U.S. 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 September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _______ to _______
COMMISSION FILE NUMBER 0-05391
METWOOD, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 83-0210365
(State or other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
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 Section13
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
November 1, 2000: 11,832,883
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
---------------------------
METWOOD, INC. & SUBSIDIARY
As of September 30, 2000 & June 30, 2000
ASSETS (Unaudited)
--------------------
<S> <C> <C>
September 30, 2000 June 30, 2000
-------------------- --------------
CURRENT ASSETS
----------------------------------
Cash . . . . . . . . . . . . . . . $ 14,505 91,598
Accounts receivable. . . . . . . . 167,755 104,171
Inventory. . . . . . . . . . . . . 106,505 84,741
Accrued interest receivable. . . . 4,500 4,500
-------------------- --------------
TOTAL CURRENT ASSETS . . . . . . 293,265 285,010
PROPERTY, PLANT AND EQUIPMENT
----------------------------------
Land . . . . . . . . . . . . . . . 88,000 88,000
Buildings and improvements . . . . 323,694 309,056
Machinery and equipment. . . . . . 229,801 193,685
Accumulated depreciation. . . . . (92,032) (83,032)
-------------------- --------------
NET PROPERTY, PLANT AND EQUIPMENT 549,463 507,709
OTHER ASSETS
----------------------------------
Notes receivable from stockholders 300,000 300,000
Deposits . . . . . . . . . . . . . 8,250 8,250
-------------------- --------------
TOTAL OTHER ASSETS . . . . . . . 308,250 308,250
-------------------- --------------
TOTAL ASSETS . . . . . . . . . $ 1,150,978 1,100,969
==================== ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
---------------------------------------
METWOOD, INC. & SUBSIDIARY
As of September 30, 2000 & June 30, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
(Unaudited)
September 30, 2000 June 30, 2000
------------------ --------------
<S> <C> <C>
CURRENT LIABILITIES
------------------------------------------
Accounts payable and accrued expenses. . . 115,019 87,553
------------------ --------------
TOTAL CURRENT LIABILITIES. . . . . . . . 115,019 87,553
------------------ --------------
STOCKHOLDERS' EQUITY
------------------------------------------
Common stock
($.001, par value,100,000,000
authorized- 11,432,886 issued and
outstanding at September 30, 2000
& 8,153,499 issued and outstanding
at June 30, 2000) . . . . . . . . . . . . 11,432 8,153
Common stock subscribed not yet delivered
($.001,par value, -0- and 3,200,000
subscribed at September 30, 2000 & June
30, 2000, respectively) . . . . . . . . . -0- 3,200
Additional paid-in-capital . . . . . . . . 1,015,797 1,015,797
Retained earnings (deficit). . . . . . . . 8,730 (13,734)
------------------ --------------
TOTAL STOCKHOLDERS'EQUITY. . . . . . . . . 1,035,959 1,013,416
------------------ --------------
$1,150,978 1,100,969
================= ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
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<PAGE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
---------------------------------------------
METWOOD, INC. & SUBSIDIARY
For the Three Months Ended September 30, 2000 & 1999
Sept. 30, 2000 Sept. 30, 1999
---------------- ----------------
<S> <C> <C>
REVENUE
------------------------------------------
Sales . . . . . . . . . . . . . . . . . . $ 386,741 353,233
Cost of Labor . . . . . . . . . . . . . . (226,904) (208,054)
---------------- -----------
GROSS PROFIT . . . . . . . . . . . . . . 159,837 145,179
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
------------------------------------------
Salaries and Wages. . . . . . . . . . . . 64,125 36,107
Payroll Taxes . . . . . . . . . . . . . . 9,820 5,744
Commissions . . . . . . . . . . . . . . . -- 36,000
Rent. . . . . . . . . . . . . . . . . . . 850 8,350
Utilities . . . . . . . . . . . . . . . . 5,233 432
Telephone . . . . . . . . . . . . . . . . 3,501 2,722
Depreciation. . . . . . . . . . . . . . . 9,000 2,880
Supplies. . . . . . . . . . . . . . . . . 16,769 12,311
Repairs and maintenance . . . . . . . . . 9,766 6,127
Advertising . . . . . . . . . . . . . . . 17,922 5,295
Employee benefit programs . . . . . . . . 4,102 649
Insurance . . . . . . . . . . . . . . . . 9,183 2,231
Professional fees . . . . . . . . . . . . 2,018 1,395
Miscellaneous expenses. . . . . . . . . . 547 66
Vehicles.expense 588 112
---------------- ------------
TOTAL EXPENSES . . . . . . . . . . . . . . 153,424 120,421
---------------- -----------
OPERATING INCOME . . . . . . . . . . . . 7,018 24,756
Other Income . . . . . . . . . . . . . . 16,052 4,109
NET INCOME . . . . . . . . . . . . . . $ 22,465 28,865
================ ===========
Retained Earnings
(Deficit), June 30,. . . . . . . . . . . . (13,734) 40,658
---------------- -----------
Retained Earnings,
September 30,. . . . . . . . . . . . . $ 8,730 $ 69,523
================ ===========
Net Income Per Share-
Basic and fully diluted. . . . . . . . $ .002 $ .004
================ ===========
Weighted Average Shares. . . . . . . . 10,717,745 7,183,667
================ ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
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<PAGE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
-------------------------------------------------
METWOOD, INC. & SUBSIDIARY
For the Three Months Ended September 30, 2000 & 1999
September 30,
<S> <C> <C>
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
-----------------------------------------
Net Income $22,465 28,865
