**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 December 31, 2004**








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 xNoo
      
      Number
      of shares of common stock outstanding as of February 18, 2005:
      12,167,499
      
      Transitional
      Small Business Disclosure Format (Check one) Yes o No x









*Table of Contents*




**METWOOD, INC. AND SUBSIDIARY**
      **FORM
      10-QSB**
      ****
      **TABLE
      OF CONTENTS**





***Part
      I.* *Financial Information***
    
    *Page
      (s)*Item 1.   Financial StatementsConsolidated Balance Sheet As of December 31,
      2004
    
    1-2Consolidated Statements of Income for the Three and Six Months
      Ended December 31, 2004 and 2003
    
    3Consolidated Statements of Cash Flows for the Six Months Ended
      December 31, 2004 and 2003
    
    4Notes to Consolidated Financial Statements
    
    5-9Item
      2.Management’s Discussion and Analysis
    
    10-15Item
      3.Controls and Procedures
    
    15***Part
      II*         *Other Information***Item
      6.Exhibits and Reports on Form 8-K
    
    16Signatures
    
    16Index to Exhibits
    
    17Exhibits
    
    18-22





See
      accompanying notes to consolidated financial statements.




*Table of Contents*






Part I. Financial Information





Item
1.  Financial Statements


**METWOOD, INC. AND SUBSIDIARY****Consolidated
      Condensed Balance Sheet****December
      31, 2004*****(unaudited)*******ASSETS2004CURRENT
      ASSETSCash
      and Cash Equivalents
    
    
    
    
    $
    36,847Accounts
      Receivable, net of allowance of $10,262
    
    
    
    
    
    479,715Inventory
    
    
    
    
    
    679,807Other
      Current Assets
    
    
    
    
    
    18,910TOTAL
      CURRENT ASSETS
    
    
    
    
    
    1,215,279PROPERTY
      AND EQUIPMENTFurniture,
      fixtures and equipment
    
    
    
    
    
    44,022Computer
      hardware, software and peripherals
    
    
    
    
    
    98,353Machinery
      and shop equipment
    
    
    
    
    
    262,967Vehicles
    
    
    
    
    
    252,469Buildings
      and improvements
    
    
    
    
    
    855,885Land
      and land improvement
    
    
    
    
    
    194,7861,708,482Accumulated
      Depreciation
    
    
    
    
    
    (400,405
    )Net
      Property and Equipment
    
    
    
    
    
    1,308,077OTHER
      ASSETSGoodwill
    
    
    
    
    
    253,088Net
      Other Assets
    
    
    
    
    
    253,088TOTAL
      ASSETS
    
    
    
    
    $
    2,776,444LIABILITIES
      AND STOCKHOLDERS' EQUITYLIABILITIESCurrent
      Liabilities:Accounts
      Payable
    
    
    
    
    $
    118,769Accrued
      Expenses
    
    
    
    
    
    37,726Customer
      Deposits
    
    
    
    
    
    5,200Current
      Maturities of Long-term Debt
    
    
    
    
    
    365,024Bank
      Line of Credit
    
    
    
    
    
    34,000Income
      Taxes Payable
    
    
    
    
    
    135,827TOTAL
      CURRENT LIABILITIES
    
    
    
    
    
    696,546Long-term
      Debt, excluding current maturities
    
    
    
    
    
    81,800Deferred
      Income Taxes,net
    
    
    
    
    
    86,014TOTAL
      LONG-TERM LIABILITIES
    
    
    
    
    
    167,814STOCKHOLDERS'
      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
    
    
    
    
    
    594,057TOTAL
      STOCKHOLDERS' EQUITY
    
    
    
    
    
    1,912,084TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
    
    
    $
    2,776,444The
      accompanying notes are an integral part of the consolidated financial
      statements




1
 *Table of Contents*




**METWOOD, INC. AND SUBSIDIARY****Consolidated
      Income Statements****For
      the three and six months ended December 31, 2004 and
      2003****(unaudited)******Three
      Months Ended December 31,
    
