UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C . 2054 9

 

F ORM 10-K

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 2016

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 193 4

 

For the transition period from ________ to ________

 

Commission file number 000-05391

 

METWOOD, INC.

(Exact name of registrant as specified in its charter)

   

NEVADA

 

 83-0210365

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

  

819 Naff Road, Boones Mill, VA 24065

(Address of principal executive offices)

 

(540) 334-4294

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

$0.001 Par Value Common Voting Stock

(Title of Class)

  

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the the Act. Yes ¨ No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x   No  ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ¨  No x

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K. Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and a "smaller reporting company” in Rule 12b-2 of the Exchange Act.  ¨

  

Large accelerated filer

¨

 

Accelerated filer

¨

Non-accelerated filer

¨

(Do not check if a smaller reporting company)

Smaller reporting company

x

 

 

 

Emerging growth company

x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for compling with any new or revised financial accounting standard pursuant to section 13(a) of the Exchange act Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 

Indicate by check mark is the company is a shell company. Yes ¨ No x

 

As of January 13, 2019 the aggregate market value of the common shares outstanding (based upon the average of the bid price ($.08) reported on the OTCQB Market) held by non-affiliates was $329,101.

 

As of January 13, 2019, the number of shares outstanding of the registrant's common stock, $0.001 par value (the only class of voting stock), was 17,766,647 shares.

 

 
 
 
 

 

METWOOD, INC. AND SUBSIDIARY

FORM 10-K

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

 

PART I

 

 

 

 

Item 1

Description of Business

 

4

 

Item 1A

Risk Factors

 

9

 

Item 2

Properties

 

9

 

Item 3

Legal Proceedings

 

9

 

 

 

 

 

PART II

 

 

 

 

Item 5

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

10

 

Item 7

Management's Discussion and Analysis or Plan of Operation

 

11

 

Item 8

Financial Statements and Supplementary Data

 

13

 

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

26

 

Item 9A

Controls and Procedures

 

26

 

Item 9B

Other Information

 

26

 

 

 

 

 

PART III

 

 

 

 

Item 10

Directors, Executive Officers and Corporate Governance

 

27

 

Item 11

Executive Compensation

 

29

 

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

30

 

Item 13

Certain Relationships and Related Transactions, and Director Independence

 

31

 

Item 14

Principal Accounting Fees and Services

 

31

 

 

 

 

 

PART IV

 

 

 

 

Item 15

Exhibits and Financial Statement Schedules

 

32

 

 

 

 

 

Signatures

 

33

 

  
 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K 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.

 

 
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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, for $350,000 and accounted for the transaction under the purchase method of accounting. As of June 30, 2012, Providence was no longer an operating segment of the Company. A decision was made that the majority of the engineering portion of the business could best be handled through a strategic partnership with an outside engineering firm. We believe that continuing research and development efforts will soon enable us to meet code requirements for our products and will eliminate the need for individual engineering seals.

 

 
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Metwood ("the Company," "We," "Us," "Our") 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

 

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 saw the need to combine the strength and durability of steel with the convenience and familiarity of wood and wood fasteners.

 

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.

 

Metwood's primary products are:

 

 

· TUFF BEAM - internally reinforced cold-formed steel beam

 

· TUFF JOIST - cold-formed steel joint system

 

· TUFF JOIST+ - internally reinforced cold-formed steel joist

 

· TUFF FLOOR SYSTEM - combinations of TUFFBEAM, NUJOIST and TUFFJOIST are utilized to make up a complete floor system

 

· TUFF DECK - concrete deck systems

 

· RIM BEAM - internally reinforced CFS load distribution member

 

· TUFF FRAME 3.5 & 5.5 - a fully proprietary panelized load bearing and non-load bearing CFS wall framing solution

 

· TUFF TRUSS 2.0 - a proprietary roof and floor truss system

 

· Aegis - Metwood is a distributor of Aegis Metal Framing's cold-formed steel trusses SURE-SPAN™

 

· Trimmable square columns

 

· Joist reinforcers

 

· Engineering, design and custom building services

 

Metwood's services include providing its customers, through a strategic partnership with an outside engineering firm, 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. Metwood also performs ongoing product research and development.

 

 
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We also perform 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.

 

The Company has designed numerous foundations for a variety of structures. Our 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.

 

We have also designed and drafted full building plans for several applications. When subcontracting for local companies, we have the ability, in partnership with our outside engineering firm, to provide basic architectural, mechanical, electrical, and detailed civil and structural design services for these facilities.

 

We have 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

 

Our sales are primarily wholesale, directly 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. We are an authorized vendor for Lowe's, Home Depot, 84 Lumber, Builders First Source, Ferguson, and, many more local and regional suppliers. We have several stocking dealers of our square columns and reinforcing products. We will sell directly to contractors in areas where we do not have a dealer, but with our national dealer relationships, we typically have a dealer to use. 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

 

Metwood has become a fabricator of the Aegis steel truss system and is a supplier of their products to both residential and commercial customers.

 

 
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Seasonality of Market

 

Our sales are subject to seasonal impacts, as our 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, our sales are typically greater in our fourth and first fiscal quarters. We build an inventory of our products throughout the winter and spring to support our sales season. Due to the seasonality of our local market, we are continuing our efforts to expand into markets that are not so seasonally impacted. We have shipped projects to Florida, Georgia, South Carolina, Arizona, Washington, and more. These markets have some seasonality, but increased exposure in these markets will help maintain stronger sales year round.

 

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 ours. However, we have often found that our 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 we use are readily available on the market from numerous suppliers. The light-gage metal used by the company is supplied primarily by Telling Industries, New Millenium, Allied Tube & Conduit, and Vulcraft. Our main source of lumber is BlueLinx. Adelphia Metals, Re- Steel, Nucor and Gerdau Amersteel provide the majority of our rebar. Because of the number of suppliers available to us, our decisions in purchasing materials are dictated primarily by price and secondarily by availability. We do not anticipate a lack of supply to affect our production; however, a shortage might cause us to pass on higher materials prices to our buyers.

 

Dependence on One or a Few Major Customers

 

At June 30, 2016 and 2015, the Company had the following customer concentrations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

Accounts Receivable

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Customer A

 

 

13 %

 

 

12 %

 

 

15 %

 

*

 

Customer B

 

 

11 %

 

*

 

 

 

23 %

 

*

 

Customer C

 

*

 

 

*

 

 

*

 

 

 

13 %

Customer D

 

*

 

 

*

 

 

*

 

 

 

15 %

Customer E

 

*

 

 

*

 

 

 

20 %

 

*

 

 

*Amounts to less than 10%

 

7
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Patents

 

The Company has nine U.S. Patents:

 

U.S. Patent Nos. 5,519,977 and 7,347,031, "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 the above-mentioned patents was originally issued to the inventors and Company founders, Robert Callahan and Ronald B. Shiflett, who licensed these patents to us.

 

Need for Government Approval of Principal Products

 

Our products must either be sold with an engineer's seal or applicable building code approval. Currently, we are seeking International Code Council ("ICC") code approval on our TUFFBEAMS. Once that approval is obtained, our 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). At the date this document was filed the Company continues to test products to achieve it’s stated goal.

 

Time Spent During the Last Two Fiscal Years on Research and Development Activities

 

There is no fixed time that our time and resources have been spent during the last two fiscal years researching and developing our metal/wood products, new product lines, and new patents. Time and resources are utilized on research and development as required.

 

Costs and Effects of Compliance with Environmental Laws

 

We do not incur any costs to comply with environmental laws. We are an environmentally friendly business in that our products are fabricated from recycled steel.

 

Number of Total Employees and Number of Full-Time Employees

 

We had fourteen employees at June 30, 2016, thirteen of whom were full time.

  

 
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Table of Contents

 

Item 1A . Risk Factors

 

Our business is subject to various risks, including those described below. You should carefully consider the following risk factors and all other information contained in this Form 10-K. If any of the following events or outcomes actually occurs, our business, operating results, and financial conditions would likely suffer.

 

Changing economic conditions could materially adversely affect us - Our operations and performance depend significantly on regional and national economic conditions and their impact on levels of spending by our customers and end users. Currently, those economic conditions have deteriorated and may remain depressed for the foreseeable future. These changing economic conditions could have a material adverse effect on demand for our products and on our financial condition and operating results.

 

Current volatility and disruption in the capital an d credit markets may continue to exert downward p ressure on our stock price - The capital and credit markets have been experiencing extreme volatility and disruption over the past year. Stock markets in general, and our stock price in particular, have experienced significant volatility over the past year. Our stock recently traded at historic lows. In the future, there can be no assurance that price volatility in the stock markets in general will abate or that our stock price in particular will rise. Additionally, the volatility in the credit markets could impact our ability to access new financing.

 

We have a history of operating losses and may incur future losses. We incurred net losses of $659,896 for the fiscal year ended June 30, 2016 and $718 for the year ended June 30, 2015. Our ability to generate significant revenues and maintain profitability is dependent in large part on our ability to expand our customer base; increase sales of our products to existing customers; manage our expense growth; enter into additional supply, license and collaborative arrangements; and successfully manufacture and commercialize products incorporating our technologies in new applications and in new markets.

 

Item 2 . Properties

 

During the year ended June 30, 2005, we sold our facilities to a related party for $600,000 and subsequently leased the facilities back under a long-term lease agreement. We now lease our facilities in Boones Mill, Virginia, which consist of corporate offices, warehouses, a garage/vehicle maintenance building, and other multi-use buildings.

 

We do 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 have no policies related to such investments.

 

Item 3 . Legal Proceedings

 

On June 27, 2016 a law suit was filed against the company alleging breach of a contract that would have transferred the publicly held part of the company to a third party. Management does believe that the effect of this proceeding is of a material nature, but the company has an affiermative defense to the matter. This matter was ajudicated in the Company’s favor in December 2017.

 

Item 4. Submission of Matters to a Vote of Security Holders

 

No matter was submitted to a vote during the year.

 

 
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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 recent close of our common stock at November 13, 2018 of $.08 per share (with a 52-week high of $0.08), the market value of shares held by non-affiliates would be $329,101.

 

Our common stock is currently listed on the OTCQB market, the middle tier of the OTC marketplace under the symbol "MTWD.OB."

 

The following table sets forth high and low bid information for each full quarterly period within the two most recent fiscal years. These over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

Year Ended June 30, 2016

 

High

 

 

Bid

 

First Quarter

 

$ 0.65

 

 

$ 0.12

 

Second Quarter

 

$ 0.51

 

 

$ 0.12

 

Third Quarter

 

$ 0.51

 

 

$ 0.18

 

Fourth Quartet

 

$ 0.51

 

 

$ 0.25

 

 

 

 

 

 

 

 

 

 

Year Ended June 30, 2015

 

 

 

 

 

 

 

 

First Quarter

 

$ 0.50

 

 

$ 0.50

 

Second Quarter

 

$ 0.50

 

 

$ 0.06

 

Third Quarter

 

$ 0.12

 

 

$ 0.11

 

Fourth quarter

 

$ 0.67

 

 

$ 0.08

 

 

The approximate number of holders of record of our common stock as of January 13, 2019 was 1,103. 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

 

We have not paid any dividends on our common stock and do not intend to pay dividends in the foreseeable future.

 

 
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I t em 7. Management's Discussion and Analysis of Financial Condition and Results of Operation

 

We anticipate that the next twelve months will be a period of continued growth as we seek to further expand our presence in new markets throughout the United States through increased numbers of distributors, licensees and dealers. ICC code approval is being sought for our TUFFBEAM 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.

 

Results of Operations

 

Below are selected financial data for the years ended June 30, 2016 and 2015:

 

 

 

2016

 

 

2015

 

Revenues

 

$ 1,781,062

 

 

$ 1,722,261

 

Net loss

 

$ (659,896 )

 

$ (718 )

Net loss per common share

 

$ (0.04 )

 

$ (0.00 )

Weighted average common shares

 

 

17,776,647

 

 

 

15,266,647

 

 

At June 30, 2016 and 2015:

 

Total assets

 

$ 1,314,406

 

 

$ 1,584,610

 

Working capital

 

$ 503,488

 

 

$ 753,582

 

Stockholders’ equity

 

$ 1,033,426

 

 

$ 1,356,668

 

 

No dividends have been declared or paid during the periods presented.

 

Revenues and c o st of s a les - Gross sales increased $68,801, or 4%, for the year ended June 30, 2016 ("fiscal 2016") compared to the year ended June 30, 2015 ("fiscal 2015"). Gross profit decreased $125,510 (16%) from fiscal 2015 to fiscal 2016.

 

The Company's sales increased for fiscal 2016 versus 2015 reflects an increase in the overall economy and in the building industry in particular, although the commercial market has continued to increase and the residential market is showing increased activity. The potential for increased sales volume as the Company goes forward is enhanced by the fact that we are now an authorized fabricator for the Dynatruss light-gage steel truss system, begun in March 2008.

