TECHPRECISION CORP

Beginning with the new calendar year 2020, the novel strain of coronavirus known as COVID-19 (“COVID-19”) has spread worldwide, including to U.S jurisdictions where the Company does business, and became a global pandemic. The United States Government has since declared a national emergency and various state governments have imposed “lockdown” and “shelter-in-place” orders intended to reduce the spread of COVID-19 that have severely restricted business, social activities and travel. The Governor of the Commonwealth of Massachusetts, in which jurisdiction the Company’s manufacturing and executive offices are located, issued an emergency order on March 31, 2020, updated on April 28, 2020, imposing such an emergency order. The Company’s business has been designated as a “COVID-19 Essential Service” and, accordingly, we have continued our operations.

In light of the foregoing uncertainty caused by the COVID-19 pandemic, the Company determined it necessary to obtain additional funds. In this connection, as previously disclosed, on May 8, 2020, the Company, through Ranor, issued a promissory note (the “PPP Note”) evidencing an unsecured loan in the amount of $1,317,100 made to Ranor under the Paycheck Protection Program (the “PPP”). The PPP was established under the federal Coronavirus Aid, Relief, and Economic Security Act and is administered by the U.S. Small Business Administration. The loan to Ranor was made through Berkshire Bank. The PPP Note provides for an interest rate of 1.00% per year and matures two years after the issuance date. Principal and accrued interest are payable monthly in equal installments commencing on the date that is six months after the date funds are first disbursed on the loan and continuing through the maturity date, unless the PPP Note is forgiven. To be available for loan forgiveness, the PPP Note may only be used for payroll costs, costs related to certain group health care benefits and insurance premiums, rent payments, utility payments, mortgage interest payments and interest payments on any other debt obligation that were incurred before February 15, 2020.

Beginning with the new calendar year 2020, the COVID-19 pandemic began to adversely affect our business and operations. The effects of the continuing pandemic and related governmental responses could include extended disruptions to supply chains and capital markets, reduced labor availability and productivity and a prolonged reduction in demand for our products and overall global economic activity. In this connection, the United States Government declared a national emergency and various state governments have imposed various “lockdown” and “shelter-in-place” orders as a result of the COVID-19 pandemic, including the government of the Commonwealth of Massachusetts. The Company has been designated as a provider of a “COVID-19 Essential Service” under the emergency order in Massachusetts and, accordingly, has continued its operations. However, the full extent of the COVID-19 pandemic, related business and travel restrictions and changes to social behavior remain uncertain as the health crisis continues to evolve globally. Management has been closely monitoring the impact that the COVID-19 pandemic is having on the Company. As of the date of this Annual Report on Form 10-K, the COVID-19 pandemic has negatively affected the Company’s customers, suppliers and labor force. Customer impacts have included certain customers halting operations entirely for a period of time, shifting to remote work, and suspending on-site inspections – which delays customer acceptance of completed work, customer payment of milestone payments to us, and delivery of finished goods. The Company believes that the potential exists for other customer shutdowns or slow-downs. Supplier impacts have included difficulties experienced by the Company in ordering certain essential supplies. Labor impacts have included a few issues related to employee attendance such as voluntary avoidance of work out of fear of contracting the coronavirus, certain employees becoming ill, and others self-quarantining as a result of potential exposure to other individuals with symptoms of COVID-19. To date, this has had a minor impact on the Company’s production levels, however, if more employees become ill in the future, the Company could experience more significant disruptions, which could have a material adverse effect on our results of operations, financial condition and cash flows.

As discussed above (see “Business – COVID-19 Pandemic Update”), the COVID-19 pandemic and the government-imposed lockdowns have begun to affect our business. The Governor of the Commonwealth of Massachusetts, in which jurisdiction the Company’s manufacturing and executive offices are located, issued an emergency order on March 31, 2020, updated on April 28, 2020, imposing an emergency order generally shutting down the economy. However, the Company has been designated as a provider of a “COVID-19 Essential Service” and, accordingly, has continued it operations.

As of the date of this Annual Report on Form 10-K, the COVID-19 pandemic has negatively affected the Company’s customers, suppliers and labor force. With respect to customers, management has observed impacts from certain of its customers halting operations entirely for a period of time, shifting to remote work, and suspending on-site inspections – which delays customer acceptance of completed work, the making of milestone payments to us, and delivery of finished goods. The Company believes that the potential exists for other customer shutdowns or slowdowns to occur in the future. Management expects that the impact of the foregoing may negatively affect the Company’s cash flows. With respect to suppliers, the Company has seen lead-times for delivery of certain critical supplies extended. Labor impacts have included a few issues related to employee attendance such as voluntary avoidance of work out of fear of contracting the coronavirus, certain employees becoming ill, and others self-quarantining as a result of potential exposure to other individuals with symptoms of COVID-19. This has had a minor impact on the Company’s production levels, however if more employees become ill in the future, the Company could experience a more significant disruption.

Nevertheless, our production facilities continued to operate during the fourth quarter of fiscal 2020 much as they had prior to the outbreak of the COVID-19 pandemic, other than the implementation of enhanced safety measures intended to prevent the spread of the virus. The remote working arrangements and travel restrictions imposed by applicable governmental authorities has not materially impaired our ability to maintain operations during the fourth quarter of fiscal 2020. Accordingly, our results of operations and cash flows during the fiscal year ended March 31, 2020 were not materially affected by the COVID-19 pandemic. However, we believe that our future financial condition, results of operations and cash flows in fiscal 2021 may be materially and adversely affected by the COVID-19 pandemic. However, given the speed and frequency of continuously evolving developments with respect to this pandemic, the extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the effectiveness of actions globally to contain or mitigate its effects, we cannot reasonably estimate the magnitude of the impact on our financial condition and results of operations.