TECHPRECISION CORP

Previous wording

These forward-looking statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, the forward-looking statements due to numerous risks and uncertainties. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from:

Current wording

These forward-looking statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, the forward-looking statements due to numerous risks and uncertainties. As discussed below under*“Liquidity and Capital Resources”,* certain events and conditions, when examined in the aggregate, indicate substantial doubt about our ability to continue as a going concern for at least one year beyond the date of the financial statements. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from:

Previous wording

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 continue to seek more long-term projects with predictable cost structures.

Current wording

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.

Previous wording

On November 22, 2023, the Company entered into a Stock Purchase Agreement with Doerfer Corporation, or the “Seller”, pursuant to which the Seller has agreed to sell, and the Company has agreed to purchase, all of the issued and outstanding common stock of Votaw Precision Technologies, Inc. All of Votaw operations are located in Southern California.

Current wording

On November 22, 2023 we and the Seller, entered into the Purchase Agreement, pursuant to which, we would acquire all of the issued and outstanding common stock of Votaw Precision Technologies, Inc. (“Votaw”) and after giving effect to such purchase, Votaw was to become our wholly owned subsidiary.

Previous wording

The preparation of the condensed consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We continually evaluate our estimates, including those related to revenue recognition and income taxes. These estimates and assumptions require management’s most difficult, subjective or complex judgments. Actual results may vary under different assumptions or conditions.

Current wording

The preparation of the condensed consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We continually evaluate our estimates, including those related to revenue recognition and income taxes. These estimates and assumptions require management’s most difficult, subjective or complex judgments. Actual results may vary under different assumptions or conditions.

Previous wording

We consider the principles and estimates applied for revenue recognition to be one of the most critical accounting estimates that we make. Our revenue can fluctuate from quarter-to-quarter as we measure revenue recognition over the duration of a project, or at the end of the project. The Company records most of its revenue over time as it completes performance obligations or at a point-in-time, for example, at the delivery date, when control of the promised goods are transferred to the customer. Project volume for revenue recognized at a point-in-time is generally smaller, can fluctuate from period to period, and is difficult to forecast.

Current wording

We consider the principles and estimates applied for revenue recognition as one of our most critical accounting estimates. Our revenue can fluctuate from quarter-to-quarter as we measure revenue recognition over the duration of a project, or at the end of the project. The Company records most of its revenue over-time as it completes performance obligations or at a point-in-time, for example, at the delivery date, when control of the promised goods is transferred to the customer. Project volume for revenue recognized at a point-in-time is generally smaller, can fluctuate from period-to-period, and is difficult to forecast.

Previous wording

Our significant accounting policies are set forth in detail in Note 2 to the consolidated financial statements included in the 2023 Annual Report on Form 10-K. There were no significant changes to our critical accounting policies during the nine months ended December 31, 2023.

Current wording

Our significant accounting policies are set forth in detail in Note 2 to the consolidated financial statements included in the 2024 Annual Report on Form 10-K. There were no significant changes to our critical accounting policies during the three months ended June 30, 2024.

Previous wording

Our results of operations are affected by a number of external factors including the availability of customer furnished material, raw materials, commodity prices (particularly steel), macroeconomic factors, including the availability of capital that may be needed by our customers, and political, regulatory and legal conditions in the United States and in foreign markets. It generally takes approximately twelve months or less to complete our manufacturing projects. However, contracts for larger complex components can take up to thirty-six months or more to complete. Units manufactured under the majority of our customer contracts have historically been delivered on time and with a positive gross margin, with some exceptions. Our results of operations are also affected by our success in booking new contracts, the timing of revenue recognition, delays in customer 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 could have an unfavorable impact on liquidity, cause us to have inventories in excess of our short-term needs, and delay our ability to recognize, or prevent us from recognizing, revenue on contracts in our order backlog.

