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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 22, 2002
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.[x]
As of May 15, 2002, the aggregate market value of the Registrant's common stock
held by non-affiliates of the Registrant was approximately $38,976,000. As of
May 15, 2002, there were 7,153,428 shares of Registrant's common stock, $0.05
par value per share, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE. Portions of Registrant's 2002 Annual Report
to Stockholders (the "Annual Report") are incorporated by reference in Part II,
Items 5, 6, 7, and 8.
1
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements are based on our current expectations and projections about future
events. These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about us and our subsidiaries, that may cause our
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements include statements with respect to the Company's
vision, mission, strategies, goals, beliefs, plans, objectives, expectations,
anticipations, estimates, intentions, financial condition, results of
operations, future performance and business of the Company, including but not
limited to, (i) projections of revenues, costs of raw materials, income or loss,
earnings or loss per share, capital expenditures, growth prospects, dividends,
the effect of currency fluctuations, capital structure and other financial
items, (ii) statements of plans and objectives of the Company or its management
or board of directors, including the introduction of new products, or estimates
or predictions of actions by customers, suppliers, competitors or regulating
authorities, (iii) statements of future economic performance, (iv) statements of
assumptions and other statements about the Company or its business, and (v)
statements preceded by, followed by or that include the words, "may," "could,"
"should," "pro forma," "looking forward," "would," "believe," "expect,"
"anticipate," "estimate," "intend," "plan," or similar expressions. These
forward-looking statements involve risks and uncertainties, which are subject to
change based on various important factors (some of which, in whole or in part,
are beyond the Company's control). The following factors, among others, could
cause the Company's financial performance to differ materially from the goals,
plans, objectives, intentions and expectations expressed in such forward-looking
statements: (1) the strength of the United States and global economies in
general and the strength of the regional and local economies in which the
Company conducts operations; (2) the effects of, and changes in, U.S. and
foreign governmental trade, monetary and fiscal policies and laws; (3) the
import of domestic or foreign military or political conflicts and turmoil; (4)
the timely development of competitive new products and services by the Company
and the acceptance of such products and services by customers; (5) willingness
of customers to substitute competitors' products and services and vice versa;
(6) the impact on operations of changes in U.S. and governmental laws and public
policy, including environmental regulations; (7) the level of export sales
impacted by export controls, changes in legal and regulatory requirements;
policy changes affecting the markets, changes in tax laws and tariffs, exchange
rate fluctuations, political and economic instability, and accounts receivable
collection; (8) technological changes; (9) regulatory or judicial proceedings;
(10) the impact of any current or future litigation involving the Company; and
(11) the success of the Company at managing the risks involved in the foregoing.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.
PART I
Item 1. 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 23, 2001, there has been no material change in the
Company's mode of conducting business.
(b) Business of the Company
Segments
The company operates in two primary business segments, Aircrew Training
Systems ("ATS") and the Industrial Group.
Aircrew Training Systems. This segment includes three primary
product groups: aircrew training devices, entertainment products, and disaster
management simulation.
2
Aircrew Training Devices. The Company's aircrew training
devices are used for medical research, advanced tactical and
physiological flight training, and for the indoctrination and
testing of military and commercial pilots. The major devices
sold in this product area are military and 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.
Entertainment Products. The Company's entertainment products
consist of motion-based simulation rides and other products.
Disaster Management Simulation. The Company's Disaster
Management Systems line includes real-time interactive
training programs that allow instruction on various disaster
situations.
The aircrew training system class of products as a whole represented 69%, 73%
and 76% of consolidated revenues of the Company for the years ended February 22,
2002, February 23, 2001 and February 25, 2000, respectively.
Industrial Group. This segment includes three primary product lines:
sterilizers, environmental systems and other products, and hyperbarics.
Sterilizers. The Company manufactures steam and gas
sterilizers 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 for HVAC and other
applications.
Hyperbarics. The Company's Hyperbarics line includes monoplace
(single person) and multiplace (multiple persons) chambers for
high altitude training, decompression and wound care
applications.
Sales of Industrial Group products were 31%, 27% and 24% of consolidated
revenues of the Company for the years ended February 22, 2002, February 23, 2001
and February 25, 2000, respectively.
The Company also provides control upgrades, maintenance and repair services and
spare parts for its own and other manufacturers' equipment.
For a more complete description of financial information regarding our business
segments, see "Note 10. Business Segment Information" to the Company's
consolidated financial statements incorporated herein by reference to the Annual
Report.
