UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
the quarterly period ended September 30, 2009





OR





o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
the transition period from
             to





Commission
File Number 0-51378





TECHPRECISION
CORPORATION


(Exact
name of registrant as specified in its charter)





DELAWARE
            
            51-0539828(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)Bella
      Drive, Westminster, Massachusetts 01473
            
            01473(Address
      of principal executive offices)
            
            (Zip
      Code)





(978) 874-0591


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x
    No  o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).     Yes  o
    No  o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer
            o
            Accelerated
      filer                                      oNon-Accelerated
      Filer
            o
            Smaller
      reporting
      company                   x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes  o
   No  x





The
number of shares of the Registrant’s common stock, par value $.0001 per share,
issued and outstanding at November 11, 2009 was 13,930,846.




















TECHPRECISION CORPORATION


CONSOLIDATED
BALANCE SHEETS





September
      30, 2009
            
            
            March
      31, 2009(unaudited)
            
            
            (audited)ASSETSCurrent
      assetsCash
      and cash equivalents
            
            $
            9,537,327
            
            
            $
            10,462,737Accounts
      receivable, less allowance for doubtful accounts of
$25,000
            
            
            3,031,150
            
            
            
            1,418,830Costs
      incurred on uncompleted contracts, in excess of progress
      billings
            
            
            3,603,134
            
            
            
            3,660,802Inventories
      - raw materials
            
            
            303,899
            
            
            
            351,356Deferred
      tax asset
            
            
            194,192
            
            
            
            --Prepaid
      expenses
            
            
            164,247
            
            
            
            1,583,234Other
      receivables
            
            
            30,000
            
            
            
            59,979Total
      current assets
            
            
            16,863,949
            
            
            
            17,536,938Property,
      plant and equipment, net
            
            
            3,460,430
            
            
            
            2,763,434Equipment
      under construction
            
            
            -
            
            
            
            887,279Deferred
      loan cost, net
            
            
            96,153
            
            
            
            104,666Total
      assets
            
            $
            20,420,532
            
            
            $
            21,292,317LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            348,486
            
            
            
            950,681Accrued
      expenses
            
            
            541,306
            
            
            
            710,332Accrued
      taxes
            
            
            498,448
            
            
            
            155,553Deferred
      revenues
            
            
            1,777,472
            
            
            
            3,945,364Current
      maturity of long-term debt
            
            
            752,646
            
            
            
            624,818Total
      current liabilities
            
            
            3,918,358
            
            
            
            6,386,748LONG-TERM
      DEBTNotes
      payable- noncurrent
            
            
            5,303,275
            
            
            
            4,824,453STOCKHOLDERS’
      EQUITYPreferred
      stock- par value $.0001 per share, 10,000,000 sharesauthorized,
      of which 9,890,980 are designated as Series A PreferredStock,
      with 9,890,980 shares issued and outstanding at September 30,
      2009and
      6,295,508 at March 31, 2009 (liquidation preference
      of  $2,818,930 and $1,794,220 at September 30, 2009 and
      March 31, 2009, respectively.)
            
            
            2,287,508
            
            
            
            2,287,508Common
      stock -par value $.0001 per share, authorized,90,000,000
      shares, issued and outstanding, 13,930,846shares
      at September 30, 2009 and 13,907,513 at March 31, 2009
            
            
            1,394
            
            
            
            1,392Paid
      in capital
            
            
            2,794,671
            
            
            
            2,872,779Retained
      earnings
            
            
            6,115,326
            
            
            
            4,919,437Total
      stockholders’ equity
            
            
            11,198,899
            
            
            
            10,081,116Total
      liabilities and stockholders' equity
            
            $
            20,420,532
            
            
            $
            21,292,317





The
accompanying notes are an integral part of the financial
statements.








-1-








TECHPRECISION
      CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS
              (unaudited)








Three
      months ended
            
            
            Six
      months endedSeptember
      30,
            
            
            September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      sales
            
            $
            15,117,114
            
            
            $
            13,601,010
            
            
            $
            18,436,025
            
            
            $
            25,259,144Cost
      of sales
            
            
            12,471,343
            
            
            
            8,588,210
            
            
            
            15,225,452
            
            
            
            16,866,013Gross
      profit
            
            
            2,645,771
            
            
            
            5,012,800
            
            
            
            3,210,573
            
            
            
            8,393,131Operating
      expenses:Salaries
      and related expenses
            
            
            331,302
            
            
            
            322,035
            
            
            
            724,669
            
            
            
            757,130Professional
      fees
            
            
            110,411
            
            
            
            72,782
            
            
            
            186,623
            
            
            
            120,469Selling,
      general and administrative
            
            
            226,573
            
            
            
            150,138
            
            
            
            524,994
            
            
            
            289,134Total
      operating expenses
            
            
            668,286
            
            
            
            544,955
            
            
            
            1,436,286
            
            
            
            1,166,733Income
      from operations
            
            
            1,977,485
            
            
            
            4,467,845
            
            
            
            1,774,287
            
            
            
            7,226,398Other
      income (expenses)Interest
      expense
            
            
            (107,390
            )
            
            
            (115,090
            )
            
            
            (211,552
            )
            
            
            (233,871
            )Interest
      income
            
            
            5,184
            
            
            
            -
            
            
            
            8,370
            
            
            
            -Finance
      costs
            
            
            (4,257
            )
            
            
            (4,687
            )
            
            
            (8,513
            )
            
            
            (8,513
            )Total
      other income (expense)
            
            
            (106,463
            )
            
            
            (119,777
            )
            
            
            (211,695
            )
            
            
            (242,384
            )Income
      before income taxes
            
            
            1,871,022
            
            
            
            4,348,068
            
            
            
            1,562,592
            
            
            
            6,984,014Provision
      for income taxes
            
            
            550,388
            
            
            
            1,871,968
            
            
            
            366,703
            
            
            
            2,936,218Net
      income
            
            $
            1,320,634
            
            
            $
            2,476,100
            
            
            $
            1,195,889
            
            
            $
            4,047,796Net
      income per share of common stock (basic)
            
            $
            0.09
            
            
            $
            0.18
            
            
            $
            0.09
            
            
            $
            0.30Net
      income per share (fully diluted)
            
            $
            0.06
            
            
            $
            0.09
            
            
            $
            0.06
            
            
            $
            0.15Weighted
      average number of shares outstanding (basic)
            
            
            13,916,462
            
            
            
            13,823,245
            
            
            
            13,912,012
            
            
            
            13,379,358Weighted
      average number of shares outstanding (fully diluted)
            
            
            21,300,150
            
            
            
            26,978,330
            
            
            
            19,930,238
            
            
            
            26,736,678





The
accompanying notes are an integral part of the financial
statements.




-2-







TECHPRECISION
      CORPORATIONCONSOLIDATED STATEMENT OF CASH FLOWS
              (unaudited)





Six
      Months EndedSeptember
      30,2009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
            
            $
            1,195,889
            
            
            $
            4,047,796Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
            
            
            208,016
            
            
            
            275,378Share
      based compensation
            
            
            7,500
            
            
            
            --Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (1,612,320
            )
            
            
            1,216,678Deferred
      income taxes
            
            
            (194,192
            )
            
            
            (133,999
            )Inventory
            
            
            47,457
            
            
            
            (111,909
            )Costs
      incurred on uncompleted contracts
            
            
            7,254,185
            
            
            
            313,021Other
      receivables
            
            
            29,979
            
            
            
            --Prepaid
      expenses
            
            
            1,418,987
            
            
            
            (1,575,887
            )Accounts
      payable
            
            
            (602,195
            )
            
            
            2,388,747Accrued
      expenses
            
            
            173,869
            
            
            
            1,323,035Customer
      advances
            
            
            (9,364,407
            )
            
            
            (416,638
            )Net
      cash (used in) provided by operating activities
            
            
            (1,437,232
            )
            
            
            7,383,852CASH
      FLOW FROM INVESTING ACTIVITIESPurchases
      of property, plant and equipment
            
            
            (9,220
            )
            
            
            (137,609
            )Deposits
      on equipment
            
            
            -
            
            
            
            (150,000
            )Net
      cash used in investing activities
            
            
            (9,220
            )
            
            
            (287,609
            )CASH
      FLOWS FROM FINANCING ACTIVITIESCapital
      distribution of WMR equity
            
            
            (92,256
            )
            
            
            (93,548
            )Proceeds
      from exercised stock options and warrants
            
            
            6,650
            
            
            
            170,060Borrowings
      under line of credit facility
            
            
            919,297
            
            
            
            -Payment
      of notes and lease obligations
            
            
            (312,649
            )
            
            
            (306,072
            )Net
      cash provided by (used in) financing activities
            
            
            521,042
            
            
            
            (229,560
            )Net
      (decrease) increase in cash and cash equivalents
            
            
            (925,410
            )
            
            
            6,866,683Cash
      and cash equivalents, beginning of period
            
            
            10,462,737
            
            
            
            2,852,676Cash
      and cash equivalents, end of period
            
            $
            9,537,327
            
            
            $
            9,719,359





The
accompanying notes are an integral part of the financial
statements.





-3-










TECHPRECISION
      CORPORATIONCONSOLIDATED
      STATEMENT OF CASH FLOWS
              (unaudited)





Six
      Months Ended September 30,2009
            
            
            2008SUPPLEMENTAL
      DISCLOSURES OF CASH FLOWS INFORMATIONCash
      paid during the year for:Interest
      expense
            
            $
            208,451
            
            
            $
            236,276Income
      taxes
            
            $
            218,000
            
            
            $
            1,621,138





SUPPLEMENTAL
INFORMATION – NONCASH TRANSACTIONS:





Six
months Ended September 30, 2009





The
company placed $887,279 of equipment which was under construction at the
beginning of the six month period ended September 30, 2009 into
service.





On August
14, 2009, the Company entered into a warrant exchange agreement pursuant to
which the Company agreed to issue 3,595,472 shares of Series A convertible
preferred stock to certain investors in exchange for warrants to purchase
9,320,000 shares of common stock. The warrants carried exercise prices ranging
from $0.44 to $0.65 per share. Effective September 11, 2009, the warrants were
surrendered to the Company, the Company filed an amendment to its certificate of
designation relating to its Series A convertible Preferred Stock to increase the
number of designated shares of Series A convertible preferred stock, and the
3,595,472 shares of Series A preferred stock were issued pursuant to the terms
of the warrant exchange agreement.  All warrants surrendered in
connection with the warrant exchange were cancelled.





Six
months Ended September 30, 2008





During
      the six months ended September 30, 2008, the Company issued 944,518 shares
      of common stock upon conversion of 722,556 shares of series A preferred
      stock, based on a conversion ratio of 1.3072 shares of common stock for
      each share of series A preferred stock. The conversion price of each share
      of common stock was computed at $0.2180 for a total
      of  $255,040.





During
      the six months ended September 30, 2008, the Company issued 390,000 shares
      of common stock upon exercise of 390,000 warrants having an exercise price
      of $.43605.





The
accompanying notes are an integral part of the financial
statements.







