TECHPRECISION CORP [TPCS] Filings

10-Q 1 tpcs-20221231x10q.htm 10-Q

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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, 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 9, 2023, was 34,443,959.

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TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)	4
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	5
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	32
ITEM 4.	CONTROLS AND PROCEDURES	32
PART II.	OTHER INFORMATION	34
ITEM 6.	EXHIBITS	34
	SIGNATURES	35

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PART I

ITEM 1. FINANCIAL STATEMENTS

TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


	December 31,		March 31,
	2022		2022
ASSETS
Current assets:
Cash and cash equivalents	$	316,185	$	1,052,139
Accounts receivable		2,927,407		3,009,249
Contract assets		9,356,242		8,350,231
Raw materials		1,271,558		874,538
Work-in-process		1,020,566		1,360,137
Other current assets		986,024		1,421,459
Total current assets		15,877,982		16,067,753
Property, plant and equipment, net		12,640,077		13,153,165
Right of use asset, net		6,043,056		6,383,615
Deferred income taxes		2,117,985		2,126,770
Other noncurrent assets, net		726,456		121,256
Total assets	$	37,405,556	$	37,852,559
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	1,489,972	$	3,426,921
Accrued expenses		2,443,285		3,435,866
Contract liabilities		1,905,262		1,765,319
Current portion of long-term lease liability		727,803		593,808
Current portion of long-term debt		2,069,859		4,093,079
Total current liabilities		8,636,181		13,314,993
Long-term debt, net		4,863,602		3,114,936
Long-term lease liability		5,481,895		5,853,791
Other noncurrent liabilities		2,828,737		305,071
Total liabilities		21,810,415		22,588,791
Commitments and contingencies - see Note 15
Stockholders’ Equity:
Common stock - par value $.0001 per share, 90,000,000 shares authorized, shares issued and outstanding : December 31, 2022 - 34,443,959; March 31, 2022 - 34,307,450		3,444		3,430
Additional paid in capital		14,945,376		14,637,771
Retained earnings		646,321		622,567
Total stockholders’ equity		15,595,141		15,263,768
Total liabilities and stockholders’ equity	$	37,405,556	$	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 INCOME (LOSS) (unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Net sales	$	8,327,345	$	6,511,325	$	23,926,349	$	14,720,964
Cost of sales		6,828,458		6,033,267		19,870,572		12,479,531
Gross profit		1,498,887		478,058		4,055,777		2,241,433
Selling, general and administrative		1,224,572		1,623,883		4,426,894		3,530,179
Income (loss) from operations		274,315		(1,145,825)		(371,117)		(1,288,746)
Other income		254		1,999		40,590		13,390
Interest expense		(93,603)		(94,721)		(260,978)		(181,494)
PPP loan forgiveness		—		—		—		1,317,100
Refundable employee retention tax credits		—		—		624,045		—
Total other (expense) income		(93,349)		(92,722)		403,657		1,148,996
Income (loss) before income taxes		180,966		(1,238,547)		32,540		(139,750)
Income tax expense (benefit)		46,991		(333,867)		8,786		(385,749)
Net income (loss)	$	133,975	$	(904,680)	$	23,754	$	245,999
Other comprehensive loss:
Foreign currency translation adjustments	$	—	$	(810)	$	—	$	(1,909)
Other comprehensive loss	$	—	$	(810)	$	—	$	(1,909)
Comprehensive income (loss)	$	133,975	$	(905,490)	$	23,754	$	244,090
Net income (loss) per share basic	$	0.00	$	(0.03)	$	0.00	$	0.01
Net income (loss) per share diluted	$	0.00	$	(0.03)	$	0.00	$	0.01
Weighted average shares outstanding - basic		34,443,959		34,286,580		34,363,352		31,716,353
Weighted average shares outstanding - diluted		36,134,709		34,286,580		36,039,468		33,395,123

See accompanying notes to the condensed consolidated financial statements.

