**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549


**FORM
        10-KSB**





(Mark
      One)


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




For
      the
      fiscal year ended December 31, 2007


Commission
      File Number 0-2000





**Entrx
      Corporation**


(Exact
      name of registrant as specified in its charter)




**Delaware**
              
              **95-2368719**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer ID No.)******800
                  Nicollet Mall, Suite 2690**
                **Minneapolis,
                  Minnesota**
              
              **55402**(Address
                  of Principal Executive Office)
              
              (Zip
                  Code)





**Registrant's
      telephone number, including area code (612) 333-0614**





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




Title
                of each class
            
            Name
                of each exchange
              on
                which registeredNone
            
            None




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


**Common
      Stock – $.10 Par Value**


**(Title
      of Class)**




Check
                whether the issuer is not required to file reports pursuant to Section
                13
                or 15(d) of the Exchange Act. o





Check
      whether the issuer (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
xNo
o





Check
      if
      there is no disclosure of delinquent filers in response to Items 405 of
      Regulation S-B in this form, and no disclosure will be contained, to the best
      of
      registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of the Form 10-KSB or any amendment to
      this Form 10-KSB. o





Indicate
      by checkmark whether the registrant is a shell company (as defined by Rule
      12b-2
      of the Exchange Act). Yes oNo x





The
      Company’s revenues from operations for the fiscal year ended December 31, 2007
      totaled $22,358,764.





The
      aggregate market value of the common stock held by nonaffiliates of the
      registrant as of February 26, 2008 was approximately $1,627,849 based on the
      average of the closing bid and asked price of the registrant’s common stock on
      such date. The number of shares outstanding of the registrant’s common stock, as
      of February 26, 2008 was 7,656,147.





Transitional
      Small Business Issuer Format (Check One): Yes o No x
















All
      statements, other than statements of historical fact, included in this Form
      10-KSB, including without limitation the statements under “Management’s
      Discussion and Analysis or Plan of Operation” and “Description of Business” 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 Entrx 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-KSB. Such potential risks and uncertainties include, without
      limitation; the outcome of existing litigation; competitive pricing and other
      pressures from other businesses in the Company’s markets; the accuracy of the
      Company’s estimate of future liability for asbestos-related injury claims; the
      adequacy of insurance, including the adequacy of insurance to cover current
      and
      future asbestos-related injury claims; the valuation of the Company’s
      investments; collectibility of a loan due from an affiliate of a former officer
      and principal shareholder; economic conditions generally and in the Company’s
      primary markets; availability of capital; the adequacy of the Company’s cash and
      cash equivalents; the cost of labor; the accuracy of the Company’s cost analysis
      for fixed price contracts; 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-KSB 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.  You
      can
      identify these forward-looking statements by forward-looking words such as
      “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate,”
“continue,” and similar words.





**References
      to “we”, “us”, “our”, “the registrant”, “Entrx” and “the Company” in this annual
      report on Form 10KSB shall mean or refer to Entrx Corporation and its
      consolidated subsidiary, Metalclad Insulation Corporation, unless the context
      in
      which those words are used would indicate a different
      meaning.**





**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS**





**General**





The
      Company, incorporated originally in 1947 as an Arizona corporation, was
      reincorporated in Delaware on November 24, 1993. In June 2002, the Company
      changed its name from Metalclad Corporation to Entrx Corporation. We conduct
      our
      business operations primarily through a wholly owned subsidiary, Metalclad
      Insulation Corporation, a California corporation.





For
      over
      30 years, the Company and its predecessors have been providing insulation and
      asbestos abatement services, primarily on the West Coast. We currently provide
      these services through Metalclad Insulation Corporation to a wide range of
      industrial, commercial and public agency clients.




Our
      principal executive offices are located at 800 Nicollet Mall, Suite 2690,
      Minneapolis, Minnesota 55402, and our telephone number is (612) 333-0614.
      Metalclad Insulation Corporation’s principal facilities are located at 1818 East
      Rosslynn, Fullerton, California 92831.





**Insulation
      Services**





***Background.*** Our
      insulation services include the installation of high- and low-temperature
      insulation on pipe, ducts, furnaces, boilers, and various other types of
      equipment. We also maintain and repair existing insulation systems, generally
      under one or multi-year maintenance contracts. Our customers include refineries,
      utilities, chemical plants, manufacturing facilities, commercial properties,
      office buildings and various governmental facilities. This may include complete
      removal of existing insulation during the repair operations. The removed
      insulation may or may not be asbestos containing. We also fabricate specialty
      items for the insulation industry, and occasionally sell insulation material
      and
      accessories to our customers. Metalclad Insulation Corporation is a licensed
      general and specialty contractor and typically provides project management,
      labor, tools, equipment and materials necessary to complete its installation
      projects.


1





We
      perform substantially all of the work required to complete most contracts,
      while
      generally subcontracting to others the scaffolding, painting and other trades
      not performed by Metalclad Insulation. In a typical insulation project, we
      obtain plans and specifications prepared by the owner of a facility or its
      agent. In projects where the customer is the owner of the facility, we may
      act
      as the general contractor. We may also work as a subcontractor for other general
      contractors. Projects for the installation of insulation in new construction
      may
      require one or more years to complete.





If
      a
      project involves the removal of asbestos containing materials, we first treat
      the materials with water and a wetting agent, and take other like precautions,
      to minimize fiber release. Dry removal is conducted in special cases where
      wetting is not feasible, provided Environmental Protection Agency ("EPA")
      approval is obtained. Our workers also remove asbestos laden pipe insulation
      by
      cutting the wrapping into sections in an enclosed containment area or utilizing
      special "glovebags" which provide containment around the section of pipe where
      the insulation is being removed. In some instances, the Company performs
      asbestos removal and provides related re-insulation contracting services,
      including insulation material sales; in other cases, the Company performs only
      asbestos removal services.





***Insulation
      Contracts.*** We
      normally enter into service contracts on either a “cost plus” or “fixed-price”
basis, either through competitive bids or direct negotiations.





Cost
      plus
      contracts, sometimes referred to as "time and materials" contracts, generally
      provide for reimbursement of our costs incurred on a particular project,
      including labor and materials, plus the payment of a fee normally equal to
      a
      percentage of these costs. These contracts generally provide for monthly
      payments covering both reimbursements for costs incurred to date and a portion
      of the fee based upon the amount of work performed and are customarily not
      subject to retention of fees or costs.





Fixed-price
      contracts generally require that we perform all work for an agreed upon price,
      often by a specified date. Such contracts usually provide for increases in
      the
      contract price if our construction costs increase due to changes in or delays
      of
      the project initiated or caused by the customer or owner. However, absent causes
      resulting in increases in contract prices, we take certain risks, including
      the
      risk that our costs associated with the project exceed the agreed upon price.
      In
      such cases, generally accepted accounting principles require that we recognize
      the full amount of the expected loss at the point where contract costs are
      expected to exceed contract revenues. Our failure to accurately predict the
      extent of the effort required and cost of labor on one insulation removal
      project commenced on April 18, 2005 and subsequent revisions in our estimates
      of
      costs to complete, resulted in the recognition of losses of $566,000 in 2006
      and
      an additional loss of $127,000 in 2007. Under these fixed-price contracts we
      normally receive periodic payments based on the work performed to a particular
      date, less certain retentions. The amounts retained are held by the customer
      pending either satisfactory completion of our work or, in some cases,
      satisfactory completion of the entire project.





In
      accordance with industry practice, most of our contracts are subject to
      termination or modification by the customer, with provision for the recovery
      of
      costs incurred and the payment to us of a proportionate part of our fees in
      the
      case of a cost-plus contract, and overhead and profit in the case of a fixed
      price contract. Such termination or modification occurs in the regular course
      of
      our business due to changes in the work to be performed as determined by the
      customer throughout the term of a project. No single termination or modification
      has had or is expected to have a material adverse impact on our
      business.





***Operations
      and Employee Safety.*** All
      contract work is performed by trained personnel, and supervised by project
      managers trained and experienced in both construction and asbestos abatement.
      Each employee involved in asbestos abatement must complete a general training
      and safety program conducted by the Company or union affiliation. Training
      topics include approved work procedures, instruction on protective equipment
      and
      personal safety, dangers of asbestos, methods for controlling friable asbestos
      and asbestos transportation and handling procedures. In addition, all employees
      engaged in asbestos abatement activities are required to attend a minimum
      four-day course approved by the EPA and the Occupational Safety and Health
      Administration ("OSHA"), and all supervisors of abatement projects are required
      to attend an eight-hour first aid/CPR/safety course and an eight-hour EPA/AHERA
      refresher course annually. At December 31, 2007, two of our full-time salaried
      employees and 68 hourly employees had been trained and certified as "competent
      individuals" under EPA regulations relating to the training of asbestos
      abatement workers. All employees are issued detailed training materials. We
      typically conduct a job safety analysis in the job bidding
      stage.


2





We
      require the use of protective equipment on all projects, and sponsor periodic
      medical examinations of all of our hourly field employees. During removal
      procedures, asbestos containing material is generally treated to minimize fiber
      release, and filtration devices are used to minimize contamination levels.
      Air
      monitoring to determine asbestos fiber contamination levels is conducted on
      all
      abatement projects involving the removal of friable asbestos. We have a
      comprehensive policy and procedure manual that covers all activities of an
      asbestos abatement project, and the specific responsibilities and implementation
      of procedures and policies to be followed on each project. The manual is
      reviewed periodically by management and updated to insure compliance with
      federal, state, and local regulations, to include information from in-house
      project review findings, and to include updated information regarding industry
      practices. To separate our responsibilities and limit our liability, we utilize
      unaffiliated third party laboratories for asbestos sampling analysis, and
      licensed independent waste haulers for the transportation and disposal of
      asbestos waste.





***Materials
      and Supplies.*** We
      purchase our insulating and asbestos abatement materials and supplies used
      in
      our insulation services from a number of national manufacturers, and we are
      not
      dependent on any one source.





**Marketing
      and Sales**





***Insulation
      Contracting Services.*** We
      currently obtain most of our insulation contracting business from existing
      customers, and through referrals by customers, engineers, architects, and
      construction firms. Additional business is obtained by referrals obtained
      through labor, industry and trade association affiliations.





Projects
      are often awarded through competitive bidding, although major companies
      frequently rely on selected bidders chosen by them based on a variety of
      criteria such as adequate capitalization, bonding capability, insurance carried,
      and experience. We are frequently invited to bid on projects, and obtain a
      significant amount of our contracts through the competitive bidding process.





Our
      marketing and sales effort emphasizes our experience, reputation for timely
      performance, and knowledge of the insulation and asbestos abatement industry.
      We
      are a member of the Western Insulation Contractors Association and various
      local
      business associations.





***Curtom-Metalclad
      Joint Venture.*** In 1989,
      Metalclad Insulation Corporation entered into a joint venture with a minority
      service firm, known as Curtom Building & Development Corporation (“Curtom
      Building”). Metalclad Insulation Corporation owns a 49% interest in the joint
      venture. The joint venture, known as "Curtom-Metalclad," submited bids for
      insulation and asbestos abatement services. When contracts were obtained by
      the
      joint venture, we performed the work specified in the contract as a
      subcontractor to the joint venture. The joint venture agreement, as amended,
      provides that Curtom-Metalclad will receive 2.5% of revenues obtained by
      Metalclad Insulation Corporation as a subcontractor, of which 80% will be
      distributed to Curtom Building and 20% will be retained by Curtom-Metalclad.
      We
      retain the remaining revenues. Sales for the year ended December 31, 2007 for
      Curtom-Metalclad projects were approximately $1,738,000 or 7.8% of our revenue,
      compared to $3,383,000 or 17.3% of revenue in 2006. While the revenues and
      gross
      profit from the subcontracts we performed for Curtom-Metalclad were significant
      to us in the past, we do not anticipate any significant revenues through
      Custom-Metalclad after 2008. Curtom-Metalclad has no material assets,
      liabilities or earnings. We believe the termination of the Curtom-Metalclad
      joint venture and the loss of revenues that joint venture generated, would
      not
      have a material adverse affect on us. In accordance with FIN 46R “Consolidation
      of Variable Interest Entities”, we have consolidated Curtom-Metalclad since we
      have determined we are the primary beneficiary.





***Customers.*** Our
      customers are generally either industrial or commercial. The industrial
      customers are predominately public utilities (power, natural gas and water/water
      treatment), major oil companies for oil refineries and petrochemical plants,
      chemical and food processors, other heavy manufacturers, and
      engineering/construction companies. The commercial customers are primarily
      government agencies, schools, hospitals, commercial and light manufacturing
      companies, and general or mechanical construction contractors. During 2007,
      Jacobs Field Services North America, Inc. and ARB, Inc accounted for 17.4%
      and
      17.9% of our revenues, respectively. We cannot project whether a significant
      portion of our revenues will be derived from these customers in 2008. It is
      often the case in our business that a customer that represented over 10% of
      our
      revenues in one year would not represent over 10% of our revenues in the
      following year. (See Note 13 to the Consolidated Financial
      Statements.)


3





***Competition.*** **** Competition
      in the insulation contracting services business is intense and is expected
      to
      remain intense in the foreseeable future. Competition includes a few national
      and regional companies that provide integrated services, and many regional
      and
      local companies that provide insulation and asbestos abatement specialty
      contracting services similar to the Company. Many of the national and regional
      competitors providing integrated services are well established and have
      substantially greater marketing, financial, and technological resources than
      we
      do. The regional and local specialty contracting companies, which compete with
      us, either provide one service or they provide integrated services by
      subcontracting part of their services to other companies. We believe that the
      primary competitive factors for our services are price, technical performance
      and reliability. We obtain a significant number of our insulation service
      contracts through the competitive bidding process. We believe that our bids
      are
      generally competitively priced. Our policy is to bid all projects with the
      expectation of a reasonable gross profit.





***Backlog.*** Our
      backlog for insulation services at December 31, 2007 and December 31, 2006
      was
      approximately $12,629,000 and $11,305,000, respectively. Backlog is calculated
      in terms of estimated revenues on fixed-price and cost-plus projects in progress
      or for which contracts have been executed. Approximately 74% of our backlog
      is
      under cost-plus contracts. Our backlog as of any date is not necessarily
      indicative of future revenues. We estimate that our entire backlog as of
      December 31, 2007 will be completed during the next eighteen months.





**Insurance
      and Bonding** *.*





***General
      Liability.*** Our
      combined general liability and contractor pollution insurance policy provides
      base coverage of $1,000,000 per occurrence and excess liability coverage of
      $10,000,000.





***Performance
      Bonds*** . **** While
      our
      current insulation and asbestos abatement services customers generally do not
      require performance bonds, an increasing number of customers have requested
      such
      bonds. While the changes in the bonding industry have made it more difficult
      to
      obtain performance bonds, we believe that our current bonding arrangements
      are
      adequate for our anticipated future needs.





***Asbestos
      Insurance Coverage*** .
      Prior
      to 1975, we were engaged in the sale and installation of asbestos-related
      insulation materials, which has resulted in numerous claims of personal injury
      allegedly related to asbestos exposure. Many of these claims are now being
      brought by the children and close relatives of persons who have died, allegedly
      as a result of the direct or indirect exposure to asbestos. To date all of
      our
      asbestos-related injury claims have been paid and defended by our insurance
      carriers.





Based
      on
      the general trend of reducing asbestos-related injury claims made against the
      Company over the past seven years, we project that 738 asbestos-related injury
      claims will be made against the Company in the future, in addition to the 222
      claims existing as of December 31, 2007, totaling 960 claims. Multiplying the
      average indemnity paid per resolved claim over the past seven years of $19,700,
      by 960, we project the probable future indemnity to be paid on those claims
      to
      be equal to approximately $19 million. In addition, multiplying an estimated
      cost (which cost is included within the limits of our insurance coverage) of
      defense per resolved claim of approximately $13,500 by 960, we project the
      probable future defense costs to equal approximately $13 million. See Item
      3 -
“Legal Proceedings - Asbestos-related Claims.”





There
      are
      numerous insurance carriers which have issued a number of policies to us over
      a
      period extending from approximately 1967 through approximately 1985 that still
      provide coverage for asbestos-related injury claims. After approximately 1985
      the policies were issued with provisions which purport to exclude coverage
      for
      asbestos related claims. The terms of our insurance policies are complex, and
      coverage for many types of claims is limited as to the nature of the claim
      and
      the amount of coverage available. It is clear, however, under California law,
      where the substantial majority of the asbestos-related injury claims are
      litigated, that all of those policies cover any asbestos-related injury
      occurring during the 1967 through 1985 period when these policies were in
      force.


4





We
      have
      engaged legal counsel to review all of our known insurance policies, and to
      provide us with the amount of coverage which such counsel believes to be
      probable under those policies for current and future asbestos-related injury
      claims against us. Such legal counsel has provided us with its opinion of the
      minimum probable coverage available to satisfy asbestos-related injury claims,
      which significantly exceeds our estimated $36,000,000 liability for such claims
      at December 31, 2007.





On
      February 23, 2005 ACE Property & Casualty Company ("ACE"), Central National
      Insurance Company of Omaha ("Central National") and Industrial Underwriters
      Insurance Company ("Industrial"), which are all related entities, filed a
      declaratory relief lawsuit (“the ACE Lawsuit”) against Metalclad Insulation
      Corporation (“Metalclad”) and a number of Metalclad's other liability insurers,
      in the Superior Court of the State of California, County of Los Angeles. ACE,
      Central National and Industrial issued umbrella and excess policies to
      Metalclad, which has sought and obtained from the plaintiffs both defense and
      indemnity under these policies for the asbestos lawsuits brought against
      Metalclad during the last four to five years. The ACE Lawsuit seeks declarations
      regarding a variety of coverage issues, but is centrally focused on issues
      involving whether historical and currently pending asbestos lawsuits brought
      against Metalclad are subject to either an "aggregate" limits of liability
      or
      separate "per occurrence" limits of liability. Whether any particular asbestos
      lawsuit is properly classified as being subject to an aggregate limit of
      liability depends upon whether or not the suit falls within the "products"
      or
      "completed operations" hazards found in most of the liability policies issued
      to
      Metalclad. Resolution of these classification issues will determine if, as
      ACE
      and Central National allege, their policies are nearing exhaustion of their
      aggregate limits and whether or not other Metalclad insurers who previously
      asserted they no longer owed any coverage obligations to Metalclad because
      of
      the claimed exhaustion of their aggregate limits, in fact, owe Metalclad
      additional coverage obligations. The ACE Lawsuit also seeks to determine the
      effect of the settlement agreement between the Company and Allstate Insurance
      Company entered into in June 2004 on the insurance obligations of various other
      insurers of Metalclad, and the effect of the “asbestos exclusion” in the
      Allstate policy. The ACE Lawsuit does not seek any monetary recovery from
      Metalclad. Nonetheless, we anticipate that we will incur attorneys fees and
      other associated litigation costs in defending the lawsuit and any counter
      claims made against us by any other insurers, and in prosecuting any claims
      we
      may seek to have adjudicated regarding our insurance coverage. In addition,
      the
      ACE Lawsuit may result in our incurring costs in connection with obligations
      we
      may have to indemnify Allstate under the settlement agreement discussed under
      “Insurance Policy Settlement” below. Allstate, in a cross-complaint filed
      against Metalclad Insulation Corporation in October, 2005, asked the court
      to
      determine the Company’s obligation to assume and pay for the defense of Allstate
      in the ACE Lawsuit under the Company’s indemnification obligations in the
      settlement agreement. The Company does not believe that it has any legal
      obligation to assume or pay for such defense.





In
      2003
      and 2004 the Judiciary Committee of the United States Senate considered
      legislation to create a privately funded, publicly administered fund to provide
      the necessary resources for an asbestos injury claims resolution program, and
      is
      commonly referred to as the “FAIR” Act. In 2005, a draft of the “FAIR” Act was
      approved by the Judiciary Committee, but the bill was rejected by the full
      Senate in February 2006, when a cloture motion on the bill was withdrawn. An
      amended version of the 2006 “FAIR” Act (S 3274) was introduced in the Senate in
      May 2006, but has not been scheduled for a vote. A similar bill was introduced
      in the House (HR 1360) in March 2005, but was referred to a subcommittee in
      May
      2005. The latest draft of the “FAIR” Act calls for the fund to be funded
      partially by asbestos defendant companies, of which the Company is one, and
      partially by insurance companies. The bill could be voted on by the Senate
      or
      the House at any time in the future. The impact, if any, the “FAIR” Act will
      have on us if passed cannot be determined at this time although the latest
      draft
      of the legislation did not appear favorable to us.





***Insurance
      Policy Settlement*** .
      In June
      2004, Metalclad Insulation Corporation, our wholly owned subsidiary, and Entrx
      Corporation, entered into a Settlement Agreement and Full Policy Release (the
      “Agreement”) releasing Allstate Insurance Company from its policy obligations
      for a broad range of claims arising from injury or damage which may have
      occurred during the period March 15, 1980 to March 15, 1981, under an umbrella
      liability policy (the “Policy”). The Policy provided limits of $5,000,000 in the
      aggregate and per occurrence. Allstate claimed that liability under the Policy
      had not attached, and that regardless of that fact, an exclusion in the Policy
      barred coverage for virtually all claims of bodily injury from exposure to
      asbestos, which is of primary concern to Metalclad Insulation Corporation.
      Metalclad Insulation Corporation took the position that such asbestos coverage
      existed. The parties to the Agreement reached a compromise, whereby Metalclad
      Insulation Corporation received $2,500,000 in cash, and Metalclad Insulation
      Corporation and Entrx Corporation agreed to indemnify and hold harmless Allstate
      from all claims which could be alleged against the insurer respecting the
      policy, limited to $2,500,000 in amount. Based on past experience related to
      asbestos insurance coverage, we believe that the Agreement we entered into
      in
      June 2004, will result in a probable loss contingency for future insurance
      claims based on the indemnification provision in the Agreement. Although we
      are
      unable to estimate the exact amount of the loss, we believe at this time the
      reasonable estimate of the loss will not be less than $375,000 or more than
      $2,500,000 (the $2,500,000 represents the maximum loss we would have based
      on
      the indemnification provision in the Agreement). Based on the information
      available to us, no amount in this range appears at this time to be a better
      estimate than any other amount. The $375,000 estimated loss contingency noted
      in
      the above range represents 15% of the $2,500,000 we received and is based upon
      our attorney’s informal and general inquiries to an insurance company of the
      cost for us to purchase an insurance policy to cover the indemnification
      provision we entered into. We recorded a reserve of $375,000 at the time we
      entered into the Agreement and nothing has come to our attention that would
      require us to record a different estimate at December 31, 2007.


5





**Employees** .





As
      of
      December 31, 2007, we had two part-time salaried employees in our executive
      offices and 15 full-time salaried employees in our insulation business in
      California, for a total of 17 employees. These included three executive
      officers, project managers/estimators, purchasing, accounting, and office
      staff.





As
      of
      December 31, 2007, our subsidiary, Metalclad Insulation Corporation, employed
      approximately 220 hourly employees for insulation and asbestos/lead abatement
      contracting services, nearly all of whom are members of Local No. 5 -
      International Association of Heat and Frost Insulators and Asbestos Workers
      ("AFL-CIO") or Laborers Local Union 300, which makes hourly employees available
      to us. Metalclad Insulation Corporation is a party to agreements with local
      chapters of various trade unions. The number of hourly employees employed by
      us
      fluctuates depending upon the number and size of projects that we have under
      construction at any particular time. It has been our experience that hourly
      employees are generally available for our projects, and we have continuously
      employed a number of hourly employees on various projects over an extended
      period of time. We consider our relations with our hourly employees and the
      unions representing them to be good, and have not experienced any recent work
      stoppages due to strikes by such employees. Additionally, the trade union
      agreements we are a party to include no strike, no work stoppage provisions.
      In
      August, 2004 a new “Basic Agreement” was signed with Local No. 5 of the
      International Association of Heat and Frost Insulators and Asbestos Workers
      that
      expires in September 2008. We anticipate that a new agreement will be reached
      prior to the expiration of the current agreement. The “Basic Agreement” included
      a “Maintenance Agreement” as an addendum. Approximately 95% of our hourly
      employees are covered by the Local No. 5 agreement. A new agreement with the
      Laborers Local 300 was signed in January 2007 and expires in December 2009.
      Approximately 5% of our hourly employees are covered by the Labors Local 300
      agreement.





