Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(dollars in thousands, except per share data)
Statement Regarding Forward Looking Disclosure
The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes, which appear elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K, including this section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may contain predictive or “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of current or historical fact contained in this annual report, including statements that express our intentions, plans, objectives, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events, or conditions are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “should,” “would” and similar expressions, as they relate to us, are intended to identify forward-looking statements.
These forward-looking statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, the forward-looking statements due to numerous risks and uncertainties. As discussed below under “Liquidity and Capital Resources”, certain events and conditions, when examined in the aggregate, indicate substantial doubt about our ability to continue as a going concern for at least one year beyond the date of the financial statements. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from:
our reliance on individual purchase orders, rather than long-term contracts, to generate revenue;
our ability to balance the composition of our revenues and effectively control operating expenses;
external factors that may be outside of our control, including health emergencies, like epidemics or pandemics, California wildfires, the conflicts in Eastern Europe and the Middle East, price inflation, increasing interest rates, and supply-chain inefficiencies;
the availability of appropriate financing facilities impacting our operations, financial condition and/or liquidity;
our ability to receive contract awards through competitive bidding processes;
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our ability to maintain standards to enable us to manufacture products to exacting specifications;
our ability to enter new markets for our services;
our reliance on a small number of customers for a significant percentage of our business;
competitive pressures in the markets we serve;
changes in the availability or cost of raw materials and energy for our production facilities;
restrictions on our ability to operate our business due to our outstanding indebtedness;
government tariffs, regulations and requirements;
pricing and business development difficulties;
changes in government spending on national defense;
our ability to make acquisitions and successfully integrate those acquisitions with our business;
our failure to maintain effective internal controls over financial reporting;
general industry and market conditions and growth rates;
unexpected costs, charges or expenses resulting from the recently terminated Stock Purchase Agreement; and
those risks discussed in “ Item 1A. Risk Factors ” and elsewhere in this Annual Report on Form 10-K, as well as those described in any other filings which we make with the SEC.
Any forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this Annual Report on Form 10-K, except as required by applicable law. Investors should evaluate any statements made by us in light of these important factors.
Recent Developments
Termination of Votaw Acquisition
On November 22, 2023 we and the Seller, entered into the Purchase Agreement, pursuant to which, we would acquire all of the issued and outstanding common stock of Votaw, and after giving effect to such purchase, Votaw was to become our wholly owned subsidiary.
Due to a change in certain conditions and events, it became probable that on March 31, 2024, the Company would be unable to close on the acquisition. On April 2, 2024, the Seller delivered to the Company written notice of its election to terminate the Purchase Agreement under Section 7.01(f) effective immediately. Pursuant to Section 7.01(f) of the Purchase Agreement, since the Closing had not occurred by March 31, 2024, either we or the Seller had the right to terminate the Purchase Agreement, subject to the party terminating having complied with the other required closing conditions. The Seller validly terminated the Purchase Agreement pursuant to Section 7.01(f), the Company was required to pay to the Seller the Stock Termination Fee. On April 29, 2024, we issued 320,000 shares of our common stock as the Stock Termination Fee.
Also, under the Purchase Agreement, a registration statement was filed to effect the resale of the shares of common stock. Such registration was filed initially with the Securities and Exchange Commission on May 2, 2024, and was declared effective on January 31, 2025.
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Amendments to Amended and Restated Loan Agreement and Fourth Amendment to Second Amended and Restated Promissory Note
On March 20, 2024, Ranor and certain affiliates of the Company entered into a Seventh Amendment to Amended and Restated Loan Agreement and Third Amendment to Second Amended and Restated Promissory Note, or the “Seventh Amendment”. Effective March 20, 2024, the Seventh Amendment, among other things (i) extended the maturity date of the Revolver Loan from March 20, 2024 to May 20, 2024; (ii) limited the use of proceeds from the Revolver Loan by the Company or its affiliates to $2,000 in the aggregate for due diligence and related professional costs incurred on or prior to May 10, 2024 in connection with any acquisitions; and (iii) makes certain changes to the amount and methods of valuation of equipment securing repayment of the borrowed funds. Through May 20, 2024, Ranor utilized a revolving line of credit with, following certain modifications, a maximum principal amount available of $5,000. Advances under the Revolver Loan are subject to a borrowing base equal to the lesser of (a) $5,000 or (b) the sum of (i) 80% of the net outstanding amount of Base Accounts, plus (ii) the lesser of (x) 25% of Eligible Raw Material Inventory, and (y) $250, plus (iii) 80% of the Appraised Value of the Eligible Equipment, as such terms are defined in the Loan Agreement.
