**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, 2005**
 
 
 o
    **TRANSITION
      REPORT UNDER SECTION 12 OR 15(d) OF THE EXCHANGE
    ACT**
  **For
      the transition period from ________ to
________**
  **Commission
      File Number 000-05391**
      ****
      
      
      **METWOOD,
      INC.**
      **(Exact
      name of registrant as specified in its charter)**
 
 
 **NEVADA**
      **(State
      or other jurisdiction****of
      incorporation)**
    
    **83-0210365**
      **(IRS
      Employer****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 o
      
      Number of shares of common stock outstanding as of May 11,
      2005: 12,167,499
      
      Transitional Small Business Disclosure Format (Check one)
      Yes o No x
   
 *Table of Contents*
  METWOOD,
      INC. AND SUBSIDIARY
      
      
      TABLE OF CONTENTS - FORM 10-QSB
 
 PART
      I - FINANCIAL INFORMATION
    
    *Page(s)*Item
      1      Financial
      Statements
    
    3Consolidated Balance Sheet As of March 31,
    2005
    
    3Consolidated Statements of Income for the Three and Nine Months
      Ended March 31, 2005 and 2004
    
    4Consolidated Statements of Cash Flows for the Nine Months Ended
      March 31, 2005 and 2004
    
    5Notes to Consolidated Financial
    Statements
    
    6-11Item
      2      Management’s Discussion and
      Analysis
    
    11-14Item
      3      Controls and
      Procedures
    
    14PART
      II - OTHER INFORMATION
    
    15Item
      6      Exhibits and Reports on
      Form 8-K
    
    15Signatures
    
    16Index to Exhibits
    
    17Exhibits
    
    18-22
 
 See
      accompanying notes to consolidated financial statements.
 
 2
 *Table of Contents*
  PART I -
FINANCIAL INFORMATION
 Item
1      Financial
Statements
  **METWOOD,INC. AND SUBSIDIARY****Consolidated
      Condensed Balance Sheet****March
      31, 2005*****(unaudited)*******ASSETSCURRENT
      ASSETSCash
      and Cash Equivalents
    
    
    
    
    $
    106,507Accounts
      Receivable, net of allowance of $10,262
    
    
    
    
    
    552,460Inventory
    
    
    
    
    
    678,074Other
      Current Assets
    
    
    
    
    
    148,248TOTAL
      CURRENT ASSETS
    
    
    
    
    
    1,485,289PROPERTY
      AND EQUIPMENTFurniture,
      fixtures and equipment
    
    
    
    
    
    44,022Computer
      hardware, software and peripherals
    
    
    
    
    
    118,333Machinery
      and shop equipment
    
    
    
    
    
    262,967Vehicles
    
    
    
    
    
    252,469677,791Accumulated
      Depreciation
    
    
    
    
    
    (340,637
    )Net
      Property and Equipment
    
    
    
    
    
    337,154OTHER
      ASSETSGoodwill
    
    
    
    
    
    253,088Net
      Other Assets
    
    
    
    
    
    253,088TOTAL
      ASSETS
    
    
    
    
    $
    2,075,531LIABILITIES
      AND STOCKHOLDERS' EQUITYLIABILITIESCurrent
      Liabilities:Accounts
      Payable
    
    
    
    
    $
    148,209Accrued
      Expenses
    
    
    
    
    
    12,413Customer
      Deposits
    
    
    
    
    
    5,200Income
      Taxes Payable
    
    
    
    
    
    40,500TOTAL
      CURRENT LIABILITIES
    
    
    
    
    
    206,322Deferred
      Income Taxes, net
    
    
    
    
    
    79,014TOTAL
      LONG-TERM LIABILITIES
    
    
    
    
    
    285,336STOCKHOLDERS'
      EQUITYCommon
      Stock ($.001par value, 100,000,000 shares authorized:11,877,499
      shares issued and outstanding)
    
    
    
    
    
