10-Q

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2012

OR

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

For the transition period from              to            

Commission File Number 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.)
3477 Corporate  Parkway, Center Valley, PA	18034
(Address of principal executive offices)	(Zip Code)

(484) 693-1700

(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      x           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 November 9, 2012 was 18,904,577.

EXPLANATORY NOTE

TechPrecision Corporation is filing this Quarterly Report on Form 10-Q for the period ended September 30, 2012 in reliance on the relief granted by the Securities and Exchange Commision's Order dated November 14, 2012 (Release No. 34-68224). We were unable to file this report within the prescribed time period without unreasonable effort and expense because of the effect of Hurricane Sandy, which included a power outage at our headquarters and key personnel not being able to report to work for a period of several days.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	1
ITEM 1.	FINANCIAL STATEMENTS	1
	CONSOLIDATED BALANCE SHEETS	1
	CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)	2
	CONSOLIDATED STATEMENTS OF CASH FLOWS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 4.	CONTROLS AND PROCEDURES	27
PART II.	OTHER INFORMATION	28
ITEM 1A.	RISK FACTORS	28
ITEM 5.	OTHER INFORMATION	28
ITEM 6.	EXHIBITS	28
	SIGNATURES	29
EXHIBIT INDEX

TECHPRECISION CORPORATION

CONSOLIDATED BALANCE SHEETS

	September 30, 2012 (Unaudited)			March 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	2,138,756			$	2,823,485
Accounts receivable, less allowance for doubtful accounts of $25,010 and $25,010		4,684,370				4,901,791
Costs incurred on uncompleted contracts, in excess of progress billings		4,858,217				3,910,026
Inventories- raw materials		578,047				373,544
Income taxes receivable		1,198,099				1,751,169
Current deferred taxes		1,054,847				1,020,208
Other current assets		1,425,755				1,486,954
Total current assets		15,938,091				16,267,177
Property, plant and equipment, net		7,125,796				7,395,445
Noncurrent deferred taxes		396,604				118,005
Other noncurrent assets, net		158,422				270,630
Total assets	$	23,618,913			$	24,051,257
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	2,026,595			$	1,361,611
Accrued expenses		1,538,459				2,424,695
Accrued taxes payable		159,987				159,987
Deferred revenues		1,730,866				799,413
Current maturity of long-term debt		1,079,676				1,358,933
Total current liabilities		6,535,583				6,104,639
Long-term debt, including capital leases		5,418,000				5,776,294
Commitments and contingent liabilities (see Note 16)
Stockholders’ Equity:
Preferred stock- par value $.0001 per share, 10,000,000 shares authorized,
of which 9,890,980 are designated as Series A Convertible Preferred Stock,
with 6,337,998 and 7,035,982 shares issued and outstanding at September 30, 2012
and March 31, 2012, (liquidation preference of $1,806,329 and $2,005,254
at September 30, 2012 and March 31, 2012)		1,485,696				1,637,857
Common stock -par value $0.0001 per share, authorized, 90,000,000 shares
issued and outstanding, 18,904,577 shares at September 30, 2012 and
17,992,177 at March 31, 2012		1,890				1,799
Additional paid in capital		4,844,253				4,412,075
Accumulated other comprehensive loss		(257,397	)			(223,584	)
Retained earnings		5,590,888				6,342,177
Total stockholders’ equity		11,665,330				12,170,324
Total liabilities and stockholders’ equity	$	23,618,913			$	24,051,257

The accompanying notes are an integral part of the financial statements.

1

 TECHPRECISION CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three months ended September 30						Six months ended  September 30
	2012			2011			2012			2011
Net sales	$	8,078,552		$	7,147,167		$	15,224,291		$	16,323,607
Cost of sales		6,140,187			5,231,710			12,180,487			11,981,227
Gross profit		1,938,365			1,915,457			3,043,804			4,342,380
Selling, general and administrative		1,924,079			1,953,978			3,924,599			3,686,649
Income (loss) from operations		14,286			(38,521	)		(880,795	)		655,731
Other income		2,558			--			2,511			--
Interest expense		(74,394	)		(78,531	)		(154,485	)		(137,221	)
Interest income		1,188			8,460			2,881			10,406
Total other expense, net		(70,648	)		(70,071	)		(149,093	)		(126,815	)
(Loss) income before income taxes		(56,362	)		(108,592	)		(1,029,888	)		528,916
Income tax (benefit) expense		(11,342	)		(20,494	)		(278,599	)		235,553
Net (loss) income	$	(45,020	)	$	(88,098	)	$	(751,289	)	$	293,363
Other comprehensive (loss) income, before tax:
Change in unrealized loss on cash flow hedges		(8,552	)		(208,528	)		(79,143	)		(421,928	)
Foreign currency translation adjustments		26,214			14,348			14,111			18,184
Other comprehensive income (loss), before tax		17,662			(194,180	)		(65,032	)		(403,744	)
Net tax benefit of other comprehensive income (loss) items		(3,374	)		(83,975	)		(31,219	)		(169,910	)
Other comprehensive income (loss), net of tax		21,036			(110,205	)		(33,813	)		(233,834	)
Comprehensive (loss) income	$	(23,984	)	$	(198,303	)	$	(785,102	)	$	59,529
Net (loss) income per share (basic)	$	(0.00	)	$	(0.01	)	$	(0.04	)	$	0.02
Net (loss) income per share (diluted)	$	(0.00	)	$	(0.01	)	$	(0.04	)	$	0.01
Weighted average number of shares outstanding (basic)		18,696,846			16,546,279			18,614,112			16,049,144
Weighted average number of shares outstanding (diluted)		18,696,846			16,546,279			18,614,112			24,143,956

The accompanying notes are an integral part of the financial statements.

2

TECHPRECISION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended  September 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(751,289	)	$	293,363
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		415,429			237,237
Stock based compensation expense		282,719			249,061
Deferred income taxes		(282,020	)		41,355
Provision for contract losses		83,196			--
Changes in operating assets and liabilities:
Accounts receivable		219,289			2,516,457
Costs incurred on uncompleted contracts, in excess of progress billings		(948,192	)		(5,620,879	)
Inventories – raw materials		(202,361	)		319,823
Other current assets		61,199			(102,803	)
Taxes receivable		553,070			(579,887	)
Other noncurrent assets		88,126			(277,500	)
Accounts payable		664,632			549,512
Accrued expenses		(1,036,974	)		98,757
Deferred revenues		931,453			1,311,233
Net cash provided by (used in) operating activities		78,277			(964,271	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(75,109	)		(2,337,533	)
Net cash used in investing activities		(75,109	)		(2,337,533	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercised stock options		--			35,511
Tax expense from share-based compensation		--			(1,030	)
Repayment of long-term debt, including capital lease		(683,928	)		(686,980	)
Borrowings of long-term debt		--			1,618,325
Net cash (used in) provided by financing activities		(683,928	)		965,826
Effect of exchange rate on cash and cash equivalents		(3,969	)		6,836
Net decrease in cash and cash equivalents		(684,729	)		(2,329,142	)
Cash and cash equivalents, beginning of period		2,823,485			7,541,000
Cash and cash equivalents, end of period	$	2,138,756		$	5,211,858

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the year for:
Interest expense	$	140,138	$	170,987
Income taxes	$	--	$	764,306

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SUPPLEMENTAL INFORMATION – NONCASH INVESTING AND FINANCING TRANSACTIONS:

Six months ended September 30, 2012

For the six months ended September 30, 2012, the Company issued 912,400 shares of common stock in connection with the conversion of 697,984 shares of Series A Convertible Preferred Stock.

The Company recorded a liability of $275,315 (net of tax of $179,339) to reflect the fair value of an interest rate swap contract in connection with a tax exempt bond financing transaction.

For the six months ended September 30, 2012, Ranor entered into a capital lease arrangement for $46,378 for new office equipment.

Six months ended September 30, 2011

The Company placed $1,143,443 of equipment which was under construction at the beginning of the fiscal year ended March 31, 2011, or fiscal 2011, into service. 

For the six months ended September 30, 2011, the Company issued 1,173,861 shares of common stock in connection with the conversion of 898,000 shares of Series A Convertible Preferred Stock.

The Company recorded a liability of $246,536 (net of tax of $166,215) to reflect the fair value of an interest rate swap contract in connection with a tax exempt bond financing transaction.

The accompanying notes are an integral part of the financial statements.

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TECHPRECISION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS

TechPrecision Corporation, or 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., or Ranor, a Delaware corporation. On November 4, 2010, TechPrecision announced it completed the formation of a wholly foreign owned enterprise (WFOE), Wuxi Critical Mechanical Components Co., Ltd., or WCMC, to meet growing demand for local manufacturing of components in China. TechPrecision, WCMC and Ranor are collectively referred to as the “Company,” “we,” “us,” or “our.” The Company manufactures large scale metal fabricated and machined precision components and equipment. These products are used in a variety of markets including the alternative energy, medical, nuclear, commercial, defense and aerospace industries.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of TechPrecision, WCMC and Ranor. Intercompany transactions and balances have been eliminated in consolidation.

The accompanying consolidated balance sheet as of September 30, 2012, the consolidated statements of operations and comprehensive income (loss) for the three and six-month periods ended September 30, 2012 and 2011, and the consolidated statements of cash flows for the six months ended September 30, 2012 and 2011 are unaudited, but in the opinion of management, include all adjustments that are necessary for a fair presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The consolidated balance sheet as of March 31, 2012 was derived from audited financial statements.

The Notes to Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These notes should be read in conjunction with the notes to consolidated financial statements of the Company in Item 8 of the Company’s Annual Report on Form 10-K for the year ended March 31, 2012, or 2012 Form 10-K.

Use of Estimates in the Preparation of Financial Statements

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

Fair Value Measurements

We account for fair value of financial instruments under the Financial Accounting Standard Board’s (FASB) Accounting Standards Codification (ASC) authoritative guidance which defines fair value and establishes a framework to measure fair 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 FASB 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; and 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.

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In addition, we will measure fair value in an inactive or dislocated market based on facts and circumstances and significant management judgment.  We will use inputs based on management estimates or assumptions, or make adjustments to observable inputs to determine fair value when markets are not active and relevant observable inputs are not available.  

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses as presented in the balance sheet, approximates fair value due to the short-term nature of these instruments. 

Cash and cash equivalents

Holdings of highly liquid investments with maturities of three months or less, when purchased, are considered to be cash equivalents.  U.S. based deposits are maintained in a large regional bank. The Company’s China subsidiary also maintains a bank account in a large national Bank in China subject to People’s Republic of China, or PRC, banking regulations. Cash on deposit with a large national China-based bank was $534,975 and $692,524 at September 30, 2012 and March 31, 2012, respectively.

Foreign currency translation

The majority of the Company’s business is transacted in U.S. dollars; however, the functional currency of the Company’s China subsidiary is the local currency, the Chinese Yuan Renminbi. In accordance with ASC No. 830,  Foreign Currency Matters  (ASC 830), foreign currency translation adjustments of subsidiaries operating outside the U.S. are included in stockholders’ equity as a component of accumulated other comprehensive loss, a separate component of equity. Foreign currency transaction gains and losses are recognized in the determination of net income (loss) as incurred.

Accounts receivable and allowance for doubtful accounts

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. 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. Historically, the level of uncollectible accounts has not been significant. There was bad debt expense of $0 for the six months ended September 30, 2012 and 2011.

Inventories

Inventories - raw materials is stated at the lower of cost or market determined by the first-in, first-out (FIFO) method.

Property, plant and equipment

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. Amortization of assets recorded under capital leases is included under depreciation expense. 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, 5-15 years; buildings, 30 years; and leasehold improvements, 2-5 years.

Interest is capitalized for assets that are constructed or otherwise produced for the Company’s own use, including assets constructed or produced for the Company by others for which deposits or progress payments have been made. Interest is capitalized to the date the assets are available and ready for use. When an asset is constructed in stages, interest is capitalized for each stage until it is available and ready for use. The Company uses the interest rate incurred on funds borrowed specifically for the project. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life.

In accordance with ASC No. 360, Property, Plant & Equipment (ASC 360), the Company's property, plant and equipment is tested for impairment when triggering events occur, and if impaired, written-down to fair value based on either discounted cash flows or appraised values. The carrying amount of an asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. There were no impairments for the six months ended September 30, 2012 and 2011, respectively.

6

Operating Leases

Operating leases are charged to operations on a straight-line basis over the term of the lease. The Company leases its office facilities for various terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2016 and provide for renewal options ranging from three months to five years. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.

Derivative Financial Instruments

The Company is exposed to various risks such as fluctuating interest rates, foreign exchange rates and increasing commodity prices. To manage these market risks, we may periodically enter into derivative financial instruments such as interest rate swaps, options and foreign exchange contracts for periods consistent with and for notional amounts equal to or less than the related underlying exposures. We do not purchase or hold any derivative financial instruments for speculation or trading purposes.

All derivative instruments are recognized in the financial statements and measured at fair value regardless of the purpose or intent of holding them. At September 30, 2012 and March 31, 2012, the Company had two interest rate swap transactions designated as cash flow hedges, each with an effective date of January 3, 2011. For our cash flow hedges, the effective portion of the derivative’s gain or loss is initially reported in stockholders’ equity as a component of accumulated other comprehensive loss and is subsequently reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The ineffective portion of the gain or loss of a cash flow hedge is reported in earnings immediately.

The Company formally documents the hedging relationship and its risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions.

The Company will discontinue hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative expires, is sold, terminated, or exercised, or management determines to remove the designation of a cash flow hedge. See Note 8 for additional disclosure related to interest rate swaps.

Convertible Preferred Stock and Warrants

The Company measures the fair value of the Series A Convertible Preferred Stock by the amount of cash that was received for their issuance. The Company has determined that the convertible preferred shares and warrants issued are equity instruments. The holders of the Series A Convertible Preferred Stock have 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 unregistered common stock and are classified in stockholders’ equity.

Selling, General, and Administrative Expense

Selling, general and administrative expenses include items such as executive compensation, business travel and advertising costs. Selling, general and administrative expenses amounted to $3.9 million and $3.7 million for the six months ended September 30, 2012 and 2011, respectively. Advertising costs are expensed as incurred. Other general and administrative expenses include items for the Company’s administrative functions and for items such as office rent, supplies, insurance, legal, accounting, tax, telephone and other outside services.

Stock Based Compensation

Stock based compensation represents the cost related to stock based awards granted to the Board of Directors and employees. The Company measures stock based compensation cost at the 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 requisite service period. The Company estimates the fair value of stock options using a Black-Scholes valuation model.

Excess tax benefits of awards that are recognized in equity related to stock options exercises are reflected as financing cash inflows. Stock based compensation cost that has been included in (loss) income from operations amounted to $282,719 and $249,061 for the six months ended September 30, 2012 and 2011, respectively. See Note 13 for additional disclosures related to stock based compensation.

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Net Income (Loss) per Share of Common Stock

Basic net income (loss) per common share is computed by dividing net income or loss by the weighted average number of shares outstanding during the 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 convertible preferred stock, stock options and warrants calculated using the treasury stock method. See Note 13 for additional disclosures related to stock based compensation.

Revenue Recognition

We account for revenues and earnings using the percentage-of-completion method of accounting. Under this method, we recognize contract revenue and gross profit as the work progresses, either as the products are produced and delivered, or as services are rendered. We determine progress toward completion on production contracts based on either input measures, such as labor hours incurred, or output measures, such as units delivered.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability are recognized in the period in which the revisions are determined. Costs incurred on uncompleted contracts consist of labor, overhead, and materials.

We may combine contracts for accounting purposes when they are negotiated as a package with an overall profit margin objective. These essentially represent an agreement to do a single project for a single customer, involve interrelated construction activities with substantial common costs, and are performed concurrently or sequentially. When a group of contracts is combined, revenue and profit are earned during the performance of the combined contracts.

Costs allocable to undelivered units are reported in the consolidated balance sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed upon contract price for customer directed changes, construction 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 reliably estimated. Revenues from such claims are recorded only to the extent that contract costs relating to the claim have been incurred. Revisions in cost and profit estimates are reflected in the period in which the facts requiring the revision become known and are estimable.

When we can only estimate a range of revenues and costs, we use the most likely estimate within the range. If we cannot determine which estimate in the range is most likely, the amounts within the ranges that would result in the lowest profit margin (the lowest contract revenue estimate and the highest contract cost estimate) is used.

In some situations, it may be impractical for us to estimate either specific amounts or ranges of contract revenues and costs. However, if we can at least determine that we will not incur a loss, a zero profit model is adopted. The zero profit model results in the recognition of an equal amount of revenues and costs. This method is only used if more precise estimates cannot be made and its use is discontinued when such estimates are obtainable. When we obtain more precise estimates, the change is treated as a change in an accounting estimate.

Income Taxes

In accordance with ASC No. 740, Income Taxes (ASC 740), income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Recent Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on its financial position, and to allow investors to better compare financial statements prepared under U.S. GAAP with financial statements prepared under International Financial Reporting Standards, or IFRS.

8

The new standards are effective for annual periods beginning January 1, 2013, and interim periods within those annual periods. Retrospective application is required. The Company will implement the provisions of ASU 2011-11 as of April 1, 2013.

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

	September 30,  2012			March 31, 2012
Land	$	110,113		$	110,113
Building and improvements		3,345,662			3,345,662
Machinery equipment, furniture and fixtures		8,154,188			8,102,700
Equipment under capital leases		46,378			56,242
Total property, plant and equipment		11,656,341			11,614,717
Less: accumulated depreciation		(4,530,545	)		(4,219,272	)
Total property, plant and equipment, net	$	7,125,796		$	7,395,445

Depreciation expense for the three and six months ended September 30, 2012 and 2011 was $195,727 and $388,650, and, $127,011 and $225,222, respectively.

NOTE 4 - COSTS INCURRED ON UNCOMPLETED CONTRACTS

	September 30, 2012			March 31, 2012
Cost incurred on uncompleted contracts, beginning balance	$	10,879,743		$	7,958,153
Plus: Total cost incurred on contracts during the period		7,771,827			31,104,174
Less: cost of sales, during the period		(12,180,487	)		(28,182,584	)
Cost incurred on uncompleted contracts, ending balance	$	6,471,083		$	10,879,743
Billings on uncompleted contracts, beginning balance	$	6,969,717		$	5,104,301
Plus: Total billings incurred on contracts, during the period		9,867,439			35,132,194
Less: Contracts recognized as revenue, during the period		(15,224,290	)		(33,266,778	)
Billings on uncompleted contracts, ending balance	$	1,612,866		$	6,969,717
Cost incurred on uncompleted contracts, ending balance	$	6,471,083		$	10,879,743
Billing on uncompleted contracts, ending balance		(1,612,866	)		(6,969,717	)
Cost incurred on uncompleted contracts, in excess of progress billings	$	4,858,217		$	3,910,026

Contract costs consist primarily of labor and materials and related overhead, to the extent that such costs are recoverable. Revenues associated with these contracts are recorded only when the amount of recovery can be estimated reliably and realization is probable. As of September 30, 2012 and March 31, 2012, the Company had deferred revenues totaling $1,730,866 and $799,413, respectively. Deferred revenues represent customer prepayments on their contracts and completed contracts on which all revenue recognition criteria were not met.   The Company records provisions for losses within costs of sales in its consolidated statement of operations and comprehensive income (loss). The Company also receives advance billings and deposits representing down payments for acquisition of materials and progress payments on contracts. The agreements with our customers allow the Company to offset the progress payments against the costs incurred.