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TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)


						Accumulated
	Common			Additional		Other				Total
	Stock	Par		Paid in		Comprehensive		Retained		Stockholders’
	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
Stock-based compensation					33,500						33,500
Net income									1,371,092		1,371,092
Foreign currency translation adjustment							42				42
Balance 6/30/2021	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
Stock-based compensation					28,566						28,566
Net loss									(220,413)		(220,413)
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 3/31/2022	34,307,450	$	3,430	$	14,637,771	$	—		622,567	$	15,263,768
Stock-based compensation					52,107						52,107
Net loss									(501,165)		(501,165)
Balance 6/30/2022	34,307,450	$	3,430	$	14,689,878	$	—		121,402	$	14,814,710
Stock-based compensation					46,539						46,539
Stock issued for contingent consideration	36,509		4		56,306						56,310
Stock award nonemployee directors	100,000		10		143,990						144,000
Net income									390,944		390,944
Balance 9/30/2022	34,443,959	$	3,444	$	14,936,713	$	—		512,346	$	15,452,503
Stock-based compensation					8,663						8,663
Net income									133,975		133,975
Balance 12/31/2022	34,443,959	$	3,444	$	14,945,376	$	—		646,321	$	15,595,141

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,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	23,754	$	245,999
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,666,741		978,517
Amortization of debt issue costs		39,961		34,588
Stock based compensation expense		307,619		141,176
Change in contract loss provision		100,880		(66,232)
Deferred income taxes		8,785		(386,413)
PPP loan forgiveness		—		(1,317,100)
Change in fair value for contingent consideration		63,436		—
Gain on sale of fixed asset		(468)		—
Changes in operating assets and liabilities:
Accounts receivable		81,842		(575,181)
Contract assets		(1,006,010)		(871,339)
Work-in-process and raw materials		(57,450)		477,936
Other current assets		435,435		215,334
Other noncurrent assets		—		(50,633)
Accounts payable		(166,749)		(611,045)
Accrued expenses		(1,741,606)		(1,282,269)
Contract liabilities		139,944		1,418,010
Other noncurrent liabilities		974,737		—
Net cash provided by (used in) operating activities		870,851		(1,648,652)
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of cash acquired		—		(7,795,810)
Proceeds from sale of fixed assets		7,000		—
Fixed asset deposit		(605,200)		—
Purchases of property, plant, and equipment		(663,033)		(436,531)
Net cash used in investing activities		(1,261,233)		(8,232,341)
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
Debt issue costs		(43,945)		(116,511)
Revolver loan payments and borrowings, net		187,998		1,978,221
Payments of principal for leases		(31,058)		(493,015)
Repayments of long-term debt		(458,567)		(243,510)
Net cash (used in) provided by financing activities		(345,572)		8,312,766
Effect of exchange rate on cash and cash equivalents		—		(25)
Net decrease in cash and cash equivalents		(735,954)		(1,568,252)
Cash and cash equivalents, beginning of period		1,052,139		2,130,711
Cash and cash equivalents, end of period	$	316,185	$	562,459
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest; net of amounts capitalized	$	216,881	$	152,498

See accompanying notes to the condensed consolidated financial statements.

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SUPPLEMENTAL INFORMATION - NONCASH OPERATING, INVESTING AND FINANCING TRANSACTIONS:

Nine Months Ended December 31, 2022

Stadco entered into a payment arrangement agreement (the “Payment Agreement”) with the Department of Water and Power of the City of Los Angeles (the “LADWP”), to settle previously outstanding amounts for water, water service, electric energy and/or electric service in the aggregate amount of $1,770,201 that are delinquent and unpaid. This liability amount was included in accounts payable on the Company’s balance sheet as of March 31, 2022, and was reclassified as a current liability for $221,272 to accrued expenses and to noncurrent liabilities for $1,548,929 in December 2022.

Nine Months Ended December 31, 2021

On August 25, 2021, in exchange for the issuance of 1,466,061 shares of common stock and a warrant to purchase 100,000 shares of the common stock, the Company acquired all 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 common stock transferred was $2,269,000, based on the closing market price of the Company’s common stock on the closing date, August 25, 2021. The fair value of the warrants transferred was $46,256 and was estimated using the Black-Scholes option-pricing model. Also, 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS

TechPrecision Corporation, or “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, Westminster Credit Holdings, LLC, or “WCH”, Stadco New Acquisition, LLC, or “Acquisition Sub”, Stadco and Wuxi Critical Mechanical Components Co., Ltd., or “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, the Company completed its previously announced acquisition of Stadco, pursuant to that certain stock purchase agreement with Acquisition Sub, Stadco Acquisition, LLC, Stadco and each equity holder of Stadco Acquisition, LLC. On the closing date, the Company, through Acquisition Sub, 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 now our wholly owned indirect subsidiary. See Note 3 for additional disclosures related to this business combination.

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. All our operations and customers are in the United 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, Acquisition Sub, and WCMC, until its dissolution. Intercompany transactions and balances have been eliminated in consolidation. The accompanying condensed consolidated balance sheets as of December 31, 2022, the condensed consolidated statements of operations and comprehensive income (loss) and stockholders’ equity for the three and nine months ended December 31, 2022 and 2021, and the condensed consolidated statements of cash flows for the nine months ended December 31, 2022 and 2021 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”. All

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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”, 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, 2022, filed with the SEC on August 10, 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 revenue recognition and income 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.