On May 28, 2024, Ranor and the other Borrowers entered into an Eighth Amendment to Amended and Restated Loan Agreement and Fourth Amendment to Second Amended and Restated Promissory Note, or the “Eighth Amendment”, with Berkshire Bank. Effective May 24, 2024, the Eighth Amendment, among other things, (i) extends the maturity date of the Revolver Loan from May 24, 2024 to August 30, 2024; (ii) amends the maximum principal amount of the Revolver Loan from $5,000 to $4,500; and (iii) effective on June 1, 2024, increases the Term SOFR Margin (as defined in the Amendment) used to calculate the interest rate from 2.25% per annum to 2.50% per annum.
On September 4, 2024, Ranor and the other Borrowers entered into a Ninth Amendment to Amended and Restated Loan Agreement and Fifth Amendment to Second Amended and Restated Promissory Note, or the “Ninth Amendment”, with Berkshire Bank. Effective August 30, 2024, the Ninth Amendment, among other things, (i) extends the maturity date of the Revolver Loan from August 30, 2024 to January 15, 2025.
On December 19, 2024, Ranor and the other Borrowers entered into a Tenth Amendment to Amended and Restated Loan Agreement and Sixth Amendment to Second Amended and Restated Promissory Note, or the “Tenth Amendment”, with Berkshire Bank. The Tenth Amendment, among other things, extended the maturity date of the Revolver Loan from January 15, 2025 to April 30, 2025.
On April 28, 2024, Ranor and the other Borrowers entered into the Eleventh Amendment to Amended and Restated Loan Agreement and Seventh Amendment to Second Amended and Restated Promissory Note, or the “Eleventh Amendment”, with Berkshire Bank. The Eleventh Amendment, among other things, extended the maturity date of the Revolver Loan from April 30, 2025 to August 29, 2025.
Read about the Berkshire Bank Loans under the “Liquidity and Capital Resources” section below, for a discussion of the amended debt agreement and its impact on the Company’s liquidity and on-going operations.
July Private Placement
On July 3, 2024, the Company entered into a Securities Purchase Agreement (the “PIPE Agreement”), with certain accredited investors (the “PIPE Purchasers”) pursuant to which we agreed to sell in a private placement (the “July Private Placement”) at an aggregate purchase price of $2,298, (i) 666,100 shares of our common stock (the “PIPE Shares”), and (ii) common stock purchase warrants to purchase up to 666,100 shares of our common stock (the “PIPE Warrants”). The combined purchase price for one PIPE Share and one PIPE Warrant was $3.45. The purpose of the July Private Placement was to raise working capital for use by the Company. The closing of the July Private Placement occurred on July 8, 2024 (the “PIPE Closing Date”). Placement fees in connection with the offering totaled $247. In addition, the Company issued to the placement agent common stock purchase warrants to purchase up to 19,983 shares of common stock.
Pursuant to the PIPE Agreement, we have agreed to have a registration statement registering for resale the PIPE Shares and the shares underlying the PIPE Warrants declared effective within 60 days of the PIPE Closing Date. If such registration statement is not declared effective in a timely manner, we will be subject to liquidated damages as described in the PIPE Agreement. The registration statement was declared effective by the Securities and Exchange Commission on January 31, 2025. Since the registration statement was not declared effective in a timely manner, the Company was obligated to pay $108 as liquidated damages and interest under the agreement.
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Overview
TechPrecision, through our wholly owned subsidiaries, is a manufacturer of large-scale metal fabricated and machined precision components and equipment. These components are used in a variety of markets, primarily defense and aerospace, and secondarily precision industrial. All our operations and customers are in the United States.
We work with our customers to manufacture components in accordance with the customers’ drawings and specifications. Our work complies with specific military specifications and standards as well as national and international codes and standards required by our customers. We believe that we have earned our reputation through outstanding technical expertise, attention to detail, and a total commitment to quality and excellence in customer service.
The manufacturing operations of our Ranor subsidiary are situated on approximately 65 acres in North Central Massachusetts. Leveraging our 145,000 square foot facilities, Ranor provides a full range of custom solutions to transform material into precision finished welded components and precision finished machined components up to 100 tons: manufacturing engineering, materials management and traceability, high-precision heavy fabrication (in-house fabrication operations include cutting, press and roll forming, welding, heat treating, assembly, blasting and painting), heavy high-precision machining (in-house machining operations include CNC programming, finishing, and assembly), QC inspection including portable CMM, NonDestructive Testing, and final packaging.
All manufacturing at Ranor is performed in accordance with customer requirements. Ranor is an ISO 9001:2015 certificate holder. Ranor is a U.S. defense-centric company with over 95% of its revenue in the defense sector. Ranor is registered and compliant with ITAR.
The manufacturing operations of our Stadco subsidiary are situated in an industrial self-contained multi-building complex comprised of approximately 183,000 square feet under roof in Los Angeles, California. Stadco manufactures large mission-critical components on several high-profile military aircraft, military helicopter, and military space programs. Stadco has been a critical supplier to a blue-chip customer base that includes some of the largest OEMs and prime contractors in the defense and aerospace industries. Stadco also manufactures tooling, molds, fixtures, jigs and dies used in the production of defense-centric aircraft components.
