UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549







FORM
10-K





(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, 2009





Commission
File Number 0-2000





Entrx
Corporation


(Exact
name of registrant as specified in its charter)




Delaware
              95-2368719(State
      or other jurisdiction of
              (I.R.S.
      Employer ID No.)incorporation
      or organization)





800
      Nicollet Mall, Suite 2690Minneapolis,
      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:




Name
      of each exchangeTitle
      of each class
              on
      which registeredNone
              None





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


Common
Stock — $.10 Par Value


(Title
of Class)





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





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





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





Indicate
by check mark if disclosure of delinquent filers in response to Items 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-K or
any amendment to this Form 10-K. x





Indicate by checkmark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.




Large accelerated
    filer
                    o
                    Accelerated
      filer
                    oNon-accelerated
      filer
                    o
                    Smaller
      reporting Company
                    x





Indicate
by checkmark whether the registrant is a shell company (as defined by Rule 12b-2
of the Exchange Act). Yes  o No x





The
aggregate market value of the common stock held by non-affiliates of the
registrant as of June 30, 2009 was approximately $3,234,568 based on the average
of the closing bid and asked price of the registrant’s common stock on such
date.  All executive officers, directors and 10% or more beneficial
owners of the registrant’s common stock have been deemed, solely for the purpose
of the foregoing calculation, “affiliates” of the registrant.





As of
March 3, 2010, there were 7,416,211 shares of the registrant’s common stock,
$.10 par value, issued and outstanding.










All
statements, other than statements of historical fact, included in this Form
10-K, including without limitation the statements under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” 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-K.  Such
potential risks and uncertainties include, without limitation; estimates of
future revenues; 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 imposition of laws or regulations
relating to asbestos related injury claims; 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-K 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,” “assume,” “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 10K 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
40 years, the Company and its predecessors have been providing insulation
installation, maintenance and removal services, 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.  We
also provide and erect scaffolding both with respect to our installation,
removal and maintenance services, and for others.  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 painting and other trades not performed
by Metalclad Insulation Corporation.  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.  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/Asbestos Hazard Emergency Response Act refresher course
annually.  At December 31, 2009, 3 of our full-time salaried employees
and 41 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.





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.


2





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," submitted 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
were approximately $2,082,000 or 7.5% of our revenue in
2008.  Curtom-Metalclad had no sales in 2009, and is not expected to
have any sales in the future.  Curtom-Metalclad has no material
assets, liabilities or earnings.  We believe the discontinued use of
the Curtom-Metalclad joint venture and the loss of revenues that joint venture
generated, will not have a material adverse affect on us.  In
accordance with ASC 810-10-5-10, 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 2009, BP West Coast Products LLC, Southern
California Edison and NRG Energy accounted for 15.2%, 10.8% and 10.7% of our
revenues, respectively.  We cannot project whether a significant
portion of our revenues will be derived from these customers in
2010.  It is often the case in our business that a customer that
represented 10% or over of our revenues in one year would not represent 10% or
more of our revenues in the following year.  (See Note 11 to the
Consolidated Financial Statements.)





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, 2009 and December 31, 2008 was
approximately $3,746,000 and $8,727,000, 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
54% 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, 2009 will be completed
during the next eighteen months.


3





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 $15,000,000.





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.





Under
current accounting rules we are required to estimate our liability for existing
and future asbestos-related claims, and include this estimate as a liability in
our financial statements.  Until 2006, the number of asbestos-related
claims brought against the Company trended downward in a fairly consistent
manner from 725 cases brought in 2001, to 199 cases brought in
2005.  Similarly, the number of pending cases showed a similar
downward trend through 2007, from 1,009 cases at the end of 2001, to 222 cases
at the end of 2007.  Our prediction of future claims was based upon
these trends.





Beginning
in 2006, however, and through 2009, the number of claims brought against the
Company appears to have leveled off, making such projections
difficult.  In addition, we have experienced increases in our costs to
defend and resolve claims during this period.  As a result, we have
found it necessary to increase our projections of future liability with respect
to each of our 2006, 2008 and 2009 financial statements.





We
continue to believe, however, that the number of claims, as well as our total
liability for such claims, will decrease over time, and we have adjusted our
estimates based on an overall downward trend in claims made since 2001, and our
belief that the downward trend experienced before 2006 will resume.





Based on
this general downward trend we project that 986 asbestos-related injury claims
will be made against the Company in the future, in addition to the 239 claims
existing as of December 31, 2009, totaling 1,225 claims.  Multiplying
the average indemnity paid per resolved claim over the past nine years of
$21,130, by 1,225, we project the probable future indemnity to be paid on those
claims to be equal to approximately $26 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 $21,000 by
1,225, we project the probable future defense costs to equal approximately $26
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.





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 exceeds our estimated $52,000,000 liability for such claims
at December 31, 2009.  We cannot be assured, however, that our current
estimates of liability, based upon our experience, will prove to be accurate,
and there is a possibility that our estimated liability for asbestos-related
claims will eventually exceed our insurance coverage.


4





ACE Property
& Casualty Company Litigation.  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.  The ACE Lawsuit is
principally about coverage responsibility among the several insurers, as well as
total coverage.  Regardless of the outcome of this litigation, Entrx
does not believe that the ACE Lawsuit will result in materially diminishing
Entrx’s insurance coverage for asbestos-related
claims.  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, but has accrued $375,000, as
discussed below in “Insurance Policy Settlement,” to cover potential
indemnification obligations.  Based upon information known to date,
the Company is unable to predict to what extent its indemnification obligations
are reasonably possible to vary from the amounts accrued.





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 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.  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.
If
Allstate is required to provide indemnity for Entrx’s asbestos-related lawsuits,
it is likely that Entrx would have to indemnify Allstate for asbestos-related
claims that it defends up to $2,500,000 in the aggregate.  If Allstate
is not required to provide indemnity, Entrx would have no liability to
Allstate.  Entrx has accrued $375,000 as a potential loss in
connection with the Allstate matter and nothing has come to our attention that
would require us to record a different estimate at December 31,
2009.


5





Employees





As of
December 31, 2009, we had two part-time salaried employees in our executive
offices and 16 full-time salaried employees in our insulation business in
California, for a total of 18 employees.  These included three
executive officers, project managers/estimators, purchasing, accounting, and
office staff.





As of
December 31, 2009, our subsidiary, Metalclad Insulation Corporation, employed
approximately 137 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.  As of December 31, 2009, Metalclad Insulation Corporation also
employed approximately 10 hourly employees for scaffolding services, all of whom
are members of Local No. 1506 – Carpenters.  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, many
of the trade union agreements we are a party to include no strike, no work
stoppage provisions.  The Company’s subsidiary, Metalclad Insulation
Corporation, is one of a group of employers with a collective bargaining
agreement with Local No. 5 - International Association of Heat and Frost
Insulators and Allied Workers ("Local No. 5").  Our “Basic Agreement”
with Local No. 5 of the International Association of Heat and Frost Insulators
and Allied Workers expired in September 2008.  The “Basic Agreement”
included a “Maintenance Agreement” as an addendum.  Metalclad
Insulation Corporation and the other employers have agreed with the negotiating
representatives of Local No. 5 for an extension of the expired contract until
June 28, 2010.  Approximately 86% of our hourly employees are covered
by the Local No. 5 agreement.  An agreement with the Laborers Local
300 was signed in December 2009 and expires in December
2012.  Approximately 7% of our hourly employees are covered by the
Labors Local 300 agreement.  Our agreement with the Southwest Regional
Council of Carpenters was extended in May 2009 and currently expires on June 30,
2011.  Approximately 7% of our hourly employees are covered under the
Carpenters Local 1506 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.





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.


6





ITEM
2.        DESCRIPTION OF
PROPERTY





Our
executive offices are located in Minneapolis, Minnesota, which consists of
approximately 1,400 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 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.  We believe that the
properties currently leased by us are adequate for our operations for the
foreseeable future.





ITEM
3.        LEGAL PROCEEDINGS





Asbestos-related
Claims





Liability for
Asbestos 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.





Set forth
below is a table for the years ended December 31, 2005, 2006, 2007, 2008 and
2009 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:





2005
                                                                
                                                                
                                                                2006
                                                                
                                                                
                                                                2007
                                                                
                                                                
                                                                2008
                                                                
                                                                
                                                                2009New
      cases filed
                                                                
                                                                
                                                                199
                                                                
                                                                
                                                                
                                                                232
                                                                
                                                                
                                                                
                                                                163
                                                                
                                                                
                                                                
                                                                187
                                                                
                                                                
                                                                
                                                                188Defense
      judgments and dismissals
                                                                
                                                                
                                                                294
                                                                
                                                                
                                                                
                                                                253
                                                                
                                                                
                                                                
                                                                292
                                                                (3)
                                                                
                                                                
                                                                109
                                                                
                                                                
                                                                
                                                                168Plaintiff
      judgments and settled cases
                                                                
                                                                
                                                                108
                                                                
                                                                
                                                                
                                                                82
                                                                
                                                                
                                                                
                                                                53
                                                                
                                                                
                                                                
                                                                29
                                                                
                                                                
                                                                
                                                                52Total
      resolved cases (1)
                                                                
                                                                
                                                                402
                                                                
                                                                
                                                                
                                                                335
                                                                
                                                                
                                                                
                                                                345
                                                                (3)
                                                                
                                                                
                                                                138
                                                                
                                                                
                                                                
                                                                220Pending
      cases (1)
                                                                
                                                                
                                                                507
                                                                
                                                                
                                                                
                                                                404
                                                                
                                                                
                                                                
                                                                222
                                                                (3)
                                                                
                                                                
                                                                271
                                                                
                                                                
                                                                
                                                                239Total
      indemnity payments
                                                                
                                                                $
                                                                8,513,750
                                                                (2)
                                                                
                                                                $
                                                                4,858,750
                                                                
                                                                
                                                                $
                                                                7,974,500
                                                                
                                                                
                                                                $
                                                                7,582,550
                                                                (2)
                                                                
                                                                $
                                                                5,345,000Average
      indemnity paid on plaintiff judgments and settled cases
                                                                
                                                                $
                                                                78,831
                                                                (2)
                                                                
                                                                $
                                                                59,253
                                                                
                                                                
                                                                $
                                                                150,462
                                                                
                                                                
                                                                $
                                                                261,467
                                                                (2)
                                                                
                                                                $
                                                                102,788Average
      indemnity paid on all resolved cases
                                                                
                                                                $
                                                                21,178
                                                                (2)
                                                                
                                                                $
                                                                14,504
                                                                
                                                                
                                                                $
                                                                23,114
                                                                
                                                                
                                                                $
                                                                54,946
                                                                (2)
                                                                
                                                                $
                                                                24,295





(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
      total and average indemnity amounts paid on resolved cases in 2005 does
      not include an award rendered on April 4, 2005, finding Metalclad
      Insulation Corporation liable for $1,117,000 in damages.  The
      judgment was appealed by our insurer, and a final order and judgment of
      $1,659,000 was rendered in 2008.  The total and average
      indemnity amounts paid on this judgment are included in
    2008.


(3)
              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.


7





Under
current accounting rules we are required to estimate our liability to existing
and future asbestos-related claims.  This requires that we estimate
the number of claims we believe will be brought in the future.  We
previously based our estimates on the downward trend of cases brought from 725
cases brought in 2001, to 199 cases brought in 2005.  This downward
trend leveled off somewhat since 2006.  In addition, we have
experienced increases in our costs to defend and resolve claims during this
period.  As a result, we have found it necessary to increase our
projections of known and incurred but not reported liabilities with respect to
each of our 2006, 2008 and 2009 financial statements.  In the table
below is comparison of our estimates made at the beginning of each year of the
number of cases which would be brought in each of the past four years, and the
actual number of cases brought during that year:





2006
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2009Estimated
                  
                  
                  145
                  *
                  
                  
                  186
                  
                  
                  
                  148
                  
                  
                  
                  154Actual
                  
                  
                  232
                  
                  
                  
                  163
                  
                  
                  
                  187
                  
                  
                  
                  188





*Estimate
adjusted to 196 as of June 30, 2006.  These estimates resulted in the
estimated liability as shown under Item 1, Description of Business – Insurance
and Bonding.





We
believe that the leveling off of cases brought in 2005 through 2009 is largely
due to an aggressive campaign waged by plaintiffs’ lawyers in an attempt to
identify new plaintiffs, and that as the pool of plaintiffs decreases that it is
probable that the downward trend experienced prior to 2006 will resume, although
such resumption cannot be assured.





From 2001
and through 2009, the annual average indemnity paid on over 3,000 resolved cases
has fluctuated significantly, between a low of $14,504 in 2006 and a high of
$54,946 in 2008, with an overall average over that period of approximately
$21,130.  During this period, although there has been no discernible
upward or downward trend in indemnity payments, our most recent settlement
experience in 2008 and 2009 has been less favorable than earlier
periods.





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.  We expect that the newer
cases being brought will not be as meritorious and have as high a potential for
damages as 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 a low of $8,514
in 2003 to a high of $44,490 in 2008.  The weighted average defense
cost per resolved claim from 2005 through 2009 was $20,988.  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 intend to monitor the defense costs in
2010 and will adjust our estimates if events occur which would cause us to believe
that those estimates need revision.  We are currently
projecting those costs to be approximately $21,000 per claim.





Although
defense costs are included in our insurance coverage, we expended $188,000,
$215,000, $296,000, $128,000 and $96,000 in 2005, 2006, 2007, 2008 and 2009,
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.





As of
December 31, 2009, we re-evaluated our estimates to take into account our
experience in 2009.  Primarily as a result of the increase in the
number of new cases commenced during 2009 which exceeded our previous estimates,
we estimate that there will be 986 asbestos-related injury claims made against
the Company after December 31, 2009.  The 986, in addition to the 239
claims existing as of December 31, 2009, totals 1,225 current and future
claims.  Multiplying the average indemnity per resolved claim over the
past nine years of $21,130, times 1,225, we project the probable future
indemnity to be paid on those claims after December 31, 2009 to be equal to
approximately $26,000,000.  In addition, multiplying an estimated cost
of defense per resolved claim of approximately $21,000 times 1,225, we project
the probable future defense costs to equal approximately
$26,000,000.  Accordingly, our total estimated future asbestos-related
liability at December 31, 2009 is $52,000,000.