    11,877Common
      Stock Subscribed but not Issued ($.001 par, 2950 shares)
    
    
    
    
    
    3Additional
      Paid-in-Capital
    
    
    
    
    
    1,306,147Retained
      Earnings
    
    
    
    
    
    472,168TOTAL
      STOCKHOLDERS' EQUITY
    
    
    
    
    
    1,790,195TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
    
    
    $
    2,075,531The
      accompanying notes are an integral part of the consolidated financial
      statements
  3
 *Table of Contents*
  **METWOOD, INC. AND SUBSIDIARY****Consolidated
      Income Statements****For
      the three and nine months ended March 31, 2005 and
      2004****(unaudited)******Three
      Months Ended March 31,
    
    Nine
      Months Ended March 31,2005
    
    2004
    
    2005
    
    2004REVENUESConstruction
      Sales
    
    $
    985,773
    
    $
    662,509
    
    $
    2,817,162
    
    $
    1,890,383Engineering
      sales
    
    
    96,021
    
    
    77,969
    
    
    276,828
    
    
    221,071Gross
      Sales
    
    
    1,081,794
    
    
    740,478
    
    
    3,093,990
    
    
    2,111,454Cost
      of construction sales
    
    
    560,395
    
    
    451,561
    
    
    1,467,463
    
    
    1,109,966Cost
      of engineering sales
    
    
    50,331
    
    
    50,185
    
    
    175,175
    
    
    133,455Gross
      cost of sales
    
    
    610,726
    
    
    501,746
    
    
    1,642,638
    
    
    1,243,421Gross
      Profit
    
    
    471,068
    
    
    238,732
    
    
    1,451,352
    
    
    868,033ADMINISTRATIVE
      EXPENSES:Advertising
    
    
    13,087
    
    
    34,205
    
    
    101,620
    
    
    46,153Construction/bidding
      data
    
    
    3,148
    
    
    -
    
    
    14,547
    
    
    -Depreciation
    
    
    9,216
    
    
    12,805
    
    
    42,252
    
    
    38,312Dues
      and publications
    
    
    (3,437
    )
    
    -
    
    
    7,505
    
    
    -Insurance
    
    
    9,010
    
    
    15,121
    
    
    43,146
    
    
    35,020Office
      expenses
    
    
    22,814
    
    
    -
    
    
    50,002
    
    
    -Payroll
      expenses
    
    
    154,465
    
    
    96,662
    
    
    425,445
    
    
    315,303Professional
      fees
    
    
    6,057
    
    
    12,635
    
    
    34,772
    
    
    30,829Rent
    
    
    18,600
    
    
    -
    
    
    18,700
    
    
    -Research
      and development
    
    
    600
    
    
    6,923
    
    
    600
    
    
    22,826Telephone
    
    
    7,577
    
    
    6,297
    
    
    20,858
    
    
    17,758Travel
    
    
    9,897
    
    
    -
    
    
    19,673
    
    
    -Vehicle
    
    
    5,769
    
    
    6,460
    
    
    21,706
    
    
    13,278Property
      taxes
    
    
    66
    
    
    8,418
    
    
    5,566
    
    
    30,665Other
    
    
    16,899
    
    
    44,369
    
    
    47,714
    
    
    121,324Total
      administrative expenses
    
    
    273,768
    
    
    243,895
    
    
    854,106
    
    
    671,468OPERATING
      INCOME
    
    
    197,300
    
    
    (5,163
    )
    
    597,246
    
    
    196,565LOSS
      ON SALE OF FIXED ASSETS
    
    
    (368,563
    )
    
    -
    
    
    (368,813
    )
    
    -OTHER
      INCOME (EXPENSE)
    
    
    (4,126
    )
    
    (5,687
    )
    
    (582
    )
    
    558INCOME
      BEFORE INCOME TAXES
    
    
    (175,389
    )
    
    (10,850
    )
    
    227,851
    
    
    197,123INCOME
      TAXES
    
    
    (53,500
    )
    