Our Stadco subsidiary, similar to Ranor, provides a full range of custom solutions: manufacturing engineering, materials management and traceability, high-precision fabrication (in-house fabrication operations include waterjet cutting, press forming, welding, and assembly) and high-precision machining (in-house machining operations include CNC programming, finishing, and assembly), QC inspection including both fixed and portable CMM NonDestructive Testing, and final packaging. In addition, Stadco features a large electron beam welding cell, and two NonDestructive Testing work cells, a unique mission-critical technology set.
All manufacturing at Stadco is performed in accordance with customer requirements. Stadco is an AS 9100 D and ISO 9001:2015 certificate holder and a NADCAP NonDestructive Testing certificate holder. Stadco is a US defense-centric company with almost all of its revenue in the defense sector. Stadco is registered and compliant with ITAR.
Custom Manufacturing
We manufacture a variety of components in accordance with our internal core competencies and external customer needs and requirements. We also provide manufacturing engineering services to assist customers in optimizing their engineering designs for manufacturability. We do not design the components we manufacture; we custom manufacture according to customer “build-to-print” requirements and specifications. Accordingly, we do not distribute the components that we manufacture on the open market, and we do not market any products. We do not own the intellectual property rights to any proprietary marketed product, and we do not manufacture in anticipation of orders. Our custom manufacturing operations do not commence on any project before we receive and accept a customer’s purchase order. We only accept contracts that cover specific components within the capability of our resources.
We primarily target repeating custom programs with relatively mature and stable designs in order to provide long-term solutions for our customers. The multi-unit work is repeat work or a single product with multiple quantity releases. Secondarily, our activities include a variety of both multi-unit and one-off requirements. The one-off work is typically either a prototype or a unique, one-of-a-kind component.
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Changes in regulations and market demand for our manufacturing expertise can be significant and sudden, and require us to adapt to the needs of the customers that we serve Understanding this dynamic, we focus on the defense industry in order to reliably pivot with our defense customers to jointly develop the capability to transform our workforce to manufacture components in accordance with our own and our external customers’ changing requirements.
We primarily serve customers in defense and aerospace, secondarily in the precision industrial sectors. Within these sectors, we have manufactured custom components for US Navy submarines and aircraft carriers, USMC military helicopters, US defense and civilian aerospace programs.
Our contracts are generated both through negotiation with the customer and from bids made pursuant to a request for proposal. Our ability to receive contract awards is dependent upon the contracting party’s perception of such factors as our ability to perform on time, our history of performance, including quality, our financial condition, and our ability to price our services competitively.
Critical Accounting Policies and Estimates
The preparation of the consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We continually evaluate our estimates, including those related to revenue recognition, recovery of long-lived assets, and income taxes. These estimates and assumptions require management’s most difficult, subjective, or complex judgments. Actual results may differ under different assumptions or conditions.
Revenue and Related Cost Recognition
We recognize revenue over time based on the transfer of control of the promised goods or services to the customer, or at a point in time. This transfer will occur over time when the Company’s performance does not create an asset that has an alternative use to the Company, and we have an enforceable right to payment for performance completed to date. Otherwise, control to the promised goods or services transfers to customers at a point in time.
The majority of the Company’s contracts have a single performance obligation and provide title to, or grant a security interest in, work-in-process to the customer. In addition, these contracts contain enforceable rights to payment, allowing the Company to recover both its cost and a reasonable margin on performance completed to date. The combination of these factors indicates that the customer controls the asset (and revenue is recognized) as the asset is created or enhanced. The Company measures progress for performance obligations satisfied over time using input methods (e.g., costs incurred, resources consumed, labor hours expended, time elapsed).
Our evaluation of whether revenue should be recognized over time requires significant judgment about whether the asset has an alternative use and whether the entity has an enforceable right to payment for performance completed to date. When any one of these factors is not present, the Company will recognize revenue at the point in time when control over the promised good or service transfers to the customer, i.e., when the customer has accepted the asset and taken physical possession of the product and has legal title, and the Company has a right to payment.
When estimating contract costs, the Company takes into consideration a number of assumptions and estimates regarding risks related to technical requirements and scheduling. Management performs periodic reviews of the contracts to evaluate the underlying risks. Profit margin on any given project could increase if the Company is able to mitigate and retire such risks. Conversely, if the Company is not able to properly manage these risks, cost estimates may increase, resulting in a lower profit margin, or potentially, contract losses.
The cost estimation process requires significant judgment and is based upon the professional knowledge and experience of the Company’s engineers, program managers, and financial professionals. Factors considered in estimating the work to be completed and ultimate contract recovery include the availability, productivity, and cost of labor, the nature and complexity of the work to be performed, the effect of change orders, the availability of materials, the effect of any delays in performance, the availability and timing of funding from the customer, and the recoverability of any claims included in the estimates to complete. Costs allocable to undelivered units are reported as work in process, a component of inventory, in the consolidated balance sheet. Pre-contract fulfillment costs requiring capitalization are not material.
