1<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-2000
METALCLAD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-2368719
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 Corporate Plaza, Suite 125
Newport Beach, CA 92660
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (949) 719-1234.
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 [ ]
As of September 30, 1998, the registrant had 30,450,622 shares
outstanding of its Common Stock, $.10 par value.<PAGE>
METALCLAD CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at September 30, 1998
(unaudited) and December 31, 1997. . . . . . . . . . . . . 1-2
Consolidated Statements of Operations for the nine
months ended September 30, 1998 (unaudited) and
September 30, 1997 . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1998 (unaudited) and
September 30, 1997. . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements. . .. . . . . . 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . 6
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE><S> <C> <C>
September 30, December 31,
1998 1997
------------ ------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 527,599 $ 1,643,521
Accounts receivable, less allowance for doubtful accounts of $43,840 in
September 1998 and $82,026 in December 1997 2,409,239 2,890,681
Costs and estimated earnings in excess of billings on uncompleted contracts 99,745 232,073
Inventories 231,481 181,172
Prepaid expenses and other current assets - 159,581
Receivables from related parties 156,157 131,825
---------- ----------
TOTAL CURRENT ASSETS 3,424,221 5,238,853
Property, plant and equipment, net 6,644,029 6,106,938
Investment and capitalized costs in unconsolidated affiliates 1,307,397 613,601
Deposits and other assets 555,735 432,087
Goodwill, less accumulated amortization of $320,078 in September 1998 and
$232,354 in December 1997 711,370 799,094
Real estate held for sale 25,000 25,000
---------- ----------
$12,667,752 $13,215,573
1<PAGE>
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,489,807 $ 1,932,997
Accrued payroll, property and other taxes - 622,379
Accrued expenses 2,362,757 940,511
Billings in excess of costs and estimated earnings on uncompleted contracts 26,047 20,727
Current portion of convertible subordinated debentures and notes 18,542 19,533
---------- ----------
TOTAL CURRENT LIABILITIES 3,897,153 3,536,147
---------- ----------
Notes payable 56,611 -
Convertible subordinated debentures, less discounts 2,794,708 1,500,000
---------- ----------
TOTAL LONG-TERM DEBT 2,851,319 1,500,000
---------- ----------
Shareholders equity:
Preferred stock, par value $10; 1,500,000 shares authorized; none issued - -
Common stock, par value $.10; 80,000,000 shares authorized, 30,450,622 and
30,063,870 issued and outstanding in September 1998 and December 1997,
respectively 3,045,063 3,006,387
Additional paid-in capital 57,372,704 56,962,689
Accumulated deficit (51,820,176) (49,129,377)
Officers receivable collateralized by stock (538,300) (520,163)
Cumulative foreign currency translation adjustment 2,140,011 (2,140,110)
---------- ----------
5,919,280 8,179,426
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $12,667,752 $13,215,573
========== ==========
</TABLE>
2<PAGE>
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE><S> <C> <C> <C> <C>
For Nine Months Ended For Three Months Ended
------------------------- --------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
INSULATION BUSINESS
Revenues
Contract revenues $7,881,005 $6,046,266 $2,580,468 $1,584,791
Material sales 50,444 159,876 28,796 27,167
Other 5,797 202,097 2,297 16,513
---------- ---------- ---------- ----------
7,937,246 6,408,239 2,611,561 1,628,471
Operating costs and expenses
Contract costs and expenses 6,860,260 5,351,956 2,282,235 1,367,928
Cost of material sales 37,680 120,056 22,367 16,483
Selling, general and administrative expenses 713,877 894,198 190,879 274,828
---------- ---------- ---------- ----------
7,611,817 6,366,210 2,495,481 1,659,239
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 325,429 42,029 116,080 (30,768)
WASTE MANAGEMENT
Revenues
Collection, recycling and destruction 4,085,219 1,443,822 1,384,578 1,294,085
Operating costs and expenses
Collection, recycling and destruction 4,290,810 2,037,184 1,360,455 1,611,532
Landfill 410,091 325,598 115,634 131,556
---------- ---------- ---------- ----------
4,700,901 2,362,782 1,476,089 1,743,088
Other income 12,551 168,720 12,551 -
Equity in earnings of unconsolidated affiliates - (742,845) - -
---------- ---------- ---------- ----------
