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8-K/A

Techprecision Corp (TPCS)

8-K/A 2021-11-15 For: 2021-08-25
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securitiesand Exchange Act of 1934

Date of Report (Date of earliest event reported): August 25, 2021

TECHPRECISION CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware 000-51378 51-0539828
(State or Other Jurisdiction<br><br> <br>of Incorporation or Organization) (Commission File Number) (IRS Employer Identification No.)

1 Bella Drive

Westminster, MA 01473

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:

(978) 874-0591

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
N/A N/A N/A

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

EXPLANATORY NOTE

TechPrecision Corporation (the “Company”) previously filed a Current Report on Form 8-K on August 30, 2021 (the “Initial Report”) to report the completion of the Company’s acquisition of STADCO, a company in the business of manufacturing high-precision parts, assemblies and tooling for aerospace, defense, research and commercial customers (the “Acquisition”), pursuant to that certain stock purchase agreement (as amended, the “SPA”) with Stadco New Acquisition, LLC (“Acquisition Sub”), STADCO, Stadco Acquisition, LLC (“Holdco”) and each stockholder of Holdco. On August 25, 2021, pursuant to the SPA, and upon the terms and subject to the conditions therein, the Company, through Acquisition Sub, acquired all of the issued and outstanding capital stock of STADCO from Holdco.

The purpose of this Current Report on Form 8-K/A (the “Amended Report”) is to amend Items 9.01(a) and 9.01(b) of the Initial Report to provide the financial statements and pro forma financial information required by Item 9.01 of Form 8-K that were previously omitted from the Initial Report as permitted by Item 9.01(a)(3) and 9.01(b)(2). This Amended Report does not amend any other item of the Initial Report and all other information previously reported in or filed with the Initial Report is hereby incorporated by reference to this Amended Report. This Amended Report should be read in connection with the Initial Report.

The pro forma financial information included in this Amended Report has been presented for informational purposes only, as required by Form 8-K, and is not intended to, and does not purport to, represent what the Company’s actual results or financial condition would have been had the Acquisition been completed as of the dates indicated or will be for any future periods.

Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
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STADCO’s audited consolidated balance sheets as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholder’s deficit and cash flows for each of the years in the two-year period ended December 31, 2020, the related notes and the report of Baker Tilly US, LLP, independent registered accounting firm, dated November 3, 2021 are filed as Exhibit 99.1 to this Amended Report and are incorporated herein by reference.

STADCO’s unaudited consolidated balance sheet as of June 30, 2021 and audited consolidated balance sheet as of December 31, 2020, the related unaudited consolidated statements of operations, stockholder’s deficit and cash flows for each of the six months ended June 30, 2021 and 2020 and the related notes are filed as Exhibit 99.2 to this Amended Report and are incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed statement of operations of the Company for the year ended March 31, 2021 (combining the TechPrecision Corporation financial information for the fiscal year ended March 31, 2021 and STADCO financial information for the fiscal year ended December 31, 2020), giving effect to the Company’s acquisition of STADCO, is filed as Exhibit 99.3 to this Amended Report and are incorporated herein by reference.

The unaudited pro forma condensed combined financial information of the Company as of and for the three months ended June 30, 2021 (combining the TechPrecision Corporation financial information for the quarter ended June 30, 2021 and the STADCO financial information for the quarter ended March 31, 2021), giving effect to the Company’s acquisition of STADCO, is filed as Exhibit 99.3 to this Amended Report and are incorporated herein by reference.

(d) Exhibits
Exhibit<br> <br>Number Description
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23.1 Consent of Baker Tilly US, LLP.
99.1 STADCO audited consolidated balance sheets as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholder’s deficit and cash flows for each of the years in the two-year period ended December 31, 2020, the related notes and the report of Baker Tilly US, LLP, independent registered accounting firm, dated November 3, 2021.
99.2 STADCO unaudited consolidated balance sheets as of June 30, 2021 and audited consolidated balance sheet as of December 31, 2020, the related unaudited consolidated statements of comprehensive income (loss), stockholder’s deficit and cash flows for each of the six months ended June 30, 2021 and 2020.
99.3 Unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2021 and notes to unaudited pro forma condensed combined financial information; unaudited pro forma condensed combined statement of operations for the three months ended June 30, 2021; unaudited pro forma condensed combined balance sheet as of June 30, 2021; and notes to unaudited pro forma condensed combined financial information.
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TECHPRECISION CORPORATION
Date: November 15, 2021 By: /s/ Thomas Sammons
Name: Thomas Sammons
Title: Chief Financial Officer

Exhibit 23.1

Consentof Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements of TechPrecision Corporation on Form S-8 (No. 333-215028, 333-214541, 333-177315, and 333-148152) of our report dated November 3, 2021, relating to the consolidated financial statements of Stadco, Inc., which appears in this Form 8-K/A of Tech Precision Corporation filed on November 15, 2021.

/s/ Baker Tilly US, LLP

Los Angeles, CA

November 15, 2021

Exhibit 99.1

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition, LLC)

Consolidated Financial Statements

December 31, 2020 and 2019

INDEX TO FINANCIAL STATEMENTS

Independent Auditors’ Report 1
Consolidated Balance Sheets 3
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Consolidated Statements of Operations 4
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Consolidated Statements of Stockholder’s<br>Deficit 5
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Consolidated Statements of Cash Flows 6
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Notes to Consolidated Financial Statements 7
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INDEPENDENT AUDITORS’ REPORT

To the Stockholder

Stadco, Inc.

Los Angeles, CA

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Stadco, Inc. and subsidiaries which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of operations, statements of stockholder’s deficit and cash flows for the years then ended and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Los Angeles, California

November 3, 2021

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

CONSOLIDATED BALANCE SHEETS

December 31, 2020 and 2019

ASSETS

2020 2019
Current Assets
Cash $ 1,831 $ 554,519
Accounts receivable 2,367,710 1,676,518
Inventories 3,615,560 4,533,544
Prepaid expenses and other current assets 266,147 508,722
Total current assets 6,251,248 7,273,303
Property and equipment, net 2,056,956 3,824,370
Total assets $ 8,308,204 $ 11,097,673

LIABILITIES AND STOCKHOLDER’S DEFICIT

Current Liabilities
Accounts payable and accrued expenses $ 7,253,410 $ 5,662,358
Line of credit 4,335,118 3,606,319
Long term debt, current portion 6,016,626 6,892,994
Paycheck Protection Program note payable, current portion 1,218,151 –
Capital leases, current portion 35,637 28,667
Total current liabilities 18,858,942 16,190,338
Long term debt, current portion and debt issuance costs 221,038 121,826
Paycheck Protection Program note payable, net of current portion 352,144 –
Capital leases, net of current portion 40,311 62,275
Total current liabilities 19,472,435 16,374,439
Commitments and Contingencies (Note 13)
Stockholder’s Deficit
Common stock, no par value; 20,000,00 shares authorized, 12,028,500 shares issued and outstanding 1,100,000 1,100,000
Series A Preferred stock, net of stock issuance costs, no par value; 850,000 shares authorized, issued, and outstanding 208,712 208,712
Accumulated deficit (12,455,569 ) (6,569,940 )
Accumulated other comprehensive loss (17,374 ) (15,538 )
Total stockholder’s deficit (11,164,231 ) (5,276,766 )
Total liabilities and stockholder’s deficit $ 8,308,204 $ 11,097,673 
| Page 2 | *The accompanying notes are an integral part of these financial statements.* |

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2020 and 2019

2020 2019
SALES $ 14,620,890 $ 16,344,982
COST OF GOODS SOLD 15,838,557 15,802,732
GROSS (LOSS) PROFIT (1,217,667 ) 542,250
OPERATING EXPENSES 2,862,221 2,700,797
OPERATING LOSS (4,079,888 ) (2,158,547 )
OTHER INCOME (EXPENSES)
Interest expense (1,100,189 ) (954,932 )
Other expenses (Note 10) (529,258 ) (524,234 )
Gain on change in fair value of warrant liability – 213,500
Other income 14,724 1,205
Total other income (expenses) (1,614,723 ) (1,264,461 )
OTHER INCOME (EXPENSES) (5,694,611 ) (3,423,008 )
INCOME TAX EXPENSE (18,184 ) (30,412 )
NET LOSS (5,712,795 ) (3,453,420 )
OTHER COMPREHENSIVE (LOSS) INCOME
Currency translation (loss) gain (1,836 ) 20,558
COMPREHENSIVE LOSS $ (5,714,631 ) $ (3,432,862 ) 
| Page 3 | *The accompanying notes are an integral part of these financial statements.* |

