10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2017

¨ 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

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. 

x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    

x 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	¨	(Do not check if a smaller reporting company)	Smaller reporting company	x
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 provided 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 x No

The number of shares outstanding of the registrant’s common stock as of November 7, 2017 was 28,824,593. 

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	2
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	2
	CONDENSED CONSOLIDATED BALANCE SHEETS	2
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME	3
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	4
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 4.	CONTROLS AND PROCEDURES	18
PART II.	OTHER INFORMATION	19
ITEM 1.	LEGAL PROCEEDINGS	19
ITEM 6.	EXHIBITS	19
	SIGNATURES	20

1 

PART I.

ITEM 1. FINANCIAL STATEMENTS

TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	September 30, 2017		March 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	2,489,626	$	3,066,156
Accounts receivable, net		2,175,822		1,870,672
Costs incurred on uncompleted contracts, in excess of progress billings		3,213,329		2,097,221
Inventories - raw materials		200,787		141,792
Other current assets		546,633		422,096
Total current assets		8,626,197		7,597,937
Property, plant and equipment, net		5,369,167		4,912,202
Deferred income taxes		2,364,303		2,871,680
Other noncurrent assets, net		68,625		100,000
Total assets	$	16,428,292	$	15,481,819
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	380,318	$	365,308
Accrued expenses		1,008,717		893,415
Billings on uncompleted contracts, in excess of related costs		827,573		642,831
Current portion of long-term debt		742,292		717,481
Total current liabilities		2,958,900		2,619,035
Long-term debt, including capital leases		4,546,078		4,874,721
Noncurrent accrued expenses		8,064		17,742
Commitments and contingent liabilities (see Note 14)
Stockholders’ Equity:
Common stock - par value $.0001 per share, 90,000,000 shares authorized, 28,824,593 shares issued and outstanding at September 30 and March 31, 2017		2,882		2,882
Additional paid in capital		8,409,517		8,258,820
Accumulated other comprehensive income		20,872		19,328
Retained earnings (accumulated deficit)		481,979		(310,709	)
Total stockholders’ equity		8,915,250		7,970,321
Total liabilities and stockholders’ equity	$	16,428,292	$	15,481,819

See accompanying notes to the condensed consolidated financial statements.

2 

TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2017			2016			2017			2016
Net sales	$	4,588,894		$	3,656,163		$	10,419,280		$	8,300,968
Cost of sales		3,155,893			2,182,547			7,245,692			5,291,959
Gross profit		1,433,001			1,473,616			3,173,588			3,009,009
Selling, general and administrative		720,341			739,585			1,640,100			1,627,763
Income from operations		712,660			734,031			1,533,488			1,381,246
Other income		1,456			6,824			1,547			7,575
Interest expense		(100,414	)		(183,268	)		(209,196	)		(376,478	)
Total other expense, net		(98,958	)		(176,444	)		(207,649	)		(368,903	)
Income before income taxes		613,702			557,587			1,325,839			1,012,343
Income tax expense		245,516			11,505			533,151			20,958
Net income	$	368,186		$	546,082		$	792,688		$	991,385
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	$	1,854		$	(281	)	$	2,586		$	(1,223	)
Other comprehensive income (loss), before tax		1,854			(281	)		2,586			(1,223	)
Income tax expense on other comprehensive income		746			--			1,042			--
Other comprehensive income (loss), net of tax	$	1,108		$	(281	)	$	1,544		$	(1,223	)
Comprehensive income	$	369,294		$	545,801		$	794,232		$	990,162
Net income per share (basic)	$	0.01		$	0.02		$	0.03		$	0.04
Net income per share (diluted)	$	0.01		$	0.02		$	0.03		$	0.04
Weighted average number of shares outstanding (basic)		28,824,593			27,324,593			28,824,593			27,324,593
Weighted average number of shares outstanding (diluted)		29,730,456			28,020,795			29,751,219			27,936,098

See accompanying notes to the condensed consolidated financial statements.

3 

TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	792,688		$	991,385
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		351,422			353,488
Amortization of debt issue costs		37,038			90,049
Stock based compensation expense		150,697			22,910
Change in contract losses		29,139			(40,532	)
Deferred income taxes		507,376			--
Changes in operating assets and liabilities:
Accounts receivable		(305,150	)		1,118,019
Costs on uncompleted contracts, in excess of progress billings		(1,116,108	)		240,431
Inventories – raw materials		(58,995	)		3,005
Other current assets		(124,537	)		152,051
Other noncurrent assets and liabilities		(9,678	)		(819	)
Accounts payable		15,010			(406,463	)
Accrued expenses		88,319			(170,369	)
Accrued taxes		--			20,958
Billings on uncompleted contracts, in excess of related costs		184,742			(945,358	)
Net cash provided by operating activities		541,963			1,428,755
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment		80,000			--
Deposit for fixed assets		(36,987	)		--
Purchases of property, plant and equipment		(808,386	)		(114,856	)
Net cash used in investing activities		(765,373	)		(114,856	)
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred loan costs		--			(145,995	)
Borrowings of long-term debt		--			3,011,648
Repayment of long-term debt		(352,509	)		(2,673,432	)
Net cash (used in) provided by financing activities		(352,509	)		192,221
Effect of exchange rate on cash and cash equivalents		(611	)		42
Net (decrease) increase in cash and cash equivalents		(576,530	)		1,506,162
Cash and cash equivalents, beginning of period	$	3,066,156		$	1,332,166
Cash and cash equivalents, end of period	$	2,489,626		$	2,838,328
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the period for:
Interest	$	185,415		$	479,179
Income taxes	$	30,000		$	20,000

See accompanying notes to the condensed consolidated financial statements.

4 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS

TechPrecision Corporation, or TechPrecision, is the parent company of Ranor, Inc., or Ranor, a Delaware corporation and Wuxi Critical Mechanical Components Co., Ltd., or WCMC, a wholly foreign owned enterprise (WFOE) organized under the laws of the People’s Republic of China. TechPrecision, WCMC and Ranor are collectively referred to as the “Company”, “we”, “us” or “our”.

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.

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 and WCMC. Intercompany transactions and balances have been eliminated in consolidation. The accompanying condensed consolidated balance sheets as of September 30, 2017 and March 31, 2017, the condensed consolidated statements of operations and comprehensive income for the three and six months ended September 30, 2017 and 2016, and the condensed consolidated statements of cash flows for the six months ended September 30, 2017 and 2016 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 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.

The Notes to 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 note 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 our consolidated financial statements included with our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, or the 2017 Form 10-K, filed with the SEC on June 29, 2017.

Significant Accounting Policies

Our significant accounting policies are set forth in detail in Note 2 to the 2017 Form 10-K.

NOTE 3 - NEW ACCOUNTING STANDARDS

New Accounting Standards Recently Adopted

In March 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share Based Payment Accounting, or ASU 2016-09, which contains authoritative guidance intended to simplify various aspects to how share-based payment awards to employees are accounted for and presented in the financial statements. We adopted this guidance as of April 1, 2017, on a prospective basis. The guidance eliminates additional paid-in capital pools and allows entities to record tax benefits within income tax expense in the consolidated statement of operations, classify any excess tax benefits within net cash provided by operating activities in the consolidated statement of cash flows, and account for award forfeitures as they occur. The adoption of this new guidance did not have an impact on our financial statements and disclosures.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, or ASU 2015-11. The new guidance defines net realizable value as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This definition is consistent with existing authoritative guidance. We adopted this guidance as of April 1, 2017, on a prospective basis. The adoption did not have an impact on our financial statements and disclosures.

Issued Standards Not Yet Adopted

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments, or ASU 2016-15. The new guidance reduces the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We are currently evaluating the impact that this guidance will have on our financial statements and disclosures.

5 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, the authoritative guidance that changes the criteria for recognizing revenue from a contract with a customer. The new revenue recognition standard replaces existing guidance on revenue recognition, including most industry specific guidance, with a five step model for recognizing and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets.

The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. Current practice is primarily a risk and rewards based model, while the new standard introduces the concept of inventory control and satisfaction of performance obligations over time. We are currently assessing the impact that the new revenue recognition guidance may have on our financial statements and disclosures by comparing our current revenue recognition policy with the requirements of the new standard. A review of contracts with our largest customers which represents more than 80% of our revenue is underway, and it is probable that our current practices may no longer be viable for all customers under the new revenue recognition guidance. The guidance also requires a number of disclosures regarding the nature, amount, timing and uncertainty of revenue and the related cash flows.

The new guidance can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method). The guidance is effective for annual reporting periods beginning on or after December 15, 2017. We plan to adopt the new standard on April 1, 2018.

In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, or ASU 2016-20. The amendments in ASU 2016-20 update and affect narrow aspects of the guidance issued in ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, Narrow Scope Improvements and Practical Expedients, which provided revised guidance on certain issues relating to revenue from contracts with customers, including clarification of the objective of the collectability criterion. In March 2016, the FASB issued an amendment to clarify the implementation guidance for principal versus agent considerations and in April 2016 issued a final amendment to clarify the guidance related to identifying performance obligations and the accounting for intellectual property licenses. We are currently evaluating the impact these updates may have on our financial statements and disclosures.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra Entity Transfers of Assets Other Than Inventory, or ASU 2016-16. The guidance in ASU 2016-16 requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases, or ASU 2016-02. Under this amendment, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the impact ASU 2016-02 will have on our financial statements and disclosures.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, or ASU 2017-09. ASU 2017-09 provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017. We are currently evaluating the impact ASU 2017-09 will have on our financial statements and disclosures.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following as of: 

	September 30, 2017			March 31, 2017
Land	$	110,113		$	110,113
Building and improvements		3,252,908			3,252,908
Machinery equipment, furniture and fixtures		9,896,917			8,601,199
Construction in progress		--			487,331
Equipment under capital leases		54,376			54,376
Total property, plant and equipment		13,314,314			12,505,927
Less: accumulated depreciation		(7,945,147	)		(7,593,725	)
Total property, plant and equipment, net	$	5,369,167		$	4,912,202

6 

Depreciation expense, which includes amortization of equipment under capital leases, for the three and six months ended September 30, 2017 and 2016 was $179,808 and $351,422, and $177,438 and $353,488, respectively.

Capitalized leases were $54,376 at the end of September 30, 2017 and March 31, 2017. Accumulated depreciation on all property, plant and equipment accounted for as capitalized leases at September 30, 2017 and March 31, 2017, was $8,156 and $2,719, respectively.

We capitalize interest during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. Capitalized interest for the three and six months ended September 30, 2017 was $8,590 and $13,257, respectively.

NOTE 5 - COSTS INCURRED ON UNCOMPLETED CONTRACTS

The following table sets forth information as to costs incurred on uncompleted contracts as of:

	September 30, 2017			March 31, 2017
Cost incurred on uncompleted contracts, beginning balance	$	5,538,815		$	5,491,605
Total cost incurred on contracts during the year		6,351,959			12,501,752
Less: cost of sales, during the year		(7,245,692	)		(12,454,542	)
Cost incurred on uncompleted contracts, ending balance	$	4,645,082		$	5,538,815
Billings on uncompleted contracts, beginning balance	$	3,441,594		$	3,095,963
Total billings incurred on contracts, during the year		8,409,439			18,896,305
Less: Contracts recognized as revenue, during the year		(10,419,280	)		(18,550,674	)
Billings on uncompleted contracts, ending balance	$	1,431,753		$	3,441,594
Cost incurred on uncompleted contracts, ending balance	$	4,645,082		$	5,538,815
Billings on uncompleted contracts, ending balance		1,431,753			3,441,594
Costs incurred on uncompleted contracts, in excess of progress billings	$	3,213,329		$	2,097,221

Contract costs consist primarily of labor and materials and related overhead, to the extent that such costs are recoverable. Revenues associated with these contracts are recorded only when the amount of recovery can be estimated reliably and realization is probable. As of September 30, 2017 and March 31, 2017, we had billings in excess of costs totaling $827,573 and $642,831, respectively. Billings on uncompleted contracts represent customer prepayments on their contracts and completed contracts for which all revenue recognition criteria were not met.   We also receive advance billings and deposits representing down payments for acquisition of materials and progress payments on contracts. The agreements with our customers allow us to offset the progress payments against the costs incurred.

