UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [X] ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                     
                 
                  
     For the fiscal year
ended June 30, 2004 [  ] TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                     
                 
               
For the transition
period from________to________ Commission fle number
000-05391 METWOOD, INC. (Name of
small business issuer in its charter) NEVADA
    
    83-0210365(State
      or other jurisdiction
    
    (IRS
      Employerof
      incorporation or organization)
    
    Identification
      No.)  819 Naff Road, Boones
Mill, VA 24065 (Address
of principal executive offices) (540) 334-4294 (Issuers
telephone number) Securities registered
under Section 12(b) of the Exchange Act:  None Securities registered
under Section 12(g) of the Exchange Act:  $0.001 Par Value Common
Voting Stock (Title of Class) 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. YesX
  No Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-KSB
or an amendment to this Form 10-KSB. [  ] State issuers revenues for its
most recent fiscal year: $3,109,681 As of September 8, 2004 there were
11,861,749 common shares outstanding, and the aggregate market value of the common shares
(based upon the average of the bid price ($.90) reported by brokers) held by
non-affiliates was approximately $10,675,574. Transitional Small Business
Disclosure Format (check one): Yes [  ] No [X]




METWOOD, INC. AND
SUBSIDIARY FORM 10-K TABLE OF CONTENTS  PagePART IItem 1          Description
        of Business
    
    
    
    1Item 2
                 Description
        of Property
    
    
    
    5Item 3
                 Legal
        Proceedings
    
    
    
    5Item 4
                 Submission
        of Matters to a Vote of Security Holders
    
    
    
    5PART IIItem 5
                 Market
        for Common Equity and Related Stockholder Matters
    
    
    
    6Item 6
                 Managements
        Discussion and Analysis or Plan of Operation
    
    
    
    6Item 7
                 Financial
        Statements
    
    
    
    10Item 8A
              Controls and Procedures
    
    
    
    23PART IIIItem 9
                  Directors
        and Executive Officers of the Registrant
    
    
    
    24Item 10
                Executive Compensation
    
    
    
    26Item 11
                Security Ownership
        of Certain Beneficial Owners and Management
    
    
    
    27Item 12
                Certain Relationships
        and Related Transactions
    
    
    
    28Item 13
                Exhibits and
        Reports on Form 8-K
    
    
    
    29Item 14
                Principal
        Accountant Fees and Services
    
    
    
    29Signatures
    
    
    
    30Index
        to Exhibits
      
      
      
      31Exhibits
    
    
    
    32  ii




SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS This Annual
Report on Form 10-KSB contains certain
forward-looking statements within the meaning of
the Private Securities Litigation Reform Act
of 1995 with respect to the financial
condition, results of operations, business
strategies, operating efficiencies or synergies,
competitive positions, growth opportunities for
existing products, and plans and objectives
of management. Statements that are not
historical in nature and which include
such words as anticipate, estimate,
should, expect, believe,
intend, and similar expressions are
intended to identify forward-looking statements for
the purpose of the safe harbor provided
by Section 21E of the Exchange Act
and Section 27A of the Securities Act. PART I Item 1. 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. 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 shares. Prior to 1990, the company was
engaged in the business of exploring for and producing oil and gas in the Rocky Mountain
and mid-continental 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. (Metwood), 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. 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, paying
$60,000 in cash and issuing 290,000 Metwood common shares to the two Providence
shareholders (one of whom was also an officer and existing shareholder of Metwood prior to
the acquisition). These shares were valued at the closing quoted stock price of $1.00 per
share at the effective date of the purchase. On October 15, 2002, $15,000 additional cash
was paid to one shareholder in exchange for the shareholders surrender of 15,000
shares of Metwood stock, and $50,000 was paid to that shareholder in two installments of
$25,000 each (on January 15 and April 15, 2004) for 275,000 shares. All of the originally
issued 290,000 shares of Metwood stock have thus been repurchased as of June 30, 2004. The
initial purchase transaction was accounted for under the purchase method of accounting.  1




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. Principal Products or
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. The Companys primary products
and services are: 
Girders
and headers  
Floor
joists  
Floor
joist reinforcers  
Roof
and floor trusses and rafters  
Metal
framing  
Square
structural columns  
Garage,
deck and porch concrete pourover 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. Providence 
Extensively involved in ongoing product research and development for Metwood,
Providence also offers its customers civil engineering capabilities which include rezoning
and special use submissions; erosion and sediment control and storm-water management
design; residential, commercial, and religious facility site development design; and
utility design, including water, sewer and onsite treatment systems. Providences
staff is familiar with construction practices and has been actively involved in
construction administration and inspection on multiple projects. Providence also performs a variety of
structural design and analysis work, successfully providing solutions for many projects,
including retaining walls, residential framing, commercial building framing, light-gage
steel fabrication drawings, metal building retrofits and additions, mezzanines, and
seismic anchors and restraints.  2




Providence has designed numerous
foundations for a variety of structures. Its foundation design expertise includes metal
building foundations, traditional building construction foundations, atypical foundations
for residential structures, tower foundations, and sign foundations for a variety of uses
and applications. Providence has also designed and
drafted full building plans for several applications. When subcontracting with local
professional firms, Providence has the ability to provide basic architectural, mechanical,
electrical, and detailed civil and structural design services for these facilities. Providence has reviewed designs by
manufacturers for a variety of structures and structural components, including retaining
walls, radio towers, tower foundations, sign foundations, timber trusses, light-gage steel
trusses, and light-gage steel beams. This service enables clients to take generic designs
and have them certified and approved for construction in the desired locality. Distribution Methods of
Products and Services The Companys sales are
primarily retail, directly to contractors and do-it-yourself homeowners in Virginia and
North Carolina. Approximately 30% of the Companys sales are wholesale to
lumberyards, home improvement stores, hardware stores, and plumbing and electrical
suppliers in Virginia and North Carolina. Metwood relies primarily on its own sales force
to generate sales; additionally, however, the Company has distributors in Virginia, New
York, Oklahoma, Arizona and Colorado and also utilizes the salespeople of wholesale yards
stocking the Companys products as an additional sales force. The Company is in
discussions with national engineered I-joist manufacturers who are interested in marketing
the Companys products and expects to announce affiliations with these companies in
the near future. Metwood intends to continue expanding the wholesale marketing of its
unique products to retailers, to increase dealer sales, and to license the Companys
technology and products to increase its distribution outside of Virginia, North Carolina
and the South. 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.  3




