FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act Of 1934 For the fiscal year ended February 25, 2000 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [no fee required] For the transition period from ____________ to ____________. Commission File Number 1-10655 ENVIRONMENTAL TECTONICS CORPORATION ----------------------------------- (Exact name of small business issuer in its charter) Pennsylvania 23-1714256 - ------------------------------- ------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) County Line Industrial Park Southampton, Pennsylvania 18966 - ---------------------------------------- -------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (215) 355-9100 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.05 per share -------------------------------------- (Title of Class) Securities registered pursuant to Section 12(g) of the Act: None Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 --- --- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K 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 this Form 10-K or any amendment to this Form 10-K. As of May 19, 2000, the aggregate market value of the Registrant's common stock held by non-affiliates of the Registrant was approximately $32,852,000. As of May 19, 2000, there were 7,088,646 shares of Registrant's common stock, $0.05 par value per share, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE. Portions of Registrant's 2000 Annual Report to Stockholders (the "Annual Report") are incorporated by reference in Part II, Items 5, 6, 7, and 8. Proxy statement to be used with the Registrant's annual meeting to be held August 31, 2000, is incorporated by reference in response to Item 11 of Part 3 hereof. Transitional Small Business Disclosure Format: Yes ___ No x --- Certain statements under Item 1 and Item 7 contained herein or as may otherwise be incorporated by reference herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to: statements regarding future product development, technological advances and market acceptance of products. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Environmental Tectonics Corporation (the "Company"), or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, general economic and business conditions, competition, technological advances, political unrest in customer countries, contract cancellations and other risk factors that are detailed in this document and in other periodic reports and registration statements filed by Environmental Tectonics Corporation with the Securities and Exchange Commission. All forward-looking statements included in this document are based on information available to the company on the date hereof, and the Company assumes no responsibility to update any such forward-looking statements. Accordingly, past results and trends should not be used by investors to anticipate future results or trends. PART I Item 1. Description of Business (a) Business Development Environmental Tectonics Corporation ("ETC" or the "Company"), a Pennsylvania corporation, incorporated in 1969, is principally engaged in the design, manufacture and sale of software driven products used to A) create and monitor the physiological effects of motion on humans and equipment and B) control, modify, simulate and measure environmental conditions. These products include aircrew training systems, entertainment products, sterilizers, environmental and hyperbaric chambers, and other products which involve similar manufacturing techniques and engineering technologies. Since February 26, 1999, there has been no material change in the Company's mode of conducting business. (b) Business of the Company The company operates in two primary business segments, Aircrew Training Systems and Industrial Group. Aircrew Training Systems. This segment includes three primary product groups. The Company's aircrew training devices are used for medical research, advanced flight training, and for the indoctrination and testing of military and commercial pilots. The major devices sold in this product area are commercial flight simulators, night vision trainers, water survival training equipment, disorientation training equipment, human centrifuges, ejection seat trainers and vehicle and tank simulators. The Company provides operation and maintenance services for installed equipment it manufactures as well as equipment produced by others. The Company's entertainment products consist of motion-based simulation rides and other products. The Company's Disaster Management Systems line includes real-time interactive training programs that allow instruction on various disaster situations. 