Brett Maas – IR, Hayden IR Alex Shen - Chief Executive Officer Rich Fitzgerald - Chief Financial Officer

Walter Schenker - MAZ Partners Rob Strauss - Private Investor Jim Koenig - Kacika Capital Partners Ross Taylor - Somerset Capital Mike Schellinger - Microcapclub

Greetings, and welcome to the TechPrecision Corporation First Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Brett Maas, Managing Partner of Hayden IR. Thank you, sir. You may begin.

Thank you. On the call today is Alex Shen, Chief Executive Officer, and Rich Fitzgerald, Chief Financial Officer. The call is also being simulcast on the Company's Web site www.techprecision.com. Before we begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the Company claims the protection of the Safe Harbor for forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today and therefore we refer you to a more detailed discussion of risks and uncertainties in the Company's financial filings with the SEC. In addition, projections as to the Company's future performance represents management's estimates as of today, August 17, 2015. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex?

Thank you, Brett. Good day to everyone and thank you for joining us. Opening the first quarter of fiscal year 2016 with net profit is certainly a significant achievement for all of us. This is the first profitable quarter the company has reported since June 30, 2011 and the first profitable quarter since I joined the company back in late June of 2014. Prior to my watch we had 12 consecutive quarters of net losses, prior to first quarter fiscal year '16 we had 15 consecutive quarters of net losses. We now have one quarter of net profit. We achieved this result with our consistent sharp focus on productivity initiatives, resource realignment and top line growth with key customers. We improved profitability on the sales volume that was 30% lower than the same period last fiscal year. We ended the first quarter of fiscal year 2016 with a 39% decrease in selling, general and administrative expense and a positive gross margin of 29% compared to 3.5% for the first quarter of fiscal year 2015. Moving forward, we intend to maintain the sharp focus that got us to this point of our recovery. We plan to increase our backlog and focus on new business contracts which utilize our core competencies in custom, large scale, high precision fabrication and machining with our core customers which leverage our established expertise, our certification and our qualification in the defense, nuclear and precision industrial sectors. We must continue to execute and maintain operational run rate improvements to improve our gross margins and increase the amount of cash generated from operations. I'd like to now turn the call over to Rich Fitzgerald. Rich?

Thank you, Alex. I will recap the three months result for the quarter ended June 30, 2015. Net sales were 4.4 million compared with 6.2 million in the same fiscal quarter one year ago. The decrease was due to lower sales in the company's precision industrial group and defense group partially offset by increased sales in the customer’s energy group. Gross margins for the first quarter of fiscal 2016 were 29.3% compared with 3.5% for the first quarter of fiscal 2015. The increase was due to decreased cost for materials and decreased labor costs as well as the assets of contract losses which were recognized on certain loss contracts during Q1 of the prior year. As Alex alluded to earlier total SG&A for the fiscal first quarter of 2016 was 0.8 million or 39% lower when compared with the first quarter costs in the prior year. SG&A compensation expense were lower due to reduced headcount in the United States and lower outside advisory service costs. We continue to pursue a process to recover at least a portion of the contract losses we recorded last year. However, our efforts are now governed by the customers Chapter 11 bankruptcy proceeding, which adds additional uncertainty to both the timing and the amount that we may ultimately recover. On April 17, 2015, the company through Ranor entered into an Assignment of Claim Agreement with Citigroup Financial Products Inc. in which Ranor agreed to sell, transfer, convey and assign to Citigroup all of Ranor’s right, title and interests in Ranor’s $3.7 million unsecured claim against GTAT, GT Advanced Technologies, rather. Citigroup paid to Ranor an initial amount equal to approximately 508,000. The assignment agreement provides for Citigroup to pay to Ranor up to an additional $614,000 if we and Citigroup are successful in transitioning Ranor’s proof of claim within the bankruptcy proceeding to a formal allowed status within our customer’s bankruptcy case. At this time, we have no further update on the bankruptcy proceedings or the status of this claim. Turning to net income. Our net income for the quarter was approximately 206,000 or $0.01 per share basic and fully diluted for the three months ended June 30, 2015, as compared to a net loss of 1.3 million or $0.05 per share basic and fully diluted for the three months ended June 30, 2014. This is based on a share count of 24.9 million both basic and fully diluted shares and fiscal ’15 first quarter per share amounts are based on 24 million basic and fully diluted shares outstanding. Now for a cash flow recount. We generated approximately $379,000 in positive operating cash flow during the first fiscal quarter of 2016. We finished the quarter with 1.5 million in cash and cash equivalents. From a backlog perspective, our sales order backlog at June 30, 2015 was approximately 13.9 million compared with a backlog of 14.3 million at March 31, 2015. This backlog excludes orders cancelled by a customer that filed for bankruptcy subsequent to March 31, 2014. With that, I’d now like to turn the call back over to Alex. Alex?

