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Edited Transcript of TPCS earnings conference call or presentation 11-Jun-20 8:30pm GMT

Q4 2020 TechPrecision Corp Earnings Call

Westminster Jun 21, 2020 (Thomson StreetEvents) -- Edited Transcript of TechPrecision Corp earnings conference call or presentation Thursday, June 11, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alexander Shen

TechPrecision Corporation - CEO & President

* Thomas C. Sammons

TechPrecision Corporation - CFO

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Conference Call Participants

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* Aaron Warwick

* Mark Gomes

* Richard E. Greulich

REG Capital Advisors - President & CEO

* Ross Taylor

* Brett Maas

Hayden IR, LLC - Managing Principal

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Presentation

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Operator [1]

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Ladies and gentlemen, hello, and welcome. Thank you for joining us for today's TechPrecision Fourth Quarter 2020 Earnings Call and Webcast. (Operator Instructions). This session is being recorded.

And now for opening remarks and introductions, we will go live to managing partner at Hayden IR, Mr. Brett Maas. Welcome, Brett.

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Brett Maas, Hayden IR, LLC - Managing Principal [2]

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Thank you. On the call today is Alex Shen, Chief Executive Officer; and Tom Sammons, Chief Financial Officer.

Before we begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements, which are subject to risks and uncertainties, and by management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor and forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of risks and uncertainties in the company's financial filings with the SEC.

In addition, projections as to the company's future performance represents management's estimates as of today, June 11, 2020. TechPrecision assumes no obligation to revise or update these forward-looking statements.

With that out of the way, I'd like to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex?

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Alexander Shen, TechPrecision Corporation - CEO & President [3]

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Brett, thank you. Good day to everyone, and thank you for joining us. Net sales improved in the fourth quarter to $4.9 million compared to $4.7 million in the same quarter a year ago, resulting in total net sales in fiscal year 2020 of $16 million, down from $16.7 million in fiscal year 2019.

Gross margins also improved in the fourth quarter to 26.4%, higher than gross margins realized in the prior 3 quarters of fiscal 2020. However, our fourth quarter results were negatively impacted by a $495,000 settlement, related to a civil action brought by former employees for past wages claimed under a paid time off program. We agreed to settle the claims to avoid the expense and uncertainty of future litigation. The company will be released from all claims raised in this litigation once the court approves the settlement. As a result, our fourth quarter net income was $48,000 or less than $0.01 per share.

Our full year fiscal 2020 results were negatively impacted by learning curve related cost overruns on a limited number of new projects, which added $1 million to our loss provision. These new projects are an opportunity to demonstrate technical excellence and custom know-how of complex fabrication and custom know-how of complex machining. Furthermore, these specific projects represent an entry point into new business prospects as the highly complex nature of these projects and extended time period of performance, spanning multiple fiscal years, provide a showcase opportunity on Ranor's production floor. A number of these units have now been completed. We expect improved margins going forward as the remaining of these projects approach completion and their cost stabilize and other new projects come online during fiscal year 2021.

We reported a net loss of $342,000 for the full fiscal year 2020, compared to net income of $1.1 million in the prior year.

The company's sales order backlog was $16.8 million on March 31, 2020, compared to $12.6 million in the prior year. As approximately $20.1 million as additional orders were booked over the full year in fiscal 2020. We continue to replenish backlog. We believe this will provide for a steady revenue and profitable margins in fiscal 2021.

Overall, fiscal year 2020 was a great year of positioning the company for future growth, securing new orders, characterized by part numbers that are new to the company, clearly demonstrating customer confidence and our ability to execute on our core business, which is complex fabrication and complex machining.

I will address the impact of COVID-19 on our business and customers, following a brief review of our fiscal 2020 financial results with Tom Sammons, our CFO. Tom?

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Thomas C. Sammons, TechPrecision Corporation - CFO [4]

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Thank you, Alex. As Alex mentioned, net sales for the fourth quarter of fiscal 2020 were $4.9 million, 5% higher when compared to the same period a year ago, primarily on increased shipments in the industrial sector. Cost of sales were 12% higher than the prior year, due in part to $178,000 charge in our fourth quarter for loss contracts. Gross profit was $1.3 million or 11% lower than the same period a year ago.