**Government
      Regulation**





***Insulation
      Services and Material Sales Regulation.*** As
      a
      general and insulation specialty contractor, we are subject to regulation
      requiring us to obtain licenses from several state and municipal agencies.
      Other
      than licensing, our industrial insulation services and material sales business
      is not subject to material or significant regulation.





***Asbestos
      Abatement Regulation.*** Asbestos
      abatement operations are subject to regulation by federal, state, and local
      governmental authorities, including OSHA and the EPA. In general, OSHA
      regulations set maximum asbestos fiber exposure levels applicable to employees,
      and the EPA regulations provide asbestos fiber emission control standards.
      The
      EPA requires use of accredited persons for both inspection and abatement. In
      addition, a number of states have promulgated regulations setting forth such
      requirements as registration or licensing of asbestos abatement contractors,
      training courses for workers, notification of intent to undertake abatement
      projects and various types of approvals from designated entities. Transportation
      and disposal activities are also regulated.





OSHA
      has
      promulgated regulations specifying airborne asbestos fiber exposure standards
      for asbestos workers, engineering and administrative controls, workplace
      practices, and medical surveillance and worker protection requirements. OSHA's
      construction standards require companies removing asbestos on construction
      sites
      to utilize specified control methods to limit employee exposure to airborne
      asbestos fibers, to conduct air monitoring, to provide decontamination units
      and
      to appropriately supervise operations. EPA regulations restrict the use of
      spray
      applied asbestos containing material (“ACM”) and asbestos insulation, establish
      procedures for handling ACM during demolition and renovations, and prohibit
      airborne fiber emissions during removal, transportation and disposal of
      ACM.


6





We
      believe that we are substantially in compliance with all regulations relating
      to
      our asbestos abatement operations, and currently have all material government
      permits, licenses, qualifications and approvals required for our
      operations.





**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**





Our
      executive offices are located in Minneapolis, Minnesota, which consists of
      approximately 2,400 square feet leased at a current rate of $2,000 per month,
      on
      a month-to-month basis.





Our
      wholly owned subsidiary, Metalclad Insulation Corporation, is housed in a
      facility in Fullerton, California. This facility consists of approximately
      27,100 square feet of office and warehouse space. The Company has leased this
      facility through December 31, 2011 at a monthly rate of $13,500 per month with
      yearly rent increases of approximately 3% per year. The lease contains an option
      for the Company to renew for an additional five years as defined in the
      agreement.





An
      inactive subsidiary of the Company, Ecosistemas del Potosi SA de CV, owns an
      approximately 92-hectare parcel (approximately 227 acres) of land in Santa
      Maria
      del Rio near San Luis Potosi, Mexico. We are presently attempting to dispose
      of
      this property. Such sale or disposition will not have a material effect on
      the
      Company as the land has a value of less than $15,000.





We
      believe that the properties currently owned and leased by us are adequate for
      our operations for the foreseeable future.





**ITEM
      3.**  **LEGAL
      PROCEEDINGS**





**Asbestos-related
      Claims**





Prior
      to
      1975, we were engaged in the sale and installation of asbestos-related
      insulation materials, which has resulted in numerous claims of personal injury
      allegedly related to asbestos exposure. Many of these claims are now being
      brought by the children and close relatives of persons who have died, allegedly
      as a result of the direct or indirect exposure to asbestos. To date all of
      our
      asbestos-related injury claims have been paid and defended by our insurance
      carriers.




The
      number of asbestos-related cases which have been initiated naming us (primarily
      our subsidiary, Metalclad Insulation Corporation) as a defendant decreased
      from
      351 in 2003, to 265 in 2004 and to 199 in 2005, but increased in 2006 to 232.
      The number decreased to 163 in 2007. At December 31, 2003, 2004, 2005, 2006
      and
      2007, there were, respectively, approximately 853, 710, 507, 404 and 222 cases
      pending. These claims are currently defended and covered by insurance.





Set
      forth
      below is a table for the years ended December 31, 2003, 2004, 2005, 2006 and
      2007, which sets forth for each such period the approximate number of
      asbestos-related cases filed, the number of such cases resolved by dismissal
      or
      by trial, the number of such cases resolved by settlement, the total number
      of
      resolved cases, the number of filed cases pending at the end of such period,
      the
      total indemnity paid on all resolved cases, the average indemnity paid on all
      settled cases and the average indemnity paid on all resolved
      cases:


7





2003
            
            
            2004
            
            
            2005
            
            
            
            2006
            
            
            2007New
                cases filed
            
            
            351
            
            
            
            265
            
            
            
            199
            
            
            
            
            232
            
            
            
            163Defense
                judgments and dismissals
            
            
            311
            
            
            
            311
            
            
            
            294
            (3)
            
            
            
            253
            
            
            
            292
            (3)Settled
                cases
            
            
            175
            
            
            
            97
            
            
            
            108
            
            
            
            
            82
            
            
            
            53Total
                resolved cases(1)
            
            
            486
            
            
            
            408
            
            
            
            402
            (3)
            
            
            
            335
            
            
            
            345
            (3)Pending
                cases(1)
            
            
            853
            
            
            
            710
            
            
            
            507
            (2,3)
            
            
            
            404
            
            
            
            222
            (3)Total
                indemnity payments
            
            $
            10,618,700
            
            
            $
            6,366,750
            
            
            $
            8,513,750
            
            
            
            $
            4,858,750
            
            
            $
            7,974,500Average
                indemnity paid on settled cases
            
            $
            60,678
            
            
            $
            65,637
            
            
            $
            78,831
            
            
            
            $
            59,253
            
            
            $
            150,462Average
                indemnity paid on all resolved cases
            
            $
            21,849
            
            
            $
            15,605
            
            
            $
            21,178
            (2)
            
            
            $
            14,504
            
            
            $
            23,114





(1)
            Total
                resolved cases includes, and the number of pending cases excludes,
                cases
                which have been settled but which have not been closed for lack of
                final
                documentation or payment.


(2)
            The
                average indemnity paid on resolved cases does not include, and the
                number
                of pending cases includes, a jury award rendered on March 22, 2005
                and a
                judgment on that award rendered on April 4, 2005, finding Metalclad
                Insulation Corporation liable for $1,117,000 in damages, which is
                covered
                by insurance. The judgment is being appealed by our
                insurer.


(3)
            Of
                the decrease from 710 cases pending at December 31, 2004 to 507 cases
                pending at December 31, 2005, were 80 cases which had been previously
                counted in error and are included in “Defense judgments and dismissals”
                and “Total resolved cases”, so that the actual decrease over the year
                ended December 31, 2005 was 123 cases. Included in the decrease from
                404
                cases pending at December 31, 2006 to 222 cases pending at December
                31,
                2007, were 53 cases which had been previously counted in error and
                are
                included in “Defense judgments and dismissals” and “Total resolved cases”,
                so that the actual decrease for the year ended December 31, 2007
                was 129
                cases.





The
      number of asbestos-related claims made against the Company since 2003, as well
      as the number of cases pending at the end of each of those years, has reflected
      a general downward trend from 2003 through 2007. We believe that it is probable
      that this general trend will continue, although such continuance cannot be
      assured. The average indemnity paid on all resolved claims has fluctuated over
      the past five-year period ended December 31, 2007 from a high of $23,114 in
      2007, to a low of $14,504 in 2006, with an average indemnity payment of $19,250
      over the same five-year period **.** We
      believe that the sympathies of juries, the aggressiveness of the plaintiffs’ bar
      and the declining base of potential defendants as the result of business
      failures, have tended to increase payments on resolved cases. This tendency,
      we
      believe, has been mitigated by the declining pool of claimants resulting from
      death, and the likelihood that the most meritorious claims have been ferreted
      out by plaintiffs’ attorneys and that the newer cases being brought are not as
      meritorious nor do they have as high a potential for damages as do cases which
      were brought earlier. We have no reason to believe, therefore, that the average
      future indemnity payments will increase materially in the future.





In
      addition, direct defense costs per resolved claim increased from $8,514 in
      2003
      to $16,700 in 2007. We believe that these defense costs increased as a result
      of
      a change in legal counsel in 2004, and the more aggressive defense posture
      taken
      by new legal counsel since that change. We do not believe that the defense
      costs
      will increase materially in the future, and are projecting those costs to be
      approximately $13,500 per claim.





Based
      on
      the general trend of reducing asbestos-related injury claims made against the
      Company over the prior six calendar years, we projected in our Form 10-KSB
      filed
      with the Securities and Exchange Commission for the year ended December 31,
      2006
      that there would be 924 asbestos-related injury claims made against the Company
      after December 31, 2006. The 924, in addition to the 404 claims existing as
      of
      December 31, 2006, totaled 1,328 current and future claims. Multiplying the
      average indemnity per resolved claim over the past six years of $19,131, times
      1,328, we projected the probable future indemnity to be paid on those claims
      after December 31, 2006 to be equal to approximately $25 million. In addition,
      multiplying an estimated cost of defense per resolved claim of approximately
      $13,500 times 1,328, we projected the probable future defense costs to equal
      approximately $18 million. Accordingly, our total estimated future
      asbestos-related liability at December 31, 2006 was $43 million.


8







As
      of
      December 31, 2006, we projected that approximately 186 new asbestos-related
      claims would be commenced, and approximately 237 cases would be resolved, in
      2007, resulting in an estimated 353 cases pending at December 31, 2007. Although
      the actual number of claims made in 2007 was 163 and the number of cases pending
      as of December 31, 2007 was 222, slightly less than we anticipated, we do not
      believe the differences are significant enough to re-evaluate our estimate.
      In
      addition, our future defense costs could be greater than projected, and such
      increase could partially offset any lower projection of liability which would
      result from such re-evaluation. Since we projected that an aggregate of 738
      new
      cases would be commenced after December 31, 2007, and that 148 of these cases
      would be commenced in 2008, we estimated that an aggregate of 590 new cases
      would be commenced after December 31, 2008. Accordingly, we have projected
      the
      cases pending and projected to be commenced in the future at December 31, 2008,
      would be 897 cases. Multiplying 897 claims times the approximate average
      indemnity paid and defense costs incurred per resolved claim from 2002 through
      2006 of $32,600, we estimated our liability for current and future
      asbestos-related claims at December 31, 2008 to be approximately $29,000,000.
      This amounts to a $7,000,000 reduction from the $36,000,000 liability we
      estimated as of December 31, 2007, or a $1,750,000 reduction per quarter in
      2008.





We
      have
      determined that it is probable that we have sufficient insurance to provide
      coverage for both current and future projected asbestos-related injury claims.
      This determination assumes that the current trend of reducing asbestos-related
      injury claims will continue and that the average indemnity and direct legal
      costs of each resolved claim will not materially increase. The determination
      also assumes that the insurance companies live up to what we believe is their
      obligation to continue to cover our exposure with regards to these claims.
      Several affiliated insurance companies have brought a declaratory relief action
      against our subsidiary, Metalclad, as well as a number of other insurers, to
      resolve certain coverage issues.





We
      intend
      to re-evaluate our estimate of future liability for asbestos claims at the
      end
      of each fiscal year, or whenever actual results are materially different from
      our estimates, integrating our actual experience in that fiscal year with that
      of prior fiscal years since 2002. We estimate that the effects of economic
      inflation on either the average indemnity payment or the projected direct legal
      expenses will be approximately equal to a discount rate applied to our future
      liability based upon the time value of money. It is probable that we have
      adequate insurance to cover current and future asbestos-related claims, although
      such coverage cannot be assured.





Although
      defense costs are included in our insurance coverage, we expended $174,000,
      $304,000, $188,000, $215,000 and $296,000 in 2003, 2004, 2005, 2006 and 2007,
      respectively, to administer the asbestos claims and defend the ACE Lawsuit
      discussed below. These amounts were primarily fees paid to attorneys to monitor
      the activities of the insurers, and their selected defense counsel, and to
      look
      after our rights under the various insurance policies.





On
      February 23, 2005 ACE Property & Casualty Company ("ACE"), Central National
      Insurance Company of Omaha ("Central National") and Industrial Underwriters
      Insurance Company ("Industrial"), which are all related entities, filed a
      declaratory relief lawsuit (“the ACE Lawsuit”) against Metalclad Insulation
      Corporation (“Metalclad”) and a number of Metalclad's other liability insurers,
      in the Superior Court of the State of California, County of Los Angeles. ACE,
      Central National and Industrial issued umbrella and excess policies to
      Metalclad, which has sought and obtained from the plaintiffs both defense and
      indemnity under these policies for the asbestos lawsuits brought against
      Metalclad during the last four to five years. The ACE Lawsuit seeks declarations
      regarding a variety of coverage issues, but is centrally focused on issues
      involving whether historical and currently pending asbestos lawsuits brought
      against Metalclad are subject to either an "aggregate" limits of liability
      or
      separate "per occurrence" limits of liability. Whether any particular asbestos
      lawsuit is properly classified as being subject to an aggregate limit of
      liability depends upon whether or not the suit falls within the "products"
      or
      "completed operations" hazards found in most of the liability policies issued
      to
      Metalclad. Resolution of these classification issues will determine if, as
      ACE
      and Central National allege, their policies are nearing exhaustion of their
      aggregate limits and whether or not other Metalclad insurers who previously
      asserted they no longer owed any coverage obligations to Metalclad because
      of
      the claimed exhaustion of their aggregate limits, in fact, owe Metalclad
      additional coverage obligations. The ACE Lawsuit also seeks to determine the
      effect of the settlement agreement between the Company and Allstate Insurance
      Company on the insurance obligations of various other insurers of Metalclad,
      and
      the effect of the “asbestos exclusion” in the Allstate policy. The ACE Lawsuit
      does not seek any monetary recovery from Metalclad. Nonetheless, we anticipate
      that we will incur attorneys fees and other associated litigation costs in
      defending the lawsuit and any counter claims made against us by any other
      insurers, and in prosecuting any claims we may seek to have adjudicated
      regarding our insurance coverage. In addition, the ACE Lawsuit may result in
      our
      incurring costs in connection with obligations we may have to indemnify Allstate
      under a settlement agreement (See “Item 1 - Description of Business - Insurance
      and Bonding - Insurance Policy Settlement”). Allstate, in a cross-complaint
      filed against Metalclad Insulation Corporation in October, 2005, asked the
      court
      to determine the Company’s obligation to assume and pay for the defense of
      Allstate in the ACE Lawsuit under the Company’s indemnification obligations in
      the settlement agreement. The Company does not believe that it has any legal
      obligation to assume or pay for such defense.




9


In
      2003
      and 2004 the Judiciary Committee of the United States Senate considered
      legislation to create a privately funded, publicly administered fund to provide
      the necessary resources for an asbestos injury claims resolution program, and
      is
      commonly referred to as the “FAIR” Act. In 2005, a draft of the “FAIR” Act was
      approved by the Judiciary Committee, but the bill was rejected by the full
      Senate in February 2006, when a cloture motion on the bill was withdrawn. An
      amended version of the 2006 “FAIR” Act (S 3274) was introduced in the Senate in
      May 2006, but has not been scheduled for a vote. A similar bill was introduced
      in the House (HR 1360) in March 2005, but was referred to a subcommittee in
      May
      2005. The latest draft of the “FAIR” Act calls for the fund to be funded
      partially by asbestos defendant companies, of which the Company is one, and
      partially by insurance companies. The bill could be voted on by the Senate
      or
      the House at any time in the future. The impact, if any, the “FAIR” Act will
      have on us if passed cannot be determined at this time although the latest
      draft
      of the legislation did not appear favorable to us.





**Claim
      Against Former Employee, Etc.**





In
      October 1999, we completed the sale of our operating businesses and development
      project located in Aguascalientes, Mexico. That sale specifically excluded
      those
      Mexican assets involved in the Company’s NAFTA claim which was settled in 2001.
      Under the terms of the sale we received an initial cash payment of $125,000
      and
      recorded a receivable for $779,000, which has been fully reserved. On November
      13, 2000, the Company filed a complaint in the Superior Court of California
      against a former employee, the U.S. parent of the buyer and its representative
      for breach of contract, fraud, collusion and other causes of action in
      connection with this sale seeking damages in the form of a monetary award.
      An
      arbitration hearing was held in September, 2002 in Mexico City, as requested
      by
      one of the defendants. This arbitration hearing was solely to determine the
      validity of the assignment of the purchase and sale agreement by the buyer
      to a
      company formed by the former employee defendant. The Superior Court action
      against the U.S. parent was stayed pending the Mexican arbitration. On April
      8,
      2003, the arbitrator ruled that the assignment was inexistent, due to the
      absence of our consent. In June 2003, the Court of Appeal for the State of
      California ruled that the  U.S.
      parent was also entitled to compel a Mexican arbitration of the claims raised
      in
      our complaint. We are now prepared to pursue our claim in an arbitration
      proceeding for the aforementioned damages. No assurances can be given on the
      outcome.





In
      a
      related action, a default was entered against us in December, 2002, in favor
      of
      the same former employee referred to in the foregoing paragraph by the Mexican
      Federal Labor Arbitration Board, for an unspecified amount. The former employee
      was seeking in excess of $9,000,000 in damages as a result of his termination
      as
      an employee. The default was obtained without the proper notice being given
      to
      us, and was set aside in the quarter ended June 30, 2003. The Mexican Federal
      Labor Arbitration Board rendered a recommendation on December 13, 2004, to
      the
      effect that the former employee was entitled to an award of $350,000 from Entrx
      in connection with the termination of his employment. The award is in the form
      of a recommendation which has been affirmed by the Mexican Federal Court, but
      is
      only exercisable against assets of the Company located in Mexico. The Company
      has no material assets in Mexico. The award does not represent a collectible
      judgment against the Company in the United States. Since the Company has no
      material assets in Mexico, the likelihood of any liability based upon this
      award
      is remote, and we therefore believe that there is no potential liability to
      the
      Company at December 31, 2007 or 2006. The Company intends to continue to pursue
      its claims against the same employee for breach of contract, fraud, collusion
      and other causes of action in connection with the 1999 sale of one of the
      Company’s operating businesses in Mexico.




10


On
      May
      31, 2006, we entered into a Settlement Agreement with Ventana Global
      Environmental Organizational Partnership, L.P. and North America Environmental
      Fund, L.P. (collectively referred to as “Ventana”) whereby Ventana agreed to pay
      Entrx Corporation $1,250,000 in exchange for the dismissal with prejudice by
      Entrx Corporation of the law suit (the “Ventana Action”) filed by Entrx
      Corporation against Ventana and others in Orange County, California Superior
      Court in November 2000. Entrx Corporation and Ventana also entered into a mutual
      release of all claims each may have had against the other. In addition, Entrx
      Corporation released Carlos Alberto de Rivas Oest and Geologic de Mexico S.A.
      de
      C.V., which were parties related to Ventana, and against whom Entrx Corporation
      had claims pending in Mexico. The Settlement Agreement does not limit claims
      that Entrx had or currently has against Javier Guerra Cisneros and Promotora
      Industrial Galeana, S.A. de C.V., which Entrx Corporation continues to pursue
      in
      Mexico. Javier Guerra Cisneros and Promotora Industrial Galeana, S.A. de C.V.
      were involved with the transactions which were the subject of the Ventana
      Action. Entrx Corporation received approximately $925,000 net after payment
      of
      legal fees and expenses associated with the Ventana Action and the Settlement
      Agreement.




**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None




**PART
      II**





**ITEM
      5.**  **MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**





Market
      for Common Stock





Since
      February 16, 2005 our common stock has traded on the pink sheets under the
      symbol ENTX.PK. The following table sets forth, for the fiscal periods
      indicated, the high and low bid ** prices
      for the Common Stock as reported by Nasdaq or as quoted over-the-counter and
      recorded in the pink sheets. The bid prices represent prices between
      broker-dealers and do not include retail mark-ups and mark-downs or any
      commissions to the dealer. These bid prices may not reflect actual
      transactions.




**Bid
                  Price****High**
              
              **Low****Fiscal
                  Year Ended December 31, 2006**Quarter
                  Ended March 31, 2006
              
              $
              0.24
              
              $
              0.13Quarter
                  Ended June 30, 2006
              
              
              0.25
              
              
              0.15Quarter
                  Ended September 30, 2006
              
              
              0.35
              
              
              0.18Quarter
                  Ended December 31, 2006
              
              
              0.23
              
              
              0.11**Fiscal
                  Year Ended December 31, 2007**Quarter
                  Ended March 31, 2007
              
              $
              0.47
              
              $
              0.16Quarter
                  Ended June 30, 2007
              
              
              0.34
              
              
              0.17Quarter
                  Ended September 30, 2007
              
              
              0.38
              
              
              0.16Quarter
                  Ended December 31, 2007
              
              
              0.46
              
              
              0.28




As
      of
      February 26, 2008, the closing bid ** price
      for
      the common shares in the pink sheets was $0.27.




Shareholders
      of Record





As
      of
      February 26, 2008, the approximate number of record holders of our Common Stock
      was 1,500.





Dividends





We
      have
      not paid any cash dividends on our Common Stock since our incorporation, and
      anticipate that, for the foreseeable future, earnings, if any, will continue
      to
      be retained for use in our business.




11


Unregistered
      Sales of Securities





The
      following table sets forth certain information regarding the sale of common
      stock by the Company during the calendar year 2007 in transactions which were
      not registered under the Securities Act of 1933 (the “Act”).




Date
                  of
                Sale
              
              Number of
                Shares
                Sold
              
              Person(s)
                  to Whom Sold
              
              Consideration
                  Paid
              
              Exemption
                  from Registration
                Relied
                  Upon Under the Act(1)3/9/2007
              
              115,000
                  Shares
              
              Members
                  of the Board of Directors of Entrx Corporation (4 members) and
                  Metalclad
                  Insulation Corporation (1 member)
              
              Services
                  as directors, valued at $0.16 per share
              
              Section
                  4(2) of the Securities Act of 1933, as a transaction not involving
                  a
                  public offering.





(1)
            Each
                member of the Board of Directors of Entrx Corporation, the chief
                executive
                officer of Entrx and the Director of Metalclad Insulation Corporation
                are
                deemed to be “accredited investors” by reason of their offices.




**ITEM
      6.**  **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





**Summary** .





Our
      revenues increased from $19,517,000 in 2006 to $22,359,000 in 2007. Gross margin
      percentage increased from 14.8% in 2006 to 17.9% in 2007. Revenues increased
      primarily due to the Company obtaining new insulation services contracts, and
      hiring additional project managers which allows the Company to bid on more
      projects. The gross margin percentage increased for 2007 as compared with 2006
      due to the Company recording an anticipated loss of $566,000 on a single project
      in 2006 which negatively impacted the gross margin in 2006. We anticipate that
      our revenues will continue to increase in 2008 due to the increase in our
      backlog at December 31, 2007 as compared to December 31, 2006, and anticipate
      that gross margin percentages in 2008 will approximate those in
      2007.





We
      had
      net income of $622,000 in 2007. We had net income of $2,052,000 in 2006
      primarily due to the operating income at Metalclad Insulation Corporation,
      a
      $1,725,000 gain recorded on the sale of a building, land and building
      improvements and $1,025,000 of income related to the settlement of lawsuits.
      An
      additional allowance of $1,084,000 on a shareholder note receivable partially
      offset the net income.





In
      an
      effort to increase shareholder value and to diversify from our insulation
      services business, we have made equity investments in several companies that
      are
      not in the insulation services business and which we believed had the ability
      to
      provide acceptable return on our investments. We have investments in the common
      stock of Catalytic Solutions, Inc., and the common stock of Clearwire
      Corporation, which we value at $450,000 and $540,000, respectively. Both of
      these companies are in the early stages of their business development. Our
      investments represent less than 5% ownership in each company and represent
      approximately 2.2% and 2.3% of the Company’s total assets at December 31, 2007
      and 2006, respectively. Catalytic Solutions, Inc. manufactures and delivers
      proprietary technology that improves the performance and reduces the cost of
      catalytic converters. Catalytic’s common stock is traded on the AIM market in
      London under the symbol “CTS”. Clearwire Corporation is a provider of
      non-line-of-sight plug-and-play broadband wireless access systems. Clearwire’s
      common stock is traded on the NASDAQ market under the symbol “CLWR”. We also own
      190,566 shares of the common stock of VioQuest Pharmaceuticals, Inc., the common
      stock of which is publicly traded on the NASD Bulletin Board under the symbol
      “VQPH”. Of the 190,566 shares, 75,000 shares are subject to options exercisable
      by one current and two former members of our Board of Directors at $1.25 per
      share. Any or all of these investments could be impaired in the future. See
      “Liquidity and Capital Resources.”