8





As of
December 31, 2009 we project that approximately 158 new asbestos-related claims
will be commenced and approximately 179 cases will be resolved in 2010,
resulting in an estimated 218 cases pending at December 31,
2010.  Since we project that an aggregate of 986 new cases will be
commenced after December 31, 2009, and that 158 of these cases will be commenced
in 2010, we estimate that an aggregate of 828 new cases will be commenced after
December 31, 2010.  Accordingly, we project the cases pending and
projected to be commenced in the future at December 31, 2010, will be 1,046
cases.  Multiplying 1,046 claims times the approximate average
indemnity paid per resolved claim from 2001 through 2009 and defense costs
incurred per resolved claim from 2005 through 2009 of $42,130, we estimate our
liability for current and future asbestos-related claims at December 31, 2010 to
be approximately $44,000,000.  This amounts to a $8,000,000 reduction
from the $52,000,000 liability we estimate as of December 31, 2009, or a
$2,000,000 reduction per quarter in 2010.





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 2001.  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.





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
determined that the minimum probable insurance coverage available to satisfy
asbestos-related injury claims exceeds our estimated future liability for such
claims of $52,000,000 and $45,250,000 as of December 31, 2009 and 2008,
respectively.  This determination assumes that the general trend of
reducing asbestos-related injury claims experienced prior to 2006 will resume
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 remain solvent and live up to what we believe is their
obligation to continue to cover our exposure with regards to these
claims.  Accordingly, we have included $52,000,000 and $45,250,000 of
such insurance coverage receivable as an asset on our December 31, 2009 and 2008
balance sheets, respectively.  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, as
discussed under “Insurance Coverage Litigation” below.Regardless of
our best estimates of liability for current and future asbestos-related claims,
the liability for these claims could be higher or lower than estimated by
amounts which are not predictable.  We, of course, cannot give any
assurance that our liability for such claims will not ultimately exceed our
available insurance coverage.  We believe, however, that our current
insurance is adequate to satisfy additional liability that is reasonably
possible in the event actual losses exceed our estimates.  We will
update our estimates of insurance coverage in future filings with the Securities
and Exchange Commission, as events occur which would cause us to believe that
those estimates need revision, based upon the subsequent claim experience, using
the methodology we have employed.





Insurance
Coverage Litigation





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. The
ACE Lawsuit is principally about coverage responsibility among the several
insurers, as well as total coverage.  Regardless of the outcome of
this litigation, Entrx does not believe that the ACE Lawsuit will result in
materially diminishing Entrx’s insurance coverage for asbestos-related claims.Nonetheless, we anticipate that we will incur attorney’s 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.  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.If Allstate is
required to provide indemnity for Entrx’s asbestos-related lawsuits, it is
likely that Entrx would have to indemnify Allstate for asbestos-related claims
that it defends up to $2,500,000 in the aggregate.  If Allstate is not
required to provide indemnity, Entrx would have no liability to
Allstate.  Entrx has accrued $375,000 as a potential loss in
connection with the Allstate matter.


9





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





None





PART
II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES





Market for Common
Stock





Since
June 18, 2009 our common stock has traded on the pink sheets under the symbol
ENTZ.PK.  Prior to that and from February 16, 2005 our common stock
traded on the pink sheets under the symbol ENTX.PK. The following table sets
forth, for the fiscal periods indicated, the high and low bidprices 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 PriceHigh
                          
                          
                          LowFiscal Year Ended December 31,
      2008Quarter
      Ended March 31, 2008
                          
                          $
                          0.42
                          
                          
                          $
                          0.25Quarter
      Ended June 30, 2008
                          
                          
                          0.33
                          
                          
                          
                          0.21Quarter
      Ended September 30, 2008
                          
                          
                          0.30
                          
                          
                          
                          0.21Quarter
      Ended December 31, 2008
                          
                          
                          0.28
                          
                          
                          
                          0.115Fiscal Year Ended December 31,
      2009Quarter
      Ended March 31, 2009
                          
                          $
                          0.25
                          
                          
                          $
                          0.11Quarter
      Ended June 30, 2009
                          
                          
                          1.01
                          
                          
                          
                          0.05Quarter
      Ended September 30, 2009
                          
                          
                          0.50
                          
                          
                          
                          0.13Quarter
      Ended December 31, 2009
                          
                          
                          0.30
                          
                          
                          
                          0.13





As of
March 3, 2010, the closing bidprice for the common
shares in the pink sheets was $0.38.





Shareholders of
Record





As of
March 3, 2010, the approximate number of record holders of our Common Stock was
49.


10





Dividends





The
Company paid a cash dividend of $.10 per common share to shareholders of record
on December 28, 2009.  We do not anticipate paying a dividend in 2010,
and earnings in 2010, if any, will likely be retained for use in our
business.





Unregistered Sales of
Securities





The
following table sets forth certain information regarding the sale of common
stock by the Company during the calendar year 2009 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)5/11/2009
                                  
                                  70,000
      Shares
                                  
                                  Members
      of the Board of Directors of Entrx Corporation (4 members) and the
      President of the Company’s wholly owned subsidiary
                                  
                                  Services
      as directors and officer valued at $0.25 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 and the president of
      the Company’s wholly owned subsidiary are deemed to be “accredited
      investors” by reason of their
offices.





ITEM
6.               MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





Summary.





Our
revenues decreased from $27,847,000 in 2008 to $19,077,000 in
2009.  Gross margin percentage decreased from 18.0% in 2008 to 15.8%
in 2009.  Our industrial customers cut back on capital projects in
2009 as compared to 2008, which resulted in lower revenue in
2009.  The decrease in oil prices during the fourth quarter of 2008
and the first quarter of 2009 caused some of these same customers who are in the
oil refining business to tighten their budgets for both maintenance and capital
project work in the year ended December 31, 2009.  The gross margin
percentage decreased for 2009 as compared with 2008 primarily as a result of the
Company aggressively bidding projects in order to obtain the
business.  Gross margin percentage was also impacted by the decrease
in revenues, and the fact that our fixed costs do not decrease in proportion to
the decrease in those revenues.  While the gross margin percentage
varies from job to job, insulation maintenance contracts generally have a lower
gross margin percentage than insulation installation and removal
contracts.  We believe that our revenues will increase in 2010
primarily due to an upturn in the general economic environment, and anticipate
that gross margin percentages in 2010 will increase slightly with improved
economic conditions.





In an
effort to increase shareholder value and to diversify from our insulation
services business, over five years ago we made equity investments in Catalytic
Solutions, Inc. and Clearwire Corporation, of $1,000,000 and $1,750,000
respectively.  Neither of those companies is in the insulation
services business.  We believed that these investments had the ability
to provide acceptable returns on our investment.  As it has turned
out, neither investment has provided us with a profit.





The
Company determined that there had been an impairment with respect to Entrx’s
investment in the common stock of Catalytic Solutions based upon the severity of
declines in the market price of the common stock below our carrying value and
our belief that there had been impairment indicators as discussed in ASC
320-10-35-27, including factors that raised significant concerns about Catalytic
Solution’s ability to continue as a going concern.  The shares in
Catalytic Solutions are traded on the London Stock Exchange’s Alternative
International Market for smaller companies (the “AIM”).  We therefore
recognized a $349,000 impairment on this investment during the year ended
December 31, 2008, representing the difference between our carrying value and
the quoted market price on December 31, 2008.  We also recognized an
impairment charge of $94,000 on this investment during the year ended December
31, 2009 based on the quoted market price as of June 30,
2009.  Catalytic Solutions, Inc. manufactures and delivers proprietary
technology that improves the performance and reduces the cost of catalytic
converters.


11





The
Company also determined that there had been an impairment with respect to
Entrx’s investment in the common stock of Clearwire Corporation during 2008
based upon the severity of declines in the market price of the common stock
below our carrying value.  We therefore recognized an impairment
charge of $563,000 on this investment during the year ended December 31, 2008,
based on the quoted market price as of September 30, 2008.  The
Company sold all of its shares of Clearwire Corporation during the year ended
December 31, 2009 which resulted in a gain of $121,000 for that year, but a loss
of our original investment of $1,442,000.  See “Liquidity and Capital
Resources.”





Our net
loss of $56,000 for the year ended December 31, 2009 as compared to a net income
at $255,000 for the year ended December 31, 2008, was primarily due to the
decrease in revenues.





Our
subsidiary, Metalclad Insulation Corporation, continues to be engaged in
lawsuits involving asbestos-related injury or potential injury
claims.  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
$45,250,000 at December 31, 2008.  Since we did not see a decrease in
the number of claims made in 2009, as compared to 2008, we re-evaluated our
estimate of that liability to be approximately $52,000,000 at December 31,
2009.  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
general trend of reducing asbestos-related injury claims we experienced prior to
2006 will resume, 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 $96,000 and $128,000 in 2009 and 2008, respectively, in legal fees
to assess and monitor the asbestos-related claims, 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, 2009 Compared to Year Ended December 31,
2008.





Contract
Revenue.  Total revenues were $19,077,000 in 2009 as compared
to $27,847,000 for 2008, a decrease of 31.6%.  The decrease from 2008
to 2009 was primarily a result of the Company performing non-recurring capital
project work for major industrial clients in the year ended December 31,
2008.  The decrease in oil prices during the fourth quarter of 2008
and the first quarter of 2009 caused some of these same customers who are in the
oil refining business to tighten their budgets for both maintenance and capital
project work in the year ended December 31, 2009.





Approximately
53% and 61% of the revenues for the years ended December 31, 2009 and 2008,
respectively, were from insulation maintenance contracts, which often continue
from year to year.  Approximately 37% of revenues in the years ended
December 31, 2009 and 2008, were derived from insulation installation and
removal projects, which are not normally continuing, but can go on for a year or
more.  These percentages are approximate because some installation and
removal projects involve maintenance arrangements, and vice
versa.  Approximately 8.1% of the revenues for the year ended December
31, 2009 were from scaffolding contracts, which often continue from year to
year.  The Company bids on hundreds of projects during any given year.
These projects range in value from a few hundred dollars to multi-million dollar
projects, and the projects can last from a few hours up to over a year in
duration.  The Company cannot predict what projects will be coming up
for bid in any particular period, or whether it will be the winning
bidder.  Accordingly, the Company is unable to determine if the
revenue trends, or the allocation between maintenance contracts and installation
and removal contracts, will continue.  We do, however, anticipate that
our revenues in 2010 will be more than 2009.


12





Contract Costs
and Gross Margin.Total cost of revenue for the year ended
December 31, 2009 was $16,057,000 as compared to $22,847,000 for the year ended
December 31, 2008, a decrease of 29.7%.  The gross margin as a
percentage of revenue was approximately 15.8% for the year ended December 31,
2009 compared to 18.0% for the year ended December 31, 2008.  The
decrease in the gross margin percentage during the year ended December 31, 2009
as compared with the year ended December 31, 2008 is primarilyas a result of the
Company aggressively bidding projects in order to obtain the
business.  Gross margin percentage was also impacted by the decrease
in revenues, and the fact that our fixed costs do not decrease in proportion to
the decrease in those revenues.While the gross margin
percentage varies from job to job, insulation maintenance contracts generally
have a lower gross margin percentage than insulation installation and removal
contracts.  The decrease in the cost of revenues for the year ended
December 31, 2009 as compared to the year ended December 31, 2008 was primarily
due to lower revenues as discussed above.





Selling, General
and Administrative Expenses.Selling, general and
administrative expenses were $3,117,000 for the year ended December 31, 2009 as
compared to $3,840,000 for the year ended December 31, 2008, a decrease of
18.8%.  The decrease was primarily due to decreases in the accrual for
bonuses of $838,000 and a decrease in legal expenses of $57,000, partially
offset by increases in bad debt expense of $64,000, shareholder reporting
expense of $52,000 and entertainment expense of $45,000.





Write off of
Shareholder Note Receivable.  As of December 31, 2007, the
Company had a receivable from Blake Capital Partners, LLC, guaranteed by a
former principal shareholder, Wayne Mills.  The note had been written
down to a net book value of $25,000 as of December 31, 2007.  In
December 2008, the Company received a notice from the United States Bankruptcy
Court that Blake Capital Partners, LLC and Mr. Mills had filed for Chapter 7
bankruptcy.  As such, the Company completely wrote-off the note
receivable and related allowance from Blake as of December 31,
2008.





Gain on Disposal
of Property, Plant and Equipment.  Gain on the disposal of
property plant and equipment was $3,000 and $18,000 for the year ended December
31, 2009 and 2008, respectively.




Interest Income
and Expense.Interest expense for
the year ended December 31, 2009 was $8,000 as compared with interest expense of
$8,000 for the year ended December 31, 2008.  Interest income
decreased from $40,000 in the year ended December 31, 2008 to $18,000 in the
year ended December 31, 2009 primarily as a result of a decrease in interest
rates.





Impairment Charge
on Available-for-Sale Securities.  The Company recognized
impairment charges of $94,000 and $930,000 on its available for sale securities
during the years ended December 31, 2009 and 2008, respectively.  The
Company recognized an impairment charge of $563,000 on its investment in
Clearwire Corporation for the year ended December 31, 2008.  The
Company also recognized an impairment charge of $94,000 and $349,000 on its
investment in Catalytic Solutions, Inc. during the years ended December 31, 2009
and 2008, respectively, and an impairment charge of $18,000 on its investment in
VioQuest Pharmaceuticals, Inc. during the year ended December 31,
2008.





Net Income
(loss).  Net income (loss) was down for the year ended December
31, 2009 as compared with the year ended December 31, 2008 primarily due to the
decrease in revenues.  We realized a net loss of $56,000 (or net loss
of $0.01 per share) for the year ended December 31, 2009, as compared to net
income of $255,000 (or net income of $0.03 per share) for the year ended
December 31, 2008.





Liquidity and Capital
Resources





General.  As
of December 31, 2009, we had $2,071,000 in cash and cash equivalents and $7,000
in available-for-sale securities.  The Company had working capital of
$5,652,000 as of December 31, 2009.  We own 384,084 shares of
Catalytic Solutions, Inc. common stock (AIM: CTSU), which are treated as
available-for-sale securities.





