##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended November 28, 2008
 Commission File Number 1-10655
 ENVIRONMENTAL TECTONICS CORPORATION
 Pennsylvania
    
    23-1714256(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 
   þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ  o þ




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##### 



PART I  FINANCIAL INFORMATION
    
    3Item 1. Financial Statements (unaudited)
    
    3Condensed Consolidated Statements of Operations for the 13 and 39 week periods ended November
28, 2008 and November 23, 2007
    
    3Condensed Consolidated Balance Sheets as of November 28, 2008 and February 29, 2008
    
    4Condensed Consolidated Statements of Cash Flows for the 39 week periods ended November 28, 2008 and
November 23, 2007
    
    5Notes to the Condensed Consolidated Financial Statements
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    17Item 4. Controls and Procedures
    
    25PART II  OTHER INFORMATION
    
    26Item 1. Legal Proceedings
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    27Item 3. Defaults Upon Senior Securities
    
    27Item 4. Submission of Matters to Vote of Security Holders
    
    27Item 5. Other Information
    
    27Item 6. Exhibits
    
    27Signatures
    
    28EX-31.1EX-31.2EX-32
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements (unaudited)
 Environmental Tectonics Corporation
 
 Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except share and per share information)
 Thirteen Weeks
    
    
    Thirty nine WeeksEnded
    
    
    EndedNovember 28,
    
    
    November 23,
    
    
    November 28,
    
    
    November 23,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    8,706
    
    
    $
    6,701
    
    
    $
    27,405
    
    
    $
    15,295Cost of goods sold
    
    
    5,749
    
    
    
    5,434
    
    
    
    19,911
    
    
    
    12,501Gross profit
    
    
    2,957
    
    
    
    1,267
    
    
    
    7,494
    
    
    
    2,794Operating expenses:Selling and administrative
    
    
    2,434
    
    
    
    2,830
    
    
    
    8,502
    
    
    
    8,353Claim settlement costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,639Research and development
    
    
    247
    
    
    
    64
    
    
    
    946
    
    
    
    3552,681
    
    
    
    2,894
    
    
    
    9,448
    
    
    
    12,347Operating income (loss)
    
    
    276
    
    
    
    (1,627
    )
    
    
    (1,954
    )
    
    
    (9,553
    )Other expenses:Interest expense
    
    
    417
    
    
    
    406
    
    
    
    1,287
    
    
    
    1,146Other, net
    
    
    (27
    )
    
    
    61
    
    
    
    (38
    )
    
    
    102390
    
    
    
    467
    
    
    
    1,249
    
    
    
    1,248Loss before income taxes
    
    
    (114
    )
    
    
    (2,094
    )
    
    
    (3,203
    )
    
    
    (10,801
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss before minority interest
    
    
    (114
    )
    
    
    (2,094
    )
    
    
    (3,203
    )
    
    
    (10,801
    )(Loss) profit attributable to minority interest
    
    
    (1
    )
    
    
    4
    
    
    
    (6
    )
    
    
    (8
    )Net loss
    
    
    (113
    )
    
    
    (2,098
    )
    
    
    (3,197
    )
    
    
    (10,793
    )Preferred stock dividend
    
    
    (230
    )
    
    
    (231
    )
    
    
    (695
    )
    
    
    (411
    )Loss applicable to common shareholders
    
    $
    (343
    )
    
    $
    (2,329
    )
    
    $
    (3,892
    )
    
    $
    (11,204
    )Per share information:Basic and diluted loss per share
applicable to common shareholders
    
    $
    (0.04
    )
    
    $
    (0.26
    )
    
    $
    (0.43
    )
    
    $
    (1.24
    )Basic and diluted weighted average
number of common shares
    
    
    9,035,000
    
    
    
    9,030,000
    
    
    
    9,035,000
    
    
    
    9,030,000
  3




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Environmental Tectonics Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share information)
 November 28,
    
    
    February 29,2008
    
    
    2008(unaudited)ASSETSCash and cash equivalents
    
    $
    548
    
    
    $
    1,871Restricted cash
    
    
    2,474
    
    
    
    4,526Accounts receivable, net of allowance for bad debts of $361 and $746
    
    
    4,083
    
    
    