OPERATING LOSS (603,131) (1,493,085) (78,960) (449,003)
CORPORATE EXPENSE (2,002,535) (1,918,251) (638,047) (645,946)
---------- ---------- ---------- ----------
Operating Loss (2,280,237) (3,369,307) (600,927) (1,125,717)
Interest expense (371,820) (58,885) (179,173) (33,272)
Gain (LOSS) on foreign currency translation (38,742) 5,771 (54,418) 14,820
NET LOSS ($2,690,799) ($3,422,421) ($834,518) ($1,144,169)
Weighted average number of common shares 30,312,436 29,234,647 30,450,622 29,429,368
Net loss per share of common stock:
Basic ($.09) ($.12) ($.03) ($.04)
Diluted ($.09) ($.12) ($.03) ($.04)
</TABLE>
3<PAGE>
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><S> <C> <C>
For Nine Months Ended
--------------------------------
September 30, September 30,
1998 1997
-------------- -------------
OPERATING ACTIVITIES
Net loss ($2,690,799) ($3,422,421)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 312,497 357,364
Loss in earnings of unconsolidated affiliates - 742,845
Provision for losses on accounts receivable (8,907) (7,600)
Issuance of stock for services and interest on convertible subordinated
debentures 8,440 108,750
Earnings in excess of distributions from Curtom-Metalclad - 12,588
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (105,242) 387,696
(Increase) decrease in unbilled receivables 218,020 (17,670)
(Increase) decrease in inventories (61,811) 114,536
(Increase) decrease in prepaid expenses and other assets 22,855 62,662
(Increase) decrease in receivables from related parties (24,332) 95,314
Increase (decrease) in accounts payable and accrued expenses 875,795 (781,122)
Increase (decrease) in billings over costs 137,648 (7,781)
(Increase) in capitalized development costs (693,710) -
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (2,009,548) (2,354,839)
---------- ----------
INVESTING ACTIVITIES
Purchase of equipment (803,270) (1,191,255)
Investments and capitalized costs in affiliates - (203,403)
Restricted Cash - 769,500
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (803,270) (625,158)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 1,350,329 -
Payments on Officers receivables collateralized by stock (18,137) -
Proceeds from sale of common stock under stock option plans and warrants 440,250 1,103,454
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,772,442 1,103,454
---------- ----------
Effect of exchange rates on cash (75,546) 4,709
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,115,920) (1,871,834)
Cash and cash equivalents at beginning of period 1,643,521 3,074,395
---------- ----------
Cash and cash equivalents at end of period $ 527,599 $ 1,202,561
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 8,191 $ 62,137
=========== ==========
</TABLE>
4<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended September 30, 1998
(Unaudited)
1. The accompanying unaudited financial statements of Metalclad
Corporation and its subsidiaries (the "Company") have been prepared in
accordance with the instructions to Form 10-Q and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management all adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1998 are not
necessarily indicative of what results will be for the year ending
December 31, 1998. These statements should be read in conjunction with
the consolidated financial statements and notes thereto and the report of
independent public accountants which was modified due to substantial doubt
about the Company s ability to continue as a going concern included in the
Company's Form 10-K for the year ended December 31, 1997.
2. The Company has completed all design, pre-development and
permitting necessary to build and operate an industrial waste landfill in
Aguascalientes, Mexico. Completion of construction and beginning of
operations were expected to occur in October. Because of a protest at the
site, construction was forced to be halted. The Company has now had
several meetings with the present governor, the governor-elect, members of
their cabinets and leaders in the local community. The Company now
believes that the demonstration had less to do with the actual project
than the change taking place in political administrations at both the
state and local levels. The Company believes that once the change in
administration has been completed in early December it will be given the
right to build and operate, pursuant to the terms of existing permits and
authorizations. Before returning to finish construction, the Company will
first evaluate the strength of the assurances expected to be given by both
the governor and leaders of the local community.