 

Cost of sales increased $184,316, or 19.8%, in fiscal 2016 compared to fiscal 2015, representing a disproportionate increase compared to the 4% increase in gross sales. Material costs, primarily metal products, were significantly higher in fiscal 2016 compared to fiscal 2015 and accounted for much of the disproportional increase.

 

 
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Operating expenses - These costs increased $331,001 from fiscal 2015 to fiscal 2016. The increase was in large part from much higher rent expense. We are invested in decreasing expenditures where possible in order to maximize our net earnings.

 

Other income (expense) - Other income in fiscal 2016 were $31,547 compared to other expense of $10,088 in fiscal 2015. The change was the result of the sale of assets that were no longer needed.

 

Income Taxes - Management determined that the inability of the company to generate profits made the utilization of the previously established tax valuation reserve unlikely, therefore it was charged against the current period operations resulting in an additional expense of $245,233.

 

We have historically funded our cash needs through operating income and credit line draws as needed. We will continue to rely on sales revenue as our 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 our products. In those circumstances, debt may be added to meet our fixed costs and to maintain inventory in anticipation of a spurt in product demand that generally occurs once a weather-related slowdown has ended.

 

On a long-term basis, we also anticipate that product demand will increase considerably as we continue to expand our 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 our products throughout the country. As sales increase, we can add a second shift to meet the additional product demand without having to use funds to expand our production facilities. If additional cash becomes necessary to fund our growth, we may raise this capital through an additional follow-on stock offering rather than taking on more debt. However, there can be no assurance that we will be able to obtain additional equity or debt financing in the future. If we are unable to raise additional capital as needed, our growth potential will be adversely affected, and we would have to significantly modify our plans.

 

 
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Item 8 . Financial Statements and Supplementary Data

 

NC Office

19720 Jetton Road, 3rd Floor

Cornelius, NC     28031

Tel:   704-897-8336

Fax:  704-919-5089

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders

Metwood, Inc.

 

We have audited the accompanying consolidated balance sheets of Metwood, Inc and subsidiary (“the Company”) as of June 30, 2015 and 2014 and the related consolidated statements of operations, stockholders’ equity, and consolidated cash flows for the years ended June 30, 2015 and 2014. 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 audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the 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 consolidated financial position of the Company as of June 30, 2015 and 2014, and the results of its operations, changes in stockholders’ equity and cash flows for the years ended June 30, 2015 and 2014 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ L&L CPAS, PA

F.K.A. Bongiovanni & Associates, PA

Certified Public Accountants

Cornelius, North Carolina

The United States of America

October 13, 2015

 

 

 

www.llcpas.net

 

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of Metwood, Inc.

 

We have audited the accompanying consolidated balance sheet of Metwood, Inc. and its subsidiary (the “Company”) as of June 30, 2016, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audit provides 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 its subsidiary as of June 30, 2016, and the results of their consolidated operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Turner, Stone & Company, L.L.P.

 

Dallas, Texas

February 20, 2019

 

 
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METWOOD, INC.

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2016 AND 2015

 

 

 

2016

 

 

2015

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 91,309

 

 

$ 87,315

 

Accounts receivable, net of reserve

 

 

201,502

 

 

 

129,712

 

Inventory

 

 

479,203

 

 

 

728,500

 

Other current assets

 

 

12,454

 

 

$ 36,343

 

Total assets

 

 

784,468

 

 

 

981,870

 

Property and Equipment improvements

 

 

 

 

 

 

 

 

Leasehold Improvements

 

 

274,869

 

 

 

274,869

 

Furniture, fixtures and equipment

 

 

78,222

 

 

 

78,222

 

Computer and software

 

 

174,541

 

 

 

180,923

 

Machinery & Equipment

 

 

720,585

 

 

 

477,166

 

Vehicles

 

 

412,917

 

 

 

412,917

 

Land Improvements

 

 

67,958

 

 

 

67,959

 

Total property and equipment

 

 

1,729,092

 

 

 

1,492,056

 

Less accumulated depreciation

 

 

(1,199,154 )

 

 

(1,134,549 )

 

 

$

529,938

 

 

 

357,507

 

Other assets

 

 

 

 

 

 

 

 

Deferred tax asset, less valuation reserve

 

 

0

 

 

 

245,233

 

Total assets

 

$ 1,314,406

 

 

$ 1,584,610

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

181,107

 

 

 

136,267

 

Accrued payroll expense

 

 

18,881

 

 

 

26,237

 

Note payable to related party

 

 

80,992

 

 

 

65,784

 

Total current liabilities

 

 

280,980

 

 

 

228,288

 

 

 

 

 

 

 

 

 

 

Commitmen tments and contingencies Note 4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholder's equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (par $.001) 40,000,000 authorized and shares authorized 0 outstanding

 

 

 

 

 

 

 

 

Common stock (par $.001) 100,000,0000 authorized and 17,774,364 and 15,222,247 outstanding

 

 

17,775

 

 

 

15,222

 

Unissued common stock

 

 

0

 

 

 

53

 

Paid in capital

 

 

3,500,228

 

 

 

1,917,729

 

Accumulated deficit

 

 

(1,236,577 )

 

 

(576,682 )

Contra equity-prepaid rent

 

 

(1,248,000 )

 

 

0

 

Total stockholders' equity

 

 

1,033,426

 

 

 

1,356,322

 

Total liaibliities and stockholders equity

 

$ 1,314,406

 

 

$ 1,584,610

 

 

See the accompaning notes to the financial statements

 

 
15
 
 

  

METWOOD, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 2016 AND 2015

 

 

2016

 

2015

 

Gross sales

 

$

1,781,062

 

$

1,722,261

 

Cost of sales

 

1,113,748

 

929,437

 

Gross profit

 

667,314

 

792,824

 

Operating expenses

 

Advertising

 

26,513

 

25,682

 

Bad debt recovery

 

1,202

 

-1,094

 

Depreciation

 

35,260

 

35,494

 

Insurance

 

44,519

 

34,362

 

Payroll expense

 

422,261

 

385,658

 

Professional fees

 

43,588

 

48,901

 

Rent related party

 

380,491

 

75,000

 

Repairs and Maintenance

 

52,495

 

0

 

Research and Development

 

5,700

 

7,491

 

Telephone

 

29,105

 

25,648

 

Vehicle

 

19,558

 

20,001

 

Other

 

52,832

 

125,380

 

Total operating expenses

 

1,113,524

 

782,523

 

Operating income (loss)

 

(446,210

)

 

10,301

 

Other Income (expense)

 

Interest

 

(4,370

)

 

0

 

Gain on sale of asset

 

28,682

 

0

 

Other Income (expense)

 

7,235

 

(10,088

)

Total Other Income (expense)

 

31,547

 

(10,088

)

Net income (loss) before taxes

 

(414,663

)

 

213

 

Income taxes

 

(245,233

)

 

931

 

Net (loss)

 

$

(659,896

)

 

$

(718

)

 

Basic loss per share

 

$

(0.04

)

 

0

 

Weighted number of shares outstanding 

 

17,776,647

 

15,221,647

 

See the accompaning notes to the financial statements

 

 
16
 
 

  

METWOOD, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE YEARS ENDED JUNE 30, 2016 AND 2015

 

 

Common

 

Common

 

Common

 

Common

 

Shares not

 

Shares not

 

Additional

 

Total

 

Shares

 

shares

 

yet issued

 

yet isued

 

Paid-in

 

Prepaid

 

Retained

 

Shareholders'

 

(000s)

 

($.001 Par)

 

(000s)

 

($0.001 Par)

 

Capital

 

Rent

 

Earnings

 

Equity

 

Balances June 30, 2014

 

15,222

 

15,222

 

8

 

8

 

1,899,773

 

(575862.00

)

 

1,339,133

 

Common Stock issued and adjustment of common shares not issued

45

45

 

17,956

 

18,000

 

Net loss for the year

 

(718

)

 

(718

)

Balances June 30, 2015

 

15,222

 

15,222

 

53

 

53

 

1,917,729

 

(576,681

)

 

1,356,322

 

Common stock issued for rent

 

2,400

 

$

2,400

 

0

 

1,557,600

 

(1,560,000

)

 

0

 

Common stock issued

 

153

 

$

153

 

-53

 

24,900

 

25,000

 

Amortization of prepaid rent

 

312,000

 

Net loss for year

 

(659,896

)

 

(659,896

)

Balances June 30, 2016

 

17,775

 

$

17,775

 

0

 

0

 

3,500,227

 

(1,248,000

)

 

(1,236,577

)

 

1,033,426

 

See the accompaning notes to the financial statements

 

 
17
 
 

  

  METWOOD, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE YEARS ENDED JUNE 30, 2016 AND 2015

 

 

2016

 

2015

 

Net loss

 

$

(659,896

)

 

$

(718

)

Adjustments to reconcile net loss to net cash provided by (used in)

 

Depreciation

 

81,338

 

62,747

 

Gain on insurance settlement

 

(28,682

)

 

0

 

Allowance for inventory obsolesence

 

33,702

 

0

 

Amortization of prepaid rent

 

312,000

 

0

 

Provision for deferred income taxes

 

930

 

(Increase) decrease in operating assets

 

Accounts receivable

 

(90,704

)

 

19,964

 

Inventories

 

(27,823

)

 

86,692

 

Other current assets

 

23,889

 

8,008

 

Deferrd tax asset

 

245,233

 

0

 

Increase (Decrease in liabilities

 

Accounts payable

 

59,106

 

(74,923

)

Accrued payroll

 

12,501

 

0

 

Net cash provided (used) for operations

 

(39,336

)

 

102,700

 

Investment activities

 

Property, plant, equipment purchases

 

(10,351

)

 

(27,440

)

Proceeds from disposal of property, plant & equipment

 

28,682

 

4,250

 

Net cash provided (used) for investment activities

 

18,331

 

(23,190

)

 

Financing activities

 

Proceeds from sale of common stock

 

25,000

 

0

 

Related party advances

 

0

 

(29,031

)

Total cash provided financing activities

 

25,000

 

(29,031

)

Increase (decrease) in cash

 

3,995

 

50,479

 

Beginning cash

 

87,315

 

36,836

 

Ending Cash

 

$

91,309

 

$

87,315

 

Supplemental Disclosure of cash flow information

 

Interest paid

 

$

0

 

$

0

 

Income taxes paid

 

$

0

 

$

0

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities

 

Common stock issued for fixed assets

 

$

1,560,000

 

$

18,000

 

Capitalization of fixed assets from inventory

 

$

243,419

 

$

0

 

Notes payable related party advances through Accounts payable

 

$

32,000

 

$

0

 

Notes payable related party payments through accounts receivable

 

$

(16,792

)

 

$

0

 

See the accompaning notes to the financial statements

 

 
18
 
 

  

METWOOD, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016 AND 2015

 

NOTE 1 - ORGANIZATION AND OPERATIONS

 

Metwood, Inc. ("The Company", “we”, “us”) 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. 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.

 

The Company provides construction-related products and engineering services to residential customers and contractors, commercial contractors, developers and retail enterprises, primarily in southwestern Virginia

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

 

Going Concern

 

Our consolidated financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have sustained significant operating losses which raises substantial doubt about the Company’s ability to continue as a going concern. During the year ended June 30, 2016, The Company incurred a loss from operations of $446,210 and has an accumulated deficit of $1,236,577. Management will continue its ongoing efforts to increase the customer base and seek lower cost suppliers to generate future profits.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. The basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.

 

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.

 

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. Actual results could differ

from those estimates.

 

Fair Value of Financial Instruments - For certain of The Company financial instruments, none of which are held for trading, including cash, accounts receivable, accounts payable and accrued expenses, 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 cash in bank deposit accounts, which, at times, may exceed the federally insured limit of $250,000. The Company has not experienced any losses in such accounts and believe we are not exposed to any significant credit risk on cash and cash equivalents.

 
 
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Table of Contents

 

Accounts Receivable  - The Company grants credit in the form of unsecured accounts receivable to it’s customers based on an evaluation of their financial condition. We perform ongoing credit evaluations of it’s 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, 2016 and 2015, the allowance for doubtful accounts was $8,362 and $6,539 respectively 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, 2016 and 2015, the bad debt expense was $1,202 and $0 respectively.

 

Inventory  - Raw material inventory, consisting primarily of metal and wood raw materials, is located on our premises and is stated at the lower of cost or market using the first-in, first-out method and was valued at $366,662. The total work in process inventory on the balance sheet date totaled $112,541. Inventory reserve totaled $76,607 and $42,905 at June 30,2016 and 2015, respectively.

