# Techprecision Corp: Form 10-K for the period ended Mar 31, 2013

- Company: [Techprecision Corp](/companies/tpcs.md) (CIK 1328792)
- Form: 10-K
- Filed: 2013-08-16
- Accepted by EDGAR: Aug 16, 2013, 17:15 ET
- Period: 2013-03-31
- Accession: 0000950159-13-000526
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1328792/000095015913000526/tpcs10k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1328792/000095015913000526/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2013-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2013-01-01 to 2013-03-31 | $10.0m | us-gaap:SalesRevenueNet |
| Revenue | 12 months, 2012-04-01 to 2013-03-31 | $32.5m | us-gaap:SalesRevenueNet |
| Cost of revenue | 12 months, 2012-04-01 to 2013-03-31 | $25.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2013-01-01 to 2013-03-31 | $1.6m | us-gaap:GrossProfit |
| Gross profit | 12 months, 2012-04-01 to 2013-03-31 | $6.6m | us-gaap:GrossProfit |
| Research and development | 12 months, 2012-04-01 to 2013-03-31 | $0 | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 12 months, 2012-04-01 to 2013-03-31 | $8.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 12 months, 2012-04-01 to 2013-03-31 | −$1.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 12 months, 2012-04-01 to 2013-03-31 | $309.8k | us-gaap:InterestExpense |
| Income tax | 12 months, 2012-04-01 to 2013-03-31 | $472.3k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2013-01-01 to 2013-03-31 | −$1.1m | us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic |
| Net income | 12 months, 2012-04-01 to 2013-03-31 | −$2.4m | us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic |
| Diluted EPS | 3 months, 2013-01-01 to 2013-03-31 | −$0.06 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 12 months, 2012-04-01 to 2013-03-31 | −$0.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2013-01-01 to 2013-03-31 | −$0.06 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 12 months, 2012-04-01 to 2013-03-31 | −$0.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2012-04-01 to 2013-03-31 | 19,004,897 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2012-04-01 to 2013-03-31 | $1.8m | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 12 months, 2012-04-01 to 2013-03-31 | $663.2k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2013-03-31 | $3.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2013-03-31 | $14.3m | us-gaap:AssetsCurrent |
| Total assets | at 2013-03-31 | $21.6m | us-gaap:Assets |
| Current liabilities | at 2013-03-31 | $11.2m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2013-03-31 | $10.1m | us-gaap:StockholdersEquity |

## Business

As filed, 21,079 characters.

### Our Business

We are a global manufacturer of precision, large-scale fabricated and machined metal components and systems operating two wholly-owned subsidiaries, Ranor, Inc., or Ranor, a Delaware corporation, located in Westminster Massachusetts, USA, and Wuxi Critical Mechanical Components Co., Ltd., or WCMC, a limited company organized under the laws of the People’s Republic of China, or China, located in Wuxi City, Jiangsu Province, China. Our products are used in a variety of markets including: alternative energy, medical, nuclear, defense, industrial, and aerospace. Our mission is to be the leading end-to-end global service provider to our markets by furnishing custom, fully integrated "turn-key" solutions for complete products that require custom fabrication, precision machining, assembly, integration, inspection, non-destructive evaluation and testing.

We work with our customers to manufacture products in accordance with the customers’ drawings and specifications. Our work complies with specific national and international codes and standards applicable to our industry. We believe that we have earned our reputation through outstanding technical expertise, attention to detail, and a total commitment to quality and excellence in customer service.

On November 4, 2010, we announced the formation of WCMC to meet the demand for local manufacture and machining of components in China. We formed WCMC after consultation with a large customer in the solar energy industry, and in order to meet demand for solar and nuclear energy components in Asia, including China in particular. During the fiscal year ended March 31, 2011, or fiscal 2011, we undertook organizational and start-up activities at WCMC, including forming the entity, obtaining the necessary licenses to conduct business in China, and identifying and qualifying manufacturing subcontractors within China. Our relationship with the subcontractors is confirmed when we issue purchase orders for manufacturing services. WCMC subcontracts all fabrication and machining services and such subcontracted services are overseen by our own personnel.

### About Us

We are a Delaware corporation, organized in 2005 under the name Lounsberry Holdings II, Inc. On February 24, 2006, we acquired all of the issued and outstanding capital stock of Ranor. Ranor together with its predecessors, has been in continuous operation since 1956. Since February 24, 2006, our primary business has been the business of Ranor. On March 6, 2006, following the acquisition of Ranor, we changed our corporate name to TechPrecision Corporation. Our acquisition of Ranor was accounted for as a reverse acquisition.

Our executive offices are located at Saucon Valley Plaza, 3477 Corporate Parkway, Suite 140, Center Valley, PA 18034, and our telephone number is (484) 693-1700. Our website is www.TechPrecision.com. Information on our website, or any other website, is not incorporated in this annual report.

References in this annual report to “the Company”, “we,” “us,” “our” and similar words refer to TechPrecision Corporation and its subsidiaries, Ranor and WCMC, unless the context indicates otherwise.

### General

Our manufacturing operations within the U.S. are situated on approximately 65 acres in North Central Massachusetts. Our 145,000 square foot facility is the home for state-of-the-art equipment which gives us the capability to manufacture products as large as 100 tons. We offer a full range of services required to transform raw material into precise finished products. Our manufacturing capabilities include: fabrication operations (cutting, press and roll forming, assembly, welding, heat treating, and painting) and machining operations including CNC (computer numerical controlled) horizontal and vertical milling centers. We also provide support services to our manufacturing capabilities: manufacturing engineering (planning, fixture and tooling development, and manufacturing), quality control (inspection and testing), materials procurement and production control (scheduling, project management and expediting) and final assembly. During fiscal 2012, we completed an expansion project at our Massachusetts facility that expanded our manufacturing capacity by an additional 19,500 square feet. This expansion project was completed in September 2011 at a cost of approximately $1.7 million, which was financed in part from the proceeds of a Massachusetts Development Authority bond financing that was completed in December 2010. During the third quarter of fiscal 2012 we completed the installation and testing of a new $2.4 million gantry mill machine. This machine was placed into service during January 2012.

All U.S. based 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 customer’s needs, and we have implemented such standards into our manufacturing operations.

Our operations in China are conducted through WCMC. WCMC, through its subcontractors, provides large-scale precision component fabrication and machining solutions for solar and LED markets in Asia. WCMC is co-located with one of the largest forges in the industry and is positioned to provide our customers in Asia with quality, durable, and efficient current and next-generation components that address industry-specific needs. WCMC is licensed in China as a trading company, allowing it to contract freely with multiple manufacturers within China to source the manufacturing capacity and expertise required by our customers and their product designs. In February 2012, WCMC received certification that its Quality Management Systems comply with the requirements of ISO 9001: 2008 indicating that WCMC operates to this international standard.

### Products

We manufacture a wide variety of products pursuant to customer contracts and based on individual customer needs. We also provide manufacturing engineering services to assist customers in optimizing their engineering designs for manufacturing efficiency. In general, we do not design the products we manufacture, but rather manufacture according to “build-to-print” requirements specified by our customers. Accordingly, we do not distribute the products that we manufacture on the open market and we do not market any typical product on an on-going basis. We do not own the intellectual property rights to any proprietary marketed product, and we do not manufacture products in anticipation of orders. Manufacturing operations do not commence on any project before we receive a customer’s purchase order. All contracts cover specific products within the capability of our resources.

Although our focus is to provide long-term integrated solutions to our customers on continuous production programs, our activities include a variety of both custom-based and production-based requirements. The custom-based work is typically either a prototype or unique, one-of-a-kind product. The production-based work is repeat work or a single product with multiple quantity releases. To the greatest extent possible, we seek opportunities where we are in a Tier 1 or Tier 2 supplier relationship with our customers.

Changes in market demand for our manufacturing expertise can be significant and sudden and require us to be able to adapt to the collective needs of the customers and industries that we serve. Understanding this dynamic, we have developed the capability to transform our workforce to manufacture products for customers across different industries.

In addition to manufacturing services, WCMC also provides field service repairs for our customers who have their proprietary equipment deployed and operating at their customer locations within Asia.

Examples of the industries we serve and products we have manufactured within such industries during recent years include, but are not limited to:

### Alternative Energy:

Production chambers to manufacture multi-crystalline and mono-crystalline solar panels

Polysilicon production chambers

Production components for sapphire growth systems

Wind turbine components

### Defense:

Aircraft carrier steam accumulator tanks

DDX destroyer prototype propulsion equipment, gun and weapons handling equipment

Submarine sonar system components, primary shield tank heads and foundations

### Industrial:

Vacuum chambers

Food processing equipment

Chemical processing equipment

Pressure vessels

### Aerospace:

Delta rocket precision-machined fuel tank bulkheads

F-15 special equipment pods

Various other components, fixtures and tooling

### Nuclear:

Commercial reactor internal components and temporary heads

Spent fuel storage and transportation canisters and casks

Material handling equipment

Radioactive isotope transportation casks

### Medical:

Components and major assemblies for proton beam accelerators for cancer treatment

### Source of Supply

Manufacturing operations are partly dependent on the availability of raw materials. Raw material requirements vary with each contract and are dependent upon customer requirements and specifications. We have established relationships with numerous suppliers. We consistently seek to initiate new contacts in order to establish alternate sources of material supply to reduce our dependency on any one supplier. The purchase of raw material is subject to the customer’s purchase order requirements, and not based on speculation or long-term contract awards. Some contracts require the use of customer-supplied raw materials in the manufacture of their product.

Our projects include the manufacturing of products from various traditional as well as specialty metal alloys. These materials may include, but are not limited to: inconel, titanium, stainless steel, high strength steel and other alloys. Certain of these materials are subject to long-lead time delivery schedules. During fiscal 2013, a supplier that provided forging, accounted for 15% of our purchased material. There was no other single supplier that provided 10% or more of purchased raw materials in fiscal 2013 or fiscal 2012.

