Emerge Health International (MTWD) 10-Q 2011 Q2 Quarterly report

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, 2010
[   ] 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 small business issuer as specified in its charter)
NEVADA		83-0210365
(State or other jurisdiction		(IRS Employer
of incorporation)		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)
	Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the
	Exchange Act during the past 12 months (or for such shorter period that the registrant was required
	to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
	Yes [ X ] No [   ]
	Indicate by check mark whether the regiatrant 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 ]
	As of February 10, 2011, the number of shares outstanding of the registrant's common stock,
	$0.001 par value (the only class of voting stock), was 12,231,797 shares.

METWOOD, INC. AND SUBSIDIARY
TABLE OF CONTENTS - FORM 10-QSB
PART I - FINANCIAL INFORMATION		Page(s)
Item 1	Financial Statements
	Consolidated Balance Sheets As of December 31, 2010 (Unaudited) and June 30, 2010		1-2
	Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended December 31, 2010 and 2009		3
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months  Ended December 31, 2010 and 2009		4
	Notes to Consolidated Financial Statements		5-6
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations		7
Item 4	Controls and Procedures		9
PART II - OTHER INFORMATION
Item 6	Exhibits and Reports on Form 8-K		10
Signatures			10
Index to Exhibits			11

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
	(UNAUDITED)			(AUDITED)
	December 31,			June 30,
	2010			2010
ASSETS
Current Assets
Cash and cash equivalents	$	166,639		$	403,512
Accounts receivable, net		175,579			297,828
Inventory		1,003,203			938,878
Recoverable income taxes		138,267			84,383
Other current assets		40,680			53,329
Total current assets		1,524,368			1,777,930
Property and Equipment
Leasehold and land improvements		210,437			210,437
Furniture, fixtures and equipment		98,208			97,766
Computer hardware, software and peripherals		157,068			155,924
Machinery and shop equipment		441,188			356,166
Vehicles		384,432			380,834
		1,291,333			1,201,127
Less accumulated depreciation		(870,625	)		(825,942	)
Net property and equipment		420,708			375,185
Goodwill		253,088			253,088
TOTAL ASSETS	$	2,198,164		$	2,406,203
See accompanying notes to consolidated financial statements.

1

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
	(UNAUDITED)		(AUDITED)
	December 31,		June 30,
	2010		2010
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	54,928	$	188,075
Total current liabilities		54,928		188,075
Long-term Liabilities
Due to related company		147,302		175,027
Deferred income taxes, net		41,430		49,755
Total long-term liabilities		188,732		224,782
Total liabilities		243,660		412,857
Stockholders' Equity
Common stock, $.001 par, 100,000,000 shares authorized;
12,231,797 shares issued and outstanding at December 31, 2009		12,232		12,232
Common stock not yet issued ($.001 par, 8,150 shares)		8		8
Additional paid-in capital		1,544,268		1,544,268
Retained earnings		397,996		436,838
Total stockholders' equity		1,954,504		1,993,346
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY	$	2,198,164	$	2,406,203
See accompanying notes to consolidated financial statements.