    Six
      Months Ended December 31,2004
    
    2003
    
    2004
    
    2003REVENUESConstruction
      Sales
    
    $
    811,189
    
    $
    704,727
    
    $
    1,830,090
    
    $
    1,227,874Engineering
      sales
    
    
    86,186
    
    
    70,691
    
    
    182,105
    
    
    143,102Gross
      Sales
    
    
    897,375
    
    
    775,418
    
    
    2,012,195
    
    
    1,370,976Cost
      of construction sales
    
    
    350,344
    
    
    357,230
    
    
    907,427
    
    
    658,404Cost
      of engineering sales
    
    
    75,509
    
    
    45,485
    
    
    124,448
    
    
    82,963Gross
      cost of sales
    
    
    425,853
    
    
    402,715
    
    
    1,031,875
    
    
    741,367Gross
      Profit
    
    
    471,522
    
    
    372,703
    
    
    980,320
    
    
    629,609ADMINISTRATIVE
      EXPENSES:Advertising
    
    
    41,804
    
    
    5,033
    
    
    88,533
    
    
    11,948Construction/bidding
      data
    
    
    6,558
    
    
    -
    
    
    11,340
    
    
    -Depreciation
    
    
    15,517
    
    
    12,870
    
    
    31,052
    
    
    25,507Dues
      and publications
    
    
    4,554
    
    
    -
    
    
    10,942
    
    
    -Insurance
    
    
    20,895
    
    
    11,219
    
    
    33,997
    
    
    19,900Office
      expenses
    
    
    12,616
    
    
    -
    
    
    18,790
    
    
    218,642Payroll
      expenses
    
    
    148,568
    
    
    111,941
    
    
    270,980
    
    
    22,247Professional
      fees
    
    
    7,973
    
    
    12,893
    
    
    36,515
    
    
    18,194Research
      and development
    
    
    -
    
    
    8,700
    
    
    -
    
    
    15,903Telephone
    
    
    6,670
    
    
    5,747
    
    
    13,281
    
    
    11,461Travel
    
    
    6,351
    
    
    -
    
    
    9,776
    
    
    -Vehicle
    
    
    6,866
    
    
    910
    
    
    16,440
    
    
    6,817Property
      taxes
    
    
    5,501
    
    
    15,222
    
    
    5,500
    
    
    -Other
    
    
    13,732
    
    
    49,020
    
    
    35,445
    
    
    77,261Total
      administrative expenses
    
    
    297,605
    
    
    233,555
    
    
    582,591
    
    
    427,880OPERATING
      INCOME
    
    
    173,917
    
    
    139,148
    
    
    397,729
    
    
    201,729OTHER
      INCOME:
    
    
    8,875
    
    
    88
    
    
    5,511
    
    
    6,252INCOME
      BEFORE INCOME TAXES
    
    
    182,792
    
    
    139,236
    
    
    403,240
    
    
    207,981INCOME
      TAXES
    
    
    55,000
    
    
    51,082
    
    
    137,000
    
    
    75,919NET
      INCOME
    
    $
    127,792
    
    $
    88,154
    
    $
    266,240
    
    $
    132,062Basic
      and diluted earnings per share
    
    $
    0.01
    
    
    **
    
    $
    0.02
    
    $
    0.01Weighted
      Average CommonShares
      Outstanding
    
    
    11,877,499
    
    
    12,057,549
    
    
    11,874,874
    
    
    12,055,396**
      Less than .01The
      accompanying notes are an integral part of the consolidated financial
      statements
 
  2
 *Table of Contents*




**METWOOD, INC. AND SUBSIDIARY****Consolidated
      Statements of Cash Flows****For
      the six months ended December 31, 2004 and 2003****(unaudited)******2004
    
    2003CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Income
    
    
    
    
    $
    266,240
    
    $
    132,062Adjustments
      to reconcile net income to net cash provided byoperating
      activities:Depreciation
    
    
    
    
    
    47,690
    
    
    47,012Net
      loss on sale of property and equipment
    
    
    
    
    
    2,948
    
    
    -Common
      stock issued for services
    
    
    
    
    
    -
    
    
    3,500Provision
      for deferred income taxes
    
    
    
    
    
    7,000
    
    
    17,006(Increase)
      decrease in operating assets:Accounts
      receivable
    
    
    
    
    
    (100,511
    )
    
    (44,511
    )Inventory
    
    
    
    
    
    (46,582
    )
    
    (38,884
    )Prepaid
      expenses
    
    
    