NOTE 5 – OTHER CURRENT ASSETS

	September 30, 2012		March 31, 2012
Payments advanced to suppliers	$	22,099	$	77,000
Prepaid taxes, maintenance renewals		204,327		34,785
Prepaid insurance		130,211		220,496
Collateral deposits (see Note 8)		1,052,500		1,052,500
Other		16,618		102,173
Total	$	1,425,755	$	1,486,954

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NOTE 6 – OTHER NONCURRENT ASSETS

	September 30, 2012		March 31, 2012
Collateral deposit (see Note 8)	$	83,337	$	171,252
Deferred loan costs, net of amortization		75,085		99,378
Total	$	158,422	$	270,630

NOTE 7 - ACCRUED EXPENSES

	September 30, 2012		March 31, 2012
Accrued compensation	$	826,297	$	970,088
Interest rate swaps market value		454,654		375,512
Provision for contract losses		83,196		887,458
Other		174,312		191,637
Total	$	1,538,459	$	2,424,695

NOTE 8 – LONG-TERM DEBT

The following debt obligations were outstanding as of:	September 30, 2012			March 31, 2012
Sovereign Bank Secured Term Note due March, 2013	$	285,714		$	571,429
Sovereign Bank Capital Expenditure Note due November 2014		370,541			490,292
Sovereign Bank Staged Advance Note due March 2016		417,312			445,133
MDFA Series A Bonds due January 2021		3,895,833			4,002,083
MDFA Series B Bonds due January 2018		1,485,714			1,624,999
Obligations under capital leases		42,562			1,291
Total long-term debt		6,497,676			7,135,227
Principal payments due within one year		(1,079,676	)		(1,358,933	)
Principal payments due after one year	$	5,418,000		$	5,776,294

On February 24, 2006, the Company entered into a loan and security agreement, or the Loan Agreement, with Sovereign Bank, or the Bank, which has since been amended as further described below. Pursuant to the Loan Agreement, as amended, the Bank provided the Company with a secured term loan of $4,000,000, or the Term Note, and a revolving line of credit of up to $2,000,000, or Revolving Note. On January 29, 2007, the Loan Agreement was amended, adding a capital expenditure line of credit facility of $3,000,000, or Capital Expenditure Note. On March 29, 2010, the Bank agreed to extend to the Company a loan facility, or Staged Advance Note, in the amount of up to $1,900,000 for the purpose of acquiring a gantry mill machine.

On December 30, 2010, the Company completed a $6,200,000 tax exempt bond financing with the Massachusetts Development Finance Authority, or the MDFA, pursuant to which the MDFA sold to the Bank MDFA Revenue Bonds, Ranor Issue, Series 2010A in the original aggregate principal amount of $4,250,000, or Series A Bonds, and MDFA Revenue Bonds, Ranor Issue, Series 2010B in the original aggregate principal amount of $1,950,000, or Series B Bonds together with the Series A Bonds, the Bonds. The proceeds of such sales were loaned to the Company under the terms of a Mortgage Loan and Security Agreement, dated as of December 1, 2010, by and among the Company, MDFA and the Bank (as Bond owner and Disbursing Agent), or the MLSA.  

In connection with the December 30, 2010 bond financing, the Company executed an Eighth Amendment to the Loan Agreement, or Eighth Amendment. The Eighth Amendment incorporated borrowing of the Bond proceeds into the borrowings covered by the Loan Agreement. The MLSA provides for customary events of default, including any event of default under the Loan Agreement described above. Subject to lapse of any applicable cure period, a default under the MLSA would cause the acceleration of all outstanding obligations of the Company under the MLSA. Under the MLSA and the Eighth Amendment, the Company was required to meet certain financial covenants applicable while the Bonds remain outstanding, including, among other things, that the ratio of earnings available to cover fixed charges will be greater than or equal to 120%; the interest coverage ratio will equal or exceed 2:1 as of the end of each fiscal quarter; and that the Company’s leverage ratio will be less than or equal to 3:1.

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On August 8, 2011, an appraisal was completed on the Westminster, Massachusetts property assigning a value of $4.8 million to such property. The Series A Bonds require that the loan-to-value ratio not exceed 75%, indicating a maximum loan amount of $3.6 million. The bond balance exceeded such maximum loan amount at September 30, 2011 by approximately $490,000. On October 28, 2011, the Company and the Bank agreed to resolve the collateral shortfall by establishing a separate interest bearing restricted cash account in the amount of $490,000 which is pledged as additional collateral to the debt and restricted from use for any other purpose. The required restricted balance will be amortized down at the current monthly debt principal amount of $17,708. At September 30, 2012, the cash is classified as a collateral deposit in other current and noncurrent assets of $212,500 and $83,337, respectively.

At December 31, 2011, we were in compliance with our leverage ratio bank covenant. However, we did not meet the ratio of earnings available to cover fixed charges or the interest coverage ratio covenants. In February 2012, the Company executed a Tenth Amendment and obtained a waiver of the breach of such covenants from the Bank, which waiver covered the breach that otherwise would have occurred in connection with the covenant testing for the third quarter ended December 31, 2011 and waived the ratio of earnings available to cover fixed charges covenant at March 31, 2012. This waiver did not apply to any future covenant testing dates.

On July 6, 2012, the Company executed an Eleventh Amendment and obtained a waiver for failure to comply with the fixed charge coverage ratio and the interest coverage ratio covenants at March 31, 2012. The Eleventh Amendment also waived the covenant testing requirements related to the ratio of earnings available to cover fixed charges and the interest coverage ratio for the fiscal quarters ended June 30, 2012 and September 30, 2012. The leverage ratio covenant remained in effect, and must not be greater than 2:1. The Company was in compliance with the leverage ratio covenant at September 30, 2012, as the actual leverage ratio was 1:1. Although there was no testing of the covenant to comply with the ratio of earnings available to cover fixed charges and the interest coverage covenants for the fiscal quarters ended June 30 and September 30, 2012, the Bank required that the Company have earnings before interest and taxes (EBIT) greater than $1 for the fiscal quarter ended September 30, 2012. The Company reported EBIT of $14,286 for the fiscal quarter ended September 30, 2012 and therefore was in compliance with this covenant. The $1 EBIT covenant at September 30, 2012 is not applicable to any future periods as testing of all covenants resumes on December 31, 2012 according to the terms of the Eleventh Amendment.

Under the Eleventh Amendment the covenants were revised such that the Company shall not permit earnings available for fixed charges to be less than 125%, the interest coverage ratio to be less than 2:1, and the leverage ratio to be greater than 2:1 at any time, tested quarterly. Also, in connection with the Eleventh Amendment, the Company paid the Bank a fee of $10,000 and made a collateral deposit of $840,000 to cover estimated principal and interest on its obligation. The collateral deposit is included in other current assets at September 30, 2012 and March 31, 2012. This collateral will be released to the Company upon successful compliance with all debt covenant tests. The earliest date this could occur is December 31, 2012, the first date the Company will again be subject to testing of all of the financial covenants. The Eleventh Amendment also revised covenant testing to provide that the ratio of earnings available to cover fixed charges and the interest ratio coverage covenant testing will resume at December 31, 2012 on a trailing six month basis, and continue at March 31, 2013 on a trailing nine month basis and quarterly thereafter on a trailing twelve month basis beginning on June 30, 2013.

Without the execution of the Eleventh Amendment for the applicable periods, the Company would have been required to reclassify all of its long-term debt as a current liability. In addition, if the lender had demanded repayment and caused the debt to be considered a short-term obligation, the Company may have been unable to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations. In the event of default (which default may occur in connection with a non-waived breach), the Bank may choose to accelerate payment of any long-term debt outstanding and, under certain circumstances, the Bank may be entitled to cancel the facilities. If the Company were unable to obtain a waiver for a breach of covenant and the Bank accelerated the payment of any outstanding amounts, such acceleration may cause the Company’s cash position to deteriorate or, if cash on hand were insufficient to satisfy any payment due, may require the Company to seek alternate financing to satisfy any accelerated payment obligation. The Company believes it will remain in compliance with all of the revised covenants through at least December 30, 2012.

Obligations under the Term Note, Revolving Note, Capital Expenditure Note and Staged Advance Note are guaranteed by the Company. Collateral securing such notes comprises all personal property of the Company, including cash, accounts receivable, inventories, equipment, financial and intangible assets.

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 converted 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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MDFA Series A and B Bonds:

On December 30, 2010, the Company and Ranor completed a $6,200,000 tax exempt bond financing with the MDFA pursuant to which the MDFA sold to Sovereign Bank MDFA Revenue Bonds, Ranor Issue, Series 2010A in the original aggregate principal amount of $4,250,000 (Series A Bonds) and MDFA Revenue Bonds, Ranor Issue, Series 2010B in the original aggregate principal amount of $1,950,000 (Series B Bonds) and loaned the proceeds of such sale to Ranor under the terms of the MLSA, dated as of December 1, 2010, by and among the Company, Ranor, MDFA and Sovereign Bank.

The proceeds from the sale of the Series A Bonds were used to finance the Ranor facility acquisition and 19,500 sq. ft. expansion of Ranor’s manufacturing facility located in Westminster, Massachusetts, and the proceeds from the sale of the Series B Bonds were used to finance acquisitions of qualifying manufacturing equipment installed at the Westminster facility. Under the MLSA and related documents, the Westminster facility secures, and the Company further guarantees, Ranor’s obligations to Sovereign Bank and subsequent holders of the Bonds.

The initial rate of interest on the Bonds was 1.96% for a period from the bond date to and including January 31, 2011, and the interest rate thereafter is 65% times the sum of 275 basis points plus one-month LIBOR. The Company is required to make monthly payments of $17,708 and $23,214 with respect to the Loans beginning on February 1, 2011 until the maturity date or earlier redemption of each Bond. The Series A Bonds and the Series B Bonds will mature on January 1, 2021 and January 1, 2018, respectively. The Bonds are redeemable pursuant to the MLSA prior to maturity, in whole or in part, on any payment date in accordance with the terms of the MLSA.

In connection with the Bond financing, the Company and the Bank entered into the International Swap and Derivatives Association, Inc. 2002 Master Agreement, dated December 30, 2010, or ISDA Master Agreement, pursuant to which the variable interest rates applicable to the Bonds were swapped for fixed interest rates of 4.14% on the Series A Bonds and 3.63% on the Series B Bonds. Under the ISDA Master Agreement, the Company and the Bank entered into two swap transactions, each with an effective date of January 3, 2011. The notional amount of outstanding fair-value interest rate swaps totaled $5.4 and $5.6 million at September 30, 2012 and March 31, 2012, respectively. These derivative instruments, which are designated as cash flow hedges, are carried on the Company’s consolidated balance sheet at fair value with the effective portion of the gain or loss on the derivative reported in stockholders’ equity as a component of accumulated other comprehensive loss and subsequently reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The swaps will terminate on January 4, 2021 and January 2, 2018, respectively. The fair value of the interest rate swaps contracts were measured using market based level 2 inputs. The method employed to calculate the values conforms to the industry convention for calculation of such values. The swap’s market value can be calculated any time by comparing the fixed rate set at the inception of the transaction and the “swap replacement rate,” which represents the market rate for an offsetting interest rate swap with the same Notional Amounts and final maturity date. The market value is then determined by calculating the present value interest differential between the contractual swap and the replacement swap. The termination value is the sum of the present value interest differential as described above plus the accrued interest due at termination.

Revolving Note:

The Company and the Bank agreed to extend the maturity date of the revolving credit facility to July 29, 2012 under the Ninth Amendment to the Loan Agreement. The maturity date of the revolving credit facility was further extended to January 31, 2013 under the Eleventh Amendment. 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 on the Revolving Note is 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 $2,000,000.   There were no borrowings outstanding under this facility as of September 30, 2012 and 2011.  As of September 30, 2012, $2.0 million was available for us to borrow. The Company pays an unused credit line fee of 0.25% on the average unused credit line amount in the previous month.

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. On November 30, 2009, the Company elected not to renew this facility when it terminated. Borrowings outstanding under this facility were converted to a note when the facility terminated. The current rate of interest is LIBOR plus 3%. Principal and interest payments are due monthly based on a five year amortization schedule. The Capital Expenditure Note matures on November 30, 2014.

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Staged Advance Note:

The Bank made certain loans to the Company limited to a cap of $1.9 million for the purpose of acquiring a gantry mill machine. The machine serves as collateral for the loan. The total aggregate amount of advances under this agreement could not exceed 80% of the actual purchase price of the gantry mill machine. All advances provided for a payment of interest only monthly through February 28, 2011, and thereafter no further borrowings were permitted under this facility. The current interest rate is LIBOR plus 4%. Beginning on April 1, 2011, the Company was obligated to pay principal and interest sufficient to amortize the outstanding balance on a five year schedule. The Staged Advance Note matures on March 1, 2016.

Capital Lease:

The Company entered into a new capital lease in April 2012 in the amount of $46,378 for certain office equipment. The lease term is for 63 months, bears interest at 6.0% and requires monthly payments of principal and interest of $860.

NOTE 9 - INCOME TAXES

For the six months ended September 30, 2012 and 2011, the Company recorded an income tax benefit of $278,599 and income tax expense of $235,553, respectively. At the end of each interim period, the Company makes an estimate of its annual U.S. and PRC expected effective tax rates and applies these rates to its respective year-to-date taxable income or loss.

In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The Company has determined that it is more likely than not that certain future tax benefits may not be realized.  Accordingly, a valuation allowance has been recorded against deferred tax assets that are unlikely to be realized.  Realization of the remaining deferred tax assets will depend on the generation of sufficient taxable income in the appropriate jurisdiction, the reversal of deferred tax liabilities, tax planning strategies and other factors prior to the expiration date of the carryforwards.  A change in the estimates used to make this determination could require a reduction in deferred tax assets if they are no longer considered realizable.

As of September 30, 2012, the Company’s federal net operating loss carry-forward was approximately $1.5 million. If not utilized, the federal net operating loss carry-forward will begin to expire in 2025. Under Section 382 of the Internal Revenue Code, we are substantially limited with regard to the amount of certain net operating loss carry forward that we may use in any given year in the future due to prior changes in our ownership.

The Internal Revenue Code provides for a limitation on the annual use of net operating loss carryforwards following certain ownership changes that could limit the Company’s ability to utilize these carryforwards on a yearly basis. The Company experienced an ownership change in connection with the acquisition of Ranor. Accordingly, the Company’s ability to utilize the aforementioned carryforwards is limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for Federal or state income tax purposes.

The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. The Company’s foreign subsidiary files separate income tax returns in the foreign jurisdiction in which it is located.  Tax years 2008 and forward remain open for examination.  The Company recognizes interest and penalties accrued related to income tax liabilities in selling, general and administrative expense in its Consolidated Statements of Operations and Comprehensive Income (Loss).

NOTE 10- RELATED PARTY TRANSACTIONS

On November 15, 2010, WCMC leased approximately 1,000 sq. ft. of office space from an affiliate of Cleantech Solutions International, or CSI, to serve as its primary corporate offices in Wuxi, China. The lease has an initial two-year term and rent under the lease with the CSI affiliate is approximately $17,000 on an annual basis. In addition to leasing property from an affiliate of CSI, the Company subcontracts fabrication and machining services from CSI through their manufacturing facility in Wuxi, China and such subcontracted services are overseen by Company personnel co-located at CSI in Wuxi, China.

We view CSI as a related party because a holder of an approximate 18% fully diluted equity interest in CSI, also holds an approximate 36% fully diluted equity interest in the Company. WCMC is also subcontracting manufacturing services from other Chinese manufacturing companies on comparable terms as those it has with CSI. For the six months ended September 30, 2012 and 2011, the Company paid approximately $0.5 million and $1.0 million to CSI for manufacturing services, respectively.

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NOTE 11 - PROFIT SHARING PLAN

Ranor has a 401(k) profit sharing plan that covers substantially all Ranor employees who have completed 90 days of service. Ranor retains the option to match employee contributions. The Company’s contributions were $10,703 and $11,378 for the six months ended September 30, 2012 and 2011, respectively.

NOTE 12 - CAPITAL STOCK

Preferred Stock

The Company has 10,000,000 authorized shares of preferred stock and the Board of Directors of TechPrecision, or 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.

Each share of Series A Convertible 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 December 31, 2009, each share of Series A Convertible Preferred Stock was convertible into 1.3072 shares of common stock, with an effective conversion price of $0.218.  Based on the current conversion ratio, there were 8,285,031 and 9,197,436 common shares underlying the Series A Convertible Preferred Stock as of September 30, 2012 and March 31, 2012, respectively.

In addition to the conversion rights described above, the certificate of designation for the Series A Convertible Preferred Stock provides that the holder of the series A preferred stock or its affiliates will not be entitled to convert the Series A Convertible 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.

No dividends are payable with respect to the Series A Convertible Preferred Stock and no dividends are payable on common stock while Series A Convertible Preferred Stock is outstanding. The common stock will not be redeemed while preferred stock is outstanding.

The holders of the Series A Convertible Preferred Stock have no voting rights. However, so long as any shares of Series A Convertible Preferred Stock are outstanding, the Company shall not, without the affirmative approval of the holders of 75% of the outstanding shares of Series A Convertible Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Series A Convertible 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 Convertible 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 Convertible 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 Convertible Preferred Stock, or (e) enter into any agreement with respect to the foregoing.

Upon any liquidation the Company is required to pay $0.285 for each share of Series A Convertible 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 Convertible 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 Convertible 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.

During the six months ended September 30, 2012 and 2011, 697,984 and 898,000 shares of Series A Convertible Preferred Stock were converted into 912,400 and 1,173,861 shares of common stock, respectively. The Company had 6,337,998 and 7,035,982 shares of Series A Convertible Preferred Stock outstanding at September 30, 2012 and March 31, 2012, respectively.

Common Stock Purchase Warrants

On February 15, 2011, the Company entered into a contract with a third party pursuant to which the Company issued two-year warrants to purchase 100,000 shares of common stock at an exercise price of $1.65 per share.   Using the Black-Scholes options pricing formula assuming a risk free rate of 0.30%, volatility of 79%, a term of one year, and the price of the common stock on February 15, 2011 of $1.65 per share, the value of the warrant was calculated at $0.51 per share issuable upon exercise of the warrant, or a total of $51,428.

Since the warrant permitted delivery of unregistered shares, the Company has the control in settling the contract by issuing equity. The cost of warrants was charged to selling, general and administrative. At September 30, 2012 and March 31, 2012 there were 100,000 warrants issued and outstanding.

Common Stock

The Company had 90,000,000 authorized common shares at September 30 and March 31, 2012.  The Company had 18,904,577 and 17,992,177 shares of common stock outstanding at September 30, 2012 and March 31, 2012, respectively.

For the six months ended September 30, 2012, the Company issued 912,400 shares of common stock in connection with Series A Convertible Preferred Stock conversions.

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NOTE 13 - STOCK BASED COMPENSATION

In 2006, the directors adopted, and the stockholders approved, the 2006 long-term incentive plan, or the Plan, covering 1,000,000 shares of common stock. On August 5, 2010, the Plan was amended to increase the maximum number of shares of common stock that may be issued to an aggregate of 3,000,000 shares. On September 15, 2011, the directors adopted and the shareholders approved an amendment to increase the maximum number of shares of common stock that may be issued to an aggregate of 3,300,000 shares. 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 receives 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 10,000 shares of common stock on July 1st of each year following the third anniversary of the date of his or her first election.  

On April 26, 2012, the Company granted stock options to an employee to purchase 50,000 shares of common stock at an exercise price of $0.70 per share, the fair market value on the date of grant. The options will vest in equal amounts over three years on the anniversary of the grant date.

The fair market value is estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The risk-free interest rate was selected based upon the five-year U.S. Treasury yields. The Company uses the simplified method for all grants to estimate the expected term of the option. We assume that stock options will be exercised evenly over the period from vesting until the awards expire. As such, the assumed period for each vesting tranche is computed separately and then averaged together to determine the expected term for the award. Because of our limited stock option exercise activity we did not rely on our historical exercise data. The assumptions utilized for option grants during the six months ended September 30, 2012 were 106% for volatility, a risk free interest rate of 0.083%, and expected term of approximately six years. At September 30, 2012, there were 453,506 shares of common stock were available for grant under the Plan.

