UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended JuneSeptember 30, 2009
 
OR
 
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             
 
Commission File Number 0-51378
 
TECHPRECISION CORPORATION
(Exact name of registrant as specified in its charter)
 
DELAWARE 51-0539828
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
Bella Drive, Westminster, Massachusetts 01473 01473
(Address of principal executive offices) 
(Zip Code)
 
(978) 874-0591
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x     No  o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  o     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
   Large accelerated filer  o  
Accelerated filer                                      o
   
 
Non-Accelerated Filer  
o  
 
Smaller reporting company                   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

The number of shares of the Registrant’s common stock, par value $.0001 per share, issued and outstanding at June 30,November 11, 2009 was 13,907,513.13,930,846.
 
 
 
 
 
TECHPRECISION CORPORATION
CONSOLIDATED BALANCE SHEETS
 
 June 30, 2009  March 31, 2009  September 30, 2009 March 31, 2009 
 (unaudited)  (audited)  (unaudited) (audited) 
ASSETSASSETS ASSETS 
Current assets           
Cash and cash equivalents $9,403,943  $10,462,737  $9,537,327  $10,462,737 
Accounts receivable, less allowance for doubtful accounts of $25,000  1,655,553   1,418,830   3,031,150   1,418,830 
Costs incurred on uncompleted contracts, in excess of progress billings  3,529,599   3,660,802   3,603,134   3,660,802 
Inventories - raw materials  305,161   351,356   303,899   351,356 
Deferred tax asset  246,133   --   194,192   -- 
Prepaid expenses  1,555,844   1,583,234   164,247   1,583,234 
Other receivables  30,000   59,979   30,000   59,979 
Total current assets  16,726,233   17,536,938   16,863,949   17,536,938 
Property, plant and equipment, net  3,533,588   2,763,434   3,460,430   2,763,434 
Equipment under construction  --   887,279   -   887,279 
Deferred loan cost, net  100,410   104,666   96,153   104,666 
Total assets $20,360,231  $21,292,317  $20,420,532  $21,292,317 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable $631,721   950,681  $348,486   950,681 
Accrued expenses  571,767   710,332   541,306   710,332 
Accrued taxes  -   155,553   498,448   155,553 
Deferred revenues  3,953,249   3,945,364   1,777,472   3,945,364 
Current maturity of long-term debt  624,593   624,818   752,646   624,818 
Total current liabilities  5,781,330   6,386,748   3,918,358   6,386,748 
                
LONG-TERM DEBT                
Notes payable- noncurrent  4,668,914   4,824,453   5,303,275   4,824,453 
                
STOCKHOLDERS’ EQUITY                
Preferred stock- par value $.0001 per share, 10,000,000 shares                
authorized, of which 9,000,000 are designated as Series A Preferred        
Stock, with 6,295,508 shares issued and outstanding at June 30,2009        
and 6,295,508 at March 31, 2009 (liquidation preference of
$1,794,220 and $1,794,220 at June 30, 2009 and March 31, 2009,
respectively.)
  2,287,508   2,287,508 
authorized, of which 9,890,980 are designated as Series A Preferred        
Stock, with 9,890,980 shares issued and outstanding at September 30, 2009        
and 6,295,508 at March 31, 2009 (liquidation preference of $2,818,930 and $1,794,220 at September 30, 2009 and March 31, 2009, respectively.)  2,287,508   2,287,508 
Common stock -par value $.0001 per share, authorized,                
90,000,000 shares, issued and outstanding, 13,907,513        
shares at June 30, 2009 and March 31, 2009  1,392   1,392 
90,000,000 shares, issued and outstanding, 13,930,846        
shares at September 30, 2009 and 13,907,513 at March 31, 2009  1,394   1,392 
Paid in capital  2,827,395   2,872,779   2,794,671   2,872,779 
Retained earnings  4,794,692   4,919,437   6,115,326   4,919,437 
Total stockholders’ equity  9,910,987   10,081,116   11,198,899   10,081,116 
Total liabilities and stockholders' equity $20,360,231  $21,292,317  $20,420,532  $21,292,317 
                

The accompanying notes are an integral part of the financial statements.
 
 
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TECHPRECISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
 
 Three months ended  Six months ended 
 Three Months Ended  September 30,  September 30, 
 June 30 ,  2009  2008  2009  2008 
 2009  2008             
Net sales $3,318,911  $11,658,134  $15,117,114  $13,601,010  $18,436,025  $25,259,144 
Cost of sales  2,754,109   8,277,803   12,471,343   8,588,210   15,225,452   16,866,013 
                
Gross profit  564,802   3,380,331   2,645,771   5,012,800   3,210,573   8,393,131 
Operating expenses:                       
Salaries and related expenses  393,367   435,095   331,302   322,035   724,669   757,130 
Professional fees  76,212   47,687   110,411   72,782   186,623   120,469 
Selling, general and administrative   298,421   138,996   226,573   150,138   524,994   289,134 
Total operating expenses   768,000   621,778   668,286   544,955   1,436,286   1,166,733 
Income from operations  (203,198)  2,758,553   1,977,485   4,467,845   1,774,287   7,226,398 
                
Other income (expenses)                       
Interest expense  (104,162)  (118,781)  (107,390)  (115,090)  (211,552)  (233,871)
Interest income  3,186   --   5,184   -   8,370   - 
Finance costs  (4,256)  (3,826)  (4,257)  (4,687)  (8,513)  (8,513)
                
Total other income (expense)  (105,232)  (122,607)  (106,463)  (119,777)  (211,695)  (242,384)
                       
Income (loss) before income taxes  (308,430)  2,635,946 
Income before income taxes  1,871,022   4,348,068   1,562,592   6,984,014 
                
Provision for income taxes  183,685   (1,064,250)  550,388   1,871,968   366,703   2,936,218 
Net (loss) income $(124,745) $1,571,696 
Net (loss) income per share of common stock (basic) $(0.01) $0.12 
Net (loss) income per share (basic) and net income per share (diluted) $(0.01) $0.06 
                
Net income $1,320,634  $2,476,100  $1,195,889  $4,047,796 
                
Net income per share of common stock (basic) $0.09  $0.18  $0.09  $0.30 
Net income per share (fully diluted) $0.06  $0.09  $0.06  $0.15 
Weighted average number of shares outstanding (basic)  13,907,513   12,925,606   13,916,462   13,823,245   13,912,012   13,379,358 
Weighted average number of shares outstanding (diluted)  13,907,513   26,421,957 
Weighted average number of shares outstanding (fully diluted)  21,300,150   26,978,330   19,930,238   26,736,678 
                        
 
The accompanying notes are an integral part of the financial statements.


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TECHPRECISION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
 
 Three Months Ended  Six Months Ended 
 June 30,  September 30, 
 2009  2008  2009 2008 
CASH FLOWS FROM OPERATING ACTIVITIES           
Net income (loss) $(124,745) $1,571,696 
Net income $1,195,889  $4,047,796 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  121,383   136,471   208,016   275,378 
        
Share based compensation 7,500  -- 
Changes in operating assets and liabilities:                
Accounts receivable  (236,723)  (1,891,316)  (1,612,320)  1,216,678  
Deferred income taxes  (246,133)  (90,772)  (194,192)  (133,999) 
Inventory  46,195   (57,584)  47,457   (111,909)
Costs incurred on uncompleted contracts  (454,217)  4,790   7,254,185   313,021 
Other receivables  29,979   --   29,979   -- 
Prepaid expenses  27,390   787,284   1,418,987   (1,575,887)
Accounts payable and accrued expenses  (725,578)  1,316,052 
Accrued severance  112,500   -- 
Accounts payable  (602,195)  2,388,747 
Accrued expenses  173,869   1,323,035 
Customer advances  593,307   (551,836)  (9,364,407)  (416,638)
Net cash provided by (used in)operating activities  (856,642)  1,224,785 
Net cash (used in) provided by operating activities  (1,437,232)   7,383,852 
                
CASH FLOW FROM INVESTING ACTIVITIES                
Purchases of property, plant and equipment  --   (123,540)  (9,220)  (137,609)
Deposits on equipment  --   (150,000)   -   (150,000)
Net cash used in investing activities  --   (273,540)  (9,220)  (287,609)
                
CASH FLOWS FROM FINANCING ACTIVITIES                
Capital distribution of WMR equity  (45,384)  (46,875)  (92,256)  (93,548)
Issuance of common stock on exercise of warrants  --   170,060 
Proceeds from exercised stock options and warrants  6,650   170,060 
Borrowings under line of credit facility 919,297 - 
Payment of notes and lease obligations  (156,768)  (153,217)  (312,649)  (306,072)
Net cash used in financing activities  (202,152)  (30,032)
Net cash provided by (used in) financing activities  521,042   (229,560)
                
Net (decrease) increase in cash and cash equivalents  (1,058,794)  921,213   (925,410)  6,866,683 
Cash and cash equivalents, beginning of period  10,462,737   2,852,676   10,462,737   2,852,676 
Cash and cash equivalents, end of period $9,403,943  $3,773,889  $9,537,327  $9,719,359 
                
     
 
The accompanying notes are an integral part of the financial statements.


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TECHPRECISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(continued)
TECHPRECISION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)

 Three Months Ended June 30,  Six Months Ended September 30, 
 2009  2008  2009 2008 
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION           
Cash paid during the year for:           
Interest expense $104,162  $118,781  $208,451  $236,276 
Income taxes $218,000  $937,067  $218,000  $1,621,138 
 
SUPPLEMENTAL INFORMATION – NONCASH TRANSACTIONS:

ThreeSix months Ended JuneSeptember 30, 2009

The company placed $887,279 of equipment which was under construction at the beginning of the six month period ended September 30, 2009 into service.

ThreeOn August 14, 2009, the Company entered into a warrant exchange agreement pursuant to which the Company agreed to issue 3,595,472 shares of Series A convertible preferred stock to certain investors in exchange for warrants to purchase 9,320,000 shares of common stock. The warrants carried exercise prices ranging from $0.44 to $0.65 per share. Effective September 11, 2009, the warrants were surrendered to the Company, the Company filed an amendment to its certificate of designation relating to its Series A convertible Preferred Stock to increase the number of designated shares of Series A convertible preferred stock, and the 3,595,472 shares of Series A preferred stock were issued pursuant to the terms of the warrant exchange agreement.  All warrants surrendered in connection with the warrant exchange were cancelled.

Six months Ended JuneSeptember 30, 2008

During the three months ended June 30, 2008, the Company issued 723,000 shares of common stock upon conversion of 553,093 shares of series A preferred stock, based on a conversion ratio of 1.3072 shares of common stock for each share of series A preferred stock. The conversion price of each share of common stock was computed at $0.2180.
During the six months ended September 30, 2008, the Company issued 944,518 shares of common stock upon conversion of 722,556 shares of series A preferred stock, based on a conversion ratio of 1.3072 shares of common stock for each share of series A preferred stock. The conversion price of each share of common stock was computed at $0.2180 for a total of  $255,040.

During the three months ended June 30, 2008, the Company issued 390,000 shares of common stock upon exercise of 390,000 warrants having an exercise price of $0.43605. The Company had estimated the costs of warrants at $.03 per warrant using Black-Scholes model, at the time of issuance.
During the six months ended September 30, 2008, the Company issued 390,000 shares of common stock upon exercise of 390,000 warrants having an exercise price of $.43605.

The accompanying notes are an integral part of the financial statements.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS
 
Techprecision Corporation (“Techprecision”) is a Delaware corporation organized in February 2005 under the name Lounsberry Holdings II, Inc. The name was changed to Techprecision Corporation on March 6, 2006.  Techprecision is the parent company of Ranor, Inc. (“Ranor”), a Delaware corporation.  Techprecision and Ranor are collectively referred to as the “Company.”
 
The Company manufactures metal fabricated and machined precision components and equipment.  These products are used in a variety of markets including the alternative energy, medical, nuclear, defense, industrial, and aerospace industries.
 