2

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2010			2009			2010			2009
REVENUES
Construction sales	$	522,927		$	504,661		$	1,203,718		$	1,062,376
Engineering sales		32,725			48,181			90,354			92,592
Gross sales		555,652			552,842			1,294,072			1,154,968
Cost of construction sales		283,757			327,022			731,553			677,930
Cost of engineering sales		42,726			42,300			81,737			83,919
Gross cost of sales		326,483			369,322			813,290			761,849
Gross profit		229,169			183,520			480,782			393,119
ADMINISTRATIVE EXPENSES
Advertising		35,280			22,576			49,997			41,894
Depreciation		9,185			13,121			19,435			26,654
Insurance		5,118			9,159			9,593			21,030
Payroll expenses		144,293			151,165			295,920			305,107
Professional fees		6,545			13,712			31,318			33,175
Rent		19,800			19,800			39,600			39,600
Repairs and maintenance		14,484			3,238			22,520			6,812
Travel		5,482			5,702			10,707			10,478
Vehicle		12,981			14,203			23,113			23,017
Other		44,527			35,773			86,983			64,794
Total administrative expenses		297,695			288,449			589,186			572,561
Operating loss		(68,526	)		(104,929	)		(108,404	)		(179,443	)
Other income		3,914			7,497			7,353			15,521
Loss before income taxes		(64,612	)		(97,432	)		(101,051	)		(163,922	)
Income tax benefit		(42,338	)		(11,693	)		(62,209	)		(40,654	)
Net loss from operations	$	(22,274	)	$	(85,739	)	$	(38,842	)	$	(123,268	)
Basic and diluted deficit per share		**			**		$	-		$	(0.01	)
Weighted average number of shares		12,231,797			12,231,797			12,231,797			12,231,797
**Less than $0.01
See accompanying notes to consolidated financial statements.

3

METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
	Six Months Ended
	December 31,
	2010			2009
OPERATIONS
Net loss	$	(38,842	)	$	(123,268	)
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation		44,683			56,073
Provision for (reversal of) deferred income taxes		(8,325	)		(19,378	)
(Increase) decrease in operating assets:
Accounts receivable		135,449			93,667
Inventory		(64,325	)		67,340
Recoverable income taxes		(53,884	)		(16,410	)
Other operating assets		(551	)		19,867
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(133,147	)		2,810
Net cash (used for) from operating activities		(118,942	)		80,701
INVESTING
Capital expenditures		(90,206	)		(6,111	)
Net cash used for investing activities		(90,206	)		(6,111	)
FINANCING
Decrease in borrowings from related party		(27,725	)		-
Net cash used for financing activities		(27,725	)		-
Net increase (decrease) in cash		(236,873	)		74,590
Cash, beginning of the year		403,512			199,868
Cash, end of the period	$	166,639		$	274,458
See accompanying notes to consolidated financial statements

4

METWOOD, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

(UNAUDITED)

NOTE 1 - ORGANIZATION AND OPERATIONS

Metwood, Inc. ("Metwood") was organized under the laws of the Commonwealth of Virginia on April 7, 1993.  On June 30, 2000, Metwood entered into an Agreement and Plan of Reorganization in which the majority of its outstanding common stock was acquired by a publicly held Nevada shell corporation.  The acquisition was a tax-free exchange for federal and state income tax purposes and was accounted for as a reverse merger in accordance with Accounting Principles Board ("APB") Opinion No. 16.  Upon acquisition, the name of the shell corporation was changed to Metwood, Inc., and Metwood, Inc., the Virginia corporation, became a wholly owned subsidiary of Metwood, Inc., the Nevada corporation.  The publicly traded shell corporation had not had a material operating history for several years prior to the merger.

Effective January 1, 2002, Metwood acquired certain assets of Providence Engineering, PC ("Providence"), a professional engineering firm with customers in the same proximity as Metwood.  The total purchase price of $350,000 was paid with $60,000 in cash and with 290,000 shares of the Company's common stock to the two Providence shareholders.  These shares were valued at the closing active quoted market price of the stock at the effective date of the purchase, which was $1.00 per share.  One of the shareholders of Providence was also an officer and existing shareholder of Metwood prior to the acquisition.  The transaction was accounted for under the purchase method of accounting.  Liabilities assumed at the date of acquisition were identified, paid and added to goodwill.

The consolidated company ("the Company") provides construction-related products and engineering services to residential customers and contractors, commercial contractors, developers and retail enterprises, primarily in southwestern Virginia.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

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

In the opinion of management, the unaudited condensed consolidated financial statements contain all the adjustments necessary in order to make the financial statements not misleading.  The results for the period ended December 31, 2010 are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2011.