Thank you, Rich. Our focus for the coming quarters is to increase our backlog and grow our pipeline of new business opportunities to leverage our core competencies and our expertise in our industry. At the same time, our manufacturing operations will continue their standards of high quality production to fulfill orders we have in process. Essentially, the diligence and execution that propelled us to this point of our recovery will continue as we aim to improve our gross margin and increase our cash generation. I would now like to open up the call for questions and answers.

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Walter Schenker with MAZ Partners. Please go ahead with your question.

Congratulations again, it's nice to make money, most shareholders don’t remember when the company made money. First question and I’ll limit myself to just a couple of questions, can you address your view of what the implications might be of one of your major customers historically, Mevion putting its financial house in better order by getting a $200 million financing and how that might affect demand as for you especially if they grow the business in China?

Well as far as implication go that would require me to make some very forward-looking statements with my crystal ball, which I don’t do very well. But having that investment from Mevion certainly bolsters their position and with them increasing their volume possibly in China as they’ve stated publicly. As they grow I think we will grow. But it really remains to be seen what's going to happen next, I'm just very happy and ecstatic that a major customer of ours has bolstered their standing.

And I'll ask one more question then I'll get back in the queue. In listening to your presentation you indicated a goal, so it’s not a forward looking forecast, of growing revenues, growing backlog and improving margins. Realizing very little goes in a straight line, but having said that you would therefore expect/hope to remain profitable going forward on a quarterly basis?

Not so sure about expect, but this is the reason why I talk about 15 consecutive quarters of loss followed by one quarter of positive profit, so I have one data point. Two points will make a line, three points will make a trend. I think we're all rooting for Ranor and TechPrecision to get another point so that we can have two data points to make a line. I haven’t really answered your question though.

No. I know. I didn’t expect you to. But you are optimistic and as you look at your customer base your goal should be achievable based on the relationships you now have in place?

We got here through our customer base and through the customers that have stuck through us and helped us as we were going through our recovery, my first three quarters of loss and the customers have stuck by us. So has our supply chain, so here we are. I would expect that we continue our consistent efforts with our current supply chain that has stuck with us and our current customers that have stuck with us.

Can't squeeze a really positive line out of you, can I Alex?

We are not going to get positive or negative. Here is the fact, we’re going to consistently approach the facts and deliver and execute according to the facts.

Okay. Thank you.

Absolutely. Thank you, Walt.

Thank you. [Operator Instructions] Our next question comes from the line of Ross Taylor with Somerset Capital. Please go ahead with your question.

Thank you. Good quarter Alex. Real quick on the Mevion. The relationship with Mevion does it continue in the same fashion should the JV be successful selling i.e. are you going to supply the same components for systems sold into China that you are supplying in the U.S.?

That's a good question. I can't confirm that, but we have a very good relationship with Mevion and they have a very good relationship with us. So as we move forward I'll have to report out what I find out.

Okay.

I can't really answer that without more facts.

Right. And they haven’t sold anything yet at this point, but to your knowledge is there anyone in China who can produce the parts and piece -- the things that you produce to the same tolerances that you produce?

Let's look at the fact, it’s taken several years for Ranor to achieve this expertise in Westminster, Massachusetts. It’s also taken Mevion several years to achieve their expertise and between the both of us we've taken all these years to grow it to this level of high precision and high level of execution with the ability to launch actual treatment centers in the field by Mevion. So the China JV is not there yet, they are talking about that right now.

Okay. Looking at the current quarter and going forward. What sort of revenue run rate do you need to remain profitable?

The revenue run rates that I am at right now is profitable, according to my data from first quarter of 2016.

