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 June 30, 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 June 30, 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 June 30, 2000 (unaudited)
and December 31, 1999...................................... 1
Consolidated Statements of Operations for the three months
and six months ended June 30, 2000 and June 30, 1999
(unaudited)................................................ 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and June 30, 1999 (unaudited).......... 3
Notes to Consolidated Financial Statements................. 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................. 5
PART II. OTHER INFORMATION............................................ 9
SIGNATURES............................................................ 11
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE><S> <C> <C>
June 30, December 31,
2000 1999
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 307,882 $ 769,176
Accounts receivable, less allowance for doubtful accounts of $20,000 at
June 2000 and December 1999 2,530,693 1,644,991
Costs and estimated earnings in excess of billings on uncompleted contracts 445,471 147,991
Inventories 180,323 161,832
Prepaid expenses and other current assets 33,766 125,630
Receivables from related parties, net 58,859 77,686
Note receivable sale of Mexican assets 779,402 779,402
--------- ---------
Total current assets 4,336,396 3,706,708
Property, plant and equipment, net 372,512 357,769
Net assets of discontinued operations 4,870,172 4,815,811
Other assets 25,086 23,086
--------- ---------
$ 9,604,166 $8,903,374
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,572,606 $ 898,745
Current liabilities, net discontinued operations 151,657 339,936
Accrued expenses 374,384 499,076
Billings in excess of costs and estimated earnings on uncompleted contracts 22,418 -
Current portion of long-term debt 56,795 42,798
Convertible zero coupon notes 2,188,950 2,071,003
--------- ---------
Total current liabilities 4,366,810 3,851,558
Long-term debt, less current portion 135,462 105,915
Convertible subordinated debentures 360,000 360,000
--------- ---------
Total liabilities 4,862,272 4,317,473
--------- ---------
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 June 2000 and December 1999,
respectively 515,050 485,950
Additional paid-in capital 65,235,348 64,330,947
Accumulated deficit (58,869,833) (58,106,460)
Officers' receivable (583,248) (569,113)
Accumulated other comprehensive income (1,555,423) (1,555,423)
--------- ---------
4,741,894 4,585,901
--------- ---------
$9,604,166 $8,903,374
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE><S> <C> <C> <C> <C>
For Six Months Ended For Three Months Ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Revenues--Insulation
Contract revenues $8,084,152 $7,479,848 $3,874,345 $3,985,351
Material sales 51,111 184,328 15,238 73,500
Other 9,269 - 2,136 -
--------- --------- --------- ---------
8,144,532 7,664,176 3,891,719 4,058,851
--------- --------- --------- ---------
Operating costs and expenses--Insulation
Contract costs and expenses 7,099,180 6,491,445 3,298,527 3,400,166
Cost of material sales 30,587 146,857 10,994 60,520
Selling, general and administrative expenses 720,999 604,876 369,178 316,126
--------- --------- --------- ---------
7,850,766 7,243,178 3,678,699 3,776,812
--------- --------- --------- ---------
Corporate expense 872,673 843,323 498,622 403,987
--------- --------- --------- ---------
Operating loss (578,907) (422,325) (285,602) (121,948)
Interest income (expense) (130,906) (148,672) (61,333) (64,368)
Other income 9,627 - - -
--------- --------- --------- ---------
Loss from continuing operations (700,186) (570,997) (346,935) (186,316)
Loss from discontinued operations (63,187) (617,780) (63,187) (617,780)
--------- --------- --------- ---------
Net loss ($763,373) ($1,188,777) ($410,122) ($804,096)
========= ========== ========= =========
Weighted average number of common shares 5,119,575 3,401,229 5,150,498 3,556,313
========= ========== ========= =========
Loss per share of common stock, continuing
operations--basic and diluted ($.14) ($.17) ($.07) ($.05)
==== ==== ==== ====
Loss per share of common stock, discontinued
operations--basic and diluted ($.01) ($.18) ($.01) ($.18)
==== ==== ==== ====
Loss per share of common stock--basic and diluted ($.15) ($.35) ($.08) ($.23)
==== ==== ==== ====
</TABLE>
See Notes to Consolidated Financial Statements
METALCLAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><S> <C> <C>
For Six Months Ended
June 30,
-----------------------------------
2000 1999
------------ ------------
Cash flows from operating activities:
Net loss $ (763,373) ($1,188,777)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from discontinued operations 63,187 617,780
Depreciation and amortization 44,932 139,753
Issuance of stock for services - 108,000
Changes in operating assets & liabilities:
Decrease (increase) in accounts receivable (885,702) (929,890)
Decrease (increase) in unbilled receivables (297,480) (42,175)
Decrease (increase) in inventories (18,491) 8,024
Decrease in prepaid expenses and other assets 91,864 39,622
Decrease in receivables from related parties 18,827 45,765
Increase in accounts payable and accrued expenses 549,169 (100,235)
Increase in billings over costs 22,418 29,814
Other (2,000) 20,276
--------- ---------
Net cash used in continuing operations (1,176,649) (1,252,043)
Net cash used in discontinued operations (305,827) (284,188)
--------- ---------
Net cash used in operating activities (1,482,476) (1,536,231)
--------- ---------
Cash flows from investing activities:
Capital expenditures--continuing operations (59,675) (67,798)
--------- ---------
Net cash used in investing activities (59,675) (67,798)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term borrowings 183,828 133,880
Payments on long-term borrowings--continued operations (22,336) (150,000)
Borrowings by officers, secured by stock (net) (14,135) (11,519)
Proceeds from exercise of warrants 933,500 1,276,026
--------- ---------
Net cash provided by financing activities 1,080,857 1,248,387
--------- ---------
Decrease in cash and cash equivalents (461,294) (355,642)
Cash and cash equivalents at beginning of period 769,176 519,940
--------- ---------
Cash and cash equivalents at end of period $ 307,882 $ 164,298
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Period Ended June 30, 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 six months ended
June 30, 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.
