UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended August 28, 2009
 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.)
 (Address of principal executive offices, Zip Code)
   þ o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-accelerated Filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ




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##### 



PART I  FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the thirteen and twenty-six week periods
ended August 28, 2009 and August 29, 2008
    
    
    3Condensed Consolidated Balance Sheets as of August 28, 2009 and February 27, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the twenty-six week periods ended August
28, 2009 and August 29, 2008
    
    
    5Notes to the Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    18Item 4. Controls and Procedures
    
    
    25PART II  OTHER INFORMATION
    
    
    25Item 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26Signatures
    
    
    27
  2




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##### 



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
    
    
    Twenty-six WeeksEnded
    
    
    EndedAugust 28, 2009
    
    
    August 29, 2008
    
    
    August 28, 2009
    
    
    August 29, 2008Net sales
    
    $
    9,860
    
    
    $
    8,724
    
    
    $
    19,441
    
    
    $
    18,699Cost of goods sold
    
    
    4,904
    
    
    
    6,682
    
    
    
    10,058
    
    
    
    14,162Gross profit
    
    
    4,956
    
    
    
    2,042
    
    
    
    9,383
    
    
    
    4,537Operating expenses:Selling and administrative
    
    
    2,838
    
    
    
    2,755
    
    
    
    5,694
    
    
    
    6,068Research and development
    
    
    227
    
    
    
    404
    
    
    
    455
    
    
    
    6993,065
    
    
    
    3,159
    
    
    
    6,149
    
    
    
    6,767Operating profit (loss)
    
    
    1,891
    
    
    
    (1,117
    )
    
    
    3,234
    
    
    
    (2,230
    )Other expenses:Interest expense
    
    
    350
    
    
    
    434
    
    
    
    866
    
    
    
    870Loss on extinguishment of debt
    
    
    224
    
    
    
    
    
    
    
    224
    
    
    
    Other, net
    
    
    66
    
    
    
    50
    
    
    
    121
    
    
    
    (11
    )640
    
    
    
    484
    
    
    
    1,211
    
    
    
    859Income (loss) before income taxes
    
    
    1,251
    
    
    
    (1,601
    )
    
    
    2,023
    
    
    
    (3,089
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) before noncontrolling interest
    
    
    1,251
    
    
    
    (1,601
    )
    
    
    2,023
    
    
    
    (3,089
    )Income (loss) attributable to
noncontrolling interest
    
    
    2
    
    
    
    (8
    )
    
    
    4
    
    
    
    (7
    )Net income (loss)
    
    
    1,249
    
    
    
    (1,593
    )
    
    
    2,019
    
    
    
    (3,082
    )Preferred stock dividend
    
    
    (460
    )
    
    
    (233
    )
    
    
    (695
    )
    
    
    (465
    )Income (loss) applicable to common
shareholders
    
    $
    789
    
    
    $
    (1,826
    )
    
    $
    1,324
    
    
    $
    (3,547
    )Per share information:Earnings (loss) per common share:Basic
    
    $
    0.09
    
    
    $
    (0.20
    )
    
    $
    0.15
    
    
    $
    (0.39
    )Diluted
    
    $
    0.06
    
    
    $
    (0.20
    )
    
    $
    0.09
    
    
    $
    (0.39
    )Weighted average common shares:Basic
    
    
    9,069,000
    
    
    
    9,035,000
    
    
    
    9,063,000
    
    
    
    9,035,000Diluted
    
    
    21,122,000
    
    
    
    9,035,000
    
    
    
    21,266,000
    
    
    
    9,035,000
  3




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##### 



Environmental Tectonics Corporation
 Condensed Consolidated Balance Sheets
 (in thousands, except share information)
 August 28,
    
    
    February 27,2009
    
    
    2009(unaudited)ASSETSCash and cash equivalents
    
    $
    966
    
    
    $
    520Restricted cash
    
    
    4,466
    
    
    
    4,454Accounts receivable, net of allowance for bad debt of $458 and $364
    
    
    3,983
    
    
    