NOTE 6 - OTHER CURRENT ASSETS

Other current assets included the following as of:

	September 30, 2017		March 31, 2017
Payments advanced to suppliers	$	190,163	$	107,591
Prepaid insurance		226,174		229,132
Other		130,296		85,373
Total	$	546,633	$	422,096

NOTE 7 - OTHER NONCURRENT ASSETS

Other noncurrent assets included the following as of:

	September 30, 2017		March 31, 2017
Assets held for sale	$	20,000	$	100,000
Deposit for fixed assets		36,987		--
Prepaid loan costs		11,638		--
Total	$	68,625	$	100,000

7 

At September 30, 2017 and March 31, 2017, we classified certain machinery and equipment of $20,000 and $100,000, respectively, to assets held for sale. This amount approximates fair value net of selling costs. We expect to sell the remaining fixed asset held for sale before the end of fiscal 2018. In fiscal 2017, we wrote down certain machinery held for sale and subsequently sold the machinery in May 2017.

NOTE 8 - ACCRUED EXPENSES

Accrued expenses included the following as of:  

	September 30, 2017		March 31, 2017
Accrued compensation	$	551,128	$	568,766
Provision for contract losses		177,838		148,699
Accrued professional fees		141,139		142,648
Accrued project costs		97,525		--
Other		41,087		33,302
Total	$	1,008,717	$	893,415

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. 

NOTE 9 - DEBT

Long-term debt included the following as of: 

	September 30, 2017		March 31, 2017
Commerce Term Loan due January 2022	$	2,788,161	$	2,828,844
People’s Equipment Loan Facility due April 2021		2,584,086		2,884,982
Obligations under capital leases		56,423		67,353
Total debt	$	5,428,670	$	5,781,179
Less: debt issue costs unamortized	$	140,300	$	188,977
Total debt, net	$	5,288,370	$	5,592,202
Less: Current portion of long-term debt	$	742,292	$	717,481
Total long-term debt, net	$	4,546,078	$	4,874,721

Commerce Bank & Trust Company Loan Facility

On December 21, 2016, TechPrecision, through Ranor, closed on a Loan Agreement, or the Commerce Loan Agreement, with Commerce Bank & Trust Company, or Commerce.  Pursuant to the Commerce Loan Agreement, Commerce made a term loan to Ranor in the amount of $2,850,000, or the Term Loan, and made available to Ranor a revolving line of credit in the amount of $1,000,000, or the Revolver Loan, and together with the Term Loan, the Commerce Loans.  The Commerce Loans are secured by a first lien on all personal and real property of Ranor.  Starting on January 20, 2017, payments on the Term Loan began and will be 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 December 20, 2021.  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 to any collateral or if a full prepayment is made during the 45-day period immediately preceding the maturity date.  Advances under the Revolver Loan will be subject to a borrowing base equal to the lesser of (A) $1,000,000 and (B) the sum of (i) 80% of eligible accounts receivable, and (ii) the lesser of (a) 25% of eligible raw material inventory and (b) $250,000.  Advances made under the Revolver Loan bear interest at a variable rate equal to the one-month LIBOR plus 275 basis points.  Interest-only payments on advances made under the Revolver Loan will be payable monthly in arrears.  The Revolver Loan will mature on December 21, 2018.  Ranor’s obligations under the Commerce Loan Agreement are guaranteed by TechPrecision. There were no amounts outstanding under the Revolver Loan at September 30, 2017 and March 31, 2017. Unamortized debt issue costs for the Term Loan at September 30, 2017 were $52,594.

The Commerce Loan Agreement contains a covenant whereby the Company is required to maintain a debt service coverage ratio, or DSCR, of at least 1.2 to 1.0 during the term of the Commerce Loans.  The DSCR will be measured at the end of each fiscal quarter of the Company.  Pursuant to the Commerce Loan Agreement, Ranor also covenants (a) to cause its balance sheet leverage to be less than or equal to 3.00 to 1.00 for the fiscal year ending March 31, 2018, and less than or equal to 2.50 to 1.00 for the fiscal year ending March 31, 2019 and each fiscal year end thereafter, and (b) that its annual capital expenditures shall not exceed $2,500,000 for the fiscal year ending March 31, 2018, $2,500,000 for the fiscal year ended March 31, 2019, and $1,500,000 for the fiscal year ending March 31, 2020 and each fiscal year end thereafter.  The Commerce Loan Agreement contains an additional covenant whereby Ranor is required to maintain a loan-to-value ratio of not greater than 0.75 to 1.00, to be measured by appraisal not more frequently than one time during each 365-day period. At September 30, 2017 and March 31, 2017, the DSCR was 3.07 to 1.00 and 3.40 to 1.00, respectively. At March 31, 2017, the leverage ratio was 1.01 to 1.00.

8 

People’s Capital and Leasing Corp. Equipment Loan Facility

On April 26, 2016, TechPrecision, through Ranor, executed and closed a Master Loan and Security Agreement, or the MLSA, with People’s Capital and Leasing Corp., or People’s.  Loan proceeds were disbursed to Ranor on April 26, 2016.  Pursuant to the MLSA, People’s loaned $3,011,648 to Ranor, or the People’s Loan. The People’s Loan is secured by a first lien on certain machinery and equipment of Ranor, or the Equipment Collateral.  Payments on the People’s Loan will be made in 60 monthly installments of $60,921 each, inclusive of interest at a fixed rate of 7.90% per annum.  A prepayment penalty will apply during the first four years of the loan term.  Ranor’s obligations under the MLSA are guaranteed by TechPrecision.  The Company covenants to maintain a DSCR of at least 1.5 to 1.0 during the term of the People’s Loan.  The DSCR will be measured at the end of each fiscal year of the Company. At March 31, 2017, the DSCR was 2.86 to 1.00. The People’s Loan may be accelerated upon the occurrence of an “Event of Default” (as defined in the MLSA). Some of the Events of Default are subject to certain cure periods. Unamortized debt issue costs at September 30, 2017 were $87,706.

Capital Lease

We entered into a new capital lease in January 2017 for certain office equipment. The lease term is for 60 months, bears interest at 7.9% per annum and requires monthly payments of principal and interest of $1,169. Concurrently, in January 2017 we retired certain office equipment under an existing capital lease which was amended in 2014. The revised lease term will expire in March 2018 and the required monthly payments of principal and interest will be $1,187 through October 2017, and then $720 until the lease payment expires in September 2018.

Collateral securing the above obligations comprises all personal and real property of TechPrecision and Ranor, including cash, accounts receivable, inventories, equipment, financial and intangible assets.

NOTE 10 - INCOME TAXES

We account for income taxes under the provisions of FASB 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 provision for income taxes was $533,151 and $20,958 and the effective tax rate was 40.2% and 2.1%, for the six months ended September 30, 2017 and 2016, respectively. The low effective tax rate for the six months ended September 30, 2016 was a result of net operating loss utilization and the associated reduction in the valuation allowance which had been provided for this deferred tax asset. The tax provision for the six months ended September 30, 2016 was an accrual for the alternative minimum tax.

The valuation allowance on deferred tax assets at September 30, 2017 and March 31, 2017 was approximately $1.5 million. We believe that it is more likely than not that the benefit from certain state and foreign 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 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.

We regularly assess the effects of various factors to determine the adequacy of our provision for income taxes. For example, our future effective tax rate would be affected if earnings were lower than anticipated in tax jurisdictions where we have lower statutory rates and higher than anticipated in tax jurisdictions where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles or interpretations thereof. 

NOTE 11 - PROFIT SHARING PLAN

Ranor has a 401(k) profit sharing plan that covers substantially all Ranor employees who have completed 90 days of service. Ranor retains the option to match employee contributions. The Company’s contributions were $40,850 and $39,653 for the six months ended September 30, 2017 and 2016, respectively.

NOTE 12 - STOCK BASED COMPENSATION

Our board of directors, upon the recommendation of the previously constituted compensation committee of our board of directors, approved 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, and it applies to awards granted after that date. The 2016 Plan provides for a share reserve of 5,000,000 shares of common stock.

9 

On April 4, 2017, we granted stock options to members of our board of directors to collectively purchase 200,000 shares of common stock at an exercise price of $0.74 per share, the closing stock market price on the date of grant. The weighted average fair value of the options on the grant date was $0.60 each. Forty percent of the options granted vested immediately. The remaining options will vest equally at the end of each quarter during fiscal 2018, beginning with the second quarter of fiscal 2018. The aggregate fair value of the stock options expensed during the six months ended September 30, 2017 was $84,138.

The fair value of the options we grant is 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 underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The average dividend yield over the historical period for which volatility was computed is zero. The risk-free interest rate was selected based upon yields of five-year U.S. Treasury issues. We used the simplified method for all grants to estimate the expected life of the option. We assume that stock options will be exercised evenly over the period from vesting until the awards expire. As such, the assumed period for each vesting tranche is computed separately and then averaged together to determine the expected term for the award. The assumptions utilized for options granted during the period were 110.1% for volatility, 1.88% for the risk free interest rate and approximately six years for the expected life. At September 30, 2017, there were 1,803,332 shares available for grant under the 2016 Plan.

The following table summarizes information about options for the six months ended September 30, 2017: 

	Number Of			Weighted Average		Aggregate Intrinsic		Weighted Average Remaining Contractual Life
	Options			Exercise Price		Value		(in years)
Outstanding at 3/31/2017		3,002,668		$	0.387	$	1,246,600		5.72
Granted		200,000		$	0.740		--		--
Forfeited		(6,000	)	$	1.960		--		--
Outstanding at 9/30/2017		3,196,668		$	0.406	$	1,084,600		6.22
Vested or expected to vest at 9/30/2017		3,196,668		$	0.406	$	1,084,600		6.22
Exercisable and vested at 9/30/2017		2,576,668		$	0.394	$	934,600		6.22

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 second quarter of fiscal 2018 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 September 30, 2017. This amount changes based on the fair market value of the Company’s common stock.

The following table summarizes the status of our stock options outstanding but not vested for the six month period ended September 30, 2017:

	Number of Options			Weighted Average Exercise Price
Outstanding at 3/31/2017		833,334		$	0.266
Granted		200,000		$	0.740
Vested		(413,334	)	$	0.208
Outstanding at 9/30/2017		620,000		$	0.458

The total fair value of shares vested during the period was $74,747. Other information relating to stock options outstanding at September 30, 2017 is as follows:

Range of Exercise Prices:	Options Outstanding		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Options Exercisable		Weighted Average Exercise Price
$0.01-$1.00		3,021,668		6.92	$	0.34		2,401,668	$	0.31
$1.01-$1.96		175,000		2.84	$	1.59		175,000	$	1.59
Totals		3,196,668						2,576,668

10 

NOTE 13 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

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 September 30, 2017, there were accounts receivable balances outstanding from two customers comprising 82% of the total receivables balance. The following table sets forth information as to accounts receivable from customers who accounted for more than 10% of our accounts receivable balance as of: 

	September 30, 2017					March 31, 2017
Customer	Dollars		Percent			Dollars		Percent
A	$	1,478,882		68	%	$	*		*	%
B	$	308,638		14	%	$	961,463		51	%
C	$	*		*	%	$	406,428		22	%
D	$	*		*	%	$	187,410		10	%

*less than 10% of total

We have been dependent in 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 information as to net sales from customers who accounted for more than 10% of our net sales in the periods presented:

	Three months ended September 30, 2017					Three months ended September 30, 2016					Six months ended September 30, 2017					Six months ended September 30, 2016
Customer	Dollars		Percent			Dollars		Percent			Dollars		Percent			Dollars		Percent
A	$	2,061,276		45	%	$	383,253		10	%	$	4,950,432		48	%	$	*		*	%
B	$	746,877		16	%	$	*		*	%	$	2,330,088		22	%	$	1,457,222		18	%
C	$	*		*	%	$	*		*	%	$	1,079,832		10	%	$	*		*	%
D	$	*		*	%	$	1,998,724		55	%		*		*	%	$	3,285,065		40	%
E	$	*		*	%	$	*		*	%		*		*	%	$	1,741,084		21	%

*less than 10% of total

NOTE 14 - COMMITMENTS

Employment Agreements

We have employment agreements with each of our executive officers. Such agreements provide for minimum salary levels, adjusted annually, and incentive bonuses that are payable if specified company goals are attained. The aggregate commitment at September 30, 2017 for future executive salaries during the next twelve months was approximately $0.5 million. The aggregate commitment for the remainder of our employees at September 30, 2017 was approximately $0.3 million for accrued payroll, vacation and holiday pay.