    (13,590
    )
    
    83,500
    
    
    62,329NET
      INCOME (LOSS)
    
    $
    (121,889
    )
    $
    2,740
    
    $
    144,351
    
    $
    134,794Basic
      and diluted earnings per share
    
    $
    (0.01
    )
    
    **
    
    $
    0.01
    
    $
    0.01Weighted
      Average CommonShares
      Outstanding
    
    
    11,877,499
    
    
    11,941,203
    
    
    11,875,749
    
    
    12,017,609**
      Less than .01The
      accompanying notes are an integral part of the consolidated financial
      statements
  4
 *Table of Contents*
  **METWOOD,
      INC. AND SUBSIDIARY****Consolidated
      Statements of Cash Flows****For
      the three months ended March 31, 2005 and
      2004****(unaudited)******2005
    
    2004CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Income
    
    
    
    
    $
    144,351
    
    $
    134,794Adjustments
      to reconcile net income to net cash provided byoperating
      activities:Depreciation
    
    
    
    
    
    42,252
    
    
    71,332Net
      loss on sale of property and equipment
    
    
    
    
    
    368,813
    
    
    -Common
      stock issued for services
    
    
    
    
    
    -
    
    
    3,500Provision
      for deferred income taxes
    
    
    
    
    
    -
    
    
    24,829(Increase)
      decrease in operating assets:Accounts
      receivable
    
    
    
    
    
    (173,256
    )
    
    4,240Inventory
    
    
    
    
    
    (44,849
    )
    
    (151,778
    )Other
      current assets
    
    
    
    
    
    (107,374
    )
    
    (49,666
    )Increase
      (decrease) in operating liabilities:Accounts
      payable, accrued expenses and customer deposits
    
    
    
    
    
    (167,382
    )
    
    137,679Current
      income taxes payable
    
    
    
    
    
    (19,327
    )
    
    37,500NET
      CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    
    
    
    43,228
    
    
    212,430CASH
      FLOWS FROM INVESTING ACTIVITIES:Proceeds
      from sale of buildings, land and improvements
    
    
    
    
    
    600,000
    
    
    -Purchases
      of property and equipment
    
    
    
    
    
    (35,312
    )
    
    (146,382
    )NET
      CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    
    
    
    564,688
    
    
    (146,382
    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Borrowings
      from (repayment of ) long term debt
    
    
    
    
    
    (125,020
    )
    
    2,802Net
      borrowings from (repayment of ) related party
    
    
    
    
    
    -
    
    
    6,200Borrowings
      (repayments) under line-of-credit agreement
    
    
    
    
    
    (422,000
    )
    
    1,200Common
      stock retired
    
    
    
    
    
    -
    
    
    (25,000
    )Common
      stock issued for cash
    
    
    
    
    
    7,875
    
    
    -NET
      CASH (USED IN) FINANCING ACTIVITIES
    
    
    
    
    
    (539,145
    )
    
    (14,798
    )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    
    
    
    68,771
    
    
    51,250CASH
      AND CASH EQUIVALENTS:Beginning
      of period
    
    
    
    
    
    37,736
    
    
    9,482End
      of period
    
    
    
    
    
    106,507
    
    
    60,732The
      accompanying notes are an integral part of the consolidated financial
      statements
 5
 *Table of Contents*
  METWOOD, INC. AND SUBSIDIARY
      NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
      MARCH
      31, 2005
      (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 (“APB”) Opinion 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, PC (“Providence”), a professional engineering firm with
      customers in the same proximity as Metwood. The total purchase price of
      $350,000 was paid with $60,000 in cash and with 290,000 shares of the
      Company’s common stock to the two Providence shareholders. These shares
      were valued at the closing active quoted market price of the stock at the
      effective date of the purchase, which was $1.00 per share. One of the
      shareholders of Providence was also an officer and existing shareholder of
      Metwood prior to the acquisition. On January 15, 2004, Metwood purchased
      from that shareholder and retired 137,500 of the originally issued 290,000
      shares for $25,000. The initial purchase transaction was accounted for
      under the purchase method of accounting. The purchase price was allocated
      as follows:
  Accounts
      receivable
    