Risks and Uncertainties - For the nine months ended December 31, 2022 and 2021, there were no events related to Coronavirus Disease (COVID-19) that had a material impact on our operations. The Company will continue to monitor the impacts of COVID-19 and any government-imposed actions thereto.

We reported a net loss of $0.1 million for the six months ended September 30, 2022. We reported 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. Berkshire Bank waived the Company’s noncompliance with certain of the financial and related covenants at September 30, 2022. In our Form 10-Q for the quarter ended September 30, 2022, we disclosed our intention to secure new long-term financing on terms consistent with our near-term business plans 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. On December 23, 2022, we were successful extending the maturity date of the Ranor Term Loan to December 2027 and renewing the Revolver Loan for one year (each as defined below; see Note 12 – Debt). Additionally, we were able to meet certain financial and related loan covenants that the Company had failed in the prior quarter. As such, the uncertainty with respect to the Company’s ability to continue as a going concern has been alleviated.

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”, among TechPrecision, Acquisition Sub, Stadco Acquisition, LLC, or “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.

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 Acquisition Sub, 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-

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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.

Stadco’s assets and liabilities were measured at estimated fair values on August 25, 2021, primarily using Level 1 and Level 3 inputs. Estimates of 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 liabilities.

Included in the total consideration transferred is $113,890 related to a contingent provision in the agreements that required payment based on the difference between the TechPrecision stock price and contract target stock price. The contingent provision allowed 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 was less than the target stock price stated in each agreement, TechPrecision was to 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 was guaranteed and only the number of shares issued could vary, with the final measurement date and amount determined on the one-year anniversary date. Since the contract did not specify a fixed maximum number of shares to be issued on the anniversary date, had the company determined to satisfy the contingent consideration with shares only, then a number of shares higher than the amount currently authorized by the company’s certificate of incorporation could have been required to be issued. In any case, the maximum value of the contingent consideration was $2,269,000, whether paid in shares of common stock or in cash, or both. The Company settled the obligation associated with the contingent consideration on August 25, 2022 by issuing 36,509 shares of common stock valued at $56,310 on August 25, 2022. The fair value of the contingent consideration was based on the closing stock price on the issuance date.

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 ^and		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 ERTC 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.

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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. The following table discloses the pro forma results for the combined entities, assuming the acquisition date had occurred on April 1, 2021, for the nine months ended December 31, 2021:


	Pro forma combined
	Nine months ended
	December 31,
	2021
Net sales	$	19,441,005
Operating loss	$	(2,793,821)
Loss before income taxes	$	(1,880,903)
Net loss	$	(1,496,049)
EPS basic	$	(0.04)
EPS dilutive	$	(0.04)
Weighted average shares outstanding – basic and diluted		34,212,032

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. Other adjustments reflected in the pro forma results are as follows for the nine months ended December 31, 2021:

●

In selling, general and administrative, excluded non-recurring expense of $0.3 million for consulting, legal, due diligence, bank fees, and other costs incurred in connection with the acquisition.

●

We excluded $0.7 million of management fees due to then preferred stockholders of Stadco,

●

We excluded interest expense of $0.5 million, reflecting a reduction of Stadco’s bank debt and interest rates.

●

We included an estimated tax benefit of $0.4 million based on the Company’s fiscal year 2022 annual estimated tax rate.

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, 2022	$	8,316,711	$	10,634	$	8,327,345
Three months ended December 31, 2021	$	6,362,681	$	148,644	$	6,511,325
Nine months ended December 31, 2022	$	23,543,077	$	383,272	$	23,926,349
Nine months ended December 31, 2021	$	13,868,968	$	851,996	$	14,720,964


Net Sales by contract type	Over-time		Point-in-time		Totals
Three months ended December 31, 2022	$	7,813,273	$	514,072	$	8,327,345
Three months ended December 31, 2021	$	6,378,952	$	132,733	$	6,511,325
Nine months ended December 31, 2022	$	22,672,048	$	1,254,301	$	23,926,349
Nine months ended December 31, 2021	$	13,259,229	$	1,461,735	$	14,720,964

As of December 31, 2022, the Company had $43.9 million of remaining performance obligations, of which $39.7 million were less than 50% complete. The Company expects to recognize all its remaining performance obligations as revenue within the next thirty-six months.

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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.