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

CONSOLIDATED STATEMENTS OF STOCKHOLDER’SDEFICIT

For the Years Ended December 31, 2020 and 2019

Common stock Preferred stock
Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder’s Deficit
BALANCE - December 31, 2018 12,028,500 $ 1,100,000 850,000 $ 208,712 $ (2,938,965 ) $ (36,096 ) $ (1,666,349 )
Preferred stock dividends – – – – (177,555 ) – (177,555 )
Currency translation gain – – – – – 20,558 20,558
Net loss – – – – (3,453,420 ) – (3,453,420 )
BALANCE - December 31, 2019 12,028,500 1,100,000 850,000 208,712 (6,569,940 ) (15,538 ) (5,276,766 )
Preferred stock dividends – – – – (172,834 ) – (172,834 )
Currency translation loss – – – – – (1,836 ) (1,836 )
Net loss – – – – (5,712,795 ) – (5,712,795 )
BALANCE - December 31, 2020 12,028,500 $ 1,100,000 850,000 $ 208,712 $ (12,455,569 ) $ (17,374 ) $ (11,164,231 ) 
| Page 4 | *The accompanying notes are an integral part of these financial statements.* |

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2020 and 2019

2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,712,795 ) $ (3,453,420 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization 2,051,383 2,237,089
Accretion of deferred financing cost 31,524 31,524
Foreign currency translation (gain) loss (1,836 ) 20,558
Loss on disposal of fixed assets 25,086 –
Impairment of fixed assets 157,798 –
Changes in operating assets and liabilities:
Accounts receivable (691,192 ) 274,278
Inventories 917,984 (417,369 )
Prepaid expenses and other current assets 242,575 19,996
Accounts payable and accrued expenses 1,591,052 2,125,642
Net cash (used in) provided by operating activities (1,388,421 ) 838,298
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (441,853 ) (139,261 )
Net cash used in investing activities (441,853 ) (139,261 )
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings from line of credit 728,799 436,976
Borrowings from Paycheck Protection Program note payable 1,570,295 –
Borrowings from long term debt 599,869 697,122
Principal repayments on long term debt (1,408,549 ) (1,379,330 )
Payments for capital leases (39,994 ) (55,317 )
Dividends paid (172,834 ) (177,555 )
Net cash provided by (used in) investing activities 1,277,586 (478,104 )
NET CHANGE IN CASH (552,688 ) 220,933
CASH – beginning of year 554,519 333,586
CASH – end of year $ 1,831 $ 554,519
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the year for:
Interest $ 526,900 $ 693,978
Income taxes $ 18,184 $ 30,412
NON-CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of property and equipment through notes payable $ – $ 84,984
Acquisition of property and equipment through capital leases $ 25,000 $ 9,228
Payment of expenses by holder of promissory note $ – $ 200,000 
| Page 5 | *The accompanying notes are an integral part of these financial statements.* |

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

1.       NATURE OF OPERATIONS

Stadco, Inc. (the “Company”), a California corporation, designs, machines, fabricates, assembles and tests large precision parts and assemblies for various industries throughout the United States. Significant portions of the Company’s revenues are generated from the defense industry, including customers such as Boeing, Northrop Grumman, Raytheon and Lockheed Martin. The Company’s manufacturing facilities are located in Los Angeles, California and Mexicali, Mexico.

The Company has two foreign subsidiaries: Stadco-Mexico, Inc., a wholly-owned subsidiary incorporated in Mexico; and Group Stadco Mexico a Mexican corporation that is owned 95% by Stadco, Inc. and 5% by Stadco-Mexico, Inc.

Group Stadco Mexico ceased operations in November 2020. The legal entity remains in place pending authorization of closure from governmental authorities. The Company abandoned, sold, or transferred the remaining property and equipment held by this entity resulting in the impairment charge described in Note 2 to the consolidated financial statements.

Going Concern

The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of obligations in the normal course of business. The Company had recurring operating losses and an accumulated deficit of $12,455,569 and $6,569,940 at December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, the Company also had current debt of $11,605,532 and $10,527,980, respectively, and working capital deficiencies of $12,607,694 and $8,917,035, respectively.

Management’s plan to address this substantial doubt of the Company’s ability to continue as a going concern relied on their ability to bring on additional investments into the Company. As described in Note 2, in August 2021, a third party acquired all of the issued and outstanding capital stock of the Company. In addition, the terms of the Company’s debt and payables were renegotiated with lenders and vendors. Management expects the Company to continue as a going concern through at least twelve months from the date these financial statements were available to be issued. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

| Page 6 |

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such consolidated financial statements and accompanying notes are the representation of management, who is responsible for their integrity and objectivity.

The consolidated financial statements include the accounts of Stadco, Inc. and its foreign subsidiaries Stadco Mexico and Group Stadco Mexico. All intercompany transactions are eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to use estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from estimated amounts.

Significant estimates include those related to the allowance for doubtful accounts, inventory reserves, the realization of long-lived assets and estimation of costs for contracts.

Cash and Cash Equivalents

The Company considers all highly liquid investments and time deposits with original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2020 and 2019.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Accounts Receivable

Accounts receivable are carried at their estimated collectible amounts. Credit is generally extended on a short-term basis and therefore receivables do not bear interest. Accounts receivable are periodically evaluated for collectability based on a history of past collections, credit and chargebacks, and current credit considerations. At December 31, 2020 and 2019 management deemed no allowance was required. No bad debt was recorded for the years ended December 31, 2020 and 2019.

Inventories

Inventories are stated at the lower of average cost or net realizable value, and consists of raw materials and work in process.

| Page 7 |

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the following estimated useful lives:

Machinery and equipment 5 – 15 years
Furniture and fixtures 3 – 5 years
Leasehold improvements 5 – 15 years

Costs related to the acquisition and improvement of property and equipment are capitalized, while other costs, including repairs and maintenance are expensed as incurred. Construction in-progress represents capitalized costs for in-process improvements. Such costs are not depreciated or amortized until they are placed in service.

Deferred Financing Costs

The Company incurred debt issuance costs in 2018 in connection with long term debt. Such costs are reflected as a reduction of the related debt balance and are amortized over the term of the related debt instruments using the straight-line method, which approximates the effective interest method.

Research and Development

Research and development costs are charged to expense as incurred. Research and development expenses were not significant for the years ended December 31, 2020 and 2019. Research and development expenses include compensation and related overhead for employees and consultants involved in research and development and the cost of materials purchased for research and development.

| Page 8 |

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of Long-Lived Assets

The Company reviews all of its long-lived assets for impairment indicators throughout the year and performs detailed testing whenever impairment indicators are present. When necessary, the Company records charges for impairments. Specifically:

· For finite-lived intangible assets, such as developed technology rights and other long-lived assets, the<br>Company compares the undiscounted amount of the projected cash flows associated with the asset, or asset group, to the carrying amount.<br>If the carrying amount is found to be greater, the Company records an impairment loss for the excess of book value over fair value. In<br>addition, in all cases of an impairment review, the Company re-evaluates the remaining useful lives of the assets and modify them, as<br>appropriate; and
· For indefinite-lived intangible assets, such as acquired in-process research and development assets, each<br>year and whenever impairment indicators are present, the Company determines the fair value of the asset and records an impairment loss<br>for the excess of book value over fair value, if any.
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Management determined certain property and equipment held at Group Stadco Mexico was impaired at December 31, 2020. Impairment charges amounted to $157,798 for the year ended December 31, 2020 and are included in operating expenses in the accompanying consolidated statement of operations. No impairment charges were recorded during the year ended December 31, 2019.

