FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File No. 1-10655
ENVIRONMENTAL TECTONICS CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1714256
(State or other jurisdiction (IRS Employer
of incorporation or organization Identification No.)
COUNTY LINE INDUSTRIAL PARK
SOUTHAMPTON, 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 past 90 days.
Yes x No
The number of shares outstanding of the registrant's common
stock as of August 8, 1998 is: [_________]
PAGE 1
<PAGE>
Environmental Tectonics Corporation
Consolidated Income Statements
(unaudited)
<TABLE>
<CAPTION>
Three months ended: Six Months ended:
Aug 28, Aug 29, Aug 28, Aug 29,
1998 1997 1998 1997
(thousands, except share and per share information)
<S> <C> <C> <C> <C>
Net sales $5,996 $7,181 $13,456 $13,825
Cost of goods sold 3,713 4,823 8,424 9,507
Gross profit 2,283 2,358 5,032 4,318
Operating expenses:
Selling and administrative 1,319 1,244 2,981 2,374
Research and development 135 19 223 59
1,454 1,263 3,204 2,433
Operating income 829 1,095 1,828 1,885
Other expenses:
Interest expense 333 384 598 601
Other, net 55 80 77 107
388 464 675 708
Income before income taxes 441 631 1,153 1,177
Provision for income taxes 146 225 395 411
Income before minority
interest 295 406 758 766
Income attributable to
minority interest 61 0 61 0
Net income $ 234 $ 406 $ 697 $ 766
Per share information:
Income available to common
shareholders $ 154 $ 320 $ 538 $ 654
Income per share: basic $ 0.05 $ 0.11 $ 0.17 $ 0.21
Income per share: diluted $ 0.05 $ 0.10 $ 0.16 $ 0.20
Number of shares: basic 3,071,000 2,987,000 3,053,000 2,977,000
Number of shares: diluted 3,316,000 3,196,000 3,286,000 3,169,000
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
PAGE 2
<PAGE>
Environmental Tectonics Corporation
Consolidated Balance Sheets
(unaudited)
August 28, February 27,
1998 1998
(amounts in thousands)
Assets
Current assets:
Cash and cash equivalents $ 396 $ 225
Cash equivalents restricted
for letters of credit 25 15
Accounts receivable, net 11,716 8,448
Costs and estimated earnings
in excess of billings on
uncompleted long-term
contracts 8,506 5,651
Inventories 2,689 3,058
Deferred tax asset 770 770
Prepaid expenses and other
current assets 463 283
24,565 18,450
Property, plant and equipment,
at cost, net of accumulated
depreciation of $6,954 at
Aug 28, 1998 and $6,729 at
Feb 27, 1998 3,028 2,837
Software development costs,
net of accumulated amortization
of $4,229 at Aug 28, 1998 and
$3,914 at February 27, 1998 1,094 1,155
Goodwill 654 -
Other assets 463 513
Total assets $29,804 $22,955
The accompanying notes are an integral part of the consolidated
financial statements.
PAGE 3
<PAGE>
Environmental Tectonics Corporation
Consolidated Balance Sheets
(unaudited)
Aug. 28, Feb. 27
1998 1998
(amounts in thousands)
Liabilities and Stockholders' Equity
Liabilities
Current liabilities:
Current portion of long-term debt $ 186 $ 148
Convertible notes payable - related
parties 300 800
Accounts payable - trade 817 1,424
Billings in excess of costs and
estimated earnings on uncompleted
long-term contracts 2,083 1,145
Customer deposits 637 1,373
Accrued income taxes 541 984
Accrued liabilities 1,393 1,114
Total current liabilities 5,958 6,988
Long-term debt, less current portion:
Credit facility payable to banks 6,549 467
Subordinated debt 3,752 3,730
Other 448 159
10,749 4,356
Deferred income taxes 702 702
Total liabilities 17,094 12,046
Redeemable cumulative preferred stock, $100
par and redemption value; 25,000 shares
authorized, issued and outstanding 2,351 2,330
Minority interest 361 -
Stockholders' Equity
Common stock; $.10 par value;
10,000,000 shares authorized;
3,076,331 and 3,006,596 issued
and outstanding at August 28, 1998
and February 27,1998, respectively 308 300
Capital contributed in excess of par
value of common stock 3,210 2,671
Foreign currency exchange adjustment 18 -
Retained earnings 6,147 5,608
Total stockholders' equity 9,683 8,579
Total liabilities and stockholders'
equity $29,804 $22,955
The accompanying notes are an integral part of the consolidated
financial statements.