Fourth quarter operating income, which included a $495,000 provision for the legal settlement, was $166,000, down from $832,000 in the same period a year ago. Net sales for fiscal year 2020 were $16 million or 4% lower than fiscal year 2019. Net sales in the defense and energy markets decreased by $1.7 million and $0.7 million, respectively, when compared to fiscal 2019, while sales to industrial markets increased by $1.7 million.

Cost of sales for fiscal 2020 was $750,000 higher, primarily due to the increase in provision of $1 million for contract losses. As a result, gross profit was $3.1 million or $1.4 million lower than the prior year. Gross margin was 19.6% in fiscal 2020, compared to a gross margin of 27.5% in fiscal 2019.

Selling, general and administrative expense, excluding the $495,000 provision for the legal settlement, was up $39,000 or 1% over fiscal year 2019. Interest expense was $296,000 or 17% lower than the same period a year ago. In January 2020, we paid off in full our capital equipment loan that carried a 7.9% interest rate. As a result above, we recorded a net loss in fiscal 2020 and of $342,000 or negative $0.01 per share basic and fully diluted compared to a net income in fiscal 2019 of $1.1 million or $0.04 per share basic and fully diluted.

Moving to the balance sheet. Our working capital was $5.6 million at March 31, 2020, a decrease of $656,000 when compared to working capital at March 31, 2019. Total debt at March 31, 2020, was $2.6 million compared to a total debt of $4.3 million at March 31, 2019, as we paid off our equipment loan in full in January 2020. Our net debt at the end of fiscal 2020 was approximately $1.7 million.

Cash provided by operating activities was $677,000 for fiscal 2020 compared with $531,000 in fiscal 2019.

In December 2019, we signed an agreement to increase the amount available under our revolver loan to $3 million from $1 million and decrease our interest rate on the revolver by 50 basis points. In April 2020, we drew down $1 million under the revolver for working capital purposes. In May 2020, the company issued a promissory note and received $1.3 million in proceeds under the Paycheck Protection Program established under the Coronavirus Aid, Relief and Economic Security Act administered by the small business administration. The loan was made through Berkshire Bank.

With that, I will now turn the call back over to Alex to tell us more about the impact COVID-19 has had on our business. Alex?

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Alexander Shen, TechPrecision Corporation - CEO & President [5]

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Thank you, Tom. At the end of March of 2020, the outbreak of coronavirus, COVID-19, had spread worldwide as a pandemic. The full extent of the outbreak-related business and travel restrictions and changes to social behavior intended to reduce its spread. These all -- the full extent remains uncertain as the health crisis continues to evolve in the U.S. and abroad. The directives imposed by federal, state and local governments did not impair our ability to maintain operations during the fourth quarter of fiscal 2020 as the company was designated an essential service. However, the pandemic has negatively affected our customers, our suppliers and labor force. And with the changing conditions as a result of the COVID-19 outbreak, the impact on our operations and fiscal year 2021 financial results remains uncertain. The change in focus of the company on growing its defense business, which started 6 years ago by the current executive team. This sharp focus put us on a successful trajectory to transform ourselves into a predominantly defense-centric entity. We became a full-fledged member of the defense industrial base and secured the designation of an essential service during this COVID-19 crisis. The 2 shipyards that we serve directly. Our other key defense customers as well as the U.S. Navy itself, issued formal communications requesting and directing our Ranor subsidiary to remain open and productive during this time of crisis.

As a result, we were able to successfully continue to execute contracts and very importantly, retain our highly skilled custom workforce and provide full wages and benefits. We must remain vigilant and take the necessary actions to protect our workforce. And by extension, our families, so that we can continue executing our mission.

TechPrecision is proud and honored to serve the United States defense industry, specifically naval submarine manufacturing and carrier manufacturing through its Ranor subsidiary.

I would now like to open up the call for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today comes from Ross Taylor with ARS.

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Ross Taylor, [2]

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First, congratulations to you and your team. I think you guys continue, Alex, to do a great job. It looks to me from the backlog numbers that we are turning the revenue corner. We're starting to see the benefits of work and the efforts you guys have put into building this business? Is that -- do you think that would be a correct assumption? Obviously, with the caveat of COVID-19 impacting the flow of business from your primes?

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Alexander Shen, TechPrecision Corporation - CEO & President [3]

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Well, I think your characterization of turning the revenue corner. I don't know if it is or not, but certainly, the numbers are better.

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Ross Taylor, [4]

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Is there any reason we should expect them not to continue to get better?

