SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 March 31, 2000, the registrant had 5,150,498 shares outstanding of its
Common Stock, $.10 par value.
METALCLAD CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 2000
(unaudited) and December 31, 1999..................... 1-2
Consolidated Statements of Operations for the three
months ended March 31, 2000 (unaudited) and 1999...... 3
Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 (unaudited) and 1999...... 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..................................... 11
SIGNATURES..................................................... 13
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE><S> <C> <C>
March 31, December 31,
--------- ------------
2000 1999
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 459,751 $ 769,176
Accounts receivable, less allowance for doubtful
accounts of $20,000 at March 2000 and December 1999 2,920,430 1,644,991
Costs and estimated earnings in excess of billings on
uncompleted contracts 305,982 147,991
Inventories 209,512 161,832
Prepaid expenses and other current assets 93,142 125,630
Receivables from related parties, net 90,785 77,686
Note receivable sale of Mexican assets 779,402 779,402
---------- ----------
Total current assets 4,859,004 3,706,708
Property, plant and equipment, net 364,453 357,769
Net assets of discontinued operations 4,850,450 4,815,811
Other assets 25,086 23,086
---------- ----------
$10,098,993 $ 8,903,374
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,638,887 $ 898,745
Current liabilities, net discontinued operations 132,057 339,936
Accrued expenses 450,614 499,076
Billings in excess of costs and estimated earnings
on uncompleted contracts 47,353 -
Current portion of long-term debt 36,380 42,798
Convertible zero coupon notes 2,129,977 2,071,003
---------- ----------
Total current liabilities 4,435,268 3,851,558
Long-term debt, less current portion 144,333 105,915
Convertible subordinated debentures 360,000 360,000
---------- ----------
Total liabilities 4,939,601 4,317,473
---------- ----------
CONSOLIDATED BALANCE SHEETS
(continued)
March 31, December 31,
--------- ------------
2000 1999
---- ----
(Unaudited)
Shareholders' equity:
Preferred stock, par value $10; 1,500,000 shares
authorized; none issued - -
Common stock, par value $.10; 80,000,000 shares
authorized; 5,150,498 and 4,859,498 issued and
outstanding at March 2000 and December 1999,
respectively 515,050 485,950
Additional paid-in capital 65,235,348 64,330,947
Accumulated deficit (58,459,711) (58,106,460)
Officers' receivable (575,872) (569,113)
Accumulated other comprehensive income (1,555,423) (1,555,423)
---------- ----------
5,159,392 4,585,901
---------- ----------
$10,098,993 $ 8,903,374
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
March 31, March 31,
--------- ---------
2000 1999
---- ----
Revenues
Contract revenues $4,209,807 $3,494,497
Material sales 35,873 110,828
Other 7,133 -
--------- ---------
4,252,813 3,605,325
--------- ---------
Operating costs and expenses
Contract costs and expenses 3,800,653 3,091,279
Cost of material sales 19,593 86,337
Selling, general and administrative 351,821 288,750
--------- ---------
4,172,067 3,466,366
--------- ---------
Corporate expense 374,051 439,336
Operating loss (293,305) (300,377)
Interest income (expense) (69,573) (84,304)
Other income 9,627 -
Loss from continuing operations (353,251) (384,681)
Loss from discontinued operations - -
--------- ---------
Net loss $ (353,251) $ (384,681)
========= =========
Weighted average number of common shares 5,088,652 3,262,450
========= =========
Loss per share of common stock, continuing
operations basic and diluted $(.07) $(.12)
==== ====
Loss per share of common stock, discontinued
operations basic and diluted - -
Loss per share of common stock basic and
diluted $(.07) $(.12)
==== ====
See Notes to Consolidated Financial Statements
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><S> <C> <C>
Three Months Ended
March 31,
--------------------------
2000 1999
---- ----
Cash flows from operating activities:
Net loss $ (353,251) $ (384,681)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 20,583 69,166
Issuance of stock for services and interest - 107,800
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (1,275,439) (990,423)
Decrease (increase) in unbilled receivables (157,991) (11,777)
Decrease (increase) in inventories (47,680) (32,089)
Decrease (increase) in prepaid expenses and other assets 32,488 (8,538)
Decrease (increase) in receivables from related parties (13,099) 44,514
Increase (decrease) in accounts payable and accrued expenses 691,680 262,194
Increase (decrease) in billings over cost 47,353 150,821
Increase in other assets (2,000) -
--------- ---------
Net cash used in continuing operations (1,057,356) (793,013)
Net cash used in discontinued operations (242,517) (131,266)
--------- ---------
Net cash used in operating activities (1,299,873) (924,279)
--------- ---------
Cash flows from investing activities:
Capital expenditures continuing operations (27,267) (81,217)
