UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM10-K
[X] ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHE SECURITIESEXCHANGEACTOF1934
For thefiscalyearendedJune30,2014
[ ]TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGE ACTOF
1934
For thetransitionperiodfrom________to________
Commission filenumber000-05391
METWOOD, INC.
(Exact nameofregistrantasspecifiedinitscharter)
NEVADA83-0210365
(State orotherjurisdiction (IRS Employer
of incorporationororganization)Identification No.)
819 NaffRoad,BoonesMill,VA24065
(Address ofprincipalexecutiveoffices)
(540) 334-4294
(Registrant's telephonenumber,includingareacode)
Securities registeredpursuanttoSection12(b)of theAct:
None
Securities registeredpursuanttoSection12(g)of theAct:
$0.001 ParValueCommonVotingStock
(TitleofClass)
Indicate bycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.Yes ☐No ☒
Indicate bycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13 orSection15(d)of the Act.Yes ☐No☒
Indicate bycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13 or15(d) ofthe Securities ExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrant was required tofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirements for thepast90 days. Yes ☒No☐
Indicate bycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporatewebsite, if any, everyInteractive DataFilerequiredtobesubmittedandpostedpursuanttoRule405of RegulationS-T (§232.405 ofthischapter) duringthepreceding 12months(orforsuchshorterperiodthattheregistrant wasrequired to submitandpost suchfiles). Yes☒No ☐
Indicate bycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationS-K
(§229.405 of this chapter) isnot contained herein,and willnotbe contained,tothebestofregistrant'sknowledge,indefinitiveproxyor information statements incorporatedbyreferenceinPartIIIofthisForm10-KoranyamendmenttothisForm10-K. Yes ☒No☐
Indicate bycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler, or asmallerreportingcompany.Seethedefinitionsof“largeacceleratedfiler,” “acceleratedfiler,”anda"smaller reporting company” inRule12b-2oftheExchangeAct.
Large acceleratedfilerAccelerated filer ☐Non-accelerated filer☐(Donotcheckifasmallerreportingcompany)Smallerreportingcompany☒
Indicate bycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheAct). Yes ☐No ☒
As ofSeptember 29, 2014,theaggregatemarketvalueofthe5,720,015commonsharesoutstanding (basedupon theaverageofthebidprice($.5)reported ontheOTCQBMarket)heldbynon-affiliates was$2,860,000.
As ofSeptember 29, 2014,thenumberofsharesoutstandingoftheregistrant'scommonstock,$0.001parvalue (the onlyclass ofvotingstock),was15,221,647shares.
ii
METWOOD, INC.ANDSUBSIDIARY
FORM10-K
TABLEOFCONTENTS
| | ITEM | | | PART I | | | PAGE | |
| | | | | | | | | |
| | Item 1 | | | Description of Business | | | 2 | |
| | Item 1A | | | Risk Factors | | | 4 | |
| | Item 2 | | | Properties | | | 5 | |
| | Item 3 | | | Legal Proceedings | | | 5 | |
| | | | | | | | | |
| | | | | PART II | | | | |
| | Item 5 | | | Market for Registrant’s Common Equity, Related Stockholder Matters and Issurer Purchases of Equity Securities | | | 6 | |
| | Item 7 | | | Management’s Discussion and Analysis or Plan of Operation | | | 8 | |
| | Item 8 | | | Financial Statements and Supplementary Data | | | 14 | |
| | Item 9 | | | Changes inandDisagreementswithAccountantsonAccounting and Financial Disclosure. | | | 14 | |
| | Item 9A | | | Controls and Procedures | | | 16 | |
| | Item 9B | | | Other Information | | | 16 | |
| | | | | | | | | |
| | | | | PART III | | | | |
| | Item 10 | | | Directors, Executive Officers and Corporate Governance | | | 17 | |
| | Item 11 | | | Executive Compensation | | | 18 | |
| | Item 12 | | | Security OwnershipofCertainBeneficialOwners andManagement and RelatedStockholder Matters | | | 19 | |
| | Item 13 | | | Certain Relationships andRelatedTransactions,andDirector Independence | | | 20 | |
| | Item 14 | | | Principal Accounting Fees and Services | | | | |
| | | | | | | | | |
| | | | | PART IV | | | | |
| | Item 15 | | | Exhibits and Financial Statement Schedules | | | 21 | |
| | | | | | | | | |
| | | | | Signatures | | | 22 | |
iii
SPECIAL NOTEREGARDINGFORWARD-LOOKINGSTATEMENTS
This AnnualReportonForm10-Kcontainscertainforward-looking statementswithinthemeaning of thePrivateSecuritiesLitigationReformActof1995withrespect tothefinancial condition,results of operations,business strategies, operating efficiencies orsynergies, competitivepositions,growth opportunities for existing products, andplansandobjectivesofmanagement. Statements thatare not historical in nature and which include such wordsas "anticipate,""estimate,""should,""expect," believe,""intend," and similar expressions are intended to identify forward-looking statements for the purposeof the safeharborprovidedbySection21Eof the Exchange Actand
Section27AoftheSecurities Act.
PART I
Item1.DescriptionofBusiness
Business Development
The companywasincorporatedunderthelawsofthe StateofWyomingonJune19,1969. Following an involuntarydissolutionforfailure tofileanannualreport,thecompany wasreinstated asa Wyoming corporation onOctober14,1999. OnJanuary 28, 2000, the company, through a majority shareholder vote, changedits domicile to Nevada through a merger with EMC Energies, Inc., a Nevada corporation. The Plan of Merger provided for thedissenting shareholders to bepaid the amount, ifany,towhichtheywouldbeentitledundertheWyomingCorporationStatuteswith respect to the rights of dissenting shareholders. The company also changed its par value to $.001 and the amountof authorizedcommonstockto100,000,000shares.
Prior to1990,thecompanywasengaged inthebusinessofexploringforandproducingoilandgasin the RockyMountain andmid-continentalareasof the United States.Thecompany liquidated substantially allofits assetsin 1990and was dormantuntilJune30,2000,when it acquired, in a stock-for-stock, tax-free exchange,all of the outstanding common stockof aprivatelyheld Virginia corporation, Metwood, Inc. ("Metwood"),which was incorporated in1993. See Form 8-K and attached exhibitsfiledAugust11,2000. Metwoodhas been inthemetalandmetal/woodconstruction materials manufacturing business since1992. Following the acquisition, the company approved a name changefromEMCEnergies, Inc. toMetwood, Inc.
Effective January1,2002,MetwoodacquiredcertainassetsofProvidenceEngineering, PC ("Providence"), aprofessionalengineeringfirmwithcustomers inthesameproximity as Metwood, for $350,000 and accounted for the transactionunder thepurchase methodof accounting. Asof June 30, 2012, Providence was no longer anoperating segmentof theCompany. A decision was made that the majority of the engineering portion of the business couldbestbehandled through a strategic partnership with an outside engineering firm. We believe that continuing research anddevelopment efforts will soon enable us to meet code requirements for ourproducts andwill eliminate the needfor individual engineering seals.
Metwood ("theCompany,""We,""Us,""Our")providesconstruction-relatedproductsand engineering services toresidential customersandcontractors, commercialcontractors,developersandretail enterprises, primarily insouthwesternVirginia.
Principal ProductsorServicesandMarkets
Residential buildersareawareofthesuperiorityofsteelframing vs.woodframing,insofar assteelframing islighter;stronger; termite,pest,rot andfireresistant;anddimensionally morestable in withstanding inducedloads. Although use of steel framing in residentialconstructionhas generally increased each yearsince 1980, many residential builders have beenhesitant toutilize steeldue to the need to retrain framers and subcontractors who are accustomed toa "stick-built" construction method where components are laid out and assembledwithnails and screws. The Company's founders saw the need tocombine the strengthand durability of steel withthe convenience andfamiliarityof wood and wood fasteners.