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Alexander Shen, TechPrecision Corporation - CEO & President [5]

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I don't see a reason for that.

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Ross Taylor, [6]

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Okay. Great. And you had about -- you had, what, $1 million in cost overrun losses on new part numbers that you were picking up. What was the revenue base that was around those part -- that loss, that $1 million loss?

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Alexander Shen, TechPrecision Corporation - CEO & President [7]

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I'm thinking, hold on.

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Ross Taylor, [8]

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I can hear.

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Alexander Shen, TechPrecision Corporation - CEO & President [9]

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Yes. It's clunky, as usual.

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Ross Taylor, [10]

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Yes, we dance again, Alex.

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Alexander Shen, TechPrecision Corporation - CEO & President [11]

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Well, we dance again maybe, but let's see. And Tom, help me out here. I know it's over $1 million.

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Thomas C. Sammons, TechPrecision Corporation - CFO [12]

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Yes. And it is over $1 million. It's probably about -- give me one second. I'll come up. The only caveat I would say is that the loss that we booked is scheduled or expected to be the total loss. I mean that's what we're estimating. So even though we haven't recognized all the revenue to date, the loss, so it's really the question is, how much of that loss versus the contract amount.

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Ross Taylor, [13]

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Yes, that's what I'm looking for.

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Alexander Shen, TechPrecision Corporation - CEO & President [14]

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Let me come back to you. (inaudible)

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Ross Taylor, [15]

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Okay. And then -- yes. Right. And so while we're waiting to come back to that, also going forward, you've indicated that these are -- this is business that you are both continuing to work on and expect to see continued look on going forward. So I was going to try to get to an idea of the magnitude of the opportunity that these -- this particular or these particular projects offer us?

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Alexander Shen, TechPrecision Corporation - CEO & President [16]

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I think I want to make sure that I expound on my characterization of this opportunity. So this opportunity is not just an opportunity to resecure the same part numbers again. This opportunity was an entry point into potentially securing other new part number opportunities, hopefully, similar in nature to the complex, highly complex and critical nature of these projects, similar projects. And so I tried to add more color into it and tell us about the extended time period of performance, spanning multiple fiscal years, which actually leave these parts on the Ranor's production floor to be showcased since seeing is believing. That kind of -- because it's been such a long period of time, it far will outstrip this limited people contact time into the time where there's more customers that come back and visit us once again. This extended time period of performance will be then as well. Am I -- that was coming up pretty clunky, I guess.

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Ross Taylor, [17]

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No. But most of what you're looking at is a multiyear opportunity here and it's...

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Alexander Shen, TechPrecision Corporation - CEO & President [18]

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(inaudible) opportunity, and it's a multi-part number, new part number opportunity, not just these part numbers that we have the learning curve cost overruns.

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Ross Taylor, [19]

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Right. And it's of such a quality or precision or the work is so sophisticated that you actually consider this work to be my words an advertisement for the capabilities of Ranor.

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Alexander Shen, TechPrecision Corporation - CEO & President [20]

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I would completely agree with you.

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Ross Taylor, [21]

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Okay. Now with these parts, were they on vessels that spend most of their time sea above or below the water?

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Alexander Shen, TechPrecision Corporation - CEO & President [22]

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I won't be able to answer that question. I'm sorry.

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Ross Taylor, [23]

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Okay. Now you are seeing revenues. I would assume at this point at the last quarter, and does the backlog include revenues from all 3 of the vessel types in which I -- which you're working, Columbia, Virginia and carriers.

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Alexander Shen, TechPrecision Corporation - CEO & President [24]

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Does the backlog include all three classes? Yes. Backlog does include all 3 classes.

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Ross Taylor, [25]

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Okay. And so basically, at this point, what we're seeing is we're starting to see all of these areas ramp and you're seeing -- you've successfully demonstrated the capabilities of the company. And so you said, when you're getting new part numbers, are those part numbers being -- those contracts being given to you by the primes or by subcontractors for the primes?

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Alexander Shen, TechPrecision Corporation - CEO & President [26]

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Primes, you mean the 2 shipyards?

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Ross Taylor, [27]

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Yes. Are they seeing you guys as a way to outsource business that's complicated and difficult to basically, say, allows them to focus their resources on higher other areas where they feel they can be more effective? Or is what this is, is that you're finding, you're picking up business from people who stand between you and the final assembler?