    $
    75,000Fixed
      assets
    
    
    45,000Goodwill
    
    
    230,000Total
    
    $
    350,000
 
 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 financial statements include the accounts of Metwood, Inc. (a Nevada
      corporation) and its wholly owned subsidiary, Metwood Inc. (a Virginia
      corporation) prepared in accordance with accounting principles generally
      accepted in the United States of America and pursuant to the rules and
      regulations of the Securities and Exchange Commission. All significant
      intercompany balances and transactions have been eliminated.
  6
 *Table of Contents*
 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, 2005 are not necessarily indicative of the results to be
      expected for the entire fiscal year ending June 30, 2005.
      
      Fair
      Value of Financial Instruments—
      For certain of the Company’s financial instruments, none of which are held
      for trading, including cash, accounts receivable, accounts payable and
      accrued expenses, and the bank lines of credit, the carrying amounts
      approximate fair value due to their short maturities.
      
      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.
      
      Accounts
      Receivable—
      The Company grants credit in the form of unsecured accounts receivable to
      its customers based on an evaluation of their financial condition. The
      Company performs ongoing credit evaluations of its customers. The estimate
      of the allowance for doubtful accounts, which is charged off to bad debt
      expense, is based on management’s assessment of current economic
      conditions and historical collection experience with each customer. At
      March 31, 2005, the allowance for doubtful accounts was $10,262. Specific
      customer receivables are considered past due when they are outstanding
      beyond their contractual terms and are charged off to the allowance for
      doubtful accounts when determined uncollectible. For both the three and
      nine months ended March 31, 2005 and 2004, the bad debt expense was $-0-.
      
      Inventory—
      Inventory, consisting of metal and wood raw materials, is located on the
      Company’s premises and is stated at the lower of cost or market using the
      first-in, first-out method.
      
      Property
      and equipment—
      Property and equipment are recorded at cost and include expenditures for
      improvements when they substantially increase the productive lives of
      existing assets. Maintenance and repair costs are expensed to operations
      as incurred. Depreciation is computed using the straight-line method over
      the assets’ estimated useful lives, which range from three to forty years.
      
      When
      a fixed asset is disposed of, its cost and related accumulated
      depreciation are removed from the accounts. The difference between
      undepreciated cost and the proceeds from disposition is recorded as a gain
      or loss.
      
      Patents—
      The Company has been assigned several key product patents developed by
      certain Company officers. No value has been recorded in the Company’s
      financial statements because the fair value of the patents was not
      determinable within reasonable limits at the date of assignment.
 
 7
 *Table of Contents*
 
 Goodwill
      — In June 2001 the Financial Accounting Standards Board (‘FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 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.
      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
      and again as of March 31, 2005 and 2004 using discounted cash flow
      estimates and found no goodwill impairment.
      
      Revenue
      Recognition — Revenue is recognized when goods are shipped and earned or
      when services are performed, provided collection of the resulting
      receivable is probable. If any material contingencies are present, revenue
      recognition is delayed until all material contingencies are eliminated.
      Further, no revenue is recognized unless collection of the applicable
      consideration is probable.
      
      Income
      Taxes — Income taxes are accounted for in accordance with SFAS No. 109,
      “Accounting for Income Taxes.” A deferred tax asset or liability is
      recorded for all temporary differences between financial and tax reporting
      and for net operating loss carryforwards, where applicable. Deferred tax
      assets are reduced by a valuation allowance when, in the opinion of
      management, it is more likely than not that some portion or the entire
      deferred tax asset will not be realized. Deferred tax assets and
      liabilities are adjusted for the effect of changes in tax laws and rates
      on the date of enactment.
      
