DEBT

3 Months Ended

Jun. 30, 2018

NOTE 11 - DEBT

	June 30, 2018		March 31, 2018
Berkshire Term Loan due December 2021	$	2,723,856	$	2,745,181
People’s Equipment Loan Facility due April 2021		2,109,939		2,271,109
Obligations under capital leases		43,012		47,413
Total debt	$	4,876,807	$	5,063,703
Less: debt issue costs unamortized	$	99,207	$	112,075
Total debt, net	$	4,777,600	$	4,951,628
Less: Current portion of long-term debt	$	778,991	$	766,354
Total long-term debt, net	$	3,998,609	$	4,185,274

Berkshire Bank Loan Facility

December 21, 2016

, pursuant to

the Loan Agreement dated December 20, 2016, or

the Berkshire Loan Agreement, Berkshire Bank 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, collectively, the Berkshire Loans. The Berkshire 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.

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)

% of eligible accounts receivable, and (ii) the lesser of (a)

% 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 Berkshire Loan Agreement are guaranteed by TechPrecision. There were no amounts outstanding under the Revolver Loan at

June 30, 2018

March 31, 2018

. The Company pays, as consideration for the bank’s commitment to make advances under the Revolver Loan, a nonrefundable commitment fee equal to

0.25

% per annum on the average daily difference between the amount of $

1,000,000

and the aggregate amount of all advances made under the Revolver Loan as of each quarterly period.

The Berkshire 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 Berkshire Loans. The DSCR will be measured at the end of each fiscal quarter of the Company. Pursuant to the Berkshire Loan Agreement, Ranor covenants 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. The leverage ratio was 0.78 to 1.00 at March 31, 2018. Also, Ranor’s annual capital expenditures cannot exceed $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 Berkshire 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.

The Berkshire Loans may be accelerated upon the occurrence of an “Event of Default” (as defined in the Berkshire Loan Agreement). Events of Default include (i) the failure to pay any monthly installment payment before the tenth day following the due date of such payment; (ii) the failure of Ranor or TechPrecision to observe, perform or pay any obligations under the Berkshire Loan Agreement or any other obligation to Berkshire; (iii) the failure of Ranor or TechPrecision to pay any indebtedness in excess of $100,000 (other than the Berkshire Loans) when due; (iv) any representation or warranty of Ranor or TechPrecision in the Berkshire Loan Agreement and related documents, or the Loan Documents, being proven to have been incorrect, in any material respect, when made; (v) the failure of Ranor to discharge any attachment, levy or distraint on its property; (vi) any default by Ranor or TechPrecision under any of the collateral security documents executed in connection with the Berkshire Loan Agreement past any applicable grace period; (vii) the failure of Ranor or TechPrecision to file or pay taxes when due, unless such taxes are being contested in a manner permitted under the Loan Documents; (viii) a change in ownership or control of Ranor or change in management of Ranor where either the chief executive officer or chief financial officer as of December 21, 2016 is replaced without Berkshire Bank’s prior consent; (ix) Ranor or TechPrecision ceasing to do business as a going concern, making an assignment for the benefit of creditors, or commencing a bankruptcy or other similar insolvency proceeding; and (x) the entry of a judgment against Ranor or TechPrecision in excess of $150,000. Some of the Events of Default are subject to certain cure periods. Subject to the lapse of any applicable cure period, a default under the Berkshire Loans could cause the acceleration of all outstanding obligations under the Berkshire Loans.

At March 31, 2018, the Company failed to maintain the required DSCR as defined in the

Berkshire Loan Agreement

. On June 6, 2018, the Company executed a waiver and modification agreement with Berkshire Bank under which Berkshire Bank waived the Company’s noncompliance with the DSCR, at March 31, 2018, and agreed to modify the definition of cash flows in the Berkshire Loan Agreement. Subject to the lapse of any applicable cure period, a default under the Berkshire Loan Agreement could have caused the acceleration of all outstanding obligations under the loan. If the lender had demanded repayment and caused the debt to be considered a short-term obligation, the Company would have been unable to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations. The waiver does not apply to any future periods. Concurrent with the execution and delivery of this amendment, the Company agreed to pay Berkshire Bank all expenses incurred in connection with the amendment.

At June 30, 2018, the Company was in compliance with the Berkshire Loan Agreement.

Unamortized debt issue costs at June 30, 2018 and March 31, 2018 were $42,682 and $45,936, respectively.

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 No. 4180, as supplemented with Schedule No. 001, or, together, the MLSA, with People’s Capital and Leasing Corp., or People’s. The MLSA was dated and effective as of March 31, 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 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. 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.

On October 4, 2016, TechPrecision and Ranor became committed to Schedule No. 002 to the MLSA, or Schedule 2. Pursuant to Schedule 2, People’s made an additional loan in the amount of $365,852, or the Additional People’s Loan, to Ranor upon the terms and conditions set forth in the MLSA and Schedule 2. The Additional People’s Loan is guaranteed by TechPrecision pursuant to the original Corporate Guaranty from TechPrecision in favor of People’s dated March 31, 2016. The Additional People’s Loan is secured by a security interest in certain machinery and equipment of Ranor as provided in Schedule 2.

At March 31, 2018, the Company was in violation of the DSCR covenant. Under our loan with People’s, the Company is required to meet certain financial covenants applicable while the debt remains outstanding, including among other things, that the Company maintain a DSCR, of at least 1.5 to 1.0 during the term of the People’s Loan. On May 22, 2018, the Company obtained a waiver of the breach of such covenant from People’s, which waiver covered the breach that otherwise would have occurred in connection with the DSCR testing at March 31, 2018. Subject to the lapse of any applicable cure period, a default under the People’s Loan could have caused the acceleration of all outstanding obligations under the People’s Loan. If the lender had demanded repayment and caused the debt to be considered a short-term obligation, the Company would have been unable to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations. This waiver does not apply to any future periods. Concurrent with the execution and delivery of the waiver, the Company agrees to pay People’s a covenant waiver processing fee.

Unamortized debt issue costs at June 30, 2018 and March 31, 2018 were $56,525 and $66,139, respectively.

Capital Lease

We entered into a 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 approximately $1,100.

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 September 2018 and the required monthly payments of principal and interest will be $740 until the expiration date.

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.