Metwood manufactureslight-gagesteelconstructionmaterials,usuallycombinedwithwoodorwoodfasteners, foruse inresidential andcommercialapplicationsinplaceof more conventional wood products, which are inferior in terms of strength anddurability. The steel and steel/wood products allow structures to be built with increased load strength and structural integrity andfewer supportbeamsor support configurations, thereby allowing for structuraldesigns that arenot possible with wood-only products.
Metwood's primaryproductsare:
·TUFFBEAM-internallyreinforced cold-formedsteelbeam
·TUFFJOIST-cold-formedsteeljointsystem
·TUFFJOIST+-internallyreinforcedcold-formedsteeljoist
·TUFFFLOORSYSTEM-combinations ofTUFFBEAM,NUJOISTandTUFFJOIST
are utilized tomake upacompletefloor system
·TUFFDECK-concretedecksystems
·RIMBEAM-internallyreinforced CFSloaddistributionmember
·TUFFFRAME3.5&5.5-afullyproprietarypanelizedloadbearing andnon-loadbearing
CFS wallframingsolution
·TUFFTRUSS2.0-aproprietaryroofand floortrusssystem
·Aegis-MetwoodisadistributorofAegisMetalFraming'scold-formed steeltrusses
SURE-SPAN™
· Trimmablesquarecolumns
· Joistreinforcers
· Engineering,designandcustombuilding services
Metwood's servicesincludeprovidingitscustomers,throughastrategicpartnershipwithanoutside engineering firm,civil engineering capabilitieswhichinclude rezoningandspecialusesubmissions; erosion andsedimentcontrolandstorm-watermanagement design; residential, commercial, and religious facility site development design; and utilitydesign, including water, sewer and onsite treatment systems. Metwood also performs ongoingproductresearchanddevelopment.
We alsoperformavarietyofstructuraldesignandanalysiswork,successfullyproviding solutionsfor many projects,includingretainingwalls,residentialframing,commercialbuildingframing,light-gage steel fabricationdrawings, metalbuildingretrofitsand additions, mezzanines,and seismic anchors and restraints.
The Companyhasdesignednumerousfoundationsforavarietyofstructures.Ourfoundationdesign expertise includesmetalbuildingfoundations,traditional building constructionfoundations,atypical foundations forresidential structures,towerfoundations, and sign foundations for avariety of uses and applications.
We havealsodesignedanddraftedfullbuildingplansforseveralapplications.Whensubcontracting for localcompanies, wehavetheability,inpartnershipwithouroutsideengineeringfirm,toprovide basic architectural,mechanical,electrical, and detailedcivilandstructuraldesignservicesforthese facilities.
We haverevieweddesignsbymanufacturersforavarietyofstructuresand structuralcomponents,including retaining walls,radiotowers,towerfoundations,signfoundations, timbertrusses, light- gage steeltrusses,andlight-gagesteelbeams. Thisservice enablesclients to takegenericdesigns and have them certified and approved for constructioninthedesired locality.
Distribution MethodsofProductsandServices
Our salesareprimarilywholesale,directlytolumberyards,homeimprovementstores,hardware stores,
and plumbingandelectricalsuppliersinVirginiaandNorth Carolina. Metwood relies primarilyon itsown salesforcetogeneratesales;additionally, however,the Companyhas distributors inVirginia, NewYork, Oklahoma,ArizonaandColorado andalsoutilizesthe salespeople of wholesale yards stocking the Company's products as an additional sales force.
We are an authorizedvendor forLowe's,HomeDepot,84Lumber,StockBuilding Supply, ProBuild, and many more.Wehaveseveralstockingdealersofoursquarecolumns andreinforcingproducts.We will sell directly to contractors in areas where wedonothave adealer,but withour national dealer relationships, we typically have a dealer to use. Metwood intends to continue expanding the wholesale marketing ofitsunique productsto retailers,to increase dealer sales, andto license the Company's technology andproductsto increase itsdistribution outsideofVirginia,North Carolina and the South.
Status ofPubliclyAnnounced NewProductsorServices
Metwood hasbecomeafabricatoroftheAegissteeltrusssystemandisasupplieroftheirproducts to both residentialandcommercial customers.
Seasonality ofMarket
Our salesaresubject toseasonalimpacts,asourproducts areusedinresidential andcommercial construction projectswhichtendtobeatpeaklevelsinVirginiaandNorthCarolinabetween the months ofMarchandOctober. Accordingly,oursalesaretypicallygreaterinour fourthandfirst fiscal quarters. We build an inventory of ourproducts throughout the winter and spring to support our sales season. Due to the seasonality of our local market, we are continuingour efforts to expand into markets that are not so seasonallyimpacted. We haveshipped projects to Florida,Georgia, South Carolina, Arizona, Washington, and more. These markets have some seasonality, but increased exposure in these markets willhelp maintain stronger sales yearround.
Competition
Nationally, thereareoveronehundredmanufacturersofthetypesofproductsproducedbythe Company. However, themajorityofthesemanufacturers areusingwood-onlyproductsorproducts without metal reinforcement. Metwoodhas identified only oneother manufacturer in theUnited States that manufactures a wood-metal floor truss similar toours. However, we haveoftenfound that ourproducts aretheonlyones thatwillwork withinmanycustomers'designspecs.
Sources andAvailabilityofRawMaterialsandtheNamesofPrincipalSuppliers
All oftherawmaterialsweusearereadilyavailableonthemarketfromnumerous suppliers.The light-gage metalusedbythecompanyissuppliedprimarily byTellingIndustries,NewMillenium,Allied Tube & Conduit, andVulcraft. Our main source of lumber is BlueLinx. Adelphia Metals, Re- Steel, Nucor and Gerdau Amersteel providethe majority of our rebar. Because of the number of suppliers available to us,our decisions inpurchasing materials are dictated primarily by price and secondarily by availability. We donot anticipate a lackof supply to affectourproduction;however, a shortage might cause us topasson higher materialsprices to our buyers.
Dependence onOneoraFewMajorCustomers
For thefiscalyearsendingJune30,2014and2013,nocustomer accountedfor10%ormoreoftotal sales.
Patents
The CompanyhasnineU.S.Patents:
U.S. PatentNos.5,519,977and7,347,031,"JoistReinforcing Bracket,"abracket thatreinforces wooden joistswith aholeforthepassageof autility conduit. TheCompanyrefers tothis asitsfloor joist patch kit.
U.S. PatentNo.5,625,997,"Composite Beam,"acompositebeamthatincludesanelongatedmetal shell andapierceableinsertforreceivingnails,screwsorotherpenetratingfasteners.
U.S. PatentNo.5,832,691, acontinuation inpartofU.S. PatentNo.5,625,997,"CompositeBeam," acompositebeamthatincludesanelongatedmetalshell andapierceableinsertforreceiving nails, screwsorotherpenetratingfasteners.
U.S. PatentNo.5,921,053,"Internally ReinforcedGirderwithPierceableNonmetalComponents," a girderthatincludesapairof"c"-shaped memberssecured togethersoastoform ahollowbox which permits the girdertobe securedwithina buildingstructurewithconventionalfastenerssuch as nails, screws andstaples.
U.S. PatentNos.D472,791S;D472,792S;D472,793S; andD477,210S, allmodificationsof Metwood's JoistReinforcingBracket,whichwillbeused forrepairsof woodI-joists.
Each oftheabove-mentionedpatentswasoriginallyissuedtothe inventorsandCompany founders, Robert CallahanandRonaldB.Shiflett,wholicensedthesepatentstous.
NeedforGovernmentApprovalofPrincipalProducts
Our productsmusteitherbesoldwithanengineer'ssealorapplicablebuilding codeapproval.Currently, weareseekingInternationalCodeCouncil("ICC")codeapproval onourTUFFBEAMS.