 

Property and Equipment - Property and equipment are stated at cost less accumulated depreciation and are depreciated over their estimated useful lives using the straight-line method. Recovery periods range from three to thirty-nine years. Upon retirement or sale, the cost and related accumulated depreciation are removed from the consolidatedbalance sheet, and the resulting gain or loss is reflected in other income and expense. Maintenance and repairs are charged to operations as incurred.

 

 

 

Useful Life

 

 

2016

 

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasehold improvements

 

 

39

 

 

$ 274,869

 

 

$ 274,869

 

Furniture, fixtures and equipment

 

 

5

 

 

 

78,222

 

 

 

78,222

 

Computers and software

 

 

3

 

 

 

174,541

 

 

 

180,923

 

Machinery and equipment

 

 

10

 

 

 

720,585

 

 

 

477,166

 

Vehicles

 

 

5

 

 

 

412,917

 

 

 

412,917

 

Land improvements

 

 

39

 

 

 

67,958

 

 

 

67,959

 

Total property and equipment

 

 

 

 

 

 

1,729,092

 

 

 

1,492,056

 

Less accumulated depreciation

 

 

 

 

 

 

(1,199,154 )

 

 

(1,134,549 )

Total property and equipment

 

 

 

 

 

$ 529,938

 

 

$ 357,507

 

 

Impairment of Long-lived Assets  - The Company evaluates it’s long-lived assets for indications of possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amounts to the future net undiscounted cash flows which the assets are expected to generate. Should an impairment exist, the impairment would be measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash flows arising from the asset. There have been no such impairments of long-lived assets through June 30, 2016 and 2015.

 
 
20
 
Table of Contents

 

Patents  - The Company has been assigned several key product patents developed by certain Company officers. No value has been recorded in our financial statements because the fair value of the patents was not determinable within reasonable limits at the date of assignment.

 

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 FASB ASC 740, 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 our metal/wood products, new product lines, and new patents. Costs, if any, are expensed as they are incurred. For the year ended June 30, 2016, expenses were $5,700 and for the year ended June 30, 2015, expenses were $7,491.

 

Advertising  - The Company expenses 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. These costs are subsequently recognized as expenses in those periods in which the good 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.

 

During the future fiscal years the company will be required to issued up to fifty million shares of common stock to satisfy a convertible note entered into in July 2016. This note expires on June 30, 2020 and 10,000,000 shares of common stock can be issued in any year.

 

Recent Accounting Pronouncements - In February, 2016 the FASB issued ASU 20 16-0 2, “Leases (Topic 842)” requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating leases under previous U.S. GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The adoption of this standard is not expected have a material impact on the Company’s consolidated financial statements.

 

 
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Table of Contents

 

NOTE 3 - RELATED-PARTY TRANSACTIONS

 

The Company has executed a demand note with it’s controlling shareholder, Cahas Mountain, LLC, that Cahas Mountain will make available cash advances from time to time to bridge cash flow shortfalls. These advances are repaid to Cahas Mountain as cash flow allows. The unpaid balance due to Cahas Mountain at the end of each month is subject to an interest rate of 6% per year. At June 30, 2016 and 2015, advances payable to Cahas Mountain Properties of approximately $81,000 and 66,000, respectively. Accrued interest payable to Cahas Mountain Properties total approximately $19,000 and $15,000 for the years ended June 30,2016 and 2015, respectively. The Company recognized interest expense of approximately $4,000 and $6,000 for the years ended June 30, 2016 and 2015, respectively. Sales to Cahas Mountain, LLC was approximately $19,000 and $29,000. As of June 30, 2016 and 2015, the related accounts receivable totaled approximately $2,000 and $-0-, respectively.

 

At June 30, 2015, The Company owed Cahas Mountain, LLC. $32,000.00 on an open account payable for a consulting fee.

 

NOTE 4 - COMMITMENT AND CONTINGENCIES

 

In prior years, The Company implemented a stock-based incentive compensation plan for it’s 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 contributions based upon pay incentives or attendance. Periodically, The Company will purchase restricted stock on behalf of the employee in the amount of their withholding , our match, and any discretionary contributions. This plan was discontinued in fiscal year 2015 and there are no liabilities for past contributions either in cash or unissued common stock.

 

During the year ended June 30, 2005, The Company into as sales and leaseback transaction with a related party. The Company sold various buildings at the corporate headquarters which house it’s manufacturing plants, executive offices and other buildings for $600,000 in cash. The Company simultaneously entered into a commercial lease agreement with the related party whereby the Company is committed to lease back these same properties for $6,800 per month over a ten-year term expiring December 31, 2014. On July 1, 2015 a new lease was entered into with the related party. This lease terms have a term of five years and the monthly rental is $5,500 in cash, in addition the company issued common stock as part of the transaction, this portion of the lease is covered in NOTE 9.

 
 
22
 
Table of Contents

 

Future annual commitments under the current operating lease are:

 

 

 

Payments

 

 

Amortization of Contra equity

 

 

 

in cash

 

 

account

 

Fiscal year end June 30, 2017

 

$ 66,000

 

 

$ 312,000

 

Fiscal year end June 30, 2018

 

 

66,000

 

 

 

312,000

 

Fiscal year end June 30, 2019

 

 

66,000

 

 

 

312,000

 

Fiscal year end June 30, 2020

 

 

66,000

 

 

 

312,000

 

Total commitments

 

$ 264,000

 

 

$ 1,248,000

 

 

At June 30, 2016 and 2015, the Company had the following customer concentrations:

 

 

 

Sales

 

 

Accounts Receivable

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Customer A

 

 

13 %

 

 

12 %

 

 

15 %

 

*

 

Customer B

 

 

11 %

 

*

 

 

 

23 %

 

*

 

Customer C

 

*

 

 

*

 

 

*

 

 

 

13 %

Customer D

 

*

 

 

*

 

 

 

*

 

 

 

15 %

Customer E

 

*

 

 

*

 

 

 

20 %

 

*

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Amounts to less than 10%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTE 5 - EQUITY

 

During the year ended June 30, 2016 The Company did not issue any preferred shares. The Company did issue 2,400,000 shares of common stock in connection with the prepaid rent as discussed in Note 10 and 45,000 for a vehicle. There are 100,000,000 shares of common stock authorized and at the year end there are 17,776,647 shares issued and outstanding. The authorized preferred stock is 40,000,000 shares and there are -0- shares of preferred stock issued and outstanding.

 

If the convertible note that is covered in the subsequent events (Note 9) Is converted into common stock of The Company, an additional 50,000,000 shares of common stock could be issued, resulting in dilution of the current shareholders. When the contract of October 11, 2018 is completed (see Note 9) there will be an additional 30,000,000 shares issued to the principals of Emerge Nutraceuticals, Inc.

 

NOTE 6 - INCOME TAXES

 

The Company determined that the future use of a Deferred Tax Asset was no longer appropriate and therefore the Deferred tax Asset previously shown on the Balance Sheet has been expensed during this year as a line item on the Statement of operations. The decision was made that the earnings in the near term would not be sufficient to allow the utilization of the deferred tax asset.

 
 
23
 
Table of Contents

 

The difference between the expected income tax expense (benefit) and the actual tax expense (benefit) computed by using the Federal statutory rate of 39% is as follows:

 

 

 

 

 

Tax

 

 

 

 

 

Tax

 

 

 

2016

 

 

Rate

 

 

2015

 

 

Rate

 

Expected income tax benefit at statutory rate of 39%

 

$ 162,000

 

 

 

39 %

 

 

0

 

 

 

0 %

Permanent differences

 

 

(126,000

)

 

(30

)%

 

 

(3,000 )

 

(1.408

)%

Change in valuation allowance

 

 

281,000

 

 

 

(9 )%

 

 

4,000

 

 

 

1,878 %

Income tax expense (benefit)

 

$ 245,000

 

 

59

%

 

$ 1,000

 

 

 

469 %

 

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give rise to a net deferred tax asset, are as follows:

 

 

2016

 

 

2015

 

Deferred tax assets:

 

 

 

 

 

 

Tax benefit of net operating loss carry-forward

 

$ 451,000

 

 

$ 435,000

 

Book and tax difference

 

 

75,000

 

 

 

55,000

 

Less: valuation allowance

 

 

(526,000 )

 

 

(245,000 )

Net deferred tax asset

 

$ 0

 

 

$ (245,000 )

 

The Company had a federal net operating tax loss carry-forward of approximately $1,141,000 as of June 30, 2016. The loss carry-forwards are available to offset future taxable income with the federal carry-forwards beginning to expire in 2020.

 

At June 30, 2016 the deferred tax valuation allowance increased by $281,000. The realization of the tax benefits is subject to the sufficiency of taxable income in future years. The deferred tax assets represent the amounts expected to be realized before expiration. The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible profits. As of June 30, 2016 and 2015, the Company established valuation allowances equal to the full amount of the net deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.

 

For the years ended June 30, 2016 and 2015, no amounts have been recognized for uncertain tax positions and no amounts have been recognized related to interest or penalties related to uncertain tax positions. The Company has determined that it is not reasonably likely for the amounts of unrecognized tax benefits to significantly increase or decrease within the next twelve months. The Company is currently subject to a three-year statute of limitations by major tax jurisdictions.

 
 
24
 
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NOTE 7 - LEGAL PROCEEDINGS

 

On June 27, 2016 a lawsuit was filed alleging breach of contract. The contract in question would have changed the control of the public company to a third party. Management has determined that judgment will be in the favor of the company, consequently no amounts have been accrued related to this matter.

 

See note 9.

 

NOTE 8 - STOCKHOLDER’S EQUITY

 

On July 1, 2015, the Company entered into a ten-year commercial operation lease with a company related through common ownership. The related party is Cahas Mountain Properties in which Robert Callahan, our Chief Executive Officer, is a Managing Member. The lease covers various buildings and property which house our manufacturing plant, executive offices and other buildings with a current monthly rental of $5,500.00. As part of the lease agreement The Company issued 2,400,000 of its shares with a fair value of $1,560,000 at the date of the agreement. This amount is recorded on our books as a contra equity account, and is amortized over the five year term of the lease. See note 4 for commitments and contingencies.

 

NOTE 9 - SUBSEQUENT EVENTS

 

In October 2017 the legal matter referred to in Note 8 was decided by a court and confirmed on appeal that the company was not in breach of contract.

 

On August 18, 2016, the company executed a convertible note payable with Cahas Mountain, LLC. The note is for the amount of $50,000 and is payable on June 30, 2019. Interest is accrued at the rate of 8% and is payable on the expiration of the note. If the note is converted into common stock the interest is forgiven. The conversion factor of the note is at par value of $.001 and is convertible into a maximum of 50,0000,000 of common stock of the company, with 10,000,000 shares being convertible within any one year.

 

On October 11, 2018, The Company entered into a contract with Emerge Nutraceuticals, a Florida corporation. When completed this contract will transfer all of Metwood’s assets and liabilities to it’s current controlling shareholder and Emerge Nutraceuticals, Inc. will become the reporting entity.

 

 
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Item 9. Changes in and disagreements with Accountants on Accounting and Financial Disclosure

 

The Company changed accountants from L&L Accountants to Turner Stone & Company. There were no disagreements with the current or prior accountants nor any changes to the prior years financial statements as issued.

 

Item 9A. Controls and Procedures

 

(a) Evaluation of disclosure controls and procedures

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an evaluation of the effectiveness of our internal control over financial reporting and determined that our internal control over financial reporting was ineffective as of June 30, 2016 due to material weaknesses. A material weakness in internal control over financial reporting is defined by the Public Company Accounting Oversight Board’s Audit Standard No. 1305 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. Management’s assessment identified the following material weaknesses in internal control over financial reporting:

 

·  The small size of our Company limits our ability to achieve the desired level of separation in our internal controls and financial reporting. We do have a separate CEO and CFO; however, we do not have an Audit Committee to review and oversee the financial policies and procedures of the Company. Until such time we are able to install an audit committee, we do not meet the full requirement for separation. In the interim, we will continue to strengthen the role of our CEO and CFO and their review of our internal control procedures.

 

(b) Changes in internal control over financial reporting

 

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

 
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PART III

 

Item 10 . Directors, Executive Officers and Corporate Governance

 

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, 2016 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 respective positions:

 

Name

 

P osition and Background

Robert M. Callahan

 

President and CEO

  

 

 

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/CFO/VP/General Manager

 

 

Education:     MBA Accounting, University of Phoenix

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.

 

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.

 

 
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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, 2016, 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.