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 $779,000; 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 June 30, 2000 and
December 31, 1999 is approximately $4,719,000 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 $4,870,000 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, if any.
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 anticipated in the third
quarter of 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 six months ended June 30, 2000 and
June 30, 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: Six Months ended June 30, 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 six months ended June 30, 2000 were $8,145,000 as compared to $7,664,000
for the comparable period ended June 30, 1999, an increase of 6%.
Total expenses for the six months ended June 30, 2000 were $7,851,000 as
compared to $7,243,000 for the comparable period ended June 30, 1999, an
increase of 8%.
Contract Revenues. Contract revenues for the six months ended June 30,
2000 were $8,084,000 as compared to $7,480,000 for the six months ended June
30, 1999, an increase of 8%. 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 $51,000 for the six months ended
June 30, 2000 as compared to $184,000 for the six months ended June 30,
1999.
Contract and Material Costs. Contract and material costs and expenses
were $7,130,000 for the six months ended June 30, 2000 as compared to
$6,638,000 for the six months ended June 30, 1999, an increase of 7%. This
increase is consistent with the Company's increase in revenues.
Selling, General and Administrative Costs. Selling, general and
administrative costs for the six months ended June 30, 2000 were $721,000 as
compared to $605,000 for the comparable period ended June 30, 1999, an
increase of 19% and due to the increased volume of work in the period and
increasing marketing efforts.
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 six months ended June 30,
2000, the Company incurred additional costs of $72,000, which have been
charged against the December 31, 1999 accrual, and expensed. Additionally,
$63,000 in fees for the continuing costs of the NAFTA proceedings has been
expensed to discontinued operations.
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 in the third quarter. 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 $873,000 for the six months
ended June 30, 2000 as compared to $843,000 for the six months ended June
30, 1999, an increase of 4%. This increase is due primarily to increased
legal fees associated with ongoing litigation, offset by cost reductions
in other administrative areas.
Interest Expense. Interest expense for the six months ended June 30,
2000 was $131,000 as compared to interest expense of $149,000 for the six
months ended June 30, 1999. This decrease is due to the reduction in
outstanding loan balances from June 1999 to June 2000, primarily as a result
of debt to equity conversions.
Consolidated Results
The Company experienced a net loss of $763,000 for the six months ended
June 30, 2000 as compared to a net loss of $1,189,000 for the comparable
period ended June 30, 1999, a decrease of 36%.
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 six months ended June 30, 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 negative working capital at June 30, 2000 of $30,000
compared to negative working capital of $145,000 at December 31, 1999. The
Company had cash and cash equivalents at June 30, 2000 of $308,000 and
$769,000 at December 31, 1999. Cash used in continuing operations for the
six months ended June 30, 2000 was $1,177,000 compared to $1,086,000 for the
six months ended June 30, 1999. Cash used by discontinued operations for
the six months ended June 30, 2000 was $306,000 compared to cash used of
$452,000 for the six months ended June 30, 1999. Cash used in operating
activities for the six months ended June 30, 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 six months.
For the six months ended June 30, 2000 the Company generated negative
cash flow from continuing operations of $1,177,000, of which $277,000 in
negative cash flow related to the Insulation business due primarily to a
higher volume of work in the first six months of 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
included violations of the California Corporations Code, intentional
misrepresentation, negligent misrepresentation, constructive fraud, breach
of fiduciary duty, and negligence. No specific amount of damages was
claimed. In July 2000, at the request of the plaintiffs, these cases were
dismissed with prejudice.
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
litigation defense. 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 six-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 is
anticipated in the third quarter of 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: August 10, 2000
By: /s/Anthony C. Dabbene
-------------------------------
Anthony C. Dabbene
Chief Financial Officer
(Principal Accounting Officer)