NOTE 15 - EARNINGS PER SHARE (EPS)

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, as required under FASB ASC 260:

	Three months ended September 30, 2017		Three months ended September 30, 2016		Six months ended September 30, 2017		Six months ended September 30, 2016
Basic EPS
Net Income	$	368,186	$	546,082	$	792,688	$	991,385
Weighted average shares		28,824,593		27,324,593		28,824,593		27,324,593
Basic Income per share	$	0.01	$	0.02	$	0.03	$	0.04
Diluted EPS
Net Income	$	368,186	$	546,082	$	792,688	$	991,385
Dilutive effect of stock options		905,863		696,202		926,626		611,505
Diluted weighted average shares		29,730,456		28,020,795		29,751,219		27,936,098
Diluted Income per share	$	0.01	$	0.02	$	0.03	$	0.04

All potential common share 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 and six months ended September 30, 2017, there were 596,668 and 496,668, respectively, of potentially anti-dilutive stock options, none of which were included in the EPS calculations above. For each of the three and six months ended September 30, 2016, there were 428,500 of potentially anti-dilutive stock options, none of which were included in the EPS calculations above.

11 

NOTE 16 – RECLASSIFICATION OF PRIOR YEAR PRESENTATION

Certain prior year amounts have been reclassified for consistency with the current year presentation. A reclassification has been made to the condensed consolidated balance sheets for fiscal year ended March 31, 2017, to offset deferred taxes within the same tax jurisdiction. This reclassification had no effect on the reported results of operations or the consolidated statements of cash flows.

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

Statement Regarding Forward Looking Disclosure

The following discussion of the results of our operations and financial condition should be read in conjunction with our condensed 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 entitled “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 annual 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 are intended to identify forward-looking statements.

These 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 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:

· our ability to change the composition of our revenues and effectively reduce operating expenses;

· 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 our operate our business due to our outstanding indebtedness;

· government regulations and requirements;

· pricing and business development difficulties;

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

· general industry and market conditions and growth rates;

· general economic conditions; and

· the risks discussed in “Item 1A. Risk Factors” and elsewhere in our 2017 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.

Overview

We offer a full range of services required to transform raw materials into precision finished products. Our manufacturing capabilities 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 U.S. manufacturing is done in accordance with our written quality assurance program, which meets specific national and international codes, standards and specifications. Ranor holds several certificates of authorization issued by the American Society of Mechanical Engineers and the National Board of Boiler and Pressure Vessel Inspectors. The standards used are specific to the customers’ needs, and our manufacturing operations are conducted in accordance with these standards.

12 

Because our revenues are derived from the sale of goods manufactured pursuant to a contract, and we do not sell from inventory, it is necessary for us to constantly seek new contracts. There may be a time lag between the 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 which 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 are seeking more long-term projects with predictable cost structures.

We historically have experienced, and continue to experience, customer concentration. For the six months ended September 30, 2017 and September 30, 2016, our largest customers accounted for approximately 48% and 40% of reported net sales, respectively. Our sales order backlog at September 30, 2017 was approximately $10.8 million compared with a backlog of $15.8 million at March 31, 2017.

For the six months ended September 30, 2017, our net sales and net income were $10.4 million and $0.8 million, respectively, compared with net sales and net income of $8.3 and $1.0 million, respectively, for the six months ended September 30, 2016.  Our gross margins for the six months ended September 30, 2017 were 30.5% compared with gross margins of 36.2% in the six months ended September 30, 2016. We generated $0.5 million of cash from operating activities and invested $0.8 million in new machinery and equipment for the six months ended September 30, 2017. We had a cash balance of $2.5 million at September 30, 2017.

Critical Accounting Policies

The preparation of the unaudited 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 contract accounting, inventories, recovery of long-lived assets, income taxes and the valuation of equity transactions. These estimates and assumptions require management's most difficult, subjective or complex judgments. Actual results may differ under different assumptions or conditions.

Our significant accounting policies are set forth in detail in Note 2 to the consolidated financial statements included in the 2017 Form 10-K. There were no significant changes in the critical accounting policies during the six months ended September 30, 2017, nor did we make any changes to our accounting policies that would have changed these critical accounting policies.

New Accounting Pronouncements

See Note 3 - New Accounting Standards to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted new accounting 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. Generally, our product mix is made up of short-term contracts with a production timeline of less than twelve months. Units manufactured under the majority of our customer contracts are delivered on time and with a positive gross margin.  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.

Key Performance Indicators

While we prepare our financial statements in accordance with U.S. generally accepted accounting principles, or 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 financial measures.  Please see the section “EBITDA Non-GAAP financial measures” 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 nearest U.S. GAAP financial measures.

13 

Three Months Ended September 30, 2017 and 2016

The following table sets forth information from our Condensed Consolidated Statements of Operations and Comprehensive Income, in dollars and as a percentage of revenue: 

	September 30, 2017						September 30, 2016						Changes Period Ended September 30, 2017 to 2016
(dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Net sales	$	4,589			100	%	$	3,656			100	%	$	933			26	%
Cost of sales		3,156			69	%		2,182			60	%		974			45	%
Gross profit		1,433			31	%		1,474			40	%		(41	)		(3	)%
Selling, general and administrative		720			16	%		740			20	%		(20	)		(3	)%
Income from operations		713			15	%		734			20	%		(21	)		(3	)%
Other income		1			-	%		7			-	%		(6	)		(86	)%
Interest expense		(100	)		(2	)%		(183	)		(5	)%		83			45	%
Total other expense, net		(99	)		(2	)%		(176	)		(5	)%		77			44	%
Income before income taxes		614			13	%		558			15	%		56			10	%
Income tax expense		246			5	%		12			-	%		234			nm	%
Net income	$	368			8	%	$	546			15	%	$	(178	)		(33	)%

nm - not meaningful

Net Sales

Generally, increases and decreases in net sales reflect changes in product mix as our customers gauge their demand for new components. Our shipments in the three months ended September 30, 2017 included orders for new and repeat business from existing key customers. Customer acceptance and the timing of delivery dates play a significant role as to when we can recognize revenue in any given period. For the three months ended September 30, 2017, net sales increased by $0.9 million, or 26%, to $4.6 million when compared to $3.7 million for the three months ended September 30, 2016.  Net sales in our defense market increased by $0.5 million in the three months ended September 30, 2017 when compared to the three months ended September 30, 2016, primarily on higher shipments of new product components to our largest defense customers.  Net sales in our energy market increased by $0.6 million when compared to the three months ended September 30, 2016, primarily on a higher shipment volume of nuclear plant components. Net sales in our precision industrial market decreased by $0.2 million when compared to the three months ended September 30, 2016 on lower shipments of large scale medical device components.

Cost of Sales and Gross Margin

Cost of sales consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our cost of sales for the three months ended September 30, 2017 increased by $1.0 million compared to the three months ended September 30, 2016 on higher sales volume and unabsorbed overhead costs, caused by a time lag between contract deliveries and the startup schedule for new projects. Gross profit decreased by approximately $41,000 for the three months ended September 30, 2017 when compared to the three months ended September 30, 2016.  Gross margin in any reporting period is impacted by the mix of products and services we provide on projects completed within that period. Gross margins were 31.2% and 40.3% for the three months ended September 30, 2017 and 2016, respectively.

Selling, General and Administrative Expenses

Total SG&A expenses for the three months ended September 30, 2017 decreased by approximately $20,000 compared to the three months ended September 30, 2016, primarily the result of lower expenses for outside advisory services.

Other Income (Expense)

The following table reflects other income, interest expense and amortization of debt issue costs for the three months ended September 30: 

	2017			2016			$ Change			% Change
Other income	$	1,456		$	6,824		$	(5,368	)		(79	)%
Interest expense	$	(82,920	)	$	(114,012	)	$	31,092			27	%
Amortization of debt issue costs	$	(17,494	)	$	(69,256	)	$	51,762			75	%

14 

Interest expense and amortization of debt issue costs for the three months ended September 30, 2017 were lower when compared to the three months ended September 30, 2016. The decrease in interest expense is primarily due to lower interest rates in connection with our debt refinancing transactions completed in fiscal 2017. Amortization of debt issue costs for the three months ended September 30, 2017 decreased when compared to the three months ended September 30, 2016 because of lower debt issue costs in connection with our new debt refinancing transaction completed in fiscal 2017.

Income Taxes

For the three months ended September 30, 2017 we recorded tax expense of $245,516, compared to tax expense of $11,505 for the three months ended September 30, 2016, an increase of $234,011. The lower tax expense for the three months ended September 30, 2016 was primarily the result of the utilization of net operating losses and the associated reduction in the valuation allowance which had been provided for this deferred tax asset. The three months ended September 30, 2016 tax provision reflects an accrual for the alternative minimum tax.

The valuation allowance on deferred tax assets at September 30, 2017 and March 31, 2017 was approximately $1.5 million. We believe that it is more likely than not that the benefit from certain state and foreign 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 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.

Net Income

As a result of the foregoing, for the three months ended September 30, 2017, our net income was $368,186, or $0.01 per share basic and fully diluted, compared with net income of $546,082, or $0.02 per share basic and fully diluted, for the three months ended September 30, 2016.

Six Months Ended September 30, 2017 and 2016

The following table sets forth information from our Condensed Consolidated Statements of Operations and Comprehensive Income, in dollars and as a percentage of revenue:  

	September 30, 2017						September 30, 2016						Changes Period Ended September 30, 2017 to 2016
(dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Net sales	$	10,419			100	%	$	8,301			100	%	$	2,118			26	%
Cost of sales		7,246			69	%		5,292			64	%		1,954			37	%
Gross profit		3,173			31	%		3,009			36	%		164			5	%
Selling, general and administrative		1,640			16	%		1,628			20	%		12			1	%
Income from operations		1,533			15	%		1,381			16	%		152			11	%
Other income		2			-	%		7			-	%		(5	)		(71	)%
Interest expense		(209	)		(2	)%		(376	)		(5	)%		167			44	%
Total other expense, net		(207	)		(2	)%		(369	)		(4	)%		162			44	%
Income before income taxes		1,326			13	%		1,012			12	%		314			31	%
Income tax expense		533			5	%		21			-	%		512			nm	%
Net income	$	793			8	%	$	991			12	%	$	(198	)		(20	)%

nm - not meaningful

Net Sales

Generally, increases and decreases in net sales reflect changes in product mix as our customers gauge their demand for new product components. Our shipments in the six months ended September 30, 2017 included orders for new and repeat business from existing key customers. Customer acceptance and the timing of delivery dates play a significant role as to when we can recognize revenue in any given period. For the six months ended September 30, 2017, net sales increased by $2.1 million, or 26%, to $10.4 million when compared to $8.3 million for the six months ended September 30, 2016.  Net sales in our defense market increased by $2.5 million in the six months ended September 30, 2017 when compared to the six months ended September 30, 2016, primarily on higher shipments of new product components to one of our largest defense customers.  Net sales in our energy market increased by $1.4 million when compared to the six months ended September 30, 2016, primarily on a higher shipment volume of nuclear plant components. Net sales in our precision industrial market decreased by $1.8 million when compared to the three months ended September 30, 2016 on lower shipments of large scale medical device components.

15 

Cost of Sales and Gross Margin

Cost of sales consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our cost of sales for the six months ended September 30, 2017 increased by $1.9 million compared to the six months ended September 30, 2016 primarily on higher sales volume, higher estimates for contract losses and higher amounts of unabsorbed overhead. Gross profit increased by $0.2 million for the six months ended September 30, 2017 when compared to the six months ended September 30, 2016.  Gross margin in any reporting period is impacted by the mix of products and services we provide on projects completed within that period. Gross margins were 30.5% and 36.3% for the six months ended September 30, 2017 and 2016, respectively. Lower gross margin for the six months ended September 30, 2017 were the result of higher amounts of unabsorbed overhead costs caused by a time lag between contract deliveries and the startup schedule for new contract projects.

