TechPrecision .(TPCS) - 2025 Q4 - Annual Report

Part I Business TechPrecision Corporation manufactures large-scale, precision-fabricated and machined metal components primarily for the U.S. defense market, operating on a "build-to-print" model with a significant revenue concentration from a few prime contractors Our Business and Operations The company manufactures precision, large-scale metal components for the defense and precision industrial sectors through its two U.S. defense-centric subsidiaries, Ranor and Stadco - TechPrecision is a manufacturer of precision, large-scale fabricated and machined metal components for the defense and precision industrial industries[12] - The company operates through two reportable segments, its wholly-owned subsidiaries Ranor and Stadco, both of which are U.S. defense-centric[14][26][29] - Ranor's operations are in a 145,000 sq ft facility in Westminster, MA, while Stadco's are in a 183,000 sq ft complex in Los Angeles, CA[25][27] Termination of the Votaw Acquisition The planned acquisition of Votaw Precision Technologies, Inc. was terminated in April 2024 due to failure to close by the deadline, resulting in a stock termination fee - The Stock Purchase Agreement to acquire Votaw Precision Technologies, Inc. was terminated on April 2, 2024[16] - The termination occurred because the acquisition did not close by the outside date of March 31, 2024[16] - A stock termination fee of 320,000 shares of the Company's common stock was issued to the seller on April 29, 2024[17][18] Products and Customers The company operates on a "build-to-print" model, primarily serving the defense market with significant customer concentration and a current order backlog of $48.6 million - The company operates on a "build-to-print" model, manufacturing products according to customer specifications and does not own intellectual property for any marketed product[31] Revenue by Industry Group (in thousands) | (dollars in thousands) | 2025 | | 2024 | | |---|---|---|---|---| | Revenue | Amount | Percent | Amount | Percent | | Defense | $ 33,599 | 99% | $ 31,406 | 99% | | Precision Industrial | $ 432 | 1% | $ 185 | 1% | Revenue from Major Customers (in thousands) | (dollars in thousands) | 2025 | | 2024 | | |---|---|---|---|---| | Revenue | Amount | Percent | Amount | Percent | | Defense Customer A | $ 5,795 | 17% | $ 10,295 | 32% | | Defense Customer B | $ 3,327 | 10% | $ 3,320 | 10% | | Defense Customer C | $ 4,947 | 15% | $ 3,258 | 10% | | Defense Customer E | $ 7,671 | 22% | $ 5,005 | 16% | | Defense Customer F | $ 5,003 | 15% | * | *% | - The order backlog was $48.6 million as of March 31, 2025, compared to $49.5 million as of March 31, 2024[42] Human Capital As of March 31, 2025, TechPrecision employed 152 full-time individuals across its Ranor and Stadco subsidiaries, none of whom are unionized - As of March 31, 2025, the company had a total of 152 full-time employees[53] - At the Ranor subsidiary, there are 21 salaried and 60 hourly employees; at the Stadco subsidiary, there are 21 salaried and 50 hourly employees[53] - None of the company's employees are represented by a labor union[53] Risk Factors The company faces significant risks including a "going concern" warning, high customer concentration, raw material volatility, and material weaknesses in internal controls Risks Related to Our Business and Industry Auditors have expressed substantial doubt about the company's going concern ability due to debt covenant non-compliance and high customer concentration, alongside risks from raw material costs and defense industry reliance - Auditors have indicated substantial doubt about the company's ability to continue as a going concern due to non-compliance with financial covenants in its Loan Agreement with Berkshire Bank as of March 31, 2025[56] - The company failed to satisfy the Debt Service Coverage Ratio (DSCR) for the twelve-month period ending March 31, 2025, which constitutes an event of default[59] - The company is highly dependent on a limited number of customers; in fiscal 2025, the five largest customers accounted for 79% of revenue, and the single largest customer accounted for 22%[70][71] - The company's backlog of $48.6 million as of March 31, 2025, had 73% attributable to just four customers[70] - The business is exposed to risks from raw material availability and price volatility for materials like steel, nickel, and aluminum, which could be impacted by tariffs and geopolitical events[74][78][79] Risks Related to our Common Stock The company's common stock faces potential Nasdaq delisting, significant price volatility due to low trading volume, and dilution risks from equity issuances - The company received a notice from Nasdaq for not being in compliance with the Timely Filing Requirement for its Form 10-K for the fiscal year ended March 31, 2025; failure to maintain compliance could lead to delisting[113] - A significant number of shares have been registered for resale, including those from the Votaw Stock Termination Fee and the July 2024 Private Placement, which could depress the market price[120] - The trading volume of the common stock is typically low, which can adversely affect liquidity