    3,231Costs and estimated earnings in excess of billings on uncompleted long-term contracts
    
    
    726
    
    
    
    3,422Inventories, net
    
    
    4,691
    
    
    
    6,773Prepaid expenses and other current assets
    
    
    656
    
    
    
    833Total current assets
    
    
    13,178
    
    
    
    20,656Lease receivable, net of current portion
    
    
    412
    
    
    
    Property, plant and equipment, at cost, net
    
    
    15,323
    
    
    
    15,208Construction in progress
    
    
    522
    
    
    
    147Software development costs, net of accumulated amortization of $12,962 and $12,161
    
    
    1,040
    
    
    
    1,614Total assets
    
    $
    30,475
    
    
    $
    37,625LIABILITIESCurrent portion of long-term debt
    
    $
    9
    
    
    $
    9Accounts payable  trade
    
    
    2,309
    
    
    
    3,060Billings in excess of costs and estimated earnings on uncompleted long-term contracts
    
    
    4,195
    
    
    
    6,491Customer deposits
    
    
    2,669
    
    
    
    2,989Accrued claim settlement costs
    
    
    
    
    
    
    2,275Accrued interest and dividends
    
    
    3,731
    
    
    
    2,287Other accrued liabilities
    
    
    2,243
    
    
    
    1,803Total current liabilities
    
    
    15,156
    
    
    
    18,914Long-term obligations, less current portion:Credit facility payable to bank
    
    
    8,910
    
    
    
    8,810Subordinated convertible debt
    
    
    9,589
    
    
    
    9,366Other long-term debt
    
    
    9
    
    
    
    1618,508
    
    
    
    18,192Unearned interest
    
    
    161
    
    
    
    Total liabilities
    
    
    33,825
    
    
    
    37,106Commitments and contingencies
    
    
    
    
    
    
    Minority interest
    
    
    44
    
    
    
    50Cumulative convertible participating preferred stock, Series B, $.05 par value,
15,000 shares authorized; 6,000 shares issued and outstanding at November 28, 2008
and February 29, 2008
    
    
    6,000
    
    
    
    6,000Cumulative convertible participating preferred stock, Series C, $.05 par value,
3,300 shares authorized, issued and outstanding at November 28, 2008 and February
29, 2008
    
    
    3,300
    
    
    
    3,300STOCKHOLDERS DEFICIENCYCommon stock, $.05 par value, 20,000,000 shares authorized; 9,035,355 shares issued
and outstanding at November 28, 2008 and February 29, 2008
    
    
    451
    
    
    
    451Additional paid-in capital
    
    
    15,487
    
    
    
    16,139Accumulated other comprehensive loss
    
    
    (121
    )
    
    
    (121
    )Accumulated deficit
    
    
    (28,511
    )
    
    
    (25,300
    )Total stockholders deficiency
    
    
    (12,694
    )
    
    
    (8,831
    )Total liabilities and stockholders deficiency
    
    $
    30,475
    
    
    $
    37,625
  4




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Environmental Tectonics Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 Thirty nine Weeks EndedNovember 28,
    
    
    November 23,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (3,197
    )
    
    $
    (10,793
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    1,668
    
    
    
    1,359Accretion of debt discount
    
    
    223
    
    
    
    394(Decrease)/increase in allowances for accounts receivable and inventories, net
    
    
    (5
    )
    
    
    653Loss attributable to minority interest
    
    
    (6
    )
    
    
    (8
    )Stock compensation expense
    
    
    43
    
    
    
    86Changes in operating assets and liabilities:Accounts receivable
    
    
    (467
    )
    
    
    (4,471
    )Costs and estimated earnings in excess of billings on uncompleted
long-term contracts
    
    
    2,696
    
    
    
    (283
    )Inventories
    
    
    1,702
    
    
    
    (2,319
    )Prepaid expenses and other assets
    
    
    (229
    )
    
    
    (124
    )Accounts payable
    
    
    (751
    )
    
    
    1,349Billings in excess of costs and estimated earnings on uncompleted
long-term contracts
    
    
    (2,296
    )
    
    
    3,611Customer deposits
    
    
    (320
    )
    
    
    2,063Accrued interest
    
    
    749
    
    
    