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Changes in job performance, job conditions, and estimated profitability are recognized in the period in which the revisions are determined. Costs incurred on uncompleted contracts consist of labor, overhead, and materials. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Our provision for losses at March 31, 2025 and 2024 was $463 and $293, respectively, with 88% and 92% of the totals related to customer projects at our Stadco reportable segment, and the remaining amounts at our Ranor segment.
Long-lived assets
In accordance with Accounting Standards Codification (ASC) 360, Property, Plant & Equipment , our property, plant and equipment is tested for impairment whenever events or circumstances indicate the carrying amount of an asset may be impaired. The carrying amount of an asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. If impaired, the asset is written down to fair value based on either discounted cash flows or appraised values.
In the fourth quarter of fiscal 2025, we determined that a history of operating losses at Stadco may indicate that the carrying value of the long-lived assets may not be recoverable. As such, we conducted a test for recoverability of long-lived assets at our Stadco segment and determined that the carrying value of the long-lived assets were not impaired.
Income Taxes
We provide for federal and state income taxes currently payable, as well as those deferred because of temporary differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable. The effect of the change in the tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income taxes to the amount that is more likely than not to be realized.
In assessing the recoverability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. If we determine that it is more likely than not that certain future tax benefits may not be realized, a valuation allowance will be recorded against deferred tax assets that are unlikely to be realized. Realization of the remaining deferred tax assets will depend on the generation of sufficient taxable income in the appropriate jurisdiction, the reversal of deferred tax liabilities, tax planning strategies and other factors prior to the expiration date of the carryforwards. A change in the estimates used to make this determination could require a reduction in the valuation allowance for deferred tax assets if they become realizable.
Accounting Pronouncements
New Accounting Standards
See Note 3, Accounting Standards Update, in the Notes to the Consolidated Financial Statements under “ Item 8. Financial Statements and Supplementary Data ”, for a discussion of recently adopted new accounting guidance and new accounting guidance not yet adopted.
Results of Operations
Our results of operations are affected by a number of external factors including the availability of raw materials, commodity prices (particularly steel), macroeconomic factors, including the availability of capital that may be needed by our customers, and political, regulatory, and legal conditions in the United States and in foreign markets. Generally, our product mix is made up of short-term contracts with a production timeline of twelve months, more or less. However, contracts for larger complex components can take up to thirty-six months to complete. Units manufactured under most of our customer contracts have historically been delivered on time and with a positive gross margin, with some exceptions. Our results of operations are also affected by our success in booking new contracts, the timing of revenue recognition, delays in customer acceptance of our products, delays in deliveries of ordered products and our rate of progress fulfilling obligations under our contracts. A delay in deliveries or cancellations of orders could have an unfavorable impact on liquidity, cause us to have inventories in excess of our short-term needs, and our ability to recognize, or prevent us from recognizing, revenue on contracts in our order backlog.
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We evaluate the performance of our segments based upon, among other things, segment revenue and operating profit. Segment operating profit excludes general corporate costs, which include director compensation, stock-based compensation, certain pension and other retirement benefit costs, and other corporate administrative expenses not allocated to the segments. Also excluded are items that we consider not representative of ongoing operations, such as the unallocated PPP loan forgiveness and refundable employee retention tax credits.
Key Performance Indicators
While we prepare our financial statements in accordance with U.S. generally accepted accounting principles, or “U.S. GAAP”, we also utilize and present certain financial measures that are not based on or included in U.S. GAAP. We refer to these as non-GAAP financial measures. Please see the section titled “ EBITDA Non-GAAP Financial Measure ” below for further discussion of these financial measures, including the reasons why we use such financial measures and reconciliations of such financial measures to the most directly comparable U.S. GAAP financial measures.
Percentages in the following tables and throughout this “Results of Operations” section may reflect rounding adjustments.
Corporate expenses include stock-based compensation, board of director compensation, and other corporate general expenses not allocated to the segments. Prior period segment data is restated to reflect changes in the allocation of corporate expenses to the segments.
Fiscal Years Ended March 31, 2025 and 2024
The following table presents revenue, gross profit, and gross margin, consolidated and by reportable segment:
Changes
Percent of
Percent of
Amount
Revenue
Amount
Revenue
Amount
Percent
Revenue
Ranor
Stadco
Intersegment elimination
Consolidated Revenue
Cost of Revenue
Ranor
Stadco
Intersegment elimination
Consolidated Cost of Revenue
Gross Profit (Loss)
Ranor
Stadco
Consolidated Gross profit
Revenue
Consolidated - Revenue was $34,031 for the fiscal year ended March 31, 2025, or 8% higher when compared to revenue of $31,591 for the fiscal year ended March 31, 2024. Revenue increased primarily on a period of efficient throughput at Stadco during the fourth quarter of fiscal 2025 as relative contract values increased year-over-year. However, as described in the gross profit and gross margin section below, higher or lower relative contract prices may not necessarily result in higher or lower gross profit or gross margin. The consolidated backlog was $48,625 as of March 31, 2025. Our project order flow from prime defense contractors remains strong.
