TechPrecision .(TPCS) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) The company's quarterly net income turned positive to $1.37 million, driven by PPP loan forgiveness Condensed Consolidated Balance Sheets Total assets were $15.5 million and total liabilities decreased to $4.1 million due to PPP loan forgiveness Condensed Consolidated Balance Sheet Highlights (unaudited) | Balance Sheet Item | June 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $9,615,560 | $9,921,771 | | Total Assets | $15,490,720 | $16,004,019 | | Total Current Liabilities | $4,114,786 | $4,720,233 | | Total Liabilities | $4,144,238 | $6,062,171 | | Total Stockholders' Equity | $11,346,482 | $9,941,848 | Condensed Consolidated Statements of Operations Quarterly net income reached $1.37 million, reversing a prior-year loss, due to PPP loan forgiveness Statement of Operations Summary (unaudited) | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | | :--- | :--- | :--- | | Net Sales | $3,412,229 | $3,282,525 | | Gross Profit | $832,668 | $697,014 | | Income (Loss) from Operations | $100,060 | $(96,348) | | PPP Loan Forgiveness | $1,317,100 | $0 | | Net Income (Loss) | $1,371,092 | $(116,234) | | Diluted EPS | $0.04 | $(0.01) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased by $1.4 million to $11.35 million, driven by quarterly net income - Stockholders' equity grew from $9.94 million to $11.35 million, mainly due to the quarterly net income of $1.37 million[13] Condensed Consolidated Statements of Cash Flows Cash from operations turned positive to $0.14 million, improving from a net use in the prior year Cash Flow Summary (unaudited) | Cash Flow Activity | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $137,048 | $(369,243) | | Net cash used in investing activities | $(4,198) | $(41,768) | | Net cash (used in) provided by financing activities | $(27,166) | $1,282,200 | | Net increase in cash | $105,664 | $871,183 | Notes to Condensed Consolidated Financial Statements Notes detail operations, significant customer concentration, PPP loan forgiveness, and a subsequent acquisition amendment - The company operates in a single segment: metal fabrication and precision machining, serving markets like defense, aerospace, nuclear, and medical[18] Net Sales by Market (Three months ended June 30) | Market | 2021 | 2020 | | :--- | :--- | :--- | | Defense | $3,103,132 | $3,203,590 | | Industrial | $309,097 | $78,935 | | Total | $3,412,229 | $3,282,525 | - The company has significant customer concentration, with one customer accounting for 38% of net sales and another for 28% during the quarter[27] - On May 12, 2021, the SBA forgave the company's entire Paycheck Protection Program (PPP) loan, including $1,317,100 in principal and $13,207 in interest[61] - Subsequent to the quarter's end, the company amended its stock purchase agreement to acquire STADCO, extending the potential closing date and revising the stock consideration[68][69] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses improved results from PPP loan forgiveness and addresses liquidity and upcoming debt refinancing Results of Operations Net sales grew 4% and gross margin improved to 24.4%, leading to positive operating income Quarterly Results Comparison (in thousands) | Metric | Q1 FY2022 | Q1 FY2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $3,412 | $3,283 | $129 | 4% | | Gross profit | $833 | $697 | $136 | 20% | | Operating income (loss) | $100 | $(96) | $196 | 204% | | Net income (loss) | $1,371 | $(116) | $1,487 | nm | - The company's backlog of remaining performance obligations was $17.6 million at June 30, 2021, a decrease from $18.6 million at March 31, 2021[95] - Selling, general and administrative (SG&A) expenses decreased by $60,754 due to lower compensation, benefit costs, and reduced spending on outside advisory services[98] Liquidity and Capital Resources Liquidity improved with $5.5 million in working capital, though a $2.4 million loan payment is due Key Liquidity Measures (in thousands) | Measure | June 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,236 | $2,131 | | Working capital | $5,501 | $5,202 | | Total debt | $2,485 | $3,829 | - The company intends to refinance a term loan with a balloon payment of $2.4 million due on December 20, 2021[106] - The company expects its financing needs to increase following the potential acquisition of Stadco and anticipates seeking new debt and/or equity financing[104] Quantitative and Qualitative Disclosure About Market Risk The company has opted to omit market risk disclosures as a smaller reporting company - The company has opted not to provide market risk disclosures, as permitted for a smaller reporting company[121] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021[123] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[128] PART II. OTHER INFORMATION Exhibits This section lists filed exhibits, including an acquisition amendment and executive certifications - A key exhibit filed is the Third Amendment to the Stock Purchase Agreement for the acquisition of STADCO, dated July 20, 2021[130] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as exhibits[130]