    5,100Costs and estimated earnings in excess of billings on uncompleted long-term contracts
    
    
    4,532
    
    
    
    2,460Inventories, net
    
    
    4,444
    
    
    
    4,435Prepaid expenses and other current assets
    
    
    797
    
    
    
    479Total current assets
    
    
    19,188
    
    
    
    17,448Property, plant and equipment, at cost, net
    
    
    16,181
    
    
    
    15,786Construction in progress
    
    
    
    
    
    
    275Software development costs, net of accumulated amortization of $13,380 and $13,105
    
    
    785
    
    
    
    1,013Other assets
    
    
    479
    
    
    
    406Total assets
    
    $
    36,633
    
    
    $
    34,928LIABILITIESCurrent portion of long-term debt
    
    $
    9
    
    
    $
    9Accounts payable  trade
    
    
    2,061
    
    
    
    2,105Billings in excess of costs and estimated earnings on uncompleted long-term contracts
    
    
    1,796
    
    
    
    4,155Customer deposits
    
    
    1,685
    
    
    
    2,397Accrued interest and dividends
    
    
    955
    
    
    
    4,197Other accrued liabilities
    
    
    2,874
    
    
    
    2,251Total current liabilities
    
    
    9,380
    
    
    
    15,114Long-term obligations, less current portion:Credit facility payable to bank
    
    
    11,210
    
    
    
    10,510Promissory note payable
    
    
    1,909
    
    
    
    1,891Subordinated convertible debt
    
    
    
    
    
    
    9,664Other long-term debt
    
    
    2
    
    
    
    713,121
    
    
    
    22,072Unearned interest
    
    
    30
    
    
    
    152Total liabilities
    
    
    22,531
    
    
    
    37,338Commitments and contingencies
    
    
    
    
    
    
    Cumulative convertible participating preferred stock, Series B, $.05 par value,
15,000 shares authorized; 6,000 shares issued and outstanding at February 27, 2009
    
    
    
    
    
    
    6,000Cumulative convertible participating preferred stock, Series C, $.05 par value,
3,300 shares authorized, issued and outstanding at February 27, 2009
    
    
    
    
    
    
    3,300STOCKHOLDERS EQUITY (DEFICIENCY)Cumulative convertible participating preferred stock, Series D, $.05 par value,
11,000 shares authorized; 155 shares outstanding
    
    
    155
    
    
    
    Cumulative convertible participating preferred stock, Series E, $.05 par value,
25,000 shares authorized; 23,741 shares outstanding
    
    
    23,741
    
    
    
    Common stock, $.05 par value, 50,000,000 shares authorized; 9,069,351 and 9,049,351
shares issued and outstanding
    
    
    453
    
    
    
    452Additional paid-in capital
    
    
    15,191
    
    
    
    15,399Accumulated other comprehensive loss
    
    
    (458
    )
    
    
    (557
    )Accumulated deficit
    
    
    (25,026
    )
    
    
    (27,046
    )Total Environmental Tectonics Corporation stockholders equity (deficiency)
    
    
    14,056
    
    
    
    (11,752
    )Noncontrolling interest
    
    
    46
    
    
    
    42Total stockholders equity (deficiency)
    
    
    14,102
    
    
    
    (11,710
    )Total liabilities and stockholders equity (deficiency)
    
    $
    36,633
    
    
    $
    34,928
  4




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##### 



Environmental Tectonics Corporation
 Condensed Consolidated Statements of Cash Flows
 (unaudited)
(in thousands)
 Twenty-six Weeks EndedAugust
28, 2009
    
    

August
29, 2008Cash flows from operating activities:Net income (loss)
    
    $
    2,019
    
    
    $
    (3,082
    )Adjustments to reconcile net income/(loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    982
    
    
    
    1,113Accretion of debt discount
    
    
    132
    
    
    
    149Increase in allowances for accounts receivable and inventories, net
    
    
    444
    
    
    
    95Income/(loss) attributable to noncontrolling interest
    
    
    4
    
    
    