      Research
      and Development — The Company performs research and development on its
      metal/wood products, new product lines, and new patents. Costs, if any,
      are expensed as they are incurred. For the three months ended March 31,
      2005 and 2004, the expenses relating to research and development were $600
      and $6,923, respectively. For the nine months ended March 31, 2005 and
      2004, the expenses relating to research and development were $600 and
      $22,826, respectively.
      
      Earnings
      Per Common Share —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. This presentation has been adopted for the
      quarters presented. There were no adjustments required to net income for
      the years presented in the computation of diluted earnings per share.
      
      Reclassifications
      — Certain items in the financial statements for the three and nine months
      ended March 31, 2004 have been reclassified to conform to the March 31,
      2005 consolidated financial statement presentation.
      
      Recent
      Accounting Pronouncements — In April 2003, the FASB issued SFAS No. 149
      “Amendment of Statement 133 on Derivative Instruments and Hedging
      Activities.” This statement amends and clarifies financial accounting and
      reporting for derivative instruments, including certain derivative
      instruments embedded in other contracts (collectively referred to as
      derivatives) and for hedging activities under FASB Statement No. 133,
      “Accounting for Derivative Instruments and Hedging Activities.” The
      effective date for implementation of this statement is for contracts
      entered into or modified after June 30, 2003. The adoption of this
      statement has had no impact on the Company’s consolidated financial
      condition or results of operations.
 
 8
 *Table of Contents*
 
 In
      May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial
      Instruments with Characteristics of both Liabilities and Equity.” This
      statement establishes standards for how an issuer classifies and measures
      certain financial instruments with characteristics of both liabilities and
      equity. It requires that an issuer classify a financial instrument that is
      within its scope as a liability (or an asset in some circumstances). The
      remaining provisions of this statement are consistent with the Board’s
      proposal to revise the definition of liabilities to encompass certain
      obligations that a reporting entity can or must settle by issuing its own
      equity shares, depending on the nature of the relationship established
      between the holder and the issuer. This statement is effective for
      financial instruments entered into or modified after May 31, 2003, and is
      effective at the beginning of the first interim period beginning after
      June 15, 2003. The adoption of this statement has had no material impact
      on the Company’s consolidated financial condition or results of
      operations.
      
      In
      December 2004, the FASB issued SFAS No. 123(R), "Accounting for
      Stock-Based Compensation". SFAS 123(R) establishes standards for the
      accounting for transactions in which an entity exchanges its equity
      instruments for goods or services. This Statement focuses primarily on
      accounting for transactions in which an entity obtains employee services
      in share-based payment transactions. SGAS 123(R) requires that the fair
      value of such equity instruments be recognized as expense in the
      historical financial statements as services are performed. Prior to SFAS
      123(R), only certain pro-forma disclosures of fair value were required.
      SFAS 123(R) shall be effective for the Company as of the beginning of the
      first interim or annual reporting period that begins after December 15,
      2005. The adoption of this new accounting pronouncement is expected to
      have a material impact on the financial statements of the Company
      commencing with the third quarter of the year ending September 30, 2006.
      Small business issuers need not comply with the new standard until fiscal
      periods beginning after December 15, 2005. We have no expense of employee
      stock options for annual and quarterly periods on fair value calculation
      according to SFAS No.123.
      
      In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs” (SFAS 151).
      This Statement amends the guidance in ARB No. 43, Chapter 4, “Inventory
      Pricing,” to clarify the accounting for abnormal amounts of idle facility
      expense, freight, handling costs, and wasted material (spoilage). SFAS 151
      requires that those items be recognized as current-period charges. In
      addition, this Statement requires that allocation of fixed production
      overheads to the costs of conversion be based on the normal capacity of
      the production facilities. The provisions of SFAS 151 are effective for
      inventory costs incurred in fiscal years beginning after June 15, 2005.
  9
 *Table of Contents*
  NOTE 2 —
EARNINGS PER SHARE
  Net
income and earnings per share for the three and nine months ended March 31, 2005
and 2004 are as follows:
 