Capital expenditures discontinued operations - (46,771)
--------- ---------
Net cash used in investing activities (27,267) (127,988)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term borrowings 100,377 69,063
Payments on long-term borrowings continued operations (9,403) (137,785)
(Borrowings) repayments by officers (6,759) (5,681)
Proceeds from exercise of warrants 933,500 943,351
--------- ---------
Net cash provided by continuing operations 1,017,715 868,948
Net cash provided (used) in discontinued operations - (49,657)
--------- ---------
Net cash provided by financing activities 1,017,715 819,291
--------- ---------
Decrease in cash and cash equivalents (309,425) (232,976)
Cash and cash equivalents at beginning of period 769,176 519,940
--------- ---------
Cash and cash equivalents at end of period $ 459,751 $ 286,964
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
METALCLAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended March 31, 2000
(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, 2000 are not necessarily indicative of what results will be
for the year ending December 31, 2000. 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, 1999.
This Form 10-Q Amendment No. 1 to Form 10-Q which amends the 2000
Quarterly Report includes the following change: in the Consolidated
Statements of Operations the column heading for the comparative first
quarter ended March 31, 1999 was incorrectly reported as December 31, 1999.
All dollars, shares and per share amounts were properly reported as the
balances at March 31, 1999 and the column heading has been corrected as
appropriate.
2. In October 1999, the Company completed a sale of its operating
businesses and development project located in Aguascalientes. The sale
specifically excluded those Mexican assets involved in the NAFTA claim. The
terms of this sale stipulate payment of the purchase price in stages as
various benchmarks are achieved in the operation of the business as well as
the buyer's assumption of all liabilities. The Company received an initial
cash payment of $125,000 and recorded a receivable of $779,402; however, no
gain or loss will be recorded on the payments until 100% of the Company's
net investment is recovered.
Under the terms of the sale, the Company can receive up to $5,000,000
in payments as certain specific milestones are met. The most significant
milestone payments are associated with the buyer's ability to complete and
open the Aguascalientes landfill project. If the buyer can obtain all
necessary authorizations, complete construction and open the facility,
payments totaling $1,125,000 will be due the Company under the milestone
payment schedule. Presently, the buyer has not completed any of the
milestones associated with the Aguascalientes project. It is at least
reasonably possible that the buyer may not complete any of the milestones.
In the event that the buyer is not successful in its efforts to open the
project or continue the businesses, the Company will be required to write
down its receivable in the transaction.
Included in net assets of discontinued operations at March 31, 2000 and
December 31, 1999 is approximately $4,718,000 and $4,476,000, respectively.
These assets represent the Company's net investment in its completed
hazardous waste treatment facility in the State of San Luis Potosi, Mexico,
known as "El Confin". The Company intends to dispose of this asset upon
resolution of the NAFTA claim. However, should a decision be rendered
against the Company, assets totaling $4,850,000 may be impaired and could
potentially result in a write down should the Company be unable to sell or
otherwise recover its investment.
The Company addresses the realization of its assets as required by SFAS
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". This statement requires that long-lived assets
and certain identifiable intangibles to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. The Company has
conducted this review and believes that no impairment currently exists and
no material adjustments are necessary to the valuation of its assets.
Relative to the NAFTA assets, the Company's claim is for $90,000,000;
however, the Tribunal is the final arbiter on value and damages.
3. For approximately three years, the Company has been involved in an
arbitration proceeding with the United Mexican States over the Company's
completed, but unopened, landfill facility in San Luis Potosi, Mexico. The
final hearing in these proceedings commenced August 30, 1999 and was
completed on September 9, 1999. Post hearing briefs were filed by the
parties on November 9, 1999 and a final decision is not anticipated before
late April 2000.
4. In October 1999, the Company entered into a "non-binding" letter of
intent which outlined terms under which the Company was considering a sale
of its Insulation business to PDG Environmental. To date, no definitive
agreement has been reached for any sale. The Company will consider the
possibility of a sale after conclusion of its ongoing NAFTA arbitration.