In an
effort to increase shareholder value and to diversify from our insulation
services business, we made equity investments in Catalytic Solutions, Inc. and
Clearwire Corporation, that are not in the insulation services business and
which we believed had the ability to provide acceptable return on our
investment.  The Company determined that there had been an impairment
with respect to Entrx’s investment in the common stock of Catalytic Solutions
based upon the severity of declines in the market price of the common stock
below our carrying value and our belief that there had been impairment
indicators as discussed in ASC 320-10-35-27, including factors that raise
significant concerns about Catalytic Solution’s ability to continue as a going
concern.  The shares in Catalytic Solutions are traded on the London
Stock Exchange’s Alternative International Market for smaller companies (the
“AIM”).  We therefore recognized a $349,000 impairment on this
investment during the year ended December 31, 2008, representing the difference
between our carrying value and the quoted market price on December 31,
2008.  We also recognized an additional impairment charge of $94,000
on this investment during the year ended December 31, 2009 based on the quoted
market price as of June 30, 2009.  Catalytic Solutions, Inc.
manufactures and delivers proprietary technology that improves the performance
and reduces the cost of catalytic converters.  The Company also
determined that there had been an impairment with respect to Entrx’s investment
in the common stock of Clearwire Corporation based upon the severity of declines
in the market price of the common stock below our carrying value.  We
therefore recognized an impairment charge of $563,000 on this investment during
the year ended December 31, 2008, based on the quoted market price as of
September 30, 2008.  The Company sold all of its shares of Clearwire
Corporation during the year ended December 31, 2009, resulting in a gain on the
sale in the amount of $121,000.


13





Blake
Capital Partners, LLC was current in the payment of interest on the shareholder
note receivable through the payment due March 1, 2006.  The payment
due September 1, 2006, however, was not made, and we were informed by Mr. Mills,
the principal of Blake Capital Partners and guarantor on the note, that no
payment should be expected in the foreseeable future.  As of December
31, 2007 the Company had adjusted the net book value of the note to $25,000, the
approximate value of the collateral securing the note.  In December
2008, the Company received a notice from the United States Bankruptcy Court that
Blake Capital Partners, LLC and Mr. Mills had filed for Chapter 7
bankruptcy.  The Company is exploring its opportunities to obtain
proceeds from the sale of the 25,000 shares (250,000 shares before a one for ten
share reverse stock split on April 30, 2008) of VioQuest Pharmaceuticals, Inc.
common stock pledged as collateral on the note, but any proceeds are expected to
be de minimis.  As such, the Company completely wrote-off the note
receivable and related allowance from Blake as of December 31,
2008.





Cash
provided by operations was $719,000 for 2009, compared with cash provided by
operations of $779,000 in 2008.  For the year ended December 31, 2009
the positive cash flow from operations was primarily the result of a decrease in
accounts receivable of $1,809,000 and a decrease in inventories of
$81,000.  This positive cash flow was partially offset by a decrease
in accounts payable and accrued expenses of $1,225,000 and an increase in costs
and estimated earnings in excess of billings on uncompleted contracts of
$107,000.  The decrease in accounts receivable is primarily due to a
decrease in revenues.  For the year ended December 31, 2008 the
positive cash flow from operations was primarily the result of our net income of
$255,000, non-cash expenses for impairment charges on investments totaling
$930,000, and depreciation and amortization of $209,000 partially offset by an
increase in accounts receivable of $230,000, an increase in costs and estimated
earnings in excess of billings on uncompleted contracts totaling $436,000 and a
decrease in accounts payable and accrued expenses of $168,000.  The
increase in accounts receivable is primarily due to an increase in
revenues.





Net
investing activities provided $279,000 of cash in 2009.  Sales of
available-for-sale securities provided $317,000 and we used cash of $40,000 for
capital expenditures, primarily at our subsidiary, Metalclad Insulation
Corporation during 2009.





Cash used
in financing activities totaled $1,006,000 in 2009 compared with cash used in
financing activities of $145,000 in 2008.  In the year ended December
31, 2009, the Company used $108,000 to repurchase common stock related to the
reverse/forward stock split approved by the shareholders.  Payments on
long-term borrowings used $156,000 and $145,000 of cash in the years ended
December 31, 2009 and 2008, respectively.  During the year ended
December 31, 2009, the Company used $742,000 for a dividend.





Liability for
Asbestos 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.





Set forth
below is a table for the years ended December 31, 2005, 2006, 2007, 2008 and
2009 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:


14





2005
                                                                  
                                                                  
                                                                  2006
                                                                  
                                                                  
                                                                  2007
                                                                  
                                                                  
                                                                  2008
                                                                  
                                                                  
                                                                  2009New
      cases filed
                                                                  
                                                                  
                                                                  199
                                                                  
                                                                  
                                                                  
                                                                  232
                                                                  
                                                                  
                                                                  
                                                                  163
                                                                  
                                                                  
                                                                  
                                                                  187
                                                                  
                                                                  
                                                                  
                                                                  188Defense
      judgments and dismissals
                                                                  
                                                                  
                                                                  294
                                                                  
                                                                  
                                                                  
                                                                  253
                                                                  
                                                                  
                                                                  
                                                                  292
                                                                  (3)
                                                                  
                                                                  
                                                                  109
                                                                  
                                                                  
                                                                  
                                                                  168Plaintiff
      judgments and settled cases
                                                                  
                                                                  
                                                                  108
                                                                  
                                                                  
                                                                  
                                                                  82
                                                                  
                                                                  
                                                                  
                                                                  53
                                                                  
                                                                  
                                                                  
                                                                  29
                                                                  
                                                                  
                                                                  
                                                                  52Total
      resolved cases (1)
                                                                  
                                                                  
                                                                  402
                                                                  
                                                                  
                                                                  
                                                                  335
                                                                  
                                                                  
                                                                  
                                                                  345
                                                                  (3)
                                                                  
                                                                  
                                                                  138
                                                                  
                                                                  
                                                                  
                                                                  220Pending
      cases (1)
                                                                  
                                                                  
                                                                  507
                                                                  
                                                                  
                                                                  
                                                                  404
                                                                  
                                                                  
                                                                  
                                                                  222
                                                                  (3)
                                                                  
                                                                  
                                                                  271
                                                                  
                                                                  
                                                                  
                                                                  239Total
      indemnity payments
                                                                  
                                                                  $
                                                                  8,513,750
                                                                  (2)
                                                                  
                                                                  $
                                                                  4,858,750
                                                                  
                                                                  
                                                                  $
                                                                  7,974,500
                                                                  
                                                                  
                                                                  $
                                                                  7,582,550
                                                                  (2)
                                                                  
                                                                  $
                                                                  5,345,000Average
      indemnity paid on plaintiff judgments and settled cases
                                                                  
                                                                  $
                                                                  78,831
                                                                  (2)
                                                                  
                                                                  $
                                                                  59,253
                                                                  
                                                                  
                                                                  $
                                                                  150,462
                                                                  
                                                                  
                                                                  $
                                                                  261,467
                                                                  (2)
                                                                  
                                                                  $
                                                                  102,788Average
      indemnity paid on all resolved cases
                                                                  
                                                                  $
                                                                  21,178
                                                                  (2)
                                                                  
                                                                  $
                                                                  14,504
                                                                  
                                                                  
                                                                  $
                                                                  23,114
                                                                  
                                                                  
                                                                  $
                                                                  54,946
                                                                  (2)
                                                                  
                                                                  $
                                                                  24,295





(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
      total and average indemnity amounts paid on resolved cases in 2005 does
      not include an award rendered on April 4, 2005, finding Metalclad
      Insulation Corporation liable for $1,117,000 in damages.  The
      judgment was appealed by our insurer, and a final order and judgment of
      $1,659,000 was rendered in 2008.  The total and average
      indemnity amounts paid on this judgment are included in
    2008.


(3)
              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.





Under
current accounting rules we are required to estimate our liability to existing
and future asbestos-related claims.  This requires that we estimate
the number of claims we believe will be brought in the future.  We
previously based our estimates on the downward trend of cases brought from 725
cases brought in 2001, to 199 cases brought in 2005.  This downward
trend leveled off somewhat since 2006.  In addition, we have
experienced increases in our costs to defend and resolve claims during this
period.  As a result, we have found it necessary to increase our
projections of known and incurred but not reported liabilities with respect to
each of our 2006, 2008 and 2009 financial statements.  In the table
below is comparison of our estimates made at the beginning of each year of the
number of cases which would be brought in each of the past four years, and the
actual number of cases brought during that year:





2006
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2009Estimated
                  
                  
                  145
                  *
                  
                  
                  186
                  
                  
                  
                  148
                  
                  
                  
                  154Actual
                  
                  
                  232
                  
                  
                  
                  163
                  
                  
                  
                  187
                  
                  
                  
                  188





*Estimate
adjusted to 196 as of June 30, 2006.  These estimates resulted in the
estimated liability as shown under Item 1, Description of Business – Insurance
and Bonding.





We
believe that the leveling off of cases brought in 2005 through 2009 is largely
due to an aggressive campaign waged by plaintiffs’ lawyers in an attempt to
identify new plaintiffs, and that as the pool of plaintiffs decreases that it is
probable that the downward trend experienced prior to 2006 will resume, although
such resumption cannot be assured.





From 2001
and through 2009, the annual average indemnity paid on over 3,000 resolved cases
has fluctuated significantly, between a low of $14,504 in 2006 and a high of
$54,946 in 2008, with an overall average over that period of approximately
$21,130.  During this period, although there has been no discernible
upward or downward trend in indemnity payments, our most recent settlement
experience in 2008 and 2009 has been less favorable than earlier
periods.


15





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.  We expect that the newer
cases being brought will not be as meritorious and have as high a potential for
damages as 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 a low of $8,514
in 2003 to a high of $44,490 in 2008.  The weighted average defense
cost per resolved claim from 2005 through 2009 was $20,988.  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 intend to monitor the defense costs in
2010 and will adjust our estimates if events occur which would cause us to believe
that those estimates need revision.  We are currently
projecting those costs to be approximately $21,000 per claim.





Although
defense costs are included in our insurance coverage, we expended $188,000,
$215,000, $296,000, $128,000 and $96,000 in 2005, 2006, 2007, 2008 and 2009,
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.





As of
December 31, 2009, we re-evaluated our estimates to take into account our
experience in 2009.  Primarily as a result of the increase in the
number of new cases commenced during 2009 which exceeded our previous estimates,
we estimate that there will be 986 asbestos-related injury claims made against
the Company after December 31, 2009.  The 986, in addition to the 239
claims existing as of December 31, 2009, totals 1,225 current and future
claims.  Multiplying the average indemnity per resolved claim over the
past nine years of $21,130, times 1,225, we project the probable future
indemnity to be paid on those claims after December 31, 2009 to be equal to
approximately $26,000,000.  In addition, multiplying an estimated cost
of defense per resolved claim of approximately $21,000 times 1,225, we project
the probable future defense costs to equal approximately
$26,000,000.  Accordingly, our total estimated future asbestos-related
liability at December 31, 2009 is $52,000,000.





As of
December 31, 2009 we project that approximately 158 new asbestos-related claims
will be commenced and approximately 179 cases will be resolved in 2010,
resulting in an estimated 218 cases pending at December 31,
2010.  Since we project that an aggregate of 986 new cases will be
commenced after December 31, 2009, and that 158 of these cases will be commenced
in 2010, we estimate that an aggregate of 828 new cases will be commenced after
December 31, 2010.  Accordingly, we project the cases pending and
projected to be commenced in the future at December 31, 2010, will be 1,046
cases.  Multiplying 1,046 claims times the approximate average
indemnity paid per resolved claim from 2001 through 2009 and defense costs
incurred per resolved claim from 2005 through 2009 of $42,130, we estimate our
liability for current and future asbestos-related claims at December 31, 2010 to
be approximately $44,000,000.  This amounts to a $8,000,000 reduction
from the $52,000,000 liability we estimate as of December 31, 2009, or a
$2,000,000 reduction per quarter in 2010.





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 2001.  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.





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.


16





We have
determined that the minimum probable insurance coverage available to satisfy
asbestos-related injury claims exceeds our estimated future liability for such
claims of $52,000,000 and $45,250,000 as of December 31, 2009 and 2008,
respectively.  This determination assumes that the general trend of
reducing asbestos-related injury claims experienced prior to 2006 will resume
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 remain solvent and live up to what we believe is their
obligation to continue to cover our exposure with regards to these
claims.  Accordingly, we have included $52,000,000 and $45,250,000 of
such insurance coverage receivable as an asset on our December 31, 2009 and 2008
balance sheets, respectively.  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, as
discussed under “Insurance Coverage Litigation” below.Regardless of
our best estimates of liability for current and future asbestos-related claims,
the liability for these claims could be higher or lower than estimated by
amounts which are not predictable.  We, of course, cannot give any
assurance that our liability for such claims will not ultimately exceed our
available insurance coverage.  We believe, however, that our current
insurance is adequate to satisfy additional liability that is reasonably
possible in the event actual losses exceed our estimates.  We will
update our estimates of insurance coverage in future filings with the Securities
and Exchange Commission, as events occur which would cause us to believe that
those estimates need revision, based upon the subsequent claim experience, using
the methodology we have employed.





Insurance
Coverage Litigation





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. The
ACE Lawsuit is principally about coverage responsibility among the several
insurers, as well as total coverage.  Regardless of the outcome of
this litigation, Entrx does not believe that the ACE Lawsuit will result in
materially diminishing Entrx’s insurance coverage for asbestos-related claims.Nonetheless, we anticipate that we will incur attorney’s 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.  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.If Allstate is
required to provide indemnity for Entrx’s asbestos-related lawsuits, it is
likely that Entrx would have to indemnify Allstate for asbestos-related claims
that it defends up to $2,500,000 in the aggregate.  If Allstate is not
required to provide indemnity, Entrx would have no liability to
Allstate.  Entrx has accrued $375,000 as a potential loss in
connection with the Allstate matter.





The
following summarizes our contractual obligations at December 31,
2009.  The long-term debt consists of various notes payable to finance
companies for vehicles used in the ordinary course of the Company’s insulation
business (See Note 7).





