UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2021~~June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-51378

TechPrecision Corporation

(Exact name of registrant as specified in its charter)


Delaware		51-0539828
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


1 Bella Drive
Westminster, MA		01473
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code		(978) 874-0591

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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	☐	No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


☒	Yes	☐	No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


☐	Yes	☒	No

The number of shares outstanding of the registrant’s common stock as of ~~February 8,~~September 13, 2022 was ~~34,287,450.~~34,307,450.

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PART I

ITEM 1. FINANCIAL STATEMENTS

TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


	December 31,		March 31,		June 30,		March 31,
	2021		2021		2022		2022
ASSETS
Current assets:
Cash and cash equivalents	$	562,459	$	2,130,711	$	573,638	$	1,052,139
Accounts receivable		2,430,255		608,059		2,507,367		3,009,249
Contract assets		10,234,353		5,532,408		8,802,642		8,350,231
Raw materials		944,094		503,636		1,037,969		874,538
Work-in-process		776,314		767,520		1,861,898		1,360,137
Other current assets		467,458		379,437		728,065		1,421,459
Total current assets		15,414,933		9,921,771		15,511,579		16,067,753
Property, plant and equipment, net		12,071,530		4,063,209		12,936,156		13,153,165
Right of use asset, net		6,526,862		—		6,219,245		6,383,615
Deferred income taxes		2,320,827		1,934,415		2,300,484		2,126,770
Goodwill		930,759		—
Other noncurrent assets, net		121,256		84,624		680,256		121,256
Total assets	$	37,386,167	$	16,004,019	$	37,647,720	$	37,852,559

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	2,570,133	$	500,848	$	3,908,129	$	3,426,921
Accrued expenses		2,533,755		1,526,270		3,458,285		3,435,866
Contract liabilities		1,792,887		218,152		1,786,402		1,765,319
Current portion lease liability		539,670		—
Current portion of long-term lease liability						629,113		593,808
Current portion of long-term debt		4,882,456		2,474,963		3,083,956		4,093,079
Total current liabilities		12,318,901		4,720,233		12,865,885		13,314,993
Long-term debt, net		3,210,468		1,341,938		2,990,063		3,114,936
Long-term lease liability		6,026,848		—		5,678,788		5,853,791
Other noncurrent liability						1,298,274		305,071
Total liabilities		21,556,217		6,062,171		22,833,010		22,588,791
Commitments and contingent liabilities (Note 14)
Commitments and contingencies (see Note 15)
Stockholders’ Equity:
Common stock - par value $.0001 per share, 90,000,000 shares authorized, 34,287,450 and 29,498,662 shares issued and outstanding at December 31, 2021 and March 31, 2021		3,428		2,949
Common stock - par value $.0001 per share, 90,000,000 shares authorized, 34,307,450 shares issued and outstanding at June 30, 2022 and March 31, 2022						3,430		3,430
Additional paid in capital		14,588,193		8,944,660		14,689,878		14,637,771
Accumulated other comprehensive income		19,929		21,838
Retained earnings		1,218,400		972,401		121,402		622,567
Total stockholders’ equity		15,829,950		9,941,848		14,814,710		15,263,768
Total liabilities and stockholders’ equity	$	37,386,167	$	16,004,019	$	37,647,720	$	37,852,559

See accompanying notes to the condensed consolidated financial statements.

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TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (unaudited)


	Three Months Ended				Nine Months Ended
	December 31,				December 31,				Three months ended June 30,
	2021		2020		2021		2020		2022		2021
Net sales	$	6,511,325	$	3,569,718	$	14,720,964	$	11,566,176	$	7,076,357	$	3,412,229
Cost of sales		6,033,267		2,864,274		12,479,531		9,034,858		6,259,139		2,579,561
Gross profit		478,058		705,444		2,241,433		2,531,318		817,218		832,668
Selling, general and administrative		1,623,883		716,361		3,530,179		2,205,739		1,375,227		732,608
(Loss) income from operations		(1,145,825)		(10,917)		(1,288,746)		325,579		(558,009)		100,060
Other income		1,999		(219)		13,390		1,237
Other (expense) income										(33,225)		10,390
Interest expense		(94,721)		(50,405)		(181,494)		(159,885)		(83,645)		(29,878)
PPP loan forgiveness		—		—		1,317,100		—		—		1,317,100
Total other (expense) income		(92,722)		(50,624)		1,148,996		(158,648)
Total other (expense) income, net										(116,870)		1,297,612
(Loss) income before income taxes		(1,238,547)		(61,541)		(139,750)		166,931		(674,879)		1,397,672
Income tax (benefit) expense		(333,867)		(13,369)		(385,749)		60,573
Income tax (benefit) provision										(173,714)		26,580
Net (loss) income	$	(904,680)	$	(48,172)	$	245,999	$	106,358	$	(501,165)	$	1,371,092
Other comprehensive (loss) income:
Foreign currency translation adjustments	$	(810)	$	1,252	$	(1,909)	$	151		—		42
Other comprehensive (loss) income	$	(810)	$	1,252	$	(1,909)	$	151
Other comprehensive (loss) income, net of tax										—		42
Comprehensive (loss) income	$	(905,490)	$	(46,920)	$	244,090	$	106,509	$	(501,165)	$	1,371,134
Net (loss) income per share basic	$	(0.03)	$	(0.00)	$	0.01	$	0.00
Net (loss) income per share diluted	$	(0.03)	$	(0.00)	$	0.01	$	0.00
Weighted average shares outstanding - basic		34,286,580		29,498,662		31,716,353		29,430,206
Weighted average shares outstanding - diluted		34,286,580		29,498,662		33,395,123		31,021,384
Net (loss) income per share - basic									$	(0.01)	$	0.05
Net (loss) income per share - diluted									$	(0.01)	$	0.04
Weighted average number of shares outstanding - basic										34,307,450		29,498,662
Weighted average number of shares outstanding - diluted										34,307,450		31,054,110

See accompanying notes to the condensed consolidated financial statements.

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TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)


						Accumulated											Accumulated
	Common			Additional		Other				Total		Common			Additional		Other				Total
	Stock	Par		Paid in		Comprehensive		Retained		Stockholders’		Stock	Par		Paid in		Comprehensive		Retained		Stockholders’
	Outstanding	Value		Capital		Income		Earnings		Equity
Balance 3/31/2020	29,354,594	$	2,935	$	8,793,062	$	21,688	$	651,770	$	9,469,455
Stock-based compensation					55,500						55,500
Shares issued under LTIP	44,068		4		(4)						—
Net loss									(116,234)		(116,234)
Foreign currency translation adjustment							(97)				(97)
Balance 6/30/2020	29,398,662	$	2,939	$	8,848,558	$	21,591	$	535,536	$	9,408,624
Stock-based compensation					57,417						57,417
Restricted stock award	100,000		10		(10)						—
Net income									270,764		270,764
Foreign currency translation adjustment							(1,005)				(1,005)
Balance 9/30/2020	29,498,662	$	2,949	$	8,905,965	$	20,586	$	806,300	$	9,735,800
Stock-based compensation					33,500						33,500
Taxes on exercised options					(28,305)						(28,305)
Net loss									(48,172)		(48,172)
Foreign currency translation adjustment							1,252				1,252
Balance 12/31/2020	29,498,662	$	2,949	$	8,911,160	$	21,838	$	758,128	$	9,694,075
												Outstanding	Value		Capital		Income		Earnings		Equity
Balance 3/31/2021	29,498,662	$	2,949	$	8,944,660	$	21,838	$	972,401	$	9,941,848	29,498,662	$	2,949	$	8,944,660	$	21,838	$	972,401	$	9,941,848
Stock-based compensation					33,500						33,500	—		—		33,500		—		—		33,500
Net income									1,371,092		1,371,092	—		—		—		—		1,371,092		1,371,092
Foreign currency translation adjustment							42				42	—		—		—		42		—		42
Balance 6/30/2021	29,498,662	$	2,949	$	8,978,160	$	21,880	$	2,343,493	$	11,346,482	29,498,662	$	2,949	$	8,978,160	$	21,880	$	2,343,493	$	11,346,482
Restricted stock award	100,000		10		(10)						—
Common stock issued for acquired business	1,466,061		147		2,268,853						2,269,000
Proceeds from sale of common stock, net	3,202,727		320		3,187,261						3,187,581
Issuance of warrants					46,256						46,256

Balance 3/31/2022												34,307,450	$	3,430	$	14,637,771	$	—	$	622,567	$	15,263,768
Stock-based compensation					28,566						28,566	—		—		52,107		—		—		52,107
Net loss									(220,413)		(220,413)	—		—		—		—		(501,165)		(501,165)
Foreign currency translation adjustment							(1,141)				(1,141)
Balance 9/30/2021	34,267,450	$	3,426	$	14,509,086	$	20,739	$	2,123,080	$	16,656,331
Issuance of common stock	20,000		2		34,998						35,000
Stock-based compensation					44,109						44,109
Net loss									(904,680)		(904,680)
Foreign currency translation adjustment							(810)				(810)
Balance 12/31/2021	34,287,450	$	3,428	$	14,588,193	$	19,929	$	1,218,400	$	15,829,950
Balance 6/30/2022												34,307,450	$	3,430	$	14,689,878	$	—	$	121,402	$	14,814,710

See accompanying notes to the condensed consolidated financial statements.

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TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


	Nine Months Ended December 31,				Three Months Ended June 30,
	2021		2020		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	245,999	$	106,358
Adjustments to reconcile net income to net cash used in operating activities:
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income					$	(501,165)	$	1,371,092
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		978,517		521,422		585,361		182,678
Amortization of debt issue costs		34,588		45,099		13,399		8,824
Stock based compensation expense		141,176		146,417		52,107		33,500
Change in contract loss provision		(66,232)		(175,365)		18,402		(69,951)
Deferred income taxes		(386,413)		60,573		(173,714)		26,580
Change in fair value of contingent consideration						(33,474)		—
PPP loan forgiveness		(1,317,100)		—		—		(1,317,100)
Changes in operating assets and liabilities:
Accounts receivable		(575,181)		(183,076)		501,882		(547,344)
Contract assets		(871,339)		(810,032)		(452,411)		716,600
Inventories		477,936		19,129
Work-in-process and raw materials						(665,192)		239,012
Other current assets		215,334		164,127		693,394		3,607
Other noncurrent assets		(50,633)		38,092
Accounts payable		(611,045)		325,369		481,208		(331,079)
Accrued expenses		(1,282,269)		(101,028)		(85,348)		(389,586)
Contract liabilities		1,418,010		(496,691)		21,083		210,215
Net cash used in operating activities		(1,648,652)		(339,606)
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of cash acquired		(7,795,810)		—
Other noncurrent liabilities						993,203		—
Net cash provided by operating activities						1,448,735		137,048
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed asset deposit						(559,000)		—
Purchases of property, plant and equipment		(436,531)		(546,890)		(203,981)		(4,198)
Net cash used in investing activities		(8,232,341)		(546,890)		(762,981)		(4,198)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from term loan		4,000,000		—
Closing costs related to common stock sale		(335,419)		—
Proceeds from sale of common stock		3,523,000		—
CASH FLOWS FROM FINANCING ACTIVITIES
Debt issue costs		(116,511)		(24,610)		(6,268)		—
Proceeds from payroll protection program loan		—		1,317,100
Revolver loan borrowings		2,553,221		1,000,000
Revolver loan repayments		(575,000)		(1,000,000)
Principal payments for leases		(493,015)		—		(16,860)		—
Repayments long-term debt		(243,510)		(81,352)
Net cash provided by financing activities		8,312,766		1,211,138
Net payments under revolver loan						(987,002)		—
Repayment of long-term debt						(154,125)		(27,166)
Net cash used in financing activities						(1,164,255)		(27,166)
Effect of exchange rate on cash and cash equivalents		(25)		(178)		—		(20)
Net (decrease) increase in cash and cash equivalents		(1,568,252)		324,464		(478,501)		105,664
Cash and cash equivalents, beginning of period		2,130,711		930,856		1,052,139		2,130,711
Cash and cash equivalents, end of period	$	562,459	$	1,255,320	$	573,638	$	2,236,375
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest, net of amounts capitalized	$	152,498	$	106,342
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the year for:
Interest					$	69,799	$	32,746

See accompanying notes to the condensed consolidated financial statements.

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~~SUPPLEMENTAL INFORMATION – NONCASH INVESTING AND FINANCING TRANSACTIONS:~~

~~Nine months ended December 31, 2021 and 2020~~

On August 25, 2021, in exchange for the issuance of 1,466,061 shares of common stock and warrants, the Company acquired all of the issued and outstanding capital stock of Stadco, acquired certain other securities of Stadco and satisfied certain liabilities of Stadco. The fair value of the aggregate consideration transferred was $2,269,000 and based on the closing market price of the Company’s common stock on the closing date, August 25, 2021.

In connection with the Stadco acquisition, the Company became party to an amended and restated lease agreement to rent buildings and property at the Stadco manufacturing location, and recorded a right-of-use asset and liability of approximately $6.7 million.

On June 16, 2020, our executive officers exercised options to purchase 150,000 shares of the Company’s common stock, par value $0.0001 per share, in a cashless transaction, pursuant to option awards granted under the Company’s 2016 Long-Term Incentive Plan.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS

TechPrecision Corporation, or ~~TechPrecision,~~“TechPrecision”, is a Delaware corporation organized in February 2005 under the name Lounsberry Holdings II, Inc. On February 24, 2006, we acquired all the issued and outstanding capital stock of our wholly owned subsidiary Ranor, Inc., or “Ranor.” Ranor, together with its predecessors, has been in continuous operation since 1956. The name was changed to TechPrecision Corporation on March 6, 2006.

TechPrecision is the parent company of Ranor, ~~Inc., or Ranor,~~ Westminster Credit Holdings, LLC, or ~~WCH,~~“WCH”, Stadco New Acquisition, LLC, or ~~Acquisition Sub,~~“Acquisition Sub”, Stadco and Wuxi Critical Mechanical Components Co., Ltd., or ~~WCMC,~~“WCMC”, a wholly foreign owned enterprise. WCMC was dissolved and deregistered in November 2021 and has had no customers or operations for over five years. TechPrecision, Ranor, WCH, WCMC (until November 2021), Acquisition Sub and Stadco are collectively referred to as the “Company”, “we”, “us” or “our”.

On August 25, 2021, ~~pursuant to~~ the ~~stock purchase agreement among TechPrecision, Acquisition Sub, Stadco and certain affiliates of Stadco, TechPrecision~~Company completed its previously announced acquisition of ~~Stadco.~~Stadco, pursuant to that certain stock purchase agreement with Stadco New Acquisition, LLC, Stadco Acquisition, LLC, Stadco and each equity holder of Stadco Acquisition, LLC. On the closing date, the Company, through Stadco New Acquisition, LLC, acquired all the issued and outstanding capital stock of Stadco from Stadco Acquisition, LLC in exchange for the issuance of shares of the Company’s common stock to Stadco Acquisition, LLC. As a result of the acquisition, Stadco is ~~a company in the business of manufacturing high-precision parts, assemblies and tooling for aerospace, defense, research and industrial customers.~~now our wholly owned indirect subsidiary. See Note 3 ~~below~~ for ~~more information regarding the Stadco acquisition.~~additional disclosures related to this business combination.

~~The Company manufactures~~We manufacture large-scale metal fabricated and machined precision components and equipment. These products are used in a variety of markets including defense and aerospace, nuclear, medical, and precision industrial. ~~We consider our business to consist of one segment - metal fabrication and precision machining.~~ All of our operations and customers are ~~located~~ in the United ~~States.~~States, or “U.S.”.

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation - The accompanying condensed consolidated financial statements include the accounts of TechPrecision, Ranor, Stadco, WCH, and WCMC, ~~(until~~until its ~~dissolution), Acquisition Sub and Stadco.~~disposition. Intercompany transactions and balances have been eliminated in consolidation. The accompanying condensed consolidated balance sheets as of ~~December~~June 30, 2022 and March 31, ~~2021,~~2022, the condensed consolidated statements of operations and comprehensive (loss) income and stockholders’ equity for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ and the condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ are unaudited, but, in the opinion of management, include all adjustments that are necessary for a fair presentation of our financial statements for interim periods in accordance with U.S. Generally Accepted Accounting Principles, or ~~U.S. GAAP.~~“U.S. GAAP”. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The results of operations for an interim period are not necessarily indicative of the results of operations to be expected for the fiscal year.