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation and Consolidation
 
On February 24, 2006, Techprecision acquired all stock of Ranor in a transaction which is accounted for as a recapitalization (reverse acquisition), with Ranor being treated as the acquiring company for accounting purposes.
The accompanying consolidated financial statements include the accounts of the Company and Ranor as well as a variable interest entity, WM Realty. Intercompany transactions and balances have been eliminated in consolidation.

In accordance with Statement of Financial Accounting Standards (SFAS) No. 165, “Subsequent Events” (SFAS No. 165), the Company performed an evaluation of subsequent events for the accompanying financial statements and notes included in Part 1, Item 1 of this report through November 11, 2009, the date this Report was issued. The Notes to Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These notes should be read in conjunction with the Notes to Consolidated Financial Statements of the Company in Item 8 of the 2009 Annual Report on Form 10-K.
 
Use of Estimates in the Preparation of Financial Statements
 
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.
 
Fair Values of Financial Instruments

The Company’sWe account for fair value of financial instruments consist primarily of cash, cash equivalents, accounts receivable,under the Financial Accounting Standard Board’s (FASB) authoritative guidance, which defines fair value, and accounts payable. The carrying values of these financial instruments approximate theirestablishes a framework to measure fair values.
value and the related disclosures about fair value measurements. The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” on April 1, 2008. This statement defines fair value, establishes a framework to measure fair value, and expands disclosures about fair value measurements. SFAS No. 157FASB establishes a fair value hierarchy used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

Level 1:  Inputs based upon quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2:  Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:  Inputs that are management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.  The inputs are unobservable in the market and significant to the instruments’ valuation.
 
In February 2008, the FASB issued Staff Position (“FSP”) No. FAS 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS No. 157 for non-financial assets and liabilities to fiscal years beginning after November 15, 2008. The Company has analyzed the requirements of FSP No. FAS 157-2 and does not believe it has any impact on its financial condition, results of operations, or cash flows.
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In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.”  This statement clarifies that determiningaddition, we will measure fair value in an inactive or dislocated market dependsbased on facts and circumstances and requires significant management judgment.  This statement specifies that it is acceptable toWe will use inputs based on management estimates or assumptions, or for management to make adjustments to observable inputs to determine fair value when markets are not active and relevant observable inputs are not available.  FSP 157-3 does not have an impact on the Company’s financial statements.
  
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The Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” effective March 1, 2008, and elected not to establish a fair value for its financial instruments and certain other items under this statement.  Therefore, the Company’s adoption of this statement did not impact its consolidated financial statements during the three months ended June 30, 2009.

The carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, prepaid and accrued expenses, and notes payable, as presented in the balance sheet, approximates fair value.

Cash and cash equivalents
 
Holdings of highly liquid investments with maturities of three months or less, when purchased, are considered to be cash equivalents. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. The deposits are maintained in a large regional bank and the amount of federally insured cash deposits was $250,000 as of JuneSeptember 30, 2009 andcompared to $100,000 as of JuneSeptember 30, 2008.

Accounts receivable
 
Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Current earnings are also charged with an allowance for sales returns based on historical experience. There was no bad debt expense for the quarters ended JuneSeptember 30, 2009 and 2008.2008, respectively.
 
Inventories
 
Inventories - - raw materials is stated at the lower of cost or market determined principally by the first-in, first-out method.
 
Notes Payable
 
The Company accountsWe account for all note liabilitiesnotes that are due and payable in one year as short-term liabilities.liabilities; carrying amounts approximate fair value.

Long-lived Assets
 
Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are accounted for on the straight-line method based on estimated useful lives. The amortization of leasehold improvements is based on the shorter of the lease term or the useful life of the improvement. Betterments and large renewals, which extend the life of the asset, are capitalized whereas maintenance and repairs and small renewals are expensed as incurred. The estimated useful lives are: machinery and equipment, 7-15 years; buildings, up to 30 years; and leasehold improvements, 10-20 years.
 
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We accountThe accounting for the impairment or disposal of long-lived assets in accordance with the provisions of the Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 requires an assessment of the recoverability of our investment in long-lived assets to be held and used in operations whenever events or circumstances indicate that their carrying amounts may not be recoverable. Such assessment requires that the future cash flows associated with the long-lived assets be estimated over their remaining useful lives. An impairment loss may be required when the future cash flows are less than the carrying value of such assets
 
MajorRepair and maintenance activities
 
The Company incurs maintenance costs on all of its major equipment. Costs that extend the life of the asset, materially add to its value, or adapt the asset to a new or different use are separately capitalized in property, plant and equipment and are depreciated over their estimated useful lives. All other repair and maintenance costs are expensed as incurred.

Leases
 
Operating leases are charged to operations as paid. Capital leases are capitalized and depreciated over the term of the lease.  A lease is considered a capital lease if one of four criteria are satisfied: 1) the lease contains an option to purchase the property for less than fair market value.value, 2) transfer of ownership at the end of the lease, 3) the lease term is 75% or more of estimated economic life of leased property, and 4) present value of minimum lease payments is at least 90% of fair value of the leased property to the lessor at the inception of the lease.
-6-
 
Convertible Preferred Stock and Warrants
 
In accordance with EITF 00-19, theThe Company initially measuredmeasures the fair value of the seriesSeries A preferred stock by the amount of cash that was received for their issuance. The Company subsequently determined that the convertible preferred shares and the accompanying warrants wereissued are equity instruments under SFAS 150instruments.

Our preferred stock also met all conditions for the classification as equity instruments. The Company had a sufficient number of authorized shares, there is no required cash payment or net cash settlement requirement and 133.the holders of the series A preferred stock had no right higher than the common stockholders other than the liquidation preference in the event of liquidation of the Company. Although the Company had an unconditional obligation to issue additional shares of common stock upon conversion of the seriesSeries A preferred stock if EBITDA per share was below the targeted amount, the certificate of designation relating to the series A preferred stock does not require the Company to issue shares that are registered pursuant to the Securities Act of 1933, and as a result, the additional shares issuable upon conversion of the Series A preferred stock need not be registered shares. Our preferred stock also met all other conditions for the classification as equity instruments. The Company had a sufficient number of authorized shares, there is no required cash payment or net cash settlement requirement and the holders of the series A preferred stock had no right higher than the common stockholders other than the liquidation preference in the event of liquidation of the Company.
 
The Company’s warrants were excluded from derivative accounting because they were indexed to the Company’s own unregistered common stock and wereare classified in stockholders’ equity section according to SFAS 133 paragraph 11(a), under preferred stock.equity.
   
The Company recorded the series A preferred stock to permanent equity in accordance with the terms of the Abstracts - Appendix D - Topic D-98: “Classification and Measurement of Redeemable Securities.”

Shipping Costs 
 
Shipping and handling costs are included in cost of sales in the accompanying Consolidated Statements of Operations for all periods presented.
 
Selling, General, and Administrative 
 
Selling expenses include items such as business travel and advertising costs. Advertising costs are expensed as incurred. General and administrative expenses include items for Company’s administrative functions and include costs for items such as office supplies, insurance, telephone and payroll services.
 
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Stock Based Compensation
 
Stock-basedStock based compensation represents the cost related to stock-based awards granted to employees. The Company measures stock-basedstock based compensation cost at grant date, based on the estimated fair value of the award and recognizes the cost as expense on a straight-line basis (net of estimated forfeitures) over the employeeemployee’s requisite service period. The Company estimates the fair value of stock options using a Black-Scholes valuation model.

Earnings per Share of Common Stock
 
Basic net income per common share is computed by dividing net income or loss by the weighted average number of shares outstanding during the year.period. Diluted net income per common share is calculated using net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of potential common stock issuable in respect of convertible preferred stock, preferred shareholders and other warrants and share-based compensation were calculated using the treasury stock method.
 
Revenue Recognition and Costs Incurred
 
Revenue and costs are recognized on the units of delivery method. This method recognizes as revenue the contract price of units of the product delivered during each period and the costs allocable to the delivered units as the cost of earned revenue. When the sales agreements provide for separate billing of engineering services, the revenues for those services are recognized when the services are completed. Costs allocable to undelivered units are reported in the balance sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed upon contract price for customer directed changes, constructive changes, customer delays or other causes of additional contract costs are recognized in contract value if it is probable that a claim for such amounts will result in additional revenue and the amounts can be reasonably estimated. Revisions in cost and profit estimates are reflected in the period in which the facts requiring the revision become known and are estimable. The unit of delivery method requires the existence of a contract to provide the persuasive evidence of an arrangement and determinable seller’s price, delivery of the product and reasonable collection prospects. The Company has written agreements with the customers that specify contract prices and delivery terms. The Company recognizes revenues only when the collection prospects are reasonable.
 
Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined and are reflected as reductions of the carrying value of the costs incurred on uncompleted contracts. Costs incurred on uncompleted contracts consist of labor, overhead, and materials. Work in process is stated at the lower of cost or market and reflect accrued losses, if required, on uncompleted contracts.
 
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Income Taxes
 
The Company uses the asset and liability method of financial accounting and reporting for income taxes required by statement of Financial Accounting Standards No. 109 (“FAS 109”), “FASB ASC 740, Accounting for Income Taxes.” Under FAS 109,FASB ASC 740, deferred income taxes reflect the tax impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes.
 
Temporary differences giving rise to deferred income taxes consist primarily of the reporting of losses on uncompleted contracts, the excess of depreciation for tax purposes over the amount for financial reporting purposes, and accrued expenses accounted for differently for financial reporting and tax purposes, and net operating loss carry-forwards.
   
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According to FASB Codification740-270-25, ASC 740-270-25, Intraperiod Tax Allocation, tax (benefit)expense related to interim period ordinary income (loss) is computed at an estimated annual effective tax rate and tax (benefit) related to all other items are individually computed and recognized when the items occur.  The tax effects of losses that arise in the early portion of a fiscal year are recognized only when the benefits are expected to be either realized during the year or recognized as a deferred tax asset at the end of the year. Based on projected contractual profitability during the fiscal year, the company has recognized a net tax benefit of $183,685 in the three months ended June 30, 2009 that it would expect to realize during subsequent periods of profitability during the remainder of the fiscal year.

Interest and penalties are included in general and administrative expenses.

Variable Interest Entity (VIE)
 
The Company has consolidated WM Realty, a variable interest entity that entered into a sale and leaseback contract with the Company, in 2006, to conform to the authoritative FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). The Company has also adoptedguidance (see Note 9 for more information related to the revision to FIN 46, FIN 46R, which clarified certain provisions of the original interpretation and exempted certain entities from its requirements.VIE). The creditors of WM Realty do not have recourse to the general credit of TechprecisionTechPrecision or Ranor.
 