PAGE 4
<PAGE>
Environmental Tectonics Corporation
Consolidated Statements of Cash Flows
(unaudited)
Six months ended
Aug. 28, Aug. 29,
1998 1997
(amounts in thousands)
Cash flows from operating activities:
Net income $ 697 $ 766
Adjustments to reconcile net income to
net cash (used) provided by operating
activities:
Depreciation and amortization 724 635
Provision for losses on accounts
receivable and inventories (164) 193
Changes in operating assets and
liabilities:
Accounts receivable (3,224) (108)
Costs and estimated earnings in
excess of billings on
uncompleted long-term contracts (2,855) (2,228)
Inventories 489 77
Prepaid expenses and other current
assets (784) (413)
Accounts payable (607) (442)
Billings in excess of costs and
estimated earnings on
uncompleted long-term contracts 938 (702)
Customer deposits (736) (500)
Accrued income taxes (443) 203
Other accrued liabilities 340 262
Payments under settlement
agreements (60) (60)
Net cash used in operating activities (5,685) (2,317)
Cash flows from investing activities:
Acquisition of equipment (428) (218)
Capitalized software development costs (254) (240)
Net cash used in investing activities (682) (458)
Cash flows from financing activities:
Net borrowings (payments) under credit
facility 6,082 (3,280)
Proceeds from subordinated debt, net 0 3,227
Proceeds from preferred stock, net 0 2,293
Payment of dividends on preferred stock (138) (95)
Decrease in cash equivalents restricted
for letters of credit (10) 406
Decrease in notes payable - related
party (500) (500)
Net increase of other long-term debt 327 6
<PAGE 5>
Proceeds from issuance of common
stock/warrants 416 621
Minority interest 361 -
Net cash provided by financing activities 6,538 2,678
Net increase (decrease) in cash and cash
equivalents 171 (97)
Cash and cash equivalents at beginning of
period 225 189
Cash and cash equivalents at end of period $ 396 $ 92
Supplemental schedule of cash flow
information:
Interest paid 369 517
Income taxes paid 756 230
Supplemental information on noncash
operating and investing activities:
During the six month period ended
August 28, 1998, the company transferred
$36 of other assets to property, plant
and equipment.
Also, in connection with an acquisition,
the company issued 55,000 shares of its
common stock and a three-year interest-
only note for $375.
During the six month period ended
August 29, 1997, the company transferred
$158,000 of inventory to property, plant
and equipment and $637,000 of customer
deposits to billings in excess of cost
and estimated earnings on uncompleted
long-term contracts
The accompanying notes are an integral part of the consolidated
financial statements.
PAGE 6
<PAGE>
Environmental Tectonics Corporation
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements include
the accounts of Environmental Tectonics Corporation ("ETC" or the
"Company"), its wholly-owned subsidiary ETC International
Corporation and its majority-owned subsidiary ETC-PZL Aerospace
Industries, Ltd. ("ETC-PZL").
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 27, 1998.
Certain reclassifications have been made to the 1997
financial statements to conform with the 1998 presentation.
2. Earnings per Share
Basic earnings per share excludes dilution and is computed
by dividing income available to common shareholders by the
weighted average common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common
stock were exercised and converted into common stock or resulted
in the issuance of common stock that then shared in the earnings
of the entity. The following table demonstrates the components
of basic and diluted earning per share for the three and six
month periods ended August 28, 1998 and August 29, 1997.
<PAGE 7>
<TABLE>
<CAPTION>
(amounts in thousands, except share and per share information)
Three months ended: Six months ended:
Aug 28, Aug 29, Aug 28, Aug 29,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income $234 $406 $697 $766
Less preferred stock dividends (69) (69) (138) (95)
Less accretion of preferred
stock (11) (17) (21) (17)
Income available to common
stockholders $154 $320 $538 $654
Basic earnings per share:
Weighted average shares 3,070,969 2,986,810 3,053,410 2,977,176
Per share amount $0.05 $0.11 $0.21 $0.19
Diluted earnings per share:
Weighted average shares
Effect of dilative
securities: 3,070,969 2,986,810 3,053,410 2,977,176
Stock options 56,879 33,506 40,898 38,050
Stock warrants 187,741 175,625 191,791 153,746
3,315,589 3,195,941 3,286,099 3,168,972
Per share amount $0.05 $0.10 $0.16 $0.20
</TABLE>
Common stock issuable pursuant to conversion provisions of
convertible subordinated debt and preferred stock totaling
360,611 shares of common stock were not included in the
computation of diluted earnings per share because the effect of
the assumed conversion was anti-dilutive.