These notes to the condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or the ~~SEC,~~“SEC”, for Quarterly Reports on Form 10-Q. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited financial statements and related notes should be read in conjunction with the consolidated financial statements included with our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021, or the 2021 Form 10-K,~~2022, filed with the SEC on ~~June~~August 10, ~~2021.~~2022.

Use of Estimates in the Preparation of Financial Statements - In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and revenues and expenses during the reported period. We continually evaluate our estimates, including those related to ~~business combinations, contract accounting, accounts receivable, inventories, the recovery of long-lived assets,~~revenue recognition and income ~~taxes and the valuation of equity transactions.~~taxes. We base our estimates on historical and current experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

~~Accounting for Goodwill –~~ Risks and Uncertainties - For the three months ended June 30, 2022 and 2021, there were no events related to Coronavirus Disease (COVID-19) that had a material impact on our operating margins. The Company ~~allocates~~will continue to monitor the ~~purchase price~~impacts of ~~an acquired company, including, when applicable, the acquisition date fair value of contingent consideration, between tangible~~COVID-19 and ~~intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill.~~

Goodwill of a reporting unit is not amortized, but tested for impairment at least annually, or on an interim basis whenever circumstances indicate that the carrying value of these assets may not be recoverable. A goodwill impairment charge would reflect the amount by which the carrying amount of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill.any government-imposed actions thereto.

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Liquidity and Going Concern – We reported a net loss of $0.5 million for the three months ended June 30, 2022. We reported net a net loss of $0.3 million for the fiscal year ended March 31, 2022. Our liquidity is highly dependent on the availability of financing facilities and our ability to maintain our gross profit and operating income.

As of June 30, 2022, we had $4.5 million in total available liquidity, consisting of $0.6 million in cash and cash equivalents, and $3.9 million in undrawn capacity under our revolver loan. As of March 31, 2022, we had $3.9 million in total available liquidity, consisting of $1.1 million in cash and cash equivalents, and $2.8 million in undrawn capacity under our revolver loan.

On June 16, 2022, Ranor entered into a Third Amendment to Amended and Restated Loan Agreement and Third Amendment to Promissory Note to further extend the maturity date of the Ranor Term Loan to September 16, 2022. The Company has ~~not formed~~commenced negotiations of a ~~conclusion~~further amended and restated loan agreement with Berkshire Bank, including a potential modification of the loan covenants. We intend to refinance the original term loan made by Berkshire Bank to Ranor in the principal amount of $2.85 million (the “Ranor Term Loan”) by borrowing on terms similar to the ~~issue of tax deductibility~~current loan and using the proceeds to pay down certain existing debt obligations and lowering our debt levels and debt service requirements. However, there can be no assurance that we will be successful in negotiating for ~~goodwill. We are evaluating certain tax election options under the Stadco stock purchase agreement and will make a determination as soon as practicable.~~these terms with Berkshire Bank or any other lender.

Our debt financing agreements limit our capital expenditures to $1.5 million annually and contain loan to value, balance sheet leverage, and debt service coverage ratio covenants. At June 30, 2022, the Company was not in compliance with all of these financial covenants.

Berkshire Bank waived the Company’s noncompliance with certain of the financial and related covenants at June 30, 2022. The bank retains the right to act on covenant violations that occur after the date of delivery of the waiver. If the lender had demanded repayment and caused the debt to be considered a short-term obligation, the Company would have been unable to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations.

In order for us to continue operations beyond the next twelve months and be able to discharge our liabilities and commitments in the normal course of business, we must secure new long-term financing on terms consistent with our near-term business plans.

We had cash and cash equivalents of $0.6 million and working capital of $2.6 million, a decrease of $0.2 million when compared to March 31, 2022. We believe our available cash, plus cash expected to be provided by operations, Employee Retention Credit cash refunds of approximately $0.9 million, and borrowing capacity available under the revolver loan (until the expiration date of December 20, 2022), will be sufficient to fund our operations, expected capital expenditures, and principal and interest payments under our lease and debt obligations through the next 12 months from the issuance date of our financial statements. Our revolver loan matures in December 2022 and will not be available to provide liquidity unless it is renewed. The Company intends to renew the revolver loan with Berkshire Bank. There was $0.3 million outstanding under the revolver loan at June 30, 2022, and $3.9 million of available liquidity.

The uncertainty associated with the refinancing of the Ranor Term Loan which is due on September 16, 2022, and the Revolver Loan which is due on December 20, 2022, raises substantial doubt about our ability to continue as a going concern.

The condensed consolidated financial statements for the three months ended June 30, 2022, were prepared on the basis of a going concern which contemplates that we will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should we be required to liquidate assets. Our ability to satisfy our current liabilities and to continue as a going concern is dependent upon the timely availability of long-term financing and successful execution of our operating plan. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 3 – BUSINESS COMBINATION

Stadco Acquisition

On August 25, 2021, the closing date, the Company completed its previously announced acquisition of Stadco, pursuant to that certain stock purchase agreement, dated as of October 16, 2020, or the ~~SPA,~~“SPA”, among TechPrecision, Stadco New Acquisition ~~Sub,~~LLC, Stadco Acquisition, LLC, or ~~Holdco,~~“Holdco”, and each stockholder of Holdco. Stadco is a company in the business of manufacturing high-precision parts, assemblies and tooling for aerospace, defense, and industrial customers.

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Also on the closing date, the Company completed its previously announced acquisition of certain indebtedness obligations of Stadco, pursuant to that certain Amended and Restated Loan Purchase and Sale Agreement, dated as of April 23, 2021, with Sunflower Bank, N.A., as amended by Amendment to Amended and Restated Loan Purchase and Sale Agreement, dated as of June 28, 2021, together, the Loan Purchase Agreement. On August 25, 2021, WCH, as assignee of Stadco New Acquisition ~~Sub,~~LLC, paid $7.9 million in the aggregate to Sunflower Bank, N.A., under the terms of the Loan Purchase Agreement, to purchase the indebtedness.

Pursuant to the SPA, and upon the terms and subject to the conditions therein, the Company acquired all of the issued and outstanding capital stock of Stadco in exchange for the issuance of 666,666 shares of the Company’s common stock to Holdco. In connection with the acquisition of Stadco, the Company reached an agreement with the holders of certain other non-bank indebtedness of Stadco, under which each such lender agreed to forgive such indebtedness in exchange for an aggregate of 199,395 shares of the Company’s common stock. In addition, the Company reached an agreement with a certain other security holder who agreed to sell its Stadco securities to the Company in exchange for the issuance by the Company of 600,000 shares of the Company’s common stock and a warrant to purchase 100,000 shares of the Company’s common stock. The fair value of the 1,466,061 shares of common stock issued as aggregate consideration was $2.3 million based on the closing market price of the Company’s common stock on the August 25, 2021 closing date. The fair value of the warrants is estimated using the Black-Scholes option-pricing model. The warrants vested in full on the issue date, have a three-year term and exercise price of $1.43 per share. The fair value of the warrants was $46,256 and estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the grant. Expected volatility of 46.7% was based on the historical volatility of our common stock. The risk-free interest rate of 0.4% was selected based upon yields of three-year U.S. Treasury bond.

On August 25, 2021, the Company entered into a Securities Purchase Agreement with a limited number of institutional and other accredited investors, pursuant to which investors committed to subscribe for and purchase 3,202,727 shares of the Company’s common stock at a purchase price of $1.10 per share. Costs directly attributable to this offering of securities totaled $0.3 million.

~~The accounting for a business combination is dependent upon obtaining valuations and other information for certain~~Stadco’s assets and liabilities ~~which have not yet been completed or obtained to a point where definitive estimates can be made. The process for estimating the~~were measured at estimated fair values on August 25, 2021, primarily using Level 1 and Level 3 inputs. Estimates of ~~identified intangible assets, certain tangible~~fair value represent management’s best estimate and require a complex series of judgments about future events and uncertainties. Third-party valuation specialists were engaged to assist in the valuation of these assets and assumed liabilities require the use of judgment to determine the appropriate assumptions. Until the Company finalizes estimates of the fair value of assets acquired and liabilities assumed substantially all of the purchase price allocation for Stadco is provisional. Additional purchase price adjustments will be recorded during the measurement period not to exceed one year beyond the acquisition date. These adjustments may have a material impact on the Company’s results of operations and financial position.liabilities.

Included in the total consideration transferred is $113,890 related to a contingent provision in the agreements that could require payment based on the difference between the TechPrecision stock price and contract target stock price. The contingent provision allows the issuer, TechPrecision, to settle the contingency with stock or cash, or a combination of each. If after one year following the closing of the acquisition, the fair value of the consideration stock is less than the target stock price stated in each agreement, TechPrecision will issue to the holder additional shares of consideration stock or cash, or some combination of stock and cash. The target stock price stated in the agreements are guaranteed and, only the number of shares issued can vary, with the final measurement date and amount to be determined on the one-year anniversary date. Since the contract does not specify a fixed maximum number of shares to be issued on the anniversary date, should the company determine to satisfy the contingent consideration with shares, then a number of shares higher than the amount currently authorized by the company’s certificate of incorporation may be required to be issued. In any case, the maximum value of the contingent consideration will be $2,269,000, whether paid in shares of common stock or in cash, or both. The estimated liability associated with the contingent consideration was valued under a Monte Carlo simulation and had a 0 balance ~~at December 31, 2021.~~

~~Table~~ of ~~Contents~~

$96,909 on June 30, 2022. The ~~table below presents the provisional estimated~~ fair value of ~~assets acquired and liabilities assumed on~~ the ~~acquisition date~~contingent consideration was estimated using the Monte Carlo model based on the best information it has received to date in accordance with Accounting Standards Codification, or ASC, 805. Acquisition related costs totaled approximately $320,000 and are included under general and administrative expenses in our statement of operations.

The preliminary fair values are substantially complete with the exception of certain current assets and liabilities, property, plant and equipment, income taxes and goodwill. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period, but no later than one year from the date of the acquisition. The Company will reflect measurement period adjustments, if any, inclosing stock prices at the period ~~in which~~end date and expected volatility of 50.0% based on the ~~adjustments are recognized. In the third quarter~~historical volatility of fiscal 2022, the Company made measurement period adjustments to reflect the facts and circumstances in existence at the acquisition date. These adjustments included a decrease to goodwill and accrued expenses of $243,670.our common stock.

Total consideration transferred

$
10,163,164
Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable

$
1,247,015
Inventory and other current assets

5,250,781
Property, plant and equipment including right of use assets

15,074,273
Accounts payable, accrued expenses, and other current liabilities

(5,638,378)
Lease obligations

(6,701,286)
Net assets

$
9,232,405
Goodwill

930,759
Total

$
10,163,164

~~Supplemental Pro Forma Information~~

The pro forma results presented below were prepared as if the acquisition had been consummated on April 1, 2020. The pro forma results have been prepared for comparative purposes only and do not necessarily represent what the revenue or results of operations would have been had the acquisition been completed on April 1, 2020. In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved from the acquisition.

The pro forma results include adjustments for the estimated purchase accounting impact, including, but not limited to, depreciation and amortization associated with the acquired tangible and intangible assets, and an adjustment for interest expense related to the new long-term debt, the alignment of accounting policies, and the elimination of transactions between TechPrecision and Stadco. Other adjustments reflected in the pro forma results are as follows:

●

For the three and nine months ended December 31, 2020, we excluded $0.2 million and $1.2 million, respectively, from cost of goods sold, the net change in depreciation and amortization resulting from a reversal of amortization for an asset deemed to have zero fair value based on revaluation of the Stadco intangible assets upon TechPrecision Corporation’s acquisition of Stadco. This amount was partially offset by depreciation and amortization resulting from a valuation adjustment to Stadco’s property, plant and equipment of $7.1 million plus the recognition of the right-of-use asset for Stadco’s property lease in the amount of $6.6 million against the reversal of historical rent expense

●

For the nine months ended December 31, 2021, we excluded $0.7 million of management fees due to then-preferred stockholders of Stadco. For the three and nine months ended December 31, 2020, we excluded $0.3 million and $1.0 million, respectively, of management fees due to then-preferred stockholders of Stadco

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●

For the nine months ended December 31, 2021, we excluded interest expense of $0.5 million, reflecting a reduction of Stadco’s bank debt and interest rates. For the three and nine months ended December 31, 2020, we excluded interest expense of $0.4 million and $0.9 million, respectively, reflecting a reduction of Stadco’s bank debt and interest rates.

●

For the nine months ended December 31, 2021, we excluded non-recurring expense of $0.3 million related to consulting, legal, diligence and bank fees, and nominal costs incurred TechPrecision Corporation and related to the acquisition of Stadco.

Measurement Period Adjustments

The Company has completed the process of measuring the fair value of assets acquired and liabilities assumed. In the third and fourth quarters of fiscal 2022, the Company made certain measurement period adjustments to reflect the facts and circumstances in existence at the acquisition date. These measurement period adjustments are related to changes in preliminary assumptions and initial estimates that would have been recognized if all the facts and circumstances had been known at the time of acquisition. The table below presents the fair value of assets acquired and liabilities assumed on the acquisition date based on the best information it has received to date in accordance with Accounting Standards Codification (“ASC”) 805.


									Adjusted
	Reported at		ERTC		Customer		Fixed		Totals
	August 25,		refundable		claim²		Asset		August 25,
	2021		credit¹		Warrant³		Valuation⁴		2021
Total consideration transferred	$	10,163,164		—	$	46,256		—	$	10,209,420
Recognized amounts of identifiable assets acquired and liabilities assumed:		—		—		—		—		—
Accounts receivable		1,247,015		—		—		—		1,247,015
Inventory		927,188		—		—		—		927,188
Other current assets		4,323,593		1,093,661		—		—		5,417,254
Property, plant, and equipment and right of use assets		15,074,273		—		—		897,488		15,971,761
Accounts payable, accrued expenses, and other current liabilities		(5,882,048)		(164,049)		(606,415)		—		(6,652,512)
Lease obligations		(6,701,286)		—		—		—		(6,701,286)
Net assets		8,988,735		929,612		(606,415)		897,488		10,209,420
Goodwill		1,174,429		(929,612)		652,671		(897,488)		—
Total	$	10,163,164	$	—	$	46,256	$	—	$	10,209,420

All measurement period adjustments were offset against goodwill:

¹In calendar year 2021 our Stadco subsidiary filed for a refund of tax credits for $1,093,661 from the IRS under the Employee Retention Credit, or ERC program. Fees associated with the filing totaled $164,049.

²Customer claim of $471,166 accrued for additional costs incurred in connection with a certain product manufacturing project. Other adjustments to current liabilities totaled $135,249.

³Warrant issued to former shareholder in connection with the acquisition valued at $46,256.

⁴Fixed asset adjustments related to changes in preliminary valuation assumptions and estimates, including estimates of asset useful lives.

Supplemental Pro Forma Information

The pro forma results have been prepared for comparative purposes only and do not necessarily represent what the revenue or results of operations would have been had the acquisition been completed on April 1, 2021. In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved from the acquisition.