-4-







NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
1 - DESCRIPTION OF BUSINESS





Techprecision
Corporation (“Techprecision”) is a Delaware corporation organized in February
2005 under the name Lounsberry Holdings II, Inc. The name was changed to
Techprecision Corporation on March 6, 2006.  Techprecision is the
parent company of Ranor, Inc. (“Ranor”), a Delaware
corporation.  Techprecision and Ranor are collectively referred to as
the “Company.”





The
Company manufactures metal fabricated and machined precision components and
equipment.  These products are used in a variety of markets including
the alternative energy, medical, nuclear, defense, industrial, and aerospace
industries.





NOTE 2 - SIGNIFICANT ACCOUNTING
POLICIES





Basis
of Presentation and Consolidation





On
February 24, 2006, Techprecision acquired all stock of Ranor in a transaction
which is accounted for as a recapitalization (reverse acquisition), with Ranor
being treated as the acquiring company for accounting purposes. The accompanying
consolidated financial statements include the accounts of the Company and Ranor
as well as a variable interest entity, WM Realty. Intercompany transactions and
balances have been eliminated in consolidation.





In
accordance with Statement of Financial Accounting Standards (SFAS) No. 165,
“Subsequent Events” (SFAS No. 165), the Company performed an evaluation of
subsequent events for the accompanying financial statements and notes included
in Part 1, Item 1 of this report through November 11, 2009, the date this Report
was issued. The Notes to Consolidated Financial Statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC) for Quarterly Reports on Form 10-Q. Certain information and note
disclosures normally included in financial statements prepared in accordance
with GAAP have been condensed or omitted pursuant to such rules and regulations.
These notes should be read in conjunction with the Notes to Consolidated
Financial Statements of the Company in Item 8 of the 2009 Annual Report on
Form 10-K.





Use
of Estimates in the Preparation of Financial Statements





In
preparing financial statements in conformity with generally accepted accounting
principles, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reported period.  Actual results could differ from
those estimates.





Fair
Values of Financial Instruments





We
account for fair value of financial instruments under the Financial Accounting
Standard Board’s (FASB) authoritative guidance,which defines fair value,
and establishes a framework to measure fair value and the related disclosures
about fair value measurements. The fair value of a financial instrument is the
amount that could be received upon the sale of an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. Financial assets are marked to bid prices and financial
liabilities are marked to offer prices. Fair value measurements do not include
transaction costs. The FASB establishes a fair value hierarchy used to
prioritize the quality and reliability of the information used to determine fair
values. Categorization within the fair value hierarchy is based on the lowest
level of input that is significant to the fair value measurement. The fair value
hierarchy is defined into the following three categories:





Level
1:  Inputs based upon quoted market prices for identical assets or
liabilities in active markets at the measurement date.





Level
2:  Observable inputs other than quoted prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets; quoted
prices for identical or similar assets and liabilities in markets that are not
active; or other inputs that are observable or can be corroborated by observable
market data.





Level
3:  Inputs that are management’s best estimate of what market participants
would use in pricing the asset or liability at the measurement date.  The
inputs are unobservable in the market and significant to the instruments’
valuation.







-5-




In
addition, we will measure fair value in an inactive or dislocated market based
on facts and circumstances and significant management judgment.  We will
use inputs based on management estimates or assumptions, or make adjustments to
observable inputs to determine fair value when markets are not active and
relevant observable inputs are not available.





The
carrying amount of cash and cash equivalents, trade accounts receivable,
accounts payable, prepaid and accrued expenses, and notes payable, as presented
in the balance sheet, approximates fair value.





Cash
and cash equivalents





Holdings
of highly liquid investments with maturities of three months or less, when
purchased, are considered to be cash equivalents. The carrying amount reported
in the balance sheet for cash and cash equivalents approximates its fair value.
The deposits are maintained in a large regional bank and the amount of federally
insured cash deposits was $250,000 as of September 30, 2009 compared to $100,000
as of September 30, 2008.





Accounts
receivable





Trade
accounts receivable are stated at the amount the Company expects to collect. The
Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments.
Management considers the following factors when determining the collectability
of specific customer accounts: customer credit-worthiness, past transaction
history with the customer, current economic industry trends, and changes in
customer payment terms. If the financial condition of the Company’s customers
were to deteriorate, adversely affecting their ability to make payments,
additional allowances would be required. Based on management’s assessment, the
Company provides for estimated uncollectible amounts through a charge to
earnings and a credit to a valuation allowance. Balances that remain outstanding
after the Company has used reasonable collection efforts are written off through
a charge to the valuation allowance and a credit to accounts receivable. Current
earnings are also charged with an allowance for sales returns based on
historical experience. There was no bad debt expense for the quarters ended
September 30, 2009 and 2008, respectively.





Inventories





Inventories
- raw materials is stated at the lower of cost or market determined principally
by the first-in, first-out method.





Notes
Payable





We
account for all notes that are due and payable in one year as short-term
liabilities; carrying amounts approximate fair value.





Long-lived
Assets





Property,
plant and equipment are recorded at cost less accumulated depreciation and
amortization. Depreciation and amortization are accounted for on the
straight-line method based on estimated useful lives. The amortization of
leasehold improvements is based on the shorter of the lease term or the useful
life of the improvement. Betterments and large renewals, which extend the life
of the asset, are capitalized whereas maintenance and repairs and small renewals
are expensed as incurred. The estimated useful lives are: machinery and
equipment, 7-15 years; buildings, up to 30 years; and leasehold improvements,
10-20 years.





The
accounting for the impairment or disposal of long-lived assets requires an
assessment of the recoverability of our investment in long-lived assets to be
held and used in operations whenever events or circumstances indicate that their
carrying amounts may not be recoverable. Such assessment requires that the
future cash flows associated with the long-lived assets be estimated over their
remaining useful lives. An impairment loss may be required when the future cash
flows are less than the carrying value of such assets





Repair
and maintenance activities





The
Company incurs maintenance costs on all of its major equipment. Costs that
extend the life of the asset, materially add to its value, or adapt the asset to
a new or different use are separately capitalized in property, plant and
equipment and are depreciated over their estimated useful lives. All other
repair and maintenance costs are expensed as incurred.





Leases





Operating
leases are charged to operations as paid. Capital leases are capitalized and
depreciated over the term of the lease.  A lease is considered a
capital lease if one of four criteria are satisfied: 1) the lease contains an
option to purchase the property for less than fair market value, 2) transfer of
ownership at the end of the lease, 3) the lease term is 75% or more of estimated
economic life of leased property, and 4) present value of minimum lease payments
is at least 90% of fair value of the leased property to the lessor at the
inception of the lease.







-6-




Convertible
Preferred Stock and Warrants





The
Company measures the fair value of the Series A preferred stock by the amount of
cash that was received for their issuance. The Company determined that the
convertible preferred shares and the accompanying warrants issued are equity
instruments.





Our
preferred stock also met all conditions for the classification as equity
instruments. The Company had a sufficient number of authorized shares, there is
no required cash payment or net cash settlement requirement and the holders of
the series A preferred stock had no right higher than the common stockholders
other than the liquidation preference in the event of liquidation of the
Company. Although the Company had an unconditional obligation to issue
additional shares of common stock upon conversion of the Series A preferred
stock if EBITDA per share was below the targeted amount, the certificate of
designation relating to the series A preferred stock does not require the
Company to issue shares that are registered pursuant to the Securities Act of
1933, and as a result, the additional shares issuable upon conversion of the
Series A preferred stock need not be registered shares.





The
Company’s warrants were excluded from derivative accounting because they were
indexed to the Company’s own unregistered common stock and are classified in
stockholders’ equity.





Shipping
Costs





Shipping
and handling costs are included in cost of sales in the Consolidated Statements
of Operations for all periods presented.





Selling,
General, and Administrative





Selling
expenses include items such as business travel and advertising costs.
Advertising costs are expensed as incurred. General and administrative expenses
include items for Company’s administrative functions and include costs for items
such as office supplies, insurance, telephone and payroll services.





Stock
Based Compensation





Stock
based compensation represents the cost related to stock-based awards granted to
employees. The Company measures stock based compensation cost at grant date,
based on the estimated fair value of the award and recognizes the cost as
expense on a straight-line basis (net of estimated forfeitures) over the
employee’s requisite service period. The Company estimates the fair value of
stock options using a Black-Scholes valuation model.




Earnings
per Share of Common Stock





Basic net
income per common share is computed by dividing net income or loss by the
weighted average number of shares outstanding during the period. Diluted net
income per common share is calculated using net income divided by diluted
weighted-average shares. Diluted weighted-average shares include
weighted-average shares outstanding plus the dilutive effect of potential common
stock issuable in respect of convertible preferred stock, warrants and
share-based compensation were calculated using the treasury stock
method.





Revenue
Recognition and Costs Incurred





Revenue
and costs are recognized on the units of delivery method. This method recognizes
as revenue the contract price of units of the product delivered during each
period and the costs allocable to the delivered units as the cost of earned
revenue. When the sales agreements provide for separate billing of engineering
services, the revenues for those services are recognized when the services are
completed. Costs allocable to undelivered units are reported in the balance
sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed
upon contract price for customer directed changes, constructive changes,
customer delays or other causes of additional contract costs are recognized in
contract value if it is probable that a claim for such amounts will result in
additional revenue and the amounts can be reasonably estimated. Revisions in
cost and profit estimates are reflected in the period in which the facts
requiring the revision become known and are estimable. The unit of delivery
method requires the existence of a contract to provide the persuasive evidence
of an arrangement and determinable seller’s price, delivery of the product
and reasonable collection prospects. The Company has written agreements with the
customers that specify contract prices and delivery terms. The Company
recognizes revenues only when the collection prospects are
reasonable.





Adjustments
to cost estimates are made periodically, and losses expected to be incurred on
contracts in progress are charged to operations in the period such losses are
determined and are reflected as reductions of the carrying value of the costs
incurred on uncompleted contracts. Costs incurred on uncompleted contracts
consist of labor, overhead, and materials. Work in process is stated at the
lower of cost or market and reflect accrued losses, if required, on uncompleted
contracts.







-7-




Income
Taxes





The
Company uses the asset and liability method of financial accounting and
reporting for income taxes required by FASB ASC 740, Income Taxes . Under FASB ASC
740, deferred income taxes reflect the tax impact of temporary differences
between the amount of assets and liabilities recognized for financial reporting
purposes and the amounts recognized for tax purposes.




Temporary
differences giving rise to deferred income taxes consist primarily of the
reporting of losses on uncompleted contracts, the excess of depreciation for tax
purposes over the amount for financial reporting purposes, and accrued expenses
accounted for differently for financial reporting and tax purposes, and net
operating loss carry-forwards.





According
to FASB ASC 740-270-25, Intraperiod Tax Allocation,tax expense related to interim period ordinary income is computed at an
estimated annual effective tax rate related to all other items are individually
computed and recognized when the items occur.  The tax effects of
losses that arise in the early portion of a fiscal year are recognized only when
the benefits are expected to be either realized during the year or recognized as
a deferred tax asset at the end of the year. Interest and penalties are
included in general and administrative expenses.