3. Accounts Receivable
The components of accounts receivable are as follows:
August 28, February 27,
1998 1998
(amounts in thousands)
U.S. Government receivables billed and
unbilled contract costs subject to
negotiation $4,824 $4,563
U.S. commercial receivables billed 1,341 1,071
International receivables billed 5,886 3,193
12,051 8,827
Less allowance for doubtful accounts (335) (379)
$11,716 $8,448
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. Theses costs were recorded during
fiscal years 1994, 1995 and 1998. The Company has recorded
<PAGE 8> claims, amounting to $2.75 million, to the extent of
contract costs incurred, and accounts receivable of $1.7 million,
representing the balance due under the contract. Claim 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 1999. 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 $10.3 million in claims filed with the U.S.
Government (including the aforementioned recorded claim and
accounts receivable balances), which are subject to negotiation
and audit by the U.S. Government. The U.S. Government has
responded to the claims with either denials or deemed denials
that the Company has appealed. As of August, 1998, the company
was involved in discovery document review and preparing for
depositions of key government personnel. Also, additional
amounts are under review for the period November 1995 through
October 1996 to determine what, if any, additional amounts can be
filed as supplemental claims.
International receivables billed:
International receivables billed includes $1.8 million
related to a certain contract with the Royal Thai Air Force.
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 this
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.
Except as noted in the award, the rights and obligations of the
parties remain as per the original contract including the
potential invoking of penalties or termination of the contract
for delay. On December 22, 1997, the Company successfully
performed acceptance testing and the unit passed with no
discrepancy reports. Although the contract was not completed in
the time allotted, the Company has requested an extension on the
completion time due to various extenuating circumstances,
including allowable "force majeure" events.
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 (net of reserves):
August 28, February 27,
<PAGE 9>
1998 1998
(amounts in thousands)
Raw materials $ 557 $ 404
Work in Process 2,132 2,654
$2,689 $3,058
5. Subordinated Debt and Preferred Stock
The components of the subordinated debt and preferred stock
at August 28, 1998 and February 27,1998, were as follows:
<TABLE>
<CAPTION>
(amounts in thousands)
August 28, 1998 February 27, 1998
Subordinated Preferred Subordinated Preferred
Debt Stock Debt Stock
<S> <C> <C> <C> <C>
Face value $4,000 $2,500 $4,000 $2,500
Deferred financing costs (311) (208) (311) (208)
Amortization of financing costs 63 - 41
Accretion of preferred stock - 59 - 38
Total $3,752 $2,351 $3,730 $2,330
</TABLE>
6. Stockholders' Equity
The components of stockholders' equity at August 28, 1998
and February 27, 1998 were as follows:
<TABLE>
<CAPTION>
(amounts in thousands, except share information)
Common stock Additional Foreign Retained
Shares Amount Capital Currency Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1997 3,006,596 $300 $2,671 $ 0 $5,608 $8,579
Net income for six month period
ended August 28, 1998 - - - - 697 697
Stock issued in connection with
acquisition 55,000 6 490 - - 496
Dividend on preferred stock - - - - (138) (138)
Accretion of preferred stock - - - - (20) (20)
Shares issued in connection with
employee stock purchase and
stock option plans 14,735 2 49 - - 51
Foreign currency exchange
adjustments - - - 18 - 18
Balance at August 28, 1998 3,076,331 $308 $3,210 $18 $6,147 $9,683
</TABLE>
7. Acquisition of ETC-PZL Aerospace Industries, Ltd.
On April 21, 1998, ETC acquired 65% ownership of MP-PZL
Aerospace Industries, Ltd. ("MP-PZL"), a simulation and advanced
training device manufacturing company located in Warsaw, Poland.
<PAGE 10> The purchase price was $375,000 in cash, a $350,000
three-year promissory note bearing interest at a rate of 10% per
annum and payable as to principal at maturity and 55,000 shares
of ETC's common stock. MP-PZL was subsequently renamed ETC-PZL
Aerospace Industries, Ltd. ("ETC-PZL"). ETC's cost for this
acquisition was $1,220,000 and has been recorded in the
accompanying balance sheet under the purchase method of
accounting for business combinations. In connection with the
acquisition, the Company has recorded goodwill of approximately
$662,000 and a minority interest of approximately $300,000.
