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
December 31,
2014
[ ] 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 of incorporation or organization) |
(IRS Employer 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 - 15,221,647 shares as
of February 7, 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, 2014. 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 December 31, 2014 are not
necessarily indicative of the results that can be expected for the year ending June 30, 2015.
METWOOD, INC.
TABLE OF CONTENTS - FORM
10-Q
FOR THE THREE AND SIX MONTHS ENDED
DECEMBER 31, 2014 AND 2013
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION |
PAGE |
|
|
|
Item 1 |
Consolidated Financial Statements (unaudited) including |
|
|
Consolidated Balance Sheets |
4 |
|
Consoliated Statements of Operations and Comprehensive Loss |
5 |
|
Consolidated Statements of Cash Flows |
6 |
|
Notes to the Financial Statements |
7-8 |
Item 2. |
Management Discussion and Analysis of Financial Condition and Results of Operations |
9-10 |
Item 3 |
Quantitative and Qualitative Disclosures About Market Risk |
12 |
Item 4. |
Controls and Procedures |
12 |
|
|
|
PART II - OTHER INFORMATION |
|
|
|
|
Item 1. |
Legal Proceedings |
13 |
Item 1a |
Risk Factors |
13 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
14 |
Item 3. |
Defaults Upon Senior Securities |
14 |
Item 4 |
Mine Safety Disclosures |
15 |
Item 5 |
Other information |
15 |
Item 6 |
Exhibits |
15 |
|
|
|
CERTIFICATIONS
Exhibit 31 – Management certification…………………………………………………...
26-27
Exhibit 32 – Sarbanes-Oxley Act………………………………………………………….
28
METWOOD, INC.
CONSOLIDATED BALANCE
SHEETS
|
|
(UNAUDITED) |
|
|
|
|
December 31, |
|
June 30, |
|
|
2014 |
|
2014 |
ASSETS |
|
|
|
|
|
Current Assets |
|
|
Cash and cash equivalents |
|
$ |
63,714 |
|
|
$ |
36,836 |
|
Accounts receivable, net |
|
|
160,042 |
|
|
|
149,671 |
|
Inventory |
|
|
|
|
|
|
|
|
Raw materials |
|
|
725,417 |
|
|
|
815,192 |
|
Other current assets |
|
|
19,375 |
|
|
|
44,356 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
968,548 |
|
|
|
1,046,055 |
|
|
|
|
|
|
|
|
|
|
Property and Equipment |
|
|
|
|
|
|
|
|
Leasehold and land improvements |
|
|
342,828 |
|
|
|
342,828 |
|
Furniture, fixtures and equipment |
|
|
78,222 |
|
|
|
78,222 |
|
Computer hardware, software and peripherals |
|
|
175,207 |
|
|
|
175,207 |
|
Machinery and shop equipment |
|
|
477,166 |
|
|
|
467,166 |
|
Vehicles |
|
|
392,751 |
|
|
|
387,443 |
|
|
|
|
1,466,174 |
|
|
|
1,450,866 |
|
Less accumulated depreciation |
|
|
(1,106,551 |
) |
|
|
(1,071,802 |
) |
Net property and equipment |
|
|
359,623 |
|
|
|
379,064 |
|
|
|
|
|
|
|
|
|
|
Other Assets |
|
|
|
|
|
|
|
|
Deferred tax asset, net of valuation reserve |
|
|
248,147 |
|
|
|
246,163 |
|
|
|
|
|
|
|
|
|
|
Total other assets |
|
|
248,147 |
|
|
|
246,163 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
1,576,318 |
|
|
$ |
1,671,282 |
|
See accompanying
notes to condensed financial statements.
METWOOD, INC.