Selling, General and Administrative Expenses

Total SG&A expenses increased by approximately $12,000 for the six months ended September 30, 2017 compared to the six months ended September 30, 2016, primarily the result of higher share based compensation almost entirely offset by lower outside advisory services.   

Other Income (Expense)

The following table reflects other income, interest expense and amortization of debt issue costs for the six months ended September 30: 

	2017			2016			$ Change			% Change
Other income	$	1,547		$	7,575		$	(6,028	)		(80	)%
Interest expense	$	(172,158	)	$	(286,429	)	$	114,271			40	%
Amortization of debt issue costs	$	(37,038	)	$	(90,049	)	$	53,011			59	%

Interest expense and amortization of debt issue costs for the six months ended September 30, 2017 were lower when compared to the six months ended September 30, 2016. The decrease in interest expense and is primarily due to lower interest rates in connection with the debt refinancing transactions completed in fiscal 2017. Amortization of debt issue costs in connection with our refinanced debt were also lower for the six months ended September 30, 2017 when compared to the six months ended September 30, 2016.

Income Taxes

For the six months ended September 30, 2017 we recorded tax expense of $533,151, compared to tax expense of $20,958 for the six months ended September 30, 2016. The lower effective tax rate for the six months ended September 30, 2016 was the result of the utilization of net operating losses and the associated reduction in the valuation allowance which had been provided for this deferred tax asset. The six months ended September 30, 2016 tax provision reflects an accrual for the alternative minimum tax.

The valuation allowance on deferred tax assets at September 30, 2017 and March 31, 2017 was approximately $1.5 million. We believe that it is more likely than not that the benefit from certain state and foreign 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 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.

Net Income

As a result of the foregoing, for the six months ended September 30, 2017, our net income was $792,688, or $0.02 per share basic and fully diluted, compared with net income of $991,385, or $0.04 per share basic and fully diluted, for the six months ended September 30, 2016.

EBITDA Non-GAAP Financial Measure

To complement our condensed consolidated statements of operations and comprehensive income and condensed consolidated statements of cash flows, we use EBITDA, a non-GAAP financial measure. Net 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.

16 

We define EBITDA as net income plus interest, income taxes, depreciation and amortization. Net income was $368,168 for the three months ended September 30, 2017, as compared to $546,082 for the three months ended September 30, 2016. EBITDA, a non-GAAP financial measure, was $0.9 million for the three months ended September 30, 2017 and 2016. Net income was $792,688 for the six months ended September 30, 2017, as compared to $991,385 for the six months ended September 30, 2016. EBITDA, a non-GAAP financial measure, was $1.9 million for the six months ended September 30, 2017, as compared to $1.7 million for the six months ended September 30, 2016.

The following table provides a reconciliation of EBITDA to net income, the most directly comparable U.S. GAAP measure reported in our condensed consolidated financial statements:

(dollars in thousands)	Three months ended September 30, 2017		Three months ended September 30, 2016		Change Amount
Net income	$	368	$	546	$	(178	)
Income tax expense		246		12		234
Interest expense (1)		100		183		(83	)
Depreciation		180		177		3
EBITDA	$	894	$	918	$	(24	)

(dollars in thousands)	Six months ended September 30, 2017		Six months ended September 30, 2016		Change Amount
Net income	$	793	$	991	$	(198	)
Income tax expense		533		21		512
Interest expense (1)		209		376		(167	)
Depreciation		351		353		(2	)
EBITDA	$	1,886	$	1,741	$	145

(1)       Includes amortization of debt issue costs.

Liquidity and Capital Resources

At September 30, 2017, we had cash and cash equivalents of $2.5 million. Net cash provided by operating activities for the six months ended September 30, 2017 was $0.5 million, compared to net cash provided by operating activities for the six months ended September 30, 2016 of $1.4 million. Net cash used in investing activities was $0.8 million for the six months ended September 30, 2017. At September 30, 2017, we had working capital of $5.7 million as compared with working capital of $5.0 million at March 31, 2017. The table below presents selected liquidity and capital measures as of:

(dollars in thousands)	September 30, 2017		March 31, 2017		Change Amount
Cash and cash equivalents	$	2,490	$	3,066	$	(576	)
Working capital	$	5,667	$	4,979	$	688
Total debt	$	5,429	$	5,781	$	(352	)
Total stockholders’ equity	$	8,915	$	7,970	$	945

The following table summarizes our primary cash flows for the periods presented:

(dollars in thousands)	September 30, 2017			September 30, 2016			Change Amount
Cash flows provided by (used in):
Operating activities	$	542		$	1,429		$	(887	)
Investing activities		(765	)		(115	)		(650	)
Financing activities		(353	)		192			(545	)
Net (decrease) increase in cash	$	(576	)	$	1,506		$	(2,082	)

At September 30, 2017 we were in compliance with all financial covenants contained in all of our debt agreements. We believe our available cash will be sufficient to fund our operations, capital expenditures and principal and interest payments under our debt obligations through the 12 months from the issuance date of our financial statements.

17 

Operating activities

Our primary sources of cash are from accounts receivable collections, customer advance payments and project progress payments. 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 the composition of our receivables collections mix changes between advance payments and customer payments made after shipment of finished goods. Cash provided by operations for the six months ended September 30, 2017 was $0.5 million compared with cash provided by operations of $1.4 million for the six months ended September 30, 2016. The six month period ended September 30, 2017 was marked by a change in the customer project mix which resulted in less cash collected from customer advances and progress payments.

Investing activities

Net cash used in investing activities totaled $0.8 million for the six months ended September 30, 2017. We expended $0.8 million for new factory machinery and equipment, offset in part by $80,000 in proceeds from the sale of certain machinery and equipment.

Financing activities

For the six months ended September 30, 2017, net cash used in financing activities was $0.4 million of monthly principal payments in connection with our debt obligations. For the six months ended September 30, 2016, cash provided by financing activities was $192,221. During the six months ended September 30, 2016, we received proceeds of $3.0 million from our MLSA with People's. In connection with the People’s MLSA, $2.7 million of the proceeds were disbursed as payment in full for the principal obligations under our previous Loan and Security Agreement with Utica LeaseCo, LLC. We also paid $145,995 in loan closing costs for our outstanding debt during the six months ended September 30, 2016.

All of the above activity resulted in a net decrease in cash of $0.6 million for the six months ended September 30, 2017 compared with an increase in cash of $1.5 million for the six months ended September 30, 2016.

Off-Balance Sheet Arrangements

We do not currently have, and have not had during the six months ended September 31, 2017, any off-balance sheet assets, liabilities or arrangements.

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 September 30, 2017, our disclosure controls and procedures were effective at a reasonable assurance level.

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. generally accepted accounting principles, or 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.

18 

Changes in Internal Control over Financial Reporting

For the quarter ended September 30, 2017, 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.

PART II. OTHER INFORMATION.

Item 1. Legal Proceedings.

Class Action Lawsuit

There have been no material changes to the legal proceedings discussed in Item 3. "Legal Proceedings," in the 2017 Form 10-K.

Item 6. Exhibits.

Exhibit No.	Description
3.1	Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 3.1 to our registration statement on Form SB-2, filed with the Commission on August 28, 2006).

3.2 Amended and Restated By-laws of the Registrant (incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the Commission on February 3, 2014).

3.3	Certificate of Designation for Series A Convertible Preferred Stock of the Registrant (incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the Commission on March 3, 2006)
3.4	Certificate of Amendment to Certificate of Designation for Series A Convertible Preferred Stock of the Registrant (incorporated herein by reference to Exhibit 3.5 to our Quarterly Report on Form 10-Q, filed with the Commission on November 12, 2009).
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	The following financial information from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at September 30, 2017 and March 31, 2017; (ii) the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended September 30, 2017 and 2016; (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2017 and 2016; and (v) the Notes to the Condensed Consolidated Financial Statements.

19 

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
November 13, 2017	By:	/s/ Thomas Sammons
		Thomas Sammons
		Chief Financial Officer
		(principal financial officer)
		(duly authorized officer)

20 

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Alexander Shen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TechPrecision Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 13, 2017	/s/ Alexander Shen
	Alexander Shen
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Thomas Sammons, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TechPrecision Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 13, 2017	/s/ Thomas Sammons
	Thomas Sammons
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of TechPrecision Corporation (the “Company”) for the quarter ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alexander Shen, the Chief Executive Officer of the Company, and I, Thomas Sammons, the Chief Financial Officer of the Company, do hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 13, 2017	/s/ Alexander Shen
	Alexander Shen
	Chief Executive Officer
Dated: November 13, 2017	/s/ Thomas Sammons
	Thomas Sammons
	Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Sep. 30, 2017	Nov. 07, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Entity Registrant Name	TECHPRECISION CORP
Entity Central Index Key	0001328792
Current Fiscal Year End Date	--03-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	TPCS
Entity Common Stock, Shares Outstanding		28,824,593

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2017	Mar. 31, 2017
Current assets:
Cash and cash equivalents	$ 2,489,626	$ 3,066,156
Accounts receivable, net	2,175,822	1,870,672
Costs incurred on uncompleted contracts, in excess of progress billings	3,213,329	2,097,221
Inventories - raw materials	200,787	141,792
Other current assets	546,633	422,096
Total current assets	8,626,197	7,597,937
Property, plant and equipment, net	5,369,167	4,912,202
Deferred income taxes	2,364,303	2,871,680
Other noncurrent assets, net	68,625	100,000
Total assets	16,428,292	15,481,819
Current liabilities:
Accounts payable	380,318	365,308
Accrued expenses	1,008,717	893,415
Billings on uncompleted contracts, in excess of related costs	827,573	642,831
Current portion of long-term debt	742,292	717,481
Total current liabilities	2,958,900	2,619,035
Long-term debt, including capital leases	4,546,078	4,874,721
Noncurrent accrued expenses	8,064	17,742
Commitments and contingent liabilities (see Note 14)
Stockholders’ Equity:
Common stock - par value $.0001 per share, 90,000,000 shares authorized, 28,824,593 shares issued and outstanding at September 30 and March 31, 2017	2,882	2,882
Additional paid in capital	8,409,517	8,258,820
Accumulated other comprehensive income	20,872	19,328
Retained earnings (accumulated deficit)	481,979	(310,709)
Total stockholders’ equity	8,915,250	7,970,321
Total liabilities and stockholders’ equity	$ 16,428,292	$ 15,481,819

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2017	Mar. 31, 2017
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	28,824,593	28,824,593
Common stock, shares outstanding	28,824,593	28,824,593

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Net sales	$ 4,588,894	$ 3,656,163	$ 10,419,280	$ 8,300,968
Cost of sales	3,155,893	2,182,547	7,245,692	5,291,959
Gross profit	1,433,001	1,473,616	3,173,588	3,009,009
Selling, general and administrative	720,341	739,585	1,640,100	1,627,763
Income from operations	712,660	734,031	1,533,488	1,381,246
Other income	1,456	6,824	1,547	7,575
Interest expense	(100,414)	(183,268)	(209,196)	(376,478)
Total other expense, net	(98,958)	(176,444)	(207,649)	(368,903)
Income before income taxes	613,702	557,587	1,325,839	1,012,343
Income tax expense	245,516	11,505	533,151	20,958
Net income	368,186	546,082	792,688	991,385
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	1,854	(281)	2,586	(1,223)
Other comprehensive income (loss), before tax	1,854	(281)	2,586	(1,223)
Income tax expense on other comprehensive income	746	0	1,042	0
Other comprehensive income (loss), net of tax	1,108	(281)	1,544	(1,223)
Comprehensive income	$ 369,294	$ 545,801	$ 794,232	$ 990,162
Net income per share (basic) (in dollars per share)	$ 0.01	$ 0.02	$ 0.03	$ 0.04
Net income per share (diluted) (in dollars per share)	$ 0.01	$ 0.02	$ 0.03	$ 0.04
Weighted average number of shares outstanding (basic) (in shares)	28,824,593	27,324,593	28,824,593	27,324,593
Weighted average number of shares outstanding (diluted) (in shares)	29,730,456	28,020,795	29,751,219	27,936,098