    1,129Other accrued liabilities
    
    
    587
    
    
    
    (339
    )Net cash provided by (used in) operating activities
    
    
    397
    
    
    
    (7,693
    )Cash flows from investing activities:Acquisition of equipment
    
    
    (982
    )
    
    
    (3,114
    )Capitalized software development costs
    
    
    (227
    )
    
    
    (580
    )Payments for construction in progress
    
    
    (381
    )
    
    
    Net cash used in investing activities
    
    
    (1,590
    )
    
    
    (3,694
    )Cash flows from financing activities:Borrowings under line of credit
    
    
    1,600
    
    
    
    8,810Repayments under line of credit
    
    
    (1,500
    )
    
    
    Proceeds from notes payable, Lenfest
    
    
    
    
    
    
    4,000Repayments of notes payable, Lenfest
    
    
    
    
    
    
    (4,000
    )Payments of other debt obligations
    
    
    (7
    )
    
    
    Proceeds from issuance of preferred stock
    
    
    
    
    
    
    3,300Payment of claim settlement costs
    
    
    (2,275
    )
    
    
    3,550Decrease (increase) in restricted cash
    
    
    2,052
    
    
    
    (5,628
    )Net cash (used in) provided by financing activities
    
    
    (130
    )
    
    
    10,032Effect of exchange rate changes on cash
    
    
    
    
    
    
    (65
    )Net decrease in cash
    
    
    (1,323
    )
    
    
    (1,420
    )Cash at beginning of period
    
    
    1,871
    
    
    
    2,215Cash at end of period
    
    $
    548
    
    
    $
    795Supplemental schedule of cash flow information:Interest paid
    
    $
    383
    
    
    $
    116Income taxes paid
    
    
    
    
    
    
    Supplemental information on non-cash operating and investing activities:Accrued dividends on preferred stock
    
    $
    695
    
    
    $
    148
  5




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements
 1. Stock Exchange Listing
    2. Lenfest Acquisition Proposal
  3. Liquidity Matters
   6




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
   ,
 4. Summary of Significant Accounting Policies
 Basis of Presentation
       Significant Accounting Policies
  Fair Value Measurements
 Fair Value Measurements Effective Date of FASB Statement No. 157
 7




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
  Recently Issued Accounting Pronouncements
 Business Combinations
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51
 Hierarchy of Generally Accepted Accounting Principles The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.
 Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement)
  8




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
 5. Inventories
  November 28,
    
    
    February 29,2008
    
    
    2008(unaudited)(in thousands)Raw materials
    
    $
    96
    
    
    $
    90Work in process
    
    
    3,398
    
    
    
    5,916Finished goods
    
    
    1,197
    
    
    
    767Total
    
    $
    4,691
    
    
    $
    6,773
  6. Accounts Receivable:
  November 28,
    
    
    February 29,2008
    
    
    2008(unaudited)(in thousands)U.S. government receivables
    
    $
    179
    
    
    $
    315U.S. commercial receivables
    
    
    1,628
    
    
    
    2,573International receivables
    
    
    2,637
    
    
    
    1,0894,444
    
    
    
    3,977Less: allowance for doubtful accounts
    
    
    (361
    )
    
    
    (746
    )$
    4,083
    
    
    $
    3,231
 7. Long-term Obligations, Credit Arrangements and Preferred Stock:
      9




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
      (in thousands)November 28,2008
    
    February 29,(unaudited)
    
    2008Credit facility payable to bank
    
    $
    8,910
    
    
    $
    8,810Subordinated convertible debt,
net of unamortized discount of
$411 and $634
    
    
    9,589
    
    
    
    9,366Other debt obligations
    
    
    18
    
    
    
    2518,517
    
    
    
    18,201Less current portion
    
    
    9
    
    
    
    9$
    18,508
    
    
    $
    18,192
 10




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
            11




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
   (amounts in thousands)November 28,2008
    
    February 29,(unaudited)
    
    2008Accrued dividends on Series B Preferred Stock
    
    $
    1,198
    
    
    $
    749Accrued dividends on Series C Preferred Stock
    
    
    418
    
    
    
    171Total accrued dividends
    
    
    1,616
    
    
    
    920Accrued interest on Subordinated Debt
    
    
    2,080
    
    
    