Once thatapprovalisobtained,ourproducts canbeusedinallfiftystatesandwill eliminatetheneed for anengineer'ssealonindividualproducts. Todate,the Company's2x10floor joistreinforcerhas received both Bureau Officials Code Association approval(2001) andICC approval(2004).
Time SpentDuringtheLastTwoFiscalYearsonResearchand DevelopmentActivities
Approximately fifteenpercentofourtimeandresourceshavebeen spentduringthelasttwofiscalyears researching anddeveloping ourmetal/woodproducts,newproduct lines,and newpatents.
Costs andEffectsofCompliancewithEnvironmentalLaws
We do notincuranycoststocomplywithenvironmental laws.Weareanenvironmentallyfriendlybusiness inthatourproductsarefabricatedfromrecycledsteel.
Number ofTotalEmployeesandNumberofFull-TimeEmployees
We hadfourteenemployeesatJune30,2014,thirteenofwhomwerefull time.
Item1A.RiskFactors
Our businessissubject tovariousrisks,including thosedescribedbelow.Youshould carefullyconsider thefollowingriskfactorsand all other information containedin this Form10-K. If anyof the following events or outcomes actually occurs,our business,operatingresults, andfinancial conditions wouldlikely suffer.
Changingeconomicconditions couldmateriallyadverselyaffectus-Ouroperations andperformance dependsignificantly onregionalandnationaleconomicconditions andtheir impacton levels ofspendingbyour customers and endusers. Currently, those economic conditions have deteriorated and mayremaindepressedfor theforeseeablefuture. These changing economic conditions could have a material adverse effect ondemandforourproducts andonourfinancialcondition andoperatingresults.
Current volatilityanddisruptioninthecapitalandcreditmarketsmay continue toexertdownwardpressureonour stockprice-Thecapitalandcreditmarketshavebeenexperiencing extreme volatility and disruption over thepast year. Stockmarketsin general,andour stockprice in particular, haveexperienced significant volatility over the past year. Our stockrecently traded at historic lows. In the future, there can be no assurance thatprice volatilityin the stock markets in general will abate or that our stockprice inparticularwill rise. Additionally, the volatility in the credit markets couldimpactour abilitytoaccessnewfinancing.
We haveahistoryofoperating lossesandmayincurfuture losses.Weincurrednetlosses of$184,667 forthefiscalyearendedJune30,2014and$61,291for theyear endedJune30,2013.Our ability to generate significant revenues and maintain profitability is dependent in largepartonour ability toexpandour customerbase;increasesalesof ourproductstoexistingcustomers; manageour expense growth;enter into additional supply, licenseand collaborative arrangements; and successfully manufacture and commercialize products incorporating our technologies innew applications and innew markets.
Item2.Properties
During theyearendedJune30,2005,wesoldourfacilitiesto arelatedpartyfor$600,000 and subsequently leasedthefacilitiesback under a long-term leaseagreement. Wenow leaseour facilities inBoones Mill, Virginia, which consist of corporate offices, warehouses, a garage/vehiclemaintenancebuilding, and other multi-usebuildings.Theconditionof thesebuildings isverygood.
Wedonot investinrealestateorinterests inrealestate,realestatemortgagesor securitiesoforinterests inpersons primarilyengagedinrealestateactivitiesandthereforehavenopoliciesrelated to such investments.
Item3.LegalProceedings
We arenotapartytoanylegalproceedings,nor,tothebestofourknowledge,areanysuchproceedings threatenedorcontemplated.
Item4.SubmissionofMatterstoaVoteof SecurityHolders
No matterwassubmitted toavoteduringtheyear.
PART II
Item5.MarketforCommonEquityandRelatedStockholderMatters
Because thereisnoactivetradingmarketforMetwood,Inc.commonstock,itisdifficulttodetermine the market valueofthestock.Basedontherecentcloseofour common stock at July28,2014 of $.50 per share (with a 52-weekhighof$.85), the market valueof sharesheldby non-affiliates wouldbe$7,610,824.
Our commonstockiscurrentlylistedontheOTCQBMarket, themiddletieroftheOTCmarketplace, under thesymbol"MTWD.OB."
The followingtablesetsforthhighandlowbidinformation foreachfullquarterlyperiodwithin the two mostrecentfiscalyears.Theseover-the-countermarketquotationsreflectinter-dealerprices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| Year Ended June 30, 2014 | | | High | | | | Bid | |
| | | | | | | | | |
| First Quarter | | $ | 0.85 | | | $ | 0.25 | |
| Second Quarter | | $ | 0.50 | | | $ | 0.36 | |
| Third Quarter | | $ | 0.50 | | | $ | 0.50 | |
| Fourth Quarter | | $ | 0.50 | | | $ | 0.50 | |
| | | | | | | | | |
| Year Ended June 30, 2013 | | | | | | | | |
| | | | | | | | | |
| First Quarter | | $ | 0.51 | | | $ | 0.04 | |
| Second Quarter | | $ | 1.35 | | | $ | 0.03 | |
| Third Quarter | | $ | 1.00 | | | $ | 0.08 | |
| Fourth Quarter | | $ | 0.45 | | | $ | 0.37 | |
Holders
The approximatenumberofholdersofrecordofour commonstockasofJuly28,2014was1,103. This numberdoesnotincludeanindeterminatenumberof stockholders whosesharesareheldby brokers in streetname. The numberofstockholdershasbeen substantially the sameduring thepast ten years.
Dividends
We havenotpaidanydividendsonourcommon stockanddonot intendtopaydividends intheforeseeablefuture.
Item7.Management'sDiscussionandAnalysisofFinancial ConditionandResultsof
Operation
Metwood hadpreviouslyenteredintoaMemberInterestsPurchaseAgreement(the"Agreement") dated June30,2013with GlobalEnergyGroup. TheCompanyhasdetermined not toconsummate the transaction.
We anticipatethatthenexttwelvemonthswillbeaperiodofcontinued growthasweseektofurther expand ourpresenceinnewmarketsthroughout theUnited Statesthrough increasednumbersof distributors, licensees anddealers. ICC code approval is being soughtforour TUFFBEAM and is expected tobeobtained within the comingfiscal year. If this approval is obtained, product marketability would begreatly enhancedandwouldlikelyleadtohigher demand.
Results ofOperations
Below areselectedfinancialdatafortheyearsendedJune30,2014and2013:
| | | 2014 | | 2013 |
| Revenues | | $ | 1,933,006 | | | $ | 2,157,379 | |
| Net loss | | $ | (244,117 | ) | | $ | (327,504 | ) |
| Net loss per common share | | $ | (0.02 | ) | | $ | (0.02 | ) |
Weighted averagecommon sharesoutstanding | | | | | | | | |
| | | | | | | | | |
| At June 30, 2014 and 2013: | | | | | | | | |
| Total assets | | $ | 1,671,282 | | | $ | 1,944,206 | |
| Working capital | | $ | 808,626 | | | $ | 1,112,947 | |
| Stockholders' equity | | $ | 1,339,039 | | | $ | 1,583,156 | |
No dividendshavebeendeclaredorpaidduring theperiodspresented.
Revenues andCost of Sales-Grosssalesdecreased $224,373,or10%,for theyearended June30,2014("fiscal2014")compared to theyear ended June 30,2013("fiscal 2013"). Grossprofitdecreased$249,842 (31%)fromfiscal2013 tofiscal 2014.
The Company'ssalesdecreaseforfiscal2014versus2013 reflectsacontinuing downtown in the overall economy and in the building industry in particular, althoughthe commercialmarket hasovercomesomeoftheresidentialdownturn. Thepotentialfor increased sales volume as the Company goes forward is enhanced by thefact that we arenow an authorized fabricatorfor the Dynatruss light-gage steel truss system, begun in March2008.
