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 31,2011

or

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

_________________

METWOOD, INC

(Exact name of registrant as specified in its charter)

_________________

NEVADA	000-05391	83-0210365
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation or Organization)	File Number)	Identification No.)

819 Naff Road,Boones Mill,VA24065
(Address of Principal Executive Offices) (Zip Code)

(540) 334-4294
(Registrant’s telephone number, including area code)

N/A
(Former name or 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  þ     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer  o Accelerated filer  o Non-accelerated filer  o Smaller reporting company   þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  o     No  þ

 As of January 24, 2012, the number of shares outstanding of the registrant’s commons tock , $0.001

par value (the only class of voting stock), was 12,231,797 shares.

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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, 2011 (Unaudited) 1-2 and June 30, 2011	3
	Consolidated Statements of Income (Unaudited) for the Three and Six Months 3 Ended December 31, 2011 and 2010	4
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months 4 Ended December 31, 2011 and 2010	5
	Notes to Consolidated Financial Statements	6-9
Item 2	Management's Discussion and Analysis of Financial Condition 9-15 and Results of Operations	10-12
Item 4	Controls and Procedures	13
PART II	OTHER INFORMATION
Item 6	Exhibits and Reports on Form 8-K	14
	Signatures	15
	Index to Exhibits	16

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METWOOD, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	(UNAUDITED)		(AUDITED)
	December 31, 2011		June 30, 2011
ASSETS
Current Assets
Cash and cash equivalents	$	129,259	$	180,448
Accounts receivable, net		253,069		240,581
Inventory		954,844		855,864
Recoverable income taxes -		—		42,606
Other current assets		18,163		47,872
Total current assets		1,355,335		1,367,371
Property and Equipment
Leasehold and land improvements		328,644		327,449
Furniture, fixtures and equipment		97,514		98,458
Computer hardware, software and peripherals		196,578		159,261
Machinery and shop equipment		457,688		457,688
Vehicles		394,183		420,533
		1,447,607		1,463,389
Less accumulated depreciation		-981,691		-935,093
Net property and equipment		465,916		528,296
Other Assets
Deferred tax asset		51,787		157,792
Less valuation reserve		-5,923		-120,732
Total other assets		45,864		37,060
Goodwill		253,088		253,088
TOTAL ASSETS		2,120,203		2,185,815
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	86,699	$	111,901
Note payable		0		5,359
Total current liabilities		86,699		117,260
Long-term Liabilities
Note payable		—		24,529
Due to related company		124,888		136,942
Total long-term liabilities		124,888		161,471
Total liabilities		211,587		278,731
Stockholders' Equity
Common stock, $.001 par, 100,000,000 shares authorized 12,231,797 shares issued and outstanding at December 31, 2011		12,232		12,232
Common stock not yet issued ($.001 par, 8,150 shares)		8		8
Additional paid-in capital		1,544,268		1,544,268
Retained earnings		352,108		350,576
Total stockholders' equity		1,908,616		1,907,084
TOTAL LIABILITIES  AND STOCKHOLDERS' EQUITY		2,120,203		2,185,815

See accompanying notes to consolidated financial statements.

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METWOOD, INC.AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2011			2010		2011		2010
REVENUES
Construction sales	$	556,441		$	522,927	$	1,061,773	$	1,203,718
Engineering sales		12,500			32,725		14,856		90,354
Gross sales		568,941			555,652		1,076,629		1,294,072
Cost of construction sales		343,251			283,757		632,691		731,553
Cost of engineering sales		3,266			42,726		18,343		81,737
Gross cost of sales		346,517			326,483		651,034		813,290
Gross profit		222,424			229,169		425,595		480,782
ADMINISTRATIVE EXPENSES
Advertising		8,588			35,280		21,115		49,997
Depreciation		9,776			9,185		19,608		19,435
Insurance		2,932	��		5,118		8,704		9,593
Payroll expenses		120,921			144,293		245,546		295,920
Professional fees		5,275			6,545		30,370		31,318
Rent		20,000			19,800		39,800		39,600
Repairs and maintenance		2,336			14,484		4,242		22,520
Travel		2,322			5,482		4,871		10,707
Vehicle		10,960			12,981		22,562		23,113
Other		20,301			44,527		45,613		86,983
Total administrative expenses		203,420			297,695		442,431		589,186
Operating income (loss)		19,004			-68,526		-16,836		-108,404
Other income		4,046			3,914		9,564		7,353
Loss before income taxes		23,050			-64,612		-7,272		-101,051
Income tax expense (benefit)		1,780			-42,338		-8,804		-62,209
Net income (loss) from operations		21,270			-22,274		1,532		-38,842
Basic and diluted deficit per share		**			**		**		**
Weighted average number of shares		12,231,797			12,231,797		12,231,797		12,231,797
** Less than $0.01

Seeaccompanyingnotestoconsolidatedfinancialstatements.