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 792,688	$ 991,385
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	351,422	353,488
Amortization of debt issue costs	37,038	90,049
Stock based compensation expense	150,697	22,910
Change in contract losses	29,139	(40,532)
Deferred income taxes	507,376	0
Changes in operating assets and liabilities:
Accounts receivable	(305,150)	1,118,019
Costs on uncompleted contracts, in excess of progress billings	(1,116,108)	240,431
Inventories - raw materials	(58,995)	3,005
Other current assets	(124,537)	152,051
Other noncurrent assets and liabilities	(9,678)	(819)
Accounts payable	15,010	(406,463)
Accrued expenses	88,319	(170,369)
Accrued taxes	0	20,958
Billings on uncompleted contracts, in excess of related costs	184,742	(945,358)
Net cash provided by operating activities	541,963	1,428,755
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment	80,000	0
Deposit for fixed assets	(36,987)	0
Purchases of property, plant and equipment	(808,386)	(114,856)
Net cash used in investing activities	(765,373)	(114,856)
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred loan costs	0	(145,995)
Borrowings of long-term debt	0	3,011,648
Repayment of long-term debt	(352,509)	(2,673,432)
Net cash (used in) provided by financing activities	(352,509)	192,221
Effect of exchange rate on cash and cash equivalents	(611)	42
Net (decrease) increase in cash and cash equivalents	(576,530)	1,506,162
Cash and cash equivalents, beginning of period	3,066,156	1,332,166
Cash and cash equivalents, end of period	2,489,626	2,838,328
Cash paid during the period for:
Interest	185,415	479,179
Income taxes	$ 30,000	$ 20,000

XML

DESCRIPTION OF BUSINESS

6 Months Ended

Sep. 30, 2017

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS

NOTE 1 - DESCRIPTION OF BUSINESS

TechPrecision Corporation, or TechPrecision, is the parent company of Ranor, Inc., or Ranor, a Delaware corporation and Wuxi Critical Mechanical Components Co., Ltd., or WCMC, a wholly foreign owned enterprise (WFOE) organized under the laws of the People’s Republic of China. TechPrecision, WCMC and Ranor are collectively referred to as the “Company”, “we”, “us” or “our”.

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.

XML

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Sep. 30, 2017

SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 and WCMC. Intercompany transactions and balances have been eliminated in consolidation. The accompanying condensed consolidated balance sheets as of September 30, 2017 and March 31, 2017, the condensed consolidated statements of operations and comprehensive income for the three and six months ended September 30, 2017 and 2016, and the condensed consolidated statements of cash flows for the six months ended September 30, 2017 and 2016 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 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.

The Notes to 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 note 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 our consolidated financial statements included with our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, or the 2017 Form 10-K, filed with the SEC on June 29, 2017.

Significant Accounting Policies

Our significant accounting policies are set forth in detail in Note 2 to the 2017 Form 10-K.

XML

NEW ACCOUNTING STANDARDS

6 Months Ended

Sep. 30, 2017

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles

NOTE 3 - NEW ACCOUNTING STANDARDS

New Accounting Standards Recently Adopted

In March 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share Based Payment Accounting, or ASU 2016-09, which contains authoritative guidance intended to simplify various aspects to how share-based payment awards to employees are accounted for and presented in the financial statements. We adopted this guidance as of April 1, 2017, on a prospective basis. The guidance eliminates additional paid-in capital pools and allows entities to record tax benefits within income tax expense in the consolidated statement of operations, classify any excess tax benefits within net cash provided by operating activities in the consolidated statement of cash flows, and account for award forfeitures as they occur. The adoption of this new guidance did not have an impact on our financial statements and disclosures.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, or ASU 2015-11. The new guidance defines net realizable value as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This definition is consistent with existing authoritative guidance. We adopted this guidance as of April 1, 2017, on a prospective basis. The adoption did not have an impact on our financial statements and disclosures.

Issued Standards Not Yet Adopted

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments, or ASU 2016-15. The new guidance reduces the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We are currently evaluating the impact that this guidance will have on our financial statements and disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, the authoritative guidance that changes the criteria for recognizing revenue from a contract with a customer. The new revenue recognition standard replaces existing guidance on revenue recognition, including most industry specific guidance, with a five step model for recognizing and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets.

The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. Current practice is primarily a risk and rewards based model, while the new standard introduces the concept of inventory control and satisfaction of performance obligations over time. We are currently assessing the impact that the new revenue recognition guidance may have on our financial statements and disclosures by comparing our current revenue recognition policy with the requirements of the new standard. A review of contracts with our largest customers which represents more than 80% of our revenue is underway, and it is probable that our current practices may no longer be viable for all customers under the new revenue recognition guidance. The guidance also requires a number of disclosures regarding the nature, amount, timing and uncertainty of revenue and the related cash flows.

The new guidance can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method). The guidance is effective for annual reporting periods beginning on or after December 15, 2017. We plan to adopt the new standard on April 1, 2018.

In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, or ASU 2016-20. The amendments in ASU 2016-20 update and affect narrow aspects of the guidance issued in ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, Narrow Scope Improvements and Practical Expedients, which provided revised guidance on certain issues relating to revenue from contracts with customers, including clarification of the objective of the collectability criterion. In March 2016, the FASB issued an amendment to clarify the implementation guidance for principal versus agent considerations and in April 2016 issued a final amendment to clarify the guidance related to identifying performance obligations and the accounting for intellectual property licenses. We are currently evaluating the impact these updates may have on our financial statements and disclosures.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra Entity Transfers of Assets Other Than Inventory, or ASU 2016-16. The guidance in ASU 2016-16 requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases, or ASU 2016-02. Under this amendment, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the impact ASU 2016-02 will have on our financial statements and disclosures.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, or ASU 2017-09. ASU 2017-09 provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017. We are currently evaluating the impact ASU 2017-09 will have on our financial statements and disclosures.

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PROPERTY, PLANT AND EQUIPMENT, NET

6 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following as of: 

	September 30, 2017		March 31, 2017
Land	$	110,113	$	110,113
Building and improvements		3,252,908		3,252,908
Machinery equipment, furniture and fixtures		9,896,917		8,601,199
Construction in progress		--		487,331
Equipment under capital leases		54,376		54,376
Total property, plant and equipment		13,314,314		12,505,927
Less: accumulated depreciation		(7,945,147)		(7,593,725)
Total property, plant and equipment, net	$	5,369,167	$	4,912,202

Depreciation expense, which includes amortization of equipment under capital leases, for the three and six months ended September 30, 2017 and 2016 was $179,808 and $351,422, and $177,438 and $353,488, respectively.

 

Capitalized leases were $54,376 at the end of September 30, 2017 and March 31, 2017. Accumulated depreciation on all property, plant and equipment accounted for as capitalized leases at September 30, 2017 and March 31, 2017, was $8,156 and $2,719, respectively.

We capitalize interest during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. Capitalized interest for the three and six months ended September 30, 2017 was $8,590 and $13,257, respectively.

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COSTS INCURRED ON UNCOMPLETED CONTRACTS

6 Months Ended

Sep. 30, 2017

COSTS INCURRED ON UNCOMPLETED CONTRACTS

COSTS INCURRED ON UNCOMPLETED CONTRACTS

NOTE 5 - COSTS INCURRED ON UNCOMPLETED CONTRACTS

The following table sets forth information as to costs incurred on uncompleted contracts as of:

	September 30, 2017		March 31, 2017
Cost incurred on uncompleted contracts, beginning balance	$	5,538,815	$	5,491,605
Total cost incurred on contracts during the year		6,351,959		12,501,752
Less: cost of sales, during the year		(7,245,692)		(12,454,542)
Cost incurred on uncompleted contracts, ending balance	$	4,645,082	$	5,538,815
Billings on uncompleted contracts, beginning balance	$	3,441,594	$	3,095,963
Total billings incurred on contracts, during the year		8,409,439		18,896,305
Less: Contracts recognized as revenue, during the year		(10,419,280)		(18,550,674)
Billings on uncompleted contracts, ending balance	$	1,431,753	$	3,441,594
Cost incurred on uncompleted contracts, ending balance	$	4,645,082	$	5,538,815
Billings on uncompleted contracts, ending balance		1,431,753		3,441,594
Costs incurred on uncompleted contracts, in excess of progress billings	$	3,213,329	$	2,097,221

Contract costs consist primarily of labor and materials and related overhead, to the extent that such costs are recoverable. Revenues associated with these contracts are recorded only when the amount of recovery can be estimated reliably and realization is probable. As of September 30, 2017 and March 31, 2017, we had billings in excess of costs totaling $827,573 and $642,831, respectively. Billings on uncompleted contracts represent customer prepayments on their contracts and completed contracts for which all revenue recognition criteria were not met.   We also receive advance billings and deposits representing down payments for acquisition of materials and progress payments on contracts. The agreements with our customers allow us to offset the progress payments against the costs incurred.

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OTHER CURRENT ASSETS

6 Months Ended

Sep. 30, 2017

OTHER CURRENT ASSETS

OTHER CURRENT ASSETS

NOTE 6 - OTHER CURRENT ASSETS

Other current assets included the following as of:

	September 30, 2017		March 31, 2017
Payments advanced to suppliers	$	190,163	$	107,591
Prepaid insurance		226,174		229,132
Other		130,296		85,373
Total	$	546,633	$	422,096

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OTHER NONCURRENT ASSETS

6 Months Ended

Sep. 30, 2017

OTHER NONCURRENT ASSETS

OTHER NONCURRENT ASSETS

NOTE 7 - OTHER NONCURRENT ASSETS

Other noncurrent assets included the following as of:

	September 30, 2017		March 31, 2017
Assets held for sale	$	20,000	$	100,000
Deposit for fixed assets		36,987		--
Prepaid loan costs		11,638		--
Total	$	68,625	$	100,000

At September 30, 2017 and March 31, 2017, we classified certain machinery and equipment of $20,000 and $100,000, respectively, to assets held for sale. This amount approximates fair value net of selling costs. We expect to sell the remaining fixed asset held for sale before the end of fiscal 2018. In fiscal 2017, we wrote down certain machinery held for sale and subsequently sold the machinery in May 2017.

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ACCRUED EXPENSES

6 Months Ended

Sep. 30, 2017

ACCRUED EXPENSES

ACCRUED EXPENSES

NOTE 8 - ACCRUED EXPENSES

Accrued expenses included the following as of:  

	September 30, 2017		March 31, 2017
Accrued compensation	$	551,128	$	568,766
Provision for contract losses		177,838		148,699
Accrued professional fees		141,139		142,648
Accrued project costs		97,525		--
Other		41,087		33,302
Total	$	1,008,717	$	893,415

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. 

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DEBT

6 Months Ended

Sep. 30, 2017

DEBT

DEBT

NOTE 9 - DEBT

Long-term debt included the following as of: 

	September 30, 2017		March 31, 2017
Commerce Term Loan due January 2022	$	2,788,161	$	2,828,844
People’s Equipment Loan Facility due April 2021		2,584,086		2,884,982
Obligations under capital leases		56,423		67,353
Total debt	$	5,428,670	$	5,781,179
Less: debt issue costs unamortized	$	140,300	$	188,977
Total debt, net	$	5,288,370	$	5,592,202
Less: Current portion of long-term debt	$	742,292	$	717,481
Total long-term debt, net	$	4,546,078	$	4,874,721

Commerce Bank & Trust Company Loan Facility

On December 21, 2016, TechPrecision, through Ranor, closed on a Loan Agreement, or the Commerce Loan Agreement, with Commerce Bank & Trust Company, or Commerce.  Pursuant to the Commerce Loan Agreement, Commerce made a term loan to Ranor in the amount of $2,850,000, or the Term Loan, and made available to Ranor a revolving line of credit in the amount of $1,000,000, or the Revolver Loan, and together with the Term Loan, the Commerce Loans.  The Commerce Loans are secured by a first lien on all personal and real property of Ranor.  Starting on January 20, 2017, payments on the Term Loan began and will be 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 December 20, 2021.  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 to any collateral or if a full prepayment is made during the 45-day period immediately preceding the maturity date.  Advances under the Revolver Loan will be subject to a borrowing base equal to the lesser of (A) $1,000,000 and (B) the sum of (i) 80% of eligible accounts receivable, and (ii) the lesser of (a) 25% of eligible raw material inventory and (b) $250,000.  Advances made under the Revolver Loan bear interest at a variable rate equal to the one-month LIBOR plus 275 basis points.  Interest-only payments on advances made under the Revolver Loan will be payable monthly in arrears.  The Revolver Loan will mature on December 21, 2018.  Ranor’s obligations under the Commerce Loan Agreement are guaranteed by TechPrecision. There were no amounts outstanding under the Revolver Loan at September 30, 2017 and March 31, 2017. Unamortized debt issue costs for the Term Loan at September 30, 2017 were $52,594.