12


Our
      subsidiary, Metalclad Insulation Corporation, continues to be engaged in
      lawsuits involving asbestos-related injury or potential injury claims. The
      163
      claims made in 2007 were down from the 232 claims made in 2006. The average
      indemnity payment on all resolved claims during each of the past five years
      has
      fluctuated from a high of $23,114 in 2007, to a low of $14,504 in 2006. These
      claims are currently defended and covered by insurance. We have projected that
      our future liability for currently outstanding and estimated future
      asbestos-related claims was approximately $43,000,000 at December 31, 2006
      and
      approximately $36,000,000 at December 31, 2007. We have determined that it
      is
      probable that we have sufficient insurance to provide coverage for both current
      and future projected asbestos-related injury claims. This determination assumes
      that the recent trend of reducing asbestos-related injury claims will continue,
      and that the average indemnity and direct legal costs of each resolved claim
      will not materially increase. The determination also assumes that the insurance
      companies live up to what we believe is their obligation to continue to cover
      our exposure with regards to these claims. Several affiliated insurance
      companies have brought a declaratory relief action against our subsidiary,
      Metalclad, as well as a number of other insurers, to resolve certain coverage
      issues. (See Item 3, “Legal Proceedings - Asbestos-related Claims”) In addition,
      we paid approximately $296,000 and $215,000 in 2007 and 2006, respectively,
      in
      legal fees to assess and monitor the asbestos-related claims, assess, to monitor
      our insurance coverage and insurance company activities involving the defense
      and payment of these claims, and to defend the ACE Lawsuit. We anticipate that
      this cost will continue.





**Results
      of Operations**





***General.*** Our
      revenues have been generated primarily from insulation services and sales of
      insulation products and related materials in the United States.





***Year
      Ended December 31, 2007 Compared to Year Ended December 31,
      2006.***





***Revenue.*** Total
      revenues were $22,358,000 in 2007 as compared to $19,517,000 for 2006, an
      increase of 14.6%. The increase from 2007 to 2006 was primarily a result of
      the
      Company obtaining new insulation services contracts, and hiring additional
      project managers which allowed the Company to bid on more projects in 2007
      and
      which ultimately increased the number of jobs in which we were the winning
      bidder.





***Cost
      of Revenue and Gross Margin.*** Total
      cost of revenue for the year ended December 31, 2007 was $18,353,000 as compared
      to $16,638,000 for the year ended December 31, 2006, an increase of 10.3%.
      The
      gross margin as a percentage of revenue was approximately 17.9% for the year
      ended December 31, 2007 compared to 14.8% for the year ended December 31, 2006.
      The increase in the gross margin percentage during the year ended December
      31,
      2007 as compared with the year ended December 31, 2006 is primarily the result
      of the Company recording a charge of $566,000 related to an anticipated loss
      on
      a project during the year ended December 31, 2006. The increase in the cost
      of
      revenues for the year ended December 31, 2007 as compared to the year ended
      December 31, 2006 was primarily due to higher revenues as discussed
      above. ****





***Selling,
      General and Administrative Expenses.*** Selling,
      general and administrative expenses were $3,291,000 for the year ended December
      31, 2007 as compared to $2,401,000 for the year ended December 31, 2006, an
      increase of 37.1% due primarily to a increases in compensation expenses,
      performance bonuses, legal expenses and bad debt expense.





***Other
      Operating Expense.*** For the
      year ended December 31, 2006, we increased our reserve against the note
      receivable from Blake Capital Partners, LLC (“Blake”) by $1,083,885 as a result
      of the non-payment of interest, bringing the net of the note receivable less
      the
      reserve down to $210,000, the approximate value of the collateral securing
      the
      note. During 2007, the Company canceled 500,000 shares of the Company’s common
      stock that were pledged as collateral on the note and applied the value of
      the
      stock, $115,000 against the outstanding note receivable balance. The Company
      is
      exploring its opportunities to obtain proceeds from the sale of 250,000 shares
      of VioQuest Pharmaceuticals, Inc. common stock (OTC Bulletin Board: VQPH),
      also
      pledged as collateral on the note. As such, the Company has continued to adjust
      the carrying value of the note receivable to the approximate value of the
      collateral securing the note at December 31, 2007, which has increased the
      reserve by $70,000 for the year ended December 31, 2007. (See “Liquidity and
      Capital Resources” under this Item 6 below).




13


***Interest
      Income and Expense.*** ** Interest
      expense for the year ended December 31, 2007 was $10,000 as compared with
      interest expense of $107,000 for the year ended December 31, 2006. The decrease
      in 2007 as compared to 2006 was primarily due to the pay-off of debt after
      the
      sale of the Company’s California building during the year ended December 31,
      2006. The note with Pandora Select Partners L.P. was also repaid in June 2006.
      Interest income decreased from $105,000 in the year ended December 31, 2006
      to
      $60,000 in the year ended December 31, 2007, primarily due to the Company not
      recording any interest income on the note receivable from Blake Capital
      Partners, LLC in the second half of 2006 or the year ended December 31, 2007.





***Gain
      on Sale of Building, Land, and Building Improvements.*** Gain
      on
      sale of building, land and building improvements was $1,725,000 for the year
      ended December 31, 2006. This gain was related to the sale of the Company’s
      facilities in Anaheim, California that housed the Company’s insulation
      operations.





***Other
      Income and Expense.*** Other
      income for the year ended December 31, 2006 was $1,025,000. $100,000 of other
      income related to the settlement agreement with Meyers-Reynolds whereby
      Meyers-Reynolds agreed to pay Entrx Corporation $100,000 in exchange for the
      dismissal with prejudice by Entrx Corporation of the law suit filed by Entrx
      Corporation against Meyers-Reynolds. Also included in the $1,025,000 of other
      income for the year ended December 31, 2006 was $925,000 related to the
      settlement agreement with Ventana Global Environmental Organizational
      Partnership, L.P. and North America Environmental Fund, L.P. (collectively
      referred to as “Ventana”) whereby Ventana agreed to pay Entrx Corporation
      $1,250,000 in exchange for the dismissal with prejudice by Entrx Corporation
      of
      the law suit (the “Ventana Action”) filed by Entrx Corporation against Ventana
      and others in Orange County, California Superior Court in November 2000. Entrx
      Corporation received $925,000 net after payment of legal fees and expenses
      associated with the settlement.





In
      an
      effort to increase shareholder value and to diversify from our insulation
      services business, we have made equity investments in several companies that
      are
      not in the insulation services business and which we believed had the ability
      to
      provide acceptable return on our investments. For the year ended December 31,
      2007 we recognized an impairment charge of $80,000 related to our investment
      in
      VioQuest Pharmaceuticals, Inc. For the year ended December 31, 2006 we
      recognized an impairment charge of $91,000 related to our investment in VioQuest
      Pharmaceuticals, Inc. The impairment charges were due to the decline in the
      fair
      value below the cost basis that was judged to be other than temporary.





***Net
      Income.*** We
      realized net income of $622,000 (or net income of $0.08 per share) for the
      year
      ended December 31, 2007, as compared to net income of $2,052,000 (or net income
      of $0.26 per share) for the comparable period ended December 31, 2006. The
      net
      income for the year ended December 31, 2006 was primarily due to the gain on
      the
      sale of our facilities in Anaheim, California, our settlement with Ventana
      Global Environmental Organizational Partnership, L.P. and North America
      Environmental Fund, L.P. and the improved operating results at Metalclad
      Insulation Corporation.





**Liquidity
      and Capital Resources**





As
      of
      December 31, 2007, we had $1,445,000 in cash and cash equivalents and $559,000
      in available-for-sale securities. The Company had working capital of $5,402,000
      as of December 31, 2007.





In
      an
      effort to increase shareholder value and to diversify from our insulation
      services business, we made an equity investment in Catalytic Solutions, Inc.,
      that is not in the insulation services business and which we believed had the
      ability to provide acceptable return on our investment. We currently have an
      investment in Catalytic Solutions, Inc. which we value at $450,000. This company
      is in the early stages of its business development. Our investment represents
      less than 5% ownership and represents approximately 1.0% of the Company’s total
      assets at December 31, 2007. Catalytic Solutions, Inc. manufactures and delivers
      proprietary technology that improves the performance and reduces the cost of
      catalytic converters. Catalytic Solutions, Inc. is traded on the AIM market
      in
      London, England.





Cash
      used
      in continuing operations was $24,000 for 2007, compared with cash provided
      by
      continuing operations of $446,000 in 2006. For the year ended December 31,
      2007
      the negative cash flow from operations was primarily the result of an increase
      in accounts receivable and an increase in costs and estimated earnings in excess
      of billings on uncompleted contracts, partially offset by our net income and
      an
      increase in accounts payable and accrued expenses. The increase in accounts
      receivable is primarily due to an increase in revenues. For the year ended
      December 31, 2006 the positive cash flow from operations was primarily the
      result of our net income, a decrease in inventories, a decrease in other
      receivables and a gain on the settlement of the Ventana action **.** These
      sources of cash were partially offset by an increase in accounts receivable.




14


Net
      investing activities used $25,000 of cash in the year ended December 31, 2007,
      and provided $3,566,000 of cash in 2006. Additions to property and equipment
      used $64,000 and $171,000 in 2007 and 2006, respectively, primarily for our
      subsidiary, Metalclad Insulation Corporation. During the year ended December
      31,
      2007, cash of $39,000 was provided by proceeds from sales of assets. During the
      year ended December 31, 2006, cash of $3,738,000 was provided by proceeds from
      sales of assets, primarily related to the sale of the Company’s facilities in
      Anaheim, California.





Cash
      used
      in financing activities totaled $114,000 in 2007 compared with cash used in
      financing activities of $2,819,000 in 2006. During the year ended December
      31,
      2006, $2,831,000 of cash was used to repay the note payable to bank, the
      mortgage payable on the building we sold and the Company’s note to Pandora
      Select Partners L.P. Long-term borrowings provided $114,000 of cash in 2006
      and
      payments on long-term borrowings used $114,000 and $102,000 of cash in 2007
      and
      2006, respectively.





In
      2001,
      $1,250,000 was loaned to an affiliate of Wayne W. Mills, Blake Capital Partners,
      LLC (“Blake”) under a note (“Note”) secured by 500,000 shares of the Company’s
      common stock and any dividends received on those shares. At the time the loan
      was made, Mr. Mills was a principal shareholder of the Company, and was
      subsequently elected as the Company’s President and Chief Executive Officer. In
      November 2003, the Board of Directors of the Company negotiated an amendment
      to
      the security agreement (the “Amended and Restated Security Agreement”) which it
      believed to be beneficial to the Company. The Note as amended (the “New Note”)
      is in the principal amount of $1,496,370, and provided for an October 31, 2007
      due date, with interest at 2% over the prime rate established by Wells Fargo
      Bank, NA in Minneapolis, Minnesota, adjusted on March 1 and September 1 of
      each
      year, instead of the 12% rate established in the Note. Interest only was payable
      commencing March 1, 2004, and at the end of each six-month period thereafter.
      The New Note is with full recourse to Blake Capital Partners, which had minimal
      assets, other than 350,000 shares of the Company’s common stock and 175,000
      shares of VioQuest Pharmaceuticals, Inc., all of which, along with 150,000
      shares of the Company’s common stock and 75,000 shares of VioQuest
      Pharmaceuticals, Inc. owned by Mr. Mills, had been held by the Company as
      collateral for the New Note. The Amended and Restated Security Agreement, unlike
      the original Security Agreement, did not require us, or permit Blake Capital
      Partners or Mr. Mills, to cancel the shares of the Company’s common stock held
      as collateral as full payment of the loan, or require us to apply the value
      of
      those cancelled shares at $2.50 per share against the principal balance of
      the
      amounts due. In addition, Mr. Mills has personally guaranteed the repayment
      of
      the New Note.





For
      the
      year ended December 31, 2006, we increased our reserve against the note
      receivable from Blake Capital Partners, LLC (“Blake”) by $1,083,885 as a result
      of the non-payment of interest, bringing the net of the note receivable less
      the
      reserve down to $210,000, the approximate value of the collateral securing
      the
      Note. In April 2007, the Company canceled 500,000 shares of the Company’s common
      stock that were pledged as collateral on the New Note and applied the $115,000
      value of the stock against the outstanding New Note balance. The New Note was
      not repaid on the October 31, 2007 due date. As of December 31, 2007 the Company
      adjusted the net book value of the New Note to $25,000, the approximate value
      of
      the collateral securing the New Note. The Company is exploring its opportunities
      to obtain proceeds from the sale of the VioQuest Pharmaceuticals, Inc. common
      stock, also pledged as collateral on the note.





Prior
      to
      1975, we were engaged in the sale and installation of asbestos-related
      insulation materials, which has resulted in numerous claims of personal injury
      allegedly related to asbestos exposure. Many of these claims are now being
      brought by the children and close relatives of persons who have died, allegedly
      as a result of the direct or indirect exposure to asbestos. To date, all of
      the
      asbestos-related injury claims have been defended and paid by our insurance
      carriers.




The
      number of asbestos-related cases which have been initiated naming us (primarily
      our subsidiary, Metalclad Insulation Corporation) as a defendant decreased
      to
      351 in 2003, to 265 in 2004 and to 199 in 2005, but increased in 2006 to 232.
      The number decreased to 163 in 2007. At December 31, 2003, 2004, 2005, 2006
      and
      2007, there were, respectively, approximately 853, 710, 507, 404 and 222 cases
      pending. These claims are currently defended and covered by insurance.





Set
      forth
      below is a table for the years ended December 31, 2003, 2004, 2005, 2006 and
      2007, which sets forth for each such period the approximate number of
      asbestos-related cases filed, the number of such cases resolved by dismissal
      or
      by trial, the number of such cases resolved by settlement, the total number
      of
      resolved cases, the number of filed cases pending at the end of such period,
      the
      total indemnity paid on all resolved cases, the average indemnity paid on all
      settled cases and the average indemnity paid on all resolved
      cases:


15




2003
              
              
              2004
              
              
              2005
              
              
              
              2006
              
              
              2007New
                  cases filed
              
              
              351
              
              
              265
              
              
              199
              
              
              
              232
              
              
              163Defense
                  judgments and dismissals
              
              
              311
              
              
              311
              
              
              294
              (3)
              
              
              253
              
              
              292
              (3)Settled
                  cases
              
              
              175
              
              
              97
              
              
              108
              
              
              
              82
              
              
              53Total
                  resolved cases (1)
              
              
              486
              
              
              408
              
              
              402
              (3)
              
              
              335
              
              
              345
              (3)Pending
                  cases (1)
              
              
              853
              
              
              710
              
              
              507
              (2,3)
              
              
              404
              
              
              222
              (3)Total
                  indemnity payments
              
              $
              10,618,700
              
              $
              6,366,750
              
              $
              8,513,750
              
              
              $
              4,858,750
              
              $
              7,974,500Average
                  indemnity paid on settled cases
              
              $
              60,678
              
              $
              65,637
              
              $
              78,831
              
              
              $
              59,253
              
              $
              150,462Average
                  indemnity paid on all resolved cases
              
              $
              21,849
              
              $
              15,605
              
              $
              21,178
              (2)
              
              $
              14,504
              
              $
              23,114




(1) Total
      resolved cases includes, and the number of pending cases excludes, cases which
      have been settled but which have not been closed for lack of final documentation
      or payment.


(2) The
      average indemnity paid on resolved cases does not include, and the number of
      pending cases includes, a jury award rendered on March 22, 2005 and a judgment
      on that award rendered on April 4, 2005, finding Metalclad Insulation
      Corporation liable for $1,117,000 in damages, which is covered by insurance.
      The
      judgment is being appealed by our insurer.


(3) Of
      the
      decrease from 710 cases pending at December 31, 2004 to 507 cases pending at
      December 31, 2005, were 80 cases which had been previously counted in error
      and
      are included in “Defense judgments and dismissals” and “Total resolved cases”,
      so that the actual decrease over the year ended December 31, 2005 was 123 cases.
      Included in the decrease from 404 cases pending at December 31, 2006 to 222
      cases pending at December 31, 2007, were 53 cases which had been previously
      counted in error and are included in “Defense judgments and dismissals” and
“Total resolved cases”, so that the actual decrease for the year ended December
      31, 2007 was 129 cases.




The
      number of asbestos-related claims made against the Company since 2003, as well
      as the number of cases pending at the end of each of those years, has reflected
      a general downward trend from 2003 through 2007. We believe that it is probable
      that this general trend will continue, although such continuance cannot be
      assured. The average indemnity paid on all resolved claims has fluctuated over
      the past five-year period ended December 31, 2007 from a high of $23,114 in
      2007, to a low of $14,504 in 2006, with an average indemnity payment of $19,250
      over the same five-year period **.** We
      believe that the sympathies of juries, the aggressiveness of the plaintiffs’ bar
      and the declining base of potential defendants as the result of business
      failures, have tended to increase payments on resolved cases. This tendency,
      we
      believe, has been mitigated by the declining pool of claimants resulting from
      death, and the likelihood that the most meritorious claims have been ferreted
      out by plaintiffs’ attorneys and that the newer cases being brought are not as
      meritorious nor do they have as high a potential for damages as do cases which
      were brought earlier. We have no reason to believe, therefore, that the average
      future indemnity payments will increase materially in the future.





In
      addition, direct defense costs per resolved claim increased from $8,514 in
      2003
      to $16,700 in 2007. We believe that these defense costs increased as a result
      of
      a change in legal counsel in 2004, and the more aggressive defense posture
      taken
      by new legal counsel since that change. We do not believe that the defense
      costs
      will increase materially in the future, and are projecting those costs to be
      approximately $13,500 per claim.





Based
      on
      the general trend of reducing asbestos-related injury claims made against the
      Company over the prior six calendar years, we projected in our Form 10-KSB
      filed
      with the Securities and Exchange Commission for the year ended December 31,
      2006
      that there would be 924 asbestos-related injury claims made against the Company
      after December 31, 2006. The 924, in addition to the 404 claims existing as
      of
      December 31, 2006, totaled 1,328 current and future claims. Multiplying the
      average indemnity per resolved claim over the past six years of $19,131, times
      1,328, we projected the probable future indemnity to be paid on those claims
      after December 31, 2006 to be equal to approximately $25 million. In addition,
      multiplying an estimated cost of defense per resolved claim of approximately
      $13,500 times 1,328, we projected the probable future defense costs to equal
      approximately $18 million. Accordingly, our total estimated future
      asbestos-related liability at December 31, 2006 was $43 million.




16


As
      of
      December 31, 2006, we projected that approximately 186 new asbestos-related
      claims would be commenced, and approximately 237 cases would be resolved, in
      2007, resulting in an estimated 353 cases pending at December 31, 2007. Although
      the actual number of claims made in 2007 was 163, and the number of cases
      pending as of December 31, 2007 was 222, slightly less than we anticipated,
      we
      do not believe the differences are significant enough to re-evaluate our
      estimate. In addition, our future defense costs could be greater than projected,
      and such increase could partially offset any lower projection of liability
      which
      would result from such re-evaluation. Since we projected that an aggregate
      of
      738 new cases would be commenced after December 31, 2007, and that 148 of these
      cases would be commenced in 2008, we estimated that an aggregate of 590 new
      cases would be commenced after December 31, 2008. Accordingly, we have projected
      the cases pending and projected to be commenced in the future at December 31,
      2008, would be 897 cases. Multiplying 897 claims times the approximate average
      indemnity paid and defense costs incurred per resolved claim from 2002 through
      2006 of $32,600, we estimated our liability for current and future
      asbestos-related claims at December 31, 2008 to be approximately $29,000,000.
      This amounts to a $7,000,000 reduction from the $36,000,000 liability we
      estimated as of December 31, 2007, or a $1,750,000 reduction per quarter in
      2008.





We
      have
      determined that it is probable that we have sufficient insurance to provide
      coverage for both current and future projected asbestos-related injury claims.
      This determination assumes that the current trend of reducing asbestos-related
      injury claims will continue and that the average indemnity and direct legal
      costs of each resolved claim will not materially increase. The determination
      also assumes that the insurance companies live up to what we believe is their
      obligation to continue to cover our exposure with regards to these claims.
      Several affiliated insurance companies have brought a declaratory relief action
      against our subsidiary, Metalclad, as well as a number of other insurers, to
      resolve certain coverage issues.





We
      intend
      to re-evaluate our estimate of future liability for asbestos claims at the
      end
      of each fiscal year, or whenever actual results are materially different from
      our estimates, integrating our actual experience in that fiscal year with that
      of prior fiscal years. We estimate that the effects of economic inflation on
      either the average indemnity payment or the projected direct legal expenses
      will
      be approximately equal to a discount rate applied to our future liability based
      upon the time value of money. It is probable that we have adequate insurance
      to
      cover current and future asbestos-related claims, although such coverage cannot
      be assured.





Although
      defense costs are included in our insurance coverage, we expended $174,000,
      $304,000, $188,000, $215,000 and $296,000 in 2003, 2004, 2005, 2006 and 2007,
      respectively, to administer the asbestos claims and defend the ACE Lawsuit
      discussed below. These amounts were primarily fees paid to attorneys to monitor
      the activities of the insurers, and their selected defense counsel, and to
      look
      after our rights under the various insurance policies.





There
      are
      numerous insurance carriers which have issued a number of policies to us over
      a
      period extending from approximately 1967 through approximately 1985 that still
      provide coverage for asbestos-related injury claims. After approximately 1985
      the policies were issued with provisions which purport to exclude coverage
      for
      asbestos related claims. The terms of our insurance policies are complex, and
      coverage for many types of claims is limited as to the nature of the claim
      and
      the amount of coverage available. It is clear, however, under California law,
      where the substantial majority of the asbestos-related injury claims are
      litigated, that all of those policies cover any asbestos-related injury
      occurring during the 1967 through 1985 period when these policies were in
      force.





We
      have
      engaged legal counsel to review all of our known insurance policies, and to
      provide us with the amount of coverage which such counsel believes to be
      probable under those policies for current and future asbestos-related injury
      claims against us. Such legal counsel has provided us with its opinion of the
      minimum probable insurance coverage available to satisfy asbestos-related injury
      claims, which significantly exceeds our estimated $36 million future liability
      for such claims as of December 31, 2007. Accordingly, we have included
      $36,000,000 and $43,000,000 of such insurance coverage receivable as an asset
      on
      our 2007 and 2006 balance sheets, respectively.




17


On
      February 23, 2005 ACE Property & Casualty Company ("ACE"), Central National
      Insurance Company of Omaha ("Central National") and Industrial Underwriters
      Insurance Company ("Industrial"), which are all related entities, filed a
      declaratory relief lawsuit (“the ACE Lawsuit”) against Metalclad Insulation
      Corporation (“Metalclad”) and a number of Metalclad's other liability insurers,
      in the Superior Court of the State of California, County of Los Angeles. ACE,
      Central National and Industrial issued umbrella and excess policies to
      Metalclad, which has sought and obtained from the plaintiffs both defense and
      indemnity under these policies for the asbestos lawsuits brought against
      Metalclad during the last four to five years. The ACE Lawsuit seeks declarations
      regarding a variety of coverage issues, but is centrally focused on issues
      involving whether historical and currently pending asbestos lawsuits brought
      against Metalclad are subject to either an "aggregate" limits of liability
      or
      separate "per occurrence" limits of liability. Whether any particular asbestos
      lawsuit is properly classified as being subject to an aggregate limit of
      liability depends upon whether or not the suit falls within the "products"
      or
      "completed operations" hazards found in most of the liability policies issued
      to
      Metalclad. Resolution of these classification issues will determine if, as
      ACE
      and Central National allege, their policies are nearing exhaustion of their
      aggregate limits and whether or not other Metalclad insurers who previously
      asserted they no longer owed any coverage obligations to Metalclad because
      of
      the claimed exhaustion of their aggregate limits, in fact, owe Metalclad
      additional coverage obligations. The ACE Lawsuit also seeks to determine the
      effect of the settlement agreement between the Company and Allstate Insurance
      Company on the insurance obligations of various other insurers of Metalclad,
      and
      the effect of the “asbestos exclusion” in the Allstate policy. The ACE Lawsuit
      does not seek any monetary recovery from Metalclad. Nonetheless, we anticipate
      that we will incur attorneys fees and other associated litigation costs in
      defending the lawsuit and any counter claims made against us by any other
      insurers, and in prosecuting any claims we may seek to have adjudicated
      regarding our insurance coverage. In addition, the ACE Lawsuit may result in
      our
      incurring costs in connection with obligations we may have to indemnify Allstate
      under a settlement agreement (See “Item 1 – Description of Business – Insurance
      and
      Bonding – Insurance Policy Settlement”). Allstate, in a cross-complaint filed
      against Metalclad Insulation Corporation in October, 2005, asked the court
      to
      determine the Company’s obligation to assume and pay for the defense of Allstate
      in the ACE Lawsuit under the Company’s indemnification obligations in the
      settlement agreement. The Company does not believe that it has any legal
      obligation to assume or pay for such defense.





