UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the quarterly period ended March 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 12 OR 15(d) OF THE EXCHANGE ACT For the
transition period from ________ to ________
Commission File Number 0-05391
METWOOD, INC.
(Exact name of registrant as specified in its charter)
NEVADA 83-0210365
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
819 Naff Road, Boones Mill, VA 24065
(Address of principal executive offices)
(540) 334-4294
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes__X___ No______
Number of shares of common stock outstanding as of May 19, 2003: 12,051,549
Transitional Small business Disclosure Format (Check one) Yes [ ] No [X]
1
METWOOD, INC. AND SUBSIDIARY
TABLE OF CONTENTS - FORM 10QSB
PART I - FINANCIAL INFORMATION Page
Item 1 Financial Statements
Consolidated Balance Sheet - March 31, 2003 3-4
Consolidated Statements of Income (Loss) for the Three and Nine Months 5
Ended March 31, 2003 and 2002
Consolidated Statements of Cash Flows for the Nine Months 6
Ended March 31, 2003 and 2002
Notes to Consolidated Financial Statements 7-10
Item 2 Management's Discussion and Analysis 11-15
Item 3 Controls and Procedures 16
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 17
Signatures 17
Certification of Chief Executive Officer 18-19
Certification of Chief Financial Officer 20-21
Index to Exhibits 22
2
METWOOD, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF March 31, 2003
(Unaudited)
March 31,
2003
--------------------
ASSETS
Current Assets
Cash 21,493
Accounts receivable 162,120
Inventory 361,466
Prepaid expenses 38,197
Refundable income taxes 20,053
--------------------
Total current assets 603,329
Property and Equipment
Furniture, fixtures and equipment 34,521
Computer hardware, software and peripherals 71,914
Website development 11,800
Machinery and shop equipment 192,157
Vehicles 178,504
Buildings and improvements 792,523
Land and land improvements 179,989
--------------------
1,461,408
Less accumulated depreciation (256,171)
--------------------
Net property and equipment 1,205,237
Goodwill 253,088
--------------------
TOTAL ASSETS $ 2,061,654
====================
3
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2003
(Unaudited)
March 31,
2003
---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 145,917
Bank line of credit 467,000
-----------------
Total current liabilities 612,917
Long-term Liabilities
Deferred income tax credits 44,441
-----------------
Total liabilities 657,358
-----------------
Stockholders' Equity
Common stock, $.001 par, 100,000,000 shares authorized;
12,043,549 shares issued and outstanding 12,043
Common stock not yet issued ($.001 par, 7,500 shares) 8
Additional paid-in capital 1,338,003
Retained earnings 54,242
-----------------
Total stockholders' equity 1,404,296
-----------------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 2,061,654
=================
4
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2003 AND 2002
Three Months Ended Nine Months Ended
----------------------------------- -----------------------------------
March 31, March 31, March 31, March 31,
2003 2002 2003 2002
---------------- --------------- ---------------- ----------------
REVENUES
Sales $ 384,034 $ 490,367 $ 1,334,451 $ 1,324,607
Cost of sales (157,403) (274,077) (781,775) (739,131)
---------------- --------------- ---------------- ----------------
Gross profit 226,631 216,290 552,676 585,476
ADMINISTRATIVE EXPENSES
Advertising 17,144 10,618 23,686 42,303
Depreciation 8,817 14,579 33,056 26,784
Insurance 12,774 7,628 33,152 25,621
Office expense 8,598 8,791 25,256 19,273
Payroll taxes 8,630 6,102 22,256 17,133
Professional fees 9,686 11,874 64,215 28,951
Salaries and wages 105,895 88,174 299,555 249,485
Telephone 3,376 7,521 12,978 16,435
Travel 5,743 2,128 12,715 2,128
Vehicle 3,826 10,526 12,482 13,024
Other 16,546 30,292 60,861 54,803
---------------- --------------- ---------------- ----------------
Total administrative expenses 201,035 198,233 600,212 495,940
---------------- --------------- ---------------- ----------------
Operating income (loss) 25,596 18,057 (47,536) 89,536
Other income (expense) (3,316) 5,185 (4,131) 8,091
---------------- --------------- ---------------- ----------------
Income before income taxes 22,280 23,242 (51,667) 97,627
Income tax provision (benefit) 551 12,407 (1,762) 29,150
---------------- --------------- ---------------- ----------------
Net income (loss) $ 21,729 $ 10,835 $ (49,905) $ 68,477
================ =============== ================ ================
Basic and diluted earnings per share ** ** ** $ 0.01