CONSOLIDATED BALANCE
SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
101,900 |
|
|
$ |
224,262 |
|
Customer deposits |
|
|
87,459 |
|
|
|
13,166 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
189,359 |
|
|
|
237,428 |
|
|
|
|
|
|
|
|
|
|
Long-term Liabilities |
|
|
|
|
|
|
|
|
Due to related company |
|
|
77,901 |
|
|
|
94,815 |
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities |
|
|
77,901 |
|
|
|
94,815 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
267,260 |
|
|
|
332,243 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
|
|
Common stock, $.001 par, 100,000,000 shares |
|
|
15222 |
|
|
|
15,222 |
|
authorized; 15,221,647 shares issued and |
|
|
|
|
|
|
|
|
outstanding at December 31, 2014 |
|
|
|
|
|
|
|
|
Common stock not yet issued ($.001 par, 8,150 shares) |
|
|
— |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $.001 par, 40,000,000 shares |
|
|
— |
|
|
|
— |
|
authorized; 0 shares issued and outstanding |
|
|
|
|
|
|
|
|
at December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
1,899,781 |
|
|
|
1,899,773 |
|
Retained earnings |
|
|
(605,945 |
) |
|
|
(575,964 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders' equity |
|
|
1,309,058 |
|
|
|
1,339,039 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
|
|
|
AND STOCKHOLDERS' EQUITY |
|
$ |
1,576,318 |
|
|
$ |
1,671,282 |
|
See accompanying
notes to condensed financial statements.
METWOOD,
INC.
CONSOLIDATED
STATEMENTS
OF INCOME
(UNAUDITED)
|
|
Three Months Ended December 31, |
|
Six Months Ended
December 31, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross sales |
|
$ |
505,504 |
|
|
$ |
418,219 |
|
|
$ |
891,207 |
|
|
$ |
1,075,984 |
|
Cost of sales |
|
|
(277,014 |
) |
|
|
(227,780 |
) |
|
|
(537,601 |
) |
|
|
(625,496 |
) |
Gross profit |
|
|
228,490 |
|
|
|
190,439 |
|
|
|
353,606 |
|
|
|
450,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADMINISTRATIVE EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising |
|
|
7,651 |
|
|
|
3,545 |
|
|
|
12,909 |
|
|
|
5,918 |
|
Depreciation |
|
|
6,894 |
|
|
|
4,715 |
|
|
|
13,788 |
|
|
|
9,827 |
|
Insurance |
|
|
4,490 |
|
|
|
5,165 |
|
|
|
14,998 |
|
|
|
11,107 |
|
Payroll expenses |
|
|
94,464 |
|
|
|
116,907 |
|
|
|
195,101 |
|
|
|
227,163 |
|
Professional fees |
|
|
11,220 |
|
|
|
17,465 |
|
|
|
34,424 |
|
|
|
20,272 |
|
Rent |
|
|
19,310 |
|
|
|
18,775 |
|
|
|
38,620 |
|
|
|
37,025 |
|
Vehicle |
|
|
5,394 |
|
|
|
6,872 |
|
|
|
11,712 |
|
|
|
13,439 |
|
Other |
|
|
28,317 |
|
|
|
28,775 |
|
|
|
52,421 |
|
|
|
56,046 |
|
Total administrative expenses |
|
|
177,740 |
|
|
|
202,219 |
|
|
|
373,973 |
|
|
|
380,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
50,750 |
|
|
|
(11,780 |
) |
|
|
(20,367 |
) |
|
|
69,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
(9,636 |
) |
|
|
(6,578 |
) |
|
|
(11,599 |
) |
|
|
(6,363 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
41,114 |
|
|
|
(18,358 |
) |
|
|
(31,966 |
) |
|
|
63,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
|
886 |
|
|
|
10,906 |
|
|
|
(1,984 |
) |
|
|
10,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from operations |
|
$ |
40,228 |
|
|
$ |
(29,264 |
) |
|
$ |
(29,982 |
) |
|
$ |
52,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted deficit per share |
|
|
$ ** |
|
|
|
$ ** |
|
|
|
$ ** |
|
|
|
$ ** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares |
|
|
15,221,647 |
|
|
|
15,221,647 |
|
|
|
15,221,647 |
|
|
|
15,221,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**Less than $0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying
notes to
condensed
financial
statements.
METWOOD,
INC.