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The following table discloses the ~~actual results of Stadco since the August 25, 2021 acquisition which are included in the Company’s condensed consolidated financial statements. Also presented in the table below are~~ pro forma results for the combined entities, assuming the acquisition date had occurred on April 1, ~~2020,~~2021, for the ~~following periods:~~three months ended June 30, 2021:


	Actual Stadco		Pro Forma		Pro Forma		Pro Forma
	August 25, 2021 –		Nine months ended		Nine months ended		Three months
	December 31,		December 31,		December 31,		ended
	2021		2021		2020		June 30, 2021
Net sales	$	5,033,454	$	19,441,005	$	21,680,503	$	7,835,528
Operating loss	$	(150,362)	$	(2,793,821)	$	(1,408,893)
Loss before income taxes	$	(217,208)	$	(1,880,903)	$	(1,893,203)
Net loss			$	(1,496,049)	$	(1,955,536)
Operating income							$	61,355
Income before income taxes							$	1,190,153
Net income							$	1,162,625
EPS basic			$	(0.04)	$	(0.06)	$	0.03
EPS dilutive			$	(0.04)	$	(0.06)	$	0.03
Weighted average shares outstanding: – basic and diluted				34,212,032		34,098,994
Weighted average shares outstanding:
Basic								34,267,450
Diluted								35,822,898

The pro forma results include adjustments for the purchase accounting impact, including, but not limited to, depreciation and amortization associated with the acquired tangible assets, and an adjustment for interest expense related to the new long-term debt, the alignment of accounting policies, and the elimination of transactions between TechPrecision and Stadco.

Adjustments included in the pro forma results for the three months ended June 30, 2021, are as follows:

●

Included expense in cost of goods sold of $53,712 for depreciation and amortization from a valuation adjustment to Stadco’s property, plant and equipment and the recognition of a new right-of-use asset for Stadco’s property lease that more than offset a reversal of historical rent expense.

●

In selling, general and administrative, excluded non-recurring expense of $311,905 for consulting, legal, diligence and bank fees, and nominal costs incurred in connection with the acquisition of Stadco. Also excluded was $188,806 of management fees due to then preferred stockholders of Stadco.

●

Excluded interest expense for $160,261 resulting from the reduction in Stadco’s bank debt and applicable interest rates, partially offset by additional interest expense related to Stadco leases.

NOTE 4 - REVENUE

The Company generates revenue primarily from performance obligations completed under contracts with customers in two main market sectors: defense and precision industrial. The period over which the Company performs its obligations can be between three and thirty-six months.

Revenue is recognized over-time or at a point-in-time given the terms and conditions of the related contracts. The Company utilizes an inputs methodology based on estimated labor hours to measure performance progress. This model best depicts the transfer of control to the customer.

The Company’s contract portfolio is comprised of fixed-price contracts and provide for product type sales only. The following table presents net sales on a disaggregated basis by market and contract type:

Net Sales by market

Defense

Industrial

Totals
Three months ended December 31, 2021

$
6,362,681

$
148,644

$
6,511,325
Three months ended December 31, 2020

$
2,885,753

$
683,965

$
3,569,718
Nine months ended December 31, 2021

$
13,868,968

$
851,996

$
14,720,964
Nine months ended December 31, 2020

$
9,314,846

$
2,251,330

$
11,566,176


Net Sales by market	Defense		Industrial		Totals
Three months ended June 30, 2022	$	6,840,924	$	235,433	$	7,076,357
Three months ended June 30, 2021	$	3,103,132	$	309,097	$	3,412,229

Net Sales by contract type

Over-time

Point-in-time

Totals
Three months ended December 31, 2021

$
6,378,592

$
132,733

$
6,511,325
Three months ended December 31, 2020

$
3,141,416

$
428,302

$
3,569,718
Nine months ended December 31, 2021

$
13,259,229

$
1,461,735

$
14,720,964
Nine months ended December 31, 2020

$
9,251,284

$
2,314,892

$
11,566,176


Net Sales by contract type	Over-time		Point-in-time		Totals
Three months ended June 30, 2022	$	6,622,093	$	454,264	$	7,076,357
Three months ended June 30, 2021	$	3,122,649	$	289,580	$	3,412,229

As of December 31, 2021, the Company had $35.2 million of remaining performance obligations, of which $22.3 million were less than 50% complete. The Company expects to recognize all of its remaining performance obligations as revenue within the next thirty-six months.

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As of June 30, 2022, the Company had $45.9 million of remaining performance obligations, of which $43.6 million were less than 50% complete. The Company expects to recognize all of its remaining performance obligations as revenue within the next thirty-six months.

We are dependent each year on a small number of customers who generate a significant portion of our business, and these customers change from year to year. The following table sets forth revenues from customers who accounted for more than 10% of our net ~~sales.~~sales for the three months ended:


	��	Three months ended				Three months ended				Nine months ended				Nine months ended				June 30, 2022				June 30, 2021
Customer		December 31, 2021				December 31, 2020				December 31, 2021				December 31, 2020				Amount		Percent		Amount		Percent
A		$	967,846	15	%	$	609,114	17	%	$	3,447,511	23	%	$	1,679,814	15	%	$	1,296,387	18	%	$	1,303,772	38	%
B		$	793,910	12	%	$	530,583	15	%	$	2,454,171	17	%	$	1,871,256	16	%	$	1,763,591	25	%	$	*	*	%
C		$	937,620	14	%	$	*	*	%	$	*	*	%	$	*	*	%	$	735,758	11	%	$	938,856	28	%
D		$	926,965	14	%	$	*	*	%	$	*	*	%	$	*	*	%	$	1,071,874	15	%	$	*	*	%
E		$	913,501	14	%	$	*	*	%	$	*	*	%	$	*	*	%
F		$	*	*	%	$	398,011	11	%	$	*	*	%	$	2,106,998	18	%
G		$	*	*	%	$	550,096	15	%	$	*	*	%	$	*	*	%
H		$	*	*	%	$	682,337	19	%	$	*	*	%	$	1,631,010	14	%

*Less than 10% of total

In our condensed consolidated balance sheet, contract assets and contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. For the ~~nine~~three months ended ~~December 31, 2021,~~June 30, 2022, we recognized revenue of ~~$0.2~~approximately $0.5 million related to our contract liabilities at April 1, ~~2021. At~~2022. Contract assets consisted of the following ~~dates, contract assets were:~~at:

Progress

Contract Assets

Unbilled

payments

Total
December 31, 2021

$
14,853,999

$
(4,619,646)

$
10,234,353
March 31, 2021

$
11,392,948

$
(5,860,540)

$
5,532,408


			Progress
	Unbilled		payments		Total
June 30, 2022	$	15,185,780	$	(6,383,138)	$	8,802,642
March 31, 2022	$	14,216,187	$	(5,865,956)	$	8,350,231

NOTE 5 - INCOME TAXES

The Company accounts for income taxes under ASC 740, Income ~~Taxes.~~Taxes. The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings before taxes, adjusted for the impact of discrete quarterly items. The income tax benefit was $173,714 for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022, and the provision for income taxes was ~~$333,867 and $385,749.~~$26,580 for the three months ended June 30, 2021. The Company’s effective tax rate for the three months ended ~~December 31, 2021~~June 30, 2022 was ~~approximately 27%~~25.7%. The Company’s effective tax rate ~~for~~to the ~~nine~~three months ended ~~December 31,~~June 30, 2021, was ~~higher~~approximately 2%, due to the nontaxable PPP loan forgiveness item of $1.3 million disclosed in the condensed consolidated statement of operations.

The valuation allowance on deferred tax assets was approximately ~~$1.8~~$2.0 million at ~~December 31, 2021.~~June 30, 2022. We believe that it is more likely than not that the benefit from certain state ~~and foreign~~ net operating losses, or ~~NOL,~~NOLs, carryforwards and other deferred tax assets will not be realized. In the event future taxable income is below management’s estimates or is generated in tax jurisdictions different than projected, the Company could be required to increase the valuation allowance for deferred tax assets. This would result in an increase in the Company’s effective tax rate.

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NOTE 6 - EARNINGS PER SHARE

Basic ~~earnings per share, or~~ EPS is computed by dividing reported earnings available to stockholders by the weighted average ~~number of~~ shares outstanding. Diluted EPS also includes the effect of stock options that would be dilutive. The following table provides a reconciliation of the numerators and denominators reflected in the basic and diluted earnings per share ~~computations:~~computations for the three months ended:


									June 30,		June 30,
	Three Months ended		Three Months ended		Nine Months ended		Nine Months ended		2022		2021
Basic EPS	December 31, 2021		December 31, 2020		December 31, 2021		December 31, 2020
Net (loss) income	$	(904,680)	$	(48,172)	$	245,999	$	106,358	$	(501,165)	$	1,371,092
Weighted average shares		34,286,580		29,498,662		31,716,353		29,430,206		34,307,450		29,498,662
Net (loss) income per share	$	(0.03)	$	(0.00)	$	0.01	$	0.00	$	(0.01)	$	0.05
Diluted EPS
Net (loss) income	$	(904,680)	$	(48,172)	$	245,999	$	106,358	$	(501,165)	$	1,371,092
Dilutive effect of stock options		—		—		1,678,770		1,591,178		—		1,555,448
Weighted average shares		34,286,580		29,498,662		33,395,123		31,021,384		34,307,450		31,054,110
Net (loss) income per share	$	(0.03)	$	(0.00)	$	0.01	$	0.00	$	(0.01)	$	0.04

~~All of the restricted and common stock issued in September and October 2021 is included in the weighted average basic and diluted shares calculation.~~ All potential common stock equivalents that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three months ended ~~December 31, 2021 and 2020,~~June 30, 2022, there were ~~2,820,000~~potential anti-dilutive stock options and ~~2,814,000~~warrants of ~~potential common stock equivalents,~~2,720,000 and 100,000, respectively, none of which were included in the ~~EPS~~earnings per share calculations above.

NOTE 7 – STOCK-BASED COMPENSATION

~~Our board of directors, upon the recommendation of the compensation committee of our board of directors, approved the~~The 2016 TechPrecision Equity Incentive Plan, or the ~~2016 Plan, on November 10, 2016. Our stockholders approved the 2016 Plan at the Company’s Annual Meeting of Stockholders on December 8, 2016.~~“2016 Plan”, is designed to reflect our commitment to having best practices in both compensation and corporate governance. The 2016 Plan succeeds the 2006 Long-Term Incentive Plan, or the 2006 Plan, and applies to awards granted after the 2016 Plan’s adoption by the Company’s stockholders. The 2016 Plan was amended on February 14, 2022 to add an additional typeprovides for a share reserve of ~~award that the Company is permitted to grant to eligible participants.~~5,000,000 shares of common stock.

The 2016 Plan authorizes the award of incentive and non-qualified stock options, restricted stock awards, restricted stock units, and performance ~~awards and fully vested stock~~ awards to employees, directors, consultants, and other individuals who provide services to TechPrecision or its affiliates. The purpose of the 2016 Plan is to: (a) enable TechPrecision and its affiliated companies to recruit and retain highly qualified employees, directors and consultants; (b) provide those employees, directors and consultants with an incentive for productivity; and (c) provide those employees, directors and consultants with an opportunity to share in the growth and value of the Company. Subject to adjustment as provided in the 2016 Plan, the maximum number of shares of common stock that may be issued with respect to awards under the 2016 Plan is 5,000,000 shares (inclusive of awards issued under the 2006 Long-Term Incentive Plan, or the “2006 Plan”, that remained outstanding as of the effective date of the 2016 Plan). Shares of our common stock subject to awards that expire unexercised or are otherwise forfeited shall again be available for awards under the 2016 Plan.

OnAt June ~~16, 2020, our executive officers~~30, 2022, there were 1,350,000 shares available for grant under the 2016 Plan. The following table summarizes information about options granted during the most recently completed periods:


						Weighted
						Average
		Weighted		Aggregate		Remaining
	Number Of	Average		Intrinsic		Contractual Life
	Options	Exercise Price		Value		(in years)
Outstanding at 3/31/2021	2,719,000	$	0.372	$	2,476,300	5.62
Canceled	(49,000)
Outstanding at 3/31/2022	2,670,000	$	0.343	$	3,597,700	4.66
Outstanding at 6/30/2022	2,670,000	$	0.343	$	3,130,450	4.42
Vested or expected to vest at 6/30/2022	2,670,000	$	0.343	$	3,130,450	4.42
Exercisable and vested at 6/30/2022	2,670,000	$	0.343	$	3,130,450	4.42

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The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on the last trading day of the first quarter of fiscal 2023 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options ~~to purchase 150,000 shares~~on June 30, 2022. This amount changes based on the fair market value of the Company’s common stock.

The maximum contractual term is ten years for option grants. Other information relating to stock ~~par~~options outstanding at June 30, 2022 is as follows:


		Weighted
		Average
		Remaining	Weighted			Weighted
	Options	Contractual	Average		Options	Average
Range of Exercise Prices:	Outstanding	Term	Exercise Price		Exercisable	Exercise Price
$0.01‑$0.49	1,270,000	3.35	$	0.12	1,270,000	$	0.12
$0.50‑$0.99	1,400,000	4.90	$	0.55	1,400,000	$	0.55
Totals	2,670,000				2,670,000

Restricted Stock Awards

Our board periodically authorizes the issuance of restricted stock as service-based awards measured at fair value ~~$0.0001 per share,~~on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock. The shares of restricted stock fully vest and cease to be subject to forfeiture one year from the grant date. Each grantee is required to have been serving as a director on the vesting date and must have been continuously serving in such capacity from the grant date through the vesting date for the shares of restricted stock to vest. Prior to the vesting date, the grantee is not permitted to sell, transfer, pledge, assign or otherwise encumber the shares of restricted stock and if the grantee’s service with the Company has terminated prior to the vesting date, subject to certain exceptions, the grantee’s restricted stock is forfeited automatically.

On September 17, 2021, we granted a ~~cashless transaction, pursuant~~total of 100,000 shares of restricted stock under the 2016 Plan to ~~option awards~~the members of the board of directors. The stock-based compensation expense of $175,000 for service-based restricted stock was measured at fair value on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock.

On January 24, 2022, the board of directors, in recognition of their special efforts in completing the previously disclosed acquisition of Stadco, granted (a) an aggregate total of 20,000 shares of restricted stock under the Company’s 2016 ~~Long-Term~~Equity Incentive ~~Plan.~~Plan and (b) a cash award of $35,000, to each of Alexander Shen, the Company’s chief executive officer, and Thomas Sammons, the Company’s chief financial officer. The shares were measured at fair value at $34,000 on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock. The shares of restricted stock fully vest and cease to be subject to forfeiture on January 24, 2023, or the vesting date, one year following the grant date. Each grantee must be serving as an executive officer on the vesting date and must have been continuously serving in such capacity from the grant date through the vesting date for the shares of restricted stock to vest. Prior to the vesting date, the grantee is not permitted to sell, transfer, pledge, assign or otherwise encumber the shares of restricted stock and if the grantee’s service with the Company terminates prior to the vesting date, the grantee’s restricted stock will be forfeited automatically, subject to certain exceptions.

Total recognized compensation cost related to the restricted stock awards for the three months ended June 30, 2022 was $52,107. On June 30, 2022 there was $56,973 of unrecognized compensation cost related to the restricted stock awards.

1314

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~~At December 31, 2021, there were 1,370,000 shares available for grant under the 2016 Plan. The following table summarizes information about options granted during the most recently completed periods:~~

Weighted

Average

Weighted

Aggregate

Remaining

Number Of

Average

Intrinsic

Contractual Life


Options

Exercise Price

Value

(in years)
Outstanding at 3/31/2020

2,916,000

$
0.415

$
2,546,800

6.21
Exercised

(150,000)

0.800

Canceled

(47,000)

Outstanding at 3/31/2021

2,719,000

$
0.372

$
2,476,300

5.62
Canceled

(49,000)

Outstanding at 12/31/2021

2,670,000

$
0.343

$
4,505,500

4.90
Vested or expected to vest at 12/31/2021

2,670,000

$
0.343

$
4,505,500

4.90
Exercisable and vested at 12/31/2021

2,670,000

$
0.343

$
4,505,500

4.90

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on the last trading day of the third quarter of fiscal 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31,2021. This amount changes based on the fair market value of the Company’s common stock.