In
      2003
      and 2004 the Judiciary Committee of the United States Senate considered
      legislation to create a privately funded, publicly administered fund to provide
      the necessary resources for an asbestos injury claims resolution program, and
      is
      commonly referred to as the “FAIR” Act. In 2005, a draft of the “FAIR” Act was
      approved by the Judiciary Committee, but the bill was rejected by the full
      Senate in February 2006, when a cloture motion on the bill was withdrawn. An
      amended version of the 2006 “FAIR” Act (S 3274) was introduced in the Senate in
      May 2006, but has not been scheduled for a vote. A similar bill was introduced
      in the House (HR 1360) in March 2005, but was referred to a subcommittee in
      May
      2005. The latest draft of the “FAIR” Act calls for the fund to be funded
      partially by asbestos defendant companies, of which the Company is one, and
      partially by insurance companies. The bill could be voted on by the Senate
      or
      the House at any time in the future. The impact, if any, the “FAIR” Act will
      have on us if passed cannot be determined at this time although the latest
      draft
      of the legislation did not appear favorable to us.





The
      following summarizes our contractual obligations at December 31, 2007. The
      long-term debt consists of various notes payable to a finance company for
      vehicles used in the ordinary course of the Company’s insulation business (See
      Note 9).




Total
              
              1 Year or Less
              
              1-3 Years
              
              4-5 Years
              
              Over 5 YearsLong-term
                  debt
              
              $
              245,470
              
              $
              113,000
              
              $
              132,470
              
              $
              -
              
              $
              -Non-cancelable
                  leases
              
              
              865,224
              
              
              162,972
              
              
              518,832
              
              
              183,420
              
              
              -Estimated
                  interest payments
              
              
              5,488
              
              
              3,208
              
              
              2,280
              
              
              -
              
              
              -Total
              
              $
              1,116,182
              
              $
              279,180
              
              $
              653,582
              
              $
              183,420
              
              $
              -




During
      2007 and 2006, we did not pay or declare any cash dividends and do not intend
      to
      pay any cash dividends in the near future.


18




The
      Company projects that cash flow generated through the operations of its
      subsidiary, Metalclad Insulation Corporation, and the Company’s cash balance at
      December 31, 2007, will be sufficient to meet the Company’s cash requirements
      for at least the next twelve months.





**Impact
      of Inflation**





We
      reflect price escalations in our quotations to our insulation customers and
      in
      the estimation of costs for materials and labor. For construction contracts
      based on a cost-plus or time-and-materials basis, the effect of inflation on
      us
      is negligible. For projects on a fixed-price basis, the effect of inflation
      may
      result in reduced profit margin or a loss as a result of higher costs to us
      as
      the contracts are completed; however, the majority of our contracts are
      completed within 12 months of their commencement and we believe that the impact
      of inflation on such contracts is insignificant.





**Significant
      Accounting Policies**





Our
      critical accounting policies are those both having the most impact to the
      reporting of our financial condition and results, and requiring significant
      judgments and estimates. Our critical accounting policies include those related
      to (a) revenue recognition, (b) investments in unconsolidated affiliates, (c)
      allowances for uncollectible notes and accounts receivable, (d) judgments and
      estimates used in determining the need for an accrual, and the amount, of our
      asbestos liability, and (e) evaluation and estimates of our probable insurance
      coverage for asbestos-related claims. Revenue recognition for fixed price
      insulation installation and asbestos abatement contracts are accounted for
      by
      the percentage-of-completion method, wherein costs and estimated earnings are
      included in revenues as the work is performed. If a loss on a fixed price
      contract is indicated, the entire amount of the estimated loss is accrued when
      known. Revenue recognition on time and material contracts is recognized based
      upon the amount of work performed. We have made investments in companies which
      can still be considered to be in the startup or development stages. We monitor
      these investments for impairment considering factors such as the severity and
      duration of any decline in fair value, our ability and intent to retain our
      investment for a period of time sufficient to allow for a recovery of market
      value and based on the financial condition and near-term prospects of these
      companies. We make appropriate reductions in carrying values if we determine
      an
      impairment charge is required. These investments are inherently risky, as the
      markets for the technologies or products these companies are developing are
      typically in the early stages and may never materialize. Notes and accounts
      receivable are reduced by an allowance for amounts that may become uncollectible
      in the future. The estimated allowance for uncollectible amounts is based
      primarily on our evaluation of the financial condition of the noteholder or
      customer. Future changes in the financial condition of a note payee or customer
      may require an adjustment to the allowance for uncollectible notes and accounts
      receivable. We have estimated the probable amount of future claims related
      to
      our asbestos liability and the probable amount of insurance coverage related
      to
      those claims. We offset proceeds received from our insurance carriers resulting
      from claims of personal injury allegedly related to asbestos exposure against
      the payment issued to the plaintiff. The cash from the insurance company goes
      directly to the plaintiff, so we never have access to this cash. We never have
      control over any of the funds the insurance company issues to the plaintiff.
      Once a claim is settled, payment of the claim is normally made by the insurance
      carrier or carriers within 30 to 60 days. Changes in any of the judgments and
      estimates could have a material impact on our financial condition and results
      of
      operations.





**New
      Accounting Pronouncements**





In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
      No.
      157 defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements, the FASB having previously
      concluded in those accounting pronouncements that fair value is the relevant
      measurement attribute. Accordingly, SFAS No. 157 does not require any new fair
      value measurements. SFAS No. 157 is effective for fiscal years beginning after
      December 15, 2007. We are evaluating the impact, if any, that the adoption
      of
      SFAS No. 157 will have on our financial statements.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159 (SFAS 159), "The Fair Value Option for Financial Assets and Financial
      Liabilities". SFAS 159 permits entities to choose to measure certain financial
      instruments and certain other items at fair value. Unrealized gains and losses
      on items for which the fair value option has been elected are reported in
      earnings. SFAS 159 is effective for fiscal years beginning after November 15,
      2007. The Company does not expect to elect to apply SFAS 159 to its financial
      assets and liabilities. Therefore, SFAS 159 is expected to have no impact on
      the
      Company's financial position and results of operations.


19





Effective
      January 1, 2007, the Company adopted FASB Interpretation (FIN) No. 48 (FIN
      No.
      48), “Accounting for Uncertainty in Income Taxes”. The adoption of FIN No. 48
      had no material impact on the financial position or results of operations for
      the year ended December 31, 2007.





In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS
      141(R) requires the acquiring entity in a business combination to record all
      assets acquired and liabilities assumed at their respective acquisition-date
      fair values and changes other practices under SFAS No. 141, Business
      Combinations, some of which could have a material impact on how an entity
      accounts for its business combinations. SFAS 141(R) also requires additional
      disclosure of information surrounding a business combination. SFAS 141(R) is
      effective for fiscal years beginning after December 15, 2008, and is to be
      applied prospectively to business combinations for which the acquisition date
      is
      on or after December 15, 2008. The provisions of SFAS 141(R) will only impact
      the Company if it is party to a business combination after the pronouncement
      has
      been adopted.




In
      December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in
      Consolidated Financial Statements - an amendment of ARB No. 51. SFAS 160
      requires entities to report non-controlling minority interests in subsidiaries
      as equity in consolidated financial statements. SFAS 160 is effective for fiscal
      years beginning on or after December 15, 2008. The Company does not believe
      that
      SFAS 160 will have any impact on its financial position or results of operations
      since none of its subsidiaries are owned by minority interests.


20





**Item
      7. FINANCIAL STATEMENTS**





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Shareholders, Audit Committee and Board of Directors


Entrx
      Corporation and subsidiaries


Minneapolis,
      Minnesota





We
      have
      audited the accompanying consolidated balance sheets of Entrx Corporation and
      subsidiaries as of December 31, 2007 and 2006, and the related consolidated
      statements of operations and comprehensive income, shareholders' equity and
      cash
      flows for the years then ended. These consolidated financial statements are
      the
      responsibility of the company's management. Our responsibility is to express
      an
      opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance with 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
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      its 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 consolidated financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management as well as evaluating the overall consolidated financial statement
      presentation. We believe that our audits provide a reasonable basis for our
      opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Entrx Corporation and
      subsidiaries as of December 31, 2007 and 2006 and the results of their
      operations and their cash flows for the years then ended, in conformity with
      U.S. generally accepted accounting principles.





/s/
      Virchow, Krause & Company, LLP





Minneapolis,
      Minnesota


March
      10,
      2008


21





**ENTRX
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**




December
                31,
              2007
            
            December
                31,
              2006**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            1,444,883
            
            $
            1,607,580Available-for-sale
                securities
            
            
            559,436
            
            
            99,094Accounts
                receivable, less allowance for doubtful accounts of $80,000 and $15,000
                as
                of December 31, 2007 and December 31, 2006, respectively
            
            
            5,466,889
            
            
            4,052,823Costs
                and estimated earnings in excess of billings on uncompleted
                contracts
            
            
            631,625
            
            
            364,981Inventories
            
            
            107,118
            
            
            27,763Prepaid
                expenses and other current assets
            
            
            273,156
            
            
            191,309Insurance
                claims receivable
            
            
            7,000,000
            
            
            8,000,000Shareholder
                note receivable, net of allowance of $1,356,000 and $1,286,000 as
                of
                December 31, 2007 and 2006, respectively
            
            
            25,000
            
            
            210,000Other
                receivables
            
            
            180,015
            
            
            374,175Total
                current assets
            
            
            15,688,122
            
            
            14,927,725Property,
                plant and equipment, net
            
            
            366,954
            
            
            331,041Investments
                in unconsolidated affiliates
            
            
            450,000
            
            
            1,206,889Insurance
                claims receivable
            
            
            29,000,000
            
            
            35,000,000Other
                assets
            
            
            193,540
            
            
            201,560Total
                Assets
            
            $
            45,698,616
            
            $
            51,667,215**LIABILITIES
                AND SHAREHOLDERS’ EQUITY**Current
                liabilities:Current
                portion of long-term debt
            
            $
            113,000
            
            $
            89,327Accounts
                payable
            
            
            1,251,423
            
            
            946,417Accrued
                expenses
            
            
            1,859,048
            
            
            1,486,082Reserve
                for asbestos liability claims
            
            
            7,000,000
            
            
            8,000,000Billings
                in excess of costs and estimated earnings on uncompleted
                contracts
            
            
            62,394
            
            
            106,353Total
                current liabilities
            
            
            10,285,865
            
            
            10,628,179Long-term
                debt, less current portion
            
            
            132,470
            
            
            67,762Reserve
                for asbestos liability claims
            
            
            29,000,000
            
            
            35,000,000Total
                liabilities
            
            
            39,418,335
            
            
            45,695,941Commitments
                and contingenciesShareholders’
                equity:Preferred
                stock, par value $1; 5,000,000 shares authorized; none
                issued
            
            
            -
            
            
            -Common
                stock, par value $0.10; 80,000,000 shares authorized; 7,616,147 issued
                and
                outstanding at December 31, 2007 and 8,455,947 and 8,001,147 issued
                and
                outstanding, respectively, at December 31, 2006
            
            
            807,095
            
            
            845,595Additional
                paid-in capital
            
            
            69,821,881
            
            
            70,260,746Less
                treasury stock at cost, 454,800 shares at December 31,
                2006
            
            
            -
            
            
            (380,765
            )Accumulated
                deficit
            
            
            (64,132,186
            )
            
            (64,754,302
            )Accumulated
                other comprehensive loss
            
            
            (216,509
            )
            
            -Total
                shareholders’ equity
            
            
            6,280,281
            
            
            5,971,274Total
                Liabilities and Shareholders’ Equity
            
            $
            45,698,616
            
            $
            51,667,215





See
      Notes
      to Consolidated Financial Statements


22


**ENTRX
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME**


Year
                  Ended December 31,2007
              
              2006Contract
                  revenues
              
              $
              22,358,764
              
              $
              19,517,250Contract
                  costs and expenses
              
              
              18,352,750
              
              
              16,638,105Gross
                  margin
              
              
              4,006,014
              
              
              2,879,145Operating
                  expenses:Selling,
                  general and administrative
              
              
              3,290,670
              
              
              2,400,799Change
                  in allowance on shareholder note receivable
              
              
              70,000
              
              
              1,083,885Gain
                  on disposal of property, plant and equipment
              
              
              (6,957
              )
              
              (1,294
              )Total
                  operating expenses
              
              
              3,353,713
              
              
              3,483,390Operating
                  income (loss)
              
              
              652,301
              
              
              (604,245
              )Interest
                  income
              
              
              59,720
              
              
              104,882Interest
                  expense
              
              
              (9,867
              )
              
              (107,150
              )Gain
                  on sale of building, land and building improvements
              
              
              -
              
              
              1,724,980Other
                  income - settlements
              
              
              -
              
              
              1,025,000Impairment
                  charge on available-for-sale securities
              
              
              (80,038
              )
              
              (91,472
              )Net
                  income
              
              
              622,116
              
              
              2,051,995Other
                  comprehensive lossUnrealized
                  losses on available-for-sale securities
              
              
              (216,509
              )
              
              -Comprehensive
                  income
              
              $
              405,607
              
              $
              2,051,995Weighted
                  average number of common shares — basic and diluted
              
              
              7,721,065
              
              
              7,979,640Net
                  income per common share — basic and diluted
              
              $
              0.08
              
              $
              0.26





See
      Notes
      to Consolidated Financial Statements


23


**ENTRX
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY**





Years
      Ended December 31, 2007 and 2006


Common
                  Stock
              
              Additional
                Paid-in
              
              Treasury
                  Stock
              
              Accumulated
              
              Accumulated
                Other
                Comprehensive
              
              Total
                  Shareholders’Shares
              
              Amounts
              
              Capital
              
              Shares
              
              Amounts
              
              Deficit
              
              Income
                  (loss)
              
              EquityBalance
                  at December 31, 2005
              
              
              7,951,147
              
              $
              840,595
              
              $
              70,257,746
              
              
              454,800
              
              $
              (380,765
              )
              $
              (66,806,297
              )
              $
              (47,641
              )
              $
              3,863,638Reclassification
                  adjustment for losses recognized in net income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              47,641
              
              
              47,641Common
                  stock issued in exchange for services
              
              
              50,000
              
              
              5,000
              
              
              3,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              8,000Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,051,995
              
              
              -
              
              
              2,051,995Balance
                  at December 31, 2006
              
              
              8,001,147
              
              
              845,595
              
              
              70,260,746
              
              
              454,800
              
              
              (380,765
              )
              
              (64,754,302
              )
              
              -
              
              
              5,971,274Unrealized
                  loss on available-for-sale securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (216,509
              )
              
              (216,509
              )Common
                  stock issued in exchange for services
              
              
              115,000
              
              
              11,500
              
              
              6,900
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              18,400Cancellation
                  of treasury stock
              
              
              -
              
              
              -
              
              
              (380,765
              )
              
              (454,800
              )
              
              380,765
              
              
              -
              
              
              -
              
              
              -Cancellation
                  of common stock held as collateral on shareholder note
                  receivable
              
              
              (500,000
              )
              
              (50,000
              )
              
              (65,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (115,000
              )Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              622,116
              
              
              -
              
              
              622,116Balance
                  at December 31, 2007
              
              
              7,616,147
              
              $
              807,095
              
              $
              69,821,881
              
              
              -
              
              $
              -
              
              $
              (64,132,186
              )
              $
              (216,509
              )
              $
              6,280,281




See
      Notes
      to Consolidated Financial Statements


24


**ENTRX
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





Year
                Ended December 31,2007
            
            2006Cash
                flows from operating activities:Net
                income
            
            $
            622,116
            
            $
            2,051,995Adjustments
                to reconcile net income to net cash provided by (usedin)
                operating activities:Depreciation
                and amortization
            
            
            198,239
            
            
            171,768Gain
                on disposal of property, plant and equipment
            
            
            (6,957
            )
            
            (1,726,274
            )Impairment
                charge on investments
            
            
            80,038
            
            
            91,472Change
                in allowance for doubtful accounts
            
            
            65,000
            
            
            4,388Allowance
                on shareholder note receivable
            
            
            70,000
            
            
            1,036,370Net
                interest income recorded on shareholder note receivable
            
            
            -
            
            
            42,513Common
                stock issued for services
            
            
            18,400
            
            
            8,000Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            (1,479,066
            )
            
            (1,140,706
            )Costs
                and estimated earnings in excess of billings on uncompleted
                contracts
            
            
            (266,644
            )
            
            (171,750
            )Inventories
            
            
            (79,355
            )
            
            107,628Prepaid
                expenses and other current assets
            
            
            (81,847
            )
            
            52,055Other
                receivables
            
            
            194,160
            
            
            123,448Other
                assets
            
            
            8,020
            
            
            (125,964
            )Accounts
                payable and accrued expenses
            
            
            677,972
            
            
            (8,165
            )Billings
                in excess of costs and estimated earnings on uncompleted
                contracts
            
            
            (43,959
            )
            
            (70,288
            )Net
                cash (used in) provided by operating activities
            
            
            (23,883
            )
            
            446,490Cash
                flows from investing activities:Capital
                expenditures
            
            
            (63,919
            )
            
            (171,199
            )Proceeds
                from sale of property, plant and equipment, net of
                expenses
            
            
            38,800
            
            
            3,737,621Net
                cash (used in) provided by investing activities
            
            
            (25,119
            )
            
            3,566,422Cash
                flows from financing activities:Proceeds
                from long-term debt
            
            
            -
            
            
            114,178Payments
                on note payable to bank
            
            
            -
            
            
            (775,000
            )Payments
                on long-term debt
            
            
            (113,695
            )
            
            (102,258
            )Payments
                on note payable
            
            
            -
            
            
            (554,969
            )Payments
                on mortgage payable
            
            
            -
            
            
            (1,500,678
            )Net
                cash provided by (used in) financing activities
            
            
            (113,695
            )
            
            (2,818,727
            )Increase
                (decrease) in cash and cash equivalents
            
            
            (162,697
            )
            
            1,194,185Cash
                and cash equivalents at beginning of year
            
            
            1,607,580
            
            
            413,395Cash
                and cash equivalents at end of year
            
            $
            1,444,883
            
            $
            1,607,580


Non-cash
                investing and financing activities:Acquisition
                  of property, plant and equipmentin exchange for notes
                  payable
            
            $
            202,076
            
            $
            -


See
      Notes
      to Consolidated Financial Statements


25


**ENTRX
      CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**




**NOTE
      1 –
      DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
      POLICIES**





**Description
      of Business**





Entrx
      Corporation (the “Company”) is engaged in insulation services, including
      asbestos abatement and material sales, to customers primarily in California
      (the
“Insulation Business”).





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of the Company, its
      wholly-owned and majority-owned subsidiaries, and the accounts of
      Curtom-Metalclad pursuant to Financial Accounting Standards Board (FASB)
      Interpretation 46R, “Consolidation of Variable Interest Entities” (see Note 2).
      Significant intercompany accounts and transactions have been eliminated in
      consolidation.





**Cash
      and Cash Equivalents**





The
      Company considers all highly liquid investments with original maturities of
      three months or less to be cash equivalents. The carrying amount approximates
      fair value because of the short maturity of those instruments. The Company
      deposits its cash in high credit quality financial institutions. The balances,
      at times, may exceed federally insured limits.





**Investments**





Investments
      held by the Company are classified as available-for-sale securities.
      Available-for-sale securities are reported at fair value with all unrealized
      gains or losses included in other comprehensive income. The fair value of the
      securities was determined by quoted market prices of the underlying security.
      For purposes of determining gross realized gains, the cost of available-for-sale
      securities is based on specific identification.




Aggregate
                fair
              value
            
            Gross unrealized
              gains
            
            Gross unrealizedlosses
            
            CostAvailable
                for sale securities –
                December
                31, 2007
            
            $
            559,436
            
            $
            -
            
            $
            216,509
            
            $
            775,945Available
                for sale securities – December 31, 2006
            
            $
            99,094
            
            $
            -
            
            $
            -
            
            $
            99,094





The
      Company's net unrealized holding loss was $216,509 and $0 for the years ended
      December 31, 2007 and 2006, respectively.





On
      an
      ongoing basis, the Company evaluates its investments in available-for-sale
      securities to determine if a decline in fair value is other-than-temporary.
      When
      a decline in fair value is determined to be other-than-temporary, an impairment
      charge is recorded and a new cost basis in the investment is established. Considering
      the severity and duration of the decline in fair value and the financial
      condition and near-term prospects of one of our investments, we recognized
      an
      other than temporary impairment charge in the amount of $80,038 during the
      year
      ended December 31, 2007.





The
      following table shows the gross unrealized losses and fair value of the
      Company's investments with unrealized losses that are not deemed to be
      other-than-temporarily impaired, aggregated by investment category and length
      of
      time that individual securities have been in a continuous unrealized loss
      position, at December 31, 2007.


26








Less
                than 12 Months
            
            12
                Months or Greater
            
            
            
            TotalDescription
                of
              Securities
            
            Fair
                Value
            
            Unrealized
                Losses
            
            Fair
                Value
            
            Unrealized
                Losses
            
            Fair
                Value
            
            Unrealized
              LossesMarketable
                equity securities
            
            $
            559,436
            
            $
            (216,509
            )
            $
            -
            
            $
            -
            
            $
            559,436
            
            $
            (216,509
            )Total
            
            $
            559,436
            
            $
            (216,509
            )
            $
            -
            
            $
            -
            
            $
            559,436
            
            $
            (216,509
            )




The
      Company also has a minority investment in a company. This investment is included
      in investments in unconsolidated affiliates on the Consolidated Balance Sheets
      and is carried at cost unless the fair value of the investment below the cost
      basis is judged to be other-than-temporary. The Company monitors this investment
      for impairment on an ongoing basis (see Note 5).





**Accounts
      Receivable**





The
      Company reviews customers’ credit history before extending unsecured credit and
      establishes an allowance for doubtful accounts based upon factors surrounding
      the credit risk of specific customers and other information. Invoices are
      generally issued with net 30 day terms. Accounts receivable over 30 days are
      considered past due. The Company does not accrue interest on past due accounts
      receivable. Accounts receivable are uncollateralized customer obligations
      resulting from the performance of construction contracts and time and material
      projects. Balances are based on terms of the contract or invoice amount. The
      Company follows the practice of filing liens on construction projects where
      collection problems are anticipated. The liens serve as collateral on the
      associated receivable. Receivables are written-off only after all collection
      attempts have failed and are based on individual credit evaluation and specific
      circumstances of the customer.





**Financial
      Instruments**





The
      carrying amounts for all financial instruments approximate fair value. The
      carrying amounts for cash and cash equivalents, accounts receivable, accounts
      payable and accrued expenses approximate fair value because of the short
      maturity of these instruments. The fair value of the Company’s long-term debt
      approximates the carrying amount based upon the Company's expected borrowing
      rate for debt with similar remaining maturities and comparable
      risk.





**Inventories**





Inventories,
      which consist principally of insulation products and related materials, are
      stated at the lower of cost (determined on the first-in, first-out method)
      or
      market.





**Depreciation
      and Amortization**





Property,
      plant and equipment are stated at cost. Depreciation and amortization is
      computed using the straight-line method over the estimated useful lives of
      related assets which range from three to five years for machinery and equipment.
      Maintenance, repairs and minor renewals are expensed when incurred.