Foreign Currency Translation

In accordance with Accounting Standards Codification (“ASC”) 830-30, international operations use the respective local currencies as their functional currency. The Company considers the U.S. dollar as its reporting currency. The Company operates Group Stadco Mexico in Mexico. Translation adjustments for this subsidiary are included in other comprehensive loss. Assets and liabilities of the foreign operations denominated in local currencies are translated at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the weighted average rate of the exchange during the period.

Fair Value of Financial Instruments

The Company’s consolidated financial instruments include cash, accounts receivable, accounts payable, long term debt, capital lease liability, and warrant liability. The Company believes that the fair value of these financial instruments approximates their carrying amounts based on current market indicators, such as prevailing market rates and short-term maturities of these instruments.

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments (continued)

The Company follows authoritative guidance with respect to fair value reporting issued by the Financial Accounting Standards Board (“FASB”) for financial assets and liabilities, which defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance does not apply to measurements related to share-based payments. The guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a framework for measuring fair value and a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

Level 1 – Observable inputs, such as quoted market prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3 – Unobservable inputs that reflect the reporting entity’s own assumptions when there is little or no market data

At December 31, 2020 and 2019, The Company did not have any significant assets or liabilities measured at fair value.

| Page 10 |

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Warrant Liability

The Company accounted for its warrant issued in accordance with ASC 815, Derivatives and Hedging, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that the Company’s warrant does not meet the criteria for classification as equity.

Accordingly, the Company classified the warrant as a liability (see discussion in Note 10). The warrant is subject to re-measurement at each balance sheet date, and each warrant exercise date, and the fair value of warrants exercised is reclassified to stockholder’s deficit. Other changes in fair value would be recognized as a component of other (expense) income, net in the consolidated statement of operations.

Income Taxes

The Company provides for income taxes using the asset and liability method. Deferred income taxes are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted statutory tax rates in effect for years in which differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to reflect uncertainty associated with their ultimate realization. Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based upon consideration of available evidence, including future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies.

The Company evaluates its tax positions in a two-step process. First, the Company determines whether it is more likely than not that a tax position will be sustained upon examination by the taxing authorities. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company currently has recorded a liability for unrecognized tax benefits related to uncertainties in income taxes in accordance with ASC Topic 740, Income Taxes.

The Company initially recognizes a tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes (continued)

The Company’s policy is to recognize both interest and penalties related to unrecognized benefits in income tax expense. Interest and penalties on unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest and penalties during the years ended December 31, 2020 and 2019.

As the determination of whether a tax position is greater than 50% likely of being realized and the related largest amount of benefit is subjective, it is possible that outside tax professionals or the taxing authority could conclude that the amounts recognized or disclosed in our financial statements would differ from amounts the Company’s management believes are applicable.

Revenue Recognition

The Company adopted the revenue recognition guidelines in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), effective January 1, 2019. ASC 606 provides that revenues are to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration expected to be received for those goods or services. Revenue is recognized when the performance obligation has been satisfied and control of the product has transferred to the customer. In evaluating the timing of the transfer of control of products to customers, the Company considers several indicators, including significant risks and rewards of products, the right to payment, and the legal title of the products.

The Company primarily recognizes revenue over time as either design and manufacturing milestones noted in contracts are met or upon shipment of products.

Sales allowances related to claims are generally not material to the consolidated financial statements, and do not comprise a significant portion to variable consideration. Estimates for sales allowances are based on, among other things, an assessment of historical trends, information from customers, and anticipated returns related to current sales activity. These estimates are established in the period of sale and reduce revenue in the period of sale.

The incremental cost of obtaining a contract is expensed when incurred.

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Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Business Concentrations

Four customers accounted for approximately 53% and 54% of the Company’s revenues for the years ended December 31, 2020 and 2019, respectively. Two customers accounted for approximately 46% of the Company’s accounts receivable at December 31, 2020. Three customers accounted for approximately 53% of the Company’s accounts receivable at December 31, 2019.

Recent Accounting Pronouncements

The Company adopted the revenue recognition guidelines in accordance with ASC 606 effective January 1, 2019, the first day of the Company’s fiscal year using the modified retrospective approach applied to those contracts which were not completed as of January 1, 2019. As part of the adoption of ASC 606, the Company elected the following transition practical expedients: (i) to reflect the aggregate of all contract modifications that occurred prior to the date of initial application when identifying satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price; and (ii) to apply the standard only to contracts that are not completed at the initial date of application. Because contract modifications are minimal, there is not a significant impact as a result of electing these practical expedients. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases. This update requires lessees to recognize at the lease commencement date a lease liability which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use assets, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees will no longer be provided with a source of off-balance sheet financing. In June 2020, the FASB issued ASU 2020-05, which deferred the effective date for private entities by one year, making this change effective January 1, 2022. The Company is currently evaluating the impact of the adoption of this standard on their consolidated financial statements.

3.       INVENTORIES

Inventories include the following at December 31, 2020 and 2019:

2020 2019
Raw Materials $ 563,022 $ 724,972
Work in-progress 3,052,538 3,808,572
$ 3,615,560 $ 4,533,544 
| Page 13 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

4.       PROPERTY AND EQUIPMENT

The components of property and equipment at December 31, 2020 and 2019 are as follows:

2020 2019
Machinery and equipment $ 43,325,383 $ 43,166,352
Furniture and fixtures 2,005,795 2,002,014
Leasehold improvements 1,406,232 1,495,792
Other 1,415,014 1,204,497
48,152,424 47,868,655
Less accumulated depreciation and amortization (46,095,468 ) (44,044,285 )
Property and equipment, net $ 2,056,956 $ 3,824,370

Depreciation and amortization expense amounted to $2,051,383 and 2,237,089 for the years ended December 31, 2020 and 2019, respectively.

5.       ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses at December 31, 2020 and 2019 are as follows:

2020 2019
Accounts Payable $ 2,532,970 $ 2,735,641
Accrued management fees 1,147,680 536,690
Accrued interest 494,825 171,214
Accrued rent 1,205,146 –
Progress billings and customer deposits 438,406 531,654
Accrued vacation 357,071 374,875
Accrued preferred stock dividends 326,896 154,063
Loans from related parties 272,521 235,441
Accrued payroll and related 185,416 261,518
Other 262,479 661,562
$ 7,253,410 $ 5,662,358 
| Page 14 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

6.       LINE OF CREDIT

Stadco, Inc. entered into a revolving line of credit agreement with a bank in 2018, allowing it to borrow up to a maximum amount of $5,000,000. Borrowings under the line are collateralized by substantially all of the assets of the Company, including Stadco’s ownership in its Mexican subsidiaries. The line of credit bears interest at the LIBOR rate (as defined) plus an Applicable Margin of 4% per annum. At December 31, 2020 and 2019, the interest rate for the line of credit was 4.24% and 5.91%, respectively. Interest payments are to be paid monthly in arrears which commenced on January 1, 2019.

In April 2019, the Company failed to meet a required financial covenant and has been in default since that date. The Company has continued to make payments on the line of credit and non-default interest. The Company has not paid the 3% default interest triggered as of the date of default.

At December 31, 2020 and 2019, outstanding balances for the line of credit were $4,335,118 and $3,606,319, respectively.

7.       DEBT

In addition to the line of credit, Stadco, Inc. entered into a loan and security agreement with a bank in 2018 for a term loan for $7,500,000 to refinance their previous loans and the related accrued interest.

Borrowings under the term loan are collateralized by substantially all of the assets of the Company, including Stadco’s ownership in its Mexican subsidiaries. The term loan is payable in monthly principal installments of $89,286, with a final balloon payment in an aggregate amount equal to the unpaid principal balance on the earlier of December 7, 2022 or the Termination Date (defined as the date Lender terminates the loans following an event of default).

The term loan bears interest at the LIBOR rate (as defined) plus an Applicable Margin of 5% per annum. At December 31, 2020 and 2019, the interest rate for the term loan were 5.24% and 6.91%, respectively. Interest payments are to be paid monthly in arrears which commenced on January 1, 2019.

At December 31, 2020 and 2019, outstanding balance for the term loan was $5,446,429 and $6,517,857, respectively.

