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BUSINESS COMBINATION | 9 Months Ended
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Dec. 31, 2022
BUSINESS COMBINATION |
BUSINESS COMBINATION | NOTE 3 – BUSINESS COMBINATION Stadco Acquisition On August 25, 2021, the closing date, the Company completed its previously announced acquisition of Stadco, pursuant to that certain stock purchase agreement, dated as of October 16, 2020, or the “SPA”, among TechPrecision, Acquisition Sub, Stadco Acquisition, LLC, or “Holdco”, and each stockholder of Holdco. Stadco is a company in the business of manufacturing high-precision parts, assemblies and tooling for aerospace, defense, and industrial customers. Also on the closing date, the Company completed its previously announced acquisition of certain indebtedness obligations of Stadco, pursuant to that certain Amended and Restated Loan Purchase and Sale Agreement, dated as of April 23, 2021, with Sunflower Bank, N.A., as amended by Amendment to Amended and Restated Loan Purchase and Sale Agreement, dated as of June 28, 2021, together, the “Loan Purchase Agreement”. On August 25, 2021, WCH, as assignee of Acquisition Sub, paid $7.9 million in the aggregate to Sunflower Bank, N.A., under the terms of the Loan Purchase Agreement, to purchase the indebtedness. Pursuant to the SPA, and upon the terms and subject to the conditions therein, the Company acquired all of the issued and outstanding capital stock of Stadco in exchange for the issuance of 666,666 shares of the Company’s common stock to Holdco. In connection with the acquisition of Stadco, the Company reached an agreement with the holders of certain other non-bank indebtedness of Stadco, under which each such lender agreed to forgive such indebtedness in exchange for an aggregate of 199,395 shares of the Company’s common stock. In addition, the Company reached an agreement with a certain other security holder who agreed to sell its Stadco securities to the Company in exchange for the issuance by the Company of 600,000 shares of the Company’s common stock and a warrant to purchase 100,000 shares of the Company’s common stock. The fair value of the 1,466,061 shares of common stock issued as aggregate consideration was $2.3 million based on the closing market price of the Company’s common stock on the August 25, 2021 closing date. The fair value of the warrants is estimated using the Black-Scholes option-pricing model. The warrants vested in full on the issue date, have a three-year term and exercise price of $1.43 per share. The fair value of the warrants was $46,256 and estimated using the Black- Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the grant. Expected volatility of 46.7% was based on the historical volatility of our common stock. The risk-free interest rate of 0.4% was selected based upon yields of three-year U.S. Treasury bond. On August 25, 2021, the Company entered into a Securities Purchase Agreement with a limited number of institutional and other accredited investors, pursuant to which investors committed to subscribe for and purchase 3,202,727 shares of the Company’s common stock at a purchase price of $1.10 per share. Costs directly attributable to this offering of securities totaled $0.3 million. Stadco’s assets and liabilities were measured at estimated fair values on August 25, 2021, primarily using Level 1 and Level 3 inputs. Estimates of fair value represent management’s best estimate and require a complex series of judgments about future events and uncertainties. Third-party valuation specialists were engaged to assist in the valuation of these assets and liabilities. Included in the total consideration transferred is $113,890 related to a contingent provision in the agreements that required payment based on the difference between the TechPrecision stock price and contract target stock price. The contingent provision allowed the issuer, TechPrecision, to settle the contingency with stock or cash, or a combination of each. If after one year following the closing of the acquisition, the fair value of the consideration stock was less than the target stock price stated in each agreement, TechPrecision was to issue to the holder additional shares of consideration stock or cash, or some combination of stock and cash. The target stock price stated in the agreements was guaranteed and only the number of shares issued could vary, with the final measurement date and amount determined on the one-year anniversary date. Since the contract did not specify a fixed maximum number of shares to be issued on the anniversary date, had the company determined to satisfy the contingent consideration with shares only, then a number of shares higher than the amount currently authorized by the company’s certificate of incorporation could have been required to be issued. In any case, the maximum value of the contingent consideration was $2,269,000, whether paid in shares of common stock or in cash, or both. The Company settled the obligation associated with the contingent consideration on August 25, 2022 by issuing 36,509 shares of common stock valued at $56,310 on