 **For
      the Three Months Ended**
      **March
      31,**
    
    **For
      the Nine Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Net
      income (loss)
    
    $
    (121,889
    )
    $
    2,740
    
    $
    144,351
    
    $
    134,794Income
      (loss) per share - basic and fully diluted
    
    
    (0.01
    )
    
    **
    
    
    0.01
    
    
    0.01Weighted
      average number of shares
    
    
    11,877,499
    
    
    11,941,203
    
    
    11,875,749
    
    
    12,017,609
 **Less
than $.01
 NOTE 3 —
SUPPLEMENTAL CASH FLOW INFORMATION
 
 Supplemental
disclosures of cash flow information for the three and nine months ended March
31, 2005 and 2004 are summarized as follows:
   **For
      the Three Months Ended**
      **March
      31,******
    
    **For
      the Nine Months Ended**
      **March
      31,********2005**
    
    **2004**
    
    **2005**
    
    **2004**Cash
      paid for income taxes
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --Cash
      paid for interest
    
    $
    5,529
    
    $
    10,711
    
    $
    15,298
    
    $
    19,587
   NOTE 4 —
RELATED-PARTY TRANSACTIONS
 For
      the three months ended March 31, 2005 and 2004, we had sales of $23,030
      and $60,989, respectively, to our shareholder and CEO, Robert Callahan. As
      of March 31, 2005, the related party receivable was $28,873.
      
      NOTE
      5 — BANK CREDIT LINE
      
      We
      have available a $600,000 revolving line of credit with a local bank. We
      paid off this loan in full during the three months ended March 31, 2005
      from some of the proceeds from the sale of our land and building. Interest
      was payable monthly on the outstanding balance at the prime lending rate,
      which was 4.0% as of March 31, 2005. The note was secured by accounts
      receivable, equipment, general intangibles, inventory, and furniture and
      fixtures. The note was personally guaranteed by the Company’s CEO. The
      balance outstanding as of March 31, 2005 was $-0-.
      
      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. Summarized revenue and expense
      information by segment for the three and nine months ended March 31, 2005
      and 2004, as excerpted from internal management reports, is as follows:
  10
 *Table of Contents*
 **For
      the Three Months Ended**
      **March
      31,**
    
    **For
      the Nine Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Construction:Sales
    
    
    
    
    $
    985,773
    
    
    
    
    $
    662,509
    
    $
    2,817,162
    
    
    
    
    $
    1,890,383Cost
      of sales
    
    
    
    
    
    (560,395
    )
    
    
    
    
    (451,561
    )
    
    (1,467,463
    )
    
    
    
    
    (1,109,966
    )Corporate
      and other expenses
    
    
    
    
    
    (537,954
    )
    
    
    
    
    (214,813
    )
    
    (1,246,005
    )
    
    
    
    
    (668,155
    )Segment
      income (loss)
    
    
    
    
    $
    (112,576
    )
    
    
    
    $
    (3,865
    )
    $
    103,694
    
    
    
    
    $
    112,262Engineering:Sales
    
    
    
    
    $
    96,021
    
    
    
    
    $
    77,969
    
    $
    276,828
    
    
    
    
    
    221,071Cost
      of sales
    
    
    
    
    
    (50,331
    )
    
    
    
    
    (50,185
    )
    
    (175,175
    )
    
    
    
    
    (133,455
    )Corporate
      and other expenses
    
    
    
    
    
    (36,377
    )
    
    
    
    
    (21,179
    )
    
    (60,996
    )
    
    
    
    
    (65,084
    )Segment
      income (loss)
    
    
    
    
    $
    (9,313
    )
    
    
    
    $
    6,605
    
    $
    40,657
    
    
    
    
    $
    22,532
  NOTE 7 —
OPERATING LEASE COMMITMENTS
 
 On
January 3, 2005, we entered into a ten year commercial lease with a monthly
rental of $6,200. We lease various buildings on the same site which house our
manufacturing plants, executive offices, among other buildings from a third
party under a commercial operating lease which expires on January, 2015.
Accordingly, for the three months ended March 31, 2005 and 2004, we recognized
rental expense for these spaces in the amount of $18,600 and $-0-
respectively.
 