Management's Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.  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, 2010, the allowance for doubtful accounts was $5,000.  Specific customer receivables are considered past due when they are outstanding beyond their contractual terms and are charged off to bad debt expense when determined uncollectible.  For the three and six mon ths ended December 31, 2010,  the amount of bad debts charged off was $1,587 and $35,744, respectively.  For the three and six months ended December 31, 2009, 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.

Goodwill - We account for goodwill and intangibles under SFAS No. 142, “Goodwill and Other Intangible Assets.” As such, goodwill is not amortized, but is subject to annual impairment reviews, or more frequent reviews if events or circumstances indicate there may be an impairment. We performed our required annual goodwill impairment test as of June 30, 2010 using discounted cash flow estimates and found that there was no impairment of goodwill.

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, 2010.

Patents - We have been assigned several key product patents developed by certain Company officers.  No value has been recorded in our financial statements because the fair value of the patents was not determinable within reasonable limits at the date of assignment.

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 December 31, 2010 and 2009 were $3,914 and $960, respectively.  For the six months ended December 31, 2010 and 2009, research and development costs were $5,700 and $960, 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 December 2009, the FASB issued Accounting Standards Update 2009-16 (ASU 2009-16), Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets, which improves financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, the amendments require enhanced disclosures about the risks that a transferor continues  to be exposed to because of its continuing involvement in  transferred financial assets .    Comparability and consistency in accounting for transferred financial assets will also be improved through clarifications of the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. The pending content that links to this paragraph is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, and for interim  periods within  that first annual reporting period and interim and annual reporting periods thereafter. This Update has not had a material impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-06, Improving Disclosures about Fair Value Measurements. This guidance requires new disclosures and clarifies certain existing disclosure requirements about fair value measurements. It requires a reporting entity to disclose significant transfers in and out of Level 1 and Level 2 fair value measurements, to describe the reasons for the transfers and to present separately information about purchases, sales, issuances and settlements for fair value measurements using significant unobservable inputs. This Update is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which is effective for interim and annual reporting periods beginning after December 15, 2010; early adoption is permitted. The adoption did not have a material effect on our consolidated financial statements.

In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements.  ASU 2010-09 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC’s requirements. ASU 2010-09 is effective for interim and annual periods ending after June 15, 2010. The Company does not expect the adoption of ASU 2010-09 to have a material impact on its results of operations or financial position.

Management does not believe that any other recently issued accounting pronouncements would have a material effect on the accompanying consolidated financial statements.

5

NOTE 3 - EARNINGS PER SHARE

Net income (loss) and earnings per share for the three and six months ended December 31, 2010 and 2009 are as follows:

	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2010			2009			2010			2009
Net income (loss)	$	(22,274	)	$	(85,739	)	$	(38,842	)	$	(123,268	)
Earnings per share - basic and fully diluted	$		**	$		**	$		**	$	(0.01	)
Weighted average number of shares		12,231,797			12,231,797			12,231,797			12,231,797
**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, 2010 and 2009 are summarized as follows:

	For the Three Months Ended December 31,				For the Six Months Ended December 31,
	2010		2009		2010		2009
Cash paid for:
Income taxes	$	--	$	--	$	--	$	--
Interest	$	--	$	--	$	--	$	--

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.  There were no fees paid to the related company for the three and six months ended December 31, 2010 and 2009.  For the three months ended December 31, 2010 and 2009, we had sales of $90,482 and $2,696, respectively, to the company referred to above.  For the six months ended December 31, 2010 and 2009, we had sales of $98,922 and $5,412 to the company.  As of December 31, 2010 and 2009, the related receivable was $-0- and $1,961, respectively.  See also Note 8.

NOTE 6 - BANK CREDIT LINE

The Company has available a $600,000 revolving line of credit with a local bank.  The balance outstanding at December 31, 2010 and 2009 was $-0-.