    
    
    21,964
    
    
    (24,677
    )Increase
      (decrease) in operating liabilities:Accounts
      payable, accrued expenses and customer deposits
    
    
    
    
    
    (173,057
    )
    
    (15,702
    )Current
      income taxes payable
    
    
    
    
    
    76,000
    
    
    58,913NET
      CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    
    
    
    101,692
    
    
    134,719CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of property and equipment
    
    
    
    
    
    (44,260
    )
    
    (67,452
    )NET
      CASH (USED IN) INVESTING ACTIVITIES
    
    
    
    
    
    (44,260
    )
    
    (67,452
    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Borrowings
      from (repayment of ) notes payable
    
    
    
    
    
    (9,220
    )
    
    3,184Net
      borrowings from (repayment of ) related party
    
    
    
    
    
    -
    
    
    10,154Borrowings
      (Repayments) under line-of-credit agreement
    
    
    
    
    
    (56,976
    )
    
    8,000Common
      stock issued for cash
    
    
    
    
    
    7,875
    
    
    -NET
      CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    
    
    
    (58,321
    )
    
    21,338NET
      INCREASE (DECREASE) IN CASH ANDCASH
      EQUIVALENTS
    
    
    
    
    
    (889
    )
    
    88,605CASH
      AND CASH EQUIVALENTS:Beginning
      of period
    
    
    
    
    
    37,736
    
    
    9,482End
      of period
    
    
    
    
    
    36,847
    
    
    98,087The
      accompanying notes are an integral part of the consolidated financial
      statements
 
  3
 *Table of Contents*


**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
31, 2004**


**(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.





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 December 31, 2004 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.




4
 *Table of Contents*




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 December 31, 2004, 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 six months ended December 31, 2004 and
2003, 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.




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 December 31, 2004 and 2003 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 December 31, 2004 and
2003, the expenses relating to research and development were $-0- and $8,700,
respectively. For the six months ended December 31, 2004 and 2003, the expenses
relating to research and development were $-0- and $15,903,
respectively.




5
 *Table of Contents*




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 six months ended
December 31, 2003 have been reclassified to conform to the December 31, 2004
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.




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.





6
 *Table of Contents*




**Note
2 — Earnings Per Share**




Net
income and earnings per share for the three and six months ended December 31,
2004 and 2003 are as follows:




**For the Three Months Ended**
      **December 
      31,**
    
    **For
      the Six Months Ended**
      **December
      31,****2004**
      ****
    
    ****
      **2003**
    
    **2004**
    
    **2003******Net
      income
    
    $
    127,792
    
    $
    88,154
    
    $
    266,240
    
    $
    132,062Income
      per share - basic and fully diluted
    
    
    0.01
    
    
    **
    
    
    0.02
    
    
    0.01Weighted
      average number of shares
    
    
    11,877,499
    
    
    12,057,549
    
    
    11,874,874
    
    
    12,055,396




**Less than $.01




**Note
3 — Supplemental Cash Flow Information**
  Supplemental
disclosures of cash flow information for the three and six months ended December
31, 2004 and 2003 are summarized as follows:


**For
      the Three Months Ended**
      **December
      31,******
    
    **For
      the Six Months Ended**
      **December
      31,********2004**
    
    **2003**
    
    **2004**
    
    **2003******Cash
      paid for income taxes
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --Cash
      paid for interest
    
    $
    3,960
    
    $
    5,553
    
    $
    10,429
    
    $
    11,145
 
 **Note
4 — Related-Party Transactions**


For the
three months ended December 31, 2004 and 2003, we had sales of $36,847 and
$50,288 respectively, to our shareholder and CEO, Robert Callahan. As of
December 31, 2004, the related party receivable was $20,667.




**Note
5 — Bank Credit Line**




The
Company has available a $600,000 revolving line of credit with a local bank.
Interest is payable monthly on the outstanding balance at the prime lending
rate, which was 4.0% as of December 31, 2004. The note is secured by accounts
receivable, equipment, general intangibles, inventory, and furniture and
fixtures. The note is personally guaranteed by the Company’s CEO. The balance
outstanding as of December 31, 2004 was $446,824.




