UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 28, 2002
(Date of Report)
METWOOD, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-5391 83-0210365
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
819 Naff Road
Boones Mill, VA 24065
(Address of principal executive offices)
(540) 334-4294
(Registrant's telephone number, including area code)
1
The Registrant hereby amends Item 7 of its Report on Form 8-K filed with the
Securities and Exchange Commission on June 28, 2002.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of Providence Engineering, P.C., the business
acquired:
(i) Independent Auditors' Report
(ii) Balance Sheets as of December 31, 2001 and 2000
(iii) Statements of Income and Retained Earnings for the Years Ended
December 31, 2001 and 2000
(iv) Statements of Cash Flows for the Years Ended December 31, 2001 and
2000
(v) Notes to Financial Statements
(b) Pro forma financial statements:
(i) Consolidated (Unaudited) Condensed Pro Forma Balance Sheet as of
December 31, 2001
(ii) Consolidated (Unaudited) Condensed Pro Forma Statement of Income for
the Year Ended June 30, 2001
(iii) Consolidated (Unaudited) Condensed Pro Forma Statement of Income for
the Six Months Ended December 31, 2001
(iv) Notes to Pro Forma Consolidated (Unaudited) Condensed Financial
Statements
2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Providence Engineering, P.C.
Roanoke, Virginia
We have audited the accompanying balance sheets of Providence Engineering, P.C.
as of December 31, 2001 and 2000, and the related statements of income and
retained earnings, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by 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 financial statements referred to above present fairly, in
all material respects, the financial position of Providence Engineering, P.C. at
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
McLeod & Company
Roanoke, Virginia
August 20, 2002
3
PROVIDENCE ENGINEERING, P.C.
BALANCE SHEETS
December 31,
-------------------------------------------
2001 2000
----------------- -----------------
ASSETS
Current Assets
Cash $ 1,244 $17,167
Accounts receivable, less allowance for doubtful accounts
of $2,500 in 2001 and $1,000 in 2000 73,655 32,028
----------------- -----------------
Total Current Assets 74,899 49,195
Property and Equipment
Automobiles 24,663 24,663
Computer hardware & software 12,325 6,338
Furniture and fixtures 16,827 16,827
----------------- -----------------
53,815 47,828
Less accumulated depreciation (27,502) (19,084)
----------------- -----------------
Net Property and Equipment 26,313 28,743
----------------- -----------------
TOTAL ASSETS $101,212 $77,938
================= =================
See accompanying notes to financial statements.
4
PROVIDENCE ENGINEERING, P.C.
BALANCE SHEETS
December 31,
------------------------------------------
2001 2000
---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 8,636 $ 5,756
Payroll liabilities 5,027 5,499
Notes payable - current 8,249 7,283
----------------- ----------------
Total Current Liabilities 21,912 18,537
Notes payable - long-term 2,421 10,669
----------------- ----------------
Total Liabilities 24,333 29,207
----------------- ----------------
Stockholders' Equity
Common stock, $1.00 par; 5,000 shares authorized;
1,000 shares issued and outstanding 1,000 1,000
Retained earnings 75,879 47,731
----------------- -----------------
Total Stockholders' Equity 76,879 48,731
----------------- -----------------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $101,212 $77,938
================= =================
See accompanying notes to financial statements.
5
PROVIDENCE ENGINEERING, P.C.
STATEMENTS OF INCOME AND RETAINED EARNINGS
Year Ended December 31,
---------------------------------------------
2001 2000
------------------- -------------------
Sales $ 288,895 $ 239,343
Cost of sales 145,579 133,983
------------------- -------------------
Gross Profit 143,316 105,360
Selling, general and administrative expenses 112,678 91,119
------------------- -------------------
Income from operations 30,638 14,241
Other income (expense):
Interest expense (2,490) (1,816)
------------------- -------------------
Net income 28,148 12,425
Retained earnings, beginning of year 47,731 35,306
------------------- -------------------
Retained earnings, end of year $ 75,879 $ 47,731
=================== ===================
See accompanying notes to financial statements.