August 25, 2022. The fair value of the contingent consideration was based on the closing stock price on the issuance date. Measurement Period Adjustments The Company has completed the process of measuring the fair value of assets acquired and liabilities assumed. In the third and fourth quarters of fiscal 2022, the Company made certain measurement period adjustments to reflect the facts and circumstances in existence at the acquisition date. These measurement period adjustments are related to changes in preliminary assumptions and initial estimates that would have been recognized if all the facts and circumstances had been known at the time of acquisition. The table below presents the fair value of assets acquired and liabilities assumed on the acquisition date based on the best information it has received to date in accordance with Accounting Standards Codification (“ASC”) 805. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Adjusted
​ | ​ | Reported at | ​ | ERTC | ​ | Customer | ​ | Fixed | ​ | Totals
​ | ​ | August 25, | ​ | refundable | ​ | claim2 and | ​ | Asset | ​ | August 25,
​ |  | 2021 |  | credit1 |  | Warrant3 |  | Valuation4 |  | 2021
Total consideration transferred | ​ | $ | 10,163,164 | ​ | ​ | ​ | ​ | $ | 46,256 | ​ | ​ | ​ | ​ | $ | 10,209,420
Recognized amounts of identifiable assets acquired and liabilities assumed: | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Accounts receivable | ​ | ​ | 1,247,015 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,247,015
Inventory | ​ |  | 927,188 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 927,188
Other current assets | ​ | ​ | 4,323,593 | ​ | ​ | 1,093,661 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 5,417,254
Property, plant, and equipment and right of use assets | ​ |  | 15,074,273 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 897,488 | ​ | ​ | 15,971,761
Accounts payable, accrued expenses, and other current liabilities | ​ |  | (5,882,048) | ​ | ​ | (164,049) | ​ | ​ | (606,415) | ​ | ​ | ​ | ​ | ​ | (6,652,512)
Lease obligations | ​ |  | (6,701,286) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (6,701,286)
Net assets | ​ | ​ | 8,988,735 | ​ | ​ | 929,612 | ​ | ​ | (606,415) | ​ | ​ | 897,488 | ​ | ​ | 10,209,420
Goodwill | ​ |  | 1,174,429 | ​ | ​ | (929,612) | ​ | ​ | 652,671 | ​ | ​ | (897,488) | ​ | ​ | —
Total | ​ | $ | 10,163,164 | ​ | $ | — | ​ | $ | 46,256 | ​ | $ | — | ​ | $ | 10,209,420
All measurement period adjustments were offset against goodwill: 1In calendar year 2021 our Stadco subsidiary filed for a refund of tax credits for $1,093,661 from the IRS under the Employee Retention Credit, or ERTC program. Fees associated with the filing totaled $164,049. 2Customer claim of $471,166 accrued for additional costs incurred in connection with a certain product manufacturing project. Other adjustments to current liabilities totaled $135,249. 3Warrant issued to former shareholder in connection with the acquisition valued at $46,256. 4Fixed asset adjustments related to changes in preliminary valuation assumptions and estimates, including estimates of asset useful lives. Supplemental Pro Forma Information The pro forma results have been prepared for comparative purposes only and do not necessarily represent what the revenue or results of operations would have been had the acquisition been completed on April 1, 2021. In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved from the acquisition. The following table discloses the pro forma results for the combined entities, assuming the acquisition date had occurred on April 1, 2021, for the nine months ended December 31, 2021: ​
​ | ​ | ​ | ​
​ | ​ | Pro forma combined
​ | ​ | Nine months ended
​ | ​ | December 31,
​ |  | 2021
Net sales | ​ | $ | 19,441,005
Operating loss | ​ | $ | (2,793,821)
Loss before income taxes | ​ | $ | (1,880,903)
Net loss | ​ | $ | (1,496,049)
EPS basic | ​ | $ | (0.04)
EPS dilutive | ​ | $ | (0.04)
Weighted average shares outstanding – basic and diluted | ​ | ​ | 34,212,032
​ The pro forma results include adjustments for the purchase accounting impact, including, but not limited to, depreciation and amortization associated with the acquired tangible assets, and an adjustment for interest expense related to the new long-term debt, the alignment of accounting policies, and the elimination of transactions between TechPrecision and Stadco. Other adjustments reflected in the pro forma results are as follows for the nine months ended December 31, 2021:
| ● | In selling, general and administrative, excluded non-recurring expense of $0.3 million for consulting, legal, due diligence, bank fees, and other costs incurred in connection with the acquisition.
| ● | We excluded $0.7 million of management fees due to then preferred stockholders of Stadco,
| ● | We excluded interest expense of $0.5 million, reflecting a reduction of Stadco’s bank debt and interest rates.
| ● | We included an estimated tax benefit of $0.4 million based on the Company’s fiscal year 2022 annual estimated tax rate.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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