The loan agreement contains financial and nonfinancial covenants, including maintenance of certain financial ratios. In April 2019, the Company failed to meet a required ratio and has been in default since that date. The Company has continued to make principal non-default interest and payments. The Company has not paid the 3% default interest triggered as of the date of default. Due to this default, the balance of this loan due as of December 31, 2020 and 2019 have been classified in the current portion of long-term debt.

| Page 15 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

7.       DEBT (continued)

During 2019 and 2020, the Company entered into three short-term loan agreements with a lending institution. The 2019 loan drawn was for $350,000, had an implicit interest rate of 46.17% based on a fixed amount of weekly $8,479 payments, matured May 2020, and was collateralized by a subordinated interest in the Company’s accounts receivable. The loan was paid off in May 2020. The two loans drawn in 2020 totaled $350,000 and $100,000, respectively, had implicit interest rates of 44.41% and 46.14%, respectively, based on a fixed amount of weekly $8,411 and $2,403 payments, respectively, maturing September and November 2021, respectively, and are collateralized by a subordinated interest in the Company’s accounts receivable. These notes had early loan repayment penalties totaling $86,674 and $12,892 at December 31, 2020 and 2019, respectively. At December 31, 2020 and 2019, outstanding balances on these short-term loans were $352,373 and $140,746, respectively.

During 2019 and 2020, the Company entered into three long-term loan agreements with a lending institution. The two 2019 loans were drawn for $261,045 and $84,948, had implicit interest rates of 5.92% and 5.85%, respectively, based on a fixed amount of weekly $7,897 and $2,578 payments, respectively, maturing January 2023, and are collateralized by an interest in substantially all assets of the Company. The loan drawn in 2020 was for $149,869, had implicit interest rate of 5.92% based on weekly payments ranging from $3,000 to $15,000, maturing May 2023, and is collateralized by an interest in substantially all assets of the Company. At December 31, 2020 and 2019, outstanding balances on these short-term loans were $371,530 and $320,409, respectively.

During February 2019, the Company entered into a short-term note payable with a shareholder of the parent company of Stadco, Inc. This note was for $200,000, noninterest bearing, is unsecured, and was due in full March 2019. The Company is in default on this note due to the unpaid $120,000 balance at December 31, 2020 and 2019.

The Company’s non-PPP debt as of December 31, 2020 and 2019 are summarized as follows:

2020 2019
Bank term loan $ 5,446,429 $ 6,517,857
Long-term loans with lending institution 371,530 320,409
Short-term loans with lending institution 352,373 140,746
Promissory note 120,000 120,000
6,290,332 7,099,012
Less current portion (6,016,626 ) (6,892,994 )
273,706 206,018
Less deferred financing costs, net (52,668 ) (84,192 )
$ 221,038 $ 121,826 
| Page 16 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

7.       DEBT (continued)

The following is a schedule by years of the future minimum principal payments on these loans:

For years ending December 31:

2021 $ 6,069,294
2022 148,500
2023 72,538
Total 6,290,332
Less: deferred financing costs (52,668 )
$ 6,237,664

8.       PAYCHECK PROTECTION PROGRAM NOTE PAYABLE

In April 2020, the Company received loan proceeds totaling $1,570,295 under the Paycheck Protection Program (“PPP”) which was established as part of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and is administered through the SBA. The PPP provides loans to qualifying businesses in amounts up to 2.5 times their average monthly payroll expenses and was designed to provide a direct financial incentive for qualifying businesses to keep their workforce employed during the Coronavirus crisis. PPP loans are uncollateralized and guaranteed by the SBA and are forgivable after a “covered period” (eight or twenty-four weeks) as long as the borrower maintains its payroll levels and uses the loan proceeds for eligible expenses, including payroll, benefits, mortgage interest, rent, and utilities. The forgiveness amount will be reduced if the borrower terminates employees or reduces salaries and wages more than 25% during the covered period. Any unforgiven portion is payable over 2 years if issued before, or 5 years if issued after, June 5, 2020 at an interest rate of 1% with payments deferred until the SBA remits the borrower’s loan forgiveness amount to the lender, or, if the borrower does not apply for forgiveness, ten months after the end of the covered period. PPP loan terms provide for customary events of default, including payment defaults, breaches of representations and warranties, and insolvency events and may be accelerated upon the occurrence of one or more of these events of default. Additionally, PPP loan terms do not include prepayment penalties.

The following is a schedule by years of the future minimum principal payments on the Company’s PPP loans:

For years ending December 31:

2021 $ 1,218,151
2022 352,144
$ 1,570,295 
| Page 17 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

8.       PAYCHECK PROTECTION PROGRAM NOTE PAYABLE (continued)

The Company met the PPP’s loan forgiveness requirements, and therefore, applied for forgiveness in October 2020. Legal release was received January 2021, therefore, the Company will record the amount forgiven, $1,570,295, as forgiveness income in its 2021 statement of operations.

The SBA reserves the right to audit any PPP loan, regardless of size. These audits may occur after forgiveness has been granted. In accordance with the CARES Act, all borrowers are required to maintain their PPP loan documentation for six years after the PPP loan was forgiven or repaid in full and to provide that documentation to the SBA upon request.

9.       RELATED PARTY TRANSACTIONS

Amounts Due from Related Parties

From time to time, certain stockholders of Stadco Acquisition, LLC (“the Parent”) advance monies to the Company for operational needs. As of December 31, 2020, and 2019, the Company owed $272,521 and $235,441, respectively, to such related parties which are due on demand, bear no interest and are included in accounts payable and accrued expenses in the accompanying consolidated balance sheet.

During the years ended December 31, 2020 and 2019, the Company was charged a corporate management fee in the amount of $500,000 from a preferred stockholder. The Company ceased paying this management fee in February 2019. As of December 31, 2020, and 2019, the Company owed $958,342 and $458,337, respectively, to this related party and are included in accounts payable and accrued expenses in the accompanying consolidated balance sheet.

10.       STOCKHOLDER’S DEFICIT

Common Stock

As of December 31, 2020, and 2019, the Company’s Board of Directors is authorized to issue 20,000,000 shares of common stock, with no par value. As of December 31, 2020, and 2019, 12,028,500 shares of common stock were issued and outstanding, respectively.

| Page 18 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

10.       STOCKHOLDER’S DEFICIT (continued)

Series A Preferred Stock and Warrant Grant

In December 2018, in conjunction with the debt refinancing discussed in Note 7, the Company issued 850,000 shares of preferred stock, no par value, at an issuance price of $1.00 per share, and a warrant to purchase shares of the Company’s common stock.

The preferred stockholders are entitled to cumulative dividends at a rate of 15% per annum of the Series A Issue Price (defined as $1.00 per share), payable on a monthly basis. If dividend amounts are not paid out in a timely manner, cumulative dividends will accrue at an increased rate of 20% per annum of the Series A Issue Price plus unpaid dividends, until such amounts are paid in full. The preferred stockholders are also owed monthly management fees of $41,667 until debt obligations are fully repaid. For the years ended December 31, 2020 and 2019, management fee expenses totaled $500,000, and are included in other expenses in the accompanying consolidated statement of operations. The Series A preferred stock contains liquidation preferences, but no voting rights or conversion options. There are two redemption options for the Series A preferred stock: one at the Company’s option at the earlier of the three year anniversary from issuance or when the debt obligation has been paid in full; and one at the stockholder’s option at the earlier of the four year anniversary from issuance or when the debt obligation has been paid in full.

As of December 31, 2020, and 2019, the Company owed $326,896 and $154,063, in unpaid dividends to the preferred stockholders and are included in accounts payable and accrued expenses in the accompanying consolidated balance sheet.

The Company ceased paying the monthly management fees in April 2019 and began accruing interest at that time. At December 31, 2020 and 2019, the outstanding accrued management fees and interest was $1,147,680 and $536,390, respectively.

The Company issued a warrant to purchase 11% of the fully-diluted common stock as of the date of exercise at an exercise price $0.01 per share. This warrant was fully vested on the date of grant, expires on December 7, 2026, and may be exercised in cash or by cashless exercise in lieu of cash. The warrant also contains a put right at the earlier of when debt obligation has been paid in fully or the four year anniversary from issuance that the Holder may elect to require the Company to purchase this warrant at a price equal to the Put Price. The Put Price is to be calculated as of the Put Date and will equal 7.5 multiplied by the Company’s trailing twelve months EBITDA, minus Net Debt of the Company as of such date, multiplied by the Warrant Conversion Percentage of 11%, minus the Warrant Exercise Price of $0.01 per share.