Variable
Interest Entity (VIE)





The
Company has consolidated WM Realty, a variable interest entity that entered into
a sale and leaseback contract with the Company, in 2006, to conform to the
authoritative FASB guidance (see Note 9 for more information related to the
VIE). The creditors of WM Realty do not have recourse to the general credit of
TechPrecision or Ranor.





Recent
Accounting Pronouncements




In
October 2009, the FASB issued update No. 2009-13 – Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements – a consensus of the FASB Emerging
Issues Task Force, which provides guidance for identifying separate
deliverables in a revenue-generating transaction where multiple deliverables
exist, and provides guidance for allocating and recognizing revenue based on
those separate deliverables. The guidance is expected to result in more multiple
deliverable arrangements being separable than under current guidance. This
guidance is effective for the Company beginning on April 1, 2011 and is required
to be applied prospectively to new or significantly modified arrangements. The
Company will assess the impact this guidance may have on the consolidated
financial statements.




In August
2009, the FASB issued update No. 2009-05 - Fair Value Measurements and
Disclosures (Topic 820) - Measuring Liabilities at Fair
Value.  The amendments in this update apply to all entities
that measure liabilities at fair value within the scope of Topic 820. The update
provides clarification that in circumstances where a quoted price in an active
market for the identical liability is not available, a reporting entity is
required to measure fair value using one or more of the following valuation
techniques that uses the quoted price of the identical liability when traded as
an asset, quoted prices for similar liabilities or similar liabilities when
traded as assets, or a income or market approach consistent with the principles
of Topic 820. The guidance is effective at October 1, 2009, and the adoption of
this amendment did not have a material impact on the Company’s consolidated
financial statements.




In June
2009, the FASB issued update No. 2009-01 “Topic 105—Generally Accepted Accounting
Principles—amendments based on—Statement of Financial Accounting Standards No.
168—TheFASB Accounting Standards Codificationand the Hierarchy of Generally
Accepted Accounting Principles.” This Accounting Standards Update amends
the FASB Accounting Standards Codification for the issuance of FASB Statement
No. 168, “The FASB
Accounting Standards Codification and the Hierarchy of GAAP”. This
Accounting Standards Update includes Statement 168 in its entirety, and
establishes the Codification as the single source of authoritative U.S. GAAP
recognized by the FASB to be applied by nongovernmental entities. SEC rules and
interpretive releases are also sources of authoritative GAAP for SEC
registrants. This guidance modifies the GAAP hierarchy to include only two
levels of GAAP: authoritative and non-authoritative. The guidance was effective
for the Company as of September 30, 2009, and did not impact the Company’s
results of operations, cash flows or financial positions. The Company has
adjusted historical GAAP references in its second quarter 2009 Form 10-Q to
reflect accounting guidance references included in the
codification.





In June
2009, the FASB amended authoritative guidance for the manner in which entities
evaluate whether consolidation is required for VIEs. A company must first
perform a qualitative analysis in determining whether it must consolidate a VIE,
and if the qualitative analysis is not determinative, must perform a
quantitative analysis. Further, the guidance requires that companies continually
evaluate VIEs for consolidation, rather than assessing based upon the occurrence
of triggering events, and also requires enhanced disclosures about how a
company’s involvement with a VIE affects its financial statements and exposure
to risks. The guidance is effective  beginning April 1, 2010, and
the Company is currently assessing the impact on the consolidated financial
statements.





In May
2009, the FASB issued authoritative guidance to establish general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. In
particular, this guidance  sets forth the period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements; the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements; and the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. This guidance is
effective for periods ending after June 15, 2009 and its adoption did not
have a material impact on the Company’s consolidated financial
statements.






-8-





In April
2009, the FASB issued guidance to require disclosure about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. Since this guidance provides only
disclosure requirements, the adoption
of this standard did not impact the results of operations, cash flows or
financial positions.




In April
2009, the FASB amended authoritative guidance to determine fair value when the
volume and level of activity for the asset or liability have significantly
decreased and on identifying transactions that are not orderly. This guidance
requires disclosure in interim and annual periods of inputs and valuation
techniques used to measure fair value and a discussion of changes in valuation
techniques.




The
guidance was adopted for the period ended September 30, 2009. The adoption did
not have a material impact on the Company’s consolidated
financial statements or the fair value of its financial assets.





In April
2009, the FASB amended authoritative guidance related to the requirements for
the recognition and measurement of other-than-temporary impairments for debt
securities by modifying the pre-existing “intent and ability” indicator. Under
this guidance, an other-than-temporary impairment is triggered when there is
intent to sell the security, it is more likely than not that the security will
be required to be sold before recovery, or the security is not expected to
recover the entire amortized cost basis of the security. Additionally, this
guidance changes the presentation of other-than-temporary impairment in the
income statement for those impairments involving credit losses. The credit loss
component will be recognized in earnings and the remainder of the impairment
will be recorded in other comprehensive income. The guidance was adopted for the
period ended September 30, 2009 and its adoption did not have a material impact
on the Company’s consolidated financial statements.





NOTE
3 - PROPERTY, PLANT AND EQUIPMENT





As of
September 30, 2009 and March 31, 2009, property, plant and equipment consisted
of the following:





September
      30, 2009
              (unaudited)
            
            
            March
      31, 2009
              (audited)Land
            
            $
            110,113
            
            
            $
            110,113Building
      and improvements
            
            
            1,486,349
            
            
            
            1,486,349Machinery
      equipment, furniture and fixtures
            
            
            4,902,734
            
            
            
            4,006,235Equipment
      under capital leases
            
            
            56,242
            
            
            
            56,242Total
      property, plant and equipment
            
            
            6,555,438
            
            
            
            5,658,939Less:
      accumulated depreciation
            
            
            (3,095,008
            )
            
            
            (2,985,505
            )Total
      property, plant and equipment, net
            
            $
            3,460,430
            
            
            $
            2,763,434





Depreciation
expense for the six months ended September 30, 2009 and 2008 was $199,503 and
$267,296, respectively. Land and buildings (which are owned by WM Realty, a
consolidated entity are collateral for the $3,200,000 Amalgamated Bank Mortgage
Loan described in greater detail under Note 6 Long-Term Debt. Other fixed assets
of the Company together with its other personal properties, are collateral for
the Sovereign Bank $4,000,000 secured loan and revolving line of
credit.





The
Company has placed $887,279 of equipment into service during the six months
ended September 30, 2009 that it had ordered in 2008 and received in January
2009.





NOTE
4 - COSTS INCURRED ON UNCOMPLETED CONTRACTS





The
Company recognizes revenues based upon the units-of-delivery method (see Note
2). The advance billing and deposits include down payments for acquisition
of materials and progress payments on contracts. The agreements with the buyers
of the Company’s products allow the Company to offset the progress payments
against the costs incurred.  The following table sets forth information as
to costs incurred on uncompleted contracts as of September 30, 2009 and March
31, 2009:




-9-




September
      30, 2009
              (unaudited)
            
            
            March
      31, 2009
              (audited)Cost
      incurred on uncompleted contracts, beginning balance
            
            $
            12,742,217
            
            
            $
            10,633,862Total
      cost incurred on contracts during the period
            
            
            7,971,267
            
            
            
            28,078,982Less
      cost of sales, during the period
            
            
            (15,225,452
            )
            
            
            (25,970,626
            )Cost
      incurred on uncompleted contracts, ending balance
            
            $
            5,488,032
            
            
            $
            12,742,217Billings
      on uncompleted contracts, beginning balance
            
            $
            9,081,416
            
            
            $
            6,335,179Plus:
      Total billings incurred on contracts, during the period
            
            
            11,239,508
            
            
            
            40,833,972Less:
      Contracts recognized as revenue, during the period
            
            
            (18,436,025
            )
            
            
            (38,087,735
            )Billings
      on uncompleted contracts, ending balance
            
            $
            1,884,898
            
            
            $
            9,081,416Cost
      incurred on uncompleted contracts, ending balance
            
            $
            5,488,032
            
            
            $
            12,742,218Billings
      on uncompleted contracts, ending balance
            
            
            1,884.898
            
            
            
            (9,081,416
            )Costs
      incurred on uncompleted contracts, in excess of progress
      billings
            
            $
            3,603,134
            
            
            $
            3,660,802





As of
September 30, 2009 and March 31, 2009, the Company had deferred revenues
totaling $1,777,472 and $3,945,364, respectively. Deferred revenues represent
the customer prepayments on their contracts.





NOTE
5 - PREPAID EXPENSES





As of
September 30, 2009 and March 31, 2009, the prepaid expenses included the
following:





September
      30, 2009
              (unaudited)
            
            
            March
      31, 2009
              (audited)Prepayments
      on material purchases
            
            $
            -
            
            
            $
            1,418,510Insurance
            
            
            99,170
            
            
            
            140,237Other
            
            
            65,077
            
            
            
            24,487Total
            
            $
            164,247
            
            
            $
            1,583,234





NOTE
6 – LONG-TERM DEBT and CAPITAL LEASE OBLIGATIONS





The
following debt and capital lease obligations were outstanding on September 30,
2009 and March 31, 2009:




September
      30, 2009
              (unaudited)
            
            
            March
      31, 2009
              (audited)Sovereign
      Bank Secured Term Note Payable
            
            $
            2,000,000
            
            
            $
            2,285,715Amalgamated
      Bank Mortgage Loan
            
            
            3,099,464
            
            
            
            3,118,747Capital
      expenditure note, other
            
            
            919,297
            
            
            
            1,098Capital
      Lease
            
            
            37,160
            
            
            
            43,711Total
      long-term debt
            
            
            6,055,921
            
            
            
            5,449,271Principal
      payments due within one year
            
            
            (752,646
            )
            
            
            (624,818
            )Principal
      payments due after one year
            
            $
            5,303,275
            
            
            $
            4,824,453





On
February 24, 2006, Ranor entered into a loan and security agreement with
Sovereign Bank.  Pursuant to the agreement, the bank provided Ranor
with a secured term loan of $4,000,000 (“Term Note”) and also extended to Ranor
a revolving line of credit of up $1,000,000 the (“Revolving
Note”).  On January 29, 2007, the loan and security agreement was
amended, adding a capital expenditure line of credit facility of $3,000,000 to
the above two debt facilities the (“CapEx Note”). Significant terms associated
with the Sovereign debt facilities are summarized below.





Term
Note:





The Term
Note issued on February 24, 2006 has a term of 7 years with an initial fixed
interest rate of 9%.  The interest rate on the Term Note converts from
a fixed rate of 9% to a variable rate on February 28, 2011.  From
February 28, 2011 until maturity the Term Note will bear interest at the Prime
Rate plus 1.5%, payable on a quarterly basis.   Principal is
payable in quarterly installments of $142,857, plus interest, with a final
payment due on March 1, 2013.





The Term
Note is subject to various covenants that include the following: the loan
collateral comprises all personal property of Ranor, including cash, accounts
receivable inventories, equipment, financial and intangible
assets.  The company must also maintain a ratio of earnings available
to cover fixed charges of at least 120% of the fixed charges for the rolling
four quarters, tested at the end of each fiscal quarter.  Additionally
the Company must also maintain an interest coverage ratio of at least 2.1 at the
end of each fiscal quarter.   Ranor’s obligations under the notes
to the bank are guaranteed by Techprecision. The company is in compliance with
all of the covenants under this agreement.








