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v3.22.2.2

DEBT | 3 Months Ended
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Jun. 30, 2022
DEBT |
DEBT | NOTE 12 – DEBT ​
​ | ​ | ​ | ​ | ​ | ​ | ​
Long-term debt included the following as of: |  | June 30, 2022 |  | March 31, 2022
Stadco Term Loan, at 3.79% interest, due August 2028 | ​ | $ | 3,578,102 | ​ | $ | 3,705,792
Ranor Term Loan, at 5.21% interest, due September 2022 | ​ | ​ | 2,336,691 | ​ | ​ | 2,363,126
Ranor Revolver Loan, at 2.75% interest, due December 2022 | ​ | ​ | 300,000 | ​ | ​ | 1,287,002
Total debt | ​ | $ | 6,214,793 | ​ | $ | 7,355,920
Less: debt issue costs unamortized | ​ | $ | 140,774 | ​ | $ | 147,905
Total debt, net | ​ | $ | 6,074,019 | ​ | $ | 7,208,015
Less: Current portion of long-term debt | ​ | $ | 3,083,956 | ​ | $ | 4,093,079
Total long-term debt, net | ​ | $ | 2,990,063 | ​ | $ | 3,114,936
​ Stadco Term Loan On August 25, 2021, Stadco borrowed $4,000,000 from Berkshire Bank, or the “Stadco Term Loan”. Interest on the Stadco Term Loan is due on unpaid balances beginning on August 25, 2021 at a fixed rate per annum equal to the seven-year Federal Home Loan Bank of Boston Classic Advance Rate plus 2.25%. Since September 25, 2021 and on the 25th day of each month thereafter, Stadco had made and will make monthly payments of principal and interest in the amount of $54,390 each, with all outstanding principal and accrued interest due and payable on August 25, 2028. Interest shall be calculated based on actual days elapsed and a 360-day year. The Company is required to pay a late charge in the amount of 5% of each payment due under the Stadco Term Loan (other than the balloon payment due at maturity) that is more than ten days in arrears. In addition, from and after the date on which the Stadco Term Loan becomes, or at Berkshire Bank’s option, could become due and payable (whether accelerated or not), at maturity, upon default or otherwise, interest shall accrue and shall be immediately due and payable at the default rate equal to 5% per annum greater than the interest rate otherwise in effect, but in no event higher than the maximum interest rate permitted by law. Unamortized debt issue costs at June 30, 2022 and March 31, 2022 were $63,753 and $71,617, respectively. Ranor Term Loan The Ranor Term Loan was made to Ranor by Berkshire Bank in 2016 in the amount of $2.85 million. Payments began on January 20, 2017 and were made in 60 monthly installments of $19,260 each, inclusive of interest at a fixed rate of 5.21% per annum, with all outstanding principal and accrued interest due and payable on the maturity date. On December 17, 2021, Ranor and certain affiliates of the Company entered into a First Amendment to the Amended and Restated Loan Agreement and First Amendment to Promissory Note to extend the maturity date of the Ranor Term Loan from December 20, 2021 to March 18, 2022. On March 18, 2022, Ranor and certain affiliates of the Company entered into a Second Amendment to Amended and Restated Loan Agreement and Second Amendment to Promissory Note to further extend the maturity date of the Ranor Term Loan to June 16, 2022. On June 16, 2022, Ranor and certain affiliates of the Company entered into a Third Amendment to the Amended and Restated Loan Agreement and Third Amendment to the Promissory Note to further extend the maturity date of the Ranor Term Loan to September 16, 2022. A balloon principal payment of approximately $2.4 million, originally due on December 20, 2021, is now due on September 16, 2022, under the Term Loan. In accordance with the amended loan agreement, the maximum amount that can now be borrowed under the Revolver loan is $5.0 million. Advances under the Revolver Loan are subject to a borrowing base equal to the lesser of (a) $5.0 million or (b) the sum of (i)80% of the net outstanding amount of Base Accounts, plus (ii) the lesser of (x) 25% of Eligible Raw Material Inventory, and (y) $250,000, plus (iii) 80% of the Appraised Value of the Eligible Equipment, as such terms are defined in the amended and restated loan agreement among the Company, certain subsidiaries of the Company, and Berkshire Bank, dated August 25, 2021 (the “Loan Agreement”). The Company agrees to pay to Berkshire Bank, as consideration for Berkshire Bank’s agreement to make the Revolver Loan available, a nonrefundable Revolver Loan fee equal to 0.25% per annum (computed based on a year of 360 days and actual days elapsed) on the difference between the amount of: (a) $5.0 million, and (b) the average daily outstanding balance of the Revolver Loan during the quarterly period then ended. All Revolver Loan fees are payable quarterly in arrears on the first day of each January, April, July and October and on the Revolver Maturity Date, or upon acceleration of the Revolver Loan, if earlier. Under the promissory note for the Revolver Loan, the Company can elect to pay interest at an adjusted LIBOR-based rate or an Adjusted Prime Rate. The minimum adjusted LIBOR-based rate is 2.75% and the Adjusted Prime Rate is the greater of (i) the Prime Rate minus 70 basis points or (ii) 2.75%. Interest-only payments on advances made under the Revolver Loan will continue to be payable monthly in arrears. The maturity date of the Revolver Loan is December 20, 2022. This agreement contains customary LIBOR replacement provisions. There