    1,367Other accrued interest
    
    
    35
    
    
    
    Total accrued interest
    
    
    2,115
    
    
    
    1,367Total accrued interest and dividends
    
    $
    3,731
    
    
    $
    2,287
 8. Income Taxes
 Accounting for Income Taxes
  12




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
 9. Segment Information (unaudited):
  (in thousands)TSG
    
    CSG
    
    TotalThirteen weeks ended and as of November
28, 2008:Net sales
    
    $
    5,552
    
    
    $
    3,154
    
    
    $
    8,706Interest expense
    
    
    309
    
    
    
    108
    
    
    
    417Depreciation and amortization
    
    
    162
    
    
    
    393
    
    
    
    555Operating income (loss)
    
    
    917
    
    
    
    (373
    )
    
    
    544Income tax
    
    
    
    
    
    
    
    
    
    
    Identifiable assets
    
    
    6,105
    
    
    
    5,139
    
    
    
    11,244Expenditures for segment assets
    
    
    100
    
    
    
    299
    
    
    
    399Thirteen weeks ended and as of November
23, 2007:Net sales
    
    $
    1,774
    
    
    $
    4,927
    
    
    $
    6,701Interest expense
    
    
    300
    
    
    
    106
    
    
    
    406Depreciation and amortization
    
    
    131
    
    
    
    322
    
    
    
    453Operating (loss) income
    
    
    (1,027
    )
    
    
    52
    
    
    
    (975
    )Income tax
    
    
    
    
    
    
    
    
    
    
    Goodwill and intangibles
    
    
    455
    
    
    
    
    
    
    
    455Identifiable assets
    
    
    10,119
    
    
    
    7,871
    
    
    
    17,990Expenditures for segment assets
    
    
    3,146
    
    
    
    46
    
    
    
    3,192
 2008
    
    
    2007Reconciliation to consolidated amountsSegment assets
    
    $
    11,244
    
    
    $
    17,990Corporate assets
    
    
    19,231
    
    
    
    22,422Total assets
    
    $
    30,475
    
    
    $
    40,412Segment operating income (loss)
    
    $
    544
    
    
    $
    (975
    )Interest expense
    
    
    417
    
    
    
    406Income tax expense
    
    
    
    
    
    
    Total income (loss) for segments
    
    
    127
    
    
    
    (1,381
    )Corporate home office expenses
    
    
    268
    
    
    
    652Other expenses, net
    
    
    (27
    )
    
    
    61Minority interest
    
    
    (1
    )
    
    
    4Net loss
    
    $
    (113
    )
    
    $
    (2,098
    )
 13




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
 (in thousands)TSG
    
    CSG
    
    TotalThirty-nine weeks ended and as of
November 28, 2008:Net sales
    
    $
    14,051
    
    
    $
    13,354
    
    
    $
    27,405Interest expense
    
    
    952
    
    
    
    335
    
    
    
    1,287Depreciation and amortization
    
    
    467
    
    
    
    1,201
    
    
    
    1,668Operating loss
    
    
    (691
    )
    
    
    (239
    )
    
    
    (930
    )Income tax
    
    
    
    
    
    
    
    
    
    
    Identifiable assets
    
    
    6,105
    
    
    
    5,139
    
    
    
    11,244Expenditures for segment assets
    
    
    1,232
    
    
    
    358
    
    
    
    1,590Thirty-nine weeks ended and as of
November 23, 2007:Net sales
    
    $
    4,905
    
    
    $
    10,390
    
    
    $
    15,295Interest expense
    
    
    848
    
    
    
    298
    
    
    
    1,146Depreciation and amortization
    
    
    387
    
    
    
    972
    
    
    
    1,359Operating loss
    
    
    (2,820
    )
    
    
    (5,440
    )
    
    
    (8,260
    )Income tax
    
    
    
    
    
    
    
    
    
    
    Goodwill and intangibles
    
    
    455
    
    
    
    
    
    
    
    455Identifiable assets
    
    
    10,119
    
    
    
    7,871
    
    
    
    17,990Expenditures for segment assets
    
    
    3,448
    
    
    
    246
    
    
    
