FORM 10-QSB
SECURITIES AND EXCHANGE
WASHINGTON, D.C. 50549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED AUGUST 29, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 05 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File No. 1-10655
ENVIRONMENTAL TECTONICS CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1714256
(State or other jurisdiction of (IRS Employer or
incorporation) organization Identification
No.)
COUNTY LINE INDUSTRIAL PARK
SOUTHHAMPTON, PENNSYLVANIA 18966
(Address of principal executive offices) (Zip Code)
(215) 355-9100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for at least the last 90 days.
Yes X No ____________
The registrant had 3,001,716 shares of common stock
outstanding as of September 30, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
<TABLE>
<CAPTION>
Environmental Tectonics
Corporation Consolidated
Income Statements
(unaudited)
Three months ended: Six months ended:
August 29, August 30, August 29, August 30,
1997 1996 1997 1996
--------- ---------- --------- ----------
(In thousands, except per share information)
<S> <C> <C> <C> <C>
Net Sales $7,181 $4,897 $13,825 $9,406
Cost of goods sold 4,823 3,315 9,507 6,429
---------- --------- ---------- ---------
Gross profit 2,358 1,582 4,318 2,977
---------- --------- ---------- ---------
Operating expenses:
Selling and administrative 1,244 979 2,374 1,883
Research and development 19 22 59 74
---------- --------- ---------- ---------
1,263 1,001 2,433 1,957
---------- --------- ---------- ---------
Operating income 1,095 581 1,885 1,020
---------- --------- ---------- ---------
Other expenses:
Interest expense 384 289 601 515
Letter of credit fees 8 4 24 11
Other, net 72 33 83 64
---------- --------- ---------- ---------
464 326 708 590
---------- --------- ---------- ---------
Income before income taxes 631 255 1,177 430
Provision for income taxes 225 83 411 138
---------- --------- ---------- ---------
Net income $406 $172 $766 $292
========== ========= ========== =========
Per share information:
Income per share: primary $0.11 $0.06 $0.21 $0.10
Income per share: fully diluted $0.10 $0.06 $0.19 $0.10
Number of shares: primary 3,190,262 2,967,199 3,166,133 2,955,026
Number of shares: fully diluted 3,534,179 2,983,917 3,501,524 2,975,060
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Environmental Tectonics Corporation
Consolidated Balance Sheets
(unaudited)
August 29, February 28,
1997 1997
---------- -----------
Assets (In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 92 $189
Cash equivalents restricted for letters of
credit 259 665
Accounts receivable, net 11,410 11,352
Cost and estimated earnings in excess
of billings on uncompleted long-term
contracts 5,573 3,345
Inventories 2,340 2,719
Prepaid expenses and other current
assets 341 92
------- -------
20,015 18,362
Property, plant and equipment, at cost, net
of accumulated depreciation of $6,474
at August 29 and $6,258 at February 28 2,641 2,480
Software development costs, net of accum-
ulated amortization of $3,607 at August 29
and $3,244 at February 28 1,306 1,430
Other assets 162 37
------- -------
Total assets $24,124 $22,309
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION> Environmental Tectonics Corporation
Consolidated Balance Sheets (continued)
(unaudited)
August 29, February 28,
1997 1997
---------- ----------
(In thousands)
<S> <C> <C>
Liabilities
Current liabilities:
Current portion of long-term debt $ 93 $ 119
Convertible notes payable - related
parties 800 1,300
Accounts payable - trade 1,357 1,799
Billings in excess of costs and estimated
earnings on uncompleted long-term
contracts 1,986 2,051
Customer deposits 609 1,746
Accrued income taxes 474 271
Accrued liabilities 1,790 1,528
------- -------
Total current liabilities 7,109 8,814
------- -------
Long-term debt, less current portion:
Credit facility payable to banks 3,434 6,714
Subordinated debt 3,227 -
Other 271 283
------- -------
6,932 6,997
------- -------
Deferred income taxes 89 89
------- -------
Total liabilities 14,130 15,900
------- -------
Redeemable cumulative preferred
stock, $100 par and redemption
value: 25,000 shares authorized;
25,000 shares issued and outstanding 2,309 -
------- -------
Stockholders' Equity
Common stock; $.10 par value; 10,000,000
shares authorized; 3,001,716 and
2,963,083 issued and outstanding at