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 has eight U.S. Patents: 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, a continuation in part of 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. 5,921,053, 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 B. Shiflett, who
licensed these patents to the Company.  4




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. The
Companys chief engineer has obtained professional licensure in several states, which
permits 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. Currently, the Company is
seeking International Code Council (ICC) code approval on its joist
reinforcers and beams. Once that approval is obtained, the products can be used in all
fifty states and will eliminate the need for an engineers seal on individual
products. To date, the Companys 2x10 floor joist reinforcer has received both Bureau
Officials Code Association approval (2001) and ICC approval (2004). 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-three
employees at June 30, 2004, twenty-two of whom were full time. Item 2. Description of Property The Company owns its facilities in
Boones Mill, Virginia, which consist of corporate offices, warehouses, a garage/vehicle
maintenance building, and other multi-use buildings. The condition of these buildings is
excellent, and there is no mortgage or lien on the properties. In the opinion of
management, the properties are adequately covered by insurance. The Company does not invest in real
estate or interests in real estate, real estate mortgages or securities of or interests in
persons primarily engaged in real estate activities and therefore has no policies related
to such investments. Item 3. Legal Proceedings The Company is not a party to any
legal proceedings, nor, to the best of its knowledge, are any such proceedings threatened
or contemplated. Item 4. Submission of Matters to a
Vote of Security Holders No matter was submitted to a vote
during the year.  5




PART II Item 5. Market for
Common Equity and Related Stockholder Matters Because there is no active trading
market for Metwood, Inc. common stock, it is difficult to determine the market value of
the stock. Based on the average bid price for the Companys common stock at September
8, 2004 of $.90 per share (average asking price of $.90), the market value of shares held
by non-affiliates would be $10,675,574. There are no preferred shares authorized. The Company is listed on the OTC
Bulletin Board of the National Association of Securities Dealers (NASD) under
the symbol MTWD.OB. Set forth below are the high and low
bid prices for the Companys common stock for the last two years: Quarter
      Ended
    High
      Bid
    Low
      BidSeptember
      2002
    $1.01
    $0.60December
      2002
    $0.80
    $0.60March 2003
    $0.90
    $0.57June 2003
    $1.09
    $1.09September
      2003
    $0.30
    $0.30December
      2003
    $0.80
    $0.80March 2004
    $1.05
    $0.65June 2004
    $0.60
    $0.60  Holders The number of holders of record of
the Companys common stock as of September 8, 2004 was 1,104. This number does not
include an indeterminate number of stockholders whose shares are held by brokers in street
name. The number of stockholders has been substantially the same during the past ten
years. Dividends Per the negative covenants in the
line-of-credit agreements, the Company is restricted from paying dividends until the debt
is repaid. The Company has not paid any dividends on its common stock and does not intend
to pay dividends in the foreseeable future. Item 6.
Managements Discussion and Analysis or Plan of Operation Plan of Operation The Company anticipates that the next
twelve months will be a period of continued growth as it seeks to further expand its
presence in new markets throughout the United States through increased numbers of
distributors, licensees and dealers. ICC code approval is being sought for the
Companys joist reinforcers and beams and is expected to be obtained within the
coming fiscal year. If this approval is obtained, product marketability would be greatly
enhanced and would likely lead to higher demand.  6




Higher product demand would likely
increase the need for more capital as inventory requirements grew, which could be met
through borrowing or a stock offering. No decision has been made at the present time,
however, as to which means might be used to raise capital. Managements
Discussion and Analysis of Financial Condition and Results of Operations Below are selected financial data for
the years ended June 30, 2004 and 2003:  2004
    
    2003Revenues
    
    
    $
    3,109,681
    
    $
    2,015,423Net
      income
    
    
    $
    222,184
    
    $
    1,486Net
      income per common share
    
    
    $
    0.02
    
    
    **Weighted
      average common
                 shares
      outstanding
    
    
    
    11
      ,984,082
    
    
    12,047,722At June 30,
      2004 and 2003:Total
      assets
    
    
    $
    2,657,034
    
    $
    2,157,138Working
      capital
    
    
    $
    232,132
    
    $
    78,377Shareholders
      equity
    
    
    $
    1,636,421
    
    $
    1,460,737**Less
      than $.01  No dividends have been declared or
paid during the periods presented. Results of Operations
Fiscal 2004 Compared with Fiscal 2003 Revenues and
Cost of Sales  Consolidated gross sales increased
$1,094,258, or 54%, for the year ended June 30, 2004 (fiscal 2004) compared to
the year ended June 30, 2003 (fiscal 2003). Construction sales consisted of
product sales, engineering, delivery and installation fees. Engineering sales consisted of
fees for engineering services. Gross profit increased $465,335 (57%) from fiscal 2003 to
fiscal 2004. The increase in construction revenues
was due to several factors, including adding inside sales support for outside sales reps,
thereby freeing up the reps to make more daily contacts; increased marketing efforts, such
as regular seminars for building inspectors and architects on the Companys systems
and services; and strengthened dealer relationships. Also, product prices were raised in
the third quarter to compensate for the increasing cost of steel. In addition, the Company
experienced heightened demand for its pourover systems for fiscal 2004 compared to 2003
which had the added benefit of increasing related installation fees. Growth in engineering
sales resulted from both higher demand and quicker turnaround time on jobs. Cost of sales rose $628,923 overall
(52%) in fiscal 2004 compared to fiscal 2003. On the construction side, cost of sales
increased $604,681 (59%), while cost of engineering sales increased only $24,242 (14%).
The rise in construction costs was due primarily to the higher steel prices the Company
faced in fiscal 2004. However, efforts were made to secure as much steel as possible just
prior to the new higher prices taking effect, thereby alleviating some of the impact of
those increases. The Company anticipates that steel prices will continue to be high for
the foreseeable future. 7