Cost ofsalesincreased$25,468,or 2%,infiscal2014compared tofiscal2013.Material costs, primarily metal products, were significantly higher in fiscal 2014 compared to fiscal 2013 and accounted for much of the increase.
Administrative Expenses-Thesecostsdecreased$384,080fromfiscal2013 tofiscal2014.Thedecrease resultedin large part from much lower payroll expenses and professional fees. Weareinvestedindecreasingexpenditureswherepossibleinorder tomaximizeournetearnings.
OtherIncome (Expense)-Otherexpenses in fiscal 2014 were $20,589 compared to other income of $9,967 infiscal2013.Thechange resulted from lower finance charge income in fiscal 2014 and also from a net loss on asset disposals compared to a gain on asset disposals in fiscal 2013.
Income Taxes-Infiscal2014werecordedanincometaxbenefitof$56,855comparedtoataxbenefit of$77,150infiscal2013. Anincometaxbenefitwas recognized inbothfiscal yearsbecause, in addition to the book loss experienced, temporary ("timing") differencesbetweenbook and tax income gave risetoa higher taxloss,whichwill be carriedforward andoffsetfuture taxable income. A deferred taxasset hasbeen recorded toreflect thepotentialfuturebenefitof such acarryforward. Since the realization of such an asset is uncertain, we have also recorded a valuation allowance to reduce thisassettoitsnetrealizablevalue.
Liquidity andCapitalReserves-Cashflowsusedforoperatingactiviesinfiscal2014were$61,039versus netcashusedforoperatingactivitiesof$158,282infiscal2013. Thedecrease incashflows used for operations for fiscal2014 compared to fiscal 2013 wasprimarily attributabletodecreases in accounts receivable and in inventory. Weused $76,776 for capital improvements andpurchasesoffixed assets in fiscal 2014 compared to$29,567 infiscal2013. Financing activities in fiscal2014 were $-0- compared to$12,711usedinfiscal2013. Theuseoffunds in2013wasfrom amounts repaid to a related party.
We havehistoricallyfundedourcashneedsthroughoperating incomeandcreditline drawsasneeded. We willcontinue torelyonsalesrevenueasourmainsource ofliquidity andwillincurdebtprimarily to fundinventorypurchasesassalesgrowthproducesincreasedproduct demand. Liquidityneedsthat cannot bemet by current sales revenue may also arisein certain unusual circumstances such as has previously occurred whenrainand snowsignificantlyslowed construction activity andresulted in a corresponding decline indemandforourproducts. Inthosecircumstances,debt may beadded tomeet our fixed costs and to maintain inventory in anticipation of a spurt in product demand that generally occurs once a weather-related slowdownhas ended.
On along-termbasis,wealsoanticipatethatproductdemandwillincreaseconsiderablyaswecontinueto expand ourmarketingandadvertisingcampaign,whichmayincludetheuseoftelevision,radio, print andinternet advertising. Efforts are well underway toincrease thenumberofout-of-state sales representatives/brokers who will market ourproducts throughout thecountry. As salesincrease, we can add a second shift to meet the additionalproductdemandwithouthaving tousefunds to expand our productionfacilities. If additional cash becomes necessary to fund our growth, we mayraise this capital throughanadditionalfollow-on stockofferingratherthantakingonmoredebt. However, there can be no assurance that we willbe able toobtain additional equityordebt financing in thefuture. If we areunabletoraiseadditionalcapitalas needed, our growthpotential willbe adverselyaffected,and we wouldhave to significantly modify ourplans
Item8.FinancialStatementsand Supplementary Data
| | 7951 SW 6thSt. Suite 216 Plantation, Fl 33324 Tel: 954-424-2345 Fax: 954-424-2230 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Metwood, Inc.
We have audited the accompanying consolidated balance sheets of Metwood, Inc and subsidiary (“the Company”) as of June 30, 2014 and 2013 and the related consolidated statements of operations, stockholders’ equity, and consolidated cash flows for the years ended June 30, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2014 and 2013, and the results of its operations, changes in stockholders’ equity and cash flows for the years ended June 30, 2014 and 2013 in conformity with accounting principles generally accepted in the United States of America.
/s/ Bongiovanni & Associates, PA
Bongiovanni & Associates, PA
Certified Public Accountants
Plantation, Florida
The United States of America
September 29 , 2014
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2014 AND 2013
| | | | June 30, |
| | | | 2014 | | | | 2013 | |
| ASSETS | | | | | | | | |
| | | | | | | | | |
| Current Assets | | | | | | | | |
| Cash and cash equivalents | | $ | 36,836 | | | $ | 174,650 | |
| Accounts receivable, net | | | 149,671 | | | | 238,515 | |
| Inventory | | | 815,192 | | | | 930,672 | |
| Other current assets | | | 44,356 | | | | 30,160 | |
| | | | | | | | | |
| Total current assets | | | 1,046,054 | | | | 1,373,997 | |
| | | | | | | | | |
| Property and Equipment | | | | | | | | |
| Leasehold improvements | | | 274,869 | | | | 266,689 | |
| Furniture, fixtures and equipment | | | 78,222 | | | | 93,243 | |
| Computer hardware, software and peripherals | | | 175,207 | | | | 178,605 | |
| Machinery and shop equipment | | | 467,166 | | | | 465,085 | |
| Vehicles | | | 387,443 | | | | 372,646 | |
| Land improvements | | | 67,959 | | | | 67,959 | |
| | | | 1,450,866 | | | | 1,444,227 | |
| Less accumulated depreciation | | | (1,071,802 | ) | | | (1,063,326 | ) |
| | | | | | | | | |
| Net property and equipment | | | 379,064 | | | | 380,901 | |
| | | | | | | | | |
| Other Assets | | | | | | | | |
| Deferred tax asset, less valuation reserve | | | 246,163 | | | | 189,308 | |
| | | | 246,163 | | | | 189,308 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 1,671,282 | | | $ | 1,944,206 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts payable | | $ | 205,037 | | | $ | 135,248 | |
| Customer deposits | | | 13,166 | | | | 115,011 | |
| Accrued expenses | | | 19,225 | | | | 10,791 | |
| | | | | | | | | |
| Total current liabilities | | | 237,428 | | | | 261,050 | |
| | | | | | | | | |
| Long-term Liabilities | | | | | | | | |
| Due to related companies and parties | | | 94,815 | | | | 100,000 | |
| | | | | | | | | |
| Total long-term liabilities | | | 94,815 | | | | 100,000 | |
| | | | | | | | | |
| Total liabilities | | | 332,243 | | | | 361,050 | |
| | | | | | | | | |
| Stockholders' Equity | | | | | | | | |
| Common stock ($.001 par, 100,000,000 shares authorized; | | | | | | | | |
| 15,221,647 shares issued and outstanding at June 30, 2014 and 2013, respectively) | | | 15,222 | | | | 15,222 | |
| Common stock not yet issued ($.001 par, 8,150 shares at | | | | | | | | |
| June 30, 2014 and 2013, respectively) | | | 8 | | | | 8 | |
| Additional paid-in capital | | | 1,899,773 | | | | 1,899,773 | |
| Retained (deficit) | | | (575,964 | ) | | | (331,847 | ) |
| Total stockholders' equity | | | 1,339,039 | | | | 1,583,156 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | | $ | $1,671,282 | | | $ | 1,944,206 | |
The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these consolidated financial statements
| METWOOD, INC. AND SUBSIDIARY |
| CONSOLIDATED STATEMENTS OF INCOME |
| FOR THE YEARS ENDED JUNE 30, 2014 AND 2013 |
| | | | 2014 | | | | 2013 | |