2 The aircrew training system class of products as a whole represented 75%, 84% and 75% of consolidated revenues of the Company for the years ended February 25, 2000, February 26,1999 and February 27, 1998, respectively. Industrial Group. This segment includes three primary product groups: Sterilizers. The Company manufactures steam and gas sterilizers used for various industrial and pharmaceutical applications. The Company concentrates on marketing the larger custom-designed sterilizers to the pharmaceutical and medical device industries. Environmental Systems and Other Products. The Company's environmental systems business consists of the design and fabrication of sampling and analysis systems, and test equipment and systems. The simulation systems generally consist of an enclosed chamber with instrumentation and equipment which enable the customer to control and modify such environmental factors as temperature, pressure, humidity, wind velocity and gas content to produce desired conditions. These products include controlled air systems for automotive companies and environmental chambers The Company's Hyperbaric line includes monoplace and multiplace chambers for decompression and wound care applications. Sales in this class of products were 25%, 16% and 25% of consolidated revenues of the Company for the years ended February 25,2000, February 26, 1999 and February 27, 1998, respectively. The Company also provides control operator repair and upgrades and maintenance service for its own and other manufacturers' equipment. Marketing The Company currently markets its products and services primarily through its sales offices and employees. At February 25, 2000, approximately 19 employees were committed to sales and marketing functions. The Company uses branch offices in the United Kingdom, the Middle East, and Asia as well as the services of approximately 100 independent sales organizations in seeking foreign orders for its products. 3 Product Development New products and improvements in existing products are being continually developed in response to inquiries from customers and to management's determination that particular products should be produced or significantly improved. Although the Company does not have a separate research and development group, there are a few technical personnel whose main activity is the development and integration of new technologies into our existing products. These personnel include the Vice-President of Engineering and the Vice-President of New Product Development whose additional activity is the introduction of product extensions and new applications of existing technology. Within the Aircrew Training Segment, product development emphasizes enhancing control systems and software graphics and exploring commercial possibilities. The Company's product development efforts will be focused on three areas: - Disaster Management Simulation. The Company is in production of a major contract from the City of Chicago to develop, install and maintain a computer-based Incident Command Simulator. The company will continue to explore product applications and extensions to this Intelligent Virtual Reality product. - G-force and Disorientation trainers. The Company is updating all software to a windows based platform. - Entertainment. The Company is evaluating product extensions to motion based amusement rides. On April 16, 1999, the Company formed a new wholly owned subsidiary, Entertainment Technology Corporation, to handle all of the Company's future entertainment projects. Product development in this class will emphasize entertainment applications of our proven ATS simulation technology. The Company reported research and development costs of $920,000, $397,000 and $148,000 for the years ended February 25,2000, February 26, 1999 and February 27, 1998, respectively. However, the majority of the Company's research and development efforts are not separately identified and recorded. Instead, they are expressed as part of project job costs in the cost of sales. 4 Supplies The components being used in the assembly of systems and the parts used to manufacture the Company's products are purchased from equipment manufacturers, electronics supply firms and others. To date, the Company has had no difficulty in obtaining supplies. Further, all raw materials, parts, components, and other supplies used by the Company in the manufacture of its products can be obtained at competitive prices from alternate sources should existing sources of supply become unavailable. Patents and Trademarks The Company has no patents or trademarks which it considers significant to its operations, except a patent on the GYROLAB Spatial Disorientation Trainer which expires in December 2004. Customers In the current year and recent past, it has been the Company's experience that a substantial portion of sales are made to a small number of customers that vary within any given year. The Company's business does not depend upon repeat orders from these same customers. Sales of aircrew training systems are made principally to U.S. and foreign governmental agencies. Sales