UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September
30, 2015
¨ TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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)
(Zip code)
(540) 334-4294
(Registrant's telephone number, including
area code)
N/A
(Former name, former address and former
fiscal year, if changed since last report)
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 ¨
No x
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate website, 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 such shorter
period that the registrant was required to submit and post such files).
Yes ¨
No x
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act:
Large accelerated filer ¨ |
Non-accelerated filer ¨ |
Accelerated filer ¨ |
Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act):
Yes ¨
No x
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (no shares of preferred stock were issue and outstanding).
Common Stock, $.001 Par Value – 17,666,647
shares as of November 13, 2015
Transitional Small Business Disclosure Format: Yes ¨
No x
PART 1
FINANCIAL INFORMATION
As used in these footnotes, “we,”
“us,” “our,” “Metwood,” “Company,” or “our company” refers to Metwood,
Inc. and its subsidiaries.
ITEM 1. INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES
General
The accompanying reviewed interim unaudited
consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not
include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash
flows, and stockholders' equity in conformity with generally accepted accounting principles applicable in the United States of
America. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated
financial statements included in our Company's annual report on Form 10-K for the year ended June 30, 2015. In the opinion of
management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended September
30, 2015 are not necessarily indicative of the results that can be expected for the year ending June 30, 2016.
METWOOD, INC.
TABLE OF CONTENTS - FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
TABLE OF CONTENTS
CERTIFICATIONS
Exhibit 31 – Management certification |
|
|
|
Exhibit 32 – Sarbanes-Oxley Act |
|
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2015 AND JUNE 30, 2015
| |
September 30, | | |
June 30, | |
| |
2015 | | |
2015 | |
| |
(Unaudited) | | |
(Audited) | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 94,827 | | |
$ | 87,315 | |
Accounts receivable, net | |
| 138,084 | | |
| 129,712 | |
Inventory | |
| 783,116 | | |
| 728,500 | |
Other current assets | |
| 142,630 | | |
| 36,343 | |
| |
| | | |
| | |
Total current assets | |
| 1,158,657 | | |
| 981,870 | |
| |
| | | |
| | |
Property and Equipment | |
| | | |
| | |
Leasehold improvements | |
| 274,869 | | |
| 274,869 | |
Furniture, fixtures and equipment | |
| 78,222 | | |
| 78,222 | |
Computer hardware, software and peripherals | |
| 183,361 | | |
| 180,923 | |
Machinery and shop equipment | |
| 477,166 | | |
| 477,166 | |
Vehicles | |
| 421,793 | | |
| 412,917 | |
Land improvements | |
| 67,959 | | |
| 67,959 | |
| |
| 1,503,370 | | |
| 1,492,056 | |
Less accumulated depreciation | |
| (1,151,005 | ) | |
| (1,134,549 | ) |
| |
| | | |
| | |
Net property and equipment | |
| 352,365 | | |
| 357,507 | |
| |
| | | |
| | |
Other Assets | |
| | | |
| | |
Deferred tax asset, less valuation reserve | |
| 249,061 | | |
| 245,233 | |
| |
| 249,061 | | |
| 245,233 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 1,760,083 | | |
$ | 1,584,610 | |
The Report of Independent Registered Public
Accounting Firm and accompanying notes are an integral part of these consolidated financial statements.
METWOOD, INC.
BALANCE SHEETS
| |
(UNAUDITED) | | |
| |
| |
September 30, | | |
June 30, | |
| |
2015 | | |
2015 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 236,059 | | |
$ | 142,647 | |
Customer deposits | |
| 16,025 | | |
| 19,857 | |
| |
| | | |
| | |
Total current liabilities | |
| 252,084 | | |
| 162,504 | |
| |
| | | |
| | |
Long-term Liabilities | |
| | | |
| | |
Due to related company | |
| 48,992 | | |
| 65,784 | |
| |
| | | |
| | |
Total long-term liabilities | |
| 48,992 | | |
| 65,784 | |
| |
| | | |
| | |
Total liabilities | |
| 301,076 | | |
| 228,288 | |
| |
| | | |
| | |
Stockholders' Equity | |
| | | |
| | |
Common stock, $.001 par, 100,000,000 shares authorized; 17,666,647 shares issued and outstanding at September 30, 2015 and June 30, 2015 | |
| 17,667 | | |
| 15,222 | |
Common stock not yet issued ($.001 par, 8,150 shares) | |
| 8 | | |
| 53 | |
Additional paid-in capital | |
| 2,035,328 | | |
| 1,917,729 | |
Retained earnings | |
| (593,996 | ) | |
| (576,682 | ) |
| |
| | | |
| | |
Total stockholders' equity | |
| 1,459,007 | | |
| 1,356,322 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 1,760,083 | | |
$ | 1,584,610 | |
The Report of Independent Registered Public
Accounting Firm and accompanying notes are an integral part of these consolidated financial statements.