Weighted average number of shares 12,043,549 11,842,549 12,046,578 11,823,734
**Less than $.01
5
METWOOD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2003 AND 2002
2003 2002
---------------- ---------------
CASH FLOWS USED FOR OPERATING ACTIVITIES
Net income (loss) $(49,905) $ 68,477
Adjustments to reconcile net income (loss) to net cash used for
operating activities:
Depreciation 58,779 54,366
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 24,718 (120,229)
Increase in inventory (98,309) (90,237)
Increase in prepaid expenses (30,691) (11,376)
Increase in accounts payable and accrued expenses 29,162 45,317
Increase (decrease) in current income taxes payable (65,036) 11,084
Increase in deferred income taxes 32,831 16,559
---------------- ---------------
Net cash used for operating activities (98,451) (26,039)
---------------- ---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Expenditures for fixed assets (257,448) (103,405)
---------------- ---------------
Net cash used for investing activities (257,448) (103,405)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock retired (15,000)
Common stock issued for services 3,500 2,000
Common stock issed for equipment 1,801 15,000
Distributions to stockholders (10,840)
Net borrowings (repayment) of note payable (7,997) 10,988
Net borrowings under line-of-credit agreement 317,000 140,153
---------------- ---------------
Net cash from financing activities 299,304 157,301
---------------- ---------------
Net increase (decrease) in cash (56,595) 27,857
Cash, beginning of the year 78,088 25,924
---------------- ---------------
Cash, end of the period $ 21,493 $ 53,781
================ ===============
6
METWOOD, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity - Metwood, Inc. ("Metwood") was organized under the laws of
the Commonwealth of Virginia on April 7, 1993. On June 30, 2000, Metwood entered
into an Agreement and Plan of Reorganization in which the majority of its
outstanding common stock was acquired by a publicly held Nevada shell
corporation. The acquisition was a tax-free exchange for federal and state
income tax purposes and was accounted for as a reverse merger in accordance with
Accounting Principles Board No. 16. Upon acquisition, the name of the shell
corporation was changed to Metwood, Inc., and Metwood, Inc., the Virginia
corporation, became a wholly owned subsidiary of Metwood, Inc., the Nevada
corporation. The publicly traded shell corporation had not had a material
operating history for several years prior to the merger.
Effective January 1, 2002, Metwood acquired certain assets of Providence
Engineering, P.C. ("Providence"), a professional engineering firm with customers
in the same proximity as Metwood, paying $60,000 in cash and issuing 290,000
common shares to the two Providence shareholders. These shares were valued at
the closing quoted stock price of $1.00 per share at the effective date of the
purchase. See the Company's Annual Report on Form 10-KSB for the year ended June
30, 2002 for additional disclosures. One of the shareholders of Providence was
also an officer and existing shareholder of Metwood prior to the acquisition.
The transaction was accounted for under the purchase method of accounting.
The consolidated company ("the Company") provides construction-related products
and engineering services to residential customers and contractors, commercial
contractors, developers and retail enterprises, primarily in southwestern
Virginia.
Basis of Presentation - The unaudited condensed financial statements included
herein include the accounts of Metwood, Inc. (the Nevada corporation) and its
wholly owned subsidiary (the Virginia corporation) on a consolidated basis,
prepared under the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. For further
information, refer to the Company's Annual Report on Form 10-KSB for the year
ended June 30, 2002.
7
In the opinion of management, the unaudited condensed consolidated financial
statements contain all the adjustments necessary in order to make the financial
statements not misleading. The results for the period ended March 31, 2003 are
not necessarily indicative of the results to be expected for the entire fiscal
year ending June 30, 2003.
Accounts Receivable - Accounts receivable are charged to an allowance for
doubtful accounts as they are deemed uncollectible based upon a periodic review
of the accounts. At March 31, 2003, the allowance was zero.
Credit is extended to customers based on an evaluation of their financial
condition, and collateral is not required. The Company performs ongoing credit
evaluations of its customers.