Current wording

Our results of operations are affected by a number of external factors including the availability of raw materials, commodity prices (particularly steel), macroeconomic factors, including the availability of capital that may be needed by our customers, and political, regulatory and legal conditions in the United States and in foreign markets. It generally takes approximately twelve months or less to complete our manufacturing projects. However, contracts for larger complex components can take up to thirty-six months in general to complete. Units manufactured under the majority of our customer contracts have historically been delivered on time and with a positive gross margin. Our results of operations are also affected by our success in booking new contracts, the timing of revenue recognition, delays in customer acceptances of our products, delays in deliveries of ordered products and our rate of progress fulfilling obligations under our contracts. Delays in any of these items could have an unfavorable impact on liquidity, cause us to have inventories in excess of our short-term needs, and delay our ability to recognize, or prevent us from recognizing, revenue on contracts in our order backlog.

Previous wording

We evaluate the performance of our segments based upon, among other things, segment net sales and operating profit. Segment operating profit excludes general corporate costs, which include executive and director compensation, stock-based compensation, certain pension and other retirement benefit costs, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that we consider not representative of ongoing operations, such as refundable employee retention tax credits.

Current wording

We evaluate the performance of our segments based upon, among other things, segment revenue, operating profit, and certain key performance indicators. Segment operating profit excludes general corporate costs, which include executive and director compensation, stock-based compensation, certain retirement benefit costs, and other corporate facilities and administrative expenses not allocated to the segments.

Previous wording

Percentages in the following tables and throughout this “Results of Operations” section may reflect rounding adjustments. Prior period segment data is revised to reflect new allocations. Prior period Selling, General and Administrative, or “SG&A”, segment data is revised to reflect current period updates to unallocated corporate administrative expense.

Current wording

Percentages in the following tables and throughout this “Results of Operations” section may reflect rounding adjustments.

Previous wording

The following table presents net sales, cost of sales and gross profit, consolidated and by reportable segment:

Current wording

The following table presents revenue, cost of revenue and gross profit, consolidated and by reportable segment:

Previous wording

Stadco - Net sales were $9.9 million for the nine months ended December 31, 2023 compared with net sales of $9.5 million for the nine months ended December 31, 2022, an increase of $0.4 million, or 4%. Direct labor hours charged to projects was virtually even with the prior year period. We are making incremental improvements with throughput on projects where revenue is recognized over time. In the nine months ended December 31, 2023, average selling price was higher and more than offset a lower number of labor hours. The defense backlog remains strong as new orders for components related to a variety of programs, including the U.S. Marine Corps heavy lift helicopter programs, continue to flow down from our existing customer base of prime defense contractors. Stadco’s backlog was $32.3 million as of December 31, 2023.

Current wording

The backlog remains strong as new orders for components related to a variety of programs, including the U.S. Marine Corps heavy lift helicopter programs, continue to flow to us from our existing customer base of prime defense contractors. Stadco’s backlog was $22.4 million and $24.5 million as of June 30, 2024 and 2023, respectively.

Previous wording

*Consolidated –*Cost of sales consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our cost of sales for the three months ended December 31, 2023, was $6.5 million, or 5% lower when compared to the three months ended December 31, 2022. The decrease in cost of sales was primarily the result of lower revenue at Ranor and Stadco. Gross profit decreased by $0.3 million, or 5% when compared to the same period a year ago. Gross margin for the three months ended December 31, 2023 was 15.2% compared to 18.0% in the same period a year ago.

Current wording

Consolidated – Cost of revenue consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our cost of revenue for the three months ended June 30, 2024, was $7.7 million, or 16% higher when compared to the three months ended June 30, 2023. The increase in cost of revenue was primarily the result of higher production costs and under-absorbed overhead at Stadco. As a result, gross profit decreased by $0.5 million, or 66% when compared to the same period a year ago. Gross margin for the three months ended June 30, 2024 was 3.0% compared to 9.4% in the same period a year ago.