    (7
    )Stock compensation expense
    
    
    
    
    
    
    43Changes in operating assets and liabilities:Accounts receivable
    
    
    1,023
    
    
    
    (952
    )Costs and estimated earnings in excess of billings on uncompleted
long-term contracts
    
    
    (2,072
    )
    
    
    1,992Inventories
    
    
    (359
    )
    
    
    2,352Prepaid expenses and other assets
    
    
    247
    
    
    
    (302
    )Accounts payable
    
    
    (44
    )
    
    
    (656
    )Billings in excess of costs and estimated earnings on uncompleted
long-term contracts
    
    
    (2,359
    )
    
    
    (1,233
    )Customer deposits
    
    
    (712
    )
    
    
    (340
    )Other accrued liabilities
    
    
    1,232
    
    
    
    1,119Net cash provided by operating activities
    
    
    537
    
    
    
    291Cash flows from investing activities:Acquisition of equipment
    
    
    (698
    )
    
    
    (970
    )Capitalized software development costs
    
    
    (176
    )
    
    
    (97
    )Payments for construction in progress
    
    
    
    
    
    
    (124
    )Net cash used in investing activities
    
    
    (874
    )
    
    
    (1,191
    )Cash flows from financing activities:Borrowings under line of credit
    
    
    2,900
    
    
    
    1,400Repayments under line of credit
    
    
    (2,200
    )
    
    
    (1,500
    )Issuance of common stock
    
    
    1
    
    
    
    Payments of other debt obligations
    
    
    (5
    )
    
    
    (5
    )Payment of claim settlement costs
    
    
    
    
    
    
    (2,275
    )(Increase) decrease in restricted cash
    
    
    (12
    )
    
    
    2,068Net cash provided by /(used in) financing activities
    
    
    684
    
    
    
    (312
    )Effect of exchange rate changes on cash
    
    
    99
    
    
    
    126Net increase/(decrease) in cash
    
    
    446
    
    
    
    (1,086
    )Cash at beginning of period
    
    
    520
    
    
    
    1,871Cash at end of period
    
    $
    966
    
    
    $
    785Supplemental schedule of cash flow information:Interest paid
    
    $
    209
    
    
    $
    266Income taxes paid
    
    
    
    
    
    
    Supplemental information on non-cash operating and investing activities:Accrued dividends on preferred stock
    
    $
    695
    
    
    $
    465
   5




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##### 



Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements
 1. Summary of Significant Accounting Policies
 Basis of Presentation
     Earnings Per Common Share
   
    
    Series D Preferred Stock of $55,000 at $0.94 per share, equating to 58,511 shares of
common stock, issued in April 2009;
    
    Series D Preferred Stock of $100,000 at $1.11 per share, equating to 90,090 shares
of common stock, issued in July 2009;
    
    Series E Preferred Stock of $23,741,000 at $2.00 per share, equating to 11,870,500
shares of common stock, issued in July 2009.
   6




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##### 



Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
  Thirteen weeks ended
    
    
    Twenty-six weeks endedAugust 28, 2009
    
    
    August 28, 2009Income
    
    
    Weighted
    
    
    per
    
    
    Income
    
    
    Weighted
    
    
    per(in
    
    
    average
    
    
    share
    
    
    (in
    
    
    average
    
    
    sharethousands)
    
    
    shares
    
    
    amount
    
    
    thousands)
    
    
    shares
    
    
    amountNet income
    
    $
    1,249
    
    
    
    
    
    
    
    
    
    
    $
    2,019Less preferred stock dividends
    
    
    (460
    )
    
    
    
    
    
    
    
    
    
    
    (695
    )Basic earnings per share:Basic earnings available to common shareholders
    
    $
    789
    
    
    
    9,069,000
    
    
    $
    0.09
    
    
    $
    1,324
    
    
    
    9,063,000
    
    
    $
    0.15Effect of dilutive securities:Preferred stock
    
    
    
    
    
    
    12,019,000
    
    
    
    
    
    
    
    
    
    
    