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METWOOD, INC.AND SUBSIDIARY

CONSOLIDATEDSTATEMENTS OFCASHFLOWS

(UNAUDITED)

	Six Months Ended
	December 31,
	2011		2010
OPERATIONS
Net income (loss)
Adjustments to reconcile net income to net cash from operating activities	$	1,532		-38,842
Depreciation
Provision for (reversal of) deferred income taxes(increase) decrease in operating assets:		46,598		44,683
Accounts receivable		-8,804		-8,325
Inventory		11,751		135,449
Recoverable income taxes		-98,979		-64,325
Other operating assets		42,606		-53,884
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		-25,203		-133,147
Net cash used for operating activities		-25,029		-118,942
INVESTING
Capital expenditures		15,782		-90,206
Net cash provided by (used for) investing activities		15,782		-90,206
FINANCING
Decrease in note payable		-29,888		—
Decrease in borrowings from related party		-12,054		-27,725
Net cash used for financing activities		-41,942		-27,725
Net decrease in cash		-51,189		-236,873
Cash, beginning of the year		180,448		403,512
Cash, end of the period		129,259		166,639

Seeaccompanyingnotestoconsolidatedfinancialstatements.

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METWOOD, INC.AND SUBSIDIARY

NOTES TOCONSOLIDATEDFINANCIAL STATEMENTS

DECEMBER 31,2011

(UNAUDITED)

NOTE 1-ORGANIZATION ANDOPERATIONS

Metwood, Inc.("Metwood") wasorganizedunderthelawsoftheCommonwealthofVirginiaon April7,1993. On June30,2000,Metwood enteredintoanAgreementandPlanofReorganization in which the majorityof itsoutstanding common stock was acquiredby apubliclyheldNevada shell coporation. The acquisition was a tax-free exchange forfederal and state income taxpurposes andwas accounted for as a reverse merger in accordance with Accounting Principles Board ("APB") OpinionNo.16. Upon acquisition, thename of the shell corporation was changed to Metwood, Inc., and Metwood, Inc., the Virginia corporation,became a whollyowned subsidiaryof Metwood, Inc., the Nevada corporation. The publicly traded shell corporation hadnothad a materialoperating history forseveralyearspriortothemerger.

Effective January 1, 2002, Metwood acquired certain assetsofProvidence Engineering, PC ("Providence"), a professional engineering firm with customers in the sameproximity as Metwood. The total purchase price of$350,000waspaidwith$60,000 in cash and with290,000 sharesof theCompany's common stock to the two Providence shareholders. These shareswere valued at the closing active quoted market price of thestock atthe effectivedate of thepurchase,which was$1.00per share. One of the shareholders of Providencewas also anofficer and existing shareholderofMetwood prior to the acquisition. The transaction was accounted for under thepurchase methodofaccounting. Liabilitiesassumedatthedateofacquisitionwereidentified,paid andaddedtogoodwill.

The consolidated company ("the Company") provides construction-relatedproducts and engineering services to residentialcustomers and contractors, commercial contractors, developers and retail enterprises, primarilyin southwesternVirginia.

NOTE 2-SUMMARYOFSIGNIFICANTACCOUNTINGPRACTICES

Basis ofPresentation - The financialstatements include theaccounts of Metwood, Inc.and itswhlly owned subsidiary, Providence Engineering, PC, prepared in accordance with accountingprinciplesgenerally accepted in the United States of America and pursuant to the rules and regulationsof theSecurities and Exchange Commission. All significant intercompany balances and transactionshavebeen eliminated.

In the opinion of management, theunaudited condensed consolidated financial statements contain all

the adjustments necessary in order to make the financial statements not misleading. The resultsfor the periodendedDecember31,2011arenotnecessarily indicativeoftheresultstobe expectedfor the entirefiscalyearendingJune30,2012.

Fair ValueofFinancialInstruments - For certain of the Company's financial instruments, none of which are held for trading, including cash, accounts receivable, accounts payable and accruedexpenses, thecarryingamounts approximatefairvalueduetotheirshort maturities.