Administrative expenses
 These costs increased $137,036, or 17%, to $942,477 in fiscal 2004
from $805,441 in fiscal 2003. The increase was due primarily to higher advertising and
marketing, insurance and payroll costs. Other smaller increases were offset by a
significant decrease in professional fees in fiscal 2004 over 2003 of $34,521. Legal
expenses in fiscal 2004 decreased $15,483 compared to fiscal 2003, which had included a
large one-time outlay related to filing for Canadian patents on the Companys
products. In addition, audit and outside accountants fees declined by $19,038. Other Income
(Expense)  The Company was eligible for and received $9,244
from the Virginia Department of Business Assistance in fiscal 2004 as reimbursement for a
portion of its employee training efforts compared to $0 in fiscal 2003. This income plus a
gain of $3,600 from the sale of vehicles ($0 in fiscal 2003) as well as $12,419 in
interest income and other fees ($8,101 in fiscal 2003) resulted in Other
Income of $25,263, a net increase of $17,162 in fiscal 2004 over 2003. Interest
expense amounted to $25,106 in 2004 compared to $15,538 in 2003, an increase of $9,568 and
reflective of the Companys higher credit line and notes payable balances in fiscal
2004. Overall, there was an increase in other income of $7,594 in fiscal 2004 over fiscal
2003. Income Taxes
 In fiscal 2004 the Companys income tax expense was $114,417 compared
to a tax benefit of $778 in fiscal 2003. An income tax benefit was recognized for fiscal
2003 because temporary (timing) differences between book and tax income gave
rise to a tax loss, which was fully carried back to prior years. The Company increased its
deferred tax liability by $31,689 in 2004. The primary components of the deferred tax
liability relate to timing differences between book and tax depreciation and the treatment
of goodwill amortization. Liquidity and
Capital Reserves  Cash flows provided by operations in fiscal
2004 were $212,452 versus cash flows used in fiscal 2003 of $159,428, a change of
$371,880. The increase in cash flows from operations was primarily attributable to higher
net income and increases in accounts payable and current income taxes payable, both of
which will require future cash outlays. The Company also used $166,685 for capital
improvements and purchases of fixed assets, while $2,314 was recouped from asset
disposals. Financing activities in fiscal 2004 used $19,827 compared to $340,243 provided
in fiscal 2003. The main use of funds in 2004 was $50,000 paid to a stockholder for his
Metwood common stock, while funds in 2003 provided through financing activities was a net
increase in borrowings under the Companys line-of-credit agreement of $377,000. The Company has historically funded
its cash needs through operating income and credit line draws as needed. It will continue
to rely on sales revenue as its main source of liquidity and will incur debt primarily to
fund inventory purchases as sales growth produces increased product demand. Liquidity
needs that cannot be met by current sales revenue may also arise in certain unusual
circumstances such as has previously occurred when rain and snow significantly slowed
construction activity and resulted in a corresponding decline in demand for the
Companys products. In those circumstances, debt may be added to meet the
Companys fixed costs and to maintain inventory in anticipation of a spurt in product
demand that generally occurs once a weather-related slowdown has ended.  8




On a long-term basis, the Company
also anticipates that product demand will increase considerably as it continues to expand
its marketing and advertising campaign, which may include the use of television, radio,
print and internet advertising. Efforts are well underway to increase the number of
out-of-state sales representatives/brokers who will market the Companys products
throughout the country. As sales increase, the Company can add a second shift to meet the
additional product demand without having to use funds to expand its production facilities.
If additional cash becomes necessary to fund its growth, the Company may raise this
capital through an additional follow-on stock offering rather than taking on more debt.
However, there can be no assurance that the Company will be able to obtain additional
equity or debt financing in the future. If the Company is unable to raise additional
capital as needed, the Companys growth potential will be adversely affected, and the
Company would have to significantly modify its plans.  9




Item 7. Financial
Statements REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Metwood,
Inc. We have audited the accompanying
consolidated balance sheets of Metwood, Inc. (a Nevada corporation) and subsidiary as of
June 30, 2004 and 2003, and the related consolidated statements of income,
stockholders equity, and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial statements based
on our audits. We conducted our audits in accordance
with auditing standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion. In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of Metwood, Inc. and subsidiary as of June 30, 2004 and 2003, and the
results of their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America. McLeod & Company Roanoke, Virginia
September 17, 2004  10




METWOOD, INC. AND
SUBSIDIARY CONSOLIDATED BALANCE
SHEET JUNE 30, 2004  ASSETSCurrent AssetsCash
    
    
    $
    37,736Accounts
      receivable, net of allowance of $10,262
    
    
    
    379,204Inventory
    
    
    
    633,225Prepaid
      expenses
    
    
    
    40,874Total
      current assets
    
    
    
    1,091,039Property
      and EquipmentFurniture,
      fixtures and equipment
    
    
    
    42,288Computer
      hardware, software and peripherals
    
    
    
    102,870Machinery
      and shop equipment
    
    
    
    252,145Vehicles
    
    
    
    222,592Buildings
      and improvements
    
    
    
    852,585Land
      and land improvements
    
    
    
    193,1421,665,622Less
      accumulated depreciation
    
    
    
    (352,715
    )Net
      property and equipment
    
    
    
    1,312,907Goodwill
    
    
    
    253,088TOTAL
      ASSETS
    
    
    $
    2,657,034 See accompanying notes
to consolidated financial statements.  11




METWOOD, INC. AND
SUBSIDIARY CONSOLIDATED BALANCE
SHEET JUNE 30, 2004  LIABILITIES
      AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts
      payable
    
    
    $
    244,799Accrued
      expenses
    
    
    
    44,753Customer
      deposits
    
    
    
    45,200Current
      maturities of long-term debt
    
    
    