NOTE 7 - SEGMENT INFORMATION

We operate in two principal business segments: (1) construction-related products and (2) engineering services.  Performance of each segment is evaluated based on profit or loss from operations before income taxes.  These reportable segments are strategic business units that offer different products and services.  Summarized revenue and expense information by segment for the three and six months ended December 31, 2010 and 2009, as excerpted from internal management reports, is as follows:

	For the Three Months Ended						For the Six Months Ended
	December 31,						December 31,
Construction:	2010			2009			2010			2009
Sales	$	522,927		$	504,661		$	1,203,718		$	1,062,376
Intersegment expenses		(5,165	)		(6,570	)		(10,670	)		(19,110	)
Cost of sales		(283,757	)		(327,022	)		(731,553	)		(677,930	)
Corporate and other expenses		(251,124	)		(253,397	)		(501,888	)		(487,811	)
Segment income (loss)	$	(17,119	)	$	(82,328	)	$	(40,393	)	$	(122,475	)
Engineering:
Sales	$	32,725		$	48,181		$	90,354		$	92,592
Intersegment revenues		5,165			6,570			10,670			19,110
Cost of sales		(42,726	)		(42,300	)		(81,737	)		(83,919	)
Corporate and other expenses		(6,919	)		(15,862	)		(24,336	)		(28,576	)
Segment income (loss)	$	(11,755	)	$	(3,411	)	$	(5,049	)	$	(793	)

NOTE 8 - 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 lease covers various buildings and property which house our manufacturing plant, executive offices and other buildings with a current monthly rental of $6,600.  The lease expires on December 31, 2014. For the three and six months ended December 31, 2010 and 2009, we recognized rental expense for these spaces of $19,800 and $39,600, respectively.

6

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
With the exception of historical facts stated herein, the matters discussed in this report are "forward-looking" statements that involve risks and uncertainties that could cause actual results to differ materially from projected results.  Such "forward-looking" statements include, but are not necessarily limited to, statements regarding anticipated levels of future revenues and earnings from operations of the Company.  Readers of this report are cautioned not to put undue reliance on "forward-looking" statements, which are by their nature, uncertain as reliable indicators of future performance.
Description of Business
Background
As discussed in detail in Note 1, we were incorporated under the laws of the Commonwealth of Virginia on April 7, 1993 and, on June 30, 2000, entered into a reverse merger in which it became the wholly owned subsidiary of a public Nevada shell corporation, renamed Metwood, Inc.  Effective January 1, 2002, Metwood acquired certain assets of Providence Engineering, PC in a transaction accounted for under the purchase method of accounting.
Principal Products/Services and Markets
Metwood
Residential builders are aware of the superiority of steel framing vs. wood framing, insofar as steel framing is lighter; stronger; termite, pest, rot and fire resistant; and dimensionally more stable in withstanding induced loads.  Although use of steel framing in residential construction has generally increased each year since 1980, many residential builders have been hesitant to utilize steel due to the need to retrain framers and subcontractors who are accustomed to a "stick-built" construction method where components are laid out and assembled with nails and screws.  The Company's founders, Robert ("Mike") Callahan and Ronald Shiflett, saw the need to combine the strength and durability of steel with the convenience and familiarity of wood and wood fasteners.
Metwood manufactures light-gage steel construction materials, usually combined with wood or wood fasteners, for use in residential and commercial applications in place of more conventional wood products, which are inferior in terms of strength and durability.  The steel and steel/wood products allow structures to be built with increased load strength and structural integrity and fewer support beams or support configurations, thereby allowing for structural designs that are not possible with wood-only products.
Metwood's primary products and services are:
	·  Girders and headers	·  Garage, deck and porch concrete pour-over systems
	·  Floor joists	·  Garage and post-and-beam buildings
	·  Floor joist reinforcers	·  Engineering, design and custom building services
	·  Roof and floor trusses

Providence

Providence is extensively involved in ongoing product research and development for Metwood.  Additionally, Providence offers its customers civil engineering capabilities which include rezoning and special use submissions; erosion and sediment control and storm-water management design; residential, commercial, and religious facility site development design; and utility design, including water, sewer and onsite treatment systems.  Providence's staff is familiar with construction practices and has been actively involved in construction administration and inspection on multiple projects.