 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, PC in a transaction accounted for under the purchase method
      of accounting.
      
      Principal
      Products/Services and Markets
      
      *Metwood*
      
      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 in withstanding 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 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.
      
      Metwood’s
      primary products and services are:·
      Girders and headers
      ·
      Floor joists
      ·
      Floor joist reinforcers
      ·
      Roof and floor trusses
    ·
      Garage, deck and porch concrete pour-over systems
      ·
      Garage and post-and-beam buildings
      ·
      Engineering, design and custom building services
  11
 *Table of Contents*
  Metwood
      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.
  Status
      of Publicly Announced New Products or Services
      
      The
      Company has acquired four new patents through assignment from Robert
      Callahan and Ronald Shiflett, the patent holders. All four patents reflect
      various modifications to the Company’s Joist Reinforcing Bracket which
      will make it even easier for tradesmen to insert utility conduits through
      wood joists.
      
      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
      peak levels in Virginia and North Carolina between the months of March and
      October. Accordingly, the Company’s sales are greater in its fourth and
      first fiscal 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. However, the majority of these manufacturers are using
      wood-only products or products without metal reinforcement. Metwood has
      identified only one other manufacturer in the United States that
      manufactures a wood-metal floor truss similar to that of the Company.
      However, Metwood has often found that its products are the only ones that
      will work within many customers’ design specs.
      
      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, Marino-Ware, and
      Consolidated Systems, Inc. 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. Because of the number of suppliers available to the
      Company, its decisions in purchasing materials are dictated primarily by
      price and secondarily by availability. The Company does not anticipate a
      lack of supply to affect its production; however, a shortage might 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 whose loss would have a
      substantial impact on the Company’s operations.
      
      Patents
      
      The
      Company’s eight U.S. Patents are:
      
      U.S.
      Patent No. 5,519,977, “Joist Reinforcing Bracket,” a bracket that
      reinforces wooden joists with a hole for the passage of a utility conduit.
      The Company refers to this as its Floor Joist Patch Kit.
  12
 *Table of Contents*
 
 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.
      
      U.S.
      Patent Nos. D472,791S; D472,792S; D472,793S; and D477,210S, all
      modifications of Metwood’s Joist Reinforcing Bracket, which will be used
      for repairs of wood I-joists.
      
      Each
      of these patents was originally issued to the inventors and Company
      founders, Robert Callahan and Ronald Shiflett, who licensed these patents
      to the Company.
      
      Need
      for Government Approval of Principal Products
      
      The
      Company’s products must either be sold with an engineer’s seal or
      applicable building code approval. Once that approval is obtained, the
      products can be used in all fifty states. The Company’s Floor Joist
      Reinforcer received Bureau Officials Code Association (“BOCA”) approval in
      April 2001. Currently, the Company’s chief engineer has obtained
      professional licensure in several states which permit products not
      building code approved to be sold and used with his seal. The Company
      expects his licensure in a growing number of states to greatly assist in
      the uniform acceptability of its 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 its metal/wood
      products, new product lines, and new patents.
      
      Costs
      and Effects of Compliance with Environmental Laws
      
      The
      Company does not incur any costs to comply with environmental laws. It is
      an environmentally friendly business in that its products are fabricated
      from recycled steel.
      