Total
                  
                  
                  1 Year or Less
                  
                  
                  1-3 Years
                  
                  
                  4-5 Years
                  
                  
                  Over 5 YearsLong-term
      debt
                  
                  $
                  137,772
                  
                  
                  $
                  106,152
                  
                  
                  $
                  31,620
                  
                  
                  $
                  -
                  
                  
                  $
                  -Non-cancelable
      leases
                  
                  
                  351,076
                  
                  
                  
                  172,944
                  
                  
                  
                  178,132
                  
                  
                  
                  -
                  
                  
                  
                  -Estimated
      interest payments
                  
                  
                  4,290
                  
                  
                  
                  3,644
                  
                  
                  
                  646
                  
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  493,138
                  
                  
                  $
                  282,740
                  
                  
                  $
                  210,398
                  
                  
                  $
                  -
                  
                  
                  $
                  -





During
2009 we paid a cash dividend of $.10 per common share or
$741,621.  During 2008, we did not pay or declare any cash
dividends.  We do not anticipate paying any cash dividends in the near
future.


17





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, 2009, 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) valuation of investments, (c)
allowances for uncollectible accounts receivable, (d) judgments and estimates
used in determining 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.  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
customer.  Future changes in the financial condition of a customer may
require an adjustment to the allowance for uncollectible 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
December 2007, the Financial Accounting Standards Board (“FASB”) issued
authoritative guidance requiring 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 prior practices, some of which
could have a material impact on how an entity accounts for its business
combinations.  The guidance also requires additional disclosure of
information surrounding a business combination.  The guidance 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 adoption of this guidance had no
impact on the Company’s financial position or results of
operations.





In
December 2007, the FASB issued authoritative guidance requiring entities to
report non-controlling minority interests in subsidiaries as equity in
consolidated financial statements.  The guidance is effective for
fiscal years beginning on or after December 15, 2008.  The adoption of
this authoritative guidance had no impact on the Company’s financial position or
results of operations since its consolidated subsidiaries are wholly owned and
non-controlling interests in consolidated variable interest entities are not
material.


18





In March
2008, the FASB issued authoritative guidance amending and expanding upon the
disclosure requirements for derivative financial instruments and for hedging
activities to provide users of financial statements with an enhanced
understanding of how and why an entity uses derivative financial instruments,
how derivative financial instruments are accounted for, and how derivative
financial instruments affect an entity’s financial position, financial
performance, and results of operations.  The guidance is effective for
financial statement and interim periods beginning after November 15,
2008.  The adoption of this authoritative guidance had no material
effect on the Company’s financial statements and disclosures.





In April,
2009, the FASB issued authoritative guidance requiring entities to disclose,
among other things, the methods and significant assumptions used to estimate the
fair value of financial instruments in both interim and annual financial
statements.  This guidance also requires those disclosures in
summarized financial information at interim reporting periods. The guidance is
effective for interim and annual periods ending after June 15,
2009.  The Company adopted the authoritative guidance on April 1,
2009.





Also in
April, 2009, the FASB issued authoritative guidance amending the
other-than-temporary impairment (OTTI) guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of OTTI
on debt and equity securities in the financial statements. This guidance does
not amend existing recognition and measurement guidance related to OTTI of
equity securities.  The guidance requires that an entity disclose
information for interim and annual periods that enables users of its financial
statements to understand the types of available-for-sale and held-to maturity
debt and equity securities held, including information about investments in an
unrealized loss position for which an OTTI has or has not been
recognized.  The guidance is effective for interim and annual
reporting periods ending after June 15, 2009.  Entrx adopted the
authoritative guidance as of April 1, 2009.





In May
2009, the FASB issued authoritative guidance providing establishing general
standards of accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued.  The guidance also requires entities to disclose the
date through which subsequent events were evaluated as well as the rationale for
why that date was selected.  The guidance is effective for interim and
annual periods ending after June 15, 2009, and accordingly, we adopted this
authoritative guidance during the second quarter of 2009.  The
guidance requires that public entities evaluate subsequent events through the
date that the financial statements are issued.  In February 2010, the
FASB amended its guidance effective immediately to remove the requirement for an
SEC filer to disclose the date through which subsequent events were
evaluated.  The Company’s adoption of the FASB’s guidance on
subsequent events, as amended, did not have a material effect on the Company’s
financial statements.





In June
2009, the FASB issued authoritative guidance modifying how a company determines
when an entity that is insufficiently capitalized or is not controlled through
voting (or similar rights) should be consolidated.  The guidance
clarifies that the determination of whether a company is required to consolidate
an entity is based on, among other things, an entity’s purpose and design and a
company’s ability to direct the activities of the entity that most significantly
impact the entity’s economic performance.  The guidance requires an
ongoing reassessment of whether a company is the primary beneficiary of a
variable interest entity.  The guidance also requires additional
disclosures about a company’s involvement in variable interest entities and any
significant changes in risk exposure due to that involvement.  The
guidance is effective for fiscal years beginning after November 15,
2009.  The Company does not expect that the adoption of this
authoritative guidance will have a material effect on our financial condition,
results of operations or cash flows.





In June
2009, the FASB issued authoritative guidance codifying generally accepted
accounting principles in the United States (“GAAP”).  While the
guidance was not intended to change GAAP, it did change the way the Company
references these accounting principles in the Notes to the Consolidated
Financial Statements.  This guidance was effective for interim and
annual reporting periods ending after September 15, 2009.  The
Company’s adoption of this authoritative guidance as of September 30, 2009
changed how it references GAAP in its disclosures.


19


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, 2009 and 2008, 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, 2009 and 2008 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/ Baker
Tilly Virchow Krause, LLP
 
 Minneapolis,
Minnesota
 March 10,
2010
  20
 
 ENTRX
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
  December 31,
                    2009
                
                
                December 31,
                    2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                2,070,710
                
                
                $
                2,078,666Available-for-sale
      securities
                
                
                7,000
                
                
                
                296,266Accounts
      receivable, less allowance for doubtful accounts of $80,000 as of December
      31, 2009 and 2008
                
                
                3,888,261
                
                
                
                5,697,084Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                
                
                1,174,085
                
                
                
                1,067,384Inventories
                
                
                34,620
                
                
                
                115,670Prepaid
      expenses and other current assets
                
                
                327,802
                
                
                
                292,957Insurance
      claims receivable
                
                
                8,000,000
                
                
                
                7,250,000Other
      receivables
                
                
                83,620
                
                
                
                138,229Total
      current assets
                
                
                15,586,098
                
                
                
                16,936,256Property,
      plant and equipment, net
                
                
                195,069
                
                
                
                369,981Insurance
      claims receivable
                
                
                44,000,000
                
                
                
                38,000,000Other
      assets
                
                
                62,431
                
                
                
                46,620Total
      Assets
                
                $
                59,843,598
                
                
                $
                55,352,857LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of long-term debt
                
                $
                106,152
                
                
                $
                153,290Accounts
      payable
                
                
                496,004
                
                
                
                999,737Accrued
      expenses
                
                
                1,221,047
                
                
                
                1,942,453Reserve
      for asbestos liability claims
                
                
                8,000,000
                
                
                
                7,250,000Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                
                
                111,312
                
                
                
                100,615Total
      current liabilities
                
                
                9,934,515
                
                
                
                10,446,095Long-term
      debt, less current portion
                
                
                31,620
                
                
                
                140,602Reserve
      for asbestos liability claims
                
                
                44,000,000
                
                
                
                38,000,000Total
      liabilities
                
                
                53,966,135
                
                
                
                48,586,697Commitments
      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; 7,416,211 and
      7,656,147 issued and outstanding at December 31, 2009 and 2008,
      respectively
                
                
                787,101
                
                
                
                811,095Additional
      paid-in capital
                
                
                69,023,276
                
                
                
                69,831,881Accumulated
      deficit
                
                
                (63,932,914
                )
                
                
                (63,876,816
                )Total
      shareholders’ equity
                
                
                5,877,463
                
                
                
                6,766,160Total
      Liabilities and Shareholders’ Equity
                
                $
                59,843,598
                
                
                $
                55,352,857
 
 See Notes
to Consolidated Financial Statements
  21
  ENTRX
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 
 Year Ended December 31,2009
                    
                    
                    2008Contract
      revenues
                    
                    $
                    19,077,341
                    
                    
                    $
                    27,846,507Contract
      costs and expenses
                    
                    
                    16,057,047
                    
                    
                    
                    22,847,031Gross
      margin
                    
                    
                    3,020,294
                    
                    
                    
                    4,999,476Operating
      expenses:Selling,
      general and administrative
                    
                    
                    3,117,264
                    
                    
                    
                    3,840,192Change
      in allowance on shareholder note receivable
                    
                    
                    -
                    
                    
                    
                    25,000Gain
      on disposal of property, plant and equipment
                    
                    
                    (2,800
                    )
                    
                    
                    (18,250
                    )Total
      operating expenses
                    
                    
                    3,114,464
                    
                    
                    
                    3,846,942Operating
      income (loss)
                    
                    
                    (94,170
                    )
                    
                    
                    1,152,534Interest
      income
                    
                    
                    18,076
                    
                    
                    
                    40,282Interest
      expense
                    
                    
                    (7,520
                    )
                    
                    
                    (7,767
                    )Gain
      on sale of marketable securities
                    
                    
                    121,799
                    
                    
                    
                    -Impairment
      charge on available-for-sale securities
                    
                    
                    (94,283
                    )
                    
                    
                    (929,679
                    )Net
      income (loss)
                    
                    
                    (56,098
                    )
                    
                    
                    255,370Other
      comprehensive income (loss)Unrealized
      gain on available-for-sale securities
                    
                    
                    6,512
                    
                    
                    
                    -Reclassification
      adjustment for unrealized (gains) losses on available-for-sale securities
      recognized in net income
                    
                    
                    (6,512
                    )
                    
                    
                    216,509Comprehensive
      income (loss)
                    
                    $
                    (56,098
                    )
                    
                    $
                    471,879Weighted
      average number of common shares — basic and diluted
                    
                    
                    7,531,388
                    
                    
                    
                    7,653,196Net
      income (loss) per common share — basic and diluted
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.03Dividends
      declared per common share
                    
                    $
                    0.10
                    
                    
                    $
                    0.00
 
 See Notes
to Consolidated Financial Statements
  22
  ENTRX
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
 
 Years
Ended December 31, 2009 and 2008
 
 Common Stock
                
                
                Additional
                  Paid-in
                
                
                Accumulated
                
                
                Accumulated
                  Other
                  Comprehensive
                
                
                Total
                  Shareholders’Shares
                
                
                Amounts
                
                
                Capital
                
                
                Deficit
                
                
                Income (loss)
                
                
                EquityBalance
      at December 31, 2007
                
                
                7,616,147
                
                
                $
                807,095
                
                
                $
                69,821,881
                
                
                $
                (64,132,186
                )
                
                $
                (216,509
                )
                
                $
                6,280,281Reclassification
      adjustment for losses recognized in net income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                216,509
                
                
                
                216,509Common
      stock issued in exchange for services
                
                
                40,000
                
                
                
                4,000
                
                
                
                10,000
                
                
                
                -
                
                
                
                -
                
                
                
                14,000Net
      income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                255,370
                
                
                
                -
                
                
                
                255,370Balance
      at December 31, 2008
                
                
                7,656,147
                
                
                
                811,095
                
                
                
                69,831,881
                
                
                
                (63,876,816
                )
                
                
                -
                
                
                
                6,766,160Unrealized
      loss on available-for-sale securities
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                6,512
                
                
                
                6,512Reclassification
      adjustment for losses recognized in net income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (6,512
                )
                
                
                (6,512
                )Repurchases
      of common stock
                
                
                (309,936
                )
                
                
                (30,994
                )
                
                
                (77,484
                )
                
                
                -
                
                
                
                -
                
                
                
                (108,478
                )Common
      stock issued in exchange for services
                
                
                70,000
                
                
                
                7,000
                
                
                
                10,500
                
                
                
                -
                
                
                
                -
                
                
                
                17,500Dividend
      paid
                
                
                -
                
                
                
                -
                
                
                
                (741,621
                )
                
                
                -
                
                
                
                -
                
                
                
                (741,621
                )Net
      income (loss)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (56,098
                )
                
                
                -
                
                
                
                (56,098
                )Balance
      at December 31, 2009
                
                
                7,416,211
                
                
                $
                787,101
                
                
                $
                69,023,276
                
                
                $
                (63,932,914
                )
                
                $
                -
                
                
                $
                5,877,463
  See Notes
to Consolidated Financial Statements
  23
  ENTRX
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 Year Ended December 31,2009
                    
                    
                    2008Cash
      flows from operating activities:Net
      income (loss)
                    
                    $
                    (56,098
                    )
                    
                    $
                    255,370Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization
                    
                    
                    215,114
                    
                    
                    
                    208,633Gain
      on disposal of property, plant and equipment
                    
                    
                    (2,800
                    )
                    
                    
                    (18,250
                    )Impairment
      charge on available-for-sale securities
                    
                    
                    94,283
                    
                    
                    
                    929,679Gain
      on sales of available-for-sale securities
                    
                    
                    (121,799
                    )
                    
                    
                    -Allowance
      on shareholder note receivable
                    
                    
                    -
                    
                    
                    
                    25,000Common
      stock issued for services
                    
                    
                    17,500
                    
                    
                    
                    14,000Changes
      in operating assets and liabilities:Accounts
      receivable, net
                    
                    
                    1,808,823
                    
                    
                    
                    (230,195
                    )Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                    
                    
                    (106,701
                    )
                    
                    
                    (435,759
                    )Inventories
                    
                    
                    81,050
                    
                    
                    
                    (8,552
                    )Prepaid
      expenses and other current assets
                    
                    
                    (34,845
                    )
                    
                    
                    (19,801
                    )Other
      receivables
                    
                    
                    54,609
                    
                    
                    
                    41,786Other
      assets
                    
                    
                    (15,811
                    )
                    
                    
                    146,920Accounts
      payable and accrued expenses
                    
                    
                    (1,225,139
                    )
                    
                    
                    (168,281
                    )Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                    
                    
                    10,697
                    
                    
                    
                    38,221Net
      cash provided by operating activities
                    
                    
                    718,883
                    
                    
                    
                    778,771Cash
      flows from investing activities:Capital
      expenditures
                    
                    
                    (40,202
                    )
                    
                    
                    -Sales
      of available-for-sale securities
                    
                    
                    316,782
                    
                    
                    
                    -Proceeds
      from sale of property, plant and equipment, net of
expenses
                    
                    
                    2,800
                    
                    
                    