Management's Use of Estimates - The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities at the date of consolidated financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Net Income Per Common Share -SFAS No. 128 requires dual presentation of basic
and diluted earnings per share (EPS) with a reconciliation of the numerator and
denominator of the EPS computations. Basic earnings per share amounts are based
on the weighted average shares of common stock outstanding. If applicable,
diluted earnings per share would assume the conversion, exercise or issuance of
all potential common stock instruments such as options, warrants and convertible
securities, unless the effect is to reduce a loss or increase earnings per
share. Accordingly, this presentation has been adopted for the years presented.
There were no adjustments required to net income for the years presented in the
computation of diluted earnings per share.
Web Site Development - The rules regarding capitalization versus expensing of
web site development costs have been set forth in two American Institute of
Certified Public Accountants (AICPA) publications, AICPA Statement of Position
(SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use," and AICPA Emerging Issues Task Force (EITF) Issue No. 00-2,
"Accounting for Web Site Development Costs." These publications require, in
part, that all costs incurred during the application development stage of web
site development be capitalized, all training and application maintenance costs
incurred during the post-implementation (operations) stage be expensed, and all
upgrades and enhancements incurred during the post-implementation (operations)
stage be capitalized. As of March 31, 2003, the Company had capitalized $11,800
in costs which have been incurred in the development stage of its web site.
8
New Accounting Standards - In June 2001 the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"),
"Goodwill and Other Intangible Assets." This statement requires that goodwill
and intangible assets deemed to have an indefinite life not be amortized.
Instead, such assets are to be tested for impairment annually, or immediately if
conditions indicate that such an impairment could exist. Transition to the new
rules of SFAS 142 requires the completion of a transitional impairment test of
goodwill within the first year of adoption. The Company adopted the provisions
of SFAS 142 beginning July 1, 2002 and completed the transitional impairment
test of goodwill as of July 1, 2002 using discounted cash flow estimates and
found no goodwill impairment.
NOTE 2 - EARNINGS PER SHARE
Net income (loss) and earnings per share for the three and six months ending
March 31, 2003 and 2002 are as follows:
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
2003 2002 2003 2002
----------- ---------- --------- -------
Net income (loss) $21,729 $10,835 $(49,905) $68,477
Income (loss) per share-basic and fully diluted ** ** ** $.01
Weighted average number of shares 12,043,549 11,842,549 12,046,578 11,823,734
**Less than $.01
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information for the three and nine months
ended March 31, 2003 and 2002 are summarized as follows:
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
2003 2002 2003 2002
----------- ---------- --------- -------
Cash paid for:
Income taxes $30,443 $ -- $ 30,443 $ --
Interest $ 3,825 $ 1,910 $ 8,033 $ 4,926
NOTE 4 - RELATED-PARTY TRANSACTIONS
From time to time, the Company contracts with a construction company related
through common ownership and from whom the Company earns equipment rental fees.
There were no fees earned for the three and nine months ended March 31, 2003 or
2002, and there were no amounts receivable from the related party at March 31,
2003 or 2002.
9
NOTE 5 - BANK CREDIT LINE
During the nine months ended March 31, 2003, the Company borrowed $347,000 on
its $650,000 bank line of credit and repaid $30,000, leaving a balance of
$467,000 outstanding. The available line of credit at March 31, 2003 was
$183,000. The loan is payable on demand, with interest payable at the bank's
prime rate. The actual rate of interest in effect at March 31, 2003 was 4.25%.