Ranor - Revenue was $18,165 for the fiscal year ended March 31, 2025, an increase of $344 or 2% higher when compared to the same period a year ago, as we executed on a different project mix. The backlog at Ranor remains strong as new orders continue to flow down from our existing customer base of prime defense contractors. Backlog at Ranor on March 31, 2025, and 2024 was $21,068 and $21,100, respectively.
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Stadco - Revenue was $15,998 for the fiscal year ended March 31, 2025, compared with revenue of $14,567 for the fiscal year ended March 31, 2024, an increase of $1,431, or 10%. We executed on a different project mix with favorable changes in volume and relative contract values when compared with the fiscal year ended March 31, 2024. Revenue increased under several defense and aerospace programs, including work on the U.S. Marine Corps heavy lift helicopters. The backlog remains strong as new orders for components related to a variety of defense programs continue to flow down from our existing customer base of prime defense contractors, including the U.S. Marine Corps heavy lift helicopters. Stadco’s backlog was $27,557 and $28,900 as of March 31, 2025 and 2024, respectively.
Cost of Revenue and Gross Profit
Consolidated – Cost of revenue consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our cost of revenue for the fiscal year ended March 31, 2025, was $29,702, an increase of 8% when compared to the fiscal year ended March 31, 2024. The increase in cost of revenue was primarily the result of higher production costs and under - absorbed overhead at Stadco. Strong production performance at Ranor resulted in an increase in gross profit. Gross margin for the fiscal years ended March 31, 2025 and 2024 was 13% and 13%, respectively.
Ranor – Cost of revenue decreased by $650 or 5% when compared with the same period a year ago. Fiscal 2025 was marked by a period of efficient production as higher absorbed overhead was added to our work - in - progress which more than offset an increase in material costs. As a result, gross profit increased by $1,126 or 25% when compared with fiscal 2024.
Stadco – Cost of revenue increased by $2,214 or 15% as our Stadco segment continues to work through remaining legacy pricing problems on core business. Factory overhead was under - absorbed for fiscal 2025 due to a period of inefficient production as manufacturing costs, and repairs and maintenance expenses increased year-over-year. Gross profit was negative and 213% higher when compared with fiscal 2024.
Selling, General and Administrative (SG&A) Expenses
Changes
Percent of
Percent of
(dollars in thousands)
Amount
Revenue
Amount
Revenue
Amount
Percent
Ranor
Stadco
Corporate and unallocated
Consolidated SG&A
Fiscal 2025 and 2024: SG&A segment data was revised to reflect current period updates to allocated corporate expenses.
Consolidated - Total selling, general and administrative expenses decreased by $2,263, or 26%, due primarily to the absence of due diligence work on the terminated Votaw acquisition. Corporate expenses incurred in connection with due diligence acquisition activity and breakup fees decreased year-over-year and more than offset increased expenses at Ranor and Stadco.
Ranor - SG&A expense increased by $285 or 13% due primarily to an increase in allocated outside advisory costs. Also, a smaller increase in compensation due to additional office headcount was offset by a decrease in travel expenses.
Stadco - SG&A expense increased by $173 or 6%, due primarily to an increase in allocated compensation and benefits costs which more than offset a decrease in legal expenses.
Corporate and unallocated - SG&A decreased by $2,721 or 81% due primarily to the absence of due diligence work on acquisitions in fiscal 2025. For the fiscal year ended March 31, 2025, corporate expenses in connection with the terminated Votaw acquisition decreased by $2,556, stock-based compensation expenses decreased by $181 and other corporate expenses increased by $16 when compared with the fiscal year ended March 31, 2024.
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Operating (loss) income
Changes
Percent of
Percent of
(dollars in thousands)
Amount
Revenue
Amount
Revenue
Amount
Percent
Ranor
Stadco
Corporate and unallocated
Operating loss
Consolidated – For the fiscal year ended March 31, 2025, we reported an operating loss of $2,158, compared with an operating loss of $4,632 for the fiscal year ended March 31, 2024. The change was due primarily to the absence of due diligence work on the terminated Votaw acquisition.
Ranor - Operating income increased by $842 or 37% when compared to the same period a year ago, due primarily to a favorable project mix and efficient throughput.
Stadco - Operating loss increased by $1,089 or 31% as Stadco continues to work through pricing issues on remaining legacy contracts with our core business.
Corporate and unallocated - Operating loss decreased by $2,721 or 81%, due primarily to the absence of due diligence work on the terminated Votaw acquisition. For the fiscal year ended March 31, 2025, corporate expenses in connection with the terminated Votaw acquisition decreased by $2,556, stock-based compensation expenses decreased by $181 and other corporate expenses increased by $16 when compared with the fiscal year ended March 31, 2024.