                    -Net
      cash provided by investing activities
                    
                    
                    279,380
                    
                    
                    
                    -Cash
      flows from financing activities:Payments
      on long-term debt
                    
                    
                    (156,120
                    )
                    
                    
                    (144,988
                    )Dividends
      paid
                    
                    
                    (741,621
                    )
                    
                    
                    -Repurchases
      of common stock
                    
                    
                    (108,478
                    )
                    
                    
                    -Net
      cash used in financing activities
                    
                    
                    (1,006,219
                    )
                    
                    
                    (144,988
                    )Increase
      (decrease) in cash and cash equivalents
                    
                    
                    (7,956
                    )
                    
                    
                    633,783Cash
      and cash equivalents at beginning of year
                    
                    
                    2,078,666
                    
                    
                    
                    1,444,883Cash
      and cash equivalents at end of year
                    
                    $
                    2,070,710
                    
                    
                    $
                    2,078,666Non-cash
      investing and financing activities:Acquisition
      of property, plant and equipment in exchange for notes
    payable
                    
                    $
                    -
                    
                    
                    $
                    211,660Supplemental
      disclosure of cash flow information:Interest
      paid
                    
                    $
                    7,520
                    
                    
                    $
                    7,767
 
 See Notes
to Consolidated Financial Statements
  24
  ENTRX
CORPORATION AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009 AND 2008
  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 ASC 810-10-15-14 (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
(loss).  The fair value of the securities was determined by quoted
market prices of the underlying security (Level 1 inputs under the three-level
fair-value hierarchy established under Fair Value Measurements and
Disclosures, ASC
820-10-35-40.)  For purposes of determining gross realized
gains (losses), the cost of available-for-sale securities is based on specific
identification.
  Aggregate fair
                      value
                    
                    
                    Gross unrealized
                      gains
                    
                    
                    Gross unrealized
                      losses
                    
                    
                    CostAvailable
      for sale securities – December 31, 2009
                    
                    $
                    7,000
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    7,000Available
      for sale securities – December 31, 2008
                    
                    $
                    296,266
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    296,266
 
 The
Company's net unrealized holding loss was $0 and $0 for the years ended December
31, 2009 and 2008, respectively.
 
 As of
December 31, 2009, the fair value, unrealized gain or loss and cost of each
available-for-sale investment held by the Company is as follows:
  Description of Security
                      
                      Fair Value
                      
                      
                      Unrealized Gain
                      
                      
                      Unrealized Loss
                      
                      
                      CostCatalytic
      Solutions, Inc.
                      
                      $
                      7,000
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      7,000Total
                      
                      $
                      7,000
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      7,000
  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 such
that the change should be reflected in the Company’s financial
statements.  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.
  25
 
 Considering
the severity and duration of the decline in fair value and the financial
condition and near-term prospects of our investment, we recognized other than
temporary impairment charge in the amount of $18,389 on our investment in
VioQuest Pharmaceuticals, Inc. during the year ended December 31,
2008.
 
 We
recognized an impairment charge on our Clearwire Corporation investment of
$173,153 during the three months ended March 31, 2008 and an impairment charge
of $115,486 during the three months ended September 30, 2008.  Our
determination that the impairment with respect to Entrx’s investment in the
common stock of Clearwire Corporation was other-than-temporary, was based upon
both the length of time that the market value of that stock was below Entrx’s
carrying value, and the severity of the decline in that market
value.  The impairment charges represented the differences between the
market value on March 31, 2008 and September 30, 2008 and Entrx’s carrying value
on those dates.  We also recognized an impairment charge on our
Clearwire Corporation investment of $273,934 during the three months ended
December 31, 2008.  Our determination that the impairment with respect
to Entrx’s investment in the common stock of Clearwire Corporation was
other-than-temporary, was based upon both the length of time that the market
value of that stock was below Entrx’s previous carrying value of $11.88 per
share, and the severity of the decline in that market value.  Since
October 1, 2008, through early March 2009, when Entrx filed its Form 10-K for
the year ended December 31, 2008, the market value of Entrx’s investment in the
common stock of Clearwire Corporation was less than its cost.  In
addition, as of December 31, 2008, the market value of Entrx’s investment was
approximately 59% below its carrying value.  As a result of those
conditions, Entrx recorded an impairment charge of $273,934, which represented
the difference between the market value on December 31, 2008 and Entrx’s
carrying value.
 
 During
the year ended December 31, 2009, the Company sold all of its 19,056 shares of
VioQuest Pharmaceuticals, Inc. and all of its 39,415 shares of Clearwire
Corporation.
 
 The
Company has a minority investment in the common stock of Catalytic Solutions,
Inc. which is traded on the London Stock Exchange’s Alternative International
Market for smaller companies (the “AIM” market).  Prior to the third
quarter of 2008, this investment was included in investments in unconsolidated
affiliates on the Consolidated Balance Sheets and was carried at cost based upon
our assessment that the AIM market was not of a comparable breadth and scope to
a U.S. market.  During the third quarter of 2008, the Company changed
its method of accounting for its investment in the common stock of Catalytic
Solutions, Inc. to reclassify this investment to an investment in
available-for-sale security, based on the continued expansion of the breadth and
scope of the AIM market and the Company’s related interpretations of ASC
320-10-35-1.
 
 We recognized an
impairment charge on our Catalytic Solutions, Inc. investment of $150,000 during
the three months ended September 30, 2008, which represented the difference
between the market value quoted on the AIM market on September 30, 2008 and
Entrx’s carrying value.Our determination that there was an
impairment with respect to Entrx’s investment in the common stock of Catalytic
Solutions was based upon the severity of the decline in the quoted market price
below our carrying value and our belief that there had been impairment
indicators as discussed in ASC 320-10-35-27, including factors that raise
significant concerns about Catalytic Solution’s ability to continue as a going
concern.  We also recognized an
impairment charge on our Catalytic Solutions, Inc. investment of $198,717 during
the three months ended December 31, 2008, which represented the difference
between the market value quoted on the AIM market on December 31, 2008 and
Entrx’s carrying value.Our determination that there was an
impairment with respect to Entrx’s investment in the common stock of Catalytic
Solutions was based upon the severity of the decline in the quoted market price
below our carrying value and our belief that there had been impairment
indicators as discussed in ASC 320-10-35-27, including factors that raise
significant concerns about Catalytic Solution’s ability to continue as a going
concern.  Finally, we recognized an
impairment charge on our Catalytic Solutions, Inc. investment of $94,283 during
the three months ended June 30, 2009, which represented the difference between
the market value quoted on the AIM market on June 30, 2009 and Entrx’s carrying
value.Our determination that there was an impairment with
respect to Entrx’s investment in the common stock of Catalytic Solutions was
based upon the severity of the decline in the quoted market price below our
carrying value and our belief that there had been impairment indicators as
discussed in ASC 320-10-35-27, including factors that raise significant concerns
about Catalytic Solution’s ability to continue as a going concern.  We
previously had been carrying our Catalytic investment at $.2637 per
share.  Based upon the last trade on the AIM market on June 30, 2009,
the value would be $.0182 per share (after conversion to US
dollars).  As a result of these
conditions, Entrx recorded an impairment charge of $94,283, corresponding to a
remaining carried value of $0.02 per share.
  26
 
 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 and accounts payable 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 $22,998 and $16,366 for the years ended December 31, 2009 and
2008, respectively.
 
 Revenue
Recognition
 
 Fixed
price insulation installation and asbestos abatement contracts are accounted for
by the percentage-of-completion method in the ratio that total costs incurred to
date bear to total estimated costs, 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 with recognition of revenue as the services are
performed.  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, 2009 and 2008.
 
 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.
 
 Taxes Collected from
Customers
 
 We
account for sales taxes collected from customers and remitted to government
authorities on a net basis.
  27
 
 Income/Loss Per
Share
 
 The
Company computes income (loss) per share in accordance with ASC 260-10-15-2
which 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 1,140,000 and 2,155,900 shares were excluded from the computation of
diluted earnings per share for the years ended December 31, 2009 and 2008,
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:
  2009
                    
                    
                    2008Basic
      net income (loss) per common shareNet
      income (loss)
                    
                    $
                    (56,098
                    )
                    
                    $
                    255,370Weighted
      average shares outstanding
                    
                    
                    7,531,388
                    
                    
                    
                    7,653,196Basic
      net income (loss) per common share
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.03Diluted
      net income (loss) per common shareNet
      income (loss)
                    
                    $
                    (56,098
                    )
                    
                    $
                    255,370Weighted
      average shares outstanding
                    
                    
                    7,531,388
                    
                    
                    
                    7,653,196Effect
      of dilutive securities
                    
                    
                    -
                    
                    
                    
                    -Weighted
      average shares outstanding
                    
                    
                    7,531,388
                    
                    
                    
                    7,653,196Diluted
      net income (loss) per common share
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.03
 
 Legal
Costs
 
 The
Company expenses its legal costs as incurred.
 
 Stock-Based
Compensation
 
 ASC
718-10-15-3 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.  In addition,
companies must also recognize compensation expense related to any awards that
are not fully vested as of the effective date.  We implemented ASC
718-10-15-3 on January 1, 2006 using the modified prospective
method.  ASC 718-10-15-3 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, 2009.
 
 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
 
 ASC
220-10-15-1 establishes rules for the reporting of comprehensive income (loss)
and its components.  Comprehensive income (loss) consists of net
income (loss), unrealized gains (losses) on available-for-sale securities and
reclassification adjustments for unrealized losses on available-for-sale
securities recognized in net income.  During the year ended December
31, 2009, the Company recorded other comprehensive gain of $6,512 for unrealized
gains on available-for-sale securities and recorded a reclassification
adjustment of $(6,512).  During the year ended December 31, 2008, the
Company recorded a reclassification adjustment of $216,509.  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.
  28
 
 New Accounting
Pronouncements
 
 In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
authoritative guidance requiring 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 prior practices, some of which
could have a material impact on how an entity accounts for its business
combinations.  The guidance also requires additional disclosure of
information surrounding a business combination.  The guidance 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 adoption of this guidance had no
impact on the Company’s financial position or results of
operations.
 
 In
December 2007, the FASB issued authoritative guidance requiring entities to
report non-controlling minority interests in subsidiaries as equity in
consolidated financial statements.  The guidance is effective for
fiscal years beginning on or after December 15, 2008.  The adoption of
this authoritative guidance had no impact on the Company’s financial position or
results of operations since its consolidated subsidiaries are wholly owned and
non-controlling interests in consolidated variable interest entities are not
material.
 
 In March
2008, the FASB issued authoritative guidance amending and expanding upon the
disclosure requirements for derivative financial instruments and for hedging
activities to provide users of financial statements with an enhanced
understanding of how and why an entity uses derivative financial instruments,
how derivative financial instruments are accounted for, and how derivative
financial instruments affect an entity’s financial position, financial
performance, and results of operations.  The guidance is effective for
financial statement and interim periods beginning after November 15,
2008.  The adoption of this authoritative guidance had no material
effect on the Company’s financial statements and disclosures.
 
 In April,
2009, the FASB issued authoritative guidance requiring entities to disclose,
among other things, the methods and significant assumptions used to estimate the
fair value of financial instruments in both interim and annual financial
statements.  This guidance also requires those disclosures in
summarized financial information at interim reporting periods. The guidance is
effective for interim and annual periods ending after June 15,
2009.  The Company adopted the authoritative guidance on April 1,
2009.
 
 Also in
April, 2009, the FASB issued authoritative guidance amending the
other-than-temporary impairment (OTTI) guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of OTTI
on debt and equity securities in the financial statements. This guidance does
not amend existing recognition and measurement guidance related to OTTI of
equity securities.  The guidance requires that an entity disclose
information for interim and annual periods that enables users of its financial
statements to understand the types of available-for-sale and held-to maturity
debt and equity securities held, including information about investments in an
unrealized loss position for which an OTTI has or has not been
recognized.  The guidance is effective for interim and annual
reporting periods ending after June 15, 2009.  Entrx adopted the
authoritative guidance as of April 1, 2009.
 
 In May
2009, the FASB issued authoritative guidance providing establishing general
standards of accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued.  The guidance also requires entities to disclose the
date through which subsequent events were evaluated as well as the rationale for
why that date was selected.  The guidance is effective for interim and
annual periods ending after June 15, 2009, and accordingly, we adopted this
authoritative guidance during the second quarter of 2009.  In February
2010, the FASB amended its guidance effective immediately to remove the
requirement for an SEC filer to disclose the date through which subsequent
events were evaluated.  The Company’s adoption of the FASB’s guidance
on subsequent events, as amended, did not have a material effect on the
Company’s financial statements.
 
 In June
2009, the FASB issued authoritative guidance modifying how a company determines
when an entity that is insufficiently capitalized or is not controlled through
voting (or similar rights) should be consolidated.  The guidance
clarifies that the determination of whether a company is required to consolidate
an entity is based on, among other things, an entity’s purpose and design and a
company’s ability to direct the activities of the entity that most significantly
impact the entity’s economic performance.  The guidance requires an
ongoing reassessment of whether a company is the primary beneficiary of a
variable interest entity.  The guidance also requires additional
disclosures about a company’s involvement in variable interest entities and any
significant changes in risk exposure due to that involvement.  The
guidance is effective for fiscal years beginning after November 15,
2009.  The Company does not expect that the adoption of this
authoritative guidance will have a material effect on our financial condition,
results of operations or cash flows.
  29
 
 In June
2009, the FASB issued authoritative guidance codifying generally accepted
accounting principles in the United States (“GAAP”).  While the
guidance was not intended to change GAAP, it did change the way the Company
references these accounting principles in the Notes to the Consolidated
Financial Statements.  This guidance was effective for interim and
annual reporting periods ending after September 15, 2009.  The
Company’s adoption of this authoritative guidance as of September 30, 2009
changed how it references GAAP in its disclosures.
 
 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-owned 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, 2009, Curtom-Metalclad had
assets of $12,000 (all cash) and partners’ equity of
$12,000.  Curtom-Metalclad did not have any liabilities at December
31, 2009.
 