    42,328Bank
      line of credit
    
    
    
    422,000Income
      taxes payable
    
    
    
    59,827Total
      current liabilities
    
    
    
    858,907Long-term
      LiabilitiesLong-term
      debt, excluding current maturities
    
    
    
    82,692Deferred
      income taxes, net
    
    
    
    79,014Total
      long-term liabilities
    
    
    
    161,706Total
      liabilities
    
    
    
    1,020,613Commitment
      (Note 4)Stockholders
      EquityCommon
      stock, $.001 par, 100,000,000 shares authorized;
    
    
    
    11,86311,861,749
      shares issued and outstandingCommon
      stock not yet issued ($.001 par, 2,950 shares)
    
    
    
    3Additional
      paid-in capital
    
    
    
    1,296,738Retained
      earnings
    
    
    
    327,817Total
      stockholders equity
    
    
    
    1,636,421TOTAL
      LIABILITIESAND
      STOCKHOLDERS EQUITY
    
    
    $
    2,657,034 See accompanying notes
to consolidated financial statements.  12




METWOOD, INC. AND
SUBSIDIARY CONSOLIDATED STATEMENTS
OF INCOME FOR THE YEARS ENDED
JUNE 30, 2004 AND 2003  2004
    
    
    2003REVENUESConstruction
      sales
    
    
    $
    2,779,220
    
    $
    1,801,490Engineering
      sales
    
    
    
    330,461
    
    
    213,933Gross
      sales
    
    
    
    3,109,681
    
    
    2,015,423Cost
      of construction sales
    
    
    
    1,638,082
    
    
    1,033,401Cost
      of engineering sales
    
    
    
    192,678
    
    
    168,436Gross
      cost of sales
    
    
    
    1,830,760
    
    
    1,201,837Gross
      profit
    
    
    
    1,278,921
    
    
    813,586ADMINISTRATIVE
      EXPENSESAdvertising
    
    
    
    82,473
    
    
    36,651Construction/bidding
      data
    
    
    
    18,668
    
    
    16,802Depreciation
    
    
    
    53,197
    
    
    45,068Insurance
    
    
    
    43,729
    
    
    33,311Office
      expense
    
    
    
    26,391
    
    
    31,044Payroll
      expenses
    
    
    
    474,660
    
    
    411,846Professional
      fees
    
    
    
    43,197
    
    
    77,718Research
      and development
    
    
    
    30,871
    
    
    29,952Telephone
    
    
    
    22,763
    
    
    19,030Travel
    
    
    
    15,404
    
    
    14,290Vehicle
    
    
    
    19,984
    
    
    11,685Other
    
    
    
    111,140
    
    
    78,044Total
      administrative expenses
    
    
    
    942,477
    
    
    805,441Operating
      income
    
    
    
    336,444
    
    
    8,145Other
      income (expense)
    
    
    
    157
    
    
    (7,437
    )Income
      before income taxes
    
    
    
    336,601
    
    
    708Income
      taxes
    
    
    
    (114,417
    )
    
    778Net
      income
    
    
    $
    222,184
    
    $
    1,486Basic
      and diluted earnings per share
    
    
    $
    0.02
    
    
    **Weighted
      average number of shares
    
    
    
    11,984,082
    
    
    12,047,722**Less
      than $.01  See accompanying notes
to consolidated financial statements. 13




METWOOD, INC. AND
SUBSIDIARY CONSOLIDATED STATEMENTS
OF STOCKHOLDERS EQUITY FOR THE YEARS ENDED
JUNE 30, 2004 AND 2003  Common
    
    
    CommonCommon
    
    
    Common
    
    
    Shares
      Not
    
    
    Shares
      Not
    
    
    AdditionalShares
    
    
    Shares
    
    
    Yet
      Issued
    
    
    Yet
      Issued
    
    
    Paid-in
    
    
    Retained(000s)
    
    
    ($.001
      Par)
    
    
    (000s)
    
    
    ($.001
      Par)
    
    
    Capital
    
    
    EarningsBalances
      July 1, 2002
    
    
    
    12,053
    
    $
    12,053
    
    
    4
    
    $
    4
    
    $
    1,347,696
    
    $
    104,147Net
      income for year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,486Common
      stock retired
    
    
    
    (15
    )
    
    (15
    )
    
    
    
    
    
    
    
    (14,985
    )
    
    Issuance
      of common stockfor
      services
    
    
    
    5
    
    
    5
    
    
    
    
    
    
    
    
    2,995
    
    
    Issuance
      of common stockfor
      equipment
    
    
    
    3
    
    
    3
    
    
    
    
    
    
    
    
    1,798
    
    
    Common
      stock not yetissued
      for services
    
    
    
    
    
    
    
    
    
    7
    
    
    7
    
    
    5,543
    
    
    Balances
      June 30, 2003
    
    
    
    12,046
    
    $
    12,046
    
    
    11
    
    $
    11
    
    $
    1,343,047
    
    $
    105,633Net
      income for year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222,184Common
      stock retired
    
    
    
    (275
    )
    
    (275
    )
    
    
    
    
    
    
    
    (49,725
    )
    
    Issuance
      of common stockfor
      services
    
    
    
    5
    
    
    5
    
    
    
    
    
    
    
    
    3,495
    
    
    Issuance
      of common stocksubscribed
    
    
    
    8
    
    
    8
    
    
    (8
    )
    
    (8
    )
    
    
    
    
    Previously
      canceled commonstock
      reinstated
    
    
    
    79
    
    
    79
    
    
    
    
    
    
    
    
    (79
    )
    
    Balances
      June 30, 2004
    
    
    
    11,863
    
    $
    11,863
    
    
    3
    
    $
    3
    
    $
    1,296,738
    
    $
    327,817  See accompanying notes
to consolidated financial statements. 14




METWOOD, INC. AND
SUBSIDIARY CONSOLIDATED STATEMENTS
OF CASH FLOWS FOR THE YEARS ENDED
JUNE 30, 2004 AND 2003  2004
    
    2003OPERATING
      ACTIVITIESNet
      income
    
    
    $
    222,184
    
    $
    1,486Adjustments
      to reconcile net income to net cash provided by(used
      for) operating activities:Depreciation
    