 

 
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Item 11 . Executive Compensation

 

The following table sets forth in summary form the compensation received during each of the Company's last three fiscal years by our President and Chief Executive Officer, Robert M. Callahan, and our Chief Financial Officer, Shawn A. Callahan:

 

Sum m ary Compensation Table

 

 

 

Fiscal

Year

 

 

Annual

Salary

 

 

Bonuses

 

 

Other

Compensation

 

 

Restricted

Stock

Awards

 

 

LTIP

Options

 

 

Restricted

Stock

Bonuses

 

 

 

 

 

 

 

 

 

 

(1)

 

 

(2)

 

 

 

(3)

 

 

 

(4)

 

 

 

(4)

Robert M. Callahan

 

2016

 

 

$

55,192

 

 

$ 0,000

 

 

-0-

 

 

$

-0-

 

 

-0-

 

 

 

-0-

 

 

 

2015

 

 

$ 80,000

 

 

$ 7,100

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

2014

 

 

$ 71,667

 

 

$ 7,800

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shawn A. Callahan

 

2016

 

 

$

74,538

 

 

$ 0,000

 

 

-0-

 

 

$

-0-

 

 

-0-

 

 

 

-0-

 

 

 

2015

 

 

$ 62,102

 

 

$ 7,580

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

2014

 

 

$ 63,006

 

 

$ 8,938

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

(1) The dollar value of bonuses (cash and non-cash) received.

 

 

(2) 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.

 

 

(3) During the periods covered by the table, the Company made no restricted stock awards.

 

 

(4) The Company currently has no stock option or restricted stock bonus plans.

 

No member of our 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 our directors are compensated for any services provided as director. No additional amounts are payable to our directors for committee participation or special assignments.

 

There are no arrangements pursuant to which any of our directors was compensated during our last completed fiscal year or the previous two fiscal years for any services provided as director.

 

 
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Table of Contents

 

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 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

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 July 24, 2013, based upon 15,221,647 shares outstanding:

 

Greater Than 5% Owners

 

Title of Class

 

Name and Address of

Beneficial Owner

 

No. of

Shares

 

 

Percent of

Class

 

Common

 

Robert Callahan

819 Naff

Boones Mill, Va.

 

 

9,501,632 (1)

 

62.4

%

 

 

  

 

 

 

 

 

 

 

Common

 

Ronald Shiflett

638 Patti Road

Rocky Mount, VA 24151

 

 

1,000,000

 

 

 

6.6 %

 

 

(1) Includes direct and indirect interests. There are 9,128,600 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 January 21, 2018

 

Management Owners h ip

 

Title of Class

 

Name and Address

of Beneficial Owner

 

No. of

Shares

 

 

Percent

of Class

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

Robert Callahan

819 Naff Road

Boones Mill, VA 24065

 

 

9,501,632 (1)

 

 

62.4 %

 

 

(1) Includes direct and indirect interests. There are 9,128,600 common shares included in this amount that are owned in the names of family members of Mr. Callahan.

 

 

 

 

Ownership of shares by directors and officers of Metwood as a group: 62.4%

 

 
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Changes in Control

 

The company entered into a contract on October 11, 2018 that will change control when completed. The new entity will be Emerge Nutraceuticals, Inc. a Florida corporation. This contract should be completed in the first quarter of 2019.

 

Item 13 . Certain Relationships and Related Transactions, and Director Independence

 

Following are the transactions between Metwood and members of management, directors, officers, 5% shareholders, and promoters of Metwood:

 

During the year ended June 30, 2005, we entered into a sales and leaseback transaction with a related party. We sold the various buildings at our corporate headquarters which house our manufacturing plants, executive offices and other buildings for $600,000 in cash. We simultaneously entered into a commercial lease agreement with the related party whereby we are committed to lease back these same properties for $6,800 per month over a ten-year term expiring December 31, 2014. Rent expense charged to operations for the years ended June 30, 2016 and 2015 was $380,491 and $75,000, The large increase in rent was due to the prepaid rent as discussed previously.

 

On July 1, 2015, The Company entered into a renewed lease agreement with Cahas Mountain LLC, our controlling shareholder. This lease is for five years and involved the cash payment of $5,500.00 per month rent and annual prepaid rent amortization of $312,000.00

 

Item 14 . Principal Accounting Fees and Services

 

The following table sets forth the aggregate fees billed or to be billed by , Turner Stone & co. and L&L Accountants CPAs for audit services rendered in connection with the consolidated financial statements and reports for the years ended June 30, 2016 and 2015:

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Audit fees

 

$ 25,000

 

 

$ 35,233

 

Audit-related fees

 

 

-

 

 

 

-

 

Tax fees

 

 

-

 

 

 

-

 

All other fees

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total

 

$ 25,000

 

 

$ 35,233

 

 

Audit fees : Consist of fees billed for professional services rendered for the audits of our consolidated financial statements and reviews of the interim consolidated financial statements included in quarterly reports and services that are normally provided by our auditors 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 our 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.

 

 
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PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

NUMBER

 

DESCRIPTION

 

 

3(i)*

 

Articles of Incorporation

 

 

3(ii)*

 

By-laws

 

 

10.1

 

Agreement with Emerge Nuetracueticals, Inc.

 

 

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 2002.

 

 

31.2

 

Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

32

 

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

 

*Incorporated by reference on Form 8-K filed February 16, 2000

 

 
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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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 12, 2019

 

/s/ Robert M. Callahan

 

 

 

Robert M. Callahan

 

 

 

President, CEO and Director

 

 

 

 

Date: February 12, 2019

 

/s/ Shawn A. Callahan

 

 

 

Shawn A. Callahan

 

 

 

Secretary/Treasurer/CFO and Director

 

 

 

 33

 

EXHIBIT 10.1

 

PURCHASE AND SALES AGREEMENT

 

by and between

 

METWOOD, INC., as Seller

 

and

 

EMERGE NUTRACEUTICALS, INC., as Buyer

 

dated as of

 

October 11, 2018

 

 
 
 
 

 

TABLE OF CONTENTS

 

ARTICLE

 

PAGE

 

 

 

 

 

 

ARTICLE I DEFINITIONS

 

 

 

 

 

ARTICLE II PURCHASE AND SALE

 

 

 

 

 

Section 2.01

Purchase and Sale

 

8

 

 

 

 

 

 

Section 2.02

Purchase Price

 

8

 

 

 

 

 

 

Section 2.03

Transactions to be Affected Prior to Closing

 

8

 

 

 

 

 

 

Section 2.04

Transactions to be Affected at the Closing

 

8

 

 

 

 

 

 

Section 2.06

Closing

 

9

 

 

 

 

 

 

Section 2.07

Allocation

 

9

 

 

 

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER

 

 

 

 

 

Section 3.01

Organization and Authority of Seller

 

9

 

 

 

 

 

 

Section 3.02

Organization, Authority and Qualification of the Public Company

 

10

 

 

 

 

 

 

Section 3.03

Capitalization; Indebtedness

 

10

 

 

 

 

 

 

Section 3.04

No Subsidiaries

 

10

 

 

 

 

 

 

Section 3.05

No Conflicts; Consents

 

10

 

 

 

 

 

 

Section 3.06

Financial Statements

 

11

 

 

 

 

 

 

Section 3.07

Undisclosed Liabilities

 

11

 

 

 

 

 

 

Section 3.08

Absence of Certain Changes, Events and Conditions

 

12

 

 

 

 

 

 

Section 3.10

SEC Documents; Other Reports; Internal Controls

 

14

 

 

 

 

 

 

Section 3.11

Title to Assets

 

14

 

 

 

 

 

 

Section 3.12

Intellectual Property

 

14

 

 

 

 

 

 

Section 3.14

[Intentionally Omitted]

 

15

 

 

 

 

 

 

Section 3.15

Insurance

 

15

 

 

 

 

 

 

Section 3.16

Legal Proceedings; Governmental Orders

 

15

 

 

 

 

 

 

Section 3.17

Compliance With Laws; Licenses

 

15

 

 

 

 

 

 

Section 3.18

[Intentionally Omitted]

 

15

 

 

 

 

 

 

Section 3.21

Taxes

 

 

 

 

 

 

 

 

Section 3.22

Books and Records

 

 

 

 

 

 

 

 

Section 3.23

Brokers

 

 

 

 

 

 

 

 

Section 3.24

Disclaimer of Additional Warranties

 

 

 

 

 
-i-
 
 

   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER

 

 

 

 

 

Section 4.01

Organization and Authority of Buyer

 

16

 

 

 

 

 

 

Section 4.02

 No Conflicts; Consents

 

16

 

 

 

 

 

 

Section 4.03

[Intentionally Omitted]

 

16

 

 

 

 

 

 

Section 4.04

Legal Proceedings

 

16

 

 

 

 

 

 

Section 4.05

Financial Capacity

 

16

 

 

 

 

 

 

ARTICLE V COVENANTS

 

 

 

 

 

Section 5.01

Conduct of Business Prior to the Closing

 

17

 

 

 

 

 

 

Section 5.02.

Access to Information

 

17

 

 

 

 

 

 

Section 5.03

Certain Transitional Cooperation

 

17

 

 

 

 

 

 

Section 5.04

No Solicitation of Other Bids

 

17

 

 

 

 

 

 

Section 5.05

Notice of Certain Events

 

18

 

 

 

 

 

 

Section 5.06

Resignations

 

18

 

 

 

 

 

 

Section 5.07

Confidentiality

 

19

 

 

 

 

 

 

Section 5.08

Governmental Approvals and Consents

 

20

 

 

 

 

 

 

Section 5.09

Books and Records

 

20

 

 

 

 

 

 

Section 5.11

Ongoing Business of the Public Company

 

20

 

 

 

 

 

 

Section 5.12

Closing Conditions

 

21

 

 

 

 

 

 

Section 5.13

Public Announcements

 

21

 

 

 

 

 

 

Section 5.14

Further Assurances

 

21

 

 

 

 

 

 

ARTICLE VI TAX MATTERS

 

 

 

 

 

Section 6.01

Tax Covenants

 

21

 

 

 

 

 

 

Section 6.02

Tax Indemnification

 

21

 

 

 

 

 

 

Section 6.03

Contests

 

22

 

 

 

 

 

 

Section 6.04

Cooperation and Exchange of Information

 

22

 

 

 

 

 

 

Section 6.05

Tax Treatment of Indemnification Payments

 

22

 

 

 

 

 

 

Section 6.06

Survival

 

22

 

 

 

 

 

 

Section 6.07

Overlap

 

22

 

 

 

 

 

 

ARTICLE VII CONDITIONS TO CLOSING

 

 

 

 

 

Section 7.01

Conditions to Obligations of All Parties

 

22

 

 

 

 

 

 

Section 7.02

Conditions to Obligations of Buyer

 

23

 

 

 

 

 

 

Section 7.03

Conditions to Obligations of Seller

 

24

 

    

 
-ii-
 
 

   

ARTICLE VIII INDEMNIFICATION

 

 

 

 

 

Section 8.01

Seller’s Indemnification of Buyer

 

25

 

 

 

 

 

 

Section 8.02

Buyer’s Indemnification of Seller

 

25

 

 

 

 

 

 

Section 8.03

Limitations on Indemnification .

 

26

 

 

 

 

 

 

Section 8.04

Notice of Claim

 

26

 

 

 

 

 

 

Section 8.05

Sole Remedy

 

26

 

 

 

 

 

 

ARTICLE IX TERMINATION

 

 

 

 

 

Section 9.01

Termination

 

26

 

 

 

 

 

 

Section 9.02

Effect of Termination .

 

27

 

 

 

 

 

 

ARTICLE X MISCELLANEOUS

 

 

 

 

 

Section 10.01

 Expenses

 

27

 

 

 

 

 

 

Section 10.02

Notices

 

27

 

 

 

 

 

 

Section 10.03.

Interpretations

 

28

 

 

 

 

 

 

Section 10.04

Headings

 

28

 

 

 

 

 

 

Section 10.05

Severability

 

28

 

 

 

 

 

 

Section 10.06

Entire Agreement

 

28

 

 

 

 

 

 

Section 10.07

Successors and Assigns

 

28

 

 

 

 

 

 

Section 10.08

No Third-party Beneficiaries

 

28

 

 

 

 

 

 

Section 10.09

Attorney’s Fees

 

28

 

 

 

 

 

 

Section 10.10

Amendment and Modification; Waiver

 

28

 

 

 

 

 

 

Section 10.11

Governing Law; Submission to Jurisdiction; Waiver of Jury Trial

 

29

 

 

 

 

 

 

Section 10.12

Counterparts

 

29

 

 

 

 

 

 

Section 10.13

Schedules

 

30

 

    

-iii-

 

PURCHASE AGREEMENT

 

This Purchase and Sales Agreement (this ‘ Agreement ’), dated as of October 11, 2018, is entered into between METWOOD, INC., a corporation (‘ Seller ’ or ‘ MTWD’), and EMERGE NUTRACEUTICALS, INC., a Florida corporation (‘ Buyer ’).