and price[121] - The company does not expect to pay dividends due to cash requirements and restrictive debt covenants[122] General Risk Factors The company has identified five material weaknesses in its internal control over financial reporting, which could impair its ability to produce accurate and timely financial statements - The company has identified material weaknesses in its internal control over financial reporting, which could impair its ability to produce accurate and timely financial statements[126] - Identified material weaknesses pertain to: (i) initial purchase and fair value accounting for the Stadco acquisition, (ii) insufficient tax accounting personnel for determining the valuation allowance at Stadco, and (iii) insufficient accounting resources at Stadco for timely reconciliations and management review[128] Unresolved Staff Comments The company reports no unresolved staff comments - The company reports no unresolved staff comments[130] Cybersecurity The company manages cybersecurity risks through internal IT staff and third-party providers, with the CEO overseeing efforts and the audit committee providing board-level oversight - The company relies on IT staff and third-party providers to assess, identify, and manage cybersecurity risks[131] - The Chief Executive Officer is primarily responsible for managing cybersecurity risks, with oversight from the audit committee of the board of directors[134][135] - To date, the company has not encountered cybersecurity challenges that have materially impaired its operations or financial standing[133] Properties The company operates from two primary facilities: an owned 145,000 sq ft facility in Massachusetts for Ranor and a leased 183,000 sq ft complex in California for Stadco - The Ranor segment owns its 145,000 sq. ft. facility in Westminster, Massachusetts, which is used as collateral for its Berkshire Bank loans[136] - The Stadco segment leases its 183,000 sq. ft. facility in Los Angeles, California[137] Legal Proceedings A lawsuit, Ibarra v. Stadco, alleging discrimination and wage violations, was filed in October 2023 and resolved through mediation in June 2024 - A lawsuit, Ibarra v. Stadco, was filed against the company and an employee on October 30, 2023, alleging discrimination and wage violations[139] - The parties reached a resolution at a mediation on June 26, 2024; the settlement for individual claims was paid in August 2024, and the PAGA settlement was paid in December 2024[139][394] Mine Safety Disclosures This item is not applicable to the registrant - This item is not applicable to the company[140] Executive Officers of the Registrant The company's executive officers are Alexander Shen, Chief Executive Officer since November 2014, and Phillip Podgorski, Chief Financial Officer appointed March 2025 Executive Officers | Name | Age | Position | |---|---|---| | Alexander Shen | 63 | Chief Executive Officer | | Phillip Podgorski | 60 | Chief Financial Officer | - Alexander Shen was appointed CEO on November 14, 2014[142] - Phillip Podgorski was appointed CFO on March 31, 2025[143] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "TPCS" with 46 record holders as of June 30, 2025, and no dividends are anticipated due to debt covenants - The company's common stock is traded on the Nasdaq Capital Market under the symbol "TPCS"[146] - The company has never paid dividends and is prohibited from doing so by its loan agreement with Berkshire Bank[147] Management's Discussion and Analysis of Financial Condition and Results of Operations For fiscal 2025, revenue increased 8% to $34.0 million, but a "going concern" warning persists due to Stadco's losses and debt covenant non-compliance, with management focused on profitability and financing Results of Operations In fiscal 2025, consolidated revenue grew 8% to $34.0 million, driven by Stadco, while a reduced operating loss of $2.2 million resulted from lower SG&A expenses despite Stadco's widening gross loss Consolidated Revenue and Gross Profit by Segment (FY2025 vs FY2024, in thousands) | | 2025 | 2024 | Change ($) | Change (%) | |---|---:|---:|---:|---:| | Revenue | | | | | | Ranor | $18,165 | $17,821 | $344 | 2% | | Stadco | $15,998 | $14,567 | $1,431 | 10% | | Consolidated Revenue | $34,031 | $31,591 | $2,440 | 8% | | Gross Profit (Loss) | | | | | | Ranor | $5,674 | $4,548 | $1,126 | 25% | | Stadco | ($1,345) | ($430) | ($915) | (213)% | | Consolidated Gross Profit | $4,329 | $4,118 | $211 | 5% | Consolidated SG&A and Operating Loss by Segment (FY2025 vs FY2024, in thousands) | | 2025 | 2024 | Change ($) | Change (%) | |---|---:|---:|---:|---:| | SG&A Expenses | | | | | | Consolidated SG&A | $6,487 | $8,750 | ($2,263) | (26)% | | Operating (Loss) Income | | | | | | Ranor | $3,129 | $2,287 | $842 | 37% | | Stadco | ($4,643) | ($3,554) | ($1,089) | (31)% | | Corporate and unallocated | ($644) | ($3,365) | $2,721 | 81% | | Operating Loss | ($2,158) | ($4,632) | $2,474 | 53% | Net Loss and EPS (FY2025 vs FY2024) | | 2025 | 2024 | |---|---|---| | Net Loss | ($2,748,000) | ($7,042,000) | | Net Loss per Share | ($0.29) | ($0.81) | Liquidity, Capital Resources and Going Concern Substantial doubt about the company's