Recent Accounting Pronouncements
 
In AprilOctober 2009, the FASB issued FSP 107-1update No. 2009-13 – Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force, which provides guidance for identifying separate deliverables in a revenue-generating transaction where multiple deliverables exist, and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP 107-1/APB 28-1”). FSP 107-1/APB 28-1 amendsprovides guidance for allocating and recognizing revenue based on those separate deliverables. The guidance is expected to result in more multiple deliverable arrangements being separable than under current guidance. This guidance is effective for the requirements in FASB 107, Disclosure about Fair Value of Financial Instruments,Company beginning on April 1, 2011 and is required to require disclosure about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion 28, Interim Financial Reporting,be applied prospectively to require those disclosures in summarized financial information at interim reporting periods.new or significantly modified arrangements. The Company will discloseassess the impact this guidance may have on the consolidated financial statements.
In August 2009, the FASB issued update No. 2009-05 - Fair Value Measurements and Disclosures (Topic 820) - Measuring Liabilities at Fair Value.  The amendments in this update apply to all entities that measure liabilities at fair value within the scope of Topic 820. The update provides clarification that in circumstances where a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following valuation techniques that uses the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or a income or market approach consistent with the principles of Topic 820. The guidance is effective at October 1, 2009, and the adoption of this amendment did not have a material impact on the Company’s consolidated financial instruments under FSP 107-1/APB 28-1statements.
In June 2009, the FASB issued update No. 2009-01 “Topic 105—Generally Accepted Accounting Principles—amendments based on—Statement of Financial Accounting Standards No. 168—The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 168, “The FASB Accounting Standards Codification and the Hierarchy of GAAP”. This Accounting Standards Update includes Statement 168 in its entirety, and establishes the Codification as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. SEC rules and interpretive releases are also sources of authoritative GAAP for SEC registrants. This guidance modifies the GAAP hierarchy to include only two levels of GAAP: authoritative and non-authoritative. The guidance was effective for the Company as of September 30, 2009, and did not impact the Company’s results of operations, cash flows or financial positions. The Company has adjusted historical GAAP references in its second quarter 2009 Form 10-Q to reflect accounting guidance references included in the codification.
In June 2009, the FASB amended authoritative guidance for the manner in which entities evaluate whether consolidation is required for VIEs. A company must first perform a qualitative analysis in determining whether it must consolidate a VIE, and if they arethe qualitative analysis is not already carried at fair value.determinative, must perform a quantitative analysis. Further, the guidance requires that companies continually evaluate VIEs for consolidation, rather than assessing based upon the occurrence of triggering events, and also requires enhanced disclosures about how a company’s involvement with a VIE affects its financial statements and exposure to risks. The guidance is effective  beginning April 1, 2010, and the Company is currently assessing the impact on the consolidated financial statements.

In May 2009, the FASB issued FAS 165, Subsequent Events (“FAS 165”). FAS 165 isauthoritative guidance to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Statementguidance  sets forth:

1.  The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements;
2.  The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and
3.  The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

FAS 165forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance is effective for periods ending after June 15, 2009 and its adoption did not have a material impact on the Company’s consolidated financial statements.

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In April 2009, the FASB issued FSP 157-4, Determining Fair Value When Volume and Levelguidance to require disclosure about fair value of Activityfinancial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. Since this guidance provides only disclosure requirements, the Assetadoption of this standard did not impact the results of operations, cash flows or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157-4”). FSP 157-4 providesfinancial positions.
In April 2009, the FASB amended authoritative guidance in determiningto determine fair value when the volume and level of activity for the asset or liability have significantly decreased and on identifying transactions that are not orderly. FSP 157-4This guidance requires disclosure in interim and annual periods of the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques. FSP 157-4 is effective
The guidance was adopted for periods ending after June 15, 2009 and itsthe period ended September 30, 2009. The adoption did not have a material impact on the Company’s consolidated financial statements or the fair value of its financial assets.
 
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In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairment (“FSP 115-2/124-2”). FSP 115-2/124-2 amendsamended authoritative guidance related to the requirements for the recognition and measurement of other-than-temporary impairments for debt securities by modifying the pre-existing “intent and ability” indicator. Under FSP 115-2/124-2,this guidance, an other-than-temporary impairment is triggered when there is an intent to sell the security, it is more likely than not that the security will be required to be sold before recovery, or the security is not expected to recover the entire amortized cost basis of the security. Additionally, FSP 115-2/124-2this guidance changes the presentation of an other-than-temporary impairment in the income statement for those impairments involving credit losses. The credit loss component will be recognized in earnings and the remainder of the impairment will be recorded in other comprehensive income. FSP 115-2/124-2 is effectiveThe guidance was adopted for periods ending after June 15,the period ended September 30, 2009 and its adoption did not have a material impact on the Company’s consolidated financial statements.

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
 
As of JuneSeptember 30, 2009 and March 31, 2009, property, plant and equipment consisted of the following:
 
 
June 30, 2009
(unaudited)
 
March 31, 2009
(audited)
 
September 30, 2009
(unaudited)
  
March 31, 2009
(audited)
 
Land $110,113 $110,113 $110,113  $110,113 
Building and improvements  1,486,349   1,486,349  1,486,349   1,486,349 
Machinery equipment, furniture and fixtures 4,893,515 4,006,235  4,902,734   4,006,235 
Equipment under capital leases 56,242 56,242  56,242   56,242 
Total property, plant and equipment  6,546,219   5,658,939  6,555,438   5,658,939 
Less: accumulated depreciation  (3,012,631)  (2,895,505)  (3,095,008)  (2,985,505)
Total property, plant and equipment, net $3,533,588  $2,763,434 $3,460,430  $2,763,434 
 
Depreciation expense for the periodssix months ended JuneSeptember 30, 2009 and 2008 was $117,126$199,503 and $132,645,$267,296, respectively. Land and buildings (which are owned by WM Realty, - a consolidated entity under Fin 46 (R)) are collateral for the $3,200,000 Amalgamated Bank Mortgage Loan described in greater detail under Note 6 Long-Term Debt. Other fixed assets of the Company together with its other personal properties, are collateral for the Sovereign Bank $4,000,000 secured loan and revolving line of credit.

The Company has placed $887,279 of equipment into service during the threesix months ended JuneSeptember 30, 2009 that it had ordered in 2008 and received in January 2009.  The new equipment expands the Company’s machining capacity.
 
NOTE 4 - COSTS INCURRED ON UNCOMPLETED CONTRACTS
 
The Company recognizes revenues based upon the units-of-delivery method (see Note 2). The advance billing and deposits include down payments for acquisition of materials and progress payments on contracts. The agreements with the buyers of the Company’s products allow the Company to offset the progress payments against the costs incurred.  The following table sets forth information as to costs incurred on uncompleted contracts as of JuneSeptember 30, 2009 and March 31, 2009:  
 
-10--9-
 
 
June 30, 2009
(unaudited)
 
March 31, 2009
(audited)
  
September 30, 2009
(unaudited)
 
March 31, 2009
(audited)
 
Cost incurred on uncompleted contracts, beginning balance $12,742,217 $10,633,862  $12,742,217  $10,633,862 
Total cost incurred on contracts during the period  3,208,327  28,078,982   7,971,267   28,078,982 
Less cost of sales, during the period  (2,754,110)  (25,970,626)  (15,225,452)  (25,970,626)
Cost incurred on uncompleted contracts, ending balance $13,196,434 $12,742,218  $5,488,032  $12,742,217 
               
Billings on uncompleted contracts, beginning balance $9,081,416 $6,335,179  $9,081,416  $6,335,179 
Plus: Total billings incurred on contracts, during the period  3,904,330  40,833,972   11,239,508   40,833,972 
Less: Contracts recognized as revenue, during the period  (3,318,911)  (38,087,735)  (18,436,025)  (38,087,735)
Billings on uncompleted contracts, ending balance $9,666,835 $9,081,416  $1,884,898  $9,081,416 
               
Cost incurred on uncompleted contracts, ending balance $13,196,434 $12,742,218  $5,488,032  $12,742,218 
Billings on uncompleted contracts, ending balance  (9,666,835)  (9,081,416)  1,884.898   (9,081,416)
Costs incurred on uncompleted contracts, in excess of progress billings $3,529,599 $3,660,802  $3,603,134  $3,660,802 
 
As of JuneSeptember 30, 2009 and March 31, 2009, the Company had deferred revenues totaling $3953,249$1,777,472 and $3,945,364, respectively. Deferred revenues represent the customer prepayments on their contracts.

NOTE 5 - PREPAID EXPENSES
 
As of JuneSeptember 30, 2009 and March 31, 2009, the prepaid expenses included the following:
 
   
September 30, 2009
(unaudited)
  
March 31, 2009
(audited)
 
Prepayments on material purchases $               -  $1,418,510 
Insurance         99,170   140,237 
Other        65,077   24,487 
Total $    164,247  $1,583,234 
   
June 30, 2009
(unaudited)
  
March 31, 2009
(audited)
 
Prepayments on material purchases $1,414,433  $1,418,510 
Insurance  83,139   140,237 
Other  58,272   24,487 
Total $1,555,844  $1,583,234 

NOTE 6 – LONG-TERM DEBT and CAPITAL LEASE OBLIGATIONS

The following debt and capital lease obligations were outstanding on JuneSeptember 30, 2009 and March 31, 2009:

 
June 30, 2009
(unaudited)
 
March 31, 2009
(audited)
  
September 30, 2009
(unaudited)
 
March 31, 2009
(audited)
 
Sovereign Bank Secured Term Note Payable $2,142,858  $2,285,715  $ 2,000,000   $  2,285,715 
Amalgamated Bank Mortgage Loan 3,109,188   3,118,747   3,099,464     3,118,747 
Ford Motor Credit Vehicle Loan  -   1,098 
Capital expenditure note, other     919,297           1,098 
Capital Lease       37,160         43,711 
Total long-term debt 5,252,046   5,405,560    6,055,921     5,449,271 
Principal payments due within one year  (611,089)  (611,362)     (752,646)     (624,818)
Principal payments due after one year $4,640,957  $4,794,198  $   5,303,275   $   4,824,453 
       
 
On February 24, 2006, Ranor entered into a loan and security agreement with Sovereign Bank.  Pursuant to the agreement, the bank provided Ranor with a secured term loan of $4,000,000 (“Term Note”) and also extended to Ranor a revolving line of credit of up $1,000,000 the (“Revolving Note”).  On January 29, 2007, the loan and security agreement was amended, adding a capital expenditure line of credit facility of $3,000,000 to the earlierabove two debt facilities the (“CapEx Note”).
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Significant terms associated with the Sovereign debt facilities are summarized below.

Term Note:

The Term Note issued on February 24, 2006 has a term of 7 years with an initial fixed interest rate of 9%.  The interest rate on the Term Note converts from a fixed rate of 9% to a variable rate on February 28, 2011.  From February 28, 2011 until maturity the Term Note will bear interest at the Prime Rate plus 1.5%, payable on a quarterly basis.   Principal is payable in quarterly installments of $142,857, plus interest, with a final payment due on March 1, 2013.
 
The Term Note is subject to various covenants that include the following: the loan collateral comprises all personal property of Ranor, including cash, accounts receivable inventories, equipment, financial and intangible assets.  The company must also maintain a ratio of earnings available to cover fixed charges of at least 120% of the fixed charges for the rolling four quarters, tested at the end of each fiscal quarter.  The company has incurred a loss in the three months ended June 30, 2009 but meets the covenants after that loss.  Additionally the Company must also maintain an interest coverage ratio of at least 2:12.1 at the end of each fiscal quarter.   Ranor’s obligations under the notes to the bank are guaranteed by Techprecision. The company is in compliance with all of the covenants under this agreement.  


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Revolving Note:

The Revolving Note bears interest at a variable rate determined as the Prime Rate, plus 1.5% annually on any outstanding balance.   The borrowing limit onamount under the Revolving Note has been limited to the sum of 70% of the Company’s eligible accounts receivable plus 40% of eligible inventory up to a maximum borrowing limit of $1,000,000.   The agreement has been amended several times with the effect of increasing the maximum available borrowing limit to $2,000,000 as of JuneSeptember 30, 2009.  There were no borrowings outstanding under this facility as of JuneSeptember 30, 2009 and 2008.  The Company pays andan unused credit line fee of .25% on the average unused credit line amount in the previous month.  The Company received notice from Sovereign Bank that this facility had been renewed onin August 2009.

Capital Expenditure Note:

The initial borrowing limit under the Capital Expenditure Note was $500,000 and has been amended several times resulting in a borrowing limit of $3,000,000 available under the facility as of JuneSeptember 30, 2009.  The facility is open forsubject to renewal on an annual basis.  Under the facility, the Company may borrow 80% of the original purchase cost of qualifying capital equipment.  The interest rate is LIBOR, plus 3%.  The Company is obligated to make interest only payments monthly on any borrowings through November 30, 2009 and on December 1, 2009 any outstanding borrowings and interest will be due and payable monthly on a five year amortization schedule.  There were no amounts outstandingwas $919,297 borrowed under this facility as of Juneat September 30, 2009 and March 31, 2009.   The Company is  however inused the process of  financing approximately $1.1 millionproceeds to finance the purchase of qualifying equipment purchased as of Juneduring the six months ended  September 30, 2009 under the facility and expects to draw down $880,000 in borrowings during August 2009.