At December 31,2021, there was 0 remaining unrecognized compensation cost related to stock options. The maximum contractual term is ten years for option grants. Other information relating to stock options outstanding at December 31,2021 is as follows:

Weighted

Average

Remaining

Weighted

Weighted

Options

Contractual

Average

Options

Average
Range of Exercise Prices:

Outstanding

Term

Exercise Price

Exercisable

Exercise Price
$0.01‑$0.49

1,270,000

3.85

$
0.12

1,270,000

$
0.12
$0.50‑$0.99

1,400,000

5.39

$
0.55

1,400,000

$
0.55
Totals

2,670,000

2,670,000

~~Restricted Stock Awards~~

On September 1, 2020 we granted a total of 100,000 shares of restricted stock under the 2016 Plan to the board of directors. The stock-based compensation expense of $134,000 for service-based restricted stock was measured at fair value on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock. The shares of restricted stock fully vested and ceased to be subject to forfeiture on September 1, 2021. Each grantee was required to have been serving as a director on the vesting date and must have been continuously serving in such capacity from the grant date through the vesting date for the shares of restricted stock to vest. Prior to the vesting date, the grantee was not permitted to sell, transfer, pledge, assign or otherwise encumber the shares of restricted stock and if the grantee’s service with the Company had terminated prior to the vesting date, subject to certain exceptions, the grantee’s restricted stock was to have been forfeited automatically.

On September 17, 2021, we granted a total of 100,000 shares of restricted stock under the 2016 Plan to the board of directors. The stock-based compensation expense of $175,000 for service-based restricted stock was measured at fair value on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock.

Total recognized compensation cost related to the restricted stock awards for the three and nine months ended December 31, 2021 was $44,109 and $106,176, respectively. At December 31, 2021 there was $124,658 of unrecognized compensation cost related only to the September 17, 2021 stock award.

~~Table of Contents~~

~~Warrants~~

On August 25, 2021, we issued warrants to purchase 100,000 shares of our common stock in connection with the Stadco acquisition. The warrants vested in full on the issue date, have a three year term and exercise price of $1.43 per share. The fair value of the warrants was $46,256 and estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the grant. Expected volatility of 46.7% was based on the historical volatility of our common stock. The risk-free interest rate of 0.4% was selected based upon yields of three-year U.S. Treasury bond.

~~Nonemployee Stock Based Payment~~

On October 5, 2021, the Company issued 20,000 shares of common stock to a third-party consultant as payment of a finder’s fee in connection with the acquisition of Stadco. The estimated fair value of the award is $35,000 and was measured on the date of grant based on the number of shares issued and the quoted market price of the Company’s common stock.

NOTE 8 - CONCENTRATION OF CREDIT RISK

We maintain bank account balances, which, at times, may exceed insured limits. We have not experienced any losses with these accounts and believe that we are not exposed to any significant credit risk on cash.

~~At December 31, 2021,~~On June 30, 2022, there were trade accounts receivable balances outstanding from 4three customers comprising ~~76%~~67% of the total trade receivables balance. The following table sets forth information as to trade accounts receivable from customers who accounted for more than 10% of our accounts receivable balance as of:


	December 31, 2021				March 31, 2021				June 30, 2022				March 31, 2022
Customer	Amount		Percent		Amount		Percent		Dollars		Percent		Dollars		Percent
A	$	809,448	33	%	$	*	*	%	$	875,027	35	%	$	1,079,264	36	%
B	$	559,214	23	%	$	*	*	%	$	*	*	%	$	436,051	14	%
C	$	*	*	%	$	399,692	66	%	$	521,107	21	%	$	*	*	%
D	$	*	*	%	$	193,368	32	%	$	265,937	11	%	$	382,789	13	%
E									$	*	*	%	$	309,500	10	%

*less than 10% of total

NOTE 9 - OTHER CURRENT ASSETS


	December 31, 2021		March 31, 2021
Supplier advances	$	18,283	$	17,010
Other current assets included the following as of:					June 30, 2022		March 31, 2022
Prepaid taxes					$	4,222	$	26,497
ERC refundable credits						347,208		1,093,661
Prepaid insurance		322,896		312,669		148,878		184,275
Prepaid subscriptions		50,260		25,967		132,113		66,098
Payments advanced to suppliers						21,100		21,100
Employee advances		5,798		16,526		12,517		9,668
Deposits		21,100		—
Prepaid taxes		43,866		—
Other		5,255		7,265
Prepaid advisory fees, other						62,027		20,160
Total	$	467,458	$	379,437	$	728,065	$	1,421,459

NOTE 10 - PROPERTY, PLANT AND EQUIPMENT, NET


	December 31, 2021		March 31, 2021
Property, plant and equipment, net consisted of the following as of:					June 30, 2022		March 31, 2022
Land	$	110,113	$	110,113	$	110,113	$	110,113
Building and improvements		3,289,901		3,249,577		3,289,901		3,289,901
Machinery equipment		18,477,075		10,113,670
Furniture, fixtures, auto equipment		983,115		627,571
Total property, plant and equipment		22,860,204		14,100,931
Machinery equipment, furniture, and fixtures						20,934,635		20,860,152
Construction in progress						129,498		—
Total property, plant, and equipment						24,464,147		24,260,166
Less: accumulated depreciation		(10,788,674)		(10,037,722)		(11,527,991)		(11,107,001)
Total property, plant and equipment, net	$	12,071,530	$	4,063,209	$	12,936,156	$	13,153,165

~~Table of Contents~~

NOTE 11 - ACCRUED EXPENSES


	December 31, 2021		March 31, 2021
Accrued expenses included the following as of:					June 30, 2022		March 31, 2022
Accrued compensation	$	942,304	$	496,320	$	939,530	$	947,938
Provision for claims settlement		—		495,000
Provision for claims						935,382		935,382
Provision for contract losses		392,016		164,164		358,674		340,272
Accrued professional fees		300,561		213,213		316,758		513,379
Accrued project costs		609,111		114,611		576,175		487,869
Contingent consideration						96,909		63,436
Other		289,763		42,962		234,857		147,590
Total	$	2,533,755	$	1,526,270	$	3,458,285	$	3,435,866

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Accrued compensation includes amounts for executive bonuses, payroll and vacation and holiday pay. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in the provision are recorded in cost of sales. Accrued project costs are estimates for certain project expenses during the reporting period.

A customer of our Stadco subsidiary has provided a notice for collection of additional costs incurred in connection with a certain product manufacturing project. Stadco has booked a contingent loss for approximately $0.8 million which is included on the provision for claims line in the above table.

NOTE 12 – DEBT


	December 31, 2021		March 31, 2021
Stadco Term Loan at 3.79% interest, due August 2028	$	3,833,013	$	—
Ranor Term Loan at 5.21% interest, due March 2022		2,389,885		2,466,408
Revolver loan		1,978,221		—
SBA PPP loan at 1% interest, due May 2022		—		1,317,100
Finance lease liability		—		45,663
Long-term debt included the following as of:					June 30, 2022		March 31, 2022
Stadco Term Loan, at 3.79% interest, due August 2028					$	3,578,102	$	3,705,792
Ranor Term Loan, at 5.21% interest, due September 2022						2,336,691		2,363,126
Ranor Revolver Loan, at 2.75% interest, due December 2022						300,000		1,287,002
Total debt	$	8,201,119	$	3,829,171	$	6,214,793	$	7,355,920
Less: debt issue costs unamortized	$	108,195	$	12,270	$	140,774	$	147,905
Total debt, net	$	8,092,924	$	3,816,901	$	6,074,019	$	7,208,015
Less: Current portion of long-term debt	$	4,882,456	$	2,474,963	$	3,083,956	$	4,093,079
Total long-term debt, net	$	3,210,468	$	1,341,938	$	2,990,063	$	3,114,936

~~Amended and Restated Berkshire Loan Agreement~~

On August 25, 2021, the Company entered into an amended and restated loan agreement with Berkshire Bank, or the Loan Agreement. Under the Loan Agreement, Berkshire Bank will continue to provide the Ranor Term Loan (as defined below) and the revolving line of credit, or the Revolver Loan. In addition Berkshire Bank provided the Stadco Term Loan (as defined below) in the original amount of $4,000,000. The proceeds of the original Ranor Term Loan of $2,850,000 were previously used to refinance existing mortgage debt of Ranor. The proceeds of the Revolver Loan are used for working capital and general corporate purposes of the Company. The proceeds of the Stadco Term Loan were to be used to support the acquisition of Stadco and refinance existing indebtedness of Stadco. For purposes of the discussion of the Loan Agreement, Ranor and Stadco are referred to together as the “Borrowers.”

Stadco Term Loan

On August 25, 2021, ~~the Company~~Stadco borrowed $4,000,000 from Berkshire Bank, or the ~~Stadco~~“Stadco Term ~~Loan.~~Loan”. Interest on the Stadco Term Loan is due on unpaid balances beginning on August 25, 2021 at a fixed rate per annum equal to the ~~7 year~~seven-year Federal Home Loan Bank of Boston Classic Advance Rate plus 2.25%. Since September 25, 2021 and on the 25th day of each month thereafter, Stadco ~~shall~~had made and will make monthly payments of principal and interest in the amount of $54,390 each, with all outstanding principal and accrued interest due and payable on August 25, 2028. Interest shall be calculated based on ~~the basis of~~ actual days elapsed and a 360-day year.

The Company ~~shall~~is required to pay a late charge in the amount of 5% of each payment due under the Stadco Term Loan (other than the balloon payment due at maturity) ~~which~~that is more than ten days in arrears. In addition, from and after the date on which the Stadco Term Loan becomes, or at Berkshire Bank’s option, could become due and payable (whether accelerated or not), at maturity, upon default or otherwise, interest shall accrue and shall be immediately due and payable at the default rate equal to 5% per annum greater than the interest rate otherwise in effect, but in no event higher than the maximum interest rate permitted by law.

16Unamortized debt issue costs at June 30, 2022 and March 31, 2022 were $63,753 and $71,617, respectively.

~~Table of Contents~~

Ranor Term Loan

~~A term loan~~The Ranor Term Loan was made to Ranor by Berkshire Bank in 2016 in the amount of ~~$2,850,000, or the Ranor Term Loan.~~$2.85 million. Payments began on January 20, 2017 and ~~are~~were made in 60 monthly installments of $19,260 each, inclusive of interest at a fixed rate of 5.21% per annum, with all outstanding principal and accrued interest due and payable on the maturity date. ~~A balloon principal payment of approximately $2,400,000 was due on December 20, 2021 under the Term Loan.~~

On December 17, 2021, Ranor and certain affiliates of the Company entered into a ~~first amendment~~First Amendment to the ~~amended~~Amended and ~~restated loan agreement~~Restated Loan Agreement and First Amendment to Promissory Note to extend the maturity date of the Ranor Term Loan from December 20, 2021 to March 18, 2022.

On March 18, 2022, Ranor and certain affiliates of the Company entered into a Second Amendment to ~~provide additional time~~Amended and Restated Loan Agreement and Second Amendment to ~~finalize the terms for refinancing and allow for completion of Berkshire Bank’s due diligence.~~

~~A prepayment penalty will apply during the loan term but will not apply if a prepayment is made from either casualty loss insurance proceeds or a condemnation award applicable~~Promissory Note to ~~any collateral or if a full prepayment is made during the 45-day period immediately preceding~~further extend the maturity ~~date.~~date of the Ranor Term Loan to June 16, 2022.

~~Revolver~~On June 16, 2022, Ranor and certain affiliates of the Company entered into a Third Amendment to the Amended and Restated Loan Agreement and Third Amendment to the Promissory Note to further extend the maturity date of the Ranor Term Loan to September 16, 2022.

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A balloon principal payment of approximately $2.4 million, originally due on December 20, 2021, is now due on September 16, 2022, under the Term Loan.

In accordance with the amended loan agreement, the maximum amount that can now be borrowed under the Revolver loan is ~~$5,000,000.~~$5.0 million. Advances under the Revolver Loan are subject to a borrowing base equal to the lesser of (a) ~~$5,000,000~~$5.0 million or (b) the sum of (i)80% of the net outstanding amount of Base Accounts, plus (ii) the lesser of (x) 25% of Eligible Raw Material Inventory, and (y) $250,000, plus (iii) 80% of the Appraised Value of the Eligible Equipment, as such terms are defined in the ~~Loan Agreement.~~amended and restated loan agreement among the Company, certain subsidiaries of the Company, and Berkshire Bank, dated August 25, 2021 (the “Loan Agreement”).

The Company agrees to pay to Berkshire Bank, as consideration for Berkshire Bank’s agreement to make the Revolver Loan available, a nonrefundable Revolver Loan fee equal to 0.25% per annum (computed based on ~~the basis of~~ a year of 360 days and actual days elapsed) on the difference between the amount of: (a) ~~$5,000,000,~~$5.0 million, and (b) the average daily outstanding balance of the Revolver Loan during the quarterly period then ended. All Revolver Loan fees are payable quarterly in arrears on the first day of each January, April, July and October and on the Revolver Maturity Date, or upon acceleration of the Revolver Loan, if earlier.

Under the promissory note for the Revolver Loan, the Company can elect to pay interest at an adjusted LIBOR-based rate or an Adjusted Prime Rate. The minimum adjusted LIBOR-based rate is 2.75% and the Adjusted Prime Rate is the greater of (i) the Prime Rate minus 70 basis points or (ii) 2.75%. Interest-only payments on advances made under the Revolver Loan will continue to be payable monthly in arrears. The maturity date of the Revolver Loan is December 20, 2022. This agreement contains customary LIBOR replacement provisions.

There was ~~$1,978,221~~approximately $0.3 million outstanding under the Revolver Loan at ~~December 31, 2021.~~June 30, 2022. Interest payments made under the Revolver Loan were ~~$10,602~~$1,961 for the ~~nine~~three months ended ~~December~~June 30, 2022. The weighted average interest rate at June 30, 2022 and March 31, ~~2021.~~2022 was 2.75% and 2.67%, respectively. Unused borrowing capacity at ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021~~2022 was approximately ~~$2.1~~$3.9 million and ~~$2.7~~$2.8 million, respectively.

Unamortized debt issue costs at March 31, 2022 and 2021 were $77,021 and $76,288, respectively.

Berkshire Loan Covenants

For purposes of this discussion, Ranor and Stadco are referred to together as the “Borrowers”. The Ranor Term Loan, the Stadco Term Loan and the Revolver Loan, or together, the ~~Berkshire Loans,~~“Berkshire Loans”, may be accelerated upon the occurrence of an event of default as defined in the Berkshire Loan Agreement. Upon the occurrence and during the continuance of any of certain default events, at the option of Berkshire Bank, or automatically without notice or any other action upon the occurrence of any event specified in the loan agreement, the unpaid principal amount of the Loans and the Notes together with accrued interest and all other obligations owing by the Borrowers to Berkshire Bank would become immediately due and payable without presentment, demand, protest, or further notice of any kind.

~~Pursuant to the Berkshire Loan Agreement, the Company agrees~~The Borrowers agree to maintain athe ratio of the Cash Flow ~~(as defined below)~~ of ~~the Company~~TechPrecision to the Total Debt Service ~~(as defined below)~~ of ~~the Company~~TechPrecision of not less than 1.20 to 1.00, measured quarterly on the last day of each fiscal ~~quarter-annual~~quarter or-annual period of ~~the Company~~TechPrecision on a trailing twelve (12) month basis, commencing with the fiscal quarter ending as of ~~December 31,~~September 30, 2021. Calculations will be based on the audited (year-end) and unaudited (quarterly) consolidated financial statements of ~~the Company.~~TechPrecision. Quarterly tests will be measured based on the financial statements included in the Company’s quarterly reports on Form 10-Q ~~reports~~ within ~~ninety (90)~~sixty days of the end of each quarter, and annual tests will be measured based on the financial statements included in the Company’s annual reports on Form 10-K ~~reports~~ within one hundred twenty days ~~(120)~~ after the end of each fiscal annual period. Cash Flow means an amount, without duplication, equal to the sum of net income of ~~the Company~~ TechPrecision plus (i) interest expense, plus (ii) taxes, plus (iii) depreciation and amortization, plus (iv) stock-based compensation expense taken by ~~the Company,~~ TechPrecision, plus (v) non-cash losses and charges and ~~one-time~~one time or non-recurring expenses at Berkshire Bank’s discretion, less (vi) the amount of cash distributions, if any, made to ~~stockholders~~shareholders or owners of ~~the Company,~~TechPrecision, less (vii) cash taxes paid by the ~~Company,~~TechPrecision, all as determined in accordance with U.S. GAAP. Total Debt Service shall mean an amount, without duplication, equal to the sum of (i) all amounts of cash interest paid on liabilities, obligations and reserves of ~~the Company~~TechPrecision paid by ~~the Company,~~TechPrecision, (ii) all amounts paid by ~~the Company~~TechPrecision in connection with current maturities of long-term debt and preferred dividends, and (iii) all payments on account of capitalized leases, all as determined in accordance with U.S. GAAP.

