Long-term debt and capital lease obligations outstanding on:	June 30, 2011			March 31, 2011
Sovereign Bank Secured Term Note	$	1,000,000		$	1,142,857
Sovereign Bank Capital expenditure note, other		618,913			674,151
Sovereign Bank Staged advance note		537,869			556,416
MDFA Series A Bonds		3,862,358			3,663,991
MDFA Series B Bonds		456,130			535,488
Obligations under capital leases		12,620			16,285
Total long-term debt		6,487,890			6,589,188
Principal payments due within one year		(1,370,263	)		(1,371,767	)
Principal payments due after one year	$	5,117,627		$	5,217,421

On February 24, 2006, the Company entered into a loan and security agreement with Sovereign Bank (“Loan Agreement”). Pursuant to the agreement, as amended, the bank provided the Company with a secured term loan of $4,000,000 (“Term Note”) and also extended a revolving line of credit of up to $2,000,000 (“Revolving Note”). On January 29, 2007, the loan and security agreement was amended, adding a capital expenditure line of credit facility of $3,000,000 (“CapEx Note”). On March 29, 2010, the bank agreed to extend to the Company a loan facility (“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 (“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”) (together with the Series A Bonds, the “Bonds”) and Sovereign Bank (the “Bank”). The Bank loaned the proceeds of such sale to the Company under the terms of that certain Mortgage Loan and Security Agreement, dated as of December 1, 2010, by and among the Company, MDFA and Sovereign Bank (as Bondowner and Disbursing Agent thereunder) (the “MLSA”).

In connection with the December 30, 2010 financing, the Company executed an Eighth Amendment to the Loan Agreement (“Eighth Amendment”). 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, including, among other things, that 1) the ratio of earnings available to cover fixed charges will be grater or equal to 120%, 2) the interest coverage ratio will equal or exceed 2:1 as of the end of each fiscal quarter, and 3) the leverage ratio will be less than or equal to 3:1. As of June 30, 2011, we were in compliance with all debt covenants.

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, we and the Company must 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; Ranor’s leverage ratio will be less than or equal to 3:1.

The initial rate of interest on the Bonds was 1.9606% for a period from the bond date to and including January 31, 2011. The interest rate thereafter is 65% times 275 basis points plus one-month LIBOR. Effective February 1, 2011, the Company commenced making payments of $17,708 and $23,214 with respect to the Bonds. Monthly payments are required to be made thereafter 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 (“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 interest rate swaps, which are designated as cash flow hedges, have notional amounts of $4,250,000 and $1,950,000 and will terminate on January 4, 2021 and January 2, 2018, respectively. At June 30, 2011 and March 31, 2011, the fair value of the interest rate swaps were $204,224 and $9,177 respectively, and are recorded as a current liability and a current asset. The fair value of the interest rate swaps contracts were measured using market based level 2 inputs.

The Revolving Note bears interest at a variable rate defined 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 our 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 June 30, 2011 and March 31, 2011. The facility was renewed on July 30, 2011 and the maturity date changed to July 31, 2012. The Company pays an unused credit line fee 0.25% on the average unused credit line amount in the previous month.

The initial borrowing limit under the Capital Expenditure Note was $500,000 and has been amended several times resulting in a borrowing limit of $3,000,000 available under the facility as of November 30, 2009. The facility was subject to renewal on an annual basis. On November 30, 2009, the Company elected not to renew this facility when it terminated because the Company plans to finance any future equipment financing needs on a specific basis rather than under a blanket revolving line of credit. Under the facility, the Company was permitted to borrow 80% of the original purchase cost of qualifying capital equipment. The current rate of interest is based on LIBOR plus 3%. Principal and interest payments are due monthly based on a five year amortization schedule. There was $704,794 and $658,829 outstanding under this facility at June 30, 2011 and March 31, 2011, respectively.

The Bank made certain loans to Ranor 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 cannot 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 are 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. On March 29, 2010 and September 29, 2010, the Company drew down equal amounts of $556,416 under this facility to finance the initial deposit on the purchase of the gantry mill machine. On December 30, 2010, the Company paid down $556,416 of principal using proceeds from the Series B Bonds and amended the term loan agreement with the Bank to cap advances at $556,416, with no further advances permitted.

The Company also leases certain office equipment under a non-cancelable capital lease. This lease will expire in 2012. Future minimum payments under this lease for fiscal periods ending on June 30, 2012 are $12,620. Interest payments included in the above amounts total $856 and the present value of all future minimum lease payments total $11,764. Lease payments for capital lease obligations for the three months ended June 30, 2011 totaled $10,513.