 NOTE
3 – ACCOUNTS RECEIVABLE
 
 Accounts
receivable consisted of the following at December 31:
  2009
                    
                    
                    2008BilledCompleted
      contracts
                    
                    $
                    982,096
                    
                    
                    $
                    792,363Contracts
      in process
                    
                    
                    390,662
                    
                    
                    
                    1,032,762Time
      and material work
                    
                    
                    2,261,942
                    
                    
                    
                    3,088,273Material
      sales
                    
                    
                    16,801
                    
                    
                    
                    43,582Unbilled
      retainage
                    
                    
                    316,760
                    
                    
                    
                    820,1043,968,261
                    
                    
                    
                    5,777,084Less:
      Allowance for doubtful accounts
                    
                    
                    (80,000
                    )
                    
                    
                    (80,000
                    )$
                    3,888,261
                    
                    
                    $
                    5,697,084
  30
  NOTE
4 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
 Costs and
estimated earnings on uncompleted contracts consisted of the following at
December 31:
 
  2009
                    
                    
                    2008Costs
      incurred on uncompleted contracts
                    
                    $
                    15,846,647
                    
                    
                    $
                    15,902,597Estimated
      earnings (loss)
                    
                    
                    4,038,764
                    
                    
                    
                    4,032,74719,885,411
                    
                    
                    
                    19,935,344Less
      billings to date
                    
                    
                    (18,822,638
                    )
                    
                    
                    (18,968,575
                    )$
                    1,062,773
                    
                    
                    $
                    966,769
 
 The above
information is presented in the balance sheet as follows:
 
 2009
                    
                    
                    2008Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                    
                    $
                    1,174,085
                    
                    
                    $
                    1,067,384Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                    
                    
                    (111,312
                    )
                    
                    
                    (100,615
                    )$
                    1,062,773
                    
                    
                    $
                    966,769
 
 NOTE
5 - PROPERTY, PLANT AND EQUIPMENT
 
 Property,
plant and equipment consist of the following:
  December 31,2009
                      
                      
                      2008Machinery
      and equipment
                      
                      $
                      542,309
                      
                      
                      $
                      539,518Leasehold
      improvements
                      
                      
                      78,526
                      
                      
                      
                      41,115Automotive
      equipment
                      
                      
                      674,793
                      
                      
                      
                      698,5441,295,628
                      
                      
                      
                      1,279,177Less
      accumulated depreciation and amortization
                      
                      
                      (1,100,559
                      )
                      
                      
                      (909,196
                      )$
                      195,069
                      
                      
                      $
                      369,981
 
 Depreciation
and amortization expense for the years ended December 31, 2009 and 2008 was
$215,114 and $208,633, respectively.
 
 NOTE
6 – ACCRUED EXPENSES
 
 Accrued
expenses consist of the following:
  December 31,2009
                    
                    
                    2008Wages,
      bonuses and taxes
                    
                    $
                    233,293
                    
                    
                    $
                    1,014,893Union
      dues
                    
                    
                    262,124
                    
                    
                    
                    316,290Accounting
      and legal fees
                    
                    
                    110,351
                    
                    
                    
                    30,000Insurance
                    
                    
                    61,470
                    
                    
                    
                    35,015Insurance
      settlement reserve
                    
                    
                    375,000
                    
                    
                    
                    375,000Sales
      Tax
                    
                    
                    25,884
                    
                    
                    
                    -Other
                    
                    
                    152,925
                    
                    
                    
                    171,255$
                    1,221,047
                    
                    
                    $
                    1,942,453
  31
  NOTE
7 – 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
8.2% for a period of 36 months with the last payment due in
2011.  Principal maturities over the next five years are as
follows:
 
 Year
      ending
                        December 31,2010
                      
                      $
                      106,1522011
                      
                      
                      31,6202012
                      
                      
                      -2013
                      
                      
                      -2014
                      
                      
                      -Totals
                      
                      
                      137,772Less
      current portion
                      
                      
                      (106,152
                      )Long-term
      portion
                      
                      $
                      31,620
 
 NOTE
8 - INCOME TAXES
 
 The major
deferred tax items are as follows:
 
 December
      31,2009
                    
                    
                    2008Assets:Allowances
      established against realization of certain assets
                    
                    $
                    515,000
                    
                    
                    $
                    1,178,000Net
      operating loss carryforwards
                    
                    
                    13,824,000
                    
                    
                    
                    13,062,000Liabilities:Accrued
      liabilities and other
                    
                    
                    51,000
                    
                    
                    
                    12,00014,390,000
                    
                    
                    
                    14,252,000Valuation
      allowance
                    
                    
                    (14,390,000
                    )
                    
                    
                    (14,252,000
                    )$
                    -
                    
                    
                    $
                    -
 
 The
valuation allowance increased $138,000 and increased $767,000 for the years
ended December 31, 2009 and 2008, respectively.  The valuation
allowance increased in the current year primarily due to the Company’s net
operating loss.
 
 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:
 
 2009
                      
                      
                      2008Federal
      statutory tax rate
                      
                      
                      (35.0
                      )%
                      
                      
                      35.0
                      %State
      tax, net of federal benefit
                      
                      
                      (5.0
                      )%
                      
                      
                      5.0
                      %Change
      in valuation allowance
                      
                      
                      50.0
                      %
                      
                      
                      (55.4
                      )%Permanent
      differences
                      
                      
                      (10.0
                      )%
                      
                      
                      15.4
                      %Effective
      tax rate
                      
                      
                      0.0
                      %
                      
                      
                      0.0
                      %
 
 At
December 31, 2009, the Company has available for U.S. federal income tax
purposes net operating loss carry-forwards of approximately
$34,560,000.  These carryforwards expire in the years 2011 through
2027.  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.
  32
 
 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’s tax returns are open to examination by tax authorities for the tax
years 2006 through 2009.  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, 2009, the Company recognized no interest and
penalties.
 
 NOTE
9 - SHAREHOLDERS’ EQUITY
 
 Stock
Options
 
 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.  The 1997 Plan has expired, and while no new options may be
granted under the 1997 Plan, some options granted under that plan remain
exercisable.  At December 31, 2009, there were 70,000 options
outstanding under this plan and no 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 could 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, 2009, there were options outstanding under the
2000 Plan for 1,070,000 shares and 930,000 shares available for
grant.  These options expire 10 years from the date of the
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.
 
 The
following is a summary of options granted:
 
 Year Ended December 31,2009
                      
                      
                      2008Shares
                      
                      
                      Weighted
                          Average
                          Exercise
                          Price
                      
                      
                      Shares
                      
                      
                      Weighted
                          Average
                          Exercise
                          PriceOptions
      outstanding at beginning of the year
                      
                      
                      2,105,900
                      
                      
                      $
                      2.20
                      
                      
                      
                      2,191,630
                      
                      
                      $
                      2.59Granted
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Exercised
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Canceled
      or expired
                      
                      
                      (965,900
                      )
                      
                      
                      2.04
                      
                      
                      
                      (85,730
                      )
                      
                      
                      12.25Options
      outstanding at end of the year
                      
                      
                      1,140,000
                      
                      
                      $
                      2.33
                      
                      
                      
                      2,105,900
                      
                      
                      $
                      2.20Options
      Exercisable
                      
                      
                      1,140,000
                      
                      
                      $
                      2.33
                      
                      
                      
                      2,105,900
                      
                      
                      $
                      2.20
 
 There is
no intrinsic value at December 31, 2009 for outstanding or exercisable
options.
  33
 
 Options Outstanding
                    
                    
                    Options ExercisableRange of
                        exercise prices
                    
                    Number
                        outstanding
                        as of 12/31/09
                    
                    
                    Weighted
                        average
                        remaining
                        contractual life
                        in years
                    
                    
                    Weighted
                        average
                        exercise price
                    
                    
                    Number
                        exercisable as
                        of 12/31/09
                    
                    
                    Weighted
                        average
                        exercise price$0.50
                    
                    
                    50,000
                    
                    
                    
                    0.27
                    
                    
                    $
                    0.50
                    
                    
                    
                    50,000
                    
                    
                    $
                    0.50$0.55
      - $1.20
                    
                    
                    60,000
                    
                    
                    
                    0.76
                    
                    
                    $
                    0.90
                    
                    
                    
                    60,000
                    
                    
                    $
                    0.90$2.00
                    
                    
                    510,000
                    
                    
                    
                    1.44
                    
                    
                    $
                    2.00
                    
                    
                    
                    510,000
                    
                    
                    $
                    2.00$3.00
                    
                    
                    520,000
                    
                    
                    
                    0.88
                    
                    
                    $
                    3.00
                    
                    
                    
                    520,000
                    
                    
                    $
                    3.00$0.50
      - $3.00
                    
                    
                    1,140,000
                    
                    
                    
                    1.10
                    
                    
                    $
                    2.33
                    
                    
                    
                    1,140,000
                    
                    
                    $
                    2.33
 
 Stock Purchase
Warrants
 
 In
connection with various debt offerings, stock placements and services provided,
the Company had 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 were exercisable at
various dates through July, 2009.  At December 31, 2008, the weighted
average exercise price for warrants outstanding was $0.75.
 
 Summarized
information for stock purchase warrants is as follows:
 
 Number of
                      Warrants
                  
                  
                  Price per shareWarrants
      outstanding at December 31, 2007
                  
                  
                  100,000
                  
                  
                  $
                  0.50
      - $0.75Canceled
      or expired
                  
                  
                  (50,000
                  )
                  
                  $
                  0.50Warrants
      outstanding at December 31, 2008
                  
                  
                  50,000
                  
                  
                  $
                  0.75Canceled
      or expired
                  
                  
                  (50,000
                  )
                  
                  $
                  0.75Warrants
      outstanding at December 31, 2009
                  
                  
                  -
 
 Common
Stock
 
 During
the year ended December 31, 2008, the Company issued an aggregate of 40,000
shares to four members of the Company’s board of directors.  The
shares issued to the board members had a value of $14,000, based upon the market
price at the date of issuance.
 
 During
the year ended December 31, 2009, the Company issued an aggregate of 70,000
shares to four members of the Company’s board of directors and to the president
of Metalclad Insulation.  The shares issued to the board members and
the president of Metalclad Insulation had a value of $17,500, based upon the
market price at the date of issuance.
 
 On May 4,
2009, the Company’s shareholders approved two proposals to amend Entrx’s
Restated and Amended Certificate of Incorporation.  The first
amendment effected a reverse 1-for-500 share stock split of Entrx’s common
stock.  The second amendment effected a subsequent forward 500-for-1
share stock split of Entrx’s common stock.  The proposals had the
effect of reducing the number of the Company’s shareholders from an estimated
2,350 to between 800 and 900, and the number of shareholders of record from
approximately 520 to approximately 53, by cashing out fractional shares after
the reverse stock split.  The shareholdings of a person owning 500
shares or more of Entrx in any one account was unaffected, while the shares held
by persons owning less than 500 shares of Entrx in any one account were bought
out at the price of $0.35 per share.  The amendments were effective
with regards to shareholders of record at the close of business on May 15,
2009.  There were 309,936 shares of common stock cashed-out related to
the reverse and forward splits and therefore the amount of cash paid to the
cashed-out shareholders was approximately $108,000.
 
 Dividends
 
 During
the year ended December 31, 2009, the Company paid a cash dividend of $.10 per
common share to shareholders of record as of December 18, 2009.  The
$741,621 dividend was paid on December 28, 2009.
  34
 
 NOTE
10 - 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, 2009 and 2008.
 
 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 $899,646 and
$1,046,051 for the years ended December 31, 2009 and 2008,
respectively.
 
 NOTE
11 - SIGNIFICANT CUSTOMERS
 
 Sales to
significant customers were as follows:
  Year Ended
                        December 31, 2009
                      
                      
                      Year Ended
                        December 31, 2008Revenue
                      
                      
                      % of Total
                        Revenue
                      
                      
                      Revenue
                      
                      
                      % of Total
                        RevenueB.
      P. West Coast Products LLC
                      
                      $
                      2,897,000
                      
                      
                      
                      15.2
                      %
                      
                      $
                      3,148,000
                      
                      
                      
                      11.3
                      %Southern
      California Edison
                      
                      $
                      2,057,000
                      
                      
                      
                      10.8
                      %
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )NRG
      Energy
                      
                      $
                      2,042,000
                      
                      
                      
                      10.7
                      %
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )Jacobs
      Field Services North America, Inc.
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )
                      
                      $
                      5,024,000
                      
                      
                      
                      18.0
                      %Black
      & Veatch
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )
                      
                      $
                      3,345,000
                      
                      
                      
                      12.0
                      %
  (1)
              Sales
      to this customer were less than 10% of total revenue during the reported
      period.
  Significant
accounts receivable were as follows:
  December 31, 2009
                      
                      
                      December 31, 2008Accounts
                        Receivable
                      
                      
                      % of Total
                        Accounts
                        Receivable
                      
                      
                      Accounts
                        Receivable
                      
                      
                      % of Total
                        Accounts
                        ReceivableSouthern
      California Edison
                      
                      $
                      1,271,000
                      
                      
                      
                      32.0
                      %
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )Black
      & Veatch
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )
                      
                      $
                      1,054,000
                      
                      
                      
                      18.5
                      %Jacobs
      Field Services North America, Inc.
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )
                      
                      $
                      840,000
                      
                      
                      
                      14.7
                      %
 (1)
              Accounts
      receivable from this customer were less than 10% of total accounts
      receivable for the reported period.
 
 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.
  35
 
 NOTE
12 - COMMITMENTS AND CONTINGENCIES
 
 Collective Bargaining
Agreements
 
 Approximately
90% of the Company’s employees are covered under collective Bargaining
Agreements.  Approximately 86% of the Company’s hourly employees are
covered by the Local No. 5 - International Association of Heat and Frost
Insulators and Asbestos Workers ("Local No. 5") agreement.  The
Company’s subsidiary, Metalclad Insulation Corporation, is one of a group of
employers with a collective bargaining agreement with Local No. 5 -
International Association of Heat and Frost Insulators and Allied Workers
("Local No. 5").  Our “Basic Agreement” with Local No. 5 of the
International Association of Heat and Frost Insulators and Allied Workers
expired in September 2008.  The “Basic Agreement” included a
“Maintenance Agreement” as an addendum.  Metalclad Insulation
Corporation and the other employers have agreed with the negotiating
representatives of Local No. 5 for an extension of the expired contract until
June 28, 2010.  An agreement with the Laborers Local 300 was signed in
December 2009 and expires in December 2012.  Approximately 7% of our
hourly employees are covered by the Labors Local 300 agreement.  Our
agreement with the Southwest Regional Council of Carpenters was extended in May
2009 and currently expires on June 30, 2011.  Approximately 7% of our
hourly employees are covered under the Carpenters Local 1506
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.
 
