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| ETC Receives Extension of Bank Default Waiver, Engages new Auditors |
| Southampton, PA: February 5, 2008 - Environmental Tectonics Corporation (AMEX: ETC) ("ETC" or the "Company") today announced that on January 31, 2008, it had received an extension (the "Extension") on its credit agreement waiver, originally received November 21, 2007, from PNC Bank, National Association ("PNC"), which extends the waiver to May 31, 2008. This extension agreement requires ETC to deliver to PNC its restated financial statements for the fiscal year ended February 23, 2007 no later than May 31, 2008.
On July 31, 2007, ETC completed a refinancing (the "Refinancing") of its indebtedness with PNC in the aggregate amount of up to $15,000,000. In connection with the Refinancing, the Company entered into a Credit Agreement (the "Credit Agreement") with PNC. The terms of the Credit Agreement and the related documents are described in a Current Report on Form 8-K dated July 31, 2007 and filed with the Securities and Exchange Commission on August 3, 2007. As previously disclosed on November 14, 2007, the Audit Committee of the Board of Directors of the Company, in consultation with management, determined that the Company would need to restate its previously issued consolidated financial statements for prior periods, including the periods ended November 24, 2006 and February 23, 2007, due to errors in accounting with respect to accounts receivable related to the carrying value of a claims receivable booked in connection with a contract with the Department of the Navy for a submarine decompression chamber project. As a result of the proposed restatement, the Company was in breach of the representation and warranty contained in Section 7(a) of the Credit Agreement with respect to its previously delivered financial statements as set forth in the Company's Annual Report on Form 10-K for the fiscal year ended February 23, 2007. This breach constituted an Event of Default under the Credit Agreement and related documents. In addition, the proposed restatement caused the Company to be in breach of the Consolidated Tangible Net Worth covenant set forth in the Credit Agreement. As the Company previously disclosed, PNC waived the Financial Statement Default (and any comparable default in respect of the Company's financial statements as of any prior fiscal period), provided that the Company delivered to PNC its restated financial statements for the fiscal year ended February 23, 2007 no later than January 31, 2008. PNC also waived the Net Worth Covenant Default as of February 23, 2007. The Extension does not obligate PNC to grant any future extension for the date on which the Company must deliver its restated financial statements for the fiscal year ended February 23, 2007. Additionally, on January 30, 2008, the Audit Committee of the Board of Directors of the Company engaged Friedman LLP as the Company's registered public accounting firm for the Company | |
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This press release may include 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. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the Company that may cause our actual results, levels of activity, performance or achievements to be materially different from any other future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "could", "would", "expect", "plan", "anticipate", "believe", "estimate", "continue", or the negative of such terms or similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, contract cancellations, failure to obtain new contracts, political unrest in customer countries, unfavorable results in litigation, general economic conditions, and those issues identified from time to time in our Securities and Exchange Commission filings and other public documents, including, without limitation, our Annual Report on Form 10-K for the fiscal year ended February 24, 2006.