    12,019,000Stock warrants
    
    
    
    
    
    
    34,000
    
    
    
    
    
    
    
    
    
    
    
    184,000Diluted earnings per share:Income available to common shareholders plus effect ofDilutive securities
    
    $
    1,249
    
    
    
    21,122,000
    
    
    $
    0.06
    
    
    $
    2,019
    
    
    
    21,266,000
    
    
    $
    0.09
 Significant Accounting Policies
    Recent Accounting Pronouncements
 Interim Disclosures about Fair Value
of Financial Instruments
 7




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##### 



Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
 Subsequent Events
 The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles
 2. Long-Term Obligations and Credit Arrangements
 Lenfest Financing Transaction
   Lenfest Credit Facility
  Increase in Authorized Common Shares
  8




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##### 



Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
 Exchange of Existing Instruments for Series E Preferred Stock
 Determining Whether an Instrument (or Embedded Feature) is indexed to an entitys Own Stock
    BalanceuponDescription
    
    exchangeSubordinated convertible note
    
    $
    10,000,000Accrued interest on subordinated convertible note
    
    
    2,275,000Series B Preferred stock
    
    
    6,000,000Series C Preferred Stock
    
    
    3,300,000Accrued dividends on preferred stock, Series B and C
    
    
    2,166,000Series E Preferred Stock issued in exchange
    
    $
    23,741,000
  Lenfest Promissory Note
    9




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##### 



Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
 Bank Credit and Facility
 Increased PNC Bank Credit Facility and Issuance of New Guarantee
       10




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##### 



Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
    Subordinated Convertible Debt
    August 28,
    
    
    February 27,2009
    
    
    2009(in thousands)Note payable to bank
    
    $
    11,210
    
    
    $
    10,510Automobile loan
    
    
    11
    
    
    
    16Promissory note, net of unamortized discount of $91 and $109
at August 28, 2009 and February 27, 2009, respectively *
    
    
    1,909
    
    
    
    1,891Subordinated convertible debt, net of unamortized discount
$336 at February 27, 2009.
    
    
    
    
    
    
    9,664$
    13,130
    
    
    $
    22,081
 
 *
    
    Note: This Promissory Note was repaid on September 1, 2009. 11




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Environmental Tectonics Corporation  Notes to the Condensed Consolidated Financial Statements, continued
 3. Inventories
  August 28,
    
    
    February 27,2009
    
    
    2009(unaudited)(in thousands)Raw materials
    
    $
    94
    
    
    $
    92Work in process
    
    
    3,481
    
    
    
    3,564Finished goods
    
    
    869
    
    
    
    779Total
    
    $
    4,444
    
    
    $
    4,435
  4. Accounts Receivable:
  August 28,
    
    
    February 27,2009
    
    
    2009(unaudited)(in thousands)U.S. government receivables
    
    $
    456
    
    
    $
    551U.S. commercial receivables
    
    
    904
    
    
    
    1,002International receivables
    
    
    3,081
    
    
    
    3,9114,441
    
    
    
    5,464Less: allowance for doubtful
accounts
    
    
    (458
    )
    
    
    (364
    )$
    3,983
    
    
    $
    5,100
 5. Fair Value of Financial Instruments
  
    
    Level 1: Observable inputs such as quoted prices in active markets for identical
assets or liabilities;
    
    Level 2: Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly; these include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical assets or liabilities in
markets that are not active;
    
    Level 3: Unobservable inputs that are supported by little or no market activity, which
require the reporting entitys judgment or estimation.
 12




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##### 



Environmental Tectonics Corporation
Notes to the Condensed Consolidated Financial Statements, continued
  Fair Value Measurement atAugust 28, 2009(amounts in thousands)Liabilities
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalCredit facility payable to bank
    
    $
    
    
    
    $
    
    
    
    $
    12,101
    
    
    $
    12,101Interest rate swap agreements
    
    
    
    
    
    
    201
    
    
    
    
    
    
    
    201Promissory note payable
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Total
    
    $
    
    
    