-10-








Revolving
Note:





The
Revolving Note bears interest at a variable rate determined as the Prime Rate,
plus 1.5% annually on any outstanding balance.   The borrowing
amount under the Revolving Note has been limited to the sum of 70% of the
Company’s eligible accounts receivable plus 40% of eligible inventory up to a
maximum borrowing limit of $1,000,000.   The agreement has been
amended several times with the effect of increasing the maximum available
borrowing limit to $2,000,000 as of September 30, 2009.  There were no
borrowings outstanding under this facility as of September 30, 2009 and
2008.  The Company pays an unused credit line fee of .25% on the
average unused credit line amount in the previous month.  The Company
received notice from Sovereign Bank that this facility had been renewed in
August 2009.





Capital
Expenditure Note:





The
initial borrowing limit under the Capital Expenditure Note was $500,000 and has
been amended several times resulting in a borrowing limit of $3,000,000
available under the facility as of September 30, 2009.  The facility
is subject to renewal on an annual basis.  Under the facility, the
Company may borrow 80% of the original purchase cost of qualifying capital
equipment.  The interest rate is LIBOR, plus 3%.  The
Company is obligated to make interest only payments monthly on any borrowings
through November 30, 2009 and on December 1, 2009 any outstanding borrowings and
interest will be due and payable monthly on a five year amortization
schedule.  There was $919,297 borrowed under this facility at
September 30, 2009.   The Company used the proceeds to finance
the purchase of qualifying equipment during the six months
ended  September 30, 2009.





Mortgage
Loan:





The
mortgage loan is an obligation of WM Realty.  The mortgage has a term
of 10 years, maturing October 1, 2016, and carries an annual interest rate of
6.7% with monthly interest and principal payments of $20,955.  The
amortization is based on a 30 year term.  WM Realty has the right to
repay the mortgage note upon payment of a prepayment premium of 5% of the amount
prepaid if


the
prepayment is made during the first two years, and declining to 1% of the amount
prepaid if the prepayment is made during the ninth or tenth year.





In
connection with the mortgage financing of the real estate owned by WM Realty,
Mr. Andrew Levy executed a limited guaranty.  Pursuant to the limited
guaranty, Mr. Levy personally guaranteed the lender the payment of any loss
resulting from WM Realty’s fraud or misrepresentation in connection with the
loan documents, misapplication of rent and insurance proceeds, failure to pay
taxes and other defaults resulting from his or WM Realty’s
misconduct.





Capital
Lease:





During
2007, the Company also leased certain office equipment under a non-cancelable
capital lease. This lease will expire in 2012, and future minimum payments under
this lease for annual periods ending on September 30, 2010 are $15,564, for 2011
- $15,564, and $9,070 through April 2012. Interest payments included in the
above total $3,047 and the present value of all future minimum lease payments
total $37,160. Lease payments for capital lease obligations for the six months
ended September 30, 2009 totaled $6,552.





As of
September 30, 2009, the maturities of long-term debt and capital leases were as
follows:





Year
      ending September 30,2010
            
            $
            752,6462011
            
            
            804,9322012
            
            
            809,0392013
            
            
            528,1582014
            
            
            253,419Due
      after 2014
            
            
            2,907,727Total
            
            $
            6,055,921





NOTE
7 – OPERATING LEASES





Ranor,
Inc. has leased its manufacturing, warehouse and office facilities in
Westminster (Westminster Lease), Massachusetts from WM Realty, a variable
interest entity, for a term of 15 years, commencing February 24, 2006. For each
six month period ended September 30, 2009 and 2008, respectively the Company’s
rent expense equaled $225,000. Since the Company consolidated the operations of
WM Realty, the rental expense is eliminated in consolidation, the building is
carried at cost and depreciation is expensed. The annual rent is subject to an
annual increase based on the increase in the consumer price index.







-11-




The
Company has an option to purchase the real property at fair value and an option
to extend the term of the lease for two additional terms of five years, upon the
same terms. The minimum rent payable for each option term will be the greater of
(i) the minimum rent payable under the lease immediately prior to either the
expiration date, or the expiration of the preceding option term, or (ii) the
fair market rent for the leased premises.





The
Company previously leased approximately 12,720 square feet of manufacturingspace in Fitchburg,
Massachusetts from an unaffiliated lessor. The rent expense for the Fitchburg
facility was $0 and $28,342  for the six months ended September 30,
2009 and 2008, respectively.  The lease provided for rent at the
annual rate of $50,112 with 3% annual increases, starting 2004. The lease
expired in February 2009 and was not renewed.





On
February 24, 2009, the Company entered into a lease for 2,089 square feet of
office space in Centreville, Delaware.  The lease has a three-year
term and provides for initial rent of $2,500 per month, escalating to $3,220 per
month in year two and $3,395 per month in year three of the
lease.  The Company has the option to renew this lease for a period of
three years at the end of the lease term. During the six months ended September
30, 2009 the Company’s rent expense with respect to the Delaware property was
$15,000.





Future
minimum lease payments required under operating leases in the aggregate at
September 30, 2009 totaled $5,679,195. The totals for each annual period ending
on September 30 are: 2010 - $482,160, 2011 - $489,165, 2012 - $470,370, 2013 -
$450,000, 2014-$450,000, and $3,337,500 for the years thereafter.





NOTE
8 - INCOME TAXES





For the
three and six months ended September 30, 2009 and 2008, the Company recorded
Federal and State income tax expense of $550,388 and $1,871,968, and $366,703
and $2,936,218, respectively. The estimated annual effective tax rates for the
six months ended September 30, 2009 and September 30, 2008 were 30% and 42%,
respectively. The difference between the provision for income taxes and the
income tax determined by applying the statutory federal income tax rate of 34%
was due primarily to differences in the lives and methods used to depreciate
and/or amortize our property and equipment, timing differences of expenses
related compensated absences, net operating loss carryforwards, and operating
losses that occurred during the period.





As of
September 30, 2009, the Company’s federal net operating loss carry-forward was
approximately $1,780,714. If not utilized, the federal net operating loss
carry-forward of Ranor and Techprecision will expire in 2025 and 2027,
respectively. Furthermore, because of over fifty percent change in ownership as
a consequence of the reverse acquisition in February 2006, as a result of the
application of Section 382 of the Internal Revenue Code, the amount of net
operating loss carry forward used in any one year in the future is substantially
limited.





At
September 30, 2009 and March 31, 2009, the Company provided a full valuation
allowance for its deferred tax assets. The Company believes sufficient
uncertainty exists regarding the realization of the deferred tax
assets.





NOTE
9 - RELATED PARTY TRANSACTIONS





Sale
and Lease Agreement and Intercompany Receivable





On
February 24, 2006, WM Realty borrowed $3,300,000 to finance the purchase of
Ranor’s real property. WM Realty purchased the real property for $3,000,000 and
leased the property on which Ranor’s facilities are located pursuant to a net
lease agreement. The property was appraised on October 31, 2005 at $4,750,000.
The Company advanced $226,808 to WM Realty to pay closing costs, which advance
was repaid when WM Realty refinanced the mortgage in October 2006. WM Realty was
formed solely for this purpose; its partners are stockholders of the Company.
The Company considers WM Realty a variable interest entity and therefore has
consolidated its operations into the Company.





On
October 4, 2006, WM Realty placed a new mortgage of $3.2 million on the property
and the then existing mortgage of $3.1 million was paid off. The new mortgage
has a term of ten years, bears interest at 6.75% per annum, and provides for
monthly payments of principal and interest of $20,595 (See Note 6). In
connection with the new mortgage, Andrew Levy, the managing member of WM Realty,
executed a limited guaranty. pursuant to which Mr. Levy guaranteed the lender
the payment of any loss resulting from WM Realty’s fraud or misrepresentation in
connection with the loan documents, misapplication of rent and insurance
proceeds, failure to pay taxes and other defaults resulting from his or WM
Realty’s misconduct.





The only
assets of WM Realty available to settle its obligations are $49,542 of cash and
real property acquired from Ranor, Inc. at a cost of $3,000,000 less $321,551 of
accumulated depreciation.  The real property has a net carrying cost
of $1,135,959 on Techprecision’s consolidated balance sheet. The only liability
of WM Realty is the carrying amount of mortgage payable to Amalgamated Bank for
$3,099,465.





Amalgamated
Bank, the sole creditor of WM realty, has no recourse to the general credit of
Techprecision.






-12-





Distribution
to WM Realty Members





WM Realty
had a deficit equity balance of $369,662 on September 30, 2009. During the three
and six months ended September 30, 2009, WM Realty had a net income of $64,060
and $64,060, and capital distributions of $46,873 and $92,248.





NOTE
10 - CAPITAL STOCK





Preferred
Stock





The
Company has 10,000,000 authorized shares of preferred stock and the board of
directors has broad power to create one or more series of preferred stock and to
designate the rights, preferences, privileges and limitation of the holders of
such series. The board of directors has created one series of preferred stock -
the series A convertible preferred stock (“series A preferred
stock”).





Each
share of series A preferred stock was initially convertible into one share of
common stock. As a result of the failure of the Company to meet the levels of
earnings before interest, taxes, depreciation and amortization for the years
ended March 31, 2006 and 2007, the conversion rate changed, and, at September
30, 2009, each share of series A preferred stock was convertible into 1.3072
shares of common stock, with an effective conversion price of
$.2180.





In
February 2006, Series A preferred stock (7,719,250 shares) and warrants to
purchase a total of 11,220,000 shares of common stock were issued pursuant to a
securities purchase agreement dated February 24,
2006.  Contemporaneously with the securities purchase agreement, the
Company entered into a registration rights agreement with the investor, pursuant
to which it agreed to register the shares of common stock underlying the
securities in accordance with a schedule. The registration statement was not
declared effective in accordance with the original schedule, and the Company
issued 33,212 shares of series A preferred stock to the investor as liquidated
damages.





In
addition to the conversion rights described above, the certificate of
designation for the series A preferred stock provides that the holder of the
series A preferred stock or its affiliates will not be entitled to convert the
series A preferred stock into shares of common stock or exercise warrants to the
extent that such conversion or exercise would result in beneficial ownership by
the investor and its affiliates of more than 4.9% of the shares of common stock
outstanding after such exercise or conversion. This provision cannot be
amended.





The
holders of the series A preferred stock have no voting rights. No dividends are
payable with respect to the series A preferred stock and no dividends are
payable on common stock while series A preferred stock is outstanding. The
common stock will not be redeemed while preferred stock is
outstanding.





Upon any
liquidation the Company is required to pay $.285 for each share of Series A
preferred stock. The payment will be made before any payment to holders of any
junior securities and after payment to holders of securities that are senior to
the series A preferred stock.





Under the
terms of the purchase agreement, the investor has the right of first refusal in
the event that the Company seeks to raise additional funds through a private
placement of securities, other than exempt issuances. The percentage of shares
that investor may acquire is based on the ratio of shares held by the investor
plus the number of shares issuable upon conversion of series A preferred stock
owned by the investor to the total of such shares.





