COMMITMENTS

12 Months Ended

Mar. 31, 2012

COMMITMENTS

COMMITMENTS

NOTE 16 — COMMITMENTS

Leases

On December 20, 2010, the Company, through its wholly-owned subsidiary, Ranor, Inc., purchased the property in Westminster, Massachusetts pursuant to a Purchase and Sale Agreement, by and among the former owner of the property WM Realty (an entity controlled by the Company’s director, Andrew Levy), and Ranor. On the same date, the Company cancelled its lease with WM Realty.

The property included a 125,000 sq. ft. manufacturing facility that serves as Ranor’s primary operating location.  Pursuant to the Purchase Agreement, Ranor paid WM Realty $4,275,000 for the property, which price was based on independent, third-party real estate appraisals obtained by the Company.  Under the Purchase Agreement, the parties agreed to share equally in the $91,448 prepayment penalty associated with early termination of the mortgage that encumbered the property and which was paid off in full in connection with the closing under the Purchase Agreement.  In addition, the Purchase Agreement provided for the early termination of Ranor’s lease of the property from WM Realty, pursuant to which Ranor had been paying annual rent of $450,000.

Ranor, Inc. had leased its manufacturing, warehouse and office facilities in Westminster, Massachusetts from WM Realty, a variable interest entity, for a term of 15 years, commencing February 24, 2006. For the year ended on March 31, 2011 the Company’s rent expense was $324,194. Since the Company consolidated the operations of WM Realty, a variable interest entity, in fiscal 2011, the rental expense was eliminated in the consolidated financial statements, and the building was carried at cost and depreciation expensed.

On November 17, 2010, the Company entered into a lease agreement to lease approximately 3,200 square feet of office space in Center Valley, Pennsylvania to be used as the Company’s corporate headquarters.  The Company took possession of the office space on April 1, 2011.  Under the Lease, the Company’s payment obligations were deferred until the fifth month after it takes possession, at which time the Company will pay annual rent of approximately $58,850 in equal monthly installments, subject to upward adjustments during each subsequent year of the term of the Lease.  In addition to Base Rent, the Company will pay to the Landlord certain operating expenses and other fees in accordance with the terms of the Lease.  Payment of Base Rent and other fees under the Lease may be accelerated if the Company fails to satisfy its payment obligations in a timely manner, or otherwise defaults on its obligations under the Lease. The Lease expires sixty-four months after the date of the Lease. The Company may elect to renew the lease for an additional five-year term. The Lease contains customary representations and covenants regarding occupancy, maintenance and care of the Property. At March 31, 2012 we recorded a liability for deferred rent of $17,880 reflecting the difference between the expense recorded in the consolidated statement of operations and comprehensive income (loss) the monthly rent cash payments paid to the lessor.

On November 15, 2010 and June 15, 2011, the Company entered into certain leases for approximately 1,000 sq. ft. of office space in Wuxi, China. The annual rental cost is approximately $27,000 and the leases expire on November 14, 2012. We also lease apartment space for certain expatriate employees who live and work in China. The annual rental cost is approximately $42,000 and the leases expire on various dates during fiscal 2013. Rent expense for all operating leases for the fiscal years ended March 31, 2012 and 2011 was $131,090 and $90,030, respectively.

Future minimum lease payments required under non-cancellable operating leases in the aggregate, at March 31, 2012, totaled $186,412. The totals for each annual period ended on March 31 were: 2013- $57,360, 2014- $57,360, 2015- $57,358 and 2016- $14,334.

As of March 31, 2012, the Company had $2.3 million in purchase obligations outstanding, which primarily consisted of contractual commitments to purchase raw materials and supplies at fixed prices.

Employment Agreements

The Company has employment agreements with its executive officers. Such agreements provide for minimum salary levels, adjusted annually, as well as for incentive bonuses that are payable if specified company goals are attained. The aggregate annual commitment at March 31, 2012 for future salaries during the next fiscal year 2013, excluding bonuses, was approximately $985,000.

Severance Agreement

On February 8, 2012 the Company’s President and General Manager for its Ranor operation in the U.S. retired. In connection with the above event, the Company was required to provide severance and certain post-employment benefits. As such, the Company has recorded a charge of $226,945 associated with this event. The entire balance remains outstanding at March 31, 2012, and is included in accrued expenses on the consolidated balance sheet.