The following table summarizes activity for the six months ended September 30, 2012:

	Number Of Options			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at 3/31/2012		2,415,666		$	1.040	$	107,375	7.71
Granted		50,000		$	0.700
Forfeited		(26,666	)	$	--
Exercised		--		$	--
Outstanding at 9/30/2012		2,439,000		$	1.036	$	400,700	7.30
Vested at 9/30/2012 or expected to vest		2,439,000		$	1.036	$	400,700		7.30
Exercisable at 9/30/2012		1,473,000		$	0.893	$	288,299		5.31

At September 30, 2012, there was $714,677 of total unrecognized compensation cost related to stock options. These costs are expected to be recognized over the next three years. The total fair value of shares vested during the six months ended September 30, 2012 was $880,719.

The following is a summary of the status of the Company’s stock options outstanding but not vested for the six months ended September 30, 2012:  

	Number of  Options			Weighted Average Exercise Price
Outstanding at 3/31/2012		1,489,000		$	1.205
Granted		50,000		$	0.700
Vested		(563,000	)	$	1.071
Forfeited		(10,000	)	$	1.045
Outstanding at 9/30/2012		966,000		$	1.255

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NOTE 14 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. At September 30, 2012, there were accounts receivable balances outstanding from four customers comprising 87% of the total receivables balance; the largest balance from a single customer represented 30% of our receivables balance, while the smallest balance from a single customer making up this group was 10%.  The following table sets forth information as to accounts receivable from customers who accounted for more than 10% of our accounts receivable balance as of: 

		September 30, 2012					March 31, 2012
Customer		Dollars		Percent			Dollars		Percent
	A	$	1,404,269		30	%	$	1,160,957		24	%
	B	$	1,232,582		26	%	$	426,083		9	%
	C	$	995,193		21	%	$	561,927		11	%
	D	$	445,934		10	%	$	726,908		15	%

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. The following table sets forth information as to net sales from customers who accounted for more than 10% of our revenue for the six months ended:

		September 30, 2012					September 30, 2011
Customer		Dollars		Percent			Dollars		Percent
	A	$	3,361,526		22	%	$	1,013,759		6	%
	B	$	2,898,858		19	%	$	762,591		5	%
	C	$	2,335,696		15	%	$	--		--	%
	D	$	1,631,652		11	%	$	2,297,613		14	%
	E	$	1,439,797		10	%	$	4,649,032		29	%
	F	$	61,164		-	%	$	2,222,595		14	%
	G	$	120,962		1	%	$	1,693,128		10	%

NOTE 15 – SEGMENT INFORMATION

We consider our business to consist of one segment - metal fabrication and precision machining. A significant amount of our operations, assets and customers are located in the United States. The following table presents our geographic information (net sales and net property, plant and equipment) by the country in which the legal subsidiary is domiciled and assets are located: 

	Net Sales				Property, Plant and Equipment, Net
	Six months ended September 30, 2012		Six months ended September 30, 2011		September 30, 2012		March 31, 2012
United States	$	13,667,736	$	16,323,607	$	7,098,912	$	7,363,002
China	$	1,556,555	$	--	$	26,884	$	32,443

NOTE 16 – COMMITMENTS

Leases

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.

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At September 30, 2012, we recorded a liability for deferred rent of $17,136 reflecting the difference between the expense recorded in the consolidated statement of operations and comprehensive income (loss) and 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 expired 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 will expire on various dates during the fiscal year ended March 31, 2013, or fiscal 2013.

Rent expense for all operating leases for the six months ended September 30, 2012 and September 30, 2011 was $80,439 and $105,535, respectively.  Future minimum lease payments required under non-cancellable operating leases in the aggregate, at September 30, 2012, totaled $245,423. The totals for each annual period ended on September 30 were: 2013- $67,813, 2014- $61,236, 2015- $62,826 and 2016- $53,548. 

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.

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 recorded a charge of $226,945 associated with this event. A balance of $113,472 remains outstanding at September 30, 2012, and is included in accrued expenses on the consolidated balance sheet.

During the second quarter of fiscal 2013, Ranor was required to provide severance in connection with certain employee terminations. As such, the Company recorded a charge of $74,917 associated with this event. At September 30, 2012, a balance of $59,715 remained outstanding and is included in accrued expenses in the consolidated balance sheet.

NOTE 17 - 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 under FASB ASC 260. 

Three and Six Months ended September 30,	2012		2011		2012		2011
Basic EPS
Net (loss) income	$	(45,020)	$	(88,098)	$	(751,289)	$	293,363
Weighted average number of shares outstanding		18,696,846		16,546,279		18,614,112		16,049,144
Basic income (loss) per share	$	(0.00)	$	(0.01)	$	(0.04)	$	0.02
Diluted EPS
Net income (loss)	$	(45,020)	$	(88,098)	$	(751,289)	$	293,363
Dilutive effect of stock options, warrants and preferred stock		--		--		--		8,094,812
Diluted weighted average shares		18,696,846		16,546,279		18,614,112		24,143,956
Diluted income (loss) per share	$	(0.00)	$	(0.01)	$	(0.04)	$	0.01

All potential common share equivalents that have an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three and six month periods ended September 30, 2012 and 2011, there were 5,808,674 and 6,907,806 shares, and 8,457,830 and 762,000 shares, respectively, of potentially anti-dilutive stock options, warrants and convertible preferred stock, none of which were included in the EPS calculations above.  

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

Statement Regarding Forward Looking Disclosure

The following discussion of the results of our operations and financial condition should be read in conjunction with our consolidated financial statements and the related notes herein.  This quarterly report on Form 10Q, including this section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or MD&A, 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 in this Item 2 “Management’s Discussion and Analysis” 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 our ability to generate business on an on-going basis, 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, marketing 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 materials into precise finished products. Our manufacturing capabilities include: fabrication operations (cutting, press and roll forming, assembly, welding, heat treating, blasting and painting) and machining operations including CNC (computer numerical controlled) horizontal and vertical milling centers. We also provide support services to our manufacturing capabilities: manufacturing engineering (planning, fixture and tooling development, manufacturing), quality control (inspection and testing), materials procurement, production control (scheduling, project management and expediting) and final assembly. All U.S. manufacturing is done in accordance with our written quality assurance program, which meets specific national and international codes, standards, and specifications. Ranor holds several certificates of authorization issued by the American Society of Mechanical Engineers and the National Board of Boiler and Pressure Vessel Inspectors. The standards used are specific to the customers’ needs, and our manufacturing operations are conducted in accordance with these standards.

During the fiscal year ended March 31, 2012, or fiscal 2012, we brought our WCMC subsidiary online to meet shifting demands from key customers, and simultaneously had to weather slowdowns in our alternative energy business. The impact on our Ranor facility was significant, as manufacturing for their largest customer was transferred to China. We backfilled our Ranor facility with orders from existing and new customers that required domestic production capacity. Also during fiscal 2012, weaker market demand for our services in the Alternative energy industry impacted sales in that sector and were 28% lower than in fiscal 2011. However, we were successful in increasing sales to customers in the Commercial and Nuclear sectors, which more than offset the lower sales volume with Alternative energy customers. We concluded fiscal 2012, with an order backlog of $22.4 million. Our backlog as of September 30, 2012 was approximately $26.1 million.

We historically have experienced, and continue to experience, customer concentration. Our six largest customers collectively accounted for 77% of our revenue for fiscal 2012. For the first six months of fiscal 2013 and 2012, our single largest customer accounted for approximately 22% and 29% of reported net sales, respectively. In any year, it is likely that five to seven significant customers (albeit not always the same customers from year to year) will account for between 4% to 29% individually and up to 87% in aggregate of our total annual revenues.

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

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For the three months ended September 30, 2012, our net sales and net loss were $8.1 million and $45,020, and as compared to net sales of $7.1 million and net loss of $88,098 for the three months ended September 30, 2011. For the six months ended September 30, 2012, our net sales and net loss were $15.2 million and $0.8 million, and as compared to net sales of $16.3 million and net income of $0.3 million, respectively. Our gross margins for the three and six months ended September 30, 2012 and 2011 were 24.0% and 20.0%, and 26.8% and 26.6%, respectively. Gross margins for the three and six month periods ended September 30, 2012 and 2011 were negatively impacted by contract losses incurred on first article and prototyping projects for customers at Ranor. As the majority of the contract loss projects were completed during the first half of fiscal 2013 we expect gross margins will recover to historical levels during the second half of fiscal 2013.

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 periods, we may continue to incur overhead expense but with lower revenue resulting in lower operating margins. Furthermore, changes in either the scope of an existing contract or related delivery schedules may impact the revenue we receive under the contract and the allocation of manpower. Although we provide manufacturing services for large governmental programs, we usually do not work directly for the government or its agencies. Rather, we perform our services for large governmental contractors and large utility companies. However, our business is dependent in part on the continuation of governmental programs which require our services and products.

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 that have shown increasing demand and which we believe could generate higher margins. In November 2010, we announced the formation of WCMC. This subsidiary was formed to respond to an existing customer’s desire to migrate their supply chain nearer to their end market within China. Since the formation of WCMC, we have received numerous inquiries from current and potential customers for precision, large scale fabricated and machined metal components and systems in Asia. Based on the initial interest expressed, we believe there are attractive opportunities to expand our WCMC operations. During the quarters ended September 30, 2011, December 31, 2011 and March 31, 2012, WCMC provided initial production volumes on a single product line and completed first article production on four other product lines. After qualifying manufacturing capacity for five product lines on behalf of four customers in China, WCMC has received production volume orders for the production of sapphire chambers in fiscal 2013. At September 30, 2012, WCMC had a backlog of $1.5 million for the production of sapphire chambers.

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 are uniquely qualified to deliver 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.

Nuclear Energy

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. In January 2010, the Obama administration increased the level of government-backed debt guarantees as an incentive to support the construction of new nuclear plants in the U.S. The 2011 nuclear tragedy in Japan has bolstered demand for advanced nuclear reactor designs with passive safety systems. Over the next 10 years, 26 nuclear power plants are scheduled to be built in China, six in the United States and five in Europe (including three in the United Kingdom). Because Ranor is one of the few facilities in the United States that has the certifications required to produce the necessary components for these plants, this pipeline of new nuclear projects creates a significant opportunity. 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. However, we cannot assure you that we will be able to develop any significant business from the nuclear industry.

Medical Industry

We have been exploring potential business applications focused on the medical industry. These efforts include the development and fabrication of transportation/storage solutions for radioactive isotopes and the development and fabrication of critical components for proton beam therapy machines designed to be utilized in the treatment of cancer. In March 2012, our radioactive isotope customer received approval from the U.S. Nuclear Regulatory Commission, or NRC, to market its Type B transportation containers. Now that our radioactive isotope customer has received regulatory approval we are working on initial production orders during the 2012 calendar year as they launch their Type B transportation containers in the market. Our proton beam therapy customer has received U.S Food and Drug Administration, or FDA, clearance on June 11, 2012 for their proton beam therapy system and we believe we are positioned to benefit from this development with increased production orders as they begin marketing their regulated product.

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 LED Lighting/Enabled Products

Growing global demand for LED lighting and LED enabled products has increased the worldwide demand for Heat Exchanger Method (HEM) sapphire, a core component in high-end LED products. Accordingly, many polysilicon companies, including our customer GTAT, are expanding into the field of HEM sapphire and existing players in the HEM sapphire industry are expanding their production capacity. The production of HEM sapphire requires robust high temperature furnaces much like those we have been producing for the processing of polysilicon within the solar industry. Accordingly, we believe the HEM sapphire field is a growing sector where our manufacturing expertise and experience with similar products for the solar industry can be directly leveraged. We are in active dialogue with both existing customers and potential customers regarding our capability and capacity to manufacture furnaces for the HEM sapphire industry in both the U.S. and Asia. In February 2012, WCMC received a purchase agreement from an existing customer for up to $9.5 million in sapphire chamber orders over the term of the purchase agreement which contemplates orders being placed under the agreement from March 2012 through February 2013. As of October 31, 2012, we have received purchase orders for $2.4 million of sapphire chambers under this purchase agreement. We are also working on qualifying manufacturing capacity for other customers who also have developed engineering designs for sapphire growth chambers.

Solar Power

Historically we have participated in the multi-crystalline segment of the solar industry through the manufacturing support we have provided GTAT. Increasingly, GTAT and other companies are focusing on production innovations that will improve the production efficiency and cost competitiveness of mono-crystalline solar cells. To diversify our customer and sector concentration within the solar industry, we are in active discussions with various companies focused on enabling production equipment for mono-crystalline solar cells and believe these efforts will provide us with broader capacity and customer diversification in the future. During fiscal 2012, we completed manufacture of initial mono-crystalline furnaces for three separate customers with the goal of qualifying our production capacity in the U.S. and China for these customers and subsequent production volume orders.

During fiscal 2012, we expanded into the polysilicon field through receipt of a $4.8 million order to manufacture polysilicon reactor chambers for an existing customer. Polysilicon reactor chambers operate upstream of the solar equipment we have historically manufactured. Accordingly, this order presents an opportunity to further diversify our product portfolio within the solar sector. The initial production units covered by this order are expected to ship in fiscal 2013.

Expansion of Manufacturing Capabilities

In addition to the expansion of our existing manufacturing capabilities, we may, from time to time, pursue opportunistic acquisitions to increase and strengthen our manufacturing, marketing, product development and customer diversification. During fiscal 2012, we completed a 19,500 square foot expansion of our Westminster, Massachusetts facility at a cost of $1.7 million. The building expansion was completed and placed into service in September, 2011. We also completed the installation of a new $2.4 million gantry mill machine during the year and it was placed in service during January 2012. A portion of the proceeds from the December 2010 municipal bond financing were utilized to finance the building expansion and final payments on the gantry machine.

Critical Accounting Policies

The preparation of our consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make assumptions, estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 2 to the Consolidated Financial Statements describes the significant accounting policies used in preparation of the consolidated financial statements. We rely on historical experience and other assumptions we believe to be reasonable in making our estimates. We continually evaluate our estimates, including those related to contract accounting, inventories, recovery of long-lived assets, income taxes and the valuation of equity transactions. These estimates and assumptions require management’s most difficult, subjective or complex judgments. Actual financial results of the operations could differ materially from such estimates.

Percentage-of-completion is considered the revenue recognition model that best reflects the economics for our custom contracts. As a result of the transfer of solar production chambers for Ranor’s largest customer to WCMC during fiscal 2012, Ranor’s product mix changed and included a heavy volume of prototyping and first article production. These types of projects necessitated a different type of percentage-of-completion method of accounting for revenue recognition purposes. As a result, we are accounting for these types of projects based on an inputs based method utilizing labor hours incurred on the projects to determine progress toward completion.

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Revenue Recognition

We account for revenues and earnings in our business using the percentage-of-completion method of accounting. We recognize contract revenue under this method as the work progresses, either as the products are produced and delivered, or as services are rendered. We determine progress toward completion on production contracts based on either input measures, such as labor hours incurred, or output measures, such as units delivered.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability are recognized in the period in which the revisions are determined. Costs incurred on uncompleted contracts consist of labor, overhead, and materials. Work in process is stated at the lower of cost or market.

We may combine contracts for accounting purposes when they are negotiated as a package with an overall profit margin objective. These essentially represent an agreement to do a single project for a single customer, involve interrelated construction activities with substantial common costs, and are performed concurrently or sequentially. When a group of contracts is combined, revenue and profit are earned during the performance of the combined contracts. We may segment a single contract or group of contracts when a clear economic decision has been made during contract negotiations that would produce different rates of profitability for each element or phase of the contract.

Costs allocable to undelivered units are reported in the consolidated balance sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed upon contract price for customer directed changes, construction 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 reliably estimated. Revenues from such claims are recorded only to the extent that contract costs have been incurred. 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. We have written agreements with the customers that specify contract prices and delivery terms. We recognize revenues only when the collectability is reasonably assured.

When we can only estimate a range of revenues and costs, we use the most likely estimate within the range. If we cannot determine which estimate in the range is most likely, the amounts within the ranges that would result in the lowest profit margin (the lowest contract revenue estimate and the highest contract cost estimate) are used.

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.

As of September 30, 2012, our federal net operating loss carry-forward was approximately $1.5 million. If not utilized, the federal net operating loss carry-forward will begin to expire in 2025. Furthermore, because of the over fifty-percent change in ownership as a consequence of the reverse acquisition of Ranor in February 2006, the amount of net operating loss carry forward used in any one year in the future is substantially limited.

New Accounting Pronouncements

See Note 2, Significant Accounting Policies, in the Notes to our Consolidated Financial Statements.

Results of Operations

Our results of operations are affected by a number of external factors including the availability of raw materials, commodity prices (particularly steel), macroeconomic factors, including the availability of capital that may be needed by our customers, and political, regulatory and legal conditions in the United States and foreign markets.

Our results of operations are also affected by our 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. At September 30, 2012, our purchase order backlog was $26.1million compared with $22.4 million at March 31, 2012.

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Three Months Ended September 30, 2012 and 2011

The following table sets forth information from our statements of operations in dollars and as a percentage of revenue for the three months ended:  

	September 30, 2012						September 30, 2011						Changes Period Ended September 30, 2012 to 2011
(dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Net sales	$	8,078			100	%	$	7,147			100	%	$	931			13	%
Cost of sales		6,140			76	%		5,231			73	%		909			17	%
Gross profit		1,938			24	%		1,916			27	%		22			(1	) %
Selling, general and administrative		1,924			24	%		1,954			27	%		(30	)		(2	) %
(Loss) Income from operations		14			0	%		(38	)		--	%		52			nm	%
Interest expense		(74	)		(1	)%		(78	)		(1	) %		4			5	%
Other income		4			--	%		8			--	%		(4	)		(50	) %
Total other expense, net		(70	)		(1	)%		(70	)		(1	) %		--			--	%
(Loss) Income before income taxes		(56	)		(1	)%		(108	)		(1	) %		52			48	%
Income tax (benefit) expense		(11	)		--	%		(20	)		--	%		9			45	%
Net (Loss) Income	$	(45	)		(1	)%	$	(88	)		(1	) %	$	43			49	%
nm - not meaningful

Net Sales

Net sales increased by $0.9 million, or 13%, to $8.1 million for the three months ended September 30, 2012 when compared to the same period last year.  This increase in net sales was due primarily to shipments of sapphire chambers to our largest Alternative Energy customer in China. Net sales to our largest Alternative Energy customer increased by $0.8 million during the quarter ended September 30, 2012 when compared with the same quarterly period one year ago as our customer delayed alternative energy shipments until the third quarter of fiscal 2012. Net sales to our new Poly Silicon customer were $1.9 million in the quarter. Net sales also increased by $1.3 million in our Medical markets, reflecting fulfilled new orders for new equipment related to proton beam therapy. These increases were partially offset by a net sales decrease in the Commercial, Defense and Aerospace, and Nuclear sectors by $2.8 million, $0.2 million, and $0.1 million, respectively.

Cost of Sales and Gross Margin

Our cost of sales for the three months ended September 30, 2012 increased by $0.9 million to $6.1 million, or 17%, from $5.2 million for the same period in fiscal 2012. The increase in the cost of sales was principally due to an increase in the volume of shipments to our customers. Gross profit was $1.9 million and $1.9 million for the three month periods ended September 30, 2012 and September 30, 2011, respectively. Gross margins were 24.0% and 26.8% for the same comparable periods, respectively. 

Gross margin in any reporting period is impacted by the mix of services we provide on projects completed within that period. Gross margins during fiscal 2013 decreased because of lower gross profit on contracts for first article production and prototyping at Ranor. Ranor’s production mix shifted to a greater volume of prototyping and first article production during fiscal 2012 as we redeployed open U.S. production capacity because of the transfer of solar production chambers to China for our largest customer.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses for the three months ended September 30, 2012 decreased by $29,899 or 1.5%.  SG&A was 23.8% as a percentage of sales during the second quarter of fiscal 2013, compared with 27.3% of net sales for the same period in fiscal 2012.  Cost reductions in general and administrative expenses more than offset an increase in severance, search and outside advisory service expenses.

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Interest Expense

The following table reflects other income and interest expense for the three months ended September 30:

	2012		2011			$ Change		% Change
Interest income, other	$	4	$	8		$	(4)		(50)%
Interest expense	$	(74)	$	(78	)	$	4		(5) %

Interest expense decreased by 5% for the three months ended September 30, 2012 when compared with the same period in fiscal 2011.  This decrease in interest expense is due to lower average levels of long-term debt and the absence of capitalized interest in fiscal 2013 when compared with the same prior year quarter.