### Marketing

While we have had significant customer concentration over the past three years, we are engaged in the development of marketing initiatives to broaden our customer base as well as the industries we serve. We market to our existing customer base and we initiate contacts with new potential customers through various sources including personal contacts, customer referrals, and trade show participation. A significant portion of our business is the result of competitive bidding processes and a significant portion of our business is from contract negotiation. We believe that the reputation we have developed with our current customers represents an important part of our marketing effort.

Requests for quotations received from customers are reviewed to determine the specific requirements and our ability to meet such requirements. Quotations are prepared by estimating the material and labor costs and assessing our current backlog to determine our delivery commitments. Competitive bid quotations are submitted to the customer for review and award of contract. Negotiation bids typically require the submission of additional information to substantiate the quotation. The bidding process can range from several weeks for a competitive bid, to several months for a negotiation bid before the customer awards a contract.

### Research and Product Development

Many of our customers generate drawings illustrating their projected unit design and technology requirements. Our research and product development activities are focused on delivering robust production solutions to such projected unit design and technology requirements. We accomplish this by introducing improved versions of existing products or by developing next-generation products. We follow this product development methodology in all our major product lines. We incurred no expenses for research and development in fiscal 2013. We spent $0.3 million in fiscal 2012 on research and development.

### Principal Customers

A significant portion of our business is generated by a small number of major customers. The balance of our business consists of discrete projects for numerous other customers. As industry and market demand changes, our major customers may also change. Our largest customer in fiscal 2013 was Mevion Medical Systems, Inc., or Mevion, which accounted for 24% of our net sales. Mevion is a radiation therapy company dedicated to advancing the treatment of cancer. We build components and major assemblies for Mevion’s Proton Therapy Systems which are being installed at certain institutions throughout North America. Our largest customer in fiscal 2012 was GT Advanced Technologies, or GTAT, which accounted for 34% of our net sales. GTAT is a leading global provider of production technology and materials for the solar, LED and other specialty markets that engaged us to manufacture production furnaces for the manufacturing of solar panels and LED products.

Our business is dependent on purchase orders, or POs, received from our customers for work. Certain of these POs are issued under long-term purchase agreements. We historically have experienced, and continue to experience, customer concentration. A significant loss of business from our largest customer or a combination of several of our significant customers could result in lower operating profitability and/or operating losses if we are unable to replace such lost revenue from other sources. Sales to our top six customers accounted for 79% and 77% of total net sales for fiscal 2013 and 2012, respectively. Our customer base consists of many businesses in the markets identified above.

The revenue derived from these markets during fiscal 2013 and fiscal 2012 are highlighted within the table below (dollars in thousands):

| As of March 31 Net Sales | 2013 Amount | Percent | 2012 Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Alternative Energy | $9,270 | 29% | $14,470 | 44% |
| Defense & Aerospace | $9,232 | 28% | $8,501 | 26% |
| Medical | $7,666 | 24% | $1,096 | 3% |
| Nuclear | $3,684 | 11% | $2,109 | 6% |
| Commercial | $2,620 | 8% | $7,091 | 21% |

The following table sets forth the revenue, both in dollars and as a percentage of total revenue, generated by individual customers in their specific markets that accounted for 10% or more of our revenue in either of the two past fiscal years ended (dollars in thousands):

| March 31 Net Sales by Customer type | 2013 Amount | Percent | 2012 Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Medical | $7,666 | 24% | $- | \*% |
| Alternative Energy | $6,087 | 19% | $- | \*% |
| Defense | $4,800 | 15% | $3,388 | 10% |
| Alternative Energy | $- | \*% | $11,307 | 34% |

\* No single customer in market accounted for 10% or more of our revenue during the period.

For fiscal 2013 and fiscal 2012, WCMC generated $3.3 and $4.6 million of our total revenue, respectively. WCMC shipped its first production units to a customer in Asia in March 2011. The global downturn in demand for alternative energy components has limited our ability to scale larger order volumes for WCMC in China.

At March 31, 2013, we had a backlog of orders totaling approximately $16.4 million which included no orders for WCMC. We expect to deliver the backlog over the course of the next two fiscal years. The comparable backlog at the end of fiscal 2012 was $22.4 million. As of July 31, 2013, our backlog was $19.2 million.

### Competition

In the manufacture of metal fabricated and machined precision components and equipment we face competition from both domestic and foreign manufacturers. The industry in which we compete is fragmented with no one dominant player. We compete against companies that are both larger and smaller in size and capacity. Some competitors may be better known, have greater resources at their disposal, and may have lower production costs. For certain products, being a domestic manufacturer may play a role in determining whether we are awarded a certain contract. For other products, we may be competing against foreign manufacturers who have a lower cost of production. If a contracting party has a relationship with a vendor and is required to place a contract for bids, the preferred vendor may provide or assist in the development of the specification for the product which may be tailored to that vendor’s products. In such event, we would be at a disadvantage in seeking to obtain that contract. We believe that customers focus on such factors as the quality of work, the reputation of the vendor, the perception of the vendor’s ability to meet the required schedule, and price in selecting a vendor for their products.

WCMC was formed to serve existing customers who expressed a strong desire for a qualified supply chain within China to serve their Asian end markets. China’s manufacturing base is large and developed, and we believe that there are many domestic and international companies that could compete with us in China. However, we believe that our strategy of augmenting our China-based subcontractors with experienced fabrication and machining expertise from the United States at WCMC enables us to better serve the precision manufacturing requirements of our customers within China, as compared to existing China manufacturers operating solely on their own. We also believe that WCMC allows us to offer our customers global manufacturing solutions in North America and Asia that are not easily replicated by competitors operating exclusively only in either the United States or China.

### Government Regulations

Although we have very few contracts with government agencies, a significant portion of our manufacturing services are provided as a subcontractor to prime government contractors. Such prime government contractors are subject to government procurement and acquisition regulations which give the government the right to termination for convenience, certain renegotiation rights, and rights of inspection. Any government action which affects our customers who are prime government contractors would affect us. Some of the work we perform for our customers is part of government appropriation packages, and therefore, subject to the Miller Act, requiring our customers who are prime government contractors to pay all subcontractors under contracted purchase agreements first. Because of the nature and use of our products, we are subject to compliance with quality assurance programs, compliance with which is a condition for our ability to bid on government contracts and subcontracts. We believe we are in compliance with all of these programs. We are also subject to laws applicable to manufacturing regulations, such as federal and state occupational health and safety laws, and environmental laws, which are discussed in more detail below under “Environmental Compliance.” WCMC operates under a business license granted by the appropriate government authorities in China. WCMC must operate under the terms and scope of that license in order to maintain its right to conduct business operations in China.

### Environmental Compliance

We are subject to compliance with United States federal, state and local environmental laws and regulations that involve the use, disposal and cleanup of substances regulated by those laws and the filing of reports with environmental agencies, and we are subject to periodic inspections to monitor our compliance. We believe that we are currently in compliance with applicable environmental regulations. As part of our normal business practice we are required to develop and file reports and maintain logbooks that document all environmental issues within our organization. We may engage outside consultants to assist us in keeping current on developments in environmental regulations. Expenditures for environmental compliance purposes during fiscal 2013 were not material.

### Intellectual Property Rights

Presently, we have no patent rights and we do not believe that our business requires patent or similar protection. Because of the nature of our business as a contract manufacturer, we do not believe that the lack of ownership of intellectual property will adversely affect our operations. In the course of our business we develop know-how for use in the manufacturing process. Although we have non-disclosure policies in place and in our contractual relations, we cannot assure you that we will be able to protect our intellectual property rights with respect to this know-how.

### Personnel

As of March 31, 2013, we had approximately 170 full-time employees, of whom 55 are salaried and 115 are hourly. Of those employees, 7 employees are located in China at WCMC. None of our employees is represented by a labor union.

## Risk factors

As filed, 55,299 characters.

We believe the following are the most significant risks related to our business that could cause actual results to differ materially from those contained in any forward-looking statements.

*We are not in compliance with certain financial covenants under our Loan and Security Agreement with Sovereign Bank and have incurred operating losses for the past two years. These factors raise substantial doubt about our ability to continue as a going concern.*

At March 31, 2013, we were not in compliance with the fixed charges and interest coverage financial covenants under our Loan and Security Agreement between Ranor and Sovereign Bank, or the Bank, dated February 24, 2006, as amended, or the Loan Agreement, and the Bank has not agreed to waive the non-compliance with the covenants at March 31, 2013. In addition, the Bank did not renew the revolving credit facility which expired on July 31, 2013. Since we are in default, the Bank has the right to accelerate payment of the debt in full upon 60 days’ written notice. As a consequence, we have classified all amounts under the Loan Agreement ($5.8 million) as a current liability at March 31, 2013. The Bank is evaluating its course of action and has not yet demanded repayment. We continue to make payments pursuant to the terms of the Loan Agreement. If the Bank were to make such a demand for repayment, we would be unable to pay the obligation as we do not have existing facilities or sufficient cash on hand to satisfy these obligations and would need to seek alternative financing.

We incurred operating losses of $2.4 million and $2.1 million for the periods ended March 31, 2013 and 2012, respectively. At March 31, 2013, we had cash and cash equivalents of $3.1 million, of which $0.5 million is located in China and which we may not be able to repatriate for use in the U.S. without undue cost or expense if at all. We borrowed $0.5 million under its revolving line of credit during the quarter ended March 31, 2013, and have repaid this borrowing in full in July 2013. In addition, we have $1.0 million of restricted cash with the Bank (included in our other current assets) that could be used toward satisfying our obligation under the Loan Agreement.

These factors raise substantial doubt about our ability to continue as a going concern. In order for us to continue operations beyond the next twelve months and be able to discharge our liabilities and commitments in the normal course of business, we must secure long-term financing on terms consistent with our near-term business plans. In addition, we must increase our backlog and change the composition of our revenues to focus on recurring unit of delivery projects rather than custom first article and prototyping projects which do not efficiently use our manufacturing capacity, and reduce our operating expenses to be in line with current business conditions in order to increase profit margins and decrease the amount of cash used in operations. If successful in changing the composition of revenue and reducing costs, we expect that fiscal 2014 operating results will reflect positive cash flows. However, we plan to closely monitor our expenses and, if required, will further reduce operating costs and capital spending to enhance liquidity.

