33113--5/29/2008--ENVIRONMENTAL_TECTONICS

related topics

{regulation, government, change}

{customer, product, revenue}

{operation, international, foreign}

{cost, contract, operation}

{product, market, service}

{system, service, information}

{financial, litigation, operation}

{operation, natural, condition}

{regulation, change, law}

{debt, indebtedness, cash}

We continue to have major litigation and claims in process and these require a significant amount of management time and effort. Additionally, legal costs are a major portion of our general and administrative spending, thus redirecting funds from other operating activities. There is a risk of an unfavorable outcome in litigation and resulting negative financial impact on our operating results. Our sources of revenues are not consistent; in any given fiscal year a substantial portion of our revenues is derived from a small number of customers that may not be recurring customers in future years. Our significant debt could adversely affect our financial resources and prevent us from satisfying our debt service obligations. We have introduced a new business model in one of our divisions. If customers do not purchase these services from us, our business will suffer. We need to attain validation from the U.S. defense agencies of our Authentic Tactical Fighting Systems technology. Our operations involve rapidly evolving products and technological change. Delays in the delivery of our products may prevent us from invoicing our costs and estimated earnings on uncompleted contracts. In the event we suffer production delays, we may be required to pay certain customers substantial liquidated damages and other penalties. Our fixed-price and cost-reimbursable contracts may commit us to unfavorable terms. Our contracts and subcontracts that are funded by the U.S. Government or foreign governments are subject to government regulations, audits and other requirements. Our contracts that are funded by the U.S. Government or foreign governments are subject to a competitive bidding process that may affect our ability to win contract awards or renewals in the future. Our commercial contracts are subject to competition and strict performance and other requirements. There are certain risks inherent in our international business activities, which constitute a significant portion of our business. Legislative actions, higher director and officer insurance costs and potential new accounting pronouncements are likely to cause our general and administrative expenses to increase and impact our future financial condition and results of operations. Our operations could be hurt by terrorist attacks, war and other activities or occurrences that make air travel difficult or reduce the willingness of our commercial airline customers to purchase our simulation products.

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33113--5/29/2008--ENVIRONMENTAL_TECTONICS_CORP