3. As part of the Company s warrant exchange program initiated in
August 1997, an unintended clause in the warrants issued as part of
financings in 1994 and 1996 has been identified. Each warrant issued in
these financings contained a provision for anti-dilution protection
related to exercise price. This clause entitled the holder to effectively
have the exercise price reduced to the lower of market or subsequent
equity transaction pricing ( ratchet event). The unintended provision
further provided that the number of shares underlying each warrant would
increase upon a ratchet event, resulting in the same net proceeds to the
Company upon exercise, but creating an increase in the number of shares.
The Company has attempted to both rectify this oversight and exchange
the outstanding warrants, via exchange offers to those investors holding
the affected warrants. The Company has been unsuccessful in these
a t t e mpts and has withdrawn all exchange offers. Consequently,
implementing the language of the unintended provision has created a
substantial increase in the number of outstanding warrants from 6.6
million at December 31, 1997 to approximately 19 million at September 30,
1998, all of which are now exercisable at $1.25. These warrants have
various expiration dates, with 1.1 million expiring in September 1999, 3.5
5<PAGE>
million expiring in December 2000, 12.3 million expiring in February 2001
and the remaining in 2002.
Effective January 1, 1998 the Company adopted the provisions of SFAS
No. 130, Reporting Comprehensive Income which establishes standards for
reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. Comprehensive income is
defined as the total of net income and all non-owner changes in equity.
For the periods ending September 30, 1998 and 1997, there were no
adjustments which would materially affect the net income as reported.
The loss per share amounts for the nine and three months ended
September 30, 1998 and September 30, 1997 were computed by dividing the
net loss by the weighted average shares outstanding during the applicable
quarter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
All statements, other than statements of historical fact, included in
this Form 10-Q, including without limitation the statements under
Management s Discussion and Analysis of Financial Condition and Results
of Operations are, or may be deemed to be, forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934. Such
forward-looking statements involve assumptions, known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance or achievements of Metalclad Corporation (the Company ) to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements contained in this
Form 10-Q. Such potential risks and uncertainties include, without
limitation, the ability to commence operations at the Company s hazardous
waste treatment sites under development, competitive pricing and other
pressures from other businesses in the Company s markets, economic
conditions generally and in the Company s primary markets, availability of
capital, cost of labor, and other risk factors detailed herein and in
other of the Company s filings with the Securities and Exchange
Commission. The forward-looking statements are made as of the date of
this Form 10-Q and the Company assumes no obligation to update the
forward-looking statements or to update the reasons actual results could
d i f f er from those projected in such forward-looking statements.
Therefore, readers are cautioned not to place undue reliance on these
forward-looking statements.
Results of Operations
General. The Company s revenues were generated primarily by (i)
revenues in the United States from insulation and asbestos abatement
services; and (ii) revenues in Mexico from the collection of waste oils
and solvents for recycling, placement and servicing of parts washing
machines, brokering the disposal of waste and remediation services.
Since November 1991, the Company has pursued the development of
integrated waste treatment and disposal facilities in several Mexican
6<PAGE>
states. The Company has completed construction of a hazardous waste
landfill in San Luis Potosi which is not yet open and the subject of
arbitration proceedings under the North American Free Trade Agreement
( NAFTA ). The Company is also active in the development of additional
projects in Mexico, pursuing development opportunities near the industrial
heart of Mexico. These opportunities include industrial waste landfill
facilities and hazardous waste treatment facilities which will include
neutralization, solidification and evaporation processes to handle a
variety of waste streams. These development activities include siting,
permitting, social and political support, and community awareness. The
development process typically can take up to two years to obtain the
necessary support and permitting to build a facility. The actual
construction time necessary to complete these facilities is approximately
six months. However, there can be no assurances that the Company will be
successful in these efforts. The Company s results of operations include
the costs of development of all such future waste treatment facilities in
Mexico.
Insulation Business. Total revenues from the insulation business for
the nine months ended September 30, 1998 were $7,937,000 as compared to
$6,408,000 for the comparable period ended September 30, 1997, an increase
of 24%.
Contract revenues for the nine months ended September 30, 1998 were
$7,881,000 as compared to $6,046,000 for the nine months ended September
30, 1997, an increase of 30%. This increase is attributed to the
Company s efforts to diversify its client base, including its entry into
the commercial insulation market.
Material sales were $50,000 for the period as compared to $160,000
for the comparable period, a decrease of 69% as the Company places less
emphasis on this market.
