NOTE 9 - DEBT

Long-term debt included the following as of:

	June 30, 2017		March 31, 2017
Commerce Term Loan due January 2022	$	2,808,640	$	2,828,844
People’s Equipment Loan Facility due April 2021		2,736,014		2,884,982
Obligations under capital leases		61,934		67,353
Total debt	$	5,606,588	$	5,781,179
Less: debt issue costs unamortized	$	155,414	$	188,977
Total debt, net	$	5,451,174	$	5,592,202
Less: Current portion of long-term debt	$	729,784	$	717,481
Total long-term debt, net	$	4,721,390	$	4,874,721

Commerce Bank & Trust Company Loan Facility

On December 21, 2016, TechPrecision, through Ranor, closed on a Loan Agreement, or the Commerce Loan Agreement, with Commerce Bank & Trust Company, or Commerce. Pursuant to the Commerce Loan Agreement, Commerce made a term loan to Ranor in the amount of $2,850,000, or the Term Loan, and made available to Ranor a revolving line of credit in the amount of $1,000,000, or the Revolver Loan, and together with the Term Loan, the Commerce Loans. The Commerce Loans are secured by a first lien on all personal and real property of Ranor. Starting on January 20, 2017, payments on the Term Loan began and will be made in 60 monthly installments of $19,260 each, inclusive of interest at a fixed rate of 5.21% per annum, with all outstanding principal and accrued interest due and payable on December 20, 2021. A prepayment penalty will apply during the loan term but will not apply if a prepayment is made from either casualty loss insurance proceeds or a condemnation award applicable to any collateral or if a full prepayment is made during the 45-day period immediately preceding the maturity date. Advances under the Revolver Loan will be subject to a borrowing base equal to the lesser of (A) $1,000,000 and (B) the sum of (i) 80% of eligible accounts receivable, and (ii) the lesser of (a) 25% of eligible raw material inventory and (b) $250,000. Advances made under the Revolver Loan bear interest at a variable rate equal to the one-month LIBOR plus 275 basis points. Interest-only payments on advances made under the Revolver Loan will be payable monthly in arrears. The Revolver Loan will mature on December 21, 2018. Ranor’s obligations under the Commerce Loan Agreement are guaranteed by TechPrecision. There were no amounts outstanding under the Revolver Loan at June 30, 2017 and March 31, 2017. Unamortized debt issue costs at June 30, 2017 were $55,948.

The Commerce Loan Agreement contains a covenant whereby the Company is required to maintain a debt service coverage ratio, or DSCR, of at least 1.2 to 1.0 during the term of the Commerce Loans. The DSCR will be measured at the end of each fiscal quarter of the Company. Pursuant to the Commerce Loan Agreement, Ranor covenants (a) to cause its balance sheet leverage to be less than or equal to 3.00 to 1.00 for the fiscal year ending March 31, 2018, and less than or equal to 2.50 to 1.00 for the fiscal year ending March 31, 2019 and each fiscal year end thereafter, and (b) that its annual capital expenditures shall not exceed $2,500,000 for the fiscal year ending March 31, 2018, $2,500,000 for the fiscal year ended March 31, 2019, and $1,500,000 for the fiscal year ending March 31, 2020 and each fiscal year end thereafter. The Commerce Loan Agreement contains an additional covenant whereby Ranor is required to maintain a loan-to-value ratio of not greater than 0.75 to 1.00, to be measured by appraisal not more frequently than one time during each 365-day period. At June 30, 2017 and March 31, 2017, the DSCR was 3.41 to 1.00 and 3.40 to 1.00, respectively. At March 31, 2017, the leverage ratio was 1.01 to 1.00.

People’s Capital and Leasing Corp. Equipment Loan Facility

On April 26, 2016, TechPrecision, through Ranor, executed and closed a Master Loan and Security Agreement, or the MLSA, with People’s Capital and Leasing Corp., or People’s. Loan proceeds were disbursed to Ranor on April 26, 2016. Pursuant to the MLSA, People’s loaned $3,011,648 to Ranor, or the People’s Loan. The People’s Loan is secured by a first lien on certain machinery and equipment of Ranor, or the Equipment Collateral. Payments on the People’s Loan will be made in 60 monthly installments of $60,921 each, inclusive of interest at a fixed rate of 7.90% per annum. The first monthly installment payment was paid on May 26, 2016. A prepayment penalty will apply during the first four years of the loan term. Ranor’s obligations under the MLSA are guaranteed by TechPrecision. The Company covenants to maintain a DSCR of at least 1.5 to 1.0 during the term of the People’s Loan. The DSCR will be measured at the end of each fiscal year of the Company. At March 31, 2017, the DSCR was 2.86 to 1.00. The People’s Loan may be accelerated upon the occurrence of an “Event of Default” (as defined in the MLSA). Some of the Events of Default are subject to certain cure periods. Unamortized debt issue costs at June 30, 2017 were $99,466.

Capital Lease

We entered into a new capital lease in January 2017 for certain office equipment. The lease term is for 60 months, bears interest at 7.9% per annum and requires monthly payments of principal and interest of $1,169.

Concurrently, in January 2017 we retired certain office equipment under an existing capital lease which was amended in 2014. The revised lease term will expire in March 2018 and the required monthly payments of principal and interest will be $1,187 through October 2017, and then $720 until the lease payment expires in September 2018.

Collateral securing the above obligations comprises all personal and real property of TechPrecision and Ranor, including cash, accounts receivable, inventories, equipment, financial and intangible assets.