The consolidated financial statements for the year ended March 31, 2013 were prepared on the basis of a going concern which contemplates that we will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should we be required to liquidate assets. Our ability to satisfy our total liabilities of $11.2 million at March 31, 2013 and to continue as a going concern is dependent upon the timely availability of long-term financing and successful execution of our operating plan. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Our liquidity is highly dependent on our available financing facilities and ability to improve our gross profit and operating income and our failure to obtain new or additional financing could impair our ability to both serve our existing customer base and develop new customers and could result in our failure to continue to operate as a going concern. To the extent that we require new or additional financing, we cannot assure you that we will be able to get such financing on terms equal to or better than the terms of our Loan Agreement. If we are able to raise funds through a credit facility, it may be necessary for us to conduct an offering of debt and/or equity securities on terms which may be disadvantageous to us or have a negative impact on our outstanding securities and the holders of such securities. In the event of an equity offering, it may be necessary that we offer such securities at a price that is significantly below our current trading levels which may result in substantial dilution to our investors that do not participate in the offering and a new low trading level for our common stock.

*Our going concern may have an adverse effect on our customer and supplier relationships.*

Our relationships with our customers and suppliers are predicated on the belief that we will continue to operate as a going concern. Certain of our customers may not enter into sales contracts with us if there is uncertainty regarding our ability to continue as a going concern. This may have an adverse effect on our ability to grow our revenues and increase our backlog, which is a key component of our plan to continue as a going concern. Current and future suppliers may be less likely to grant us credit, resulting in a negative impact on our working capital and cash flows. While management has developed plans to continue to operate as a going concern, in the event such adverse consequences should occur, we cannot provide assurance that we will successfully execute these plans.

*We have a history of operating losses, and we may incur additional losses in the future. Our operating results may fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal quarter.*

We have recorded net losses in each of the last two fiscal years, and we cannot be certain that we will regain profitability in the future.

Our operating results historically have been difficult to predict and have at times significantly fluctuated from quarter to quarter due to a variety of factors, many of which are outside of our control. As a result of all of these factors, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. If our revenue or operating results fall below the expectations of investors or any securities analysts that follow our company in any period, the trading price of our common stock would likely decline. Our operating expenses do not always vary directly with revenue and may be difficult to adjust in the short term. As a result, if revenue for a particular quarter is below our expectations, we may not be able to proportionately reduce operating expenses for that quarter, and therefore such a revenue shortfall would have a disproportionate effect on our operating results for that quarter.

*Our inability to use a short form registration statement on Form S-3 may affect our ability to access the capital markets, if needed.*

A Registration Statement on Form S-3, or Form S-3, permits an eligible issuer to incorporate by reference its past and future filings and reports made under the Exchange Act. In addition, Form S-3 enables eligible issuers to conduct primary offerings “off the shelf” under Rule 415 of the Securities Act of 1933, as amended, or the Securities Act. The shelf registration process under Form S-3 combined with the ability to incorporate information on a forward basis, allows issuers to avoid additional delays and interruptions in the offering process and to access the capital markets in a more expeditious and efficient manner than raising capital in a standard offering on Form S-1. One of the requirements for Form S-3 eligibility is for an issuer to have timey filed all required reports for a period of 12 months. Because we did not timely file this Annual Report on Form 10-K, we will not be eligible to use Form S-3 for a period of at least 12 months (assuming we timely file our required filings within such 12 month period). Due to our inability to use Form S-3, if we wanted to conduct a registered offering of securities to investors, we will be required to use long form registration and may experience delays. In addition, our ability to undertake certain types of financing transactions may be limited or unavailable to us without the ability to use Form S-3. Furthermore, because of the delay associated with long form registration and the limitations on the financing transactions we may undertake, the terms of any financing transaction we are able to conduct may not be advantageous to us or may cause us not to obtain capital in a timely fashion to execute our business strategies and continue to operate as a going concern.

*The terms of certain of our financing arrangements may impair our ability to raise capital.*

The securities purchase agreement pursuant to which we sold our Series A Convertible Preferred Stock to Barron Partners provides the holders of our Series A Convertible Preferred Stock with certain rights, particularly a right of first refusal on certain future equity financings, that may impair our ability to raise capital in the equity markets.

In addition the Loan Agreement contains restrictive covenants and other provisions that could limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes. If we refinance our credit facilities, we cannot guarantee that any new credit facility will not contain similar covenants and restrictions.

*Our indebtedness could adversely affect our ability to raise additional capital to fund our operations and limit our ability to pursue our growth strategy or to react to changes in the economy or our industry, and our debt obligations include restrictive covenants which may restrict our operations or otherwise adversely affect us.*

Our current credit facilities contain, and any future credit facilities will likely contain, restrictive covenants and other provisions that could have important negative consequences to our business, including, without limitation:

- increasing our vulnerability to general economic and industry conditions because our debt payment obligations may limit our ability to use our cash to respond to or defend against changes in the industry or the economy;
- requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;
- limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;
- limiting our ability to pursue our growth strategy, including restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; and
- placing us at a disadvantage compared to our competitors who are less leveraged and may be better able to use their cash flow to fund competitive responses to changing industry, market or economic conditions.

*We have identified a material weakness in our internal control over financial reporting, and if we fail to remediate this material weakness and maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired and may lead investors and other users to lose confidence in our published financial data.*

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements. In evaluating the effectiveness of our internal control over financial reporting as of March 31, 2013, management identified a material weakness in the Company's internal control over financial reporting. Specifically, we did not maintain a sufficient complement of corporate accounting personnel or Ranor accounting staff necessary to consistently perform management review controls over Ranor financial information and complete account reconciliations on a timely basis to ensure all transactions were accurately captured and recorded in the proper period. The demand on the corporate accounting resources is significant due to the manual nature of controls necessary to maintain effective control over our legacy system, and intensified during the fourth quarter of fiscal 2013 as a result of turnover of accounting personnel at Ranor. As a result of this material weakness, we made a number of late or post-closing adjustments to net sales, cost of sales, stock based compensation expense, contract loss reserves, selling, general and administrative expenses, cash, and related footnote disclosures in order to prepare the consolidated financial statements and footnotes included in this Form 10-K.

To address this material weakness, we have begun to formalize our accounting policies and plan to implement an account reconciliation process to provide guidelines for account reconciliations and enhancing documentation to support sub-ledger account reconciliations. In addition, we hired a new Ranor Controller during the fourth quarter of fiscal 2013.

We believe that the measures described above will facilitate remediation of the material weakness we have identified and will continue to strengthen our internal control over financial reporting. We are committed to continually improving our internal control process and will diligently review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may decide that additional measures are necessary to address control deficiencies.

#### We face strong competition in our markets.

We face competitive pressures from both domestic and foreign manufacturers in each of the markets we serve. No one company dominates the industry. Our competitors include international, national, and local manufacturers, some of whom may have greater financial, manufacturing, marketing and technical resources than we do, or greater penetration in or familiarity with a particular geographic market than we have.

Some competitors may be better known, with greater resources at their disposal, and some have lower production costs. For certain products, being a domestic manufacturer may play a role in determining whether we are awarded a certain contract. For other products, we may be competing against foreign manufacturers who have a lower cost of production. If a contracting party has a relationship with a vendor and is required to place a contract for bids, the preferred vendor may provide or assist in the development of the specification for the product which may be tailored to that vendor’s products. In such event, we would be at a disadvantage in seeking to obtain that contract. We believe that customers focus on such factors as the quality of work, the reputation of the vendor, the perception of the vendor’s ability to meet the required schedule, and the price in selecting a vendor for their products. Some of our customers have moved manufacturing operations or product sourcing overseas, which can negatively impact our sales. To remain competitive, we will need to invest continuously in manufacturing, product development and customer service, and we may need to reduce our prices, particularly with respect to customers in industries that are experiencing downturns. We cannot provide assurance that we will be able to maintain our competitive position in each of the markets that we serve.

#### The demand for certain products we produce may be cyclical.

Demand in our end-use markets, including companies in the renewable energy (solar and wind), medical, nuclear, defense, industrial, and aerospace industries can be cyclical in nature and sensitive to general economic conditions, competitive influences and fluctuations in inventory levels throughout the supply chain. Our sales are sensitive to the market conditions present in the industries in which the ultimate consumers of our products operate, which in some cases have been highly cyclical and subject to substantial downturns.

As a result of the cyclical nature of these markets, we have experienced, and in the future we may experience, significant fluctuations in our sales and results of operations with respect to a substantial portion of our total product offering, and such fluctuations could be material and adverse to our overall financial condition, results of operations and liquidity.

*We rely on third parties to supply certain raw materials that are critical to the manufacture of our products and we may not be able to access alternative sources of these raw materials if the suppliers are unwilling or unable to meet our demand.*

Costs of certain critical raw material, such as inconel, titanium, stainless steel, high strength steel and other alloys, among others, have been volatile due to factors beyond our control. Raw material costs are included in our contracts with customers but in some cases we are exposed to changes in raw material costs from the time purchase orders are placed to when we purchase the raw materials for production. Changes in business conditions could adversely affect our ability to recover rapid increases in raw material costs and may adversely affect our results of operations.

In addition, the availability of these critical raw materials is subject to factors that are not in our control. In some cases, these critical raw materials are purchased from suppliers operating in countries that may be subject to unstable political and economic conditions. At any given time, we may be unable to obtain an adequate supply of these critical raw materials on a timely basis, at prices and other terms acceptable to us, or at all.

If suppliers increase the price of critical raw materials or are unwilling or unable to meet our demand, we may not have alternative sources of supply. In addition, to the extent that we have quoted prices to customers and accepted customer orders for products prior to purchasing necessary raw materials, or have existing contracts, we may be unable to raise the price of products to cover all or part of the increased cost of the raw materials to our customers.