METWOOD, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2015 AND 2014
(UNAUDITED)
| |
Three Months Ended | |
| |
September 30, | |
| |
2015 | | |
2014 | |
REVENUES | |
| | | |
| | |
| |
| | | |
| | |
Gross sales | |
$ | 499,469 | | |
$ | 385,703 | |
Cost of sales | |
| 290,455 | | |
| 259,874 | |
Gross profit | |
| 209,014 | | |
| 125,829 | |
| |
| | | |
| | |
ADMINISTRATIVE EXPENSES | |
| | | |
| | |
Payroll expenses | |
| 115,327 | | |
| 100,787 | |
Other | |
| 115,137 | | |
| 96,308 | |
Total administrative expenses | |
| 230,464 | | |
| 197,095 | |
| |
| | | |
| | |
Operating loss | |
| (21,450 | ) | |
| (71,266 | ) |
| |
| | | |
| | |
Other income (expense) | |
| 1,323 | | |
| (530 | ) |
| |
| | | |
| | |
Interest expense | |
| (1,015 | ) | |
| (1,433 | ) |
| |
| | | |
| | |
Loss before income taxes | |
| (21,142 | ) | |
| (73,229 | ) |
| |
| | | |
| | |
Income tax benefit | |
| (3,828 | ) | |
| (2,870 | ) |
| |
| | | |
| | |
Net loss from operations | |
$ | (17,314 | ) | |
$ | (70,359 | ) |
| |
| | | |
| | |
Basic and diluted deficit per share | |
$ | ** | | |
$ | ** | |
| |
| | | |
| | |
Weighted average number of shares | |
| 16,393,440 | | |
| 15,221,647 | |
**Less than $0.01
The Report of Independent Registered Public
Accounting Firm and accompanying notes are an integral part of these consolidated financial statements.
METWOOD, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
Three Months Ended | |
| |
September 30, | |
| |
2015 | | |
2014 | |
OPERATIONS | |
| | | |
| | |
Net loss | |
$ | (17,314 | ) | |
$ | (70,359 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) from operating activities: | |
| | | |
| | |
Depreciation | |
| 16,456 | | |
| 19,646 | |
Issuance of common stock | |
| 120,000 | | |
| - | |
(Increase) decrease in operating assets: | |
| | | |
| | |
Accounts receivable | |
| (8,732 | ) | |
| 7,246 | |
Prepaid expenses | |
| (114,771 | ) | |
| - | |
Inventory | |
| (54,616 | ) | |
| 108,507 | |
Other operating assets | |
| 5,016 | | |
| 12,209 | |
Decrease in operating liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
| 89,579 | | |
| (60,211 | ) |
Net cash provided by operating activities | |
| 35,618 | | |
| 17,038 | |
| |
| | | |
| | |
INVESTING | |
| | | |
| | |
Capital asset expenditures | |
| (11,314 | ) | |
| (16,651 | ) |
Net cash used in investing activities | |
| (11,314 | ) | |
| (16,651 | ) |
| |
| | | |
| | |
FINANCING | |
| | | |
| | |
Decrease in borrowings from related party | |
| (16,792 | ) | |
| - | |
Net cash used in financing activities | |
| (16,792 | ) | |
| - | |
| |
| | | |
| | |
Net increase in cash | |
| 7,512 | | |
| 387 | |
| |
| | | |
| | |
Cash, beginning of the year | |
| 87,315 | | |
| 36,836 | |
| |
| | | |
| | |
Cash, end of the period | |
$ | 94,827 | | |
$ | 37,223 | |
The Report of Independent Registered Public
Accounting Firm and accompanying notes are an integral part of these consolidated financial statements.
METWOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(UNAUDITED)
NOTE 1 - ORGANIZATION AND OPERATIONS
The Company was incorporated under the
laws of the State of Wyoming on June 19, 1969. 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 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. 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 was no longer an operating segment of the Company. We 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 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 accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three-month period ended September 30, 2015 are not necessarily
indicative of the results that may be expected for the year ended June 30, 2016. The condensed balance sheet at June 30, 2015
has been derived from the audited financial statements at that date but does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements.