5. The loss per share amounts for the three months ended March 31, 2000 and
March 31, 1999 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 differ 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 (Three Months ended March 31, 2000 and 1999)
General. Historically, the Company's revenues were generated primarily
in the United States from insulation and asbestos abatement services and 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 been actively involved in doing
business in Mexico. The Company's initial focus was the development of
facilities for the treatment, storage and disposal of industrial hazardous
waste.
During the fourth quarter of 1998, the Company determined that its
efforts at building its business in Mexico would not be allowed to succeed.
The Company's investment in El Confin has resulted in an arbitration under
the NAFTA treaty, its investment in Aguascalientes has been blocked just
prior to the project's completion, and its other business has been impacted
due to the loss of these projects and the synergy they would have provided.
Consequently, the Company committed to a plan to discontinue its Mexican
operations to minimize future losses and that any further investment in
Mexico should be halted.
In October 1999, the Company completed a sale of its ongoing operations
and development assets, specifically excluding the landfill assets
associated with its NAFTA claim. The Company's NAFTA assets will be
retained until a final decision is rendered in the claim.
Insulation Business. Total revenues from the insulation business for
the three months ended March 31, 2000 were $4,253,000 as compared to
$3,605,000 for the comparable period ended March 31, 1999, an increase of
18%.
Total expenses for the three months ended March 31, 2000 were
$4,172,000 as compared to $3,466,000 for the comparable period ended March
31, 1999, an increase of 20%.
Contract Revenues. Contract revenues for the three months ended March
31, 2000 were $4,210,000 as compared to $3,494,000 for the three months
ended March 31, 1999, an increase of 20%. This increase is attributed to
the Company's efforts to diversify its client base, including its entry into
the commercial insulation market. The Company's accounts receivable have
also increased due to the increased contract revenues and the timing of cash
receipts.
Material Sales. Material sales were $36,000 for the three months ended
March 31, 2000 as compared to $111,000 for the three months ended March 31,
1999.
Contract and Material Costs. Contract and material costs and expenses
were $3,820,000 for the three months ended March 31, 2000 as compared to
$3,178,000 for the three months ended March 31, 1999, an increase of 20%.
This increase is consistent with the Company's increase in revenues.
Selling, General and Administrative Costs. Selling, general and
administrative costs for the three months ended March 31, 2000 were $352,000
as compared to $289,000 for the comparable period ended March 31, 1999, an
increase of 22% and due to the increased volume of work in the period.
Discontinued Operations. Effective October 8, 1999, the Company sold
its interests in Administracion Residuos Industriales, S.A. de C.V.,
Ecosistemas Nacionales, S.A. de C.V. and Ecosistemas El Llano, S.A. de C.V.
The Company also intends to dispose of its interests in Ecosistemas del
Potosi, S.A. de C.V. and Confinamiento Tecnico de Residuos Industriales,
S.A. de C.V., pending resolution of the NAFTA claim. As of December 31,
1999, the Company recorded a provision for anticipated costs to complete the
ongoing NAFTA claim process of $107,000. For the three months ended March
31, 2000, the Company incurred additional costs of $72,000, which have been
charged against the December 31, 1999 accrual.
The Company concluded the NAFTA arbitration hearing on September 9,
1999. A short post-hearing brief was filed by the Company with the NAFTA
tribunal in November 1999. The Company anticipates final resolution of this
claim by late April 2000. Until that time, the Company believes that legal,
consulting and other administrative expenses may continue to be incurred.
The Company is also actively pursuing a disposition of the NAFTA assets, but
management cannot reasonably estimate future losses going forward as the
schedule on completion of this claim is beyond the Company's control.
However, the Company is currently not aware of any other requirements or
filings necessary while it awaits the Tribunal's decision. It is believed
that future costs, if any, will not be material, pending the final decision.
Future costs, if any, will be charged to operations as incurred.
Corporate Expense. Corporate expenses were $374,000 for the three
months ended March 31, 2000 as compared to $439,000 for the three months
ended March 31, 1999, an decrease of 15%. This decrease is the result of
lower insurance costs, accounting and audit fees and a reduction in travel
expenses.