 

R E C I T A L S

 

WHEREAS , Seller owns at least nine million shares of the issued and outstanding common shares (the ‘ public shares ’), in METWOOD, INC., a Nevada corporation (the ‘ MTWD ’ or ‘ Public Company ’); and

 

WHEREAS , Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller, 9,000,000 shares of the common stock of MTWD, subject to the terms and conditions set forth herein;

 

WHEREAS, Seller will transfer all the assets and liabilities of Metwood, Inc. to Cahas Mountain, LLC., with the exception of the convertible note of June 29, 2016 face amount $50,000 as shown on the Balance Sheet of Metwood, Inc.

 

WHEREAS , it is anticipated that the Closing will occur on the date that is no more than seven (7) days, subject to the satisfaction of the conditions set forth in Article VII .

 

NOW, THEREFORE , in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

The following terms have the meanings specified or referred to in this Article I :

 

Accounting Referee ’ has the meaning set forth in Section 6.01(c) .

 

Acquisition Proposal ’ has the meaning set forth in Section 5.04(a) .

 

Action ’ means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

 

Affiliate ’ of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term ‘control’ (including the terms ‘controlled by’ and ‘under common control with’) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

Agreement ’ has the meaning set forth in the preamble.

 

Assignment ’ has the meaning set forth in Section 2.04(b)(i) .

 

Audited Financial Statements ’ has the meaning set forth in Section 3.06 .

 

Balance Sheet ’ has the meaning set forth in Section 3.06 .

 

 
4
 
 

 

Balance Sheet Date ’ has the meaning set forth in Section 3.06 .

 

Business Day ’ means any day except Saturday, Sunday or any other day on which commercial banks located in Franklin County, Virgnia are authorized or required by Law to be closed for business.

 

Buyer ’ has the meaning set forth in the preamble.

 

Cap ’ has the meaning set forth in Section 8.03(a) .

 

Closing ’ has the meaning set forth in Section 2.06 .

 

Closing Date ’ has the meaning set forth in Section 2.06 .

 

Code ’ means the Internal Revenue Code of 1986, as amended.

 

Company ’ means both the Public Company and the Successor Company.

 

Contracts ’ means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements, whether written or oral.

 

Current Assets ’ means cash and cash deposits (including cash deposits held by third parties), accounts receivable, liquid investments and prepaid expenses, but excluding (a) the portion of any prepaid expense of which Buyer will not receive the benefit following the Closing, (b) deferred Tax assets and (c) receivables from any of the Company’s Affiliates, managers, employees, officers or members and any of their respective Affiliates, determined in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Audited Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end. For this purpose, any noncash liquid investments held by Seller at Closing shall be valued based on the closing trading price as of the end of the day prior to Closing.

 

Closing Liabilities ’ means accounts payable, liabilities to customers, accrued Taxes (including Federal and State corporate income taxes) and accrued expenses, including, but not limited to, payables to any of the Company’s Affiliates, managers, employees, officers or members and any of their respective Affiliates, deferred Tax liabilities and any outstanding Indebtedness (as defined herein), determined in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Audited Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end. Current Liabilities shall specifically not include (a) unrealized loss on investments, (b) any reserves for rent payable, and (c) payables associated with unsettled trades.

 

Dollars or $ ’ means the lawful currency of the United States.

 

Encumbrance ’ means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

 

 
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Financial Statements ’ has the meaning set forth in Section 3.06 .

 

GAAP ’ means United States generally accepted accounting principles in effect from time to time.

 

Governmental Authority ’ means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulatory organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), any securities exchange, or any arbitrator, court or tribunal of competent jurisdiction.

 

Governmental Order ’ means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

Indebtedness ’ means any indebtedness for borrowed money or for the deferred purchase price of property or services (but excluding accounts payable and accrued expenses incurred in the ordinary course of business), any obligations evidenced by notes, bonds, debentures or similar instruments, any capital lease obligations, any guarantees of such indebtedness or obligations, and any overdrafts or similar obligations. Such indebtedness shall include, but not be limited to, the Sub Debt.

 

Indemnitor ’ has the meaning set forth in Section 8.04 .

 

Interim Balance Sheet ’ has the meaning set forth in Section 3.06 .

 

Interim Balance Sheet Date ’ has the meaning set forth in Section 3.06 .

 

Interim Financial Statements ’ has the meaning set forth in Section 3.06 .

 

Knowledge of Seller or Seller’s Knowledge ’ or any other similar knowledge qualification, means the actual knowledge of any of Seller.

 

Law ’ means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

 

Public Company ’ has the meaning set forth in the recitals.

 

Legacy Shares ’ has the meaning set forth in the recitals.

 

Licenses ’ means all licenses, permits, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities with authority over memberships in the form possessed by the Company as of the date of execution of this Agreement.

 

Losses ’ means losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses, including reasonable attorneys’ fees and the reasonable cost of enforcing any right to indemnification hereunder and the reasonable cost of pursuing any insurance providers; provided, however , that ‘ Losses ’ shall not include special or punitive damages, except in the case of fraud or to the extent actually awarded to a Governmental Authority or other third party.

 

 
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Material Adverse Effect ’ means any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or assets of the Company, or (b) the ability of Seller to consummate the transactions contemplated hereby on a timely basis; provided, however , that Material Adverse Effect shall not include any event, occurrence, fact, condition or change to the extent it results from changes occurring after the date hereof: (i) in general economic conditions, provided such change does not affect the Company in a substantially disproportionate way; (ii) in the industries and markets in which the Company operates, provided such change does not affect the Company in a substantially disproportionate way; (iii) in conditions in the securities market, credit markets, currency markets or other financial markets; (iv) in political conditions or acts of war, sabotage or terrorism (including any material escalation or worsening of any such acts of war, sabotage or terrorism); (v) in applicable Law; (vi) reasonably attributable to the public announcement of this Agreement and the transactions contemplated hereby; or (vii) from actions or omissions of a party hereto taken with the prior written consent of the other party with respect to this Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby. ‘ Material Contracts ’ has the meaning set forth in Section 3.09(a) .

 

Shares ’ means the common stock of Metwood Inc.

 

Movables ’ has the meaning set forth in Section 3.11(c) .

 

Organizational Documents ’ means (a) in the case of a Person that is a corporation, its articles or certificate of incorporation and its by-laws, regulations or similar governing instruments required by the laws of its jurisdiction of formation or organization; (b) in the case of a Person that is a partnership, its articles or certificate of partnership, formation or association, and its partnership agreement (in each case, limited, limited liability, general or otherwise); (c) in the case of a Person that is a limited liability company, its articles or certificate of formation or organization, and its limited liability company agreement or operating agreement; and (d) in the case of a Person that is none of a corporation, partnership (limited, limited liability, general or otherwise), limited liability company or natural person, its governing instruments as required or contemplated by the laws of its jurisdiction of organization.

 

Person ’ means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity. ‘ Purchase Price ’ has the meaning set forth in Section 2.02 .

 

Representative ’ means, with respect to any Person, any and all directors, managing members, managers, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

 

Requisite Regulatory Approvals ’ has the meaning set forth in Section 7.01(c) .

 

Seller ’ has the meaning set forth in the preamble.

 

Statement of Objections ’ means a statement by Seller submitted on or prior to the last day of the Review Period to Buyer setting forth Seller’s objections in reasonable detail indicating each disputed item or amount concerning the Post Closing Adjustment.

 

Successor Company ’ has the meaning set forth in the recitals.

 

Successor shares ’ has the meaning set forth in the recitals.

 

 
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Taxes ’ means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees or assessments of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

 

Tax Claim ’ has the meaning set forth in Section 6.03 .

 

Tax Return ’ means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

Transaction Documents ’ means this Agreement and the Assignment.

 

ARTICLE II

 

PURCHASE AND SALE

 

Section 2.01 Purchase and Sale . Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell to Buyer, and Buyer shall purchase from Seller, all of Seller’s right, title and interest in and to 9,000,000 common shares whichever is greater, free and clear of all Encumbrances.

 

Section 2.02 Purchase Price . The aggregate purchase price for the shares shall be an amount equal to $300,000.00, and auditor and legal fees to bring regulatory filings to current status prior to closing, as such amount may be adjusted pursuant to Section 2.05 hereof (the ‘ Purchase Price ’).

 

Section 2.03 Transactions to be Affected Prior to Closing .

 

(a) Concurrent with the execution and delivery by Seller and Buyer of this Agreement, Buyer shall deliver to the Escrow Agent the amount of $300,000.00 by wire transfer within sixty days of closing. The nine million (9,000,000) shares of Metwood, Inc. common stock is to be held in escrow until payment is made within sixty days of closing.

 

(b) Filings with regulatory agencies currently in arrears are to be brought current. All accounting records are to be made current as well, all costs to bring the company into compliance with the regulatory authorities will be paid by the Buyer.

 

(c) All necessary documentation to transfer the Convertible Debenture dated JUNE 29 2016 to the Legacy Company shall be completed.

 

Section 2.04 Transactions to be Affected at the Closing .

 

(a) At the Closing, Seller shall deliver to Buyer:

 

(i) an assignment of the shares to Buyer in form and substance satisfactory to Buyer (the ‘ Assignment ’), duly executed by Seller; and

 

(ii) an assignment of the Convertible Debenture dated June 29, 2016 shall be made to the Buyer, duly executed by Seller; and

 

(iii) the other Transaction Documents and all other agreements, documents, instruments or certificates required to be delivered by Seller at or prior to the Closing pursuant to Section 7.02 of this Agreement.

 

(iv) Resignation Letters from all MTWD Managers, Officers and Board Members.

 

(b) None of the foregoing deliveries shall be deemed made unless all of the foregoing deliveries have been made.

 

 
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Section 2.05 Closing . Subject to the terms and conditions of this Agreement, the purchase and sale of the shares contemplated hereby shall take place at a closing (the ‘ Closing ’) to be held at 10:00 a.m., Eastern Standard time, on December 1, 2018, subject to the conditions to Closing set forth in Article VII having been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), at the offices of METWOOD, INC., 819 Naff Rd., Boones Mill, Virginia 24065, or at such other time or on such other date or at such other place as Seller and Buyer may mutually agree upon (the day on which the Closing takes place being the ‘ Closing Date ’).

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Seller represents and warrants to Buyer that the statements contained in this Article III are true and correct as of the date hereof.

 

Section 3.01 Organization and Authority of Seller . Seller was incorporated under the laws of the State of Wyoming on June 19, 1969. 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 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. 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.

 

Seller has full power and authority to enter into this Agreement and the other Transaction Documents to which Seller is a party or has the authority to act on behalf of a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and any other Transaction Document to which Seller is a party or has the authority to act on behalf of a party, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized by Seller. This Agreement has been duly executed and delivered by Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms. When each other Transaction Document to which Seller is or will be a party has been duly executed and delivered by Seller, such Transaction Document will constitute a legal and binding obligation of Seller enforceable against it in accordance with its terms.

 

 
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Section 3.02 Organization, Authority and Qualification of the Company . The Public Company is a corporation formed, validly existing and in good standing under the Laws of the State of Nevada and has full corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it has been and is currently conducted.

 

Section 3.03 Capitalization; Indebtedness .

 

(a) Seller is the record owner of and has good and valid title to the shares, free and clear of all Encumbrances save for any Encumbrance in favor of Seller. The shares have been duly authorized and are validly issued, fully-paid and non-assessable. Upon consummation of the transactions contemplated by this Agreement, Buyer shall own all of the shares, free and clear of all Encumbrances.

 

(b) The shares were issued in compliance with applicable Laws. The shares were not issued in violation of the Organizational Documents of the Public Company or any other agreement, arrangement or commitment to which Seller or the Public Company is a party and are not subject to or in violation of any preemptive or similar rights of any Person.

 

(c) There are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to any membership interests in the Public Company or obligating Seller or the Public Company to issue or sell any membership interests (including the shares), or any other interest, in the Public Company other than as reflected herein. Other than the Organizational Documents, there are no voting trusts, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the shares.

 

Section 3.04 Subsidiaries . The Public Company owns Metwood Inc., a Virginia Corporation (‘MTVA’). MTVA is a wholly owned subsidiary of MTWD. MTVA holds certain construction product patents and associated rights to manufacture, distribution, and sales. MTVA has inventory, vehicles, shop equipment, office equipment, bank account, and other assets and liabilities for operation its business. Buyer will not acquire MTVA. At the closing, MTVA will be acquired by the existing majority shareholder of MTWD, Cahas Mountain Properties (‘CAHAS’).