On August
14, 2009, our Board adopted a resolution authorizing and directing that the
designated shares of Series A convertible Preferred Stock be increased from
9,000,000 to 9,890,980.





On August
14, 2009, the Company entered into a warrant exchange agreement pursuant to
which the Company agreed to issue 3,395,472 shares of Series A convertible
preferred stock to certain investors in exchange for warrants to purchase
9,320,000 shares of common stock. The warrants had initial exercise prices
ranging from $0.57 to $0.86 per share. As a result of the Company’s failure to
meet the EBITDA per share targets for the years ended March 31, 2006 and 2007,
the range of exercise prices per share of the warrants were reduced to $.44 to
$.65. Effective September 11, 2009, the warrants were surrendered to the
Company, the Company filed an amendment to its certificate of designation
relating to its Series A convertible Preferred Stock to increase the number of
designated shares of Series A convertible preferred stock, and the 3,595,472
shares of Series A preferred stock were issued pursuant to the terms of the
warrant exchange agreement.  All warrants surrendered in connection
with the warrant exchange were cancelled.





During
the six months ended September 30, 2009, there were no conversions of series A
preferred stock into shares of common stock.


The
Company had 9,890,980 and 6,295,908 shares of series A preferred stock
outstanding at September 30, 2009 and March 31, 2009, respectively.






-13-





Common
Stock and Warrants





The
Company had 90,000,000 authorized common shares at September 30, 2009 and March
31, 2009 and had 13,930,846 and 13,907,513 shares of common stock outstanding at
September 30, 2009 and March 31, 2009, respectively. The Company issued 23,333
shares of common stock in connection with the exercise of stock options on
August 20 and September 30, 2009.





In
February 2006, we issued to the investor warrants to purchase 11,220,000 shares
of common stock in connection with its purchase of the series A preferred stock.
These warrants are exercisable, in part or full, at any time from February 24,
2006 until February 24, 2011. If the shares of common stock are not registered
pursuant to the Securities Act of 1933, the holders of the warrants have
cashless exercise rights which will enable them to receive the value of the
appreciation in the common stock through the issuance of additional shares of
common stock. These warrants had initial exercise prices of $0.57 as to
5,610,000 shares and $0.855 as to 5,610,000 shares. As a result of the Company’s
failure to meet the EBITDA per share targets for the years ended March 31, 2006
and 2007, the exercise prices per share of the warrants were reduced from $0.57
to $.43605 and from $0.855 to $.654075, respectively.





On
September 1, 2007, the Company entered into a contract with an investor
relations firm pursuant to which the Company issued three-year warrants to
purchase 112,500 shares of common stock at an exercise price of $1.40 per
share.   Using the Black-Scholes options pricing formula assuming a
risk free rate of 5%, volatility of 28.5%, a term of three years, and the price
of the common stock on September 1, 2007 of $0.285 per share, the value of the
warrant was calculated at $0.0001 per share issuable upon exercise of the
warrant, or a total of $11. Since the warrant permits the Company to deliver
unregistered shares, the Company has the control in settling the contract by
issuing equity. The cost of warrants was added as additional paid in
capital.





On August
14, 2009, the Company completed a transaction with two shareholders resulting in
the issuance of 3,395,472 Series A preferred shares in exchange for the
surrender of 9,320,000 warrants.   Subsequent to the exchange,
all of the 9,320,000 warrants were cancelled by the Company.





As of
September 30, 2009, the Company had 112,500 warrants issued and outstanding and
during the three month period ending September 30, 2009, 9,320,000 warrants were
cancelled.





NOTE
11 - SHARE BASED COMPENSATION





In 2006,
the directors adopted, and the stockholders approved, the 2006 long-term
incentive plan (the “Plan”) covering 1,000,000 shares of common stock. The Plan
provides for the grant of incentive and non-qualified options, stock grants,
stock appreciation rights and other equity-based incentives to employees,
including officers, and consultants. The Plan is to be administered by a
committee of not less than two directors each of whom is to be an independent
director. In the absence of a committee, the plan is administered by the board
of directors. Independent directors are not eligible for discretionary options.
Pursuant to the Plan, each newly elected independent director received at the
time of his election, a five-year option to purchase 50,000 shares of common
stock at the market price on the date of his or her election.  In
addition, the plan provides for the annual grant of an option to purchase 5,000
shares of common stock on July 1st of each year, commencing July 1, 2009, with
respect to directors in office in July 2006 and commencing on July 1 coincident
with or following the third anniversary of the date of his or her first
election.  These options are exercisable in
installments.  Pursuant to the Plan, in July 2006, the Company granted
non-qualified stock options to purchase an aggregate of 150,000 shares of common
stock at an exercise price of $.285 per share, which was determined to be the
fair market value on the date of grant, to the three independent
directors.





On April
1, 2007, the Company granted options to purchase 211,660 shares of common stock
at an exercise price of $.285 to the employees. The company shares did not trade
in the market and had no intrinsic value at the date of grant.  It was
not possible to reasonably estimate fair market value at their grant date, fair
value, and thus according to SFAS 123(R) they were measured at intrinsic value.





On
October 1, 2008, the Company granted options to purchase 22,500 shares of common
stock at an exercise price of $1.31 per share to its independent
directors.  The options provided for vesting as follows: 13,500 were
immediately vested on the date of grant and the remaining 9,000 options vest in
two installments of 4,500 each on the first and second anniversary of the grant
date.  The options are not covered under the plan.





On March
23, 2009, the Company entered into an employment agreement with the Company’s
CFO, pursuant to which, he was granted an option to purchase 150,000 shares of
common stock options at an exercise price of $0.49 per share, being the fair
market value on the date of grant.  The options will vest in equal
amounts of 50,000 over three years on the anniversary of the date of this
agreement.  Pursuant to the terms of the employment agreement, the
option exercise price was determined based upon the market price of the
Company’s common stock as of the date of grant. Any future option grants will be
in the sole discretion of the Board.





On July
1, 2009, the Company granted stock options to three directors to purchase 15,000
shares of common stock at an exercise price of $0.50 per share, pursuant to the
plan provision following the third anniversary date of each director’s first
election to the board. The shares were measured on the grant date and had a fair
market value of $6,900.





The fair
value was estimated using the Black-Scholes option-pricing model based on the
closing stock prices at the grant date and the weighted average assumptions
specific to the underlying options. Expected volatility assumptions are based on
the historical volatility of our common stock. The risk-free interest rate was
selected based upon yields of five year US Treasury issues. The expected life of
the option was estimated at one half of the contractual term of the option and
the vesting period. The assumptions utilized for option grants during the
periods presented were 156% for volatility, 2.5% for the risk free interest
rate, and five years for the expected life of the options.






-14-





At
September 30, 2009, 440,841 shares of common stock were available for grant
under the Plan.





The
following table summarizes information about our options which are fully vested,
currently exercisable and expected to vest at September 30, 2009:




Weighted
      AverageNumber
      Of
              
              
              Weighted
                  Average
              
              
              Aggregate
                  Intrinsic
              Remaining
                Contractual
      Life
                LKi\(Options
              
              
              Exercise
      Price
              
              
              Value
              (in
      years)Outstanding
      at 3/31/2009
              
              
              544,159
              
              
              $
              0.384Granted
              
              
              15,000
              
              
              
              0.500Exercised
              
              
              (23,333)
              
              
              
              0.285
              
              
              $
              6,650Outstanding
      at 9/30/2009
              
              
              535,826
              
              
              $
              0.391
              
              
              $
              280,720
              
              4.51Outstanding
      but not vested 9/30/2009
              
              
              174,000
              
              
              $
              0.533
              
              
              $
              67,500
              
              4.91Exercisable
      and vested at 9/30/2009
              
              
              361,826
              
              
              $
              0.323
              
              
              $
              214,220
              
              4.32




As of
September 30, 2009 there was $77,594 of total unrecognized compensation cost
related to non vested stock options. These costs are expected to be recognized
over three years. No shares fully vested during the six months ended
September 30, 2009.





NOTE
12 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS





The
Company maintains bank account balances, which, at times, may exceed insured
limits.  At September 30, 2009, there were receivable balances
outstanding from three customers comprising 61.7% of the total receivables
balance; the largest balance from a single customer represented 31% of our
receivables balance, while the smallest balance from a single customer making up
this group was 15%.  The Company has not experienced any losses with
these accounts and believes that it is not exposed to any significant credit
risk on cash.





The
Company has been dependent in each year on a small number of customers who
generate a significant portion of our business, and these customers change from
year to year. To the extent that the Company is unable to generate orders from
new customers, it may have difficulty operating profitably.





The
following table sets forth information as to revenue derived from those
customers who accounted for more than 10% of our revenue in the six months ended
September 30, 2009 and 2008:





Six
      Months Ended September 30,2009
            
            
            2008Customer
            
            
            Dollars
            
            
            Percent
            
            
            Dollars
            
            
            PercentA
            
            
            $
            9,735,412
            
            
            
            53%
            
            
            $
            16,440,122
            
            
            
            65%B
            
            
            
            3,082,592
            
            
            
            17%
            
            
            
            3,684,978
            
            
            
            15%





During
April 2009, the Company’s largest customer, GT Solar, provided notice of its
intent to cancel a majority of their open purchase orders reducing their total
purchase commitment as of March 31, 2009 by approximately $16.8
million.  During the quarter ended September 30, 2009, the Company
completed the sale of $8.9 million of inventory material to GT Solar as part of
the cancellation.  As of September 30, 2009, the Company had remaining
open purchase orders of $2.4 million from GT Solar, included in its backlog of
$14.4 million.





NOTE
13 EARNINGS PER SHARE (“EPS”)





Basic EPS
is computed by dividing reported earnings available to stockholders by the
weighted average shares outstanding. Diluted EPS also includes the effect of
dilutive potential common shares. The following table provides a reconciliation
of the numerators and denominators reflected in the basic and diluted earnings
per share computations, as required.