**Advertising
      Costs**





Advertising
      costs are expensed as incurred. Advertising costs totaled approximately $15,265
      and $684 for the years ended December 31, 2007 and 2006,
      respectively.


27





**Revenue
      Recognition**





Fixed
      price insulation installation and asbestos abatement contracts are accounted
      for
      by the percentage-of-completion method wherein costs and estimated earnings
      are
      included in revenues as the work is performed. If a loss on a fixed price
      contract is indicated, the entire amount of the estimated loss is accrued when
      known. Time and material contracts are accounted for under a cost plus fee
      basis. Retentions by customers under contract terms are due at contract
      completion. The Company did not have any claims revenue during the years ended
      December 31, 2007 and 2006.





The
      Company has both one and multi-year maintenance contracts. These contracts
      are
      billed monthly for the amount of work performed (time and materials with pre
      approval daily by the customer) and revenue is recognized
      accordingly.





**Income/Loss
      Per Share**





The
      Company computes income (loss) per share in accordance with Statement of
      Financial Accounting Standards (“SFAS”) 128, “Earnings Per Share”. This
      statement requires the presentation of both basic and diluted net income (loss)
      per share for financial statement purposes. Basic net income (loss) per share
      is
      computed by dividing the net income (loss) available to common shareholders
      by
      the weighted average number of common shares outstanding. Diluted net income
      (loss) per share includes the effect of the potential shares outstanding,
      including dilutive stock options and warrants using the treasury stock method.
      Options and warrants totaling 2,291,630 and 2,295,710 shares were excluded
      from
      the computation of diluted earnings per share for the years ended December
      31,
      2007 and 2006, respectively, as their exercise price exceeded the average market
      price of the Company’s common stock. Following is a reconciliation of basic and
      diluted net income (loss) per share:




2007
            
            2006Basic
                net income per common shareNet
                income
            
            $
            622,116
            
            $
            2,051,995Weighted
                average shares outstanding
            
            
            7,721,065
            
            
            7,979,640Basic
                net income per common share
            
            $
            0.08
            
            $
            0.26Diluted
                net income per common shareNet
                income
            
            $
            622,116
            
            $
            2,051,995Weighted
                average shares outstanding
            
            
            7,721,065
            
            
            7,979,640Effect
                of dilutive securities
            
            
            -
            
            
            -Weighted
                average shares outstanding
            
            
            7,721,065
            
            
            7,979,640Diluted
                net income per common share
            
            $
            0.08
            
            $
            0.26




**Legal
      Costs**





The
      Company expenses its legal costs as incurred.





**Stock-Based
      Compensation**





On
      December 16, 2004, the Financial Accounting Standards Board, or FASB, issued
      SFAS No. 123(R), “Share-Based Payment”, which is a revision of SFAS No. 123 and
      supersedes APB Opinion No. 25. SFAS No. 123 (R) requires all share-based
      payments to employees, including grants of employee stock options, to be valued
      at fair value on the date of grant, and to be expensed over the applicable
      vesting period. Pro forma disclosure of the income statement effects of
      share-based payments is no longer an alternative. In addition, companies must
      also recognize compensation expense related to any awards that are not fully
      vested as of the effective date. Compensation expense for the unvested awards
      will be measured based on the fair value of the awards previously calculated
      in
      developing the pro forma disclosures in accordance with the provisions of SFAS
      No. 123. We implemented SFAS No. 123(R) on January 1, 2006 using the modified
      prospective method. SFAS 123(R) did not have an impact on the Company’s
      consolidated financial statements since all of the Company’s outstanding stock
      options were fully vested at December 31, 2005 and no additional options were
      granted through December 31, 2007.


28


**Concentration
      of Credit Risk**





Financial
      instruments that potentially subject the Company to credit risk consist
      principally of cash and contract receivables. Contract receivables are
      concentrated primarily with refineries and utility companies located in Southern
      California. Historically, the Company’s credit losses have been
      insignificant.





**Income
      Taxes**





Deferred
      taxes are provided using the asset and liability method whereby deferred tax
      assets are recognized for deductible temporary differences and operating loss
      and tax credit carry forwards and deferred tax liabilities are recognized for
      taxable temporary differences. Temporary differences are the differences between
      the reported amounts of assets and liabilities and their tax bases. 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 all of the tax assets will
      not
      be realized. Deferred tax assets and liabilities are adjusted for the effects
      of
      changes in tax laws and rates on the date of enactment.





**Comprehensive
      Income**





SFAS
      130,
“Reporting Comprehensive Income” establishes rules for the reporting of
      comprehensive income (loss) and its components. Comprehensive income (loss)
      consists of net income (loss), and unrealized gains (losses) on
      available-for-sale securities. During the years ended December 31, 2007 and
      2006, the Company recorded other comprehensive loss of $216,509 and $0,
      respectively, for unrealized losses on available-for-sale securities (net of
      reclassification adjustment of $47,641 for the year ended December 31, 2006).
      Since the Company has various net operating loss carry forwards, the amounts
      related to other comprehensive income (loss) for all periods presented are
      shown
      without any income tax provision or benefit.





**New
      Accounting Pronouncements**





In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
      No.
      157 defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements, the FASB having previously
      concluded in those accounting pronouncements that fair value is the relevant
      measurement attribute. Accordingly, SFAS No. 157 does not require any new fair
      value measurements. SFAS No. 157 is effective for fiscal years beginning after
      December 15, 2007. We are evaluating the impact, if any, that the adoption
      of
      SFAS No. 157 will have on our financial statements.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159 (SFAS 159), "The Fair Value Option for Financial Assets and Financial
      Liabilities". SFAS 159 permits entities to choose to measure certain financial
      instruments and certain other items at fair value. Unrealized gains and losses
      on items for which the fair value option has been elected are reported in
      earnings. SFAS 159 is effective for fiscal years beginning after November 15,
      2007. The Company does not expect to elect to apply SFAS 159 to its financial
      assets and liabilities. Therefore, SFAS 159 is expected to have no impact on
      the
      Company's financial position and results of operations.





Effective
      January 1, 2007, the Company adopted FASB Interpretation (FIN) No. 48 (FIN
      No.
      48), “Accounting for Uncertainty in Income Taxes”. The adoption of FIN No. 48
      had no material impact on the financial position or results of operations for
      the year ended December 31, 2007.




29




In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS
      141(R) requires the acquiring entity in a business combination to record all
      assets acquired and liabilities assumed at their respective acquisition-date
      fair values and changes other practices under SFAS No. 141, Business
      Combinations, some of which could have a material impact on how an entity
      accounts for its business combinations. SFAS 141(R) also requires additional
      disclosure of information surrounding a business combination. SFAS 141(R) is
      effective for fiscal years beginning after December 15, 2008, and is to be
      applied prospectively to business combinations for which the acquisition date
      is
      on or after December 15, 2008. The provisions of SFAS 141(R) will only impact
      the Company if it is party to a business combination after the pronouncement
      has
      been adopted.





In
      December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in
      Consolidated Financial Statements - an amendment of ARB No. 51. SFAS 160
      requires entities to report non-controlling minority interests in subsidiaries
      as equity in consolidated financial statements. SFAS 160 is effective for fiscal
      years beginning on or after December 15, 2008. The Company does not believe
      that
      SFAS 160 will have any impact on its financial position or results of operations
      since none of its subsidiaries are owned by minority interests.





**Use
      of Estimates**





The
      preparation of 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 disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





**Accounting
      for the Impairment of Long-Lived Assets**





The
      Company reviews long-lived assets for impairment whenever events or changes
      in
      business circumstances indicate that the carrying amount of an asset may not
      be
      fully recoverable. An impairment loss would be recognized when the estimated
      future cash flows from the use of the asset are less than the carrying amount
      of
      that asset.




**NOTE
      2 – CURTOM-METALCLAD**





In
      1989,
      the Company entered into a joint venture with a minority service firm
      ("Curtom-Metalclad") to perform industrial insulation and industrial asbestos
      abatement services similar to those performed by the Company. When contracts
      are
      obtained by the joint venture, the Company performs the work specified in the
      contract as a subcontractor to the joint venture. The joint venture agreement
      provides that Curtom-Metalclad receives approximately 2.5% of contract revenues.





Curtom-Metalclad
      is considered by us to be a Variable Interest Entity (VIE) and, as such, the
      Company consolidates Curtom-Metalclad since we consider the Company to be the
      primary beneficiary. At December 31, 2007, Curtom-Metalclad had assets of
      $14,000 (all cash) and partners’ equity of $14,000. Curtom-Metalclad did not
      have any liabilities at December 31, 2007.





30




**NOTE
      3 – ACCOUNTS RECEIVABLE**





Accounts
      receivable consisted of the following at December 31:




2007
            
            2006BilledCompleted
                contracts
            
            $
            1,441,653
            
            $
            655,623Contracts
                in process
            
            
            466,590
            
            
            703,850Time
                and material work
            
            
            3,555,965
            
            
            2,421,061Material
                sales
            
            
            3,765
            
            
            8,784Unbilled
                retainage
            
            
            78,916
            
            
            278,5055,546,889
            
            
            4,067,823Less:
                Allowance for doubtful accounts
            
            
            (80,000
            )
            
            (15,000
            )$
            5,466,889
            
            $
            4,052,823





**NOTE
      4 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED
      CONTRACTS**





Costs
      and
      estimated earnings on uncompleted contracts consisted of the following at
      December 31:




2007
            
            2006Costs
                incurred on uncompleted contracts
            
            $
            8,407,635
            
            $
            9,963,088Estimated
                earnings (loss)
            
            
            2,008,008
            
            
            (23,431
            )10,415,643
            
            
            9,939,657Less
                billings to date
            
            
            (9,846,412
            )
            
            (9,681,029
            )$
            569,231
            
            $
            258,628




The
      above
      information is presented in the balance sheet as follows:





2007
            
            2006Costs
                and estimated earnings in excess of billings on uncompleted
                contracts
            
            $
            631,625
            
            $
            364,981Billings
                in excess of costs and estimated earnings on uncompleted
                contracts
            
            
            (62,394
            )
            
            (106,353
            )$
            569,231
            
            $
            258,628




**NOTE
      5 - INVESTMENTS IN UNCONSOLIDATED AFFILIATES**




The
      Company owns 384,084 shares of the common stock of Catalytic Solutions, Inc.
      (“Catalytic Solutions”). Catalytic Solutions is a materials science technology
      company focused on applying its technology to improve the performance and reduce
      the cost of automotive catalytic converters. In November 2006, the common stock
      of Catalytic Solutions began trading on the AIM market in London, England.
      The
      Company has determined that the AIM market is not of the breadth and scope
      of
      the United States markets and therefore a fair market value for the investment
      is not readily determinable as required by FAS 115. Due to the lack of a readily
      determinable fair market value, the Company has continued to carry the
      investment at cost as an investment in an unconsolidated affiliate. In
      evaluating the carrying value of our investment in Catalytic we consider whether
      there has been an “impairment indicator” as discussed in Emerging Issues Task
      Force 03-1 “The Meaning of Other-Than-Temporary Impairment and its Application
      to Certain Investments”. We determined that there had not been an impairment
      indicator during the years ended December 31, 2007 and 2006.




31




The
      Company’s investment in Clearwire Corporation was previously accounted for under
      the cost method, and was reclassified to available-for-sale securities upon
      Clearwire’s initial public offering in the first quarter of 2007.





The
      Company’s investments in unconsolidated affiliates consisted of the
      following:




December
                31,2007
            
            2006Clearwire
                Corporation
            
            $
            -
            
            $
            756,889Catalytic
                Solutions, Inc.
            
            
            450,000
            
            
            450,000$
            450,000
            
            $
            1,206,889




**NOTE
      6 - PROPERTY, PLANT AND EQUIPMENT**





Property,
      plant and equipment consist of the following:




December
                31,2007
            
            2006Machinery
                and equipment
            
            $
            539,519
            
            $
            515,170Leasehold
                improvements
            
            
            35,073
            
            
            32,092Automotive
                equipment
            
            
            619,411
            
            
            498,4141,194,003
            
            
            1,045,676Less
                accumulated depreciationand
                amortization
            
            
            (827,049
            )
            
            (714,635
            )$
            366,954
            
            $
            331,041





Depreciation
      and amortization expense for the years ended December 31, 2007 and 2006 was
      $198,239 and $171,768, respectively.




**NOTE
      7 – SALE OF FACILITIES**





The
      Company signed an agreement in December 2005 to sell its facilities in Anaheim,
      California for $3,900,000. The sale of the building was completed in April
      2006
      and the Company recorded a gain on the sale of $1,725,000.




**NOTE
      8 – ACCRUED EXPENSES**





Accrued
      expenses consist of the following:




December
                31,2007
            
            2006Wages,
                bonuses and taxes
            
            $
            677,096
            
            $
            374,449Union
                dues
            
            
            462,483
            
            
            261,022Accounting
                and legal fees
            
            
            42,000
            
            
            31,877Insurance
            
            
            61,147
            
            
            158,094Insurance
                settlement reserve
            
            
            375,000
            
            
            375,000Inventory
                purchases
            
            
            44,871
            
            
            55,133Other
            
            
            196,451
            
            
            230,507$
            1,859,048
            
            $
            1,486,082




32




**NOTE
      9 – LONG-TERM DEBT**





Long-term
      debt consists of various notes payable to finance companies for vehicles used
      in
      the ordinary course of the Company’s insulation business. The notes are
      collateralized by the vehicles and bear interest at rates ranging from 0% to
      8.99% for a period of 36 months with the last payment due in 2010. Principal
      maturities over the next five years are as follows:





Year
                ending
              December
                31,2008
            
            $
            113,0002009
            
            
            89,0252010
            
            
            43,4452011
            
            
            -2012
            
            
            -Totals
            
            
            245,470Less
                current portion
            
            
            (113,000
            )Long-term
                portion
            
            $
            132,470




**NOTE
      10 - INCOME TAXES**





The
      major
      deferred tax items are as follows:





December
                31,2007
            
            2006Assets:Allowances
                established against realization of certain assets
            
            $
            1,344,000
            
            $
            1,280,000Net
                operating loss carryforwards
            
            
            12,145,000
            
            
            12,527,000Liabilities:Accrued
                liabilities and other
            
            
            (4,000
            )
            
            (20,000
            )13,485,000
            
            
            13,787,000Valuation
                allowance
            
            
            (13,485,000
            )
            
            (13,787,000
            )$
            -
            
            $
            -





The
      decrease in valuation allowance was $302,000 and $799,000 for the years ended
      December 31, 2007 and 2006, respectively.





Income
      tax computed at the U.S. federal statutory rate reconciled to the effective
      tax
      rate is as follows for the years ended December 31:





2007
            
            2006Federal
                statutory tax rate
            
            
            35.0
            %
            
            35.0
            %State
                tax, net of federal benefit
            
            
            5.0
            %
            
            5.0
            %Change
                in valuation allowance
            
            
            (44.6
            )%
            
            (40.9
            )%Permanent
                differences
            
            
            4.6
            %
            
            0.9
            %Effective
                tax rate
            
            
            0.0
            %
            
            0.0
            %




33




At
      December 31, 2007, the Company has available for U.S. federal income tax
      purposes net operating loss carry-forwards of approximately $30,363,000. These
      carryforwards expire in the years 2011 through 2025. The ultimate utilization
      of
      the net operating loss carryforwards may be limited in the future due to changes
      in the ownership of the Company. This limitation, if applicable, has not been
      determined by the Company.





The
      realization of the Company’s deferred tax assets is dependent upon the Company’s
      ability to generate taxable income in the future. The Company has recorded
      a
      100% valuation allowance against all of the deferred tax assets due to the
      uncertainty regarding their realizability.





The
      Company adopted FIN 48, Accounting for Uncertainty in Income Taxes - An
      Interpretation of FASB Statement No. 109 effective January 1, 2007. Upon
      adoption, the Company recognized no liability for unrecognized tax benefits.
      The
      Company’s tax returns are open to examination by tax authorities for the tax
      years 2004 through 2007. The Company has elected to recognize interest on tax
      deficiencies as interest expense and income tax penalties as selling, general
      and administrative expense. For the year ended December 31, 2007, the Company
      recognized no interest and penalties.




**NOTE
      11 - SHAREHOLDERS’ EQUITY**





**Stock
      Options**





On
      March
      24, 1993, the Company adopted an omnibus stock option plan (the “1993 Plan”)
      which authorized options to acquire 100,000 shares of the Company’s common
      stock. At December 31, 2007, there were options outstanding under the 1993
      Plan
      for 4,730 shares, and no shares available for grant. These options expire 10
      years from the date of the grant. Under the terms of the plan, the Board of
      Directors had the authority to grant options and other stock-based awards to
      key
      employees to purchase shares of the Company’s common stock. The options were
      exercisable at such times, in installments or otherwise, as the Board of
      Directors determined.





On
      May
      15, 1997, the Company adopted an omnibus stock option plan (the “1997 Plan”)
      which authorized options to acquire 600,000 shares of the Company’s common
      stock. At December 31, 2007, there were 450,000 options outstanding under this
      plan and 150,000 options available for grant. These options expire 10 years
      from
      the date of the grant. Under the terms of the plan, the Board of Directors
      may
      grant options and other stock-based awards to key employees to purchase shares
      of the Company’s common stock. The options are exercisable at such times, in
      installments or otherwise, as the Board of Directors may determine.





On
      November 20, 2001, the Company adopted an omnibus stock option plan (the “2000
      Plan”) which authorized options to acquire 2,000,000 shares of the Company’s
      stock. At December 31, 2007, there were options outstanding under the 2000
      Plan
      for 1,672,900 shares and 327,100 shares available for grant. These options
      expire 10 years from date of grant. The terms of the 2000 Plan are the same
      as
      the 1997 Plan. Under the terms of the plan, the stock option committee may
      grant
      options and other stock-based awards to key employees and members of the board
      of directors to purchase shares of the Company’s common stock. The options are
      exercisable at such times, in installments or otherwise, as the stock option
      committee may determine.





At
      December 31, 2007, there were options that were granted outside of the stock
      option plans outstanding to acquire 64,000 shares of the Company’s stock. The
      options are exercisable at $15.00 per share.





34




The
      following is a summary of options granted:


Year Ended December 31,2007
              
              2006Shares
              
              Weighted
                Average
                Exercise
                Price
              
              Shares
              
              Weighted
                Average
                Exercise
                PriceOptions
                  outstanding at beginning of the year
              
              
              2,195,710
              
              $
              2.61
              
              
              2,234,040
              
              $
              3.09Granted
              
              
              -
              
              
              -
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              -Canceled
              
              
              (4,080
              )
              
              14.08
              
              
              (38,330
              )
              
              30.55Options
                  outstanding at end of the year
              
              
              2,191,630
              
              $
              2.59
              
              
              2,195,710
              
              $
              2.61Options
                  Exercisable
              
              
              2,191,630
              
              $
              2.59
              
              
              2,195,710
              
              $
              2.61


There
      is
      no intrinsic value at December 31, 2007 for outstanding or exercisable
      options.


Options
                  Outstanding
              
              Options
                  ExercisableRange
                  of
                exercise
                  prices
              
              Number
                outstanding
                as
                  of 12/31/07
              
              Weighted
                average
                remaining
                contractual
                  life
                in
                  years
              
              Weighted
                Average
                exercise
                  price
              
              Number
                exercisable
                  as
                of
                  12/31/07
              
              Weighted
                Average
                exercise
                  price$0.50
              
              
              250,000
              
              
              1.89
              
              $
              0.50
              
              
              250,000
              
              $
              0.50$0.55
                  - $1.20
              
              
              209,500
              
              
              2.15
              
              $
              0.87
              
              
              209,500
              
              $
              0.87$2.00
              
              
              510,000
              
              
              3.44
              
              $
              2.00
              
              
              510,000
              
              $
              2.00$2.50
              
              
              283,400
              
              
              1.24
              
              $
              2.50
              
              
              283,400
              
              $
              2.50$3.00
              
              
              870,000
              
              
              2.39
              
              $
              3.00
              
              
              870,000
              
              $
              3.00$12.50
                  - $15.00
              
              
              68,730
              
              
              0.09
              
              $
              14.98
              
              
              68,730
              
              $
              14.98$0.50
                  - $15.00
              
              
              2,191,630
              
              
              2.33
              
              $
              2.59
              
              
              2,191,630
              
              $
              2.59




On
      November 7, 2002 the Company issued options to purchase a total of 75,000 shares
      of its available-for-sale securities holdings in VioQuest Pharmaceuticals,
      Inc.,
      to two former and one current members of the Company’s Board of Directors. The
      options, which are fully vested, have an exercise price of $1.25 per share
      and
      terminate on November 5, 2009.




**Stock
      Purchase Warrants**





In
      connection with various debt offerings, stock placements and services provided,
      the Company has issued various stock purchase warrants. All such warrants were
      issued at prices which approximated or exceeded fair market value of the
      Company’s common stock at the date of grant and are exercisable at various dates
      through July, 2009. At December 31, 2007 and 2006, the weighted average exercise
      price for warrants outstanding was $0.63.





35





Summarized
      information for stock purchase warrants is as follows:





Number
                of
              Warrants
            
            Price per shareWarrants
                outstanding at December 31, 2005
            
            
            775,000
            
            
            $0.50 - $1.50Cancelled
            
            
            (675,000
            )
            
            $1.50Warrants
                outstanding at December 31, 2006
            
            
            100,000
            
            
            $0.50 - $0.75Warrants
                outstanding at December 31, 2007
            
            
            100,000
            
            
            $0.50
                - $0.75




**Common
      Stock**





During
      the year ended December 31, 2006, the Company issued an aggregate of 50,000
      shares to four members of the Company’s board of directors and to the one member
      of Metalclad Insulation’s board of directors. The shares issued to the board
      members had a value of $8,000, based upon the market price at the date of
      issuance.





During
      the year ended December 31, 2007, the Company issued an aggregate of 115,000
      shares to four members of the Company’s board of directors and to the one member
      of Metalclad Insulation’s board of directors. The shares issued to the board
      members had a value of $18,400, based upon the market price at the date of
      issuance.




**NOTE
      12 - EMPLOYEE BENEFIT PLANS**





Effective
      January 1, 1990, the Company established a contributory profit sharing and
      thrift plan for all salaried employees. Discretionary matching contributions
      may
      be made by the Company based upon participant contributions, within limits
      provided for in the plan. No Company contributions were made in the years ended
      December 31, 2007 and 2006.





Additionally,
      the Company participates in several multi-employer plans, which provide defined
      benefits to union employees of its participating companies. The Company makes
      contributions determined in accordance with the provisions of negotiated labor
      contracts. Company contributions were $717,233 and $621,106 for the years ended
      December 31, 2007 and 2006, respectively.




**NOTE
      13 - SIGNIFICANT CUSTOMERS**





Sales
      for
      the year ended December 31, 2007 to Jacobs Field Services North America, Inc.
      were approximately $3,884,000, representing 17.4% of total revenues and to
      ARB,
      Inc. were approximately $4,008,000 representing 17.9% of total revenues.
      Accounts receivable from Southern California Edison Company was approximately
      $694,000, from ARB, Inc. was $1,516,000 and from Jacobs Field Services North
      America, Inc. was approximately $992,000 at December 31, 2007.





Sales
      for
      the year ended December 31, 2006 to Southern California Edison Company through
      our Curtom-Metalclad joint venture were approximately $2,967,000, representing
      15.2% of total revenues and to JE Merit Constructors, Inc. were approximately
      $3,367,000 representing 17.3% of total revenues. Accounts receivable from NRG
      was approximately $571,000 at December 31, 2006 and accounts receivable from
      JE
      Merit Constructors, Inc. was approximately $855,000.





It
      is the
      nature of the Company’s business that a significant customer in one year may not
      be a significant customer in a succeeding year.




36




**NOTE
      14 - COMMITMENTS AND CONTINGENCIES**





**Collective
      Bargaining Agreements**





Approximately
      90% of the Company’s employees are covered under collective Bargaining
      Agreements. In August, 2004 a new “Basic Agreement” was signed with Local No. 5
      of the International Association of Heat and Frost Insulators and Asbestos
      Workers that expires in September 2008. The new “Basic Agreement” included a
“Maintenance Agreement” as an addendum. Approximately 95% of the Company’s
      hourly employees are covered by the Local No. 5 agreement. An agreement with
      the
      Laborers Local 300 was signed in January 2007 and expires in December 2009.
      Approximately 5% of the Company’s hourly employees are covered by the Labors
      Local 300 agreement.