For further information, refer to the
consolidated financial statements and footnotes thereto included in Metwood, Inc.'s annual report on Form 10-K for the year ended
June 30, 2015.
Fair Value of Financial
Instruments - For certain of the company's financial instruments, none of which are held for trading, including cash, accounts
receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities.
Management's Use of
Estimates - The preparation of 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, disclosures of contingent assets and liabilities at the date of financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
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 September 30, 2015, the allowance for doubtful accounts was $7,267. Specific
customer receivables are considered past due when they are outstanding beyond their contractual terms and are charged off to
bad debt expense when they are determined to be uncollectible. For the three months ended September 30, 2015 and 2014, the
net amount of bad debts charged off was $728 and $-0-, respectively.
Inventory - Inventory, consisting
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 recorded at cost and include expenditures for improvements when they substantially increase the
productive lives of existing assets. Maintenance and repair costs are expensed to operations as incurred. Depreciation is computed
using the straight-line method over the assets' estimated useful lives, which range from three to forty years. When a fixed asset
is disposed of, its cost and related accumulated depreciation are removed from the accounts. The difference between undepreciated
cost and the proceeds is recorded as a gain or loss.
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 September 30, 2015.
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.
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 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. Research and development costs for the three months ended September 30, 2015 and 2014 were $1,500 and $1,592,
respectively.
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 quarters presented. There were no adjustments required to net income for the years presented in the computation
of diluted earnings per share.
Recent Accounting Pronouncements
– In April 2015, the Financial Accounting Standards Board (“FASB”) issued Update 2015-03—Interest-Imputation
of Interest (Subtopic 835-30):Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance
costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount
of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not
affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial
statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. We do not
expect this ASU to have a material impact on our financial statements.
In January 2015, FASB issued Update No.
2015-01—Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation
by Eliminating the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. It
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity
may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods
presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of
the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. We do not
expect this ASU to have a material impact on our financial statements.
In December 2014, FASB issued Accounting
Standards Update (“ASU”) No. 2014-18—Business Combinations (Topic 805): Accounting for Identifiable Intangible
Assets in a Business Combination (a consensus of the Private Company Council). This standard requires that existing customer-related
intangible assets and noncompetition agreements shall continue to be measured in accordance with Topic 350 and should not be subsumed
into goodwill upon adoption of this guidance. This standard is effective for the first transaction within the scope of the accounting
alternative that occurs in fiscal years beginning after December 15, 2015 and for interim and annual periods thereafter. If the
first transaction occurs in a fiscal year beginning after December 15, 2016, then this is effective for the interim period that
includes the date of the transaction and for interim and annual periods thereafter. We do not expect this ASU to have a material
impact on our financial statements.
NOTE 3 - EARNINGS PER SHARE
Net loss and earnings per share for the three months ended
September 30 2015 and 2014 are as follows:
| |
For the Three Months Ended | |
| |
September 30, | |
| |
2015 | | |
2014 | |
Net loss | |
$ | (17,314 | ) | |
$ | (70,359 | ) |
Earnings per share - basic and fully diluted | |
$ | ** | | |
$ | ** | |
Weighted average number of shares | |
| 16,393,440 | | |
| 15,221,647 | |
**Less than $0.01
NOTE 4 – SUPPLEMENTAL CASH FLOW
INFORMATION
Supplemental disclosures of cash flow
information for the three months ended September 30, 2015 and 2014 are summarized as follows:
| |
For the Three Months Ended | |
| |
September 30, | |
| |
2015 | | |
2014 | |
Cash paid for: | |
| | | |
| | |
Income taxes | |
$ | - | | |
$ | - | |
Interest (Related Party) | |
$ | 1,015 | | |
$ | 1,433 | |
NOTE 5 - RELATED-PARTY TRANSACTIONS
From time to time, we contract with
a company related through common ownership for building and grounds-related maintenance services. The related party is Cahas
Mountain Properties in which Robert Callahan, our Chief Executive Officer, is a Managing Member. For the three months
ended September 30, 2015 and 2014, we had sales of $16,792 and $16,645, respectively, to the company referred to above. As of September 30, 2015 and 2014, the related receivable was $-0- and $-0-, respectively. See also Note 6.