-15-






Three
      months ended
            
            
            Six
      months endedSeptember
      30,
            
            
            September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008Basic
      EPSNet
      income
            
            $
            1,320,634
            
            
            $
            2,476,100
            
            
            $
            1,195,889
            
            
            $
            4,047,796Weighted
      average number of shares outstanding
            
            
            13,916,462
            
            
            
            13,823,245
            
            
            
            13,912,012
            
            
            
            13,379,358Basic
      income per share
            
            $
            0.09
            
            
            $
            0.18
            
            
            $
            0.09
            
            
            $
            0.30Diluted
      EPSNet
      income
            
            $
            1,337,902
            
            
            $
            2,476,100
            
            
            $
            1,213,157
            
            
            $
            4,047,796Dilutive
      effect of stock options, warrants and preferred stock
            
            
            7,383,687
            
            
            
            13,155,085
            
            
            
            6,018,226
            
            
            
            13,357,320Diluted
      weighted average shares
            
            
            21,300,150
            
            
            
            26,978,330
            
            
            
            19,930,238
            
            
            
            26,736,678Diluted
      income (loss) per share
            
            $
            0.06
            
            
            $
            0.09
            
            
            $
            0.06
            
            
            $
            0.15





Item 2.Management’s Discussion and Analysis
of Financial Condition and Results of Operations





Statement
Regarding Forward Looking Disclosure





The
following discussion of the results of our operations and financial condition
should be read in conjunction with our financial statements and the related
notes, which appear elsewhere. This quarterly report of on Form 10-Q, including
this section entitled “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. Forward-looking statements include, but are not limited to, statements
that express our intentions, beliefs, expectations, strategies, predictions or
any other statements relating to our future activities or other future events or
conditions. These statements are based on current expectations, estimates and
projections about our business based in part on assumptions made by management.
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, and probably will, differ materially from what is
expressed or forecasted in the forward-looking statements due to numerous
factors. Those factors include those risks discussed under “Management’s
Discussion and Analysis” in our Form 10-K for the year ended March 31, 2009 and
this Item 2 in this Form 10-Q and those described in any other filings which we
make with the SEC. In addition, such statements could be affected by risks and
uncertainties related to the U.S. and global economies, to our ability to
generate business on an on-going business, to obtain any required financing, to
receive contract awards from the competitive bidding process, maintain standards
to enable us to manufacture products to exacting specifications, enter new
markets for our services, market and customer acceptance, our reliance on a
small number of customers for a significant percentage of our business,
competition, government regulations and requirements, pricing and development
difficulties, our ability to make acquisitions and successfully integrate those
acquisitions with our business, as well as general industry and market
conditions and growth rates, and general economic conditions. 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 report,
except as required by applicable law.





Any
forward-looking statements speak only as of the date on which they are made, and
we do not undertake any obligation to update any forward-looking statement to
reflect events or circumstances after the date of this report. Investors should
evaluate any statements made by the Company in light of these important
factors.





Overview





We offer
a full range of services required to transform raw material into precise
finished products. Our manufacturing capabilities include: fabrication
operations which include cutting, press and roll forming, assembly, welding,
heat treating, blasting and painting; and machining operations which include CNC
(computer numerical controlled) horizontal and vertical milling centers. We also
provide support services in addition to our manufacturing capabilities: which
include manufacturing engineering (planning, fixture and tooling development,
manufacturability), quality control (inspection and testing), and production
control (scheduling, project management and expediting).





All
manufacturing is done in accordance with our written quality assurance program,
which meets specific national and international codes, standards, and
specifications. Ranor holds several certificates of authorization issued by the
American Society of Mechanical Engineers and the National Board of Boiler and
Pressure Vessel Inspectors. The standards used are specific to the customers’
needs, and our manufacturing operations are conducted in accordance with these
standards.





During
the past several years, the demand for our services has been relatively
strong. However, recent recessionary pressures have affected the requirements of
our customers.  GT Solar, which has been our largest customer for each
of the past three fiscal years, slowed production significantly during the
second half of the fiscal year ended March 31, 2009 and in April
2009, canceled the majority of its outstanding purchase
orders.  Other customers have delayed deliveries of existing orders
and have delayed the placement of new orders.







-16-




A
significant portion of our revenue is generated by a small number of customers.
During the six months ended September 30, 2009, our largest customer, GT Solar,
accounted for approximately 52.8% of our revenue; our second largest customer,
BAE Systems, accounted for approximately 16.7% of our revenue; while all other
customers were less than 10% of our revenue for the six month period ended
September 30, 2009. For the six months ended September 30, 2008, our largest
customer, GT Solar, accounted for 69% of our revenue and BAE accounted for 15%
of our revenue.





Our
contracts are generated both through negotiation with customers and from bids
made pursuant to requests for proposals. 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, our financial condition
and our ability to price our services competitively.  Although some of
our contracts contemplate the manufacture of one or a limited number of units,
we are seeking more long-term projects with a more predictable cost structure.
During the six months ended September 30, 2009, our sales and net income were
$18.4 million and $1.2 million, as compared to sales of $25.3 million and net
income of $4.0 million, for the six months ended September 30,
2008.  Our gross margin for the six months ended September 30, 2009
was 17% as compared to 33% in the six months ended September 30, 2008 as a
result of lower sales volume.  Both net sales and gross margin
declined in the six months ended September 30, 2009, and the global economic
downturn continues to have an adverse impact on our customers.  In
August 2009, we completed the transfer of inventory to GT Solar as part of their
April 2009 cancellation.  Accordingly, our revenue for the three month
and six month periods ended September 30, 2009, includes $8.9 million of revenue
related to materials transferred to GT Solar as part of their order
cancellation.   The inventory transfer included a heavy mix of
raw materials and therefore carried a lower margin than we typically generate
through the sale of finished products.





Because
our revenues are derived from the sale of goods manufactured pursuant to a
contract, and we do not sell from inventory, it is necessary for us to
constantly seek new contracts. There may be a time lag between our completion of
one contract and commencement of work on another contract. During such a period,
we would continue to incur our overhead expense but with lower revenue.
Furthermore, changes in either the scope of a contract or the delivery schedule
may impact the revenue we receive under the contract and the allocation of
manpower.





As of
September 30, 2009, we had a backlog of orders totaling approximately $14.4
million, of which approximately $2.4 million represented orders from GT
Solar.  Our corresponding backlog as of September 30, 2008 was $45.5
million of which GT Solar represented 73%.





Although
we provide manufacturing services for large governmental programs, we usually do
not work directly for agencies of the United States government. Rather, we
perform our services for large governmental contractors and large utility
companies. However, our business is dependent in part on the continuation of
governmental programs which require the services we provide.





Growth
Strategy





Our
strategy is to leverage our core competence as a manufacturer of high-precision,
large-scale metal fabrications and machined components to expand our business
into areas which have shown increasing demand and which we believe could
generate higher margins.





Diversifying
Our Core Industries





We
believe that rising energy demands along with increasing environmental concerns
are likely to continue to drive demand in the alternative energy industry,
particularly the solar, wind and nuclear power industries. Because of our
capabilities and the nature of the equipment required by companies in the
alternative energy industries, we intend to focus our services in this
sector.  We also expect to market our services for medical device
applications where customer requirements demand strict tolerances and an ability
to manufacture complex heavy equipment.





As a
result of both the increased prices of oil and gas and the resulting greenhouse
gas emissions, nuclear power may become an increasingly important source of
energy. Because of our manufacturing capabilities, our certification from the
American Society of Mechanical Engineers and our historic relationships with
suppliers in the nuclear power industry, we believe that we are well positioned
to benefit from any increased activity in the nuclear sector. Revenues derived
from the nuclear power industry were $1.5 million for the six months ended
September 30, 2009 and currently constitute approximately 1.7% of our backlog
that we expect to deliver by March 31, 2010 and March 2011. We cannot assure you
that we will be able to develop any significant business from the nuclear
industry.





In
addition to the nuclear energy industry, we are also exploring potential
business applications focused on the medical industry.  These efforts
include the development and fabrication of medical isotopes storage solutions
and the development and fabrication of critical components for proton beam
therapy machines designed to be utilized in the treatment of
cancer.  Net sales from our proton beam therapy customer accounted for
4.7% of our total net sales for the six months ended September 30, 2009 while
sales to our medical isotope customer were not significant during the six months
ended September 30, 2009.







-17-




Expansion
of Manufacturing Capabilities





In
addition to the possible expansion of our existing manufacturing capabilities,
we may, from time to time, pursue opportunistic acquisitions to increase and
strengthen our manufacturing, marketing, product development capabilities and
customer diversification.  We do not have any current plans for any
acquisition, and we cannot give any assurance that we will complete any
acquisition.





Impact
of Recent Legislation





The
Congress has passed and the President has signed the $800 billion American
Recovery and Reinvestment Act of 2009 into law. Significant components of the
bill allow manufacturing concerns to apply various tax credits and apply for
government loan guarantees for the development or retooling of existing
facilities using electricity derived from renewable and previously underutilized
sources.  The Company has historically derived significant revenues
from contracts with manufacturing concerns in these alternative energy
fields.  The American Recovery and Reinvestment Act extended the 50%
Bonus depreciation enacted as a part of the Economic Stimulus Act of
2008.  Under the Act, 50% of the basis of the qualified property may
be deducted in the year the property is placed in service (i.e. 2008 and
2009).  The remaining 50% is recovered under otherwise applicable
depreciation rules. This significant tax incentive could drive increased demand
on the part of some customers.





Critical
Accounting Policies





The
preparation of the Company’s financial statements in conformity with generally
accepted accounting principles in the United States requires our management to
make assumptions, estimates and judgments that affect the amounts reported in
the financial statements, including all notes thereto, and related disclosures
of commitments and contingencies, if any. We rely on historical experience and
other assumptions we believe to be reasonable in making our estimates. Actual
financial results of the operations could differ materially from such estimates.
There have been no significant changes in the assumptions, estimates and
judgments used in the preparation of our financial statements for the three and
six months ended September 30, 2009 from the assumptions, estimates and
judgments used in the preparation of our audited financial statements for the
year ended March 31, 2009.





Revenue
Recognition and Costs Incurred





We derive
revenues from (i) the fabrication of large metal components for our customers;
(ii) the precision machining of such large metal components, including
incidental engineering services; and (iii) the installation of such components
at the customers’ locations when the scope of the project requires such
installations.





Revenue
and costs are recognized on the units of delivery method. This method recognizes
as revenue the contract price of units of the product delivered during each
period and the costs allocable to the delivered units as the cost of earned
revenue. When the sales agreements provide for separate billing of engineering
services, the revenues for those services are recognized when the services are
completed. Costs allocable to undelivered units are reported in the balance
sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed
upon contract price for customer directed changes, constructive changes,
customer delays or other causes of additional contract costs are recognized in
contract value if it is probable that a claim for such amounts will result in
additional revenue and the amounts can be reasonably estimated. Revisions in
cost and profit estimates are reflected in the period in which the facts
requiring the revision become known and are estimable. The unit of delivery
method requires the existence of a contract to provide the persuasive evidence
of an arrangement and determinable seller’s price, delivery of the product
and reasonable collection prospects. The Company has written agreements with the
customers that specify contract prices and delivery terms. The Company
recognizes revenues only when the collection prospects are
reasonable.





Adjustments
to cost estimates are made periodically, and losses expected to be incurred on
contracts in progress are charged to operations in the period such losses are
determined and are reflected as reductions of the carrying value of the costs
incurred on uncompleted contracts. Costs incurred on uncompleted contracts
consist of labor, overhead, and materials. Work in process is stated at the
lower of cost or market and reflects accrued losses, if required, on uncompleted
contracts.





Variable
Interest Entity





We have
consolidated WM Realty, a variable interest entity from which we lease our real
estate.





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.






-18-





As of
September 30, 2009, the Company’s federal net operating loss carry-forward was
approximately $1,780,714. If not utilized, the federal net operating loss
carry-forward of Ranor and Techprecision will expire in 2025 and 2027,
respectively. Furthermore, because of the over fifty-percent change in ownership
as a consequence of the reverse acquisition in February 2006, the amount of net
operating loss carry forward used in any one year in the future is substantially
limited.