Previous wording

Consolidated–* *Total selling, general and administrative expenses for the three months ended December 31, 2023, increased by approximately $932,000, or 76%, primarily due to outside advisory and business development expenses in connection with a potential acquisition.

Current wording

*Consolidated –*Total selling, general and administrative expenses for the three months ended June 30, 2024, increased by approximately $0.3 million, or 24%, primarily due to a $0.4 million change in fair value to the accrual for the breakup fee in connection with the terminated Votaw acquisition.

Previous wording

Stadco - SG&A expense for the nine months ended December 31, 2023, decreased by approximately $357,000 in the aggregate for compensation, a result of staff reductions, and outside advisory and office costs.

Current wording

Stadco – SG&A expense for the three months ended June 30, 2024, increased by approximately $19,000. The SG&A expenses for office costs and outside advisory fees increased by approximately $46,000, offset in part by a decrease in compensation and payroll taxes due to staff reductions.

Previous wording

Consolidated - As a result of the foregoing, for the nine months ended December 31, 2023, we reported an operating loss of $2.2 million, or $1.8 million higher than the operating loss for the nine months ended December 31, 2022. Operating income at Ranor was not enough to offset the corporate expenses and operating losses at Stadco.

Current wording

Consolidated – As a result of the foregoing, for the three months ended June 30, 2024, we reported an operating loss of $1.3 million, or $0.8 million higher than the operating loss for the three months ended June 30, 2023. The change was primarily due to operating losses at Stadco and an accrual for the change in fair value to the breakup fee in connection with the terminated Votaw acquisition.

Previous wording

Ranor – Operating income was lower when compared to the same period a year ago, due primarily to lower revenue and higher cost of sales.

Current wording

Ranor– Operating income was slightly higher when compared to the same period a year ago, due primarily to lower selling, general and administrative costs.

Previous wording

Amortization of debt issue costs for the nine months ended December 31, 2023 was higher when compared to nine months ended December 31, 2022, as new amortization periods commenced in December 2022 for costs incurred to extend the Ranor Term Loan and renew the Revolver Loan.

Current wording

Amortization of debt issue costs for the three months ended June 30, 2024, was slightly lower when compared to three months ended June 30, 2023, according to the term loan periods.

Previous wording

Other income, net for the nine months ended December 31, 2023 includes a gain from the sale of fixed assets for $40,399. Other income, net, in the table above, for the nine months ended December 31, 2022, includes income for the change in fair value for contingent consideration of $63,436 and other tax rebates for $33,223, offset in part by the fair value of the stock issued for $56,310 in connection with the Stadco acquisition.

Current wording

Other income, net, in the table above, for the three months ended June 30, 2024, includes a vendor rebate for approximately $11,000.

Previous wording

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The valuation allowance on deferred tax assets at December 31, 2023 was approximately $2.2 million. We believe that it is more likely than not that the benefit from certain state NOL carryforwards and other deferred tax assets will not be realized. In recognition of this risk, we continue to provide a valuation allowance on these items. In the event future taxable income is below management’s estimates or is generated in tax jurisdictions different than projected, the Company could be required to increase the valuation allowance for deferred tax assets. This would result in an increase in the Company’s effective tax rate.

Current wording

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The valuation allowance on deferred tax assets at June 30, 2024 was approximately $5.6 million. We believe that it is more likely than not that the benefit from certain state NOL carryforwards and other deferred tax assets will not be realized. The assessment was based on the weight of negative evidence at the balance sheet date, our recent operating losses and unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels. In recognition of this risk, we continue to provide a valuation allowance on these items.

Previous wording

As a result of the foregoing, for the three months ended December 31, 2023, we recorded a net loss of $865,334, or $0.10 per share basic and diluted, compared with net income of $133,975 or $0.02 per share basic and $0.01 per share diluted for the three months ended December 31, 2022.