 

The Commerce Loan Agreement contains a covenant whereby the Company is required to maintain a debt service coverage ratio, or DSCR, of at least 1.2 to 1.0 during the term of the Commerce Loans.  The DSCR will be measured at the end of each fiscal quarter of the Company.  Pursuant to the Commerce Loan Agreement, Ranor also covenants (a) to cause its balance sheet leverage to be less than or equal to 3.00 to 1.00 for the fiscal year ending March 31, 2018, and less than or equal to 2.50 to 1.00 for the fiscal year ending March 31, 2019 and each fiscal year end thereafter, and (b) that its annual capital expenditures shall not exceed $2,500,000 for the fiscal year ending March 31, 2018, $2,500,000 for the fiscal year ended March 31, 2019, and $1,500,000 for the fiscal year ending March 31, 2020 and each fiscal year end thereafter.  The Commerce Loan Agreement contains an additional covenant whereby Ranor is required to maintain a loan-to-value ratio of not greater than 0.75 to 1.00, to be measured by appraisal not more frequently than one time during each 365-day period. At September 30, 2017 and March 31, 2017, the DSCR was 3.07 to 1.00 and 3.40 to 1.00, respectively. At March 31, 2017, the leverage ratio was 1.01 to 1.00.

 

People’s Capital and Leasing Corp. Equipment Loan Facility

On April 26, 2016, TechPrecision, through Ranor, executed and closed a Master Loan and Security Agreement, or the MLSA, with People’s Capital and Leasing Corp., or People’s.  Loan proceeds were disbursed to Ranor on April 26, 2016.  Pursuant to the MLSA, People’s loaned $3,011,648 to Ranor, or the People’s Loan. The People’s Loan is secured by a first lien on certain machinery and equipment of Ranor, or the Equipment Collateral.  Payments on the People’s Loan will be made in 60 monthly installments of $60,921 each, inclusive of interest at a fixed rate of 7.90% per annum.  A prepayment penalty will apply during the first four years of the loan term.  Ranor’s obligations under the MLSA are guaranteed by TechPrecision.  The Company covenants to maintain a DSCR of at least 1.5 to 1.0 during the term of the People’s Loan.  The DSCR will be measured at the end of each fiscal year of the Company. At March 31, 2017, the DSCR was 2.86 to 1.00. The People’s Loan may be accelerated upon the occurrence of an “Event of Default” (as defined in the MLSA). Some of the Events of Default are subject to certain cure periods. Unamortized debt issue costs at September 30, 2017 were $87,706.

 

Capital Lease

We entered into a new capital lease in January 2017 for certain office equipment. The lease term is for 60 months, bears interest at 7.9% per annum and requires monthly payments of principal and interest of $1,169. Concurrently, in January 2017 we retired certain office equipment under an existing capital lease which was amended in 2014. The revised lease term will expire in March 2018 and the required monthly payments of principal and interest will be $1,187 through October 2017, and then $720 until the lease payment expires in September 2018.

Collateral securing the above obligations comprises all personal and real property of TechPrecision and Ranor, including cash, accounts receivable, inventories, equipment, financial and intangible assets.

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INCOME TAXES

6 Months Ended

Sep. 30, 2017

INCOME TAXES

INCOME TAXES

NOTE 10 - INCOME TAXES

We account for income taxes under the provisions of FASB 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 provision for income taxes was $533,151 and $20,958 and the effective tax rate was 40.2% and 2.1%, for the six months ended September 30, 2017 and 2016, respectively. The low effective tax rate for the six months ended September 30, 2016 was a result of net operating loss utilization and the associated reduction in the valuation allowance which had been provided for this deferred tax asset. The tax provision for the six months ended September 30, 2016 was an accrual for the alternative minimum tax.

The valuation allowance on deferred tax assets at September 30, 2017 and March 31, 2017 was approximately $1.5 million. We believe that it is more likely than not that the benefit from certain state and foreign 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 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.

We regularly assess the effects of various factors to determine the adequacy of our provision for income taxes. For example, our future effective tax rate would be affected if earnings were lower than anticipated in tax jurisdictions where we have lower statutory rates and higher than anticipated in tax jurisdictions where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles or interpretations thereof. 

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PROFIT SHARING PLAN

6 Months Ended

Sep. 30, 2017

PROFIT SHARING PLAN

PROFIT SHARING PLAN

NOTE 11 - PROFIT SHARING PLAN

Ranor has a 401(k) profit sharing plan that covers substantially all Ranor employees who have completed 90 days of service. Ranor retains the option to match employee contributions. The Company’s contributions were $40,850 and $39,653 for the six months ended September 30, 2017 and 2016, respectively.

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STOCK BASED COMPENSATION

6 Months Ended

Sep. 30, 2017

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

NOTE 12 - STOCK BASED COMPENSATION

Our board of directors, upon the recommendation of the previously constituted compensation committee of our board of directors, approved 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, and it applies to awards granted after that date. The 2016 Plan provides for a share reserve of 5,000,000 shares of common stock.

On April 4, 2017, we granted stock options to members of our board of directors to collectively purchase 200,000 shares of common stock at an exercise price of $0.74 per share, the closing stock market price on the date of grant. The weighted average fair value of the options on the grant date was $0.60 each. Forty percent of the options granted vested immediately. The remaining options will vest equally at the end of each quarter during fiscal 2018, beginning with the second quarter of fiscal 2018. The aggregate fair value of the stock options expensed during the six months ended September 30, 2017 was $84,138. 

The fair value of the options we grant is 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 underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The average dividend yield over the historical period for which volatility was computed is zero. The risk-free interest rate was selected based upon yields of five-year U.S. Treasury issues. We used the simplified method for all grants to estimate the expected life of the option. We assume that stock options will be exercised evenly over the period from vesting until the awards expire. As such, the assumed period for each vesting tranche is computed separately and then averaged together to determine the expected term for the award. The assumptions utilized for options granted during the period were 110.1% for volatility, 1.88% for the risk free interest rate and approximately six years for the expected life. At September 30, 2017, there were 1,803,332 shares available for grant under the 2016 Plan.

 

The following table summarizes information about options for the six months ended September 30, 2017:

	Number Of		Weighted Average		Aggregate Intrinsic		Weighted Average Remaining Contractual Life
	Options		Exercise Price		Value		(in years)
Outstanding at 3/31/2017		3,002,668	$	0.387	$	1,246,600		5.72
Granted		200,000	$	0.740		--		--
Forfeited		(6,000)	$	1.960		--		--
Outstanding at 9/30/2017		3,196,668	$	0.406	$	1,084,600		6.22
Vested or expected to vest at 9/30/2017		3,196,668	$	0.406	$	1,084,600		6.22
Exercisable and vested at 9/30/2017		2,576,668	$	0.394	$	934,600		6.22

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 second quarter of fiscal 2018 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 September 30, 2017. This amount changes based on the fair market value of the Company’s common stock.

The following table summarizes the status of our stock options outstanding but not vested for the six month period ended September 30, 2017:

	Number of Options		Weighted Average Exercise Price
Outstanding at 3/31/2017		833,334	$	0.266
Granted		200,000	$	0.740
Vested		(413,334)	$	0.208
Outstanding at 9/30/2017		620,000	$	0.458

The total fair value of shares vested during the period was $74,747. Other information relating to stock options outstanding at September 30, 2017 is as follows:

 

Range of Exercise Prices:	Options Outstanding		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Options Exercisable		Weighted Average Exercise Price
$0.01-$1.00		3,021,668		6.92	$	0.34		2,401,668	$	0.31
$1.01-$1.96		175,000		2.84	$	1.59		175,000	$	1.59
Totals		3,196,668						2,576,668

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CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

6 Months Ended

Sep. 30, 2017

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

NOTE 13 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

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 September 30, 2017, there were accounts receivable balances outstanding from two customers comprising 82% of the total receivables balance. The following table sets forth information as to accounts receivable from customers who accounted for more than 10% of our accounts receivable balance as of: 

 

	September 30, 2017					March 31, 2017
Customer	Dollars		Percent			Dollars		Percent
A	$	1,478,882		68	%	$	*		*	%
B	$	308,638		14	%	$	961,463		51	%
C	$	*		*	%	$	406,428		22	%
D	$	*		*	%	$	187,410		10	%

*less than 10% of total

We have been dependent in 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 information as to net sales from customers who accounted for more than 10% of our net sales in the periods presented:

	Three months ended September 30, 2017					Three months ended September 30, 2016					Six months ended September 30, 2017					Six months ended September 30, 2016
Customer	Dollars		Percent			Dollars		Percent			Dollars		Percent			Dollars		Percent
A	$	2,061,276		45	%	$	383,253		10	%	$	4,950,432		48	%	$	*		*	%
B	$	746,877		16	%	$	*		*	%	$	2,330,088		22	%	$	1,457,222		18	%
C	$	*		*	%	$	*		*	%	$	1,079,832		10	%	$	*		*	%
D	$	*		*	%	$	1,998,724		55	%		*		*	%	$	3,285,065		40	%
E	$	*		*	%	$	*		*	%		*		*	%	$	1,741,084		21	%

*less than 10% of total

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COMMITMENTS

6 Months Ended

Sep. 30, 2017

COMMITMENTS

COMMITMENTS

NOTE 14 - COMMITMENTS

Employment Agreements

We have employment agreements with each of our executive officers. Such agreements provide for minimum salary levels, adjusted annually, and incentive bonuses that are payable if specified company goals are attained. The aggregate commitment at September 30, 2017 for future executive salaries during the next twelve months was approximately $0.5 million. The aggregate commitment for the remainder of our employees at September 30, 2017 was approximately $0.3 million for accrued payroll, vacation and holiday pay.

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EARNINGS PER SHARE (EPS)

6 Months Ended

Sep. 30, 2017

EARNINGS PER SHARE (EPS)

EARNINGS PER SHARE (EPS)

NOTE 15 - EARNINGS PER SHARE (EPS)

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, as required under FASB ASC 260:

	Three months ended September 30, 2017		Three months ended September 30, 2016		Six months ended September 30, 2017		Six months ended September 30, 2016
Basic EPS
Net Income	$	368,186	$	546,082	$	792,688	$	991,385
Weighted average shares		28,824,593		27,324,593		28,824,593		27,324,593
Basic Income per share	$	0.01	$	0.02	$	0.03	$	0.04
Diluted EPS
Net Income	$	368,186	$	546,082	$	792,688	$	991,385
Dilutive effect of stock options		905,863		696,202		926,626		611,505
Diluted weighted average shares		29,730,456		28,020,795		29,751,219		27,936,098
Diluted Income per share	$	0.01	$	0.02	$	0.03	$	0.04

All potential common share 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 and six months ended September 30, 2017, there were 596,668 and 496,668, respectively, of potentially anti-dilutive stock options, none of which were included in the EPS calculations above. For each of the three and six months ended September 30, 2016, there were 428,500 of potentially anti-dilutive stock options, none of which were included in the EPS calculations above.

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RECLASSIFICATION OF PRIOR YEAR PRESENTATION

6 Months Ended

Sep. 30, 2017

DESCRIPTION OF BUSINESS

RECLASSIFICATION OF PRIOR YEAR PRESENTATION

NOTE 16 – RECLASSIFICATION OF PRIOR YEAR PRESENTATION

Certain prior year amounts have been reclassified for consistency with the current year presentation. A reclassification has been made to the condensed consolidated balance sheets for fiscal year ended March 31, 2017, to offset deferred taxes within the same tax jurisdiction. This reclassification had no effect on the reported results of operations or the consolidated statements of cash flows.