The manufacture of some of our products is a complex process and requires long lead times. As a result, we may experience delays or shortages in the supply of raw materials. If unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products. This could cause us to lose sales, incur additional costs, delay new product introductions or suffer harm to our reputation.

*Our manufacturing processes are complex and depend upon critical, high cost equipment for which there may be only limited or no production alternatives.*

It is possible that we could experience prolonged periods of reduced production due to unplanned equipment failures, and we could incur significant repair or replacement costs in the event of those failures. It is also possible that operations could be disrupted due to other unforeseen circumstances such as power outages, explosions, fires, floods, accidents and severe weather conditions. We must make regular capital investments and changes to our manufacturing processes to lower production costs, improve productivity, manufacture new or improved products and remain competitive. We may not be in a position to take advantage of business opportunities or respond to competitive pressures if we fail to update, replace or make additions to our equipment or our manufacturing processes in a timely manner. The cost to repair or replace much of our equipment or facilities would be significant. We cannot be certain that we will have sufficient internally generated cash or acceptable external financing to make necessary capital expenditures in the future.

*Failure to obtain and retain skilled technical personnel could impede our operations.*

Our production facilities in both the U.S. and China require skilled personnel to operate and provide technical services and support for our business. Competition for the personnel required for our businesses intensifies as activity increases. In periods of high utilization, it may become more difficult to find and retain qualified individuals. This could increase our costs or have other adverse effects on our operations.

*A significant portion of our manufacturing and production facilities are located in only a few locations around the world, which increases our exposure to significant disruption to our business as a result of unforeseeable developments in a single geographic area.*

It is possible that we could experience prolonged periods of reduced production due to unforeseen catastrophic events occurring in or around our manufacturing facilities. As a result, we may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be encountered. Our financial condition and results of our operations could be materially adversely affected.

*We rely on third parties to supply energy consumed at each of our energy-intensive production facilities.*

The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Disruptions or lack of availability in the supply of energy resources could temporarily impair the ability to operate our production facilities. Further, increases in energy costs, or changes in costs relative to energy costs paid by competitors, may adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations and financial condition.

*Laws and regulations governing international operations may require us to develop and implement costly compliance programs and the failure to comply with such laws may result in substantial penalties.*

As we have a subsidiary and operations outside of the United States, we must comply with laws and regulations relating to international business operations. The creation and implementation of international business practices compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.

The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced primarily by the U.S. Department of Justice.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. The failure to comply with laws governing international business practices may result in substantial penalties, including suspension or debarment from government contracting. Violation of the FCPA can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to suspension of the right to do business with the U.S. government until the pending claims are resolved. Conviction of a violation of the FCPA can result in long term disqualification as a government contractor.

The termination of a government contract or relationship as a result of our failure to satisfy any of our obligations under laws governing international business practices would have a negative impact on our operations and harm our reputation and ability to procure government contracts. The Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on United States exchanges for violations of the FCPA’s accounting provisions.

Additionally, we, through our WCMC subsidiary, are subject to other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. We have operations, agreements with third parties, and sell most of our WCMC manufactured products in China. China also strictly prohibits bribery of government officials. Our activities in China create the risk of unauthorized payments or offers of payments by our employees, consultants, sales agents, or distributors of ours, even though they may not always be subject to our control.

It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and our employees, consultants, sales agents, or distributors may engage in conduct for which we might be held responsible. Violations of Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.

*Our business, financial condition and results of operations could be adversely affected by the political and economic conditions in China.*

We have significant operations located in China. Multiple factors relating to WCMC’s operations could have a material adverse effect on our business, financial condition, and results of operations. These factors include:

- changes in political, regulatory, legal or economic conditions;
- governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments;
- civil disturbances, including terrorism or war;
- political instability;
- public health emergencies;
- changes in employment practices and labor standards;
- local business and cultural factors that differ from our customary standards and practices; and
- changes in tax laws.

In addition, the Chinese economy may differ favorably or unfavorably from other economies in several respects, including the growth rate of GDP, the rate of inflation, resource self-sufficiency and balance of payments position. The Chinese government has traditionally exercised and continues to exercise a significant influence over many aspects of the Chinese economy. Further actions or changes in policy, including taxation, of the Chinese central government or the respective Chinese provincial or local governments could have a significant effect on the Chinese economy, which could adversely affect private sector companies, market conditions, and the success of our operations.

U.S. and Chinese transfer pricing regulations require that any international transactions involving associated enterprises are undertaken at an arm’s length price. Applicable income tax authorities review our tax returns and if they determine that the transfer prices we have applied are not appropriate, we may incur increased tax liabilities, including accrued interest and penalties, which would cause our tax expense to increase, possibly materially, thereby materially reducing our profitability and cash flows.

#### We have limited insurance coverage in China.

We do not have any business liability, interruption or litigation insurance coverage for our operations in China. While business interruption insurance and other types of insurance are available to a limited extent in China, we have determined that the risks of interruption, cost of such insurance and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Therefore, our existing insurance coverage may not be sufficient to cover all risks associated with our business. As a result, we may be required to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results of operations.

*Fluctuations in exchange rates could adversely affect our business and the value of our securities.*

The value of our common stock will be indirectly affected by the foreign exchange rate between the U.S. dollar and Chinese yuan renminbi, or RMB, and between those currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be exchanged into U.S. dollars, as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.

Since July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future Chinese authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by Chinese exchange control regulations that restrict our ability to convert RMB into foreign currencies.

*Restrictions on currency exchange may limit our ability to receive and use our sales effectively.*

The majority of WCMC’s sales will be settled in RMB and U.S. dollars, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction that foreign invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents, at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB.

*Restrictions under Chinese law on WCMC’s ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our business.*

Chinese regulations restrict the ability of WCMC to make dividends and other payments to their offshore parent company. Any limitations on the ability of WCMC to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

#### Future inflation in China may inhibit our ability to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and fluctuating rates of inflation. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.

*As a publicly traded company, we are subject to certain regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to maintain an effective system of internal controls, our reputation and our business could be harmed.*

As a publicly traded company in the U.S., our ongoing compliance with various rules and regulations, including the Sarbanes-Oxley Act of 2002, will increase our legal and finance compliance costs and will make some activities more time-consuming and costly. These rules and requirements may be modified, supplemented or amended from time to time. Implementing these changes may take a significant amount of time and may require specific compliance training of our personnel. For example, Section 404 of the Sarbanes-Oxley Act requires that our management report on the effectiveness of our internal control over financial reporting in our annual reports filed with the SEC. Section 404 compliance may divert internal resources and will take a significant amount of time and effort to complete. If in the future our Chief Executive Officer, Chief Financial Officer or independent registered public accounting firm determines that our internal controls over financial reporting are not effective as defined under Section 404, we could be subject to sanctions or investigations by the SEC, or other regulatory authorities. As a result, investor perceptions of our company may suffer, and this could cause a decline in the market price of our common stock. Irrespective of compliance with these rules and regulations, including the requirements under the Sarbanes-Oxley Act, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our business and reputation. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting, or financial results.

*We are subject to new regulations related to conflict minerals which could adversely impact our business.*

The SEC has promulgated final rules mandated by the Dodd-Frank Act regarding disclosure of the use of tin, tantalum, tungsten, gold and certain other minerals, known as conflict minerals, in products manufactured by public companies. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that public companies conduct due diligence to determine whether such minerals originated from the Democratic Republic of Congo, or the DRC, or an adjoining country and whether such minerals helped finance the armed conflict in the DRC. These new rules will require due diligence efforts in fiscal year 2014 and thereafter, with the first conflict minerals report due by May 31, 2014 and annually thereafter. There will be costs associated with complying with these disclosure requirements, including costs to determine the origin of conflict minerals used in our products.

In addition, the implementation of these rules could adversely affect the sourcing, supply and pricing of materials used in our products. As there may be only a limited number of suppliers offering conflict-free minerals, we cannot be sure that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face reputational challenges if the due diligence procedures we implement do not enable us to verify the origins for all conflict minerals or to determine that such minerals are DRC conflict-free. We may also encounter challenges to satisfy customers that may require all of the components of products purchased to be certified as DRC conflict-free because our supply chain is complex. If we are not able to meet customer requirements, customers may choose to disqualify us as a supplier.

*Because our contracts are individual purchase orders and not long-term agreements, the results of our operations can vary significantly from quarter to quarter.*

We currently do not have long-term contracts with our customers, and major contracts with a small number of customers account for a significant percentage of our revenue. We must bid or negotiate each contract separately, and when we complete a contract, there is generally no continuing source of revenue under that contract. As a result, we cannot assure you that we have a continuing stream of revenue from any contract. Our failure to generate new business on an ongoing basis would materially impair our ability to operate profitably. Because a significant portion of our revenue is derived from services rendered from the alternative energy, nuclear, medical, defense, industrial, aerospace and related industries, our operating results may suffer from conditions affecting these industries, including any budgeting, economic or other trends that have the effect of reducing the requirements for our services.

*Because of our dependence on a limited number of customers, our failure to generate major contracts from a small number of customers may impair our ability to operate profitably.*

We have, in the past, 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. For the year ended March 31, 2013 our largest customer accounted for 24% of our revenue and our three largest customers accounted for 58% of our revenue. For the year ended March 31, 2012, our three largest customers accounted for approximately 53% of our revenue, with the largest accounting for 34% of our revenue. In addition, as of March 31, 2013, we had a $16.4 million order backlog, of which $15.3 million was attributable to ten customers. As a result, the default in payment by any of our major customers, the loss of existing orders or to the extent that we are unable to generate orders from new customers, we may have difficulty operating profitably. Furthermore, to the extent that any one customer accounts for a large percentage of our revenue, the loss of that customer could materially affect our ability to operate profitably. Since one customer, accounted for 24% of our revenue in the year ended March 31, 2013, the loss of this customer could have a material adverse effect upon our business and may impair our ability to operate profitably. We anticipate that our dependence on a limited number of customers in any given fiscal year will continue for the foreseeable future. There is a risk that existing customers will elect not to do business with us in the future or will experience financial difficulties. Furthermore, certain of our customers are at an early stage and are dependent on the equity capital markets to finance their purchase of our products.