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 9,000 2,880
Common stock issued for rounding of
fractional shares under stock split 79 --
(Increase) decrease in operating assets:
Accounts receivable (63,584) (567)
Inventory (21,764) 27,942
Increase (decrease) in operating
liabilities:
Accounts payable &
accrued expenses 27,466 (21,837)
--------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (26,338) 37,283
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-----------------------------------------
Expenditures for building improvements (14,638) --
Expenditures for equipment (36,117) (11,500)
--------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (50,755) (11,500)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
-----------------------------------------
Common stock issuances -- 76,241
Shareholder distributions -- (131,000)
Shareholder loans, net -- 3,108
--------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES -- (51,651)
--------- -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS $(77,093) (25,868)
Cash and cash equivalents,
beginning of period $91,598 89,998
--------- -----------
CASH AND CASH EQUIVALENTS
END OF PERIOD $14,505 64,130
========= ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
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<PAGE>
--------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
METWOOD, INC. & SUBSIDIARIES
September 30, 2000 (UNAUDITED)
ITEM 1.
--------
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments consisting only of normal recurring accruals
considered necessary to present fairly the Company's financial position at
September 30, 2000, the results of operations for the three month periods ended
September 30,1999 and 2000, and cash flows for the three months ended September
30, 1999 and 2000. The results for the period ended September 30, 2000, are not
necessarily indicative of the results to be expected for the entire fiscal year
ending June 30, 2001.
NOTE 2 - EARNINGS PER SHARE
The following represents the calculation of earnings per share:
<TABLE>
<CAPTION>
For the three months ended
September 30,
<S> <C> <C>
BASIC & DILUTED*. . . . . . . . . 2000 1999
--------------- ------------------------------
Net income. . . . . . . . . . . . . $ 22,465 $ 28,865
Less- preferred stock dividends --- ---
------------- ------------
Net income(loss). . . . . . . . . . $ 22,465 $ 28,865
Weighted average number
Of common shares. . . . . . 10,717,745 7,183,667
------------- ------------
Basic & diluted earnings per share. $ .002 $ .004
============= ============
</TABLE>
*There were no common stock equivalents for either period presented.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
--------
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. The
Company disclaims any intent or obligation to publicly update these "forward
looking" statements, whether as a result of new information, future events, or
otherwise.
DESCRIPTION OF BUSINESS
-------------------------
Business Development
--------------------
The Company was incorporated under the laws of the State of Wyoming on June 19,
1969. Following an involuntary dissolution for failure to file an annual
report, the Company was reinstated as a Wyoming Corporation on October 14, 1999.
Thereafter, on January 28, 2000, the Company, through a majority shareholder
vote, changed its domicile to Nevada through a merger with EMC Energies, Inc., a
Nevada corporation. The Plan of Merger provided for the dissenting shareholders
to be paid the amount, if any, to which they would be entitled under the Wyoming
Corporation Statutes with respect to the rights of dissenting shareholders. The
Company also changed its par value to $.001 and the amount of authorized common
stock to 100,000,000.
Prior to 1990, the Company was engaged in the business of exploring
for and producing oil and gas in the Rocky Mountain and Mid-Continent areas of
the United States. The Company liquidated substantially all of its assets in
1990, and was dormant until June 30, 2000, when it acquired, in a
stock-for-stock, tax-free exchange, all of the outstanding common stock of a
privately held Virginia corporation, Metwood, Inc., which was incorporated in
1993. See Form 8-K and attached exhibits, filed August 11, 2000. Metwood has
been in the metal and metal/wood construction materials
manufacturing business since 1992. Following the acquisition, the Company
approved a name change from EMC Energies, Inc. to Metwood, Inc.
<PAGE>
Principal Products or 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.
Its primary products and services are:
Girders and headers;
Floor joists;
Floor joist patch kits
Roof and floor trusses;
Garage, deck and porch kits
Garage and post and beam buildings
Engineering, design and custom building services
Distribution methods of the products or 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 relies on its own sales force for all outside sales.
<PAGE>
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
build rate in Virginia and North Carolina between the months of March and
October. Accordingly, the Company's sales are greater in its second and third
quarters. The Company builds an inventory of its products
throughout the winter and spring to support this 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 U.S. that
manufacturers a similar wood-metal floor truss 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
its wholesale marketing of its unique products to companies such as Lowes and
Home Depot, and to license the Company's technology and products, to increase
its distribution outside of Virginia, North Carolina and the South.