    
    
    99,616
    
    
    81,193Bad
      debt expense
    
    
    
    12,302
    
    
    2,061Provision
      for deferred income taxes
    
    
    
    31,689
    
    
    35,715Common
      stock issued for services
    
    
    
    3,500
    
    
    8,550(Increase)
      decrease in operating assets:Accounts
      receivable
    
    
    
    (144,519
    )
    
    (134,550
    )Inventory
    
    
    
    (286,755
    )
    
    (83,313
    )Prepaid
      expenses
    
    
    
    (13,812
    )
    
    (19,481
    )Refundable
      income taxes
    
    
    
    25,187
    
    
    (25,187
    )Increase
      (decrease) in operating liabilities:Accounts
      payable, accrued expenses and customer deposits
    
    
    
    203,233
    
    
    23,598Current
      income taxes payable
    
    
    
    59,827
    
    
    (49,500
    )Net
      cash provided by (used for) operating activities
    
    
    
    212,452
    
    
    (159,428
    )INVESTING
      ACTIVITIESProperty,
      plant and equipment:Purchases
    
    
    
    (166,685
    )
    
    (249,421
    )Property
      disposals
    
    
    
    2,314
    
    
    Net
      cash used for investing activities
    
    
    
    (164,371
    )
    
    (249,421
    )FINANCING
      ACTIVITIESCommon
      stock retired
    
    
    
    (50,000
    )
    
    (15,000
    )Borrowings
      from (repayment of) note payable
    
    
    
    2,419
    
    
    (21,757
    )Net
      borrowings from (repayment of) related party
    
    
    
    10,154
    
    
    Net
      borrowings under line-of-credit agreement
    
    
    
    17,600
    
    
    377,000Net
      cash (used for) provided by financing activities
    
    
    
    (19,827
    )
    
    340,243Net increase
      (decrease) in cash
    
    
    
    28,254
    
    
    (68,606
    )Cash, beginning
      of the year
    
    
    
    9,482
    
    
    78,088Cash, end
      of the year
    
    
    $
    37,736
    
    $
    9,482  See accompanying notes
to consolidated financial statements. 15




METWOOD, INC. AND
SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE
30, 2004 AND 2003 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. The transaction was
accounted for under the purchase method of accounting, and the purchase price was
allocated as follows: Accounts
      receivable
    
    
    $
    75,000Fixed
      assets
    
    
    
    45,000Goodwill
    
    
    
    230,000Total
    
    
    $
    350,000 During the year ended June 30, 2003,
liabilities assumed at the date of acquisition were identified and paid. The amount of the
liabilities paid was $23,088 and has been added to goodwill. The consolidated 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. 16




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 and 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. At June 30, 2004, the significant estimates used by management
include the valuation of its goodwill. Actual results could differ from those estimates. Reclassifications  Certain
items in the financial statements for the year ended June 30, 2003 have been reclassified
to conform to the June 30, 2004 financial statement presentation. 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. Cash and Cash Equivalents  For
purposes of the Consolidated Statements of Cash Flows, the Company considers liquid
investments with an original maturity of three months or less to be cash equivalents. The
Company maintains its cash in bank deposit accounts, which, at times, may exceed the
federally insured limit of $100,000. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risk on cash
and cash equivalents. 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 June 30,
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 the
years ended June 30, 2004 and 2003, the bad debt expense was $12,302 and $2,061,
respectively. Inventory  Inventory,
consisting primarily 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. 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. 17




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.
Transition to the new rules of SFAS 142 requires the completion of a transitional
impairment test of goodwill within the first year of adoption. The Company adopted the
provisions of SFAS 142 beginning July 1, 2002 and completed the transitional impairment
test of goodwill as of July 1, 2002 and again as of June 30, 2003 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 years ended
June 30, 2004 and 2003, the expenses relating to research and development were
approximately $30,872 and $28,000, respectively. Advertising  The Company
expenses advertising costs as incurred. However, certain expenditures are treated as
prepaid (such as trade show fees) if they are for goods or services which will not be
received until after the end of the accounting period, and they are subsequently
recognized as expenses in those periods in which the goods or services are received. 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 years presented. There were no
adjustments required to net income for the years presented in the computation of diluted
earnings per share. 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 Company is currently evaluating the effect of implementation of this
statement; however it does not expect the statement to apply, since it does not own nor
plan to own derivative instruments or engage in hedging activities. 18




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 2003, the FASB issued a
revised version of SFAS No. 132, Employers Disclosures about Pensions and
Other Postretirement Benefits. This statement requires additional disclosures to
those in the original Statement 132 about the assets, obligations, cash flows, and net
periodic benefit costs of defined benefit pension plans and other defined benefit
postretirement plans and is effective for financial statements with fiscal years ending
after December 15, 2003 and for interim periods beginning after December 15, 2003. Because
the Company does not currently have a pension or postretirement benefit plan, the
statement has had no impact on the Companys consolidated financial condition or
results of operations. NOTE 2 
SUPPLEMENTAL CASH FLOW INFORMATION Supplemental disclosures of cash flow
information for the years ended June 30, 2004 and 2003 are summarized as follows: 2004
    
    2003Cash
      paid for:Income
      taxes
    
    
    $
    
    
    $
    38,194Interest
    
    
    $
    21,888
    
    $
    13,791Supplemental
      disclosures of non-cash investing and financing activities:2004
    
    2003Issuance
      of common stock for fixed asset additions
    
    
    $
    
    
    $
    1,801Vehicles
      acquired with notes payable
    
    
    $
    16,000
    
    $
    Property
      and equipment acquired by exchangeof
      related party receivable
    