    $
    201
    
    
    $
    14,101
    
    
    $
    14,302
   13




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Environmental Tectonics Corporation
Notes to the Condensed Consolidated Financial Statements, continued
 7. Income Taxes
 Accounting for Income Taxes
  8. Commitments and Contingencies
 Mends International, Ltd.
  Administrative Agreement with U.S. Navy.
  9. Stock Exchange Listing
 Delisting from NYSE AMEX LLC
   14




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##### 



Environmental Tectonics Corporation
Notes to the Condensed Consolidated Financial Statements, continued
 10. Segment Information (unaudited):
  (in thousands)TSG
    
    
    CSG
    
    
    TotalThirteen weeks ended and as of August
28, 2009:Net sales
    
    $
    4,881
    
    
    $
    4,979
    
    
    $
    9,860Interest expense
    
    
    128
    
    
    
    222
    
    
    
    350Depreciation and amortization
    
    
    345
    
    
    
    76
    
    
    
    421Operating profit
    
    
    1,254
    
    
    
    1,000
    
    
    
    2,254Identifiable assets
    
    
    5,388
    
    
    
    5,629
    
    
    
    11,017Expenditures for segment assets
    
    
    170
    
    
    
    132
    
    
    
    302Thirteen weeks ended and as of August
29, 2008:Net sales
    
    $
    4,199
    
    
    $
    4,525
    
    
    $
    8,724Interest expense
    
    
    396
    
    
    
    36
    
    
    
    434Depreciation and amortization
    
    
    160
    
    
    
    397
    
    
    
    557Operating loss
    
    
    (666
    )
    
    
    (162
    )
    
    
    (828
    )Identifiable assets
    
    
    4,881
    
    
    
    6,234
    
    
    
    11,115Expenditures for segment assets
    
    
    655
    
    
    
    
    
    
    
    655Reconciliation to consolidated amounts
    
    
    2009
    
    
    
    2008Segment assets
    
    $
    11,017
    
    
    $
    11,115Corporate assets
    
    
    25,616
    
    
    
    20,255Total assets
    
    $
    36,633
    
    
    $
    31,370Segment operating profit (loss)
    
    $
    2,254
    
    
    $
    (828
    )Interest expense
    
    
    350
    
    
    
    434Total profit (loss) for segments
    
    
    1,904
    
    
    
    (1,262
    )Corporate home office expenses
    
    
    363
    
    
    
    289Loss on extinguishment of debt
    
    
    224
    
    
    
    Other expenses, net
    
    
    66
    
    
    
    50Noncontrolling interest
    
    
    2
    
    
    
    (8
    )Net profit/(loss)
    
    $
    1,249
    
    
    $
    (1,593
    )
 15




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##### 



Environmental Tectonics Corporation
Notes to the Condensed Consolidated Financial Statements, continued
 (in thousands)TSG
    
    
    CSG
    
    
    TotalTwenty-six weeks ended and as of
August 28, 2009:Net sales
    
    $
    11,796
    
    
    $
    7,645
    
    
    $
    19,441Interest expense
    
    
    427
    
    
    
    439
    
    
    
    866Depreciation and amortization
    
    
    495
    
    
    
    487
    
    
    
    982Operating profit
    
    
    3,148
    
    
    
    830
    
    
    
    3,978Identifiable assets
    
    
    5,388
    
    
    
    5,629
    
    
    
    11,017Expenditures for segment assets
    
    
    411
    
    
    
    287
    
    
    
    698Twenty-six weeks ended and as of
August 29, 2008:Net sales
    
    $
    8,499
    
    
    $
    10,200
    
    
    $
    18,699Interest expense
    
    
    644
    
    
    
    226
    
    
    
    870Depreciation and amortization
    
    
    305
    
    
    
    808
    
    
    
    1,113Operating loss (profit)
    
    
    (1,608
    )
    
    
    134
    
    
    
    (1,474
    )Identifiable assets
    
    
    4,881
    
    
    
    6,234
    
    
    
    11,115Expenditures for segment assets
    
    
    1,132
    
    
    