was approximately $0.3 million outstanding under the Revolver Loan at June 30, 2022. Interest payments made under the Revolver Loan were $1,961 for the three months ended June 30, 2022. The weighted average interest rate at June 30, 2022 and March 31, 2022 was 2.75% and 2.67%, respectively. Unused borrowing capacity at June 30, 2022 and March 31, 2022 was approximately $3.9 million and $2.8 million, respectively. Unamortized debt issue costs at March 31, 2022 and 2021 were $77,021 and $76,288, respectively. Berkshire Loan Covenants For purposes of this discussion, Ranor and Stadco are referred to together as the “Borrowers”. The Ranor Term Loan, the Stadco Term Loan and the Revolver Loan, or together, the “Berkshire Loans”, may be accelerated upon the occurrence of an event of default as defined in the Berkshire Loan Agreement. Upon the occurrence and during the continuance of any of certain default events, at the option of Berkshire Bank, or automatically without notice or any other action upon the occurrence of any event specified in the loan agreement, the unpaid principal amount of the Loans and the Notes together with accrued interest and all other obligations owing by the Borrowers to Berkshire Bank would become immediately due and payable without presentment, demand, protest, or further notice of any kind. The Borrowers agree to maintain the ratio of the Cash Flow of TechPrecision to the Total Debt Service of TechPrecision of not less than 1.20 to 1.00, measured quarterly on the last day of each fiscal quarter or-annual period of TechPrecision on a trailing twelve (12) month basis, commencing with the fiscal quarter ending as of September 30, 2021. Calculations will be based on the audited (year-end) and unaudited (quarterly) consolidated financial statements of TechPrecision. Quarterly tests will be measured based on the financial statements included in the Company’s quarterly reports on Form 10-Q within sixty days of the end of each quarter, and annual tests will be measured based on the financial statements included in the Company’s annual reports on Form 10-K within one hundred twenty days after the end of each fiscal annual period. Cash Flow means an amount, without duplication, equal to the sum of net income of TechPrecision plus (i) interest expense, plus (ii) taxes, plus (iii) depreciation and amortization, plus (iv) stock-based compensation expense taken by TechPrecision, plus (v) non-cash losses and charges and one time or non-recurring expenses at Berkshire Bank’s discretion, less (vi) the amount of cash distributions, if any, made to shareholders or owners of TechPrecision, less (vii) cash taxes paid by the TechPrecision, all as determined in accordance with U.S. GAAP. Total Debt Service shall mean an amount, without duplication, equal to the sum of (i) all amounts of cash interest paid on liabilities, obligations and reserves of TechPrecision paid by TechPrecision, (ii) all amounts paid by TechPrecision in connection with current maturities of long-term debt and preferred dividends, and (iii) all payments on account of capitalized leases, all as determined in accordance with U.S. GAAP. The Borrowers agree to cause their Balance Sheet Leverage to be less than or equal 2.50 to 1.00. Compliance with the foregoing shall be tested quarterly, as of the last day of each fiscal quarter of the Borrowers, commencing with the fiscal quarter ending September 30, 2021. Balance Sheet Leverage means, at any date of determination, the ratio of Borrowers’ (a) Total Liabilities, less Subordinated Debt, to (b) Net Worth, plus Subordinated Debt. The Borrowers agree that their combined annual capital expenditures shall not exceed $1.5 million. Compliance shall be tested annually, commencing with the fiscal year ending March 31, 2022. The Company was in compliance with all of the financial covenants at March 31, 2022. The Borrowers agree to maintain a Loan-to-Value Ratio of not greater than 0.75 to 1.00. Loan-to-Value Ratio means the ratio of (a) the sum of the outstanding balance of the Ranor Term Loan and the Stadco Term Loan, to (b) the fair market value of the property pledged as collateral for the loan, as determined by an appraisal obtained from time to time by Berkshire Bank, but not more frequently than one time during each 365 day period (provided that Berkshire Bank may obtain an appraisal at any time after either the Ranor Term Loan or the Stadco Term Loan has been accelerated), which appraisals shall be at the expense of the Borrowers. At June 30, 2022, the Company was not in compliance with all of these financial covenants. Berkshire Bank waived the Company’s noncompliance with certain of the financial and related covenants at June 30, 2022. The bank retains the right to act on covenant violations that occur after the date of delivery of the waiver. If the lender had demanded repayment, the Company would have been unable to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations. Collateral securing all the above obligations comprises all personal and real property of the Company, including cash, accounts receivable, inventories, equipment, and financial assets. The Company’s short-term and long-term debt is all privately held with no public market for this debt and is considered to be Level 3 under the fair value hierarchy.

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