NOTE 6 - OPERATING LEASE COMMITMENTS
On July 1, 2015, the Company entered into
a ten-year commercial operating lease with a company related through common ownership. The related party is Cahas Mountain Properties
in which Robert Callahan, our Chief Executive Officer, is a Managing Member. The lease covers various buildings and property which
house our manufacturing plant, executive offices and other buildings with a current monthly rental of $7,500. The Company issued
2,400,000 of its shares as consideration for $120,000 in future rent payments. This amount is recorded on our books as a prepaid
expense, and $2,000 per month is transferred to rent expense. The balance of the monthly rent, $5,500, is paid in cash. For the
three-month periods ended September 30, 2015 and 2014, we recognized rent expense for these spaces of $22,500 and $21,000.
NOTE 7 – CONCENTRATIONS OF CUSTOMER
RISK
For the three months ended September 30,
2015, three customers individually accounted for 10% or more of our company’s revenues; however, there is no customer whose
loss would have a material adverse effect on our company.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis
of Results of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the financial
statements and notes included herein. Further, this MD&A should be read in conjunction with the “Business” and
“Risk Factors” sections within this Quarterly Report on Form 10-Q.
On June 14th, 2015 the company’s facility was
struck by lightning resulting in a server loss. The server loss has been sent as a claim to our insurance company. The company
has since replaced the server with a check received from the insurance company’s claims adjuster. The company received another
insurance check on October 26, 2015 to cover the Business Income and extra expenses in the amount of $28,329.00. The company has
also submitted to the insurance company additional losses. The insurance company is evaluating these claims and will make a decision
on the validity of the losses.
On a positive note, as a result of this incident, the company
has been able to improve order processing and utilize the company’s accounting software for more functionality and improvement
on daily operations.
The company has also continued to perform research and development
on our products. Due to the projected cost of upcoming research and development, the company will be performing some fund raising
activities over the next few months to raise the necessary funds. The fund raising activities could include, but are not limited
to, private placement offering, secondary offering, and credit line at a financial institution.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Included in this interim report are "forward-looking"
statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") as well as historical
information. Some of our statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
and the Notes to Financial Statements and elsewhere in this report constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe
that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations
reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those
anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled "Risk
Factors." Forward-looking statements include those that use forward-looking terminology, such as the words "anticipate,"
"believe," "estimate," "expect," "intend," "may," "project," "plan,"
"will," "shall," "should," and similar expressions, including when used in the negative. Although
we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements
involve risks and uncertainties and we cannot assure you that actual results will be consistent with these forward-looking statements.
We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.
Consequently, all of the forward-looking
statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results
anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to
or effects on our business operations. We undertake no obligation to update or revise these forward-looking statements, whether
to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of unanticipated events
or otherwise.
On October 1, 2013, the Company filed
with the Nevada Secretary of State a Certificate of Amendment to the Company's Articles of Incorporation. The Amendment was approved
by a "Unanimous Written Consent of The Board of Directors of Metwood, Inc." on August 6, 2013, pursuant to the authority
granted them by a "Written Consent of the Holders of a Majority of the Voting Shares of Metwood, Inc." dated August
6, 2013. The information regarding this issue was fully disclosed in the Company's Form 8-K Report filed on October 2, 2013. The
Amendment incorporated the following changes:
a. The total number of shares of preferred
stock that the Corporation is authorized to issue is 40,000,000 shares with a par value of $0.001 per share.
b. Grant to the Board of Directors the
full right and authority to increase or otherwise change the authorized shares of common stock and preferred stock without any
shareholder action or approval.
c. Grant to the Board of Directors
the full right and authority to change the name of the corporation at a future date without any shareholder action or
approval.
Description of Business
Overview of Our Company
We have been in the metal and metal/wood
construction materials manufacturing business since 1992. Our Company 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.
Our primary products and services are:
· TUFF BEAM - internally
reinforced cold-formed steel beam
· TUFF JOIST - cold-formed
steel joint system
· TUFF JOIST+ - internally
reinforced cold-formed steel joist
· TUFF FLOOR SYSTEM - combinations of TUFFBEAM,
NUJOIST and TUFFJOIST are utilized to make up a complete floor system
· TUFF DECK - concrete deck systems
· RIM BEAM - internally reinforced
CFS load distribution member
· TUFF FRAME 3.5 & 5.5 - a
fully proprietary panelized load bearing and non-load bearing
CFS wall framing solution
· TUFF TRUSS 2.0 - a proprietary
roof and floor truss system
· Aegis - Metwood is a distributor
of Aegis Metal Framing's cold-formed steel trusses
SURE-SPAN™
· Trimmable square columns
· Joist reinforcers
· Engineering, design and custom
building services
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 we believe the 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 Company's founders saw the need to combine the strength and durability of steel with
the convenience and familiarity of wood and wood fasteners.