As a result of declining Company performance in 2019, the fair market value of the warrant was estimated to have no value as of December 31, 2019 and 2020 and was accordingly written off, resulting in a $213,500 gain being recognized in the 2019 statement of operations.

| Page 19 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

11.       EMPLOYEE BENEFITS

The Company maintains a 401(k) defined contribution plan (the “Plan”) that covers all eligible employees. Eligibility requirements are two months of service and a minimum age of 18 years. Employees who are members of a union governed by a collective bargaining agreement are excluded from eligibility. Each participant may defer their compensation up to the legal limits. The plan includes provisions that authorize the Company to make discretionary profit-sharing contributions, which vest automatically. Participants must be employed on the last day of the plan year in order to be eligible for discretionary profit-sharing contributions. For the years ended December 31, 2020 and 2019, the Company made no profit-sharing contributions.

12.       INCOME TAXES

The components of the provision for income taxes follow for the years ended December 31, 2020 and 2019:

2020 2019
Current:
Federal $ – $ –
State 1,748 2,400
Foreign 16,436 28,012
Total Current 18,184 30,412
Deferred:
Federal (1,129,662 ) (786,610 )
State (369,217 ) (347,195 )
Valuation Allowance 1,498,879 1,133,805
Total deferred – –
Total Provision for income taxes $ 18,184 $ 30,412 
| Page 20 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

12.       INCOME TAXES (continued)

The Company establishes a valuation allowance when it is more likely than not that the Company’s recorded net deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In determining whether a valuation allowance is required, the Company must take into account all positive and negative evidence with regard to the utilization of a deferred tax asset. As of December 31, 2020 and 2019, the valuation allowance for deferred tax assets totaled $3,164,938 and $1,666,058, respectively.

As of December 31, 2020 and 2019, the Company has net operating loss carryforwards for federal and state income tax purposes of $7,515,553 and $ 6,946,295, respectively, for Federal and $7,455,950 and $6,853,666, respectively, for California to offset future taxable income, substantially all of which are domestic. If unused, these credits will expire beginning 2034.

The benefit for income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate to income before income tax primarily due to the change in the valuation allowance.

At December 31, 2020 and 2019, the Company has no material unrecognized tax positions. The Company’s policy is to recognize interest and penalties, if any, related to uncertain tax positions as a component of income tax expense. For the years ended December 31, 2020 and 2019, the Company did not recognize any interest or penalties for uncertain tax positions. The Company is currently not under examination by the United States Internal Revenue Service or any other state, city or local jurisdiction. As such, the Company is subject to the standard statutes of limitations by the relevant tax authorities for federal and state purposes and all tax years since inception are open for examination. Since the Company does not have any unrecognized tax benefits at December 31, 2020 and 2019, the Company does not, accordingly, anticipate any significant increases or decreases within the next twelve months.

13.       COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office and manufacturing facilities under an operating lease agreement with an entity owned by one of the Company’s former shareholders which expires on June 30, 2030. The lease is a triple net lease whereby the Company pays all operating expenses of the property. The lease requires monthly rental commitment amounting to $75,520 with annual increases on each anniversary thereafter equal to the Consumer Price Index Amount (as defined) but in no event will monthly rent increased by more than three percent (3%).

| Page 21 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

13.       COMMITMENTS AND CONTINGENCIES (continued)

Operating Leases (continued)

Future minimum lease obligations under the operating lease at December 31, 2020 and 2019 are as follows:

For years ending December 31:

2021 $ 906,242
2022 906,242
2023 906,242
2024 906,242
2025 906,242
Thereafter 4,078,089
$ 8,609,299

Rent expense for the years ended December 31, 2020 and 2019 amounted to $933,069 and $989,206, respectively.

Capital Leases

The Company utilizes capital leases to finance the addition of new equipment at its office. They are secured by underlying equipment, for which the lessors maintain a first position. As of December 31, 2020, and 2019, the Company had seven and six, respectively, capital lease instruments for equipment. The capital leases are on a 24 to 48 month lease and bear interest rates ranging from 2.69% 18.62%. These leases have bargain purchase options, allowing the Company to purchase equipment at the expiration of the term of the lease. Future minimum lease payments under capital leases at December 31, 2020 are as follows:

For years ending December 31:

2021 $ 57,720
2022 29,117
2023 3,182
Total future minimum lease payments 90,019
Less: interest (14,071 )
Present value of minimum lease payments $ 75,948 
| Page 22 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

13.       COMMITMENTS AND CONTINGENCIES (continued)

Capital Leases (continued)

Following is an analysis of the carrying amount of the leased property and equipment as of December 31, 2020 and 2019:

2020 2019
Machinery and equipment $ 173,667 $ 156,564
Less accumulated depreciation (96,434 ) (70,273 )
$ 77,233 $ 86,291

14.       SUBSEQUENT EVENTS

The Company evaluated events and transactions after December 31, 2020, and through the date the financial statements were issued, for potential recognition or disclosure in the financial statements, in accordance with current accounting standards. In connection with preparing the accompanying consolidated financial statements as of December 31, 2020, management evaluated subsequent events through November 3, 2021, the date the financial statements were available to be issued.

In February 2021, the Company was granted a second PPP note payable in the amount of $1,570,295 payable over 5 years at an interest rate of 1%. The terms and conditions are the same as the first PPP note payable as described in Note 8. The Company met the PPP’s loan forgiveness requirements, and therefore, applied for forgiveness in June 2021. Legal release was received August 2021, therefore, the Company will record the amount forgiven, $1,570,295, as forgiveness income in its 2021 statement of operations. See Note 8 for an additional $1,570,295 of 2021 forgiveness income from the forgiveness of the Company’s 2020 PPP note payable.

After ceasing operations in November 2020, Group Stadco Mexico completed the termination of all its employees, made a final payment on a negotiated lease termination agreement, and settled all known accounts payable in February 2021.

In August 2021, Techprecision Corporation, (the “Acquirer”), acquired all of the issued and outstanding capital stock of the Company in exchange for 666,666 shares of the Acquirer common stock.

In August 2021, the operating lease agreement discussed in Note 13 was amended. The amendment forgave $749,931 of accrued rent and $290,809 in accrued late fees and interest.

In August 2021, the Acquirer entered into an agreement with the holder of the warrant and the preferred stock discussed in Note 10 to sell these securities to the Acquirer in exchange for 600,000 shares of Acquirer common stock and a warrant to purchase up to 100,000 shares of Acquirer common stock.

| Page 23 |

| --- |

Stadco, Inc.

(a wholly-owned subsidiary of Stadco Acquisition,LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

14.       SUBSEQUENT EVENTS (continued)

In August 2021, the lender of the Company’s line of credit forgave $1,400,000 in amounts due as well as related accrued late fees and interest under the terms of a loan purchase agreement with the Acquirer. The Acquirer paid $7,900,000 to this lender for all debts outstanding under the terms of the agreement.

In August 2021, the Company and entities related to the Acquirer jointly entered into a $4,000,000 term loan. Payments on the term loan will began on September 25, 2021, and will be made in monthly installments of $54,391, inclusive of interest at a fixed rate per annum of 3.79%.