    3,694
 2008
    
    
    2007Reconciliation to consolidated amountsSegment assets
    
    $
    11,244
    
    
    $
    17,990Corporate assets
    
    
    19,231
    
    
    
    22,422Total assets
    
    $
    30,475
    
    
    $
    40,412Segment operating loss
    
    $
    (930
    )
    
    $
    (8,260
    )Interest expense
    
    
    1,287
    
    
    
    1,146Income tax expense
    
    
    
    
    
    
    Total loss for segments
    
    
    (2,217
    )
    
    
    (9,406
    )Corporate home office expenses
    
    
    1,024
    
    
    
    1,293Other expenses, net
    
    
    (38
    )
    
    
    101Minority interest
    
    
    (6
    )
    
    
    (7
    )Net loss
    
    $
    (3,197
    )
    
    $
    (10,793
    )
  .
   14




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10. Legal Proceedings  Walt Disney World Co.
    Mends International, Ltd.
  Settlement with U.S. Navy
    15




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
       16




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 FORWARD-LOOKING STATEMENTS
         
    
    high bid and proposal activity which utilized engineering resources which
otherwise would have been applied to existing contract requirements, resulting in
delayed revenue recognition on long-term contracts;
 17




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
    
    the continuing cost of development and marketing efforts for our Authentic
Tactical Fighting Systems (ATFS);
    
    continued spending to modify our main facility in Southampton, Pa., and to build
equipment for the National Aerospace Training and Research (NASTAR) Center;
     
    
    continuing public company legal and other costs;
  
    
    relatively high cost of capital (preferred stock) and debt-related amortization
and interest expense.
  
    
    cash limitations;
    18




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
         19




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Results of Operations
 Thirteen weeks ended November 28, 2008 compared to thirteen weeks ended November 23, 2007
  Summary Table of ResultsThirteen
    
    Thirteenweeks ended
    
    weeks endedNovember 28,
    
    November 23,
    
    Variance
    
    Variance2008
    
    2008
    
    $
    
    %(amounts in thousands)
    
    Favorable (Unfavorable)Sales:Domestic
    
    $
    2,702
    
    
    $
    4,575
    
    
    
    ($1,873
    )
    
    
    (40.9
    %)US Government
    
    
    367
    
    
    
    443
    
    
    
    (76
    )
    
    
    (17.2
    %)International
    
    
    5,637
    
    
    
    1,683
    
    
    
    3,954
    
    
    
    234.9
    %Total Sales
    
    
    8,706
    
    
    
    6,701
    
    
    
    2,005
    
    
    
    29.9
    %Gross Profit
    
    
    2,957
    
    
    
    1,267
    
    
    
    1,690
    
    
    
    133.4
    %Selling, general and
administrative
    
    
    2,434
    
    
    
    2,830
    
    
    
    396
    
    
    
    14.0
    %Research and development
    
    
    247
    
    
    
    64
    
    
    
    (183
    )
    
    
    (285.9
    %)Operating profit (loss)
    
    
    276
    
    
    
    (1,627
    )
    
    
    1,903
    
    
    
    117.0
    %Interest expense, net
    
    
    417
    
    
    
    406
    
    
    
    (11
    )
    
    
    (2.7
    %)Other expense, net
    
    
    (27
    )
    
    
    61
    
    
    
    88
    
    
    
    144.3
    %Income taxes
    
    
    0
    
    
    
    0
    
    
    
    0Minority interest
    
    
    (1
    )
    
    
    4
    
    
    
    5
    
    
    
    125.0
    %Net loss
    
    
    ($113
    )
    
    
    ($2,098
    )
    
    $
    1,985
    
    
    
    94.6
    %Net loss per common share
    
    
    ($0.04
    )
    
    
    ($0.26
    )
    
    $
    0.22
    
    
    
    84.6
    %
 Net Loss
  Sales
   Domestic Sales
  20




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##### Table of Contents



International Sales
 .
 Gross Profit
  Selling and Administrative Expenses
  Research and Development Expenses
  Interest Expense
  Other Income/Expense, Net
  21




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##### Table of Contents



Thirty-nine weeks ended November 28, 2008 compared to thirty-nine weeks ended November 23, 2007
 Summary Table of ResultsThirty-nine
    