    59
    
    
    
    1,191Reconciliation to consolidated amounts
    
    
    2009
    
    
    
    2008Segment assets
    
    $
    11,107
    
    
    $
    11,115Corporate assets
    
    
    25,616
    
    
    
    20,255Total assets
    
    $
    36,633
    
    
    $
    31,370Segment operating profit (loss)
    
    $
    3,978
    
    
    $
    (1,474
    )Interest expense
    
    
    866
    
    
    
    870Total profit (loss) for segments
    
    
    3,112
    
    
    
    (2,344
    )Corporate home office expenses
    
    
    744
    
    
    
    756Loss on extinguishment of debt
    
    
    224
    
    
    
    Other expenses, net
    
    
    121
    
    
    
    (11
    )Noncontrolling interest
    
    
    4
    
    
    
    (7
    )Net profit/(loss)
    
    $
    2,019
    
    
    $
    (3,082
    )
     16




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##### 



Environmental Tectonics Corporation
Notes to the Condensed Consolidated Financial Statements, continued
 11. Sales Backlog
 ,
  17




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##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
         
    
    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;
    
    the continuing cost of development and marketing efforts for our Authentic Tactical
Fighting Systems (ATFS);
    
    continued technology upgrades to modify our main facility in Southampton, Pa., and to build
equipment for the National Aerospace Training and Research (NASTAR) Center;
  18




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##### 




    
    continued development of software for our Advanced Disaster Management Scenario (ADMS)
product line;
  
    
    cash limitations;
     19




---



##### 



Results of Operations
 Thirteen weeks ended August 28, 2009 compared to thirteen weeks ended August 29, 2008
 We have historically experienced significant variability in our quarterly revenue, earnings
and other operating results, and our performance may fluctuate significantly in the future.
 Summary Table of Results13 weeks ended
    
    
    13 weeks ended
    
    
    Variance
    
    
    VarianceAugust 28, 2009
    
    
    August 29, 2008
    
    
    $
    
    
    %(amounts in thousands)
    
    
    ( )=UnfavorableSales:Domestic
    
    $
    2,877
    
    
    $
    4,322
    
    
    $
    (1,445
    )
    
    
    (33.4
    )%US Government
    
    
    1,676
    
    
    
    386
    
    
    
    1,290
    
    
    
    334.2
    %International
    
    
    5,307
    
    
    
    4,016
    
    
    
    1,291
    
    
    
    32.1
    %Total Sales
    
    
    9,860
    
    
    
    8,724
    
    
    
    1,136
    
    
    
    13.0
    %Gross Profit
    
    
    4,956
    
    
    
    2,042
    
    
    
    2,914
    
    
    
    142.7
    %Selling, general & administrative
    
    
    2,838
    
    
    
    2,755
    
    
    
    (83
    )
    
    
    (3.0
    )%Research & development
    
    
    227
    
    
    
    404
    
    
    
    177
    
    
    
    43.8
    %Operating profit (loss)
    
    
    1,891
    
    
    
    (1,117
    )
    
    
    3,008
    
    
    
    269.3
    %Interest expense, net
    
    
    350
    
    
    
    434
    
    
    
    84
    
    
    
    19.4
    %Other expense, net
    
    
    66
    
    
    
    50
    
    
    
    (16
    )
    
    
    (32.0
    )%Loss on extinguishment of debt
    
    
    224
    
    
    
    0
    
    
    
    (224
    )
    
    
    Noncontrolling interest
    
    
    2
    
    
    
    (8
    )
    
    
    (10
    )
    
    
    (125.0
    )%Net income (loss)
    
    $
    1,249
    
    
    $
    (1,593
    )
    
    $
    2,842
    
    
    
    178.4
    %Net income (loss) per common share-basic
    
    $
    0.09
    
    
    $
    (0.20
    )
    
    $
    0.29
    
    
    
    145.0
    %Net income (loss) per common
share-diluted
    
    $
    0.06
    
    
    $
    (0.20
    )
    