Management's UseofEstimates - The preparation of consolidated financial statements in conformity

with accountingprinciplesgenerallyaccepted intheUnitedStatesofAmericarequires managementto make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the dateof consolidated financial statements, and the reportedamounts of revenues and expensesduring thereportingperiod. Actualresults coulddifferfromthoseestimates.

Accounts Receivable -We grantcreditinthe formofunsecured accounts receivabletoour customersbased on an evaluation of their financial condition. We performongoing credit evaluationsofourcustomers. The estimate of the allowance fordoubtful accounts, which is chargedoff tobaddebt expense, is based on management’s assessment of current economic conditions and historicalcollection experience with each customer. At December 31,2011, the allowance fordoubtfulaccountswas$5,000. Specific customer receivables are consideredpast duewhen they areoutstanding beyond their contractual terms and are charged off to bad debt expensewhendetermined uncollectible. For the three and six months ended December 31, 2011, the amountofbaddebts charged off was $-0- and$1,697,respectively. For the three and six months ended December31, 2010,

baddebtschargedoffwas$1,587and$35,744,respectively.

Inventory- Inventory, consisting of metal and wood raw materials, is located on our premises and is stated atthelowerofcostormarketusing thefirst-in,first-out method.

Property andEquipment - Property and equipment arerecorded at cost and include expendituresfor improvements when they substantially increase theproductive lives of existing assets. Maintenance and repair costs are expensed tooperations 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 removedfrom theaccounts. Thedifferencebetweenundepreciated costandtheproceeds isrecordedasagain orloss.

Goodwill- We account for goodwill and intangiblesunder SFASNo. 142, “Goodwill andOther Intangible Assets.”Assuch,goodwillisnotamortized,butissubjecttoannualimpairment reviews,or more frequentreviews ifevents orcircumstances indicate theremay beanimpairment.We performedour required annual goodwill impairment test as of June30,2011usingdiscounted cashflow estimates andfound thattherewasnoimpairmentofgoodwill.

Impairment ofLong-livedAssets - We evaluate our long-lived assets for indications of possible impairment wheneverevents orchanges incircumstances indicatethatthecarrying amountofanasset may not be recoverable. Recoverability is measured bycomparing the carrying amounts to the futurenet undiscounted cash flows which the assets are expected to generate. Should an impairment exist,the impairmentwouldbemeasuredbythe amount bywhichthe carryingamountofthe assetsexceeds the projecteddiscounted future cash flows arising from the asset. Therehavebeenno such impairments oflong-livedassetsthroughDecember31,2011.

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Patents- We have been assigned several key product patents developed bycertain Companyofficers. No value has been recorded in our financial statementsbecause the fair valueof thepatentswasnot determinable withinreasonablelimitsatthedateofassignment.

Revenue Recognition -Revenueisrecognizedwhengoodsareshippedandearnedorwhen servicesareperformed,provided collectionoftheresultingreceivableisprobable. Ifanymaterialcontingenciesare present, revenue recognition is delayed until all material contingencies are eliminated. Further,no revenue isrecognizedunlesscollectionoftheapplicableconsiderationisprobable.

Income Taxes - Income taxes are accounted for in accordancewith SFASNo. 109,"Accountingfor Income Taxes." A deferred tax asset or liability is recorded for all temporary differencesbetween financial and tax reporting and for net operating loss carryforwards,where applicable. Deferred taxassets arereducedby avaluation allowancewhen, in the opinionof management, itis morelikely thannot that some portion or the entiredeferred tax assetwillnotberealized. Deferred tax assets andliabilities areadjustedfortheeffectofchangesintaxlawsand ratesonthedateofenactment.

Research andDevelopment - Weperform research anddevelopment on our metal/woodproducts,newproduct lines, andnewpatents. Costs, if any, are expensed as they are incurred. Research anddevelopment costs (refunded amounts) for the three months endedDecember31,2011 and2010 were($3,513) and $3,914, respectively. For the six months ended December 31,2011 and2010,research anddevelopmentcostswere$-0-and$5,700, respectively.

Earnings PerCommonShare - Basic earnings per share amounts arebasedon theweighted average shares of common stockoutstanding. If applicable,diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such asoptions,warrants and convertible securities, unless the effect is to reduce a lossor increase earningsper share. Thispresentation has been adopted for thequarterspresented. There were no adjustmentsrequired tonetincome for the yearspresentedinthecomputation ofdilutedearningspershare.