Income Taxes

For the three months ended September 30, 2012, we recorded a tax benefit of $11,342 compared with a tax benefit of $20,494 for the comparable three month period ended September 30, 2011.

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

Net (Loss) Income

As a result of the factors described above, our net loss was $45,020, or $0.00 per share basic and fully diluted respectively, for the three months ended September 30, 2012, compared to net loss of $88,098, or $0.01 per share basic and fully diluted, for the three months ended September 30, 2011.

Six Months Ended September 30, 2012 and 2011

The following table sets forth information from our statements of operations for the six months ended September 30, 2012 and 2011, in dollars and as a percentage of revenue:  

	September 30, 2012						September 30, 2011						Changes Period Ended September 30, 2012 to 2011
(dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Net sales	$	15,224			100	%	$	16,324			100	%	$	(1,100	)		(7	)%
Cost of sales		12,180			80	%		11,981			73	%		199			2	%
Gross profit		3,044			20	%		4,343			27	%		(1,299	)		(30	)%
Selling, general and administrative		3,925			26	%		3,687			23	%		238			6	%
(Loss) Income from operations		(881	)		(6	)%		656			4	%		(1,537	)		nm	%
Interest expense		(154	)		(1	)%		(137	)		(1	)%		(17	)		(12	)%
Other income		5			--			10			--	%		(5	)		(50	)%
Total other expense, net		(149	)		(1	)%		(127	)		(1	)%		(22	)		(17	)%
(Loss) Income before income taxes		(1,030	)		(7	)%		529			3	%		(1,559	)		nm	%

Income tax (benefit) expense		(279	)	(2	)%		236	1	%		(515	)	nm	%
Net (Loss) Income	$	(751	)	(5	)%	$	293	2	%	$	(1,044	)	nm	%
nm - not meaningful

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Net Sales

Net sales decreased by $1.1 million, or 7%, to $15.2 million for the six months ended September 30, 2012 when compared to the same period last year.  We recorded lower revenue of $3.1 million on customer projects in the Commercial sector. This decrease in revenue was partially offset by higher revenue of $2.3 million recorded on new customer projects in the Alternative energy sector. However, shipments to other customers in Alternative Energy decreased by $3.8 million because of weak demand for alternative energy products. This overall decrease described above was partially offset by net sales to our customers in the Medical, Defense and Aerospace, and Nuclear markets, which increased by $2.1 million, $1.1 million, and $0.3 million, respectively.

Cost of Sales and Gross Margin

Our cost of sales for the six months ended September 30, 2012 increased by $0.2 million to $12.2 million, or 2%, from $12.0 million for the same period in fiscal 2012. Gross margin for the six months period ended September 30, 2012 was lower than the prior year due to additional contract losses of $0.4 million incurred on first article and prototype contracts during the quarter ended June 30, 2012. Gross profit was $3.0 million compared with $4.3 million for the six month periods ended September 30, 2012 and September 30, 2011, respectively. Gross margins were 20.0% and 26.6% for the same comparable periods, respectively. 

Gross margin in any reporting period is impacted by the mix of services we provide on projects completed within that period. Gross margins during fiscal 2013 decreased because of lower gross profit on contracts for first article production and prototyping at Ranor. Ranor’s production mix shifted to a greater volume of prototyping and first article production during fiscal 2012 as we redeployed open U.S. production capacity because of the transfer of solar production chambers to China for our largest customer.

Selling, General and Administrative Expenses

SG&A expenses for the six months ended September 30, 2012 were $3.9 million compared to $3.7 million for six months ended September 30, 2011, representing an increase of $0.2 million or 6%.  SG&A was 25.8% and 22.6% as a percentage of net sales for the same period in fiscal 2013 and 2012, respectively.  Primary drivers of this increase in expense were non-recurring costs of $218,000 related to severance benefits and executive search fees.

Interest Expense

The following table reflects other income and interest expense for the six months ended September 30:

	2013			2012			$ Change			% Change
Interest income, other	$	5		$	10		$	(5	)		(50	)%
Interest expense	$	(154	)	$	(137	)	$	(17	)		12	%

Interest expense increased by 12% or $17,264 for the six months ended September 30, 2012 when compared with the same period in fiscal 2011.  The increase in interest expense is primarily due to the absence of capitalized interest in fiscal 2013. We recorded capitalized interest of $30,412 during the six months ended September 30, 2011 in connection with our expansion project at Ranor.

Income Taxes

For the six months ended September 30, 2012, we recorded a tax benefit of $278,599 compared to income tax expense of $235,553 for federal and state taxes when compared to the six months ended September 30, 2011. The tax benefit for the six months ended September 30, 2012 was primarily the result of pretax losses from operations recorded at the U.S. federal and state statutory tax rates.

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

Net (Loss) Income

As a result of the factors described above, our net loss was $0.7 million or $0.04 per share basic and fully diluted respectively, for the six months ended September 30, 2012, compared to net income of $0.3 million, or $0.02 per share basic and $0.01 per share fully diluted, for the six months ended September 30, 2011.

24

Liquidity and Capital Resources

At September 30, 2012, we had working capital of $9.4 million as compared with working capital of $10.2 million at March 31, 2012, representing a decrease of $0.8 million or 8%. The following table sets forth information as to the principal changes in the components of our working capital: 

(dollars in thousands)	September 30, 2012		March 31, 2011		Change Amount			Percentage Change
Cash and cash equivalents	$	2,138	$	2,823	$	(685	)		(24	)%
Accounts receivable, net	$	4,684	$	4,902	$	218			4	%
Costs incurred on uncompleted contracts	$	4,858	$	3,910	$	948			24	%
Inventory - raw materials	$	578	$	374	$	204			55	%
Other current assets	$	1,426	$	1,487	$	(61	)		(4	)%
Income taxes receivable	$	1,198	$	1,751	$	(553	)		(32	)%
Current deferred tax assets	$	1,055	$	1,020	$	35			3	%
Accounts payable	$	2,026	$	1,361	$	665			49	%
Accrued expenses	$	1,538	$	2,425	$	(887	)		(37	)%
Accrued taxes payable	$	160	$	160	$	(133	)		(83	)%
Deferred revenues	$	1,731	$	799	$	931			117	%
Current maturity of long-term debt	$	1,079	$	1,359	$	(280	)		(21	)%

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

(dollars in thousands)	September 30, 2012			September 30, 2011			Change Amount
Cash flows provided by (used in):
Operating activities	$	78		$	(964	)	$	1,042
Investing activities		(75	)		(2,337	)		2,216
Financing activities		(684	)		966			(1,604	)
Effects of foreign exchange rates on cash		(4	)		7			(11	)
Net decrease in cash and cash equivalents	$	(685	)	$	(2,328	)	$	1,643

Operating activities

For the six months ended September 30, 2012, cash provided by operations was $78,277 as compared with cash used in operations of $964,271 for the comparable fiscal 2012 period, a change of $1,042,548. Cash provided by operations in fiscal 2013 was impacted by receipt of approximately $3.0 million in customer deposits reflecting an increase in customer orders and manufacturing activity. This amount was partially offset by our net loss and increased spending on completed projects and uncompleted projects in progress for the remaining volume mix of manufacturing activity related to new production projects which began in fiscal 2012. As all of our production activity is supported by firm orders from customers, the balance of costs incurred on uncompleted contracts will be billed and collected from customers as production billing milestones are achieved and when the orders are completed and delivered to the customer. Customers are billed for costs incurred on uncompleted projects in accordance with predetermined billing schedules or upon delivery of the customers order. We also received $0.6 million of federal income taxes refunded during fiscal 2013. We expect another $1.2 million will be refunded before the end of fiscal 2013.

Investing activities

During the six months ended September 30, 2012, we purchased approximately $75,109 in new equipment at our manufacturing facility in Westminster, MA.

Financing activities

Net cash used in financing activities was $0.7 million during the six months ended September 30, 2012 as compared with net cash provided by financing activities of $1.0 million for the same period in fiscal 2012. The primary use of cash under financing activities in fiscal 2013 and 2012 related to repayment of long-term debt. In fiscal 2012 we borrowed an additional $1.6 million under the bond financing agreement to fund the ongoing plant and equipment expansion at our Westminster, Massachusetts facility.

25

Debt Facilities

On December 30, 2010, the Company completed a $6,200,000 tax exempt bond financing with the MDFA pursuant to which the MDFA sold to the Bank the Series A Bonds and the Series B Bonds.  The Bank then loaned the proceeds of such sale to the Company under the terms of the MLSA.

The proceeds from the sale of the Series A Bonds were used to finance the Ranor facility acquisition and used to finance the 19,500 sq. ft. expansion of Ranor’s manufacturing facility located in Westminster, MA.  The proceeds of the sale of the Series B Bonds used to finance acquisitions of qualifying manufacturing equipment installed at the Westminster facility.  Under the MLSA and related documents, the Westminster facility secures, and the Company further guarantees the Company’s obligations to the Bank and subsequent holders of the Bonds. As of September 30, 2012 there was $3,895,833 and $1,485,714 outstanding under the Series A and Series B bonds, respectively.

In connection with the December 30, 2010 financing, we executed an Eighth Amendment to the Loan Agreement. The Eighth Amendment incorporated borrowing of the Bond proceeds into the borrowings covered by the Loan Agreement. Under the MLSA and the Eighth Amendment, we must meet certain financial covenants applicable while the Bonds remain outstanding. As of December 31, 2011, we were in compliance with the leverage ratio. However we did not meet the ratio of earnings available to cover fixed charges or the interest coverage covenants.

In February 2012, we executed a Tenth Amendment and obtained a waiver of the breach of such covenants from the Bank, which waiver covered the breach that otherwise would have occurred in connection with the covenant testing for the third quarter ended December 31, 2011 and waived the fixed charge covenant at March 31, 2012.

On July 6, 2012, the Company executed an Eleventh Amendment and obtained a waiver for failure to comply with the fixed charge coverage ratio and the interest coverage ratio covenants at March 31, 2012. The Eleventh Amendment also waived the covenant testing requirements related to the ratio of earnings available to cover fixed charges and the interest coverage ratio for the fiscal quarters ended June 30, 2012 and September 30, 2012. The leverage ratio covenant remained in effect, and must not be greater than 2:1. The Company was in compliance with the leverage ratio covenant at September 30, 2012 as the actual leverage ratio was 1:1. Although there was no testing of the covenant to comply with the ratio of earnings available to cover fixed charges and the interest coverage covenants for the fiscal quarters ended June 30 and September 30, 2012, the Bank required that the Company have earnings before interest and taxes (EBIT) greater than $1 for the fiscal quarter ended September 30, 2012. The Company reported EBIT of $14,286 for the fiscal quarter ended September 30, 2012 and therefore was in compliance with this covenant.  The $1 EBIT covenant at September 30, 2012 is not applicable to any future periods as testing of all covenants resumes on December 31, 2012 according to the terms of the Eleventh Amendment.

Under the Eleventh Amendment the covenants were revised such that the Company shall not permit earnings available for fixed charges to be less than 125%, the interest coverage ratio to be less than 2:1, and the leverage ratio to be greater than 2:1 at any time, tested quarterly. Also, in connection with the Eleventh Amendment, the Company paid the Bank a fee of $10,000 and made a collateral deposit of $840,000 to cover estimated principal and interest on its obligation. The collateral deposit is included in other current assets at September 30, 2012 and March 31, 2012. This collateral will be released to the Company upon successful compliance with all debt covenant tests. The earliest date this could occur is December 31, 2012, the first date the Company will again be subject to testing of all of the financial covenants. The Eleventh Amendment also revised covenant testing to provide that the ratio of earnings available to cover fixed charges and the interest ratio coverage covenant testing will resume at December 31, 2012 on a trailing six month basis, and continue at March 31, 2013 on a trailing nine month basis and quarterly thereafter on a trailing twelve month basis beginning on June 30, 2013.

Without the execution of the Eleventh Amendment for the applicable periods, the Company would have been required to reclassify all of its long-term debt as a current liability. In addition, if the lender had demanded repayment and caused the debt to be considered a short-term obligation, the Company may have been unable to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations. In the event of default (which default may occur in connection with a non-waived breach), the Bank may choose to accelerate payment of any long-term debt outstanding and, under certain circumstances, the Bank may be entitled to cancel the facilities. If the Company were unable to obtain a waiver for a breach of covenant and the Bank accelerated the payment of any outstanding amounts, such acceleration may cause the Company’s cash position to deteriorate or, if cash on hand were insufficient to satisfy any payment due, may require the Company to seek alternate financing to satisfy any accelerated payment obligation. The Company believes it will remain in compliance with all of the revised covenants through at least December 31, 2013.

We believe that the $2.0 million revolving credit facility that expires on January 31, 2013, all of which is available and unused as of September 30, 2012, our capacity to access equipment-specific financing, plus our current cash balance of $2.1 million and ability to generate cash from operations, will be sufficient to enable us to satisfy our cash requirements for the foreseeable future. Nevertheless, it is possible that we may require additional funds to the extent that we upgrade or expand our manufacturing facilities.

Obligations under the Term Note, Revolving Note, Capital Expenditure Note and Staged Advance Note are guaranteed by us. Collateral securing such notes comprises all personal property of ours, including cash, accounts receivable, inventories, equipment, financial and intangible assets.

The term note issued on February 24, 2006 has a term of seven years with an initial fixed interest rate of 9%.  The interest rate on the term note converted 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 balance outstanding on the term note as of September 30, 2012 was $285,714.

26

We also had a $3.0 million capital expenditure facility which was available until November 30, 2009.   The capital expenditure facility was not renewed upon its expiration on November 30, 2009. Borrowings available under this facility were converted to a note when the facility terminated. Principal and interest payments are due monthly based on a five year amortization schedule.  The current rate of interest is based on LIBOR, plus 3%.  Any unpaid balance on the capital expenditures facility is to be paid on November 30, 2014.  As of September 30, 2012, there was $370,541 outstanding under this facility.

Under a Staged Advance Facility, the Bank made certain loans to the Company limited to a cap of $1,900,000 for the purpose of acquiring a gantry mill machine. The machine serves as collateral for the loan. The total aggregate amount of advances under this agreement could not exceed 80% of the actual purchase price of the gantry mill machine. All advances provided for payment of interest only monthly through February 28, 2011, and thereafter no further borrowings were permitted under this facility. The interest rate is LIBOR plus 4%. Beginning on April 1, 2011, the Company is obligated to pay principal and interest sufficient to amortize the outstanding balance on a five year schedule. As of September 30, 2012, there was $417,312 outstanding under this facility.

The securities purchase agreement pursuant to which we sold Series A Convertible Preferred Stock 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. In the event that we make an acquisition, we may require additional financing for the acquisition. We have no commitment from any party for additional funds, however, the terms of our agreement with Barron Partners, particularly the 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. We have no off-balance sheet assets or liabilities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, 2012, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits to the SEC is recorded, processed, summarized and reported, within the time periods specified in SEC rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were designed and operating effectively as of September 30, 2012, to provide reasonable assurance that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

During the quarter ended September 30, 2012, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

27

PART II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes to the risk factors discussed in Part I, "Item 1A. Risk Factors," in the 2012 Form 10-K.  You should carefully consider the risks described in our 2012 Form 10-K which could materially affect our business, financial condition or future results.  The risks described in our 2012 Form 10-K are not the only risks we face.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.  If any of the risks actually occur, our business, financial condition and/or results of operations could be negatively affected.

Item 5. Other Information

On November 1, 2012, the Board of Directors scheduled the date for our 2012 annual meeting of stockholders, or 2012 Annual Meeting, for December 5, 2012, at 10:00 a.m. As such, the date of the 2012 Annual Meeting will have changed by more than 30 days from the anniversary of our 2011 annual meeting of stockholders. Stockholder proposals submitted pursuant to Rule 14a-8 for inclusion in our proxy materials for the 2012 Annual Meeting are considered to have been submitted in a timely fashion if such proposals were received by us no later than November 1, 2012. No such proposals have been submitted. To be raised at the 2012 Annual Meeting, stockholders should submit proposals to us by November 29, 2012. Such proposals should be delivered by certified mail to TechPrecision Corporation, 3477 Corporate Parkway, Suite 140, Center Valley, PA 18034, Attention:  Corporate Secretary.

Item 6. Exhibits

Exhibit No.	Description
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

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

28

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:  November 21, 2012	By:	/s/ James S. Molinaro
		James S. Molinaro Chief Executive Officer
		/s/ Richard F. Fitzgerald
		Richard F. Fitzgerald Chief Financial Officer (duly authorized officer and principal financial officer)

29

EXHIBIT INDEX

Exhibit No.	Description
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

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

30

EX-31.1

Exhibit 31.1

CERTIFICATION

I, James S. Molinaro, certify that:

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

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

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

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

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 21, 2012	/s/ James S. Molinaro
	James S. Molinaro

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard F. Fitzgerald, certify that:  

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

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

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

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

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  November 21, 2012	/s/ Richard F. Fitzgerald
	Richard F. Fitzgerald

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TechPrecision Corporation (Company) on Form 10-Q for the three months ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (Report), I, James S. Molinaro, the Chief Executive Officer, and I, Richard F. Fitzgerald, the Chief Financial Officer of the Company, do hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Dated: November 21, 2012	/s/  James S. Molinaro
	James S. Molinaro
Dated: November 21, 2012	/s/  Richard F. Fitzgerald
	Richard F. Fitzgerald

XML

OTHER NONCURRENT ASSETS (Details) (USD $)	Sep. 30, 2012	Mar. 31, 2012
OTHER NONCURRENT ASSETS
Collateral deposit	$ 83,337	$ 171,252
Deferred loan costs, net of amortization	75,085	99,378
Total	$ 158,422	$ 270,630

XML

SEGMENT INFORMATION (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 item	Sep. 30, 2011	Mar. 31, 2012
SEGMENT INFORMATION
Number of operating segments			1
SEGMENT INFORMATION
Net Sales	$ 8,078,552	$ 7,147,167	$ 15,224,291	$ 16,323,607	$ 33,266,778
Property, Plant and Equipment, Net	7,125,796		7,125,796		7,395,445
United States
SEGMENT INFORMATION
Net Sales			13,667,736	16,323,607
Property, Plant and Equipment, Net	7,098,912		7,098,912		7,363,002
China
SEGMENT INFORMATION
Net Sales			1,556,555
Property, Plant and Equipment, Net	$ 26,884		$ 26,884		$ 32,443

