159”). This
statement permits entities to choose to measure many financial instruments and
certain other items at fair value. Companies should report unrealized
gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. This statement is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007. The Company does not plan to measure any of its
existing financial assets or liabilities at fair value under the provisions of
SFAS No. 159 and, therefore, does not anticipate any material impact to its
results of operations or financial position related to the adoption of this
standard.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS No. 141 (R)”). SFAS No. 141 (R) requires an
acquiring entity in a business combination to: (i) recognize all (and only) the
assets acquired and the liabilities assumed in the transaction, (ii) establish
an acquisition-date fair value as the measurement objective for all assets
acquired and the liabilities assumed, and (iii) disclose to investors and other
users all of the information they will need to evaluate and understand the
nature of, and the financial effect of, the business combination, and, (iv)
recognize and measure the goodwill acquired in the business combination or a
gain from a bargain purchase. SFAS No. 141 (R) is effective for, and
will be applied by the Company to, business combinations occurring after
December 15, 2008.
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”. SFAS No. 160 requires: (i)
non-controlling (minority) interests in subsidiaries to be reported in the same
manner as equity, but separate from the parent’s equity, in consolidated
financial statements; (ii) net income attributable to the parent and the
non-controlling interest to be clearly identified and presented on the face of
the consolidated statement of income; and (iii) any changes in the parent’s
ownership interest, while the parent retains the controlling financial interest
in its subsidiary, to be accounted for consistently. SFAS No. 160 is
effective for fiscal years beginning after December 15, 2008. The
Company does not currently have investments in other companies and, therefore,
currently does not expect SFAS No. 160 to have a material impact on its
financial statements.
In
March 2008, the FASB released SFAS No. 161,
“Disclosures about Derivative
Instruments and Hedging Activities.”
SFAS No. 161 requires
additional disclosures related to the use of derivative instruments, the
accounting for derivatives and the financial statement impact of
derivatives. SFAS No. 161 is effective for fiscal years beginning
after November 15, 2008. The Company is currently assessing the
impact the adoption of SFAS No. 161 will have on the Company’s financial
statements.
In
May 2008, the FASB released SFAS No. 162,
“The Hierarchy of Generally Accepted
Accounting Principles.”
SFAS No. 162 identifies the sources
of accounting principles and the framework for selecting the principles used in
the preparation of financial statements of nongovernmental entities that
presented in conformity with generally accepted accounting principles in the
United States of America. SFAS No. 162 will be effective 60 days following the
SEC’s approval of the PCAOB amendments to AU Section 411,
The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles
. The
Company does not believe SFAS 162 will have a significant impact on the
Company’s financial statements.
Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the financial statements upon
adoption.
Compensated
Absences:
Company
Has Not Accrued a Liability for Compensated Absences Because the Amount Cannot
Be Reasonably Estimated
Employees
of the Company are entitled to paid vacation and paid sick days depending on job
classification, length of service, and other factors. Approximately 100% of the
Company’s salaried employees are paid vacation and sick days. It is not
practicable for the Company to estimate the amount of compensation for future
absences; accordingly, no liability for compensated absences has been recorded
in the accompanying financial statements. The Company’s policy is to recognize
the costs of compensated absences when actually paid to employees.
Note
B – Supplemental Cash Flow Information
Supplemental
disclosures of cash flow information for the years ended June 30, 2008 and 2007
are summarized as follows:
Note
C – Related Party Transactions
For the
years ended June 30, 2008, the Company had sales of $119,100 to a company owned
by the CEO, Robert Callahan. For the year ended June 30, 2008, the Company had
sales of $36,383 to its shareholder and CEO, Robert Callahan. As of June 30,
2008, the related party receivable with Mr. Callahan and the company he owns was
$-0-.
As of
June 30, 2007, the Company had a related party payable to Cahas Mountain
Properties, Inc. a company owned by Mr. Callahan, for monies
advanced. The balance was paid in full as of June 30,
2008.
Note
D – Commitment
In prior
years, the Company implemented a stock-based incentive compensation plan for its
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 the Company will match the
participating employee’s withheld amounts. The Company may also make a
discretionary contribution based upon pay incentives or attendance.