| REVENUES | | | | | | | | |
| Gross sales | | $ | 1,933,006 | | | $ | 2,157,379 | |
| Cost of sales | | | 1,384,630 | | | | 1,359,162 | |
| | | | | | | | | |
| Gross profit | | | 548,375 | | | | 798,217 | |
| | | | | | | | | |
| ADMINISTRATIVE EXPENSES | | | | | | | | |
| Advertising | | | 17,731 | | | | 29,607 | |
| Bad debt provision | | | 77,192 | | | | 110 | |
| Depreciation | | | 22,679 | | | | 22,289 | |
| Insurance | | | 18,936 | | | | 22,584 | |
| Payroll expenses | | | 440,208 | | | | 767,770 | |
| Professional fees | | | 42,207 | | | | 60,022 | |
| Rent | | | 75,045 | | | | 80,820 | |
| Research and development | | | 7,829 | | | | 5,073 | |
| Telephone | | | 23,281 | | | | 19,525 | |
| Vehicle | | | 26,596 | | | | 30,683 | |
| Other | | | 77,054 | | | | 174,355 | |
| | | | | | | | | |
| Total administrative expenses | | | 828,758 | | | | 1,212,838 | |
| | | | | | | | | |
| Operating loss | | | (280,383 | ) | | | (414,621 | ) |
| | | | | | | | | |
| Other Income (Expense) | | | (20,589 | ) | | | 9,967 | |
| | | | | | | | | |
| (Loss) before income taxes | | | (300,972 | ) | | | (404,654 | ) |
| | | | | | | | | |
| Income tax benefit | | | (56,855 | ) | | | (77,150 | ) |
| | | | | | | | | |
| Net (Loss) | | $ | (244,117 | ) | | $ | (327,504 | ) |
| | | | | | | | | |
| Basic and diluted loss per common share | | $ | (0.02 | ) | | $ | (0.02 | ) |
| | | | | | | | | |
| Weighted average number of common shares | | | 15,221,647 | | | | 15,221,647 | |
The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these consolidated financial statements
| METWOOD, INC. AND SUBSIDIARY |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
| FOR THE YEARS ENDED JUNE 30, 2014 AND 2013 |
| | Common Shares (000s) | | | Common Shares ($.001 Par) | | | Common Shares Not Yet Issued (000s) | | | | Common Shares Not Yet Issued ($.001 Par) | | | Additional Paid-In Capital | | | Retained Earnings (deficit) |
| | | | | | | | | | | | | | | | | | |
| Balances July 1, 2012 | 12,232 | | $ | 12,232 | | | 8 | | | $ | 8 | | | 1,544,268 | | $ | (4,343) |
| | | | | | | | | | | | | | | | | | |
| Issuance of common stock | | | | | | | | | | | | | | | | | |
| to employees | 560 | | | 560 | | | — | | | | — | | | 285,040 | | | — |
| | | | | | | | | | | | | | | | | | |
| Issuance of common stock | | | | | | | | | | | | | | | | | |
| to related company | 2,430 | | | 2,430 | | | — | | | | — | | | 70,465 | | | — |
| | | | | | | | | | | | | | | | | | |
| Net loss for year | — | | | — | | | — | | | | — | | | — | | | (327,504) |
| | | | | | | | | | | | | | | | | | |
| Balances June 30, 2013 | 15,222 | | $ | 15,222 | | | 8 | | | $ | 8 | | | 1,899,773 | | $ | (331,847) |
| | | | | | | | | | | | | | | | | | |
| Net loss for year | — | | | — | | | — | | | | — | | | — | | | (244,117) |
| | | | | | | | | | | | | | | | | | |
| Balances June 30, 2014 | 15,222 | | $ | 15,222 | | | 8 | | | $ | 8 | | | 1,899,773 | | $ | (575,964) |
The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these consolidated financial statements
| METWOOD, INC. AND SUBSIDIARY |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| FOR THE YEARS ENDED JUNE 30, 2014 AND 2013 |
| | | |
| | | | 2014 | | | | 2013 | |
| OPERATING ACTIVITIES | | | | | | | | |
| Net loss | | $ | (244,117 | ) | | $ | (327,504 | ) |
| Adjustments to reconcile net loss to net cash provided by | | | | | | | | |
| (used for) operating activities: | | | | | | | | |
| Depreciation, net of property disposals | | | 72,518 | | | | 62,258 | |
| Issuance of common stock | | | — | | | | 358,495 | |
| Loss on preperty disposals | | | 3,191 | | | | 6,170 | |
| Provision for deferred income taxes | | | (56,855 | ) | | | (77,150 | ) |
| (Increase) decrease in operating assets: | | | | | | | | |
| Accounts receivable | | | 88,844 | | | | (7,134 | ) |
| Impairment loss on intangible assets | | | | | | | — | |
| Inventory | | | 115,480 | | | | 31,108 | |
| Prepaid expenses | | | | | | | 1,411 | |
| Other current assets | | | (14,196 | ) | | | | |
| Refundable income taxes | | | | | | | — | |
| Increase in operating liabilities: | | | | | | | | |
| Accounts payable, customer deposits and accrued expenses | | | (25,904 | ) | | | 110,628 | |
| Net cash provided by (used in) operating activities | | | (61,039 | ) | | | (158,282 | ) |
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Property, plant and equipment: | | | | | | | | |
| Purchases | | | (76,776 | ) | | | (29,567 | ) |
| Net cash provided by (used in) investing activities | | | (76,776 | ) | | | (29,567) | |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Net repayment to related party | | | — | | | | (12,711 | ) |
| Net borrowings from vehicle financing | | | | | | | — | |
| Net cash (used in) financing activities | | | — | | | | (12,711 | ) |
| | | | | | | | | |
| Net increase (decrease) in cash | | | (137,814 | ) | | | 116,004 | |
| | | | | | | | | |
| Cash, beginning of the year | | | 174,650 | | | | 58,646 | |
| | | | | | | | | |
| Cash, end of the year | | $ | 36,836 | | | $ | 174,650 | |
| The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these consolidated financial statements. |
METWOOD, INC.ANDSUBSIDIARY
NOTES TOCONSOLIDATEDFINANCIALSTATEMENTS
JUNE30,2014AND2013
NOTE1-ORGANIZATIONANDOPERATIONS
Metwood, Inc.("Metwood") wasorganizedunderthelawsof theCommonwealthofVirginiaonApril7,1993. OnJune30,2000,MetwoodenteredintoanAgreement andPlanof Reorganizationin which themajority of itsoutstanding common stock was acquiredbyapubliclyheld Nevada shell corporation. The acquisitionwas a tax-free exchange forfederal andstate income taxpurposes and was accounted for as a reverse merger in accordance withAccounting Principles Board("APB") OpinionNo.16. Upon acquisition, thenameof theshell corporation was changed to Metwood, Inc., and Metwood, Inc., the Virginiacorporation,became a whollyowned subsidiary of Metwood, Inc., the Nevada corporation. The publicly traded shell corporationhadnothad a materialoperating history forseveralyearspriortothe merger.
Effective January1,2002,MetwoodacquiredcertainassetsofProvidence Engineering, PC("Providence"), aprofessionalengineeringfirmwithcustomersin the sameproximity asMetwood, for $350,000 and accountedfor the transactionunder thepurchase methodof accounting. AsofJune 30, 2012, Providenceis no longer anoperating segmentofthe Company. We haveconcluded that the majority of the engineering portion of thebusiness canbestbehandled through a strategic partnership with an outside engineeringfirm. We believe that continuing research and development efforts will soon enable us to meet code requirementsforourproducts andwill eliminatetheneedfor individual engineering seals.
We provideconstruction-relatedproducts and engineeringservicestoresidential customersandcontractors, commercial contractors,developers and retailenterprises, primarily insouthwesternVirginia.
NOTE2-SUMMARYOFSIGNIFICANTACCOUNTING PRACTICES
Basis ofPresentation- ThefinancialstatementsincludetheaccountsofMetwood, Inc.(aNevadacorporation) andits whollyownedsubsidiary, MetwoodInc. (a Virginiacorporation)prepared in accordance withaccountingprinciples generally accepted in theUnited Statesof America and pursuant totherulesandregulations of theSecurities and Exchange Commission. All significant intercompany balancesand transactions have been eliminated.