XML

STOCK BASED COMPENSATION (Details) (USD $)	6 Months Ended	12 Months Ended			6 Months Ended		1 Months Ended
	Sep. 30, 2012	Mar. 31, 2012	Sep. 15, 2011	Aug. 05, 2010	Sep. 30, 2012 Independent director	Sep. 30, 2012 Independent director Not less than item	Apr. 30, 2012 Employee
Share based compensation
Maximum number of shares authorized	1,000,000		3,300,000	3,000,000
Number of directors in a committee to administer the plan						2
Terms of options					5 years
Options granted (in shares)	50,000				50,000		50,000
Annual grants (in shares)					10,000
Exercise price of shares granted (in dollars per share)	$ 0.7000						$ 0.70
Vesting period	3 years
Assumption used in valuation of stock options
Yield term of U.S. Treasury issues on which risk free interest rate is based	5 years
Volatility rate (as a percent)	106.00%
Risk free interest rate (as a percent)	0.083%
Expected term	6 years
Additional general disclosure
Common stock available for grant under plan (in shares)	453,506
Number Of Options
Outstanding at the beginning of the period (in shares)	2,415,666
Granted (in shares)	50,000				50,000		50,000
Forfeited (in shares)	(26,666)
Outstanding at the end of the period (in shares)	2,439,000	2,415,666
Vested at the end of the period or expected to vest (in shares)	2,439,000
Exercisable at the end of the period (in shares)	1,473,000
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 1.040
Granted (in dollars per share)	$ 0.7000						$ 0.70
Outstanding at the end of the period (in dollars per share)	$ 1.036	$ 1.040
Vested at the end of the period or expected to vest (in dollars per share)	$ 1.036
Exercisable at the end of the period (in dollars per share)	$ 0.893
Aggregate Intrinsic Value
Outstanding at the end of the period (in dollars)	$ 400,700	$ 107,375
Vested at the end of the period or expected to vest	400,700
Exercisable at the end of the period (in dollars)	288,299
Weighted Average Remaining Contractual Life
Outstanding at the end of the period	7 years 3 months 18 days	7 years 8 months 16 days
Vested at the end of the period or expected to vest	7 years 3 months 18 days
Exercisable at the end of the period	5 years 3 months 22 days
Additional information on stock options
Unrecognized compensation cost related to stock options (in dollars)	714,677
Period of recognition of unrecognized compensation expense	3 years
Fair value of shares vested (in dollars)	$ 880,719
Stock options outstanding but not vested, Number of Options
Outstanding at the beginning of the period (in shares)	1,489,000
Granted (in shares)	50,000				50,000		50,000
Forfeited (in shares)	(10,000)
Vested (in shares)	(563,000)
Outstanding at the end of the period (in shares)	966,000	1,489,000
Stock options outstanding but not vested, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 1.205
Granted (in dollars per share)	$ 0.7000						$ 0.70
Forfeited (in dollars per share)	$ 1.045
Vested (in dollars per share)	$ 1.071
Outstanding at the end of the period (in dollars per share)	$ 1.255	$ 1.205

XML

EARNINGS PER SHARE (EPS) (Tables)

6 Months Ended

Sep. 30, 2012

EARNINGS PER SHARE (EPS)

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

Three and Six Months ended September 30,	2012			2011			2012			2011
Basic EPS
Net (loss) income	$	(45,020	)	$	(88,098	)	$	(751,289	)	$	293,363
Weighted average number of shares outstanding	18,696,846			16,546,279			18,614,112			16,049,144
Basic income (loss) per share	$	(0.00	)	$	(0.01	)	$	(0.04	)	$	0.02
Diluted EPS
Net income (loss)	$	(45,020	)	$	(88,098	)	$	(751,289	)	$	293,363
Dilutive effect of stock options, warrants and preferred stock	—			—			—			8,094,812
Diluted weighted average shares	18,696,846			16,546,279			18,614,112			24,143,956
Diluted income (loss) per share	$	(0.00	)	$	(0.01	)	$	(0.04	)	$	0.01

XML

COSTS INCURRED ON UNCOMPLETED CONTRACTS (Tables)

6 Months Ended

Sep. 30, 2012

COSTS INCURRED ON UNCOMPLETED CONTRACTS

Schedule of costs incurred on uncompleted contracts

	September 30, 2012			March 31, 2012
Cost incurred on uncompleted contracts, beginning balance	$	10,879,743		$	7,958,153
Plus: Total cost incurred on contracts during the period	7,771,827			31,104,174
Less: cost of sales, during the period	(12,180,487		)	(28,182,584		)
Cost incurred on uncompleted contracts, ending balance	$	6,471,083		$	10,879,743
Billings on uncompleted contracts, beginning balance	$	6,969,717		$	5,104,301
Plus: Total billings incurred on contracts, during the period	9,867,439			35,132,194
Less: Contracts recognized as revenue, during the period	(15,224,290		)	(33,266,778		)
Billings on uncompleted contracts, ending balance	$	1,612,866		$	6,969,717
Cost incurred on uncompleted contracts, ending balance	$	6,471,083		$	10,879,743
Billings on uncompleted contracts, ending balance	(1,612,866		)	(6,969,717		)
Cost incurred on uncompleted contracts, in excess of progress billings	$	4,858,217		$	3,910,026

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EARNINGS PER SHARE (EPS) (Details) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Basic EPS
Net (loss) income (in dollars)	$ (45,020)	$ (88,098)	$ (751,289)	$ 293,363
Weighted average number of shares outstanding	18,696,846	16,546,279	18,614,112	16,049,144
Basic income (loss) per share (in dollars per share)	$ 0.00	$ (0.01)	$ (0.04)	$ 0.02
Diluted EPS
Net (loss) income (in dollars)	$ (45,020)	$ (88,098)	$ (751,289)	$ 293,363
Dilutive effect of stock options, warrants and preferred stock (in shares)				8,094,812
Diluted weighted average shares	18,696,846	16,546,279	18,614,112	24,143,956
Diluted income (loss) per share (in dollars per share)	$ 0.00	$ (0.01)	$ (0.04)	$ 0.01
Antidilutive securities excluded from computation of earnings per share amount (in shares)	5,808,674	6,907,806	8,457,830	762,000

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INCOME TAXES (Details) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
INCOME TAXES
Income tax (benefit) expense	$ (11,342)	$ (20,494)	$ (278,599)	$ 235,553
Federal net operating loss carry-forward	$ 1,500,000		$ 1,500,000

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COSTS INCURRED ON UNCOMPLETED CONTRACTS (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012
Cost incurred on uncompleted contracts
Cost incurred on uncompleted contracts, beginning balance			$ 10,879,743	$ 7,958,153	$ 7,958,153
Plus: Total cost incurred on contracts during the period			7,771,827		31,104,174
Less: cost of sales, during the period	(6,140,187)	(5,231,710)	(12,180,487)	(11,981,227)	(28,182,584)
Cost incurred on uncompleted contracts, ending balance	6,471,083		6,471,083		10,879,743
Billings on uncompleted contracts
Billings on uncompleted contracts, beginning balance			6,969,717	5,104,301	5,104,301
Plus: Total billings incurred on contracts during the period			9,867,439		35,132,194
Less: Contracts recognized as revenue during the period	(8,078,552)	(7,147,167)	(15,224,291)	(16,323,607)	(33,266,778)
Billings on uncompleted contracts, ending balance	1,612,866		1,612,866		6,969,717
Cost incurred on uncompleted contracts
Cost incurred on uncompleted contracts, ending balance	6,471,083		6,471,083		10,879,743
Billings on uncompleted contracts, ending balance	(1,612,866)		(1,612,866)		(6,969,717)
Cost incurred on uncompleted contracts, in excess of progress billings	4,858,217		4,858,217		3,910,026
Deferred revenues	$ 1,730,866		$ 1,730,866		$ 799,413

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CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012
Concentration of credit risk and major customers
Accounts receivable balance	$ 4,684,370		$ 4,684,370		$ 4,901,791
Net sales	8,078,552	7,147,167	15,224,291	16,323,607	33,266,778
Receivable balance | Customer concentration
Concentration of credit risk and major customers
Number of major customers			4
Concentration risk percentage			87.00%
Receivable balance | Customer concentration | Customer A
Concentration of credit risk and major customers
Accounts receivable balance	1,404,269		1,404,269		1,160,957
Concentration risk percentage			30.00%		24.00%
Receivable balance | Customer concentration | Customer B
Concentration of credit risk and major customers
Accounts receivable balance	1,232,582		1,232,582		426,083
Concentration risk percentage			26.00%		9.00%
Receivable balance | Customer concentration | Customer C
Concentration of credit risk and major customers
Accounts receivable balance	995,193		995,193		561,927
Concentration risk percentage			21.00%		11.00%
Receivable balance | Customer concentration | Customer D
Concentration of credit risk and major customers
Accounts receivable balance	445,934		445,934		726,908
Concentration risk percentage			10.00%		15.00%
Net sales | Customer concentration | Customer A
Concentration of credit risk and major customers
Net sales			3,361,526	1,013,759
Concentration risk percentage			22.00%	6.00%
Net sales | Customer concentration | Customer B
Concentration of credit risk and major customers
Net sales			2,898,858	762,591
Concentration risk percentage			19.00%	5.00%
Net sales | Customer concentration | Customer C
Concentration of credit risk and major customers
Net sales			2,335,696
Concentration risk percentage			15.00%
Net sales | Customer concentration | Customer D
Concentration of credit risk and major customers
Net sales			1,631,652	2,297,613
Concentration risk percentage			11.00%	14.00%
Net sales | Customer concentration | Customer E
Concentration of credit risk and major customers
Net sales			1,439,797	4,649,032
Concentration risk percentage			10.00%	29.00%
Net sales | Customer concentration | Customer F
Concentration of credit risk and major customers
Net sales			61,164	2,222,595
Concentration risk percentage				14.00%
Net sales | Customer concentration | Customer G
Concentration of credit risk and major customers
Net sales			$ 120,962	$ 1,693,128
Concentration risk percentage			1.00%	10.00%

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COSTS INCURRED ON UNCOMPLETED CONTRACTS

6 Months Ended

Sep. 30, 2012

COSTS INCURRED ON UNCOMPLETED CONTRACTS

COSTS INCURRED ON UNCOMPLETED CONTRACTS

NOTE 4 - COSTS INCURRED ON UNCOMPLETED CONTRACTS

	September 30, 2012			March 31, 2012
Cost incurred on uncompleted contracts, beginning balance	$	10,879,743		$	7,958,153
Plus: Total cost incurred on contracts during the period	7,771,827			31,104,174
Less: cost of sales, during the period	(12,180,487		)	(28,182,584		)
Cost incurred on uncompleted contracts, ending balance	$	6,471,083		$	10,879,743
Billings on uncompleted contracts, beginning balance	$	6,969,717		$	5,104,301
Plus: Total billings incurred on contracts, during the period	9,867,439			35,132,194
Less: Contracts recognized as revenue, during the period	(15,224,290		)	(33,266,778		)
Billings on uncompleted contracts, ending balance	$	1,612,866		$	6,969,717
Cost incurred on uncompleted contracts, ending balance	$	6,471,083		$	10,879,743
Billings on uncompleted contracts, ending balance	(1,612,866		)	(6,969,717		)
Cost incurred on uncompleted contracts, in excess of progress billings	$	4,858,217		$	3,910,026

Contract costs consist primarily of labor and materials and related overhead, to the extent that such costs are recoverable. Revenues associated with these contracts are recorded only when the amount of recovery can be estimated reliably and realization is probable. As of September 30, 2012 and March 31, 2012, the Company had deferred revenues totaling $1,730,866 and $799,413, respectively. Deferred revenues represent customer prepayments on their contracts and completed contracts on which all revenue recognition criteria were not met.   The Company records provisions for losses within costs of sales in its consolidated statement of operations and comprehensive income (loss). The Company also receives advance billings and deposits representing down payments for acquisition of materials and progress payments on contracts. The agreements with our customers allow the Company to offset the progress payments against the costs incurred.

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RELATED PARTY TRANSACTIONS (Details) (USD $)	6 Months Ended	1 Months Ended		6 Months Ended
	Sep. 30, 2012	Nov. 30, 2010 WCMC Affiliate of CSI	Nov. 15, 2010 WCMC Affiliate of CSI sqft	Sep. 30, 2012 CSI	Sep. 30, 2011 CSI
Related party transactions
Area of office space leased (in square feet)			1,000
Initial lease term		2 years
Annual rent		$ 17,000
Percentage of dilutive equity interest held by the common share holder	36.00%			18.00%
Payments for manufacturing services				$ 500,000	$ 1,000,000

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LONG-TERM DEBT (Tables)

6 Months Ended

Sep. 30, 2012

LONG-TERM DEBT

Schedule of outstanding debt obligations

The following debt obligations were outstanding as of:	September 30, 2012			March 31, 2012
Sovereign Bank Secured Term Note due March, 2013	$	285,714		$	571,429
Sovereign Bank Capital Expenditure Note due November 2014	370,541			490,292
Sovereign Bank Staged Advance Note due March 2016	417,312			445,133
MDFA Series A Bonds due January 2021	3,895,833			4,002,083
MDFA Series B Bonds due January 2018	1,485,714			1,624,999
Obligations under capital leases	42,562			1,291
Total long-term debt	6,497,676			7,135,227
Principal payments due within one year	(1,079,676		)	(1,358,933		)
Principal payments due after one year	$	5,418,000		$	5,776,294

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ACCRUED EXPENSES (Tables)

6 Months Ended

Sep. 30, 2012

ACCRUED EXPENSES

Schedule of accrued expenses

	September 30, 2012		March 31, 2012
Accrued compensation	$	826,297	$	970,088
Interest rate swaps market value	454,654		375,512
Provision for contract losses	83,196		887,458
Other	174,312		191,637
Total	$	1,538,459	$	2,424,695

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PROFIT SHARING PLAN (Details) (Ranor, Inc., USD $)	6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Ranor, Inc.
PROFIT SHARING PLAN
Eligibility for employer matching contributions, period of service	90 days
Matching contributions made by the company	$ 10,703	$ 11,378

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STOCK BASED COMPENSATION (Tables)

6 Months Ended

Sep. 30, 2012

STOCK BASED COMPENSATION

Summary of stock option activity

	Number Of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at 3/31/2012	2,415,666		$	1.040	$	107,375	7.71
Granted	50,000		$	0.700
Forfeited	(26,666	)	$	—
Exercised	—		$	—
Outstanding at 9/30/2012	2,439,000		$	1.036	$	400,700	7.30
Vested at 9/30/2012 or expected to vest	2,439,000		$	1.036	$	400,700	7.30
Exercisable at 9/30/2012	1,473,000		$	0.893	$	288,299	5.31

Summary of status of the Company's stock options outstanding but not vested

	Number of Options		Weighted Average Exercise Price
Outstanding at 3/31/2012	1,489,000		$	1.205
Granted	50,000		$	0.700
Forfeited	(10,000	)	$	1.045
Vested	(563,000	)	$	1.071
Outstanding at 9/30/2012	966,000		$	1.255

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CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS (Tables) (Customer concentration)

6 Months Ended

Sep. 30, 2012

Receivable balance

Concentration of credit risk and major customers

Schedule of concentration of risk by factors

	September 30, 2012				March 31, 2012
Customer	Dollars		Percent		Dollars		Percent
A	$	1,404,269	30	%	$	1,160,957	24	%
B	$	1,232,582	26	%	$	426,083	9	%
C	$	995,193	21	%	$	561,927	11	%
D	$	445,934	10	%	$	726,908	15	%

Net sales

Concentration of credit risk and major customers

Schedule of concentration of risk by factors

	September 30, 2012				September 30, 2011
Customer	Dollars		Percent		Dollars		Percent
A	$	3,361,526	22	%	$	1,013,759	6	%
B	$	2,898,858	19	%	$	762,591	5	%
C	$	2,335,696	15	%	$	—	—	%
D	$	1,631,652	11	%	$	2,297,613	14	%
E	$	1,439,797	10	%	$	4,649,032	29	%
F	$	61,164	—	%	$	2,222,595	14	%
G	$	120,962	1	%	$	1,693,128	10	%

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PROPERTY, PLANT AND EQUIPMENT

6 Months Ended

Sep. 30, 2012

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

	September 30, 2012			March 31, 2012
Land	$	110,113		$	110,113
Building and improvements	3,345,662			3,345,662
Machinery equipment, furniture and fixtures	8,154,188			8,102,700
Equipment under capital leases	46,378			56,242
Total property, plant and equipment	11,656,341			11,614,717
Less: accumulated depreciation	(4,530,545		)	(4,219,272		)
Total property, plant and equipment, net	$	7,125,796		$	7,395,445

Depreciation expense for the three and six months ended September 30, 2012 and 2011 was $195,727 and $388,650, and, $127,011 and $225,222, respectively.

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SEGMENT INFORMATION (Tables)

6 Months Ended

Sep. 30, 2012

SEGMENT INFORMATION

Schedule of geographic information (net sales and net property, plant and equipment) by the country in which the legal subsidiary is domiciled and assets are located

	Net Sales				Property, Plant and Equipment, Net
	Six months ended September 30, 2012		Six months ended September 30, 2011		September 30, 2012		March 31, 2012
United States	$	13,667,736	$	16,323,607	$	7,098,912	$	7,363,002
China	$	1,556,555	$	—	$	26,884	$	32,443

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ACCRUED EXPENSES (Details) (USD $)	Sep. 30, 2012	Mar. 31, 2012
ACCRUED EXPENSES
Accrued compensation	$ 826,297	$ 970,088
Interest rate swaps market value	454,654	375,512
Provision for contract losses	83,196	887,458
Other	174,312	191,637
Total	$ 1,538,459	$ 2,424,695

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CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2012	Mar. 31, 2012
Current assets:
Cash and cash equivalents	$ 2,138,756	$ 2,823,485
Accounts receivable, less allowance for doubtful accounts of $25,010 and $25,010	4,684,370	4,901,791
Costs incurred on uncompleted contracts, in excess of progress billings	4,858,217	3,910,026
Inventories- raw materials	578,047	373,544
Income taxes receivable	1,198,099	1,751,169
Current deferred taxes	1,054,847	1,020,208
Other current assets	1,425,755	1,486,954
Total current assets	15,938,091	16,267,177
Property, plant and equipment, net	7,125,796	7,395,445
Noncurrent deferred taxes	396,604	118,005
Other noncurrent assets, net	158,422	270,630
Total assets	23,618,913	24,051,257
Current liabilities:
Accounts payable	2,026,595	1,361,611
Accrued expenses	1,538,459	2,424,695
Accrued taxes payable	159,987	159,987
Deferred revenues	1,730,866	799,413
Current maturity of long-term debt	1,079,676	1,358,933
Total current liabilities	6,535,583	6,104,639
Long-term debt, including capital leases	5,418,000	5,776,294
Commitments and contingent liabilities (see Note 16)
Stockholders' Equity:
Preferred stock - par value $.0001 per share, 10,000,000 shares authorized, of which 9,890,980 are designated as Series A Convertible Preferred Stock, with 6,337,998 and 7,035,982 shares issued and outstanding at September 30, 2012 and March 31, 2012, (liquidation preference of $1,806,329 and $2,005,254 at September 30, 2012 and March 31, 2012)	1,485,696	1,637,857
Common stock - par value $0.0001 per share, authorized, 90,000,000 shares issued and outstanding, 18,904,577 shares at September 30, 2012 and 17,992,177 at March 31, 2012	1,890	1,799
Additional paid in capital	4,844,253	4,412,075
Accumulated other comprehensive loss	(257,397)	(223,584)
Retained earnings	5,590,888	6,342,177
Total stockholders' equity	11,665,330	12,170,324
Total liabilities and stockholders' equity	$ 23,618,913	$ 24,051,257

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CAPITAL STOCK (Details) (USD $)	1 Months Ended	6 Months Ended					1 Months Ended		6 Months Ended
	Feb. 28, 2011	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012	Feb. 15, 2011	Sep. 30, 2012 Minimum item	Dec. 31, 2009 Series A convertible preferred stock	Aug. 31, 2009 Series A convertible preferred stock	Sep. 30, 2012 Series A convertible preferred stock item	Sep. 30, 2011 Series A convertible preferred stock	Mar. 31, 2012 Series A convertible preferred stock	Aug. 14, 2009 Series A convertible preferred stock	Sep. 30, 2012 Series A convertible preferred stock Minimum	Sep. 30, 2012 Series A convertible preferred stock Maximum
Capital stock
Number of authorized shares		10,000,000		10,000,000								9,890,980
Number of series of preferred stock						1			1
Conversion ratio							1.3072
Effective conversion price (in dollars per share)							$ 0.218
Number of shares of common stock issuable upon conversion of convertible preferred stock									8,285,031		9,197,436
Beneficial ownership percentage upon conversion														4.90%
Ownership percentage of shares outstanding needed for modification of stock agreement													75.00%
Required price per share upon liquidation									$ 0.285
Number of authorized shares before adoption of resolution								9,000,000
Shares converted into common stock		697,984	898,000						697,984	898,000
Number of shares of common stock issued for converted preferred stock		912,400	1,173,861						912,400	1,173,861
Shares outstanding		6,337,998		7,035,982					6,337,998		7,035,982
Term of warrants	2 years
Warrants issued (in shares)	100,000
Exercise price of warrants (in dollars per share)	$ 1.65
Assumptions based on Black-Scholes options pricing formula
Risk free rate (as a percent)	0.30%
Volatility (as a percent)	79.00%
Expected term	1 year
Value of warrants upon exercise (in dollars per share)					$ 0.51
Fair value of warrants issuable (in dollars)	$ 51,428
Warrants outstanding (in shares)		100,000		100,000
Number of authorized common shares		90,000,000		90,000,000
Number of outstanding common shares		18,904,577		17,992,177

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DESCRIPTION OF BUSINESS

6 Months Ended

Sep. 30, 2012

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS

NOTE 1 - DESCRIPTION OF BUSINESS

TechPrecision Corporation, or 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., or Ranor, a Delaware corporation. On November 4, 2010, TechPrecision announced it completed the formation of a wholly foreign owned enterprise (WFOE), Wuxi Critical Mechanical Components Co., Ltd., or WCMC, to meet growing demand for local manufacturing of components in China. TechPrecision, WCMC and Ranor are collectively referred to as the “Company,” “we,” “us,” or “our.” The Company manufactures large scale metal fabricated and machined precision components and equipment. These products are used in a variety of markets including the alternative energy, medical, nuclear, commercial, defense and aerospace industries.