Recent AccountingPronouncements - In May2011, the Financial AccountingStandards Board

(“FASB”) issued an Accounting StandardsUpdate(“ASU”)No.2011-04 amending Topic820 that

substantially converged the requirements for fair value measurement and disclosure between theFASB and the International Accounting Standards Board(“IASB”).This ASU is largely consistentwith existing fair value measurement principles underU.S.GAAP. This ASU is effective for the Company in its quarter beginning January1, 2012 and is not expected tohave a material impacton theCompany’s financialstatements.

In June2011, the FASB issued ASU2011-05 amending Topic220 that addressed thepresentationof comprehensive income in the financial statements. This accounting update allows an entity theoptionto present the total of comprehensive income, the componentsofnet income and the componentsof other comprehensiveincome eitherinasinglecontinuousstatementofcomprehensiveincomeorintwoseparate but consecutive statements. In addition, this ASU eliminates theoption topresent thecomponents of other comprehensiveincome aspart ofthe statementof changes in stockholders’ equity and doesnotchangethe itemsthatmustbereportedinothercomprehensive incomeorwhen anitemofother comprehensive income must be reclassified to net income. This ASU is effective for theCompany in its quarter beginningJanuary1, 2012 and isnotexpected to haveamaterialimpactonthe Company’s financialstatementsotherthanmodifyingthepresentationofcomprehensive income.

In September 2011, the FASB issued ASU 2011-08 amending Topic350 that allows an entity tofirst assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwillimpairment test. Under thisnew ASU, if a Company chooses the qualitative method, an entitywouldnotbe required to calculate the fair valueof a reporting unit unless the entity determines, basedon aqualitativeassessment, that it is more likely than not that its fair value is less than its carrying amount. ThisASU is effectiveforannual and interimimpairmenttestsperformed for fiscalyearsbeginning afterDecember15,2011. Early adoption is permitted. The Company does not expect this ASU to have amaterial impacton itsfinancial statements.

Management doesnotbelieve that anyother recently issued accounting pronouncements wouldhave a material effectontheaccompanyingconsolidatedfinancialstatements.

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NOTE3-EARNINGSPERSHARE

Net income (loss) and earningsper share for the three and six months endedDecember31,2011 and2010 areasfollows:

	For the Three Months Ended					For the Six Months Ended
	December 31,					December 31,
		2011		2010		2011		2010
Net income (loss)		$	21,270		-22,274	$	1,532		-38,842
Earnings per share - basic and fully diluted			**		**		**		**
Weighted average number of shares			12,231,797		12,231,797		12,231,797		12,231,797
**Less than $0.01

NOTE 4-SUPPLEMENTALCASHFLOWINFORMATION

Supplemental disclosures of cash flow information for the three and six months endedDecember31,2011 and 2010aresummarizedasfollows:

	For the Three Months Ended		For the Six Months Ended
	December 31,		December 31,
	2011	2010	2011	2010
Cash paid for:
Income taxes	$ -	$ -	$ -	$ -
Interest	$ -	$ -	$110	$ -

NOTE5- RELATED-PARTYTRANSACTIONS

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 December31,2011 and2010. ForthethreemonthsendedDecember31,2011 and2010, wehadsalesof$3,234 and $90,482, respectively, to the companyreferred to above. For the six months ended December31, 2011 and2010, wehadsalesof$12,054and$98,922tothecompany. AsofDecember31,2011 and2010, therelatedreceivablewas$-0-and$-0-,respectively. SeealsoNote7.

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NOTE 6-SEGMENTINFORMATION

We operate in two principal business segments: (1) construction-related products and(2) engineering services. Performance of each segment is evaluated based on profitor lossfromoperationsbeforeincome taxes. These reportable segments are strategic businessunits that offerdifferentproducts and services. Summarized revenue and expense information bysegmentfor the three andsix months ended December31, 2011and2010,asexcerptedfrominternalmanagementreports, isasfollows:

	For the Three Months Ended				For the Six Months Ended
	December 31,				December 31,
Construction:		2011		2010		2011		2010
Sales	$	556,441	$	522,927	$	1,061,773	$	1,203,718
Intersegment expenses		—		-5,165		-200		-10,670
Cost of sales		-343,251		-283,757		-632,691		-731,553
Other expenses		-197,334		-251,124		-424,438		-501,888
Segment income (loss)	$	15,856	$	(17,119)	$	4,444	$	(40,393)
Engineering:
Sales	$	12,500	$	32,725	$	14,856	$	90,354
Intersegment revenues		—		5,165		200		10,670
Cost of sales		3,266		-42,726		-18,343		-81,737
Other income (expenses)		-10,352		-6,919		375		-24,336
Segment income (loss)	$	5,414	$	(11,755)	$	(2,912)	$	(5,049)