    
    $
    160,555
    
    $
    Land
      transferred in payment for services
    
    
    $
    (89,000
    )
    $
      NOTE 3 
RELATED-PARTY TRANSACTIONS For the year ended June 30, 2004, the
Company had sales of $98,428 to its shareholder and CEO, Robert Callahan. As of June 30,
2004, the related receivable was $26,163. Also, from time to time, the Company
contracts with a construction company 50% owned by the Companys CEO which provides
capital improvements and maintenance work on the Companys buildings and grounds.
During the years ended June 30, 2004 and 2003, the construction company billed the Company
$160,555 and $0, respectively, for its services. The Company also purchased two vehicles
from the construction company for a total of $16,000. 19




The Company transferred land at its
book and fair market value of $89,000 to the construction company in partial payment of
the amounts due the construction company. Additionally, because the construction company
is owned by the Companys CEO, the Companys receivable from its CEO was reduced
by offsetting it against the Companys payable to the related construction company. See Note 7 below for related-party
common stock transactions. NOTE 4  COMMITMENT During the year ended June 30, 2003,
the Company implemented a stock-based incentive compensation plan for its employees.
Participating employees have an after-tax deduction withheld by the Company throughout the
calendar year. As of December 31 of each year, the employee is considered vested in the
plan, and the Company will match the participating employees withheld amounts. The
Company may also make a discretionary contribution based upon pay incentives or
attendance. Periodically, the Company will purchase restricted stock on behalf of the
employee in the amount of his withholdings, the Companys match, and any
discretionary contributions. As of June 30, 2004, the Company had
ten participating employees who withheld an amount immaterial to the consolidated
financial statements. No accrual for the Companys match has been made in the current
year. NOTE 5  SHORT-TERM BORROWINGS AND
CREDIT ARRANGEMENTS 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 June 30, 2004. The note is secured
by accounts receivable, equipment, general intangibles, inventory, and fixtures and
furniture and is personally guaranteed by the Companys CEO. The balance outstanding
as of June 30, 2004 was $422,000. NOTE 6  LONG-TERM
DEBT Long-term debt at June 30, 2004
consisted of the following: Bank note, payable in monthly principal installments of $3,400 plusinterest calculated at the banks current prime lending rate (4% as of June30, 2004), due July 2007, secured by receivables, inventory and property.
     $122,600Credit corporation note, payable in monthly principal installments of$127.36 at 0% interest, due February 2006, secured by engineeringequipment.
     2,420125,020Less current maturities
     (42,328
        )Long-term debt, excluding current maturities
     $82,692  20


Principal maturities of long-term
debt over the next five years are as follows:  June 30, 2005
     
     
     $42,328June 30, 2006
     41,692June 30, 2007
     40,800June 30, 2008
     200$125,020  NOTE 7  EQUITY During the year ended June 30, 2004,
the Company issued 11,200 common shares in payment for services valued at $9,600. The
Company also retired 275,000 common shares previously issued to a shareholder and Metwood
officer in exchange for $50,000 cash. During the year ended June 30, 2003,
the Company issued 3,000 common shares in partial payment for equipment with a fair market
value of $1,801 and 5,000 common shares in payment for services valued at $3,000. The
company promised, but did not issue, common shares in lieu of payment for services valued
at $5,550. The Company also retired 15,000 common shares previously issued to a
shareholder and Metwood officer in exchange for $15,000 cash. NOTE 8  INCOME TAXES The components of income tax expense
(benefit) consist of: 2004
     
     2003Current:Federal
     $67,788
        
     $(30,498
        )State
     14,940
        
     (5,995
        )82,728
        
     (36,493
        )Deferred:Federal
     25,219
        
     28,415State
     6,470
        
     7,30031,689
        
     35,715Total income tax expense (benefit)
     $114,417
        
     $(778
        )  The reconciliation of the provision
for income taxes at the U. S. federal statutory income tax rate of 39% to the Companys
income taxes is as follows:  Income before income taxes
     
     
     $336,601
        
     $708Income tax expense computed at the statutory rate
     131,274
        
     276State income tax, net of federal tax effect
     13,060
        
     796Non-deductible expenses
     1,576
        
     1,388Tax-exempt state workforce development funding
     (3,605
        )
     Effect of tax loss carryback
     
        
     (3,487
        )Effect of graduated income tax rates
     (30,013
        )
     (483
        )Other
     2,125
        
     732Total income tax expense (benefit)
     $114,417
        
     $(778
        )  21


Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amount used for federal and state
income tax purposes.  Deferred tax liabilities at June 30, 2004 were $83,072, net of
deferred tax assets of $4,058.  The components of these amounts are as follows:  Depreciation
     
     
     $70,856Amortization of goodwill
     12,216Provision for bad debts
     (3,026
        )Restricted stock compensation
     (1,032
        )Net deferred tax liabilities
     $79,014  NOTE 9  CONCENTRATIONS There is no single customer or group of
related customers from whom the Company derived more than 10% of its accounts receivable
as of June 30, 2004. The Company is potentially vulnerable to a concentration-related risk
with respect to its metal suppliers, however, since three vendors supply approximately 55%
of the metal used in the manufacture of the Companys products, though these vendors
have been used primarily because of their competitive pricing. Several other metal
suppliers are available to the Company, but purchasing from them, should that become
necessary, would likely result in increased costs. NOTE 10  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 years
ended June 30, 2004 and 2003 is as follows:  2004
     
     2003Construction:Sales
     $2,779,220
        
     $1,801,490Cost of sales
     (1,638,082
        )
     (1,033,401
        )Corporate and other expenses
     (958,647
        )
     (737,488
        )Segment income
     $182,491
        
     $30,601Total assets
     $2,245,164
        
     $1,814,815Capital expenditures
     $317,377
        
     $246,174Depreciation
     $87,695
        
     $71,713Interest expense
     $22,392
        
     $13,382  22


2004
     
     2003Engineering:Sales
     $330,461
        
     $213,933Cost of sales
     (192,678
        )
     (168,436
        )Corporate and other expenses
     (98,101
        )
     (74,612
        )Segment income (loss)
     $39,682
        