Periodically, the Company will purchase restricted stock on behalf of the
employee in the amount of his withholdings, the Company’s match, and any
discretionary contributions.
Note
E – Short-Term Borrowings And Credit Arrangements
The
Company has 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, which was 5.0% as of June 30, 2008. 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, 2008 was $150,000.
Note
F – Equity
During
the years ended June 30, 2008 and 2007, the Company issued 172,250 and -0-
common shares for the benefit of employees included in the Company’s stock based
incentive compensation During June 30, 2008 the company approved but
did not issue an additional 199,600 shares to be issued under the stock based
incentive compensation plan The valued at $223,110 and $-0-, respectively. The
employee contribution totaled 50,455. The net cost to the company was
$172,655 The common shares were valued at the fair market value of the shares at
the time of issuance as determined by a the closing share price in accordance
with FASB 123 (R)
Note
G – Sale of Fixed Assets and Related Operating Lease
During
the year ended June 30, 2006, the Company entered into a sales and leaseback
transaction with a related party. The Company sold its various buildings at its
corporate headquarters which house its manufacturing plants, executive offices,
and other buildings for $600,000 in cash. The Company simultaneously entered
into a commercial lease agreement with this entity whereby the Company is
committed to lease back these same properties for $6,200 per month over a ten
year term expiring on December 31, 2014. Rent expense charged to operations for
the years ended June 30, 2008 and 2007 was $78,850 and $78,600,
respectively.
Future
minimum rental payments as of June 30, 2008 in the aggregate and for each of the
five succeeding years and thereafter are as follows:
Note
H – Income Tax
The
components of income tax expense for the years ended June 30, 2008 and 2007
consist of:
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 for the years ending June
30, 2007 and 2008 is as follows:
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. Deferred tax liabilities at June 30, 2008 were $121,588,
net of deferred tax assets of $-0-. The components of these
amounts are as follows:
Note I – Concentrations
There is
no single customer or group of related customers from whom the Company derived
more than 10% of its accounts receivable as of June 30, 2008. The Company is
potentially vulnerable to a concentration-related risk with respect to its metal
suppliers, however, since three vendors supply approximately 70% of the metal
used in the manufacture of the Company’s products, though these vendors have
been used primarily because of their competitive pricing. Several other metal
suppliers are available to the Company, but purchasing from them, should that
become necessary, would likely result in increased costs.
Note
J – Segment Information
The
Company operates 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, 2007 and 2008 is as follows:
Item
8. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
|
a.
|
Our
Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures, as defined in
Rules 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange
Act”), as of the end of the period covered by this Annual Report (the
“Evaluation Date”). Based on such evaluation, such officers have concluded
that, as of the Evaluation Date, our disclosure controls and procedures
are effective in alerting our management on a timely basis to material
information required to be disclosed in our reports filed under the
Exchange Act.
|
|
|
b.
|
There
have been no significant changes in our internal controls or in other
factors that could significantly affect such controls since the Evaluation
Date.
|
|
PART III
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 for the year ending June 30, 2008
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 or her respective
positions:
Name
|
Position
and Background
|
Robert
M. Callahan
|
President,
Chief Executive officer
|
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,
Vice President/General Manager, Chief Financial Officer
|
|
Education:
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 our restructuring, increasing production, improving efficiency,
and developing computer aids for us.
|
|
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 us:
(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 our
directors, officers and persons who own more than 10% of our 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 our common stock during the fiscal year ended June 30, 2008, we believe that
each person who, at any time during that period, was a director, executive
officer, or beneficial owner of more than 10% of our common stock complied with
all Section 16(a) filing requirements.
The
following table sets forth in summary form the compensation received during each
of our last three fiscal years by our President and Chief Executive Officer,
Robert M. Callahan:
Summary
Compensation Table
Fiscal
Year
|
|
Annual
Salary
|
|
|
Bonuses
|
|
|
Other
Compen-
sation
|
|
|
Restricted
Stock
Awards
|
|
|
LTIP
Options
|
|
|
Restricted
Stock
Bonuses
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
2008
|
|
$
|
84,032
|
|
|
|
14,300
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
2007
|
|
$
|
143,034
|
|
|
|
17,750
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
2006
|
|
$
|
79,000
|
|
|
|
5,000
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
(1)
|
The
dollar value of base salary (cash and non-cash) received, including
amounts paid to Carolyn Callahan, wife of Robert M.