NOTE 8-OPERATINGLEASECOMMITMENTS

On January 3,2005, the Company entered into a ten-year commercial operating leasewith a company related through commonownership. The lease covers various buildings and propertywhichhouseour manufacturing plant,executiveofficesand otherbuildingswitha current monthly rentalof$6,800. Thelease expires on December31,2014. For the three months ended December31,2011 and2010,we recognized rental expense for these spacesof$20,000 and$19,800,respectively. For the six monthsended December31,2011and2010, werecognizedrentalexpenseof$39,800and$39,600,

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ITEM2-MANAGEMENT'SDISCUSSIONANDANALYSIS

With the exception of historical facts stated herein, the matters discussed in this reportare"forward-looking" statements that involve risks and uncertainties that could causeactual results todiffer materially fromprojected results. Such"forward-looking" statements include,butarenotnecessarily limited to, statements regarding anticipated levels of future revenues and earnings fromoperationsofthe Company. Readers of this report are cautionednot toputundue relianceon"forward-looking"statements, whicharebytheirnature,uncertainasreliableindicatorsoffutureperformance.

Description ofBusiness

Background

Asdiscussed in detail in Note 1, we were incorporatedunder the lawsof the Commonwealthof Virginia on April7, 1993and, onJune30,2000, entered into areverse mergerinwhichitbecamethe 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 accountedforunderthepurchase methodofaccounting.

Metwood

Residential builders are aware of the superiorityof 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 generallyincreased each year since1980, manyresidential builders have been hesitant toutilize steeldue to the need to retrain framers and subcontractors who are accustomed to a"stick-built" construction method where components are laid out and assembledwithnails and screws. The Company's founders, Robert ("Mike") Callahan and Ronald Shiflett, saw the need to combinethe strength anddurabilityof steelwiththeconvenienceandfamiliarityofwood andwood fasteners.

Metwood manufactures light-gage steel construction materials, usually combined with woodorwood fasteners, for use in residential and commercial applications in place of more conventionalwood products, which are inferior in termsof strength anddurability. The steel and steel/woodproducts allow structures to be built with increased load strength and structural integrity and fewer support beams or support configurations, thereby allowing for structuraldesigns that arenotpossiblewith wood-onlyproducts.

Metwood'sprimaryproductsandservicesare:

·TUFFBEAM-internallyreinforcedcold-formedsteelbeam

·TUFFJOIST-internally reinforcedcold-formedsteeljoist

·TNTFLOORSYSTEM-combinationsofTUFFBEAM,NUJOISTandTUFFJOIST

are utilizedtomakeupacomplete floorsystem

·TUFFDECK-concretedecksystems

·RIMBEAM-internally reinforcedCFSloaddistributionmember

·NUJOIST-Metwoodisanationaldistributorfor NUJOISTfloorjoistsystembyNuconsteel

·NUFRAME3.5&5.5-afullyproprietarypanelizedloadbearing andnon-load bearing

CFS wallframingsolution

·NUTRUSS2.0-aproprietaryroofandfloortrusssystem

·NUTRUSS-CFStrusssystem

·Accel-E-Metwoodisadistributor ofthesesteelthermal-efficientpanels

·Trimmablesquarecolumns

·Joistreinforcers

·Engineering,designand custombuildingservices

 Providence

Providence is extensively involved in ongoing product research anddevelopmentfor Metwood. Additionally, Providence offers its customers civil engineering capabilities which include rezoning and specialuse submissions; erosion and sediment control and storm-water managementdesign;residential, commercial, and religious facility site development design; and utility design, includingwater, sewer and onsite treatment systems. Providence's staff is familiar with construction practicesand hasbeenactivelyinvolvedinconstructionadministrationand inspectiononmultipleprojects.

Providence also performs a varietyof structural design and analysis work, successfullyproviding 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 anchorsandrestraints.

Providence has designed numerous foundationsfor a varietyof structures. Its foundationdesign expertise includes metalbuilding foundations, traditional building construction foundations, a typical foundations for residential structures, tower foundations, and signfoundationsfor a varietyofuses

and applications.

Providence has also designed and drafted full building plansfor several applications. When subcontracting with local professional firms, Providence has the ability to providebasic architectural, mechanical, electrical,anddetailedcivilandstructuraldesignservicesforthesefacilities.

Providencehas revieweddesignsby manufacturers for a varietyof structures and structuralcomponents, including retaining walls, radio towers, tower foundations, signfoundations, timbertrusses, light-gage steel trusses, and light-gage steel beams.This service enables clients to takegenericdesignsandhavethem certifiedandapprovedforconstructioninthedesiredlocality.