of sterilizers and environmental systems are made to commercial and governmental entities worldwide. In fiscal 2000, the Company's major customers included Mend's International $8,107,000, the United Kingdom Ministry of Defense $4,821,000, and the Walt Disney companies, $3,681,000. These companies do not have any relationship with the Company other than as customers. Foreign and Domestic Operations and Export Sales During the years ended February 25,2000, February 26, 1999 and February 27, 1998, approximately $1,587,000 (5%), $1,158,000 (4.0%) and $2,936,000 (10%), respectively, of the Company's net revenues were attributable to contracts with agencies of the U.S. Government or with other customers who had prime contracts with agencies of the federal government. During the years ended February 25,2000, February 26, 1999 and February 27, 1998, $23,907,000 (69%), $22,876,000 (78%) and $17,490,000 (60%), respectively, of the Company's net revenues were attributable to export sales or sales for export. (See Note 11 to the Company's consolidated financial statements incorporated herein by reference to the Annual Report.) On export sales, customers' obligations to the Company are normally secured by irrevocable letters of credit based on the credit worthiness of the Customer. 5 The Company does not believe that the distribution of its sales for any particular period is necessarily indicative of the distribution expected for any other period. A large portion of the Company's sales are under long-term contracts requiring more than one year to complete. The Company accounts for sales under long-term contracts on the percentage of completion basis. (See Note 1 to consolidated financial statements incorporated herein by reference to the annual report). The Company's U.S. Government contracts contain standard terms permitting termination for the convenience of the Government. In the event of termination of such contracts, the Company is entitled to receive reimbursement on the basis of work completed (cost incurred plus a reasonable profit), recording the amounts anticipated to be recovered from termination claims in income as soon as those amounts can be reasonably determined rather than at the time of final settlement. All costs applicable to a termination claim are charged as an offsetting expense concurrently with the recognition of income from the claim. Backlog The Company's sales backlog at February 25, 2000, and February 26, 1999, for work to be performed and revenue to be recognized under written agreements after such dates was approximately $44,146,000 and $32,141,000, respectively. In addition, the Company's training and maintenance contracts backlog at February 25, 2000 and February 26, 1999, for work to be performed and revenue to be recognized after that date under written agreements was approximately $1,288,000 and $1,311,000, respectively. Of the February 25,2000 backlog, approximately $38,725,000 is under contracts for aircrew training systems and maintenance support including $25,755,000 for the Walt Disney companies. Approximately 64% of the February 25, 2000, backlog is expected to be completed prior to February 23, 2001. 6 Competition The Company's business strategy in recent years has been to seek niche markets in which there are not numerous competitors. However, in some areas of its business the Company competes with well-established firms, some of which have substantially greater financial and personnel resources. Some competitor firms have technical expertise and production capabilities in one or more of the areas involved in the design and production of physiological flight training equipment, environmental systems, and other specially designed products, and compete with the Company for this business. The competition for any particular project generally is determined by the technological requirements of the project, with consideration also being given to a bidder's reliability, product performance, past performance, and price. The Company faces particularly intense competition from a number of firms in the sale of hospital sterilizers but faces less competition in the sale of the larger custom-designed industrial sterilizers. The Company believes that it is a significant participant in the markets in which it competes, especially in aircrew training systems in which the Company believes it is a principal provider of this type of equipment and training in its market area. Compliance with Environmental Laws The Company has not incurred during fiscal 2000 nor does it anticipate incurring during fiscal 2001 any material capital expenditures to maintain compliance with Federal, state and local statutes, rules and regulations concerning the discharge of materials into the environment, nor does the Company anticipate that compliance with these provisions will have a material adverse effect on its earnings or competitive position. Employees On February 25, 2000, the Company had 292 full-time employees, of whom 6 were employed in executive positions, 109 were engineers, engineering designers, or draftspeople, 67 were administrative (sales, accounting, etc.) and clerical personnel, and 110 were engaged principally in production and operations. 