NOTE 13 - STOCK BASED COMPENSATION

In 2006, the Company’s directors adopted, and the Company’s stockholders approved, the 2006 TechPrecision Corporation Long-term Incentive Plan, or, as amended, the Plan. 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. The maximum number of shares of common stock that may be issued under the Plan is 3,300,000 shares.

Pursuant to the Plan, each newly elected independent director receives at the time of his or her 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 June 13, 2013 and pursuant to the Plan, we granted stock options to our Executive Chairman to purchase 100,000 shares of common stock at an exercise price of $0.67 per share, the fair market value on the date of grant. The options have a term of ten years and will vest in three equal installments on each of the grant date and first two anniversaries of the grant date subject to continuous service as a member of the board through the second anniversary of the grant date.

On June 13, 2013 and pursuant to the Plan, we granted stock options to certain executives to purchase 300,000 shares of common stock at an exercise price of $0.67 per share, the fair market value on the date of grant. The options have a term of ten years and will vest in three equal annual installments starting on the first anniversary of the grant date subject to continuous employment service.

The fair value was estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The risk-free interest rate was selected based upon yields of five-year U.S. Treasury issues. We use 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 exercise activity we did not rely on our historical exercise data. The assumptions utilized for option grants during the nine months ended December 31, 2013 were 100.7% for volatility, a risk free interest rate of 1.1%, and expected term of approximately nine years. At December 31, 2013, 1,489,506 shares of common stock were available for grant under the Plan. The following table summarizes information about options for the most recent annual income statements presented:

	Number Of		Weighted Average		Aggregate Intrinsic		Weighted Average Remaining Contractual Life
	Options		Exercise Price		Value		(in years)
Outstanding at 3/31/2013	2,484,000		$	1.027	$	776,475	9.07
Granted	400,000		$	0.670	—		—
Forfeited	(1,471,000	)	$	0.952	—		—
Outstanding at 12/31/2013	1,413,000		$	0.979	$	478,650	6.87
Vested or expected to vest 12/31/2013	1,413,000		$	0.979	$	478,650	6.87
Exercisable at 12/31/2013	926,667		$	0.991	$	301,350	4.92

At December 31, 2013, there was $259,161 of total unrecognized compensation cost related to stock options. These costs are expected to be recognized over the next 39 months. The total fair value of shares vested during the nine months ended December 31, 2013 was $175,305. The following table summarizes the activity of our stock options outstanding but not vested for the nine months ended December 31, 2013:

	Number of Options		Weighted Average
Outstanding at 3/31/2013	854,334		$	1.249
Granted	400,000		$	0.670
Vested	(165,334	)	$	1.120
Forfeited	(602,667	)	$	1.173
Outstanding at 12/31/2013	486,333		$	0.957

We made a discretionary grant outside of the Plan on June 13, 2013 of 200,000 options at an exercise price of $0.67 per share, the fair market value on the date of grant, to our non-employee directors in recognition of their additional services while we seek a permanent chief executive officer. The options have a term of ten years and will vest in three equal installment amounts on each of the grant date and first anniversaries of the grants and are subject to continuous service as members of the board through the second anniversary of the grant date. Although the grants were made outside of the Plan, the terms of the options are the same as those issued under the Plan.