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The ~~Company agrees~~Borrowers agree to cause ~~its~~their Balance Sheet Leverage to be less than or equal 2.50 to 1.00. Compliance with the foregoing shall be tested quarterly, as of the last day of each fiscal quarter of the ~~Company,~~Borrowers, commencing with the fiscal quarter ending September 30, 2021. Balance Sheet Leverage means, at any date of determination, the ratio of Borrowers’ (a) Total Liabilities, less Subordinated Debt, to (b) Net Worth, plus Subordinated Debt.

The Borrowers agree that their combined annual capital expenditures shall not exceed $1.5 million. Compliance shall be tested annually, commencing with the fiscal year ending March 31, 2022. The Company was in compliance with all of the financial covenants at March 31, 2022.

The Borrowers agree to maintain a ~~Loan to Value~~Loan-to-Value Ratio of not greater than 0.75 to 1.00. ~~Loan to Value~~Loan-to-Value Ratio means the ratio of (a) the sum of the outstanding balance of the Ranor Term Loan and the Stadco Term Loan, to (b) the fair market value of the ~~Company’s owned real~~ property ~~at Westminster MA,~~pledged as collateral for the loan, as determined by an appraisal obtained from time to time by Berkshire Bank, but not more frequently than one time during each 365 day period (provided that Berkshire Bank may obtain an appraisal at any time after either the Ranor Term Loan or the Stadco Term Loan has been accelerated), which appraisals shall be at the expense of the Borrowers.

~~The Borrowers agree that their combined annual capital expenditures shall not exceed $1,500,000. Compliance shall be tested annually, commencing with~~At June 30, 2022, the ~~fiscal year ending March 31, 2022.~~

~~The~~ Company was not in compliance with all of these financial covenants. Berkshire Bank waived the Company’s noncompliance with certain of the financial and related covenants at ~~December 31, 2021 and March 31, 2021.~~

~~Unamortized debt issue costs at December 31, 2021 and March 31, 2021 were $108,195 and $26,272, respectively.~~June 30, 2022. The bank retains the right to act on covenant violations that occur after the date of delivery of the waiver. If the lender had demanded repayment, the Company would have been unable to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations.

Collateral securing all the above obligations comprises all personal and real property of the Company, including cash, accounts receivable, inventories, equipment, and financial ~~assets.The carrying value of short and long-term borrowings approximates their fair value.~~assets. The Company’s short-term and long-term debt is all privately held with no public market for this debt and is considered to be Level 3 under the fair value hierarchy.

~~Small Business Administration Loan~~

On May 8, 2020, the Company, through its wholly owned subsidiary Ranor, issued a promissory note, or the PPP Note, evidencing an unsecured loan in the amount of $1,317,100 made to Ranor under the Paycheck Protection Program, or the PPP. The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, and is administered by the U.S. Small Business Administration, or the SBA. The loan to Ranor was made through Berkshire Bank.

Principal and accrued interest were set to be payable monthly in equal installments commencing in September 2021 and continuing through the maturity date, unless the PPP Note was forgiven as described below.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs, certain group health care benefits and insurance premiums, and any payments of mortgage interest, rent, and utilities.

On June 5, 2020, the PPP was amended to give borrowers more time to spend loan proceeds and still obtain loan forgiveness. The amendments extended the length of the covered period as defined in the CARES Act from eight to twenty-four weeks, while allowing borrowers that received PPP loans before June 5, 2020 to elect to use the original eight-week covered period.

The Company applied for loan forgiveness with the SBA under the Paycheck Protection Program on March 26, 2021. On May 12, 2021, as authorized by Section 1106 of the CARES Act, the SBA remitted to Berkshire Bank, the lender of record, a payment of principal and interest in the amount of $1,317,100 and $13,207, respectively, for forgiveness of the Company’s PPP loan. The funds credited to the bank paid this loan off in full. Loan forgiveness is recorded as a gain under other income and expense in the condensed consolidated statement of operations.

NOTE 13 - OTHER NONCURRENT LIABILITY

The Company purchased new equipment in fiscal 2022 for contract project work with a certain customer. Under an addendum to the contract purchase orders, that customer agreed to reimburse the Company for the cost of the new equipment. We received the first payment in January 2022 and two additional payments April 2022. In case of a contract breach, at the time of the breach, the customer may claw back the funds based on a prorated ten-year straight-line annual declining balance recovery period. Customer payments received of $1.3 million and $0.3 million are recorded as a noncurrent liability in the condensed consolidated balance sheet at June 30, 2022 and March 31, 2022, respectively.

NOTE 14 – LEASES

~~After we settled certain default amounts,~~ Stadco became party to an amended building and property operating lease and recorded a right of use asset and liability of $6.6 million. Monthly base rent for the property is $78,233 per month, with a 20% discount through November 30, 2022. The term of the lease will expire on June 30, ~~2030.~~2030, and the lessee has no right of renewal beyond the expiration date. The lease contains customary default provisions allowing the Landlord to terminate the lease if the lessee fails to remedy a breach of its obligations under the lease within the ~~time~~ period specified in the lease, or upon certain events of bankruptcy or seizure or attachment of the lessee’s assets or interest in the lease. The lease also contains other customary provisions for real property leases of this type.

The following table lists our right-of-use assets and liabilities on our condensed consolidated balance sheets at:


	June 30, 2022		March 31, 2022
Finance lease:
Right of use asset – operating lease	$	6,649,744	$	6,649,744
Right of use asset – finance leases		125,032		125,032
Amortization		(555,531)		(391,161)
Right of use asset, net	$	6,219,245	$	6,383,615
Lease liability – operating lease	$	6,251,853	$	6,374,691
Lease liability – finance leases		56,048		72,908
Total lease liability	$	6,307,901	$	6,447,599

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in the lease, or upon certain events of bankruptcy or seizure or attachment of the lessee’s assets or interest in the lease. The lease also contains other customary provisions for real property leases of this type.

In December 2019, we signed a one-year operating lease for office space which expired in December 2020 and was amortized on a straight line basis. We leased the office month-to-month until December 31, 2021, and have not renewed the lease.

~~The following table lists our right-of-use assets and lease liabilities in our condensed consolidated balance sheet at:~~

December 31, 2021

March 31, 2021
Right of use asset – operating lease

$
6,655,724

$
—
Right of use asset – finance leases

98,704

45,663
Amortization

(227,566)

—
Right of use asset, net

$
6,526,862

$
45,663
Lease liability – operating lease

$
6,475,889

$
—
Lease liability – finance leases

$
90,629

$
45,663
Total lease liability

$
6,566,518

$
45,663

Other supplemental information regarding our leases are contained in the following tables:


Components of lease expense for the nine months ended:	December 31, 2021		December 31, 2020
Components of lease expense for the three months ended:					June 30, 2022		June 30, 2021
Operating lease amortization	$	206,432	$	2,878	$	158,071	$	1,234
Finance lease amortization	$	21,134	$	8,156	$	6,300	$	2,283
Finance lease interest	$	2,415	$	1,102	$	544	$	362

Weighted average lease term and discount rate at:

December 31, 2021

December 31, 2020

Lease term (years) – operating lease

8.50

—

Lease term (years) – finance leases

2.85

1.25

Lease rate – operating lease

4.5
%
—

Lease rate – finance leases

3.9
%
8.0
%


Weighted average lease term and discount rate at:	June 30, 2022		June 30, 2021
Lease term (years) – finance	2.70		5.00
Lease term (years) – operating	8.00		—
Lease rate - finance	3.7	%	3.2	%
Lease rate - operating	4.5	%	—


Supplemental cash flow information related to leases for the nine months ended:	December 31, 2021		December 31, 2020
Supplemental cash flow information related to leases for the three months ended:					June 30, 2022		June 30, 2021
Cash used in operating activities	$	181,525	$	2,878	$	193,393	$	1,596
Cash used in financing activities	$	493,015	$	8,798	$	16,860	$	2,113

Maturities of lease liabilities ~~at December 31, 2021~~as of June 30 for each of the next five years and thereafter:


2022	$	816,665
2023		965,843	$	911,059
2024		957,060		952,881
2025		951,171		948,701
2026		941,276		946,226
2027				938,801
Thereafter		3,224,985		2,738,171
Total lease payments	$	7,857,000	$	7,435,839
Less: imputed interest		1,290,482		1,127,938
Total	$	6,566,518	$	6,307,901

NOTE ~~14 -~~15 – COMMITMENTS AND CONTINGENCIES

Employment Agreements

We have employment agreements with each of our executive officers. Such agreements provide for minimum salary levels, ~~adjusted~~adjustable annually, and incentive bonuses that are payable if specified company goals are attained. The aggregate commitment at ~~December 31,~~

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~~2021~~June 30, 2022 for future executive salaries and bonus was approximately ~~$1.2~~$0.6 million. The aggregate commitment at ~~December~~June 30, ~~2021~~2022 for accrued payroll, vacation and holiday pay was approximately $0.8 million for the remainder of our employees.

Retirement Benefits

Ranor has a defined contribution and savings plan that covers substantially all Ranor employees who have completed 90 days of service. Ranor retains the option to match employee contributions. The Company contributed ~~$22,063~~$22,123 and ~~$65,303~~$21,388 for the three ~~and nine~~ months ended ~~December 31, 2021.~~June 30, 2022 and 2021, respectively.

NOTE 16 – SEGMENT INFORMATION

The Company has two wholly-owned subsidiaries, Ranor and Stadco that are reportable segments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. All of the Company’s operations, assets, and customers are located in the U.S.

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Each reportable segment focuses on the manufacture and assembly of specific components, primarily for defense, aerospace and other industrial customers. However, both segments have separate operating, engineering, and sales teams. The Chief Operating Decision Maker, or CODM, evaluates the performance of our segments based upon, among other things, segment net sales and operating profit. Segment operating profit excludes general corporate costs. Corporate costs include executive and director compensation, stock-based compensation, and other corporate and administrative expenses not allocated to the segments. The segment operating profit metric is what the CODM uses in evaluating our results of operations and the financial measure that provides insight into our overall performance and financial position.


The following table provides summarized financial information for our segments:	June 30, 2022		June 30, 2021
Ranor	$	4,725,931	$	3,412,229
Stadco		2,350,426		—
Net sales from external customers	$	7,076,357	$	3,412,229
Ranor operating income		1,352,662		427,466
Stadco operating loss		(1,458,791)		—
Corporate and unallocated (1)		(451,880)		(327,406)
Total operating (loss) income	$	(558,009)	$	100,060
Interest expense and other expense		(116,870)		(19,488)
PPP loan forgiveness		—		1,317,100
Consolidated (loss) income before income taxes	$	(674,879)	$	1,397,672
Depreciation and amortization
Ranor		131,600		182,678
Stadco		453,761		—
Totals	$	585,361	$	182,678
Capital expenditures
Ranor		62,233		4,198
Stadco		141,748		—
Totals	$	203,981	$	4,198

(1)Corporate general costs include executive and director compensation, and other corporate administrative expenses not allocated to the segments.

Prior period segment data is restated to reflect the new reportable segments.

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NOTE 1517 – ACCOUNTING STANDARDS UPDATE

New Accounting Standards Recently Adopted

In ~~December 2019,~~November 2021, the ~~Financial Accounting Standards Board, or~~ FASB issued ~~Accounting Standards Update, or~~ ASU No. ~~2019-12,~~2021-10, Government Assistance (Topic 832): ~~Income Taxes (Topic 740): Simplifying~~Disclosures by Business Entities About Government Assistance. The amendments in this update require the ~~Accounting~~following annual disclosures about transactions with a government that are accounted for ~~Income Taxes, expected~~by applying a grant or contribution accounting model by analogy: 1) information about the nature of the transactions and the related accounting policy used to ~~reduce cost and complexity related to~~account for the ~~accounting for income taxes. This ASU removes specific exceptions to~~transactions, 2) the ~~general principles in Topic 740 under U.S. GAAP and removes the limitation~~line items on the ~~tax benefit recognized on pre-tax losses in interim periods. This guidance is effective for fiscal years,~~balance sheet and ~~interim periods within those years, beginning after December 15, 2020.~~income statement that are affected by the transactions, and the amounts applicable to each financial statement line item, 3) significant terms and conditions of the transactions, including commitments and contingencies. The ~~Company adopted~~adoption of this ASU ~~2019-12~~ on April 1, ~~2021 and the amendments in this update~~2022 did not have a significant impact on ~~our~~the Company’s financial statements and disclosures.

~~Issued Standards Not Yet Adopted~~

~~In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805),~~ ~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within these fiscal years. The Company is currently evaluating the impact that this new guidance may have on our financial statements and disclosures.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.The FASB issued this update to clarify and reduce diversity in issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The ~~Company is currently evaluating the~~adoption of these amendments on April 1, 2022 did not have a material impact ~~that this new guidance may have~~ on our financial statements and disclosures.

~~NOTE 16 – SUBSEQUENT EVENT~~

~~On January 24, 2022, or the Grant Date, the board of directors of TechPrecision, in recognition of their special efforts in completing the previously disclosed acquisition of Stadco, granted (a)~~ ~~10,000~~ shares of restricted stock under the Company’s 2016 Equity Incentive Plan and (b) a cash award of $35,000, to each of Alexander Shen, the Company’s chief executive officer, and Thomas Sammons, the Company’s chief financial officer. The shares of restricted stock fully vest and cease to be subject to forfeiture on January 24, 2023, or the vesting date, one year following the Grant Date. Each grantee must be serving as an executive officer on the Vesting Date and must have been continuously serving in such capacity from the Grant Date through the Vesting Date for the shares of restricted stock to vest. Prior to the Vesting Date, the grantee is not permitted to sell, transfer, pledge, assign or otherwise encumber the shares of restricted stock and if the grantee’s service with the Company terminates prior to the Vesting Date, the grantee’s restricted stock will be forfeited automatically, subject to certain exceptions.

On February 14, 2022, the Company’s board of directors approved an amendment, or the Plan Amendment, to the 2016 Plan. The Plan Amendment, which became effective upon its signature by an executive officer, amends the 2016 Plan to permit the Company to grant shares of fully vested common stock as a stock bonus award to eligible participants. Prior to the Plan Amendment, the 2016 Plan only permitted the board of directors to grant stock options, restricted stock, restricted stock units and performance-based awards. The

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committee designated to administer the 2016 Plan, or in the absence of such a committee, the full board of directors, will determine the number of shares, the restrictions, if any, and any other terms in connection with a stock bonus award. The recipient of a stock bonus award shall not have any rights as a stockholder of the Company with respect to the shares subject to such stock bonus award until the shares are actually issued thereunder. Stock bonus awards may be paid in the form of cash, whole shares of common stock or a combination thereof.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statement Regarding Forward Looking Disclosure

The following discussion of ~~the~~our financial condition and results of ~~our~~ operations ~~and financial condition~~ should be read in conjunction with our ~~condensed~~audited consolidated financial statements and the related notes, which appear elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including this section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may contain predictive or “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of current or historical fact contained in this quarterly report, including statements that express our intentions, plans, objectives, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events, or conditions are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “should,” “would” and similar expressions, as they relate to us, are intended to identify forward-looking statements.