7
 *Table of Contents*





**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 six months ended December 31, 2004 and 2003, as excerpted from internal
management reports, is as follows:






****
      **For
      the Three Months Ended**
      **December
      31,**
    
    
    **For
      the Six Months Ended**
      **December
      31,******
      **2004**
      ****
    
    
    ****
      **2003**
      ****
    
    
    **2004**
    
    
    **2003**Construction:Sales
    
    $
    811,189
    
    $
    704,727
    
    $
    1,830,090
    
    $
    1,227,874Cost
      of sales
    
    
    (350,344)
    
    
    (357,230)
    
    
    (907,427)
    
    
    (658,644)Corporate
      and other expenses
    
    
    (329,665)
    
    
    (266,411)
    
    
    (687,767)
    
    
    (453,343)Segment income (loss)
    
    $
    131,180
    
    $
    81,086
    
    $
    234,896
    
    $
    115,887Engineering:Sales
    
    $
    86,185
    
    $
    70,691
    
    $
    182,105
    
    $
    143,342Cost
      of sales
    
    
    (75,509)
    
    
    (45,485)
    
    
    (124,448)
    
    
    (82,963)Corporate
      and other expenses
    
    
    (17,965)
    
    
    (18,138)
    
    
    (26,313)
    
    
    (44,204)Segment income (loss)
    
    $
    (3,387)
    
    $
    7,068
    
    $
    31,344
    
    $
    16,175








**Item
2 — Management'sDiscussion 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.







8
 *Table of Contents*




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




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.




9
 *Table of Contents*




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.




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 December 31, 2004, twenty of whom were full
time.




10
 *Table of Contents*




Results
of Operations




Net
Income




The
Company had net income of $127,792 and $266,240 for the three and six months
ended December 31, 2004, versus net income of $88,154 and $132,062 for the three
and six months ended December 31, 2003. This represents an increase in net
income of $39,638 and $134,178 for the three and six months ended December 31,
2004, respectively, compared to prior period amounts. The increase in net income
for the quarter ended December 31, 2004 over 2003 resulted from gross sales,
which increased by 15.7% to $897,375 from $775,418 for the three months in 2004
compared to 2003 and fairly constant administrative expenses .




Revenues




Gross
sales were $897,375 for the three months ended December 31, 2004 compared to
$775,418 for the same period in 2003, an increase of $121,957, or 15.7%. These
increases resulted from a combination of greater sales volume, an average
increase in selling prices and materials costs decrease.




The
Company’s significant growth in 2004 sales over 2003 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 December 31, 2004.




Expenses




Total
administrative expenses were $297,605 for the quarter ended December 31, 2004,
versus $233,555 for the quarter ended December 31, 2003, an increase of $64,050
(27%). Areas of particular increase for the three months ended December 31, 2004
over 2003 were advertising (731%), insurance (86%), payroll expense (33%). We
hired additional employees to handle our increase in sales volume in 2004. We
also advertised more which generated the increase in sales above.




Liquidity
and Capital Reserves




On
December 31, 2004, the Company had cash of $36,847 and working capital of
$518,733. Net cash provided by operating activities was $101,692 for the six
months ended December 31, 2004 compared to net cash provided by operating
activities of $134,719 for the six months ended December 31, 2003. 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
used in investing activities was $44,260 for the six months ended December 31,
2004 compared to net cash used of $67,452 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 ($4,991), vehicles
($9,744).





Cash used
in financing activities totaled $58,321 for the six months ended December 31,
2004 as compared to $21,338 provided by financing activities for the six months
ended December 31, 2003. During the period ended December 31, 2004, the Company
issued 15,750 shares of stock for cash of $7,875 .




11
 *Table of Contents*





**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.




**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 — Eexhibits and Reports on Form 8-K




(a) 
Exhibits  are  incorporated  by  reference.




(b) 
On  November 18, 2004, we filed an 8-K/A regarding the filing of a change
in auditors.





12
 *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:
      February 18, 2005
    
    */s/
      Robert M. Callahan*
      Robert
      M. Callahan
      *Chief
      Executive Officer*








Date:
      February 18, 2005
    
    */s/
      Shawn Callahan*
      Shawn
      Callahan
      *Chief
      Financial Officer*







13
 *Table of Contents*




**Indexto 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 200232
    
    Certifications Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)




14
 **