Management's UseofEstimates-Thepreparationofconsolidatedfinancialstatementsinconformity with accountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequiresmanagement to makeestimatesandassumptionsthataffectthereportedamountsofassets andliabilitiesand disclosures ofcontingentassets andliabilities atthe date ofconsolidatedfinancial statements and the reported amounts of revenues and expenses during the reporting period. Actualresultscoulddiffer from those estimates.
Fair ValueofFinancial Instruments-Forcertainofourfinancialinstruments,noneof which areheldfor trading,includingcash,accountsreceivable,accountspayableandaccruedexpenses,and thebank lines ofcredit,thecarryingamountsapproximatefairvalueduetotheir shortmaturities.
Cash andCashEquivalents- ForpurposesoftheConsolidated StatementsofCashFlows,weconsider liquid investmentswithanoriginalmaturityofthreemonthsorlesstobecashequivalents.We maintain ourcash in bank depositaccounts, which,at times, may exceed thefederally insured limit of $250,000. We have not experienced any losses in such accounts and believe we arenot exposed to any significant creditrisk on cash andcashequivalents.
Accounts Receivable-Wegrantcreditintheformofunsecuredaccountsreceivable toourcustomers based onanevaluation oftheirfinancial condition. We perform ongoingcreditevaluations ofour customers. The estimate of the allowance for doubtful accounts, which ischargedoff tobad debt expense, is based onmanagement’s assessment of current economic conditions and historical collection experience with each customer. At June30,2014 and2013, the allowance fordoubtful accounts was $7,800 and $5,000, respectively. Specific customer receivables are considered past due when they are outstanding beyond their contractual terms and are charged off to the allowancefor doubtful accountswhendetermined uncollectible. For the years ended June 30, 2014 and 2013, the bad debt expensewas $77,192 and $110, respectively.
Inventory-Inventory,consistingprimarilyofmetalandwoodrawmaterials,islocatedonourpremises and isstatedatthelowerofcostormarket usingthefirst-in,first-out method.
Property andEquipment-Property andequipment arestated atcost lessaccumulateddepreciation and are depreciatedover theirestimated useful livesusing thestraight-line method.Recovery periodsrange from threetothirty-nine years.Upon retirementorsale, thecost andrelated accumulateddepreciation are removed from the balance sheet, and the resulting gain or loss is reflected in other income and expense. Maintenanceand repairsare charged tooperations asincurred
Impairment ofLong-livedAssets- Weevaluateourlong-livedassetsforindicationsofpossibleimpairment whenevereventsorchangesincircumstancesindicatethatthecarryingamountof anasset may notberecoverable. Recoverabilityismeasuredbycomparingthe carrying amountsto thefuture net undiscounted cashflows which the assets are expected to generate. Should an impairment exist, the impairment would bemeasuredby theamount by whichthecarryingamountof theassets exceeds the projected discounted future cashflows arising from the asset. There have been no such impairmentsof long-lived assets throughJune30,2014and 2013.
Patents-Wehavebeenassignedseveralkeyproductpatentsdevelopedbycertain Companyofficers. No valuehasbeenrecordedinourfinancialstatementsbecausethefairvalueof thepatentswasnot determinable withinreasonablelimitsatthedateofassignment.
Revenue Recognition-Revenueisrecognizedwhengoodsareshipped andearnedorwhen services areperformed,providedcollectionof theresulting receivableisprobable.Ifanymaterialcontingencies arepresent, revenuerecognition is delayed untilall material contingenciesare eliminated. Further, no revenue is recognized unless collection of the applicable consideration is probable.
Income Taxes-IncometaxesareaccountedforinaccordancewithFASBASC740,IncomeTaxes.A deferredtaxassetorliabilityisrecordedforalltemporarydifferencesbetweenfinancial and tax reporting and for net operating loss carryforwards,where applicable. Deferred tax assets arereduced by a valuation allowance when, intheopinionof management,itismore likelythannot that some portion or the entiredeferred tax assetwillnotbe realized. Deferred tax assets and liabilities are adjusted forthe effectofchanges intaxlaws andratesonthedateofenactment.
Research andDevelopment-Weperformresearchanddevelopmentonourmetal/woodproducts, new productlines, andnewpatents.Costs,ifany,areexpensed astheyare incurred. For the year ended June30,2014, expenseswere$7,829andfor the year ended June30,2013, expenseswere $5,073.
Advertising-Weexpenseadvertisingcostsasincurred. However,certainexpenditures aretreatedas prepaid(suchastradeshowfees)ifthey areforgoods or serviceswhichwillnot bereceived until after theendofthe accounting period. Thesecosts aresubsequently recognized asexpenses inthose periods inwhichthe goods orservices arereceived.
Earnings PerCommonShare-Basicearningspershareamountsarebasedonthe weighted average shares ofcommon stock outstanding. Ifapplicable,dilutedearningspersharewould assume the conversion, exercise or issuance of all potential common stock instruments such asoptions,warrants and convertible securities, unless the effect is toreduce a lossor increase earningsper share. This presentation has been adoptedfor the yearspresented. There were no adjustmentsrequired tonet income for the years presented in the computationof diluted earningsper share.
Recent AccountingPronouncements–InMay 2014,the FASBissuedASUNo.2014-09, Revenue from Contracts with Customers(Topic606)(“ASU2014-09").WithASU2014-09,the FASBsupersedes the revenue recognition requirements of Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 sets forth an entirely new revenue recognition model, codified in FASB ASC 606-10, requiring that contracts be identified, performance obligations be identified, the transaction price be determined and allocated to performance obligations, and revenue be recognized upon satisfaction of performance obligations. ASU 2014-09 is effective for public companies for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is not permitted.
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward except to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. In assessing whether a loss or tax credit carryforward is available to settle additional income taxes at the reporting date, entities would not consider future developments such as the subsequent expiration of a deferred tax asset. The assessment would only reflect conditions present at the reporting date. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.
Managementdoesnotbelievethat anyotherrecentlyissued,butnotyeteffectiveaccountingpronouncements, ifadopted,wouldhaveamaterialeffectontheaccompanyingconsolidatedfinancial statements.
NOTE 3-RELATED-PARTYTRANSACTIONS
For theyearsendedJune30,2014 and2013, wehadsalesof$18,721and$21,455,respectively,to a related company 50% owned by our CEO.AsofJune30,2014and2013, the related receivablewas$-0-.
Also, fromtimetotimewecontractwiththis relatedcompany which providescapitalimprovementsandmaintenanceworkonourbuildings and grounds. Billingsforsuch services duringtheyears endedJune30, 2014and2013 were$2,585and10,080,respectively.
Additionally, Metwood has a note payable to the related company incurred for services provided. The balances at June 30, 2014 and 2013 were $94,815 and $100,000, respectively.
NOTE 4-COMMITMENT
In prior years,weimplementedastock-basedincentivecompensationplanforouremployees.Participating employeeshaveanafter-taxdeductionwithheldbytheCompanythroughout the calendar year. As of December 31 of each year, the employee is considered vested in the plan, and wewill match theparticipating employee's withheld amounts. We may also makeadiscretionary contribution based upon pay incentives or attendance. Periodically, we will purchase restricted stock on behalf of the employee in the amountofhis withholdings,our match, and anydiscretionary contributions.