Our management is continually performing
ongoing product research and development. Through a strategic partnership with an outside engineering firm, we are able to offer
our 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.
Our 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.
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.
Our company relies primarily on its own sales force to generate sales; additionally, however, we have distributors in Virginia,
New York, Oklahoma, Arizona and Colorado and also utilize 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, 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. Our management 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.
Seasonality of Market
Our sales are subject to seasonal impacts,
as our products are used in residential and commercial construction projects which tend to be at peak levels in Virginia and North
Carolina between the months of March and October. Accordingly, our sales are greater in our fourth and first fiscal quarters.
We build an inventory of our products throughout the winter and spring to support our sales season. Due to the seasonality of
our local market, we are continuing our efforts to expand into markets that are not so seasonally impacted. We have shipped projects
to Florida, Georgia, South Carolina, Arizona, Washington, and more. These markets have some seasonality, but increased exposure
in these markets wil help maintain stronger sales year round.
Competition
Nationally, we believe there are
over one hundred manufacturers of the types of products produced by our Company. However, we contend that the majority of
these manufacturers are using wood-only products or products without metal reinforcement. Our management has identified only
one other manufacturer in the United States that manufactures a cold-formed steel beam. 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 Principle 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. Adelphia Metals, 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 three months ended September 30,
2015, three customers individually accounted for 10% or more of our company’s revenues; however, there is no customer whose
loss would have a material adverse effect on our company.
Patents
We have 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, "Composite Beam," a
composite beam that includes an elongated metal shell and a pierceable insert for receiving nails, screws or other
penetrating fasteners. This is a continuation-in-part of 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 U.S. Patent Nos. D472,791S, D472,792S, D472,793S, and D477,210S, all modifications of
Metwood's Reinforcing Bracket, which will be used for repairs of wood I-joists.
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, our 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 has
been spent during the last two fiscal years researching and developing our metal/wood products, new product lines, and new patents.
We have performed several tests with NTA, Inc. to achieve a cold compliance report on our TUFFBEAM and TUFFJOIST product lines.
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
The Company had fifteen employees at September 30, 2015, thirteen
of whom were full time.
Changes in Results of Operations
We had a net loss of $17,314 for the three
months ended September 30, 2015 compared to a net loss of $70,359 for the three months ended September 30, 2014. Gross profit
increased $66% for the three months ended September 30, 2015 compared to 2014. Materials costs increased significantly comparing
those two periods, and administrative expenses increased as well. However, because of the greater gross profit for the three months
ended September 30, 2015 compared to 2014, the Company experienced a 70% lower operating loss comparing 2015 to 2014.
Liquidity and Capital Reserves –
Cash flows provided by operating activities for the three months ended September 30, 2015 were $35,618 compared to $17,038 for
the three months ended September 30, 2014. The increase comparing those two periods was primarily due to a increase in accounts
payable and accrued expenses. Cash flows used in investing activities were $11,314 and $16,651 for the three months ended September
30, 2015 and 2014, respectively, and resulted from the purchase of equipment during both periods. Cash flows used for financing
activities for the three months ended September 30, 2015 were $16,792 ($-0- for the period ended September 30, 2014) and were
for repayments of borrowings from a related party.
We have historically funded our cash needs
through operating income and credit line draws as needed. We will continue to rely on sales revenue as our main source of
liquidity and will incur debt primarily to fund inventory purchases as sales growth produces increased product demand. Liquidity
needs that cannot be met by current sales revenue may also arise in certain unusual circumstances such as has previously occurred
when rain and snow significantly slowed construction activity and resulted in a corresponding decline in demand for our products. In those circumstances, debt may be added to meet our fixed costs and to maintain inventory in anticipation of a spurt in product
demand that generally occurs once a weather-related slowdown has ended.
On a long-term basis, we also anticipate
that product demand will increase considerably once we get awarded our Code Compliance Report. 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.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements
that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity
or capital expenditures.