    Thirty-nineweeks
    
    weeksNovember 28,
    
    November 23,
    
    Variance
    
    Variance2008
    
    2007
    
    $
    
    %(amounts in thousands)
    
    Favorable (Unfavorable)Sales:Domestic
    
    $
    12,348
    
    
    $
    9,416
    
    
    $
    2,932
    
    
    
    31.1
    %US Government
    
    
    1,742
    
    
    
    1,090
    
    
    
    652
    
    
    
    59.8
    %International
    
    
    13,315
    
    
    
    4,789
    
    
    
    8,526
    
    
    
    178.0
    %Total Sales
    
    
    27,405
    
    
    
    15,295
    
    
    
    12,110
    
    
    
    79.2
    %Gross Profit
    
    
    7,494
    
    
    
    2,794
    
    
    
    4,700
    
    
    
    168.2
    %Selling, general and administrative
    
    
    8,502
    
    
    
    8,353
    
    
    
    (149
    )
    
    
    (1.8
    %)Claim settlement costs
    
    
    0
    
    
    
    3,639
    
    
    
    3,639
    
    
    
    100.0
    %Research and development
    
    
    946
    
    
    
    355
    
    
    
    (591
    )
    
    
    (166.5
    %)Impairment expense
    
    
    0
    
    
    
    0
    
    
    
    0Operating loss
    
    
    (1,954
    )
    
    
    (9,553
    )
    
    
    7,599
    
    
    
    79.5
    %Interest expense, net
    
    
    1,287
    
    
    
    1,146
    
    
    
    (141
    )
    
    
    (12.3
    %)Other expense, net
    
    
    (38
    )
    
    
    102
    
    
    
    140
    
    
    
    137.3
    %Income taxes
    
    
    0
    
    
    
    0
    
    
    
    0Minority interest
    
    
    (6
    )
    
    
    (8
    )
    
    
    (2
    )
    
    
    25.0
    %Net loss
    
    
    ($3,197
    )
    
    
    ($10,793
    )
    
    $
    7,596
    
    
    
    70.4
    %Net loss per common share
    
    
    ($0.43
    )
    
    
    ($1.24
    )
    
    $
    0.81
    
    
    
    65.3
    %
 Net Loss
  Sales
   22




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##### Table of Contents



Domestic Sales
 $ $
 International Sales
   Gross Profit
  Selling and Administrative Expenses
  Claim Settlement Costs
  Research and Development Expenses
  Interest Expense
  23




---



##### Table of Contents



Other Income/Expense, Net
  Liquidity and Capital Resources
          Backlog
 ,
 24




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##### Table of Contents



Item 4. Controls and Procedures
     25




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Walt Disney World Co.
    Mends International, Ltd.
    26




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Number
    
    Item3.1
    
    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 amendment to its By-Laws, as included in the Statement
With Respect to Shares of Series B Convertible Preferred Stock, was
filed as Exhibit 3(i).1 to Registrants Form 8-K dated August 6,
2006, and is incorporated herein by reference.3.3
    
    Registrants amendment to its By-Laws, as included in the Statement
With Respect to Shares of Series C Convertible Preferred Stock, was
filed as Exhibit 3(i).1 to Registrants Form 8-K dated August 23,
2007, and is incorporated herein by reference.3.4
    
    Registrants amended and restated By-Laws were filed as Exhibit 3.2
to Registrants Form 8-K dated May 25, 2005, and are incorporated
herein by reference.31.1
    
    Certification dated January 12, 2009 pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 made by William F. Mitchell, Chief Executive Officer.31.2
    
    Certification dated January 12, 2009 pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 made by Duane D. Deaner, Chief Financial Officer.32
    
    Certification dated January 12, 2009 pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 made by William F. Mitchell, Chief Executive Officer, and
Duane D. Deaner, Chief Financial Officer.
 27




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##### Table of Contents



Signatures
  ENVIRONMENTAL TECTONICS CORPORATION
(Registrant)Date:   January 12, 2009
    By:
    /s/ William F. MitchellWilliam F. MitchellPresident and Chief
Executive Officer
(Principal Executive Officer)Date:   January 12, 2009
    By:
    /s/ Duane DeanerDuane Deaner,Chief Financial Officer
(Principal Financial and Accounting Officer) 28