 

Section 3.05 No Conflicts; Consents . The execution, delivery and performance by Seller of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the Organizational Documents of Seller or Public Company; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Seller or the Public Company, require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Contract to which Seller or the Public Company is a party or by which Seller or the Public Company is bound or to which any of their respective properties and assets are subject (including any Material Contract) or any License affecting the properties, assets or business of the Public Company, except for such violations, breaches, defaults, accelerations, terminations, modifications or cancellations that would not, individually or in the aggregate, have a Material Adverse Effect; or (d) result in the creation or imposition of any Encumbrance other than an Encumbrances permitted by the Buyer in writing on any properties or assets of the Public Company. No consent, approval, License, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Seller or the Public Company in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.

 

 
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Section 3.06 Financial Statements . Complete copies of the Public Company’s audited financial statements consisting of the balance sheet of the Public Company as of June 30, 2018 and the related statements of income and retained earnings, members’ equity and cash flow for the years then ended (the ‘ Audited Financial Statements ’), and unaudited financial statements consisting of the balance sheet of the Public Company as of the last full month ended immediately prior to Closing and the related statements of income and retained earnings, members’ equity and cash flow for the year to date period then ended (the ‘ Interim Financial Statements ’ and together with the Audited Financial Statements, the ‘ Financial Statements ’) are included in the Disclosure Schedules.

 

(a) The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments and the absence of notes (that if presented, would not differ materially from those presented in the Audited Financial Statements). The Financial Statements are based on the books and records of the Public Company, and fairly present the financial condition of the Public Company as of the respective dates they were prepared and the results of the operations of the Public Company for the periods indicated. Undisclosed Liabilities. To the Knowledge of Seller, the Public Company has no liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise of the nature required to be disclosed in a balance sheet prepared in accordance with GAAP (‘ Liabilities ’), except (a) those which are adequately reflected or reserved against in the Balance Sheet as of the Balance Sheet Date, and (b) those which have been incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date and which are not, individually or in the aggregate, material in amount.

 

(b) The expense of creating the financial statements noted in Section 3.06 shall be borne exclusively by the purchaser. Seller shall retain records of existing documentation and regulatory filings. Those existing financial statements that are out of date or not in conformity with regulatory requirements will be noted. Purchaser agrees to directly engage a bona-fide licensed accounting firm appropriately registered in Virginia and with sufficient experience in auditing public companies to bring MTWD into regulatory and accounting compliance. Buyer will pay for all costs associated with achieving the conformance noted above.

 

Section 3.07 Absence of Certain Changes, Events and Conditions . Since the Balance Sheet Date, and other than in the ordinary course of business consistent with past practice, or with the express written approval of Buyer, there has not been, with respect to the Public Company, any:

 

(a) event, occurrence or development that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(b) amendment of the Organizational Documents of the Public Company not consistent with the obligations set forth in Section 5.15 and Section 5.17 .;

 

(c) except in furtherance of the obligations set forth in Section 5.15 , split, combination or reclassification of any membership interests in the Public Company;

 

(d) issuance, sale or other disposition of, or creation of any Encumbrance on, any membership interests in the Public Company, or grant of any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any membership interests in the Public Company;

 

(e) material change in any method of accounting or accounting practice of the Public Company, except as required by GAAP or as disclosed in the notes to the Financial Statements;

 

(f) material change in the Public Company’s cash management practices and its policies, practices and procedures with respect to collection of accounts receivable, establishment of reserves for uncollectible accounts, accrual of accounts receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits;

 

 
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(g) entry into any Contract that would constitute a Material Contract;

 

(h) incurrence, assumption or guarantee of any indebtedness for borrowed money except unsecured current obligations and Liabilities incurred in the ordinary course of business consistent with past practice;

 

(i) transfer, assignment, sale or other disposition of any of assets shown or reflected in the Balance Sheet or cancellation of any debts or entitlements with the exclusion of Sub Debt;

 

(j) transfer, assignment or grant of any license or sublicense of any material rights under or with respect to any Intellectual Property;

 

(k) material damage, destruction or loss (whether or not covered by insurance) to any property;

 

(l) any capital investment in, or any loan to, any other Person;

 

(m) acceleration, termination, material modification to or cancellation of any material Contract (including, but not limited to, any Material Contract) to which the Public Company is a party or by which it is bound;

 

(n) any material capital expenditures;

 

(o) imposition of any Encumbrance upon any of the Public Company’s properties or assets, tangible or intangible;

 

Section 3.08 Documents; Other Reports; Internal Controls .

 

(a) The Public Company is, and since 2000, has been, duly registered as with the Secretary of State and is duly registered in the states where such registration is required under the laws of such states. It is understood by all parties that the required filings with the SEC are in arrears. Buyer is responsible for the cost of bringing such filings into a current status with the assistance and cooperation of Seller. The Public Company, agents and its employees are in all other respects are in compliance in all material respects with all federal and state laws or those requiring registration, licensing or qualification and the Public Company is a member in good standing and has all material licenses and authorizations in self-regulatory or trade organizations required to permit the operation of its business as presently conducted. Each such federal and state registration is in full force and effect. The Public Company has furnished to Purchaser a true, correct and complete copy of its Books and Records, as amended to date, filed by the Public Company with the State of Nevada. The Public Company has in its files for each of its existing customer accounts all appropriate material applications, certificates, agreements and other material documentation necessary or appropriate in connection with the current and historical level and type of activities engaged in. All such applications, certificates, agreements and other material documentation has been duly executed and delivered to the Public Company by the appropriate Person or Persons with respect to each such account.

 

(b) Seller and the Public Company have filed or furnished all required reports, forms, schedules, registration statements and other documents with the Secretary of State since 2000 (the ‘ Public Company Reports ’) and have paid all fees and assessments due and payable in connection therewith. As of their respective dates of filing (or, if amended or superseded by a subsequent filing prior to the date hereof, as of the date of such subsequent filing), the Public Company Reports complied as to form in all material respects with the requirements of the Securities Act of 1933, as amended (the ‘ Securities Act ’), or the Securities Exchange Act of 1934, as amended (the ‘ Exchange Act ’), as the case may be, and the rules and regulations of the SEC thereunder applicable to such Public Company Reports, and none of the Public Company Reports when filed with the SEC, and if amended prior to the date hereof, as of the date of such amendment, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Seller has made available to Buyer true, correct and complete copies of all written correspondence between the SEC and Seller and the Public Company relating to the Public Company Reports occurring prior to the date of this Agreement. There are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the Public Company Reports.

 

 
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Neither Seller nor the Company is required to file periodic reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.

 

(c) Seller and the Public Company have either timely filed or have caused the past-due reports to become current, all reports, forms, schedules, registrations, statements and other documents, together with any amendments required to be made with respect thereto, that they were required to file since founding with any Governmental Authority (other than the Public Company Reports) and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Governmental Authority in the regular course of the business of the Public Company and its Subsidiaries, no Governmental Authority has notified the Public Company that it has initiated any proceeding or, to the Knowledge of Seller, threatened an investigation into the business or operations of the Public Company or any of its Subsidiaries since January 1, 2018. To the Knowledge of Seller, other than those deficiencies specifically identified herein, there is no material unresolved violation or exception by any Governmental Authority with respect to any report, form, schedule, registration, statement or other document filed by, or relating to any examinations by any such Governmental Authority of, Seller or the Public Company.

 

(d) Seller has disclosed in writing to Buyer, based on its most recent evaluation prior to the date hereof, (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect in any material respect Seller’s or the Public Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Seller’s or the Public Company’s internal controls over financial reporting.

 

(e) The records, systems, controls, data and information of Seller and the Public Company are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Public Company or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described in the following sentence. Seller and the Public Company have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

 

(f) Seller and the Public Company have designed, implemented and maintained disclosure controls and procedures (within the meaning of Rules 13a-15(e) and 15d-15(e) under the Exchange Act) to ensure that material information relating to Seller and the Public Company is (i) recorded, processed, summarized and reported within the time frames specified in the rules and forms of the SEC and (ii) accumulated and communicated to the management of Seller and the Public Company by others within those entities as appropriate to allow timely decisions regarding required disclosure and to make the certifications required by the Exchange Act with respect to the Public Company Reports.

 

 
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(g) Since September 1st, 2018, (x) neither Seller nor the Public Company nor, to the knowledge of Seller, any director, officer, employee, auditor, accountant or representative of Seller or the Public Company has received or otherwise had or obtained knowledge of any written complaint, allegation, assertion or claim, regarding the accounting or auditing practices, procedures, methodologies or methods of Seller or the Public Company or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Seller or the Public Company has engaged in questionable accounting or auditing practices, and (y) no attorney representing Seller or the Public Company, whether or not employed by Seller or the Public Company, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Seller or the Public Company or any of their officers, directors, employees or agents to the board of managers of the Public Company or any committee thereof or to any manager or officer of the Public Company.

 

Section 3.09 Title to Assets

 

(a) The Public Company has valid title to, or a valid leasehold interest in, all Real Property and personal property and other assets reflected in Section 3.11(a) of the Disclosure Schedules or acquired after the Balance Sheet Date, other than properties and assets sold or otherwise disposed of in the ordinary course of business consistent with past practice since the Balance Sheet Date. All such properties and assets (including leasehold interests) are free and clear of any Encumbrances.

 

(b) The assets and liabilities of MTVA will be conveyed to CAHAS.

 

Section 3.10 [Intentionally Omitted] .

 

Section 3.11 [Intentionally Omitted] .

 

Section 3.12 Legal Proceedings; Governmental Orders .

 

(a) To Seller’s Knowledge, there are no Actions pending or threatened (a) against or by the Public Company affecting any of its properties or assets (or by or against Seller or any Affiliate thereof and relating to the Public Company); or (b) against or by the Public Company, Seller or any Affiliate of Seller that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To Seller’s Knowledge, no event has occurred or circumstances exist that would reasonably be expected to give rise to, or serve as a basis for, any such Action.

 

(b) There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting the Public Company or any of its properties or assets. The Public Company is in compliance in all-material respects with the terms of each Governmental Order set forth in Section 3.16(b) of the Disclosure Schedules. To Seller’s Knowledge, no event has occurred or circumstances exist that would reasonably be expected to constitute or result in (with or without notice or lapse of time) a violation of any such Governmental Order.

 

 
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Section 3.13 Compliance with Laws; Licenses .

 

(a) Since 2000, the Public Company has complied, and is now complying, in all material respects with all Laws applicable to it or its business, properties or assets.

 

(b) All material Licenses required for the Public Company to conduct its business have been obtained by it and are valid and in full force and effect. All fees and charges with respect to such Licenses as of the date hereof have been paid in full.

 

Section 3.14 [Intentionally Omitted] .

 

Section 3.15 Taxes . Except as set forth in Section 3.21 of the Disclosure Schedules:

 

(a) All Tax Returns required to be filed on or before the Closing Date by the Public Company have been, or will be, timely filed. Such Tax Returns are, or will be, true, complete and correct in all respects. All Taxes due and owing by the Public Company (whether or not shown on any Tax Return) have been, or will be, timely paid.

 

(i) The amount of taxes owed for the short year tax period ending upon the conversion of the Public Company, as set forth in Section 5.15 , shall have been properly and accurately accrued on the books of the Public Company, and

 

(ii) Such amount of taxes has been sufficiently funded or deposited with the appropriate tax authorities.

 

(b) The Public Company has withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, member or other party, and complied with all information reporting and backup withholding provisions of applicable Law.

 

(c) No claim has been made by any taxing authority in any jurisdiction where the Public Company does not file Tax Returns that it is, or may be, subject to Tax by that jurisdiction.

 

(d) No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of the Public Company.

 

(e) All deficiencies asserted, or assessments made, against the Public Company as a result of any examinations by any taxing authority have been fully paid.

 

(f) The Public Company is not a party to any Action by any taxing authority. There are no pending or threatened Actions by any taxing authority.

 

(g) Seller has delivered to Buyer copies of all federal, state, local and foreign income, franchise and similar Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by, the Public Company for all Tax periods ending after December 31, 2017.

 

(h) There are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Public Company.

 

Section 3.16 Books and Records . The minute books of the Public Company describing matters during the two (2) year period of time prior to the date hereof have been made available to Buyer, are complete and correct and have been maintained in accordance with sound business practices; provided , however , that all references not relevant to the Public Company shall be redacted from such minute books made available to Buyer.

 

Section 3.17 Disclaimer of Additional Warranties . Except for the representations and warranties set forth in this Article III , none of Seller, the Public Company, or any of their respective Affiliates or any Person acting on behalf of any of the foregoing makes or has made any other express or any implied representation or warranty to Buyer as to the accuracy or completeness of any information regarding Seller, the Public Company or any other matter. Neither Seller nor any other Person shall have or be subject to any liability to Buyer or any other Person resulting from the distribution to Buyer, or Buyer’s use, of any such information, including any information, document or material made available or provided to Buyer in certain ‘data rooms,’ presentations or offering or memoranda, or in any other form, in expectation of the transactions contemplated hereby.