NOTE5-EQUITY
During theyearendedJune30,2013,weissued560,000commonsharesfor thebenefitof employees included inourstock-basedincentivecompensationprogram. Inaddition,2,429,850 shareswere issuedtoarelatedparty aspaymentfora finder's fee during the year ended June 30, 2013. Therewereno shares issued in the program for the year ended June30,2014
NOTE 6-SALEOFFIXEDASSETSANDRELATEDOPERATINGLEASE
During theyearendedJune30,2005,weenteredintoasaleandleasebacktransactionwitharelated party. Wesoldthevarious buildingsatourcorporateheadquarterswhichhouseour manufacturing plants, executiveofficesandother buildingsfor$600,000 in cash. We simultaneously entered into a commercial lease agreement with the related party whereby we have been committed to lease back these same properties over a ten-year term expiring December31, 2014. Rent expense charged to operations related to the commercial lease for the years ended June 30, 2014 and 2013 was $76,000 and$81,600, respectively.
Future minimumleasepaymentsundernon-cancelableoperatingleasesasof June30,2014areas follows:
| Year Ending June 30, | |
| 2015 and beyond | $42,000 |
| NOTE 7- INCOME TAXES | | |
| | | | | |
| The components of income tax benefit consist of: | | |
| | | 2014 | | 2013 |
| Current: | | | | | | | | |
| Federal | | $ | (41,910 | ) | | $ | (20,681 | ) |
| State | | | (8,564 | ) | | | (5,598 | ) |
| | | | (50,474 | ) | | | (26,279 | ) |
| Deferred: | | | | | | | | |
| Federal | | | (6,176 | ) | | | (44,569 | ) |
| State | | | (205 | ) | | | (6,302 | ) |
| | | | (6,381 | ) | | | (50,871 | ) |
| | | | | | | | | |
| Total income tax benefit | | $ | (56,855 | ) | | $ | (77,150 | ) |
| | | | | | | | | |
| The reconciliation of the provision for income taxes at the U. S. federal statutory income tax rate of 39% to the Company's income taxes is as follows: |
| | | | | | | | | |
| Loss before income taxes | | $ | (300,972 | ) | | $ | (404,654 | ) |
| Income tax benefit computed at the statutory rate | | | (117,379 | ) | | | (157,815 | ) |
| State income tax benefit, net of federal tax effect | | | (10,699 | ) | | | (14,517 | ) |
| Non-deductible expenses | | | 3,375 | | | | 3,119 | |
| Valuation reserve adjustment | | | 56,855 | | | | 77,150 | |
| Effect of graduated income tax rates | | | 10,993 | | | | 14,913 | |
| | | | | | | | | |
| Total income tax benefit | | $ | (56,855 | ) | | $ | (77,150 | ) |
| | | | | | | | | |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes. We have recorded deferred tax assets at June 30, 2014 and 2013, net of a valuation reserve, of $246,163 and $189,308, respectively. The components of these amounts are as follows: |
| | | 2014 | | 2013 |
| | | | | | | | | |
| Tax loss carryforward | | $ | 189,847 | | | $ | 102,666 | |
| Depreciation and miscellaneous | | | 56,316 | | | | 86,642 | |
| | | | | | | | | |
| Net deferred tax asset | | $ | 246,163 | | | $ | 189,308 | |
Item9.Changes inandDisagreements withAccountantsonAccountingandFinancialDisclosure
None.
Item9A.ControlsandProcedures
(a) Evaluationofdisclosure controlsandprocedures
Our managementisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancial reporting(asdefinedinRule13a-15(f)underthe ExchangeAct).Managementconductedan evaluation ofthe effectiveness ofourinternalcontroloverfinancialreporting anddetermined thatour internal controloverfinancialreportingwasineffective asof June30,2013due to material weaknesses. A material weakness in internal controloverfinancialreporting is definedby the PublicCompany Accounting Oversight Board’s Audit StandardNo. 5 as a deficiency, or a combination of deficiencies, ininternal controloverfinancialreporting,suchthat there isareasonablepossibility that a material misstatement of thecompany’s annualorinterimfinancialstatementswill notbeprevented or detected on a timelybasis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a materialweakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. Management’s assessment identified the following material weaknesses in internal control over financial reporting:
• ThesmallsizeofourCompanylimitsourabilitytoachievethedesiredlevelofseparationinourinternal controlsandfinancialreporting. We dohave a separate CEO andCFO; however, we donot have an Audit Committee to review and oversee the financial policies and procedures of the Company. Until such time we are able toinstall anaudit committee,we do not meet the fullrequirementfor separation. In theinterim, we will continue to strengthen the role of our CEO and CFO and their review of ourinternal controlprocedures.
(b) Changesininternal controloverfinancialreporting
There werenochangesinourinternalcontroloverfinancialreportingduringourmostrecentfiscalquarter thathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontrol over financial reporting.
Item9B.OtherInformation
None.
PARTIII
Item10.Directors,ExecutiveOfficersandCorporate Governance
IdentificationofDirectors andExecutiveOfficers
Thefollowing tablesetsforththenamesandthenatureofallpositionsandofficesheldby all directors andexecutive officers ofthe Companyforthe yearending June30,2013andtothedateof the filingofthisreport and the periodsduringwhich each suchdirectoror executiveofficerhas served inhisrespectivepositions:
| NAME | POSITION AND BACKGROUND |
|---|
| | |
| Robert M.Callahan | Presidentand CEO |
| | Mr. Callahanhasbeeninvolvedinthebuilding industry forover thirtyyears. Heiswell recognized insouthwesternVirginia asaninnovator intheusesofpassive solardesign and wood/metal products incustomhomebuilding. Along withMr. Ronald Shiflett,he formed Metwood, Inc. in 1993 to bring light-gage construction,used in commercial building foryears,intocommonuse inresidentialconstruction. |
| | |
| ShawnA.Callahan | Secretary/Treasurer/CFO/VP/General Manager |
| | Education:MBAAccounting,UniversityofPhoenix B.S. ComputerScience andMathematics, VirginiaMilitary Institute Since startingwithMetwood, Inc. inMay1996, Mr.Callahanhasplayedamajor rolein the restructuringoftheCompany, increasingproduction, improvingefficiency,and developingcomputer aidsforthe Company. |
TermofOffice
The termofoffice ofthecurrentdirectorsshallcontinueuntilnewdirectors areelectedor appointed.
FamilyRelationships
Robert CallahanisthefatherofShawnCallahan.
Involvement inCertainLegalProceedings
Except asindicatedbelowandtotheknowledgeofmanagement,during thepastfiveyears,nopresent orformerdirector,personnominatedtobecomeadirector, executiveofficer, promoteror controlpersonof theCompany:
(1) wasageneralpartnerorexecutiveofficerofany businessbyor againstwhich anybankruptcpetitionwasfiled,whetheratthetimeofsuchfilingortwoyearspriorthereto;
(2) wasconvictedinacriminalproceedingornamedthesubjectof apending criminalproceeding(excluding trafficviolationsandotherminoroffenses);
(3) wasthesubjectofanyorder,judgmentordecree,notsubsequentlyreversed,suspendedorvacated, ofanycourtofcompetentjurisdiction, permanentlyor temporarilyenjoining,barring, suspending orotherwiselimitinghisinvolvementin any typeofbusiness, securitiesorbanking activities;
(4) wasthesubjectofanyorder,judgmentordecree,notsubsequentlyreversed,suspendedorvacated, ofanyfederalorstateauthoritybarring, suspendingorotherwiselimitingformorethansixty days therightofsuchperson to engagein any activity describedaboveunder this Item,or tobe associated withpersonsengagedinanysuchactivity;or
(5)wasfoundbyacourtofcompetentjurisdiction(inacivilaction),theCommissionortheCommodity FuturesTradingCommissiontohaveviolatedafederalorstatesecuritiesorcommodities law,norhas ajudgmentbeen reversed,suspended,orvacated.
Compliance withSection16(a)ofthe ExchangeAct
Section 16(a)oftheSecuritiesExchangeActof1934,asamended,requires theCompany'sdirectors, officers andpersons whoownmorethan10%ofthe Company's commonstockorotherregistered class of equitysecurities tofilereportsofownership and changes in ownership with theSecurities and Exchange Commission. Officers, directors and greater than10% shareholders are required to furnishuswithcopiesofallSection16(a)forms theyfile.