Accounts receivable, equipment, general intangibles, inventory, furniture and
fixtures secure the loan under a signed Security Agreement dated February 25,
2002. The Company's shareholder and CEO guarantees the loan.
NOTE 6 - SEGMENT INFORMATION
The Company operates in two principal business segments: (1)
construction-related products and (2) engineering services. Performance of each
segment is evaluated based on profit or loss from operations before income
taxes. These reportable segments are strategic business units that offer
different products and services. However, the Company's manufactured products
must either be sold with their engineers' seal or with Building Officials Code
Association (BOCA) approval. Summarized revenue and expense information by
segment for the three and nine months ended March 31, 2003 and 2002 follows:
For the Three For the Nine
Months Ended Months Ended
March 31, March 31,
2003 2002 2003 2002
------ ------ ------ ------
Construction:
Revenues from external customers $ 311,809 $ 404,838 $ 1,182,594 $ 1,239,078
Intersegment revenues $ -- $ -- $ -- $ --
Income (loss) before income taxes $ 15,494 $ (12,628) $ (21,613) $ 61,757
Engineering:
Revenues from external customers $ 72,225 $ 85,529 $ 151,857 $ 85,529
Intersegment revenues $ -- $ -- $ 200 $ --
Income (loss) before income taxes $ 6,786 $ 35,870 $ (30,054) $ 35,870
10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
With the exception of historical facts stated herein, the matters discussed in
this report are "forward-looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward-looking" statements include, but are not
necessarily limited to, statements regarding anticipated levels of future
revenues and earnings from operations of the Company. Readers of this report are
cautioned not to put undue reliance on "forward-looking" statements, which are
by their nature, uncertain as reliable indicators of future performance.
Description of Business
Background
As discussed in detail in Note 1, the Company was incorporated under the laws of
the Commonwealth of Virginia on April 7, 1993 and, on June 30, 2000, entered
into a reverse merger in which it became the wholly owned subsidiary of a public
Nevada shell corporation, renamed Metwood, Inc. Effective January 1, 2002,
Metwood acquired certain assets of Providence Engineering, P.C. in a transaction
accounted for under the purchase method of accounting.
Principal Products/Services and Markets
Residential builders are aware of the superiority of steel framing vs. wood
framing, insofar as steel framing is lighter, stronger, termite, pest, rot and
fire resistant, and dimensionally more stable to withstand induced loads.
Although use of steel framing in residential construction has generally
increased each year since 1980, many residential builders have been hesitant to
utilize steel, due to the need to retrain framers and subcontractors who are
accustomed to a "stick-built" construction method where components are laid out
and assembled with nails and screws. The Company's founders, Robert (Mike)
Callahan and Ronald Shiflett saw the need to combine the strength and durability
of steel with the convenience and familiarity of wood and wood fasteners.
The Company manufactures light-gage steel construction materials, usually
combined with wood or wood fasteners, for use in residential and commercial
applications, in place of more conventional wood products, which are inferior in
terms of strength and durability. The steel and steel/wood products allow
structures to be built with increased load strength and structural integrity and
fewer support beams or support configurations, thereby allowing for structural
designs that are not possible with wood-only products.
The Company's primary products and services are:
- Girders and headers
- Floor joists
- Floor joist reinforcers
11
- Roof and floor trusses
- Garage, deck and porch concrete pour-over systems
- Garage and post and beam buildings
- Engineering, design and custom building services
Distribution Methods of the Products and Services
The Company's sales are primarily retail, directly to contractors and
do-it-yourself homeowners in Virginia and North Carolina. Approximately 20% of
the Company's sales are wholesale to lumberyards, home improvement stores,
hardware stores, and plumbing and electrical suppliers in Virginia and North
Carolina. The Company is currently in the process of establishing more
relationships with wholesale yards to increase sales and to have the wholesale
yards stock Metwood products. The Company relies on its own sales force for all
outside sales but is anticipating utilizing the salespeople of wholesale yards
as an additional sales force once the yards stock the Company's products. The
Company is also in discussions with national engineered I-joist manufacturers
who are interested in marketing the Company's products and expects to announce
affiliations with these companies in the near future.
Seasonality of Market
The Company's sales are subject to seasonal impacts, as its products are used in
residential and commercial construction projects, which tend to be at a higher
building rate in Virginia and North Carolina between the months of March and
October. Accordingly, the Company's sales are greater in its fourth and first
quarters. The Company builds an inventory of its products throughout the winter
and spring to support its sales season.
Competition
Nationally, there are over one hundred manufacturers of the types of products
produced by the Company. Approximately 10% of these manufacturers capture
approximately 80% of the market for these products. In addition, most of these
manufacturers are better financed than the Company, and therefore better poised
for market retention and expansion. The majority of these manufacturers,
however, are using wood-only products, or products without metal reinforcement.
The Company has identified only one other manufacturer in the western United
States that manufactures a wood-metal floor truss similar to that of the
Company. The Company holds four separate patents on its products (see Patents
section below) that are unique only to the Company. The Company intends to
continue to expand the wholesale marketing of its unique products to retailers
and to license the Company's technology and products in order to increase its
distribution outside of Virginia, North Carolina and the South.