August 29, 1997 and February 28,1997,
respectively 300 296
Capital contributed in excess of par value
of common stock 2,624 2,007
Retained earnings 4,761 4,106
------- -------
Total stockholders' equity 7,685 6,409
------- -------
Total liabilities and stockholders' equity $24,124 $22,309
======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION> Environmental Tectonics Corporation
Consolidated Statements of Cash Flows
(unaudited)
Six months ended
August 29, August 30,
1997 1996
---------- ----------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 766 $ 292
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization 635 571
Provision for losses on accounts receivable
and inventories 193 -
Changes in operating assets and liabilities:
Accounts receivable (108) (32)
Costs and estimated earnings in excess of
billings on uncompleted long-term contracts (2,228) 59
Inventories 77 (471)
Prepaid expenses and other current assets (78) 81
Accounts payable (442) 555
Billings in excess of costs and estimated
earnings on uncompleted long-term contracts (702) (775)
Customer deposits (500) 21
Accrued income taxes 203 74
Other accrued liabilities 262 236
Payments under settlement agreements (60) (350)
-------- -------
Net cash (used) provided by operating activities (1,982) 261
-------- -------
Cash flows from investing activities:
Acquisition of equipment (218) (115)
Capitalized software development costs (240) (309)
------- -------
Net cash used in investing activities (458) (424)
------- -------
Cash flows from financing activities:
Borrowings under credit facility 3,434 -
Payments under credit facility (6,714) (325)
Proceeds from subordinated debt, net 3,227 -
Proceeds from preferred stock, net 2,293 -
Payment of dividends on preferred stock (95) -
Decrease in cash equivalents restricted for letters
of credit 406 465
Decrease in notes payable - related party (500) -
Deferred financing costs (335) -
Net increase of other long-term debt 6 (8)
Proceeds from issuance of common stock 621 -
------- -------
Net cash provided by financing activities 2,343 132
------- -------
Net increase (decrease) in cash and cash equivalents (97) (31)
Cash and cash equivalents at beginning of period 189 31
------- -------
Cash and cash equivalents at end of period $92 $0
======= =======
Supplemental schedule of cash flow information:
Interest paid 517 515
Income taxes paid 230 60
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
/TABLE
<PAGE>
Supplemental information on noncash operating and investing
activities:
The Company transferred $158,000 of inventory to property,
plant and equipment and $637,000 of customer deposits to
billings in excess of costs and estimated earnings on
uncompleted long-term contracts during the six month period
ended August 29, 1997.
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Environmental Tectonics Corporation
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements have been
prepared by Environmental Tectonics Corporation, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission, and reflect all adjustments which, in the
opinion of management, are necessary for a fair statement of the
results for the interim periods presented. All such adjustments
are of a normal recurring nature.
Certain information in footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles has been condensed or
omitted pursuant to such rules and regulations, although the
Company believes the disclosures are adequate to make the
information presented not misleading. These financial statements
should be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form
10-KSB for the year ended February 28, 1997.
2. Earnings per Share
Net income per share of common stock is computed by dividing
earnings applicable to common stock by the weighted average
number of shares of common stock and common stock equivalents, if
dilutive, outstanding during the three and six month periods
ended August 29,1997 and August 30, 1996. Common stock
equivalents include shares issuable under the exercise of
dilutive common stock options and stock warrants. Fully diluted
earnings per share additionally assumes the conversion of
preferred stock and related parties notes payable. Net earnings
used in the computation of primary earnings per share are reduced
by preferred stock requirements.