Critical Accounting Policies
In accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”), we record certain assets at the lower of cost or
fair market value. In determining the fair value of certain of our assets, we must make judgments, estimates and assumptions regarding
circumstances or trends that could affect the value of these assets, such as economic conditions. Those judgments, estimates and
assumptions are based on information available to us at that time. Many of those conditions, trends and circumstances are outside
our control and if changes were to occur in the events, trends or other circumstances on which our judgments or estimates were
based, we may be required under U.S. GAAP to adjust those estimates that are affected by those changes. Changes in such estimates
may require that we reduce the carrying value of the affected assets on our balance sheet (which are commonly referred to as “write
downs” of the assets involved).
It is our practice to establish reserves
or allowances to record adjustments or “write-downs” in the carrying value of assets, such as accounts receivable.
Such write-downs are recorded as charges to income or increases in the expense in our Statement of Operations in the periods when
such reserves or allowances are established or increased. As a result, our judgments, estimates and assumptions about future events
can and will affect not only the amounts at which we record such assets on our balance sheet but also our results of operations.
In making our estimates and assumptions,
we follow U.S. GAAP applicable to our business and those that we believe will enable us to make fair and consistent estimates
of the fair value of assets and establish adequate reserves or allowances. Set forth below is a summary of the accounting policies
that we believe are material to an understanding of our financial condition and results of operations.
Recently Issued Accounting Pronouncements
Refer to Note 2 in the accompanying interim financial statements.
Additional Information
You are advised to read this Form 10-Q
in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly
Reports on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain
copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In
addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.
ITEM 3 – QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are
not required to provide the information required by this item.
ITEM 4 - CONTROLS AND PROCEDURES
| (a) | Evaluation of disclosure controls and procedures |
We maintain disclosure
controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and
forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. 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, and management is required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide
reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15, our Chief Executive
Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance
level.
Management’s
Annual Report on Internal Control over Financial Reporting
Our Chief Executive
Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over our financial
reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of
the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control —
Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our
system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management
has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial
reporting. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal
control over financial reporting was not effective as of September 30, 2015. Management’s assessment identified the following
material weaknesses in internal control over financial reporting:
The small size
of our Company limits our ability to achieve the desired level of separation in our internal controls and financial reporting.
We do have a separate CEO and CFO; however, we do not have an Audit Committee to review and oversee the financial policies and
procedures of the Company. Until such time we are able to install an audit committee, we do not meet the full requirement for
separation. In the interim, we will continue to strengthen the role of our CEO and CFO and their review of our internal control
procedures.
(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.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
We are currently not involved in any litigation
that we believe could have a material adverse effect on our financial condition or results of operations. There is no action,
suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or
affecting our Company, our common stock, any of our subsidiaries or of our companies or our subsidiaries' officers or directors
in their capacities as such, in which an adverse decision could have a material adverse effect.
ITEM 1A - Risk Factors
Our business is subject to a variety
of risks and uncertainties, including, but not limited to, the risks and uncertainties described below. If any of the risks described
below, or elsewhere in this report on Form 10-Q, or our Company’s other filings with the Securities and Exchange Commission
(the "SEC") were to occur, our financial condition and results of operations could suffer, and the trading price of
our common stock could decline. Additionally, if other risks not presently known to us, or that we do not currently believe to
be significant, occur or become significant, our financial condition and results of operations could suffer, and the trading price
of our common stock could decline.
You should carefully review the risk factors
together with all other information contained in this Quarterly Report on Form 10-Q, and in prior reports pursuant to the Securities
Exchange Act of 1934, as amended and the Securities Act of 1933, as amended. Our risk factors, including but not limited to the
risk factors listed below, are as follows:
SHOULD ONE OR MORE OF THE FOREGOING
RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS OF OUR BUSINESS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.
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 $17,314 for the three months ended September 30, 2015 and $718
for the fiscal year ended June 30, 2015. 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.
Our common shares have been subject
to penny stock regulation in the United States of America - Our common shares have been subject to the provisions of Section
15(g) and Rule 15g-9 of the (US) Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly referred
to as the “penny stock” rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule
15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally
defines penny stock to be any equity security that has a market price less than US $5.00 per share, subject to certain exceptions.
Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on
a national securities exchange meeting specified criteria set by the Commission; issued by a registered investment company; excluded
from the definition on the basis of price (at least US $5.00 per share) or the registrant’s net tangible assets; or exempted
from the definition by the Commission. If our common shares are deemed to be “penny stock,” trading in common shares
will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established
customers and accredited investors.