Mortgage Loan:

The mortgage loan is an obligation of WM Realty.  The mortgage has a term of 10 years, maturing October 1, 2016, and carries an annual interest rate of 6.7% with monthly interest and principal payments of $20,955.  The amortization is based on a 30 year term.  WM Realty has the right to repay the mortgage note upon payment of a prepayment premium of 5% of the amount prepaid if
the prepayment is made during the first two years, and declining to 1% of the amount prepaid if the prepayment is made during the ninth or tenth year.
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In connection with the mortgage financing of the real estate owned by WM Realty, Mr. Andrew Levy executed a limited guaranty.  Pursuant to the limited guaranty, Mr. Levy personally guaranteed the lender the payment of any loss resulting from WM Realty’s fraud or misrepresentation in connection with the loan documents, misapplication of rent and insurance proceeds, failure to pay taxes and other defaults resulting from his or WM Realty’s misconduct.
 
Capital Lease:

During 2007, the Company also leased certain office equipment under a non-cancelable capital lease. This lease will expire in 2012, and future minimum payments under this lease for annual periods ending on September 30, 2010 are $15,564, for 2011 - - $15,564, and $9,070 through April 2012. Interest payments included in the above total $3,047 and the present value of all future minimum lease payments total $37,160. Lease payments for capital lease obligations for the six months ended September 30, 2009 totaled $6,552.

As of JuneSeptember 30, 2009, the maturities of long-term debt and capital leases were as follows:

Year ending September 30,   
2010 $752,646 
2011  804,932 
2012  809,039 
2013  528,158 
2014  253,419 
Due after 2014  2,907,727 
Total $     6,055,921 

NOTE 7 – OPERATING LEASES
Ranor, Inc. has leased its manufacturing, warehouse and office facilities in Westminster (Westminster Lease), Massachusetts from WM Realty, a variable interest entity, for a term of 15 years, commencing February 24, 2006. For each six month period ended September 30, 2009 and 2008, respectively the Company’s rent expense equaled $225,000. Since the Company consolidated the operations of WM Realty, the rental expense is eliminated in consolidation, the building is carried at cost and depreciation is expensed. The annual rent is subject to an annual increase based on the increase in the consumer price index.
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Year ending June 30,   
2010 $611,089 
2011  613,893 
2012  616,896 
2013  477,254 
2014  52,124 
Due after 2014  2,880,790 
Total $5,252,046 
The Company has an option to purchase the real property at fair value and an option to extend the term of the lease for two additional terms of five years, upon the same terms. The minimum rent payable for each option term will be the greater of (i) the minimum rent payable under the lease immediately prior to either the expiration date, or the expiration of the preceding option term, or (ii) the fair market rent for the leased premises.

In additionThe Company previously leased approximately 12,720 square feet of manufacturing space in Fitchburg, Massachusetts from an unaffiliated lessor. The rent expense for the Fitchburg facility was $0 and $28,342  for the six months ended September 30, 2009 and 2008, respectively.  The lease provided for rent at the annual rate of $50,112 with 3% annual increases, starting 2004. The lease expired in February 2009 and was not renewed.

On February 24, 2009, the Company entered into a lease for 2,089 square feet of office space in Centreville, Delaware.  The lease has a three-year term and provides for initial rent of $2,500 per month, escalating to $5,252,046,$3,220 per month in year two and $3,395 per month in year three of the total long term long-term debtlease.  The Company has the option to renew this lease for a period of $5,292,507 includes $40,461three years at the end of capitalizedthe lease obligations (see Note 9).term. During the six months ended September 30, 2009 the Company’s rent expense with respect to the Delaware property was $15,000.
Future minimum lease payments required under operating leases in the aggregate at September 30, 2009 totaled $5,679,195. The totals for each annual period ending on September 30 are: 2010 - $482,160, 2011 - $489,165, 2012 - $470,370, 2013 - $450,000, 2014-$450,000, and $3,337,500 for the years thereafter.
 
NOTE 78 - INCOME TAXES
 
For the three and six months ended JuneSeptember 30, 2009 and 2008, the Company recorded provisions for the federalFederal and State income tax benefit and income tax expense of $183,685$550,388 and $(1,064,250),$1,871,968, and $366,703 and $2,936,218, respectively. The estimated annual effective tax benefit and expense rates for the threesix months ended JuneSeptember 30, 2009 and September 30, 2008 were (60)%30% and 40%42%, respectively. The difference between the provision for income taxes and the income tax determined by applying the statutory federal income tax rate of 39%34% was due primarily to differences in the lives and methods used to depreciate and/or amortize our property and equipment, timing differences of expenses related compensated absences, net operating loss carryforwards, and operating losses that occurred during the period.

As of JuneSeptember 30, 2009, the Company’s federal net operating loss carry-forward was approximately $1,780,714. If not utilized, the federal net operating loss carry-forward of Ranor and Techprecision will expire in 2025 and 2027, respectively. Furthermore, because of over fifty percent change in ownership as a consequence of the reverse acquisition in February 2006, as a result of the application of Section 382 of the Internal Revenue Code, the amount of net operating loss carry forward used in any one year in the future is substantially limited.

At September 30, 2009 and March 31, 2009, the Company provided a full valuation allowance for its deferred tax assets. The Company believes sufficient uncertainty exists regarding the realization of the deferred tax assets.
NOTE 89 - RELATED PARTY TRANSACTIONS
 
Sale and Lease Agreement and Intra-companyIntercompany Receivable
 
On February 24, 2006, WM Realty borrowed $3,300,000 to finance the purchase of Ranor’s real property. WM Realty purchased the real property for $3,000,000 and leased the property on which Ranor’s facilities are located pursuant to a net lease agreement. The property was appraised on October 31, 2005 at $4,750,000. The Company advanced $226,808 to WM Realty to pay closing costs, which advance was repaid when WM Realty refinanced the mortgage in October 2006. WM Realty was formed solely for this purpose; its partners are stockholders of the Company. The Company considers WM Realty a variable interest entity as defined by FIN 46 (R), and therefore has consolidated its operations into the Company.
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On October 4, 2006, WM Realty placed a new mortgage of $3.2 million on the property and the then existing mortgage of $3.1 million was paid off. The new mortgage has a term of ten years, bears interest at 6.75% per annum, and provides for monthly payments of principal and interest of $20,595 (See Note 6). In connection with the new mortgage, Andrew Levy, the managing member of WM Realty, executed a limited guaranty. pursuant to which Mr. Levy guaranteed the lender the payment of any loss resulting from WM Realty’s fraud or misrepresentation in connection with the loan documents, misapplication of rent and insurance proceeds, failure to pay taxes and other defaults resulting from his or WM Realty’s misconduct. 
 
The only assets of WM Realty available to settle its obligations are $48,052$49,542 of cash and real property acquired from Ranor, Inc. at a cost of $3,000,000 less $299,210$321,551 of accumulated depreciation.  The real property has a net carrying cost of $1,143,435$1,135,959 on Techprecision’s consolidated balance sheet.

The only liability of WM Realty is the carrying amount of mortgage payable to Amalgamated bank with the carrying cost of $3,109,248.  Bank for $3,099,465.  

Amalgamated Bank, the sole creditor of WM realty, has no recourse to the general credit of Techprecision.
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Distribution to WM Realty Members
 
WM Realty had a deficit equity balance of $291,885$369,662 on JuneSeptember 30, 2009. During the three and six months ended JuneSeptember 30, 2009, WM Realty had a net income of $30,894$64,060 and $64,060, and capital distributions of $45,375.
NOTE 9 - LEASES
Ranor, Inc. has leased its manufacturing, warehouse$46,873 and office facilities in Westminster (Westminster Lease), Massachusetts from WM Realty, a variable interest entity, for a term of 15 years, commencing February 24, 2006. For the three months ended June 30, 2009 and 2008, the Company’s rent expense was $112,500 and $112,500, respectively. Since the Company consolidated the operations of WM Realty pursuant to FIN 46, the rental expense is eliminated in consolidation, the building is carried at cost and depreciation is expensed. The annual rent is subject to an annual increase based on the increase in the consumer price index.
The Company has an option to purchase the real property at fair value and an option to extend the term of the lease for two additional terms of five years, upon the same terms. The minimum rent payable for each option term will be the greater of (i) the minimum rent payable under the lease immediately prior to either the expiration date, or the expiration of the preceding option term, or (ii) the fair market rent for the leased premises.$92,248.

The Company previously leased approximately 12,720 square feet of manufacturing space in Fitchburg, Massachusetts from an unaffiliated lessor. The rent expense for the Fitchburg facility was $-0- and $14,100  in the three months ended June 30, 2009 and June 30, 2008, respectively.  The lease provided for rent at the annual rate of $50,112 with 3% annual increases, starting 2004. The lease expired in February 2009 and was not renewed.

On February 24, 2009, the Company entered into a lease for 2,089 square feet of office space in Centreville, Delaware.  The lease has a three-year term and provides for initial rent of $2,500 per month, escalating to $3,220 per month in year two and $3,395 per month in year three of the lease.  The Company has the option to renew this lease for a period of three years at the end of the lease term. During the three months ended June 30, 2009 the Company’s rent expense with respect to the Delaware property was $7,500.

During 2007, the Company also leased certain office equipment under a non-cancelable capital lease. This lease will expire in 2011. Lease payments for capital lease obligations for the three months ended June 30, 2009 totaled $3,253.
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Future minimum lease payments required under operating and capital leases as of June 30, 2009, are as follows:
  Capital  Operating 
Year ended June 30, Leases  Leases 
2010 $15,564  $480,000 
2011  15,564   488,640 
2012  12,970   480,555 
2013  --   450,000 
2014  --   450,000 
Thereafter  --   3,450,000 
Total minimum payments required  44,098  $5,799,195 
Less amount representing interest  3,637     
Present value of future minimum lease payments  40,461     
Less current obligations under capital leases  13,504     
Long-term obligations under capital leases $26,957     
NOTE 10 - CAPITAL STOCK
 
Preferred Stock
 
The Company has 10,000,000 authorized shares of preferred stock and the board of directors has broad power to create one or more series of preferred stock and to designate the rights, preferences, privileges and limitation of the holders of such series. The board of directors has created one series of preferred stock - the series A convertible preferred stock (“series A preferred stock”).

Each share of series A preferred stock was initially convertible into one share of common stock. As a result of the failure of the Company to meet the levels of earnings before interest, taxes, depreciation and amortization for the years ended March 31, 2006 and 2007, the conversion rate changed, and, at JuneSeptember 30, 2009, each share of series A preferred stock was convertible into 1.3072 shares of common stock, with an effective conversion price of $.2180.
 
The shares of seriesIn February 2006, Series A preferred stock (7,719,250 shares) and warrants to purchase a total of 11,220,000 shares of common stock were issued pursuant to a securities purchase agreement dated February 24, 2006.  Contemporaneously with the securities purchase agreement, the Company entered into a registration rights agreement with the investor, pursuant to which it agreed to register the shares of common stock underlying the securities in accordance with a schedule. The registration statement was not declared effective in accordance with the original schedule, and the Company issued 33,212 shares of series A preferred stock to the investor as liquidated damages.

During the three months ended June 30, 2009, no shares of series A preferred stock were converted into shares of common stock, respectively.
The Company had 6,295,508 shares of series A preferred stock outstanding at June 30, 2009 and March 31, 2009.
In addition to the conversion rights described above, the certificate of designation for the series A preferred stock provides that the holder of the series A preferred stock or its affiliates will not be entitled to convert the series A preferred stock into shares of common stock or exercise warrants to the extent that such conversion or exercise would result in beneficial ownership by the investor and its affiliates of more than 4.9% of the shares of common stock outstanding after such exercise or conversion. This provision cannot be amended.
  