CONSOLIDATED STATEMENTS
OF CASH
FLOWS
(UNAUDITED)
|
|
Six Months Ended December 31, |
|
|
2014 |
|
2013 |
OPERATIONS |
|
|
|
|
Net income (loss) |
|
$ |
(29,982 |
) |
|
$ |
52,422 |
|
Adjustments to reconcile net income |
|
|
|
|
|
|
|
|
to net cash from operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
34,749 |
|
|
|
34,483 |
|
Provision for deferred income taxes |
|
|
(1,984 |
) |
|
|
10,906 |
|
(Increase) decrease in operating assets: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
6,703 |
|
|
|
47,259 |
|
Inventory |
|
|
89,775 |
|
|
|
(69,026 |
) |
Other operating assets |
|
|
7,906 |
|
|
|
(14,291 |
) |
Decrease in operating liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
(48,068 |
) |
|
|
(137,421 |
) |
Net cash provided by (used for) operating activities |
|
|
59,099 |
|
|
|
(75,668 |
) |
|
|
|
|
|
|
|
|
|
INVESTING |
|
|
|
|
|
|
|
|
Capital asset expenditures |
|
|
(15,307 |
) |
|
|
(20,176 |
) |
Net cash used for investing activities |
|
|
(15,307 |
) |
|
|
(20,176 |
) |
|
|
|
|
|
|
|
|
|
FINANCING |
|
|
|
|
|
|
|
|
Decrease in borrowings from related party |
|
|
(16,914 |
) |
|
|
(2,674 |
) |
Net cash used for financing activities |
|
|
(16,914 |
) |
|
|
(2,674 |
) |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
26,878 |
|
|
|
(98,518 |
) |
|
|
|
|
|
|
|
|
|
Cash, beginning of the year |
|
|
36,836 |
|
|
|
174,650 |
|
|
|
|
|
|
|
|
|
|
Cash, end of the period |
|
$ |
63,714 |
|
|
$ |
76,132 |
|
See
accompanying
notes
to condensed
financial
statements
METWOOD,
INC.
NOTES
TO CONSOLIDATED
FINANCIAL
STATEMENTS
DECEMBER
31, 2014
(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 and six-month periods ended December 31, 2014 are not necessarily
indicative of the results that may be expected for the year ended June 30, 2015. The condensed balance sheet at June 30, 2014 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, 2014.
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 December 31, 2014, the allowance for doubtful accounts was $7,877. 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 and six months ended
December 31, 2014 and December 31, 2013, the amount of bad debts charged off was $-0-.
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 December 31, 2014.
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 and six months ended December 31, 2014 were $3,500 and $5,092,
respectively. Research and development costs for the three and six months ended December 31, 2013 were $1,940 and $6,417, 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 January 2015, the
Financial Accounting Standards Board (“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
income (loss)
and earnings
per
share
for
the
three and six
months
ended
December 31, 2014
and 2013 are
as follows:
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
Net income (loss) |
|
$ |
40,228 |
|
|
$ |
(29,264 |
) |
|
$ |
(29,982 |
) |
|
$ |
52,422 |
|
Earnings per share - basic and fully diluted |
|
$ |
** |
|
|
$ |
** |
|
|
$ |
** |
|
|
$ |
** |
|
Weighted average number of shares |
|
|
15,221,647 |
|
|
|
15,221,647 |
|
|
|
15,221,647 |
|
|
|
15,221,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**Less than $0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE
4 – SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental
disclosures of cash flow information for the three and six months ended December 31, 2014 and 2013 are summarized as follows :
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
Cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Interest |
|
$ |
1,283 |
|
|
$ |
6,312 |
|
|
$ |
2,716 |
|
|
$ |
6,312 |
|
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. Fees paid to the related company for the
three and six months ended December 31, 2014 and 2013 were $-0- and $2.235, respectively. For the three and six months ended December
31, 2014, we had sales of $7,269 and $16,645, respectively, to the company referred to above. For the three and six months ended
December 31, 2013, we had sales of $496 and $5,259, respectively to the company. As of December 31, 2014 and 2013, the related
receivable was $-0- and $-0-, respectively. See also Note 6.
NOTE 6 - OPERATING LEASE COMMITMENTS
On January 3, 2005, 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 $7,000. The
lease expired on December 31, 2014, and discussions are currently ongoing as this lease is renegotiated. For the three-month periods
ended December 31, 2014 and 2013, we recognized rent expense for these spaces of $21,000 and $20,400. For each of the six-month
periods ended December 31, 2014 and 2013, we recognized rent expense of $35,000 and $40,800.
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.