      Number
      of Total Employees and Number of Full-Time Employees
      
      The
      Company had twenty-one employees at March 31, 2005, twenty of whom were
      full time.
  13
 *Table of Contents*
  Results
      of Operations
      
      Net
      Income
      
      The
      Company had net income (loss) of $(121,889) and $144,351 for the three and
      nine months ended March 31, 2005, versus net income of $2,740 and $134,794
      for the three and nine months ended March 31, 2004. This represents a
      (decrease) increase in net income of $(124,629) and $9,557 for the three
      and nine months ended March 31, 2005, respectively, compared to prior
      period amounts. The decrease in net income for the quarter ended March 31,
      2005 over 2004 resulted from a loss on sale of fixed assets including our
      building and land in the amount of $368,813. We decided pursuant to a
      unanimous consent of our Board of Directors to lease the building and land
      back from the unrelated purchaser. We received $600,000 from this
      sale.
      
      Revenues
      
      Gross
      sales were $1,081,794 for the three months ended March 31, 2005 compared
      to $740,478 for the same period in 2004, an increase of $341,316, or 46%.
      This increase resulted from a combination of greater sales volume, an
      average increase in selling prices and materials costs
      decrease.
      
      The
      Company’s significant growth in fiscal 2005 sales over fiscal 2004
      resulted from several factors, all of which will continue to have a
      positive impact on sales into the future. Awareness of the Company’s
      products has increased as a result of aggressive marketing campaigns, and
      its patented, innovative products are becoming known throughout the
      country. The Company’s customer base continues to grow as a result.
      Additionally, new products using the technology of the Company’s four
      newly issued patents began production at the beginning of the current
      fiscal year and contributed to the growth in revenues for the three months
      ending March 31, 2005.Expenses
      
      Total
      administrative expenses were $273,768 for the quarter ended March 31,
      2005, versus $243,895 for the quarter ended March 31, 2004, an increase of
      $29,873 (12%). Areas of particular increase for the three months ended
      March 31, 2005 over 2004 were rent due to the aforementioned lease back of
      our property (100%) and payroll expense due to increased sales volume
      (59%). We hired additional employees to handle our increase in sales
      volume in 2005. We also advertised more which generated the increase in
      sales above.
      
      Liquidity
      and Capital Resources
      
      On
      March 31, 2005, we had cash of $106,507 and working capital of $1,278,967.
      Net cash provided by operating activities was $43,228 for the nine months
      ended March 31, 2005 compared to net cash provided by operating activities
      of $212,430 for the nine months ended March 31, 2004. The lesser provision
      of cash in the current year resulted primarily from a decrease in account
      payable, accrued expenses and customer deposits that required a current
      cash outlay.
      
      Net
      cash provided by (used in) investing activities was $564,688 for the nine
      months ended March 31, 2005 compared to net cash used of $(146,382) during
      the same period in the prior year. Cash flows used in investing activities
      for the current period were for shop equipment, office equipment,
      computers, software and vehicles. We received $600,000 in cash flows from
      the sale of our building and land in the third quarter which we, in turn,
      leased back from the purchaser.
      
      Cash
      used in financing activities totaled $539,145 for the nine months ended
      March 31, 2005 as compared to $14,798 used in financing activities for the
      nine months ended March 31, 2004. During the period ended March 31, 2005,
      we issued 15,750 shares of stock for cash of $7,875and we repaid all of our long term debt and credit line from the proceeds
      of the sale of our building and land.
      
      ITEM
      3 — CONTROLS AND PROCEDURES
      
      The
      Company’s management 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.
  14
 *Table of Contents*
  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  are  incorporated  by 
reference.
  15
 *Table of Contents*
  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 11, 2005
    
    */s/
      Robert M. Callahan*
      Robert
      M. Callahan
      Chief
      Executive Officer
 
 
 Date:
      May 11, 2005
    
    */s/
      Shawn Callahan*
      Shawn
      Callahan
      Chief
      Financial Officer
  16
 *Table of Contents*
  INDEX TO EXHIBITS
 
 **NUMBER**
    
    **DESCRIPTION
      OF EXHIBIT**
 
 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 200231.2
    
    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)
    17
 *Table of Contents*