Total expenses for the nine months ended September 30, 1998 were
$7,612,000 as compared to $6,366,000 for the comparable period ended
September 30, 1997, an increase of 20%.
Contract costs and expenses were $6,860,000 for the period as
compared to $5,352,000 for the nine months ended September 30, 1997, an
increase of 28%. This increase is consistent with the Company s increase
in revenues.
Cost of material sales was $38,000 for the period as compared to
$120,000, a decrease of 68%, coinciding with the decrease in sales in this
area.
Selling, general and administrative costs for the nine months ended
September 30, 1998 were $714,000 as compared to $894,000 for the
comparable period ended September 30, 1997, a decrease of 20%.
Other income was $5,800 for the period as compared to $202,000 for
the comparable period, a decrease of 97% as the comparable period
contained certain one-time collections associated with the settlement of a
claim against a previous customer and return premiums for prior years
insurance coverages.
7<PAGE>
Waste Management Services. Revenues for the nine months ended
September 30, 1998 were $4,085,000 as compared to $1,444,000 for the
comparable period ended September 30, 1997. This increase is associated
with the Company s change in accounting for these operations from the
equity method of accounting to full consolidation of ARI due to the
Company acquiring 100% ownership of ARI in 1997.
Operating costs and expenses, associated with revenues, were
$4,291,000 as compared to $2,037,000 for the comparable period ended
September 30, 1997, with this increase related to the increase in revenues
and, again, reflective of the accounting change between the periods.
Landfill costs were $410,000 for the nine months ended September 30,
1998 compared to $326,000 for the comparable period in 1997, an increase
of 26%, associated with the Company s continuing activities in its pursuit
of additional waste treatment facility opportunities.
Equity in earnings of unconsolidated affiliates was $0.00 for the
current period compared to ($743,000), representing 100% of the loss of
ARI, for the quarter ended September 30, 1997, due to the change in
accounting for ARI.
Corporate Expense. Corporate expenses were $2,003,000 for the nine
months ended September 30, 1998 as compared to $1,918,000 for the
comparable period of 1997, an increase of 4%. This increase is due to the
increasing costs associated with the Company s pursuit of its claim under
NAFTA.
Interest Expense. Interest expense for the period ended September
30, 1998 was ($372,000) as compared to ($59,000) for the comparable
period.
Gain (Loss) on Foreign Currency Translation. This loss of ($38,700)
is due to the accounting treatment associated with Mexico s highly
inflationary economy. During the comparable period, there was a gain of
$5,800.
Consolidated Results
The Company experienced a net loss of ($2,691,000) for the nine
months ended September 30, 1998 as compared to a net loss of ($3,422,000)
for the comparable period ended September 30, 1997, an improvement of 21%.
Liquidity and Capital Resources
Working capital at September 30, 1998 was ($473,000) as compared to
$1,702,000 as of December 31, 1997. The Company had cash and cash
equivalents of $528,000 at September 30, 1998 as compared to $1,644,000 at
December 31, 1997. Cash used in operations was ($2,010,000) as compared
to ($2,355,000) for the comparable period ending September 30, 1997.
The Company believes that the insulation business will generate
adequate cash flows from continuing operations to meet its future
obligations and expenses relating to such operations. The Company will
r e q uire substantial additional financing to complete and operate
8<PAGE>
Aguascalientes as well as additional waste treatment facilities in Mexico
and to support the continuing growth of ARI operations. Furthermore, to
the extent that the Company is required to expend additional efforts to
pursue its NAFTA claim, additional general and administrative expenses
without revenues to offset such expenses are anticipated until a landfill
is opened. The Company is aware of its ongoing cash requirements and
completed a $1 million private placement of 7% convertible subordinated
debentures in July. Prior agreed-to additional financings have been
unable to close and the Company is continuing pursuit of additional
financing to maintain its operations. Several proposals have been
received and are currently being evaluated. The Company believes it can
close one of these proposed financings within the next 30 days. The
Company is also discussing bridge financing to protect it against any
delays in a closing. However, no assurances can be given that the
proposed financings can be successfully completed.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Given the Company s long history in the insulation business and in
the sale of insulation materials, it is subject to various claims related
to prior asbestos related business as well as its current business. The
number of these claims is over 100, the Company believes it has adequate
insurance in place and had adequate insurance in prior years and is
vigorously defending all claims. The Company does not believe that these
claims, individually or in the aggregate, will have a material adverse
effect on its financial condition.