New
Accounting Pronouncements





See Note
2, Significant Accounting Policies, in the Notes to the Consolidated Financial
Statements.





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), macro
economic factors, including the availability of capital that may be needed by
our customers, and political, regulatory and legal conditions in the United
States and foreign markets.





Our
results of operations are also affected by a number of other factors including,
among other things, success in booking new contracts and when we are able to
recognize the related revenue, delays in customer acceptances of our products,
delays in deliveries of ordered products and our rate of progress in the
fulfillment of our obligations under our contracts. A delay in deliveries or
cancellations of orders would cause us to have inventories in excess of our
short-term needs, and may delay our ability to recognize, or prevent us from
recognizing, revenue on contracts in our order backlog.





Recent
disruptions in the global capital markets have resulted in reduced availability
of funding worldwide and a higher level of uncertainty experienced by some
end-user solar cell module manufacturers. As a result, our customers have made
reductions in their direct labor workforce and reported decreases in their order
backlogs as well as adjustments to the procurement of materials in their
photovoltaic related production.  In April, 2009, GT Solar, our
largest customer cancelled the majority of their open purchase orders with us
and in August 2009 we completed the material transfer of $8.9 million to GT
Solar to finalize the order cancellation.  While we have open orders
and backlog with GT Solar they are not at comparable levels prior to the
cancellation.





Three
Months Ended September 30, 2009 and 2008





The
following table sets forth information from our statements of operations for the
three months ended September 30, 2009 and 2008, in dollars and as a percentage
of revenue (dollars in thousands):





Changes
      Three MonthsEnded
      September 30,2009
            
            
            2008
            
            
            2009
      to 2008Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            PercentNet
      sales
            
            $
            15,117
            
            
            
            100
            %
            
            $
            13,601
            
            
            
            100
            %
            
            $
            1,516
            
            
            
            11
            %Cost
      of sales
            
            
            12,471
            
            
            
            83
            %
            
            
            8,588
            
            
            
            63
            %
            
            
            3,883
            
            
            
            45
            %Gross
      profit
            
            
            2,646
            
            
            
            17
            %
            
            
            5,013
            
            
            
            37
            %
            
            
            (2,367
            )
            
            
            (47
            )%Payroll
      and related costs
            
            
            331
            
            
            
            2
            %
            
            
            322
            
            
            
            2
            %
            
            
            9
            
            
            
            3
            %Professional
      expense
            
            
            111
            
            
            
            1
            %
            
            
            73
            
            
            
            1
            %
            
            
            38
            
            
            
            53
            %Selling,
      general and administrative
            
            
            227
            
            
            
            2
            %
            
            
            150
            
            
            
            1
            %
            
            
            77
            
            
            
            51
            %Total
      operating expenses
            
            
            669
            
            
            
            4
            %
            
            
            545
            
            
            
            4
            %
            
            
            124
            
            
            
            23
            %Income
      from operations
            
            
            1,977
            
            
            
            13
            %
            
            
            4,468
            
            
            
            33
            %
            
            
            (2,491
            )
            
            
            (56
            )%Interest
      expense, net
            
            
            (102
            )
            
            
            (1
            )%
            
            
            (115
            )
            
            
            (1
            )%
            
            
            13
            
            
            
            11
            %Finance
      costs
            
            
            (4
            )
            
            
            0
            %
            
            
            (5
            )
            
            
            0
            %
            
            
            1
            
            
            
            20
            %Income
      before income taxes
            
            
            1,871
            
            
            
            12
            %
            
            
            4,348
            
            
            
            32
            %
            
            
            (2,477
            )
            
            
            (57
            )%Provision
      for income taxes, net
            
            
            550
            
            
            
            4
            %
            
            
            1,872
            
            
            
            14
            %
            
            
            (1,322
            )
            
            
            (71
            )%Net
      income
            
            $
            1,321
            
            
            
            9
            %
            
            
            2,476
            
            
            
            18
            %
            
            
            (1,155
            )
            
            
            (47
            )%





Net
Sales





Net sales
increased by $1.5 million, or 11%, from $13.6 million for the three months
ended September 30, 2008 to $15.1 million for the three months ended
September 30, 2009.  Net sales included $8.9 million of material sales
to GT Solar that were triggered by that customer’s April 2009 cancellation of
open purchase orders.  This non-recurring material transfer represents
59.3% of the net sales for the quarter.






-19-





Cost
of Sales and Gross Margin





Our cost
of sales for the three months ended September 30, 2009 increased by $3.9
million to $12.5 million, an increase of 45%, from $8.6 million for
the three months ended September 30, 2008. The increase in the cost of sales was
principally due to the impact of the non-recurring transfer of inventory to GT
Solar as part of its April 2009 order cancellation.  The decline in
gross profit margin was $2.4 million (47%) from $5.0 million or 37% of
sales, during the three months ended September 30, 2008 to $2.6 million or 17%
of sales for the period ending September 30, 2009.  Contributing to
the decline in gross margin were costs associated with underutilized
capacity.  Further, the mix of completed projects and the lower margin
inventory transfer resulted in an overall reduction in the gross margin for the
quarter ended September 30, 2009 when compared against the same quarter in
2008.





Operating
Expenses





Our
payroll and related costs within our selling and administrative costs were
$331,302 for the three months ended September 30, 2009 as compared to $322,035
for the three months ended September 30, 2008. The $9,267 (3%) increase in
payroll is due primarily to an increase in compensation compared to the same
three month period in the prior year.





Professional
fees increased from $72,782 for the three months ended September 30, 2008 to
$110,411 for the three months ended September 30, 2009. This increase was
primarily attributable to an increase in legal costs related to the August
warrant exchange, contract review and various SEC filing
requirements.





Selling,
administrative and other expenses for the three months ended September 30, 2009
were $219,073  as compared to $150,138 for three months ended
September 30, 2008, an increase of $68,935 or 46%.  Additional
expenditures related to consulting fees and insurance were the primary
components of the increase.





Interest
Expense





Interest
expense for three months ended September 30, 2009 was $107,390 compared with
$115,090 for the three months ended September 30, 2008. The decrease of $7,700
(11%) is a result of lower principal balances of the Sovereign and Amalgamated
bank loans outstanding in the three months ended September 30, 2009 as compared
to the three months ended September 30, 2008.





Income
Taxes





For the
three months ended September 30, 2009 and 2008, the Company recorded provisions
for the Federal and State income tax expense of $550,388 and $1,871,968,
respectively. The effective tax expense rates for the three months ended
September 30, 2009 and 2008 were 30% and 43% respectively. The difference
between the provision for income taxes and the income tax determined by applying
the statutory federal income tax rate of 34% was due primarily to differences in
the lives and methods used to depreciate and/or amortize our property and
equipment, timing differences of expenses related to compensated absences, and
the expected utilization of net operating loss carryforwards.





Net
Income





As a
result of the foregoing, our net income was $1.3 million or $0.09  and
$0.06 per share basic and diluted, respectively, for the three months ended
September 30, 2009, as compared to net income of $2.5 million  $0.18
and $.0.09 per share basic and diluted, respectively, for the three months ended
September 30, 2008.





Results
of Operations for the Six Months Ended September 30, 2009 and 2008





The
following table sets forth information from our statements of operations for the
six months ended September 30, 2009 and 2008, in dollars and as a percentage of
revenue (dollars in thousands):





Changes
      Six MonthsEnded
      September 30,2009
            
            
            2008
            
            
            2009
      to 2008Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            PercentNet
      sales
            
            $
            18,436
            
            
            
            100
            %
            
            $
            25,259
            
            
            
            100
            %
            
            $
            (6,823
            )
            
            
            (27
            )%Cost
      of sales
            
            
            15,225
            
            
            
            83
            %
            
            
            16,866
            
            
            
            67
            %
            
            
            (1.641
            )
            
            
            (10
            )%Gross
      profit
            
            
            3,211
            
            
            
            17
            %
            
            
            8,393
            
            
            
            33
            %
            
            
            (5,182
            )
            
            
            (62
            )%Payroll
      and related costs
            
            
            725
            
            
            
            4
            %
            
            
            757
            
            
            
            3
            %
            
            
            (32
            )
            
            
            (4
            )%Professional
      expense
            
            
            187
            
            
            
            2
            %
            
            
            120
            
            
            
            1
            %
            
            
            67
            
            
            
            55
            %Selling,
      general and administrative
            
            
            525
            
            
            
            3
            
            
            
            289
            
            
            
            1
            
            
            
            236
            
            
            
            82
            %Total
      operating expenses
            
            
            1,437
            
            
            
            8
            %
            
            
            1,166
            
            
            
            5
            %
            
            
            271
            
            
            
            23
            %Income from
      operations
            
            
            1,774
            
            
            
            10
            %
            
            
            7,227
            
            
            
            29
            %
            
            
            (5,453
            )
            
            
            (75
            )%Interest
      expense, net
            
            
            (203
            )
            
            
            (1
            )%
            
            
            (234
            
            
            
            (1
            )%
            
            
            30
            
            
            
            13
            %Finance
      costs
            
            
            (8
            )
            
            
            0
            %
            
            
            (9
            )
            
            
            0
            %
            
            
            1
            
            
            
            11
            %Income
      before income taxes
            
            
            1,563
            
            
            
            9
            %
            
            
            6,984
            
            
            
            28
            %
            
            
            (5,421
            )
            
            
            (78
            )%Provision
      for income taxes
            
            
            (367
            )
            
            
            (2
            )%
            
            
            (2,936
            )
            
            
            (12
            )%
            
            
            (2,569
            )
            
            
            (88
            )%Net
      income
            
            $
            1,196
            
            
            
            7
            %
            
            $
            4,048
            
            
            
            16
            %
            
            $
            (2,852
            )
            
            
            (70
            )%







-20-




Net
Sales





Net sales
decreased by $6.8 million, or 27%, from $25.2 million for the six months
ended September 30, 2008 to $18.4 million for the six months ended
September 30, 2009. A significant portion of the decrease resulted from decrease
in sales to our largest customer, GT Solar.  Also, the global economic
downturn adversely impacted our business during much of the first half of fiscal
year 2010.





Cost
of Sales and Gross Margin





Our cost
of sales for the six months ended September 30, 2009 decreased by $1.6
million to $15.2 million, a decrease of 10%, from $16.9 million for
six months ended September 30, 2008. The decrease in the cost of sales was
principally due to the reduction in volume of sales. The decline in gross
profit margin was $5.2 million (62%) from $8.4 million  or 33% of
sales, during the six months ended September 30, 2008 to $3.2 or 17% of sales
for the period ending September 30, 2009.  Contributing to the decline
in gross margin were costs associated with underutilized capacity and the
inventory transfer to GT Solar which included a high volume of raw material
priced at a marginal mark-up to cost.





Operating
Expenses





Our
payroll and related costs were $724,669 for the six months ended September 30,
2009 as compared to $757,130 for the six months ended September 30, 2008. The
$32,461 (4%) decrease in payroll is due primarily to a decline in bonus
compensation compared to the prior year.