Other Income (Expense), net
The following table presents other income (expense) for the fiscal years ended March 31:
$ Change
% Change
Other income (expense), net
Interest expense
Amortization of debt issue costs
Interest expense increased by $24 when compared with the fiscal year ended March 31, 2024, due primarily to higher average debt levels under the revolver loan.
Amortization of debt issue costs for the fiscal year ended March 31, 2025, was slightly lower when compared to fiscal year ended March 31, 2024, as we continue to amortize issue costs related to the Berkshire loan agreement and amendments thereto.
Other expense, net, in the table above, for the fiscal year ended March 31, 2025, includes a payment to investors of $108 as liquidated damages and interest for a late registration filing in connection with the July 2024 private placement. That payment more than offset other income primarily from non - operating filming activities at Stadco. Other income, net for the fiscal year ended March 31, 2024, includes a gain from the settlement of an insurance claim related to abandoned fixed assets following a theft at the Stadco plant.
Income Taxes
During the fiscal year ended March 31, 2025, there has been no change in our judgment about the realizability of deferred tax assets in future years. For the fiscal year ended March 31, 2025 and 2024, the Company recorded a tax benefit and tax expense of $2 and $1,932, respectively.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The valuation allowance on deferred tax assets at March 31, 2025 and 2024 was $5,722 and $5,312, respectively. We believe that it is more likely than not that the benefit from certain state NOL carryforwards and other deferred tax assets will not be realized. The assessment was based on the weight of negative evidence at the balance sheet date, our recent operating losses and unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels. In recognition of this risk, we continue to provide a valuation allowance on these items.
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Net Loss
As a result of the foregoing, for fiscal 2025, we recorded a net loss of $2,748, or $0.29 per share basic and fully diluted, compared with a net loss of $7,042, or $0.81 per share basic and fully diluted in fiscal 2024.
Liquidity, Capital Resources and Going Concern
Our liquidity is highly dependent on the availability of financing facilities and our ability to maintain gross profit and operating income. As of March 31, 2025, we had $1,451 in total available liquidity, consisting of $195 in cash and cash equivalents and $1,256 in undrawn capacity under our Revolver Loan. As of March 31, 2024, we had $600 in total available liquidity, consisting of $138 in cash and cash equivalents, and $462 in undrawn capacity under our Revolver Loan.
There was $3,150 and $2,785 outstanding under the Revolver Loan on March 31, 2025 and 2024, respectively. The Company pays interest at an adjusted SOFR - based rate. Interest - only payments on advances made under the Revolver Loan will continue to be payable monthly in arrears. Interest paid and accrued on advances made under the Revolver Loan during fiscal 2025 and 2024, totaled $197 and $171, respectively. The weighted average interest rate on March 31, 2025 and 2024 was 7.47% and 7.58%, respectively. The weighted average amount outstanding during the fiscal year ended March 31, 2025 was $2,631. Undrawn borrowing capacity as of March 31, 2025 and 2024 was $1,256 and $539, respectively. At March 31, 2025 our working capital was negative $1,570 because of the reclassification of our long-term debt from noncurrent to current in the consolidated balance sheet. The table below presents selected liquidity and capital measures at the fiscal years ended:
March 31,
March 31,
Change
Amount
Cash and cash equivalents
Working capital
Total debt
Total stockholders’ equity
The next table summarizes changes in cash by primary component in the cash flows statements for the fiscal years ended:
March 31,
March 31,
Change
(dollars in thousands)
Amount
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash
Operating activities
Apart from our loan facilities, our primary sources of cash are provided by customer revenue, customer contract advances, and associated accounts receivable collections. Many of our customers make advance payments and progress payments under the terms of each manufacturing contract. The composition of our accounts receivable collections mix changes between advance payments and customer payments made after shipment of finished goods. Our cash flows can fluctuate from period to period as we mark progress with customer project milestones and the timing of progress payments.
Cash used in operating activities during fiscal 2025 totaled $599. Net loss adjusted by our non - cash items provided $813 of cash during fiscal 2025, as compared to cash used of $1,022 in fiscal 2024. Working capital changes to our balance sheet used $1,412 of cash during fiscal 2025, as compared to cash provided of $1,750 in fiscal 2024.
Investing activities
In fiscal 2025 we invested $4,122 in new factory machinery and equipment and were reimbursed for $3,041 of certain purchases under a supplier development fund.
We are subject to certain financial debt covenants and may not spend more than $1,500 for new machinery and equipment during any single fiscal year, excluding supplier development funding, tested on an annual basis at the end of each fiscal year. We estimate that our spending on new machinery and equipment in fiscal 2026 will not exceed that spending limitation.
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In fiscal 2024, we invested $3,230 in new factory machinery and equipment and were reimbursed for $577 of certain purchases under a supplier development fund.
Financing activities
We drew down $13,876 of proceeds under our Revolver Loan during fiscal 2025 and repaid $13,511 during the same period. We also used $663 of cash to pay down debt principal and make periodic lease payments and financed the purchase of certain equipment at Stadco for $65.