These forward-looking statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, the forward-looking statements due to numerous risks and uncertainties. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from:

●

our reliance on individual purchase orders, rather than long-term contracts, to generate revenue;

●

our ability to balance the composition of our revenues and effectively control operating expenses;

●

external factors, including the COVID-19 pandemic, Russia’s invasion of Ukraine, high inflation and increasing interest rates, that may be outside of our control;

●

the impacts of the COVID-19 pandemic and government-imposed lockdowns in response thereto;

●

the availability of appropriate financing facilities impacting our operations, financial condition and/or liquidity;

●

our ability to receive contract awards through competitive bidding processes;

●

our ability to maintain standards to enable us to manufacture products to exacting specifications;

●

our ability to enter new markets for our services;

●

our reliance on a small number of customers for a significant percentage of our business;

●

competitive pressures in the markets we serve;

●

changes in the availability or cost of raw materials and energy for our production facilities;

●

restrictions in our ability to operate our business due to our outstanding indebtedness;

●

government regulations and requirements;

●

pricing and business development difficulties;

●

changes in government spending on national defense;

●

our ability to make acquisitions and successfully integrate those acquisitions with our business;

●

our failure to maintain effective internal controls over financial reporting;

●

general industry and market conditions and growth rates;

●

~~our potential failure to successfully integrate and realize the expected benefits of the Stadco acquisition;~~

●

unexpected costs, charges or expenses resulting from the recently completed acquisition ~~and integration~~ of Stadco; and

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●

those risks discussed in ~~“Item~~“Item 1A. Risk ~~Factors”~~Factors” and elsewhere in our Annual Report on Form 10-K, as well as those described in any other filings which we make with the SEC.

Any forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this Quarterly Report on Form 10-Q, except as required by applicable law. Investors should evaluate any statements made by us in light of these important factors.

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Overview

Contract Manufacturing

Through our two wholly-owned subsidiaries, Ranor and Stadco ~~subsidiaries,~~(acquired on August 25, 2021), each of which is a reportable segment, we offer a full range of services required to transform raw materials into precision finished products. Our manufacturing capabilities ~~include:~~include fabrication operations (cutting, press and roll forming, assembly, welding, heat treating, blasting, and painting) and machining operations including CNC (computer numerical controlled) horizontal and vertical milling centers. We also provide support services to our manufacturing capabilities: manufacturing engineering (planning, fixture and tooling development, manufacturing), quality control (inspection and testing), materials procurement, production control (scheduling, project management and expediting) and final assembly.

All manufacturing is done in accordance with our written quality assurance program, which meets specific national and international codes, standards, and specifications. The standards used are specific to the customers’ needs, and our manufacturing operations are conducted in accordance with these standards.

Because our revenues are derived from the sale of goods manufactured pursuant to contracts, and we do not sell from inventory, it is necessary for us to constantly seek new contracts. There may be a time lag between our completion of one contract and commencement of work on another contract. During such periods, we may continue to incur overhead expense but with lower revenue resulting in lower operating margins. Furthermore, changes in either the scope of an existing contract or related delivery schedules may impact the revenue we receive under the contract and the allocation of manpower. Although we provide manufacturing services for large governmental programs, we usually do not work directly for the government or its agencies. Rather, we perform our services for large governmental contractors. Our business is dependent in part on the continuation of governmental programs that require our services and products.

Our contracts are generated both through negotiation with the customer and from bids made pursuant to a request for proposal. Our ability to receive contract awards is dependent upon the contracting party’s perception of such factors as our ability to perform on time, our history of performance, including quality, our financial condition and our ability to price our services competitively. Although some of our contracts contemplate the manufacture of one or a limited number of units, we continue to seek more long-term projects with predictable cost structures.

~~On August 25, 2021,~~All the Company’s operations, assets, and customers are located in the U.S.

Impact of COVID-19 Pandemic

At the beginning of calendar year 2020, the novel strain of coronavirus known as COVID-19 spread worldwide, including to U.S jurisdictions where the Company ~~completed its previously announced acquisition~~does business, and became a global pandemic. The United States Government declared a national emergency and various state governments imposed “lockdown” and “shelter-in-place” orders intended to reduce the spread of ~~Stadco,~~COVID-19 that have severely restricted business, social activities and travel. The Governors of the Commonwealth of Massachusetts and state of California, in which jurisdiction the Company’s manufacturing and executive offices are located, issued similar emergency orders in March 2020. Although the emergency order for Massachusetts has expired, the national emergency declaration was renewed on July 15, 2022 and the California emergency order remains in effect. As a ~~company in~~designated “COVID-19 Essential Service” we continued our operations throughout the ~~business~~pendency of ~~manufacturing high-precision parts, assemblies~~the orders.

Our production facilities continue to operate as they had prior to the outbreak of the COVID-19 pandemic, other than the implementation of enhanced safety measures intended to prevent the spread of the virus. The remote working arrangements and ~~tooling for aerospace, defense, research and commercial customers. We believe that the Stadco operation fits~~travel restrictions imposed by applicable governmental authorities have not impaired our ~~primary defense focus and brings a complementary customer list for our defense and industrial markets.~~

~~Financial Results~~

ability to maintain operations. Our results of operations are affected by a number of external factors including the availability of raw materials, commodity prices (particularly steel), macroeconomic factors, including the availability of capital that may be needed by our customers, and political, regulatory and legal conditions in the United States and in foreign markets. Generally, our projects are made up of contracts with a production timeline that can range from three to as much as thirty-six months. Units manufactured under the majority of our customer contracts are delivered on time and with a positive gross margin. Our results of operations for any specific period are also affected by our success in booking new contracts, the timing of revenue recognition, delays in customer acceptances of our products, delays in deliveries of ordered products and our rate of progress fulfilling obligations under our contracts. A delay in deliveries or cancellations of orders could have an unfavorable impact on liquidity, cause us to have inventories in excess of our short-term needs, and delay our ability to recognize, or prevent us from recognizing, revenue on contracts in our order backlog.

~~For~~cash flows during the three months ended ~~December 31,~~June 30, 2022, and 2021 were not materially affected by the COVID-19 pandemic.

However, given the speed and frequency of continuously evolving developments with respect to this pandemic, the extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the effectiveness of actions globally to contain or mitigate its effects, we ~~recorded net sales~~cannot reasonably estimate the magnitude of future impact on our financial condition and ~~net loss~~results of $6.5 million and $0.9 million, compared with net sales of $3.6 million and net loss of $48,172, for the three months ended December 31, 2020. For the nine months ended December 31, 2021, we recorded net sales and net income of $14.7 million and $0.2 million, compared with net sales of $11.6 million and net incomeoperations.

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of $0.1 million, for the nine months ended December 31, 2020. Our financial statements for the three and nine months ended December 31, 2021 include the results of the Stadco operation from August 26, 2021 through December 31, 2021.

On May 12, 2021, as authorized by Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, the Small Business Administration, or the SBA, remitted to Berkshire Bank, the lender of record, a payment of principal and interest in the amount of $1,317,100 and $13,207, respectively, for forgiveness of the Company’s Paycheck Protection Program loan, or PPP loan. Funds credited to the bank paid this loan off in full. Loan forgiveness is recorded as a gain in the condensed consolidated statement of operations.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We continually evaluate our estimates, including those related to ~~business combinations,~~ revenue recognition ~~inventories, recovery of long-lived assets,~~and income ~~taxes and the valuation of equity transactions.~~taxes. These estimates and assumptions require management’s most difficult, subjective or complex judgments. Actual results may vary under different assumptions or conditions.

We consider the principles and estimates applied for revenue recognition to be one of the most critical accounting estimates that we make. Our revenue can fluctuate from quarter-to-quarter as we measure revenue recognition over the duration of a project, or at the end of the project. The Company records most of its revenue over time as it completes performance obligations or at a point-in-time, for example, at the delivery date, when control of the promised goods are transferred to the customer. Project volume for revenue recognized at a point-in-time is generally smaller, can fluctuate from period to period, and is difficult to forecast.

We measure progress for performance obligations satisfied over time using input methods, for example, labor hours expended and time elapsed. As a result, assuming a steady flow of project volume and labor hours, we have the ability to deliver a fair and accurate flow of revenue over time. When project volume is higher or lower, we may report higher or lower amounts of revenue for those given quarterly periods.

Our significant accounting policies are set forth in detail in Note 2 to the consolidated financial statements included in the ~~2021~~2022 Annual Report on Form 10-K. ~~Except for the addition of our Goodwill policy, there~~There were no significant changes to our critical accounting policies during the nine months ended ~~December 31, 2021.~~June 30, 2022.

New Accounting Standards

See Note ~~15,~~17, Accounting Standards Update, in the Notes to the ~~condensed consolidated financial statements in~~Unaudited Condensed Consolidated Financial Statements under “Item 1. Financial Statements”, for a discussion of recently adopted new accounting ~~guidance.~~guidance and new accounting guidance not yet adopted.

Results of Operations

Our results of operations are affected by a number of external factors including the availability of raw materials, commodity prices (particularly steel), macroeconomic factors, including the availability of capital that may be needed by our customers, and political, regulatory and legal conditions in the United States and in foreign markets. It generally takes approximately twelve months or less to complete our manufacturing projects. However, contracts for larger complex components can take up to thirty-six months to complete. Units manufactured under the majority of our customer contracts have historically been delivered on time and with a positive gross margin, with some exceptions. Our results of operations are also affected by our success in booking new contracts, the timing of revenue recognition, delays in customer acceptances of our products, delays in deliveries of ordered products and our rate of progress fulfilling obligations under our contracts. A delay in deliveries or cancellations of orders could have an unfavorable impact on liquidity, cause us to have inventories in excess of our short-term needs, and delay our ability to recognize, or prevent us from recognizing, revenue on contracts in our order backlog.

We evaluate the performance of our segments based upon, among other things, segment net sales and operating profit. Segment operating profit excludes general corporate costs, which include executive and director compensation, stock-based compensation, certain pension and other retirement benefit costs, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that we consider not representative of ongoing operations, such as the unallocated PPP loan forgiveness.

Key Performance Indicators

While we prepare our financial statements in accordance with U.S. generally accepted accounting principles, or ~~U.S. GAAP,~~“U.S. GAAP”, we also utilize and present certain financial measures that are not based on or included in U.S. GAAP. We refer to these as ~~Non-GAAP~~non-GAAP financial measures. Please see the section titled “EBITDA Non-GAAP financial measure” below for further discussion of these financial measures, including the reasons why we use such financial measures and reconciliations of such financial measures to the most directly comparable U.S. GAAP financial measures.

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Percentages in the following tables and throughout this “Results of ~~Operations~~Operations” section may reflect rounding adjustments.

Three Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~

The following table ~~sets forth information from our condensed~~presents net sales, gross profit and gross margin, consolidated ~~statements of operations~~ and ~~comprehensive income (loss), in dollars and as a percentage of revenue:~~by reportable segment:


	Three months ended December 31,												June 30, 2022				June 30, 2021				Changes
	2021				2020				Changes						Percent of				Percent of				Percent of
(dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Net sales		Amount		Net sales		Amount		Net sales
Ranor													$	4,726	67	%	$	3,412	100	%	$	1,314	39	%
Stadco														2,350	33	%		—	—	%		2,350	nm	%
Net sales	$	6,511	100	%	$	3,569	100	%	$	2,942	82	%	$	7,076	100	%	$	3,412	100	%	$	3,664	107	%
Ranor													$	2,886	41	%	$	2,579	76	%	$	307	12	%
Stadco														3,373	48	%		—	—	%		3,373	nm	%
Cost of sales		6,033	93	%		2,864	80	%		3,169	111	%	$	6,259	89	%	$	2,579	76	%	$	3,680	143	%
Ranor													$	1,840	26	%	$	833	24	%	$	1,007	121	%
Stadco														(1,023)	(14)	%		—	—	%		(1,023)	nm	%
Gross profit		478	7	%		705	20	%		(227)	(32)	%	$	817	12	%	$	833	24	%	$	(16)	(2)	%
Selling, general and administrative		1,624	25	%		716	20	%		908	127	%
Operating loss		(1,146)	(18)	%		(11)	—	%		(1,135)	nm	%
Other expense, net		(93)	(1)	%		(50)	(1)	%		(43)	(86)	%
Loss before taxes		(1,239)	(19)	%		(61)	(2)	%		(1,178)	nm	%
Income tax (benefit) expense		(334)	(5)	%		(13)	(1)	%		(321)	nm	%
Net loss	$	(905)	(14)	%	$	(48)	(1)	%	$	(857)	nm	%

nm - not meaningful

Net Sales

Changes in net sales generally reflect a different product mix and project volume when comparing the current and prior periods. For the three months ended December 31, 2021, changes in net sales were also significantly affected by the addition of revenue from our Stadco subsidiary acquired in August 2021. Consolidated - Net sales were ~~$6.5~~$7.1 million ~~for the three months ended December 31, 2021,~~ or ~~82%~~$3.7 million higher when compared to consolidated net sales for the three months ended ~~December 31, 2020.~~June 30, 2021. Net sales in defense markets increased by $3.7 million, due primarily to the new revenue from our Stadco segment, which made up $2.2 million of the increase. Net sales to precision industrial markets decreased by less than $0.1 million.

~~Our~~Ranor - Net sales were $4.7 million for the three months ended June 30, 2022, or $1.3 million and 39% higher when compared to the same prior year period. Net sales increased year over year primarily on new orders of repeat components. Net sales to defense customers increased by $1.5 million. The defense backlog for Ranor remains strong as new orders for components related to a variety of programs continue to flow down from our existing customer base of prime defense contractors in connection with the U.S. Navy submarine programs, and new customers from our recent Stadco business acquisition. For the three months ended December 31, 2021, net sales to our defense markets increased by $3.5 million or 120% when compared to the three months ended December 31, 2020. The primary reason for the increase were new defense sales recorded for the first time with new customers from our recent Stadco business acquisition which accounted for approximately 57% of our net sales to defense industry customers during the three months ended December 31, 2021. With our recent Stadco business acquisition now complete, we anticipate reporting higher revenues in future quarters.

contractors. Net sales to precision industrial markets decreased by ~~$0.5~~$0.2 million ~~or 78%, when compared to the three months December 31, 2020,~~ due to lower project ~~activity as the Company replenishes its industrial market backlog following a period of above-normal revenue for the last three quarters of fiscal 2021.~~activity. We have repeat business in this sector, but the order flow can be uneven and difficult to forecast.

~~For the three months ended December 31, 2021, revenue recognized over time and at a point in time was $6.4 and $0.1~~Stadco - Net sales were $2.4 million ~~respectively, compared to revenue recognized over time and at a point in time of $3.1 and $0.4 million, respectively,~~ for the three months ended ~~December 31, 2020.~~June 30, 2022, with $2.2 million and $0.2 million completed for customers in the defense and precision industrial markets, respectively. Our defense backlog for Stadco is strong as new orders for components related to a variety of programs, including components for heavy lift helicopters.

~~Cost of Sales~~Gross Profit and Gross Margin

Consolidated - Cost of sales consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our cost of sales for the three months ended ~~December 31, 2021~~June 30, 2022 was ~~$6.0~~$3.7 million ~~or 111%~~ higher when compared to the three months ended ~~December 31, 2020. Gross~~June 30, 2021. The increase in cost of sales and lower gross margin was ~~7.3% for~~primarily the ~~three months ended December 31, 2021~~result of an unfavorable production mix and ~~19.8% for the three months ended December 31, 2020. Gross~~under-absorbed factory overhead at our Stadco segment. As a result, gross profit was ~~$0.5~~$0.8 million, ~~for the three months ended December 31, 2021,~~ or ~~32%~~2% lower when compared to the three months ended ~~December 31, 2020, primarily~~June 30, 2021. Gross margin was 11.6% for the ~~result~~three months ended June 30, 2022 compared to 24.4% for the three months ended June 30, 2021.

Ranor - The gross profit and gross margin significantly increased year over year with improved throughput on new orders of repeat components. This set of favorable conditions, accelerating project progress and better overhead absorption rates on higher ~~labor~~revenue recognized over-time, began to take hold in the fourth quarter of fiscal 2022. We expect this trend to continue in fiscal 2023.

Stadco - The gross margin turned negative at the end of fiscal year 2022 and ~~overhead costs.~~

~~This is~~continued through the first ~~quarterly period that includes the operations~~quarter of ~~our Stadco business~~fiscal 2023. New project startups and associated production activities resulted in unfavorable throughput and an increase in under-absorbed overhead. We expect gradual improvements in gross margin for the ~~entire quarterly period. We also recorded higher labor costs and under-absorbed factory overhead during~~remainder of fiscal 2023 as the ~~third quarter because of a lower number of available production hours~~new projects make progress to completion.