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SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012 item	Sep. 30, 2011	Sep. 30, 2012 item	Sep. 30, 2011	Mar. 31, 2012 item
Derivative Financial Instruments
Number of interest rate swap transactions	2		2		2
Selling, General, and Administrative Expense
Selling, general and administrative expenses	$ 1,924,079	$ 1,953,978	$ 3,924,599	$ 3,686,649
Stock Based Compensation
Stock based compensation cost			$ 282,719	$ 249,061
Minimum
Operating leases
Renewal period of long-term, non-cancelable operating lease agreements			3 months
Maximum
Operating leases
Renewal period of long-term, non-cancelable operating lease agreements			5 years

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EARNINGS PER SHARE (EPS)

6 Months Ended

Sep. 30, 2012

EARNINGS PER SHARE (EPS)

EARNINGS PER SHARE (EPS)

NOTE 17 - 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 under FASB ASC 260.

Three and Six Months ended September 30,	2012			2011			2012			2011
Basic EPS
Net (loss) income	$	(45,020	)	$	(88,098	)	$	(751,289	)	$	293,363
Weighted average number of shares outstanding	18,696,846			16,546,279			18,614,112			16,049,144
Basic income (loss) per share	$	(0.00	)	$	(0.01	)	$	(0.04	)	$	0.02
Diluted EPS
Net income (loss)	$	(45,020	)	$	(88,098	)	$	(751,289	)	$	293,363
Dilutive effect of stock options, warrants and preferred stock	—			—			—			8,094,812
Diluted weighted average shares	18,696,846			16,546,279			18,614,112			24,143,956
Diluted income (loss) per share	$	(0.00	)	$	(0.01	)	$	(0.04	)	$	0.01

All potential common share equivalents that have an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three and six month periods ended September 30, 2012 and 2011, there were 5,808,674 and 6,907,806 shares, and 8,457,830 and 762,000 shares, respectively, of potentially anti-dilutive stock options, warrants and convertible preferred stock, none of which were included in the EPS calculations above.

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PROPERTY, PLANT AND EQUIPMENT (Details) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012
PROPERTY, PLANT AND EQUIPMENT
Total property, plant and equipment	$ 11,656,341		$ 11,656,341		$ 11,614,717
Less: accumulated depreciation	(4,530,545)		(4,530,545)		(4,219,272)
Total property, plant and equipment, net	7,125,796		7,125,796		7,395,445
Depreciation expense	195,727	127,011	388,650	225,222
Land
PROPERTY, PLANT AND EQUIPMENT
Total property, plant and equipment	110,113		110,113		110,113
Building and improvements
PROPERTY, PLANT AND EQUIPMENT
Total property, plant and equipment	3,345,662		3,345,662		3,345,662
Machinery equipment, furniture and fixtures
PROPERTY, PLANT AND EQUIPMENT
Total property, plant and equipment	8,154,188		8,154,188		8,102,700
Equipment under capital leases
PROPERTY, PLANT AND EQUIPMENT
Total property, plant and equipment	$ 46,378		$ 46,378		$ 56,242

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PROPERTY, PLANT AND EQUIPMENT (Tables)

6 Months Ended

Sep. 30, 2012

PROPERTY, PLANT AND EQUIPMENT

Schedule of property, plant and equipment, net

	September 30, 2012			March 31, 2012
Land	$	110,113		$	110,113
Building and improvements	3,345,662			3,345,662
Machinery equipment, furniture and fixtures	8,154,188			8,102,700
Equipment under capital leases	46,378			56,242
Total property, plant and equipment	11,656,341			11,614,717
Less: accumulated depreciation	(4,530,545		)	(4,219,272		)
Total property, plant and equipment, net	$	7,125,796		$	7,395,445

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SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Sep. 30, 2012

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of TechPrecision, WCMC and Ranor. Intercompany transactions and balances have been eliminated in consolidation.

The accompanying consolidated balance sheet as of September 30, 2012, the consolidated statements of operations and comprehensive income (loss) for the three and six-month periods ended September 30, 2012 and 2011, and the consolidated statements of cash flows for the six months ended September 30, 2012 and 2011 are unaudited, but in the opinion of management, include all adjustments that are necessary for a fair presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The consolidated balance sheet as of March 31, 2012 was derived from audited financial statements. 

The Notes to Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These notes should be read in conjunction with the notes to consolidated financial statements of the Company in Item 8 of the Company’s Annual Report on Form 10-K for the year ended March 31, 2012, or 2012 Form 10-K.

Use of Estimates in the Preparation of Financial Statements

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

Fair Value Measurements

We account for fair value of financial instruments under the Financial Accounting Standard Board’s (FASB) Accounting Standards Codification (ASC) authoritative guidance which defines fair value and establishes a framework to measure fair 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 FASB 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; and 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 addition, we will measure fair value in an inactive or dislocated market based on facts and circumstances and significant management judgment.  We will use inputs based on management estimates or assumptions, or make adjustments to observable inputs to determine fair value when markets are not active and relevant observable inputs are not available.

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses as presented in the balance sheet, approximates fair value due to the short-term nature of these instruments.

Cash and cash equivalents

Holdings of highly liquid investments with maturities of three months or less, when purchased, are considered to be cash equivalents.  U.S. based deposits are maintained in a large regional bank. The Company’s China subsidiary also maintains a bank account in a large national Bank in China subject to People’s Republic of China, or PRC, banking regulations. Cash on deposit with a large national China-based bank was $534,975 and $692,524 at September 30, 2012 and March 31, 2012, respectively.

Foreign currency translation

The majority of the Company’s business is transacted in U.S. dollars; however, the functional currency of the Company’s China subsidiary is the local currency, the Chinese Yuan Renminbi. In accordance with ASC No. 830,  Foreign Currency Matters  (ASC 830), foreign currency translation adjustments of subsidiaries operating outside the U.S. are included in stockholders’ equity as a component of accumulated other comprehensive loss, a separate component of equity. Foreign currency transaction gains and losses are recognized in the determination of net income (loss) as incurred.

Accounts receivable and allowance for doubtful accounts

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. 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. Historically, the level of uncollectible accounts has not been significant. There was bad debt expense of $0 for the six months ended September 30, 2012 and 2011.

Inventories

Inventories - raw materials is stated at the lower of cost or market determined by the first-in, first-out (FIFO) method.

Property, plant and equipment

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. Amortization of assets recorded under capital leases is included under depreciation expense. 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, 5-15 years; buildings, 30 years; and leasehold improvements, 2-5 years.

Interest is capitalized for assets that are constructed or otherwise produced for the Company’s own use, including assets constructed or produced for the Company by others for which deposits or progress payments have been made. Interest is capitalized to the date the assets are available and ready for use. When an asset is constructed in stages, interest is capitalized for each stage until it is available and ready for use. The Company uses the interest rate incurred on funds borrowed specifically for the project. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life.

In accordance with ASC No. 360, Property, Plant & Equipment (ASC 360), the Company’s property, plant and equipment is tested for impairment when triggering events occur, and if impaired, written-down to fair value based on either discounted cash flows or appraised values. The carrying amount of an asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. There were no impairments for the six months ended September 30, 2012 and 2011, respectively.

Operating Leases

Operating leases are charged to operations on a straight-line basis over the term of the lease. The Company leases its office facilities for various terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2016 and provide for renewal options ranging from three months to five years. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.

Derivative Financial Instruments

The Company is exposed to various risks such as fluctuating interest rates, foreign exchange rates and increasing commodity prices. To manage these market risks, we may periodically enter into derivative financial instruments such as interest rate swaps, options and foreign exchange contracts for periods consistent with and for notional amounts equal to or less than the related underlying exposures. We do not purchase or hold any derivative financial instruments for speculation or trading purposes.

All derivative instruments are recognized in the financial statements and measured at fair value regardless of the purpose or intent of holding them. At September 30, 2012 and March 31, 2012, the Company had two interest rate swap transactions designated as cash flow hedges, each with an effective date of January 3, 2011. For our cash flow hedges, the effective portion of the derivative’s gain or loss is initially reported in stockholders’ equity as a component of accumulated other comprehensive loss and is subsequently reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The ineffective portion of the gain or loss of a cash flow hedge is reported in earnings immediately.

The Company formally documents the hedging relationship and its risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions.

The Company will discontinue hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative expires, is sold, terminated, or exercised, or management determines to remove the designation of a cash flow hedge. See Note 8 for additional disclosure related to interest rate swaps.

Convertible Preferred Stock and Warrants

The Company measures the fair value of the Series A Convertible Preferred Stock by the amount of cash that was received for their issuance. The Company has determined that the convertible preferred shares and warrants issued are equity instruments. The holders of the Series A Convertible Preferred Stock have 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 unregistered common stock and are classified in stockholders’ equity.

Selling, General, and Administrative Expense

Selling, general and administrative expenses include items such as executive compensation, business travel and advertising costs. Selling, general and administrative expenses amounted to $3.9 million and $3.7 million for the six months ended September 30, 2012 and 2011, respectively. Advertising costs are expensed as incurred. Other general and administrative expenses include items for the Company’s administrative functions and for items such as office rent, supplies, insurance, legal, accounting, tax, telephone and other outside services.

Stock Based Compensation

Stock based compensation represents the cost related to stock based awards granted to the Board of Directors and employees. The Company measures stock based compensation cost at the 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 requisite service period. The Company estimates the fair value of stock options using a Black-Scholes valuation model.

Excess tax benefits of awards that are recognized in equity related to stock options exercises are reflected as financing cash inflows. Stock based compensation cost that has been included in (loss) income from operations amounted to $282,719 and $249,061 for the six months ended September 30, 2012 and 2011, respectively. See Note 13 for additional disclosures related to stock based compensation.

Net Income (Loss) per Share of Common Stock

Basic net income (loss) per common share is computed by dividing net income or loss by the weighted average number of shares outstanding during the 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 convertible preferred stock, stock options and warrants calculated using the treasury stock method. See Note 13 for additional disclosures related to stock based compensation.

Revenue Recognition

We account for revenues and earnings using the percentage-of-completion method of accounting. Under this method, we recognize contract revenue and gross profit as the work progresses, either as the products are produced and delivered, or as services are rendered. We determine progress toward completion on production contracts based on either input measures, such as labor hours incurred, or output measures, such as units delivered.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability are recognized in the period in which the revisions are determined. Costs incurred on uncompleted contracts consist of labor, overhead, and materials.

We may combine contracts for accounting purposes when they are negotiated as a package with an overall profit margin objective. These essentially represent an agreement to do a single project for a single customer, involve interrelated construction activities with substantial common costs, and are performed concurrently or sequentially. When a group of contracts is combined, revenue and profit are earned during the performance of the combined contracts.

Costs allocable to undelivered units are reported in the consolidated balance sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed upon contract price for customer directed changes, construction 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 reliably estimated. Revenues from such claims are recorded only to the extent that contract costs relating to the claim have been incurred. Revisions in cost and profit estimates are reflected in the period in which the facts requiring the revision become known and are estimable.

When we can only estimate a range of revenues and costs, we use the most likely estimate within the range. If we cannot determine which estimate in the range is most likely, the amounts within the ranges that would result in the lowest profit margin (the lowest contract revenue estimate and the highest contract cost estimate) is used.

In some situations, it may be impractical for us to estimate either specific amounts or ranges of contract revenues and costs. However, if we can at least determine that we will not incur a loss, a zero profit model is adopted. The zero profit model results in the recognition of an equal amount of revenues and costs. This method is only used if more precise estimates cannot be made and its use is discontinued when such estimates are obtainable. When we obtain more precise estimates, the change is treated as a change in an accounting estimate.

Income Taxes

In accordance with ASC No. 740, Income Taxes (ASC 740), income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Recent Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on its financial position, and to allow investors to better compare financial statements prepared under U.S. GAAP with financial statements prepared under International Financial Reporting Standards, or IFRS.

The new standards are effective for annual periods beginning January 1, 2013, and interim periods within those annual periods. Retrospective application is required. The Company will implement the provisions of ASU 2011-11 as of April 1, 2013.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2012	Mar. 31, 2012
Accounts receivable, allowance for doubtful accounts (in dollars)	25,010	25,010
Preferred stock, par value (in dollars per share)	0.0001	0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	6,337,998	7,035,982
Preferred stock, shares outstanding	6,337,998	7,035,982
Preferred stock, liquidation preference (in dollars)	1,806,329	2,005,254
Common stock, par value (in dollars per share)	0.0001	0.0001
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	18,904,577	17,992,177
Common stock, shares outstanding	18,904,577	17,992,177
Series A Convertible Preferred Stock
Preferred stock, designated as Series A Convertible Preferred Stock	9,890,980	9,890,980
Preferred stock, shares outstanding	6,337,998	7,035,982

XML

CAPITAL STOCK

6 Months Ended

Sep. 30, 2012

CAPITAL STOCK

CAPITAL STOCK

NOTE 12 – CAPITAL STOCK

Preferred Stock

The Company has 10,000,000 authorized shares of preferred stock and the Board of Directors of TechPrecision, or 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.

Each share of Series A Convertible 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 December 31, 2009, each share of Series A Convertible Preferred Stock was convertible into 1.3072 shares of common stock, with an effective conversion price of $0.218.  Based on the current conversion ratio, there were 8,285,031 and 9,197,436 common shares underlying the Series A Convertible Preferred Stock as of September 30, 2012 and March 31, 2012, respectively.

In addition to the conversion rights described above, the certificate of designation for the Series A Convertible Preferred Stock provides that the holder of the series A preferred stock or its affiliates will not be entitled to convert the Series A Convertible 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.

No dividends are payable with respect to the Series A Convertible Preferred Stock and no dividends are payable on common stock while Series A Convertible Preferred Stock is outstanding. The common stock will not be redeemed while preferred stock is outstanding.

The holders of the Series A Convertible Preferred Stock have no voting rights. However, so long as any shares of Series A Convertible Preferred Stock are outstanding, the Company shall not, without the affirmative approval of the holders of 75% of the outstanding shares of Series A Convertible Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Series A Convertible 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 Convertible 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 Convertible 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 Convertible Preferred Stock, or (e) enter into any agreement with respect to the foregoing.

Upon any liquidation the Company is required to pay $0.285 for each share of Series A Convertible 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 Convertible 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 Convertible 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.

During the six months ended September 30, 2012 and 2011, 697,984 and 898,000 shares of Series A Convertible Preferred Stock were converted into 912,400 and 1,173,861 shares of common stock, respectively. The Company had 6,337,998 and 7,035,982 shares of Series A Convertible Preferred Stock outstanding at September 30, 2012 and March 31, 2012, respectively.

Common Stock Purchase Warrants

On February 15, 2011, the Company entered into a contract with a third party pursuant to which the Company issued two-year warrants to purchase 100,000 shares of common stock at an exercise price of $1.65 per share.   Using the Black-Scholes options pricing formula assuming a risk free rate of 0.30%, volatility of 79%, a term of one year, and the price of the common stock on February 15, 2011 of $1.65 per share, the value of the warrant was calculated at $0.51 per share issuable upon exercise of the warrant, or a total of $51,428.

Since the warrant permitted delivery of unregistered shares, the Company has the control in settling the contract by issuing equity. The cost of warrants was charged to selling, general and administrative. At September 30, 2012 and March 31, 2012 there were 100,000 warrants issued and outstanding.

Common Stock

The Company had 90,000,000 authorized common shares at September 30 and March 31, 2012.  The Company had 18,904,577 and 17,992,177 shares of common stock outstanding at September 30, 2012 and March 31, 2012, respectively.

For the six months ended September 30, 2012, the Company issued 912,400 shares of common stock in connection with Series A Convertible Preferred Stock conversions.

XML

Document and Entity Information	3 Months Ended
	Sep. 30, 2012	Nov. 09, 2012
Document and Entity Information
Entity Registrant Name	TECHPRECISION CORP
Entity Central Index Key	0001328792
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		18,904,577
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

XML

STOCK BASED COMPENSATION

6 Months Ended

Sep. 30, 2012

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

NOTE 13 – STOCK BASED COMPENSATION

In 2006, the directors adopted, and the stockholders approved, the 2006 long-term incentive plan, or the Plan, covering 1,000,000 shares of common stock. On August 5, 2010, the Plan was amended to increase the maximum number of shares of common stock that may be issued to an aggregate of 3,000,000 shares. On September 15, 2011, the directors adopted and the shareholders approved an amendment to increase the maximum number of shares of common stock that may be issued to an aggregate of 3,300,000 shares. 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 receives 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 10,000 shares of common stock on July 1st of each year following the third anniversary of the date of his or her first election.

On April 26, 2012, the Company granted stock options to an employee to purchase 50,000 shares of common stock at an exercise price of $0.70 per share, the fair market value on the date of grant. The options will vest in equal amounts over three years on the anniversary of the grant date.

The fair market value is estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The risk-free interest rate was selected based upon the five-year U.S. Treasury yields. The Company uses the simplified method for all grants to estimate the expected term of the option. We assume that stock options will be exercised evenly over the period from vesting until the awards expire. As such, the assumed period for each vesting tranche is computed separately and then averaged together to determine the expected term for the award. Because of our limited stock option exercise activity we did not rely on our historical exercise data. The assumptions utilized for option grants during the six months ended September 30, 2012 were 106% for volatility, a risk free interest rate of 0.083%, and expected term of approximately six years. At September 30, 2012, there were 453,506 shares of common stock were available for grant under the Plan.

The following table summarizes activity for the six months ended September 30, 2012:

	Number Of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at 3/31/2012	2,415,666		$	1.040	$	107,375	7.71
Granted	50,000		$	0.700
Forfeited	(26,666	)	$	—
Exercised	—		$	—
Outstanding at 9/30/2012	2,439,000		$	1.036	$	400,700	7.30
Vested at 9/30/2012 or expected to vest	2,439,000		$	1.036	$	400,700	7.30
Exercisable at 9/30/2012	1,473,000		$	0.893	$	288,299	5.31

At September 30, 2012 there was $714,677 of total unrecognized compensation cost related to stock options. These costs are expected to be recognized over the next three years. The total fair value of shares vested during the six months ended September 30, 2012 was $880,719.

The following is a summary of the status of the Company’s stock options outstanding but not vested for the six months ended September 30, 2012:

	Number of Options		Weighted Average Exercise Price
Outstanding at 3/31/2012	1,489,000		$	1.205
Granted	50,000		$	0.700
Forfeited	(10,000	)	$	1.045
Vested	(563,000	)	$	1.071
Outstanding at 9/30/2012	966,000		$	1.255

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ACCRUED EXPENSES

6 Months Ended

Sep. 30, 2012

ACCRUED EXPENSES

ACCRUED EXPENSES

NOTE 7 - ACCRUED EXPENSES

	September 30, 2012		March 31, 2012
Accrued compensation	$	826,297	$	970,088
Interest rate swaps market value	454,654		375,512
Provision for contract losses	83,196		887,458
Other	174,312		191,637
Total	$	1,538,459	$	2,424,695

XML

OTHER NONCURRENT ASSETS

6 Months Ended

Sep. 30, 2012

OTHER NONCURRENT ASSETS

OTHER NONCURRENT ASSETS

NOTE 6 — OTHER NONCURRENT ASSETS

	September 30, 2012		March 31, 2012
Collateral deposit (see Note 8)	$	83,337	$	171,252
Deferred loan costs, net of amortization	75,085		99,378
Total	$	158,422	$	270,630

XML

SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Sep. 30, 2012

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of TechPrecision, WCMC and Ranor. Intercompany transactions and balances have been eliminated in consolidation.