<TABLE>
<CAPTION>
Three months ended: Six months ended:
August 29, August 30, August 29, August 30,
1997 1996 1997 1996
--------- ---------- --------- ---------
(In thousands, except per share information)
<S> <C> <C> <C> <C>
Primary earnings per share:
Net income for primary earnings per share $406 $172 $766 $292
Preferred stock dividends (69) - (95) -
--------- --------- --------- ---------
Earnings applicable to common stock $337 $172 $671 $292
========= ========= ========= =========
2,981,939 2,928,944 2,974,740 2,928,944
Weighted average shares outstanding
Common stock equivalents based on
average market price 208,323 38,255 191,393 26,082
--------- --------- --------- ---------
Total equivalent shares for primary
computation 3,190,262 2,967,199 3,166,133 2,955,026
========= ========= ========= =========
Per share amounts:
Earnings per common share $0.11 $0.06 $0.21 $0.10
========= ========= ========= =========
Fully-diluted earnings per share:
Net income for fully-diluted
earnings per share $406 $172 $766 $292
Preferred stock dividends (69) - (95) -
--------- --------- --------- ---------
Earnings applicable to common stock $337 $172 $671 $292
========= ========= ========= =========
Weighted average shares outstanding 2,981,939 2,928,944 2,974,740 2,928,944
Common stock equivalents based on
average market price 552,240 54,973 526,784 46,116
--------- --------- --------- ---------
Total equivalent shares for fully-diluted
computation 3,534,179 2,983,917 3,501,524 2,975,060
========= ========= ========= =========
Per share amounts:
Earnings per common share $0.10 $0.06 $0.19 $0.10
========= ========= ========= =========
</TABLE>
3. Accounts Receivable
The components of accounts receivable are as follows:
<TABLE>
<CAPTION>
August 29, February 28,
1997 1997
---------- -----------
(In thousands)
<S> <C> <C>
U.S. Government receivables billed
and unbilled contract costs subject
to negotiation $5,000 $5,284
U.S. commercial receivables billed 915 2,477
International receivables billed 5,583 3,828
------- -------
11,498 11,589
Less allowance for doubtful account (89) (237)
------- -------
$11,409 $11,352
======= =======
</TABLE>
U.S. Government receivables billed and unbilled contract costs
subject to negotiation:
Unbilled contract costs subject to negotiation represent
claims made or to be made against the U.S. Government under a
contract for a centrifuge. These costs were recorded during
fiscal years 1994 and 1995. The Company has recorded claims,
amounting to $2.8 million, including $150,000 recorded in the
first quarter of fiscal 1998, to the extent of contract costs
incurred. These costs have been incurred in connection with U.S.
Government caused delays, errors in specifications and designs,
and other unanticipated causes and may not be received in full
during fiscal 1998. In accordance with generally accepted
accounting principles, revenue recorded by the Company from a
claim does not exceed the incurred contract costs related to the
claim. The Company currently has approximately $8.6 million in
claims filed with the U.S. Government. The U.S. Government has
responded to the claims with either denials or deemed denials
that the Company has appealed. During the first quarter of
fiscal 1998, the Company recorded an additional $150,000 in
claims revenue, reflecting additional expenditures on the
centrifuge contract that will be incorporated into additional
claims to be filed with the U.S. Government. Additional amounts
are under review for the period November 1995 through October
1996 to determine what, if any, additional amounts above the
$150,000 recorded in fiscal 1998 can be filed as supplemental
claims. Such claims are subject to negotiation and audit by the
U.S. Government.
In November 1996, the Company invoiced the balance due under
the centrifuge contract; at August 29, 1997, approximately
$1.7 million was in U.S. Government receivables. Given the U.S.
Government's lack of response, on June 27, 1997, a claim was
submitted to the Contracting Officer in an attempt to expedite
payment of most of the outstanding amount still open under the
centrifuge contract. Collectibility of these amounts may be
dependent upon the resolution of the above claims.
International receivables billed:
International receivables billed includes $1.3 million
related to a certain contract with the Royal Thai Air Force (see
Note 7).