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due to calendar year-end scheduling. This led to a slower changeover from completed projects to new projects and resulted in an unfavorable production mix that depressed profit margins for the third quarter. We expect an improvement with our production mix in the final quarter of fiscal 2022.

Selling, General and Administrative (SG&A) Expenses


	June 30, 2022				June 30, 2021				Changes
			Percent of				Percent of
(dollars in thousands)	Amount		Net Sales		Amount		Net Sales		Amount		Percent
Ranor	$	487	7	%	$	405	12	%	$	82	20	%
Stadco		436	6	%		—	—	%		436	nm	%
Corporate and unallocated		452	7	%		327	10	%		125	38	%
Consolidated SG&A	$	1,375	20	%	$	732	22	%	$	643	88	%

nm – not meaningful

Consolidated - Total selling, general and administrative expenses for the three months ended ~~December 31, 2021~~June 30, 2022, increased by ~~127%~~$0.6 million, or 88%, ~~or $0.9 million.~~ as the Company completed its acquisition of Stadco and spending on outside advisory services and business travel returned to pre-pandemic levels.

Ranor – Advisory fees, travel expenses and other office costs increased by approximately $0.1 million due to a return to pre-pandemic travel and business activity.

Stadco - The increase was ~~primarily~~ due to the inclusion of Stadco operations ~~for~~which were not part of the ~~entire quarterly~~Company in the comparable prior year period. Expenses incurred during the period ~~($0.5 million)~~were slightly below monthly averages.

Corporate and ~~an increase in outside advisory~~unallocated - Advisory fees, ~~($0.3 million) in connection with the Stadco acquisition. Other~~ travel ~~expense~~expenses and other office costs ~~($0.1 million) made up the balance~~increased by approximately $0.1 million due to a return to pre-pandemic travel and business activity.

Operating (loss) income


	June 30, 2022				June 30, 2021				Changes
			Percent of				Percent of
(dollars in thousands)	Amount		net sales		Amount		net sales		Amount		Percent
Ranor	$	1,353	19	%	$	427	13	%	$	926	217	%
Stadco		(1,459)	(21)	%		—	—	%		(1,459)	nm	%
Corporate and unallocated		(452)	(6)	%		(327)	(10)	%		(125)	(38)	%
Operating (loss) income	$	(558)	(8)	%	$	100	3	%	$	(658)	(658)	%

nm – not meaningful

Consolidated - As a result of the ~~increase.~~

~~Other Expense, net~~

~~The following table reflects interest expense, amortization~~foregoing, including the integration and reduced profitability at Stadco, we reported an operating loss of ~~debt issue costs and other~~$0.6 million compared to operating income ~~net~~of $0.1 million for the three months ~~ended:~~

December 31, 2021

December 31, 2020

$ Change

% Change

Other income, net

$
1,999

$
(219)

$
2,218

nm

Interest expense

$
(78,230)

$
(36,391)

$
(41,839)

(115)
%
Amortization of debt issue costs

$
(16,491)

$
(14,014)

$
(2,477)

(18)
%

ended June 30, 2021.

~~Interest expense~~Ranor – Operating income was $0.9 million higher compared to same period prior year, due primarily to significantly improved operating throughput.

Stadco – New project startups and related production activities resulted in unfavorable throughput, and higher unabsorbed overhead that resulted in an operating loss of $1.5 million.

Corporate and unallocated - Corporate expenses were higher for the three months ended ~~December 31, 2021. The increase in interest expense for the three months ended December 31, 2021 was due~~June 30, 2022, primarily ~~to $37,520 of interest expense under the new Stadco term loan, and $9,901 of interest expense on amounts borrowed under the revolver loan. We may record higher interest expense in future periods~~ due to ~~the borrowings under our new Berkshire revolver~~a return to pre-pandemic travel and ~~term loans.~~

~~Amortization of debt issue costs for the three months ended December 31, 2021 increased due to higher debt issue costs incurred for new loans.~~

~~Income Taxes~~

~~For the three months ended December 31, 2021 we recorded a tax benefit of $333,867 compared with tax benefit of $13,369 for the three months ended December 31, 2020.~~

~~Net (Loss) Income~~

~~As a result of the foregoing, for the three months ended December 31, 2021, we recorded a net loss of $904,680 compared to a net loss of $48,172 for the three months ended December 31, 2020.~~business activity.

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~~Nine Months Ended December 31, 2021 and 2020~~Other (Expense) Income, net

The following table ~~sets forth information from our condensed consolidated statements of operations and comprehensive~~presents other (expense) income ~~in dollars and as a percentage of revenue:~~

Nine Months Ended December 31,



2021

2020

Changes

(dollars in thousands)

Amount

Percent

Amount

Percent

Amount

Percent

Net sales

$
14,721

100
%
$
11,566

100
%
$
3,155

27
%
Cost of sales

12,480

85
%

9,035

78
%

3,445

38
%
Gross profit

2,241

15
%

2,531

22
%

(290)

(11)
%
Selling, general and administrative

3,530

24
%

2,206

19
%

1,324

60
%
Operating (loss) income

(1,289)

(9)
%

325

3
%

(1,614)

(497)
%
Other expense, net

(168)

(1)
%

(159)

(1)
%

(9)

(6)
%
PPP loan forgiveness

1,317

9
%

—

—
%

1,317

nm
%
(Loss) income before taxes

(140)

(1)
%

166

2
%

306

(184)
%
Income tax (benefit) expense

(386)

(3)
%

60

1
%

(446)

(743)
%
Net income

$
246

2
%
$
106

1
%
$
140

131
%

~~nm - not meaningful~~

~~Net Sales~~

Changes in net sales generally reflect a different product mix and project volume when comparing the current and prior periods. Net sales were $14.7 million for the nine months ended December 31, 2021, or 27% higher when compared to net sales for the nine months ended December 31, 2020.

Our defense backlog remains strong as new orders for components continue to flow down from prime defense contractors in connection with the U.S. Navy submarine programs, and new customers from our recent Stadco business acquisition. For the nine months ended December 31, 2021, net sales in our defense markets increased by $4.6 million or 49% when compared to the nine months ended December 31, 2020. The primary reason for the increase were new defense sales recorded for the first time by our Stadco subsidiary since August 25, 2021 which accounted for approximately 34% of our net sales to defense industry customers during the nine months ended December 31, 2021. With our recent Stadco acquisition now complete, we anticipate higher revenues in fiscal 2022.

Net sales to industrial markets decreased by $1.4 million, or 62% when compared to the nine months ended December 31, 2020, due to lower project activity as the Company replenishes its industrial market backlog following a period of above normal revenue for the last three quarters of fiscal 2021. We have repeat business in this sector, but the order flow can be uneven and difficult to forecast.

For the nine months ended December 31, 2021, revenue recognized over time and at a point in time was $13.3 and $1.5 million, respectively, compared to revenue recognized over time and at a point in time of $9.3 and $2.3 million, respectively, for the nine months ended December 31, 2020.

Remaining performance obligations reflect future revenue that will be recorded in subsequent periods as projects in progress are completed. At December 31, 2021, the Company had $35.2 million of remaining performance obligations, of which $22.3 million were less than 50% complete. The Company expects to recognize all of its remaining performance obligations as revenue within the next thirty-six months.

~~Cost of Sales and Gross Margin~~

Cost of sales consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our manufacturing operations continued to run normally during the period, albeit with higher cost of sales which dampened gross margin for the first nine months of fiscal 2022, as we brought our new Stadco operation on-line in the month of September.

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Our cost of sales for the nine months ended December 31, 2021 was $12.5 million, higher by 38% when compared to the nine months ended December 31, 2020, primarily the result of higher labor and overhead costs which more than offset lower material costs. Gross margin was 15.2% for the nine months ended December 31, 2021 and 21.9% for the nine months ended December 31, 2020. Gross profit for the nine month periods ended December 31, 2021 and 2020 was $2.2 million and $2.5 million, respectively.

We have experienced a period of slowly rising labor costs and under absorbed overhead since the first month of the fiscal year which was amplified by an unfavorable production mix as discussed in our third quarter results. This set of conditions has put pressure on our gross margins. We expect an improvement with our production mix in the final quarter of fiscal 2022.

~~Selling, General and Administrative Expenses~~

~~Total selling, general and administrative expenses~~ for the three months ended December 31, 2021 increased by $1.3 million, or 60%. The increase was primarily due to the inclusion of Stadco operations since August 25, 2021 ($0.6 million) and an increase in outside advisory fees ($0.5 million) in connection with the Stadco acquisition. Increase in travel expenses and other office costs ($0.2 million) made up the balance of the increase.

~~Other Expense, net~~

~~The following table reflects interest expense, amortization of debt issue costs and other income, net for the nine months ended:~~June 30:


	December 31, 2021		December 31, 2020		$ Change		% Change		2022		2021		$ Change		% Change
Other income, net	$	13,390	$	1,237	$	12,153	nm
Other (expense) income, net									$	(33,225)	$	10,390	$	(43,615)	nm
Interest expense	$	(146,906)	$	(114,786)	$	(32,120)	(28)	%	$	(70,246)	$	(21,054)	$	(49,192)	(234)	%
Amortization of debt issue costs	$	(34,588)	$	(45,099)	$	10,511	23	%	$	(13,399)	$	(8,824)	$	(4,575)	(52)	%

nm – not meaningful

Interest expense was higher for the three months ended June 30, 2022. The increase in interest expense was due primarily to borrowings under the new Stadco Term Loan and higher amounts borrowed under the revolver loan. We expect to see higher interest expense in fiscal 2023 due to the higher levels of debt incurred since the Stadco acquisition.

Amortization of debt issue costs were higher when compared to the three months ended June 30, 2021. New amortization periods commenced in fiscal 2022 for costs incurred for the Ranor loan extension, and for the new Stadco loan. As a result, we expect to see higher amortization expense in fiscal 2023.

Other expense, net, in the table above, includes an expense accrual for contingent consideration of $33,474 in connection with the Stadco acquisition. Other income for the ~~nine~~three months ended ~~December 31,~~June 30, 2021, includes a return of $10,000 for a retainer fee previously paid for outside advisory fees in connection with a class action settlement in March 2021.

~~Interest expense was higher for~~Paycheck Protection Program (PPP) Loan Forgiveness

For the ~~nine~~three months ended December 31, 2021. The increase in interest expense was due primarily to new borrowings under the new Stadco term loan and amounts outstanding under the revolver loan. During the prior-year period, there were no borrowings outstanding under the revolver loan. We expect to record higher interest expense in future periods due to the higher debt load under our new term loan and revolver loan.

~~Amortization of debt issue costs were higher in the nine months ended December 31, 2020 due to higher closing costs in connection with modifications to the Berkshire loans in 2020.~~

~~PPP Loan Forgiveness~~

~~On May 12,~~June 30, 2021, as authorized by Section 1106 of the CARES Act, the ~~SBA~~Small Business Administration remitted to Berkshire Bank, the lender of record, a payment of principal in the amount of $1,317,100, for forgiveness of the Company’s PPP loan. The funds credited to the PPP loan paid this loan off in full.

Income Taxes

For fiscal year 2022 the ~~nine months ended December 31, 2021 we~~Company recorded a tax benefit of ~~$385,749, compared to a tax provision of $60,573 for the nine months ended December 31, 2020. The tax benefit is~~$173,714, the result of ~~operating pretax losses.~~lower taxable income. In fiscal 2021, the Company recorded tax expense of $26,580.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The ~~gain~~valuation allowance on deferred tax assets at June 30, 2022 and March 31, 2022 was approximately $2.0 million. We believe that it is more likely than not that the benefit from certain state NOL carryforwards and other deferred tax assets will not be realized. In recognition of this risk, we continue to provide a valuation allowance on these items. In the ~~forgiveness of~~event future taxable income is below management’s estimates or is generated in tax jurisdictions different than projected, the Company could be required to increase the valuation allowance for deferred tax assets. This would result in an increase in the Company’s ~~PPP loan is a discrete nontaxable event.~~effective tax rate.

Net (Loss) Income

As a result of the foregoing, for the ~~nine~~three months ended ~~December 31, 2021,~~June 30, 2022, we recorded net ~~income~~loss of ~~$0.2~~$0.5 million, or $0.01 per share basic and fully diluted, compared towith net income of ~~$0.1~~$1.4 million, or $0.05 per share basic and $0.04 per share fully diluted in fiscal 2021.

Liquidity and Capital Resources

We reported a net loss of $0.5 million for the ~~nine~~three months ~~December~~ended June 30, 2022. We reported net a net loss of $0.3 million for the fiscal year ended March 31, ~~2020.~~2022. Our liquidity is highly dependent on the availability of financing facilities and our ability to maintain our gross profit and operating income.

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~~Liquidity~~As of June 30, 2022, we had $4.5 million in total available liquidity, consisting of $0.6 million in cash and ~~Capital Resources~~cash equivalents, and $3.9 million in undrawn capacity under our revolver loan. As of March 31, 2022, we had $3.9 million in total available liquidity, consisting of $1.1 million in cash and cash equivalents, and $2.8 million in undrawn capacity under our revolver loan.

On June 16, 2022, Ranor entered into a Third Amendment to Amended and Restated Loan Agreement and Third Amendment to Promissory Note to further extend the maturity date of the Ranor Term Loan to September 16, 2022. The Company has commenced negotiations of a further amended and restated loan agreement with Berkshire Bank, including a potential modification of the loan covenants. We intend to refinance the original term loan made by Berkshire Bank to Ranor in the principal amount of $2.85 million (the “Ranor Term Loan”) by borrowing on terms similar to the current loan and using the proceeds to pay down certain existing debt obligations and lowering our debt levels and debt service requirements. However, there can be no assurance that we will be successful in negotiating for these terms with Berkshire Bank or any other lender.

Our debt financing agreements limit our capital expenditures to $1.5 million annually and contain loan to value, balance sheet leverage, and debt service coverage ratio covenants. At ~~December 31, 2021,~~June 30, 2022, the Company was not in compliance with all of these financial covenants.

We had cash and cash equivalents of $0.6 million and working capital of ~~$3.1~~$2.6 million, a decrease of $0.2 million when compared to March 31, ~~2021.~~2022. We believe our available cash, plus cash expected to be provided by operations, Employee Retention Credit cash refunds of approximately $0.9 million, and borrowing capacity available under the revolver loan (until the expiration date of December 20, 2022), will be sufficient to fund our operations, expected capital expenditures, and principal and interest payments under our lease and debt obligations through the next 12 months from the issuance date of our financial statements. Our revolver loan matures in December 2022 and will not be available to provide liquidity unless it is renewed.

~~On August 25, 2021, we completed~~ The Company intends to renew the ~~acquisition of Stadco, closed on a private placement financing and closed on a new~~revolver loan with Berkshire Bank. In connection with the acquisition, we raised $3.5 million of cash by selling 3,202,727 shares of common stock at $1.10 per share via a private placement financing, sourced $4.0 million in new debt with Berkshire bank, drew down $0.1 million under the revolver loan and sourced $1.8 million from available cash. We issued 1.5 million shares of our common stock and warrants to satisfy Stadco’s indebtedness to its shareholders and certain other debt holders and acquired all outstanding shares of Stadco.

In addition, we purchased Stadco’s loan from Sunflower Bank, for a total amount of $7.9 million in cash. Concurrent with the closing of the Stadco acquisition, we entered into an amended and restated loan agreement with Berkshire Bank. Under the amended facility, our term loan in the original principal amount of $2.85 million, of which $2.4 million remains outstanding, will remain, and we will have access to a revolving line of credit of up to $5.0 million, and borrowed $4.0 million under a new term loan with Berkshire bank.

There was ~~$2.0~~$0.3 million outstanding under the revolver loan at June 30, 2022, and $3.9 million of available liquidity.

The uncertainty associated with the refinancing of the Ranor Term Loan which is due on September 16, 2022, and the Revolver Loan which is due on December ~~31, 2021. There were no borrowed amounts outstanding under~~20, 2022, raises substantial doubt about our ability to continue as a going concern.