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Alexander Shen, TechPrecision Corporation - CEO & President [28]

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We're picking up new part numbers from the whole -- from all of them as a whole, not just from the shipyards and not just from the guys that are the Tier 1 to the shipyards from both sides of (inaudible). Yes.

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Ross Taylor, [29]

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Okay. And then going forward, obviously, this year has...

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Alexander Shen, TechPrecision Corporation - CEO & President [30]

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I have a quick answer. I think I'll check in to Tom to make sure. I think the contract value is north of $3 million. I think it's safe to say, Tom?

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Thomas C. Sammons, TechPrecision Corporation - CFO [31]

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Yes.

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Ross Taylor, [32]

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Okay. Okay. And Alex, what made these components so difficult? Well, someone else -- was this something that someone else was doing and wasn't doing effectively? Was this something that is new that was brought to you? I mean obviously, they were quite complicated because your engineering and capabilities are quite good. So I'm curious on what about them in some ways, made them so complicated?

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Alexander Shen, TechPrecision Corporation - CEO & President [33]

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There's about 30 pages of write-up on this that's been ongoing so far. I'm not completely -- I'm a little bit at a loss to -- the devils in the details, Ross, on -- especially on this one.

Very much in the details, highly complex nature. I can tell you, for sure, these part numbers were new to our Ranor subsidiary.

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Ross Taylor, [34]

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Okay. Is there any recovery possibility?

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Alexander Shen, TechPrecision Corporation - CEO & President [35]

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The other side of it would be that they're not new to the world.

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Ross Taylor, [36]

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Okay. Is there any recovery possibility? Meaning that the source of some of the problem was it -- did you inherit it?

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Alexander Shen, TechPrecision Corporation - CEO & President [37]

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Did we inherit problems?

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Ross Taylor, [38]

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The issue, yes.

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Alexander Shen, TechPrecision Corporation - CEO & President [39]

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Let me characterize this. Did we inherit problems? Yes. Did we create our own new problems? Yes.

The customer create new problems? Yes. The supply chain that reports into us create new problems? Yes.

The number of factors on such a highly complex project was -- there's multiple factors that contributed. Absolutely.

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Ross Taylor, [40]

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Okay. And is there any ability, do you think, to recover any of the cost overruns by the write downs? I'll take a no comment as yes.

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Alexander Shen, TechPrecision Corporation - CEO & President [41]

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I think you know me by now. If there's a way that I can operate properly and get the adjustments, I will be doing so. I will not leave any walk on toes.

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Ross Taylor, [42]

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Certainly. And I will leave step back out, but I want to say, I think that this is really the backlog building and the things you're talking about, to me, make this a really exciting quarter. Congratulations once again to you and your team for the progress and success you guys have had in navigating a pretty difficult environment.

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Alexander Shen, TechPrecision Corporation - CEO & President [43]

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Ross, thank you again for your continued patience and very strong support.

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Operator [44]

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Next, we'll hear from [Aaron Warwick] at [ES Capital]. (Operator Instructions)

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Unidentified Analyst, [45]

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I wanted to ask you, you've been commenting at least now for, I don't know, probably 12 to 18 months, or I should say that starting 12 to 18 months ago, you mentioned an opportunity that you had for $80 million to $100 million over 2 years. And eventually, then you started referring to it as a $100 million opportunity. And on these calls, you've continued to say that, that was still in play. And I'm just wondering, apart from these new part numbers that you've been discussing, is that opportunity, that $100 million opportunity still in play?

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Alexander Shen, TechPrecision Corporation - CEO & President [46]

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Tom, I'm going to take this one, and you pitch in where you see fit. So let me be really clear. I don't think the $100 million over 2 years is something that I have said.

Then the next part is the $100 million opportunities in front of us, not separate from the new part numbers, including everything. It exists. I will definitely make sure that we all know when it stops existing.

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Unidentified Analyst, [47]

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When you speak of that opportunity, then over what time frame are you speaking?

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Alexander Shen, TechPrecision Corporation - CEO & President [48]

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Over many time frames because the world keeps changing. The impact of COVID itself sometimes changes. It's very dynamic. It's a snapshot in time. I check on it every day.

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Unidentified Analyst, [49]

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You guys had in the press release, the backlog as of March 31. I'm wondering if you could tell us what the current backlog is.