In fiscal 2025, the Company sold 666,100 shares of the Company’s common stock, par value $0.0001 per share, and 666,100 common stock purchase warrants to purchase 666,100 shares of Common Stock in a private placement at an aggregate purchase price of $2,299. Placement agent’s fees in connection with the offering totaled $247.
In fiscal 2024 we drew down $7,160 of proceeds under the Revolver Loan and repaid $5,025 during the same period. We also used $617 of cash to pay down debt principal and make periodic lease payments.
All of the above activity resulted in a net increase in cash of $57 for fiscal 2025 compared with a net decrease in cash of $396 for fiscal 2024.
Berkshire Bank Loans
On August 25, 2021, the Company entered into an amended and restated loan agreement with Berkshire Bank (as amended to date, the “Loan Agreement”). Under the Loan Agreement, Berkshire Bank will continue to provide the Ranor Term Loan (as defined below) and the revolving line of credit, or the “Revolver Loan”. In addition, Berkshire Bank provided the Stadco Term Loan (as defined below) in the original amount of $4,000. The proceeds of the original Ranor Term Loan of $2,850 were previously used to refinance existing mortgage debt of Ranor. The proceeds of the Revolver Loan are used for working capital and general corporate purposes of the Company. Payments for the original Ranor Term Loan began on January 20, 2017, and until the facility was amended in December 2022, the Company paid monthly installments of $19 each, inclusive of interest at a fixed rate of 5.21% per annum.
The proceeds of the Stadco Term Loan were used to support the acquisition of Stadco and refinance existing indebtedness of Stadco. Interest on the Stadco Term Loan is due on unpaid balances beginning on August 25, 2021, at a fixed rate per annum equal to the 7-year Federal Home Loan Bank of Boston Classic Advance Rate plus 2.25%. Since September 25, 2021, and on the 25th day of each month thereafter, Stadco has made and will continue to make monthly payments of principal and interest in the amount of $54 each, with all outstanding principal and accrued interest due and payable on August 25, 2028.
On June 12, 2023, the Company and Berkshire Bank executed a waiver. The waiver document contains an agreement by the parties to exclude from the calculation of capital expenditures for purposes of the Loan Agreement during the year ending March 31, 2024, any such expenditures made by the Company to the extent they are made using funds provided by customers of the Company for the purpose of making such capital expenditures.
On December 20, 2023, Ranor and certain affiliates of the Company entered into a Sixth Amendment to Amended and Restated Loan Agreement and Second Amendment to Second Amended and Restated Promissory Note, or the “Sixth Amendment”. The Sixth Amendment, among other things (i) extended the maturity date of the Revolver Loan from December 20, 2023 to March 20, 2024; (ii) limited the use of proceeds from the Revolver Loan by the Company or its affiliates to $1,000 in the aggregate for due diligence and related professional costs incurred on or prior to March 20, 2024 in connection with any acquisitions; and (iii) makes certain changes to the amount and methods of valuation of equipment securing repayment of the borrowed funds.
On March 20, 2024, Ranor and certain affiliates of the Company entered into a Seventh Amendment to Amended and Restated Loan Agreement and Third Amendment to Second Amended and Restated Promissory Note, or the “Seventh Amendment”. Effective March 20, 2024, the Seventh Amendment, among other things (i) extended the maturity date of the Revolver Loan from March 20, 2024 to May 20, 2024, and (ii) limited the use of proceeds from the Revolver Loan by the Company or its affiliates to $2,000 in the aggregate for due diligence and related professional costs incurred on or prior to May 10, 2024 in connection with any acquisitions.
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On May 28, 2024, Ranor and the other Borrowers entered into an Eighth Amendment to Amended and Restated Loan Agreement and Fourth Amendment to Second Amended and Restated Promissory Note with Berkshire Bank. Effective May 24, 2024, the Eighth Amendment, among other things, (i) extended the maturity date of the Revolver Loan from May 24, 2024 to August 30, 2024; (ii) amended the maximum principal amount of the Revolver Loan from $5,000 to $4,500; and (iii) effective on June 1, 2024, increases the Term SOFR Margin (as defined in the Amendment) used to calculate the interest rate from 2.25% per annum to 2.50% per annum.
On September 4, 2024, December 19, 2024, and April 28, 2025, Ranor and the other borrowers entered into three additional amendments with Berkshire Bank, to extend the maturity date of the Revolver Loan to January 15, 2025, April 30, 2025, and August 29, 2025, respectively.