ETC-PZL's fiscal period ends December 31, 1998. The results
of ETC-PZL for the period May 1,1998 through June 30, 1998, have
been included in ETC's results of operation for the three and six
month periods ended August 28, 1998. On a pro forma basis had
the Company consolidated the results of ETC-PZL in the prior
fiscal periods, the following comparisons would result:
Three months ended:
August 28, August 29, August 29,
1998 1997 1997
(as reported) (pro forma)
(amounts in thousands except share and
per share data)
Net sales $ 5,996 $ 7,181 $ 7,412
Gross profit 2,283 2,358 2,377
Operating Income 829 1,095 982
Net income 234 406 337
Per share information:
Income available to
common shareholders 154 320 $251
Income per share:
basic 0.05 0.11 0.08
Income per share:
diluted 0.05 0.10 0.08
Number of shares:
basic 3,071,000 2,987,000 2,987,000
Number of shares:
diluted 3,316,000 3,196,000 3,196,000
Six months ended:
August 28, August 29, August 29,
1998 1997 1997
(as reported) (pro forma)
(amounts in thousands except share and
per share data)
Net sales $ 13,456 $ 13,825 $ 14,056
Gross profit 5,032 4,318 4,337
Operating income 1,828 1,885 1,772
Net income 697 766 697
<PAGE 11>
Per share information:
Income available to
common shareholders $538 $654 $585
Income per share:
basic $0.17 $0.21 $0.20
Income per share:
diluted $0.16 $0.20 $0.18
Number of shares:
basic 3,053,000 2,977,000 2,977,000
Number of shares:
diluted 3,286,000 3,169,000 3,169,000
8. Computer Software Costs
The American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1 "Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use." The SOP was issued to provide authoritative
guidance on the subject of accounting for the costs associated
with the purchase or development of computer software for
internal use. The statement is effective for fiscal years
beginning after December 15, 1998. This statement is not
expected to have a material impact on the Company's financial
position or results of operation.
9. Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards to
provide prominent disclosure of comprehensive income items.
Comprehensive income is the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. SFAS No. 130 is effective
for all periods beginning after December 15, 1997. Effective
February 28, 1998, the Company adopted SFAS No. 130 which had no
material impact on the Company's consolidated financial position
or results of operation.
10. Business Segment Presentation:
In June 1997, the FASB issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS
No. 131 requires that public business enterprises report certain
financial information about operating segments in the complete
sets of financial statements of the enterprise and in condensed
financial statements of interim periods issued to shareholders.
It also requires that public business enterprises report certain
information about their products and services, the geographic
areas in which they operate and their major customers. SFAS
No. 131 is effective for all periods beginning after December 15,
1997. Effective February 28, 1998, the Company adopted SFAS
<PAGE 12> No. 131 which had no impact on the Company's
consolidated financial position or results of operation.
11. Year 2000 Issue
Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed
and developed without considering the impact of the upcoming
change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the
year 2000. The Year 2000 issue affects virtually all companies
and organizations. The Company is currently utilizing internal
resources to identify, convert or replace its systems for Year
2000 compliance. The Company estimates that costs associated
with the Year 2000 issue, which are currently being expensed as
incurred, will not have a material impact on its financial
position or results of operations.
Managements Discussion and Analysis of Financial Condition and
Results of Operations
Three months ended August 28, 1998 compared to August 29,
1997.
The Company had net income of $234,000, or $.05 per share
(diluted) for the second quarter of fiscal 1998. Sales were
$5,996,000, a decrease of $1,185,000 or 17% from the
corresponding prior period. Decreases were evident across most
product segments. An offset came from consolidating the
operations of the Company's Poland subsidiary, acquired in April,
1998.
Gross profit decreased $75,000, or 3%, on the lower sales
volume but as a percentage of revenues increased to 38% versus
33% for the prior period. This increase primarily reflected a
higher mix of higher margin Aeromedical Training System Sales
coupled with gross profit from the Company's Poland subsidiary.
Selling and administrative expenses increased $75,000, or
6%, reflecting the addition of local expenses for the Company's
Poland subsidiary in the current period. Research and
development expenses increased $116,000 over the prior period,
reflecting heightened development in the hyperbaric and
aeromedical product areas.