As a result, these customers could experience financial difficulties, business reversals or lose orders or anticipated orders which would reduce or eliminate the need for the products which they ordered from us, and as a result they could be unable or unwilling to fulfill their contracts with us. There is also a risk that our customers will attempt to impose new or additional requirements on us that reduce the profitability of those customers for us. Further, even if the orders are not changed, these orders may not generate margins equal to our recent historical or targeted results. If we do not develop relationships with new customers, we may not be able to increase, or even maintain, our revenue, and our financial condition, results of operations, business and/or prospects may be materially adversely affected.

*The extensive environmental, health and safety regulatory regimes applicable to our manufacturing operations create the potential exposure to significant liabilities.*

The nature of our manufacturing business subjects our operations to numerous and varied federal, state, local and international laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Failure to comply with these laws and regulations, or with the permits required for our operations, could result in fines or civil or criminal sanctions, third party claims for property damage or personal injury, and investigation and cleanup costs. Potentially significant expenditures could be required in order to comply with environmental laws that may be adopted or imposed in the future.

We have used, and currently use certain quantities of substances that are considered hazardous, extremely hazardous or toxic under worker safety and health laws and regulations. Although we implement controls and procedures designed to reduce continuing risk of adverse impacts and health and safety issues, we could incur substantial cleanup costs, fines and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations, non-compliance or liabilities under these regulatory regimes required at our facilities.

Our failure to comply with these regulations could result in increased costs as well as penalties for violation of these regulations. As a manufacturing business, we must comply with federal and state environmental laws and regulations which relate to the manner in which we store and dispose of materials and the reports that we are required to file. We cannot assure you that we will not incur additional costs to maintain compliance with environmental laws and regulations or that we will not incur significant penalties for failure to be in compliance.

*Changes in delivery schedules and order specifications may affect our revenue stream.*

Although we perform manufacturing services pursuant to orders placed by our customers, we have in the past experienced delays in the scheduling and changes in the specification of the products. These changes may result from a number of factors, including a determination by the customer that the product specifications need to be changed after receipt of an initial product or prototype. As a result of these changes, we may suffer a delay in the recognition of revenue from the projects and may incur contract losses. We cannot assure you that our revenue will not be affected in the future by delays or changes in specifications or that we will ever be able to recoup revenue which was lost as a result of the delays or changes. Further, if we cannot allocate our personnel to a different project, we will continue to incur some expenses relating to the project, including labor and overhead. Thus, if orders are postponed, our results of operations would be impacted by our need to maintain staffing and other expense generating aspects of production for the postponed projects, even though they were not fully utilized, and revenue associated with the project is not recognized, during this period. We cannot assure you that our operating results will not decline in future periods as a result of changes in customers’ orders or their requirements for the products that they ordered.

*If we make any acquisitions, they may disrupt or have a negative impact on our business.*

Although we have no present plans for any acquisitions, in the event that we make acquisitions, we could have difficulty integrating the acquired companies’ personnel and operations with our own. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses.

*Negative economic conditions may adversely impact the demand for our products and services, and the ability of our customers to meet their obligations to us on a timely basis. Any disputes with customers could also have an adverse impact on our income and cash flows.*

Tightening of credit in financial markets may lead businesses to postpone spending, which may impact our customers, causing them to cancel, decrease or delay their existing and future orders with us. Declines in economic conditions may further impact the ability of our customers to meet their obligations to us on a timely basis. If customers are unable to meet their obligations on a timely basis, it could adversely impact the realization of receivables, the valuation of inventories and the valuation of long lived assets across our businesses. Additionally, we may be negatively affected by contractual disputes with customers, which could have an adverse impact on our income and cash flows.

*Our business may be impacted by external factors that we may not be able to control.*

War, civil conflict, terrorism, natural disasters and public health issues including domestic or international pandemic have caused and could cause damage or disruption to domestic or international commerce by creating economic or political uncertainties. Additionally, the volatility in the financial markets and disruptions or downturns in other areas of the global or U.S. economies, could negatively impact our business. These events could result in a decrease in demand for our products, make it difficult or impossible to deliver orders to customers or receive materials from suppliers, affect the availability or pricing of energy sources or result in other severe consequences that may or may not be predictable. As a result, our business, financial condition and results of operations could be materially adversely affected.

#### We rely in part on international sales, which are associated with various risks.

Risks associated with international sales include without limitation: political and economic instability, including weak conditions in the world’s economies; difficulty in collecting accounts receivable; unstable or unenforced export controls; changes in legal and regulatory requirements; policy changes affecting the markets for our products; changes in tax laws and tariffs; and exchange rate fluctuations (which may affect sales to international customers and the value of profits earned on international sales when converted into dollars). Any of these factors could materially adversely affect our results for the period in which they occur.

*The dangers inherent in our operations and the limits on insurance coverage could expose us to potentially significant liability costs and materially interfere with the performance of our operations.*

The fabrication of large steel structures involves operating hazards that can cause personal injury or loss of life, severe damage to and destruction of property and equipment and suspension of operations. The failure of such structures during and after installation can result in similar injuries and damages. Although we believe that our insurance coverage is adequate, there can be no assurance that we will be able to maintain adequate insurance in the future at rates we consider reasonable or that our insurance coverage will be adequate to cover future claims that may arise. Claims for which we are not fully insured may adversely affect our working capital and profitability. In addition, changes in the insurance industry have generally led to higher insurance costs and decreased availability of coverage. The availability of insurance that covers risks we and our competitors typically insure against may decrease, and the insurance that we are able to obtain may have higher deductibles, higher premiums and more restrictive policy terms.

*The rights of the holders of common stock may be impaired by the potential issuance of preferred stock.*

Our certificate of incorporation gives our board of directors the right to create new series of preferred stock. As a result, the board of directors may, without stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights, which could adversely affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The possible impact on takeover attempts could adversely affect the price of our common stock. Although we have no present intention to issue any additional shares of preferred stock or to create any new series of preferred stock and the certificate of designation relating to the series A preferred stock restricts our ability to issue additional series of preferred stock, we may issue such shares in the future. Without the consent of the holders of 75% of the outstanding shares of series A preferred stock, we may not alter or change adversely the rights of the holders of the series A preferred stock or increase the number of authorized shares of series A preferred stock, create a class of stock which is senior to or on a parity with the series A preferred stock, amend our certificate of incorporation in breach of these provisions or agree to any of the foregoing.

*The issuance of shares of our common stock as compensation may dilute the value of existing stockholders and may affect the market price of our stock.*

We may use stock options, stock grants and other equity-based incentives, to provide motivation and compensation to our officers, employees and key independent consultants. The award of any such incentives will result in an immediate and potentially substantial dilution to our existing stockholders and could result in a decline in the value of our stock price. The exercise of these options and the sale of the underlying shares of common stock and the sale of stock issued pursuant to stock grants may have an adverse effect upon the price of our stock.

*Because of our cash requirements and restrictions in the terms of our preferred stock and our debt agreements, we may be unable to pay dividends.*

In view of the cash requirements of our business, we expect to use any cash flow generated by our business to finance our operations and growth. Further, we are prohibited from paying dividends on our common stock while the series A preferred stock is outstanding.

*Our stock price may be affected by our failure to meet projections and estimates of earnings developed either by us or by independent securities analysts.*

Although we do not make projections relating to our future operating results, our operating results may fall below the expectations of securities analysts and investors. In this event, the market price of our common stock would likely be materially adversely affected.

*The deterioration of the credit and capital markets may adversely affect our access to sources of funding.*

We rely on our credit facilities to fund a portion of our working capital needs and other general corporate purposes. If the Bank backing these facilities were unable to perform on its commitments, our liquidity could be impacted, which could adversely affect funding of working capital requirements and other general purposes. In the event that we need to access the capital markets or other sources of financing, there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable time, if at all. Our inability to obtain financing on terms and within a time acceptable to us could have an adverse impact on our operations, financial condition, and liquidity.

#### Our stock price may fluctuate significantly.

The stock market, particularly in recent years, has experienced significant volatility, and the volatility of stocks often does not relate to the operating performance of the companies represented by the stock. The market price of our common stock could be subject to significant fluctuations because of general market conditions and because of factors specifically related to our businesses.

Factors that could cause volatility in the market price of our common stock include market conditions affecting our customers’ businesses, including the level of mergers and acquisitions activity, and actual and anticipated fluctuations in our quarterly operating results, rumors relating to us or our competitors, actions of stockholders, including sales of shares by our directors and executive officers additions or departures of key personnel; and developments concerning current or future strategic alliances or acquisitions.

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock at a profit and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management.

*If equity research analysts do not publish research or reports about our business, or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.*

The trading market for our common stock will rely in part on the research and reports that equity research analysts publish about us and our business. The price of our common stock could decline if one or more securities analysts downgrade our common stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

## Properties

As filed, 2,629 characters.

We own approximately 145,000-square feet of office and manufacturing space at 1 Bella Drive, Westminster, Massachusetts 01473. On December 20, 2010, we, through Ranor, purchased the Westminster property pursuant to a purchase and sale agreement, by and among the former owner of the property, WM Realty (an entity controlled by our director, Andrew Levy), and Ranor. Prior to consummation of the sale under such purchase and sale agreement, we had leased the purchased property from WM Realty. During fiscal 2012, we expanded the Westminster facility to increase its manufacturing capacity by an additional 19,500 square feet. The total cost of the expansion was $1.7 million and this expansion was financed from the proceeds of a bond financing we completed with the Massachusetts Development Authority in December 2010 (see Note 8, Long-Term Debt, in the notes to our audited financial statements for additional information).