Current wording

As a result of the foregoing, for the three months ended June 30, 2024, we recorded a net loss of $1.5 million, or $0.16 per share basic and fully diluted, compared with a net loss of $527,455, or $0.06 per share basic and fully diluted for the three months ended June 30, 2023.

Previous wording

Our liquidity is highly dependent on the availability of financing facilities and our ability to maintain a gross profit and operating income. For the nine months ended December 31, 2023 we reported a net loss of $1.9 million.

Current wording

Our liquidity is highly dependent on the availability of financing facilities and our ability to generate positive operating cash flow.

Previous wording

As of December 31, 2023, we had $2.8 million in total available liquidity, consisting of $0.4 million in cash and cash equivalents, and approximately $2.4 million in undrawn capacity under our Revolver Loan. At of March 31, 2023, we had $4.7 million in total available liquidity, consisting of $0.5 million in cash and cash equivalents, and $4.2 million in undrawn capacity under our Revolver Loan.

Current wording

As of June 30, 2024, we had approximately $1.6 million in total available liquidity, consisting primarily of $1.5 million in undrawn capacity under our Revolver Loan. As of March 31, 2024, we had $2.3 million in total available liquidity, consisting of $0.1 million in cash and cash equivalents, and approximately $2.2 million in undrawn capacity under our Revolver Loan.

Previous wording

There was approximately $2.6 million outstanding under the Revolver Loan at December 31, 2023, as the Company borrowed more at higher rates to finance working capital requirements. Interest paid and accrued under the Revolver Loan was $116,844 for the nine months ended December 31, 2023. The weighted average interest rate at December 31, 2023 was 7.54%. At December 31, 2023 our working capital was negative because of the reclassification of our long-term debt from noncurrent to current in the condensed consolidated balance sheet. Working capital was $5.6 million at March 31, 2023.

Current wording

At June 30, 2024 and March 31, 2024 our working capital was negative in part because of the reclassification of our long-term debt from noncurrent to current in the condensed consolidated balance sheet.

Previous wording

The next table summarizes changes in cash by primary component in the cash flows statements at:

Current wording

The next table summarizes changes in cash by primary component in the cash flows statements for the fiscal years ended:

Previous wording

Apart from our loan facilities, our primary sources of cash are from accounts receivable collections. Our customers make advance payments and progress payments under the terms of each manufacturing contract. The composition of our accounts receivable collections mix changes between advance payments and customer payments made after shipment of finished goods. Our cash flows can fluctuate significantly from period to period as we mark progress with customer projects and the timing of progress payments.

Current wording

Apart from our loan facilities, our primary sources of cash are from customer revenue, customer contract advances, and associated accounts receivable collections. Many of our customers make advance payments and progress payments under the terms of each manufacturing contract. The composition of our accounts receivable collections mix changes between advance payments and customer payments made after shipment of finished goods. Our cash flows can fluctuate from period to period as we mark progress with customer project milestones and the timing of progress payments.

Previous wording

Cash provided by operating activities for the nine months ended December 31, 2023 was approximately $1.2 million. In addition to customer advances and progress payments, cash provided by operating activities included reimbursements under a certain customer project program. The sum of these customer payments was partially offset by payments for obligations for goods and services that had been acquired on open account from suppliers.

Current wording

Cash provided by operating activities for the three months ended June 30, 2023, was approximately $0.1 million. Cash provided by operating activities included reimbursements under a certain customer project program and was almost entirely offset by payments for obligations for goods and services that had been acquired on open account from suppliers.

Previous wording

We are subject to certain financial debt covenants and may not spend more than $1.5 million for new machinery and equipment during any single fiscal year, tested on an annual basis at the end of each fiscal year.

Current wording

We are subject to certain financial debt covenants and may not spend more than $1.5 million for new machinery and equipment during any single fiscal year, tested on an annual basis at the end of each fiscal year. We estimate that our spending on new machinery and equipment in fiscal 2025 will not exceed the spending limitation.