In August 2021, the Company became party to a $5,000,000 revolving line of credit through an amendment to an existing loan agreement with an entity related to the Acquirer. The line of credit bears a variable interest rate and interest only payments are due monthly with the principal and any unpaid interest due in December 2022.

| Page 24 |

| --- |

Exhibit 99.2

STADCO CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited June 30, Audited December 31,
2021 2020
ASSETS
Current assets:
Cash and cash equivalents $ 4,213 $ 1,831
Accounts receivable, net 2,119,369 2,367,710
Raw materials 557,588 563,022
Work-in-process 2,638,345 3,052,538
Other current assets 737,682 266,147
Total current assets 6,057,197 6,251,248
Property, plant and equipment, net 1,736,756 2,056,956
Total assets $ 7,793,953 $ 8,308,204
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT):
Current liabilities:
Accounts payable $ 2,137,783 $ 2,562,970
Accrued expenses 5,230,131 4,690,440
Line of credit 3,974,153 4,335,118
Current portion of long-term debt 7,063,885 7,270,414
Total current liabilities 18,405,952 18,858,942
Long-term debt 501,414 613,493
Stockholders’ Equity (Deficit):
Common stock, no par value; 20,000,000 shares authorized, 12,028,500 shares issued and outstanding 1,100,000 1,100,000
Series A Preferred stock, net of stock issuance costs, no par value; 850,000 shares authorized, issued, and outstanding 208,712 208,712
Accumulated other comprehensive income (loss) 10,316 (17,374 )
Accumulated deficit (12,432,441 ) (12,455,569 )
Total stockholder’s equity (deficit) (11,113,413 ) (11,164,231 )
Total liabilities and stockholder’s equity $ 7,793,953 $ 8,308,204

STADCO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Six months ended June 30,
2021 2020
Net sales $ 7,679,345 $ 7,989,356
Cost of sales 7,367,524 7,792,725
Gross profit 311,821 196,631
Selling, general and administrative 1,372,474 1,241,796
(Loss) from operations (1,060,653 ) (1,045,165 )
Other income 1,628,600 -
Interest expense (541,335 ) (590,376 )
Total other income (expense), net 1,087,265 (590,376 )
Income (loss) before income taxes 26,612 (1,635,541 )
Income tax expense (benefit) 3,484 (12 )
Net income (loss) $ 23,128 $ (1,635,529 )
Other comprehensive income:
Foreign currency translation adjustments 27,690 -
Other comprehensive income, net of tax 27,690 -
Comprehensive income (loss) $ 50,818 $ (1,635,529 )

STADCO UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF STOCKHOLDER’S (DEFICIT)

For the Six Months Ended June 30, 2021 and 2020

Common stock Preferred stock Accumulated Accumulated Other Comprehensive Total<br><br> <br>Stockholders’
Shares Amount Shares Amount Deficit Loss Deficit
Balance 12/31/2019 12,028,500 $ 1,100,000 850,000 $ 208,712 $ (6,569,940 ) $ (15,538 ) $ (5,276,766 )
-
Net loss 1,635,529 1,635,529
Currency translation adjustment -
Balance 6/30/2020 12,028,500 $ 1,100,000 850,000 $ 208,712 $ (8,205,469 ) $ (15,538 ) $ (6,912,295 )
Balance 12/31/2020 12,028,500 $ 1,100,000 850,000 $ 208,712 $ (12,455,569 ) $ (17,374 ) $ (11,164,231 )
Preferred stock dividends -
Net income 23,128 23,128
Currency translation adjustment 27,690 27,690
Balance 6/30/2021 12,028,500 $ 1,100,000 850,000 $ 208,712 $ (12,432,441 ) $ 10,316 $ (11,113,413 )

STADCO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 23,128 $ 1,635,529
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation 430,424 1,086,975
Amortization of debt issue costs 15,762 15,762
PPP loan forgiveness (1,570,295 ) -
Changes in operating assets and liabilities:
Accounts receivable 248,342 10,537
Inventories 419,627 459,246
Other current assets (471,535 ) 84,120
Accounts payable (425,187 ) (509,181 )
Accrued expenses 539,691 (285,497 )
Net cash used in operating activities (790,043 ) (773,567 )
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (110,224 ) (272,831 )
Net cash used in investing activities (110,224 ) (272,831 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from payroll protection program 1,570,295 1,570,295
Net payments of line of credit (360,965 ) (553,873 )
Repayments of long-term debt (334,371 ) (473,113 )
Net cash provided by financing activities 874,959 543,309
Effect of exchange rate on cash and cash equivalents 27,690 -
Net increase (decrease) in cash and cash equivalents 2,382 (503,089 )
Cash and cash equivalents, beginning of period 1,831 554,519
Cash and cash equivalents, end of period $ 4,213 $ 51,430

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

1. Nature of Business

STADCO (the “Company”), a California corporation, was founded in 1941, and is a key supplier of large flight-critical components on several high-profile commercial and military aircraft programs, including military helicopters. It has been a critical supplier to a blue-chip customer base that includes some of the largest OEMs and prime contractors in the defense and aerospace industries. STADCO provides world-class expertise in the design, engineering, fabricating, and machining of complex, high-precision, close-tolerance parts, assemblies, and tooling.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation - The accompanying condensed consolidated balance sheet as of June 30, 2021, and the condensed consolidated statements of comprehensive income (loss), stockholder’s equity (deficit) and cash flows for the six months ended June 30, 2021 and 2020, are unaudited, but, in the opinion of management, include all adjustments that are necessary for a fair presentation of our financial statements for interim periods in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The results of operations for an interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. The accompanying condensed consolidated balance sheet as of December 31, 2020, is audited.

Use of Estimates in the Preparation of FinancialStatements - In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and revenues and expenses during the reported period. We continually evaluate our estimates, including those related to accounts receivable, inventories, the realization of long-lived assets and estimation of costs for contracts. We base our estimates on historical and current experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

STADCO’s significant accounting policies are set forth in detail in Note 2 to the December 31, 2020 and 2019 audited consolidated financial statements included with this filing. There have been no significant changes to the critical accounting policies during the six months ended June 30, 2021.

3. PAYCHECK PROTECTION PROGRAM

In April 2020, the Company issued a promissory note, or the Note, evidencing an unsecured loan in the amount of $1,570,295 made to STADCO under the Paycheck Protection Program, or the PPP. The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act and is administered by the U.S. Small Business Administration, or the SBA. The loan to STADCO was made through Sunflower Bank. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs, certain group health care benefits and insurance premiums, and any payments of mortgage interest, rent, and utilities.

The Company met the PPP’s loan forgiveness requirements, and therefore, applied for forgiveness in October 2020. Forgiveness of the debt was received January 2021. The amount forgiven, $1,570,295, is included in other income in its statement of comprehensive income (loss) for the six months ended June 30, 2021.

In February 2021, the Company was granted a second PPP loan in the amount of $1,570,295. The terms and conditions were the same as the PPP loan granted in April 2020. The Company met the PPP’s loan forgiveness requirements and applied for forgiveness in June 2021. Forgiveness of the debt was received in August 2021.

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIALINFORMATION

As previously disclosed, on August 25, 2021, TechPrecision Corporation (the “Company”) completed its acquisition of STADCO, a company in the business of manufacturing high-precision parts, assemblies and tooling for aerospace, defense, research and commercial customers (the “Acquisition”), pursuant to that certain stock purchase agreement (as amended, the “SPA”) with Stadco New Acquisition, LLC (“AcquisitionSub”), STADCO, Stadco Acquisition, LLC (“Holdco”) and each stockholder of Holdco. On August 25, 2021, pursuant to the SPA, and upon the terms and subject to the conditions therein, the Company, through Acquisition Sub, acquired all of the issued and outstanding capital stock of STADCO from Holdco. The accompanying unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” and presents the combination of the historical financial information of TechPrecision Corporation and STADCO adjusted to give effect to the Acquisition and related transactions. The historical financial statements of TechPrecision Corporation and STADCO have been adjusted to give pro forma effect to events that are (a) directly attributable to the transaction, (b) factually supportable, and (c) expected to have a continuing impact on the combined company’s results.

The unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2021, combines the TechPrecision Corporation consolidated statement of operations for the fiscal year ended March 31, 2021, and the STADCO consolidated statement of operations for the fiscal year ended December 31, 2020. The unaudited pro forma condensed combined statement of operations for the three months ended June 30, 2021, combines the TechPrecision Corporation financial information for the quarter ended June 30, 2021, and the STADCO financial information for the quarter ended March 31, 2021. The unaudited pro forma condensed combined balance sheet as of June 30, 2021, combines the TechPrecision Corporation financial information for the quarter ended June 30, 2021, and the STADCO financial information for the quarter ended March 31, 2021.

The unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies. The pro forma financial information included in this Amended Report has been presented for informational purposes only, as required by Form 8-K, and is not intended to, and does not purport to represent what the Company’s actual results or financial condition would have been had the acquisition of STADCO been completed as of the dates indicated or will be for any future periods.

The unaudited pro forma condensed combined financial information, including the notes thereto, should be read in conjunction with the separate historical financial statements of TechPrecision Corporation and STADCO.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED MARCH 31, 2021

TechPrecision STADCO
Year ended Year ended
Mar 31, 2021 Dec 31, 2020 Pro Forma Pro Forma
(Historical) (Historical) Adjustments March 31, 2021
Net sales $ 15,595,558 $ 14,620,890 $ 30,216,448
Cost of sales 12,131,274 15,838,557 ) A 26,567,917
Gross profit 3,464,284 (1,217,667 ) 3,648,531
Selling, general and administrative 2,841,036 2,862,221 ) B 5,186,728
Income (loss) from operations 623,248 (4,079,888 ) (1,538,197 )
Other income 4,600 14,724 19,324
Other expense - (529,258 ) C (29,258 )
Interest expense (202,337 ) (1,100,189 ) D (651,766 )
Total other expense, net (197,737 ) (1,614,723 ) (661,700 )
Income (loss) before income taxes 425,511 (5,694,611 ) (2,199,897 )
Provision (benefit) for income taxes 104,880 18,184 ) E (542,231 )
Net income (loss) $ 320,631 $ (5,712,795 ) $ (1,657,666 )
Other comprehensive income (loss) before tax:
Foreign currency translation adjustments 150 (1,836 ) (1,686 )
Other comprehensive income (loss), net of tax 150 (1,836 ) (1,686 )
Comprehensive income (loss) $ 320,781 $ (5,714,631 ) $ (1,659,352 )
Net income (loss) per share – basic $ 0.01 $ (0.05 )
Net income (loss) per share – diluted $ 0.01 $ (0.05 )
Weighted average number of shares outstanding – basic 29,447,085 F 34,115,873
Weighted average number of shares outstanding – diluted 31,035,355 35,704,143

All values are in US Dollars.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2021

TechPrecision STADCO
Quarter ended Quarter ended
Jun 30, 2021 Mar 31, 2021 Pro Forma Pro Forma
(Historical) (Historical) Adjustments June 30, 2021
Net sales $ 3,412,229 $ 3,256,045 $ 6,668,274
Cost of sales 2,579,561 2,868,827 G 5,401,043
Gross profit 832,668 387,218 1,267,231
Selling, general and administrative 732,608 738,024 ) H 1,158,727
Income (loss) from operations 100,060 (350,806 ) 108,504
Other income 10,390 7,339 17,729
Other expense - (21,460 ) (21,460 )
Interest expense (29,878 ) (256,031 ) I (146,552 )
PPP loan forgiveness 1,317,100 1,570,295 2,887,395
Total other expense, net 1,297,612 1,300,143 2,737,112
Income before income taxes 1,397,672 949,337 2,845,616
Provision (benefit) for income taxes 26,580 - ) J (13,783)
Net income $ 1,371,092 $ 949,337 $ 2,859,398
Other comprehensive income before tax:
Foreign currency translation adjustments 42 - 42
Other comprehensive income, net of tax 42 - 42
Comprehensive income $ 1,371,134 $ 949,337 $ 2,859,440
Net income per share – basic $ 0.05 $ 0.08
Net income per share – diluted $ 0.04 $ 0.08
Weighted average number of shares outstanding – basic 29,498,662 K 34,167,450
Weighted average number of shares outstanding – diluted 31,054,110 35,722,898

All values are in US Dollars.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2021

TechPrecision STADCO
Quarter ended Quarter ended
June 30, 2021 March 31, 2021 Pro Forma Pro Forma
(Historical) (Historical) Adjustments June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents $ 2,236,375 $ 188,369 $ (1,593,375 ) L $ 831,369
Accounts receivable 1,155,403 1,809,548 - 2,964,951
Contract assets 4,815,808 - - 4,815,808
Raw materials 472,486 607,039 - 1,079,525
Work-in-process 559,658 4,738,027 - 5,297,685
Other current assets 375,830 874,633 (50,000 ) M 1,200,463
Total current assets 9,615,560 8,217,616 (1,643,375 ) 16,189,801
Property, plant and equipment, net 3,884,729 1,802,471 7,117,423 N 12,804,623
Right of use - - 6,629,396 O 6,629,396
Goodwill - - 1,174,429 P 1,174,429
Deferred income taxes 1,907,835 - - 1,907,835
Other noncurrent assets, net 82,596 - - 82,596
Total assets $ 15,490,720 $ 10,020,087 $ 13,277,873 $ 38,788,680
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT):
Current liabilities:
Accounts payable $ 169,769 $ 3,479,532 $ 331,982 Q $ 3,981,283
Accrued expenses 1,066,671 4,673,648 (3,850,890 ) R 1,889,429
Contract liabilities 428,367 - - 428,367
Current portion of long-term lease liability - - 465,816 S 465,816
Current portion of long-term debt 2,449,979 5,842,993 (5,270,849 ) T 3,022,123
Total current liabilities 4,114,786 13,996,173 (8,323,941 ) 9,787,018
Long-term debt, net 29,452 6,221,974 (427,529 ) U 5,823,897
Long-term lease liability, net - - 6,163,580 V 6,163,580
Stockholders’ Equity (Deficit):
Preferred Stockholders - 208,172 (208,172 ) W -
Common stock 2,949 1,100,000 (1,099,533 ) X 3,416
Additional paid in capital 8,978,160 - 5,388,481 Y 14,366,641
Accumulated other comprehensive income 21,880 - 21,880
Retained earnings (accumulated deficit) 2,343,493 (11,506,232 ) 11,784,987 Z 2,622,248
Total stockholders’ equity (deficit) 11,346,482 (10,198,060 ) 15,865,762 17,014,185
Total liabilities and stockholder’s equity $ 15,490,720 $ 10,020,087 $ 13,277,873 $ 38,788,680

NOTES TO THE UNAUDITEDPRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

In accordance with Article 11-02 of Regulation S-X, the objective of the pro forma financial information is to provide investors with information about the continuing impact of a particular transaction by illustrating how the acquisition of STADCO by TechPrecision Corporation might have affected STADCO’s historical financial statements if the transaction had been consummated at an earlier time.

The unaudited pro forma condensed combined statement of operations for the three months ended June 30, 2021, and for the fiscal year ended March 31, 2021, provide pro forma effect to the combined business as if the acquisition had been completed on April 1, 2020. The unaudited pro forma condensed combined statement of operations for the three months ended June 30, 2021, combines the TechPrecision Corporation financial information for the quarter ended June 30, 2021, and the STADCO financial information for the quarter ended March 31, 2021. The unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2021, combines the STADCO consolidated statement of operations for the fiscal year ended December 31, 2020, and the TechPrecision Corporation consolidated statement of operations for the fiscal year ended March 31, 2021.

The unaudited pro forma condensed combined balance sheet as of June 30, 2021, combines the TechPrecision Corporation financial information for the quarter ended June 30, 2021, and the STADCO financial information for the quarter ended March 31, 2021, and assumes that the acquisition occurred on June 30, 2021.

The pro forma condensed combined financial information does not include deferred tax adjustments as the Company continues to evaluate the impact of the acquisition on deferred taxes. Stadco’s deferred taxes have a full valuation allowance against them. The pro forma combined provision for income taxes does not necessarily represent the amounts that would have resulted had the combined company filed consolidated income tax returns during the periods presented.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, costs savings, tax savings, or operating efficiencies that may be result from the combined business. The unaudited pro forma condensed combined financial information does not purport to be indicative of what the actual results of operations and the financial position would have been had the acquisition taken place on the dates indicated, nor do they purport to be indicative of the consolidated results of operations and financial position of the combined business in the future. The pro forma adjustments are based upon currently available information and upon certain assumptions that are believed to be reasonable. The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements.