12
Sources and Availability of Raw Materials and the Names of Principal Suppliers
All of the raw materials used by the Company are readily available on the market
from numerous suppliers. The light-gage metal used by the Company is supplied
primarily by Dietrich Industries. The Company's main sources of lumber are
Lowe's, 84 Lumber Company, and Smith Mountain Building Supply. Gerdau Amersteel,
Descosteel, and Adelphia Metals provide the majority of the Company's rebar
supply. Because of the number of suppliers available to the Company, its
decisions in purchasing materials is dictated primarily by price and secondarily
by availability. The Company does not anticipate a lack of supply to ever affect
its production, but rather a shortage may cause the Company to pass on higher
materials prices to its buyers.
Dependence on One or a Few Major Customers
Presently the Company does not have any one customer, the loss of which would
have a substantial impact on the Company's operations. As the Company continues
to expand its wholesale sales to retailers, a substantial impact would be more
likely should such a customer be lost.
Patents
The Company has four U.S. patents:
U.S. Patent No. 5,519,977, Joist Reinforcing Bracket, a bracket that
reinforces wooden joists, provided with a hole for the passage of a utility
conduit. The Company refers to this as its floor joist patch kit.
U.S. Patent No. 5,625,997, Composite Beam, a composite beam that includes
an elongated metal shell and a pierceable insert for receiving nails, screws or
other penetrating fasteners.
U.S. Patent No. 5,832,691, Composite Beam, a composite beam that includes
an elongated metal shell and a pierceable insert for receiving nails, screws or
other penetrating fasteners. This is a continuation-in-part of U.S. Patent No.
5,625,997.
U.S. Patent No. 5,921,053, Internally Reinforced Girder with Pierceable
Nonmetal Components, a girder that includes a pair of c-shaped members secured
together so as to form a hollow box, which permits the girder to be secured
within a building structure with conventional fasteners such as nails, screws
and staples.
The Company also has a patent pending on a modification of the floor joist patch
kit. The Company expects that this patent will be granted from the U.S. Patent
office within the next twelve months.
Each of these patents was originally issued to the inventors and Company
founders, Robert (Mike) Callahan and Ronald Be. Shiflett, who licensed these
patents to the Company.
13
Need for Government Approval of Principal Products
The Company's products must either be sold with an engineer's seal or Bureau
Officials Code Association (BOCA) approval. Once BOCA approval is obtained, the
products can be used in all fifty states. The Company's floor joist patch kit
received BOCA approval in April 2001. The Company expects this to greatly assist
in the uniform acceptability of the Company's products as it expands to new
markets.
Time Spent During the Last Two Fiscal Years on Research and Development
Activities
Approximately fifteen percent of the Company's time and resources have been
spent during the last two fiscal years researching and developing metal/wood
products.
Results of Operations
Net Income
The Company had net income of $21,729 and a net loss of $49,905, respectively,
for the three and nine months ended March 31, 2003, versus net income of $10,835
and $68,477, respectively, for the three and nine months ended March 31, 2002.
This represents an increase of $10,894 for the three months ended March 31, 2003
and a decrease of $118,382 for the nine months ended March 31, 2003, compared to
the same periods in 2002. The increase in net income for the three months ended
March 31, 2003 compared to the same period in 2002 resulted primarily from a
lower tax provision in the current period. The decrease in net income for the
nine months ended March 31, 2003 compared to the prior year was a result of
increased expenses related to the acquisition of Providence Engineering
("Providence"), particularly payroll and professional fees; increased costs of
materials, including new federal tariffs on steel and Canadian soft lumber; and
fixed operating and overhead costs that remained fairly constant while revenue
Sales
Revenues were $384,034 for the three months ended March 31, 2003, versus
$490,367 for the three months ended March 31, 2002, a decrease of $106,333, or
22%. Revenue decreases were due primarily to the extreme weather conditions
during the fall and winter months, including both rain and snow, which prevented
jobs from either starting or being finished. Revenues for the nine months ended
March 31, 2003 were $1,334,451 versus $1,324,607 for the same prior-year period,
an increase of $9,844, or just under 1%. Increasing revenues during the first
six months of the fiscal year (up 14% over the first six months of the prior
fiscal year) were almost completely offset by the revenue declines in January
through March 2003. Average selling prices remained fairly constant.