Previous wording

For the nine months ended December 31, 2023, we invested $2.8 million in new factory machinery and equipment, primarily on the construction and installation of equipment for contract project work with a certain customer at our Ranor segment. We invested approximately $1.3 million in new factory machinery and equipment for the first nine months of fiscal 2023.

Current wording

For the three months ended June 30, 2023, we invested $1.9 million in new factory machinery and equipment.

Previous wording

For the nine months ended December 31, 2022, we drew down $6.7 million of proceeds under the Revolver Loan and repaid $6.5 million during the same period. We also used $0.5 million of cash to pay down debt principal and make periodic lease payments and pay off certain lease obligations.

Current wording

We drew down $2.8 million of proceeds under our Revolver Loan during the three months ended June 30, 2024, and repaid $2.8 million during the same period. We also used approximately $0.2 million of cash to pay down debt principal and make periodic lease payments.

Previous wording

For the nine months ended December 31, 2023 we drew down $10.2 million of proceeds under the Revolver Loan and repaid $8.3 million during the same period. We also used approximately $0.5 million of cash to pay down debt principal and make periodic lease payments.

Current wording

For the three months ended June 30, 2023, we drew down $4.5 million of proceeds under the Revolver Loan and repaid $2.9 million during the same period. We also used approximately $154,000 of cash to pay down debt principal and make periodic lease payments.

Previous wording

All of the above activity resulted in a net decrease in cash of $143,229 for the nine months ended December 31, 2023 compared with a net decrease in cash of $735,954 for the nine months ended December 31, 2022.

Current wording

All of the above activity resulted in a net decrease in cash of $0.1 million for the three months ended June 30, 2024 compared with a net decrease in cash of $0.3 million for the three months ended June 30, 2023.

Previous wording

On August 25, 2021, the Company entered into the Loan Agreement. Under the Loan Agreement, Berkshire Bank continues as lender of the Ranor Term Loan, as defined below, and the revolving line of credit, or the “Revolver Loan”. In addition, Berkshire Bank provided to Stadco a term loan in the original amount of $4.0 million, or the “Stadco Term Loan”. The proceeds of the original Ranor Term Loan of $2.85 million were previously used to refinance existing mortgage debt of Ranor. The proceeds of the Revolver Loan are used for working capital and general corporate purposes of the Company. The proceeds of the Stadco Term Loan were to be used to support the acquisition of Stadco and refinance existing indebtedness of Stadco.

Current wording

On August 25, 2021, the Company entered into an amended and restated loan agreement with Berkshire Bank (as amended to date, the “Loan Agreement”). Under the Loan Agreement, Berkshire Bank will continue to provide the Ranor Term Loan (as defined below) and the revolving line of credit, or the “Revolver Loan”. In addition, Berkshire Bank provided the Stadco Term Loan (as defined below) in the original amount of $4.0 million. The proceeds of the original Ranor Term Loan of $2.85 million were previously used to refinance existing mortgage debt of Ranor. The proceeds of the Revolver Loan are used for working capital and general corporate purposes of the Company. Payments for the original Ranor Term Loan began on January 20, 2017, and until the facility was amended in December 2022, the Company paid monthly installments of $19,260 each, inclusive of interest at a fixed rate of 5.21% per annum.

Previous wording

On August 25, 2021, Stadco borrowed $4.0 million from Berkshire Bank under 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 7-year Federal Home Loan Bank of Boston Classic Advance Rate plus 2.25%. Since September 25, 2021, and on the 25th day of each month thereafter, Stadco is required to 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.