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 source of lumber is Loews
and 84 Lumber Company. Delphia Metals supplies the majority of the Company's
rebar supply. Because of the number of suppliers available to the Company, its
decision in purchasing materials is dictated primarily by price, and secondarily
by availability. The Company does not anticipate a lack of supply to ever
effect its production, but rather a shortage may cause the Company to pass on
higher materials prices to its buyers.
<PAGE>
Dependence on one or a few major customers
------------------------------------------
Presently the Company does not have a 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 purchasers such as Loews and Home Depot, a
substantial impact would be more likely should such a customer be lost.
Patents, trademarks, licenses, franchises, concessions, royalty agreements or
labor contracts, including duration
------------------------------------------------------------------
The Company has four U.S. Patents:
U.S. Patent No. 5,519,977, Joist Reinforcing Bracket, for 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, for 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, for 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, for 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.
Each of these patents were originally issued to the inventors and Company
founders, Robert (Mike) Callahan and Ronald B. Shiflett, who assigned these
patents to the Company.
Need for any government approval of principal products or services
-----------------------------------------------------------------
The Company's products must either be sold with their engineer's seal or they
must be approved by Bureau Officials Code Association (BOCA). Once BOCA
approval is obtained, the products can be used
<PAGE>
with recognized approval in all 50 states. The Company's floor joist patch kit
is presently awaiting BOCA approval. Failure to obtain BOCA approval for any of
the Company's products does not preempt their sale, but is an impediment to
uniform acceptability as the Company 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.
Costs and effects of compliance with environmental laws
-------------------------------------------------------
None; not applicable.
Number of total employees and number of full time employees
-----------------------------------------------------------
The Company has twenty-one employees, all of which are full-time.
RESULTS OF OPERATIONS
-----------------------
Net Income
The Company had net income of $22,465, or $.002 per common share, for the first
three months of operations, versus net income of $28,865, or $.004 for the same
period ended September 30, 1999. The change in net income was primarily due to
an increase in administrative expenses, particularly advertising.
Sales
Revenues increased $33,508 or 9.4% to $386,741 for the three months ended
September 30, 2000 as compared with $353,233 for the three months ended
September 30, 1999. The increase was primarily due to the Company's aggressive
marketing campaign and growing brand awareness. Average selling prices and gross
margins remained fairly constant.
<PAGE>
Expenses
Selling, General, and Administrative expenses increased $33,003 to $153,424 for
the period ending September 30, 2000 versus $120,421 for the same period ended
September 30, 1999, an increase of 27.3%.
The most notable differences were in the advertising and supplies accounts,
which increased $12,627 and $4,458, respectively. Increases were also noted in
the depreciation, utilities, repairs and maintenance, and insurance accounts due
to the Company operating out of it newly renovated, 'owned' facility in Boones
Mill, VA. Rent expense decreased $7,500 as compared to the same period during
1999.
Liquidity and Capital Resources
On September 30, 2000, the Company had cash of $14,505 and working capital of
$178,246. This compares with cash of $64,130 and working capital of $193,218 at
September 30, 1999. The decrease in working capital was due to an increase in
accounts payable, offset by an increase in accounts receivable and a decrease in
cash from proceeds of common stock sales.
Net cash used in operating activities was $26,338 for the three month ended
September 30, 2000 as compared with cash provided by operating activities of
$37,283 for the period ended September 30, 1999. The difference was primarily
attributable to an increase in accounts receivable and inventory of $63,584 and
$21,764, respectively.
Net cash used in investing activities was $50,755 for the three months ended
September 30, 2000 as compared with net cash used of $11,500 during the same
period ended September 30, 1999. The Company purchased several items of new
equipment and made capital improvements to it building during the three months
ended September 30, 2000.
Cash provided by financing activities totaled $-0- for the three months ended
September 30, 2000 as compared with net cash used in financing activities of
$51,651 for the three months ended September 30, 1999. The difference in cash
used in financing activities was primarily due to the shareholder distributions
paid during the three months ended September 30, 1999 in the amount of $131,000.
This was offset by proceeds from the sales of common stock during the Company's
Regulation D offering in 1999.
<PAGE>
PART II. OTHER INFORMATION
---------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
-----------
27.1 Financial Data Schedule
b) Reports on Form 8-K
----------------------
1. Form 8-K was filed on August 11, 2000 regarding the change in control of
the registrant and election of new board of directors pursuant to its plan of
reorganization. Such plan is described in the Company's Form 10-KSB filed
October 6, 2000.
2. Form 8-K was filed on August 11, 2000 regarding the change in registrants
name and authorization of a reverse stock split, also pursuant to its plan of
reorganization.
3. Form 8-K was filed on July 26, 2000 regarding the change in the Company's
certifying accountants.
4. Form 8-K was filed on July 11, 2000 regarding the change in control of
registrant pursuant to its plan of reorganization.
--SIGNATURE PAGE FOLLOWS--
<PAGE>
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.
/s/ Robert 'Mike' Callahan
Date: November 1, 2000 ------------------------
Robert 'Mike' Callahan
Chief Executive Officer
<PAGE>