7 Item 2. Description of Property The Company owns its executive offices and principal production facilities located on a 5-acre site in the County Line Industrial Park, Southampton, Pennsylvania in an approximately 70,000 square foot steel and masonry building. Approximately 55,000 square feet are devoted to manufacturing, and 15,000 square feet to office space. The original building was erected in 1969 and additions were made in 1973, 1976, 1985 and 1991. This property serves as collateral for the Company's revolving credit facility. Additionally, the Company rents office space at various sales and support locations throughout the world and at its Polish subsidiary. The Company considers its machinery and plant to be in satisfactory operating condition. It plans to construct an addition to its main building in Southampton, PA, in fiscal 2001. Increases in the level of operations beyond that expected in the current fiscal year might require the Company to obtain additional facilities and equipment. Item 3. Legal Proceedings 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, all such matters are reserved for or are 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 of the Company if disposed of unfavorably. Item 4. Submission of Matters to a Vote of Security Holders None. 8 PART II Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters See information appearing under the heading "Market for the Registrant's Common Stock and Related Stockholder Matters" in the Annual Report, attached hereto as Exhibit 13 and incorporated herein by reference. Item 6. Selected Financial Data See information appearing under the heading "Financial Review" in the annual report, attached hereto as Exhibit 13 and incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations See information appearing under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report, attached hereto as Exhibit 13 and incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Not applicable. Item 8. Financial Statements See the information appearing under the headings "Consolidated Financial Statements" and "Notes to Consolidated Financial Statements" in the Annual Report, attached hereto as Exhibit 13 and incorporated herein by reference. 9 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant; The following table sets forth certain information with respect to the directors and executive officers of the Registrant: Served as Principal Occupations Director and Positions and or Officer Offices with the Name Age Since(1) Company - ---- --- ---------- --------------------- William F. Mitchell(2) 58 1969 Chairman of the Board, President and Director Richard E. McAdams(3) 64 1985 Executive Vice President and Director Philip L. Wagner, Ph.D.(4) 63 1993 Director Pete L. Stephens, M.D.(5) 62 1974 Director Craig Macnab(6) 44 1997 Director Duane D. Deaner(7) 52 1996 Chief Financial Officer - -------------------- (1) Directors serve one-year terms. (2) Mr. Mitchell has been Chairman of the Board, President and Chief Executive Officer of the Company since 1969, except for the period from January 24, 1986 through January 24, 1987, when he was engaged principally in soliciting sales for the Company's products in the overseas markets. (3) Mr. McAdams has been with the Company since 1970. He became a Vice President in 1978 with responsibility for contract administration. Mr. McAdams became Executive Vice President of the Company in 1990. (4) Dr. Wagner is an organic chemist with over 30 years of diversified experience managing research and development and new business development at E.I. du Pont de Nemours & Company and thereafter founded Chadds Ford Technologies, Inc., a consulting firm. He is currently President of Chadds Ford Technologies, Inc. (5) Dr. Stephens has been a physician engaged in the private practice of medicine for 30 years. (6) Mr. Macnab has served as Director of the Company since June 1997. Since January 1997, Mr. Macnab had been the President of Tandem Capital, Inc. which makes investments in micro-cap public companies. On February 24, 1999, Mr. Macnab tendered his resignation from the Board of Directors as a designee of Sirrom Capital Corporation, following which he then accepted the Board's invitation to serve as an independent member of the Board. Subsequent to fiscal year end Mr. Macnab terminated his position with Tandem Capital Corporation. From 1993 to 1996, Mr. Macnab served as the general partner of MacNiel Advisors, Inc., the general partner of three private funds that invested in the publicly traded securities of small public companies. From 1987 to 1993, Mr. Macnab was a partner of J.C. Bradford & Co., a regional brokerage firm, jointly responsible for the merger and acquisition department and a private mezzanine capital fund. From 1981 to 1987, Mr. Macnab was employed by Lazard Freres & Co. Mr. Macnab is also a director of JDN Realty, Smart Choice Automotive Group and Teltronics, Inc. (7) Mr. Deaner has served as Chief Financial Officer of the Company since January 1996. Mr. Deaner served as Vice President of Finance for Pennfield Precision Incorporated from September 1988 to December 1995. 