 

 
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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Buyer represents and warrants to Seller that the statements contained in this Article IV are true and correct as of the date hereof.

 

Section 4.01 Organization and Authority of Buyer . Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the state of Florida Buyer has full power and authority to enter into this Agreement and the other Transaction Documents to which Buyer is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and any other Transaction Document to which Buyer is a party, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite limited liability company action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller) this Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms.

 

Section 4.02 No Conflicts; Consents . The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the Organizational Documents of Buyer; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Buyer. No other material consent, approval, License, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, including, but not limited to, the consent or approval by shareholders, except for such violations, breaches, defaults, accelerations, terminations, modifications or cancellations that would not, individually or in the aggregate, have a Material Adverse Effect

 

Section 4.03 [Intentionally Omitted] .

 

Section 4.04 Legal Proceedings . Except as set forth in Section 4.04 of the Disclosure Schedules, there are no Actions pending or, to Buyer’s knowledge, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.

 

Section 4.05 Financial Capacity . Buyer has, or will have prior to the Closing, sufficient cash or other sources of immediately available funds to enable it to make payment of the Purchase Price and any other amounts to be paid by it hereunder.

 

 
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ARTICLE V

 

COVENANTS

 

Section 5.01 Conduct of Business Prior to the Closing . As of the date hereof until the Closing, except as otherwise provided in this Agreement or consented to in writing by Buyer (which consent shall not be unreasonably withheld or delayed), Seller shall, and shall cause the Public Company to, (x) conduct the business of the Public Company in the ordinary course of business consistent with past practice; and (y) use commercially reasonable efforts to maintain and preserve intact the current organization, business and franchise of the Public Company and to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, service providers, suppliers and regulators with the Public Company.

 

Section 5.02 Certain Transitional Cooperation . From the date hereof until the Closing and for a reasonable period of time thereafter (not to exceed six months), Seller shall, and prior to Closing to the extent possible shall cause the Public Company to, cooperate with Buyer and its representatives as they may reasonably request.

 

Section 5.03 No Solicitation of Other Bids .

 

(a) Seller shall not, and shall not authorize or permit any of its Affiliates (including the Public Company) or any of its or their Representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. Seller shall immediately cease and cause to be terminated, and shall cause its Affiliates (including the Public Company) and all of its and their Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, ‘ Acquisition Proposal ’ shall mean any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates) concerning (i) a merger, consolidation, liquidation, recapitalization or other business combination transaction involving the Public Company; (ii) the issuance or acquisition of membership interests in the Public Company; or (iii) the sale, lease, exchange or other disposition of any significant portion of the Public Company’s properties or assets.

 

(b) Seller agrees that the rights and remedies for noncompliance with this Section 5.04 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Buyer and that money damages would not provide an adequate remedy to Buyer.

 

Section 5.04 Notice of Certain Events .

 

(a) From the date hereof until the Closing, Seller shall promptly notify Buyer in writing of:

 

(i) any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by Seller hereunder not being true and correct in any material respect or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 7.02 to be satisfied;

 

 
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(ii) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

 

(iii) any notice or other communication from any Governmental

 

Authority in connection with the transactions contemplated by this Agreement; and

 

(iv) any Actions commenced or, to Seller’s Knowledge, threatened against, relating to or involving or otherwise affecting Seller or the Public Company that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.17 or that relate to the consummation of the transactions contemplated by this Agreement.

 

(b) Buyer’s receipt of information pursuant to this Section 5.05 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller in this Agreement (including Section 8.02 and Section 9.01(b) ) and shall not be deemed to amend or supplement the Disclosure Schedules.

 

Section 5.05 Resignations . Seller shall deliver to Buyer at least two (2) Business Days prior to the Closing written resignations, effective as of the Closing Date, of all the officers, managers and Board Members of the Public Company.

 

Section 5.06 Confidentiality .

 

(a) From the date hereof until the earlier of (x) the Closing and (y) the third anniversary of the date of this Agreement, Buyer shall, and shall cause its Affiliates to, hold, and shall use reasonable best efforts to cause its or their respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Public Company, and to use such information solely in connection with the transactions contemplated by this Agreement, except to the extent that Buyer can show that such information (a) is generally available to and known by the public through no fault of Seller, any of its Affiliates or their respective Representatives; or (b) is lawfully acquired by Buyer, any of its Affiliates or their respective Representatives from and after the date hereof from sources (other than the Public Company or Seller or their respective Representatives) which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If Buyer or any of its Affiliates or their respective Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, Buyer shall promptly notify Seller in writing and shall disclose only that portion of such information which Buyer is advised by its counsel in writing is legally required to be disclosed, provided that Buyer shall use commercially reasonable efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.

 

(b) From and after the Closing, Seller shall, and shall cause its Affiliates to, hold, and shall use reasonable best efforts to cause its or their respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Public Company, except to the extent that Seller can show that such information (a) is generally available to and known by the public through no fault of Seller, any of its Affiliates or their respective Representatives; or (b) is lawfully acquired by Seller, any of its Affiliates or their respective Representatives from and after the Closing from sources (other than Buyer or its Representatives) which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If Seller or any of its Affiliates or their respective Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, Seller shall promptly notify Buyer in writing and shall disclose only that portion of such information which Seller is advised by its counsel in writing is legally required to be disclosed, provided that Seller shall use commercially reasonable efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.

 

 
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Section 5.07 Governmental Approvals and Consents .

 

(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be made, all filings and submissions required under any Law applicable to such party or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities, that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement and the other Transaction Documents. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain any other consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

 

(b) Seller and Buyer shall use reasonable best efforts to give all notices to, and obtain all consents from, all third parties that are described in Section 3.05 of the Disclosure Schedules. (c) Without limiting the generality of the parties’ undertakings pursuant to subsections (a) and (b) above, each of the parties hereto shall use all reasonable best efforts to:

 

(i) respond to any inquiries by any Governmental Authority regarding antitrust or other matters with respect to the transactions contemplated by this Agreement or any Transaction Document;

 

(ii) avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this Agreement or any Transaction Document;

 

(iii) in the event any Governmental Order adversely affecting the ability of the parties to consummate the transactions contemplated by this Agreement or any Transaction Document has been issued, to have such Governmental Order vacated or lifted; and

 

(iv) promptly advise the other party hereto upon receiving any communication from any Governmental Authority whose consent or approval is required for consummation of the transactions contemplated by this Agreement which causes such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained or that the receipt of any such approval will be materially delayed or conditioned.

 

(d) If any consent, approval or authorization necessary to preserve any right or benefit under any Contract to which the Public Company is a party is not obtained prior to the Closing, Seller shall, subsequent to the Closing, cooperate with Buyer and the Public Company in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable. If such consent, approval or authorization cannot be obtained, Seller shall use its reasonable best efforts to provide the Public Company with the rights and benefits of the affected Contract for the term thereof, and, if Seller provides such rights and benefits, the Public Company shall assume all obligations and burdens thereunder.

 

(e) All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of either party before any Governmental Authority or the staff or regulators of any Governmental Authority, in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Seller or the Public Company with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to the other party hereunder in advance of any filing, submission or attendance, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Each party shall give notice to the other party with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, with such notice being sufficient to provide the other party with the opportunity to attend and participate in such meeting, discussion, appearance or contact.

 

 
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(f) Notwithstanding the foregoing, nothing in this Section 5.08 shall require, or be construed to require, Seller or Buyer or any of their respective Affiliates to agree to (i) sell, hold, divest, discontinue or limit, before or after the Closing Date, any assets, businesses or interests of Seller, Buyer, the Public Company or any of their respective Affiliates; (ii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests which, in either case, could reasonably be expected to result in a Material Adverse Effect or materially and adversely impact the economic or business benefits to Seller or Buyer of the transactions contemplated by this Agreement or (iii) any material modification or waiver of the terms and conditions of this Agreement.

 

Section 5.08 Books and Records .

 

(a) For a period of seven (7) years after the Closing, or for such longer period as may be required by Law, Buyer shall:

 

(i) retain the books and records (including personnel files) of the Public Company relating to periods prior to the Closing in a manner reasonably consistent with the prior practices of the Public Company; and

 

(ii) upon reasonable notice, afford the Representatives of Seller reasonable access (including the right to make, at Seller’s expense, photocopies), during normal business hours, to such books and records; provided, however , that any books and records related to Tax matters shall be retained pursuant to the periods set forth in Article VI .

 

(b) Neither Buyer nor Seller shall be obligated to provide the other party with access to any books or records (including personnel files) pursuant to this Section 5.10 where such access would violate any Law, provided that Buyer or Seller, as the case may be, shall preserve any such books and records (including personnel files) in their possession or controlled by them, for a period of seven (7) years after Closing, or for such longer period as may be required by law.

 

Section 5.09 Ongoing Business of the Public Company . During the period of time between the date hereof and the earlier of the Closing Date or the termination of this Agreement pursuant to Section 9.01 , Seller shall, and shall cause the Public Company to make reasonable changes to the Public Company’s infrastructure or business lines, with guidance of Buyer consistent with requirements of Law, as shall be mutually agreed by Seller and Buyer.

 

Section 5.10 Closing Conditions . From the date hereof until the Closing, each party hereto shall, and Seller shall cause the Public Company to, use reasonable best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in Article VII hereof.

 

Section 5.11 Public Announcements . Unless otherwise required by applicable Law or stock exchange requirements (based upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.

 

 
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Section 5.12 Further Assurances . Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

 

ARTICLE VI

 

TAX MATTERS

 

Section 6.01 Tax Covenants .

 

(a) Without the prior written consent of Buyer, Seller (and, prior to the Closing, the Public Company, its Affiliates and their respective Representatives) shall not, to the extent it may affect, or relate to, the Public Company, make, change or rescind any Tax election, amend any Tax Return or take any position on any Tax Return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of Buyer or the Public Company in respect of any Post-Closing Tax Period. Seller agrees that Buyer is to have no liability for any Tax resulting from any action of Seller, the Public Company, its Affiliates or any of their respective Representatives, and agrees to indemnify and hold harmless Buyer (and, after the Closing Date, the Public Company) against any such Tax or reduction of any Tax asset.

 

(b) All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid equally by Seller and Buyer when due. Seller shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Buyer shall cooperate with respect thereto as necessary).

 

(c) Seller shall prepare, or cause to be prepared, at its expense all Corporate Income Tax Returns required to be filed by the Public Company after the Closing Date with respect to a PreClosing Tax Period (other than any income Tax Return for a taxable period ending on or before the Closing Date). Any such Tax Return shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and without a change of any election or any accounting method and shall be submitted by Seller to Buyer (together with schedules, statements and, to the extent requested by Seller, supporting documentation) at least 30 days prior to the due date (including extensions) of such Tax Return.

 

Section 6.02 Tax Indemnification . Seller shall indemnify the Public Company, Buyer, and each of Buyer’s partners, officers, directors, agents, and employees and hold them harmless from and against (a) any Loss attributable to any breach of or inaccuracy in any representation or warranty made in Section 3.21 ; (b) any Loss attributable to any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in Section 6.01 ; (c) all Taxes of the Public Company or relating to the business of the Public Company for all Pre-Closing Tax Periods; (d) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Public Company (or any predecessor of the Public Company) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section 1.1502-6 or any comparable provisions of foreign, state or local Law; and (e) any and all Taxes of any person imposed on the Public Company arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring before the Closing Date. In each of the above cases, together with any out-of-pocket fees and expenses (including attorneys’ and accountants’ fees) incurred in connection therewith, Seller shall reimburse Buyer for any Taxes of the Public Company that are the responsibility of Seller pursuant to this Section 6.02 within ten (10) Business Days after payment of such Taxes by Buyer or the Public Company.

 

 
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Section 6.03 Contests . Buyer agrees to give written notice to Seller of the receipt of any written notice by the Public Company, Buyer or any of Buyer’s Affiliates which involves the assertion of any claim, or the commencement of any Action, in respect of which an indemnity may be sought by Buyer pursuant to this Article VI (a ‘ Tax Claim ’); provided, that failure to comply with this provision shall not affect Buyer’s right to indemnification hereunder except to the extent Seller is actually prejudiced as a result thereof. Buyer shall control the contest or resolution of any Tax Claim (other than a Tax Claim arising out of an income Tax Return for any period ending on or before the Closing Date); provided, however , that Buyer shall obtain the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed) before entering into any settlement of a claim or ceasing to defend such Tax Claim; and, provided further , that Seller shall be entitled to participate in the defense of such Tax Claim and to employ counsel of its choice for such purpose, the fees and expenses of which separate counsel shall be borne solely by Seller.