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The holders of the series A preferred stock have no voting rights. No dividends are payable with respect to the series A preferred stock and no dividends are payable on common stock while series A preferred stock is outstanding. The common stock will not be redeemed while preferred stock is outstanding.
The holders of the series A preferred stock have no voting rights. However, so long as any shares of series A preferred stock are outstanding, the Company shall not, without the affirmative approval of the holders of 75% of the outstanding shares of series A preferred stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the series A preferred stock, (b) authorize or create any class of stock ranking as to dividends or distribution of assets upon liquidation senior to or otherwise pari passu with the series A preferred stock, or any of preferred stock possessing greater voting rights or the right to convert at a more favorable price than the series A preferred stock, (c) amend its certificate of incorporation or other charter documents in breach of any of the provisions hereof, (d) increase the authorized number of shares of series A preferred stock, or (e) enter into any agreement with respect to the foregoing.
 
Upon any liquidation the Company is required to pay $.285 for each share of Series A preferred stock. The payment will be made before any payment to holders of any junior securities and after payment to holders of securities that are senior to the series A preferred stock.
  
Under the terms of the purchase agreement, the investor has the right of first refusal in the event that the Company seeks to raise additional funds through a private placement of securities, other than exempt issuances. The percentage of shares that investor may acquire is based on the ratio of shares held by the investor plus the number of shares issuable upon conversion of series A preferred stock owned by the investor to the total of such shares.
 
On August 14, 2009, our Board adopted a resolution authorizing and directing that the designated shares of Series A convertible Preferred Stock be increased from 9,000,000 to 9,890,980.

On August 14, 2009, the Company entered into a warrant exchange agreement pursuant to which the Company agreed to issue 3,395,472 shares of Series A convertible preferred stock to certain investors in exchange for warrants to purchase 9,320,000 shares of common stock. The warrants had initial exercise prices ranging from $0.57 to $0.86 per share. As a result of the Company’s failure to meet the EBITDA per share targets for the years ended March 31, 2006 and 2007, the range of exercise prices per share of the warrants were reduced to $.44 to $.65. Effective September 11, 2009, the warrants were surrendered to the Company, the Company filed an amendment to its certificate of designation relating to its Series A convertible Preferred Stock to increase the number of designated shares of Series A convertible preferred stock, and the 3,595,472 shares of Series A preferred stock were issued pursuant to the terms of the warrant exchange agreement.  All warrants surrendered in connection with the warrant exchange were cancelled.

During the six months ended September 30, 2009, there were no conversions of series A preferred stock into shares of common stock.
The Company had 9,890,980 and 6,295,908 shares of series A preferred stock outstanding at September 30, 2009 and March 31, 2009, respectively.
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Common Stock Purchaseand Warrants

The Company had 90,000,000 authorized common shares at September 30, 2009 and March 31, 2009 and had 13,930,846 and 13,907,513 shares of common stock outstanding at September 30, 2009 and March 31, 2009, respectively. The Company issued 23,333 shares of common stock in connection with the exercise of stock options on August 20 and September 30, 2009.

In February 2006, we issued to the investor warrants to purchase 11,220,000 shares of common stock in connection with its purchase of the series A preferred stock. These warrants are exercisable, in part or full, at any time from February 24, 2006 until February 24, 2011. If the shares of common stock are not registered pursuant to the Securities Act of 1933, the holders of the warrants have cashless exercise rights which will enable them to receive the value of the appreciation in the common stock through the issuance of additional shares of common stock. These warrants had initial exercise prices of $0.57 as to 5,610,000 shares and $0.855 as to 5,610,000 shares. As a result of the Company’s failure to meet the EBITDA per share targets for the years ended March 31, 2006 and 2007, the exercise prices per share of the warrants were reduced from $0.57 to $.43605 and from $0.855 to $.654075, respectively.
  
On September 1, 2007, the Company entered into a contract with an investor relations firm pursuant to which the Company issued three-year warrants to purchase 112,500 shares of common stock at an exercise price of $1.40 per share.   Using the Black-Scholes options pricing formula assuming a risk free rate of 5%, volatility of 28.5%, a term of three years, and the price of the common stock on September 1, 2007 of $0.285 per share, the value of the warrant was calculated at $0.0001 per share issuable upon exercise of the warrant, or a total of $11. Since the warrant permits the Company to deliver unregistered shares, the Company has the control in settling the contract by issuing equity. The cost of warrants was added as additional paid in capital.
On August 14, 2009, the Company completed a transaction with two shareholders resulting in the issuance of 3,395,472 Series A preferred shares in exchange for the surrender of 9,320,000 warrants.   Subsequent to the exchange, all of the 9,320,000 warrants were cancelled by the Company.

Common Stock
The Company had 90,000,000 authorized common shares at June 30, 2009 and March 31, 2009.  The Company had 13,907,513 sharesAs of common stock outstanding at June 30, 2009 and March 31, 2009.
During the three months ended JuneSeptember 30, 2009, the Company had 112,500 warrants issued no shares of common stock.and outstanding and during the three month period ending September 30, 2009, 9,320,000 warrants were cancelled.
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NOTE 11 - STOCKSHARE BASED COMPENSATION
 
In 2006, the directors adopted, and the stockholders approved, the 2006 long-term incentive plan (the “Plan”) covering 1,000,000 shares of common stock. The Plan provides for the grant of incentive and non-qualified options, stock grants, stock appreciation rights and other equity-based incentives to employees, including officers, and consultants. The Plan is to be administered by a committee of not less than two directors each of whom is to be an independent director. In the absence of a committee, the plan is administered by the board of directors. Independent directors are not eligible for discretionary options. Pursuant to the Plan, each newly elected independent director received at the time of his election, a five-year option to purchase 50,000 shares of common stock at the market price on the date of his or her election.  In addition, the plan provides for the annual grant of an option to purchase 5,000 shares of common stock on July 1st of each year, commencing July 1, 2009, with respect to directors in office in July 2006 and commencing on July 1 coincident with or following the third anniversary of the date of his or her first election.  These options are exercisable in installments.  Pursuant to the Plan, in July 2006, the Company granted non-qualified stock options to purchase an aggregate of 150,000 shares of common stock at an exercise price of $.285 per share, which was determined to be the fair market value on the date of grant, to the three independent directors.

On April 1, 2007, the Company granted options to purchase 211,660 shares of common stock at an exercise price of $.285 to the employees. The company shares did not trade in the market and had no intrinsic value at the date of grant.  It was not possible to reasonably estimate fair market value at their grant date, fair value, and thus according to SFAS 123(R) they were measured at intrinsic value.  

On October 1, 2008, the Company granted options to purchase 22,500 shares of common stock at an exercise price of $1.31 per share to its independent directors.  The options provided for vesting as follows: 13,500 were immediately vested on the date of grant and the remaining 9,000 options vest in two installments of 4,500 each on the first and second anniversary of the grant date.  The options are not covered under the plan.

On March 23, 2009, the Company entered into an employment agreement with the Company’s CFO, pursuant to which, he was granted an option to purchase 150,000 shares of common stock options at an exercise price of $0.49 per share, being the fair market value on the date of grant.  The options will vest in equal amounts of 50,000 over three years on the anniversary of the date of this agreement.  Pursuant to the terms of the employment agreement, the option exercise price was determined based upon the market price of the Company’s common stock as of the date of grant. Any future option grants will be in the sole discretion of the Board.

At June 30,On July 1, 2009, 455,841the Company granted stock options to three directors to purchase 15,000 shares of common stock at an exercise price of $0.50 per share, pursuant to the plan provision following the third anniversary date of each director’s first election to the board. The shares were available formeasured on the grant under the Plan.date and had a fair market value of $6,900.

The status of the Company stock options and stock awards are summarized as follows:

     Weighted  Aggregate 
  Number Of  Average  Intrinsic 
  Options  Exercise Price  Value 
Outstanding at March 31, 2009  544,159  $0.384  $87,240 
Granted  --   --   -- 
Outstanding at June 30, 2009  544,159  $0.384  $87,240 

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The following table summarizes information about our options outstanding at June 30, 2009:

      Weighted Average Remaining  Weighted  Exercisable Options 
Exercise
 Price
  
Number
Outstanding
  
Contractual
Life (in years)
  
Average
Exercise Price
  
Number
 Outstanding
  
Exercise
Price
 
 0.285   371,659   2.7-7.0  0.285   371,659   0.285 
 0.49   150,000   4.7   0.490   -   - 
 1.31   22,500   4.3   1.310   13,500   1.310 
     544,159   3.6   0.384   395,159   0.344 

As of June 30, 2009 there was $67,300, respectively, of total unrecognized compensation cost related to non vested stock options. These costs are expected to be recognized over three years. No shares fully vested during the three months ended June 30, 2009.
The fair value was 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 risk-free interest rate was selected based upon yields of five year US Treasury issues. The expected life of the option was estimated at one half of the contractual term of the option and the vesting period. The assumptions utilized for option grants during the periods presented are as follows:were 156% for volatility, 2.5% for the risk free interest rate, and five years for the expected life of the options.
 
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June 30,
2009
Volatility29.8%
Risk-Free Interest Rate2.7%
Expected Life of Options5 yrs.
At September 30, 2009, 440,841 shares of common stock were available for grant under the Plan.

The following table summarizes information about our options which are fully vested, currently exercisable and expected to vest at September 30, 2009:
 
         Weighted Average
  Number Of  
Weighted
Average
  
Aggregate
Intrinsic
Remaining
Contractual Life
LKi\(
  Options  Exercise Price  Value(in years)
Outstanding at 3/31/2009  544,159  $0.384      
Granted  15,000   0.500      
Exercised  (23,333)   0.285  $   6,650  
Outstanding at 9/30/2009  535,826  $0.391  $280,720 4.51
Outstanding but not vested 9/30/2009  174,000  $0.533  $ 67,500 4.91
Exercisable and vested at 9/30/2009  361,826  $0.323  $214,220 4.32
As of September 30, 2009 there was $77,594 of total unrecognized compensation cost related to non vested stock options. These costs are expected to be recognized over three years. No options were grantedshares fully vested during the threesix months ended JuneSeptember 30, 2009.
 
NOTE 12 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
 
The Company maintains bank account balances, which, at times, may exceed insured limits.  At September 30, 2009, there were receivable balances outstanding from three customers comprising 61.7% of the total receivables balance; the largest balance from a single customer represented 31% of our receivables balance, while the smallest balance from a single customer making up this group was 15%.  The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash.
 
The Company has 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. To the extent that the Company is unable to generate orders from new customers, it may have difficulty operating profitably. 
 
The following table sets forth information as to revenue derived from those customers who accounted for more than 10% of our revenue in the threesix months ended JuneSeptember 30, 2009 and 2008:
 
   Three Months Ended June 30,
   2009  2008
Customer  Dollars  Percent  Dollars  Percent
 A  $1,321,111   40%  $1,552,084   13%
 B     691,237   21%        
 C    488,177   15%        
 D           8,046,100   69%
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   Six Months Ended September 30,
   2009  2008
Customer  Dollars  Percent  Dollars  Percent
 A  $9,735,412   53%  $16,440,122   65% 
 B   3,082,592   17%              3,684,978                    15% 
 
During April 2009, the Company’s largest customer, GT Solar, provided notice of its intent to cancel a portionmajority of antheir open purchase orderorders reducing thetheir total purchase commitment as of March 31, 2009 by approximately $16.8 million.  PostDuring the cancellation,quarter ended September 30, 2009, the remainingCompany completed the sale of $8.9 million of inventory material to GT Solar as part of the cancellation.  As of September 30, 2009, the Company had remaining open purchase orders of $2.4 million from GT Solar, included in its backlog of approximately $11.7 million includes approximately $3.4 million of open product purchase orders and approximately $8.3 million of material buyback.$14.4 million.