     $(29,115
        )Total assets
     $411,870
        
     $342,323Capital expenditures
     $9,863
        
     $5,048Depreciation
     $11,921
        
     $9,480Interest expense
     $
        
     $318  Item 8A.Controls and
Procedures a.
The
Companys Chief Executive Officer and Chief Financial Officer have
          evaluated the effectiveness of the Companys disclosure controls and
          procedures, as defined in Rules 13a-15(e) under the Securities Exchange Act of
          1934 (the Exchange Act), as of the end of the period covered by
this           Annual Report (the Evaluation Date). Based on such evaluation,
such           officers have concluded that, as of the Evaluation Date, the Companys
          disclosure controls and procedures are effective in alerting the Companys
          management on a timely basis to material information required to be disclosed
in           the Companys reports filed under the Exchange Act.  b.
There
have been no significant changes in the Companys internal controls           or in
other factors that could significantly affect such controls since the
          Evaluation Date.   23


PART III Item 9. Directors and
Executive Officers of the Registrant Identification of
Directors and Executive Officers The following table sets forth the
names and the nature of all positions and offices held by all directors and executive
officers of the Company for the year ending June 30, 2004 and to the date of the filing of
this report and the periods during which each such director or executive officer has
served in his or her respective positions:  Name
    
    Position and BackgroundRobert M. Callahan
    
    President  Mr. Callahan       has been involved
in the building industry for over thirty years. He is       well recognized in
southwestern Virginia as an innovator in the uses of       passive solar design and
wood/metal products in custom home building. Along       with Mr. Ronald Shiflett, he
formed Metwood, Inc. in 1993 to bring light-gage       construction, used in commercial
building for years, into common use in       residential construction.  Shawn A. Callahan
    
    Secretary/Treasurer, Vice President/General ManagerEducation:
        B.S. Computer Science and Mathematics, Virginia Military Institute  Since       starting with Metwood,
Inc. in May 1996, Mr. Callahan has played a major       role in the restructuring of the
Company, increasing production, improving       efficiency, and developing computer aids
for the Company.  Ronald B. Shiflett
    
    Vice PresidentEducation:
        B.S. Civil Engineering, Virginia Polytechnic Institute & State University
                          M.S.
      Civil Engineering, Virginia Polytechnic Institute & State University  Mr. Shiflett has been engaged
in the structural design of industrial, commercial, residential, and institutional
buildings for over twenty-five years. He is recognized by the design community in
southwestern Virginia as an innovator in the use and design of light-gage steel
framing in building construction. Along with Mr. Callahan, he formed Metwood, Inc.
in 1993.  Annette G. Mariano
    
    Chief
        Financial OfficerEducation:
        B.A. English, Colorado Womens College
                          M.B.A.
      Concentration in Accounting, San Diego State University  Ms. Mariano       has over
twenty-five years experience as a CPA in both private and public       accounting. She
has been with the Company since October 2001.  24


Term of Office The term of office of the current
directors shall continue until new directors are elected or appointed. Family Relationships Robert Callahan is the father of
Shawn Callahan. Involvement in Certain
Legal Proceedings Except as indicated below and to the
knowledge of management, during the past five years, no present or former director, person
nominated to become a director, executive officer, promoter or control person of the
Company: (1)    
          was a general partner or executive officer of any business by or against which
          any bankruptcy petition was filed, whether at the time of such filing or two
          years prior thereto; (2)    
          was convicted in a criminal proceeding or named the subject of a pending
          criminal proceeding (excluding traffic violations and other minor offenses); (3)    
          was the subject of any order, judgment or decree, not subsequently reversed,
          suspended or vacated, of any court of competent jurisdiction, permanently or
          temporarily enjoining, barring, suspending or otherwise limiting his involvement
          in any type of business, securities or banking activities; (4)    
          was the subject of any order, judgment or decree, not subsequently reversed,
          suspended or vacated, of any federal or state authority barring, suspending or
          otherwise limiting for more than sixty days the right of such person to engage
          in any activity described above under this Item, or to be associated with
          persons engaged in any such activity; or (5)    
          was found by a court of competent jurisdiction (in a civil action), the
          Commission or the Commodity Futures Trading Commission to have violated a
          federal or state securities or commodities law, nor has a judgment been
          reversed, suspended, or vacated. Compliance with Section
16(a) of the Exchange Act Section 16(a) of the Securities
Exchange Act of 1934, as amended, requires the Companys directors, officers and
persons who own more than 10% of the Companys common stock or other registered class
of equity securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10% shareholders
are required to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the forms
received covering purchase and sale transactions in the Companys common stock during
the fiscal year ended June 30, 2004, the Company believes that each person who, at any
time during that period, was a director, executive officer, or beneficial owner of more
than 10% of the Companys common stock complied with all Section 16(a) filing
requirements except as follows: Ronald Shiflett failed to timely report sale transactions
in January and April 2004.  25


Item 10.Executive
Compensation The following table sets forth in
summary form the compensation received during each of the Companys last three fiscal
years by the Companys President and Chief Executive Officer, Robert M. Callahan: Summary Compensation
Table Fiscal
      Year
    
    Annual
      Salary
    
    Bonuses
    
    Other
      Compen-
      sation
    
    Restricted
      Stock
      Awards
    
    LTIP
      Options
    
    Restricted
      Stock
      Bonuses(1)
    
    (2)
    
    (3)
    
    (4)
    
    (5)
    
    (5)2004
    
    $109,200
    
    -0-
    
    -0-
    
    -0-
    
    -0-
    
    -0-2003
    
    $97,500
    
    -0-
    
    -0-
    
    -0-
    
    -0-
    
    -0-2002
    
    $100,000
    
    -0-
    
    -0-
    
    -0-
    
    -0-
    
    -0-  (1)
The dollar value of base salary (cash and non-cash) received, including amounts paid to
Carolyn Callahan, wife of Robert M. Callahan.  (2)
The
dollar value of bonuses (cash and non-cash) received.  (3)
During
the periods covered by the table, the Company did not pay any other annual compensation
not properly categorized as salary or bonus, including perquisites and other personal
benefits, securities or property.  (4)
During
the periods covered by the table, the Company did not make any award of restricted stock.  (5)
The
Company currently has no stock option or restricted stock bonus plans.  No member of the Companys
management has been granted any option or stock appreciation right; accordingly, no tables
relating to such items have been included within this item. Compensation of Directors There are no standard arrangements
pursuant to which the Companys directors are compensated for any services provided
as director. No additional amounts are payable to the Companys directors for
committee participation or special assignments. There are no arrangements pursuant to
which any of the Companys directors was compensated during the Companys last
completed fiscal year or the previous two fiscal years for any services provided as
director.  26