And so would you expect that you should be able to retain that revenue run rates this current quarter?

Well that would cause me to project a forward looking statement and forecast.

With the stock trading at $0.13, come on give us something?

Well, I think I'm giving something with the fact that it's one positive quarter after 15 negative ones. Right?

Yes. And two become a line.

I’m not trying to be shy, I'm just trying to [indiscernible].

I never thought of you as shy so that’s what I’m trying to get you to be bold.

Thank you.

Looking at -- with the end of the year approaching, obviously there is the re-fi situation, you've been able to turn a profit at this point in time. Are you currently in or have you begun discussions about rolling the debt at this point?

Well that is certainly something that I’m looking at.

Other than telling me the sky is blue, can I get anything out of you today?

Well, you know when I went and -- went over and personally sealed that deal, I knew what kind of deal it was. It was a shorter term deal for 12 months. So I didn’t get here because I have bad planning, I got here because I know that it’s for 12 months. So probably you would be correct in thinking that I've been dealing with it this whole time. I'm not ready to talk about it quite yet, as far as where I'm going with what on the re-fi.

Okay, well keep up the good, obviously you and the team had made a tremendous amount of progress and what seems like a long time but is actually probably a very short period of time. So keep at it and I'll let Walter come back and ask additional questions.

Thank you for your support Ross.

Thank you. Our next question comes from the line of [Rob Strauss] [ph], Private Investor. Please go ahead with your question.

Congratulations on the progress I know you’ve gone through a lot of hard work, you and your team, and I look forward to the next 12 to 24 months as well. Couple of my questions were asked, but I have just a couple more, we'll see if you answer any of them. First, you’ve clearly turned around the gross profit margin level. At the current rate do you expect that to continue or if I were to look out over in the next 12 to 24 months do you expect with the right mix of business that that can go higher?

Boy you three guys must be on the same page, trying to ask me the different questions that will cause me to have forward-looking statements and forecast. It would be foolish of me not to aim for that, right. But it’s also equally foolish of me to try to forecast and pin myself down.

I guess then another way of asking, how do you expect your mix of business to change, if at all?

I think our focus is very clear and we're going to consistently execute our focus. So we don’t expect changing our customer, we're going to stick with the customers that have stuck with us. If there are more customers, all customers are welcome.

Looking at the customer concentration in your 10-Q there were some customers who clearly came in and had business with us in the quarter you just reported versus the same period a year ago. Were all of those customers existing customers or any of them new customers?

We have no new customers.

Okay alright thank you very much, keep up the great work and good luck in the current quarter.

Our next question comes from the line of Jim Koenig with Kacika Capital Partners. Please go ahead with your question.

Alex just two quick one. In the quarter just reported was Mevion in there at all, as a customers?

Yes.

So you are selling -- you’re still selling some small stuff to Mevion currently and they are an existing customer, correct?

I don’t know that I would say anything was small or big. They are a current customer, they have continued to be a customer.

So you are still supplying, because I follow Mevion and follow all those stuff. They have five units under constructions. So you're supplying -- since you guys are -- they say you are the exclusive on some of their arms and all that. You're still supplying some of their product?

Well if you follow Mevion then you're free to look at their website and follow them as well.

Yes, I do. I'm just curious whether you shipped everything before the current quarter? That’s all.

That would be telling, wouldn’t it?

Well I’m just -- Yeah. Okay let me -- the other question I got, may be Richard can answer it. How is the claim with the money you guys got from Citi Bank recorded, is GTAT written off entirely? And then you get 500,000 on the claim or how does that get recorded?

You want me to take that Alex?

Sure Rich, please do. Thank you.

So if you look at the way the claims that was recorded, again that was mid-April when we transacted with Citi group. So we received roughly $508,000 so in our -- because that is contingent, it’s basically an advance on the claim rights they purchased and our claim, what was a disputed claim with GT, if you remember we are in arbitration with them, last summer and leading up to their bankruptcy filing. So the term of [indiscernible] in the bankruptcy court is allowed, we would like to have our claim allowed and when that happens we’re eligible to get further cash payment from Citigroup and once that claim is allowed at a level, we will settle up the Citigroup. That said, if our claim was not allowed at all, we would have to make a refund back to Citigroup. Now obviously they don’t believe that that’s going to happen and nor do we, but again in a bankruptcy case it's hard to predict and for that uncertainty we would debit cash credit a liability, is the way it’s recorded in the 10-Q and also the financials you see in the press release.