Financial Industry Regulatory Authority,
Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our common shares
- In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending
an investment to a client, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that
client. Prior to recommending speculative low priced securities to their non-institutional clients, broker-dealers must make reasonable
efforts to obtain information about the client’s financial status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will
not be suitable for at least some clients. FINRA requirements make it more difficult for broker-dealers to recommend that their
clients buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market
for our shares.
As a public company we are subject
to complex legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of
non-compliance - As a public company, we are subject to numerous legal and accounting requirements in both Canada and the
United States of America that do not apply to private companies. The cost of compliance with many of these requirements is material,
not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our relative
inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply.
Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability
to file required periodic reports on a timely basis, loss of market confidence, delisting of our securities and/or governmental
or private actions against us. We cannot assure you that we will be able to comply with all of these requirements or that the
cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis privately held and larger
public competitors.
Compliance with changing regulation
of corporate governance and public disclosure will result in additional expenses and pose challenges for our management - Changing
laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform
and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations,
have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S.
public markets. Our management team needs to devote significant time and financial resources to comply with both existing and
evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management
time and attention from revenue generating activities to compliance activities.
Because we are quoted on the OTC
pink Sheets instead of a national securities exchange, our investors may have more difficulty selling their stock or
experience negative volatility on the market price of our stock in the United States - Our common shares are quoted on the
OTC Pink Sheets. The OTC Pink Sheets is marketed as an electronic exchange for high growth and early stage companies. Trades
are settled and cleared in a manner similar to any NASDAQ or NYSE stock and trade reports are disseminated through Yahoo,
Bloomberg, Reuters, and most other financial data providers. The OTC Pink Sheets can be significantly illiquid, in part
because it does not have a national quotation system by which potential investors can follow the market price of shares
except through information received and generated by a limited number of broker-dealers that make markets in particular
stocks. There is a greater chance of volatility for securities that trade on the OTC Pink Sheets as compared to a national
securities exchange, such as the New York Stock Exchange, the NASDAQ Stock Market or the NYSE Amex. This volatility may be
caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent
administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common
shares may experience high fluctuations in the market price and volume of the trading market for our securities. These
fluctuations, when they occur, have a negative effect on the market price for our common shares. Accordingly, our
shareholders may not be able to realize a fair price from their shares when they determine to sell them or may have to
hold them for a substantial period of time until the market for our common shares improves.
The price at which you purchase
our common shares may not be indicative of the price that will prevail in the trading market. You may be unable to sell your
common shares at or above your purchase price, which may result in substantial losses to you. The market price for our common
shares is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float,
limited operating history and lack of profits which could lead to wide fluctuations in our share price - The market for
our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our
share price will continue to be more volatile than a seasoned issuer. The volatility in our share price is attributable to a
number of factors. First our common shares, at times, are thinly traded. As a consequence of this lack of liquidity, the
trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those
shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large
number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could
better absorb those sales without adverse impact on its share price. Second, we are a speculative or “risky”
investment due to our limited operating history, lack of profits to date and uncertainty of future market acceptance for our
potential products. As a consequence, more risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more
quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond
our control and may decrease the market price of our common shares, regardless of our performance. We cannot make any
predictions as to what the prevailing market price for our common shares will be at any time or as to what affect that the
sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.
Shareholders should be aware that,
according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include control of the market for the security by one or a few broker-dealers that are often related to
the promoter or issuer; manipulation of prices through prearranged matching of purchases and sales and false and misleading
press releases; boiler room practices involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and the
wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is
aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns from being established with respect to our securities.
The occurrence of these patterns or practices could increase the volatility of our share price.
Volatility in our common share price
may subject us to securities litigation, thereby diverting our resources that may have a material effect on our profitability
and results of operations - The market for our common shares is characterized by significant price volatility when compared
to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite
future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of
volatility in the market price of its securities. We may in the future be the target of similar litigation. This type of litigation
could result in substantial costs and could divert management’s attention and resources.
Failure to achieve and maintain effective
internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) could
have a material adverse effect on our business and our operating results - If we fail to comply with the requirements of Section
404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our
internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause
investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common
shares.
Pursuant to Section 404 of the
Sarbanes-Oxley Act and current SEC regulations, we are required to prepare assessments regarding internal controls over
financial reporting. In connection with our on-going assessment of the effectiveness of our internal control over financial
reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by
the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination
of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a
deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than
inconsequential will not be prevented or detected.