6
PROVIDENCE ENGINEERING, P.C.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
---------------------------------------------
2001 2000
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 245,767 $ 226,533
Cash paid to suppliers and employees (245,883) (208,945)
Interest paid (2,539) (1,815)
------------------- -------------------
Net cash provided (used) by operating activities (2,655) 15,773
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (5,986) (11,658)
------------------- -------------------
Net cash used by investing activities (5,986) (11,658)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt - 9,300
Principal payments on long-term debt (7,282) (4,848)
------------------- -------------------
Net cash used by financing activities (7,282) 4,452
------------------- -------------------
Net increase (decrease) in cash (15,923) 8,567
Cash, beginning of year 17,167 8,600
------------------- -------------------
Cash, end of year $ 1,244 $ 17,167
=================== ===================
(continued)
7
PROVIDENCE ENGINEERING, P.C.
STATEMENTS OF CASH FLOWS (continued)
Year Ended December 31,
------------------------------------------
2001 2000
---------------- ---------------
Reconciliation of Net Income to Net Cash
Provided (Used) by Operating Activities:
Net income $ 28,148 $12,425
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 8,418 6,247
Provision for doubtful accounts 1,500 1,000
Increase in accounts receivable (43,129) (12,809)
Increase in accounts payable and accrued expenses 2,880 5,756
Increase (decrease) in payroll liabilities (472) 3,154
---------------- ---------------
Total adjustments (30,803) 3,348
---------------- ---------------
Net Cash Provided (Used) by Operating Activities $(2,655) $15,773
================ ===============
See accompanying notes to financial statements.
8
PROVIDENCE ENGINEERING, P.C.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001 and 2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Company
The Company, located in Roanoke, Virginia, is in the business of providing
consulting and engineering services to customers primarily in southwestern
Virginia.
Cash Equivalents
For purposes of reporting cash flows, the Company considers all short-term
investments with a maturity of three months or less to be cash equivalents.
There were no cash equivalents at December 31, 2001 or 2000.
Accounts Receivable
Customer accounts are charged off when determined uncollectible. Management's
allowance for doubtful accounts is based on past experience and management's
estimate of customer's ability to pay. It is at least reasonably possible that
management's estimate will change in the near future.
Property and Equipment
Property and equipment are stated at cost. Maintenance and repairs which do not
increase the life of the related asset are charged to current operations when
incurred. Depreciation is computed on the straight-line method based on their
estimated useful lives.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
9
PROVIDENCE ENGINEERING, P.C.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001 and 2000
Income Taxes
The Company, with the consent of its stockholders, has elected under the
Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes,
the stockholders of an S Corporation are taxed on their proportionate share of
the Company's taxable income. Therefore, no provision for income taxes has been
included in the Company's financial statements.
2. LONG-TERM DEBT
Long-term debt is comprised of the following:
December 31,
-----------------------------------
2001 2000
-------------- ---------------
Note payable to a bank maturing August 2003.
Monthly payments of $318.96 at an interest rate
of 14.245%. Note is collateralized by a vehicle. $ 5,648 $ 8,451
Note payable to a bank maturing December 2002.
Monthly payments of $444.75 at an interest rate
of 11.434%. Note is collateralized by a vehicle. 5,022 9,501
-------------- ---------------
10,670 17,952
Less current maturities (8,249) (7,283)
-------------- ---------------
$ 2,421 $ 10,669
============== ===============
Aggregate principal payments required under the remaining long-term debt
obligations as of December 31, 2002 are as follows:
2002 $ 8,249
2003 2,421
---------------
$ 10,670
===============
10
PROVIDENCE ENGINEERING, P.C.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001 and 2000
3. SUBSEQUENT EVENT
On June 10, 2002 the Company sold substantially all its assets to
Metwood, Inc. pursuant to an Asset Purchase Agreement dated January 1,
2002. The assets were sold for $350,000, consisting of cash and Metwood,
Inc. common stock.
4. CONCENTRATIONS
At December 31, 2002, accounts receivable from two customers totaled
approximately $19,700. At December 31, 2000, accounts receivable from
two customers totaled approximately $15,000.
5. RELATED-PARTY TRANSACTIONS
Sales to Metwood, Inc. (see note 3) approximated $24,500 and $10,500
for the years ended December 31, 2001 and 2000, respectively. Accounts
receivable from Metwood, Inc. totaled $6,724 and $0 at December 31,
2001 and 2000, respectively.
6. LEASES
The Company leases its office space under a month-to-month lease. Rent
expense totaled $8,640 for both 2001 and 2000.