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Thomas C. Sammons, TechPrecision Corporation - CFO [50]

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I don't have that with me right now.

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Operator [51]

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(Operator Instructions) We'll hear next from Pipeline and Mr. Mark Gomes.

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Mark Gomes, [52]

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Great quarter, guys. Your introductory comments were unabashedly bullish, if not (inaudible) if I might add. In the past, you commented on your overall excitement around the business and what you see. Is it safe to say based on your introductory comments that your level of excitement about your business is as high, if not better than what it has been in past calls?

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Alexander Shen, TechPrecision Corporation - CEO & President [53]

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If I didn't know any, but I thought Ross was asking the question.

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Mark Gomes, [54]

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I've learned from the best.

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Alexander Shen, TechPrecision Corporation - CEO & President [55]

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Yes. My excitement has not diminished whatsoever.

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Mark Gomes, [56]

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Great. And with regard to the $100 million opportunity, you say that it is an ever shifting opportunity. And obviously, you've been receiving orders incoming, which would shrink the opportunity. And then it would have to be then replenished with other opportunities to remain at that $100 million level, is that an accurate assessment?

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Alexander Shen, TechPrecision Corporation - CEO & President [57]

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Absolutely. Otherwise, I would be lying to you, right?

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Mark Gomes, [58]

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Fantastic. Just making sure you're not lying to me. Final question.

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Alexander Shen, TechPrecision Corporation - CEO & President [59]

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Do you think I would?

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Mark Gomes, [60]

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That's not for me to prejudge.

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Alexander Shen, TechPrecision Corporation - CEO & President [61]

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Judge (inaudible) every day and so does the United States government, right? So we serve with integrity, right? So we can't.

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Mark Gomes, [62]

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And I've been judging you for over 5 years, and I've been never higher in my judgment of view. So with that, my final question is, is there any additional commentary you could provide us with to help us understand. We see revenues, we see backlog, but we do not see wins that are not in backlog, nor do we see projects with which you have confidence that you will win and not have in backlog. So there's maybe 4 categories of things, and we only get to see 2. Can you qualify -- not quantify but qualify, to what extent do those -- are there wins that are not in backlog? Are there are projects that you have confidence that you will win. I don't need to know how great those are. I just want to have an understanding of how much is -- what's behind the vail without knowing how much is behind the base.

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Alexander Shen, TechPrecision Corporation - CEO & President [63]

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I'm going to rely on my consistent remarks of not responding properly to that question with an answer that satisfies the question. I won't be able to forecast what happens.

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Mark Gomes, [64]

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Right. I'm not looking for forecast. I'm merely asking if you have -- if the business is conducive to wins that would not show up in backlog and/or projects that you would have confidence you were going to win. Is the business conducive to such things as opposed to a question I would ask if you have such things in hand?

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Alexander Shen, TechPrecision Corporation - CEO & President [65]

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Meaning do I have something in hand not being reported in backlog?

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Mark Gomes, [66]

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No. I'm not asking that. I'm asking if the business is conducive to have such a thing even existing?

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Alexander Shen, TechPrecision Corporation - CEO & President [67]

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Can you repeat the question? I think I'm getting pretty confused here.

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Mark Gomes, [68]

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Sure. Okay. You report revenues and backlog.

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Alexander Shen, TechPrecision Corporation - CEO & President [69]

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Right.

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Mark Gomes, [70]

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Is it possible that you have wins that are not in backlog, is it possible that you have wins that are not in backlog? And is it possible that you have projects that you have extreme confidence that you will win that are not even wins yet? Is it possible that such things exist that do not currently show up in backlog or revenue?

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Alexander Shen, TechPrecision Corporation - CEO & President [71]

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So the first question is, do I have wins that don't show up in backlog?

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Mark Gomes, [72]

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No. Is it possible...

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Alexander Shen, TechPrecision Corporation - CEO & President [73]

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I don't know that -- I don't have any wins that don't show up in backlog. Tom, do I have any wins that don't show up in backlog?

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Thomas C. Sammons, TechPrecision Corporation - CFO [74]

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Well, it depends on how you define win. If you're saying win is a PO, no, you don't have any wins that show up in backlog. If you're talking about a project that we know we're going to get, we just don't have a PO yet. And I think that's what Mark might be getting to?

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Mark Gomes, [75]

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Yes, sir.