14
Expenses
Total administrative expenses were $201,035 and $600,212 for the three and nine
months ended March 31, 2003, respectively, versus $198,233 and $495,940 for
the three and nine months ended March 31, 2002, respectively. This is an
increase of $2,802 for the three months ended March 31, 2003 compared with
the same period in 2002 and an increase of $104,272 for the nine months
ended March 31, 2003 over the nine months ended March 31, 2002. Notable
differences were as follows:
- Some expenses, such as certain depreciation, payroll taxes and
insurance, have been reclassified for the three and nine months ended
March 31, 2003 and 2002 to cost of sales in order to be more
accurately matched against related revenues. Doing so resulted in a
decrease in administrative expenses of approximately $40,000 and
$63,000, respectively, for the three and nine months ended March 31,
2003 compared to what would have otherwise been reflected. There was a
corresponding decrease of $18,000 and $62,000, respectively, for the
three and nine months ended March 31, 2002 compared to what would have
otherwise been reflected.
- Professional fees increased $35,000 for the nine months ended March
31, 2003 compared to March 2002 due to legal fees associated with
patent applications as well as higher audit and accounting fees
related to the purchase of Providence.
- Travel expenses increased approximately $4,000 and $11,000 for the
three and nine months ended March 31, 2003, respectively, over the
same periods in 2002 as a result of the Company's out-of-state
marketing campaign at building trade shows.
- Salaries and wages increased approximately $18,000 and $50,000 for the
three and nine months ended March 31, 2003, respectively, over the
same periods in 2002 as a result of hiring additional salesmen and
engineering personnel.
Liquidity and Capital Reserves
On March 31, 2003, the Company had cash of $21,493 and a working capital deficit
of $9,588. Net cash used by operating activities was $98,451 for the nine months
ended March 31, 2003 compared to $26,039 cash used for the nine months ended
March 31, 2002. The greater use of cash in the current year resulted primarily
from an increase in prepaid expenses and payment of prior years' income taxes.
Net cash used in investing activities was $257,448 for the nine months ended
March 31, 2003 compared to net cash used of $103,405 during the same period
ended March 31, 2002. Cash flows used in investing activities for the period
were for building improvements ($136,323), vehicles ($58,585), shop equipment
($37,145) and computers, software and capitalized website development ($25,395).
Cash provided by financing activities totaled $299,304 for the nine months ended
March 31, 2003 as compared with cash provided by financing activities of
$157,301 for the nine months ended March 31, 2002. Cash was borrowed from the
bank line of credit in both the current period and the prior year for operating
capital and for the purchase of plant and equipment.
15
ITEM 3 - CONTROLS AND PROCEDURES
The management of Metwood, Inc. has reviewed the systems of internal controls
and disclosures within the specified time frame of ninety days. Management
believes that the systems in place allow for proper controls and disclosures of
financial reporting information. There have been no changes in these controls
since our last evaluation date.
16
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See index to exhibits.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended March 31, 2003.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 19, 2003 /s/ Robert M. Callahan
Robert M. Callahan
Chief Executive Officer
/s/ Annette G. Mariano
Annette G. Mariano
Chief Financial Officer
17
Certification of Chief Executive Officer
Securities Exchange Act rules 13a-14 and 15d-14
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Robert M. Callahan, Chief Executive Officer of Metwood, Inc., certifies that:
1. I have reviewed this quarterly report on Form 10-QSB of Metwood, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of and for the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 131-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within ninety days prior to
the filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
18
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial date
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 19, 2003 /s/ Robert M. Callahan
-----------------------------
Robert M. Callahan
Chief Executive Officer
19
Certification of Chief Financial Officer
Securities Exchange Act rules 13a-14 and 15d-14
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Annette G. Mariano, Chief Financial Officer of Metwood, Inc., certifies that:
1. I have reviewed this quarterly report on Form 10-QSB of Metwood, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of and for the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 131-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within ninety days prior to
the filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
20
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial date
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 19, 2003 /s/ Annette G. Mariano
Annette G. Mariano
Chief Financial Officer
21
INDEX TO EXHIBITS
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
3(i)* Articles of Incorporation
3(ii)** By-Laws
*Incorporated by reference on Form 8-K, filed February 16, 2000.
**Incorporated by reference on Form 8-K, filed February 16, 2000.
22