Note 2. Business Combination

On August 25, 2021, the closing date, the Company completed its previously announced acquisition of Stadco, pursuant to the stock purchase agreement, or SPA. 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. On the Closing Date, Westminster Credit Holding, LLC, 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, the Company reached an agreement with the holders of certain other non-bank indebtedness of Stadco, under which such Lender agreed to forgive an aggregate of the indebtedness in exchange for 199,395 shares of the Company’s common stock. In addition, the Company reached an agreement with other holders 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 1.5 million common shares issued as consideration transferred for Stadco was based on the closing market price of the Company’s common shares on the closing date, August 25, 2021.

On August 25, 2021, the Company entered into a Securities Purchase Agreement (the “PIPE Agreement”) with a limited number of institutional and other accredited investors (the “PIPE Investors”), pursuant to which the PIPE investors committed to subscribe for and purchase 3,202,727 shares of the Company’s common stock (the “PIPE Shares”) at a purchase price of $1.10.

Stadco's assets and liabilities were measured at estimated fair values as of August 25, 2021, primarily using 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. The following table summarizes the fair value of the consideration transferred for Stadco and the amounts of the assets acquired, and liabilities assumed recognized at the acquisition date:

Fair value of consideration transferred $ 10,163,164
Recognized amounts of identifiable assets acquired and liabilities assumed:
Accounts receivable $ 3,891,646
Inventory and other current assets 5,250,781
Property, plant and equipment including rights of use assets 15,074,273
Accounts payable, accrued expense and other current liabilities (4,526,679)
Lease obligations (6,701,286)
Debt (4,000,000)
Net assets 8,988,735
Goodwill 1,174,429
Total $ 10,163,164

The acquisition resulted in an estimated $1.2 million of goodwill consisting largely of the synergies expected from combining the operations of the Company and Stadco.

The accounting for all items related to this business combination are estimated, as we review all of the information needed to identify and measure all impacts of this transaction. We expect to complete this review not later than one year from the acquisition date.

Note 3. Pro Forma Adjustments

The unaudited pro forma combined financial statements include pro forma adjustments that are (a) directly attributable to the transactions contemplated by the Share Exchange Agreement, (b) factually supportable, and (c) with respect to the unaudited pro forma combined statements of operations, expected to have a continuing impact on the results of operations of the combined company.

The pro forma adjustments are based on preliminary estimates that could change materially as additional information is obtained.

Adjustments to Unaudited Pro Forma Condensed Combined Statementof Operations for the fiscal year ended March 31, 2021

The adjustments included in the unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2021, are as follows:

A. Represents the net change in depreciation and amortization resulting from a $1.2 million reversal of amortization for an asset deemed to have zero fair value based on revaluation of the Stadco’s intangible assets upon TechPrecision Corporation’s acquisition of STADCO partially offset by depreciation and amortization resulting from a valuation adjustment to STADCO’s property, plant and equipment of $7.1 million plus the recognition of the right-of-use asset for STADCO’s property lease in the amount of $6.6 million against the reversal of historical rent expense.
B. Represents non-recurring expense of $0.4 million related to consulting, legal, diligence and bank fees, plus $0.1 million of expense incurred at TechPrecision Corporation related to the acquisition of STADCO.
--- ---
C. Represents elimination of monthly management fees totaling $0.5 million due to preferred stockholders of STADCO.
--- ---
D. Represents the net change in interest expense resulting from the reduction in STADCO’s bank debt and applicable interest rates, partially offset by additional interest expense related to STADCO’s property lease.
E. Reflects an estimated tax benefit at a tax rate equal to TechPrecision Corporation’s fiscal year 2021 statutory tax rate based on the proforma net income for the fiscal year ended March 31, 2021.
--- ---
F. Reflects new TechPrecision Corporation shares issued in relation to the acquisition of STADCO:
--- ---
666,666 Stadco Acquisition, LLC
--- ---
199,395 Stockholder Debt
600,000 Preferred Stockholder
3,202,727 PIPE Financing
4,668,788 Shares issued

Adjustments to Unaudited Pro Forma Condensed Combined Statementof Operations for the quarter ended June 30, 2021

The adjustments included in the unaudited pro forma condensed combined statement of operations for the quarter ended June 30, 2021, are as follows:

G. Represents the net change in depreciation and amortization resulting from a valuation adjustment to STADCO’s property, plant and equipment and the recognition of the right-of-use asset for STADCO’s property lease against the reversal of historical rent expense.
H. Represents non-recurring expense of $0.3 million related to consulting, legal, diligence and bank fees, and nominal costs incurred during the quarter by TechPrecision Corporation related to the acquisition of STADCO.
I. Represents the net change in interest expense resulting from the reduction in STADCO’s bank debt and applicable interest rates, partially offset by additional interest expense related to STADCO’s property lease.
--- ---
J. Reflects an estimated tax benefit at a tax rate equal to TechPrecision Corporation’s quarter-end 2021 statutory tax rate based on the proforma net income for the three months ended June 30, 2021.
K. Reflects new TechPrecision Corporation shares issued in relation to the acquisition of STADCO.
--- ---

Adjustments to Unaudited Pro Forma Condensed Combined BalanceSheet as of June 30, 2021

The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2021, are as follows:

L. Reflects the net cash impact of TechPrecision Corporation’s financing for the acquisition of STADCO and payments to certain debt holders of STADCO. Cash inflows were generated primarily from a new seven-year term loan in the amount of $4.0 million and gross proceeds of $3.5 million from the PIPE financing. Cash outflows included $7.9 million to pay off STADCO’s primary lender and $1.2 million to pay off other STADCO debt holders.
M. Represents the application of a deposit against the STADCO old debt. TechPrecision Corporation paid a deposit on behalf of STADCO in April 2021 that was applied to STADCO’s old debt at the close of the Acquisition.
--- ---
N. Represents a fair value adjustment to STADCO’s property, plant and equipment of $7.1 million.
--- ---
O. Represents the recognition of the right-of-use asset for STADCO’s property lease in the amount of $6.6 million. STADCO had not yet adopted ASC 842.
--- ---
P. Represents the preliminary goodwill from TechPrecision Corporation’s acquisition of STADCO.
--- ---
Q. Represents liabilities primarily incurred in the PIPE financing.
--- ---
R. Represents the net reduction in STADCO’s accrued expenses due primarily to forgiveness of accrued management fees, accrued preferred dividends and penalties totaling $2.1 million, forgiveness of $0.7 million and a payment of $0.7 million to settle the default amount of rent owed to the STADCO’s landlord, and the conversion of $0.3 million of shareholder debt to TechPrecision Corporation stock.
--- ---
S. Current portion of the property lease liability of $0.5 million.
--- ---
T. Represents a net reduction in the current portion of the long-term debt due primarily to the payoff of STADCO’s old debt with a current portion amount of $4.2 million, plus loan forgiveness of $1.4 million, offset in part by the recognition of the current portion of the new term-loan, $0.5 million.
--- ---
U. Represents a net decrease in the long-term debt due primarily to the recognition of the long-term portion of the new term-loan, $3.5 million, net of related closing costs, more than offset by the payoff of STADCO’s old debt with a long-term amount of $3.6 million and of certain lease liabilities totaling $0.3 million.
--- ---
V. Long-term portion of the property lease liability, $6.2 million.
--- ---
W. Represents the replacement of STADCO’s preferred stockholder’s interest with TechPrecision Corporation stock.
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X. Represents the elimination of STADCO’s common stock in consolidation, and the par value increase for the TechPrecision Corporation stock issued in relation to the acquisition of STADCO. TechPrecision Corporation stock has a par value of $.0001 per share; 90,000,000 shares authorized; 29,498,662 shares issued as of June 30, 2021, with an additional 4,668,788 shares issued in relation to the Acquisition.
--- ---
Y. Represents additional paid-in-capital from the PIPE financing, a net amount of $3.2 million, plus a total of $2.2 million from the investment in STADCO, the conversion of STADCO shareholder debt, and the agreement with STADCO’s preferred stockholder.
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Z. Represents the gains from loan and debt forgiveness totaling $4.2 million and the net retained earnings impact primarily due to the increase in the fixed assets valuation and the recognition of goodwill, partially offset by the issuance of TechPrecision Corporation stock to STADCO’s preferred stockholder.
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