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Alexander Shen, TechPrecision Corporation - CEO & President [76]

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I don't know that because something might change, and then we don't get it, then what?

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Operator [77]

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(Operator Instructions)

We'll hear next from Richard Greulich at REG Cap Advisors. I hope I'm saying that company name correctly, Richard?

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Richard E. Greulich, REG Capital Advisors - President & CEO [78]

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Actually it's Capital, REG Capital Advisors, but that's close enough. Alex, I think you kind of threw people back a little bit when you were asked about the time frame, of which $100 million opportunities might present themselves.

Because I think actually, in the past, you had reflected about a 2-year time frame over which you were talking about. And is that unfair just to assume?

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Alexander Shen, TechPrecision Corporation - CEO & President [79]

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Let me be really clear. What I'm asked about is the $100 million revenue over 2 years versus $100 million opportunity over 2 years.

The opportunity exists. Whether or not it converts to revenue, that is not what I'm talking about.

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Operator [80]

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And gentlemen, next, we'll hear a follow-up coming from Ross Taylor.

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Ross Taylor, [81]

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Yes. I wanted to pick up on Mr. Gomes' line of questioning.

Basically, a couple of things first. Where in the build project for the various things you're doing like in the sub state, the Virginias and the Colombia. Where does the majority of your order flow show up? Is it very early in the build? Or is it later in the build?

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Alexander Shen, TechPrecision Corporation - CEO & President [82]

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I'm thinking. Excuse me, I'm not trying to ignore the question. I'm trying to characterize it where, well, does the majority go.

I think it's -- safe to say, it's about 50-50.

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Ross Taylor, [83]

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Okay. And then you do not put anything in the backlog until you have a PO, but you do have -- I think what you -- what I picked up from your exchange with Mr. Gomes was that you do have components that you have reason to believe will be Ranor components when built. That you do not have POs for, but that you are not willing to commit to because you're not exactly sure when this -- as you said, a lot of things can happen. But in reality, at this point that the person for whom you're doing that component has basically probably told you that you are going to build that component. Or that they -- that the contract you have while not a PO is actually a contract that will be filled when they get around to it in the build cycle. Correct?

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Alexander Shen, TechPrecision Corporation - CEO & President [84]

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By and large. The problem really is one of timing. They can say things and then it doesn't time out the correct way. And the other problem also comes in when there's design changes.

So let's remember, let's add some more color, Ross, taking this opportunity to add color, which is kind of unlike what I usually do. The new things that are coming on are the VPMs, which is the middle section, adding 4 more missile tubes and firepower for the Virginia class as well as the Columbia class, which is completely new. With these new things, the design is not mature and stable. So there are changes that happen. And so when we are securing opportunities, and we're going through that pursuit cycle, sometimes there's changes that happen that either cause a part number to transform itself into something different or it would cause a tremendous, different kind of delay that would be fairly traumatic, if I counted on securing the order at a certain time. So there's timing and there's also, I would call it, changes to the design...

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Ross Taylor, [85]

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Now if a part is designed or the change into the design occurs, I think what we're getting at is, if let's say you're picked to do a door, a launch tube door for ease of the conversation. And they decide later to change the design of that launch tube door. It's generally safe to assume that you're still going to make the launch tube door, but that might be rolled back in time, and it might change what you're doing and the value of the contract might change because of all those factors. And I think that's kind of what we're getting at. There's things that you know you're going to -- that you have strong reason to believe you will supply to the Navy for the build of these vessels that are not yet POs, but you have every expectation will be POs inside some reasonable future with the caveat being that you cannot control timing, right?

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Alexander Shen, TechPrecision Corporation - CEO & President [86]

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Right. That's on the timing part of it. And then there's other design changes that just drastically changing. So now that it doesn't exist there anymore or it got integrated into something else. So now the "my part number" is no longer a part number because it's somebody else's and the door is now not needed.

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Ross Taylor, [87]

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And that goes 2 ways. Correct?

You also can pick up business as you demonstrate your capability to consolidate part numbers and things of that nature.

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Alexander Shen, TechPrecision Corporation - CEO & President [88]

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Well, we don't influence the design as much as the shipyards influence their own design. Well, either way, I was just trying to make sure that we understand the color behind it.