The accompanying consolidated balance sheet as of September 30, 2012, the consolidated statements of operations and comprehensive income (loss) for the three and six-month periods ended September 30, 2012 and 2011, and the consolidated statements of cash flows for the six months ended September 30, 2012 and 2011 are unaudited, but in the opinion of management, include all adjustments that are necessary for a fair presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The consolidated balance sheet as of March 31, 2012 was derived from audited financial statements.

The Notes to Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These notes should be read in conjunction with the notes to consolidated financial statements of the Company in Item 8 of the Company’s Annual Report on Form 10-K for the year ended March 31, 2012, or 2012 Form 10-K.

Use of Estimates in the Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements

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

Fair Value Measurements

Fair Value Measurements

We account for fair value of financial instruments under the Financial Accounting Standard Board’s (FASB) Accounting Standards Codification (ASC) authoritative guidance which defines fair value and establishes a framework to measure fair 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 FASB 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; and 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 addition, we will measure fair value in an inactive or dislocated market based on facts and circumstances and significant management judgment.  We will use inputs based on management estimates or assumptions, or make adjustments to observable inputs to determine fair value when markets are not active and relevant observable inputs are not available.

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses as presented in the balance sheet, approximates fair value due to the short-term nature of these instruments.

Cash and cash equivalents

Cash and cash equivalents

Holdings of highly liquid investments with maturities of three months or less, when purchased, are considered to be cash equivalents.  U.S. based deposits are maintained in a large regional bank. The Company’s China subsidiary also maintains a bank account in a large national Bank in China subject to People’s Republic of China, or PRC, banking regulations. Cash on deposit with a large national China-based bank was $534,975 and $692,524 at September 30, 2012 and March 31, 2012, respectively.

Foreign currency translation

Foreign currency translation

The majority of the Company’s business is transacted in U.S. dollars; however, the functional currency of the Company’s China subsidiary is the local currency, the Chinese Yuan Renminbi. In accordance with ASC No. 830,  Foreign Currency Matters  (ASC 830), foreign currency translation adjustments of subsidiaries operating outside the U.S. are included in stockholders’ equity as a component of accumulated other comprehensive loss, a separate component of equity. Foreign currency transaction gains and losses are recognized in the determination of net income (loss) as incurred.

Accounts receivable and allowance for doubtful accounts

Accounts receivable and allowance for doubtful accounts

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. 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. Historically, the level of uncollectible accounts has not been significant. There was bad debt expense of $0 for the six months ended September 30, 2012 and 2011.

Inventories

Inventories

Inventories - raw materials is stated at the lower of cost or market determined by the first-in, first-out (FIFO) method.

Property, plant and equipment

Property, plant and equipment

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. Amortization of assets recorded under capital leases is included under depreciation expense. 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, 5-15 years; buildings, 30 years; and leasehold improvements, 2-5 years.

Interest is capitalized for assets that are constructed or otherwise produced for the Company’s own use, including assets constructed or produced for the Company by others for which deposits or progress payments have been made. Interest is capitalized to the date the assets are available and ready for use. When an asset is constructed in stages, interest is capitalized for each stage until it is available and ready for use. The Company uses the interest rate incurred on funds borrowed specifically for the project. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life.

In accordance with ASC No. 360, Property, Plant & Equipment (ASC 360), the Company’s property, plant and equipment is tested for impairment when triggering events occur, and if impaired, written-down to fair value based on either discounted cash flows or appraised values. The carrying amount of an asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. There were no impairments for the six months ended September 30, 2012 and 2011, respectively.

Operating Leases

Operating Leases

Operating leases are charged to operations on a straight-line basis over the term of the lease. The Company leases its office facilities for various terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2016 and provide for renewal options ranging from three months to five years. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.

Derivative Financial Instruments

Derivative Financial Instruments

The Company is exposed to various risks such as fluctuating interest rates, foreign exchange rates and increasing commodity prices. To manage these market risks, we may periodically enter into derivative financial instruments such as interest rate swaps, options and foreign exchange contracts for periods consistent with and for notional amounts equal to or less than the related underlying exposures. We do not purchase or hold any derivative financial instruments for speculation or trading purposes.

All derivative instruments are recognized in the financial statements and measured at fair value regardless of the purpose or intent of holding them. At September 30, 2012 and March 31, 2012, the Company had two interest rate swap transactions designated as cash flow hedges, each with an effective date of January 3, 2011. For our cash flow hedges, the effective portion of the derivative’s gain or loss is initially reported in stockholders’ equity as a component of accumulated other comprehensive loss and is subsequently reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The ineffective portion of the gain or loss of a cash flow hedge is reported in earnings immediately.

The Company formally documents the hedging relationship and its risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions.

The Company will discontinue hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative expires, is sold, terminated, or exercised, or management determines to remove the designation of a cash flow hedge. See Note 8 for additional disclosure related to interest rate swaps.

Convertible Preferred Stock and Warrants

Convertible Preferred Stock and Warrants

The Company measures the fair value of the Series A Convertible Preferred Stock by the amount of cash that was received for their issuance. The Company has determined that the convertible preferred shares and warrants issued are equity instruments. The holders of the Series A Convertible Preferred Stock have 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 unregistered common stock and are classified in stockholders’ equity.

Selling, General, and Administrative Expense

Selling, General, and Administrative Expense

Selling, general and administrative expenses include items such as executive compensation, business travel and advertising costs. Selling, general and administrative expenses amounted to $3.9 million and $3.7 million for the six months ended September 30, 2012 and 2011, respectively. Advertising costs are expensed as incurred. Other general and administrative expenses include items for the Company’s administrative functions and for items such as office rent, supplies, insurance, legal, accounting, tax, telephone and other outside services.

Stock Based Compensation

Stock Based Compensation

Stock based compensation represents the cost related to stock based awards granted to the Board of Directors and employees. The Company measures stock based compensation cost at the 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 requisite service period. The Company estimates the fair value of stock options using a Black-Scholes valuation model.

Excess tax benefits of awards that are recognized in equity related to stock options exercises are reflected as financing cash inflows. Stock based compensation cost that has been included in (loss) income from operations amounted to $282,719 and $249,061 for the six months ended September 30, 2012 and 2011, respectively. See Note 13 for additional disclosures related to stock based compensation.

Net Income (Loss) per Share of Common Stock

Net Income (Loss) per Share of Common Stock

Basic net income (loss) per common share is computed by dividing net income or loss by the weighted average number of shares outstanding during the 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 convertible preferred stock, stock options and warrants calculated using the treasury stock method. See Note 13 for additional disclosures related to stock based compensation.

Revenue Recognition

Revenue Recognition

We account for revenues and earnings using the percentage-of-completion method of accounting. Under this method, we recognize contract revenue and gross profit as the work progresses, either as the products are produced and delivered, or as services are rendered. We determine progress toward completion on production contracts based on either input measures, such as labor hours incurred, or output measures, such as units delivered.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability are recognized in the period in which the revisions are determined. Costs incurred on uncompleted contracts consist of labor, overhead, and materials.

We may combine contracts for accounting purposes when they are negotiated as a package with an overall profit margin objective. These essentially represent an agreement to do a single project for a single customer, involve interrelated construction activities with substantial common costs, and are performed concurrently or sequentially. When a group of contracts is combined, revenue and profit are earned during the performance of the combined contracts.

Costs allocable to undelivered units are reported in the consolidated balance sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed upon contract price for customer directed changes, construction 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 reliably estimated. Revenues from such claims are recorded only to the extent that contract costs relating to the claim have been incurred. Revisions in cost and profit estimates are reflected in the period in which the facts requiring the revision become known and are estimable.

When we can only estimate a range of revenues and costs, we use the most likely estimate within the range. If we cannot determine which estimate in the range is most likely, the amounts within the ranges that would result in the lowest profit margin (the lowest contract revenue estimate and the highest contract cost estimate) is used.

In some situations, it may be impractical for us to estimate either specific amounts or ranges of contract revenues and costs. However, if we can at least determine that we will not incur a loss, a zero profit model is adopted. The zero profit model results in the recognition of an equal amount of revenues and costs. This method is only used if more precise estimates cannot be made and its use is discontinued when such estimates are obtainable. When we obtain more precise estimates, the change is treated as a change in an accounting estimate.

Income Taxes

Income Taxes

In accordance with ASC No. 740, Income Taxes (ASC 740), income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on its financial position, and to allow investors to better compare financial statements prepared under U.S. GAAP with financial statements prepared under International Financial Reporting Standards, or IFRS.

The new standards are effective for annual periods beginning January 1, 2013, and interim periods within those annual periods. Retrospective application is required. The Company will implement the provisions of ASU 2011-11 as of April 1, 2013.

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CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

6 Months Ended

Sep. 30, 2012

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

NOTE 14 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. At September 30, 2012, there were accounts receivable balances outstanding from four customers comprising 87% of the total receivables balance; the largest balance from a single customer represented 30% of our receivables balance, while the smallest balance from a single customer making up this group was 10%.  The following table sets forth information as to accounts receivable from customers who accounted for more than 10% of our accounts receivable balance as of:

	September 30, 2012				March 31, 2012
Customer	Dollars		Percent		Dollars		Percent
A	$	1,404,269	30	%	$	1,160,957	24	%
B	$	1,232,582	26	%	$	426,083	9	%
C	$	995,193	21	%	$	561,927	11	%
D	$	445,934	10	%	$	726,908	15	%

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. The following table sets forth information as to net sales from customers who accounted for more than 10% of our revenue for the six months ended:

	September 30, 2012				September 30, 2011
Customer	Dollars		Percent		Dollars		Percent
A	$	3,361,526	22	%	$	1,013,759	6	%
B	$	2,898,858	19	%	$	762,591	5	%
C	$	2,335,696	15	%	$	—	—	%
D	$	1,631,652	11	%	$	2,297,613	14	%
E	$	1,439,797	10	%	$	4,649,032	29	%
F	$	61,164	—	%	$	2,222,595	14	%
G	$	120,962	1	%	$	1,693,128	10	%

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RELATED PARTY TRANSACTIONS

6 Months Ended

Sep. 30, 2012

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 10- RELATED PARTY TRANSACTIONS

On November 15, 2010, WCMC leased approximately 1,000 sq. ft. of office space from an affiliate of Cleantech Solutions International, or CSI, to serve as its primary corporate offices in Wuxi, China. The lease has an initial two-year term and rent under the lease with the CSI affiliate is approximately $17,000 on an annual basis. In addition to leasing property from an affiliate of CSI, the Company subcontracts fabrication and machining services from CSI through their manufacturing facility in Wuxi, China and such subcontracted services are overseen by Company personnel co-located at CSI in Wuxi, China.

We view CSI as a related party because a holder of an approximate 18% fully diluted equity interest in CSI, also holds an approximate 36% fully diluted equity interest in the Company. WCMC is also subcontracting manufacturing services from other Chinese manufacturing companies on comparable terms as those it has with CSI. For the six months ended September 30, 2012 and 2011, the Company paid approximately $0.5 million and $1.0 million to CSI for manufacturing services, respectively.

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LONG-TERM DEBT

6 Months Ended

Sep. 30, 2012

LONG-TERM DEBT

LONG-TERM DEBT

NOTE 8 – LONG-TERM DEBT

The following debt obligations were outstanding as of:	September 30, 2012			March 31, 2012
Sovereign Bank Secured Term Note due March, 2013	$	285,714		$	571,429
Sovereign Bank Capital Expenditure Note due November 2014	370,541			490,292
Sovereign Bank Staged Advance Note due March 2016	417,312			445,133
MDFA Series A Bonds due January 2021	3,895,833			4,002,083
MDFA Series B Bonds due January 2018	1,485,714			1,624,999
Obligations under capital leases	42,562			1,291
Total long-term debt	6,497,676			7,135,227
Principal payments due within one year	(1,079,676		)	(1,358,933		)
Principal payments due after one year	$	5,418,000		$	5,776,294

On February 24, 2006, the Company entered into a loan and security agreement, or the Loan Agreement, with Sovereign Bank, or the Bank, which has since been amended as further described below. Pursuant to the Loan Agreement, as amended, the Bank provided the Company with a secured term loan of $4,000,000, or the Term Note, and a revolving line of credit of up to $2,000,000, or Revolving Note. On January 29, 2007, the Loan Agreement was amended, adding a capital expenditure line of credit facility of $3,000,000 or Capital Expenditure Note. On March 29, 2010, the Bank agreed to extend to the Company a loan facility, or Staged Advance Note, in the amount of up to $1,900,000 for the purpose of acquiring a gantry mill machine.

On December 30, 2010, the Company completed a $6,200,000 tax exempt bond financing with the Massachusetts Development Finance Authority, or the MDFA, pursuant to which the MDFA sold to the Bank MDFA Revenue Bonds, Ranor Issue, Series 2010A in the original aggregate principal amount of $4,250,000, or Series A Bonds, and MDFA Revenue Bonds, Ranor Issue, Series 2010B in the original aggregate principal amount of $1,950,000, or Series B Bonds together with the Series A Bonds, the Bonds. The proceeds of such sales were loaned to the Company under the terms of a Mortgage Loan and Security Agreement, dated as of December 1, 2010, by and among the Company, MDFA and the Bank (as Bond owner and Disbursing Agent), or the MLSA.

In connection with the December 30, 2010 bond financing, the Company executed an Eighth Amendment to the Loan Agreement, or Eighth Amendment. The Eighth Amendment incorporated borrowing of the Bond proceeds into the borrowings covered by the Loan Agreement. The MLSA provides for customary events of default, including any event of default under the Loan Agreement described above. Subject to lapse of any applicable cure period, a default under the MLSA would cause the acceleration of all outstanding obligations of the Company under the MLSA. Under the MLSA and the Eighth Amendment, the Company was required to meet certain financial covenants applicable while the Bonds remain outstanding, including, among other things, that the ratio of earnings available to cover fixed charges will be greater than or equal to 120%; the interest coverage ratio will equal or exceed 2:1 as of the end of each fiscal quarter; and that the Company’s leverage ratio will be less than or equal to 3:1.

On August 8, 2011, an appraisal was completed on the Westminster, Massachusetts property assigning a value of $4.8 million to such property. The Series A Bonds require that the loan-to-value ratio not exceed 75%, indicating a maximum loan amount of $3.6 million. The bond balance exceeded such maximum loan amount at September 30, 2011 by approximately $490,000. On October 28, 2011 the Company and the Bank agreed to resolve the collateral shortfall by establishing a separate interest bearing restricted cash account in the amount of $490,000 which is pledged as additional collateral to the debt and restricted from use for any other purpose. The required restricted balance will be amortized down at the current monthly debt principal amount of $17,708. At September 30, 2012, the cash is classified as a collateral deposit in other current and noncurrent assets of $212,500 and $83,337, respectively.

At December 31, 2011, we were in compliance with our leverage ratio bank covenant. However, we did not meet the ratio of earnings available to cover fixed charges or the interest coverage ratio covenants. In February 2012, the Company executed a Tenth Amendment and obtained a waiver of the breach of such covenants from the Bank, which waiver covered the breach that otherwise would have occurred in connection with the covenant testing for the third quarter ended December 31, 2011 and waived the ratio of earnings available to cover fixed charges covenant at March 31, 2012. This waiver did not apply to any future covenant testing dates.

On July 6, 2012, the Company executed an Eleventh Amendment and obtained a waiver for failure to comply with the fixed charge coverage ratio and the interest coverage ratio covenants at March 31, 2012. The Eleventh Amendment also waived the covenant testing requirements related to the ratio of earnings available to cover fixed charges and the interest coverage ratio for the fiscal quarters ended June 30, 2012 and September 30, 2012. The leverage ratio covenant remained in effect, and must not be greater than 2:1. The Company was in compliance with the leverage ratio covenant at September 30, 2012 as the actual leverage ratio was 1:1. Although there was no testing of the covenant to comply with the ratio of earnings available to cover fixed charges and the interest coverage covenants for the fiscal quarters ended June 30 and September 30, 2012, the Bank required that the Company have earnings before interest and taxes (EBIT) greater than $1 for the fiscal quarter ended September 30, 2012. The Company reported EBIT of $14,286 for the fiscal quarter ended September 30, 2012 and therefore was in compliance with this covenant. The $1 EBIT covenant at Septmeber 30, 2012 is not applicable to any future periods as testing of all covenants resumes on December 31, 2012 according to the terms of the Eleventh Amendment.

Under the Eleventh Amendment the covenants were revised such that the Company shall not permit earnings available for fixed charges to be less than 125%, the interest coverage ratio to be less than 2:1, and the leverage ratio to be greater than 2:1 at any time, tested quarterly. Also, in connection with the Eleventh Amendment, the Company paid the Bank a fee of $10,000 and made a collateral deposit of $840,000 to cover estimated principal and interest on its obligation. The collateral deposit is included in other current assets at September 30, 2012 and March 31, 2012. This collateral will be released to the Company upon successful compliance with all debt covenant tests. The earliest date this could occur is December 31, 2012, the first date the Company will again be subject to testing of all of the financial covenants. The Eleventh Amendment also revised covenant testing to provide that the ratio of earnings available to cover fixed charges and the interest ratio coverage covenant testing will resume at December 31, 2012 on a trailing six month basis, and continue at March 31, 2013 on a trailing nine month basis and quarterly thereafter on a trailing twelve month basis beginning on June 30, 2013.

Without the execution of the Eleventh Amendment for the applicable periods, the Company would have been required to reclassify all of its long-term debt as a current liability. In addition, if the lender had demanded repayment and caused the debt to be considered a short-term obligation, the Company may have been unable to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations.

In the event of default (which default may occur in connection with a non-waived breach), the Bank may choose to accelerate payment of any long-term debt outstanding and, under certain circumstances, the Bank may be entitled to cancel the facilities. If the Company were unable to obtain a waiver for a breach of covenant and the Bank accelerated the payment of any outstanding amounts, such acceleration may cause the Company’s cash position to deteriorate or, if cash on hand were insufficient to satisfy any payment due, may require the Company to seek alternate financing to satisfy any accelerated payment obligation. The Company believes it will remain in compliance with all of the revised covenants through at least December 30, 2012.

Obligations under the Term Note, Revolving Note, Capital Expenditure Note and Staged Advance Note are guaranteed by the Company. Collateral securing such notes comprises all personal property of the Company, including cash, accounts receivable, inventories, equipment, financial and intangible assets.

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 converted 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.

MDFA Series A and B Bonds

On December 30, 2010, the Company and Ranor completed a $6,200,000 tax exempt bond financing with the MDFA pursuant to which the MDFA sold to Sovereign Bank MDFA Revenue Bonds, Ranor Issue, Series 2010A in the original aggregate principal amount of $4,250,000 (Series A Bonds) and MDFA Revenue Bonds, Ranor Issue, Series 2010B in the original aggregate principal amount of $1,950,000 (Series B Bonds) and loaned the proceeds of such sale to Ranor under the terms of the MLSA, dated as of December 1, 2010, by and among the Company, Ranor, MDFA and Sovereign Bank.

The proceeds from the sale of the Series A Bonds were used to finance the Ranor facility acquisition and 19,500 sq. ft. expansion of Ranor’s manufacturing facility located in Westminster, Massachusetts, and the proceeds from the sale of the Series B Bonds were used to finance acquisitions of qualifying manufacturing equipment installed at the Westminster facility. Under the MLSA and related documents, the Westminster facility secures, and the Company further guarantees, Ranor’s obligations to Sovereign Bank and subsequent holders of the Bonds.