Marketing
The Company currently markets its products and services primarily through its
sales offices and employees. At February 22, 2002, approximately 18 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.
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 several 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 Systems Segment, product development emphasizes
enhancing control systems and software graphics and exploring commercial
possibilities. The Company's product development efforts will be focused on two
areas:
3
- 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. Additionally, the Company is
completing orders from respected fire schools throughout the world for
simulation products. The company will continue to explore product
applications and extensions to this Intelligent Virtual Reality
product.
- G-force and Disorientation Trainers.
-----------------------------------
- The Company recently introduced a new second generation General
Aviation Trainer (GAT II). Aimed at the commercial aviation
market, the GAT II simulates the cockpit controls, displays and
flight characteristics of general aviation private aircraft,
business aircraft and helicopters.
- The Company has begun testing on its high-end rapid onset
Sustained G Tactical Flight Simulator, the G-FET II TFS.
- The Company recently completed a successful factory acceptance of
its new GYROLAB(R) GL-1500 Advanced Flight Simulator Spatial
disorientation trainer.
- The Company plans to incorporate additional advanced tactical
flight simulation (TFS) applications into additional products in
the ATS line.
The Company's wholly owned subsidiary, Entertainment Technology
Corporation, develops and manages 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 expenses of $600,000,
$903,000 and $920,000 for the years ended February 22, 2002, February 23, 2001
and February 25, 2000, respectively. However, most of the cost of the Company's
research efforts, which were and continue to be a significant cost of its
business, are included in cost of sales for applied research for specific
contracts, as well as research for feasibility and technology updates.
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
Other than a patent on the GYROLAB Spatial Disorientation Trainer, which expires
in December 2004, the Company has no patents or trademarks which it considers
significant to its operations.
Customers
In the current year and throughout most of its history, the Company has made a
substantial portion of sales 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 2002, the Company's major customers included the Royal Thai Air Force
generating revenues of $3,285,000 and the Walt Disney companies generating
revenues of $15,859,000 or 48.8% and 10.1%, respectively, of total net sales.
These companies do not have any relationship with the Company other than as
customers. The Company expects to continue to conduct business with each of
these companies in fiscal 2003.
Foreign and Domestic Operations and Export Sales
During the years ended February 22, 2002, February 23, 2001 and February 25,
2000, approximately $1,194,000 (4%), $2,063,000 (7%) and $1,587,000 (5%),
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 U.S. government.
4
During the years ended February 22, 2002, February 23, 2001 and February 25,
2000, $10,110,000 (31%), $15,258,000 (47%) and $23,907,000 (69%), respectively,
of the Company's net revenues were attributable to export sales or sales for
export. (See Note 10 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 creditworthiness of the customer.
The Company does not believe that the distribution of its sales between foreign
and domestic sales for any particular period is necessarily indicative of the
distribution expected for any other period.
A large portion of the Company's sales is derived from 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 22, 2002 and February 23, 2001, for work
to be performed and revenue to be recognized under written agreements after such
dates, was $28,148,000 and $40,439,000, respectively. In addition, the Company's
training, maintenance and upgrade contracts backlog at February 22, 2002 and
February 23, 2001, for work to be performed and revenue to be recognized after
that date under written agreements was $1,485,000 and $1,347,000, respectively.
Of the February 22, 2002 backlog, approximately $20,967,000 is under contracts
for aircrew training systems and maintenance support including $13,069,000 for
the Walt Disney companies. Approximately 94% of the February 22, 2002, backlog
is expected to be completed prior to February 28, 2003.
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 than the Company.
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 2002, nor does it anticipate
incurring during fiscal 2003, 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 22, 2002, the Company had 276 full-time employees, of whom 6 were
employed in executive positions, 101 were engineers, engineering designers, or
draftspeople, 59 were administrative (sales, accounting, etc.) and clerical
personnel, and 110 were engaged principally in production and operations.
5
Item 2. 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 100,000 square foot steel and masonry building.
Approximately 85,000 square feet are devoted to manufacturing and 15,000 square
feet to office space. The original building was erected in 1969 and additions
were most recently made in 2001. 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 ETC-PZL
Aerospace Industries, its Polish subsidiary.
The Company considers its machinery and plant to be in satisfactory operating
condition. 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 material adverse effect on the
financial position of the Company if resolved unfavorably.
Item 4. Submission of Matters to a Vote of Security Holders
None.