10 Committees of the Board of Directors During the year ended February 25, 2000, the Company had an Audit Committee consisting of the following directors: Messrs. Mitchell, Philip L. Wagner and Dr. Pete L. Stephens. The independent outside directors also served on the Company's Compensation Committee during the year ended February 25, 2000. The Audit Committee is charged with reviewing and overseeing the Company's financial systems and internal control procedures and conferring with the Company's independent accountants with respect thereto. The Compensation Committee is charged with reviewing the compensation and incentive plans of officers and key personnel. During the year ended February 25, 2000, the Board of Directors held 3 meetings and the Audit Committee and Compensation Committee each held 1 meeting. All members of the Board attended all of the meetings of the Board held while they were members of the Board. All members of the Audit Committee and Compensation Committee attended all meetings of the Committee held while they were members thereof. Compliance With Section 16(a) of the Exchange Act Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC") and the American Stock Exchange. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) Forms they file. The rules of the SEC regarding the filing of such statement require that "late filings" of such statements be disclosed in the Company's proxy statement. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that, during the fiscal year ended February 25, 2000, its officers, directors and greater than ten percent beneficial owners complied with all applicable filing requirements except for Mr. Mitchell who had 1 late filing of Form 4 and Mr. McAdams who had 3 late filings of Form 4. 11 Item 11. Executive Compensation REMUNERATION OF DIRECTORS AND OFFICERS The following table sets forth compensation paid by the Company to the Chief Executive Officer for services rendered during fiscal years 2000,1999,1998 . There are no other executive officers whose total annual salary and bonus exceeds $100,000. The footnotes to the table provide additional information concerning the Company's compensation and benefit programs. SUMMARY COMPENSATION TABLE Annual Compensation Other Name and Annual All Other Principal Fiscal Compen- Compen- Position Year Salary($) Bonus($) sation($)(1) sation($)(2) - --------- ------ --------- -------- ------------ ------------ William F. Mitchell, 2000 $225,000 $12,023 $ - $4,000 President and Chief 1999 207,085 126,563 - 3,876 Executive Officer 1998 178,450 - - 3,876 (1) The Company's executive officers receive certain perquisites. For fiscal years 2000, 1999 and 1998, the perquisites received by Mr. Mitchell did not exceed the lesser of $50,000 or 10% of his salary and bonus. (2) These amounts represent the Company's contribution to the Retirement Savings Plan. Directors of the Company who are not officers of the Company are paid $600 for Board of Directors meetings which they attend. Additional compensation is not paid for committee meetings. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth as of May 19, 2000, the number of shares and percentage of the Company's Common Stock owned beneficially by each director, each executive officer named in the Summary Compensation Table, and each person holding, to the Company's knowledge, more than 5% of the outstanding Common Stock. The table also sets forth the holdings of all directors and executive officers as a group. 12 Amount and Nature of Percent Beneficial of Name and Address of Beneficial Owner Ownership Class - ------------------------------------ --------- -------- William F. Mitchell (1) 1,777,998 25.1% c/o Environmental Tectonics Corporation County Line Industrial Park Southampton, PA 18966 Pete L. Stephens, M.D. (2) 675,300(3) 9.5% 40 Bridgetown Rd Hilton Head Island South Carolina 29928 Richard E. McAdams (2) 33,742(4) * c/o Environmental Tectonics Corporation County Line Industrial Park Southampton, PA 18966 Philip L. Wagner, Ph.D. (2) 12,000(5) * Chadds Ford Technologies, Inc. P.O. Box 377 Chadds Ford, PA 19317 Duane D. Deaner 8,750(6) * c/o Environmental Tetonics Corporation County Line Industrial Park Southampton, PA 18966 Craig Macnab(2) 0 * 428 Westview Avenue