On October 2, 1996, having completed a long period of negotiation
with the Mexican government on the opening of its hazardous waste landfill
in San Luis Potosi, Mexico, the Company filed a Notice of Claim under the
provision of the North American Free Trade Agreement. The Notice was
filed with the International Center for the Settlement of Investment
Disputes (ICSID) in Washington, D.C. pursuant to the provisions of the
NAFTA. On January 2, 1997, the Company filed its actual claim with the
Tribunal, after which a three-member Tribunal was impaneled which includes
one arbitrator from Mexico, one from the United States and a third, chosen
jointly by the parties, from Great Britain. The first hearing was held in
Washington, D.C. on July 15, 1997 wherein a number of matters were agreed
upon by the parties and a significant amount of direction was given by the
Tribunal to the proceedings that would move forward.
Pursuant to those understandings, the Company, on October 13, 1997,
filed its Memorial which included the Claim and evidence supporting the
Claim, including expert witness studies and the like. The basis of the
Company s claim against Mexico is one likened to expropriation. The
Company s position is since it is not being allowed to operate a legally
authorized project, it has in essence been taken by the Mexican government
and they should, therefore, be responsible for paying fair compensation
under the provision of the NAFTA. A fair market valuation was done on
behalf of the Company by an outside expert which indicated the fair market
9<PAGE>
value of this business was $90,000,000.
On February 17, 1998, the United Mexican States ( Mexico ) responded
to the Company s claim to the Tribunal. The Company filed a Reply Brief
on August 21, 1998. Subsequent to the filing of the Company s Reply
Brief, the United Mexican States filed a commentary on the Reply with the
Tribunal alleging, among other things, that the Company s Reply Brief
should be submitted anew, that certain amendments should be disregarded,
that certain legal theories should be dropped, that certain witness
statements should be withdrawn, that certain submitted evidence should be
discarded, and that the Company should be required to more completely
admit or deny assertions made in the Mexican Counter-Memorial. The Company
r e s ponded in support of its Reply, arguing its compliance with
international law and the rules governing the arbitration. The Company
urged that the Tribunal disallow the petition of the United Mexican
States. Pursuant to a ruling issued November 13, 1998, the Tribunal
denied all relief requested and also ruled that the United Mexican States
must file a rejoinder on the merits of the case not later than March 19,
1999, approximately the same amount of time that the Company had with
respect to filing its Reply Brief.
The Company expects to request an oral hearing to be held as soon as
possible after Mexico s final filing, following which a decision is
expected to be rendered by the Tribunal.
In May 1997 a jury found Texaco oil refinery, a client of the Company
55% liable for injuries and damages sustained by a Metalclad Insulation
employee while working at the Wilmington, California refinery. The jury
determined that Texaco s portion of the damages amounted to $5.5 million.
Under terms of the Company s contract with Texaco, certain indemnities may
be applied. The Company had project specific, as well as other insurance
policies in effect at the time of the injury. This award has been
appealed and the ultimate outcome cannot be predicted; however, the
Company believes its insurance programs are adequate to address any
potential exposure.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
10<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
METALCLAD CORPORATION
Date: November 20, 1998
By: /s/ Anthony C. Dabbene
------------------------------
Anthony C. Dabbene
Chief Financial Officer
(Principal Accounting Officer)
11<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE) 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 528
<SECURITIES> 0
<RECEIVABLES> 2409
<ALLOWANCES> 0
<INVENTORY> 231
<CURRENT-ASSETS> 3424
<PP&E> 6644
<DEPRECIATION> 0
<TOTAL-ASSETS> 12668
<CURRENT-LIABILITIES> 3897
<BONDS> 2851
<COMMON> 3045
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12668
<SALES> 11966
<TOTAL-REVENUES> 12022
<CGS> 11151
<TOTAL-COSTS> 14303
<OTHER-EXPENSES> 39
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 372
<INCOME-PRETAX> (2692)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2692)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