NOTE 13 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 dilutive potential common shares. The following table provides a reconciliation of the numerators and denominators reflected in the basic and diluted earnings per share computations, as required by SFAS No. 128, “Earnings Per Share,” (“EPS”).required.

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  June 30,  June 30, 
  2009  2008 
Basic EPS      
Net (loss) income $(124,755) $1,571,696 
Weighted average shares  13,907,513   12,925,606 
Basic (loss) income per share $(0.01) $0.12 
Diluted EPS        
Net (loss) income $(124,755) $1,571,696 
Dilutive effect of Convertible preferred stock, warrant and stock options  --   13,496,351 
Diluted weighted average shares  13,907,513   26,421,957 
Diluted income per share $(0.01) $0.06 
During the three months ended June 30, 2008 there were no potentially anti-dilutive options, warrants, or convertible preferred stock.
NOTE 14 - SEGMENT INFORMATION

We operate in one industry segment - metal fabrication and precision machining. All of our operations, assets and customers are located in the United States.

NOTE 15 –SUBSEQUENT EVENT

On August 4, 2009, Sovereign Bank extended the Company a commitment letter to renew a $2,000,000 revolving working capital line of credit under terms substantially equivalent to those in place on the prior line of credit.
 
 
  Three months ended  Six months ended 
  September 30,  September 30, 
  2009  2008  2009  2008 
Basic EPS            
Net income $1,320,634  $2,476,100  $1,195,889  $4,047,796 
Weighted average number of shares outstanding  13,916,462   13,823,245   13,912,012   13,379,358 
Basic income per share $0.09  $0.18  $0.09  $0.30 
Diluted EPS                
Net income $1,337,902  $2,476,100  $1,213,157  $4,047,796 
Dilutive effect of stock options, warrants and preferred stock  7,383,687   13,155,085   6,018,226   13,357,320 
Diluted weighted average shares  21,300,150   26,978,330   19,930,238   26,736,678 
Diluted income (loss) per share $0.06  $0.09  $0.06  $0.15 

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 financial statements and the related notes, which appear elsewhere. This quarterly report of 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. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based in part on assumptions made by management. 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, and probably will, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors. Those factors include those risks discussed under “Management’s Discussion and Analysis” in our Form 10-K for the year ended March 31, 2009 and this Item 2 in this Form 10-Q and those described in any other filings which we make with the SEC. In addition, such statements could be affected by risks and uncertainties related to the U.S. and global economies, to our ability to generate business on an on-going business, to obtain any required financing, to receive contract awards from the competitive bidding process, maintain standards to enable us to manufacture products to exacting specifications, enter new markets for our services, market and customer acceptance, our reliance on a small number of customers for a significant percentage of our business, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. 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 report, except as required by applicable law.

Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this report. Investors should evaluate any statements made by the Company in light of these important factors.

Overview
 
We offer a full range of services required to transform raw material into precise finished products. Our manufacturing capabilities include: fabrication operations which include cutting, press and roll forming, assembly, welding, heat treating, blasting and painting; and machining operations which include CNC (computer numerical controlled) horizontal and vertical milling centers. We also provide support services in addition to our manufacturing capabilities: which include manufacturing engineering (planning, fixture and tooling development, manufacturability), quality control (inspection and testing), and production control (scheduling, project management and expediting).
 
All 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.
 
During the lastpast several years, the demand for our services has been relatively strong. However, recent recessionary pressures have affected the requirements of our customers.  GT Solar, which has been our largest customer for each of the past three fiscal years, has slowed production significantly during the second half of the fiscal year ended March 31, 2009 and in April 2009, provided notice of its’ intention to cancelcanceled the majority of orders included in our  June 30, 2009 backlog.its outstanding purchase orders.  Other customers have delayed deliveries of existing orders and have delayed the placement of new orders.
 
 
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A significant portion of our revenue is generated by a small number of customers. During the threesix months ended JuneSeptember 30, 2009, our largest customer, GT Solar, accounted for approximately 52.8% of our revenue; our second largest customer, BAE Systems, accounted for approximately 40%16.7% of our revenue; while all other customers were less than 10% of our revenue our second largest customer, Still River Systems, accounted for approximately 21% of our revenue, and our third largest customer, General Dynamics Electric Boat Corporation ,accounted for approximately 15% of our revenue.the six month period ended September 30, 2009. For the threesix months ended JuneSeptember 30, 2008, our largest customer, GT Solar, accounted for 69% of our revenue and BAE accounted for 13%15% of our revenue. 
 
Our contracts are generated both through negotiation with the customercustomers and from bids made pursuant to a requestrequests for proposal.proposals. 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, 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 a more predictable cost structure, and whenever possible.structure. During the threesix months ended JuneSeptember 30, 2009, our sales and net lossincome were $3.3$18.4 million and ($125,745), respectively$1.2 million, as compared to sales of $11.7$25.3 million and net income of $1.6$4.0 million, respectively, for the threesix months ended JuneSeptember 30, 2008.  Our gross margin for the threesix months ended JuneSeptember 30, 2009 was 17% as compared to 29%33% in the threesix months ended JuneSeptember 30, 2008 as a result of lesserlower sales volume.  Both net sales and gross margin declined in the threesix months ended JuneSeptember 30, 2009, reflecting the effects ofand the global economic downturn continues to have an adverse impact on our customerscustomers.  In August 2009, we completed the transfer of inventory to GT Solar as part of their April 2009 cancellation.  Accordingly, our revenue for the three month and six month periods ended September 30, 2009, includes $8.9 million of revenue related to materials transferred to GT Solar as part of their customers.order cancellation.   The inventory transfer included a heavy mix of raw materials and therefore carried a lower margin than we typically generate through the sale of finished products.
 
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 our completion of one contract and commencement of work on another contract. During such a period, we would continue to incur our overhead expense but with lower revenue. Furthermore, changes in either the scope of a contract or the delivery schedule may impact the revenue we receive under the contract and the allocation of manpower.

As of JuneSeptember 30, 2009, we had a backlog of orders totaling approximately $39.5$14.4 million, of which approximately $28.5$2.4 million represented orders from GT Solar.  During the three months ended JuneOur corresponding backlog as of September 30, 2009,2008 was $45.5 million of which GT Solar provided notice of its intent to cancel a portion of an open purchase order reducing its total purchase commitment by approximately $16.8 million, reducing our total backlog to $22.7 million.  Post the cancellation, the remaining GT Solar backlog of approximately $11.7 million includes approximately $3.4 million of open product purchase orders and approximately $8.3 million of material buyback.  The backlog also includes orders in excess of $1.0 million from each of five customers totaling more than $7.9 million in addition to GT Solar. We expect to deliver the backlog during the years ended March 31, 2010 and March 31, 2011.represented 73%.

Although we provide manufacturing services for large governmental programs, we usually do not work directly for agencies of the United States government. Rather, we perform our services for large governmental contractors and large utility companies. However, our business is dependent in part on the continuation of governmental programs which require the services we provide.
 
Growth Strategy
 
Our strategy is to leverage our core competence as a manufacturer of high-precision, large-scale metal fabrications and machined components to expand our business into areas which have shown increasing demand and which we believe could generate higher margins.

Diversifying Our Core Industries
 
We believe that rising energy demands along with increasing environmental concerns are likely to continue to drive demand in the alternative energy industry, particularly the solar, wind and nuclear power industries. Because of our capabilities and the nature of the equipment required by companies in the alternative energy industries, we intend to focus our services in this sector.  We also expect to market our services for medical device applications where customer requirements demand strict tolerances and an ability to manufacture complex heavy equipment.
  
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As a result of both the increased prices of oil and gas and the resulting greenhouse gas emissions, nuclear power may become an increasingly important source of energy. Because of our manufacturing capabilities, our certification from the American Society of Mechanical Engineers and our historic relationships with suppliers in the nuclear power industry, we believe that we are well positioned to benefit from any increased activity in the nuclear sector that may result. However, revenuessector. Revenues derived from the nuclear power industry were insignificant$1.5 million for the threesix months ended JuneSeptember 30, 2009 and currently constitute approximately 5%1.7% of our backlog that we expect to deliver by March 31, 2010 and March 2011. We cannot assure you that we will be able to develop any significant business from the nuclear industry.
 
In addition to the nuclear energy industry, we are also exploring potential business applications focused on the medical industry.  These efforts include the development and fabrication of medical isotopes storage solutions and the development and fabrication of critical components for proton beam therapy machines designed to be utilized in the treatment of cancer.  Net sales from our proton beam therapy customer accounted for 21%4.7% of our total net sales for the threesix months ended JuneSeptember 30, 2009 while sales to our medical isotope customer were not significant during the threesix months ended JuneSeptember 30, 2009.
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Expansion of Manufacturing Capabilities

In addition to the possible expansion of our existing manufacturing capabilities, through expansion of our existing facilities, we may, from time to time, pursue opportunistic acquisitions to increase and strengthen our manufacturing, marketing, product development capabilities and customer diversification.  We do not have any current plans for any acquisition, and we cannot give any assurance that we will complete any acquisition.

Impact of Recent Legislation

The Congress has passed and the President has signed the $800 billion American Recovery and Reinvestment Act of 2009 into law. Significant components of the bill allow manufacturing concerns to apply various tax credits and apply for government loan guarantees for the development of or the retooling of existing facilities for using electricity derived from renewable and previously underutilized sources.  The Company has historically derived significant revenues from contracts with manufacturing concerns in these alternative energy fields.  The American Recovery and Reinvestment Act extended the 50% Bonus depreciation enacted as a part of the Economic Stimulus Act of 2008.  Under the Act, 50% of the basis of the qualified property may be deducted in the year the property is placed in service (i.e. 2008 and 2009).  The remaining 50% is recovered under otherwise applicable depreciation rules. This significant tax incentive could drive increased demand on the part of some customers.
 
Critical Accounting Policies
 
The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including all notes thereto, and related disclosures of commitments and contingencies, if any. We rely on historical experience and other assumptions we believe to be reasonable in making our estimates. Actual financial results of the operations could differ materially from such estimates. There have been no significant changes in the assumptions, estimates and judgments used in the preparation of our financial statements for the three and six months ended JuneSeptember 30, 2009 from the assumptions, estimates and judgments used in the preparation of our audited financial statements for the year ended March 31, 2009.

Revenue Recognition and Costs Incurred
 
We derive revenues from (i) the fabrication of large metal components for our customers; (ii) the precision machining of such large metal components, including incidental engineering services; and (iii) the installation of such components at the customers’ locations when the scope of the project requires such installations.
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Revenue and costs are recognized on the units of delivery method. This method recognizes as revenue the contract price of units of the product delivered during each period and the costs allocable to the delivered units as the cost of earned revenue. When the sales agreements provide for separate billing of engineering services, the revenues for those services are recognized when the services are completed. Costs allocable to undelivered units are reported in the balance sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed upon contract price for customer directed changes, constructive changes, customer delays or other causes of additional contract costs are recognized in contract value if it is probable that a claim for such amounts will result in additional revenue and the amounts can be reasonably estimated. Revisions in cost and profit estimates are reflected in the period in which the facts requiring the revision become known and are estimable. The unit of delivery method requires the existence of a contract to provide the persuasive evidence of an arrangement and determinable seller’s price, delivery of the product and reasonable collection prospects. The Company has written agreements with the customers that specify contract prices and delivery terms. The Company recognizes revenues only when the collection prospects are reasonable.
 
Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined and are reflected as reductions of the carrying value of the costs incurred on uncompleted contracts. Costs incurred on uncompleted contracts consist of labor, overhead, and materials. Work in process is stated at the lower of cost or market and reflects accrued losses, if required, on uncompleted contracts.
 