The receivable, total receivable is gone. You wrote the total receivable off?

Right, that was all last year, in the March 31, 2014 we had zero balance sheet exposure to what would happen with GT and that’s not really how the accounting rules requires us to behave on that kind of uncertainty.

So right now you got cash 500 and I see your advance claim payment has a liability, that’s fair and so it's resolved?

Exactly, until the recourse that Citigroup has is resolved and that would -- the way that recourse would be resolved is our claim would be somewhat adjudicated within the bankruptcy proceedings and some portion or all of it would be allowed, which means it's fully recognized along with all the other unsecured claims and then any disputed piece of it or any dispute tied to it would be resolved between us and GT.

If you get this 507, it goes in the income into other income?

At that time whatever the uncertainty would be resolved, yes.

Thank you. Our next question in the follow-up from the line of Walter Schenker with MAZ Partners. Please go ahead with your question.

I’ll keep trying a little bit more and then let you go. First and I don’t know the answer at all, are there opportunities and are you pursuing recovery on any of the other business that was done historically where there was substantial cost overruns?

I am not sure I understand the question Walter, are you asking --.

GTAT wasn’t the only the person you had precision managed to lose a lot of money in manufacturing for over the last couple of years. I was just wondering if there are any other of those loss programs you did in the past where there was an opportunity to come back and try and recover something, or basically this is the only one which is GTAT and the rest were just history?

The rest are basically historical leftovers, so we finished those contracts. I am not so sure it's the best idea known to Alex Shen to go back after our customer, when we’ve concluded a contract and ask them for more money.

Depends on whether or not you believe the customer treated you appropriately, I realize the company has something to do with it. But the answer is that will not probably take place?

I wasn’t there, so it's difficult for me to pursue. I’ll just deal with those facts. If I was there and I was able to witness that myself and present the facts as I saw them and I would have some grounds for conversation with the clients.

And Walter that all comes from change orders, we’re much more active with our customers on change orders when the scope of a project changes, than before Alex and the new regime was in place and then with a case of GT, that was a pretty much a bright line contractual issue and we basically are holding them both in the arbitration and in our bankruptcy claim, we’re holding them to the letter of their terms and traditions and their purchase order, which we believe they breached. So that was little bit more of a bright line issue. The other issues you referenced are probably water well over the dam, in that you’ve got be very proactive to assert change orders in these types of contracts and we are doing that now where as former leadership -- we didn’t always get those right up front, the way you needed to do it.

Okay and last try to get Alex to make a forecast, you would expect as you now look at the business that the operating business should not require -- should be cash flow positive with the exception of the ups and downs of receivables versus payables. The business should not burn cash except for working capital?

Well the business is inherently lumpy, I think that’s what you're speaking also. Yes, are we going to burn capital ever again or are we going to stay positive? I don’t know yet.

Thank you. Our next question comes from the line of Mike Schellinger with Microcapclub. Please go ahead with your question.

Yes. Regarding gross margin in the current quarter were there any unusual items that would lead to the numbers you got, like cost basis on material being unusually low or some kind of unusual products that was much higher margins than typical?

Rich correct me if I'm wrong, but as anything unusual is detected we are obligated to report such unusualness in this yes.

Exactly we try to compare the quarters back and forth, when we look forward.

Since there was no unusualness reported. We are a compliant company, compliant to the SEC regulations.

Okay thank you. So than regarding your current backlog of business is that fair to assume that the margin on that would be relatively similar to what you had this quarter?

That would be another stab at asking me the forecast the margin correct?

Well. I guess maybe if you consider it that, then yes okay, but you probably know what's in your book already. But if you don’t want to talk about that that's fine.

Thank you.

I don’t have any further questions at the moment.

Thank you. Ladies and gentlemen there are no further question at this time. I would like to turn the floor back over to management for closing remarks.

Thank you all for your time today. We do look forward to updating you on our progress during our next call. Thanks everyone.

Thank you, ladies and gentlemen. This does concludes our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.