4. Inventories
Inventories are valued at the lower of cost or market using
the first-in, first out (FIFO) method and consist of the
following:
August 29, February 28,
1997 1997
---------- ------------
(In thousands)
Raw materials $417 $417
Work in Process 1,923 2,302
Finished Goods - -
------ ------
$2,340 $2,719
====== ======
5. Recapitalization
On March 27, 1997, the Company entered into a revolving
credit agreement (the "Credit Agreement") with a new bank,
establishing a credit facility of $10 million through May 31,
1998, at which time the facility is reduced to $9 million. This
facility bears interest at the bank's prime lending rate and
expires on May 31, 1999. Substantially all of the Company's
short-term financing is provided by this bank. The Company
incurred $330,000 of financing fees related to origination of the
Credit Agreement. This amount is included in prepaid expenses
and other assets and will be charged to interest expense over the
term of the agreement, which is two years. Additionally, the
Company issued $4 million of subordinated debentures, bearing
interest at 12% per annum, due March 27, 2004 to a financial
investment company, a director of which has been subsequently
appointed and elected to the Company's Board of Directors. In
connection with the subordinated debentures, warrants were issued
to acquire 166,410 shares of the Company's common stock at an
exercise price of $1.00 per share. $499,000 of the proceeds from
the sale of the debentures was allocated to the warrants and
credited to capital contributed in excess of par value of common
stock. This amount along with financing fees of $311,000, which
were netted against the proceeds, will be amortized to interest
expense over the term of the debentures, which is seven years.
The Company also issued 25,000 shares of 11%, redeemable,
convertible preferred stock for $2.5 million. Each share of
convertible stock is convertible, at the option of the
shareholder, into 13.33 shares of the Company's common stock at a
price of $7.50 per share. Financing fees for the preferred stock
were approximately $208,000, which were netted against the
proceeds and will be accreted to retained earnings over five
years. Total financing fees associated with the recapitalization
were approximately $849,000. The proceeds from these
transactions were used to repay, in full, amounts outstanding
with a prior lender.
The components of the subordinated debt and preferred stock
at August 29, 1997 were as follows:
Subordinated Preferred
Debt Stock
------------ ---------
(In thousands)
Face value $4,000 $2,500
Value of warrants issued (499) -
Amortization of warrants 18 -
Deferred financing costs (311) (208)
Amortization of financing costs 19 -
Accretion of preferred stock - 17
------ ------
Balance at August 29, 1997 $3,227 $2,309
====== ======
6. Stockholders' Equity
The components of stockholders' equity at February 28, 1997
and August 29, 1997 were as follows:
<TABLE>
<CAPTION>
Common stock Additional Retained
Shares Par Amount Capital Earnings Total
--------- ---------- ---------- -------- -------
(In thousands, except share information)
<S> <C> <C> <C> <C> <C>
Balance, February 28, 1997 2,963,083 $296 $2,007 $4,106 $6,409
Net income for six month period ended August 29, 1997 766 766
Value of warrants issued in connection with issuance
of subordinated debt 499 499
Dividend on Preferred stock (95) (95)
Accretion of preferred stock (16) (16)
Shares issued in connection with employee stock
purchase and stock option plans 38,633 4 118 122
--------- ---- ------ ------ ------
Balance, August 29, 1997 3,001,716 $300 $2,624 $4,761 $7,685
========= ==== ====== ====== ======
</TABLE>
7. Contingencies:
Claims and Litigation:
In October 1993, the Company was notified by the Royal Thai
Air Force ("RTAF") that the RTAF was terminating a certain
$4.6 million simulator contract with the Company. Although the
Company had performed in excess of 90% of the contract, the RTAF
alleged a failure to completely perform. In connection with
termination, the RTAF made a call on a $229,000 performance bond,
as well as a draw on an approximately $1.1 million advance
payment letter of credit. Work under this contract had stopped
while under arbitration, but on October 1, 1996, the Thai Trade
Arbitration Counsel rendered its decision under which the
contract was reinstated in full and the Company was given a
period of nine months to complete the remainder of the work.
Upon completion of the contract, the RTAF will pay the Company
the open receivable balance ($1.3 million), consisting of the
performance bond and the advance payment, plus 10% due on the
balance of the contract. Except as noted in the award, the
rights and obligations of the parties remain as per the original
contract. Should the Company fail to perform under the contract
in the time allotted, the RTAF could invoke penalties against the
Company, including termination of the contract and delay
penalties. Based on progress to date and recent discussions with
the RTAF, the Company has received from the RTAF an extension to
the nine month period to complete the installation and training.