Variable Interest Entity
 
We have consolidated WM Realty, a variable interest entity from which we lease our real estate, to conform to FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). We have also adopted the revision to FIN 46, FIN 46 (R), which clarified certain provisions of the original interpretation and exempted certain entities from its requirements.  estate.

Income Taxes
 
We provide for federal and state income taxes currently payable, as well as those deferred because of temporary differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable. The effect of the change in the tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income taxes to the amount that is more likely than not to be realized.

For the three months ended June 30, 2009 and 2008, the Company recorded provisions for the Federal and State income tax benefit and income tax expense of $183,685 and $(1,064,250), respectively. The effective tax benefit and expense rates for the three months ended June 30, 2009 and 2008 were (60)% and 40% respectively. The difference between the provision for income taxes and the income tax determined by applying the statutory federal income tax rate of 39% was due primarily to differences in the lives and methods used to depreciate and/or amortize our property and equipment, timing differences of expenses related compensated absences, net operating loss carryforwards, and operating losses that occurred during the period.
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As of JuneSeptember 30, 2009, the Company’s federal net operating loss carry-forward was approximately $1,780,714. If not utilized, the federal net operating loss carry-forward of Ranor and Techprecision will expire in 2025 and 2027, respectively. Furthermore, because of the over fifty percentfifty-percent change in ownership as a consequence of the reverse acquisition in February 2006, as a result of the application of Section 382 of the Internal Revenue Code, the amount of net operating loss carry forward used in any one year in the future is substantially limited.
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New Accounting Pronouncements
 
See Note 2, Significant Accounting Policies, in the Notes to the Consolidated Financial Statements.

Results of Operations
 
Three Months Ended June 30, 2009 and 2008

The following table sets forth information from our statements of operations for the three months ended June 30, 2009 and 2008, in dollars and as a percentage of revenue (dollars in thousands):
        Changes Three Months 
        Ended June 30, 
  2009  2008  2009 to 2008 
  Amount  Percent  Amount  Percent  Amount  Percent 
Net sales $3,318   100% $11,658   100% $(8,340)  (72)%
Cost of sales  2,754   83%  8,277   71%  (5,523)   (67)%
Gross profit  564   17%  3,381   29%  (2,817)   (83)%
                         
Payroll and related costs  394   12%  435   4%  (41)   (9)%
Professional expense  76   2%  47   0%  29   62%
Selling, general and administrative  298   9%  139   1%  159   114%
Total operating expenses  768   23%  621   5%  147   24%
                         
Income (loss)  from operations  (204)   (6)%  2,760   24%  (2,964)   (107)%
Interest expense, net  (101)  (3)%  (119)  (1)%  18   (15)%
Finance costs  (4)  0%  (4)  0%  -   -  %
Income (loss) before income taxes  (309)  (9)%  2,637   23%  (2,946)  (112)%
Provision for income taxes, net  184   6%  (1,064)  (9)%  1,248   117%
Net (loss) income $(125)  (4)%   1,573   13%  (1,698)   (108)%
Our results of operations are affected by a number of external factors including the availability of raw materials, commodity prices (particularly steel and graphite prices)steel), macro economic factors, including the availability of capital that may be needed by our customers, and political, regulatory and legal conditions in the United States and foreign markets.
 
Our results of operations are also affected by a number of other factors including, among other things, success in booking new contracts and when we are able to recognize the related revenue, delays in customer acceptances of our products, delays in deliveries of ordered products and our rate of progress in the fulfillment of our obligations under our contracts. A delay in deliveries or cancellations of orders would cause us to have inventories in excess of our short-term needs, and may delay our ability to recognize, or prevent us from recognizing, revenue on contracts in our order backlog.
  
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Recent disruptions in the global capital markets have resulted in reduced availability of funding worldwide and a higher level of uncertainty experienced by some end-user solar cell module manufacturers. As a result, our customers have made reductions in their direct labor workforce and reported decreases in their order backlogs as well as adjustments to the procurement of materials in their photovoltaic related production.  In response,April, 2009, GT Solar, our largest customer cancelled the majority of their open purchase orders with us and in August 2009 we completed the material transfer of $8.9 million to GT Solar to finalize the order cancellation.  While we have been negotiating extensionsopen orders and backlog with GT Solar they are not at comparable levels prior to the cancellation.

Three Months Ended September 30, 2009 and 2008

The following table sets forth information from our statements of the delivery schedules and other modifications under some of our existing contracts. Duringoperations for the three months ended September 30, 2009 GT Solar provided noticeand 2008, in dollars and as a percentage of its intent to cancel a portion of an open purchase order reducing the total purchase commitment by approximately $16.8 million, reducing our total backlog to $21.8 million.  Post the cancellation, the remaining GT Solar backlog of approximately $11.7 million includes approximately $3.4 million of open product purchase orders and approximately $8.3 million of material buyback.revenue (dollars in thousands):
        Changes Three Months 
        Ended September 30, 
  2009  2008  2009 to 2008 
  Amount  Percent  Amount  Percent  Amount  Percent 
Net sales $    15,117   100% $13,601   100% $1,516   11%
Cost of sales      12,471   83%  8,588   63%  3,883   45%
Gross profit        2,646   17%  5,013   37%  (2,367)  (47)%
                         
Payroll and related costs           331   2%  322   2%  9   3%
Professional expense           111   1%  73   1%  38   53%
Selling, general and administrative           227   2%  150   1%  77   51%
Total operating expenses           669   4%  545   4%  124   23%
                         
Income from operations        1,977   13%  4,468   33%  (2,491)  (56)%
Interest expense, net          (102)  (1)%  (115)  (1)%  13   11%
Finance costs              (4)  0%  (5)  0%  1   20%
Income before income taxes        1,871   12%  4,348   32%  (2,477)  (57)%
Provision for income taxes, net           550   4%  1,872   14%  (1,322)  (71)%
Net income $      1,321   9%  2,476   18%  (1,155)  (47)%

Net Sales

Net sales decreasedincreased by $8.3$1.5 million, , or 72%11%, from $11.7$13.6 million for the three months ended JuneSeptember 30, 2008 to $3.3$15.1 million for the three months ended JuneSeptember 30, 2009.  A significant portionNet sales included $8.9 million of the decrease resulted from decrease inmaterial sales to GT Solar.  The global economic downturn adversely impacted our operations in muchSolar that were triggered by that customer’s April 2009 cancellation of open purchase orders.  This non-recurring material transfer represents 59.3% of the first quarter of fiscal year 2009.net sales for the quarter.
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Cost of Sales and Gross Margin

Our cost of sales for the three months ended JuneSeptember 30, 2009 increased by $3.9 million to $12.5 million, an increase of 45%, from $8.6 million for the three months ended September 30, 2008. The increase in the cost of sales was principally due to the impact of the non-recurring transfer of inventory to GT Solar as part of its April 2009 order cancellation.  The decline in gross profit margin was $2.4 million (47%) from $5.0 million or 37% of sales, during the three months ended September 30, 2008 to $2.6 million or 17% of sales for the period ending September 30, 2009.  Contributing to the decline in gross margin were costs associated with underutilized capacity.  Further, the mix of completed projects and the lower margin inventory transfer resulted in an overall reduction in the gross margin for the quarter ended September 30, 2009 when compared against the same quarter in 2008.

Operating Expenses
Our payroll and related costs within our selling and administrative costs were $331,302 for the three months ended September 30, 2009 as compared to $322,035 for the three months ended September 30, 2008. The $9,267 (3%) increase in payroll is due primarily to an increase in compensation compared to the same three month period in the prior year.
Professional fees increased from $72,782 for the three months ended September 30, 2008 to $110,411 for the three months ended September 30, 2009. This increase was primarily attributable to an increase in legal costs related to the August warrant exchange, contract review and various SEC filing requirements.
Selling, administrative and other expenses for the three months ended September 30, 2009 were $219,073  as compared to $150,138 for three months ended September 30, 2008, an increase of $68,935 or 46%.  Additional expenditures related to consulting fees and insurance were the primary components of the increase.

Interest Expense
Interest expense for three months ended September 30, 2009 was $107,390 compared with $115,090 for the three months ended September 30, 2008. The decrease of $7,700 (11%) is a result of lower principal balances of the Sovereign and Amalgamated bank loans outstanding in the three months ended September 30, 2009 as compared to the three months ended September 30, 2008.

Income Taxes

For the three months ended September 30, 2009 and 2008, the Company recorded provisions for the Federal and State income tax expense of $550,388 and $1,871,968, respectively. The effective tax expense rates for the three months ended September 30, 2009 and 2008 were 30% and 43% respectively. The difference between the provision for income taxes and the income tax determined by applying the statutory federal income tax rate of 34% was due primarily to differences in the lives and methods used to depreciate and/or amortize our property and equipment, timing differences of expenses related to compensated absences, and the expected utilization of net operating loss carryforwards.

Net Income
As a result of the foregoing, our net income was $1.3 million or $0.09  and $0.06 per share basic and diluted, respectively, for the three months ended September 30, 2009, as compared to net income of $2.5 million  $0.18 and $.0.09 per share basic and diluted, respectively, for the three months ended September 30, 2008.
Results of Operations for the Six Months Ended September 30, 2009 and 2008

The following table sets forth information from our statements of operations for the six months ended September 30, 2009 and 2008, in dollars and as a percentage of revenue (dollars in thousands):

        Changes Six Months 
        Ended September 30, 
  2009  2008  2009 to 2008 
  Amount  Percent  Amount  Percent  Amount  Percent 
Net sales $18,436   100% $25,259   100% $(6,823)  (27)%
Cost of sales  15,225   83%  16,866   67%  (1.641)  (10)%
Gross profit  3,211   17%  8,393   33%  (5,182)  (62)%
                         
Payroll and related costs  725   4%  757   3%  (32)  (4)%
Professional expense  187   2%  120   1%  67   55%
Selling, general and administrative  525   3   289   1   236   82%
Total operating expenses  1,437   8%  1,166   5%  271   23%
                         
Income from operations  1,774   10%  7,227   29%  (5,453)  (75)%
Interest expense, net  (203)  (1)%  (234   (1)%  30   13%
Finance costs             (8)  0%  (9)  0%  1   11%
Income before income taxes  1,563   9%  6,984   28%  (5,421)  (78)%
Provision for income taxes  (367)  (2)%  (2,936)  (12)%  (2,569)  (88)%
Net income $1,196   7% $4,048   16% $(2,852)  (70)%
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Net Sales

Net sales decreased by $6.8 million, or 27%, from $25.2 million for the six months ended September 30, 2008 to $18.4 million for the six months ended September 30, 2009. A significant portion of the decrease resulted from decrease in sales to our largest customer, GT Solar.  Also, the global economic downturn adversely impacted our business during much of the first half of fiscal year 2010.

Cost of Sales and Gross Margin

Our cost of sales for the six months ended September 30, 2009 decreased by $5.5$1.6 million to $2,8$15.2 million, a decrease of 67%10%, from $8.3$16.9 million for threesix months ended JuneSeptember 30, 2008. The decrease in the cost of sales was principally due to the reduction in volume of sales. The decline in gross profit margin was $2.8$5.2 million (83%(62%) from $3.4$8.4 million  or 29%33% of sales, during the threesix months ended JuneSeptember 30, 2008 to $564,,802$3.2 or 17% of sales for the period ending JuneSeptember 30, 2009.  Contributing to the delinedecline in gross margin were costs associated with underutilized capacity as well as relatively higher labor cost on several contracts.and the inventory transfer to GT Solar which included a high volume of raw material priced at a marginal mark-up to cost.

Operating Expenses
 
Our payroll and related costs within our selling and administrative costs were $393,367$724,669 for the threesix months ended JuneSeptember 30, 2009 as compared to $435,095$757,130 for the threesix months ended JuneSeptember 30, 2008. The $41,529  (10%$32,461 (4%) decrease in payroll is due primarily to a decline in bonus compensation compared to the prior year..year.
 