11
PRO FORMA FINANCIAL STATEMENTS
The following consolidated (unaudited) condensed pro forma balance sheet
reflects the financial position of the Company as of December 31, 2001 as if the
acquisition of Providence Engineering, P.C. had been completed as of that date,
and the consolidated (unaudited) condensed pro forma statements of income for
the Company for the year ended June 30, 2001 and the six months ended December
31, 2001 as if the transaction had been completed as of July 1, 2000. Although
the acquisition was not completed until June 10, 2002, the effective date of the
purchase was January 1, 2002. Therefore, the Company's annual Form 10KSB for the
year ended June 30, 2002 will include income earned from Providence Engineering,
P.C. from January 1, 2002 through June 30, 2002.
These financial statements are presented for informational purposes only
and do not purport to be indicative of the financial position that would have
resulted if the acquisition had been consummated at each company's year end. The
pro forma financial statements should be read in conjunction with the notes
thereto and Metwood's financial statements and related notes thereto contained
in the Company's SEC quarterly and annual filings and Providence's financial
statements and related notes thereto contained elsewhere in this Form 8K.
A final determination of required purchase accounting adjustments,
including the allocation of the purchase price to the assets acquired based on
their respective fair values, has not yet been been made. Accordingly, the
purchase accounting adjustments made in connection with the development of the
pro forma financial statements are preliminary and have been made solely for
purposes of developing the pro forma combined financial information.
12
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED (UNAUDITED) CONDENSED PRO FORMA BALANCE SHEET
DECEMBER 31, 2001
(Unaudited) Pro Forma
Metwood Providence Adjustments Pro Forma
------------------ ------------------- -------------------- -----------------------
ASSETS
Current Assets
Cash $ 33,602 $ 1,244 (1,244)(A) $ 33,602
Accounts receivable, net 179,919 73,655 (6,724)(L) 246,850
Inventory 191,405 191,405
------------------ ------------------- -------------------- -----------------------
Total Current Assets 404,926 74,899 (7,968) 471,857
-
Property and Equipment -
Buildings and improvements 634,798 634,798
Furniture and equipment 230,491 29,152 70,848 330,491
Vehicles 94,918 24,663 337 119,918
Land 177,000 177,000
------------------ ------------------- -------------------- -----------------------
1,137,207 53,815 71,185 1,262,207
Accumulated depreciation (155,032) (27,502) 27,502 (155,032)
------------------ ------------------- -------------------- -----------------------
Net Property and Equipment 982,175 26,313 98,687 (B) 1,107,175
Intangible assets 151,345 (C) 151,345
------------------ ------------------- -------------------- -----------------------
TOTAL ASSETS $ 1,387,101 $101,212 242,064 $ 1,730,377
================== =================== ==================== =======================
See accompanying notes to (unaudited) pro forma financial statements.
13
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED (UNAUDITED) CONDENSED PRO FORMA BALANCE SHEET
DECEMBER 31, 2001
(Unaudited) Pro Forma Consolidated
Metwood Providence Adjustments Pro Forma
------------------ ------------------ -------------------- ---------------------
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and
accrued expenses $ 110,396 $ 13,663 $ (20,386) (D) $ 101,673
Notes payable - current 150,000 8,249 51,751 (E) 210,000
------------------ ------------------ -------------------- ---------------------
Total Current Liabilities 260,396 21,912 31,365 313,673
Long-Term Liabilities
Note payable - long term 2,421 (2,421) (F) -
Deferred income tax liability 6,080 6,080
------------------ ------------------ -------------------- ---------------------
Total Long-Term Liabilities 6,080 2,421 (2,421) 6,080
Stockholders' Equity
Common stock, $.001 par
value, 100,000,000 shares
authorized; 11,842,549
shares issued and outstanding 11,843 290 (G) 12,133
Common stock, $1.00 par,
5,000 shares authorized;
1,000 shares issued and
outstanding 1,000 (1,000)
Additional paid-in capital 1,058,711 289,710 (H) 1,348,421
Retained earnings 50,071 75,879 (75,879) 50,071
------------------ ------------------ -------------------- ---------------------
Total Stockholders' Equity 1,120,625 76,879 213,121 1,410,625
------------------ ------------------ -------------------- ---------------------
Total Liabilities and
Stockholders' Equity $1,387,101 $101,212 $ 242,065 $ 1,730,378
================== ================== ==================== =====================
See accompanying notes to (unaudited) pro forma financial statements.