On November 17, 2010, we entered into a lease agreement pursuant to which we leased approximately 3,200 square feet of office space in Center Valley, Pennsylvania now used as our corporate headquarters. We took possession of the property on April 1, 2011. Under the Center Valley lease, our payment obligations were deferred until the fifth month after taking possession, at which time we pay annual rent of approximately $60,000 in equal monthly installments, subject to upward adjustments during each subsequent year of the term of the lease. In addition, we are required to pay certain operating expenses and other fees in accordance with the terms of the lease. All of our payment obligations under the Center Valley lease may be accelerated if we fail to satisfy our payment obligations under the lease in a timely manner, or otherwise default on our obligations under the Center Valley lease, which expires on March 17, 2016. We may elect to renew the lease for an additional five-year term.

We lease approximately 1,100 square feet of office space in Wuxi City, Jiangsu Province, China, which houses WCMC. The lease has a one-year term and provides for rent of approximately $2,200 per month. We also lease apartment space for our expatriate employees who live and work in China for approximately $2,200 per month.

On February 24, 2009, we entered into a lease for 2,089 square feet of office space in Centreville, Delaware. The lease expired in February 2012 and was not renewed.

Although our current facilities, taking into account the Westminster facility expansion, are adequate for present requirements, we may need to further expand our manufacturing facilities as our business grows.

## Management's discussion and analysis

As filed, 40,269 characters.

### Statement Regarding Forward Looking Disclosure

The following discussion of the results of our operations and financial condition should be read in conjunction with our audited consolidated financial statements and the related notes, which appear elsewhere in this annual report on Form 10K. This annual report on Form 10-K, 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 in Item 1A “Risk Factors” and elsewhere in this Form 10-K as well as 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 recurring operating losses and the availability of appropriate financing facilities impacting our ability to continue as a going concern, to change the composition of our revenues and effectively reduce operating expenses, our ability 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 us in light of these important factors.

### Overview

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

All U.S. 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.

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 periods, we may continue to incur overhead expense but with lower revenue resulting in lower operating margins. Furthermore, changes in either the scope of an existing contract or related delivery schedules may impact the revenue we receive under the contract and the allocation of manpower. Although we provide manufacturing services for large governmental programs, we usually do not work directly for government or its agencies. 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 our services and products.

We historically have experienced, and continue to experience, customer concentration. Our five largest customers collectively accounted for 74% of our revenue for fiscal 2013. For fiscal 2013 and 2012, our largest customer accounted for approximately 24% and 34% of reported net sales, respectively. In any year, it is likely that our top five significant customers (albeit not always the same customers from year to year) will account for up to 74% in aggregate of our total annual revenues.

Our contracts are generated both through negotiation with the customer and from bids made pursuant to a request for proposal. Our ability to receive contract awards is dependent upon the contracting party’s perception of such factors as our ability to perform on time, our history of performance, including quality, our financial condition and our ability to price our services competitively. 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. For fiscal 2013, our net sales and net loss were $32.5 million and $2.4 million, as compared to net sales of $33.3 million and net loss of $2.1 million, for fiscal 2012. Our gross margin for fiscal 2013 was 20.2% as compared to 15.3% for fiscal 2012. Fiscal 2012 margin was impacted by $2.4 million of contract losses and unplanned costs incurred on first article projects and prototyping for customers of Ranor.

During fiscal 2012 we brought our WCMC subsidiary online to meet shifting demands from key customers, and simultaneously had to weather slowdowns in our alternative energy business. The impact on our Ranor facility was significant because manufacturing for their largest customer was transferred to China. We replaced the transferred business backfilling our Ranor facility with orders from existing and new customers that required domestic production capacity. In fiscal 2012, WCMC received a purchase agreement from an existing customer for up to $9.5 million in sapphire chamber orders over the term of the purchase agreement. As of March 31, 2013, we have received purchase orders and delivered $2.1 million of sapphire chambers under this purchase agreement.

At March 31, 2013, we were not in compliance with our financial covenants in the Loan Agreement, and the Bank has not agreed to waive the non-compliance with the covenants at March 31, 2013. The Bank also did not renew the revolving credit facility which expired on July 31, 2013. Since we are in default, the Bank has the right to accelerate payment of the debt in full upon 60 days' written notice. As a consequence, we have classified all amounts under the Loan Agreement ($5.8 million) as a current liability at March 31, 2013. In addition, we incurred operating losses of $2.4 million and $2.1 million for the periods ended March 31, 2013 and 2012, respectively.

These factors raise substantial doubt regarding our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. See “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

### Growth Strategy

Our strategy is to leverage our core competence as a manufacturer of high-precision, large-scale metal fabrications and machined components to optimize profitability of our current business and expand into stronger markets that have shown increasing demand. We aim to establish our expertise in Program and Project Management and develop and expand a repeatable customer business model in our strongest markets. In November 2010, we announced the formation of WCMC. This subsidiary was formed to respond to an existing customer’s desire to migrate their supply chain nearer to their end market within China. Since forming WCMC, we have produced, through subcontractors, primarily alternative energy products in China for GTAT and several other customers. During the years ended March 31, 2013 and 2012, WCMC’s net sales were $3.3 million and $4.6 million respectively.

#### Alternative Energy

Historically alternative energy has been our largest market served and has comprised a significant amount of annual net sales. The primary products we have manufactured for alternative energy customers, including GTAT, have been multi-crystalline and mono-crystalline solar furnaces, sapphire furnaces as well as polysilicon reactor vessels. During fiscal 2013 and 2012, the pace at which solar and sapphire manufactures increased their production capacity was slow. As a result our sales volume to customers within the alternative energy sector comprised only 28.5% of total sales for fiscal 2013, as compared with 43.5% in fiscal 2012.

#### Defense and Aerospace

Our Ranor subsidiary performs precision fabrication and machining for the defense and aerospace industries, delivering turnkey defense components to our customers stringent design specifications, as well as quality and safety manufacturing standards specifically for defense component fabrication and machining. Defense components the Ranor team has delivered include critical sonar housings and fairings, vertical launch missile tubes, and magnetic motor system components. In addition, the team at Ranor has successfully developed new, effective approaches to fabrication that continue to be utilized at their facility and at our customer’s own defense component manufacturing facilities. We have developed and built Tier 1 and Tier 2 relationships with our customers and will continue to seek opportunities in this sector where we have a Tier 1 or Tier 2 supplier relationship.

Over the course of the past year, we have increased our business development efforts with large prime defense contractors. Based upon these efforts, we believe there are additional opportunities to secure increased business with existing and new defense contractors who are actively looking to increase outsourced content on certain defense programs over the next several years. We believe that the military quality certifications it maintains and its ability to offer turn-key fabrication and manufacturing services at a single facility position it as an attractive outsourcing partner for prime contractors looking to increase outsourced production.

#### Medical Industry

For several years we have been providing production services to Mevion for the manufacture of its proprietary proton beam radiotherapy system. Mevion received 510(k) clearance from the U.S. Food and Drug Administration, or FDA, in June 2012 to market its proton radiotherapy device. Presently Mevion has eleven systems under development with customers in the U.S. In January 2013, we announced a five-year agreement with Mevion to exclusively produce precision components for Mevion’s proton beam system. During the year ended March 31, 2013, Mevion became our largest customer and accounted for $7.7 million in net sales. We expect that sales volume to Mevion will increase as Mevion further expands the market launch of its innovative proton therapy device.

#### Nuclear Energy

In February 2013, we completed the initial manufacture of Type B radioactive isotope transport casks on behalf of our customer, Alpha-Omega Services, Inc. We have been working with this customer for several years while it was seeking U.S. Nuclear Regulatory Commission, or NRC, license approval of its proprietary Type B radioactive isotope transport casks. As this customer’s cask design meets the NRC’s most recent regulatory requirements for Type B transport casks, we and our customer expect increased demand for this product as the NRC requires companies that transport radioactive isotopes to replace their existing Type B transport casks with casks that meet the latest NRC requirements.

Over the next 10 years, 26 nuclear power plants are scheduled to be built in China, five in the United States and five in Europe (including three in the United Kingdom). The 2011 nuclear tragedy in Japan has bolstered demand for advanced nuclear reactor designs with passive safety systems. We believe this represents a significant opportunity for us as Ranor is one of the few facilities in the United States that has the certifications required to produce the necessary components for new plants. 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. However, we cannot assure you that we will be able to develop any significant business from the nuclear industry.

#### LED Lighting/Enabled Products

Growing global demand for LED lighting and LED enabled products has increased the worldwide demand for Heat Exchanger Method or HEM, sapphire, a core component in high-end LED products. Accordingly, many polysilicon companies, including our customer GTAT, are expanding into the field of HEM sapphire and existing players in the HEM sapphire industry are expanding their production capacity. The production of HEM sapphire requires robust high temperature vacuum furnaces much like those we have been producing for the processing of polysilicon within the solar industry. We believe the HEM sapphire field is a growing sector where our manufacturing expertise and experience with similar products for the solar industry can be directly leveraged. We are in active dialogue with existing customers regarding our capability and capacity to manufacture furnaces for the HEM sapphire industry. In fiscal 2012, WCMC received a purchase agreement from an existing customer for up to $9.5 million in sapphire chamber orders over the term of the purchase agreement. We have shipped production units for $2.1 million of sapphire chambers under this purchase agreement in fiscal 2013.

### Plant Expansion

During fiscal 2012, we completed a 19,500 square foot expansion of our Westminster, Massachusetts facility at a cost of $1.7 million. The building expansion was completed and placed into service in September, 2011. We also completed the installation of a new $2.4 million gantry mill machine which was placed in service during fiscal 2012. A portion of the proceeds from December 2010 municipal bond financing were utilized to finance the building expansion and final payments on the gantry machine.

### Critical Accounting Policies

The preparation of our consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make assumptions, estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 2 to the Consolidated Financial Statements describes the significant accounting policies used in preparation of the consolidated financial statements. We rely on historical experience and other assumptions we believe to be reasonable in making our estimates. We continually evaluate our estimates, including those related to contract accounting, inventories, recovery of long-lived assets, income taxes and the valuation of equity transactions. These estimates and assumptions require management’s most difficult, subjective or complex judgments. Actual financial results of the operations could differ materially from such estimates.