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ITEM2-MANAGEMENT'SDISCUSSIONANDANALYSIS Con’t

Distribution MethodsofProducts andServices

Our sales areprimarily wholesale, directly to lumber yards, home improvement stores, hardwarestores, and plumbing and electrical suppliers inVirginia and NorthCarolina. Metwood reliesprimarily on itsownsalesforceto generatesales;additionally,however,theCompanyhasdistributors in Virginia, New York, Oklahoma, Arizona and Colorado and alsoutilizes the salespeopleofwholesale yards stocking the Company's products as an additional salesforce. We are an authorizedvendor for Lowe's, Home Depot, 84Lumber, StockBuilding Supply, The ContractorYard, and many more. Wehaveseveralstockingdealers ofoursquarecolumns andreinforcingproducts. Wewillselldirectly to contractors in areas wherewedonothave adealer,butwithournationaldealer relationships, we typicallyhave a dealer touse. We are indiscussions withnational engineered I-joist manufacturers who are interested in marketing the Company'sproducts and expect to announce affiliations with these companies in the near future. Metwood intends to continue expanding the wholesale marketing of itsunique products toretailers, toincrease dealersales, and to license the Company's technology and products to increase itsdistribution outside ofVirginia,North Carolina and theSouth.

In October 2010, Metwood signed aletter of intent with Nuconsteel("Nucon"), a Nucor company, to teamwith 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) toNucon to sell and manufacture all current andfutureproducts. Nucon will pay us a royalty for all products manufacturedbyNucon and theirsub-licensees andwill sell us Nucon's complete lineofNUJOISTproduct atthe mostfavorable pricing. Nucon will also integrate Metwood into the Nucon FabricationNetwork. Nucon willprovideuswithcertainequipmentinexchangefortheexclusiverightsgrantedintheagreement. Theagreementwillbeineffect fortwoyearswithrenewalsforadditionalperiodsof one year.

Status ofPubliclyAnnouncedNewProductsorServices

Metwoodiscurrentlynegotiatingwith Syntheon,Inc.to become an exclusive OEMfor theirAccel-Epanelsand certain other construction products in Virginia, West Virginia, Maryland, North Carolina and the Districtof Columbia (the"Territory") and as a non-exclusive OEM for Syntheon productsforuse inresidential, single familyconstructionbothinside andoutside oftheTerritory.

Seasonality ofMarket

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 monthsof March and October. Accordingly, our sales aregreater in our fourth andfirstfiscalquarters. Webuild aninventoryofour products throughout thewinter and spring to supportour sales season. Due to the seasonalityofour localmarket, we are continuing our efforts to expand into markets that arenot so seasonally impacted. We haveshipped projects to Florida, Georgia, South Carolina, Arizona, Washington, and more. These markets have someseasonality, butincreasedexposure inthesemarketswillhelpmaintainstronger salesyearround.

Competition

Nationally, there are over one hundred manufacturers of the typesof productsproducedby the Company.However, the majority of these manufacturers are using wood-onlyproductsorproductswithout metalreinforcement. Metwood has identified only one other manufacturer in the United States that manufactures acold-formed steelbeam. However, we haveoften found thatourproducts are theonlyones that will work withinmanycustomers'designspecs.

Sources andAvailabilityofRawMaterialsandtheNamesof PrincipalSuppliers

All of the raw materials we use are readily available on the market fromnumerous suppliers. The cold-formed steel usedbythe Company is supplied primarilyby Nuconsteel, Clark Western, and Vulcraft. Our main source of lumber is BlueLinx. Nucor Bar Mill provides the majorityofourrebar. Because of the numberof suppliersavailable to us, our decisions inpurchasing materials are dictated primarily by price and secondarily by availability. Wedonotanticipatea lack of supplyto affect our production;however, a shortagemight causeus to passonhighermaterialspricestoourcustomers.

Dependence onOneoraFewMajorCustomers

Forthethreeandsix monthsended December31,2011 and 2010,salestocertaincustomers amountedto more than 5%of total sales. Those customers and the related percent of sales greater than5%were as follows:

	For the Three Months Ended			For the Six Months Ended
		December 31,		December 31,
		2011	2010	2011	2010
84 Lumber		11%	6%	9%	6%
Craftman Construction		-	-	-	6%
Davenport Development		-	-	-	7%
House Vestors, LLC		7%
Probuild Co., LLC		-	6%	-	-
Valley Building Supply		6%	-	-	-

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ITEM2-MANAGEMENT'SDISCUSSIONANDANALYSIS Con’t

Patents

TheCompanyhasnineU.S.Patents:

U.S. PatentNos. 5,519,977 and 7,347,031,"Joist Reinforcing Bracket," abracket that reinforces wooden joists with a hole for thepassageof autility conduit. The Company refers to this as its floor

joist patchkit.