 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 $212,287 and $212,696 for the years
ended December 31, 2009 and 2008, respectively.  The Company has
future minimum non-cancelable lease commitments of $173,000 and $178,000 in 2010
and 2011, 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 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 have fluctuated
from 199 in 2005, to 232 in 2006, to 163 in 2007, to 187 in 2008, and to 188 in
2009.  At December 31, 2005, 2006, 2007 and 2008, there were,
respectively, approximately 507, 404, 222 and 271 cases pending.  As
of December 31, 2009, there were 239 cases pending.  These claims are
currently defended and covered by insurance.
 
 Set forth
below is a table for the years ended December 31, 2009 and 2008 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:
  36
 
 2009
                    
                    
                    2008New
      cases filed
                    
                    
                    188
                    
                    
                    
                    187Defense
      Judgments and dismissals
                    
                    
                    168
                    
                    
                    
                    109Plaintiff
      judgments and settled cases
                    
                    
                    52
                    
                    
                    
                    29Total
      resolved cases (1)
                    
                    
                    220
                    
                    
                    
                    138Pending
      cases (1)
                    
                    
                    239
                    
                    
                    
                    271Total
      indemnity payments
                    
                    $
                    5,345,000
                    
                    
                    $
                    7,582,550
                    (2)Average
      indemnity paid on settled cases
                    
                    $
                    102,788
                    
                    
                    $
                    261,467
                    (2)Average
      indemnity paid on all resolved cases
                    
                    $
                    24,295
                    
                    
                    $
                    54,946
                    (2)
 
 (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)
              In
      April 2005, there was an award rendered finding Metalclad Insulation
      Corporation liable for $1,117,000 in damages.  The judgment was
      appealed by our insurer, and a final order and judgment of $1,659,000 was
      rendered in 2008.  The total and average indemnity amounts paid
      on this judgment are included in
2008.
 
 Under
current accounting rules we are required to estimate our liability to existing
and future asbestos-related claims.  This requires that we estimate
the number of claims we believe will be brought in the future.  We
previously based our estimates on the downward trend of cases brought from 725
cases brought in 2001, to 199 cases brought in 2005.  This downward
trend leveled off somewhat since 2006.  In addition, we have
experienced increases in our costs to defend and resolve claims during this
period.  As a result, we have found it necessary to increase our
projections of known and incurred but not reported liabilities with respect to
each of our 2006, 2008 and 2009 financial statements.  We believe that
the leveling off of cases brought in 2005 through 2009 is largely due to an
aggressive campaign waged by plaintiffs’ lawyers in an attempt to identify new
plaintiffs, and that as the pool of plaintiffs decreases that it is probable
that the downward trend experienced prior to 2006 will resume, although such
resumption cannot be assured.
 
 From 2001
and through 2009, the annual average indemnity paid on over 3,000 resolved cases
has fluctuated significantly, between a low of $14,504 in 2006 and a high of
$54,946 in 2008, with an overall average over that period of approximately
$21,130.  During this period, although there has been no discernible
upward or downward trend in indemnity payments, our most recent settlement
experience in 2008 and 2009 has been less favorable than earlier
periods.
 
 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.  We expect that the newer
cases being brought will not be as meritorious and have as high a potential for
damages as 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 a low of $8,514
in 2003 to a high of $44,490 in 2008.  The weighted average defense
cost per resolved claim from 2005 through 2009 was $20,988.  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 intend to monitor the defense costs in
2010 and will adjust our estimates if events occur which would cause us to believe
that those estimates need revision.  We are currently
projecting those costs to be approximately $21,000 per claim.
 
 Although
defense costs are included in our insurance coverage, we expended $128,000 and
$96,000 in 2008 and 2009, 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.
  37


As of
December 31, 2009, we re-evaluated our estimates to take into account our
experience in 2009.  Primarily as a result of the increase in the number of
new cases commenced during 2009 which exceeded our previous estimates, we
estimate that there will be 986 asbestos-related injury claims made against the
Company after December 31, 2009.  The 986, in addition to the 239 claims
existing as of December 31, 2009, totals 1,225 current and future claims. 
Multiplying the average indemnity per resolved claim over the past nine years of
$21,130, times 1,225, we project the probable future indemnity to be paid on
those claims after December 31, 2009 to be equal to approximately
$26,000,000.  In addition, multiplying an estimated cost of defense per
resolved claim of approximately $21,000 times 1,225, we project the probable
future defense costs to equal approximately $26,000,000.  Accordingly, our
total estimated future asbestos-related liability at December 31, 2009 is
$52,000,000.





As of
December 31, 2009 we project that approximately 158 new asbestos-related claims
will be commenced and approximately 179 cases will be resolved in 2010,
resulting in an estimated 218 cases pending at December 31, 2010.  Since we
project that an aggregate of 986 new cases will be commenced after December 31,
2009, and that 158 of these cases will be commenced in 2010, we estimate that an
aggregate of 828 new cases will be commenced after December 31, 2010. 
Accordingly, we project the cases pending and projected to be commenced in the
future at December 31, 2010, will be 1,046 cases.  Multiplying 1,046 claims
times the approximate average indemnity paid per resolved claim from 2001
through 2009 and defense costs incurred per resolved claim from 2005 through
2009 of $42,130, we estimate our liability for current and future
asbestos-related claims at December 31, 2010 to be approximately
$44,000,000.  This amounts to a $8,000,000 reduction from the $52,000,000
liability we estimate as of December 31, 2009, or a $2,000,000 reduction per
quarter in 2010.





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 2001.  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.





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
determined that the minimum probable insurance coverage available to satisfy
asbestos-related injury claims exceeds our estimated future liability for such
claims of $52,000,000 and $45,250,000 as of December 31, 2009 and 2008,
respectively.  This determination assumes that the general trend of
reducing asbestos-related injury claims experienced prior to 2006 will resume
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 remain solvent and live up to what we believe is their
obligation to continue to cover our exposure with regards to these claims. 
Accordingly, we have included $52,000,000 and $45,250,000 of such insurance
coverage receivable as an asset on our December 31, 2009 and 2008 balance
sheets, respectively.  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, as discussed
below.Regardless of our best estimates of liability for current and future
asbestos-related claims, the liability for these claims could be higher or lower
than estimated by amounts which are not predictable.  We, of course, cannot
give any assurance that our liability for such claims will not ultimately exceed
our available insurance coverage.  We believe, however, that our current
insurance is adequate to satisfy additional liability that is reasonably
possible in the event actual losses exceed our estimates.  We will update
our estimates of insurance coverage in future filings with the Securities and
Exchange Commission, as events occur which would cause us to believe that those
estimates need revision, based upon the subsequent claim experience, using the
methodology we have employed.


38


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. The ACE
Lawsuit is principally about coverage responsibility among the several insurers,
as well as total coverage.  Regardless of the outcome of this litigation,
Entrx does not believe that the ACE Lawsuit will result in materially
diminishing Entrx’s insurance coverage for asbestos-related claims.
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, but has accrued
$375,000, as discussed below, to cover potential indemnification
obligations.  Based upon information known to date, the Company is unable
to predict to what extent its indemnification obligations are reasonably
possible to vary from the amounts accrued.





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.  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.If Allstate
is required to provide indemnity for Entrx’s asbestos-related lawsuits, it is
likely that Entrx would have to indemnify Allstate for asbestos-related claims
that it defends up to $2,500,000 in the aggregate.  If Allstate is not
required to provide indemnity, Entrx would have no liability to Allstate. 
Entrx has accrued $375,000 as a potential loss in connection with the Allstate
matter and nothing has come to our attention that would require us to record a
different estimate at December 31, 2009.


39





Other
Matters





The
Company had under contract uncompleted work at bid prices totaling approximately
$3,746,000 and $8,727,000 at December 31, 2009 and 2008,
respectively.





NOTE
13 - 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.  As of December 31, 2007 the Company adjusted the net book value
of the note to $25,000, the approximate value of the remaining collateral
securing the note.  In December 2008, the Company received a notice from
the United States Bankruptcy Court that Blake Capital Partners, LLC and Mr.
Mills had filed for Chapter 7 bankruptcy.  The Company is exploring its
opportunities to obtain proceeds from the sale of the 25,000 shares (250,000
shares before a one for ten share reverse stock split on April 30, 2008) of
VioQuest Pharmaceuticals, Inc. common stock pledged as collateral on the note,
but any proceeds are expected to be de minimis.  As such, the Company has
completely written-off the note from Blake Capital Partners, LLC as of December
31, 2008.





An
officer of the Company was employed by a corporation which received payments for
rent and health insurance of $46,972 and $44,346 for the years ended December
31, 2009 and 2008, respectively.




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, 2009, 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, 2009 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.


40




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, 2009. 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) inInternal Control—Integrated
Framework . Based on our evaluation, management concluded that, as of
December 31, 2009, 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





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
                  
                  PositionPeter
      L. Hauser
                  
                  2004
                  
                  69
                  
                  President,
      Chief Executive Officer, Chairman of the Board and
  DirectorJoseph
      M. Caldwell(1)(2)(3)
                  
                  2002
                  
                  42
                  
                  DirectorE.
      Thomas Welch(4)
                  
                  2004
                  
                  71
                  
                  DirectorDavid
      E. Cleveland(5)
                  
                  2008
                  
                  76
                  
                  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.


41





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.  In July 2008, Mr. Hauser founded, and is the
owner of, Standard Health, Inc., with offices in St. Paul, Minnesota. 
Standard Health, Inc. engages in the marketing of a proprietary software system
called HealthAccountProTM, for health care claim administration and accounting
serving the consumer-driven health care plans through third-party health care
administrators, for unions and self-directed corporate health care plans. 
Mr. Hauser was a founder, and was the principal owner and chairman of the board
of directors, of Health Care Financial Solutions, Inc., from March 2003 until
July 2008.  Healthcare Financial Solutions, Inc., with its office located
in St. Paul, Minnesota, was engaged in the development and marketing of the
software system now being marketed by Standard Health, Inc.  From 1967
until June 2003, Mr. Hauser was engaged in the securities brokerage
industry.  During that period, 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.  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 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 Corp. 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.





Joseph
M. Caldwellfounded 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 privately held Internet service
provider, providing services in over 1,300 cities nationwide and over 110 cities
internationally, with its principal office at 12450 Wayzata Blvd, #121,
Minnetonka, Minnesota, 55305.  From April 2002 until June 2005, Mr.
Caldwell was the chief executive officer of Marix Technologies, Inc., and since
May, 2000 has been a member of its board of directors.  Marix Technologies,
Inc. is a privately held company based in Minneapolis, Minnesota that developed
and markets software designs to facilitate and control offsite access to
software applications and information.





E. Thomas Welchis currently
engaged as the director of business development for Palisade Asset Management,
LLC, investment advisors, with offices in Minneapolis, Minnesota, a position he
has held since April 2009.  From April 2005 through March 2009, Mr. Welch
acted as the president of BNC National Bank at its Minneapolis, Minnesota
office.  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,
located at in Minneapolis, Minnesota, 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, located at 1801 Riverside
Avenue, Minneapolis, Minnesota 55454, 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.





All
members of our Board of Directors have significant business and financial
management experience, serving as the chief executive or chief operating officer
of one or more operating businesses.





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, 2009, the Board of Directors held six
meetings.  Each member of the Board of Directors was present for all of the
meetings, except for David E. Cleveland who missed one meeting.


42





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.  As part of its duties, the Audit Committee has reviewed
and discussed Entrx’s 2009 audit financial statements with Entrx’s management;
has discussed with Entrx’s auditors the matters required to be discussed by the
latest statement on Accounting Standards No. 61 as adopted by the Public Company
Accounting Oversight Board (“PCAOB”); and has received a letter from Entrx’s
auditors, as required by the PCAOB, regarding the auditor’s communication with
the Audit Committee concerning the auditor’s independence, and discussed such
independence with the auditors.  Based upon the foregoing review,
communication and discussions, the Audit Committee recommended to the Board of
Directors that the audited statements presented to the Audit Committee by
management and Entrx’s auditors be included in this Form 10K for 2009.  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 and 4250(d) of the National
Association of Securities Dealers, Inc., and incorporated by the Financial
Industry, Regulatory Authority.  The Audit Committee held four meetings
during the year ended December 31, 2009.





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,
2009.





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.  Because of the small
size of the Company and the Board of Directors and the Nominating Committee, it
is believed that the adoption of a charter is unnecessary.  No meeting of
the nominating committee was held in 2009, as no shareholder meeting was held to
elect directors in that year.





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 2010, after May 15, 2010.


43





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, 2009, 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
              
              46
              
              Treasurer
      and Chief Financial OfficerDavid
      R. Trueblood
              
              39
              
              President
      of Metalclad Insulation
Corporation




Brian
D. Nieburhas been
employed part time by Entrx as its treasurer and chief financial officer since
February 2002.  Mr. Niebur has a Bachelor of Arts degree in accounting and
is a certified public accountant (inactive).  Since July 2000, Mr. Niebur
has acted as a vice president and controller for Wyncrest Capital, Inc. located
at 800 Nicollet Mall Suite 2690 Minneapolis, Minnesota 55402, a privately held
venture capital firm.  Mr. Niebur’s primary duties for Wyncrest Capital,
Inc. have been to act as chief financial officer and a director for Spectre
Gaming, Inc. (OTCBB:  SGMG), in which Wyncrest Capital, Inc. had made an
equity investment, from January 2003 until November 2005.  Spectre Gaming,
Inc. was engaged in the business of developing and marketing electronic gaming
systems for the Native American gaming market.  Mr. Niebur’s duties for
Wyncrest Capital, Inc. also included acting from January 2005 until March 2007
as Chief Financial Officer and Secretary of Ready Credit Corporation (Pink
Sheets: RCTC), another corporation in which Wyncrest Capital, Inc. has an
investment, with offices in Minneapolis, Minnesota, and from January 2005 until
May 2008 as a member of the board of directors of Ready Credit
Corporation.