Percentage-of-completion is considered the revenue recognition model that best reflects the economics for our custom contracts. As a result of the transfer of solar production chambers for Ranor’s largest customer to WCMC during fiscal 2012, Ranor’s product mix changed and included a heavy volume of prototyping and first article production. These types of projects necessitated a different type of percentage-of-completion method of accounting for revenue recognition purposes. As a result, we are accounting for these types of projects based on an inputs based method utilizing labor hours incurred on the projects to determine progress toward completion.

### Revenue Recognition

We account for revenues and earnings in our business using the percentage-of-completion method of accounting. We recognize contract revenue and gross profit under this method as the work progresses, either as the products are produced and delivered, or as services are rendered. We determine progress toward completion on production contracts based on either input measures, such as labor hours incurred, or output measures, such as units delivered.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability are recognized in the period in which the revisions are determined. Costs incurred on uncompleted contracts consist of labor, overhead, and materials. Work in process is stated at the lower of cost or market.

We may combine contracts for accounting purposes when they are negotiated as a package with an overall profit margin objective. These essentially represent an agreement to do a single project for a single customer, involve interrelated construction activities with substantial common costs, and are performed concurrently or sequentially. When a group of contracts is combined, revenue and profit are earned during the performance of the combined contracts.

Costs allocable to undelivered units are reported in the consolidated balance sheet as costs incurred on uncompleted contracts. Amounts in excess of agreed upon contract price for customer directed changes, construction 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 reliably estimated. Revenues from such claims are recorded only to the extent that contract costs have been incurred. 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. We have written agreements with the customers that specify contract prices and delivery terms. We recognize revenues only when the collectability is reasonably assured.

When we can only estimate a range of revenues and costs, we use the most likely estimate within the range. If we cannot determine which estimate in the range is most likely, the amounts within the ranges that would result in the lowest profit margin (the lowest contract revenue estimate and the highest contract cost estimate) is used.

### Income Taxes

We provide for federal and state income taxes currently payable, as well as those deferred because of temporary differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable. The effect of the change in the tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income taxes to the amount that is more likely than not to be realized.

In assessing the recoverability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. If we determine that it is more likely than not that certain future tax benefits may not be realized, a valuation allowance will be recorded against deferred tax assets that are unlikely to be realized. Realization of the remaining deferred tax assets will depend on the generation of sufficient taxable income in the appropriate jurisdiction, the reversal of deferred tax liabilities, tax planning strategies and other factors prior to the expiration date of the carryforwards. A change in the estimates used to make this determination could require a reduction in the valuation allowance for deferred tax assets if they become realizable. Our tax expense for fiscal 2013 includes the result of recording a full valuation allowance on our deferred tax assets.

As of March 31, 2013, our federal net operating loss carry-forward was approximately $2.2 million. If not utilized, the federal net operating loss carry-forward will expire in 2033. Furthermore, because of the over fifty-percent change in ownership as a consequence of the reverse acquisition of Ranor in February 2006, the amount of net operating loss carry forward used in any one year in the future is substantially limited. We will carryback $1.2 million of fiscal 2013 net operating losses against our net taxable income for 2011 resulting in a net refund of $0.3 million.

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

Our results of operations are also affected by our 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 fulfilling 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.

### Years Ended March 31, 2013 and 2012

The following table sets forth information from our statements of operations, in dollars and as a percentage of revenue:

*(dollars in thousands)*

|  | 2013 Amount | Percent | 2012 Amount | Percent | Changes Year Ended March 31, 2013 to 2012 Amount | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $32,473 | 100% | $33,267 | 100% | $(794) | (2)% |
| Cost of sales | 25,914 | 80% | 28,183 | 85% | (2,269) | (8)% |
| Gross profit | 6,559 | 20% | 5,084 | 15% | 1,475 | 29% |
| Selling, general and administrative | 8,161 | 25% | 8,448 | 25% | (287) | (3)% |
| Loss from operations | (1,602) | (5)% | (3,364) | (10)% | 1,762 | 52% |
| Other income (expense): |  |  |  |  |  |  |
| Other income (expense) | (29) | --% | 19 | --% | (48) | nm% |
| Interest expense | (310) | (1)% | (267) | (1 ) % | (43) | (16 ) % |
| Interest income | 2 | --% | 20 | --% | (18) | (90 ) % |
| Total other expense, net | (337) | (1)% | (228) | (1 ) % | (109) | (48 ) % |
| Loss before income taxes | (1,939) | (6)% | (3,592) | (11)% | 1,653 | 46% |
| Income tax expense (benefit) | 472 | 1% | (1,469) | (4)% | 1,941 | nm% |
| Net Loss | $(2,411) | (7)% | $(2,123) | (6)% | $(288) | (13 ) % |

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### Net Sales

In fiscal 2013, net sales decreased by $0.8 million, or 2%, to $32.5 million. Our net sales to Medical customers increased by $6.6 million when compared with fiscal 2012 on increased orders from our proton beam therapy customer for components and assemblies. Demand for components and products sold to our Defense and Aerospace and Nuclear customers increased by $0.7 and $1.6 million, respectively. Deliveries to Commercial markets decreased by $4.5 million because of lower demand for industrial products when compared with fiscal 2012. Net Sales to the Alternative energy markets decreased by $5.2 million, as market demand slowed for solar and sapphire production furnaces when compared with fiscal 2012. In fiscal 2013, net sales originating at our WCMC division totaled $3.3, primarily with Alternative energy customers. Revenue generated outside the U.S. decreased by $1.3 million on weaker demand from our largest alternative energy customer in China. Revenues generated from operations domiciled in the U.S. during fiscal 2013 were $29.2 million compared with $28.7 million in fiscal 2012.

### Cost of Sales and Gross Margin

Our cost of sales for fiscal 2013 decreased by $2.3 million or 8.1% when compared to fiscal 2012. Gross margins during fiscal 2013 were 20.2% compared with 15.3% for the same period in fiscal 2012. Gross margin in any reporting period is impacted by the mix of services we provide on projects completed within that period. Gross margins during fiscal 2013 were higher due to smaller contract losses (approximately $0.3 million) incurred for custom first article and prototyping products at Ranor. There were $2.4 million of contract losses incurred on new first article production and prototyping at Ranor in fiscal 2012 as Ranor’s production mix shifted to a greater volume of prototyping and first article production during fiscal 2012 as we redeployed open U.S. production capacity because of the transfer of solar production chambers to China for our largest customer.

### Selling, General and Administrative Expenses

Total selling, general, and administrative expenses for fiscal 2013 were $8.2 million compared with $8.5 million for fiscal 2012, representing a decrease of $0.3 million or 3%. This decrease was made up of lower G&A spending of $0.4 million for compensation and benefits and for travel and business expenses, plus the absence of $0.3 million of expense related to the design and development of certain prototype production chambers in fiscal 2012. The total decrease described above was partially offset by a significant increase in expenses incurred for outside services and advisory fees in fiscal 2013 of $0.5 million when compared with fiscal 2012.

### Other Income (Expense)

The following table reflects other income (expense), interest income and interest expense for fiscal 2013 and 2012:

|  | 2013 | 2012 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Other income (expense) | $(27,397) | $38,853 | $(66,249) | nm% |
| Interest expense | $(268,351) | $(323,749) | $55,398 | 17% |
| Interest expense: non-cash | $(41,448) | $(57,973) | $16,525 | 29% |
| Capitalized interest: non-cash | $-- | $114,145 | $(114,145) | nm% |

Interest expense for the period ended March 31, 2013 decreased when compared with the prior fiscal year as our levels of debt continued to decrease. In fiscal 2013 other expense totaled $27,397, primarily the sum of certain bank fees paid in the U.S. and China compared with $38,853 of other income earned in the U.S. and China in fiscal 2012. Non –cash interest expense for $41,448 and $57,973 reflects the amortization of deferred loan costs in connection with our Series A and Series B bonds. In fiscal 2012 we reported capitalized interest expense of $114,145 for the expansion project at our Westminster, Massachusetts facility.

### Income Taxes

For fiscal 2013, we recorded tax expense of $0.5 million compared with a tax benefit of $1.5 million in fiscal 2012. The tax expense for fiscal 2013 was primarily the result of recording a full valuation allowance on our net deferred tax assets. A valuation allowance must be established for deferred tax assets when it is more likely than not that they will not be realized. The assessment was based on the weight of negative evidence at the balance sheet date, our recent operating losses and unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels. We will carryback a portion ($1.2 million) of fiscal 2013 net operating losses against our net taxable income for fiscal 2011, resulting in a net refund receivable of $0.3 million. The tax benefit for fiscal 2012 was primarily the result of pretax losses from operations recorded at the U.S. federal and state statutory tax rates.

Our future effective tax rate would be affected if earnings were lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. We regularly assess the effects resulting from these factors to determine the adequacy of our provision for income taxes.

### Net Loss

As a result of the foregoing, our net loss was $2.4 million or $0.13 per share both basic and fully diluted for fiscal 2013, as compared to net loss of $2.1 million or $0.13 per share basic and fully diluted for fiscal 2012.

### Liquidity and Capital Resources

At March 31, 2013, we were not in compliance with the fixed charges and interest coverage financial covenants in the Loan Agreement, and the Bank has not agreed to waive the non-compliance with the covenants at March 31, 2013. In addition, the Bank did not renew the revolving credit facility which expired on July 31, 2013. Since we are in default, the Bank has the right to accelerate payment of the debt in full upon 60 days' written notice. As a consequence, we have classified all amounts under the Loan Agreement ($5.8 million) as a current liability at March 31, 2013. The Bank is evaluating its course of action and has not yet demanded repayment. We continue to make payments pursuant to the terms of the Loan Agreement. If the Bank were to make such a demand for repayment, we would be unable to pay the obligation as we do not have existing facilities or sufficient cash on hand to satisfy these obligations and would need to seek alternative financing.