Nashville, TN 37205 FINOVA Mezzanine Capital 840,986(7) 11.3% 500 Church Street, Suite 200 Nashville, TN 37219 Emerald Advisors, Inc. 635,840(8) 9.0% 1857 William Penn Way P.O. Box 10666 Lancaster, PA 17605-0666 All directors, executive officers and 5% owners as a group (8 persons) 3,984,616(9) 53.5% * less than 1% - -------------------- 13 (1) Chairman of the Board, President and Director of the Corporation. Shares of Common Stock include 192,000 shares held by Mr. Mitchell's wife. (2) Director of the Corporation. (3) Includes 25,500 shares held by or for the benefit of Dr. Stephens' wife and two of his children. (4) Includes options to purchase 12,500 shares of Common Stock held under the Company's Incentive Stock Option Plan which are presently exercisable. (5) Includes 8,000 shares of Common Stock held by or for the benefit of Dr. Wagner's wife. (6) Includes options to purchase 8,750 shares of Common Stock held under the Company's Incentive Stock Option Plan which are currently exercisable. (7) These shares include 332,820 shares of Common Stock underlying a presently exercisable warrant to purchase shares of Common Stock. (8) As reported in a Schedule 13G, dated February 1,2000, filed by Emerald Advisors, Inc., Emerald has sole voting power with respect to 432,880 shares of Common Stock and sole dispositive power over 202,960 shares of Common Stock. (9) Includes options to purchase 12,500 and 8,750 shares of Common Stock which may be acquired by Director McAdams and Duane Deaner, Chief Financial Officer, respectively, upon the exercise of options granted under the Company's Incentive Stock Option Plan. Item 12. Certain Relationships and Related Transactions None Item 13. Exhibits and Reports on Form 8-K (a) Exhibits: Number Item 3.1 Registrant's Articles of Incorporation, as amended, were filed as Exhibit 3.1. to Registrant's Form 10-K for the year ended February 28, 1997 and are incorporated herein by reference. 3.2 Registrant's By-Laws, as amended, were filed as Exhibit 3(ii) to Registrant's Form 10-K for the year ended February 25, 1994 and are incorporated herein by reference. 4.1 12% Subordinated Debenture due March 27, 2004 was filed as Exhibit 4.1 to Registrant's Form 10-K for the year ended February 28, 1997 and is incorporated herein by reference. 14 10.1 Registrant's 1988 Incentive Stock Option Plan was filed as Exhibit 10(v) to Registrant's Form 10-K for the year ended February 23, 1990 and is incorporated herein by reference.* 10.2 Registrant's Employee Stock Purchase Plan was filed on July 6, 1988 as Exhibit A to the Prospectus included in Registrant's Registration Statement (File No. 33-42219) on Form S-8 and is incorporated herein by reference.* 10.3 Registrant's Stock Award Plan adopted April 7, 1993, filed as Exhibit 10(ix) to the Registrant's Form 10-K for the fiscal year ended February 25, 1994 and is incorporated herein by reference.* 10.4 Form of 1996 Warrant Agreement between the Registrant and Chase Manhattan Capital Corporation, filed as Exhibit 10(xiv) to the Registrant's Form 10-KSB for the fiscal year ended February 23, 1996 and is incorporated herein by reference. 10.5 Revolving Credit Agreement, dated as of March 27, 1997, between the Registrant and First Union National Bank was filed as Exhibit 10.6 to Registrant's Form 10-K for the year ended February 28, 1997 and is incorporated herein by reference. 10.6 Amendment to Revolving Credit Agreement dated as of November 28, 1997, as filed as Exhibit 10.6 to registrant's Form 10-KSB for the year ended February 27, 1998, and is incorporated herein by reference. 10.7 Debenture Purchase Agreement, dated March 27, 1997, between the Registrant and Sirrom Capital Corporation was filed as Exhibit 10.7 to the Registrant's Form 10-KSB for the fiscal year ended February 28, 1997 and is incorporated herein by reference. 10.8 Preferred Stock Purchase Agreement, dated March 27, 1997, between the Registrant and Sirrom Capital Corporation was filed as Exhibit 10.8 to the Registrant's Form 10-KSB for the fiscal year ended February 28, 1997 and is incorporated herein by reference. 10.9 Stock Purchase Warrant, dated March 27, 1997, issued by the Registrant to Sirrom Capital Corporation was filed as Exhibit 10.9 to the Registrant's Form 10-KSB for the fiscal year ended February 28, 1997 and is incorporated herein by reference. 15 13 Portions of Registrant's 1999 Annual Report to Shareholders which are incorporated by reference into this Form 10-K. 21 List of subsidiaries. 