14
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED (UNAUDITED) CONDENSED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 30, 2001
Pro Forma Consolidated
Metwood Providence Adjustments Pro Forma
-------------------- ----------------- ---------------- ------------------
REVENUES AND COST OF SALES
Sales $ 1,558,807 $ 270,697 (I) $ (1,867)(K) $1,827,637
Cost of sales (877,368) (142,637) 1,867 (K) (1,018,138)
-------------------- ----------------- --------------------
Gross profit 681,439 128,060 809,499
OPERATING EXPENSES
Salaries and wages 276,032 16,720 292,752
Professional fees 85,368 4,939 90,307
Insurance 42,648 18,823 61,471
Telephone 12,011 2,169 14,180
Utilities 23,555 724 24,279
Repairs and maintenance 46,668 24,992 71,660
Depreciation 42,000 7,584 49,584
Supplies 84,447 4,704 89,151
Advertising 50,045 225 50,270
Taxes and licenses 40,775 4,545 45,320
Other 15,188 17,649 32,837
-------------------- ----------------- --------------------
718,737 103,074 (J) 821,811
INCOME (LOSS) FROM
CONTINUING OPERATIONS (37,298) 24,986 (12,312)
OTHER INCOME AND EXPENSE
Lawsuit settlement income $ 50,000 50,000
Rental income 13,100 13,100
Interest income (expense), net 1,911 (3,027) (1,116)
-------------------- ----------------- --------------------
65,011 (3,027) 61,984
NET INCOME BEFORE
TAX PROVISION 27,713 21,959 49,672
INCOME TAX PROVISION (5,300) (5,300)
-------------------- ----------------- --------------------
NET INCOME $ 22,413 $ 21,959 $ 44,372
==================== ================= ====================
See accompanying notes to (unaudited) pro forma financial statements.
15
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED (UNAUDITED) CONDENSED PRO FORMA STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 2001
Pro Forma Consolidated
Metwood Providence Adjustments Pro Forma
----------------- ------------------ ------------------ -------------------
REVENUES AND COST OF SALES
Sales $ 834,239 $ 143,548 $ (6,784)(L) $971,003
Cost of sales (398,136) (73,511) 6,784 (L) (464,863)
----------------- ------------------ -------------------
Gross profit 436,103 70,037 506,140
OPERATING EXPENSES
Salaries and wages 161,310 9,000 170,310
Professional fees 17,077 680 17,757
Insurance 18,258 10,226 28,484
Telephone 8,913 1,405 10,318
Utilities 4,210 448 4,658
Repairs and maintenance 24,631 12,900 37,531
Depreciation 30,000 4,751 34,751
Supplies 27,503 2,513 30,016
Advertising 31,685 452 32,137
Taxes and licenses 24,766 1,630 26,396
Other 16,271 12,491 28,762
----------------- ------------------ -------------------
364,624 56,496 421,120
INCOME (LOSS) FROM
CONTINUING OPERATIONS 71,479 13,541 85,020
OTHER INCOME AND EXPENSE
Rental income 1,675 1,675
Interest income (expense), net 1,294 (552) 742
Other expenses, net (63) (63)
----------------- ------------------ -------------------
2,906 (552) 2,354
NET INCOME BEFORE
TAX PROVISION 74,385 12,989 87,374
INCOME TAX PROVISION (16,743) (16,743)
----------------- ------------------ -------------------
NET INCOME $ 57,642 $ 12,989 $ 70,631
================= ================== ===================
See accompanying notes to (unaudited) pro forma financial statements.
16
METWOOD, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED (UNAUDITED) CONDENSED PRO FORMA
FINANCIAL STATEMENTS
DECEMBER 31, 2001
(A) Purchased assets did not include cash
(B) Property and equipment were adjusted to a total fair market value of
$100,000. Included is a significant investment in software developed by
Providence that is critical to the design and specifications of products
manufactured by Metwood, Inc.
(C) Excess of the purchase price over the fair value of assets acquired
(D) Elimination of Providence accounts payable - no liabilities were assumed by
Metwood; elimination of Metwood account payable to Providence of $6,724
(E) Elimination of Providence current note payable of $8,249 plus addition of
Metwood note to Providence shareholders, Ronald Shiflett and Sean
Goldsmith, for $60,000, payable at closing date June 10, 2002
(F) Elimination of Providence long-term note payable - no liabilities were
assumed by Metwood
(G) Par value of 290,000 shares of Metwood stock issued and held in escrow for
Providence shareholders
(H) Excess of 290,000 shares issued (see (G) above) over par value
(I) Includes estimated accounts receivable of $47,000
(J) Includes estimated accounts payable of $4,000
(K) Amount due to Providence from Metwood for engineering services
(L) Elimination of Providence's account receivable from Metwood
17