**Leases**





In
      February 2002, the headquarters of the Company was moved to Minneapolis,
      Minnesota. The Company is leasing the Minneapolis facility on a month-to-month
      basis.





Due
      to
      the sale of the Company’s facilities in Anaheim, California on April 20, 2006,
      the Company leased the facilities back for eight months at a market rate of
      $21,800 per month. In December 2006 our wholly owned subsidiary, Metalclad
      Insulation Corporation, executed a lease for a facility in Fullerton,
      California. The Company has leased this facility through December 31, 2011
      at a
      rate of $13,500 per month with yearly rent increases of approximately 3% per
      year. The lease contains an option to renew for an additional five years as
      defined in the agreement.





Total
      rent expense under operating leases was $187,804 and $221,329 for the years
      ended December 31, 2007 and 2006, respectively. The Company has future minimum
      non-cancelable lease commitments of $163,000, $168,000, $173,000, $178,000
      and
      $183,000 in 2008, 2009, 2010, 2011 and 2012, respectively.





**Litigation**





Prior
      to
      1975, we were engaged in the sale and installation of asbestos-related
      insulation materials, which has resulted in numerous claims of personal injury
      allegedly related to asbestos exposure. Many of these claims are now being
      brought by the children and close relatives of persons who have died, allegedly
      as a result of the direct or indirect exposure to asbestos. To date, all of
      the
      asbestos-related injury claims have been defended and paid by our insurance
      carriers.




The
      number of asbestos-related cases which have been initiated naming us (primarily
      our subsidiary, Metalclad Insulation Corporation) as a defendant decreased
      from
      232 in 2006 to 163 in 2007. At December 31, 2006 and 2007, there were,
      respectively, approximately 404 and 222 cases pending. These claims are
      currently defended and covered by insurance.





Set
      forth
      below is a table for the years ended December 31, 2006 and 2007, which sets
      forth for each such period the approximate number of asbestos-related cases
      filed, the number of such cases resolved by dismissal or by trial, the number
      of
      such cases resolved by settlement, the total number of resolved cases, the
      number of filed cases pending at the end of such period, the total indemnity
      paid on all resolved cases, the average indemnity paid on all settled cases
      and
      the average indemnity paid on all resolved cases:





37


2006
              
              2007New
                  cases filed
              
              
              232
              
              
              163Defense
                  Judgments and dismissals
              
              
              253
              
              
              292
              (3)Settled
                  cases
              
              
              82
              
              
              53Total
                  resolved cases(1)
              
              
              335
              
              
              345Pending
                  cases(1)
              
              
              404
              
              
              222Total
                  indemnity payments
              
              $
              4,858,750
              
              $
              7,974,500Average
                  indemnity paid on settled cases
              
              $
              59,253
              
              $
              150,462Average
                  indemnity paid on all resolved cases
              
              $
              14,504
              
              $
              23,114




(1) Total
      resolved cases includes, and the number of pending cases excludes, cases which
      have been settled but which have not been closed for lack of final documentation
      or payment.





The
      number of asbestos-related claims made against the Company has reflected a
      general downward trend. We believe that it is probable that this general trend
      will continue, although such continuance cannot be assured. The average
      indemnity paid on all resolved claims average $19,250 **.** We
      believe that the sympathies of juries, the aggressiveness of the plaintiffs’ bar
      and the declining base of potential defendants as the result of business
      failures, have tended to increase payments on resolved cases. This tendency,
      we
      believe, has been mitigated by the declining pool of claimants resulting from
      death, and the likelihood that the most meritorious claims have been ferreted
      out by plaintiffs’ attorneys and that the newer cases being brought are not as
      meritorious nor do they have as high a potential for damages as do cases which
      were brought earlier. We have no reason to believe, therefore, that the average
      future indemnity payments will increase materially in the future.





In
      addition, direct defense costs per resolved claim have been approximately
      $13,500 per claim.





Based
      on
      the general trend of reducing asbestos-related injury claims made against the
      Company we projected in our Form 10-KSB filed with the Securities and Exchange
      Commission for the year ended December 31, 2006 that there would be 924
      asbestos-related injury claims made against the Company after December 31,
      2006.
      The 924, in addition to the 404 claims existing as of December 31, 2006, totaled
      1,328 current and future claims. Multiplying the average indemnity per resolved
      claim of $19,131, times 1,328, we projected the probable future indemnity to
      be
      paid on those claims after December 31, 2006 to be equal to approximately $25
      million. In addition, multiplying an estimated cost of defense per resolved
      claim of approximately $13,500 times 1,328, we projected the probable future
      defense costs to equal approximately $18 million. Accordingly, our total
      estimated future asbestos-related liability at December 31, 2006 was $43
      million.





As
      of
      December 31, 2006, we projected that approximately 186 new asbestos-related
      claims would be commenced, and approximately 237 cases would be resolved, in
      2007, resulting in an estimated 353 cases pending at December 31, 2007. Although
      the actual number of claims made in 2007 was 163 and the number of cases pending
      as of December 31, 2007 was 222, slightly less than we anticipated, we do not
      believe the differences are significant enough to re-evaluate our estimate.
      In
      addition, our future defense costs could be greater than projected, and such
      increase could partially offset any lower projection of liability which would
      result from such re-evaluation. Since we projected that an aggregate of 738
      new
      cases would be commenced after December 31, 2007, and that 148 of these cases
      would be commenced in 2008, we estimated that an aggregate of 590 new cases
      would be commenced after December 31, 2008. Accordingly, we have projected
      the
      cases pending and projected to be commenced in the future at December 31, 2008,
      would be 897 cases. Multiplying 897 claims times the approximate average
      indemnity paid and defense costs incurred per resolved claim of $32,600, we
      estimated our liability for current and future asbestos-related claims at
      December 31, 2008 to be approximately $29,000,000. This amounts to a $7,000,000
      reduction from the $36,000,000 liability we estimated as of December 31, 2007,
      or a $1,750,000 reduction per quarter in 2008.




38







We
      have
      determined that it is probable that we have sufficient insurance to provide
      coverage for both current and future projected asbestos-related injury claims.
      This determination assumes that the current trend of reducing asbestos-related
      injury claims will continue and that the average indemnity and direct legal
      costs of each resolved claim will not materially increase. The determination
      also assumes that the insurance companies live up to what we believe is their
      obligation to continue to cover our exposure with regards to these claims.
      Several affiliated insurance companies have brought a declaratory relief action
      against our subsidiary, Metalclad, as well as a number of other insurers, to
      resolve certain coverage issues.





We
      intend
      to re-evaluate our estimate of future liability for asbestos claims at the
      end
      of each fiscal year, or whenever actual results are materially different from
      our estimates, integrating our actual experience in that fiscal year with that
      of prior fiscal years. We estimate that the effects of economic inflation on
      either the average indemnity payment or the projected direct legal expenses
      will
      be approximately equal to a discount rate applied to our future liability based
      upon the time value of money. It is probable that we have adequate insurance
      to
      cover current and future asbestos-related claims, although such coverage cannot
      be assured.





Although
      defense costs are included in our insurance coverage, we expended $215,000
      and
      $296,000 in 2006 and 2007, respectively, to administer the asbestos claims
      and
      defend the ACE Lawsuit discussed below. These amounts were primarily fees paid
      to attorneys to monitor the activities of the insurers, and their selected
      defense counsel, and to look after our rights under the various insurance
      policies.





There
      are
      numerous insurance carriers which have issued a number of policies to us over
      a
      period extending from approximately 1967 through approximately 1985 that still
      provide coverage for asbestos-related injury claims. After approximately 1985
      the policies were issued with provisions which purport to exclude coverage
      for
      asbestos related claims. The terms of our insurance policies are complex, and
      coverage for many types of claims is limited as to the nature of the claim
      and
      the amount of coverage available. It is clear, however, under California law,
      where the substantial majority of the asbestos-related injury claims are
      litigated, that all of those policies cover any asbestos-related injury
      occurring during the 1967 through 1985 period when these policies were in
      force.





We
      have
      engaged legal counsel to review all of our known insurance policies, and to
      provide us with the amount of coverage which such counsel believes to be
      probable under those policies for current and future asbestos-related injury
      claims against us. Such legal counsel has provided us with its opinion of the
      minimum probable insurance coverage available to satisfy asbestos-related injury
      claims, which significantly exceeds our estimated $43 million future liability
      for such claims as of December 31, 2006. Accordingly, we have included
      $36,000,000 and $43,000,000 of such insurance coverage receivable as an asset
      on
      our 2007 and 2006 balance sheets, respectively.





On
      February 23, 2005 ACE Property & Casualty Company ("ACE"), Central National
      Insurance Company of Omaha ("Central National") and Industrial Underwriters
      Insurance Company ("Industrial"), which are all related entities, filed a
      declaratory relief lawsuit (“the ACE Lawsuit”) against Metalclad Insulation
      Corporation (“Metalclad”) and a number of Metalclad's other liability insurers,
      in the Superior Court of the State of California, County of Los Angeles. ACE,
      Central National and Industrial issued umbrella and excess policies to
      Metalclad, which has sought and obtained from the plaintiffs both defense and
      indemnity under these policies for the asbestos lawsuits brought against
      Metalclad during the last four to five years. The ACE Lawsuit seeks declarations
      regarding a variety of coverage issues, but is centrally focused on issues
      involving whether historical and currently pending asbestos lawsuits brought
      against Metalclad are subject to either an "aggregate" limits of liability
      or
      separate "per occurrence" limits of liability. Whether any particular asbestos
      lawsuit is properly classified as being subject to an aggregate limit of
      liability depends upon whether or not the suit falls within the "products"
      or
      "completed operations" hazards found in most of the liability policies issued
      to
      Metalclad. Resolution of these classification issues will determine if, as
      ACE
      and Central National allege, their policies are nearing exhaustion of their
      aggregate limits and whether or not other Metalclad insurers who previously
      asserted they no longer owed any coverage obligations to Metalclad because
      of
      the claimed exhaustion of their aggregate limits, in fact, owe Metalclad
      additional coverage obligations. The ACE Lawsuit also seeks to determine the
      effect of the settlement agreement between the Company and Allstate Insurance
      Company on the insurance obligations of various other insurers of Metalclad,
      and
      the effect of the “asbestos exclusion” in the Allstate policy. The ACE Lawsuit
      does not seek any monetary recovery from Metalclad. Nonetheless, we anticipate
      that we will incur attorneys fees and other associated litigation costs in
      defending the lawsuit and any counter claims made against us by any other
      insurers, and in prosecuting any claims we may seek to have adjudicated
      regarding our insurance coverage. In addition, the ACE Lawsuit may result in
      our
      incurring costs in connection with obligations we may have to indemnify Allstate
      under the settlement agreement. Allstate, in a cross-complaint filed against
      Metalclad Insulation Corporation in October, 2005, asked the court to determine
      the Company’s obligation to assume and pay for the defense of Allstate in the
      ACE Lawsuit under the Company’s indemnification obligations in the settlement
      agreement. The Company does not believe that it has any legal obligation to
      assume or pay for such defense.


39





In
      2003
      and 2004 the Judiciary Committee of the United States Senate considered
      legislation to create a privately funded, publicly administered fund to provide
      the necessary resources for an asbestos injury claims resolution program, and
      is
      commonly referred to as the “FAIR” Act. In 2005, a draft of the “FAIR” Act was
      approved by the Judiciary Committee, but the bill was rejected by the full
      Senate in February 2006, when a cloture motion on the bill was withdrawn. An
      amended version of the 2006 “FAIR” Act (S 3274) was introduced in the Senate in
      May 2006, but has not been scheduled for a vote. A similar bill was introduced
      in the House (HR 1360) in March 2005, but was referred to a subcommittee in
      May
      2005. The latest draft of the “FAIR” Act calls for the fund to be funded
      partially by asbestos defendant companies, of which the Company is one, and
      partially by insurance companies. The bill could be voted on by the Senate
      or
      the House at any time in the future. The impact, if any, the “FAIR” Act will
      have on us if passed cannot be determined at this time although the latest
      draft
      of the legislation did not appear favorable to us.





In
      October 1999, we completed the sale of our operating businesses and development
      project located in Aguascalientes, Mexico. That sale specifically excluded
      those
      Mexican assets involved in the Company’s NAFTA claim which was settled in 2001.
      Under the terms of the sale we received an initial cash payment of $125,000
      and
      recorded a receivable for $779,000, which has been fully reserved. On November
      13, 2000, the Company filed a complaint in the Superior Court of California
      against a former employee, the U.S. parent of the buyer and its representative
      for breach of contract, fraud, collusion and other causes of action in
      connection with this sale seeking damages in the form of a monetary award.
      An
      arbitration hearing was held in September, 2002 in Mexico City, as requested
      by
      one of the defendants. This arbitration hearing was solely to determine the
      validity of the assignment of the purchase and sale agreement by the buyer
      to a
      company formed by the former employee defendant. The Superior Court action
      against the U.S. parent was stayed pending the Mexican arbitration. On April
      8,
      2003, the arbitrator ruled that the assignment was inexistent, due to the
      absence of our consent. In June 2003, the Court of Appeal for the State of
      California ruled that the  U.S.
      parent was also entitled to compel a Mexican arbitration of the claims raised
      in
      our complaint. We are now prepared to pursue our claim in an arbitration
      proceeding for the aforementioned damages. No assurances can be given on the
      outcome.





In
      a
      related action, a default was entered against us in December, 2002, in favor
      of
      the same former employee referred to in the foregoing paragraph by the Mexican
      Federal Labor Arbitration Board, for an unspecified amount. The former employee
      was seeking in excess of $9,000,000 in damages as a result of his termination
      as
      an employee. The default was obtained without the proper notice being given
      to
      us, and was set aside in the quarter ended June 30, 2003. The Mexican Federal
      Labor Arbitration Board rendered a recommendation on December 13, 2004, to
      the
      effect that the former employee was entitled to an award of $350,000 from Entrx
      in connection with the termination of his employment. The award is in the form
      of a recommendation which has been affirmed by the Mexican Federal Court, but
      is
      only exercisable against assets of the Company located in Mexico. The Company
      has no material assets in Mexico. The award does not represent a collectible
      judgment against the Company in the United States. Since the Company has no
      material assets in Mexico, the likelihood of any liability based upon this
      award
      is remote, and we therefore believe that there is no potential liability to
      the
      Company at December 31, 2007 or 2006. The Company intends to continue to pursue
      its claims against the same employee for breach of contract, fraud, collusion
      and other causes of action in connection with the 1999 sale of one of the
      Company’s operating businesses in Mexico.





On
      May
      31, 2006, we entered into a Settlement Agreement with Ventana Global
      Environmental Organizational Partnership, L.P. and North America Environmental
      Fund, L.P. (collectively referred to as “Ventana”) whereby Ventana agreed to pay
      Entrx Corporation $1,250,000 in exchange for the dismissal with prejudice by
      Entrx Corporation of the law suit (the “Ventana Action”) filed by Entrx
      Corporation against Ventana and others in Orange County, California Superior
      Court in November 2000. Entrx Corporation and Ventana also entered into a mutual
      release of all claims each may have had against the other. In addition, Entrx
      Corporation released Carlos Alberto de Rivas Oest and Geologic de Mexico S.A.
      de
      C.V., which were parties related to Ventana, and against whom Entrx Corporation
      had claims pending in Mexico. The Settlement Agreement does not limit claims
      that Entrx had or currently has against Javier Guerra Cisneros and Promotora
      Industrial Galeana, S.A. de C.V., which Entrx Corporation continues to pursue
      in
      Mexico. Javier Guerra Cisneros and Promotora Industrial Galeana, S.A. de C.V.
      were involved with the transactions which were the subject of the Ventana
      Action. Entrx Corporation received approximately $925,000 net after payment
      of
      legal fees and expenses associated with the Ventana Action and the Settlement
      Agreement.


40





In
      August
      of 2001, Metalclad Insulation Corporation purchased a workers’ compensation
      policy from American Home Assurance Company (“American Home”), an American
      International Group (“AIG”) company, for the period of September 1, 2001 to
      September 1, 2002. The premium for the workers’ compensation policy was to be
      calculated retrospectively. The American Home policy required Metalclad to
      pay
      an initial estimated premium, but Metalclad’s premium was recalculated
      periodically, through March 1, 2006, based on actual workers’ compensation
      losses incurred. Metalclad also provided American Home with collateralized
      security for future premium adjustments in the form of a letter of credit and
      cash.





In
      November 2003, a dispute arose between Metalclad, on the one hand, and American
      Home and Metalclad’s insurance broker, Meyers-Reynolds & Associates, on the
      other hand regarding calculation of the first periodic premium adjustment.
      Specifically, American Home employed the use of a loss development factor and
      estimated payroll figure in its premium calculation which substantially
      increased the premium it charged Metalclad. As a result of that dispute, another
      AIG company, National Union Fire Insurance Company of Pittsburgh drew down
      on
      the above mentioned letter of credit. Metalclad believes that American Home’s
      calculations were inconsistent with the terms of the American Home policy and
      representations made by American Home and Meyers-Reynolds regarding how the
      premium would be calculated. Metalclad also believes that National Union was
      in
      breach of the American Home policy when it drew down on the letter of
      credit.





On
      February 27, 2004, we filed an action in Orange County Superior Court against
      American Home, National Union and Meyers-Reynolds for breach of contract, breach
      of the covenant of good faith and fair dealing, declaratory relief, reformation,
      injunctive relief, negligent and intentional misrepresentation and breach of
      fiduciary duty. During the three months ended March 31, 2005, the Company
      recorded an accrual of $75,000 related to this dispute. On May 2, 2005, we
      reached a settlement in principal with American Home and National Union which
      resulted in the payment by the Company to American Home of approximately $39,000
      in 2005 and resulted in the Company paying an additional $45,000 in 2006, which
      had been accrued at December 31, 2005. During 2006 the Company reached a
      settlement with Meyers-Reynolds which resulted in the payment to the Company
      by
      Meyers-Reynolds of $100,000.





**Insurance
      Settlement**





In
      June
      2004, Metalclad Insulation Corporation, our wholly owned subsidiary, and Entrx
      Corporation, entered into a Settlement Agreement and Full Policy Release (the
      “Agreement”) releasing Allstate Insurance Company from its policy obligations
      for a broad range of claims arising from injury or damage which may have
      occurred during the period March 15, 1980 to March 15, 1981, under an umbrella
      liability policy (the “Policy”). The Policy provided limits of $5,000,000 in the
      aggregate and per occurrence. Allstate claimed that liability under the Policy
      had not attached, and that regardless of that fact, an exclusion in the Policy
      barred coverage for virtually all claims of bodily injury from exposure to
      asbestos, which is of primary concern to Metalclad Insulation Corporation.
      Metalclad Insulation Corporation took the position that such asbestos coverage
      existed. The parties to the Agreement reached a compromise, whereby Metalclad
      Insulation Corporation received $2,500,000 in cash, and Metalclad Insulation
      Corporation and Entrx Corporation agreed to indemnify and hold harmless the
      insurer from all claims which could be alleged against the insurer respecting
      the policy, limited to $2,500,000 in amount. Based on past experience related
      to
      asbestos insurance coverage, we believe that the Agreement we entered into
      in
      June 2004, will result in a probable loss contingency for future insurance
      claims based on the indemnification provision in the Agreement. Although we
      are
      unable to estimate the exact amount of the loss, we believe at this time the
      reasonable estimate of the loss will not be less than $375,000 or more than
      $2,500,000 (the $2,500,000 represents the maximum loss we would have based
      on
      the indemnification provision in the Agreement). Based on the information
      available to us, no amount in this range appears at this time to be a better
      estimate than any other amount. The $375,000 estimated loss contingency noted
      in
      the above range represents 15% of the $2,500,000 we received and is based upon
      our attorney’s informal and general inquiries to an insurance company of the
      cost for us to purchase an insurance policy to cover the indemnification
      provision we entered into. We recorded a reserve of $375,000 at the time we
      entered into the Agreement and nothing has come to our attention that would
      require us to record a different estimate at December 31, 2007. The ACE Lawsuit
      may result in our incurring costs in connection with obligations we may have
      to
      indemnify Allstate under the Settlement Agreement. Allstate, in a
      cross-complaint filed against Metalclad Insulation Corporation in October,
      2005,
      asked the court to determine the Company’s obligation to assume and pay for the
      defense of Allstate in the ACE Lawsuit under the Company’s indemnification
      obligations in the Settlement Agreement. The Company is taking the position
      that
      it has no legal obligation to assume or pay for such defense.


41





**Other
      Matters**





The
      Company had under contract uncompleted work at bid prices totaling approximately
      $12,629,000 and $11,305,000 at December 31, 2007 and 2006, respectively.





**NOTE** **15 –
      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON-CASH INVESTING
      ACTIVITIES**





**Supplemental
      Disclosures of Cash Flow Information**





Cash
      paid
      for interest was $9,867 and $110,494 for the years ended December 31, 2007
      and
      2006, respectively.





**NOTE
      16 - RELATED PARTY TRANSACTIONS**





In
      2001,
      $1,255,000 was loaned to an affiliate of Wayne W. Mills, Blake Capital Partners,
      LLC (“Blake”) under a note (“Note”) secured by 500,000 shares of the Company’s
      common stock and any dividends received on those shares. At the time the loan
      was made, Mr. Mills was a principal shareholder of the Company, and was
      subsequently elected as the Company’s President and Chief Executive Officer. In
      November 2003, the Board of Directors of the Company negotiated an amendment
      to
      the security agreement (the “Amended and Restated Security Agreement”) which it
      believed to be beneficial to the Company. The Note as amended (the “New Note”)
      is in the principal amount of $1,496,370, and provided for an October 31, 2007
      due date, with interest at 2% over the prime rate established by Wells Fargo
      Bank, NA in Minneapolis, Minnesota, adjusted on March 1 and September 1 of
      each
      year, instead of the 12% rate established in the Note. Interest only was payable
      commencing March 1, 2004, and at the end of each six-month period thereafter.
      The New Note was with full recourse to Blake Capital Partners, which had minimal
      assets, other than 350,000 shares of the Company’s common stock and 175,000
      shares of VioQuest Pharmaceuticals, Inc., all of which, along with 150,000
      shares of the Company’s common stock and 75,000 shares of VioQuest
      Pharmaceuticals, Inc. owned by Mr. Mills, were held by the Company as collateral
      for the New Note. The Amended and Restated Security Agreement, unlike the
      original Security Agreement, did not require us, or permit Blake Capital
      Partners or Mr. Mills, to cancel the shares of the Company’s common stock held
      as collateral as full payment of the loan, or require us to apply the value
      of
      those cancelled shares at $2.50 per share against the principal balance of
      the
      amounts due. In addition, Mr. Mills has personally guaranteed the repayment
      of
      the New Note.





For
      the
      year ended December 31, 2006, we increased our reserve against the note
      receivable from Blake Capital Partners, LLC (“Blake”) by $1,083,885 as a result
      of the non-payment of interest, bringing the net of the note receivable less
      the
      reserve down to $210,000, the approximate value of the collateral securing
      the
      Note. In April 2007, the Company canceled 500,000 shares of the Company’s common
      stock that were pledged as collateral on the New Note and applied the $115,000
      value of the stock against the outstanding New Note balance. The New Note was
      not repaid on the October 31, 2007 due date. As of December 31, 2007 the Company
      adjusted the net book value of the New Note to $25,000, the approximate value
      of
      the collateral securing the New Note. The Company is exploring its opportunities
      to obtain proceeds from the sale of the 250,000 shares of VioQuest
      Pharmaceuticals, Inc. common stock pledged as collateral on the
      note.


42





An
      officer of the Company was employed by a corporation which received payments
      for
      rent and health insurance of $43,715 and $44,112 for the years ended December
      31, 2007 and 2006, respectively.





In
      order
      to fund operations of the Company until the sale of the Company’s facilities in
      Anaheim, California was completed, on February 9, 2006 the Company borrowed
      $150,000 from Peter Hauser, the Company’s Chairman and Chief Executive Officer.
      The promissory note evidencing the loan was due and payable 10 days following
      written demand and bore interest at 2% over the prime interest rate as published
      in the Wall Street Journal (9.5% at March 31, 2006). The loan was secured by
      a
      deed of trust on the Company’s facilities in Anaheim, California, housing the
      industrial insulation services operations of the Company’s subsidiary, Metalclad
      Insulation Corporation. The Company repaid the loan and accrued interest upon
      the sale of the Company’s facilities in April 2006.