U.S. Patent No. 5,625,997,"Composite Beam," a compositebeam that includes an elongated metal shellandapierceableinsertforreceivingnails,screwsorother penetrating fasteners.

U.S. Patent No. 5,832,691,"Composite Beam," a compositebeam that includes an elongated metal shell and a pierceable insert for receiving nails, screws orotherpenetratingfasteners. This is a

continuation-in-partofU.S.PatentNo.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 toform ahollowbox, which

permits the girder tobe secured within a building structure with conventionalfasteners such asnails,

screwsandstaples.

U.S.PatentNos. D472,791S,D472,792S,D472,793S, and D477,210S, all modificationsof

Metwood's ReinforcingBracket,whichwillbeusedforrepairsofwoodI-joists.

Need forGovernmentApprovalofPrincipal Products

Our products must either be sold with an engineer's seal or applicablebuilding code approval. The

Company's chiefengineerhas obtainedprofessionallicensureinseveralstates,whichpermits products not building code approved tobe sold andusedwithhis seal. We expect his licensure in a growing number of states to greatly assist in the uniform acceptability of ourproducts aswe expand tonew markets. Currently, we are seeking International Code Council ("ICC") code approvalonourjoist reinforcers andbeams. Once thatapprovalisobtained,ourproductscanbeused in allfifty states and will eliminate theneed for an engineer's seal on individual products. Todate, the Company's 2x10floor joist reinforcer has received both Bureau Officials Code Association approval(2001) and ICC approval(2004).

TimeSpentDuringtheLastTwoFiscalYearsonResearchandDevelopment Activities

Approximately fifteenpercentofourtimeandresources hasbeenspentduring thelasttwofiscal years researching and developing our metal/wood products,newproduct lines, andnewpatents. We haveperformed several tests with NTA, Inc. to achieve a cold compliance reportonour TUFFBEAM and TUFFJOIST product lines.

Costs andEffectsofCompliancewithEnvironmental Laws

We do not incur any costs to comply with environmental laws. We are an environmentally friendly

business inthatourproducts arefabricatedfromrecycledsteel.

Number ofTotalEmployeesandNumberofFull-TimeEmployees

TheCompanyhadeighteenemployeesatDecember31,2011,allofwhomwerefulltime.

Results ofOperations

NetIncome

We had net income of $21,270 for the three months endedDecember31,2011, versus anet lossof $22,274 for the three months endedDecember31,2010. Construction sales increased6% comparing 2011 to 2010; as a percentage of construction sales, costof goods soldwas62% and54% comparing2011 to2010. Engineering sales decreased62% comparing2011 to2010.As apercentageof engineering sales, the cost of engineering sales decreased from130% to26% comparing2011 to2010. Administrativeexpenses decreased32%comparingthethreemonthsendedDecember 31,2011to the same period in2010. This decrease was attributable to lower advertising costs, payroll and otherexpenses.

For thesixmonths endedDecember31, 2011 and2010,wewentfromanetlossof$38,842 tonetincome of$1,532. Grosssalesdeclined17%between thetwo periods,but costof salesdecreased20%comparing 2011 and 2010, and administrative expensesdecreased 25% for the six months endedDecember31,2011comparedto2010.Thenetresultwasabottomlineimprovementof104%comparingthetwoperiods.

Management is currently discussing the possibility of taking the Company private as a meansof raising capital, improving thebottom line, and removing the highcompliance costs incurred as apubliccompany. The presenteconomic environmentmaymakeprivatization thebestoption astheCompany goes forward.

Sales

Revenues were $568,941 for the three months endedDecember31,2011 compared to$555,652for the same period in 2010, an increaseof2%. For the six-monthperiods ended December31,2011 and2010, sales were$1,076,629 and $1,294,072, respectively, adecreaseof17%. The sales increase for the three-month period in 2011 compared to 2010 were not significant enough toreflect anupturn in theoverall economy; however, the Company remains optimistic that it may portend an improvingbuilding industry . Although wehave soldproduct in over twenty-five states since July 2007,our local marketnonetheless remainsdown more than30%. The potential for increased sales volumeaswe go forward isenhancedbythefactthatwe arenowanauthorizedfabricatorfortheDynatrusslight-gaugesteel trusssystem,begunin March2008.