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Ross Taylor, [89]

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Right. No, I understand. And also, the other thing is because of the fact that the Navy is rolling out these contracts, these -- they basically roll out POs on a per-vessel basis, correct? It's not a lot that the Navy is ordering on the front. And they're not saying we're building 9 boats or 10 boats of this class, and we're going to need X number of, once again, let's say, launch tube doors until we want you to build 158 launch tube doors. They instead say boat X is coming online, it's going to have Y number of launch tube doors. Therefore, your contract is to build them for that boat. And then when the next boat comes online, then you end up getting another -- a new purchase order for that next boat.

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Alexander Shen, TechPrecision Corporation - CEO & President [90]

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Correct. I don't think we should characterize it like that, Ross.

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Ross Taylor, [91]

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I'm trying to make it simple, Alex.

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Alexander Shen, TechPrecision Corporation - CEO & President [92]

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Right, except it's a hodgepodge. I think it just depends case by case. Some part numbers act that way and some part numbers don't. And then with the changing dynamics, the parts that acted that way, don't act that way anymore. A lot of it has to do with how specific funding gets released.

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Ross Taylor, [93]

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Right. Does your backlog include any part...

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Alexander Shen, TechPrecision Corporation - CEO & President [94]

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There's also -- sorry, go ahead.

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Ross Taylor, [95]

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I guess, does your backlog include any parts that you don't expect to deliver in the next 2 years?

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Alexander Shen, TechPrecision Corporation - CEO & President [96]

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Yes. Not very many.

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Ross Taylor, [97]

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That's interesting. Not very many.

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Alexander Shen, TechPrecision Corporation - CEO & President [98]

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Well, the percentage of the dollars is not very significant. But the answer to your question is yes.

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Operator [99]

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Gentlemen, next will hear once again from Aaron Warwick

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Aaron Warwick, [100]

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Alex, you like to talk about opportunities. It seems like a set of revenue. So I'll ask it this way about the Virginia class versus Columbia class subs.

How do your opportunities change when you're looking at comparing Virginia to Colombia? When you're looking at Colombia, talking to some people that are familiar with the industry and with the company, they tell me that they think the opportunity with [Ferran] or with Columbia class subs is anywhere from 50% to 100% higher in terms of what might eventually convert to revenue, but that opportunity is significantly higher for Columbia class. How would you characterize it -- that or compare those two?

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Alexander Shen, TechPrecision Corporation - CEO & President [101]

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I don't. I think putting on a number, a fictitious number is -- it's a futile exercise. It really depends.

I don't know how to characterize it, to be truthful.

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Aaron Warwick, [102]

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Okay. That's fair. And then finally. What have you seen -- you talked -- you, I think, started talking about it several quarters ago about reviewing strategic alternatives. And I'm just wondering how that -- if that's changed at all, has slowed down at all because of the COVID crisis? If it's heated up because it seems like the submarine business has finally been going? You've got some new parts, well, how would you characterize that activity compared to, say, last quarter?

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Alexander Shen, TechPrecision Corporation - CEO & President [103]

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I think we're always looking for that opportunity. And I don't think that stance changes quarter-over-quarter. We need to be on the lookout for the right opportunity.

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Operator [104]

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Gentlemen, we'll hear once more again from REG Capital Advisors and Richard Greulich.

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Richard E. Greulich, REG Capital Advisors - President & CEO [105]

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Alex, the PPC funds, I think, were $1 million, $1.5 million, something like that. Are those forgivable? And what would be the circumstances under which that loan would be forgivable?

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Alexander Shen, TechPrecision Corporation - CEO & President [106]

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Tom, I don't think that's an Alex question. I think it's a Tom question. Tom?

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Thomas C. Sammons, TechPrecision Corporation - CFO [107]

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The PPP loan is forgivable under certain circumstances. A lot of that depends on what you spend the funds on. And all I can say at this point, I've had conversations with the bank, things keep changing. And by the time we get to the point where we are perhaps ready to look at getting a forgiveness loan, we'll see what the criteria is at the time. But in general, it's money spent -- money to be spent on labor costs, salaries, health benefits...

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Alexander Shen, TechPrecision Corporation - CEO & President [108]

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I think the specifics are in the public domain, and we don't need you to maybe iterate it.

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Richard E. Greulich, REG Capital Advisors - President & CEO [109]

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Right. So most -- those term -- those definitions are totally fungible, whether you take the money from this to spin it for the salaries or do it for that. So it's likely, it seems to me that's probably going to be forgivable at the end of the day.