Professional fees increased from $47,687$120,469 for the threesix months ended JuneSeptember 30, 2008 to $76,212$164,713 for the threesix months ended JuneSeptember 30, 2009. This increase was primarily attributable to an increase in legal costs related to contract review and SEC filing requirements.
 
Selling, administrative and other expenses threesix months ended JuneSeptember 30, 2009 were $298,421$517,494 as compared to $138,996$289,134 for threesix months ended JuneSeptember 30, 2008, an increase of $159,425$44,244 or 114%37%.  Additional expenditures of $112,500 related to executive severance pay and travel were the principal component ofprimary reasons for the increase.

Interest Expense
 
Interest expense for threethe six months ended JuneSeptember 30, 2009 was $104,162$211,552 compared to $118,781with $233,871 for the threesix months ended JuneSeptember 30, 2008. The decrease of $14,619 (11%$22,319 (10%) is a result of lower principal balances of the Sovereign and Amalgamated bank loans outstanding in the three months ended Juneat September 30, 2009 as compared to September 30, 2008.

Income Taxes

For the threesix months ended JuneSeptember 30, 2008.2009 and 2008, the Company recorded provisions for Federal and State income tax expense of $366,703 and $2,936,218, respectively. The effective tax expense rates for the six months ended September 30, 2009 and 2008 were 30% and 42%, respectively. The difference between the provision for income taxes and the income tax determined by applying the statutory federal income tax rate of 34% was due primarily to differences in the lives and methods used to depreciate and/or amortize our property and equipment, timing differences of expenses related compensated absences, and the expected utilization of net operating loss carryforwards.

Net Income
 
As a result of the foregoing, our net lossincome was ($124,745) ($0.01$1.2 million or $0.09 and $0.06 per share)share basic and diluted, respectively for the threesix months ended JuneSeptember 30, 2009, as compared to net income of $1.57$4.0 million ($0.12or $0.30 and $.0.06$0.15 per share basic and diluted, respectively)respectively, for the threesix months ended JuneSeptember 30, 2008.
 
 
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Liquidity and Capital Resources
 
At JuneSeptember 30 2009, we had working capital of $10..9$12.9 million as compared towith working capital of $11.1 million at March 31, 2009, a decreasean increase of $205,787$1.8 million or 1.8% 16.1%. The following table sets forth information as to the principal changes in the components of our working capital (dollars in thousands).

Category June 30, 2009  March 31, 2009  
Change
 Amount
  Percentage Change  September 30, 2009 
March 31,
2009
 
Change
Amount
 Percentage Change 
Cash and cash equivalents  9,404   10,463   (1,059)  (10.1)%  $9,537   $10,463      $(925)  (8.8)
Accounts receivable, net  1,656   1,419   237   16.7%  3,031   1,419   1,612   113.6 
Costs incurred on uncompleted contracts  3,530   3,661   (131)  (3.6)%  3,603   3,661   58   (1.6)
Raw material inventories  305   351   (46)  (13.1)%  304   351   (47)  (13.5)
Prepaid expenses  1,556   1,583   (27)  (1.7)%  164   1,583   (1,419)  (89.6)
Deferred tax asset  246   --   246   --%  194   --   194   -- 
Other receivables  30   60   (30)  (50.0)%  30   60   (30)  (50.0)
Accounts payable  632   951   (319)  (33.6)%  348   951   (603)  (63.4)
Accrued expenses  459   710   (251)  (35.3)%  541   710   (169)  (23.8)
Accrued severance  113   -   113     
Accrued taxes  -   156   (156)  (100.0)%  498   156   342   (219.2)
Progress billings in excess of cost of uncompleted contracts  3,953   3,945   8   0.2%  1,777   3,945   (2,168)  (54.9)
Current maturity of long-term debt  625   625   (0)  0.0%  752   625   127   (20.3)
 
The cashCash used in operations was $856,642$1.4 million for the threesix months ended JuneSeptember 30, 2009 as compared to thewith cash provided by operations of $1,2$7.4 million for the threesix months ended JuneSeptember 30, 2008. The decrease in cash flows from operations of $2.1$6.0 million or 170%, was the net effect of a decrease in the net profits, decrease in costs incurred on uncompleted contracts and payment of accounts payable and accrued expenses induring the threesix months ended JuneSeptember 30, 2009.

The netNet cash used inprovided by financing activities was $202,152$521,041 for the threesix months ended JuneSeptember 30, 2009 as compared to $30,032with net cash used of $229,560 for the threesix months ended JuneSeptember 30, 2008.  During the threesix months ended JuneSeptember 30, 2009, the Company received $6,650 from the exercise of stock options, and we borrowed $919,296 under a line of credit facility in August 2009 to finance the purchase of new equipment placed into service during the last six months. We made principal paymentpayments of $142,857$285,714 on our loans from Sovereign Bank and principal payments of $3,251$6,552 on capital lease obligations.  In addition, WM Realty made principal payments on its mortgage of $9,559.$19,161.  WM Realty also made capital distributions to its members of $45,375.  During the three months ended June 30, 2008, the Company made principal payments of $142,857 on our loans from Sovereign Bank and received $170,060 from the exercise of warrants.  WM Realty made mortgage principal reduction payments totaling $8,788 and made capital distributions to its members of $46,875.$92,256.    
 
During the threesix months ended JuneSeptember 30, 2009, the installation of the equipment under construction at March 31, 2009 hadhas been fully completed, placed into service and was transferred to property, plant and equipment. We did not engage in additional investing activities forFor the threesix months ended June 30, 2009.  For the three months ended JuneSeptember 30, 2008 we invested $123,540$9,220 in property, plant and equipment and paid a deposit on equipment of $150,000.  This deposit was credited to our purchase price in fiscal 2009 when the equipment was received.  
 
The net decrease in cash was $1,.06 million$925,410 for the threesix months ended JuneSeptember 30, 2009 as compared to $921,214with a $6.9 million increase in cash for the for the threesix months ended JuneSeptember 30, 2008.
  
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At JuneSeptember 30, 2009, WM Realty had an outstanding mortgage of $3.1 million on the real property that it leases to Ranor. The mortgage has a term of ten years, maturing November 1, 2016, bears interest at 6.75% per annum, and provides for monthly payments of principal and interest of $20,955. The monthly payments are based on a thirty-year amortization schedule, with the unpaid principal being due in full at maturity. WM Realty has the right to prepay the mortgage note upon payment of a prepayment premium of 5% of the amount prepaid if the prepayment is made during the first two years, and declining to 1% of the amount prepaid if the prepayment is made during the ninth or tenth year.

Debt Facilities
 
We have a loan and security agreement with Sovereign Bank, dated February 24, 2006, pursuant to which we borrowed $4.0 million on a term loan basis in connection with our acquisition of Ranor.  As a result of amendments to the loan and security agreement, we currently have a $2.0 million revolving credit facility which is available until June 30, 2010.   We also have a $3.0 million capital expenditure facility which is available until November 30, 2009.  Pursuant to the terms of the capital expenditure facility we may request financing of capital equipment purchased through November 30, 2009, at which time any amounts borrowed under the line are to be amortized over a five year period. Pursuant to the agreement, Ranor is required to maintain a ratio of earnings available for fixed charges to fixed charges of at least 1.2 to 1, and an interest coverage ratio of 2 to 1. At JuneSeptember 30, 2009, we were in compliance with both of these ratios, with Ranor’s ratio of earnings available for fixed charges to fixed charges being 3.61.6 to 1 and Ranor’s interest coverage ratio, calculated on a rolling basis being 15.29.8 to 1.

The term note issued on February 24, 2006 has a term of 7 years with an initial fixed interest rate of 9%.  The interest rate on the term note converts from a fixed rate of 9% to a variable rate on February 28, 2011.  From February 28, 2011 until maturity the term note will bear interest at the prime rate plus 1.5%, payable on a quarterly basis.   Principal is payable in quarterly installments of $142,857 plus interest, with a final payment due on March 1, 2013.
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The term note is subject to various covenants that include the following: the loan collateral comprises all personal property of Ranor, including cash, accounts receivable inventories, equipment, financial and intangible assets.  Ranor must also maintain a ratio of earnings available to cover fixed charges of at least 120% of the fixed charges for the rolling four quarters, tested at the end of each fiscal quarter.  Additionally, Ranor must also maintain an interest coverage ratio of at least 2:1 at the end of each fiscal quarter.   Ranor’s obligations under the notes to the bank are guaranteed by Techprecision.TechPrecision.  At JuneSeptember 30, 2009, there were no borrowings under the revolving note and the maximum available under the borrowing formula was $2.0 million. The Company is in compliance with all of the debt covenants.    

Under the $3.0 million capital expenditures facility Ranor is able to borrow up to $3.0 million until November 30, 2009. We pay interest only on borrowings under the capital expenditures line until November 30, 2009, at which time the principal balance is amortized over five years, commencing December 31, 2009.  The interest on borrowings under the capital expenditure line is either equal to the prime plus ½% or the LIBOR rate plus 3%, as the Company may elect.  Any unpaid balance on the capital expenditures facility is to be paid on November 30, 2014.  As of JuneSeptember 30, 2009, and June 30, 2008, there were no borrowings outstandingwe borrowed $0 under either the revolving line orand $919,297 under the capital expenditure line.  We intend to borrow approximately $880,000The funds were used to finance the purchase of equipment that has been installed and placed in service during the quarter ended JuneSeptember 30, 2009..2009.

The securities purchase agreement pursuant to which we sold the series A preferred stock and warrants to Barron Partners provides Barron Partners with a right of first refusal on future equity financings, which may affect our ability to raise funds from other sources if the need arises.

We believe that the $2.0 million revolving credit facility, which remained unused as of JuneSeptember 30, 2009 and terminates in June 2010, and the $3.0$2.1 million capital expenditure facility and our cash flow from operations should be sufficient to enable us to satisfy our cash requirements at least through the end of fiscal 2010.  Nevertheless, it is possible that we may require additional funds to the extent that we expand our manufacturing facilities. In the event that we make an acquisition, we may require additional financing for the acquisition. However, we do not have any current plans for any acquisition, and we cannot give any assurance that we will complete any acquisition. We have no commitment from any party for additional funds; however, the terms of our agreement with Barron Partners, particularly Barron Partners’ right of first refusal, may impair our ability to raise capital in the equity markets to the extent that potential investors would be reluctant to negotiate a financing when another party has a right to match the terms of the financing.
  

ITEM 4Item 4T – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of JuneSeptember 30, 2009, we carried out an evaluation, under the supervision and with the participation of management, including our interim chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)).

Based upon that evaluation, our interim chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of JuneSeptember 30, 2009, to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Controls

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) that occurred during the quarter ended JuneSeptember 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
PART II: OTHER INFORMATION
 
ITEMItem 6 - EXHIBITS

3.4Amendment to Amended and Restated Bylaws of the Company, dated September 14, 2009 (filed as Exhibit 3.1 to the current report on Form 8-K filed with the SEC on September 18, 2009).*
3.5Certificate of Amendment to Certificate of Designation of Series A Convertible Preferred Stock
10.1Warrant Exchange Agreement, dated August 14, 2009, by and among the Company, Barron Partners LP, and GreenBridge Capital Partners IV, LLC (filed as Exhibit 103.1 to the current report on Form 8-K filed with the SEC on August 20, 2009).*
31.1   Rule 13a-14(a) certification of chief executive officer
31.2   Rule 13a-14(a) certification of chief financial officer
32.1   Section 1350 certification of chief executive and chief financial officers

* = Incorporated by reference.


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SIGNATURES

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


 
TECHPRECISION CORPORATION
(Registrant)
   
Dated:  AugustNovember 12, 2009
By:/s/ Richard F. Fitzgerald                                               
  
Richard F. Fitzgerald
Chief Financial Officer
(duly authorized officer and principal financial officer)
 
 

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