43





**ITEM
              8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**





None





**ITEM
              8A.**
            **CONTROLS
                AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**




We
      have
      established disclosure controls and procedures to ensure that material
      information relating to the Company is made known to the officers who certify
      the financial statements and to other members of senior management and the
      Audit
      Committee of the Board.




We
      conducted an evaluation, under the supervision and with the participation of
      our
      chief executive officer and chief financial officer of our disclosure controls
      and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
      the Securities Exchange Act of 1934). Based on this evaluation our chief
      executive officer and chief financial officer have concluded that, as of
      December 31, 2007, our disclosure controls and procedures are
      effective.




**Changes
      in Internal Control Over Financial Reporting**




There
      have been no changes in our internal controls over financial reporting for
      the
      three-months ended December 31, 2007 that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




**Management’s
      Report on Internal Controls over Financial Reporting**




The
      management of the Company is responsible for establishing and maintaining
      adequate internal control over financial reporting. Our internal control system
      was designed to provide reasonable assurance to our management and Board of
      Directors regarding the preparation and fair presentation of published financial
      statements.




All
      internal controls over financial reporting, no matter how well designed, have
      inherent limitations, including the possibility of human error and the
      circumvention or overriding of controls. Therefore, even effective internal
      control over financial reporting can provide only reasonable, and not absolute,
      assurance with respect to financial statement preparation and presentation.
      Further, because of changes in conditions, the effectiveness of internal
      controls over financial reporting may vary over time.




Our
      management, including our chief executive officer and chief financial officer,
      assessed the effectiveness of our internal control over financial reporting
      as
      of December 31, 2007. In making its assessment of internal control over
      financial reporting, management used the criteria set forth by the Committee
      of
      Sponsoring Organizations of the Treadway Commission (COSO) in *Internal Control—Integrated Framework* . Based
      on our evaluation, management concluded that, as of December 31, 2007, our
      internal control over financial reporting was effective based on those
      criteria.





This
      annual report does not include an attestation report of the Company’s
      independent registered public accounting firm regarding internal control over
      financial reporting. Management’s report was not subject to attestation by the
      Company’s registered public accounting firm pursuant to temporary rules of the
      Securities and Exchange Commission that permit the Company to provide only
      management’s report in this annual report.





**ITEM
      8B.**  **OTHER
      INFORMATION**





None


44





**PART
      III**





**ITEM
      9.**  **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(a)
      OF THE EXCHANGE ACT**





**Directors**





The
      name,
      initial year of service as a director, age, and position or office of each
      member of our board of directors, is as follows:


**Name**
                
                **Director Since**
                
                **Age**
                
                **Position**Peter
                    L. Hauser
                
                2004
                
                67
                
                President,
                    Chief Executive Officer, Chairman of the Board and
                    DirectorJoseph
                    M. Caldwell(1)(2)(3)
                
                2002
                
                40
                
                DirectorE.
                    Thomas Welch(4)
                
                2004
                
                69
                
                DirectorDavid
                    E. Cleveland(5)
                
                2008
                
                74
                
                Director





(1) Member
      of
      the Audit Committee and Stock Option Committee since March 2003.


(2) Member
      of
      the Nominating Committee since April 2004.


(3) Member
      of
      the Compensation Committee since December 2004.


(4) Member
      of
      the Audit, Compensation, Nominating and Stock Option Committees since December
      2004.


(5) Member
      of
      the Audit, Compensation and Nominating Committees since January
      2008.





The
      business experience, principal occupations and directorships in publicly-held
      companies of the members of our board of directors are set forth
      below.





*Peter
      L. Hauser* has been
      the president and chief executive officer of Entrx Corporation since October
      2004, and devotes approximately one-third of his working time to such office.
      Mr. Hauser is a founder, and has been the principal owner and chairman of the
      board of directors, of Health Care Financial Solutions, Inc., since March 2003.
      Health Care Financial Solutions, Inc., with its office in St. Paul, Minnesota,
      is engaged in the development and marketing of a health care claims
      administration software system for use by third-party health care plan
      administrators. Mr. Hauser was an account executive at Feltl & Company, a
      Minneapolis, Minnesota securities brokerage firm, from April 2003 until June
      2003, at which time he retired from the securities industry. From 1977 through
      April 2003, Mr. Hauser was employed at Equity Securities Trading Co., Inc.,
      a
      Minneapolis, Minnesota-based securities brokerage firm (now known as The Oak
      Ridge Financial Group, Inc.), where he acted as a vice president and a principal
      beginning in 1993. From 1993 until 2003, Mr. Hauser was a member of the board
      of
      directors of GelStat Corp. (OTCBB: GSAC.OB), (formerly called “Developed
      Technology Resources, Inc.”), which was previously engaged in various
      enterprises in the former Soviet Union, including the distribution of airport
      security equipment and the manufacture and distribution of dairy products and
      snack foods. By 2003, GelStat had disposed of all of its assets relating to
      its
      former Soviet Union enterprises, and began engaging in the domestic production
      and distribution of over-the-counter, non-prescription health care
      products.


45


*Joseph
      M. Caldwell* founded
      US Internet Corporation in March 1995, and since that date has served on
      its board of directors. From March 1995 to May 2000 Mr. Caldwell was the chief
      executive officer of US Internet Corporation.  In June 2005 he became the
      Vice President of Marketing for US Internet Corporation, a position he currently
      holds. US Internet Corporation is a Minneapolis-based, privately held Internet
      service provider, providing services in over 1,300 cities nationwide and
      over 110 cities internationally. From April 2002 until June 2005, Mr. Caldwell
      was the chief executive officer of Marix Technologies, Inc., and beginning
      in
      May, 2000, a member of its board of directors. Marix Technologies, Inc. was
      a
      privately held company based in Minneapolis, Minnesota that developed and
      marketed software designs to facilitate and control offsite access to software
      applications and information.





*E.
      Thomas Welch* has
      been
      the president of BNC National Bank at its Minneapolis, Minnesota office, since
      April 2005. BNC National Bank, with corporate offices in Phoenix, Arizona,
      conducts banking business through 21 banks located in North Dakota, Minnesota
      and Arizona. Mr. Welch was a Managing Director of the U. S. Trust Company,
      at
      its Minneapolis, Minnesota office, from April 2001 until March 2005, where
      he
      was primarily responsible for financial, risk management, compliance and
      fiduciary matters. U.S. Trust Company was engaged nationally in the trust,
      asset
      management, investment and banking business. From 1984 until April 2001, Mr.
      Welch was employed by Resource Trust Company, in Minneapolis, Minnesota, where
      he acted as the president from 1988 to April 2001, in charge of private banking,
      trust investment and corporate matters. Resource Trust Company and its principal
      affiliated companies were acquired by U.S. Trust Company in April 2001. Mr.
      Welch has a Bachelor’s degree in accounting and a J.D. degree in
      law.





*David
      E. Cleveland* was
      chairman of the Board of Associated Bank of Minnesota, in Minneapolis,
      Minnesota, from March 2001 until April 2004, and President of the Board of
      that
      bank from March 13, 2000 until January 2001. From March 1987 until March 2000,
      Mr. Cleveland was President of the Riverside Bank, in Minneapolis, Minnesota.
      From April 1969 until March 1987, Mr. Cleveland served consecutively as
      President of State Bank of Hudson, Hudson, Wisconsin, Riverside Community State
      Bank, Minneapolis, and Resources Bank & Trust, Minneapolis. Mr. Cleveland
      has been retired since April 2004.





Each
      member of our Board of Directors was elected to serve until the next annual
      meeting of our shareholders.





**Meetings
      of Board of Directors**





During
      the year ended December 31, 2007, the Board of Directors held 5 meetings. Each
      member of the Board of Directors was present for all of the meetings except
      for
      Joseph M. Caldwell and Kenneth W. Brimmer, who each missed one meeting.





**Committees
      of Board of Directors**





***Audit
      Committee.*** The
      Audit
      Committee has the authority and responsibilities set forth in Entrx’s Audit
      Committee Charter (the “Charter”). The Charter was originally adopted in 2001
      and was amended in April 2004. Under the Charter, the Audit Committee has the
      authority and responsibility of (i) reviewing audited annual consolidated
      financial statements, and reports and consolidated financial statements
      submitted to any governmental body or disclosed to the public; (ii) consulting
      with Entrx’s independent auditors on various audit and financial personnel
      issues, including questions of independence, disagreement between the auditors
      and Entrx’s financial personnel, reviewing of internal financial controls; (iii)
      recommending to the Board of Directors the engagement of independent accountants
      to audit the consolidated financial statements of Entrx, and reviewing the
      performance of such accountants; (iv) reviewing and considering the
      appropriateness of accounting principles or practices applied to Entrx’s
      consolidated financial statements; and (v) reviewing Entrx’s financial personnel
      and organization. E. Thomas Welch, a member of the Audit Committee, has been
      determined to be the audit committee financial expert. Each member of the Audit
      Committee is independent as that term is defined in Rule 4200 of the National
      Association of Securities Dealers, Inc. The Audit Committee held four meetings
      during the year ended December 31, 2007.





***Compensation
      Committee*** **.** The
      Compensation Committee, which consists solely of non-employee directors, has
      the
      obligation to adopt policies applicable to the establishment and the
      compensation of Entrx’s executive officers, and has authority to consider and
      recommend to the Board of Directors the salaries, bonuses, share options, and
      other forms of compensation of those executive officers. The Compensation
      Committee held one meeting during the year ended December 31,
      2007.


46





***Nominating
      Committee*** **.** Entrx's
      Nominating Committee was initially established by resolution of the Board of
      Directors in February 2002. The Board of Directors expanded and revised the
      duties of the Nominating Committee by resolutions adopted in April 2004. The
      Nominating Committee is charged with the responsibility to seek out and consider
      the qualifications of new candidates and incumbents for election as members
      of
      our Board of Directors, and to recommend to the Board of Directors those persons
      it believes would be suitable candidates for election or, in the case of a
      vacancy, appointment, as members of our Board of Directors. The full Board
      of
      Directors nominates persons to be members of the Board of Directors, after
      considering the recommendation of the Nominating Committee. Each member of
      the
      Nominating Committee is independent, as that term is defined in Rule 4200 of
      the
      National Association of Security Dealers, Inc. The Nominating Committee has
      no
      charter.





The
      Nominating Committee met on two occasions by conference telephone, in June
      2007
      and then in August 2007, to discuss and establish its recommendations for
      nominees for election to the Company’s Board of Directors, and recommended the
      re-election of Peter L. Hauser, Joseph M. Caldwell and E. Thomas Welch at the
      special meeting of the Company’s shareholders held in January 2008. Also
      recommended to be nominated for election as a director at the January 2008
      meeting, was David E. Cleveland, who was introduced to the Nominating Committee
      by Mr. Welch. Mr. Cleveland was a former business associate of Mr. Welch. The
      Board of Directors adopted the recommendations of the Nominating Committee,
      and
      all of the nominees were elected as directors at the special meeting of
      shareholders held in January 2008.





We
      have
      found it to be difficult to find suitable candidates who would be willing to
      serve as a member of the Board of Directors of a small company such as ours.
      We
      are looking for candidates with a good business background, preferably with
      some
      experience in starting or growing, and running a business. We would also
      favorably entertain a candidate with a good financial background, either as
      a
      chief financial officer or chief executive officer of another company, or by
      reason of education and experience in accounting. We would exclude any candidate
      who had any criminal record, or a background which exhibited any illegal or
      unethical activities, or questionable business practices.





Shareholders
      are encouraged to send the resumes of persons they believe would be suitable
      candidates to Joseph Caldwell, Entrx Corporation, 800 Nicollet Mall, Suite
      2690,
      Minneapolis, Minnesota 55402. Along with the resume of the proposed candidate,
      please have the candidate provide a written consent to serve as a member of
      our
      Board of Directors if so elected, or to acknowledge in writing that he or she
      would like to be considered for nomination.





Shareholders
      are further encouraged to submit the names of proposed candidates at any time
      throughout the year. We will not likely be able to consider any candidate
      submitted to us for inclusion in our proxy statement for the annual meeting
      to
      be held in 2008, after April 30, 2008.





***Stock
      Option Committee*** **.** Entrx’s
      Stock Option Committee was established by resolutions adopted by the Board
      of
      Directors in September 2002. The Stock Option Committee, which consists solely
      of independent members, has the authority to grant options to purchase common
      stock of Entrx to employees and members of the Board of Directors. In granting
      options to non-executive officer employees, the Stock Option Committee generally
      considers the recommendation of management. In the past, the Stock Option
      Committee has worked closely with, and considered the recommendations of, the
      Compensation Committee in cases involving the granting of stock options to
      executive officers of Entrx. The Stock Option Committee did not meet in the
      year
      ended December 31, 2007, and no stock options were granted.





**Information
      Concerning Non-Director Executive Officers**





The
      name,
      age, position or office, and business experience of each of our non-director
      executive officers is as follows:




Name
            
            Age
            
            PositionBrian
                D. Niebur
            
            44
            
            Treasurer
                and Chief Financial OfficerDavid
                R. Trueblood
            
            36
            
            President
                of Metalclad Insulation
                Corporation


47




*Brian
      D. Niebur* has been
      employed part time by Entrx as its treasurer and chief financial officer since
      February 2002. At the request of Entrx’s Board of Directors, from May 2002,
      until February 2003 Mr. Niebur served as chief financial officer and a member
      of
      the Board of Directors of Chiral Quest, Inc. (formerly Surg II, Inc.) (OTCBB:
      CQST). Chiral Quest, Inc. was a 90%-owned subsidiary of Entrx until Entrx’s
      shares of Chiral Quest, Inc. were spun out to Entrx’s shareholders in October
      2002. Mr. Niebur has a Bachelor of Arts degree in accounting and is a CPA
      (inactive). Since July 2000, Mr. Niebur has acted as a vice president and
      controller for Wyncrest Capital, Inc. in Minneapolis, Minnesota, a privately
      held venture capital firm. Mr. Niebur’s duties for Wyncrest Capital, Inc. have
      included acting as chief financial officer and a director for Spectre Gaming,
      Inc. (OTCBB: SGMG), in which Wyncrest Capital, Inc. has made an equity
      investment, from January 2003 until November 2005. Spectre Gaming, Inc. is
      engaged in the business of developing and marketing electronic gaming systems
      for the Native American gaming market. From January 2005 until March 2007,
      Mr.
      Niebur’s duties for Wyncrest Capital, Inc. also included acting as Chief
      Financial Officer and Secretary of Ready Credit Corporation (Pink Sheets: RCTC),
      another corporation in which Wyncrest Capital, Inc. as an investment. Mr. Niebur
      has acted as a member of the board of directors of Ready Credit Corporation
      since January, 2005. From August 1997 until July 2000, Mr. Niebur was the
      controller for Vital Images, Inc., a developer and marketer of medical
      visualization and analysis software, in Plymouth, Minnesota.





*David
      R. Trueblood* was
      elected as the President of Entrx’s wholly owned subsidiary, Metalclad
      Insulation Corporation, on February 1, 2007. Mr. Trueblood replaced John J.
      Macias, Metalclad Insulation Corporation’s former President, after Mr. Macias
      experienced major medical problems which prevented him from continuing as
      President and resulted in his taking a long-term disability leave. Mr. Trueblood
      has been employed by Metalclad Insulation Corporation since November 1993,
      in
      various capacities. Immediately prior to his appointment as President, Mr.
      Trueblood served as a Project Manager, bidding, securing and managing many
      of
      our most important projects.





Each
      officer of Entrx and Metalclad Insulation Corporation is elected to serve at
      the
      discretion of the Board of Directors of each corporation.





**Reporting
      Under Section 16(a) of the Securities Exchange Act of 1934**





Section
      16(a) of the Securities Exchange Act of 1934 requires executive officers and
      directors of Entrx, and persons who beneficially own more than 10 percent of
      Entrx's outstanding shares of Common Stock, to file initial reports of ownership
      and reports of changes in ownership of securities of Entrx with the Securities
      and Exchange Commission (“SEC”) and the NASDAQ Stock Market. Officers, directors
      and persons owning more than 10 percent of Entrx's outstanding Common Stock
      are
      required by SEC regulation to furnish Entrx with copies of all Section 16(a)
      forms filed. Based solely on a review of the copies of such reports and
      amendments thereto furnished to or obtained by Entrx or written representations
      that no other reports were required, Entrx believes that during the year ended
      December 31, 2007, all filing requirements applicable to its directors, officers
      or beneficial owners of more than 10 percent of Entrx's outstanding shares
      of
      Common Stock were complied with, except that the
      Form
      3 of David Trueblood, who became the President of Entrx’s wholly owned
      subsidiary, Metalclad Insulation Corporation, on February 1, 2007, was filed
      on
      March 23, 2007; (2) the Form 4’s of Peter Hauser, Joseph Caldwell, Kenneth
      Brimmer, E. Thomas Welch and Brian Niebur, officers and directors who received
      stock grants from Entrx of 45,000, 20,000, 20,000, 20,000 and 10,000 shares,
      respectively, on March 9, 2007, were all filed one day late on March 12, 2007;
      and (3) the Form 4’s of Wayne W. Mills, a 10% shareholder, with respect to the
      disposition of his Entrx common stock were filed as follows: (i) the foreclosure
      upon 500,000 shares, on April 3, 2007, held as collateral by Entrx to secure
      payment of a loan, which occurred on April 3, 2007, was reported in a Form
      4
      filed on July 31, 2007; (ii) the sale of 95,000 shares by Mr. Mills and 25,000
      shares by his spouse, over the period from August 6 to August 23, was reported
      in a Form 4 filed by Mr. Mills on August 27, 2007; and (iii) the sale of 100,000
      shares by Mr. Mills over the period from September 4 to September 24, 2007,
      was
      reported on a Form 4 filed by Mr. Mills on October 5, 2007.




48


**Code
      of Ethics**





We
      have
      adopted a Code of Ethics which is intended to govern the conduct of our
      officers, directors and employees in order to promote honesty, integrity,
      loyalty and the accuracy of our financial statements. You may obtain a copy
      of
      the Code of Ethics without charge by writing us and requesting a copy,
      attention: Brian Niebur, 800 Nicollet Mall, Suite 2690, Minneapolis, Minnesota
      55402. You may also request a copy by calling us at (612) 333-0614.




**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





**Summary
      Compensation Table**





The
      following table sets forth certain compensation information for: (i) each person
      who served as the chief executive officer of Entrx at any time during the year
      ended December 31, 2007, regardless of compensation level, and (ii) each of
      our
      other executive officers, other than the chief executive officer, serving as
      an
      executive officer at any time during 2007. The foregoing persons are
      collectively referred to in this Form 10-KSB as the “Named Executive Officers.”
Compensation information is shown for fiscal years 2007 and 2006.




Name/Principal
                Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-Equity
              Incentive Plan
              Compensation
              ($)
            
            Nonqualified
              Deferred
              Compensation
              Earnings
              ($)
            
            All
                Other
              Compensation
              ($)
            
            Total
              ($)Peter
                L. HauserPresident
                and Chief Executive
            
            
            2007
            
            
            75,000
            
            
            —
            
            
            7,200
            (4)
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            82,200Officer
            
            
            2006
            
            
            75,000
            
            
            —
            
            
            1,600
            (4)
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            76,600Brian
                D. NieburTreasurer
                and Chief
            
            
            2007
            
            
            78,750
            
            
            15,310
            (2)
            
            1,600
            (5)
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            95,660Financial
                Officer
            
            
            2006
            
            
            75,000
            
            
            
            (2)
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            75,000David
                R. Trueblood(1)President
                of Metalclad
            
            
            2007
            
            
            126,969
            
            
            26,021
            (3)
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            152,990Insulation
                Corporation
            
            
            2006
            
            
            98,416
            
            
            
            (3)
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            98,416




There
      are
      no employment agreements between Entrx and any executive officer of Entrx or
      any
      subsidiary.




(1)
            On
                February 1, 2007, David R. Trueblood replaced Mr. Macias as the President
                of our wholly owned subsidiary, Metalclad Insulation Corporation,
                as the
                result of Mr. Macias’ current medical incapacity to fulfill his duties as
                President.


(2)
            Pursuant
                to an incentive plan established for Mr. Niebur, he earned bonuses
                based
                upon Metalclad’s net profit for 2007 and 2006, equal to $30,300 and
                $15,310, respectively. The 2007 bonus was paid in 2008 and is not
                included
                in the table above and the 2006 bonus was paid in
                2007.


(3)
            Pursuant
                to an incentive plan established for the employees of Entrx’s subsidiary,
                Metalclad Insulation Corporation, Mr. Trueblood earned a bonus based
                upon
                Metalclad’s net profits for 2007 and 2006, equal to $55,785 and $20,820,
                respectively. $5,200 of the 2007 bonus was paid in December 2007,
                with the
                remaining amount paid in 2008 and is not included in the table above.
                The
                2006 bonus was paid in 2007.


(4)
            Common
                stock awards of 45,000 and 10,000 valued at $7,200 and $1,600,
                respectively, were granted to Mr. Hauser in 2007 and 2006, respectively,
                for services as a member of the Board of Directors, and was included
                in
                the table above, rather than in the table headed “Director
                Compensation.”


(5)
            A
                10,000 common stock award, valued at $1,600, was granted to Mr. Niebur
                in
                2007, for services as a member of the Metalclad Insulation Corporation
                Board of Directors.




49




**Outstanding
      Option Awards at Year End**





The
      following table provides certain information regarding unexercised options
      to
      purchase common stock, stock options that have not vested, and equity-incentive
      plan awards outstanding at December 31, 2007, for each Named Executive
      Officer.


******Outstanding
                  Equity Awards At Fiscal Year-End****Option
                  Awards**
              
              **Stock
                  Awards****Name**
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Exercisable
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Unexercisable
              
              Equity
                  Incentive Plan Awards: Number of Securities Underlying Unexercised
                  Unearned Options (#)
              
              Option
                  Exercise Price ($)
              
              Option
                  Expiration Date
              
              Number
                  of Shares or Units of Stock That Have Not Vested (#)
              
              Market
                  Value of Shares or Units of Stock That Have Not Vested ($)
              
              Equity
                  Incentive Plan Awards: Number of Unearned Shares, Units or Other
                  Rights
                  That Have Not Vested (#)
              
              Equity
                  Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                  Units or
                  Other Rights That Have Not Vested ($)Peter
                  L.Hauser(1)
              
              
              200,000
                10,000
              
              
              0
                0
              
              
              0
                0
              
              $
                $
              0.50
                0.55
              
              
              10/15/09
                12/31/09
              
              
              0
                0
              
              
              n/a
                n/a
              
              
              0
                0
              
              
              0
                0Brian
                  D. Niebur
              
              
              50,000
                20,000
              
              
              0
                0
              
              
              0
                0
              
              $
                $
              2.50
                0.65
              
              
              3/10/10
                3/04/09
              
              
              0
                0
              
              
              n/a
                n/a
              
              
              0
                0
              
              
              0
                0David
                  R. Trueblood
              
              
              7,000
                900
              
              
              0
                0
              
              
              0
                0
              
              $
                $
              1.20
                15.00
              
              
              9/23/09
                1/26/08
              
              
              0
                0
              
              
              n/a
                n/a
              
              
              0
                0
              
              
              0
                0




(1)
            Not
                included are 50,000 shares which Mr. Hauser may purchase under a
                warrant
                issued to Mr. Hauser in February 2003, before he became an employee,
                director or executive officer of Entrx. The warrant was exercisable
                through February 12, 2008 at $0.50 per
                share.




**Director
      Compensation**





The
      following table sets forth the compensation paid to our directors for our fiscal
      year ended December 31, 2007, excluding Entrx’s Chief Executive Officer Peter L.
      Hauser, whose compensation is set forth in the Summary Compensation Table for
      Named Executive Officer, set forth above.