going concern ability persists due to Stadco's losses and debt covenant non-compliance, leading to reclassification of all $7.4 million long-term debt as current - The company's recurring operating losses at Stadco, need for financing, and non-compliance with debt covenants raise substantial doubt about its ability to continue as a going concern[239] - As of March 31, 2025, the company was not in compliance with the Debt Service Coverage Ratio covenant in its Loan Agreement, resulting in an event of default[234][381] - Due to the default, all long-term debt has been reclassified as current; total debt as of March 31, 2025 was $7.4 million[235][359] Selected Liquidity Measures (in thousands) | | March 31, 2025 | March 31, 2024 | |---|---:|---:| | Cash and cash equivalents | $195 | $138 | | Working capital | ($1,570) | ($2,904) | | Total debt | $7,424 | $7,648 | - The Revolver Loan, with a balance of $3.15 million, was extended to mature on August 29, 2025[233][366] EBITDA Non-GAAP Financial Measure The company uses EBITDA, a non-GAAP measure, to evaluate operating performance, reporting a positive EBITDA of $587,000 for fiscal 2025, a significant improvement from the prior year's negative figure Reconciliation of Net Loss to EBITDA (in thousands) | (dollars in thousands) | March 31, 2025 | March 31, 2024 | |---|---:|---:| | Net loss | $ (2,748) | $ (7,042) | | Income tax (benefit) expense | (2) | 1,932 | | Interest expense (1) | 541 | 521 | | Depreciation and amortization | 2,796 | 2,429 | | EBITDA | $ 587 | $ (2,160) | Financial Statements and Supplementary Data The audited consolidated financial statements for fiscal 2025 include an auditor's "going concern" warning due to losses and debt defaults, with notes detailing revenue, tax assets, debt, and segment performance Report of Independent Registered Public Accounting Firm The auditor's report includes an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern due to significant losses and debt covenant non-compliance - The auditor's report contains an explanatory paragraph raising substantial doubt about the Company's ability to continue as a going concern[247] - Reasons for the going concern uncertainty include significant losses, default on debt obligations due to covenant non-compliance, and a revolving line of credit due within the year[247] - Revenue recognition for contracts earned over time was identified as a Critical Audit Matter due to the significant judgment required in estimating costs to complete[252] Consolidated Financial Statements The consolidated balance sheet as of March 31, 2025, shows negative working capital, while the statement of operations reports a $2.75 million net loss on $34.0 million revenue, and cash flows indicate a net cash increase of $57,000 Consolidated Balance Sheet Highlights (March 31, 2025 vs 2024, in thousands) | | 2025 | 2024 | |---|---:|---:| | Total current assets | $15,346 | $14,850 | | Total assets | $33,527 | $34,747 | | Total current liabilities | $16,916 | $17,754 | | Total liabilities | $24,787 | $26,944 | | Total stockholders' equity | $8,740 | $7,803 | Consolidated Statement of Operations Highlights (FY2025 vs FY2024, in thousands) | | 2025 | 2024 | |---|---:|---:| | Revenue | $34,031 | $31,591 | | Gross profit | $4,329 | $4,118 | | Loss from operations | ($2,158) | ($4,632) | | Net loss | ($2,748) | ($7,042) | Consolidated Statement of Cash Flows Highlights (FY2025 vs FY2024, in thousands) | | 2025 | 2024 | |---|---:|---:| | Net cash (used in) provided by operating activities | ($599) | $728 | | Net cash used in investing activities | ($1,081) | ($2,591) | | Net cash provided by financing activities | $1,737 | $1,467 | | Net increase (decrease) in cash | $57 | ($396) | Notes to Financial Statements Key notes detail the going concern uncertainty, revenue disaggregation (99% from defense), a $5.7 million valuation allowance against deferred tax assets, debt covenant violations, and segment performance showing Ranor's profit offset by Stadco's loss - Note 2 reiterates the going concern uncertainty due to recurring losses at Stadco, debt covenant violations, and the need to renew or find alternative financing[280][288] - Note 4 shows that in fiscal 2025, 99% of revenue was from the defense market and 92% ($31.3 million) was recognized over time; remaining performance obligations total $48.6 million[326] - Note 5 indicates a valuation allowance of $5.7 million against deferred tax assets as of March 31, 2025, as it is more likely than not that these benefits will not be realized[331] - Note 12 details the company's debt and covenant non-compliance; the company was not in compliance with the debt service and balance sheet leverage tests as of March 31, 2025[376][381] Segment Operating Profit (Loss) (FY2025, in thousands) | Segment | Operating Profit (Loss) | |---|---:| | Ranor | $3,129 | | Stadco | ($4,643) | | Unallocated Items | ($644) | | Consolidated Operating Loss | ($2,158) | Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were ineffective as of March 31, 2025, due to five material weaknesses, for which a remediation plan is underway - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025[405] - Management concluded