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PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

6 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of components of property, plant and equipment, net

Property, plant and equipment, net consisted of the following as of: 

	September 30, 2017		March 31, 2017
Land	$	110,113	$	110,113
Building and improvements		3,252,908		3,252,908
Machinery equipment, furniture and fixtures		9,896,917		8,601,199
Construction in progress		--		487,331
Equipment under capital leases		54,376		54,376
Total property, plant and equipment		13,314,314		12,505,927
Less: accumulated depreciation		(7,945,147)		(7,593,725)
Total property, plant and equipment, net	$	5,369,167	$	4,912,202

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COSTS INCURRED ON UNCOMPLETED CONTRACTS (Tables)

6 Months Ended

Sep. 30, 2017

COSTS INCURRED ON UNCOMPLETED CONTRACTS

Schedule of costs incurred on uncompleted contracts

The following table sets forth information as to costs incurred on uncompleted contracts as of:

	September 30, 2017		March 31, 2017
Cost incurred on uncompleted contracts, beginning balance	$	5,538,815	$	5,491,605
Total cost incurred on contracts during the year		6,351,959		12,501,752
Less: cost of sales, during the year		(7,245,692)		(12,454,542)
Cost incurred on uncompleted contracts, ending balance	$	4,645,082	$	5,538,815
Billings on uncompleted contracts, beginning balance	$	3,441,594	$	3,095,963
Total billings incurred on contracts, during the year		8,409,439		18,896,305
Less: Contracts recognized as revenue, during the year		(10,419,280)		(18,550,674)
Billings on uncompleted contracts, ending balance	$	1,431,753	$	3,441,594
Cost incurred on uncompleted contracts, ending balance	$	4,645,082	$	5,538,815
Billings on uncompleted contracts, ending balance		1,431,753		3,441,594
Costs incurred on uncompleted contracts, in excess of progress billings	$	3,213,329	$	2,097,221

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OTHER CURRENT ASSETS (Tables)

6 Months Ended

Sep. 30, 2017

OTHER CURRENT ASSETS

Schedule of other current assets

Other current assets included the following as of:

	September 30, 2017		March 31, 2017
Payments advanced to suppliers	$	190,163	$	107,591
Prepaid insurance		226,174		229,132
Other		130,296		85,373
Total	$	546,633	$	422,096

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OTHER NONCURRENT ASSETS (Tables)

6 Months Ended

Sep. 30, 2017

OTHER NONCURRENT ASSETS

Schedule of other noncurrent assets

Other noncurrent assets included the following as of:

	September 30, 2017		March 31, 2017
Assets held for sale	$	20,000	$	100,000
Deposit for fixed assets		36,987		--
Prepaid loan costs		11,638		--
Total	$	68,625	$	100,000

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ACCRUED EXPENSES (Tables)

6 Months Ended

Sep. 30, 2017

ACCRUED EXPENSES

Schedule of accrued expenses

Accrued expenses included the following as of:  

	September 30, 2017		March 31, 2017
Accrued compensation	$	551,128	$	568,766
Provision for contract losses		177,838		148,699
Accrued professional fees		141,139		142,648
Accrued project costs		97,525		--
Other		41,087		33,302
Total	$	1,008,717	$	893,415

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DEBT (Tables)

6 Months Ended

Sep. 30, 2017

DEBT

Schedule of outstanding debt obligations

Long-term debt included the following as of: 

	September 30, 2017		March 31, 2017
Commerce Term Loan due January 2022	$	2,788,161	$	2,828,844
People’s Equipment Loan Facility due April 2021		2,584,086		2,884,982
Obligations under capital leases		56,423		67,353
Total debt	$	5,428,670	$	5,781,179
Less: debt issue costs unamortized	$	140,300	$	188,977
Total debt, net	$	5,288,370	$	5,592,202
Less: Current portion of long-term debt	$	742,292	$	717,481
Total long-term debt, net	$	4,546,078	$	4,874,721

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STOCK BASED COMPENSATION (Tables)

6 Months Ended

Sep. 30, 2017

STOCK BASED COMPENSATION

Summary of information about options for the periods presented

The following table summarizes information about options for the six months ended September 30, 2017:

	Number Of		Weighted Average		Aggregate Intrinsic		Weighted Average Remaining Contractual Life
	Options		Exercise Price		Value		(in years)
Outstanding at 3/31/2017		3,002,668	$	0.387	$	1,246,600		5.72
Granted		200,000	$	0.740		--		--
Forfeited		(6,000)	$	1.960		--		--
Outstanding at 9/30/2017		3,196,668	$	0.406	$	1,084,600		6.22
Vested or expected to vest at 9/30/2017		3,196,668	$	0.406	$	1,084,600		6.22
Exercisable and vested at 9/30/2017		2,576,668	$	0.394	$	934,600		6.22

Summary of activity of stock options outstanding but not vested

The following table summarizes the status of our stock options outstanding but not vested for the six month period ended September 30, 2017:

	Number of Options		Weighted Average Exercise Price
Outstanding at 3/31/2017		833,334	$	0.266
Granted		200,000	$	0.740
Vested		(413,334)	$	0.208
Outstanding at 9/30/2017		620,000	$	0.458

Stock Based Compensation By Exercise Price Range

The total fair value of shares vested during the period was $74,747. Other information relating to stock options outstanding at September 30, 2017 is as follows:

 

Range of Exercise Prices:	Options Outstanding		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Options Exercisable		Weighted Average Exercise Price
$0.01-$1.00		3,021,668		6.92	$	0.34		2,401,668	$	0.31
$1.01-$1.96		175,000		2.84	$	1.59		175,000	$	1.59
Totals		3,196,668						2,576,668

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CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS (Tables)

6 Months Ended

Sep. 30, 2017

Accounts Receivable

Concentration of credit risk and major customers

Schedule of concentration of risk by factors

	September 30, 2017					March 31, 2017
Customer	Dollars		Percent			Dollars		Percent
A	$	1,478,882		68	%	$	*		*	%
B	$	308,638		14	%	$	961,463		51	%
C	$	*		*	%	$	406,428		22	%
D	$	*		*	%	$	187,410		10	%

*less than 10% of total

Net sales

Concentration of credit risk and major customers

Schedule of concentration of risk by factors

	Three months ended September 30, 2017					Three months ended September 30, 2016					Six months ended September 30, 2017					Six months ended September 30, 2016
Customer	Dollars		Percent			Dollars		Percent			Dollars		Percent			Dollars		Percent
A	$	2,061,276		45	%	$	383,253		10	%	$	4,950,432		48	%	$	*		*	%
B	$	746,877		16	%	$	*		*	%	$	2,330,088		22	%	$	1,457,222		18	%
C	$	*		*	%	$	*		*	%	$	1,079,832		10	%	$	*		*	%
D	$	*		*	%	$	1,998,724		55	%		*		*	%	$	3,285,065		40	%
E	$	*		*	%	$	*		*	%		*		*	%	$	1,741,084		21	%

*less than 10% of total

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EARNINGS PER SHARE (EPS) (Tables)

6 Months Ended

Sep. 30, 2017

EARNINGS PER SHARE (EPS)

Schedule of reconciliation of the numerators and denominators reflected in the basic and diluted earnings per share computations

	Three months ended September 30, 2017		Three months ended September 30, 2016		Six months ended September 30, 2017		Six months ended September 30, 2016
Basic EPS
Net Income	$	368,186	$	546,082	$	792,688	$	991,385
Weighted average shares		28,824,593		27,324,593		28,824,593		27,324,593
Basic Income per share	$	0.01	$	0.02	$	0.03	$	0.04
Diluted EPS
Net Income	$	368,186	$	546,082	$	792,688	$	991,385
Dilutive effect of stock options		905,863		696,202		926,626		611,505
Diluted weighted average shares		29,730,456		28,020,795		29,751,219		27,936,098
Diluted Income per share	$	0.01	$	0.02	$	0.03	$	0.04

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NEW ACCOUNTING STANDARDS (Details)	6 Months Ended
	Sep. 30, 2017
Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Concentration Risk, Percentage	80.00%

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PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Mar. 31, 2017
Property, Plant and Equipment, Net
Total property, plant and equipment	$ 13,314,314		$ 13,314,314		$ 12,505,927
Less: accumulated depreciation	(7,945,147)		(7,945,147)		(7,593,725)
Total property, plant and equipment, net	5,369,167		5,369,167		4,912,202
Depreciation expense	179,808	$ 177,438	351,422	$ 353,488
Interest Costs Capitalized	8,590		13,257
Land
Property, Plant and Equipment, Net
Total property, plant and equipment	110,113		110,113		110,113
Building and improvements
Property, Plant and Equipment, Net
Total property, plant and equipment	3,252,908		3,252,908		3,252,908
Machinery equipment, furniture and fixtures
Property, Plant and Equipment, Net
Total property, plant and equipment	9,896,917		9,896,917		8,601,199
Construction in progress
Property, Plant and Equipment, Net
Total property, plant and equipment	0		0		487,331
Equipment under capital leases
Property, Plant and Equipment, Net
Total property, plant and equipment	54,376		54,376		54,376
Less: accumulated depreciation	$ (8,156)		$ (8,156)		$ (2,719)

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COSTS INCURRED ON UNCOMPLETED CONTRACTS (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Mar. 31, 2017	Sep. 30, 2017	Mar. 31, 2017
Cost incurred on uncompleted contracts
Cost incurred on uncompleted contracts, beginning balance			$ 5,538,815	$ 5,491,605	$ 5,491,605
Total cost incurred on contracts during the year			6,351,959		12,501,752
Less: cost of sales, during the year	$ (3,155,893)	$ (2,182,547)	(7,245,692)	(5,291,959)	(12,454,542)
Cost incurred on uncompleted contracts, ending balance	4,645,082		4,645,082		5,538,815
Billings on uncompleted contracts
Billings on uncompleted contracts, beginning balance			3,441,594	3,095,963	3,095,963
Total billings incurred on contracts, during the year			8,409,439		18,896,305
Less: Contracts recognized as revenue, during the year	(4,588,894)	$ (3,656,163)	(10,419,280)	(8,300,968)	(18,550,674)
Billings on uncompleted contracts, ending balance	1,431,753		1,431,753		3,441,594
Cost incurred on uncompleted contracts
Cost incurred on uncompleted contracts, ending balance	4,645,082		5,538,815	5,491,605	5,538,815	$ 4,645,082	$ 5,538,815
Billings on uncompleted contracts, ending balance	$ 1,431,753		$ 3,441,594	$ 3,095,963	$ 3,441,594	1,431,753	3,441,594
Costs incurred on uncompleted contracts, in excess of progress billings						3,213,329	2,097,221
Billings in excess of costs						$ 827,573	$ 642,831

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OTHER CURRENT ASSETS (Details) - USD ($)	Sep. 30, 2017	Mar. 31, 2017
Payments advanced to suppliers	$ 190,163	$ 107,591
Prepaid insurance	226,174	229,132
Other	130,296	85,373
Total	$ 546,633	$ 422,096

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OTHER NONCURRENT ASSETS (Details) - USD ($)	Sep. 30, 2017	Mar. 31, 2017
Other Noncurrent Assets [Line Items]
Assets held for sale	$ 20,000	$ 100,000
Deposit for fixed assets	36,987	0
Prepaid loan costs	11,638	0
Total	68,625	100,000
Machinery and Equipment [Member]
Other Noncurrent Assets [Line Items]
Assets held for sale	$ 20,000	$ 100,000

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ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2017	Mar. 31, 2017
Accrued Expenses
Accrued compensation	$ 551,128	$ 568,766
Provision for contract losses	177,838	148,699
Accrued professional fees	141,139	142,648
Accrued project costs	97,525	0
Other	41,087	33,302
Total	$ 1,008,717	$ 893,415

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DEBT - Long-term Debt (Details) - USD ($)	Sep. 30, 2017	Mar. 31, 2017
Long-term Debt
Total debt	$ 5,428,670	$ 5,781,179
Less: debt issue costs unamortized	140,300	188,977
Total debt, net	5,288,370	5,592,202
Less: Current portion of long-term debt	742,292	717,481
Total long-term debt, net	4,546,078	4,874,721
Commerce Term Loan due January 2022
Long-term Debt
Total debt	2,788,161	2,828,844
People's Equipment Loan Facility due April 2021
Long-term Debt
Total debt	2,584,086	2,884,982
Obligations under capital leases
Long-term Debt
Total debt	$ 56,423	$ 67,353