    $
    0.26
    
    
    
    130.0
    %
 Net Income
  Sales
  Domestic Sales
   20




---



##### 



International Sales
    Gross Profit
  Selling and Administrative Expenses
  Research and Development Expenses
  Interest Expense
  Other Income/Expense
  Loss on Extinguishment of Debt
  21




---



##### 



Income Taxes
  Twenty-six weeks ended August 28, 2009 compared to twenty-six weeks ended August 29, 2008
 We have historically experienced significant variability in our revenue, earnings and other
operating results, and our performance may fluctuate significantly in the future.
 Summary Table of Results26 weeks ended
    
    
    26 weeks ended
    
    
    Variance
    
    
    VarianceAugust 28, 2009
    
    
    August 29, 2008
    
    
    $
    
    
    %(amounts in thousands)
    
    
    ( )=UnfavorableSales:Domestic
    
    $
    4,836
    
    
    $
    9,644
    
    
    $
    (4,808
    )
    
    
    (49.9
    )%US Government
    
    
    3,512
    
    
    
    1,377
    
    
    
    2,135
    
    
    
    155.0
    %International
    
    
    11,093
    
    
    
    7,678
    
    
    
    3,415
    
    
    
    44.5
    %Total Sales
    
    
    19,441
    
    
    
    18,699
    
    
    
    742
    
    
    
    4.0
    %Gross Profit
    
    
    9,383
    
    
    
    4,537
    
    
    
    4,846
    
    
    
    106.8
    %Selling, general and administrative
    
    
    5,694
    
    
    
    6,068
    
    
    
    374
    
    
    
    6.2
    %Research and development
    
    
    455
    
    
    
    699
    
    
    
    244
    
    
    
    34.9
    %Operating profit (loss)
    
    
    3,234
    
    
    
    (2,230
    )
    
    
    5,464
    
    
    
    245.1
    %Interest expense, net
    
    
    866
    
    
    
    870
    
    
    
    4
    
    
    
    0.6
    %Other expense (income), net
    
    
    121
    
    
    
    (11
    )
    
    
    (132
    )
    
    
    (1,300.0
    )%Loss on extinguishment of debt
    
    
    224
    
    
    
    0
    
    
    
    (224
    )
    
    
    Noncontrolling interest
    
    
    4
    
    
    
    (7
    )
    
    
    (11
    )
    
    
    (157.1
    )%Net income (loss)
    
    $
    2,019
    
    
    $
    (3,082
    )
    
    $
    5,101
    
    
    
    165.5
    %Net income (loss) per common share-basic
    
    $
    0.15
    
    
    $
    (0.39
    )
    
    $
    0.54
    
    
    
    138.5
    %Net income (loss) per common share-diluted
    
    $
    0.09
    
    
    $
    (0.39
    )
    
    $
    0.48
    
    
    
    123.1
    %
 Net Income
  Sales
  Domestic Sales
  22




---



##### 



International Sales
    Gross Profit
  Selling and Administrative Expenses
  Research and Development Expenses
  Interest Expense
  Other Income/Expense, Net
  Loss on Extinguishment of Debt
  23




---



##### 



Income Taxes
  Liquidity and Capital Resources
        Backlog
 ,
  24




---



##### 



Item 4.
    
    Controls and Procedures
     PART II  OTHER INFORMATION
 Item 1.
    
    Legal Proceedings
 Mends International, Ltd.
  Administrative Agreement with U.S. Navy
  Other Matters
  25




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##### 



Item 1A.
    
    Risk Factors
  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 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 October 13, 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 October 13, 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 October 13, 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.
 26




---



##### 



Signatures
  ENVIRONMENTAL TECTONICS CORPORATION
  Date:

    October 13, 2009By:
    /s/ William F. Mitchell

 William F. Mitchell 
 President and Chief Executive Officer
 (Principal Executive Officer)Date:

    October 13, 2009By:
    /s/ Duane Deaner

 Duane Deaner, 
 Chief Financial Officer
 (Principal Financial and Accounting Officer)