A lawsuit was commenced against the Company in April 1997 in
the United States District Court for the District of Puerto Rico
by an employee of a customer who claims to have been injured as a
result of an alleged malfunction of a sterilizer manufactured by
the Company. The plaintiff is seeking $3 million in damages.
The Company has up to $10 million of product liability coverage,
subject to a $100,000 deductible. The outcome of this litigation
is not currently predictable.
Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against the
Company. In the opinion of management, after consultation with
legal counsel, all such matters are reserved for or adequately
covered by insurance or, if not so covered, are without merit or
are of such kind, or involve such amounts, as would not have a
significant effect on the financial position or results of
operations of the Company if disposed of unfavorably.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Three months ended August 29, 1997 compared to August 30, 1996
The Company had net income of $406,000 or $.10 per share, an
increase of $234,000 or 136% over the second quarter of fiscal
1997. Operating income increased $514,000 or 89%.
Sales were $7,181,000, an increase of $2,284,000 or 47%.
This increase primarily reflected higher sales in the
Aeromedical Training Systems ("ATS") and Hyperbaric product lines
(ATS more than doubled compared to the second quarter of fiscal
1997), partially offset by decreases in the Company's Process
Simulation Group.
Gross profit increased $776,000 or 49%, due principally to
the higher sales volume. As a percentage of sales, gross profit
was 33% compared to 32% for the same period a year ago. This
increase was the result of production efficiencies related to
improved factory utilization as well as a product mix shift to
higher margin ATS products.
Selling and administrative expenses increased $265,000 or
27% due principally to variable costs related to the higher sales
volume, principally commissions. As a percentage of sales, these
expenses were 17%, compared to 20% for the same period a year
ago. This improvement was due, in part, to the fixed
administrative costs being spread over the higher sales volume.
Interest expense increased $95,000 or 33%, reflecting both
higher borrowings at a lower rate and increased amortization of
various deferred financing fees associated with the new credit
facility of March 1997. The Company's tax rate approximates the
statutory rate.
Six months ended August 29, 1997 compared to August 30, 1996
The Company had net income of $766,000 or $.19 per share, an
increase of $474,000 or 162% over the first six months of fiscal
1997. Operating income increased $865,000 or 85%.
Sales were $13,825,000, an increase of $4,419,000 or 47%.
This increase reflected a ramp up of ATS and simulation products,
partially offset by reduced sales primarily in the Process
Simulation Group. As a percentage of the total, ATS activity for
the six month period constituted 55% of total sales compared to
34% in the prior year corresponding period. Revenue recognized
under contracts with the United Kingdom Royal Air Force accounted
for $3.3 million or 25% of total sales. Sales to international
customers, principally government agencies, accounted for $9
million or 65% of total sales compared to $7 million or 74% for
the same period a year ago. Gross profit increased $1,341,000 or
45%, due principally to the higher sales volume. As a percentage
of sales, gross profit was 31% , down slightly from the same
period a year ago.
Selling and administrative expenses increased $491,000 or
26% due principally to variable costs related to the higher sales
volume, primarily commissions expense which increased $301,000.
Adjusted for the commission increase, selling and administrative
expenses increased $190,000 or 10% on a sales increase of 47%.
As a percentage of sales, these expenses were 17%, compared to
20% for the same period a year ago. This improvement was due, in
part, to the fixed administrative costs being spread over the
higher sales volume.
Interest expense increased $86,000 or 33%, reflecting both
higher borrowings at a lower rate and increased amortization of
various deferred financing fees associated with the new credit
facility of March 1997. The Company's tax rate approximates the
statutory rate.
Liquidity and Capital Resources
On March 27, 1997, the Company entered into a revolving
credit agreement (the "Credit Agreement") with a new bank,
establishing a credit facility of $10 million through May 31,
1998, at which time the facility is reduced to $9 million. This
facility bears interest at the bank's prime lending rate and
expires on May 31, 1999. Substantially all of the Company's
short-term financing is provided by this bank. The Company
incurred $330,000 of financing fees related to origination of the
Credit Agreement. This amount is included in prepaid expenses
and other assets and will be charged to interest expense over the
term of the agreement, which is two years. Additionally, the
Company issued $4 million of subordinated debentures, bearing
interest at 12% per annum, due March 27, 2004 to a financial
investment company, a director of which has been subsequently
appointed and elected to the Company's Board of Directors. In
connection with the subordinated debentures, warrants were issued
to acquire 166,410 shares of the Company's common stock at an
exercise price of $1.00 per share. $499,000 of the proceeds from
the sale of the debentures was allocated to the warrants and
credited to capital contributed in excess of par value of common
stock. This amount along with financing fees of $311,000, which
were netted against the proceeds, will be amortized to interest
expense over the term of the debentures, which is seven years.