6
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.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
7
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information as of May 15, 2002, with
respect to the directors and executive officers of the Company:
Served
as Principal Occupations
Director and Positions and
or Officer Offices with the
Name Age Since (1) Company
- ---- --- --------- -------
William F. Mitchell (2) 60 1969 Chairman of the Board,
President and Director
Richard E. McAdams (3) 66 1985 Executive Vice President
and Director
Pete L. Stephens, M.D. (4) 64 1974 Director
David P. Lazar (5) 45 2000 Director
Duane D. Deaner (6) 54 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) Recently retired, Dr. Stephens had been a physician engaged in the
private practice of medicine for 30 years.
(5) Since November 2001, Mr. Lazar has served as Senior Executive Vice
President of Boenning and Scattergood, Inc., and Managing Director of
its investment banking group. Prior to that, Mr. Lazar served as
Managing Director of Berwind Financial, L.P. from February 1, 1993, to
November 2001. Boenning and Scattergood is a regional investment firm
specializing in investment banking services to both privately held and
publicly traded companies. Mr. Lazar holds an MBA from the College of
William and Mary Graduate School of Business Administration and a B.S.
from Duke University. He serves as a trustee of the Academy of Natural
Sciences, is a member of the Board of the Recording for the Blind and
Dyslexic, and also serves as an advisory director of Lydian Trust Co.,
a Florida based internet company that provides financial services.
(6) 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.
Committees of the Board of Directors
During the year ended February 22, 2002, the Company had an Audit Committee
consisting of the following directors: Messrs. Lazar, Philip L. Wagner and Dr.
Pete L. Stephens. Dr. Wagner retired from the Board on December 19, 2001. The
independent outside directors also served on the Company's Compensation
Committee during the year ended February 22, 2002. 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.
8
During the year ended February 22, 2002, the Board of Directors held four
meetings and the Audit Committee and Compensation Committee each held one
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 (except
Mr. Wagner) and Compensation Committee attended all meetings of the Committee
held while they were members thereof.
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.
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 22, 2002, its officers, directors and greater than ten percent
beneficial owners complied with all applicable filing requirements.
Item 11. Executive Compensation
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid by the Company to the Chief
Executive Officer for services rendered during fiscal years 2002, 2001, and
2000. There are no other executive officers whose total annual salary and bonus
exceeds $100,000. The footnotes to the table provide additional information
concerning the Company's compensation and benefit programs.
Annual Compensation
Other
Name and Annual All Other
Principal Fiscal Compen- Compen-
Position Year Salary ($) Bonus ($) sation ($)(2) sation ($)(3)
- -------- ---- ---------- --------- ------------- -------------
William F. Mitchell, 2002 $225,000 $10,051(1) -- $4,413
President and Chief 2001 225,000 $10,969(1) -- 4,000
Executive Officer 2000 225,000 $12,023(1) -- 3,876
(1) These amounts represent a portion of a deferred bonus from fiscal 1999
due 75% in 1999 and 5% in each of the five following fiscal years. No
bonus awards for fiscal 2000, 2001, or 2002 were paid.
(2) The Company's executive officers receive certain perquisites. For
fiscal years 2002, 2001 and 2000, the perquisites received by Mr.
Mitchell did not exceed the lesser of $50,000 or 10% of his salary and
bonus.
(3) These amounts represent the Company's contribution to the Retirement
Savings Plan.
9
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of May 15, 2002, 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.
Amount and
Nature of Percent
Beneficial of
Name and Address of Beneficial Owner Ownership(9) Class
- ------------------------------------ ------------ -------
William F. Mitchell (1) 1,701,998 23.8%
c/o Environmental Tectonics
Corporation
County Line Industrial Park
Southampton, PA 18966
Pete L. Stephens, M.D. (2) 679,500(3) 9.5%
31 Ribaut Drive
Hilton Head Island, SC 29926
Richard E. McAdams (2) 51,017(4) *
c/o Environmental Tectonics
Corporation
County Line Industrial Park
Southampton, PA 18966
David P. Lazar (2) 0 *
c/o Boenning and Scattergood, Inc.
4 Tower Bridge
200 Barr Harbor Dr., Suite 300
West Conshohocken, PA 19428
ETC Asset Management, LLC 832,820(5) 11.1%
50 Midtown Park East
Mobile, AL 36606
T. Todd Martin, III 944,520(6) 12.6%
50 Midtown Park East
Mobile, AL 36606
Emerald Advisors, Inc. 1,350,255(7) 18.9%
1703 Oregon Pike
Suite 101
Lancaster, PA 17601
All directors and executive
officers as a group (5 persons) 2,440,485(8) 33.9%
* less than 1%
- --------------
(1) Chairman of the Board, President and Director of the Corporation.