 

Section 6.04 Cooperation and Exchange of Information . Seller and Buyer shall provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return pursuant to this Article VI or in connection with any audit or other proceeding in respect of Taxes of the Public Company. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by tax authorities. Each of Seller and Buyer shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Public Company for any taxable period beginning before the Closing Date until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions for the respective Tax periods. Prior to transferring, destroying or discarding any Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Public Company for any taxable period beginning before the Closing Date, Seller or Buyer (as the case may be) shall provide the other party with reasonable written notice and offer the other party the opportunity to take custody of such materials.

 

Section 6.05 Tax Treatment of Indemnification Payments . Any indemnification payments pursuant to this Article VI shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Law.

 

Section 6.06 Survival . Notwithstanding anything in this Agreement to the contrary, the provisions of Section 3.21 , this Article VI , and Article X shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus 60 days.

 

Section 6.07 Overlap . To the extent that any obligation or responsibility pursuant to Article VIII may overlap with an obligation or responsibility pursuant to this Article VI , the provisions of this Article VI shall govern.

 

ARTICLE VII

 

CONDITIONS TO CLOSING

 

Section 7.01 Conditions to Obligations of All Parties . The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

 

(a) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

 

 
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Section 7.02 Conditions to Obligations of Buyer . The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:

 

(a) Each of the representations and warranties of Seller set forth in Section 3.02 and Section 3.03 shall be true and correct in all respects (other than de minimis inaccuracies) as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except to the extent representations and warranties by their terms speak only as of a certain date, in which case such representations and warranties shall be true and correct as of such date; and (ii) the other representations and warranties of Seller set forth in Article III of this Agreement (but without regard to any materiality qualifications or references to Material Adverse Effect contained in any representation or warranty) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except to the extent representations and warranties by their terms speak only as of a certain date, in which case such representations and warranties shall be true and correct as of such date.

 

(b) Seller shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements, covenants and conditions that are qualified by materiality, Seller shall have performed such agreements, covenants and conditions, as so qualified, in all respects.

 

(c) No Action shall have been commenced against Buyer, Seller or the Public Company, which would prevent the Closing. No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any transaction contemplated hereby.

 

(d) All approvals, consents and waivers that are listed on Section 7.02 of the Disclosure Schedules shall have been received, and executed counterparts thereof shall have been delivered to Buyer at or prior to the Closing.

 

(e) From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, would reasonably be expected to result in a Material Adverse Effect.

 

(f) Seller shall have duly executed and delivered the Assignment to Buyer.

 

(g) The other Transaction Documents shall have been executed and delivered by the parties thereto and true and complete copies thereof shall have been delivered to Buyer.

 

(h) Buyer shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Seller, that each of the conditions set forth in (a) and (b) have been satisfied.

 

(i) Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying that attached thereto are true and complete copies of all resolutions adopted by the managing member of Seller authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.

 

 
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(j) Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying the names and signatures of the officers of Seller authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder.

 

(k) Buyer shall have received resignations of the managers and officers of the Public Company pursuant to Section 5.05 .

 

(l) Seller shall have delivered to Buyer a good standing certificate (or its equivalent) for the Public Company from the secretary of state or similar Governmental Authority of the jurisdiction under the Laws in which they are organized.

 

(m) Seller shall have delivered to Buyer such other documents or instruments as Buyer reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.

 

(n) Seller shall have provided Buyer with a confirmation of any bank balances as of the Closing Date and that such balances are consistent with the Estimated Closing Working Capital Statement.

 

Section 7.03 Conditions to Obligations of Seller . The obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the following conditions:

 

(a) Other than the representations and warranties of Buyer contained in Section 4.01 , the representations and warranties of Buyer contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Buyer contained in Section 4.01 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date.

 

(b) Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements, covenants and conditions that are qualified by materiality, Buyer shall have performed such agreements, covenants and conditions, as so qualified, in all respects; and provided, further, that Buyer shall have performed its covenants in Section 2.03 in all respects.

 

(c) No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any material transaction contemplated hereby.

 

(d) The other Transaction Documents shall have been executed and delivered by the parties thereto and true and complete copies thereof shall have been delivered to Seller.

 

 
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(e) Seller shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions set forth in (a) and (b) have been satisfied.

 

(f) Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by the managers of Buyer authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.

 

(g) Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying the names and signatures of the officers of Buyer authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder.

 

(h) The Escrow Agreement shall remain in full force and effect without any breach, default or termination thereunder by Buyer or the Escrow Agent, and Buyer shall have delivered to the Escrow Agent the notice contemplated by Section 2.03(a) .

 

(i) Buyer shall have delivered to Seller such other documents or instruments as Seller reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.

 

ARTICLE VIII

 

INDEMNIFICATION

 

Section 8.01 Seller’s Indemnification of Buyer . Seller and the Public Company, jointly and severally, shall indemnify and hold harmless Buyer and its partners, directors, officers, agents and employees from and against any and all claims, actions, damages, arbitration fees and expenses, costs, attorney’s fees and other liabilities incurred by Buyer or its partners, officers, agents and employees arising from or in connection with:

 

(a) Any breach of any representation or warranty made by Seller or the Public Company in this Agreement;

 

(b) Any breach of any covenant made by Seller or the Public Company in this Agreement;

 

(c) Any claim by any person or entity for brokerage or finder’s fees or commissions or similar payments in respect of the transactions contemplated by this Agreement based upon any agreement or understanding alleged to have been made by any such person or entity with Seller; or

 

(d) Any act or omission by Seller or the Public Company, or any of the Public Company’s director, officers, agents, or employees in connection with the conduct or business of Seller or the Public Company occurring on or before the Closing.

 

Section 8.02 Buyer’s Indemnification of Seller . Buyer shall indemnify and hold harmless Seller from and against any and all claims, actions, damages, arbitration fees and expenses, costs, attorney’s fees and other liabilities incurred by Seller arising from or in connections with:

 

(a) Any material breach of any representation, warranty, obligation or covenant made by Buyer in this Agreement (it being agreed that any breach of any payment obligation shall be deemed material);

 

(b) Any act or omission by Buyer in connection with directors, officers, agents or employees in connection with the conduct of the business of Public Company that Buyer seeks for Public Company to add between execution of the Agreement and Closing.

 

 
25
 
 

 

Section 8.03 Notice of Claim . If any claim is brought against any party in respect of which indemnification may be brought under this Agreement, the party seeking indemnification shall give notice to the party against whom indemnification (the ‘ Indemnitor ’) is sought and, in the case of a claim brought by a person or entity not party to this Agreement, the Indemnitor shall have the right to take exclusive control of the defense, negotiation and settlement of any such third-party claim.

 

Section 8.04 Sole Remedy . Unless otherwise provided for in the Agreement, the parties agree that the indemnification provisions contained in this Agreement constitute the sole and exclusive remedies of the Seller and Buyer.

 

ARTICLE IX

 

TERMINATION

 

Section 9.01 Termination . This Agreement may be terminated at any time prior to the Closing:

 

(a) by Buyer by written notice to Seller if:

 

(i) Buyer is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Seller within 30 days of Seller’s receipt of written notice of such breach from Buyer or if the Public Company becomes insolvent prior to the Closing Date; or

 

(ii) any of the conditions set forth in Section 7.01 or Section 7.02 shall not have been, or if it becomes apparent that any of such conditions will not be fulfilled by the Closing Date, unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; (b) by Seller by written notice to Buyer if:

 

(i) Seller is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Buyer within 30 days of Buyer’s receipt of written notice of such breach from Seller; or

 

(ii) any of the conditions set forth in Section 7.01 or Section 7.03 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by the Closing Date, unless such failure shall be due to the failure of Seller to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or (c) by Buyer or Seller in the event that:

 

(i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited; or any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable.

 

 
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Section 9.02 Effect of Termination .

 

(a) In the event of termination of this Agreement in accordance with Section 9.01 of this Agreement, no party shall have any monetary liability for such termination or for any breach giving rise thereto except (x) as provided in Section 9.02(b) or Section 9.02(c) , (y) as provided in Section 2.03(b) , and (z) where such termination results from fraud or an intentional and material breach of covenant by such party.

 

(b) In event seller terminates this agreement then all reasonable costs to bring the Public Company into compliance with the SEC are due and payable to buyer. If seller discovers undisclosed detrimental information then the amounts would not be payable.

 

(c) Neither the payment of any fee pursuant to Section 9.02(b) or

 

Section 9.02(c) nor the delivery of any refund pursuant to Section 2.03(b) shall be deemed liquidated damages nor shall limit or restrict in any manner any remedy otherwise available to the receiving party.

 

ARTICLE X

 

MISCELLANEOUS

 

Section 10.01 Expenses . Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Buyer, whether or not the Closing shall have occurred.

 

Section 10.02 Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent on a Business Day during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the fifth day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02 ):

 

 

If to Seller:

 

METWOOD, INC.

 

 

 

819 Naff Road

 

 

 

Boones Mill, VA. 24065

 

 

 

 

 

If to Buyer: 

 

EMERGE

 

 

 

NUTRACEUTICALS, INC.

 

 

 

18848 US HWY 441

 

 

 

Suite 168 Mount Dora, FL.

 

 
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Section 10.03 Interpretation . For purposes of this Agreement, (a) the words ‘include,’ ‘includes’ and ‘including’ shall be deemed to be followed by the words ‘without limitation’; (b) the word ‘or’ is not exclusive; and (c) the words ‘herein,’ ‘hereof,’ ‘hereby,’ ‘hereto’ and ‘hereunder’ refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

 

Section 10.04 Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

Section 10.05 Severability . If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Except as provided in Section 5.07(e) , upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 10.06 Entire Agreement . This Agreement and the other Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

 

Section 10.07 Successors and Assigns . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however , that prior to the Closing Date, Buyer may, without the prior written consent of Seller, assign all or any portion of its rights under this Agreement to one or more of its direct or indirect wholly-owned subsidiaries. No assignment shall relieve the assigning party of any of its obligations hereunder.

 

Section 10.08 No Third-party Beneficiaries . Except as provided in Section 6.03 and Article VIII , this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 10.09 Attorney’s Fees . In the event of litigation in relation to the enforcement of rights under this Agreement, the non-prevailing party shall reimburse the prevailing party for all reasonable attorney’s fees and costs resulting therefrom.

 

Section 10.10 Amendment and Modification; Waiver . This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

 
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Section 10.11 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial .

 

(a) This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Virginia without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Virginia or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the Commonwealth of Virginia.

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE COMMONWEALTH OF VIRGINIA IN EACH CASE LOCATED IN FRANKLIN COUNTY, VRIGINIA, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SEC TION 10.10(c).

 

Section 10.12 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

 
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Section 10.13 Schedules . Nothing in any Schedule attached hereto shall be adequate to disclose an exception to a representation or warranty made in this Agreement unless such Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. The Schedules and Exhibits to this Agreement are qualified in their entirety by reference to specific provisions of this Agreement. The Schedules to this Agreement are not intended to constitute, and shall not be construed as,

 

 

 

30

 

EXHIBIT 31.1

 

Certification of Chief Executive Officer

Securities Exchange Act Rules 13a-14 and 15d-14

As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Robert M. Callahan, certify that:

 

1. I have reviewed this annual report on Form 10-K of Metwood, Inc.;

 

 

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

 

3. Based on my knowledge, the financial statements and other financial information included in this annual report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this annual report;

 

 

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

b) designed such internal controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

 

 

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

 

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

 

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: February 12, 2019 By: /s/ Robert M. Callahan
   

Robert M. Callahan

Chief Executive Officer

 

 

EXHIBIT 31.2

 

Certification of Chief Executive Officer

Securities Exchange Act Rules 13a-14 and 15d-14

As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Shawn A. Callahan, certify that:

 

1. I have reviewed this annual report on Form 10-K of Metwood, Inc.;

 

 

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

 

3. Based on my knowledge, the financial statements and other financial information included in this annual report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this annual report;

 

 

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

b) designed such internal controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

 

 

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

 

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;

 

 

 

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: February 12, 2019 /s/ Shawn A. Callahan
   

Shawn A. Callahan

Chief Financial Officer

 

 

EXHIBIT 32

 

Certification of

Chief Executive Officer

and Chief Financial Officer

Securities Exchange Act rules 13(a) and 15(d)

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Annual Report on Form 10-K of Metwood, Inc. ("the Company") for the year ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), each of the undersigned Chief Executive Officer and Chief Financial Officer of the Company certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

 

 

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: February 12, 2019 /s/ Robert M. Callahan
    Robert M. Callahan  

 

 

Chief Executive Officer

 

 

 

 

 

Date: February 12, 2019

 

/s/ Shawn A. Callahan

 

 

 

Shawn A. Callahan

 

 

 

Chief Financial Officer