that internal control over financial reporting was not effective as of March 31, 2025, due to five identified material weaknesses[408][409] - The five material weaknesses are: 1) Purchase accounting (Stadco acquisition), 2) Tax accounting (valuation allowance), 3) Stadco accounting (resources and controls), 4) Accounting for impairment of long-lived assets, and 5) Segregation of duties[412] - A remediation plan is underway, including using tax and valuation specialists, enhancing policies, and centralizing Stadco's accounting functions, but the weaknesses are not yet fully remediated[414][416] Part III Directors, Executive Officers and Corporate Governance The five-member Board of Directors includes four independent members, with Mr. Schenker as the audit committee financial expert, and the company has adopted a Code of Ethics and Insider Trading Policy - The Board of Directors is composed of five members, with four determined to be independent: Victor E. Renuart Jr., Robert D. Straus, Andrew A. Levy, and Walter M. Schenker[423][491] - Walter M. Schenker serves as the Chair of the Audit Committee and is designated as the 'audit committee financial expert'[435] - The company has adopted a Code of Ethics and an Insider Trading Policy to promote compliance with laws and regulations[435][436] Executive Compensation For fiscal 2025, CEO Alexander Shen's total compensation was $337,767, with non-employee directors receiving annual fees and equity awards, and a disconnect noted between pay and performance Summary Compensation Table - Fiscal 2025 | Name and Position | Salary | Bonus | All Other Compensation | Totals | |---|---:|---:|---:|---:| | Alexander Shen, CEO | $334,423 | $500 | $2,844 | $337,767 | | Barbara Lilley, CFO (former) | $120,000 | $500 | $395 | $120,895 | | Richard Roomberg, CFO (former) | $121,795 | $25,500 | — | $147,295 | - CEO Alexander Shen has an employment agreement with a base salary of $350,000 and is eligible for an annual cash performance bonus targeted at up to 75% of his base salary[445] - Non-employee directors receive an annual fee of $24,000, with additional fees for the Chairman of the Board ($20,000) and committee chairs ($5,000 to $7,500)[466] Pay Versus Performance (Fiscal 2025) | Metric | Value | |---|---| | Compensation Actually Paid – PEO | $337,767 | | Compensation Actually Paid – non-PEO NEO | $258,790 | | Value of Initial $100 Investment (TSR) | $45 | | Net Income (Loss) | ($5,794,760) | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of June 30, 2025, executive officers and directors collectively owned 15.42% of outstanding common stock, with no other known beneficial owners exceeding 5%, and 204,327 securities available for future issuance under equity plans - As of June 30, 2025, all executive officers and directors as a group beneficially owned 1,505,237 shares, representing 15.42% of the outstanding common stock[484] Beneficial Ownership of Key Individuals (as of June 30, 2025) | Name | Shares of common stock | Percentage | |---|---:|---:| | Andrew A. Levy | 417,943 | 4.78% | | Walter M. Schenker | 320,872 | 3.29% | | Alexander Shen | 461,720 | 4.73% | | Robert Straus | 212,721 | 2.18% | - As of March 31, 2024, there were 204,327 securities available for future issuance under equity compensation plans approved by security holders[487] Certain Relationships and Related Transactions, and Director Independence The Audit Committee reviews and approves all related party transactions, with no material transactions reported since April 1, 2022, and a majority of the board determined to be independent - The Audit Committee is responsible for approving all transactions with related parties[488] - The company reports no material related person transactions since April 1, 2022[490] - A majority of the board of directors (4 out of 5 members) has been determined to be independent[491] Principal Accountant Fees and Services For fiscal 2025, the company incurred $569,666 in audit fees, an increase from fiscal 2024, with all services pre-approved by the Audit Committee Accountant Fees (for fiscal years ended March 31) | | 2025 | 2024 | |---|---:|---:| | Audit Fees | $569,666 | $502,416 | | Audit related fees | — | — | | Tax fees | — | — | | All other fees | — | — | | Total | $569,666 | $502,416 | - The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm[496] Part IV Exhibits and Financial Statement Schedules This section lists documents filed as part of the Form 10-K, including consolidated financial statements and notes, with financial statement schedules omitted as information is provided elsewhere - The report includes the consolidated financial statements for fiscal years 2025 and 2024[499] - Financial statement schedules are omitted because they are not applicable or the required information is provided elsewhere[499] - Key exhibits filed include the Stock Purchase Agreement for the terminated Votaw acquisition, the Amended and Restated Loan Agreement with Berkshire Bank and its eleven subsequent amendments, and various employment agreements[500][501][502] Form 10-K Summary The company has not provided a summary under this item - The company has not provided a summary under this item[506]