Interest Expense. Interest expense for the three months ended March
31, 2000 was $70,000 as compared to interest expense of $84,000 for the
three months ended March 31, 1999. This decrease is due to the reduction in
outstanding loan balances from March 1999 to March 2000, primarily as a
result of debt to equity conversions.
Consolidated Results
The Company experienced a net loss of $353,000 for the three months
ended March 31, 2000 as compared to a net loss of $385,000 for the
comparable period ended March 31, 1999, a decrease of 8%.
Year 2000 Issues
As previously reported, over the past year the Company developed and
implemented a plan to address the anticipated impacts of the Year 2000
problem. The Company also surveyed selected third parties to determine the
status of their Year 2000 compliance programs. In addition, the Company
developed contingency plans specifying what the Company would do if we or
important third parties experienced disruptions to critical business
activities as a result of the Year 2000 problem.
The Company's Year 2000 plan was completed in all material respects
prior to the anticipated Year 2000 failure dates. As of March 31, 2000, the
Company has not experienced any materially important business disruptions or
system failures as a result of Year 2000 issues, nor is it aware of any Year
2000 issues that have impacted its customers, suppliers or other significant
third parties to an extent significant to the Company. However, Year 2000
compliance has many elements and potential consequences, some of which may
not be foreseeable or may be realized in future periods. Consequently, there
can be no assurance that unforeseen circumstances may not arise, or that the
Company will not in the future identify equipment or systems that are not
Year 2000 compliant.
For the three months ended March 31, 2000, the Company incurred no
additional costs addressing Year 2000 issues. The Company does not
anticipate that it will incur any more material costs related to the Year
2000 issue.
Liquidity and Capital Resources
In the fourth quarter of 1998, the Company committed to a plan to
discontinue its Mexican operations and to seek potential buyers for its
Mexican business. Although no further investments are being made in Mexico,
the Company continues to rely upon additional capital to maintain its
remaining Mexican assets until disposed of, pursue its NAFTA arbitration and
support its remaining operations.
During the three months ended March 31, 2000, the Company received
approximately $934,000 from the exercise of warrants.
On July 30, 1999 the Company entered into an amendment of the terms of
its Five-Year Zero Coupon Notes with the holder. The amendment included the
conversion of accrued interest through July 30, 1999 into principal notes,
the interest rate was adjusted from 9.3% to 12% effective July 31, 1999, the
convertibility of the notes and the holder's redemption option on the notes
was extended until the earlier of March 31, 2000 or completion of the NAFTA
proceedings and the conversion rate per share will be at the lesser of 70%
of the average market price per share or $2.50 per share. In no event,
however, can the holder convert its principal into common shares such that
it would result in the holder obtaining shares that would exceed 19.99% of
the outstanding common stock of the Company. Should the holder exercise its
right to convert the notes, all accrued interest would be forfeited. As
part of this amendment, the note holder agreed to exercise certain of its
warrants and to purchase $250,000 in additional notes. As of April 1, the
holder has the right to convert the principal amount of the notes. The
holder also now has the right to require the Company to redeem these notes.
Management does not believe the holder intends to require redemption at this
time, but intends to convert the notes in the future.
The Company had positive working capital at March 31, 2000 of $424,000
compared to negative working capital of $145,000 at December 31, 1999. The
Company had cash and cash equivalents at March 31, 2000 of $460,000 and
$769,000 at December 31, 1999. Cash used in continuing operations for the
three months ended March 31, 2000 was $1,057,000 compared to $793,000 for
the three months ended March 31, 1999. Cash used by discontinued operations
for the three months ended March 31, 2000 was $243,000 compared to cash used
of $131,000 for the three months ended March 31, 1999. Cash used in
operating activities for the three months ended March 31, 2000 was funded
primarily by cash and cash equivalents on hand at the beginning of the year
as well as the warrant exercises during the three months.
For the three months ended March 31, 2000 the Company generated
negative cash flow from continuing operations of $1,057,000, of which
$559,000 in negative cash flow related to the insulation business due
primarily to a higher volume of work in the first quarter 2000 versus 1999.
The remaining negative cash flow is related to corporate activities,
primarily the Company's NAFTA claim, along with general and administrative
expenses without revenues to offset such expenses. The Company is aware of
its on going cash needs and continues to work with its investment bankers
and other sources to meet its on going needs through December 31, 2000.