Shares of Common Stock include 177,000 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 30,775 shares of Common Stock held under
the Company's Stock Option Plan which are presently exercisable.
(5) These shares include 332,820 shares of Common Stock underlying a presently
exercisable warrant to purchase shares of Common Stock.
(6) These shares include 500,000 shares of Common Stock and 332,820 shares of
Common Stock underlying a presently exercisable warrant to purchase shares
of Common Stock presently owned by ETC Asset Management, LLC, a limited
liability company of which Mr. Martin is manager, 26,900 shares owned by
Allied Williams Co, Inc., a corporation of which Mr. Martin is an officer
and director, 14,300 shares owned by Mr. Martin jointly with his spouse,
and 7000 shares owned by trusts of which Mr. Martin is trustee.
10
(7) As reported in a Schedule 13G, dated December 31, 2001, filed by Emerald
Advisors, Inc., Emerald has sole voting power with respect to 835,365
shares of Common Stock and sole dispositive power over 1,350,255 shares of
Common Stock.
(8) Includes options to purchase 30,775 and 9,470 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 Stock Option Plan.
(9) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934. Unless otherwise noted, the
Company believes that all persons named in the table have sole voting and
investment power with respect to all shares of the Company's Common Stock
beneficially owned by them.
Item 13. Certain Relationships and Related Transactions
David P. Lazar, a director of the Company, is a Senior Executive Vice
President of Boenning and Scattergood, Inc. and is Managing Director of its
investment banking group. Boenning and Scattergood, Inc. has been retained to
provide general financial advisory services to the Company.
Item 14. 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.
10.1 Registrant's 1998 Stock Option Plan was filed on October 8, 1998 on
Form S-8 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. *
10.5 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 March 29, 2002.
10.7 Stock Purchase Warrant dated as of December 26, 2001, issued by the
Registrant to ETC Asset Management, LLC.
13 Portions of Registrant's 2002 Annual Report to Shareholders which are
incorporated by reference into this Form 10-K.
21 List of subsidiaries.
23 Consent of Grant Thornton L.L.P.
* Represents a management contract or a compensatory plan or arrangement.
(b) Reports on Form 8-K:
The Company did not file any Current Reports on Form 8-K during the
fiscal quarter ended February 22, 2002.
11
SIGNATURES
Pursuant to the requirements of 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
Pursuant to the requirements of 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, June 7, 2002
- ----------------------- Chief Executive Officer,
William F. Mitchell President and Director
/s/ Duane D. Deaner Chief Financial June 7, 2002
- ------------------- Officer (Principal
Duane D. Deaner Accounting Officer)
/s/ Richard E. McAdams Director June 7, 2002
- ----------------------
Richard E. McAdams
/s/ David P. Lazar Director June 7, 2002
- ------------------
David P. Lazar
/s/ Pete L. Stephens Director June 7, 2002
- --------------------
Pete L. Stephens, M.D.
12
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 (1) Period
----------- --------- -------- -------------- ------
Year ended February 22, 2002:
Valuation and qualifying accounts related to:
Accounts receivable $370 $ 3 $ -- $373
Inventory $630 $108 $ -- $738
Property, plant and equipment $8,635 $668 $ -- $9,303
Software development costs $5,670 $496 $ -- $6,166
Other assets $96 $311 $294 $113
Year ended February 23, 2001
Valuation and qualifying accounts related to:
Accounts receivable $367 $3 $ -- $370
Inventory $720 $100 $190 $630
Property, plant and equipment $8,004 $631 $ -- $8,635
Software development costs $5,215 $455 $ -- $5,670
Other assets $61 $192 $157 $96
Year ended February 25, 2000
Valuation and qualifying accounts related to:
Accounts receivable $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 $264 $228 $61
(1) Amounts written off or retired
13
EXHIBIT INDEX
Exhibit
No. Item
- -------- ----
10.6 Amendment to Revolving Credit Agreement dated as of March 29, 2002.
10.7 Stock Purchase Warrant dated as of December 26, 2001, issued by the
Registrant to ETC Asset Management, LLC.
13 Portions of Registrant's 2002 Annual Report to Shareholders which are
incorporated by reference into this Form 10-K.
21 List of subsidiaries.
23 Consent of Grant Thornton L.L.P.
* Represents a management contract or a compensatory plan or arrangement.
14