Based solelyonareviewoftheformsreceivedcoveringpurchaseandsaletransactions intheCompany's commonstockduringthefiscalyearendedJune30,2014,theCompanybelieves that each person who, at any time during that period, was adirector, executiveofficer,orbeneficialownerof more than10%of the Company's common stock compliedwith all Section16(a)filing requirements.
Item11.ExecutiveCompensation
The followingtablesetsforthinsummary formthecompensationreceivedduring eachoftheCompany's last threefiscalyearsbyourPresident andChiefExecutiveOfficer,RobertM. Callahan, and our Chief Financial Officer, ShawnA. Callahan:
Summary Compensation Table
| | Fiscal Year | Annual Salary | Bonuses | Other Compensation | Restricted Stock Awards | LTIP Options | Restricted Stock Bonuses |
|---|
| | | | (1) | (2) | (3) | (4) | (4) |
| Robert M. Callahan | 2014 | $ 59,856 | $ 7,900 | -0- | $-0- | -0- | -0- |
| | 2013 | $ 80,000 | $ 7,100 | -0- | -0- | -0- | -0- |
| | 2012 | $ 71,667 | $ 7,800 | -0- | -0- | -0- | -0- |
| | | | | | | | |
| Shawn A. Callahan | 2014 | $ 65,623 | $ 8,000 | -0- | $-0- | -0- | -0- |
| | 2013 | $ 62,102 | $ 7,580 | -0- | -0- | -0- | -0- |
| | 2012 | $ 63,006 | $ 8,938 | | | | |
| | | | | | | | |
(1) Thedollarvalueofbonuses(cashandnon-cash) received.
(2) During theperiodscoveredbythetable,theCompanydidnotpayanyother
annual compensationnotproperlycategorizedassalaryorbonus,including
perquisites andotherpersonalbenefits,securitiesor property.
(3) During theperiodscoveredbythetable,theCompany made norestrictedstock
awards.
(4) TheCompanycurrentlyhasnostockoptionor restrictedstockbonusplans.
No memberofourmanagementhasbeengrantedanyoptionorstockappreciationright;accordingly,no tables relatingtosuchitemshavebeenincludedwithinthisitem.
CompensationofDirectors
There arenostandardarrangementspursuanttowhichourdirectors arecompensatedforanyservices provided asdirector. Noadditionalamountsarepayabletoourdirectorsforcommittee participationor special assignments.
There arenoarrangements pursuanttowhichanyofourdirectorswascompensatedduringourlastcompleted fiscalyearor theprevioustwofiscalyearsforanyservicesprovidedasdirector.
TerminationofEmploymentandChangeof ControlArrangement
There arenocompensatoryplansorarrangements,includingpaymentstobereceived fromtheCompany, withrespect toanypersonnamedintheSummaryCompensationTablesetoutabove which would in any way result in payments to any suchpersonbecauseofhisresignation,retirement or other termination of such person's employment with the Companyor its subsidiaries,or any change in control of the Company, or a change in theperson'sresponsibilitiesfollowing a change in controlof the Company.
Item12.SecurityOwnershipofCertainBeneficialOwnersand ManagementandRelated Stockholder Matters
Security Ownershipof CertainBeneficialOwners
The followingtablesetsforththesharesheldby thosepersons whoowned morethanfivepercentof Metwood's commonstockasofJuly31,2014,based upon15,221,647sharesoutstanding:
GreaterThan 5% Owners
| | Title of Class | | | Name and Address of Beneficial Owner | | | No. of Shares | | | | Percent of Class | |
| | | | | | | | | | | | | |
| | Common | | | RobertCallahan 819 NaffRoad Boones Mill,VA | | | 9,501,632 (1) | | | | 62.4 | % |
| | | | | | | | | | | | | |
| | Common | | | Ronald Shiflett 638PattiRoad Rocky Mount,VA | | | 1,000,000 | | | | 6.6 | % |
(1) Includesdirectandindirect interests.Thereare9,128,600 commonshares
included inthisamount thatareownedinthenamesoffamilymembersofMr.
Callahan.
Security Ownershipof Management
The followingtablesetsforththesharesheldbyMetwooddirectors andofficers asofJuly 31,2014:
Management Ownership
| Title of Class | Name and Address of Beneficial Owner | No. of Shares | Percent of Class |
|---|
| | | | |
| Common | RobertCallahan 819 NaffRoad Boones Mill,VA | 9,501,632 (1) | 62.4% |
(1) Includesdirectandindirect interests.Thereare9,128,600 commonshares
included inthisamount thatareownedinthenamesoffamilymembersofMr.
Callahan.
Ownership ofsharesby directorsandofficersofMetwoodasagroup: 62.4%
Changes inControl
We knowofnocontractualarrangementswhichmayatasubsequentdateresult inachangeofcontrol in the Company.
Item13.Certain RelationshipsandRelated Transactions,andDirectorIndependence
Following arethetransactionsbetweenMetwoodandmembersofmanagement,directors,officers,5% shareholders,andpromotersofMetwood:
We contractwithaconstructioncompany50%ownedbyourCEOwhichprovides capitalimprovements and maintenanceworkonourbuildings andgrounds.
During theyearendedJune30,2005,weenteredintoasalesandleasebacktransactionwitha related party.Wesoldthevarious buildingsatourcorporateheadquarters whichhouseourmanufacturing plants, executive officesand other buildingsfor$600,000 in cash. We simultaneously entered into a commercial lease agreement with the related party whereby we are committed to lease back these same properties for a ten-year term expiringDecember31,2014. Rent expense charged tooperationsfor the years endedJune30,2014and2013 was$76,000 and$81,600.
Item14.PrincipalAccountingFeesandServices
The followingtablesetsforththeaggregatefeesbilledortobebilledby Bongiovanni &Associates,CPAs forauditservicesrenderedinconnection withtheconsolidatedfinancialstatementsandreportsfor the yearsendedJune30,2014and 2013:
| 2014 | 2013 |
|---|
| | | |
| Audit Fee | $ 20,494 | $ 28,384 |
| Audit-related fees | - | - |
| Tax fees | - | - |
| All other fees | - | - |
| Total | $ 20,494 | $28,384 |
Audit fees:Consistoffeesbilledforprofessionalservicesrenderedfortheauditsofourconsolidated financial statementsand reviews ofthe interim consolidatedfinancialstatements included inquarterly reports and services that are normally provided by our auditors in connectionwith statutory and regulatory filingsorengagements and attestservices,exceptthosenotrequiredbystatuteorregulation.
Audit-related fees:Consistoffeesbilledforassuranceandrelatedservicesthatarereasonablyrelatedto the performanceoftheauditorreviewofour consolidatedfinancialstatements andarenotreported under"Audit fees." These services include accounting consultations in connectionwith the Sarbanes- Oxley Actof2002.
Tax fees:Consistoffeesbilledfortaxcompliance,taxadviceandtax planningservices.
All other fees:Consistof feesbilledforallother servicesotherthanthosereportedabove.
PARTIV
ITEM15.EXHIBITSANDFINANCIALSTATEMENTSCHEDULES
| NUMBER | DESCRIPTION |
| | |
| 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 (18 U.S.C. 1350) |
*Incorporated byreferenceon Form8-K,filedFebruary16,2000
SIGNATURES
Pursuant totherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1934, the registrant hasduly causedthisreporttobesignedonitsbehalfbytheundersigned, thereunto dulyauthorized.
Date: September 29, 2014
/s/Robert M. Callahan
Robert M. Callahan
President, CEOand Director
Date: September 29, 2014
/s/ Shawn A. Callahan
ShawnA. Callahan
Secretary/Treasurer/CFO
and Director