Providence also performs a variety of structural design and analysis work, successfully providing solutions for many projects, including retaining walls, residential framing, commercial building framing, light-gage steel fabrication drawings, metal building retrofits and additions, mezzanines, and seismic anchors and restraints.

Providence has designed numerous foundations for a variety of structures.  Its foundation design expertise includes metal building foundations, traditional building construction foundations, atypical foundations for residential structures, tower foundations, and sign foundations for a variety of uses and applications.

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

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

Distribution Methods of Products and Services

Our sales are primarily wholesale, directly to lumberyards, home improvement stores, hardware stores, and plumbing and electrical suppliers in Virginia and North Carolina.  Metwood relies primarily on its own sales force to generate sales; additionally, however, the Company has distributors in Virginia, New York, Oklahoma, Arizona and Colorado and also utilizes the salespeople of wholesale yards stocking the Company's products as an additional sales force.  We are an authorized vendor for Lowe's, Home Depot, 84 Lumber, Stock Building Supply, ProBuild, and many more.  We have several stocking dealers of our square columns and reinforcing products.  We will sell directly to contractors in areas where we do not have a dealer, but with our national dealer relationships,  we typically & #160;have a dealer to use.  We are in discussions with national engineered I-joist manufacturers who are interested in marketing the Company's products and expect to announce affiliations with these companies in the near future.    Metwood  intends  to continue  expanding  the  wholesale  marketing  of  its unique products to retailers,   to increase dealer  sales,  and  to license the Company's technology and products to increase its distribution outside of Virginia, North Carolina and the South.

Status of Publicly Announced New Products or Services

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

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

Seasonality of Market

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

Competition

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

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

All of the raw materials we use are readily available on the market from numerous suppliers.  The light-gage metal used by the Company is supplied primarily by Nuconsteel, Clark Western, and Wheeling Corrugating.  Our main source of lumber is BlueLinx.  Nucor Bar Mill provides 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 customers.

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Dependence on One or a Few Major Customers

For the three and six months ended December 31, 2010 and 2009, sales to certain customers amounted to more than 5% of total sales.  Those customers and the related percent of sales greater than 5% were as follows:

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2010			2009			2010			2009
84 Lumber		6	%		6	%		6	%		-
Craftman Construction		-			-			6	%		-
Davenport Development		-			-			7	%		-
Pacific Polysteel		-			6	%		-			7	%
Price Buildings		-			20	%		-			14	%
Probuild Co., LLC		6	%		7	%		-			8	%
Straco, Inc.		-			6	%		-			-

Patents

The Company has nine U.S. Patents:

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

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

     U.S. Patent No. 5,832,691, "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. 5,625,997.

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

     U.S. Patent Nos. D472,791S, D472,792S, D472,793S, and D477,210S, all modifications of Metwood's 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.  The Company's chief engineer has obtained professional licensure in several states, which permits products not building code approved to be sold and used with his seal.   We expect his licensure in a growing number of states to greatly assist in the uniform acceptability of our products as we expand to new markets. Currently, we are seeking International Code Council ("ICC") code approval on our joist reinforcers and beams.  Once that approval is obtained, our products can be used in all fifty states and will eliminate the need for an engineer's seal on individual products.  To date, the Company's 2x10 floor joist reinforcer has received both Bureau Officials Code Association approval (2001) and I CC approval (2004).

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

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

Costs and Effects of Compliance with Environmental Laws

We do not incur any costs to comply with environmental laws.  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 twenty-one employees at December 31, 2010, all of whom were full time.