Current wording

In addition, Berkshire Bank provided to Stadco a term loan in the original amount of $4.0 million, or the “Stadco Term Loan”. On August 25, 2021, Stadco borrowed $4.0 million from Berkshire Bank under the Stadco Term Loan. The proceeds of the Stadco Term Loan were used to support the acquisition of Stadco and refinance existing indebtedness of Stadco. Interest on the Stadco Term Loan is due on unpaid balances beginning on August 25, 2021, at a fixed rate per annum equal to the 7-year Federal Home Loan Bank of Boston Classic Advance Rate plus 2.25%. Since September 25, 2021, and on the 25th day of each month thereafter, Stadco has made and will continue to make monthly payments of principal and interest in the amount of $54,390 each, with all outstanding principal and accrued interest due and payable on August 25, 2028.

Previous wording

On June 12, 2023, we executed a waiver with the lender under which the lender agreed to waive the Company’s noncompliance with this capital spending limit covenant, as it relates to the period ended March 31, 2023. The waiver also contains an agreement by the parties to exclude from the calculation of capital expenditures for purposes of the Loan Agreement during the year ending March 31, 2024, any such expenditures made by the Company to the extent they are made using funds provided by customers of the Company for the purpose of making such capital expenditures.

Current wording

On June 12, 2023, the Company and Berkshire Bank executed a waiver under which Berkshire Bank waived the Company’s noncompliance with the capital expenditure limit on March 31, 2023. The waiver document also contains an agreement by the parties to exclude from the calculation of capital expenditures for purposes of the Loan Agreement during the year ending March 31, 2024, any such expenditures made by the Company to the extent they are made using funds provided by customers of the Company for the purpose of making such capital expenditures.

Previous wording

As a result of Borrowers’ failure to satisfy the required minimum Debt Service Coverage Ratio for the twelve (12) month period ending December 31, 2023 as set forth in the Loan Agreement, or the “Existing Default”, the borrowers acknowledge that a certain Event of Default has occurred and is continuing under the Loan Agreement. The borrowers further acknowledge that the sixth amendment to the Agreement constitutes written notice pursuant to the Loan Documents of such Existing Default. Regardless of entering into this Agreement or any discussions between Borrowers and Lender, the Lender expressly reserves any and all rights and remedies available to it under the Loan Documents, the Collateral Documents, and under applicable law, including, without limitation, its right to choose to accelerate and demand the outstanding indebtedness evidenced by the Loan Documents and seek immediate repayment in full, and institute the default rate of interest as of the date of the occurrence of the default or at any time thereafter, as a result of any default or event of default, including, without limitation, the Existing Default, that have arisen or may arise. No such discussions or the entering into of this Agreement shall imply any course of conduct or any agreement on the part of Lender to waive any of its rights and remedies or to forbear from taking any action authorized by the Loan Documents, the Collateral Documents, or by applicable law while discussions continue.

Current wording

As a result of Borrowers’ failure to satisfy the required minimum Debt Service Coverage Ratio for the twelve (12) month period ending March 31, 2024 and June 30, 2024, as set forth in the Loan Agreement, or the “Existing Default”, the borrowers acknowledge that a certain Event of Default has occurred and is continuing under the Loan Agreement. The borrowers further acknowledge that the sixth amendment to the Agreement constitutes written notice pursuant to the Loan Documents of such Existing Default. Regardless of entering into this Agreement or any discussions between Borrowers and Lender, the Lender expressly reserves any and all rights and remedies available to it under the Loan Documents, the Collateral Documents, and under applicable law, including, without limitation, its right to choose to accelerate and demand the outstanding indebtedness evidenced by the Loan Documents and seek immediate repayment in full, and institute the default rate of interest as of the date of the occurrence of the default or at any time thereafter, as a result of any default or event of default, including, without limitation, the Existing Default, that have arisen or may arise. No such discussions or the entering into of this Agreement shall imply any course of conduct or any agreement on the part of Lender to waive any of its rights and remedies or to forbear from taking any action authorized by the Loan Documents, the Collateral Documents, or by applicable law while discussions continue.