Termination of Employment
and Change of Control Arrangement There are no compensatory plans or
arrangements, including payments to be received from the Company, with respect to any
person named in the Summary Compensation Table set out above which would in any way result
in payments to any such person because of his resignation, retirement or other termination
of such persons employment with the Company or its subsidiaries, or any change in
control of the Company, or a change in the persons responsibilities following a
change in control of the Company. Item 11. Security
Ownership of Certain Beneficial Owners and Management Security Ownership of
Certain Beneficial Owners The following table sets forth the
shares held by those persons who owned more than five percent of Metwoods common
stock as of September 8, 2004, based upon 11,861,749 shares outstanding:  Greater Than 5% Owners Title
      of
      Class
    Name and
      Address
      of Beneficial Owner
    No. of
      Shares
    
    Percent
      of ClassCommon
    Robert
      Callahan
      819 Naff Road
      Boones Mill, VA 24065
    5,564,665
    (1)
    46.2%Common
    Ronald
      Shiflett
      819 Naff Road
      Boones Mill, VA 24065
    2,151,282
    
    17.8%Common
    Shawn
      Callahan
      819 Naff Road
      Boones Mill, VA 24065
    1,004,550
    
    8.3%  (1)
Includes
direct and indirect interests. There are 2,000,000 common shares included in this amount
that are owned in the names of family members of Mr. Callahan.  Security Ownership of
Management The following table sets forth the
shares held by Metwood directors and officers as of September 8, 2004:  27


Management Ownership Title
      of
      Class
    Name and
      Address
      of Beneficial Owner
    No. of
      Shares
    
    Percent
      of ClassCommon
    Robert
      Callahan
      819 Naff Road
      Boones Mill, VA 24065
    5,564,665
    (1)
    46.9%Common
    Ronald
      Shiflett
      819 Naff Road
      Boones Mill, VA 24065
    2,151,282
    
    18.1%Common
    Shawn
      Callahan
      819 Naff Road
      Boones Mill, VA 24065
    1,004,550
    
    8.5%Common
    Annette
      Mariano
      819 Naff Road
      Boones Mill, VA 24065
    6,000
    
    *  (1)  Includes
direct and indirect interests.  There are 2,000,000 common shares included in this amount
that are owned in the names of family members of Mr. Callahan.  * Less
than 1%  Ownership
of shares by directors and officers of Metwood as a group:  73.5%  Changes in Control We know of no contractual
arrangements which may at a subsequent date result in a change of control in the Company. Item 12. Certain
Relationships and Related Transactions Following are the transactions
between Metwood and members of management, directors, officers, 5% shareholders, and
promoters of Metwood: The Company contracts with a
construction company 50% owned by the Companys CEO which provides capital
improvements and maintenance work on the Companys buildings and grounds. During the
years ended June 30, 2004 and 2003, the construction company billed the Company $160,555
and $0, respectively, for its services. The Company also purchased two vehicles from the
construction company for a total of $16,000. The Company transferred land at its
book and fair market value of $89,000 to the construction company in partial payment of
the amounts due the construction company. Additionally, because the construction company
is owned by the Companys CEO, the Companys receivable from its CEO was reduced
by offsetting it against the Companys payable to the related construction company.  28


Item 13. Exhibits and
Reports on Form 8-K (a)
Exhibits  See
index to exhibits  (b)
Reports
on Form 8-K  There
were no reports on Form 8-K filed during the year ended June 30, 2004. Item 14. Principal
Accountant Fees and Services The following table sets forth the
aggregate fees billed by McLeod & Company for audit services rendered in connection
with the consolidated financial statements and reports for the years ended June 30, 2004
and 2003:  2004
     
     2003Audit fees
     
     
     $18,500
        
     $16,135Audit-related fees
     
        
     1,178Tax fees
     
        
     All other fees
     
        
     Total fees
     $18,500
        
     $17,313  Audit fees:  Consist of fees
billed for professional services rendered for the audits of the Companys
consolidated financial statements and reviews of the interim consolidated financial
statements included in quarterly reports and services that are normally provided by McLeod
& Company in connection with statutory and regulatory filings or engagements and
attest services, except those not required by statute or regulation. Audit-related fees:  Consist of
fees billed for assurance and related services that are reasonably related to the
performance of the audit or review of the Companys consolidated financial statements
and are not reported under Audit fees. These services include accounting
consultations in connection with the Sarbanes-Oxley Act of 2002. Tax fees:  Consist of fees
billed for tax compliance, tax advice and tax planning services. All other fees:  Consist of
fees billed for all other services other than those reported above.  29


SIGNATURES In accordance with Section 13 or
15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.  Date:  September 8, 2004
     
     /s/ Robert M. Callahan
Robert M. Callahan
President, CEO and DirectorDate:  September 8, 2004
     
     /s/ Ronald B. Shiflett
Ronald B. Shiflett
Vice-President and DirectorDate:  September 8, 2004
     
     /s/ Shawn A. Callahan
Shawn A. Callahan
Secretary/Treasurer and DirectorDate:  September 8, 2004
     
     /s/ Annette G. Mariano
Annette G. Mariano
Chief Financial Officer  30


INDEX TO EXHIBITS  NUMBER
    
    DESCRIPTION
      OF EXHIBIT3(i)*
    
    Articles of Incorporation3(ii)*
    
    By-Laws31.1
    
    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) *Incorporated by reference on Form
8-K, filed February 16, 2000  31