The Company also issued 25,000 shares of 11%, redeemable,
convertible preferred stock for $2.5 million. Each share of
convertible stock is convertible, at the option of the
shareholder, into 13.33 shares of the Company's common stock at a
price of $7.50 per share. Financing fees for the preferred stock
were approximately $208,000, which were netted against the
proceeds and will be accreted to retained earnings over five
years. Total financing fees associated with the recapitalization
were approximately $849,000. The proceeds from these
transactions were used to repay, in full, amounts outstanding
with a prior lender. At August 29, 1997, the Company had
$5.7 million available borrowings under its Credit Agreement.
In connection with the 1996 extension of the old credit
facility with another bank, the Company had issued to the former
bank warrants to purchase 100,000 shares of the Company's common
stock at $5.18 per share. Pursuant to the antidilution
provisions of the warrants, the number of shares covered by the
warrants has been increased to 106,433 shares and the exercise
price has been reduced to $4.87. In June 1997, the Company filed
a registration statement with the Securities and Exchange Com-
mission (Form S-3) to register the common stock issuable upon the
exercise of the warrants. As a result of this filing, the bank
returned to the Company an escrow deposit of $375,000.
During the six month period ended August 29, 1997, the
Company used $1,982,000 for operating activities. This was
primarily the result of an increase in costs and estimated
earnings in excess of billings and a reduction in customer
deposits. The Company expects to increase its billings for
these long-term contracts during the third and fourth quarters of
fiscal 1998. These cash uses were offset, in part, by net income
and non-cash charges of depreciation, amortization and increases
in reserve balances. The Company used $458,000 for investing
activities of capital expenditures and software development
costs. Funds were provided for operating and investing
activities from the Company's Credit Agreement. The Company
believes that cash generated from operating activities as well
as available borrowings under its Credit Agreement will be
sufficient to meet its obligations.
The Company's sales backlog at August 29, 1997 and
August 30, 1996 for work to be performed and revenue to be
recognized under written agreements after such dates was
approximately $40 million and $31.5 million, respectively.
This report contains certain "forward-looking statements"
including, without limitation, statements containing the words
"believes," "anticipates," "intends," "expects" and words of
similar import relating to the Company's operations. There are
important factors that could cause actual results to differ
materially from those indicated by such forward-looking
statements including contract cancellations, political unrest in
customer countries, general economic conditions and the risk
factors detailed from time to time in Environmental Tectonics
Corporation's periodic reports and registration statements filed
with the Securities and Exchange Commission, including, without
limitation, Environmental Tectonics Corporations Annual Report on
Form 10-KSB for the fiscal year ended February 28, 1997.
<PAGE>
Part II
Item 1. Legal Proceedings
There were no material developments in the litigation
previously described in the Company's Annual Report on Form
10-KSB for the fiscal year ended February 27, 1997.
Item 2. Changes in Securities
The constituent instruments defining the rights of the
holders of any class of securities were not modified nor were the
rights evidenced by any class of registered securities materially
limited or qualified during the period covered by this report
Item 3. Defaults Upon Senior Securities
No defaults occurred during the period covered in this
report.
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Articles of Incorporation
3.2 Bylaws
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ENVIRONMENTAL TECTONICS CORPORATION
(Registrant)
By:/s/ Duane Deaner
Duane Deaner
Chief Financial Officer
(authorized officer and
principal financial officer)
<PAGE>
EXHIBIT INDEX
3.1 Articles of Incorporation (Incorporated herein by reference
to Exhibit 3.1 to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended February 28, 1997).
3.2 Bylaws (Incorporated herein by reference to Exhibit 3(ii) to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended February 25, 1994).
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
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