The initial rate of interest on the Bonds was 1.96% for a period from the bond date to and including January 31, 2011, and the interest rate thereafter is 65% times the sum of 275 basis points plus one-month LIBOR. The Company is required to make monthly payments of $17,708 and $23,214 with respect to the Loans beginning on February 1, 2011 until the maturity date or earlier redemption of each Bond. The Series A Bonds and the Series B Bonds will mature on January 1, 2021 and January 1, 2018, respectively. The Bonds are redeemable pursuant to the MLSA prior to maturity, in whole or in part, on any payment date in accordance with the terms of the MLSA.

In connection with the Bond financing, the Company and the Bank entered into the International Swap and Derivatives Association, Inc. 2002 Master Agreement, dated December 30, 2010, or ISDA Master Agreement, pursuant to which the variable interest rates applicable to the Bonds were swapped for fixed interest rates of 4.14% on the Series A Bonds and 3.63% on the Series B Bonds. Under the ISDA Master Agreement, the Company and the Bank entered into two swap transactions, each with an effective date of January 3, 2011. The notional amount of outstanding fair-value interest rate swaps totaled $5.4 and $5.6 million at September 30, 2012 and March 31, 2012, respectively. These derivative instruments, which are designated as cash flow hedges, are carried on the Company’s consolidated balance sheet at fair value with the effective portion of the gain or loss on the derivative reported in stockholders’ equity as a component of accumulated other comprehensive loss and subsequently reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The swaps will terminate on January 4, 2021 and January 2, 2018, respectively. The fair value of the interest rate swaps contracts were measured using market based level 2 inputs. The method employed to calculate the values conforms to the industry convention for calculation of such values. The swap’s market value can be calculated any time by comparing the fixed rate set at the inception of the transaction and the “swap replacement rate,” which represents the market rate for an offsetting interest rate swap with the same Notional Amounts and final maturity date. The market value is then determined by calculating the present value interest differential between the contractual swap and the replacement swap. The termination value is the sum of the present value interest differential as described above plus the accrued interest due at termination.

Revolving Note:

The Company and the Bank agreed to extend the maturity date of the revolving credit facility to July 29, 2012 under the Ninth Amendment to the Loan Agreement. The maturity date of the revolving credit facility was further extended to January 31, 2013 under the Eleventh Amendment. 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 on the Revolving Note is 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 $2,000,000.   There were no borrowings outstanding under this facility as of September 30, 2012 and 2011.  As of September 30, 2012, $2.0 million was available for us to borrow. The Company pays an unused credit line fee of 0.25% on the average unused credit line amount in the previous month.

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. On November 30, 2009, the Company elected not to renew this facility when it terminated. Borrowings outstanding under this facility were converted to a note when the facility terminated. The current rate of interest is LIBOR plus 3%. Principal and interest payments are due monthly based on a five year amortization schedule. The Capital Expenditure Note matures on November 30, 2014.

Staged Advance Note:

The Bank made certain loans to the Company limited to a cap of $1.9 million for the purpose of acquiring a gantry mill machine. The machine serves as collateral for the loan. The total aggregate amount of advances under this agreement could not exceed 80% of the actual purchase price of the gantry mill machine. All advances provided for a payment of interest only monthly through February 28, 2011, and thereafter no further borrowings were permitted under this facility. The current interest rate is LIBOR plus 4%. Beginning on April 1, 2011, the Company was obligated to pay principal and interest sufficient to amortize the outstanding balance on a five year schedule. The Staged Advance Note matures on March 1, 2016.

Capital Lease:

The Company entered into a new capital lease in April 2012 in the amount of $46,378 for certain office equipment. The lease term is for 63 months, bears interest at 6.0% and requires monthly payments of principal and interest of $860.

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INCOME TAXES

6 Months Ended

Sep. 30, 2012

INCOME TAXES

INCOME TAXES

NOTE 9 - INCOME TAXES

For the six months ended September 30, 2012 and 2011, the Company recorded an income tax benefit of $278,599 and income tax expense of $235,553, respectively. At the end of each interim period, the Company makes an estimate of its annual U.S. and PRC expected effective tax rates and applies these rates to its respective year-to-date taxable income or loss.

In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The Company has determined that it is more likely than not that certain future tax benefits may not be realized.  Accordingly, a valuation allowance has been recorded against deferred tax assets that are unlikely to be realized.  Realization of the remaining deferred tax assets will depend on the generation of sufficient taxable income in the appropriate jurisdiction, the reversal of deferred tax liabilities, tax planning strategies and other factors prior to the expiration date of the carryforwards.  A change in the estimates used to make this determination could require a reduction in deferred tax assets if they are no longer considered realizable.

As of September 30, 2012, the Company’s federal net operating loss carry-forward was approximately $1.5 million. If not utilized, the federal net operating loss carry-forward will begin to expire in 2025. Under Section 382 of the Internal Revenue Code, we are substantially limited with regard to the amount of certain net operating loss carry forward that we may use in any given year in the future due to prior changes in our ownership.

The Internal Revenue Code provides for a limitation on the annual use of net operating loss carryforwards following certain ownership changes that could limit the Company’s ability to utilize these carryforwards on a yearly basis. The Company experienced an ownership change in connection with the acquisition of Ranor. Accordingly, the Company’s ability to utilize the aforementioned carryforwards is limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for Federal or state income tax purposes.

The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. The Company’s foreign subsidiary files separate income tax returns in the foreign jurisdiction in which it is located.  Tax years 2008 and forward remain open for examination.  The Company recognizes interest and penalties accrued related to income tax liabilities in selling, general and administrative expense in its Consolidated Statements of Operations and Comprehensive Income (Loss).

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PROFIT SHARING PLAN

6 Months Ended

Sep. 30, 2012

PROFIT SHARING PLAN

PROFIT SHARING PLAN

NOTE 11 - PROFIT SHARING PLAN

Ranor has a 401(k) profit sharing plan that covers substantially all Ranor employees who have completed 90 days of service. Ranor retains the option to match employee contributions. The Company’s contributions were $10,703 and $11,378 for the six months ended September 30, 2012 and 2011, respectively.

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SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012
Cash and cash equivalents
Cash deposit with the large national China-based bank	$ 534,975		$ 692,524
Accounts receivable and allowance for doubtful accounts
Bad debt expense	$ 0	$ 0
Machinery and equipment | Minimum
Property, plant and equipment
Estimated useful lives	5 years
Machinery and equipment | Maximum
Property, plant and equipment
Estimated useful lives	15 years
Buildings
Property, plant and equipment
Estimated useful lives	30 years
Leasehold improvements | Minimum
Property, plant and equipment
Estimated useful lives	2 years
Leasehold improvements | Maximum
Property, plant and equipment
Estimated useful lives	5 years

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COMMITMENTS

6 Months Ended

Sep. 30, 2012

COMMITMENTS

COMMITMENTS

NOTE 16 – COMMITMENTS

Leases

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 September 30, 2012 we recorded a liability for deferred rent of $17,136 reflecting the difference between the expense recorded in the consolidated statement of operations and comprehensive income (loss) and 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 expired 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 the fiscal year ended March 31, 2013, or fiscal 2013.

Rent expense for all operating leases for the six months ended September 30, 2012 and September 30, 2011 was $80,439 and $105,535, respectively.  Future minimum lease payments required under non-cancellable operating leases in the aggregate, at September 30, 2012, totaled $245,423. The totals for each annual period ended on September 30 were: 2013- $67,813, 2014- $61,236, 2015- $62,826 and 2016- $53,548.

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.

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 recorded a charge of $226,945 associated with this event. A balance of $113,472 remains outstanding at September 30, 2012, and is included in accrued expenses on the consolidated balance sheet.

During the second quarter of fiscal 2013, Ranor was required to provide severance in connection with certain employee terminations. As such, the Company recorded a charge of $74,917 associated with this event. At September 30, 2012, a balance of $59,715 remained outstanding and is included in accrued expenses in the consolidated balance sheet.

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OTHER CURRENT ASSETS (Tables)

6 Months Ended

Sep. 30, 2012

OTHER CURRENT ASSETS

Schedule of other current assets

	September 30, 2012		March 31, 2012
Payments advanced to suppliers	$	22,099	$	77,000
Prepaid taxes, maintenance renewals	204,327		34,785
Prepaid insurance	130,211		220,496
Collateral deposits (see Note 8)	1,052,500		1,052,500
Other	16,618		102,173
Total	$	1,425,755	$	1,486,954

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COMMITMENTS (Details) (USD $)	6 Months Ended					6 Months Ended		1 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Ranor, Inc.	Sep. 30, 2012 Ranor, Inc. President and General Manager	Feb. 08, 2012 Ranor, Inc. President and General Manager	Sep. 30, 2012 Wuxi, China sqft	Sep. 30, 2012 Expatriate employees living and working in China	Nov. 30, 2010 Lease agreement Center Valley, Pennsylvania sqft	Sep. 30, 2012 Lease agreement Center Valley, Pennsylvania
Commitments
Area of land leased (in square feet)						1,000		3,200
Annual lease rent						$ 27,000	$ 42,000	$ 58,850
Term of lease								64 months
Additional period of renewal of lease								5 years
Deferred rent									17,136
Rent expense for operating lease	80,439	105,535
Future minimum lease payments for property and equipment under noncancelable operating leases
Total	245,423
2013	67,813
2014	61,236
2015	62,826
2016	53,548
Employment agreements
Severance and certain post-employment benefit charges			74,917		226,945
Severance and certain post-employment benefit charges, outstanding			$ 59,715	$ 113,472

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LONG-TERM DEBT (Details) (USD $)	1 Months Ended	6 Months Ended				6 Months Ended		1 Months Ended			3 Months Ended		3 Months Ended	6 Months Ended				6 Months Ended				1 Months Ended	6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended			6 Months Ended					1 Months Ended	6 Months Ended		6 Months Ended				1 Months Ended	6 Months Ended		6 Months Ended
	Aug. 31, 2011	Sep. 30, 2012 item	Mar. 31, 2012 item	Sep. 30, 2012 Other current assets	Sep. 30, 2012 Other noncurrent assets	Sep. 30, 2012 MLSA and Eighth Amendment Minimum	Sep. 30, 2012 MLSA and Eighth Amendment Maximum	Sep. 30, 2013 Eleventh Amendment	Mar. 31, 2013 Eleventh Amendment	Dec. 31, 2012 Eleventh Amendment	Sep. 30, 2012 Eleventh Amendment	Jul. 06, 2012 Eleventh Amendment	Sep. 30, 2012 Eleventh Amendment Minimum	Sep. 30, 2012 Eleventh Amendment Minimum	Sep. 30, 2012 Eleventh Amendment Maximum	Sep. 30, 2012 ISDA Master Agreement	Mar. 31, 2012 ISDA Master Agreement	Sep. 30, 2012 Sovereign Bank Secured Term Note due March, 2013	Mar. 31, 2012 Sovereign Bank Secured Term Note due March, 2013	Feb. 24, 2006 Sovereign Bank Secured Term Note due March, 2013	Feb. 24, 2006 Sovereign Bank Secured Term Note due March, 2013 Loan Agreement	Jan. 31, 2007 Sovereign Bank Capital Expenditure Note due November 2014	Sep. 30, 2012 Sovereign Bank Capital Expenditure Note due November 2014	Mar. 31, 2012 Sovereign Bank Capital Expenditure Note due November 2014	Sep. 30, 2012 Sovereign Bank Staged Advance Note due March 2016	Mar. 31, 2012 Sovereign Bank Staged Advance Note due March 2016	Sep. 30, 2012 Sovereign Bank Staged Advance Note due March 2016 Maximum	Mar. 29, 2010 Sovereign Bank Staged Advance Note due March 2016 Loan Agreement	Sep. 30, 2012 Bonds financing	Jan. 31, 2011 Bonds financing	Dec. 30, 2010 Bonds financing	Sep. 30, 2012 MDFA Series A Bonds due January 2021	Mar. 31, 2012 MDFA Series A Bonds due January 2021	Oct. 28, 2011 MDFA Series A Bonds due January 2021	Sep. 30, 2011 MDFA Series A Bonds due January 2021	Dec. 30, 2010 MDFA Series A Bonds due January 2021	Dec. 31, 2010 MDFA Series A Bonds due January 2021 Ranor Inc. sqft	Sep. 30, 2012 MDFA Series A Bonds due January 2021 Maximum	Sep. 30, 2012 MDFA Series A Bonds due January 2021 ISDA Master Agreement	Sep. 30, 2012 MDFA Series B Bonds due January 2018	Mar. 31, 2012 MDFA Series B Bonds due January 2018	Dec. 30, 2010 MDFA Series B Bonds due January 2018	Sep. 30, 2012 MDFA Series B Bonds due January 2018 ISDA Master Agreement	Apr. 30, 2012 Obligations under capital leases	Sep. 30, 2012 Obligations under capital leases	Mar. 31, 2012 Obligations under capital leases	Sep. 30, 2012 Revolving Note	Sep. 30, 2012 Revolving Note Loan Agreement	Feb. 24, 2006 Revolving Note Loan Agreement
Long-term debt and capital lease obligations
Total long-term debt		$ 6,497,676	$ 7,135,227															$ 285,714	$ 571,429				$ 370,541	$ 490,292	$ 417,312	$ 445,133						$ 3,895,833	$ 4,002,083							$ 1,485,714	$ 1,624,999				$ 42,562	$ 1,291
Principal payments due within one year		(1,079,676)	(1,358,933)
Principal payments due after one year		5,418,000	5,776,294
Aggregate principal amount																					4,000,000							1,900,000			6,200,000					4,250,000						1,950,000
Maximum borrowings																							3,000,000																									2,000,000	2,000,000
Ratio of earnings to cover fixed charges (as a percent)						120.00%									125.00%
Interest coverage ratio that must be exceeded						2								2
Leverage ratio covenant							3								2
Actual leverage ratio											1
Value of property after appraisal	4,800,000
Loan-to-value ratio (as a percent)																																						75.00%
Maximum loan amount																																3,600,000
Amount by which bond balance exceeded the maximum loan amount																																			490,000
Current monthly debt principal amount																																17,708								23,214
Required earnings before interest and taxes													1
EBIT											14,286
Cash collateral deposit				212,500	83,337																													490,000
Additional cash collateral in restricted cash account												840,000
Trailing period used for determining the ratio of earnings available to cover fixed charges and the interest ratio coverage under the terms of the loan covenants									9 months	6 months
Trailing period used for quarterly determination of the ratio of earnings available to cover fixed charges and the interest ratio coverage under the terms of the loan covenants								12 months
Bank fee paid												10,000
Term of debt																		7 years
Variable interest basis																		Prime Rate					LIBOR		LIBOR				one-month LIBOR																		Prime Rate
Interest margin (as a percent)																		1.50%					3.00%		4.00%				2.75%																		1.50%
Amount of principal payable in quarterly installments																		142,857
Area of land financed for expansion (in square feet)																																					19,500
Initial interest rate (as a percent)																				9.00%										1.96%	1.96%
Interest rate percentage multiplier																													65.00%
Fixed interest rate (as a percent)																																							4.14%				3.63%
Number of interest rate swap transactions		2	2
Notional amount of interest rate swap cash flow hedges																5,400,000	5,600,000
Borrowing limit as a percentage of accounts receivable																																															70.00%
Borrowing limit as a percentage of inventory																																															40.00%
Funds available for borrowing																																															2,000,000
Unused borrowing capacity fee as a percentage of average unused credit line amount of previous month																																															0.25%
Initial maximum loan amount																						500,000
Period of amortization of debt instrument																							5 years		5 years
Percentage of purchase price of gantry mill machine used for determination of aggregate amount of advances																											80.00%
Capital lease obligation for new office equipment		46,378																																										46,378
Capital lease term																																													63 months
Capital lease interest rate																																													6.00%
Capital lease monthly payment																																													$ 860

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$ (751,289)	$ 293,363
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	415,429	237,237
Stock based compensation expense	282,719	249,061
Deferred income taxes	(282,020)	41,355
Provision for contract losses	83,196
Changes in operating assets and liabilities:
Accounts receivable	219,289	2,516,457
Costs incurred on uncompleted contracts, in excess of progress billings	(948,192)	(5,620,879)
Inventories - raw materials	(202,361)	319,823
Other current assets	61,199	(102,803)
Taxes receivable	553,070	(579,887)
Other noncurrent assets	88,126	(277,500)
Accounts payable	664,632	549,512
Accrued expenses	(1,036,974)	98,757
Deferred revenues	931,453	1,311,233
Net cash provided by (used in) operating activities	78,277	(964,271)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(75,109)	(2,337,533)
Net cash used in investing activities	(75,109)	(2,337,533)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercised stock options		35,511
Tax expense from share-based compensation		(1,030)
Repayment of long-term debt, including capital lease	(683,928)	(686,980)
Borrowings of long-term debt		1,618,325
Net cash (used in) provided by financing activities	(683,928)	965,826
Effect of exchange rate on cash and cash equivalents	(3,969)	6,836
Net decrease in cash and cash equivalents	(684,729)	(2,329,142)
Cash and cash equivalents, beginning of period	2,823,485	7,541,000
Cash and cash equivalents, end of period	2,138,756	5,211,858
Cash paid during the year for:
Interest expense	140,138	170,987
Income taxes		764,306
SUPPLEMENTAL INFORMATION - NONCASH INVESTING AND FINANCING TRANSACTIONS:
Series A Convertible Preferred Stock converted (in shares)	697,984	898,000
Common stock issued in conversion of Series A Preferred Stock (in shares)	912,400	1,173,861
Liability recorded for fair value of an interest rate swap contract in connection with a tax exempt bond	275,315	246,536
Tax on liability recorded for fair value of an interest rate swap contract in connection with a tax exempt bond	179,339	166,215
Capital lease arrangement for new office equipment	46,378
Placed equipment into service which was under construction		$ 1,143,443

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OTHER CURRENT ASSETS

6 Months Ended

Sep. 30, 2012

OTHER CURRENT ASSETS

OTHER CURRENT ASSETS

NOTE 5 — OTHER CURRENT ASSETS

	September 30, 2012		March 31, 2012
Payments advanced to suppliers	$	22,099	$	77,000
Prepaid taxes, maintenance renewals	204,327		34,785
Prepaid insurance	130,211		220,496
Collateral deposits (see Note 8)	1,052,500		1,052,500
Other	16,618		102,173
Total	$	1,425,755	$	1,486,954

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OTHER NONCURRENT ASSETS (Tables)

6 Months Ended

Sep. 30, 2012

OTHER NONCURRENT ASSETS

Schedule of other noncurrent assets

	September 30, 2012		March 31, 2012
Collateral deposit (see Note 8)	$	83,337	$	171,252
Deferred loan costs, net of amortization	75,085		99,378
Total	$	158,422	$	270,630

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OTHER CURRENT ASSETS (Details) (USD $)	Sep. 30, 2012	Mar. 31, 2012
OTHER CURRENT ASSETS
Payments advanced to suppliers	$ 22,099	$ 77,000
Prepaid taxes, maintenance renewals	204,327	34,785
Prepaid insurance	130,211	220,496
Collateral deposits	1,052,500	1,052,500
Other	16,618	102,173
Total	$ 1,425,755	$ 1,486,954

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SEGMENT INFORMATION

6 Months Ended

Sep. 30, 2012

SEGMENT INFORMATION

SEGMENT INFORMATION

NOTE 15 — SEGMENT INFORMATION

We consider our business to consist of one segment - metal fabrication and precision machining. A significant amount of our operations, assets and customers are located in the United States. The following table presents our geographic information (net sales and net property, plant and equipment) by the country in which the legal subsidiary is domiciled and assets are located:

	Net Sales				Property, Plant and Equipment, Net
	Six months ended September 30, 2012		Six months ended September 30, 2011		September 30, 2012		March 31, 2012
United States	$	13,667,736	$	16,323,607	$	7,098,912	$	7,363,002
China	$	1,556,555	$	—	$	26,884	$	32,443