23 Consent of Grant Thornton LLP. 27 Financial Data Schedule - --------------- * Represents a management contract or a compensatory plan or arrangement. (b) Reports on Form 8-K: None. 16 SIGNATURES In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ENVIRONMENTAL TECTONICS CORPORATION By /s/ William F. Mitchell -------------------------------- William F. Mitchell, President and Chief Executive Officer In accordance with 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. Name Position Date ---- -------- ---- /s/ William F. Mitchell - -------------------------- Chairman of the Board, May 25, 2000 William F. Mitchell Chief Executive Officer, President and Director /s/ Duane D. Deaner - -------------------------- Chief Financial May 25, 2000 Duane D. Deaner Officer (Principal Accounting Officer) /s/ Richard E. McAdams - -------------------------- Director May 25, 2000 Richard E. McAdams /s/ Craig Macnab - -------------------------- Director May 25, 2000 Craig Macnab /s/ Pete L. Stephens - -------------------------- Director May 25, 2000 Pete L. Stephens, M.D. /s/ Philip L. Wagner - -------------------------- Director May 25, 2000 Philip L. Wagner, Ph.D. 17 ENVIRONMENTAL TECTONICS CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Charges/ Balance at (Credits) Balance At Beginning to Costs/ End of Description of Period Expenses Reductions(A) Period ----------- --------- -------- ------------- ------ Year ended February 25, 2000: Valuation and qualifying accounts related to: Accounts receivables $ 385 $ - $ 18 $ 367 Inventory $ 625 $ 95 $ - $ 720 Property, plant and equipment $7,527 $ 535 $ 58 $8,004 Software development costs $4,619 $ 596 $ - $5,215 Other assets $ 25 $ 36 $ - $ 61 Year ended February 26, 1999 Valuation and qualifying accounts related to: Accounts receivable $ 379 $ 83 $ 77 $ 385 Inventory $1,040 $(315) $100 $ 625 Property, plant and equipment $6,729 $ 798 $ - $7,527 Software development costs $3,914 $ 705 $ - $4,619 Other assets $ 0 $ 25 $ - $ 25 Year ended February 27, 1998 Valuation and qualifying accounts related to: Accounts receivables $ 237 $ 142 $ - $ 379 Inventory $ 756 $ 284 $ - $1,040 Property, plant and equipment $6,258 $ 482 $ 11 $6,729 Software development costs $3,244 $ 670 $ - $3,914 Other assets $ 0 $ - $ - $ 0 (A) Amounts written off or retired 18 EXHIBIT INDEX Exhibit No. Item - ----------- ---- 3.1 Registrant's Articles of Incorporation, as amended, were filed as Exhibit 3.1 to Registrant's Form 10-K for the year ended February 28, 1997 and are incorporated herein by reference. 3.2 Registrant's By-Laws, as amended, were filed as Exhibit 3(ii) to Registrant's Form 10-K for the year ended February 25, 1994 and are incorporated herein by reference. 4.1 12% Subordinated Debenture due March 27, 2004 was filed as Exhibit 4.1 to Registrant's Form 10-K for the year ended February 28, 1997 and is incorporated herein by reference. 10.1 Registrant's 1988 Incentive Stock Option Plan was filed as Exhibit 10(v) to Registrant's Form 10-K for the year ended February 23, 1990 and is incorporated herein by reference.* 10.2 Registrant's Employee Stock Purchase Plan was filed on July 6, 1988 as Exhibit A to the Prospectus included in Registrant's Registration Statement (File No. 33-42219) on Form S-8 and is incorporated herein by reference.* 10.3 Registrant's Stock Award Plan adopted April 7, 1993, filed as Exhibit 10(ix) to the Registrant's Form 10-K for the fiscal year ended February 25, 1994 and is incorporated herein by reference.* 10.4 Form of 1996 Warrant Agreement between the Registrant and Chase Manhattan Capital Corporation, filed as Exhibit 10(xiv) to the Registrant's Form 10-KSB for the fiscal year ended February 23, 1996 and is incorporated herein by reference. 10.5 Revolving Credit Agreement, dated as of March 27, 1997, between the Registrant and First Union National Bank was filed as Exhibit 10.6 to Registrant's Form 10-K for the year ended February 28, 1997 and is incorporated herein by reference. 10.6 Amendment to Revolving Credit Agreement dated as of November 28, 1997, as filed as Exhibit 10.6 to registrant's Form 10-KSB for the year ended February 27, 1998, and is incorporated herein by reference. 10.7 Debenture Purchase Agreement, dated March 27, 1997, between the Registrant and Sirrom Capital Corporation was filed as Exhibit 10.7 to the Registrant's Form 10-KSB for the fiscal year ended February 28, 1997 and is incorporated herein by reference. 10.8 Preferred Stock Purchase Agreement, dated March 27, 1997, between the Registrant and Sirrom Capital Corporation was filed as Exhibit 10.8 to the Registrant's Form 10-KSB for the fiscal year ended February 28, 1997 and is incorporated herein by reference. 10.9 Stock Purchase Warrant, dated March 27, 1997, issued by the Registrant to Sirrom Capital Corporation was filed as Exhibit 10.9 to the Registrant's Form 10-KSB for the fiscal year ended February 28, 1997 and is incorporated herein by reference. 13 Portions of Registrant's 1999 Annual Report to Shareholders which are incorporated by reference into this Form 10-KSB. 21 List of subsidiaries. 23 Consent of Grant Thornton LLP. 27 Financial Data Schedule - --------------- * Represents a management contract or a compensatory plan or arrangement.