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, Stock Building Supply, ProBuild, and many more. We
have several stocking dealers of our square columns and reinforcing products. We will sell directly to contractors in areas where
we do not have a dealer, but with our national dealer relationships, we typically have a dealer to use. 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 and six months
ended December 31, 2013 and 2012, two 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 fourteen employees at December 31, 2014,
thirteen of whom were full time.
Changes in Results of Operations
We had net income of $40,228 for the
three months ended December 31, 2014 compared to a net loss of $29,264 for the three months ended December 31, 2013 and a net loss
of $29,982 for the six months ended December 31, 2014 versus net income of $52,422 for the six months ended December 31, 2013.
Gross profit increased 20% for the three months ended December 31, 2014 to 2013, but decreased 21% comparing the six-month period
in 2014 to 2013. Savings in payroll and other administrative expenses accounted for the profitable three months ended December
31, 2014 compared to the same period in 2013 and also helped to lower administrative costs comparing the periods ending December
31, 2014 to 2013.
Liquidity and Capital Reserves –
at December 31, 2014 we had cash of $63,714 compared to $36,836 at June 30, 2014.
Cash flows provided by operating activies
for the six months ended December 31, 2014 were $59,099 versus net cash used for operating activities of $75,668 for the six months
ended December 31, 2013. The increase in cash flows from operations for the period ended December 31, 2014 was primarily attributable
to decreases in inventory and increases in accounts payable and accrued expenses.
Cash flows used for investing activities
were $15,307 for the six months ended December 31, 2014 compared to $20,176 for the same period in 2013 and were for the purchase
of capital assets.
Cash flows used for financing activities
for the six months ended December 31, 2014 were $16,914 compared to $2,674 for the six months ended December 31, 2013 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.
Our management team, under the supervision
and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness
of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report,
December 31, 2014. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure
that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive
and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure. Based on this evaluation and the deficiencies noted in our management’s report on internal controls and procedures
over financial reporting, our principal executive officer and our principal financial officer concluded that, given the size of
our Company and its finance department, that our disclosure controls and procedures were not effective as of December 31, 2014.
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.
There
were not 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 lost $29,982 for the six months ended December 31, 2014, and although we earned $52,422
for the six months ended December 31, 2013, we incurred net losses of $244,117 for the fiscal year ended June 30, 2014 and $327,504
for the year ended June 30, 2013. 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.
We did not consummate the Global
Energy Group LLC transaction - Metwood had previously entered into a Member Interests Purchase Agreement (the "Agreement")
dated June 30, 2013 with Global Energy Group LLC. The Company has determined not to consummate the transaction. The discussions
regarding this Agreement are ongoing and any failure of the parties to reach an accommodation may have material adverse effect
on our financial condition or results of operations and could divert management’s attention and resources.
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 December 31, 2014.
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: February 7, 2015 |
|
|
|
|
/s/ Robert M. Callahan |
|
|
Robert M. Callahan |
|
|
Chief Executive Officer |
|
|
|
|
|
|
Date: February 7, 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 statements or 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 quarterly report; |
|
3. |
Based on my knowledge, the financial statements and the other financial information included in this quarterly 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 quarterly report; |
|
4. |
The registrant's other certifying officer 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: |
- designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
- designed such internal controls and procedures, or caused such
disclosure controls and procedures 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;
- 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
- 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
5. |
The registrant's other certifying officer and I 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: February 7, 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 statements or 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 quarterly report; |
|
3. |
Based on my knowledge, the financial statements and the other financial information included in this quarterly 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 quarterly report; |
|
4. |
The registrant's other certifying officer 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 to ensure that material information relating to the registrant, including its consolidated subsidiary, 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 controls and procedures, or caused such disclosure controls and procedures 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. |
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 |
|
5. |
The registrant's other certifying officer 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: February 7, 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 December 31,
2014, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), the undersigned Robert
M. Callahan, Chief Executive Officer, and Shawn A. Callahan, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of each of our knowledge:
| 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: February 7, 2015 |
|
|
|
|
/s/ Robert M. Callahan |
|
|
Robert M. Callahan |
|
|
Chief Executive Officer |
|
|
|
|
|
|
Date: February 7, 2015 |
|
/s/ Shawn A. Callahan |
|
|
Shawn A. Callahan |
|
|
Chief Financial Officer |
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