As a result of Borrowers’ failure to satisfy the required minimum Debt Service Coverage Ratio for the twelve (12) month period ending March 31, 2025, as set forth in the Loan Agreement, or the “Existing Default”, the borrowers acknowledge that a certain Event of Default has occurred and is continuing under the Loan Agreement. The borrowers further acknowledge that the sixth amendment to the Agreement constitutes written notice pursuant to the Loan Documents of such Existing Default. Regardless of entering into this Agreement or any discussions between Borrowers and Lender, the Lender expressly reserves any and all rights and remedies available to it under the Loan Documents, the Collateral Documents, and under applicable law, including, without limitation, its right to choose to accelerate and demand the outstanding indebtedness evidenced by the Loan Documents and seek immediate repayment in full, and institute the default rate of interest as of the date of the occurrence of the default or at any time thereafter, as a result of any default or event of , including, without , the Existing , that has arisen or may arise. No such discussions or the entering into of this Agreement shall imply any course of conduct or any agreement on the part of Lender to waive any of its rights and remedies or to forbear from taking any action authorized by the Loan Documents, the Collateral Documents, or by applicable law while discussions continue.
There was $7,387 and $7,648 outstanding under the Loan Agreement on March 31, 2025 and 2024, respectively. Without a waiver, the lender has the right, but not the obligation, to demand repayment from the Company for noncompliance with the debt covenants. In addition, the bank retains the right to act on covenant violations that occur after the date of delivery of any waiver. The lender has not granted us a waiver. As such, we need to seek alternative financing to pay these obligations as the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations. It is also probable that the Company will not be in compliance with the same debt covenants at subsequent measurement dates within the next twelve months. As a result of the above, all of our long-term debt has been classified as current in our consolidated balance sheet.
The Company is exploring various means of strengthening its liquidity position and ensuring compliance with its debt financing covenants by making Stadco operations profitable, renewing our revolver loan, or entering into alternative debt facilities.
On July 3, 2024, the Company entered into a Security Purchase Agreement with certain accredited investors, pursuant to which the Company sold common stock and warrants in a private placement at an aggregate purchase price of $2,299. The combined purchase price for one share of common stock and one warrant was $3.45. The purpose of the sale of the common stock and warrants was to raise working capital for use by the Company.
In order for us to continue operations beyond the next twelve months from the date of issuance of the financial statements and to be able to discharge our liabilities and commitments in the normal course of business, we must renew our revolver loan or seek alternative financing by August 29, 2025. We must mitigate our recurring operating losses at our Stadco subsidiary, efficiently increase utilization of our manufacturing capacity at Stadco and improve the manufacturing process. We plan to closely monitor our expenses and, if required, will reduce operating costs to enhance liquidity.
The uncertainty associated with the recurring operating losses at Stadco, the revolver loan renewal, the need for alternative financing, and compliance with debt covenants at subsequent measurement dates raise substantial doubt about our ability to continue as a going concern for at least one-year after the date the consolidated financial statements included in this Annual Report on Form 10-K are issued.
Collateral securing all the above obligations comprises all personal and real property of the Company, including cash, accounts receivable, inventories, equipment, and financial assets.
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Commitments and Contractual Obligations
The following contractual obligations associated with our normal business activities are expected to result in cash payments in future periods, and include the following material items on March 31, 2025:
Our debt obligations under the Berkshire loan agreement, including fixed and variable-rate debt, totaled $7,387, and, because of debt covenant violations, are classified as current in the consolidated balance sheets.
We enter into various commitments with suppliers for the purchase of raw materials and work supplies. Our outstanding unconditional contractual commitments, including the purchase of raw materials and supplies goods, totaled $4,690, all of it due to be incurred and paid within the next twelve months.
We also have $10,475 in purchase obligations outstanding for the purchase of machinery and equipment under an arrangement with a certain customer where the Company is reimbursed in full for all purchases.
Our operating lease obligations, including imputed interest, totaled $4,860 for buildings through 2030, with $939 due annually for each of the next five years and $156 in year six.
There were no off-balance sheet arrangements as of March 31, 2025.
EBITDA Non-GAAP Financial Measure
To complement our consolidated statements of operations and consolidated statements of cash flows, we use EBITDA, a non-GAAP financial measure. Net income (loss) is the financial measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to EBITDA. We believe EBITDA provides our board of directors, management, and investors with a helpful measure for comparing our operating performance with the performance of other companies that have different financing and capital structures or tax rates. We also believe that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry, and is a measure contained in our debt covenants. However, while we consider EBITDA to be an important measure of operating performance, EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.
We define EBITDA as net income (loss) plus interest, income taxes, depreciation, and amortization. Net loss was $2,748 for the fiscal year ended March 31, 2025, as compared to net loss of $7,042 for the year ended March 31, 2024. EBITDA, a non-GAAP financial measure, was $587 for the year ended March 31, 2025, compared to negative $2,160 for the year ended March 31, 2024. The following table provides a reconciliation of EBITDA to net loss, the most directly comparable U.S. GAAP measure reported in our consolidated financial statements for the fiscal years ended:
March 31,
March 31,
Change
(dollars in thousands)
Amount
Net loss
Income tax (benefit) expense
Interest expense (1)
Depreciation and amortization
EBITDA
Includes amortization of debt issue costs.