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DEBT - Commerce Bank & Trust Company Loan Facility (Details)		6 Months Ended	12 Months Ended
	Dec. 21, 2016 USD ($)	Sep. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)
Debt Instrument [Line Items]
Debt Issuance Costs, Net		$ 140,300	$ 188,977
Commerce Loan Agreement
Debt Instrument [Line Items]
Amount Included In Sum To Calculate Maximum Borrowing Base		$ 250,000
Debt Instrument, Description of Variable Rate Basis		one-month LIBOR plus 275 basis points
Debt Instrument Debt Service Coverage Ratio Threshold		1.2
Debt Instrument Covenant Leverage Ratio Year One		3.00
Debt Instrument Covenant Leverage Ratio Year Two		2.50
Debt Instrument Covenant Maximum Capital Expenditures To Be Incurred Year One		$ 2,500,000
Debt Instrument Covenant Maximum Capital Expenditures To Be Incurred Year Two		2,500,000
Debt Instrument Covenant Maximum Capital Expenditures To Be Incurred Year Three		$ 1,500,000
Debt Instrument Covenant Loan To Value Ratio		0.75
Debt Instrument Covenant Trailing Period For Measurement Of Loan To Value Ratio		365 days
Debt Instrument Covenant Leverage Ratio			1.0
Debt Instrument, Debt Service Coverage Ratio		3.07	3.40
Commerce Loan Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Maximum Amount Of Borrowing Base Required To Grant Loan Advance	$ 1,000,000
Debt Instrument Percentage Of Accounts Receivable Used For Determination Of Aggregate Amount Of Advances	80.00%
Debt Instrument Percentage Of Eligible Raw Material Used For Determination Of Aggregate Amount Of Advances	25.00%
Amount Included In Sum To Calculate Maximum Borrowing Base	$ 250,000
Commerce Loan Agreement | Secured Term Loan
Debt Instrument [Line Items]
Debt Instrument, Term	60 months
Debt Instrument, Periodic Payment	$ 19,260
Debt Instrument Prepayment Period	45 days
Debt Instrument, Interest Rate, Stated Percentage	5.21%
Commerce Loan Agreement | Ranor, Inc. | Revolving Credit Facility
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,000,000
Commerce Loan Agreement | Ranor, Inc. | Secured Term Loan
Debt Instrument [Line Items]
Debt Instrument, Face Amount	2,850,000
Peoples and Commerce Loan Agreements
Debt Instrument [Line Items]
Debt Issuance Costs, Net	$ 52,594

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DEBT - People's Capital and Leasing Corp. Equipment Loan Facility (Details)	1 Months Ended	12 Months Ended
	Apr. 26, 2016 USD ($)	Mar. 31, 2017 USD ($)	Sep. 30, 2017 USD ($)
Debt Instrument [Line Items]
Debt Issuance Costs, Net		$ 188,977	$ 140,300
People's Capital and Leasing Corp
Debt Instrument [Line Items]
Debt Instrument, Debt Service Coverage Ratio		2.86
Debt Issuance Costs, Net			$ 87,706
MLSA | People's Capital and Leasing Corp
Debt Instrument [Line Items]
Debt Instrument Debt Service Coverage Ratio Threshold	1.5
MLSA | People's Capital and Leasing Corp | Secured Term Loan
Debt Instrument [Line Items]
Debt Instrument, Term	60 months
Debt Instrument, Interest Rate, Stated Percentage	7.90%
Debt Instrument, Periodic Payment	$ 60,921
MLSA | People's Capital and Leasing Corp | Secured Term Loan | Ranor, Inc.
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 3,011,648

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DEBT - Capital Lease (Details) - Long-term obligations under capital leases	1 Months Ended
	Jan. 31, 2017 USD ($)
New Lease [Member]
Debt
Capital lease term	60 months
Capital lease interest rate (as a percent)	7.90%
Capital lease monthly payment	$ 1,169
Old Lease [Member]
Debt
Lease Payment Until Expire	720
Maturities of the long-term debt, including the capital lease
Repayments of Long-term Capital Lease Obligations	$ 1,187

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INCOME TAXES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Mar. 31, 2017
Income Tax Expense (Benefit)	$ 245,516	$ 11,505	$ 533,151	$ 20,958
Effective Income Tax Rate Reconciliation, Percent			40.20%	2.10%
Deferred Tax Assets, Valuation Allowance	$ 1,500,000		$ 1,500,000		$ 1,500,000

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PROFIT SHARING PLAN (Details) - Ranor, Inc. - USD ($)	6 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
PROFIT SHARING PLAN
Eligibility for employer matching contributions, period of service	90 days
Matching contributions made by the company	$ 40,850	$ 39,653

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STOCK BASED COMPENSATION - Summary (Details) - USD ($)	1 Months Ended	6 Months Ended
	Apr. 04, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 08, 2016
Share based compensation
Options granted (in shares)		200,000
Exercise price of shares granted (in dollars per share)		$ 0.74
Assumption used in valuation of stock options
Volatility rate (as a percent)		110.10%
Risk free interest rate (as a percent)		1.88%
Fair value of shares vested		$ 74,747
Share-based Compensation		$ 150,697	$ 22,910
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 0.60
2016 Plan
Assumption used in valuation of stock options
Shares reserved				5,000,000
Shares available for grant		1,803,332
Members of board
Share based compensation
Options granted (in shares)	200,000
Exercise price of shares granted (in dollars per share)	$ 0.74
Board of directors
Assumption used in valuation of stock options
Share-based Compensation		$ 84,138

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STOCK BASED COMPENSATION - Stock Option Activity (Details) - USD ($)	6 Months Ended	12 Months Ended
	Sep. 30, 2017	Mar. 31, 2017
Number Of Options
Outstanding at the beginning of the period (in shares)	3,002,668
Granted (in shares)	200,000
Forfeited (in shares)	(6,000)
Outstanding at the end of the period (in shares)	3,196,668	3,002,668
Vested or expected to vest at the end of the period (in shares)	3,196,668
Exercisable and vested at the end of the period (in shares)	2,576,668
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 0.387
Granted (in dollars per share)	0.74
Forfeited (in dollars per share)	1.960
Outstanding at the end of the period (in dollars per share)	0.406	$ 0.387
Vested or expected to vest at the end of the period (in dollars per share)	0.406
Exercisable and vested at the end of the period (in dollars per share)	$ 0.394
Aggregate Intrinsic Value
Outstanding at the beginning of the period	$ 1,246,600
Granted (in values)	0
Outstanding at the end of the period	1,084,600	$ 1,246,600
Vested or expected to vest at the end of the period	1,084,600
Exercisable and vested at the end of the period	$ 934,600
Weighted Average Remaining Contractual Life
Outstanding at the end of the period	6 years 2 months 19 days	5 years 8 months 19 days
Vested or expected to vest at the end of the period	6 years 2 months 19 days
Exercisable and vested at the end of the period	6 years 2 months 19 days

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STOCK BASED COMPENSATION - Stock Options Outstanding (Details)	6 Months Ended
	Sep. 30, 2017 $ / shares shares
Stock options outstanding but not vested, Number of Options
Outstanding at the beginning of the period (in shares) | shares	833,334
Granted (in shares) | shares	200,000
Vested (in shares) | shares	(413,334)
Outstanding at the end of the period (in shares) | shares	620,000
Stock options outstanding but not vested, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share) | $ / shares	$ 0.266
Granted (in dollars per share) | $ / shares	0.74
Vested (in dollars per share) | $ / shares	0.208
Outstanding at the end of the period (in dollars per share) | $ / shares	$ 0.458

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STOCK BASED COMPENSATION - Stock Options Outstanding By Exercise Price (Details)	6 Months Ended
	Sep. 30, 2017 $ / shares shares
Stock Based Compensation By Exercise Price Range
Options Outstanding | shares	3,196,668
Options Exercisable | shares	2,576,668
Range One
Stock Based Compensation By Exercise Price Range
Exercise Price, Lower Range	$ 0.01
Exercise Price, Upper Range	$ 1
Options Outstanding | shares	3,021,668
Options Outstanding, Weighted Average Remaining Contractual Term	6 years 11 months 1 day
Options Outstanding, Weighted Average Exercise Price	$ 0.34
Options Exercisable | shares	2,401,668
Options Exercisable, Weighted Average Exercise Price	$ 0.31
Range Two
Stock Based Compensation By Exercise Price Range
Exercise Price, Lower Range	1.01
Exercise Price, Upper Range	$ 1.96
Options Outstanding | shares	175,000
Options Outstanding, Weighted Average Remaining Contractual Term	2 years 10 months 2 days
Options Outstanding, Weighted Average Exercise Price	$ 1.59
Options Exercisable | shares	175,000
Options Exercisable, Weighted Average Exercise Price	$ 1.59

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CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS (Details) - USD ($)	3 Months Ended				6 Months Ended				12 Months Ended
	Sep. 30, 2017		Sep. 30, 2016		Sep. 30, 2017		Sep. 30, 2016		Mar. 31, 2017
Concentration of credit risk and major customers
Accounts receivable	$ 2,175,822				$ 2,175,822				$ 1,870,672
Net sales	4,588,894		$ 3,656,163		$ 10,419,280		$ 8,300,968		18,550,674
Accounts Receivable | Customer Concentration Risk
Concentration of credit risk and major customers
Concentration risk percentage					82.00%
Accounts Receivable | Customer Concentration Risk | Customer A
Concentration of credit risk and major customers
Accounts receivable	1,478,882				$ 1,478,882					[1]
Concentration risk percentage					68.00%					[1]
Accounts Receivable | Customer Concentration Risk | Customer B
Concentration of credit risk and major customers
Accounts receivable	308,638				$ 308,638				$ 961,463
Concentration risk percentage					14.00%				51.00%
Accounts Receivable | Customer Concentration Risk | Customer C
Concentration of credit risk and major customers
Accounts receivable		[1]				[1]			$ 406,428
Concentration risk percentage						[1]			22.00%
Accounts Receivable | Customer Concentration Risk | Customer D
Concentration of credit risk and major customers
Accounts receivable		[1]				[1]			$ 187,410
Concentration risk percentage						[1]			10.00%
Net sales | Customer Concentration Risk | Customer A
Concentration of credit risk and major customers
Net sales	$ 2,061,276		$ 383,253		$ 4,950,432			[1]
Concentration risk percentage	45.00%		10.00%		48.00%			[1]
Net sales | Customer Concentration Risk | Customer B
Concentration of credit risk and major customers
Net sales	$ 746,877			[1]	$ 2,330,088		$ 1,457,222
Concentration risk percentage	16.00%			[1]	22.00%		18.00%
Net sales | Customer Concentration Risk | Customer C
Concentration of credit risk and major customers
Net sales		[1]		[1]	$ 1,079,832			[1]
Concentration risk percentage		[1]		[1]	10.00%			[1]
Net sales | Customer Concentration Risk | Customer D
Concentration of credit risk and major customers
Net sales		[1]	$ 1,998,724			[1]	$ 3,285,065
Concentration risk percentage		[1]	55.00%			[1]	40.00%
Net sales | Customer Concentration Risk | Customer E
Concentration of credit risk and major customers
Net sales		[1]		[1]		[1]	$ 1,741,084
Concentration risk percentage		[1]		[1]		[1]	21.00%

[1] less than 10% of total

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COMMITMENTS (Details) - USD ($) $ in Millions	Mar. 31, 2018	Sep. 30, 2017
Employment agreements
Aggregate commitment for vacation and holiday pay for non-executive employees		$ 0.3
Scenario, Forecast [Member]
Employment agreements
Aggregate annual commitment for future executive salaries during the next fiscal year	$ 0.5

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EARNINGS PER SHARE (EPS) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Basic EPS
Net Income	$ 368,186	$ 546,082	$ 792,688	$ 991,385
Weighted average shares	28,824,593	27,324,593	28,824,593	27,324,593
Basic Income per share (in dollars per share)	$ 0.01	$ 0.02	$ 0.03	$ 0.04
Diluted EPS
Net Income	$ 368,186	$ 546,082	$ 792,688	$ 991,385
Dilutive effect of stock options	905,863	696,202	926,626	611,505
Diluted weighted average shares	29,730,456	28,020,795	29,751,219	27,936,098
Diluted Income per share (in dollars per share)	$ 0.01	$ 0.02	$ 0.03	$ 0.04
Antidilutive securities excluded from computation of earnings per share amount (in shares)	596,668	428,500	496,668	428,500