Professional
fees increased from $120,469 for the six months ended September 30, 2008 to
$164,713 for the six months ended September 30, 2009. This increase was
primarily attributable to an increase in legal costs related to contract review
and SEC filing requirements.





Selling,
administrative and other expenses six months ended September 30, 2009 were
$517,494 as compared to $289,134 for six months ended September 30, 2008, an
increase of $44,244 or 37%.  Additional expenditures related to
executive severance pay and travel were the primary reasons for the
increase.





Interest
Expense





Interest
expense for the six months ended September 30, 2009 was $211,552 compared with
$233,871 for the six months ended September 30, 2008. The decrease of $22,319
(10%) is a result of lower principal balances of the Sovereign and Amalgamated
bank loans outstanding at September 30, 2009 as compared to September 30,
2008.





Income
Taxes





For the
six months ended September 30, 2009 and 2008, the Company recorded provisions
for Federal and State income tax expense of $366,703 and $2,936,218,
respectively. The effective tax expense rates for the six months ended September
30, 2009 and 2008 were 30% and 42%, respectively. The difference between the
provision for income taxes and the income tax determined by applying the
statutory federal income tax rate of 34% was due primarily to differences in the
lives and methods used to depreciate and/or amortize our property and equipment,
timing differences of expenses related compensated absences, and the expected
utilization of net operating loss carryforwards.





Net
Income





As a
result of the foregoing, our net income was $1.2 million or $0.09 and $0.06 per
share basic and diluted, respectively for the six months ended September 30,
2009, as compared to net income of $4.0 million or $0.30 and $0.15 per
share basic and diluted, respectively, for the six months ended September 30,
2008.








-21-





Liquidity and Capital
Resources





At
September 30 2009, we had working capital of $12.9 million as compared with
working capital of $11.1 million at March 31, 2009, an increase of $1.8 million
or 16.1%. The following table sets forth information as to the principal changes
in the components of our working capital (dollars in thousands).





Category
            
            September
      30, 2009
            
            
            March
      31,
              2009
            
            
            Change
              Amount
            
            
            Percentage
      ChangeCash
      and cash equivalents
            
            $
            9,537
            
            
            $
            10,463
            
            
            $
            (925
            )
            
            
            (8.8
            )Accounts
      receivable, net
            
            
            3,031
            
            
            
            1,419
            
            
            
            1,612
            
            
            
            113.6Costs
      incurred on uncompleted contracts
            
            
            3,603
            
            
            
            3,661
            
            
            
            58
            
            
            
            (1.6
            )Raw
      material inventories
            
            
            304
            
            
            
            351
            
            
            
            (47
            )
            
            
            (13.5
            )Prepaid
      expenses
            
            
            164
            
            
            
            1,583
            
            
            
            (1,419
            )
            
            
            (89.6
            )Deferred
      tax asset
            
            
            194
            
            
            
            --
            
            
            
            194
            
            
            
            --Other
      receivables
            
            
            30
            
            
            
            60
            
            
            
            (30
            )
            
            
            (50.0
            )Accounts
      payable
            
            
            348
            
            
            
            951
            
            
            
            (603
            )
            
            
            (63.4
            )Accrued
      expenses
            
            
            541
            
            
            
            710
            
            
            
            (169
            )
            
            
            (23.8
            )Accrued
      taxes
            
            
            498
            
            
            
            156
            
            
            
            342
            
            
            
            (219.2
            )Progress
      billings in excess of cost of uncompleted contracts
            
            
            1,777
            
            
            
            3,945
            
            
            
            (2,168
            )
            
            
            (54.9
            )Current
      maturity of long-term debt
            
            
            752
            
            
            
            625
            
            
            
            127
            
            
            
            (20.3
            )





Cash used
in operations was $1.4 million for the six months ended September 30, 2009 as
compared with cash provided by operations of $7.4 million for the six months
ended September 30, 2008. The decrease in cash flows from operations of $6.0
million was the net effect of a decrease in net profits, decrease in costs
incurred on uncompleted contracts and payment of accounts payable and accrued
expenses during the six months ended September 30, 2009.





Net cash
provided by financing activities was $521,041 for the six months ended September
30, 2009 as compared with net cash used of $229,560 for the six months ended
September 30, 2008.  During the six months ended September 30, 2009,
the Company received $6,650 from the exercise of stock options, and we borrowed
$919,296 under a line of credit facility in August 2009 to finance the purchase
of new equipment placed into service during the last six months. We made
principal payments of $285,714 on our loans from Sovereign Bank and principal
payments of $6,552 on capital lease obligations.  In addition, WM
Realty made principal payments on its mortgage of $19,161.  WM Realty
also made capital distributions to its members of
$92,256.





During
the six months ended September 30, 2009, the installation of equipment under
construction has been fully completed, placed into service and was transferred
to property, plant and equipment. For the six months ended September 30,
2008 we invested $9,220 in property, plant and equipment and paid a deposit on
equipment of $150,000.  This deposit was credited to our purchase
price in fiscal 2009 when the equipment was received.





The net
decrease in cash was $925,410 for the six months ended September 30, 2009
compared with a $6.9 million increase in cash for the six months ended September
30, 2008.





At
September 30, 2009, WM Realty had an outstanding mortgage of $3.1
million on the real property that it leases to Ranor. The mortgage has a
term of ten years, maturing November 1, 2016, bears interest at 6.75% per annum,
and provides for monthly payments of principal and interest of $20,955. The
monthly payments are based on a thirty-year amortization schedule, with the
unpaid principal being due in full at maturity. WM Realty has the right to
prepay the mortgage note upon payment of a prepayment premium of 5% of the
amount prepaid if the prepayment is made during the first two years, and
declining to 1% of the amount prepaid if the prepayment is made during the ninth
or tenth year.





Debt
Facilities





We have a
loan and security agreement with Sovereign Bank, dated February 24, 2006,
pursuant to which we borrowed $4.0 million on a term loan basis in connection
with our acquisition of Ranor.  As a result of amendments to the loan
and security agreement, we currently have a $2.0 million revolving credit
facility which is available until June 30, 2010.   We also have a
$3.0 million capital expenditure facility which is available until November 30,
2009.  Pursuant to the terms of the capital expenditure facility we
may request financing of capital equipment purchased through November 30, 2009,
at which time any amounts borrowed under the line are to be amortized over a
five year period. Pursuant to the agreement, Ranor is required to maintain a
ratio of earnings available for fixed charges to fixed charges of at least 1.2
to 1, and an interest coverage ratio of 2 to 1. At September 30, 2009, we were
in compliance with both of these ratios, with Ranor’s ratio of earnings
available for fixed charges to fixed charges being 1.6 to 1 and
Ranor’s interest coverage ratio, calculated on a rolling basis being 9.8 to
1.





The term
note issued on February 24, 2006 has a term of 7 years with an initial fixed
interest rate of 9%.  The interest rate on the term note converts from
a fixed rate of 9% to a variable rate on February 28, 2011.  From
February 28, 2011 until maturity the term note will bear interest at the prime
rate plus 1.5%, payable on a quarterly basis.   Principal is
payable in quarterly installments of $142,857 plus interest, with a final
payment due on March 1, 2013.






-22-





The term
note is subject to various covenants that include the following: the loan
collateral comprises all personal property of Ranor, including cash, accounts
receivable inventories, equipment, financial and intangible
assets.  Ranor must also maintain a ratio of earnings available to
cover fixed charges of at least 120% of the fixed charges for the rolling four
quarters, tested at the end of each fiscal quarter.  Additionally,
Ranor must also maintain an interest coverage ratio of at least 2:1 at the end
of each fiscal quarter.   Ranor’s obligations under the notes to
the bank are guaranteed by TechPrecision.  At September 30, 2009,
there were no borrowings under the revolving note and the maximum available
under the borrowing formula was $2.0 million. The Company is in compliance with
all of the debt covenants.





Under the
$3.0 million capital expenditures facility Ranor is able to borrow up to $3.0
million until November 30, 2009. We pay interest only on borrowings under the
capital expenditures line until November 30, 2009, at which time the principal
balance is amortized over five years, commencing December 31,
2009.  The interest on borrowings under the capital expenditure line
is LIBOR rate plus 3%, as the Company may elect.  Any unpaid balance
on the capital expenditures facility is to be paid on November 30,
2014.  As of September 30, 2009, we borrowed $0 under the revolving
line and $919,297 under the capital expenditure line.  The funds were
used to finance the purchase of equipment that has been installed and placed in
service during the quarter ended September 30, 2009.





The
securities purchase agreement pursuant to which we sold the series A preferred
stock and warrants to Barron Partners provides Barron Partners with a right of
first refusal on future equity financings, which may affect our ability to raise
funds from other sources if the need arises.





We
believe that the $2.0 million revolving credit facility, which remained unused
as of September 30, 2009 and terminates in June 2010, and the $2.1 million
capital expenditure facility and our cash flow from operations should be
sufficient to enable us to satisfy our cash requirements at least through the
end of fiscal 2010.  Nevertheless, it is possible that we may require
additional funds to the extent that we expand our manufacturing facilities. In
the event that we make an acquisition, we may require additional financing for
the acquisition. However, we do not have any current plans for any acquisition,
and we cannot give any assurance that we will complete any acquisition. We have
no commitment from any party for additional funds; however, the terms of our
agreement with Barron Partners, particularly Barron Partners’ right of first
refusal, may impair our ability to raise capital in the equity markets to the
extent that potential investors would be reluctant to negotiate a financing when
another party has a right to match the terms of the financing.





Item
4T – CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





As of
September 30, 2009, we carried out an evaluation, under the supervision and with
the participation of management, including our interim chief executive officer
and chief financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 (the “Exchange Act”)).





Based
upon that evaluation, our interim chief executive officer and chief financial
officer concluded that our disclosure controls and procedures were effective as
of September 30, 2009, to ensure that information required to be disclosed by us
in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.





Changes
in Internal Controls





There was
no change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) that
occurred during the quarter ended September 30, 2009 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.





PART
II: OTHER INFORMATION





Item
6 - EXHIBITS





3.4
            Amendment
      to Amended and Restated Bylaws of the Company, dated September 14, 2009
      (filed as Exhibit 3.1 to the current report on Form 8-K filed with the SEC
      on September 18, 2009).*


3.5
            Certificate
      of Amendment to Certificate of Designation of Series A Convertible
      Preferred Stock


10.1
            Warrant
      Exchange Agreement, dated August 14, 2009, by and among the Company,
      Barron Partners LP, and GreenBridge Capital Partners IV, LLC (filed as
      Exhibit 103.1 to the current report on Form 8-K filed with the SEC on
      August 20, 2009).*


31.1
  Rule 13a-14(a) certification of chief executive officer


31.2
  Rule 13a-14(a) certification of chief financial officer


32.1
  Section 1350 certification of chief executive and chief financial
officers





* =
      Incorporated by reference.








-23-





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.








TECHPRECISION
      CORPORATION
              (Registrant)Dated:  November
      12, 2009
            By:
            /s/
      Richard F.
      FitzgeraldRichard
      F. Fitzgerald
              Chief
      Financial Officer
              (duly
      authorized officer and principal financial
  officer)

















-24-