Callahan.
|
|
|
(2)
|
The
dollar value of bonuses (cash and non-cash) received.
|
|
|
(3)
|
During
the periods covered by the table, we did not pay any other annual
compensation not properly categorized as salary or bonus, including
perquisites and other personal benefits, securities or
property.
|
|
|
(4)
|
During
the periods covered by the table, we did not make any award of restricted
stock.
|
|
|
(5)
|
We
currently have 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
us, 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 us or our subsidiaries, or any change in control of us, or a change in the
person’s responsibilities following a change in control of us.
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 14, 2008, based upon
12,091,399 shares outstanding:
Greater
Than 5% Owners
Title
of
Class
|
Name
and Address
of
Beneficial Owner
|
|
No.
of
Shares
|
|
|
|
|
|
Percent
of
Class
|
|
Common
|
Robert
Callahan
819
Naff Road
Boones
Mill, VA 24065
|
|
|
6,034,550
|
|
|
|
(1
|
)
|
|
|
49.9
|
%
|
Common
|
Ronald
Shiflett
819
Naff Road
Boones
Mill, VA 24065
|
|
|
2,151,282
|
|
|
|
(2
|
)
|
|
|
17.8
|
%
|
|
(1)
|
Includes
direct and indirect interests. There are 4,000,000 common shares included
in this amount that are owned in the names of family members of Mr.
Callahan.
|
|
(2) Ronald
Shiflett has authorized Robert M. Callahan to have the voting rights for his
shares of stock.
Security Ownership of
Management
The
following table sets forth the shares held by Metwood directors and officers as
of October 14, 2008:
Management
Ownership
Title
of
Class
|
Name
and Address
of
Beneficial Owner
|
|
No.
of
Shares
|
|
|
|
|
|
Percent
of
Class
|
|
Common
|
Robert
Callahan
819
Naff Road
Boones
Mill, VA 24065
|
|
|
6,034,550
|
|
|
|
(1
|
)
|
|
|
49.9
|
%
|
|
(1) Includes
direct and indirect interests. There are 4,000,000 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:
49.9%.
|
|
Changes in
Control
We know
of no contractual arrangements which may at a subsequent date result in a change
our control.
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 our buildings and grounds.
On
January 3, 2005, we entered into a sales and leaseback transaction with Cahas
Mountain Properties, LLC (“Cahas”). Cahas is an LLC that is partially owned by
members of the Callahan family which are also officers and directors of us. We
sold our various buildings at our corporate headquarters which house our
manufacturing plants, executive offices, and other buildings on January 3, 2005
for $600,000 in cash. We simultaneously entered into a commercial lease
agreement with this entity whereby we committed to lease back these same
properties for $6,200 per month over a ten year term. We paid $78,600 in rent to
Cahas during each of fiscal 2008 and fiscal 2007, respectively.
Item
13 . Exhibits and Reports on Form 8-K
None.
The
following table sets forth the aggregate fees billed by Lake & Associates,
CPA’s, PA and Bongiovanni & Associates, CPA’s for audit services rendered in
connection with the consolidated financial statements and reports for the years
ended June 30, 2008 and 2007, respectively:
|
|
2008
|
|
|
2007
|
|
Audit
fees
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
Audit-related
fees
|
|
|
—
|
|
|
|
—
|
|
Tax
fees
|
|
|
—
|
|
|
|
—
|
|
All
other fees
|
|
|
—
|
|
|
|
—
|
|
Total
fees
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
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.
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:
October 14, 2008
|
|
/s/
Robert M. Callahan
Robert
M. Callahan
President,
CEO and Director
|
|
Date:
October 14, 2008
|
|
/s/
Shawn A. Callahan
Shawn
A. Callahan
Secretary/Treasurer
and Director/CFO
|
|
INDEX
TO EXHIBITS
NUMBER
|
|
DESCRIPTION
OF EXHIBIT
|
|
3(i)*
|
|
Articles
of Incorporation
|
|
3(ii)*
|
|
By-Laws
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32
|
|
|
|
*Incorporated
by reference on Form 8-K, filed February 16, 2000.