We have incurred operating losses of $2.4 million and $2.1 million for the periods ended March 31, 2013 and 2012, respectively. At March 31, 2013, we had cash and cash equivalents of $3.1 million, of which $0.5 million is located in China and which we may not be able to repatriate for use in the U.S. without undue cost or expense if at all. We borrowed $0.5 million under its revolving line of credit during the quarter ended March 31, 2013, and have repaid this borrowing in full in July 2013. In addition, we have $1.0 million of restricted cash with the Bank (included in our other current assets) that could be used toward satisfying our obligation under the Loan Agreement.

These factors raise substantial doubt about our ability to continue as a going concern. In order for us to continue operations beyond the next twelve months and be able to discharge our liabilities and commitments in the normal course of business, we must secure long-term financing on terms consistent with our near-term business plans. In addition, we must increase our backlog and change the composition of our revenues to focus on recurring unit of delivery projects rather than custom first article and prototyping projects which do not efficiently use our manufacturing capacity, and reduce our operating expenses to be in line with current business conditions in order to increase profit margins and decrease the amount of cash used in operations. If successful in changing the composition of revenue and reducing costs, we expect that fiscal 2014 operating results will reflect positive cash flows. However, we plan to closely monitor our expenses and, if required, will further reduce operating costs and capital spending to enhance liquidity.

The consolidated financial statements for the year ended March 31, 2013 were prepared on the basis of a going concern which contemplates that we will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should we be required to liquidate assets. Our ability to satisfy our total liabilities of $11.2 million at March 31, 2013 and to continue as a going concern is dependent upon the availability to timely secure long-term financing and successful execution of our operating plan. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Our failure to obtain new or additional financing could impair our ability to both serve our existing customer base and develop new customers and could result in our failure to continue to operate as a going concern. To the extent that we require new or additional financing, we cannot assure you that we will be unable to get such financing on terms equal to or better than the terms of our Loan Agreement. If we are unable to raise funds through a credit facility, it may be necessary for us to conduct an offering of debt and/or equity securities on terms which may be disadvantageous to us or have a negative impact on our outstanding securities and the holders of such securities. In the event of an equity offering, it may be necessary that we offer such securities at a price that is significantly below our current trading levels which may result in substantial dilution to our investors that do not participate in the offering and a new low trading level for our common stock.

Our liquidity is highly dependent on our available financing facilities and ability to improve our gross profit and operating income. If we successfully secure an acceptable financing facility and execute on our business plans, then we believe that our available cash, together with additional reductions in operating costs and capital expenditures, will be sufficient to fund our operations, capital expenditures and principal and interest payments under our debt obligations through the next twelve months.

At March 31, 2013, we had working capital of $3.1 million as compared with working capital of $10.2 million at March 31, 2012, representing a decrease of $7.1 million or 70%, primarily due to the classification of long-term debt as current. The following table sets forth information as to the principal changes in the components of our working capital:

*(dollars in thousands)*

|  | March 31, 2013 | March 31, 2012 | Change Amount | Percentage Change |
| --- | ---: | ---: | ---: | ---: |
| Cash and cash equivalents | $3,075 | $2,823 | $252 | 9% |
| Accounts receivable, net | 4,331 | 4,902 | (571) | (12)% |
| Costs incurred on uncompleted contracts | 4,298 | 3,910 | 388 | 10% |
| Inventory - raw materials | 354 | 373 | 19 | 5% |
| Other current assets | 1,578 | 1,486 | 92 | 6% |
| Income taxes receivable | 374 | 1,751 | (1,377) | (79)% |
| Current deferred tax assets | 256 | 1,020 | (764) | 75% |
| Accounts payable | 2,537 | 1,361 | 1,176 | 86% |
| Accrued expenses | 1,875 | 2,425 | (550) | (23)% |
| Accrued taxes payable | 232 | 160 | 72 | 45% |
| Deferred revenues | 253 | 799 | (546) | (68)% |
| Debt | 5,784 | 1,359 | 4,425 | nm% |
| Short-term revolving line of credit | 500 | -- | 500 | nm% |

The following table summarizes our primary cash flows for the periods presented:

*(dollars in thousands)*

| Cash flows provided by (used in): | March 31, 2013 | March 31, 2012 | Change Amount |
| --- | ---: | ---: | ---: |
| Operating activities | $1,779 | $(2,647) | $4,426 |
| Investing activities | (663) | (2,682) | 2,019 |
| Financing activities | (866) | 587 | (1,453) |
| Effect of exchange rates on cash and cash equivalents | 2 | 24 | (22) |
| Net increase (decrease) in cash and cash equivalents | $252 | $(4,718) | $4,970 |

#### Operating activities

Cash provided by operations in fiscal 2013 was $1.8 million compared with cash used in operations of $2.6 million in fiscal 2012. Fiscal 2013 cash flows provided from operations were impacted by smaller losses from operations and larger customer advance and milestone payments when compared with fiscal 2012. We also received $2.1 million in federal and state tax refunds during fiscal 2013. Cash used in operations during fiscal 2012 was driven by higher spending levels on completed and uncompleted projects in progress because of a heavy volume mix of manufacturing activity related to first article production and prototyping projects.

#### Investing activities

During the years ended March 31, 2013 and 2012, we invested $0.7 and $2.7 million, respectively, in property and equipment, for the purchase of a new water jet cutter, a gantry mill machine and to expand our manufacturing facility in Westminster, MA. A bond financing arranged with the State of Massachusetts and the Bank, in December 2010 provided financing capacity to fund the purchase of the gantry mill as well as other qualifying manufacturing equipment and the 19,500 plant expansion completed during fiscal 2012. The bond financing also designated funds that could be utilized for the expansion of our Westminster, Massachusetts facility.

#### Financing activities

In fiscal 2013, net cash used in financing activities was $0.9 million, comprised of principal payments of $1.4 million on our long-term debt and borrowings of $500,000 under our revolving line of credit with the Bank in the fourth quarter to fund operations. As of March 31, 2013 the maximum available for borrowing was $1.5 million under this line of credit. The credit line expired on July 31, 2013 and was not renewed by the Bank. In fiscal 2012, net cash provided by financing activities was $0.6 million. The primary use of cash under financing activities in fiscal 2012 related to repayments of long-term debt for $1.4 million. We also borrowed an additional $1.9 million under the bond financing agreement to fund the ongoing plant and equipment expansion at our Westminster, MA facility during fiscal 2012.

All of the above activity resulted in a net increase in cash for fiscal 2013 of $0.3 million, compared with a net decrease in cash of $4.7 million for fiscal 2012.

Obligations under the Term Note, Revolving Note, Capital Expenditure Note and Staged Advance Note are guaranteed by TechPrecision and Ranor. Collateral securing such notes comprises all personal property of TechPrecision and Ranor, including cash, accounts receivable, inventories, equipment, financial and intangible assets. We have no off-balance sheet assets or liabilities.

The following table sets forth information as of March 31, 2013 as to our contractual obligations:

*(dollars in thousands)*

| Contractual obligations | Payments due by period Total | Less than 1 year | 2-3 years | 4-5 years | After 5 years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Debt and capital lease obligations | $5,815 | $5,784 | $18 | $13 | $-- |
| Interest on debt and capital leases | 1,206 | 1,203 | 2 | 1 | -- |
| Purchase obligations | 930 | 930 | -- | -- | -- |
| Non-cancellable operating leases | 227 | 60 | 124 | 43 | -- |
| Revolving credit loan | 500 | 500 | -- | -- | -- |
| Total | $8,678 | $8,477 | $144 | $57 | $-- |

## Controls and procedures

As filed, 4,676 characters.

#### Evaluation of Disclosure Controls and Procedures.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, are controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

As of the end of the period covered by this report, an evaluation was carried out, under the supervision and with the participation of management, including our Executive Chairman and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Executive Officer and Chief Financial Officer concluded that, as of March 31, 2013, our disclosure controls and procedures were not effective because of a material weakness in our internal control over financial reporting as discussed below.

#### Management’s Report of Internal Control over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Executive Chairman and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2013 based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO, in *Internal Control - Integrated Framework.*

#### Material Weakness

A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with our assessment of our internal control over financial reporting described above, we have identified a material weakness in our internal control over financial reporting as of March 31, 2013. We did not maintain a sufficient complement of corporate accounting personnel or Ranor accounting staff necessary to consistently perform management review controls over Ranor financial information and complete account reconciliations on a timely basis to ensure all transactions were accurately captured and recorded in the proper period. The demand on the corporate accounting resources is significant due to the manual nature of controls necessary to maintain effective control over our legacy system and intensified during the fourth quarter of fiscal 2013 as a result of turnover of accounting personnel at Ranor. As a result of this material weakness, we made a number of late or post-closing adjustments to net sales, cost of sales, stock based compensation expense, contract loss reserves, selling, general and administrative expenses, cash, and related footnote disclosures in order to prepare the consolidated financial statements and footnotes included in this Form 10-K.

#### Remediation Plan

To address this material weakness, we have begun to formalize our accounting policies and plan to implement an account reconciliation process to provide guidelines for account reconciliations and enhancing documentation to support sub-ledger account reconciliations. In addition, we hired a new Ranor Controller during the fourth quarter of fiscal 2013.

We believe that the measures described above will facilitate remediation of the material weakness we have identified and will continue to strengthen our internal control over financial reporting. We are committed to continually improving our internal control process and will diligently review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may decide that additional measures are necessary to address control deficiencies.

#### Changes in Internal Control Over Financial Reporting

Other than the material weakness described above, there have been no changes in our internal control over financial reporting during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting. To remediate this material weakness, during 2013, we will determine the appropriate complement of corporate and divisional accounting personnel required to consistently operate management review controls.

Filed Aug 16, 2013.
Source: SEC EDGAR, the filing index for accession 0000950159-13-000526. Last ingested by Listed: Nov 10, 2026, 04:27 ET. No prices; not investment advice.