Expenses

Total administrative expenses were $203,420 for the three months endedDecember31,2011, versus $297,695 for the three months endedDecember31,2010, adecreaseof$94,275. For the six months ended December31, 2011, administrative expenses were$442,431 compared to$589,186 for the six months endedDecember31, 2010.Thebiggestdecrease occurredinadvertisingandpayrollexpenses.

Liquidity andCapitalReserves

On December 31, 2011,wehad cashof$129,259 andworking capitalof$1,268,636. Net cashused in operating activities was $25,029 for the six months ended December 31,2011 compared tonet cashfrom operating activities of$118,942forthe six months endedDecember31,2010. Theincreasedprovisionof cash from operating activities in the current year resulted primarilyfrom the decrease in accounts payable and recoverableincometaxes.

Cash used in investing activities was $15,782 for the six months ended December31,2011, compared to cashused of$90,206 during the sameperiod in theprior year. Cash flowsprovided from investingactivities ($36,383) for the six months ended December31,2011 werefrom scrapped computers andequipment and a vehicle sale; cash flows used for investing activities were for computers andperipherals ($10,020), vehicles($7,461),leaseholdimprovements($1,196)andsoftware($1,924).

Cash used in financing activities was $41,942 for the six months ended December31,2011 compared to cashusedof $27,725fortheperiod endedDecember31,2010. Thenetcashusedin2011wasto payoff a vehiclenoteand topaydownborrowings from arelated party.

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ITEM4-CONTROLSANDPROCEDURES

(a) Evaluationofdisclosurecontrolsandprocedures.

Our management, with the participationof our chief executive officer and chief financial officer,

evaluated the effectiveness of our disclosure controls and procedurespursuant to Rule13a-15under the Securities Exchange Act of 1934 as of the end of theperiod coveredby thisQuarterly Reporton Form10-Q.Indesigning and evaluating thedisclosure controlsand procedures, managementrecognizes that any controls and procedures,no matter how welldesigned andoperated, canprovideonly reasonable assurance of achieving the desired controlobjectives. In addition, the designof disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply itsjudgment in evaluating the benefits of possible controls and procedures relativetotheircosts.

Basedonour evaluation,our chief executive officer and chief financialofficer concluded thatour

disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required todisclose inreports thatwefileor

submit under the Exchange Act is recorded, processed, summarized and reportedwithin the time

periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management,includingourchief executiveofficer andchief financial officer,asappropriate, toallowtimelydecisionsregardingrequireddisclosure.

(b) Changesininternalcontroloverfinancial 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 andwithnewproductofferings,

we continue to create new processes and controls as well as improveour existing environment to

increase efficiencies. Improvements may include such activities as implementing new, more efficient

systems, consolidatingactivities,andmigratingprocesses.

There wereno changes in our internalcontrol over financialreporting thatoccurredduring theperiod

covered by this QuarterlyReporton Form10-Q thathave materiallyaffected,or are reasonably

likely tomateriallyaffect,ourinternalcontroloverfinancialreporting.

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PART II-OTHERINFORMATION

ITEM6-EXHIBITSANDREPORTSONFORM8-K

(a) Exhibits

See indextoexhibits.

(b) Reports onForm8-K

There werenoreportsonForm8-KfiledduringthequarterendedDecember 31,2011.

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SIGNATURES

In accordance with the requirements of the Securities ExchangeActof1934, theregistranthasduly

causedthisreporttobesignedonitsbehalfbytheundersigned, thereuntodulyauthorized.

Date: February 6, 2012/s/ Robert M.Callahan

Robert M.CallahanChief ExecutiveOfficer

Date: February 6, 2012/s/ShawnA.Callahan

Shawn A.Callahan

Chief FinancialOfficer

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INDEX TOEXHIBITS

NUMBER	DESCRIPTION OF EXHIBIT
3 (i) *	ArticlesofIncorporation
3(ii)**	By-Laws
31.1	Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 asAdoptedPursuant to Section302of the Sarbanes- Oxley Actof2002
31.2	Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 asAdoptedPursuant to Section302of the Sarbanes-Oxley Actof2002
32	Certifications Pursuant to Section 906of the Sarbanes-OxleyActof2002 (18U.S.C. 1350)

*Incorporated byreferenceonForm8-K,filedFebruary16,2000

**Incorporated byreferenceon Form8-K,filedFebruary16,2000