Results of Operations

Net Loss

We had a net loss of $22,274 for the three months ended December 31, 2010, versus a net loss of $85,739 for the three months ended December 31, 2009, a decrease of $63,465.  This decrease in net loss was attributable primarily to cost savings in materials.  Construction sales increased 4% comparing 2010 to 2009; as a percentage of construction sales, cost of goods sold declined from 64% to 54% comparing 2010 to 2009.  Engineering sales decreased 32% comparing 2010 to 2009, further contributing to the net loss for the quarter. Additionally, as a percentage of engineering sales, the cost of engineering sales increased from 88% to 130% comparing 2010 to 2009.  Administrative expenses increased 3% comparing the three months ended December 31, 2010 to the same period in 2009.  This increase did not significantly impact the bottom line for the quarter ended December 31, 2010 compared to the quarter ended December 31, 2009.

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For the six months ended December 31, 2010 and 2009, we went from a net loss of $123,268 to a net loss of $38,842, a decrease in loss of $84,426 comparing the two periods.  Gross sales improved between the two periods, and though cost of sales did increase comparing 2010 and 2009, gross profit still improved $87,663, or 22%, for the six months ended December 31, 2010 compared to 2009.

Management is currently discussing the possibility of taking the Company private as a means of raising capital, improving the bottom line, and removing the high compliance costs incurred as a public company.  The present economic environment may make privatization the best option as the Company goes forward.

Sales

Revenues were $555,652 for the three months ended December 31, 2010 compared to $552,842 for the same period in 2009, an increase of $2,810, or 1%.  For the six-month periods ended December 31, 2010 and 2009, sales were $1,294,072 and $1,154,968, respectively, an increase of $139,104, or 12%.  The sales increase for both the three-month and six-month periods in 2010 versus 2009 were not significant enough to reflect an upturn in the overall economy; however, the Company remains optimistic that it may portend an improving building industry .  Although we have sold product in over twenty-five states since July 2007, our local market nonetheless remains down more than 30%.  The potential for increased sales volume as we go forward is enhanced by the fact that we are now an authorized fabricator for the NUTRUSS light-gauge steel truss system, begun in March 2010.

Expenses

Total administrative expenses were $297,695 for the three months ended December 31, 2010, versus $288,449 for the three months ended December 31, 2009, an increase of $9,246.  For the six months ended December 31, 2010, administrative expenses were $589,186 compared to $572,562 for the six months ended December 31, 2009.  The biggest increase occurred in other expenses.

Liquidity and Capital Reserves

On December 31, 2010, we had cash of $166,639 and working capital of $1,469,440.  Net cash used in operating activities was $118,942 for the six months ended December 31, 2010 compared to net cash from operating activities of $80,701 for the six months ended December 31, 2009.  The lower provision of cash from operating activities in the current year resulted primarily from the decrease in accounts payable, recoverable income taxes and inventory.

Cash used in investing activities was $90,206 for the six months ended December 31, 2010, compared to cash used of $6,111 during the same period in the prior year.  Cash flows used in investing activities for the current period were for shop equipment ($85,022); computers and computer software ($1,145); furniture and fixtures ($442); and vehicles ($12,697).

Cash used in financing activities was $27,725 for the six months ended December 31, 2010 compared to cash used of $-0- for the period ended December 31, 2009.  The net cash used in 2010 was to pay off borrowings from a related party.

ITEM 4 - CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. As we grow geographically and with new product offerings, we continue to create new processes and controls as well as improve our existing environment to increase efficiencies. Improvements may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

      (a)  Exhibits

             See index to exhibits.

      (b)  Reports on Form 8-K

             There were no reports on Form 8-K filed during the quarter ended December 31, 2010.

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 3, 2011                                  /s/  Robert M. Callahan

                                                                         Robert M. Callahan

                                                                         Chief Executive Officer

Date:  February 3, 2011                                  /s/  Shawn A. Callahan

                                                                         Shawn A. Callahan

                                                                         Chief Financial Officer

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

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