**Director
                Compensation**Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            Stock
              Awards(1)
              ($)
            
            Option
                Awards
              ($)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation ($)
            
            Total
              ($)Kenneth
                W. Brimmer(2)(3)
            
            
            0
            
            
            3,200
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            3,200Joseph
                M. Caldwell(2)
            
            
            0
            
            
            3,200
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            3,200David
                E. Cleveland(4)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0E.
                Thomas Welch(5)
            
            
            0
            
            
            3,200
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            3,200





(1)
            On
                March 9, 2007, the Company issued each of its three independent directors
                20,000 shares of common stock. The stock was valued at $0.16 per
                share,
                the fair market value on March 9, 2007.






50




(2)
            At
                December 31, 2007, Messrs. Brimmer and Caldwell each had exercisable
                options to purchase 90,000 shares of our common stock: (i) 50,000
                shares
                at $2.50 per share, expiring on March 4, 2009 (with respect to Mr.
                Brimmer) and June 24, 2009 (with respect to Mr. Caldwell);
                (ii)10,000 shares at $1.03 per share, which expire on December 31, 2010;
                (iii)
                10,000 shares at $0.80 per share, which expire on December 31, 2009;
                (iv)
                10,000 shares at $0.50 per share, which expire on April 10, 2010;
                and (v)
                10,000 shares at $0.55 per share, which expire on December 31, 2009.


(3)
            Mr.
                Brimmer resigned as a director of the Company on July 12,
                2007.


(4)
            Mr.
                Cleveland was elected to the board of directors on January 28,
                2008.


(5)
            At
                December 31, 2007, Mr. Welch had exercisable options to purchase
                25,000
                shares of our common stock at $0.55 per share, expiring on December
                31,
                2009.




**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS**





**Share
      Ownership of Officers and Directors**





The
      following table sets forth certain information as of February 29, 2008, with
      respect to the shares of common stock beneficially owned by: (i) each director;
      (ii) each executive officer; and (iii) all current executive officers
      (regardless of salary and bonus level) and directors as a group. The address
      for
      each shareholder is 800 Nicollet Mall, Suite 2690, Minneapolis, MN 55402, except
      for Mr. Trueblood whose address is 1818 East Rosslynn Avenue, Fullerton, CA
      92831. Unless otherwise indicated, the shareholders listed in the table below
      have sole voting and investment powers with respect to the shares
      indicated:





Name
                of Beneficial Owner
            
            Number
                of
              Common
                Shares
              Beneficially
              Owned
            
            Percentage
                of
              Outstanding
              Shares(7)Peter
                L. Hauser
            
            
            987,075
            (1)
            
            12.6
            %Joseph
                M. Caldwell
            
            
            130,000
            (2)
            
            1.7
            %David
                E. Cleveland
            
            
            10,000
            
            
            *E.
                Thomas Welch
            
            
            65,000
            (3)
            
            *Brian
                D. Niebur
            
            
            80,000
            (4)
            
            1.0
            %David
                R. Trueblood
            
            
            7,000
            (5)
            
            *All
                executive officers and directors as a group (6 persons)
            
            
            1,279,075
            (6)
            
            15.9
            %


____________________




*
            Less
                than 1%





(1)
            Includes
                210,000 shares that Mr. Hauser may acquire upon the exercise of
                outstanding stock options.


(2)
            Includes
                90,000 shares that Mr. Caldwell may acquire upon the exercise of
                outstanding stock options.


(3)
            Includes
                25,000 shares that Mr. Welch may acquire upon the exercise of outstanding
                stock options. Includes 40,000 shares held in a revocable trust for
                the
                benefit of Mr. Welch’s spouse.


(4)
            Includes
                70,000 shares which Mr. Niebur may acquire upon the exercise of
                outstanding stock options.


(5)
            Includes
                7,000 shares which Mr. Trueblood may acquire upon the exercise of
                outstanding stock options.


(6)
            Assumes
                that each shareholder listed exercised all options available to that
                person which would vest as of April 29,
                2008.


(7)
            The
                percentage of outstanding shares of common stock as shown in the
                table
                above is calculated on 7,656,147 shares outstanding, as of February
                29,
                2008, plus it assumes in each case that the shareholder exercised
                all
                vested options available to that person as of April 29,
                2008.




51





**Share
      Ownership of Certain Beneficial Owners**





The
      following table sets forth the name, address, number of shares of Entrx's common
      stock beneficially owned, and the percentage of the outstanding shares of common
      stock such shares represent, of each person or group of persons, known by Entrx
      to beneficially own more than 5% of Entrx's outstanding common stock as of
      February 29, 2008. Unless otherwise indicated, the shareholders listed in the
      table below have sole voting and investment powers with respect to the shares
      indicated:




Name
                and Address
              of
                Beneficial Owner
            
            Number
                of
              Common
                Shares
              Beneficially
              Owned
            
            Percentage
                of
              Outstanding
              Shares(6)Peter
                L. Hauser
              16913
                Kings Court
              Lakeville,
                MN 55044
            
            
            987,075
            (1)
            
            12.6
            %Wayne
                W. Mills
              2125
                Hollybush Road
              Medina,
                MN 55340
            
            
            800,000
            (2)
            
            10.4
            %Grant
                S. Kesler
              3739
                Brighton Point Drive
              Salt
                Lake City, UT 84121
            
            
            764,335
            (3)
            
            9.2
            %Anthony
                C. Dabbene
              26921
                Magnolia Court
              Laguna
                Hills, CA 92653
            
            
            487,200
            (4)
            
            6.0
            %George
                W. Holbrook, Jr.
              1157
                S.W. 30thStreet
              Suite
                E
              Box
                1938
              Palm
                City, FL 34991
            
            
            451,615
            (5)
            
            5.9
            %James
                R. McGoogan
              1157
                S.W. 30thStreet
              Suite
                E
              Box
                1938
              Palm
                City, FL 34991
            
            
            387,740
            (5)
            
            5.1
            %Bradley
                Resources Company
              1157
                S.W. 30thStreet
              Suite
                E
              Box
                1938
              Palm
                City, FL 34991
            
            
            376,255
            (5)
            
            4.9
            %


____________________




(1)
            Includes
                10,000 shares which Mr. Hauser may purchase under currently exercisable
                options at $0.55 per share and 200,000 shares which Mr. Hauser may
                purchase under currently exercisable options at $0.50 per share.


(2)
            As
                reported in a Schedule 13 D/A on October 10, 2007, includes 50,000
                shares
                which are owned by Blake Capital Partners, LLC, which is owned by
                Mr.
                Mills, 400,000 shares which are owned by Mr. Mills Individual Retirement
                Account, 50,000 shares which Mr. Mills may purchase under currently
                exercisable options at prices ranging from $0.50 to $2.50 per
                share.


(3)
            Includes
                620,000 shares which Mr. Kesler may purchase under currently exercisable
                options at prices ranging from $2.00 to $3.00 per
                share.


(4)
            Includes
                450,000 shares which Mr. Dabbene may purchase under currently exercisable
                options at prices ranging from $2.00 to $3.00 per
                share.


(5)
            As
                reported in a Form 13-G on January 7, 2005,Messrs.
                Holbrook and McGoogan beneficially own 75,360 and 11,485 shares,
                respectively, of our common stock and are both partners of Bradley
                Resources Company with shared voting and dispositive power with respect
                to
                the 376,255 shares owned by Bradley Resources Company. Included in
                the
                shares owned by Mr. Holbrook is a warrant to purchase 50,000 shares.
                Bradley Resources Company, Mr. Holbrook and Mr. McGoogan may be considered
                to be a “group” as defined under Rule 13d-5 of the Securities Exchange Act
                of 1934, with the power to vote and dispose of an aggregate of 451,615
                shares of our common stock, or 5.9% of our common
                stock.






52




(6)
            The
                percentage of outstanding shares of common stock shown in the table
                above
                is calculated based upon 7,656,147 shares outstanding as of the close
                of
                business February 29, 2008, plus it assumes in each case that the
                shareholder exercised all options available to that person that would
                vest
                within 60 days thereafter.





**Equity
      Compensation Plan Information**





The
      following table sets forth as of December 31, 2007, the total number of shares
      of our common stock which may be issued upon the exercise of outstanding stock
      options and other rights under compensation plans approved by the shareholders,
      and under compensation plans not approved by the shareholders. The table also
      sets forth the weighted average purchase price per share of the shares subject
      to those options, and the number of shares available for future issuance under
      those plans.





Plan
                Category
            
            Number
                of securities to be issued upon exercise of outstanding options and
                warrants
            
            Weighted-average
                exercise price of outstanding options and warrants
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))Equity
                compensation plans approved by security holders
            
            
            2,127,630
            (1)
            $
            2.22
            
            
            477,100Equity
                compensation plans not approved by security holders
            
            
            164,000
            (2)
            $
            6.23
            
            
            NoneTotal
            
            
            2,291,630
            
            $
            2.50
            (3)
            
            477,100


____________________


(1)
            Options
                for 1,672,900 shares have been granted under Entrx’s 2000 Omnibus Stock
                Option and Incentive Plan (the “2000 Plan”) which was approved by Entrx’s
                shareholders. The remaining options for 454,730 shares were granted
                under
                similar plans which were previously adopted and approved by the
                shareholders, and which have been
                terminated.


(2)
            Options
                for 64,000 shares were granted in February 1998 to two employees.
                The
                options are exercisable at $15.00 per share. Warrants for 100,000
                shares
                have been issued from February 2003 through December 31, 2006, to
                two
                persons in connection with various financings, services and concessions.
                The warrants are exercisable at prices ranging from $0.50 to $0.75
                per
                share, some of which are subject to price adjustments under the
                anti-dilution provisions of the
                warrants.


(3)
            The
                prices at which all options and warrants are exercisable range from
                $0.50
                to $15.00 per share.


**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS**





**Loan
      to Affiliate of Wayne Mills**





On
      December 10, 2001, Entrx loaned Blake Capital Partners, LLC (“Blake Capital”), a
      Minnesota limited liability company, $1,250,000 under a non-recourse secured
      note (the “Note”). Blake Capital is wholly owned by Wayne W. Mills who later
      became a director, President and Chief Executive Officer of Entrx on February
      13, 2002. The Note with interest at the rate of 6% per annum, was due June
      10,
      2002. Blake Capital had the right to extend the due date of the Note for up
      to
      90 days, and on June 10, 2002, exercised that right. During the 90-day extension
      period and beyond, the rate of interest increased to 12% per annum. The Note
      was
      not repaid on the extended due date of September 8, 2002.




53





As
      security for the loan, Mr. Mills pledged 500,000 shares of Entrx's common stock,
      under the terms of a pledge agreement (the “Pledge Agreement”) dated as of
      December 10, 2001. In October 2002, Entrx spun off shares of Chiral Quest,
      Inc.,
      now known as VioQuest Pharmaceuticals, Inc. (OTCBB: VQPH), common stock as
      a
      dividend to its shareholders, on the basis of one share of VioQuest
      Pharmaceuticals, Inc. (then Chiral Quest, Inc.) common stock for each two shares
      of Entrx common stock held as of October 11, 2002. Prior to the dividend,
      VioQuest Pharmaceuticals, Inc. was a 90% owned subsidiary of Entrx. As a result
      of the dividend, Mr. Mills received 250,000 shares of the common stock of
      VioQuest Pharmaceuticals, Inc., which were added to the 500,000 shares of
      Entrx’s common stock held as collateral for the loan.





The
      Pledge Agreement provided that Mr. Mills would retain voting power over the
      collateralized shares until such shares are either cancelled or sold to satisfy
      the loan under the terms of the Note and Pledge Agreement. To satisfy its
      obligations under the Note, all or a portion of the 500,000 shares of Entrx
      common stock, or 250,000 shares of VioQuest Pharmaceuticals, Inc. common stock,
      could have been sold at the direction of Blake Capital, in which case the
      proceeds of such sale would have been applied against the principal and interest
      due under the Note. The terms of the Note also provided that Blake Capital
      could
      request that the Entrx shares be cancelled, in which case they could have
      carried a value of $2.50 per share which would be applied against the amount
      due
      under the Note. If the Note was in default, Entrx could have cancelled the
      shares at a value of $2.50 per share, and apply the amount cancelled against
      the
      principal and interest due under the Note. Although the Pledge Agreement was
      not
      clear, Entrx took the position that the $2.50 value related to one share of
      Entrx common stock and one-half share of VioQuest Pharmaceuticals, Inc. common
      stock.





Since
      the
      Note was non-recourse to Blake Capital, neither Blake Capital nor Mr. Mills
      had
      any personal liability under the Note, except for the interest on the Note,
      and
      Entrx's only recourse for repayment of the Note was the 500,000 shares of Entrx
      common stock, and 250,000 shares of VioQuest Pharmaceuticals, Inc. common stock,
      pledged as security. The market value of the stock held as collateral has never
      exceeded the principal balance of the Note since it became due.





**Modification
      of Loan to Affiliate of Wayne Mills**





The
      Sarbanes-Oxley Act of 2002 was adopted on August 1, 2002, while the loan to
      Blake Capital Partners, as discussed in the foregoing section entitled “Loan to
      Affiliate of Wayne W. Mills,” was outstanding. Under Section 402 of the
      Sarbanes-Oxley Act, it is unlawful for any company registered under Section
      12
      of the Securities Exchange Act of 1934 to make a personal loan to any directors
      or executive officers of that company. The provision also provides that a loan
      outstanding on the date of the enactment of Section 402 is not in violation
      of
      that provision, provided that there is no material modification to any terms
      of
      the loan after such enactment. The independent members of the Board of
      Directors, taking into consideration the purpose and policy of Section 402,
      have
      concluded that the prohibition against any modification to the loan to Mr.
      Mills
      would not be applicable where the modification was, in their reasonably
      exercised determination, on balance materially beneficial to Entrx.





Accordingly,
      for several months beginning in August 2003, the independent members of Entrx’s
      Board of Directors, constituting the Audit Committee, negotiated an amendment
      to
      the Note and Pledge Agreement with Blake Capital Partners and Mr. Mills, which
      culminated in the execution of an amendment to the Pledge Agreement (the
“Amended and Restated Pledge Agreement”) which they believed to be beneficial to
      Entrx. The Note as amended (the “New Note”) in the principal amount of
      $1,496,370, provided for an October 31, 2007 due date, with interest at 2%
      over
      the prime rate established by Wells Fargo Bank, NA in Minneapolis, Minnesota,
      adjusted on March 1 and September 1 of each year, instead of the 12% rate
      established in the Note. Interest only was payable commencing March 1, 2004,
      and
      at the end of each six-month period thereafter. The New Note had full recourse
      to Blake, which had minimal assets, other than 500,000 common shares of the
      Company’s common stock and 250,000 shares of VioQuest Pharmaceuticals, Inc., all
      of which were being held by the Company as collateral for the New Note. The
      Amended and Restated Pledge Agreement did not require Entrx, nor permit Blake
      or
      Mr. Mills, to cancel the shares of Entrx’s common stock, and require Entrx to
      apply the value of those cancelled shares at $2.50 per share, to be applied
      against the principal balance of the amounts due. In addition, Mr. Mills
      personally guaranteed the repayment of the New Note. Other financial obligations
      of Mr. Mills have materially impaired his ability to fulfill his obligations
      as
      a guarantor of the New Note.




54





Blake
      Capital failed to pay the interest due under the New Note on September 1, 2006,
      and Mr. Mills has recently indicated to the Company that he is currently unable
      to fulfill his obligations under the guarantee of the New Note. Accordingly,
      on
      January 4, 2007, consistent with authority given by the Board of Directors,
      the
      Company gave notice to Blake and Mr. Mills that it was declaring the New Note
      to
      be in default, and intended to foreclose on the 500,000 shares of the Company
      held as collateral, by cancelling those shares. In April 2007, the Company
      canceled 500,000 shares of the Company’s common stock that were pledged as
      collateral on the New Note and applied the $115,000 value of the stock against
      the outstanding New Note balance. The New Note was not repaid on the October
      31,
      2007 due date. The Company is exploring its opportunities to obtain proceeds
      from the sale of the 250,000 shares of VioQuest Pharmaceuticals, Inc. common
      stock pledged as collateral on the note.




**ITEM
      13.**  **EXHIBITS**




(a)


The
      following exhibits are being filed with this Annual Report on Form 10-KSB and/or
      are incorporated by reference therein in accordance with the designated footnote
      references:





3.
            Restated
                and Amended Certificate of Incorporation and Bylaws of the Company, and
                all amendments thereto. (1)3.2
            Amended
                and Restated Bylaws adopted February 14, 2002. (2)3.3
            Certificate
                of Amendment to Certificate of Incorporation effective June 25, 2002.
                (3)4.1
            Form
                of Certificate for Common Stock. (4)10.1
            Form
                of 1993 Omnibus Stock Option and Incentive Plan. (5)10.2
            Form
                of 1996 Omnibus Stock Option and Incentive Plan. (6)10.3
            Form
                of 2000 Omnibus Stock Option and Incentive Plan. (7)10.4
            Curtom-Metalclad
                Partnership Agreement and Amendment. (8)10.5
            Secured
                Promissory Note of Blake Capital Partners and Guarantee of Wayne
                W. Mills
                dated November 1, 2003. (9)10.6
            Amended
                and Restated Security and Pledge Agreement between Blake Capital
                Partners,
                Wayne W. Mills, Entrx Corporation and the escrow agent, Bruce Haglund,
                dated November 1, 2003. (10)10.7
            Pledge
                Agreement between the Company and Pandora Select Partners L.P. dated
                December 3, 2003. (11)10.8
            Settlement
                Agreement and Full Policy Release between the Company and one of
                its
                insurers dated June 22, 2004. (12)10.9
            Exchange
                Agreement between the Company and Pandora Select Partners, L.P. dated
                November 23, 2005. (13)10.10
            Amended
                and Restated Promissory Note, dated January 16, 2006, issued by the
                Company to Pandora Select Partners, L.P. to replace secured Convertible
                Promissory Note. (14)10.11
            Settlement
                Agreement between the Company and Ventana Global Environmental
                Organizational Partnership, L.P. and North America Environmental
                Fund,
                L.P. dated May 31, 2006. (15)14.
            Code
                of Ethics (16)




55




21.
            List
                of Subsidiaries of the Registrant. (17)31.1
            Rule
                13a-14(a) Certification of Chief Executive Officer.31.2
            Rule
                13a-14(a) Certification of Chief Financial Officer.32.
            Section
                1350 Certification.





(1)
            Filed
                with the Company’s Annual Report on Form 10-K for the year ended December
                31, 1997 and incorporated herein by this
                reference.


(2)
            Filed
                with the Company's Form 8-K on February 28, 2002 as Exhibit (v) and
                incorporated herein by this
                reference.


(3)
            Filed
                with the Company’s Annual Report on Form 10-K for the year ended December
                31, 2002 as Exhibit 3.2 and incorporated herein by this
                reference.


(4)
            Filed
                with the Company’s Annual Report on Form 10-K for the year ended December
                31, 2002 as Exhibit 4.1 and incorporated herein by this
                reference.


(5)
            Filed
                with the Company’s Transition Report on Form 10-K for the five months
                ended May 31, 1993 and incorporated herein by this
                reference.


(6)
            Filed
                with the Company’s Proxy Statement dated April 17, 1997 and incorporated
                herein by this reference.


(7)
            Filed
                with the Company’s Proxy Statement dated October 20, 2000 and incorporated
                herein by this reference.


(8)
            Filed
                with the Company’s Annual Report on Form 10-K for the year ended December
                31, 2001 as Exhibit 10.20 and incorporated herein by this
                reference.


(9)
            Filed
                with the Company’s Quarterly Report on Form 10-Q for the period ended
                September 30, 2003 as Exhibit 10.2 and incorporated herein by this
                reference.


(10)
            Filed
                with the Company’s Quarterly Report on Form 10-Q for the period ended
                September 30, 2003 as Exhibit 10.3 and incorporated herein by this
                reference.


(11)
            Filed
                with the Company’s Annual Report on Form 10-K, for the year ended December
                31, 2003, on March 24, 2004 as exhibit 10.23 and incorporated herein
                by
                reference.


(12)
            Filed
                with the Company's Form 8-K on June 25, 2004 as Exhibit 10.1 and
                incorporated herein by this
                reference.


(13)
            Filed
                with the Company’s Annual Report on Form 10-K, for the year ended December
                31, 2005, on May 22, 2006 as exhibit 10.9 and incorporated herein
                by
                reference.


(14)
            Filed
                with the Company’s Annual Report on Form 10-K, for the year ended December
                31, 2005, on May 22, 2006 as exhibit 10.10 and incorporated herein
                by
                reference.


(15)
            Filed
                with the Company's Form 8-K on June 2, 2006 as Exhibit 1 and incorporated
                herein by this reference.


(16)
            Filed
                with the Company’s Annual Report on Form 10-K, for the year ended December
                31, 2003, on March 24, 2004 as exhibit 14 and incorporated herein
                by
                reference.


(17)
            Filed
                with the Company's Annual Report on Form 10-K, for the year ended
                December
                31, 2003, on March 24, 2004 as exhibit 21 and incorporated herein
                by
                reference.




**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**





**Auditors**





On
      April
      16, 2002, upon the recommendation and approval of the Audit Committee, Entrx
      engaged Virchow, Krause & Company, LLP (“Virchow Krause”), certified public
      accountants with an office in Minneapolis, Minnesota, to audit Entrx’s
      consolidated financial statements for 2002 and to perform other appropriate
      accounting services for Entrx as needed. Entrx had not previously engaged
      Virchow Krause on any matter. Virchow Krause was engaged directly by the Audit
      Committee to provide its services with respect to Entrx’s 2003, 2004, 2005, 2006
      and 2007 fiscal years.




56





**Audit
      Fees**





Virchow
      Krause billed Entrx $73,900 and $82,058 for the annual audit of Entrx’s
      consolidated financial statements, and the review of Entrx’s consolidated
      financial statements included in Entrx’s quarterly reports on Form 10Q filed
      with the Securities and Exchange Commission, for the 2006 and 2007 fiscal years,
      respectively.





**Audit-Related
      Fees**





Virchow
      Krause billed Entrx $12,050 and $0 for assurance and related services provided
      to Entrx that are not included under the caption “Audit Fee” above, and were
      reasonably related to the performance of its audit or review of Entrx’s
      financial statements for the 2006 and 2007 fiscal year, respectively. Such
      services were provided in connection with review of a Form S-2 registration
      statement filing in April, 2004 and responses to SEC comment letters directed
      to
      the Company in connection with such filing.





**Tax
      Fees**





Virchow
      Krause billed Entrx $13,610 and $16,370 for services in connection with tax
      compliance, tax advice and tax planning for the 2006 and 2007 fiscal years,
      respectively. The services billed for in 2006 and 2007 were in connection with
      the preparation of Entrx’s federal and state income tax returns.





**All
      Other Fees**





No
      such
      services were provided or billed in 2006 or 2007.





**Approval
      by Audit Committee**





According
      to Entrx’s Audit Committee charter, all services provided to Entrx by its
      independent auditors must be pre-approved by the Audit Committee. The Audit
      Committee pre-approved of the engagement of Virchow Krause related to (i) the
      audit of the consolidated financial statements of Entrx for 2006 and 2007,
      and
      to provide its report thereon, (ii) the preparation of our 2006 and 2007 federal
      and state income tax returns, (iii) the review of our quarterly reports on
      Form
      10Q filed in 2006 and 2007, and (iv) review of a Form S-2 registration statement
      filing and assistance with responses to SEC comment letters on the Form S-2
      filing. No other services, other than those set forth in the foregoing sentence,
      were performed by Virchow Krause on our behalf in 2006 or 2007.




57


**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.





ENTRX
                CORPORATIONBy:
            /s/
                Brian D. NieburBrian
                D. NieburChief
                Financial OfficerDate:
                March 14, 2008





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.




Signatures
              
              Title
              
              Date/s/
                  Peter L. Hauser
              
              Chief
                  Executive Officer and Chairman
              
              March
                  14, 2008Peter
                  L. Hauser
              
              (Principal
                  Executive Officer)/s/
                  Brian D. Niebur
              
              Chief
                  Financial Officer
              
              March
                  14, 2008Brian
                  D. Niebur
              
              (Principal
                  Financial and Accounting Officer)/s/
                  Joseph M. Caldwell
              
              Director
              
              March
                  14, 2008Joseph
                  M. Caldwell/s/
                  David E. Cleveland
              
              Director
              
              March
                  14, 2008David
                  E. Cleveland/s/
                  E. Thomas Welch
              
              Director
              
              March
                  14, 2008E.
                  Thomas Welch




58