Given the Company's decision to discontinue operations in Mexico, and sell
its businesses, the cash requirements in Mexico greatly diminish. The
Company believes it will obtain the necessary funds to continue its planned
operations throughout 2000; however, no assurances can be given that such
funds will be available to the Company as required.
Foreign Currency Translation
Effective January 1, 1999, Mexico is no longer considered to be "highly
inflationary". However, the Company has discontinued its Mexican operations,
therefore, the impact of this change had no effect on the Company's
financial statements.
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 300, 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 May 14, 1999, two shareholders, as individuals, filed almost
identical lawsuits in both state and federal courts in Los Angeles against
the Company, its officers, directors and certain advisors. Their claims
include violations of the California Corporations Code, intentional
misrepresentation, negligent misrepresentation, constructive fraud, breach
of fiduciary duty, and negligence. No specific amount of damages is
claimed. The Company believes these cases have no merit and that an adverse
decision would not be material to the Company. The Company intends to
defend the cases vigorously and seek recovery of its costs and fees from the
plaintiffs.
On July 7, 1999, Morton Associates, a Virgin Islands Corporation, filed
suit in federal court in Los Angeles against the Company requesting a
declaratory judgment interpreting certain anti-dilution provisions of a
warrant agreement owned by Morton. The Company has defended the case on
several grounds. Other holders of similar warrant agreements have reached
a settlement with the Company. The Company cannot predict the outcome, but
believes that an adverse ruling would not be material.
No assurances can be given that the Company will be successful in its
defense of these lawsuits. The Company maintains directors and officers
liability insurance, which has been noticed on these claims, and believes
its insurance coverages to be adequate to cover any potential damages, if
awarded.
On October 2, 1996, following a long period of negotiation with the
Mexican government in an effort to open its hazardous waste TSD facility in
San Luis Potosi, Mexico, the Company filed a Notice of Claim under the
provisions of the North American Free Trade Agreement ("NAFTA"). 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 ICSID,
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 and 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 all of the evidence
supporting the claim, including expert witness studies and the like. The
basis of the Company's claim against Mexico is one like unto 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 expert company, which indicated the fair market
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 by filing a "counter-memorial". On
August 21, 1998 the Company filed its "reply" to Mexico's counter-memorial,
and on April 19, 1999 Mexico filed its "rejoinder". A pre-hearing conference
took place July 6, 1999 and the final hearing took place in Washington, D.C.
from August 30 to September 9, 1999. Post-hearing briefs were filed by
Metalclad, Mexico and the United States government on November 8, 1999. The
Company has been advised by the NAFTA tribunal that a final decision will be
unlikely before late April 2000.
If a favorable decision were received by the Company, any damages
awarded to the Company would be payable by the United Mexican States as an
obligation of the government of Mexico. Both NAFTA and other international
treaties provide mechanisms for ensuring collection and it is anticipated
that any damages would be collected in the year 2000; however, there can be
no assurance, if an award is made, that the Company will not encounter
collection difficulties.
The Company has devoted substantial resources in the pursuit of its
claim before the NAFTA Tribunal. It has given counsel broad authority in
the employment of experts and others it feels necessary to properly pursue
the Company's claim. The officers of the Company have also spent
substantial amounts of time and resources in assisting the Company's NAFTA
counsel and will continue to do so until completion. There is no assurance,
however, that the Company will be successful. If it is not, the impact will
be material and adverse.
Item 2. Changes in Securities
None.
Item 3 Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
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: April 28, 2000
By: /s/Anthony C. Dabbene
-------------------------------
Anthony C. Dabbene
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 460
<SECURITIES> 0
<RECEIVABLES> 2940
<ALLOWANCES> (20)
<INVENTORY> 210
<CURRENT-ASSETS> 4859
<PP&E> 909
<DEPRECIATION> (545)
<TOTAL-ASSETS> 10099
<CURRENT-LIABILITIES> 4435
<BONDS> 2490
<COMMON> 515
0
0
<OTHER-SE> 4644
<TOTAL-LIABILITY-AND-EQUITY> 10099
<SALES> 4246
<TOTAL-REVENUES> 4253
<CGS> 4172
<TOTAL-COSTS> 4546
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (70)
<INCOME-PRETAX> (353)
<INCOME-TAX> 0
<INCOME-CONTINUING> (353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (353)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