	Three months ended				Three months ended				Nine months ended				Nine months ended
	December 31, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Customer	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
A	$	1,448,547	17	%	$	967,846	15	%	$	4,182,984	18	%	$	3,447,511	23	%
B	$	*	*	%	$	793,910	12	%	$	*	*	%	$	2,454,171	17	%
C	$	*	*	%	$	937,620	14	%	$	*	*	%	$	*	*	%
D	$	*	*	%	$	926,965	14	%	$	*	*	%	$	*	*	%
E	$	*	*	%	$	913,501	14	%	$	*	*	%	$	*	*	%
F	$	1,451,713	17	%	$	*	*	%	$	4,495,028	19	%	$	*	*	%
G	$	1,385,871	16	%	$	*	*	%	$	4,764,391	20	%	$	*	*	%

*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 months ended December 31, 2022, we recognized revenue of approximately $1.8 million related to our contract liabilities at April 1, 2022. Contract assets consisted of the following at:


			Progress
	Unbilled		payments		Total
December 31, 2022	$	18,824,537	$	(9,468,295)	$	9,356,242
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. 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 Company recorded income tax expense of $8,786 for the nine months ended December 31, 2022, and an income tax expense of $46,991 for the three months ended December 31, 2022. The Company’s effective tax rate for the nine months ended December 31, 2022 was 27.0%.

The valuation allowance on deferred tax assets was approximately $2.0 million at December 31, 2022. We believe that it is more likely than not that the benefit from certain state net operating losses, or 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 EPS is computed by dividing reported earnings available to stockholders by the weighted average 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 for the periods ended:


	Three Months ended		Three Months ended		Nine Months ended		Nine Months ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Basic EPS
Net income (loss)	$	133,975	$	(904,680)	$	23,754	$	245,999
Weighted average shares		34,443,959		34,286,580		34,363,352		31,716,353
Net income (loss) per share	$	0.00	$	(0.03)	$	0.00	$	0.01
Diluted EPS
Net income (loss)	$	133,975	$	(904,680)	$	23,754	$	245,999
Dilutive effect of stock options		1,690,750		—		1,676,116		1,678,770
Weighted average shares		36,134,709		34,286,580		36,039,468		33,395,123
Net income (loss) per share	$	0.00	$	(0.03)	$	0.00	$	0.01

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, there were potential anti-dilutive stock options and warrants of 2,820,000, none of which were included in the earnings per share calculations above.

NOTE 7 – STOCK-BASED COMPENSATION

The 2016 TechPrecision Equity Incentive Plan, or the “2016 Plan”, is designed to reflect our commitment to having best practices in both compensation and corporate governance. The 2016 Plan provides for a share reserve of 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 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.

At December 31, 2022, there were 1,250,000 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 12/31/2022	2,670,000	$	0.343	$	4,612,330	3.93
Vested or expected to vest at 12/31/2022	2,670,000	$	0.343	$

TECHPRECISION CORP [TPCS] Filings
TECHPRECISION CORP [TPCSD] Filings
10-Q	[2023-02-14]
10-Q	[2022-11-17]
10-Q	[2022-09-15]
10-K	[2022-08-10]
10-Q	[2022-02-17]
S-1	[2022-01-07]
10-Q	[2021-12-09]
10-Q	[2021-08-12]
10-K	[2021-06-10]
10-Q	[2021-02-11]
10-Q	[2020-11-12]
10-Q	[2020-08-13]
10-K	[2020-06-11]
10-Q	[2020-02-13]
10-Q	[2019-11-13]
10-Q	[2019-08-13]
10-K	[2019-06-27]
10-Q	[2019-02-13]
10-Q	[2018-11-13]
10-Q	[2018-08-13]
10-K	[2018-06-28]
10-Q	[2018-02-13]
10-Q	[2017-11-13]
10-Q	[2017-08-14]
10-K	[2017-06-29]
10-Q	[2017-02-14]
10-Q	[2016-11-14]
10-Q	[2016-08-15]
10-K	[2016-06-28]
10-Q	[2016-02-16]
10-Q	[2015-11-16]
10-Q	[2015-08-14]
10-K	[2015-06-29]
10-Q	[2015-02-17]
10-Q	[2014-11-14]
10-Q	[2014-08-18]
10-K	[2014-07-15]
10-Q	[2014-02-13]
10-Q	[2013-11-14]
10-Q	[2013-09-18]
10-K	[2013-08-16]
10-Q	[2013-02-19]
10-Q	[2012-11-21]
10-Q	[2012-08-14]
10-K	[2012-07-16]
10-Q	[2012-02-14]

TECHPRECISION CORP [TPCS] Filings

TECHPRECISION CORP [TPCSD] Filings