In the event that a material weakness
is identified, as it has been for this report, subject to expansion of the size of our Company and our finance department, we
will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify.
However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate
and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain
a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you
that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain
adequate controls over our financial process and reporting in the future.
Any failure to complete our assessment
of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new
controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial statements. Any such failure could adversely affect
the results of the management evaluations of our internal controls. Inadequate internal controls could also cause investors to
lose confidence in our reported financial information, which could have a negative effect on the trading price of our common shares.
We do not intend to pay dividends -
We do not anticipate paying cash dividends on our common shares in the foreseeable future. We may not have sufficient funds
to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide, in our sole discretion,
not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board
of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating
and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay
any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
The current financial environment
may impact our business and financial condition that we cannot predict - The continued instability in the global
financial system and related limitation on availability of credit may continue to have an impact on our business and our
financial condition, and we may continue to face challenges if conditions in the financial markets do not improve. Our
ability to access the capital markets has been restricted as a result of the economic downturn and related financial market
conditions and may be restricted in the future when we would like, or need, to raise capital. The difficult financial
environment may also limit the number of prospects for potential joint venture, asset monetization or other capital raising
transactions that we may pursue in the future or reduce the values we are able to realize in those transactions, making these
transactions uneconomic or difficult to consummate.
ITEM 2. RECENT ISSUANCES OF UNREGISTERED
SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities
during the period ended September 30, 2015.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
There is no information with respect to
which information is not otherwise called for by this form.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. |
|
Exhibit |
3.1(a) |
|
Articles of Incorporation (1) |
3.1(b) |
|
Amendment to Articles of Incorporation(2) |
3.2 |
|
New Adopted Bylaws (1) |
|
|
|
31.1 |
* |
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act. (6)(6 (2) |
|
|
|
|
|
|
|
|
31.2 |
* |
Certification of Principal Financial and Accounting Officer Pursuant to Section
906 of the Sarbanes-Oxley Act. |
32.1 |
* |
Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act. |
32.2 |
* |
Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act. |
*filed herewith
| (1) | Incorporated by reference on Form 8-K, filed February 16,
2000 |
| (2) | Incorporated by reference on Form 8-K, filed October 2,
2013 |
See index to exhibits.
SIGNATURES
In accordance with the requirements 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: November 16, 2015 |
/s/ Robert M. Callahan |
|
Robert M. Callahan |
|
Chief Executive Officer |
|
|
Date: November 16, 2015 |
/s/ Shawn A. Callahan |
|
Shawn A. Callahan |
|
Chief Financial Officer |
INDEX TO EXHIBITS
NUMBER |
|
DESCRIPTION OF EXHIBIT |
|
|
|
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 (18U.S.C. 1350) |
Exhibit 31.1
Certification of Chief Executive Officer
Securities Exchange Act Rule 13a-14
and 15d-14
As Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
I, Robert M. Callahan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Metwood,
Inc.; |
| 2. | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
| b. | designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and |
| d. | disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s third fiscal quarter) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and |
| b. | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal control over
financial reporting. |
Date: November 16, 2015 |
/s/ Robert M. Callahan |
|
Robert M. Callahan |
|
Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer
Securities Exchange Act Rule 13a-14
and 15d-14
As Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
I, Shawn A. Callahan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Metwood,
Inc.; |
| 2. | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
| b. | designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and |
| d. | disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s third fiscal quarter) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions): |
| e. | all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and |
| f. | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal control over
financial reporting. |
Date: November 16, 2015 |
/s/ Shawn A. Callahan |
|
Shawn A. Callahan |
|
Chief Financial Officer |
Exhibit 32
Certificate of
Chief Executive Officer
And Chief Financial Officer
Securities Exchange Act rules 13(a)
and 15(d)
As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report
on Form 10-Q of Metwood, Inc. ("the Company") for the quarter ended September 30, 2015, as filed with the Securities
and Exchange Commission on the date hereof ("the Report"), each of the undersigned Chief Executive Officer and Chief
Financial Officer of the Company certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of the Company. |
Date: November 16, 2015 |
/s/ Robert M. Callahan |
|
Robert M. Callahan |
|
Chief Executive Officer |
|
|
Date: November 16, 2015 |
/s/ Shawn A. Callahan |
|
Shawn A. Callahan |
|
Chief Financial Officer |
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