The condensed consolidated financial statements for the ~~revolver loan at~~three months ended June 30, 2022, and the consolidated financial statements for the year ended March 31, ~~2021. Unused borrowing capacity at December 31, 2021 was approximately $2.1 million. The maturity date~~2022 were prepared on the basis of ~~the revolver loan is December 20, 2022.~~

~~There is~~ a balloon payment of approximately $2.4 million due in March 2022 under the Ranor term loan with Berkshire Bank. We expect to refinance this debt with the bank before the maturity date. Until then, the Company will continue to pay down principal and make interest payments in the ordinary course.

~~In addition to the cash commitments required under our financing arrangements with Berkshire Bank, we also anticipate~~going concern which contemplates that we will ~~spend approximately $0.8 million~~be able to realize assets and discharge liabilities in ~~new factory machinery~~the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should we be required to liquidate assets. Our ability to satisfy our current liabilities and ~~equipment during~~to continue as a going concern is dependent upon the ~~remainder~~timely availability of ~~fiscal 2022.~~long-term financing and successful execution of our operating plan. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The table below presents selected liquidity and capital measures ~~at:~~

Change
(dollars in thousands)

December 31, 2021

March 31, 2021

Amount
Cash and cash equivalents

$
562

$
2,131

$
(1,569)
Working capital

$
3,096

$
5,202

$
(2,106)
Total debt

$
8,201

$
3,829

$
4,372
Lease liabilities

$
6,567

$
—

$
(6,567)
Total stockholders’ equity

$
15,830

$
9,942

$
5,888

~~The following table summarizes~~at the ~~primary components of cash flows for the nine months~~period ended:

Change
(dollars in thousands)

December 31, 2021

December 31, 2020

Amount
Cash flows provided by (used in):






Operating activities

$
(1,649)

$
(340)

$
(1,309)
Investing activities

(8,232)

(547)

(7,685)
Financing activities

8,313

1,211

7,102
Net (decrease) increase in cash and cash equivalents

$
(1,568)

$
324

$
(1,892)


	June 30,		March 31,		Change
(dollars in thousands)	2022		2022		Amount
Cash and cash equivalents	$	574	$	1,052	$	(478)
Working capital	$	2,646	$	2,753	$	(107)
Total debt	$	6,215	$	7,356	$	(1,141)
Total stockholders’ equity	$	14,815	$	15,264	$	(449)

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Table of Contents

The next table summarizes changes in cash by primary component in the cash flows statements for the three months ended:


	June 30,		June 30,		Change
(dollars in thousands)	2022		2021		Amount
Operating activities	$	1,448	$	137	$	1,311
Investing activities		(763)		(4)		(759)
Financing activities		(1,164)		(27)		(1,137)
Net (decrease) increase in cash	$	(479)	$	106	$	(585)

Operating activities

Apart from our loan facilities, our primary sources of cash are from accounts receivable ~~collections, customer advance payments and project progress payments.~~collections. Our customers make advance payments and progress payments under the terms of each manufacturing contract. Our cash flows can fluctuate significantly from period to period as we mark progress with customer projects and the composition of our receivables collections mix changes between advance payments and customer payments made after shipment of finished goods.

Cash ~~used in~~provided by operating activities for the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 was ~~$1.7 million. Cash outlays for the nine months ended December 31, 2021 includes a payment of $0.5~~approximately $1.4 million, ~~to plaintiffs for a court approved final class action settlement,~~as operating cash inflows exceeded outflows as work on new projects commenced and ~~$0.7 million of~~customer cash ~~used to pay past due rent on the Stadco property~~advances and ~~buildings.~~

~~Overall, the~~collections increased. Our fiscal 2023 first ~~nine months of fiscal 2022~~quarter was marked by favorable project performance progress and delivery ~~schedules. However, throughput slowed on certain projects during~~schedules that led to timely customer payments. Cash provided by operations for the ~~third quarter as fewer hours were available due to calendar year end holiday schedules. Customers have been invoiced for these projects and others started in December~~three months ended June 30, 2021 ~~so we anticipate higher available cash balances after January 1, 2022.~~

We used $0.3 million of cash in operating activities during the first nine months of fiscal 2021, as accounts receivable and contract assets increased and contract liabilities decreased due to a changing production mix.was $0.1 million.

Investing activities

We ~~anticipate that we will spend~~invested approximately $0.8 million in new factory machinery and equipment ~~during~~for the ~~remainder~~first three months of fiscal ~~2022. Net cash used in investing activities~~2023. We are limited by our financial debt covenants and may not spend more than $1.5 million for ~~purchases of property, plant~~new machinery and equipment in the ~~nine~~fiscal year. Purchases of new equipment for the three months ended ~~December 31,~~June 30, 2021 ~~was $0.4 million. In addition, we purchased Stadco’s outstanding debt from Sunflower Bank, for $7.9 million in cash.~~totaled $4,198.

Financing activities

We ~~sourced $3.5~~drew down $1.8 million of ~~cash by selling 3,202,727 shares of common stock at $1.10 per share via a private placement financing and $4.0 million in new debt with Berkshire bank. In addition we drew down $2.6 million~~proceeds under ~~the~~our revolver loan ~~used to fund~~during the ~~acquisition and operating activities since August 25, 2021~~three months ended June 30, 2022 and repaid ~~$0.6~~$2.8 million induring the ~~third quarter of fiscal 2022.~~

same period. We also used ~~$0.5~~$0.2 million of cash to make periodic lease payments and pay off certain lease and debt obligations. ~~We also used $0.7 million~~For the three months ended June 30, 2021 we paid down principal of ~~cash to pay private placement closing costs,~~$27,166 on our term debt ~~issue costs,~~ and ~~repay debt principal.~~finance lease obligations.

All of the above activity resulted in a net decrease in cash of ~~$1.6~~$0.5 million for the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022, compared with a net increase in cash of ~~$0.3~~$0.1 million for the ~~nine~~three months ended ~~December 31, 2020.~~June 30, 2021.

~~Small Business Administration PPP Loan~~Berkshire Bank Loans

On ~~May 8, 2020,~~August 25, 2021, the Company ~~through its wholly owned subsidiary~~entered into an amended and restated loan agreement with Berkshire Bank, or the “Loan Agreement”. Under the Loan Agreement, Berkshire Bank continues as lender of the “Ranor Term Loan”, and the revolving line of credit, or the “Revolver Loan”. In addition, Berkshire Bank provided to Stadco a term loan in the original amount of $4.0 million, or the “Stadco Term Loan”. The proceeds of the original Ranor ~~Inc., issued~~Term Loan of $2.85 million were previously used to refinance existing mortgage debt of Ranor. The proceeds of the Revolver Loan are used for working capital and general corporate purposes of the Company. The proceeds of the Stadco Term Loan were to be used to support the acquisition of Stadco and refinance existing indebtedness of Stadco.

Payments for the original Ranor Term Loan began on January 20, 2017 and are made in 60 monthly installments of $19,260 each, inclusive of interest at a ~~promissory note evidencing an unsecured PPP~~fixed rate of 5.21% per annum, with all outstanding principal and accrued interest due and payable on the maturity date. As amended, the Ranor Term Loan was to mature on June 16, 2022, with a balloon payment of approximately $2.3 million due under the terms of the Loan Agreement with Berkshire Bank. However, on June 16, 2022, Ranor and certain affiliates of the Company entered into a Third Amendment to Amended and Restated Loan Agreement and Third Amendment to Promissory Note to further extend the maturity date of the Ranor Term Loan to September 16, 2022. We expect to commence negotiations of a further amended and restated loan agreement to refinance that debt with Berkshire Bank prior to the new maturity date.

Table of Contents

Under the Loan Agreement, Berkshire Bank also makes available to Ranor a revolving line of credit with, following certain modifications, a maximum principal amount available of $5.0 million. The Company drew down $1.8 million under the revolver loan, and repaid $2.8 million of principal during the three months ended June 30. 2022. There was $0.3 million outstanding under the revolver loan at June 30, 2022. Interest-only payments on advances made under the revolver loan during the three months ended June 30, 2022 totaled $1,961 at a weighted average interest rate of 2.75%. Unused borrowing capacity at June 30, 2022 was approximately $3.9 million.

On August 25, 2021, Stadco borrowed $4,000,000 from Berkshire Bank under the Stadco Term Loan. Interest on the Stadco Term Loan is due on unpaid balances beginning on August 25, 2021 at a fixed rate per annum equal to the 7 year Federal Home Loan Bank of Boston Classic Advance Rate plus 2.25%. Since September 25, 2021, and on the 25th day of each month thereafter, Stadco has made and will make monthly payments of principal and interest in the amount of ~~$1,317,100 made~~$54,390 each, with all outstanding principal and accrued interest due and payable on August 25, 2028.

Commitments and Contractual Obligations

The following contractual obligations associated with our normal business activities are expected to ~~Ranor~~result in cash payments in future periods, and include the following material items at June 30, 2022:

●

We enter into various commitments with suppliers for the purchase of raw materials and work supplies. In accordance with U.S. GAAP, these purchase obligations are not reflected in the accompanying consolidated balance sheets. Our outstanding unconditional contractual commitments, including for the purchase of raw materials and supplies goods, totaled $6.2 million, all of it due to be paid in fiscal 2023. These purchase commitments are in the normal course of business.

●

Our long-term debt obligations, including fixed and variable-rate debt, totaled $6.2 million, with $3.2 million due over the next twelve months, and approximately $0.6 million due annually for each of the next five years.

●

Our lease obligations, including imputed interest, totaled $7.4 million for buildings and equipment through 2030, with approximately $0.9 million due annually for each of the next eight years.

We believe our available cash, plus cash expected to be provided by operations and borrowing capacity available under the ~~CARES Act. The PPP~~revolver loan (until December 2022 when the Company expects to ~~Ranor was made~~refinance) and Employee Retention Credit cash refunds will be sufficient to fund our operations, expected capital expenditures, and principal and interest payments under our lease and debt obligations through ~~Berkshire Bank.~~

~~Under~~ the ~~terms~~next 12 months from the issuance date of the ~~CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion~~financial statements included in this report.

There are no off-balance sheet arrangements as of loans granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs, certain group health care benefits and insurance premiums, and any payments of mortgage interest, rent, and utilities.June 30, 2022.

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The Company applied for loan forgiveness with the SBA under the Paycheck Protection Program on March 26, 2021. On May 12, 2021, as authorized by Section 1106 of the CARES Act, the SBA remitted to Berkshire Bank, the lender of record, a payment of principal and interest in the amount of $1,317,100 and $13,207, respectively, for forgiveness of the Company’s PPP loan. The funds credited to the PPP loan paid this loan off in full. Loan forgiveness is recorded as a gain under other income and expense in the condensed consolidated statement of operations.

EBITDA Non-GAAP Financial Measure

To complement our condensed consolidated statements of operations and comprehensive (loss) income and condensed consolidated statements of cash flows, we use EBITDA, a non-GAAP financial measure. Net (loss) income is the financial measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to EBITDA. We believe EBITDA provides our board of directors, management and investors with a helpful measure for comparing our operating performance with the performance of other companies that have different financing and capital structures or tax rates. We also believe that EBITDA is a measure frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, and is a measure contained in our debt covenants. However, while we consider EBITDA to be an important measure of operating performance, EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.

We define EBITDA as net ~~(loss)~~ income plus interest, income taxes, depreciation, and amortization. Net loss was $0.5 million for the three months ended June 30, 2022, as compared to net income of $1.4 million for the three months ended June 30, 2021. The following table provides a reconciliation of EBITDA to net ~~(loss)~~ income, the most directly comparable U.S. GAAP measure reported in our condensed consolidated financial statements for the ~~following periods:~~three months ended:


	Three Months ended December 31,						Nine Months ended December 31,						June 30,		June 30,		Change
(dollars in thousands)	2021		2020		Change		2021		2020		Change		2022		2021		Amount
Net (loss) income	$	(905)	$	(48)	$	(857)	$	246	$	106	$	140	$	(501)	$	1,371	$	(1,872)
Income tax (benefit) expense		(334)		(13)		(321)		(386)		61		(447)
Income tax (benefit) provision														(174)		27		(201)
Interest expense (1)		95		50		45		181		160		21		84		30		54
Depreciation and amortization		463		182		281		979		521		458		585		183		402
EBITDA	$	(681)	$	171	$	(852)	$	1,020	$	848	$	172	$	(6)	$	1,611	$	(1,617)

(1) Includes amortization of debt issue costs.

Item 3.Quantitative and Qualitative Disclosure About Market Risk.

As a smaller reporting company, we have elected not to provide the information required by this Item.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and procedures that are designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and includes controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, an evaluation was carried out, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~December 31, 2021,~~June 30, 2022, our disclosure controls and procedures were not effective ~~at a reasonable assurance level.~~due to the material weakness in our internal control over financial reporting described below.

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Inherent Limitations over Internal Controls

The Company’s internal control over financial reporting is designed under the supervision of our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods is subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weakness

We identified a material weakness in our internal control over financial reporting as of March 31, 2022, which still existed as of June 30, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the preparation of our financial statements in our Annual Report on Form 10-K, management identified the following material weakness: we did not maintain proper controls, processes and procedures over the initial purchase accounting and the continuing fair value accounting associated with our acquisition of Stadco that were adequately designed, documented and executed to support the accurate and timely reporting of our financial results regarding the initial purchase accounting and the continuing fair value accounting associated with the Stadco acquisition.

Notwithstanding the material weakness, management believes the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial condition, results of operations and cash flows as of and for the periods presented in accordance with U.S. GAAP.

Management’s Remediation Plan

Our management, with the oversight of our audit committee, has initiated steps and plans to take additional measures to remediate the underlying causes of the material weakness, which we currently believe will be primarily through the development and implementation of new procedures, policies, processes, including revising the precision level of management review controls and gaining additional assurance regarding timely completion of our quality control procedures. It is possible that we may determine that additional remediation steps will be necessary in the future.

The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We can provide no assurance as to when the remediation of these material weaknesses will be completed to provide for an effective control environment.

Changes in Internal Control over Financial Reporting

For the quarter ended ~~December 31, 2021,~~June 30, 2022, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting. The Company continues to evaluate Stadco’s internal controls over financial reporting and integrating such with its own internal controls over financial reporting.

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PART II. Other Information.

Item 6.Exhibits.

Exhibit Index


~~Exhibit No.~~		~~Description~~
~~10.1~~		First Amendment to Amended and Restated Loan Agreement and First Amendment to Promissory Note, dated as of December 17, 2021, by and among Ranor, Inc., Stadco New Acquisition, LLC, Stadco, Westminster Credit Holdings, LLC and Berkshire Bank (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on December 20, 2021).
~~31.1~~		~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~31.2~~		~~Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~32.1~~		~~Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~101.INS~~		~~XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~
~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document.~~
~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document.~~
~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document.~~
~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document.~~
~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document.~~
~~104~~		~~Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~

Exhibit No.

Description

Incorporated by
Reference Form

File
No.

Date Filed

Exhibit No.

Filed
Herewith

3.1

Certificate of Incorporation of the Registrant

SB-2

333-133509

August 28, 2006

3.1

3.2

Amended and Restated By-laws of the Registrant

8-K

000-51378

February 3, 2014

3.1

3.3

Certificate of Designation for Series A Convertible Preferred Stock of the Registrant

8-K

000-51378

March 3, 2006

3.1

3.4

Certificate of Amendment to Certificate of Designation for Series A Convertible Preferred Stock of the Registrant

10-Q

000-51378

November 12, 2009

3.5

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		TechPrecision Corporation
~~February 17,~~September 14, 2022	By:	/s/ Thomas Sammons
		Thomas Sammons
		Chief Financial Officer


		Page
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME	4
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	5
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	87
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	31
ITEM 4.	CONTROLS AND PROCEDURES	31
PART II.	OTHER INFORMATION	33
ITEM 6.	EXHIBITS	33
	SIGNATURES	34


			Progress
Contract Assets	Unbilled		payments		Total
December 31, 2021	$	14,853,999	$	(4,619,646)	$	10,234,353
March 31, 2021	$	11,392,948	$	(5,860,540)	$	5,532,408