Environmental Tectonics Corp. is reporting more fallout from its dispute with the U.S. Navy over a contract. After taking a charge for the value of the receivables of that contract, the Southampton company now says in a filing to the SEC that it must restate its prior financial statements. And that means it is not in compliance with its $15 million credit agreement with PNC Bank.
ETC, which makes decompression chambers and simulation trainers, says it has borrowed $14.3 million under the agreement, and PNC Bank could demand immediate payment. Gerry Lenfest, a big Tectonics shareholder, has guaranteed all of the company's obligations under the PNC Bank loan. ETC's audit committee has identified errors in accounting related to the Navy contract. Until it figures out what happened, the company is telling investors not to rely on its financial statements for the last five fiscal years.