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Alexander Shen, TechPrecision Corporation - CEO & President [110]

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That's your words, right? Those were your words, not ours.

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Richard E. Greulich, REG Capital Advisors - President & CEO [111]

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That's my words. That's correct.

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Alexander Shen, TechPrecision Corporation - CEO & President [112]

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Okay. We won't know until we get there is I think what the answer we got from Tom.

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Thomas C. Sammons, TechPrecision Corporation - CFO [113]

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Yes, we're -- I'm not counting on anything right now, wait and see. When I get to that point.

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Richard E. Greulich, REG Capital Advisors - President & CEO [114]

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In terms of the strategic -- ongoing strategic review, Graham Corporation in their conference call the other day was talking about the -- their continuing interest in looking for acquisitions, which you're -- you would be about the right size for what they're actually looking for. So here's my concern that right now, while your stock is actually doing relatively well, the earnings haven't come through that were unlikely to be coming through over the next year or 2. And that somebody like them or somebody else, they perceive that with a little bit longer time frame perhaps than some investors would have and would be able to acquire the company at a premium to the market, but a discount to what the longer-term value will be. What do you think about that?

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Alexander Shen, TechPrecision Corporation - CEO & President [115]

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Well, I don't think we're there right now to think on it to go seriously on how much you're going -- what the -- basically, you're asking me how much do you want to sell it for, right?

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Richard E. Greulich, REG Capital Advisors - President & CEO [116]

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Well, or what can you do about it if somebody makes a bid that, in your opinion, is lower than what the longer-term value might be, but there's -- it's higher than the market. So.

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Alexander Shen, TechPrecision Corporation - CEO & President [117]

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I think we would probably need to get together with our Board and make the correct decisions at that point in time. I don't think we can come up with a theoretical answer to a theoretical question. I -- as you say, the future looks very bright. I believe so, too. So if we're going to be sold, it should include that very bright-looking future and not discount it. That's what I think. I think we should be really incorporating all the brightness that's true, which it is. Why wouldn't it be? Tom, do you have anything to add?

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Thomas C. Sammons, TechPrecision Corporation - CFO [118]

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I'm going to let that one lie.

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Alexander Shen, TechPrecision Corporation - CEO & President [119]

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Okay.

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Richard E. Greulich, REG Capital Advisors - President & CEO [120]

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Yes. Well, the only -- the fly in that ointment is that -- and I understand your reluctance to get too specific on anything where it could have competitive implications. But for investors, it makes it a little bit difficult to then totally unveil what the future is possibly going to hold or likely to be holding. I have my own estimates of what I think could happen, but it's hard for most people, I think, to actually see those numbers. Is there anything else that you could do to, again, while protecting your competitive position, to add a little bit more specific details that would help people understand that?

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Alexander Shen, TechPrecision Corporation - CEO & President [121]

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So as we help people understand that, we also help our competition, and we also help our customers criticize us and perhaps it's difficult.

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Operator [122]

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Gentlemen, we'll hear next once again from Mark Gomes.

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Mark Gomes, [123]

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So in your second exchange with Ross regarding part changes, providing uncertainty around wins that you might have in hand, but POs not in hand, can you just boil it down, simple math. Your opportunity that you see in front of you, remains at a strong $100 million thereabouts. And therefore, I would conclude that nothing traumatic has happened with those wins to this point that have not been offset by anything equally promising to maintain your opportunity at $100 million. Would that be fair to say?

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Alexander Shen, TechPrecision Corporation - CEO & President [124]

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I get pretty confused trying to follow what you're saying. Can you break it down simpler? The $100 million opportunity has not gone down.

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Mark Gomes, [125]

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Correct. And therefore, nothing traumatic has happened to any of your parts or positioning that would not -- that would put you in an adverse opportunity situation that hasn't been at least offset by some other opportunity to replace it. And what I'm saying is, on a net-net basis, you remain at $100 million because on-net, your opportunities coming in are at least equal to those going out?

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Alexander Shen, TechPrecision Corporation - CEO & President [126]

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Right. It hasn't diminished.

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Operator [127]

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And gentlemen, we have no further signals from the audience. I'll turn it back to our leadership team for any additional or closing remarks.

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Alexander Shen, TechPrecision Corporation - CEO & President [128]

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Thank you, everyone, for attending. Have a great day.