Interest and other fees were down from the prior period
because the prior period included additional fees associated with
the Company's March, 1997, refinancing.
The Company's tax rate approximates the statutory rate.
Six months ended August 28, 1998 compared to August 29,
1997.
<PAGE 13>
For the six month period ended August 28, 1998, the Company
had net income of $697,000, or $.16 per share (diluted), versus
$766,000, or $.20 per share (diluted) in the first six months of
fiscal 1998. Sales were $13,456,000, slightly down from
$13,825,000 for the prior period. As a percentage of the total,
sales in the current period of the Aeromedical Training Systems
group approximated 78% of total sales. Revenue recognized under
contracts with the United Kingdom Royal Air Force accounted for
$2.8 million or 21% of total sales. Sales to international
customers (including sales of the Polish subsidiary), principally
government agencies, accounted for $9.9 million or 73% of total
sales, up from $9.0 million or 65% of total sales for the same
period a year ago.
Gross profit increased $714,000, or 17%, despite the reduced
sales level, reflecting a higher mix of higher margin Aeromedical
Training Systems sales coupled with gross profit from the
Company's Poland subsidiary. As a percentage of revenue, gross
profit was 37% versus 31% in the prior period.
Selling and administrative expenses were up $607,000, or 26%
from the prior period due, in part, to higher travel expenses
related to increased selling efforts and proposal development,
additional legal costs for claim activity, and the addition of
local expenses for the Company's Poland subsidiary.
Interest and other expenses were down slightly from the
prior period because the prior period included additional fees
associated with the Company's March, 1997, refinancing.
The Company's tax rate approximates the statutory rate.
Liquidity and Capital Resources
During the six month period ended August 28, 1998, the
Company used $5,685,000 for operating activities. This was
primarily a result of a net increase in costs and estimated
earnings in excess of billings, increased receivables, and a
reduction in current liability accounts including accounts
payable, customer deposits and accrued income taxes. Partial
offset came from net income and non-cash changes of depreciation
and amortization. Generally speaking, the use of cash reflected
increased production on certain large contracts combined with
end of period customer billings. The Company expects to increase
its billings for long-term contracts in the second half of fiscal
1999.
Investment activities included capital expenditures
($428,000) and capitalized software costs (254,000). On
April 21,1998, the Company acquired 65 % ownership of MP-PZL
Aerospace Industries, Ltd. ("MP-PZL), a simulation and advanced
training device manufacturer located in Warsaw, Poland, for
$375,000 in cash, a $350,000 three-year promissory note bearing
interest at 10% per annum and payable as to principal at maturity
<PAGE 14> and 55,000 shares of ETC's common stock. MP-PZL was
subsequently renamed ETC-PZL Aerospace Industries, Ltd.
Funds to support the Company's operating and investing
activities primarily came from the Company's credit facility.
The Company believes that cash generated from operating
activities as well as available borrowings under its credit
facility will be sufficient to meet its obligations. On
October 2, 1998, the Company had approximately $1 million
available under its credit facility.
The Company's sales backlog at September 30, 1998 and
February 27, 1998 for work to be performed and revenue to be
recognized under written agreements after such dates was
approximately $25.2 million and $30.4 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 ETC's periodic reports and
registration statements filed with the Securities and Exchange
Commission, including, without limitation, ETC's Annual Report on
form 10-KSB for the fiscal year ended February 27, 1998.
PAGE 15
<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, 1998.
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:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
PAGE II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
ENVIRONMENTAL TECTONICS CORPORATION
(Registrant)
By:/s/ Duane Deaner
Duane Deaner,
Chief Financial Officer (authorized
officer, principal financial
officer and principal accounting
officer)
Date: October 12, 1998
PAGE II-2
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule. <PAGE II-3>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-27-1998
<PERIOD-END> AUG-28-1998
<CASH> 396
<SECURITIES> 0
<RECEIVABLES> 12,051
<ALLOWANCES> 335
<INVENTORY> 2,689
<CURRENT-ASSETS> 24,565
<PP&E> 9,982
<DEPRECIATION> 6,954
<TOTAL-ASSETS> 29,804
<CURRENT-LIABILITIES> 5,958
<BONDS> 0
0
2,351
<COMMON> 3,518
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 29,804
<SALES> 13,456
<TOTAL-REVENUES> 13,456
<CGS> 8,424
<TOTAL-COSTS> 3,204
<OTHER-EXPENSES> 77
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 598
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