David
R. Truebloodwas elected
as President of Entrx’s wholly owned subsidiary, Metalclad Insulation
Corporation, on February 1, 2007.  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 project manager, bidding upon, securing and managing a
number of Metalclad’s 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, 2009, 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.





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.


44





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, 2009, 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 2009.  The foregoing persons are
collectively referred to in this Form 10-K as the “Named Executive
Officers.”  Compensation information is shown for fiscal years 2009 and
2008.




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
                                          
                                          2009
                                          
                                          
                                          
                                          78,750
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          3,750
                                          (3)
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          82,500Officer
                                          
                                          2008
                                          
                                          
                                          
                                          78,750
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          3,500
                                          (3)
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          82,250Brian
      D. NieburTreasurer
      and Chief
                                          
                                          2009
                                          
                                          
                                          
                                          84,238
                                          
                                          
                                          
                                          44,303
                                          (1)
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          128,541Financial
      Officer
                                          
                                          2008
                                          
                                          
                                          
                                          82,688
                                          
                                          
                                          
                                          30,215
                                          (1)
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          112,903David
      R. Trueblood
                                          
                                          2009
                                          
                                          
                                          
                                          145,718
                                          
                                          
                                          
                                          83,946
                                          (2)
                                          
                                          
                                          2,500
                                          (4)
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          232,164President
      of Metalclad
                                          
                                          2008
                                          
                                          
                                          
                                          141,845
                                          
                                          
                                          
                                          55,397
                                          (2)
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          197,242Insulation
      Corporation


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





(1)
            Pursuant
      to an incentive plan established for Mr. Niebur, he earned bonuses based
      upon Metalclad’s net profit for 2008 and 2007, equal to $44,303 and
      $30,215, respectively.  The 2008 bonus was paid in 2009 and the 2007
      bonus was paid in 2008.


(2)
            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 2008 and 2007, equal to $88,758 and $55,785,
      respectively.  $4,812 of the 2008 bonus was paid in December 2008,
      with the remaining amount paid in 2009 and $5,200 of the 2007 bonus was
      paid in December 2007, with the remaining amount paid in
    2008.


(3)
            Common
      stock awards of 15,000 and 10,000 valued at $3,750 and $3,500,
      respectively, were granted to Mr. Hauser in 2009 and 2008, 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.”


(4)
            A
      10,000 common stock award, valued at $2,500, was granted to Mr. Trueblood
      in 2009, for services as the president of Metalclad Insulation
      Corporation.





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, 2009, for each Named Executive
Officer.


45





Outstanding Equity Awards At Fiscal Year-EndName
                
                Option Awards
                
                Stock AwardsNumber 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 ($)Brian
      D. Niebur
                
                
                20,000
                
                
                
                0
                
                
                
                0
                
                
                $
                0.65
                
                4/10/2010
                
                
                0
                
                
                
                n/a
                
                
                
                0
                
                
                
                0





Director
Compensation





The
following table sets forth the compensation paid to our directors for our fiscal
year ended December 31, 2009, 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 CompensationName
                          
                          Fees Earned
                            or Paid in
                            Cash
                            ($)
                          
                          
                          Stock
                            Awards (1)
                            ($)
                          
                          
                          Option
                            Awards
                            ($)
                          
                          
                          Non-Equity
                            Incentive Plan
                            Compensation
                            ($)
                          
                          
                          Nonqualified
                            Deferred
                            Compensation
                            Earnings
                            ($)
                          
                          
                          All Other
                            Compensation
                            ($)
                          
                          
                          Total
                            ($)Joseph M. Caldwell (2)
                          
                          
                          0
                          
                          
                          
                          3,750
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          3,750David E. Cleveland(3)
                          
                          
                          0
                          
                          
                          
                          3,750
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          3,750E.
      Thomas Welch
                          
                          
                          0
                          
                          
                          
                          3,750
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          3,750





(1)
            On
      May 11, 2009, the Company issued each of its three independent directors
      15,000 shares of common stock.  The stock was valued at $0.25 per
      share, the fair market value on May 11,
2009.


(2)
            At
      December 31, 2009, Mr. Caldwell had exercisable options to purchase 20,000
      shares of our common stock, 10,000 shares at $1.03 per share, which expire
      on December 31, 2010 and 10,000 shares at $0.50 per share, which expire on
      April 10, 2010


(3)
            Mr.
      Cleveland was elected to the board of directors on January 28,
      2008.





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 28, 2010, 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:


46





Name of Beneficial Owner
                      
                      Number of
                        Common Shares
                        Beneficially
                        Owned
                      
                      
                      Percentage of
                        Outstanding
                        Shares (5)Peter
      L. Hauser
                      
                      
                      792,075
                      
                      
                      
                      10.7
                      %Joseph
      M. Caldwell
                      
                      
                      75,000
                      (1)
                      
                      
                      1.0
                      %David
      E. Cleveland
                      
                      
                      25,000
                      
                      
                      
                      *E.
      Thomas Welch
                      
                      
                      55,000
                      (2)
                      
                      
                      *Brian
      D. Niebur
                      
                      
                      30,000
                      (3)
                      
                      
                      *David
      R. Trueblood
                      
                      
                      10,000
                      
                      
                      
                      *All
      executive officers and directors as a group (6 persons)
                      
                      
                      947,075
                      (4)
                      
                      
                      13.2
                      %





*
            Less
      than 1%





(1)
            Includes
      20,000 shares that Mr. Caldwell may acquire upon the exercise of
      outstanding stock options.


(2)
            Includes
      40,000 shares held in a revocable trust for the benefit of Mr. Welch’s
      spouse.


(3)
            Includes
      20,000 shares which Mr. Niebur may acquire upon the exercise of
      outstanding stock options.


(4)
            Assumes
      that each shareholder listed exercised all options available to that
      person which would vest as of April 30,
2010.


(5)
            The
      percentage of outstanding shares of common stock as shown in the table
      above is calculated on 7,416,211 shares outstanding, as of February 28,
      2010, plus it assumes in each case that the shareholder exercised all
      vested options available to that person as of April 30,
    2010.





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 28, 2010.  Unless otherwise indicated, the shareholders listed in
the table below have sole voting and investment powers with respect to the
shares indicated:


47




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
                        
                        
                        792,075
                        
                        
                        
                        10.7
                        %Grant
      S. Kesler
                          3739
      Brighton Point Drive
                          Salt
      Lake City, UT  84121
                        
                        
                        594,335
                        (1)
                        
                        
                        7.6
                        %Brian
      F. Cassady
                          510
      Ocean Drive
                          Suite
      501
                          Miami
      Beach, FL 33139
                        
                        
                        559,225
                        (2)
                        
                        
                        7.5
                        %Thorsten
      Laux
                          Metzer
      Str. 33
                          10405
      Berlin
                          Germany
                        
                        
                        467,590
                        (3)
                        
                        
                        6.3
                        %George
      W. Holbrook, Jr.
                          161
      Rametto Road
                          Santa
      Barbara, CA 93108
                        
                        
                        451,615
                        (4)
                        
                        
                        6.1
                        %Bradley
      Resources Company
                          161
      Rametto Road
                          Santa
      Barbara, CA 93108
                        
                        
                        376,255
                        (4)
                        
                        
                        5.1
                        %Wayne
      W. Mills
                          2125
      Hollybush Road
                          Medina,
      MN  55340
                        
                        
                        415,000
                        (5)
                        
                        
                        5.6
                        %





(1)
            Includes
      450,000 shares which Mr. Kesler may purchase under currently exercisable
      options at prices ranging from $2.00 to $3.00 per
  share.


(2)
            As
      reported on a Form 13D filed with the U.S. Securities and Exchange
      Commission on February 12, 2010, Mr. Cassady beneficially owns 377,700
      shares of our common stock and is President, sole managing member and
      executive officer of 510 Ocean Drive Advisors, Inc. doing business as
      Black Management Advisors (BMA) with voting and dispositive power with
      respect to 181,555 shares owned by BMA.  Mr. Cassady and BMA 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 559,225 shares, or 7.5%, of our common
stock.


(3)
            As
      reported on a Form 13G filed with the U.S. Securities and Exchange
      Commission on February 8, 2010, Mr. Laux beneficially owns 467,590 shares,
      or 6.3%, of our common stock.


(4)
            As
      reported in a Form 13G filed with the U.S. Securities and Exchange
      Commission on January 7, 2005,Mr.
      Holbrook beneficially owns 75,360 shares of our common stock and is a
      partner of Bradley Resources Company with voting and dispositive power
      with respect to the 376,255 shares owned by Bradley Resources Company.
      Bradley Resources Company and Mr. Holbrook 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 6.1% of our common
  stock.


(5)
            As
      reported on a Form 13 D/A filed with the U.S. Securities and Exchange
      Commission on February 14, 2008, Mr. Mills owns 225,000 shares held in his
      Individual Retirement Account, and 20,000 shares which Mr. Mills may
      purchase under currently exercisable options at prices ranging from $0.50
      to $1.03 per share.


(6)
            The
      percentage of outstanding shares of common stock shown in the table above
      is calculated based upon 7,416,211 shares outstanding as of the close of
      business February 28, 2010, 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, 2009, 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.


48





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
                          
                          
                          1,140,000
                          (1)
                          
                          $
                          2.33
                          
                          
                          
                          930,000Equity
      compensation plans not approved by security holders
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          NoneTotal
                          
                          
                          1,140,000
                          
                          
                          $
                          2.33
                          
                          
                          
                          930,000





(1)
            Options
      for 1,070,000 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 70,000 shares were granted
      under similar plans which were previously adopted and approved by the
      shareholders, and which have been
terminated.





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 was not repaid on the due date of September 8,
2002.





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.





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.


49


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.





In
October 2003, the Company negotiated an amendment to the Note and Pledge
Agreement with Blake Capital Partners and Mr. Mills, 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.  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.





Blake
Capital failed to pay the interest due under the New Note on September 1, 2006,
and Mr. Mills indicated to the Company that he was 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.  In December 2008, the Company received a notice
from the United States Bankruptcy Court that Blake Capital Partners, LLC and Mr.
Mills had filed for Chapter 7 bankruptcy.  The Company is exploring its
opportunities to obtain proceeds from the sale of the 25,000 shares (250,000
shares before a one for ten share reverse stock split on April 30, 2008) of
VioQuest Pharmaceuticals, Inc. common stock pledged as collateral on the note,
but any proceeds are expected to be de minimis.  As such, the Company has
completely written-off the note from Blake Capital Partners, LLC as of December
31, 2008.





ITEM
      13.
            EXHIBITS





(a) The
following exhibits are being filed with this Annual Report on Form 10-K 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 May 4, 2009.
      (3)





4.1
            Form
      of Certificate for Common Stock.
(4)





10.1
            Form
      of 1997 Omnibus Stock Option and Incentive Plan.
  (5)





10.2
            Form
      of 2000 Omnibus Stock Option and Incentive Plan.
  (6)





10.3
            Curtom-Metalclad
      Partnership Agreement and Amendment.
(7)





10.4
            Secured
      Promissory Note of Blake Capital Partners and Guarantee of Wayne W. Mills
      dated November 1, 2003. (8)





10.5
            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. (9)


50





10.6
            Settlement
      Agreement and Full Policy Release between the Company and one of its
      insurers dated June 22, 2004. (10)





14.
            Code
      of Ethics (11)





21.
            List
      of Subsidiaries of the Registrant.
(12)





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 Proxy Statement dated May 4, 2009 and filed
      on March 26, 2009, as page 2 of appendix A 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 Proxy Statement dated April 17, 1997 and incorporated
      herein by this reference.


(6)
            Filed
      with the Company’s Proxy Statement dated October 20, 2000 and incorporated
      herein by this reference.


(7)
            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.


(8)
            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.


(9)
            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.


(10)
            Filed
      with the Company's Form 8-K on June 25, 2004 as Exhibit 10.1 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 14 and incorporated herein by
      reference.


(12)
            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 May
11, 2009, upon the recommendation and approval of the Audit Committee, Entrx
engaged Baker Tilly Virchow Krause, LLP, (formerly Virchow, Krause &
Company, LLP) (“Baker Tilly Virchow Krause”), independent registered public
accountants with an office in Minneapolis, Minnesota, to audit Entrx’s
consolidated financial statements for 2009 and to perform other appropriate
accounting services for Entrx as needed.  Entrx had not previously engaged
Baker Tilly Virchow Krause on any matter.  Baker Tilly Virchow Krause was
engaged directly by the Audit Committee to provide its services with respect to
Entrx’s 2003, 2004, 2005, 2006, 2007, 2008 and 2009 fiscal years.





Audit
Fees





Baker
Tilly Virchow Krause billed Entrx $93,002 and $80,019 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 2008 and 2009
fiscal years, respectively.  Included in this category in 2008 were fees
paid to Baker Tilly Virchow Krause for assistance related to our Securities and
Exchange Commission comment letters.


51





Audit-Related
Fees





Baker
Tilly Virchow Krause billed Entrx no amounts during 2008 or 2009 for assurance
and related services provided to Entrx that are not included under the caption
“Audit Fee” above.





Tax Fees





Baker
Tilly Virchow Krause billed Entrx $23,200 and $14,550 for services in connection
with tax compliance, tax advice and tax planning for the 2008 and 2009 fiscal
years, respectively.  The services billed for in 2008 and 2009 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 2008 or 2009.





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 Baker Tilly Virchow Krause
related to (i) the audit of the consolidated financial statements of Entrx for
2008 and 2009, and to provide its report thereon, (ii) the preparation of our
2008 and 2009 federal and state income tax returns, and (iii) the review of our
quarterly reports on Form 10Q filed in 2008 and 2009.  No other services,
other than those set forth in the foregoing sentence, were performed by Baker
Tilly Virchow Krause on our behalf in 2008 or 2009.


52


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 12, 2010





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
      12, 2010Peter
      L. Hauser
              
              (Principal
      Executive Officer)/s/ Brian D. Niebur
              
              Chief
      Financial Officer
              
              March
      12, 2010Brian
      D. Niebur
              
              (Principal
      Financial and Accounting Officer)/s/ Joseph M. Caldwell
              
              Director
              
              March
      12, 2010Joseph
      M. Caldwell/s/ David E. Cleveland
              
              Director
              
              March
      12, 2010David
      E. Cleveland/s/ E. Thomas Welch
              
              Director
              
              March
      12, 2010E.
      Thomas Welch


53