Previous wording

Without a waiver, the lender has the right, but not the obligation, to demand repayment from the Company for noncompliance with the debt covenants. In addition, the bank retains the right to act on covenant violations that occur after the date of delivery of any waiver. The lender has not granted us a waiver. As such, we need to seek alternative financing to pay these obligations as the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations. It is also probable that the Company will not be in compliance with the same debt covenants at subsequent measurement dates within the next twelve months. As a result of the above, all of our long-term debt has been classified as current in our condensed consolidated balance sheet as of December 31, 2023.

Current wording

There was $7.5 million and $7.6 million outstanding under the Loan Agreement on June 30, 2024 and March 31, 2024, respectively. Without a waiver, the lender has the right, but not the obligation, to demand repayment from the Company for noncompliance with the debt covenants. In addition, the bank retains the right to act on covenant violations that occur after the date of delivery of any waiver. The lender has not granted us a waiver. As such, we need to seek alternative financing to pay these obligations as the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations. It is also probable that the Company will not be in compliance with the same debt covenants at subsequent measurement dates within the next twelve months. As a result of the above, all of our long-term debt has been classified as current in our condensed consolidated balance sheet.

Previous wording

The Company is exploring various means of strengthening its liquidity position and ensuring compliance with its debt financing covenants, amending our facility, renewing our revolver loan, or entering into one or more alternative facilities.

Current wording

The Company is exploring various means of strengthening its liquidity position and ensuring compliance with its debt financing covenants by making Stadco operations profitable, renewing our revolver loan, or entering into alternative debt facilities.

Previous wording

In order for us to continue operations beyond the next twelve months from the date of issuance of the financial statements and to be able to discharge our liabilities and commitments in the normal course of business, we must mitigate our recurring operating losses at our Stadco subsidiary. We must efficiently increase utilization of our manufacturing capacity at our Stadco subsidiary and improve the manufacturing process, so our direct labor hours (inputs) allow us to recognize more revenue over time (outputs) and improve job performance. We plan to closely monitor our expenses and, if required, will reduce operating costs to enhance liquidity.

Current wording

In order for us to continue operations beyond the next twelve months from the date of issuance of the financial statements and to be able to discharge our liabilities and commitments in the normal course of business, we must renew our revolver loan or seek alternative financing by January 15, 2025. We must mitigate our recurring operating losses at our Stadco subsidiary, efficiently increase utilization of our manufacturing capacity at Stadco and improve the manufacturing process. We plan to closely monitor our expenses and, if required, will reduce operating costs to enhance liquidity.

Previous wording

The uncertainty associated with the recurring operating losses at Stadco, the revolver loan renewal, the need for alternative financing, compliance with debt covenants, and the expected debt covenant violation at subsequent compliance dates raise substantial doubt about our ability to continue as a going concern within one-year after the date the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are issued.

Current wording

The uncertainty associated with the recurring operating losses at Stadco, the revolver loan renewal, the need for alternative financing, and compliance with debt covenants at subsequent measurement dates raise substantial doubt about our ability to continue as a going concern for at least one-year after the date the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are issued.

Previous wording

To complement our condensed consolidated statements of operations and condensed consolidated statements of cash flows, we use EBITDA, a non-GAAP financial measure. Net (loss) income is the financial measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to EBITDA. We believe EBITDA provides our board of directors, management, and investors with a helpful measure for comparing our operating performance with the performance of other companies that have different financing and capital structures or tax rates. We also believe that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry, and is a measure contained in our debt covenants. However, while we consider EBITDA to be an important measure of operating performance, EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.

Current wording

To complement our condensed consolidated statements of operations and condensed consolidated statements of cash flows, we use EBITDA, a non-GAAP financial measure. Net loss is the financial measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to EBITDA. We believe EBITDA provides our board of directors, management, and investors with a helpful measure for comparing our operating performance with the performance of other companies that have different financing and capital structures or tax rates. We also believe that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry, and is a measure contained in our debt covenants. However, while we consider EBITDA to be an important measure of operating performance, EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.